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Good morning. My name is Sophie, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Hardwoods Distribution Fourth Quarter Results Conference Call. [Operator Instructions] And now would like to turn the conference over to Mr. Rob Brown, President and CEO. You may begin, sir.
Thank you, Sophie. Good morning, and welcome everyone. Thanks for joining us. I'm going to start this morning with some comments on our 2018 year. Faiz Karmally, our CFO, will follow with a review of our fourth quarter and full year financial performance. Then I'll return to discuss our outlook going forward. I'm pleased to report that HDI's growth story continued in 2018. Our full year sales grew 8.5% on a combination of organic and acquisitions-based growth, and diluted profit per share increased 7% year-over-year as we benefited from the reduction in U.S. corporate tax rates. I'm proud to say, these results represent our seventh consecutive year of top and bottom line growth. Over this 7-year time frame, we've increased our sales from a little over $300 million in 2012 to over $1.1 billion in 2018. This represents a compound annual growth rate of 21%, and it's been accretive growth. Our adjusted net profit per share has climbed from $0.38 to $1.61 over the same time frame, representing a compound annual growth rate of 23%. As we grow on our results, we have also provided investors with increases in our dividend. In August, we announced a 10% increase, which represented our seventh dividend increase in 7 years. Our annual dividend is now $0.32 per share. Looking more closely at our 2018 performance, about 75% of our sales growth was organic. Even in a softer year for residential construction, our broad end market diversification and our market development strategies, together with price appreciation on some product lines, helped us achieve $64 million in organic sales growth. The balance of our sales growth came from acquisitions. This includes the positive impact of 2 acquisitions completed in 2017, and 1 additional transaction in 2018. Together, these acquisitions strengthened our presence in Georgia, Alabama, Texas and the U.S. Northeast, and added $27 million to our top line results. As it relates to our bottom line, the significant reduction in the U.S. corporate tax rate offset the negative gross margin impacts of new trade barriers on hardwood plywood imported from China. On the whole, the new U.S. tax and trade policies netted out favorably for us as evidenced by our higher profit. And over time, we expect the balance to swing further in our favor as the impacts of the trade barriers gradually subside. Overall, it was a successful year for HDI and Faiz will give you more details on our performance in just a moment. But first, I want to comment on our recently announced share repurchase plan. In the fourth quarter, we saw significant disconnects between the share price performance and what we believe is the underlying value of the company. While it can be difficult to pinpoint exact causes of market sentiment, we're aware that the broader building materials product categories been negatively affected by uneven economic data on U.S. housing. We believe, the recent softness in U.S. housing markets is a temporary pause and not a directional change. In addition, our exposure to U.S. construction markets is well diversified across new residential construction, repair and remodel, nonresidential construction and a range of other end markets. Accordingly, we believe, the underlying value of HDI is not reflected currently in our share price. We've now received TSX approval for a normal course issuer bid, and we will consider share repurchases depending on future price movements and our capital allocation priorities and other factors. With that, I'll pass the call over to Faiz to review our financial results. Faiz?
Thank you, Rob, and good morning, everyone. I'm going to provide a general overview of our results for the fourth quarter and full year 2018, and then I'll provide some comments on our financial position and capital allocation plans for 2019. Starting with fourth quarter consolidated revenue, our sales increased 10.2% to $275 million. That's a gain of $25.4 million compared to 2017 and it breaks down as follows: organic growth contributed $12.3 million to sales or 4.9%; acquisitions accounted for $4.3 million of the year-over-year increase or 1.7%, and we realized a translation gain of $8.8 million related to the positive foreign exchange impact of a stronger U.S. dollar. Our fourth quarter gross profit grew by 6.6% to $47.4 million. That's an improvement of $2.9 million, and it reflects the higher sales, partially offset by a lower gross profit margin percentage related to market imbalances caused by U.S. trade barriers, Rob discussed. Our fourth quarter gross profit percentage was 17.3% as compared to 17.8% in 2017. Operating expenses were up $3.8 million year-over-year to $38.9 million. This primarily reflects cost incurred to support organic growth, the impact of a stronger U.S. dollar on translation of our U.S. operating expenses and the addition of expenses from acquired businesses. As a percentage of sales expenses were stable at 14.2% in the fourth quarter as compared to 14.1% in the comparative period. We generated fourth quarter EBITDA of $10.3 million, which was down $0.7 million year-over-year. This primarily reflects higher operating expenses, partially offset by the $2.9 million increase in gross profit. Our income tax expense decreased by approximately half to $1.9 million in 2019, primarily reflecting the lower effective US tax rate. And our profit grew by 18.9% to $5.9 million, while diluted profit per share improved to $0.27 from $0.23 in the same period of last year. This primarily reflects lower income tax expense, partially offset by lower EBITDA and an increase in depreciation and amortization. Turning now to the results for the full year ended December 31, 2018. Total sales climbed to 8.5% to $1.134 billion in 2018, a year-over-year improvement of $88.4 million. As Rob discussed, about 3 quarters of this was organic growth and roughly 1 quarter was acquisitions based. These gains were partially offset by a $2.2 million unfavorable foreign exchange impact. 2018 sales in the U.S. were up U.S. $66.9 million or 9.6% year-over-year. And sales in Canada grew by $3.8 million or 2.8% during the same period. Gross profit for the year increased by 4.5% to $200.5 million. This reflects the higher sales, partially offset by a lower gross profit margin of 17.7% as compared to 18.3% last year. And operating expenses increased by $11.4 million, reflecting added costs to support organic growth and the addition of acquired businesses. These increases were partially offset by lower transaction costs and a $0.3 million positive impact of a stronger Canadian dollar on translation of our U.S. operating costs. Income tax expense decreased by $5.8 million, primarily driven by the lower U.S. corporate tax rate. This also reflects the decrease in taxable income as compared to 2017. This in turn helped us increase profit by 7.4% to $32.2 million, and diluted profit per share increased to $1.49 from $1.39 in 2017. Looking now at our financial position and capital allocation priorities, our balance sheet continues to be responsively managed. As at year-end, our net debt-to-adjusted EBITDA ratio was a conservative 2x, and our debt-to-capital ratio was just 28%. We also had $78.4 million of unused debt capacity available. Finally, our capital allocation priorities for 2019 will include: investing in working capital to support anticipated organic growth; ensuring continued responsible management of the balance sheet; executing on our acquisitions pipeline; and continuing to return value to shareholders in the form of dividends and share repurchases. Now, I'll turn the call back to Rob.
Thanks, Faiz. I'll close today with a few comments on our outlook and then we will get to your questions. While we've seen some recent weakness in U.S. housing demand, our long-term outlook remains positive. The current level of U.S. housing starts and inventory remains below the long-term average. We believe this [ curved ] with the favorable demographic characteristics of U.S. consumers offers good support for housing demand over the longer term. Looking in 2019 more specifically, forecasters are predicting at least modest growth for U.S. residential construction over the balance of the year. In the repair and renovation segments, spending is expected to increase by about 5% and in the nonresidential construction market by around 4.4%. Combined this should create a moderate level of demand growth in 2019. We'll build on this with strategies that include capturing market share in the U.S. and gaining additional market share in product categories we're targeting like decorative surfaces and composite products. I want to note, however, that we expect first quarter sales to be in line with the first quarter of 2018. This reflects some lost sales days this quarter due to weather and also the slow start to the year for construction markets. After Q1, we expect sales activity to pick up in the U.S. and we're anticipating low to mid-single-digit organic growth through the balance of 2019. In Canada we expect nominal growth through the rest of the year. To this, we expect to add accretive acquisition-based growth. We've already completed a transaction in January, which brought us a new location in the growing Southern California market. And going forward, we have a very strong pipeline of prospects. We have completed 7 successful acquisitions in the past 7 years, adding 42 new locations and about $550 million in sales. Given the highly fragmented nature of the industry and our success in identifying and closing on acquisitions, we expect to continue to grow in this way. All of this will set us on the path for our next growth target to achieve $1.5 billion in sales within the next 5 years. And we'll be working to increase profitability at the same time by continuing to optimize our platform and leveraging our size and strength to enhance our competitive position. Overall, we're proud of the growth we've achieved to date and we're excited about our prospects going forward. HDI is not just getting bigger but focused on quality, integrity, professionalism as we create long-term value for all our stakeholders. With that, I thanks -- thank you for your attention. I'll now turn the call back to the operator to provide instructions for the Q&A period. Sophie?
[Operator Instructions] And your first question sir will be from Yuri Lynk at Canaccord.
Rob, I just wanted to dig in a little more into the outlook. You're talking about low to mid- single-digit growth in the U.S. after the first quarter. What do you think the full year 2019 organic growth numbers is going to look like?
Yes, thanks, Yuri. So I'll walk a little bit of a line here from the perspective of our forward-looking statements, because we don't give specific guidance, but we do try to give some directional views, which is what we've described related to the first quarter. So we're obviously, ways through the first quarter. We have got some outlook into the trends there. We did lose a significant number of selling days due to weather. If you look at what's occurred in both Eastern and Western Canada, unusually, we've also had some impacts in the Pacific Northwest of the United States, and certainly, the links state area, Indiana, Elkhart and Minneapolis, we've had periods of days where customers have been hooked, and we've not been able to make sales on those days. So that's been a component that's been in place in the first quarter. We obviously, as we move into the spring building season you see that, that bit go away, which is why we make the comments that, once we get through the first quarter, and we're entering the spring building season, we think go back on to bit more of a growth path for the balance of the year. And as we talk to customers they share that sentiment.
Okay. So the weakness in Q1 is -- you are seeing some macro weakness, but it's mostly weather, the reason for the kind of the flat performance in the first quarter?
Yes, it's both things. There is macro weakness. Certainly, if you look at the -- if we just take the U.S, and we look at coming into the fourth quarter, we've achieved year-to-date organic growth in the U.S. of about 7%. In the fourth quarter itself, our U.S. organic rate went to 3%. So we do see some macro slowing there. That will be a piece of the first quarter. I think that's carried into the first quarter, but then on top of that you've had some weather-related impacts.
Okay. And then just thinking about the associated EBITDA with that flat revenue. I mean, Q1 of last year, you had pretty strong gross margin, I think 18%. You're guiding below that range for the full year. So it's fair to say that flat revenue but EBITDA will probably be fall short of what you achieved last year in Q1?
Yes, so our comments are really around -- we're seeing flat sales as a probable trend line coming into year as -- we move through the first quarter. Gross profit, we're not through the first quarter, but that 17%, 18% range is where we see things, but as we move through the course of the year, we actually see the possibility for that to strengthen and then yes, you can see where the run rate is -- lies in terms of where we have been on costs, which have been fairly stable.
Okay. Just wanted to talk about the capital allocation priorities. Can you share with us the size of the NCIB first of all?
Yuri. I can tell you the TSX approved a potential repurchase, just over 1.6 million shares. So that is the maximum size the TSX has allowed for.
Okay. And have you executed on any of that at this point or was it just approved?
No, it was approved in January, but because it was approved in our blackout period, we are not able to execute on it, so we exit the blackout period, which would be early next week.
Okay. And then the comments are on working capital. I mean, obviously, every business has got a investing working capital. So it was particularly heavy investment in 2018. So what are you signaling there that that's something we should -- that above average investment working capital something we should expect? Or just curious if you can, kind of, directionally guide us to working capital investment number for '19?
Yes. So yes, when you look at the working capital, obviously, we're talking about inventory receivables and then we've got some supplier financing on the payable side. The receivables and the payable side have been very stable in terms of [indiscernible] days sales outstanding, collection period and payment period. So we're really talking about inventory. And we did invest more heavily through the course of 2018 on inventory, 2 reasons for that, one, uncertainty around the degree of supply that was going to be available in the market with disruption of hardwood plywood coming from China around the trade case. So we carried more wood than we typically would relative to the sales pace to make sure that we were caught short. And that was a significant reason for our bill -- that is not what we would consider a new -- pardon me, the second point I want to come back to that is also we brought in wood to trial related to new supply lines from countries overseas to replace what we typically or previously did for China. The higher inventory levels that you've seen, we don't consider to be permanent. We don't consider that to be the in the near-normal. We do need to do some rightsizing with the inventory relative to the sales pace. But on balance, we chose to run heavier, because it's more important to maintain the underlying sale and carry a little bit extra inventory than to find yourself short.
Okay. So I guess the net investment and working capital should be less than the $40 million that you invested in 2018, if one assumes you're going to unwind some of that extra inventory, is that the messaging?
Yes.
Your next question will be from Hamir Patel of CIBC Capital Markets.
Rob, you're betting for Q1 sales being flat year-over-year and year-over-year comps in the U.S. for the balance of the year low to mid-single digits. Could you break down how much product price inflation or potentially deflation is embedded in that?
In the low to mid-single digit growth for the balance of the year in the U.S.?
Yes, I know it's always Q1 that you're seeing product prices actually down year-over-year.
A little bit in Lumber. We've seen some decrease certainly in pricing so that ones we're calling out. We don't see a lot of significant price appreciation in the go-forward numbers either.
Okay, fair enough. And you -- I think in your prepared remarks, you referenced a $1.5 billion revenue goal within 5 years. What sort of EBITDA margin are you targeting when you hit that objective?
So 6% is where we'd like to get to in the year and we've got some internal strategies around how we're going to do that. I think you and I've at least spoken before that lower the biggest interspace, we are only about a 10% market share, but there are some things where being bigger can't be an advantage, and we think that over time creates the spread to get to that 6%. I'll also note that as we execute on our acquisitions program, typically the companies that we buy are coming [in low EBITDA ] margin, and it's up to us once we buy them to bring the profitability up and we've got a track record of doing that.
Fair enough. And when you reference a 6%, I'm guessing that's on a pre-IFRS 16 basis?
That is correct, Hamir.
Yes, that's helpful. And just a last one for me. For hardwood plywood, how much transshipping is still going on? I know there's some enforcement action in the latter part of Q4 and also are you still seeing hardwood coming in as softwood in Q1?
Sure. There's 2 pieces to that. On the transshipping, as I think you're aware, there are some importers that were named in that complaint with respect to bringing in wood that was manufactured in China transshipped to a third-party country and then brought to the United States, duty-free and that has been polluting the market in terms of volumes that are here, it should not be here. That case is still ongoing. We're waiting for an update on it, because that's gray market wood in the first place. It's very difficult to put our finger on whether the practices is still ongoing or not. But our perspective has certainly put significant pressure on the named importers in that case. And we do think that it could -- if the government follows through with the enforcement action, they could have a significant positive impact on the market going forward, because it will just clean up that piece of wood that, as I say, has held prices artificially down in that product category. The second piece you're referencing on softwood is slightly different. So that's bringing in an alternative product that has a pine face, it still hardwood plywood with a pine face to replace what used to be coming from China. The petitioners in the original trade case have taken steps to make that product not applicable or able to be brought into North America under the scope. Where that one's at is, it's being assessed now by the Department of Commerce. What I will say is, because that investigation is underway in the event anybody was continuing to bring in the pine-face product today and the Department of Commerce determines that in fact, it should be included in the scope of the trade case than anything someone has brought in since the trade investigation started would be subject to retroactive duties. So we think that, that's a fairly punitive deterrent to, again, take some of that pine product out in the market. Putting the 2 things together, we hope it soaks up the product that continued to flow into North America after the trade case was [ referred ] and we didn't really expect to be here.
Next question will be from Zachary Evershed at National Bank Financial.
Setting aside the trade action and progress at the moment and just viewing the supply and demand dynamics as they currently exist. If those remain in place for the remainder of 2019, would you see your margins compressed year-over-year versus 2018?
[indiscernible] done gymnastics on that in my mind, Zach. No, we don't see a compression of margins. No, no is the answer.
Okay. And so then if the DOC judgment comes through or transhipping dries up, there is additional upside?
Yes. And you're bringing up an important point, because the other component to that is what we've done, we're talking about things that others have done and that have occurred in the marketplace. But what we've done has gone out and build a very robust replacement import supply line to new countries and constructed that in a legally compliant way. So we do want that other [ wood to go away ] we can get back to selling what we bring, which is an advantage and choice to our customers from bringing important supply line to North America. We have been frustrated, I should say, around the margin, because we've not been able to recapture that in the same way we thought we would, because of the -- both the pine product that arrived here and the transhipped product.
All right. That's actually great color. And then just one clarification for me. In your guidance for flat year-over-year sales in Q1 '19, is that currency-neutral basis or including the impact of currency?
That's on a currency-neutral basis.
[Operator Instructions] And we now have a follow-up from Hamir Patel.
Just one follow-up for me. The trade case against Chinese wooden cabinets, what's the timing of when duties could be imposed there? And should we expect a market reaction maybe a few months prior to that? I'm just thinking if product was in transit maybe that Chinese shippers stopped couple of months before.
Sure. I'll give you just a general perspective, which is to say, the petitioners filed -- well, my first comment would be, we view the filing of that trade cases a potential positive for the company to the extent that roughly $2 billion to $4 billion of cabinets that are coming from China, seize to come from China or -- are diminished that would be a shift of production to reassuring of production to North America and that would benefit our customer base that we supply product to. In terms of where that taps status wise, the petitioners filed their claim with the Department of Commerce. Department of Commerce needs to accept that investigation as of today, I don't believe that they have, but I'd expect that will come shortly, a matter of weeks. What then occurs is, there is a period of time where Department of Commerce goes and does the preliminary work, that's some months to determine preliminary duty determinations. So you could, kind of, expect a multi-month create, where we're in the status quo, where there's no duties in place, but on notice that the investigation's underway. And then once the preliminary duties come in, you're really looking at about a year for the thing to flow its -- flow a natural course in terms of final analysis, final duty and position and ultimately, it needs to go to the ITC, which is a separate government body to affirm the case. So if you're into import RTA cabinets from China, the next year to 14 months of your life, we're going to be involved with answering questionnaires and dealing with preliminary duties.
Okay, thanks for all, that's helpful. And I know where -- it's Arauco started up a new mill recently in the U.S. how's -- is that part of your margin improvement strategy for the next few years?
You're correct, Arauco has been building a very large mill in Grayling, Michigan. They are one of -- a number of partners of ours and as that production comes fully online, we will be participating in it as a customer and look forward to do that.
Next question will be from Nick Corcoran at Acumen Capital.
Just a couple of questions for me. I think my other question has been answered. The first is, do you still see your long-term range for gross margin being in that 18% to 19% range?
Very good question. That's typically where we've liked to be in the past. We've obviously had a significant disrupter on the trade case that's been kind of rough and dirty, 50 basis point impact on our business. So we just finished the Q4 with 17.3%. I want to describe that at our expectations are being at the low end of the range. We've said 17% to 18%, because there's still a bunch of things moving around in the market. But the comment I have made on this call is that we expect to have some relief and some continued strengthening, so I'd like to be up at the higher end of that 17% to 18% range over time. What -- where we sit, if it's in the 18% to 19% range over the longer term that I think is yet to be determined.
Okay, that's great. And then you spoke of the $1.5 billion target. Can you just speak to how much you expect of that come from that confirmed acquisitions versus organic growth?
A little bit. I mean, this is -- take this for what it is, very rough and dirty. But we have described that we have a significant opportunity to grow ongoing multi-year basis through acquisitions. We've got a pipeline and we have got it adequately supported and well staffed to be that. So wherever we sit in the cycle with respect to organic growth, we'd like to be adding 3% to 5% additional growth through acquisitions on a kind of a run-rate basis annually.
Great. And then with a softening U.S. housing market, are you seeing any changes in the pipeline for acquisitions?
Well, the names are all same, they're all there. It's -- so I think you're speaking probably more to willingness to talk. And I would say that we're pleased with the level of activity we've got going in the pipeline right now.
Next is a follow-up from Yuri Lynk.
Just the CapEx looks a little bit high in the quarter and for the year $4.1 million. What should CapEx look like going forward?
Yuri, it's Faiz. Our CapEx, if you look historically, it's kind of been in that $3 million, $3-plus million range for the full year, and we were almost -- yes, just [ at the ] $4 million. Going forward, I expect it to still be in that $3 million to $4 million range. It might creep up a little bit. We are -- as we mentioned in our filings, we are in the process of consolidating ERP systems and part of that, there is a hardware server component to that. But I'm talking things on an annual basis in the hundreds of thousands of dollars not more. So next year, could it be at $4 million again potentially, but this isn't the beginning of a marked increase in CapEx. We expect to be in that $3 million to $4-ish million range going forward.
Okay. And what -- by how much should the adoption of IFRS 16 positively impact your EBITDA?
Yes. So if you were looking at our adjusted EBITDA, we just put forward $56 million. If that had been under the new accounting standard, that would have been $22 million higher.
$22 million?
Correct.
Okay.
So about $23 million annually, if you are using 2018.
Next question will be from Kelly Brown, Investor.
Just wanted to congratulate you on decent year and what sounds like some pretty rough sailing. So thanks for that. I just wanted to circle back on the net working capital and put slightly finer point on it in the context of the total cash flow generation expected for 2019. Because I think the company may have an opportunity [ here given where stock price is ] at to make some bold decisions, and you've already bought the NCIB in place and that's fantastic. So given that the working capital, I guess, you've described, which is a little bit high for those specific reasons and then going forward this year, effectively, you're guiding to, I would just effectively call it flat to little growth this year. That would potentially signal that you don't actually have a lot of marginal working capital growth needs for the year forgetting where your starting point is, on a basically flat year you wouldn't have network for capital investment. And given that you are may be a little bit high, I'm wondering whether networking capital this year could be at least neutral or even cash generated from working capital, is that too aggressive as an assumption?
I think we would probably not [ be ] as aggressive as you are there and just say, the normal working capital build that you would see will be less in this year, because of the fact that we expect to actually release some excess inventory that we have today. I would describe, last year as being a little anonymous -- an anomaly, I was just trying to say. The other way where we typically release a bunch of cash at year-end, and we didn't do that as much this year, because of the inventory access. So we'll draw that down over the course of year. I think it remains to be seen where the needle falls on growth and our expectation is we're still going to grow the business, we're just not seeing a lot of that for Q1, but we've said beyond we will grow the business. And whenever we do grow the business, we do have some incremental AR in inventory. And to your point, it will just be softened somewhat by the fact that we all are starting to draw down some excess on the inventory side that we are carrying today.
Right, okay. But conceptually, you'd agree that if you didn't grow this year, like let's say you didn't have a great growth year, you wouldn't have marginal working capital base?
Yes, if we didn't grow this year. But that's not in our thesis, it's an answer to your question.
Yes, and then in other words, so in terms of cash flow, if you would presume the same operating cash flow conversion from EBITDA, you -- could this year could potentially generate $40 million to $50 million of free cash flow if you didn't grow and maybe a little bit less if you did have some working capital needs -- incremental needs, probably small bit of growth. So I'm just -- so I was just sort of putting in my [ head going ] you could generate $40 million to $50 million this year and at a stock price of $12, you could buyback a substantial amount of the flow, provide -- considering all the other uses of capital, but I just -- it just seems to me that there is -- that this year could be quite a unique opportunity for the company, especially, if you're exiting thinking you'll be 18% plus in the future on your way to a $1.5 billion, reducing the full by 10% to 20% in 2019 to be just a wonderful opportunity for the company.
Yes. So I understand your thought process there, you did say subject to other uses of capital, we will balance that around other opportunities. We do still have acquisition opportunities out there that are accretive, notwithstanding the fact that our stock price is diminished today. And we see the acquisition as an important piece of the long-term building of the business, so that will still be a piece of the capital utilization. But I do understand your other comments, the degree that we can be active in share repurchases, of course, is also dictated by the maximum set by the TSX, which we published.
Yes, I appreciate that. And, I guess, the interesting dynamic, as I was looking back at your -- the average revenue multiple that you've acquired companies at, in your slide deck, and if you just total that up, it's about 0.37x sales, which is, sort of, your -- I think your base accrual of firm and maybe purchasing around or a little bit above book value for the acquisitions within, and your company is actually trading your own -- you have to adjust to buy your own company effectively at 0.32x sales and not too much well below book and not too much above tangible book. So you sort of getting a bargain on your own company that you know really well versus other companies. And I just think that's a really interesting dynamic. My last question is on the $1.5 billion target. It gets wonderful that you telegraph that and it allows people to benchmark and model. But if I go -- if I just take 5 years, that you were -- and apply the compounded annual growth rate of revenue from 28 sales is about 20.6%, and it's great, but it's a little bit lower than the growth rates that you've -- at the beginning of the call that you outlined that were in the 20% range. So do you feel like this is the number that you can beat or achieve it sooner than 5 years given your history?
Well, given history, I mean, the growth has been very strong. We've done very well with that, that's why we've really said, the $1.5 billion that's within the next 5 years is not putting a specific pin in that being at the end of 5. And then a important component of that is the acquisitions piece as well, which should be a little bit variable.
Great. Great. Oh, sorry just one more on the CapEx, another fine point on that. You said, this maybe going to be elevated or has been elevated, but I -- just presumably like high levels, presumably you're getting an attractive payback on those dollars?
Yes, I mean our CapEx is not very complex because we're predominantly noncapital based with leasing [ part ] facilities. So you've got some IT equipment spend that Faiz mentioned and then you're into things like mobile equipment forklifts, material handling equipment and leasehold improvements, it's not much more exciting this [ past out ].
And at this time, Mr. Brown, we have no other questions. I would like to turn the call back over to you, sir.
Okay, Sophie. Thanks, everybody, for tuning in today and for your questions and look forward to telling you more in future.
Thank you, sir. Ladies and gentlemen, this does indeed, conclude your conference call for today. Once again, thank you for attending. And at this time, we ask that you please disconnect your lines. Have yourselves a great weekend.