K-Bro Linen Inc

TSX:KBL

Earnings Call Transcript 2019-Q1

[Operator]

Good morning. My name is Mariama, and I'll be your conference operator today. At this time, I would like to welcome everyone to the K-Bro Linen Systems Inc. First Quarter Results Conference Call. [Operator Instructions] Please note that today's call is being webcast live and will be archived for both replay -- for replay, both online and by telephone, beginning approximately 2 hours following the completion of the call. I would now like to turn the call over to Kristie Plaquin, Chief Financial Officer of K-Bro Linen. You may begin your conference.

[Kristie L. Plaquin, Chief Financial Officer]

Thank you, operator, and good morning, everyone. Thank you for joining us today, and welcome to our first quarter 2019 conference call. On the line with me today is Linda McCurdy, President and Chief Executive Officer. I would like to remind everyone that statements made during our prepared remarks or in the Q&A portion of the conference call with reference to management's expectations or predictions of the future are forward-looking statements. All statements made today which are not statements of historical fact are considered to be forward-looking statements. Certain material assumptions or factors were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information. The business prospects of K-Bro Linen Inc. are subject to a number of risks and uncertainties that may cause actual results to differ materially from a conclusion, forecast or projection in the forward-looking information. Actual results could differ materially from those anticipated. Risk factors that could affect the results are detailed in the corporation's public filings. Please note that K-Bro is under no obligation to update any forward-looking information discussed today. Investors are also cautioned not to place undue reliance on these statements. For more information about these risks, uncertainties and assumptions, please refer to our annual information form and our MD&A, which are available on SEDAR or on our corporate website. I'll now turn the call over to our CEO, Linda McCurdy, who will provide her insights and remarks on the quarter. Linda?

[Linda Jane McCurdy, President, CEO & Director]

Thank you, Kristie. Good morning to everyone, and thanks for joining us today. So for the first quarter, we've seen a strong start to the year. We grew revenue by 4.3% over the same period last year, benefiting from the Linitek acquisition, which closed in October of 2018, and from organic growth, both in the U.K. and our Canadian operations. We've also begun our gradual return to normalized EBITDA before the adoption of IFRS 16, which Kristie will provide further details on shortly. EBITDA increased by 9.7% compared to the first quarter last year, and there was also improvement in EBITDA margin from 11.2% to 11.8%, again, before IFRS 16. With the completion of the Vancouver transition, we have exited our major investment cycle and remain focused on refining and improving operational efficiencies. We have a modernized industry-leading network of assets. And as we continue to increase throughput throughout the network, we look for ways to pass on efficiencies and cost savings to our customers. This has become increasingly important as we have replaced one of our existing contracts with Avendra Canada at the start of the year. Avendra is a North American leading hospitality, procurement and supply chain service provider. And as I mentioned during our last call, we expect that partnership to strengthen our competitive position in the hospitality segment and broaden our own network of customers and suppliers. Speaking to that segment, the relative proportion of hospitality to health care revenue as a percent of total revenue for the quarter continues to evolve. On the strength of our partnership with Avendra, along with organic growth from new and existing customers in the hospitality space, consolidated hospitality segment revenue for the first quarter represented 41% of overall revenue to 59% health care. This compares to the first quarter last year, when it was 39% hospitality to 61% health care. Given that seasonality, the first quarter is typically the slowest time in this segment. Regardless, we've been able to grow hospitality revenue over the same quarter last year by 7% in Canada and by 10% in the U.K., with consolidated growth nearly 9%. We expect to ramp up volumes in hospitality throughout the second quarter, hitting the segment's seasonal peak in Q3. Our health care segment has also experienced growth, although to a lesser extent. Since the first quarter last year, we have grown revenue by 1.5%, with volumes impacted this quarter by a low-severity flu season in certain markets. As mentioned last quarter, on March 1 of this year, we were awarded a 1-year extension for AHS -- with AHS for our services in Calgary. I'll now turn the call over to Kristie to discuss our financial results for the quarter, after which I'll return to talk about the remainder of the year. Kristie, over to you.

[Kristie L. Plaquin, Chief Financial Officer]

Thanks, Linda. The information we are discussing today is also highlighted in our first quarter and 2019 earnings press release issued yesterday, and detailed supplemental financial information can be found on our Investor Relations website under the heading Financial Documents. Consolidated revenue for the first quarter increased by 4.3% compared to the first quarter last year. The hospitality segment contributed $23.7 million, and health care contributed $34.1 million. Fishers contributed $13.3 million towards consolidated quarterly revenue of $57.8 million. As Linda mentioned, the distribution of revenue generated from hospitality compared to health care for the quarter was 40.9% to 59.1%, respectively, an increase in hospitality revenue compared to the same quarter last year of approximately 9%. Linda also mentioned growth in EBITDA and the impact the adoption that IFRS 16 has had on how we report EBITDA. While we have adopted the new accounting standard retroactive to January 1 of this year, we have not restated the comparative period for 2018. However, we have provided a reconciliation of actual Q1 financial results compared to what would have occurred if we had not adopted the new policy in this quarter's MD&A. For example, EBITDA for the quarter before the adoption of IFRS 16 would have been $6.9 million compared to $6.2 million for the first quarter last year, an increase of 9.7%, primarily a result of efficiencies gained from the capital expenditures made in our new facilities as well as organic growth in the U.K. and the acquisition of Linitek, offset by increased commodity charges for natural gas in B.C. due to a supply shortage and rising minimum wages. After the adjustments, upon adoption of the new policy, EBITDA for the first quarter was $9.1 million, an increase of 40% over the previous quarter. Consolidated margin, once again, before the adoption of IFRS 16 increased for the first quarter compared to the same time frame last year from 11.2% to 11.8%. Our Canadian EBITDA margin for the quarter before the adoption of IFRS 16 was 13.4% and Fishers was 6.4% compared to 12.7% and 5.6%, respectively, in the quarter -- in the comparative quarter for the previous year. Management estimates the onetime costs incurred for the quarter were approximately $0.3 million. After adjusting for these onetime costs, the Canadian EBITDA margin before the adoption of IFRS 16 would have been 14.1% compared to 15.1% in Q1 2018. With our major investment cycle now complete, we expect margins to continue to improve throughout 2019 and anticipate that we will return to an annualized EBITDA margin of between 17% and 19% for our Canadian operations.Net earnings for the quarter were $0.5 million, similar to the $0.6 million reported for the first quarter last year. As a percentage of revenue, net earnings decreased slightly from 1.2% for the first quarter last year to 0.9% for the first quarter this year, stemming from higher commodity prices in B.C. as a result of temporary natural gas supply shortage; rising minimum wage rates; carbon tax and EHT implemented in B.C. on January 1, 2019; increased interest; and depreciation expense. There was an increase to operating expenses for the quarter compared to the first quarter in 2018. Wages and benefits increased to $23.4 million but decreased slightly as a percentage of revenue to 40.5% compared to $23.3 million or 42.2% in the first quarter of 2018. The decrease as a percentage of revenue was largely due to the completion of the Vancouver transition and diminishing onetime costs associated with it. Linen expenses for the quarter remained constant at $6.4 million compared to the first quarter last year but, again, decreased as a percentage of revenue from 11.6% to 11.2%. The decrease as a percentage of revenue is largely due to lower linen requirements associated with the increased hospitality revenue, which does not require linen replacement and setup costs, unlike a health care customer. Utility costs increased to $4.3 million or 7.5% as a percentage of revenue for the quarter compared to $3.5 million or 6.4% in Q1 of 2018. The increase was primarily due to higher commodity costs in B.C. as a result of a temporary natural gas supply shortage, along with incremental volumes processed. Delivery costs decreased to $7 million or 12.1% as a percentage of revenue in the first quarter compared to $7.4 million and 13.4% in the same quarter last year. The decrease is mainly due to the adoption of IFRS 16. This is offset by increased business activity, price increases from renewals of outsourced freight contracts and higher cost of diesel and external freight charges tied to diesel price. Occupancy costs decreased to $1.1 million or 1.9% as a percentage of revenue for the quarter compared to $2.3 million or 4.1% for the first quarter last year. The decrease, again, is largely a result of the adoption of IFRS 16. Materials and supplies for the quarter decreased to $1.8 million or 3% as a percentage of revenue compared to $2 million or 3.5% in the same quarter last year. The decrease is primarily related to lower costs related to the transition of the Vancouver facilities and certain onetime recoverable costs. R&M increased to $2.1 million or 3.6% as a percentage of revenue for the quarter compared to $1.8 million and 3.3% in the first quarter last year. The timing of scheduled maintenance activities is the primary driver of the increase.Corporate costs for the quarter increased to $2.6 million or 4.5% as a percentage of revenue compared to $2.4 million and 4.4% in the same period last year. The increase was mainly due to costs associated with the initiatives to support the company's growth and business strategy. Now looking at our capital resources. Distributable cash flow for the first quarter was $5.6 million, and our payout ratio was 56.3%. In addition, the company paid out $0.30 per share in dividends during the quarter for the -- for a total consideration of $3.2 million. Debt-to-total shareholders' equity was 26%, a decrease from 26.4% for the first quarter last year. Net working capital at March 31, 2019, was $24.6 million compared to $34.8 million at December 31, 2018. The decrease is mainly a result of the adoption of IFRS 16, along with timing differences related to the cash settlements of new plant equipment, income tax recovery and deposits related to equipment and cash received from customers. Again, at March 31, 2019, total assets increased to $36.6 million (sic) [ $360.6 million ] compared to $322.2 million at December 31, 2018, and total liabilities increased to $165.8 million from $123.6 million. Shareholders' equity decreased slightly at March 31, 2019, from December 31, 2018, to $198.7 million from -- to $198.7 million from $194.7 million (sic) [ to $194.7 million from $198.7 million ].I'll now turn things back over to Linda for her concluding remarks.

[Linda Jane McCurdy, President, CEO & Director]

Thank you very much, Kristie. While capital costs over the past few years have been significant, what we now have is a highly efficient network with capacity to profitably grow our business for the long term. As Kristie touched on in her remarks, now that we've completed this last major investment cycle that saw us commit $200 million towards strategic new builds, acquisitions and upgrades across our network, we expect a gradual return to historical margins throughout the remainder of 2019. While the completion of the transition into the Vancouver facility marked the end of that cycle, focus remains on optimizing operations, securing price increases to offset rising input costs and securing new business. We continue to expect capital expenditures for the year to be much less than what we've spent over the past few years and target CapEx of less than $5 million for 2019. As we free up cash flow through a significantly reduced capital spending program, we've increased our ability to self-fund our growth and continue to evaluate acquisition opportunity. Our presence in the U.K. with Fishers has provided a good footprint for us in the U.K. While new markets remain a target, we also look to existing markets for consolidation opportunities similar to those such as our acquisition of Linitek. With our acquisition strategy -- while our acquisition strategy remains a priority, using free cash flow to pay down debt is equally important. We also remain committed to our dividend program as a use of additional free cash flow. As always, we remain committed to managing our balance sheet and maintaining a strong cash position to allow us to move quickly on opportunities. At this time, I'd like to open it up to all of you to answer any questions you may have with regards to the quarter.

[Operator]

[Operator Instructions] Your first question comes from Lennox Gibbs with TD Securities.

[Lennox Gibbs, Research Analyst]

Just the U.K. labor dynamic, can you discuss the current situation around wages and retention given the record lows in Scottish unemployment? That's the first part of the question. And then secondly, looking further out and with all the twists and turns in Brexit, I want to get your latest view with respect to potential pressure on immigrant workers and, obviously, as it pertains to Fishers.

[Linda Jane McCurdy, President, CEO & Director]

Thanks so much. Sure. Absolutely. In terms of labor in Scotland, I mean not dissimilar to Canada, we have seen continual increases in the national living wage, although not as dramatic as we've seen in Canada. So we've seen increases somewhere in the nature of the 4%, 4% to 5%. I'd make that comment to begin with. Second of all, which -- as a percent of labor, I think we've done well given that we've been able to achieve some operating efficiencies to cover those off, those cost increases. In terms of access to labor, I would say that we have seen no particular struggles that we didn't see 12 months or 24. Obviously, this comment is pre-K-Bro time, but the management team would say that they have not seen any increased turnover. Certain markets are tougher in the plants that we have than others but more driven by the local business or the market that we're -- where we're in. Going forward, I think it remains to be seen what impact it'll have. We don't expect that any of our employees that are working with us today are going to be ejected from the country. Most of them have permanent residency. I think the real implication will be how easy will it be to continue to access new employees as the result of a potentially tighter immigration policy. In terms of our...

[Lennox Gibbs, Research Analyst]

Okay.

[Linda Jane McCurdy, President, CEO & Director]

Yes, go ahead, Lennox.

[Lennox Gibbs, Research Analyst]

No, no. You go ahead. I'm sorry.

[Linda Jane McCurdy, President, CEO & Director]

Yes. No. And then second -- the final part to your question, what is our current thinking in terms of other impacts of Brexit, again, I think we've commented on impact on supply chain. And for us, what implication does that have on linen, which is our -- outside of labor are major input costs that may be -- that would be impacted as we bring that input in through China or Asia. And we have brought in excess linen, and do not, at this time, expect additional taxes and duties to be put on textiles in any event. And so nothing has really changed in our view on that, Lennox.

[Lennox Gibbs, Research Analyst]

Okay. And then just quickly, finally, can you provide some more geographic detail on the strength you saw in Canadian hospitality? And that's it for me.

[Linda Jane McCurdy, President, CEO & Director]

Yes. So a number of markets there. I would say the Linitek acquisition in Alberta has increased volumes and top line. We've seen increases in the Toronto market, and I would say those would be the primary driver -- and price increases would be the primary drivers there, Lennox.

[Operator]

Your next question comes from Maggie MacDougall with Cormark.

[Maggie Anne MacDougall, Director of of Institutional Equity Research]

I was wondering if you could speak to how things are going for you in Vancouver. It looks like you're starting to gain some efficiencies there just looking at the margin profile of the Canadian business in Q1. But wondering if you could, perhaps, comment a bit more on that with some color. And then I have a follow-up question after that.

[Linda Jane McCurdy, President, CEO & Director]

You bet. Thank you, Maggie. So very pleased with our progress in Vancouver. We continue to gain efficiencies, stabilize the workforce. There still obviously are some impacts on margin that, as we've guided, we expect to, in the back half of the year, recoup some of that or recoup that margin shortfall or margin delta. Again, we have felt the increased impact of minimum wage increases, which, again, in October in Alberta, it went up another $1.40. Freight costs, we've seen increases in as well as the new EHT that has been implemented in January of 2019. So while there still is a gap, we have seen increases in these cost lines and still maintained the gap, which gives us confidence that as we go into the back half through continual optimization, price increases and some amount of new volume, we will return to normalized margin.

[Maggie Anne MacDougall, Director of of Institutional Equity Research]

Okay. And so then that leads me to my follow-up, which is that I'm wondering how much of the margin expansion to get back to your historical levels needs to come from efficiency improvements in Vancouver and how much of it is actually going to need to come from price increases given the minimum wage pressure and the other items that you listed.

[Linda Jane McCurdy, President, CEO & Director]

We haven't broken it down and provided guidance at that level. But in -- as a big picture, it'll come -- one of those is not weighted more than the other. What I would say is we are not anticipating millions of dollars of new revenue in order to get to those improved margins. The bulk of it would come from efficiencies and price increases.

[Maggie Anne MacDougall, Director of of Institutional Equity Research]

Okay. And then just one last one. Given your new relationship with Avendra, wondering if you see more opportunity to increase capacity utilization in Canada from hospitality business over the near term and, perhaps, a bit longer term as well.

[Linda Jane McCurdy, President, CEO & Director]

I would say that it's an expanded relationship. We're very pleased with the relationship. It's one we've had for many, many years. I think it'll be beneficial for both sides in that they have an expanded network of hotels as do we. We have customers that they don't necessarily represent. So I do believe that it is an opportunity for expanded growth on both sides, and we're very happy with the relationship. It's hard to quantify, but it is a -- certainly a competitive advantage for us.

[Operator]

Your next question comes from Brian Pow with Acumen.

[Brian D. Pow, VP of Research & Equity Analyst]

Can I -- just a quick clarity. You had mentioned 1.5% relating to the Canadian health care business. Again, is that organic growth that you're seeing?

[Linda Jane McCurdy, President, CEO & Director]

Some amount of price increase, some amount of organic growth. But I did make comment in the overview that we did see a very mild flu season in certain markets, which impacted year-over-year. And conversely, if you look back into 2018, it was a very severe flu season in 2018. So I think that's why the increase is less than one potentially would have expected.

[Brian D. Pow, VP of Research & Equity Analyst]

Okay. Great. So my first question is, can you sort of characterize for me what you sort of expect out of Alberta with the change in government? Maybe sort of help me understand a little bit how the AHS relationship has sort of gone through when the NDP or -- and then sort of what you're hoping or expecting with UCP now and running the books in Edmonton. Just give us a sense maybe what sort of potential upside you see out of Alberta now that there's a little bit more clarity.

[Linda Jane McCurdy, President, CEO & Director]

What I will comment on is what has -- is in the public domain, which is Jason Kenney had, at one point, said, listen, the previous government had earmarked hundreds of millions of dollars to refurbish rural laundries. And he did not believe that, that was necessarily the best use of money given that the private sector can do it more effectively. So while we don't have any particular insight into how that's going to play out, philosophically, I think because of those comments, I would not expect refurbishments or large investments in property, plant and equipment of the rural laundries, which exist in places like Red Deer, Lethbridge, Medicine Hat, Fort McMurray. So directionally, I think that would be our expectation, Brian.

[Brian D. Pow, VP of Research & Equity Analyst]

Okay. Maybe just on that, when you look at your sort of long-term relationship with AHS, has it been sort of, I'm going to say, pretty stable in terms of who you've dealt with? So when you go back, it's more of an outside-the-box sort of direction push, and so it's not like you're going to have to sort of build a new relationship?

[Linda Jane McCurdy, President, CEO & Director]

I will say that we are very proud of our relationship with AHS. We've been working with them in both cities for 30 years plus before AHS even existed. There are many, many of the same players. In fact, there are also players that have come from other health regions who know us from other jurisdictions. So I would say that we -- and there hasn't -- AHS, in our view, has been very stable over the last number of years in terms of direction and structure. So we feel very good about our relationship there.

[Brian D. Pow, VP of Research & Equity Analyst]

Okay. And then my follow-on question just sort of transitions over to Ontario. I would say your news flow out of Ontario on the health care side has been pretty quiet since -- I'm going to say for 2 years-plus, when you were able to announce some larger contracts. Can you characterize the environment there? Has it become more competitive? Again, taking that you've got the most efficient plant, I would have thought that, perhaps, you would have seen some, I'm going to say, some more health care wins in the Ontario market to take advantage of your capacity.

[Linda Jane McCurdy, President, CEO & Director]

I would say that the large wins that we had announced some time ago have certainly slowed down largely because -- if we had won large contracts, we would have press-released them. But I wouldn't just count the fact that -- and I'd also say that there's just been fewer large RFPs. But that -- I wouldn't read into that, that there haven't been smaller wins or other smaller opportunities that exist that we haven't had a good seat at the table at. And I would expect, over the next 36 months, more RFPs of a smaller nature to come out as well. We just haven't seen the big Trilliums or William Oslers.

[Operator]

Your next question comes from Endri Leno with National Bank.

[Endri Leno, Associate]

I have a sort of a question/a clarification. On prior press releases and when we -- or quarterly updates, when we talked about returning to historical margins, there was language around those being able to be achieved by the end of 2019, which was a bit absent, I guess, from the last press release. It was more towards the lines of we're going to make gradual improvement throughout 2019. Do we still expect to get to those margins, I guess is my question, by the end of 2019? Or could we see them, perhaps, into 2020?

[Linda Jane McCurdy, President, CEO & Director]

I wouldn't read too much into or parse through any change in verbiage. We feel good about the continual progress, and by the end of 2019, we will have optimized the operation. Listen, that doesn't mean in 2020, we might not -- we'll make further gains, but we do feel that by the end of 2019, we will have optimized our plants.

[Endri Leno, Associate]

Great. And the other questions I'll land, then I'll get back on the queue. But on the natural gas prices, have you seen any improvements in the second quarter? And also related to the second quarter, what kind of onetime costs do you expect? And that's it for me.

[Linda Jane McCurdy, President, CEO & Director]

Sure. We have seen -- well, our onetime costs will virtually be gone by the end of Q2. There'll be very minimal onetime costs in Q2. As it relates to natural gas in B.C., historically -- or up until the end of Q1, we had been 50% hedged on our natural gas in B.C. We have now hedged 90% of it. So we do not expect the onetime costs to impact us like they did in Q1 as a result of the hedging that we put in place, which wasn't really possible until we had fully transitioned both of the plants and determined what our volumes -- daily volumes would look like. As a result of that hedging, we will see some overall increase in the average cost per unit of the gas. As we know -- as we hedge, oftentimes, it's more expensive than a floating rate. It's not dramatic. It's, for the balance of the year, potentially several hundred thousand dollars over the balance of 3 quarters. But we do not expect the onetime costs in the same way we experienced in Q1.

[Operator]

[Operator Instructions] Your next question comes from Justin Keywood with GMP Securities.

[Justin Keywood, Director of Equity Research]

On the Alberta contract, so this was extended in March for 1 year. Is the way to look at it, that this won't be changed until March of next year? Or does that change with the new conservative government now in place?

[Linda Jane McCurdy, President, CEO & Director]

It's hard to really answer that question in the sense that, obviously, it's a contract that we have in place till March of next year. What AHS's process is going to be is really hard for us to know at this point. I mean, they will take policy direction from the UPC (sic) [ UCP ]. It's hard to know how this will unfold, to be honest, and how it'll look like. I mean we feel -- what I will say, Justin, is listen, we're providing service every day. We have a renewed contract. They need service. They need laundry. How it plays out into the longer term is difficult -- and on what time line is difficult to predict.

[Justin Keywood, Director of Equity Research]

Got it. Is it fair to say that there will be some type of event at latest in March of next year to address this contract and the bigger issues facing some of these public laundries in the province?

[Linda Jane McCurdy, President, CEO & Director]

Certainly, something has to happen by March of next year because that's when our contract is up. So -- but what that looks like, I just -- it's hard to predict. Yes. It's just hard to say.

[Justin Keywood, Director of Equity Research]

Understood. And then on the shareholders rights plan that was announced a few weeks ago, are you able to give the rationale for that, if this is strategically or in response to something?

[Linda Jane McCurdy, President, CEO & Director]

So what I would say, and I think it's -- first of all, it's a great question. Thank you. It was not presented or put forward on the back of anything other than we thought it was a smart thing to do. There's nothing going on. There's -- what we wanted to do is to prevent any creeping takeover bid where shareholders might be accumulating on a basis that is exempt from the takeover bid rules, a private agreement exemption. So that was the essence behind it. It has -- we're certainly not trying to turn away any robust bids or stymying a robust sales process. But I can certainly say there is nothing out of the ordinary. It's an ISS-approved plan, and we certainly had a lot of advice from counsel. But there's nothing behind it, and it's certainly not being used as a defensive tactic.

[Justin Keywood, Director of Equity Research]

Understood. And then just as a broader question. With operations now stabilizing after the plant upgrades, does the focus shift for expanding volume organically? Or is it maybe more of a -- or an easier path to acquire companies like Linitek and then transfer volume to the more efficient plants already in place?

[Linda Jane McCurdy, President, CEO & Director]

I think there is an opportunity for both. We don't prefer one or the other. It certainly depends on the infrastructure in the market, whether it's Vancouver, where we have a brand-new facility or -- obviously, it's easier to acquire something and put it into a highly efficient operation. But that's not necessarily the case in every market. But I will say both are equally on the agenda, and both are equally important to our growth strategy.

[Operator]

Your next question comes from Brian Pow with Acumen.

[Brian D. Pow, VP of Research & Equity Analyst]

Just Kristie, just some housekeeping. Linda indicated sort of CapEx around $5 million for the year. You're showing $2.4 million on your cash flow statement for Q1. So how should we expect the balance to be spent through the year?

[Kristie L. Plaquin, Chief Financial Officer]

I would say there -- definitely, in the cash flow statement, there's some carryforwards from last year in terms of amounts included in AP. What I would say is, for the most part, the carryforward from last year will come through in Q2, and the rest of our spending will -- for 2019 will be a balance between Q2 and Q3.

[Brian D. Pow, VP of Research & Equity Analyst]

And so -- okay. So we should expect a larger number than $5 million on the cash flow statement at the end of the year because of the accrual?

[Kristie L. Plaquin, Chief Financial Officer]

Yes. So there's amounts sitting in accounts payable that were accrued in 2018 but just hadn't been released.

[Operator]

There are no further questions at this time. I will now turn the call back over to Linda for closing remarks.

[Linda Jane McCurdy, President, CEO & Director]

Thank you, everyone, for joining today. We look forward to getting back to you with results in Q2. And should there be any follow-up questions with regards to the leasing changes or anything else, please feel free to reach out to Kristie and myself. Thanks so much.

[Operator]

This concludes today's conference call. You may now disconnect.