Brinker International Inc
NYSE:EAT
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Estee Lauder Companies Inc
NYSE:EL
|
Consumer products
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Church & Dwight Co Inc
NYSE:CHD
|
Consumer products
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
American Express Co
NYSE:AXP
|
Financial Services
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Target Corp
NYSE:TGT
|
Retail
|
| US |
|
Walt Disney Co
NYSE:DIS
|
Media
|
| US |
|
Mueller Industries Inc
NYSE:MLI
|
Machinery
|
| US |
|
PayPal Holdings Inc
NASDAQ:PYPL
|
Technology
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
35.39
119
|
| Price Target |
|
We'll email you a reminder when the closing price reaches USD.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Estee Lauder Companies Inc
NYSE:EL
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Church & Dwight Co Inc
NYSE:CHD
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
American Express Co
NYSE:AXP
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Target Corp
NYSE:TGT
|
US |
|
|
Walt Disney Co
NYSE:DIS
|
US |
|
|
Mueller Industries Inc
NYSE:MLI
|
US |
|
|
PayPal Holdings Inc
NASDAQ:PYPL
|
US |
This alert will be permanently deleted.
Brinker International Inc
You don't have any saved screeners yet
Good day, ladies and gentlemen, and welcome to the Brinker International's Q4 2021 Earnings Call. At this time, all participants have been placed on a listen-only mode and the floor will be opened for questions and comments after the presentation.
It is now my pleasure to turn the floor over to your host, Mika Ware. Ma'am, the floor is yours.
Thank you, Kate, and good morning, everyone. Welcome to the earnings call for Brinker International's fourth quarter of fiscal 2021. With me on today's call are Wyman Roberts, Chief Executive Officer and President; and Joe Taylor, our Chief Financial Officer. Results for the quarter were released earlier this morning and are available on our website at brinker.com. As usual Wyman and Joe will first make prepared comments related to our operating performance and strategic initiatives then we will open the call for your questions.
Before beginning our comments, please let me remind everyone of our safe harbor regarding forward-looking statements. During our call, management may discuss certain items which are not based entirely on historical facts. Any such items should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All such statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such risks and uncertainties include factors more completely described in this morning's press release and the company's filings with the SEC. And of course, on the call, we may refer to certain non-GAAP financial measures that management uses in its review of the business and believes will provide insight into the company's ongoing operations.
And with that said, I will turn the call over to Wyman.
Thanks, Mika, and thanks everyone for joining us this morning. Brinker's fourth quarter was one of our more profitable quarters in recent history, marking a solid finish to a successful albeit unusual year. Underpinning our fiscal 2021 results is a consistent strategy that differentiates us in the marketplace and an exceptional team that executes every day in our restaurants. We were already growing sales and taking share before the pandemic hit and we made the decision to lean further into our strategy of providing convenience, value and a great guest experience by doubling down on third-party delivery and improving our takeout systems. In a year of social distancing, our teams came together safely to lead the industry on traffic and regained positive sales momentum. In a year of closures and shutdowns, we opened our first virtual brand in over 1,000 restaurants by leveraging our technological infrastructure.
It's Just Wings surpassed our $150 million target in our company owned restaurants and along with the support of our franchise partners It's Just Wings became more than $170 million business in the U.S. with many of our international franchisees also now operating the brand. In a year that started with unemployment near record highs, we kept all our management teams employed and paid them solid bonuses. We put a retention plan in place for our strongest team members to encourage them to stay with us as the staffing environment continued to change through the spring and summer. In a year where gatherings and special occasions at Maggiano's were restricted, Steve and the team restructured the value proposition to take out proposition and re-engineered the heart of house. The brand is already delivering much more profitable sales as volumes come back and guests has responded very positively to the changes.
In a year we thought we might have to borrow money more to survive the pandemic, we paid down our debt by over $300 million and we're committed to continuing that trend this year. And in a year where we worried we wouldn't be able to support our charitable partners at levels we're used to, our team set a record, raising more than $10 million for St. Jude during an exceptionally critical time for their patients and families. Our teams have raised nearly $90 million for St Jude's patients during our partnership. Thanks to the strength of our operations team we've emerged and even stronger business than before. In fact, we're positioned ourselves to invest aggressively to grow this business during fiscal 2022 and beyond and to keep our balance sheet strong. The ability to make these kinds of investments starts with owning our restaurants, having the opportunity to leverage our fleet and realize the full potential – the full profitability of our efforts.
The pandemics solidified our commitment to corporate ownership. Despite the challenges of owning restaurants like dealing with labor issues and commodity cycles, because ownership gives us the scale to effectively manage the issues, it allows us to steward our brands consistently and have control over the investments we make to grow the business. This year, our investments will target more ways to offer convenience, value and a great guest experience. By doubling our pipeline of new restaurant openings, [indiscernible] to keep our assets strong and vibrant, accelerating our technology advantages and expanding our portfolio of brands.
Currently, we're in the middle of rolling out our second virtual brand. Maggiano's Italian classics. It's now in over 250 restaurants today and doing very well. This one will be a slower role for a couple of reasons. It's a little more complex and since we're back to fully operational dining rooms, we're being very intentional about the experience for our operators and our guests. We're excited about it. We're getting great guests feedback and we're anticipating being in 900 restaurants by the end of the fiscal year.
We're also investing in both takeout and delivery by pursuing opportunities to increase visibility and drive awareness of these channels across all four of our brands. We recently implemented technology enhancements to our curbside takeout system, which is already simplifying the operational side of the business and improving guest metrics. Its Just Wings has gone live with a website that offers online ordering for takeout as well as delivery and we're excited about the growth potential for the brand. These technology investments are helping us do a better job handling the increased mix of off-premise business from pre-pandemic mid-teens to what's now more than 30%, as well as leveraging the full capacity of our assets with very little incremental capital. It isn't every day you more than double your off-premise business and add a couple of brands to your base. It only happens well with best-in-class systems to enable it and a strong team to execute it.
Our team is critical to our success and we take the current staffing environment very seriously. We've executed a full-court press to hire, train, and retain our talent. While the challenges came fast and furious for all of us in March, I'm pleased with the progress we've made. There are still opportunities, but isolated to specific trade areas and we're confident we'll get these staffing challenges resolved in the near future. To further support our operators, we're rolling out a new service system with handheld devices that we've worked on for three years to perfect. It isn't as easy as some might claim to implement a system that operators can execute during high volume that saves labor and still delivers a great guest experience. Ours is also putting more money in our team members' pockets, so they're staying with us longer, which is crucial in this environment.
It's in more than 250 restaurants now, and we anticipate full implementation by November. And finally, because we chose not to take price at Chili's during fiscal 2021, we have room to take some prices this year, as consumers return to work and income levels return to normal. We're evaluating how we'll address those opportunities, especially in channels like delivery while all – all while protecting our industry leading value proposition. We spent last year learning to run a much more efficient and robust revenue generating model. We're spending this year and beyond capitalizing on the opportunities for growth that are not just available, but achievable for Brinker. There is nobody who's doing this better than this team, and I'm honored to be part of their story and I'll turn the call over to Joe. Joe?
Hi, thanks, Wyman, and good morning everyone. Let me continue our prepared comments by providing some additional insight to the fourth quarter results released this morning and then share some limited thoughts on our current expectations of certain aspects of the overall fiscal year plan. As Wyman indicated, the fourth quarter was a strong finish to our fiscal year 2021. For the fourth quarter, Brinker reported total revenues of $1.009 billion with a consolidated comp sales of 65%. And keeping with our ongoing strategy, the majority of these sales were driven by traffic, up 53% for the quarter, a 10% beat versus the industry on a two-year basis. These sales translated into solid EPS with fourth quarter adjusted earnings of $1.68.
As noted in this morning's press release, the fourth quarter included an extra operating week, our 53rd week, which contributed approximately $70 million to total revenues, 90 basis points to restaurant operating margin and $0.34 to earnings per share. At the brand level, Chili's comparable restaurant sales were positive 8.5% versus the fourth quarter of fiscal year 2019, which we believe is the more appropriate comparison for the quarter. Additionally, on an absolute dollar basis, the fourth quarter was Chili's largest sales quarter on record topping $900 million in total revenue. Maggiano's while down 18% compared to fourth quarter of fiscal 2019 made very solid progress with its recovery curve and build positive momentum to carry into the current fiscal year.
Moving down to P&L, our fourth quarter restaurant operating margin was 16.9%. Adjusting this performance for the impact of the 53rd week, the resulting 16% operating margin still represent some material year-over-year improvement and more importantly was a 110 basis point margin improvement versus the pre-COVID fourth quarter of fiscal 2019. Food and beverage expense for the fourth quarter, as a percent of company's sales, was 20 basis points unfavorable as compared to prior year. This variance was driven – primarily driven by increased commodity costs, particularly for chicken and pork products. Labor expense for the quarter, again, as a percent of company sales was favorable 240 basis points versus prior year, primarily driven by the extra week sales leverage versus fixed labor expenses and the slower reopening pace and a couple of high wage states such as California.
During the quarter, our managers focus considerable efforts towards staffing our restaurants to support the solid demand for our brands. Scale clearly matters in this area as they were effectively supported by our experienced HR teams, who helped deploy hiring tools and events to assist in the process. Given the more challenging hiring environment, the dynamic of hiring, training and retaining team members resulted in an increase in labor inflation in the mid single digit range and dynamic we expect to continue in the near-term. To reward our operator strong performance throughout the fiscal year, we also chose to further invest in our hourly team members and managers through a variety of incremental bonus structures, totaling approximately $4 million for the quarter beyond our normal payout formulas.
This incremental investment impacted quarterly EPS by approximately $0.06 and increased labor expense margin by roughly 40 basis points, well worth the benefits that will accrue. Restaurant expense was 830 basis points favorable year-over-year as we fully leveraged many of our fixed costs, particularly from the benefit of the additional week in the quarter. That continued positive operating performance did result in a meaningful increase in our quarterly tax rate, 15% for the quarter, which includes a catch-up adjustment to increase the annual income tax accrual. This increase negatively impacted fourth quarter EPS approximately $0.06.
Our operating cash flow for the fourth quarter and fiscal year remained strong with $101 million and $370 million for those timeframes respectively. EBITDA for the quarter totaled $144 million bringing the fiscal year EBITDA total to $368 million. During the fourth quarter, we continue to use a significant portion of our cash flow to further reduce revolver borrowings. By year-end our revolver balance was reduced to $171 million. This decreased our total funded debt leverage to 2.5 times and our lease adjusted leverage to 3.6 times at year end.
Speaking of the revolver, we have reached agreement on terms and conditions for a new revolving credit facility with our bank group. The new $800 million five-year revolver includes improved pricing allows the return of restricted payments and provides ample liquidity and flexibility to support our growth strategies. Our board of directors has also reinstated the share repurchase authorization that was suspended in the early days of the pandemic with an authorization amount of $300 million.
Now turning to our outlook for fiscal year 2022. At this point, with the volatility and unknowns of the current operating environment, we can only share some high level thoughts for certain annual metrics. For example, we expect commodity and labor inflation percentages each in the mid single digits with commodity inflation towards the lower end of the range. CapEx of $155 million to $165 million and annual effective tax rate of 14% to 15%, weighted annual share count of 45 to 47 million shares. As we now move ahead with fiscal 2022, the reality of the pandemic with all its uncertainties is still part of our everyday operations. That being said all now four of our brands are well-prepared and positioned to perform in whatever environment they face throughout the year. We are very proud of their efforts during the past fiscal year and our competency experiences, the growth and the strength of their business models will continue to deliver quality results as we move forward from here.
With my comments now complete, let's turn it back to Kate and move on to questions. Kate?
Thank you. [Operator Instructions] Our first question today is coming from David Palmer at Evercore ISI. Your line is live. You may begin.
Thanks. I guess I'll get one out of the way your quarter-to-date sales looks pretty good. And I would think that would give you confidence. I'm wondering if you are seeing some weekly sales data or perhaps some regions that are giving you more pause with regard to the Delta variant. And I have a quick follow-up on the labor line.
Hey, David Wyman. Yes, I mean, obviously you saw the numbers we had a really good quarter especially at Maggiano’s when we started the fiscal year in July, really pleased with how Maggiano’s is kind of moving forward and starting to see some of those pieces of the business come back that were most kind of impacted by the pandemic, banquets and catering. So, some good progress through. But as the Delta variant has kind of picked up some steam here in the last few weeks, we have seen some softening still above the F-19 kind of base, but just with the uncertainty of the pandemic we are just unsure, right?
And I guess from my perspective, I was probably a little optimistic last fall and was surprised by what happened in November and December. I don't think that's where we're headed. We're just going to be a little more cautious as we work through this variant with Delta and see where it's at. There has been a little – it tends to be a little more regional again, the overall numbers are still positive and we're comfortable, our strategies are all working to seize the external factors primarily. I mean, that's the pandemic that we're just still not quite sure what the timeline is going to be before this thing gets put back into a place where we're not seeing consumers having to react and potentially more regulation put on restaurants. Right now, there is no distancing. But we're back in masks in some towns. And so, we're just being cautious.
Makes sense. And I just wanted to ask on labor costs you have two parts, you have hours and wage inflation on any modeling. I'm trying to think about a way that we can perhaps model this for fiscal 2022, based on how you gave a mid-single digit type inflation. Your labor costs were up mid-single digits in the quarter. You say that that's going to be roughly the case in fiscal 2022. That's from just a wage inflation standpoint. The labor cost per restaurant was up 3% versus the pre-pandemic fiscal 4Q 2019 per restaurant on a week adjusted basis. And I'm wondering can we think about that – can we think about a sort of how much your labor costs per restaurant would be versus pre pandemic as a way to perhaps model this into 2022, assuming that sales are roughly equal on a multi-year basis to the type of momentum you had in that quarter, any help on that would be great.
Yes, David, I think, that is a decent proxy. Again, the top line piece of the equation does matter when we look at the overall labor. So, as you comment and keeping that consistent, I think, I would expect kind of the labor dynamics to remain relatively consistent as we move forward from here. You could get some variance if you get a topline change. That's not quite expected in the numbers, depending on where the consumer goes. We're seeing a little bit of, what I would consider to be transitory costs in that too. I mentioned that we made a decision in the fourth quarter which, I think, was well-deserved to create some incremental bonus structures that was about a 40 basis points increase to that labor margin expense, as I mentioned in my script.
But if I also look at some of the, what I consider to be a little more transitory costs, like there is some incremental overhead that's being used in the system over time. Excuse me for over time. There's a little bit – there is some incremental training. I mean, one of the things that goes with the cycle we're in right now is a lot of new team members. And with that goes some training costs. You want to have that to improve your productivity as you move forward. Both of those two incremental pieces are roughly about a combined 60 basis points to that margin too.
So, I think those probably remain in place for some period of time, but I think as we get more balanced back into the labor system, as you improve the productivity through the training, you'll start to see some of those incremental pieces come out of the system I would expect in the second half of the year.
So, with that as additional detail, I think, fourth quarter is not a bad proxy for the environment that we're going to be in here for the short run.
Thank you.
Thanks Dave.
Thank you. Our next question today is coming from Chris O'Cull at Stifel. Your line is live. You may begin.
Thanks. Good morning. Wyman, can you give some more details about what you've seen in the stores with the Maggiano's Italian Classics? I'm just curious if you've seen maybe sales lifts similar to It's Just Wings, or is the margin structure similar and maybe what makes it more complex for the restaurants to execute?
Sure Chris, I'll give you some – I'm going to be a little bit guarded just for competitive reasons. So, what's got us excited about Maggiano's Classics is first the quality of the product. Before we put the Maggiano's brand on a virtual brand, we wanted to make sure that we could deliver against the standards and we've done that, the team has done a great job developing a really great lineup. It is a little bit more complicated than Just Wings product, because it's got a little more breadth to the offering.
And so, we're making sure that as we bring it to the restaurants, we're training, we're setting up that part of the line, if you will, to support this business and not be detrimental to what we're doing in our dining rooms and Chili's every day. So, that's what's got us excited. It's a higher check average product. And so, we love the fact that this isn't – It's Just Wings, it's more of a value brand, killer Wings at stupid prices, our taglines. So, with Maggiano’s, we get a much nicer – a much bigger check average. So, that's encouraging to us. We like the way the consumers are accepting the product. The demand looks good and we're executing at a high level. So, all those things are positive for us.
The thing that we love about these two virtual brands in conjunction is that they do work against different targets. So, the Wings guests is not the same as the Maggiano's Italian Classics guests for the most part. And so that allows us also to see when the push comes for Wings, it comes at a different day part, it tends to come on the weekends, it tends to come with game nights, Maggiano's Italian Classics is one of its busiest day parts is Sunday to more of a family offering. And so those are the things that have us excited about rolling this second virtual brand. We're not looking to have a huge portfolio of virtual brands, very limited these two were probably going to be focused for a while.
We think they've got – we always said we weren't going to put a brand out that it didn't have at least a $100 million with a sales potential, and we'll build from there. And we think both of these brands, obviously Wings has proven that. And we think Maggiano’s Classic will build through the year as we roll this thing out over the next few quarters.
Okay. That's helpful. And Joe, one other question. Could you give a little bit more color on what's driving the higher CapEx next year? And is that range a good run rate going forward, or are there some non-recurring investments planned for 2022?
No, I actually kind of going in reverse order. That is a good proxy, I think, for how we will look at CapEx going forward. We're first and foremost, again, from that strong cash generation, going to invest aggressively back into the business.
I think we've talked on previous calls that what we really like about the transformation of this strategy is the organic growth story that is starting to develop as we kind of move forward. One of the bigger deltas you see going into this next year is that pipeline of new restaurant development that is starting to take place. We obviously had a pause during the pandemic from a real estate standpoint. That's now back online very fully and very aggressively. In fact, we're moving pipeline now, north of 20 restaurants. That's not for fiscal year 2022. Those will start really fall into place back half of this year and into the next year.
The rest of the – we're going to continue to re-image there's a little bit more spend on the re-image side of the equation. Again, some of this is pause versus a run rate. So, you're really getting that back to a level that we had seen pre-pandemic. But you also have the typical investment back into the R&M side of the equation. And technology, again, we talked about the benefits we're going to continue to accrue from technology THC with when Wyman talked about. So, we're going to be a pretty robust and continuing to invest at those levels.
So, those are the primary areas. And I think it is going to accrue to the organic growth story quite well as we move farther into this year and clearly as we move into 2023.
Thanks guys.
Thanks Chris.
Thank you. Our next question today is coming from Josh Long at Piper Sandler. Your line is live. You may begin. Mr. Long your line is live.
No Nicole, no Josh, no one from Piper Sandler. All right, moving on, Kate.
Kate, let's go to the next.
Your next question is coming from Jon Tower at Wells Fargo. Your line is live.
Great. Thanks for taking the question. Just curious…
Hi Jon.
Yes. So first on the pricing side of the equation, Wyman, it did sound like earlier in the call, you were alluding to more pricing at Chili's in 2022. Any chance you can give us some sort of degree of magnitude perhaps across the different channels? It sounded as if you were leaning a little bit more on the delivery side, taking a bit of pricing there.
And then a question for Joe specifically on the labor side or how we should think about these handhelds that I believe Wyman, you mentioned we are going to be in stores fully by November. How that's going to impact the P&L in terms of perhaps seeing better productivity and therefore labor hours moving a bit lower per store, or perhaps an improvement in food waste? I'm just curious to hear your thoughts on how those handhelds might impact in store ops.
Sure. Let me – I’ll hit them a little bit probably at a higher level. And Joe can you do more of the detail with regard to P&L impact? So, I think from a pricing standpoint, obviously, we chose to take a different tack than many during the pandemic, we kind of held prices and we wanted to just make sure that we were supporting consumers fully. And that contributed greatly to our traffic improvement relative to the category of double digits throughout the whole pandemic. And we're maintaining that solid traffic positioned as we kind of sit today. And that's important to us.
But we also realized with what we're seeing, obviously with the inflation numbers that Joe shared with you, that we're going to need to take some price, and we're probably going to have to price it a little more than historically we've said 1% to 2%. We're going to probably go over that number this year. We're currently sitting with Joe at 1.5%, and we're targeting probably to be over 2% here before the second quarter.
So, I don't know how much more we'll need in the back half, but we do feel comfortable that we've got room to take it to, mid- to low-2% range in the near-term and then we’ll evaluate kind of how these – again, it’s a question everybody’s got, right? Is it structural or is it transitory? And we just want to be cautious about how we deal with transitory costs, both with labor and with the commodities in building, in pricing and wage – making pricing and wages decisions that you can’t really back off.
So that’s how we’re doing it. Some of that shows up in some of these programs, Joe talked where we’re more open to running maybe higher overtime or offering incentives to stay versus jumping on wage rates. So those are just some examples. With regard to the handheld devices, TSC as we call it, I’ll just say, what it does is it allows the front of the house servers to be more efficient. And then we run a server runner model. So right now we don’t – we just run up straight server model. And so this allows us to get servers to be more efficient. They can take more tables and then they use the technology to bring food out of the back and run the drinks with the runners. And that it’s a more efficient model. It’s also a better model from a guest perspective.
We get better guest satisfaction scores. So that’s why we’ve been working on it so diligently for three years. It’s technology though, so it has to be working on a Friday night, under high volumes with – when you’re counting on Wi-Fi and all this technology to interface. And that’s what we’ve just perfected really over the last year. And we’re excited to finally get this thing rolled out company-wide by November.
And Jon, just to add to that, yes, there is – there are benefits that we’ll accrue from productivity, from a labor management side of the equation. I do think you may see some other things. Again, we expect to see benefits to GWAP. I think you mentioned, AVT some things of that. You can see that accrue at different points. Now, what we haven’t done in any of the limited thoughts that I provided you at this point on 2022 is I’m not assuming a big delta based on TSC. As we get that out there in that November – by November timeframe and started to utilize it and develop it. And I think we’ll give you more insight at that point as to how we’re seeing those numbers. But I’m not making the upfront assumption that I’m going to get x amount of great benefit in my current environment from a labor perspective.
Great. Thank you for the time.
Yes.
Thank you. Our next question today is coming from Brett Levy at MKM Partners. Line is live, you may begin.
Great. Thanks for taking the question. I guess, just continuing on, on the labor side. One of the strengths you’ve had is it has been you refined operations over the last few years and the implementation of technology. But it sounds like you’re re-introducing more items, whether it’s for brands across the system now bringing this technology on board just the on and the off-premise balance. How should we think about where you are in terms of your staffing levels? What you still need to do to be able to add back either the labor hours or require additional bodies. And what do you think all of this could translate into from a longer-term on your overall restaurant level margin? Thanks.
Well, let me just talk a little bit about staffing, Brett. So the staffing issue, it’s a serious issue, right? I mean, and it’s an issue that we’re all over because at the end of the day, it’s about getting our teams, the resources they need to deliver great sales and a great guest experience without putting too much pressure on them. And the current environment while things have gotten much better from where they were in March, there are still pockets out there where we don’t have restaurants fully staffed. And so what that means is, it puts a lot of pressure on the management, it also is limiting some of our sales potential. And so our first priority right now is to just get everybody staffed up, get our management team stabilized in staffing and get that foundation strong.
It’s kind of a unique situation. I’ve been in the business for a long time, having never quite experienced situation where we’ve got so many people unemployed and still such a challenge to find people to come and take really good jobs that we provide for the industry. So we’re seeing progress though and we’re making headway. But we still have some pockets where that’s a challenge. And so with that kind of leave it to Joe to answer the kind of the details.
Yes, Brett, I think again, I’m not seeing anything that is changing any of our thought processes around the long-term strategies and long-term opportunities from a margin stand. Those are all very much still intact. Again, as we’ve talked in the past and we’ll continue to talk going forward, we think margin opportunity first and foremost is going to emanate from our ability to drive top line sales. In the very short-term, we’re just trying to get a better feel for what that short-term dynamic is before I talk more specifically about things. But I still am very comfortable and confident in our ability to move margins wider as we kind of move forward with the strategy of the virtual brands. Obviously, contributes meaningfully to that, but we are going to continue to grow the base of Chili’s. And then we’ve already talked about the great improvements that Maggiano’s is making in their business model. So that will accrue to the benefit of margins as we go forward.
Again, I think the short-term dynamics of what the labor and the commodity markets are ones we can deal with on an ongoing basis. We did not price last year. We’re now bringing that level back into play. And when I think about the typical 1.5% to 2% pricing dynamics that we’ve talked is kind of our strategic benchmarks. I think that is at a level that allows us to manage both of those issues as we move forward. At any given period of time, you may see us delta off of those two, but clearly price will be a big piece of equation as we move back into I think that more normalized post-pandemic operations.
And then just one quick follow-up on the pricing. How are you thinking about that from a qualitative and quantitative basis? How much of that is going to be internal just based on what you see in your model and what you need versus analytics across the landscape and what you’re seeing from the competitive set? Thank you.
I think first and foremost, we look at on the need state side of the equation, the value positioning of both of our brands is an important dynamic, and we want to continue to maintain that. We’re very aware of what’s going on in the industry, and you’re seeing some fairly aggressive moves on pricing. But I always go back to the strategy drives traffic, and this is particularly a sector that has seen negative traffic trends, really for a long period of time now. And that’s not something that we want to fall into. So we’re going to be very focused on our ability to continue to drive traffic and have price may or may not intersect with that thought process.
We’ve kept pricing power intact and we will use pricing power, particularly as we go through this fiscal year. I think there is an ability to price and a permission in the short run to price. But you got to be careful about over time getting out ahead of the consumer and changing the value dynamics of your brand. So we’re – so if I – we lean very heavily in that equation, you decide to the internal value perception and how we think about the need state of the longer-term strategy.
Thanks, Brett. Kate?
Thank you. Our next question today is coming from Brian Mullan at Deutsche Bank. Your line is live, you may begin.
Thank you. Just a question on It’s Just Wings. You’ve spoken before about the takeout opportunity related to that you’ve spoken about needs to generate awareness outside the delivery channel. So can you just talk about how you plan to do that going forward? And specifically, should we be thinking about any increase in advertising budget here? And is this an initiative you plan to lean into in fiscal 2022? Or is it a little bit further out on that front?
Hey, Brian, it’s Wyman. Yes, no, we’re – it’s taken us frankly a little longer than I would’ve thought to just get the infrastructure up and running to support this aspect of that virtual brand. But it’s up now, it’s just recently been put up, as I mentioned, the website’s up, you can go to ijw.com and you can order wings to go, or you can order them through delivery, delivery also on our website. So now it’s just about how do we get some awareness of that brand? And so we will spend behind it, but again, it’s a very efficient spend and very targeted spend. We know who this target is. There’s a lot of online opportunities. There’s a lot of – so it’s not like you’re going to see national television advertising around the IJW brand.
But we will spend some time and energy here in the next quarter or two really seeing how much awareness we can create and how much business we can drive. So you’ve got two ways now between Google and the website to find the brand for a takeout opportunity. And so now we’re going to continue to build that. More on that probably in the next couple of calls, we’ll keep you posted on how we’re seeing that initiative kind of build.
Thanks. And then just as a follow-up, I saw the Board reinstated the share repurchase program it’s encouraging to see. Joe, could you just speak to your philosophy there, opportunistic repurchase versus perhaps more programmatic repurchase? The share count range you provided with the guidance is someone wide. Can you just confirm, does that just have to do with the pace of buybacks, which is maybe unknown at this point?
Yes. I think that that’s an accurate way to think about it. Again, we appreciate the support and the bullish statement. I think the Board is making on how they’re viewing the business with the reinstatement of that program. Again, we’re going to first and foremost use our cash to invest in the business. You’re seeing that heightened level of CapEx, which I think will be maintained. We’re going to continue to delever on a metric basis. I would anticipate getting down into the lower 3s, we finished at 3.6x, we’re going to continue to pay that down and grow the business. It will allow that metric to continue to move lower as we go forward. But we generated a lot of cash and at that point there’s still cash that we now have the ability to return to shareholders.
I like to be both opportunistic and programmatic at the same time. So we do generate cash on an ongoing basis. And depending on where we are in any of those other given programs, we’ll deploy it. I would expect that to be over the course of the fiscal year. We have not been into the market obviously yet. But that will be coming down the road that vast guidance does incorporate some thinking about what might go on in this fiscal year.
Great. Thank you.
Thanks, Brian.
Thank you. Our next question today is coming from Nicole Miller-Regan at Piper Sandler. Your line is live, you may begin.
Thank you. We’re here. I promise. Sorry about what happened earlier.
Thank you, Nicole. Welcome back.
Great update. Two quick ones on our side from us. The first is on the store-level margin where the commentary so far is very helpful. I was very curious on It’s Just Wings impact on the P&L specifically, obviously store-level margin. I’m thinking there is contribution there is it something you can call out and then wing prices have been sky high? I think moderating a bit. So maybe you could net out the transitory nature of that too. And we could start to understand that for modeling purposes for next year as well. Thanks.
Yes, Nicole I’m going to defer on several of those. We haven’t broken out a lot of the dynamics on a specific level. It is definitely a positive contribution to that that store-level margin. Again, we look at that as an allocated P&L for the virtual brands. And I think we’ve talked about before that it generally is north of 30%, a lot depends on what you’re doing in any given time period from a marketing standpoint. Like as again, I want to fully allocate the cost as we can, but they do lever the store P&L, which is, again, that's nice piece of the volume increases that you see coming out of the virtual side of the equation.
We've noticed a little elevated price on the drilling side of the equation and we've had to make some adjustments in our cost dynamics on Wings. But we've obviously maintained supply and ability to keep that product in front of the consumer, just a great job by our supply chain team in a very unique in that times trying an environment for them. So they are elevated, I think at some point you will see that dynamic shift and that will accrue to the benefit of that brand. At the – I would anticipate, Nicole, a fairly robust discussion around virtual brands at the analysts day and the notch. So hopefully, yes, I'm going to defer some of those specifics to then, but more insights to come.
Yes, the only thing I'd add Nicole is obviously because of the incrementality, that the high incrementality of those sales to our business, the flow through and the profitability are impressive and important.
And then just on Maggiano’s, I mean, you kind of clued us in to be realistic if not cautious, but I would be curious just what kind of behavior you expect for the upcoming holiday season. And do you have any indications yet of requests for private dining or parties or catering or anything of that nature? Thanks.
Well, as you can see in the information we shared in the release, the movement from just fourth quarter to July was impressive at modular Maggiano’s. And so as we were working as a country out of COVID and people were starting to feel comfortable again about socializing. We saw the part of the business that was really being curtailed the most, which was their banquet business, and their catering business start to come back. And it's ahead of schedule from our perspective, it's mostly social. So the business side of the equation hasn't come back as much yet, but obviously, you can see, they're running again above the 2019 numbers in July.
So those are all very positive things, what that portends for the holiday season. I mean, I wish I could tell you Nicole, we were optimistic, but we're also being cautious both because again, the pandemic isn't quite totally put the bed with this whole delta variant, and we're not exactly sure what the status will be. I think if we get some clear road prior to the holiday season, from a pandemic standpoint, we'll see a pretty robust banquet business in the holiday season. We know consumers want to gather, we know they're ready to celebrate together and eat together. And if there's permission to do that in a comfort – a level of comfort around that, then I think we're going to see a good season, but we're all just kind of waiting to see.
Thank you.
Thank you. Our next question today is coming from Andrew Strelzik at BMO. Your line is live. You may begin.
Good morning. Thanks for taking the questions. I was hoping first you could do a little bit more comparing and contrasting between what you're seeing or expecting at Maggiano's Italian classics and It’s Just Wings. You mentioned the check, the occasion, anything else that we should be mindful of as we think about that rollout. And if you can comment on the margins of the flow through compared to It’s Just Wings? That would be helpful as well.
I mean, we're not going to get too specific, Andrew, I mean, I think I've given you most of the color. I'll probably give you on how the brand plays. The biggest difference, I think, is just what we've talked about in terms of rollout. I mean, we were comfortable enough to roll because of what was happening primarily in the dining rooms with a lot of constraints. We felt we could focus on rolling out the Wings brand overnight to a thousand restaurants. Well, obviously our dining rooms are busy again, and we've got a lot of things going on in the restaurants with some initiatives like TSC that we've talked about that are allowed – that are requiring us to support our restaurants on a more kind of moderated basis as we roll this brand.
So it's not going to hit like Wings hit, it's going to be rolled out throughout the year. But our energy and our excitement about the brand are comparable, I would say, we like both of these brands a lot of we think, they are – it's manageable, first of all, within our system to really leverage these assets and drive continued growth within the assets that we have. And it delivers a great guest experience. That's the return rate on It's Just Wings is exceptional based on the information we get from DoorDash. So once we get trial, we get really good repeat, and I think we'll see the same thing with the Maggiano's classic. So again, we're just focused on getting it into the restaurant in a way that our operators can execute it. And then building these brands over the next really years to come.
Okay. That's helpful. And I wanted to also ask on the food cost side, and I apologize if I missed this, but how much visibility do you have from contracting to the inflation, I like that you gave on the food cost side? Is there anything that we should be mindful of from a cadence perspective and just from suppliers, your conversations with suppliers, what's kind of the tone and kind of the expectation about sustainability? I know it's a tough one to call, but just any insights you could provide there would be really helpful. Thank you.
Yes. Again, we have a good contract positioning really most of the contracting running a lot of rest of this calendar year, some of the runs into the first quarter of next calendar year. So the back half our fiscal year, we see a higher level and actually significantly higher level of our inflation beliefs as built into the back half of this – of our fiscal year due to that contracting. So again the contracts in place, we've had at times during the last quarter discussions with some of our partners on where our contract levels are and volumes, price and things of that nature. We've adjusted a couple in conjunctions with them on the chicken side of the equation. I think that's gotten the highest level of dialogue around the industry and that those issues have been real. We've managed through them those kinds of adjustments. But again, we're comfortable with the inflation that we have built into our thought process here that I talked about. And it is a more back half of the year thought process.
Great. Thank you very much.
Thank you. Our next question today is coming from Jeff Farmer at Gordon Haskett. Your line is live. You may begin.
Thank you. We've discussed a lot of P&L lines this morning, and I was just hoping to get a little bit more context color on the G&A line. So specifically will 2020 to be an incentive compensation reset year. And will there be any other factors that could potentially push that G&A number well above or just above the 2021 number?
I know Jeff; I think it's going to be a relatively consistent year in that regard. Again, we build our policy around G&A, based on hitting targets and things of that nature. So I think we accommodate the incentive compensation pretty well. I always like to have an upside of G&A from an incentive standpoint, if that works. I think you'll see from a dollar basis, you're probably up in the $8 million to $12 million range, I think in that range, but it's a percent of sales I want to – I would assume you could model relatively close to 4%, low-4s, let's say to 4% to 4.2% be right in line with our thinking on that specific line.
And most of that, Jeff is really…
Work our way down the P&L as we go on our…
And on the G&A front, some of that does the bulk of that is really instituting some programs that we had to restrict as we got into COVID, right? And so it's putting those, it's getting a little more travel now, as people are getting back out and moving around. So pretty much in line with our history in terms of how we run a very efficient restaurant company.
That’s helpful. And just one more unrelated on the off-premise mix, I believe you said Chili's was, I think the quote was more than 30%. So question is what the more precise percentages for Chili's off-premise? And then your updated thoughts on where you think that Chili's off-premise mix will settle as we get further sort of past COVID or we move past COVID?
Yes, Jeff, it is staying very consistently, and let's say that 33% to 35% range throughout the quarter. And I think so we've seen more and more and more evidence as we've kind of gotten through the last year based on recovery curves that, let's say the low – let's say the 32% to 35% range is going to be the sweet spot going forward.
Yes. The only thing that's still out there, Jeff, and, we'll keep you posted as we learn, but there's still a lot of concern about COVID with consumers. And I think there are still some consumers that are preferring takeout to dine in still. And as, because our takeout business is really the thing that surprised us, the strength of takeout has been the biggest surprises, dining rooms have opened we thought maybe more people would move back into the dining room and we haven't seen quite as much. So that could take a little while for everybody to get kind of back to, hey, I'm not going to restrict my preferred choice by an outside influence like a COVID.
Thank you.
Thank you. Our next question today is coming from Brian Vaccaro at Raymond James. Your line is live. You may begin.
Thanks, and good morning. I just wanted to start with clarifying two items on your comments during the Q&A. So first on commodities, just to make sure I heard correctly, you expect the second half to be significantly higher than the first half. So we might be only talking about slightly inflationary in the first half, and then maybe high singles in the second half. Did I hear that correctly, Joe?
I didn't give you a specific high singles or that. I think we have more inflation built-in to the second half of the year. That's based on the contract structures we have out there. There's obviously some inflation will work its way into the first half of the year that a lot of those are spot market driven items you think about produce, avocados things of that nature. You'll probably see some inflation in that regard. You may see some inflation on the ground beef side of the equation, but our beliefs around inflation based on current markets that we're looking at and the timing of contracts lead us down a path of more inflation in the second half of the year now. Markets can change and we'll update you as we kind of move through and get closer to some of those timeframes.
Okay. That's helpful. And then on the off-premise sales mix, you are talking about kind of that 33%, 35% range. So that's the – do you have the tight number for the fiscal fourth quarter? And where was quarter to date? Is it also in that 30% to 33% range at Chili's?
At Chili's, for the fourth quarter, we were 36% to 37% range, a little bit above that fourth quarter. We don't have a year. I don't have a quarter-to-date. It's probably, I'm pretty comfortable. It's going to be consistent with that. You're not going to have maybe a slight downward variance from that.
Okay. And within that, thinking about third-party delivery versus takeout, what kind of changes are you seeing within the mix of your off-premise mix as you've moved through? Has it shifted? I think it was 60/40 prior, have you seen much shifts in the two channels?
No, I think, again, I think we're seeing a pretty consistent flow of those channels in the business right now.
Okay, great, great. And then I guess my question, I wanted to circle back on labor, if we could? Could you just give a little more color on the re-staffing progress that you've made in recent months? Perhaps you can level set where I know it's isolated, but maybe level set just where current staffing levels are on average versus 2019, or perhaps versus some targeted level at recent sales volumes that you're working towards.
Yes. I mean, in general, when you look at the overall number of key members, we have Brian we're at staffing levels that are equivalent to pre-pandemic.
Now that every restaurant probably could use another body or two but that's not unusual for the restaurant industry. You could always use another cook or another server in most restaurants on any given day. So that's not a real issue. The real issue is more where you're down several primarily, especially in the heart of the house. So what we've seen is especially in – the one thing we have seen as, as some of the stimulus has kind of abated.
We've seen front of the house so servers become more available, not as big an issue for us with front of the house, part of the house is still a little bit more challenged in those areas. Again, this isn't a nationwide issue, but in those pockets where we're more challenged with staffing, those are the bigger issues; it's getting the kitchen staff is the biggest challenge. And again, we're making good progress, but we've still got a little ways to go.
And again, I would add to that, Brian, I think it's important from our perspective is that's opportunity for us. Again, as we bring more stability to those pocketed areas, you're going to see some capacity opportunities too. So we look at it as upside from where we go from here.
Yes. Our sales were absolutely impacted in the quarter because we weren't at full staffing capacity or capabilities. And so as we get fully staffed, which we anticipate doing soon that's opportunity as Joe said.
Okay.
Thanks Brian.
Thank you. Our next question today is coming from John Glass at Morgan Stanley. Your line is live. You may begin.
Thanks and good morning. Wyman, can you just talk a little bit about where you stand on the re-imaging for Chili's I know probably last year, this past fiscal year it slowed down. Where are you in the estate? And if you think about remodeling going forward, his the public plant's changed, you've got virtual brands now versus two years ago you didn't. You've got a bigger off premise business, so you're thinking about how and how much and how you spend on remodeling differently now?
Good morning, John. We're back full bore on the re-image size equation. Right now we're actually focused very heavily in the Midwest, which was the acquisition we did two years. That was probably our in, in most cases getting fuller re-images because they had not necessarily been re-imaged at the same level and pasted we had done the brand. So a little more higher spanned in intensity there on those images, and you get a nice incremental lift out of that too, when you do a full reimage.
We probably still have a couple of years to go 2.5 years or so on the reimage program. Over time when I think about the base reimages outside of those acquired restaurants that spend has come down as we've kind of perfected our thinking and understood where the bang for the buck really was, is just so you've seen a decrease in the individual spend on any given restaurant, but we're also looking very specifically a lot of opportunities within the restaurant base.
Where can I do a more fulsome Bar reimage for instance, and things of that nature that can really help increase volumes with any one given restaurants. So that we have the general program and approach, but we're also trying to be very systematic and looking at great opportunities on individual restaurant basis as too. But that's a program that's going to continue for the next couple of years as we kind of move through that that process.
One thing we have done John. This is Wyman. I think we've gotten really good at, as we remodel thinking about future R&M experienced? And how do we take these reimage investment dollars and help offset future R&M cost that we experienced. So, two examples; one is the new awnings that we're putting on Chili's, their metal, we're not going to be dealing with faded, painting to awnings that become a challenge on a cycle and show up in your R&M expense. We are also excited about Maggiano’s reimaging program that will kick-off here pretty soon.
And a lot of the dollars that go into that reimaging are going to make the building and the experience much better. But they're also going to take out some of the things that really drive up the cost to maintain that restaurant. So changing finishes out, changing some of the products out that need to be changed, opportunity to changing them out with a product that's a lot easier to maintain. And so those are some of the things we're doing as we kind of keep moving through and refreshing and keeping the brands relevant through time.
John, from an off-premise standpoint, we haven't had to change our thinking too much within the reimage process based on that dynamic. We have brought, as we've talked in previous calls before a new off-premise system and how we move actually the food from line out to the cars into play, it's production, capabilities and shelving and the technology that we're now using to manage the parking lot that helps in that, but we haven't had to make a lot of structural physical changes to make that that happened.
Our new restaurant design we have adjusted very slightly to increase the ability – the size and ability to flow food through that side door. As we’ve just opened a brand new restaurant here in Dallas, just a week or so ago. I was in there last week and that dynamic really works well and looks great, and how we help off-premise. So we're incorporating it where we can, but the systems we're putting in place to support that, that line of business are probably more important than the physical space changes.
Is it Chili's, obviously it was a different lap than in prior quarters dining rooms were open. So you've probably got some higher alcohol sales. Is there anything else in mix that's notable; consumers are buying premium products. For example, should we think about this kind of mixed dynamic playing up similarly over the next couple of quarters as you cycle the negative mix from a year ago?
I think the biggest one, John is just alcohol sales. As dining rooms open, the biggest thing we've seen is, is just alcohol sales, and we've been, it's always been the case right? First, you can't sell it in a lot of places, and then secondly, beverage sales in general is what you pick up the biggest incremental mix benefit of getting dining rooms up and running. And that's what helps to check average the most.
Got it. Thank you.
Thanks, John.
Thank you. Our next question today is coming from John Ivankoe at JP Morgan. Your line is live. You may begin.
Hey guys, how are you? I'm happy National Fajita Day. I just got a notification from you.
There you go.
Thank you. That literally came during the conference call. So the question is on other OpEx, normally that alignment that has a lot of fixed costs including marketing, which is – I know it's the percentage of sales, which is normally relatively steady. But Fiscal 2021 presumably was not a run rate year, things like advertising, repair and maintenance, maybe insurance, and some other costs items that came out throughout at least the first half of the year. So the question is, how do you think about that cost category as a percentage of sales especially as your comps improve. And obviously understand there's probably a lot of benefit in the fourth quarter, from the 14th week in that line as well. So just wanted to make sure that we're all on the same page for that cost category?
Yes. John, again I think we'll continue to maintain the marketing strategy that we deployed really going on two years, 2.5 years now. So we're comfortable that we have enough marketing, fire power built in to the other OpEx. As I think you know, we really think about marketing in a different mindset now where a lot of quotes your marketing expense is going to show up in your net comp line as we use that digital capability in that one-to-one contact with our loyalty guests to drive traffic also. It's continuous – there's a leveragability opportunity. Again when we think about margins and think about top line growth that restaurant expense other OpEx, as you referred to it is going to be a point of leverage because it does contain a lot of fixed costs within it. So, I think there is a year-over-year opportunity to expand margins generally, but specifically in that category too.
That's great. Thank you.
Thanks, John.
And have some fajitas John.
Thank you. Our final question today is coming from Jeffrey Bernstein at Barclays. Your line is live. You may begin.
Great. Thank you very much. Two questions. The first one on the unit growth following up from the comments earlier. Joe, I think you mentioned opening 20 plus per year. I think you said starting in the back half of this coming year. So just want to make sure I understand that correctly, that that is kind of your run rate assumption for the next few years would be 20 units plus, and maybe if you can share any color in terms of what by brand or U.S. versus international, how we should think about this acceleration and unit growth to the north of 20 that you mentioned earlier?
Yes. And again, that's the comments that relate to the Chili's domestic side of the equation. We have a pipeline already that starting taking to push north of 20. I would expect based on timing of construction and actual opening that you'll probably see somewhere in the six to eight you know, may be pushed towards nine in this fiscal year because of the pause in real estate and construction, that's also probably going to be more of those in the back half of the year. So not as big of an impact in 2022, but the pipeline then moves very quickly up towards that high teens 20 – low-20s. So you'll start to see that in 2023 really come to realization, and our intent is to continue to maintain and build that pipeline in that let's say 20 to 25 range as we kind of go forward from here. So again, tonight's organic growth will start flowing back into the system.
It really was made possible Jeff, as we'd made the acquisition of the Midwest restaurants, and as we look at opportunities in these areas where franchisees just haven't developed as rapidly as we have, just opens up additional real estate opportunities for us that we're excited about getting into. And as we've now started to open some of those restaurants in these markets, we're really pleasantly surprised by the reception the brand is getting and we're excited – excited about getting more restaurants open, not only in Texas where we have quite a few, but in other parts of the country
Wyman, that's a great segue. I felt like you were beating all of us in your prepared remarks when you talked a couple of times about being much more convinced and sold on the company operated model. I'm just wondering whether you could provide any color behind that. I know you mentioned there's some scale benefits when you go through issues like we've gone through. Is there any thought in terms of whether you're going to be buying in existing U.S. franchisees and wondering whether there's write a first refusal opportunities and I know you kind of have, you currently have like a 15% plus mix of franchising, but that coupled with your commentary around maybe. wanting to accelerate growth where franchisees might not want to, I'm just wondering what your thoughts are in terms of that franchise mix U.S. I guess, or International? Thank you.
I mean, Jeff, I think you know, just looking at our history, you can see obviously we believe in the company owned model, we've got the majority of our U.S. restaurants are company owned. We have a couple of good franchise partners still out there, and we're obviously having conversations with them and, about what's their future look like. And are they – how excited are they about growing the brand and staying connected with all of the things we're doing?
That's, that's my commentary on the ownership really has to do with these investments we make and getting the scale leverage beyond just supply chain, because obviously you can do that in a franchise system, but really across everything across technology. Across the position of the brand; across the operating systems, we're moving at a rapid pace. You just start to do virtual brands and keeping everything in sync in a restaurant is hard to do, even with good franchise partners. I mean, there's just a lot of moving parts to a casual dining restaurant. And so we do believe in that, we're going to continue to look for opportunities and we'll have these conversations and we're excited about the potential.
Understood. Thank you very much. All right.
Alright. Thanks Jeff. Good talking to you.
Okay. I think we're all wrapped up, Mika?
Yes. Thank you everyone for joining us on the call. Have a wonderful day.
Thanks everyone.
Thank you, ladies and gentlemen. This does conclude today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.