K-Bro Linen Inc

TSX:KBL

Earnings Call Transcript 2018-Q3

[Operator]

Good morning. My name is Mariama, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the K-Bro Linen Systems Inc. Third Quarter Results Conference Call. [Operator Instructions] Please note that today's call is being webcast live and will be archived 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 2018 Third Quarter Results Conference Call. On the line with me today is Linda McCurdy, President and Chief Executive Officer.Before I turn the call over to Linda, I would first 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 our 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 factors or assumptions 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 our corporate website. With that, I'll now turn the call over to our CEO, Linda McCurdy.

[Linda Jane McCurdy, President, CEO & Director]

Thank you, Kristie. Good morning to everyone, and thank you for joining us today. We'll start by saying we achieved record revenue for the third quarter of this year on the strength of hospitality revenues in both the U.K. and Canada. We benefited from the addition of Fishers in the U.K., with peak tourist season in Scotland and Northern England reflected in the division's strongest quarter since we acquired the business last year.Third quarter revenue also benefited from incremental volume in the healthcare segment in the Canadian market, including newly awarded contracts, new volumes from existing customers and adding new customers in existing markets. On a consolidated basis, the relative proportion of healthcare to hospitality revenue as a percent of total revenue for the quarter was roughly 52% healthcare to 48% hospitality. This illustrates the seasonality of the hospitality segment, again most notably in the U.K. operation. We expect to return to a revenue mix that is more heavily weighted towards healthcare in the fourth quarter of 2018 and first quarter of 2019. As we announced last quarter, we acquired Linitek, a private laundry and linen service company out of Calgary, Alberta. That acquisition closed as expected in early October, and we've been processing the volumes out of that facility since that time. Acquiring high-quality operators in key markets is fundamental to our growth strategy and the Linitek acquisition is a great example of that. It has strengthened our competitive position in the Calgary, Banff and Canmore markets, while being immediately accretive to earnings.Also, during the quarter, we completed the transition into our new state-of-the-art facility in Vancouver during the quarter, a process that took a little longer than we initially forecast. We've talked a little bit throughout the quarter about the challenges we saw in the labor market, specifically in both B.C. and Québec and labor was the main reason why the transition and ramp up took longer than anticipated. As a result, there has been an impact on EBITDA margins. However, we do expect to achieve margins seen in 2015 in the later half of 2019. To date, we've incurred $51.3 million of total expected capital costs in Vancouver, including upgrades in new equipment, asset facilities, decommissioning another facility and of course, construction and transition costs for our new Burnaby facility.Once again, we view these capital investments as important and essential to leverage our competitive position in key markets, and we are near the end of this major investment cycle. We'll have modern and an efficient asset base to assist us in continuing to be the market leader with room to grow.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 2018, and what we expect to accomplish in 2019. Kristie?

[Kristie L. Plaquin, Chief Financial Officer]

Thank you, Linda. As Linda mentioned, I'll provide a summary of our consolidated results for the third quarter. The information discussed is also highlighted in our 2018 third quarter earnings press release issued yesterday and detailed supplemental financial information can be found on -- under our Investor Relations website, under the heading Financial Documents.Revenue for the quarter increased by 46.7% compared to the third quarter last year with the hospitality segment contributing $30.6 million and healthcare contributing $33.4 million. Fishers contributed $17.1 million towards consolidated revenue of $64 million for the quarter. In addition to the strength of the hospitality revenue from peak tourist season in both the U.K. and Canada, we benefited from gains in additional awarded healthcare volumes from the Vancouver lower mainland contract, Trillium Health Partners volume in the Toronto market, organic growth from existing customers and new customers in existing markets. The distribution of revenue generated from healthcare compared to hospitality for the quarter was 52.2% to 47.8%, respectively. This compares to 66.6% healthcare to 33.4% hospitality during the third quarter last year. The shift in distribution reflects the Fishers acquisition with the majority of its business focused on the hospitality structure.EBITDA increased to $8.3 million, a marginal increase over the third quarter last year and year-to-date was $23 million, an increase of 17.6% compared to the same period last year. Growth in EBITDA was again mainly the result of an increase in hospitality volume during the quarter along with efficiencies gained at our Toronto facility. Downward pressure on EBITDA continued throughout the quarter from costs associated with the transition to our new facility in Vancouver. We estimate that these costs during the quarter were approximately $2.7 million for a total of $5.7 million year-to-date. Consolidated EBITDA margin decreased to 13% for the third quarter compared to 18.6% for the same quarter last year. As we near the end of our major investment cycle and as we ramp up our operations in Vancouver, including staffing, downward pressure on EBITDA margin will continue. However, our expectation is that onetime costs will substantially decrease during the fourth quarter of 2018 relative to Q2 and Q3. We expect EBITDA margin will return to levels achieved in 2015 within the range of 17% to 19% during the latter half of 2019.Net earnings for the quarter decreased to $1.9 million or by 45% compared to the third quarter last year and year-to-date decreased to $5.1 million or 27%. The decrease in net earnings year-to-date is largely a result of flow-through items in EBITDA discussed earlier, along with higher finance costs related to our revolving credit facility, higher depreciation associated with new plant builds and the acquisition of Fishers. There was an overall increase to operating expenses for the quarter. Wages and benefits increased to $27.2 million or 53% compared with the second quarter last year. Year-to-date, they increased to $75.3 million or 49%. Year-to-date, this includes $16.2 million related to our U.K. division. The increase is largely due to incremental labor needed to process higher volumes, overtime and onetime costs relates to the Vancouver transition, incremental increases in the wage rates and escalating minimum wage rates and tight labor markets in British Columbia and Québec. Tightness in both of these labor markets presented a significant challenge in meeting the increased demand from the seasonal hospitality volume during the third quarter.Linen expense during the quarter increased to $6.7 million or 46% over the third quarter last year. Year-to-date, they increased to $20 million or 48% compared to the same period last year. The increase was mainly related to our U.K. division, but also included linen costs associated with healthcare volumes from new customers in Canada. Utility costs increased to $3.9 million or 56% compared to the same quarter last year, and year-to-date increased 10 -- to $10.9 million or 43% compared to the same period last year. Along with costs related to our U.K. division, the increase was due to incremental volumes processed and higher carbon levy rates in Alberta, partially offset by improved efficiencies at the new Toronto facility. Delivery costs for the quarter increased to $8 million or 78% compared to the third quarter last year. Year-to-date, they increased to $22.8 million or 78% compared to the same period last year. Again, the increase was a result of costs associated with Fishers, with the remainder a result of increased business activity, the transition to the new Vancouver facility, higher carbon levy rates in Alberta and higher cost of diesel and external freight charges associated with the diesel price.Occupancy costs increased to $2.7 million or 59% for the quarter compared to the third quarter last year and to $7.5 million or 60% year-to-date compared to the same period last year, again largely a result of costs associated with Fishers. The increase also reflects costs related to the new Toronto facility and additional occupancy costs in Vancouver related to our build-out strategy.Materials and supplies for the quarter increased to $2.4 million or 71% compared to the third quarter last year. Year-to-date, the expense increased to $6.4 million or 56% over the same period last year. Again, the bulk of the increase was tied to Fishers, but also a result of onetime setup costs as part of the Vancouver transition.Repairs and maintenance increased to $2.1 million or 50% compared to the third quarter last year, and year-to-date increased to $6.3 million or 58% compared to the same time frame last year. The increases were a result of timing and scheduled maintenance activities and onetime costs associated with the Vancouver facility transition. For the quarter corporate costs increased to $2.7 million or 59% compared to the third quarter last year. Year-to-date, they increased to $8.2 million or 34% compared to the same time frame last year. Changes in corporate costs are largely a result of timing and initiatives to support the company's growth and business strategies. Looking to our capital resources. For the 9 months ended September 30, 2018, distributable cash flow was $19 million and our payout ratio for the third quarter was 43.6%. Year-to-date, the company has paid out $0.90 per share in dividends for a total consideration of $9.5 million. Debt to total capitalization for the 9 months ended September 30, 2018 was 25.5%. This has increased from 18.4% at December 31, 2017 reflecting an increase in capital expenditures for the new Vancouver facility. Net working capital at September 30, 2018 was $37 million compared to $32 million at December 30, 2017. The increase is due to timing related to the cash settlement of new plant equipment, timing of income tax recovery, the seasonality of hospitality volume and deposits related to the acquisitions across the plants.At September 30, 2018, total assets increased to $317 million compared to $295 million at December 31, 2017, and total liabilities increased to $118.7 million from $93.6 million. Shareholders equity decreased slightly at September 30, 2018 from December 30, 2017 to $198.3 million from $201.6 million. I'll now turn things over to Linda to talk further about what we can expect for the remainder of the year.

[Linda Jane McCurdy, President, CEO & Director]

Thanks, Kristie. While we're happy with our top line growth, seeing increases in both healthcare and hospitality-based revenue, we remain focused on a return to stronger consolidated EBITDA margins. Along with coming to the end of our major investment cycle, we continue to manage through increases in minimum wage across Canada by gaining efficiencies at our facilities through increased automation with new and upgraded systems and equipment and managing operating costs through reduced natural gas and water usage. The benefits of this approach are paying off in Toronto as our new facility based in Mississauga has now been operational since Q4 of 2017 and is roughly 25% more productive than our previous facility. Right now, the facility is 60% utilized giving us plenty of room to grow in this key market. In the past year alone, we've added $7.6 million of additional healthcare contracts from competitive RFP processes. We expect to continue to add to this number throughout 2018 and into 2019.We expect similar results in the Vancouver market as we continue to ramp up our operations at the new facility and the upgraded facility. We've completed the transitions into both of the plants. We've stabilized the workforce, and now we continue to offer -- optimize our efficiencies. We expect this process to take up to a year to be fully efficient, but as mentioned, onetime costs will substantially decrease next quarter. As I mentioned in my opening comments, we've seen sustained tightness in some of our key labor markets, particularly Québec and British Columbia. In B.C., province-wide unemployment sits at around 5%, one of the lowest in any major Canadian city. This has led to labor shortages across the board, but more specifically for general labor and lower-income occupations. This has forced us to really rethink our human resource management practices for the near and longer term.The U.K. operations have been in the [ table fold ] now for nearly a year, and during that time, we've been able to add to Fishers' leading market position by offering existing and potential customers our own track record and expertise in laundry and linen services along with experienced local management and operation. We've been able to nurture new and existing relationships and look forward to the opportunity to optimize operations and to continue to increase our market share. While it's been a relatively stable business, it is nearly entirely exposed to seasonal fluctuation as we've seen over the last 3 quarters. Based on seasonality, the U.K. operation's strongest quarter is the third quarter, clearly demonstrated by the division generating $17 million in revenue and EBITDA margins of 18.7% for the period. We expect results for the remainder of the year and first quarter of '19 to reflect off-peak tourist season. We continue to manage our balance sheet conservatively to provide us with the flexibility needed to quickly evaluate and move on acquisitions of any size. Now with the footprint in the U.K, we'll continue to evaluate opportunities for further growth. We continue to manage our distributable cash flow to balance CapEx requirements, working capital and growth capital with stable and reliable dividend payments to our shareholders. Throughout our Canadian -- throughout our operations in both Canada and the U.K., we are confident in our strategy and assets and feel that the foundational investments that we've made over the last number of years will allow us to better serve our clients across all markets and deliver value to shareholders for the long term.At this time, I'd like to open it up for all of you to answer any questions you have with regards to the quarter.

[Operator]

[Operator Instructions] Your first question comes from Elizabeth Johnston from Laurentian Bank.

[Elizabeth Johnston, Analyst]

So I want to talk just a little bit here about Fishers and the business acquisition there. So since you've acquired it last year, have you found that the business is operating as expected?

[Linda Jane McCurdy, President, CEO & Director]

Entirely consistent with what we expected, Elizabeth, both in terms of performance -- quarterly performance, both top and bottom lines.

[Elizabeth Johnston, Analyst]

Okay. And when it comes to the seasonality that you referenced, and I understand that Q3 is the strongest period both in terms of margin and revenue, I would assume. When it comes to a full year outlook, going back to the margin that was indicated at the time of the acquisition, it seems like that points to a fairly robust EBITDA margin in the fourth quarter. Is that a fair takeaway?

[Linda Jane McCurdy, President, CEO & Director]

I think for a full year, nothing has changed from our perspective. We've signaled that Q1 and Q4 are weaker quarters, but obviously, just by doing the math, Q4 is stronger than Q1, but nothing has changed from our outlook, Elizabeth.

[Elizabeth Johnston, Analyst]

Okay. And when it comes to growth in volumes there, have you seen any success with growing volumes with existing customers? Or have you added any incrementally smaller customers in that market as a result of K-Bro owning that business?

[Linda Jane McCurdy, President, CEO & Director]

Yes. I think we've definitely seen some positive developments in terms of key large group hotels. Again, there is just generally more churn in this business than we see in the Canadian market, but we've seen some positive developments with large groups in Q3 that we're pleased about, that will lead into Q -- that will be reflected in Q4 and onwards.

[Elizabeth Johnston, Analyst]

Okay. So when we think going forward, thinking about the potential organic growth opportunity, would you say it's in line with what you've seen in the hospitality sector in Canada, that similar type range?

[Linda Jane McCurdy, President, CEO & Director]

I think that's fair. I think -- I mean, we have been, obviously, very focused on our Vancouver transition for the last 2 quarters. Fishers has done a very nice job of moving forward to drive the business, but we are looking forward to being able to focus on working closely with them, both operationally and in the market to both -- to grow both the top line and the EBITDA margin.

[Elizabeth Johnston, Analyst]

Okay, great. And then just turning over to Canada again, talking a bit about margin here. Even backing out transition costs as indicated, compared to last year, there's still a meaningful swing for lower margin all else aside. Can you may be rank for us the largest contributors to this drag? I'm assuming, wage pressure is one of them, but if you can give any further color on what that 3% difference is or so?

[Linda Jane McCurdy, President, CEO & Director]

Yes. So minimum wage definitely is part of that. I would say about 200 basis points and the balance of that would be exceptionally tight labor market in both of the Québec markets that we're in, Montréal and Québec City, as well as Victoria. And that will be a focus for us in terms of managing our strategies, looking at ways to -- and it's obviously exacerbated in very heavy volume orders like Q3, where there is more volume -- more business because of strong hospitality volumes, but we -- it definitely had an impact on the quarter with tightness in labor. So minimum wage and tightness in labor in various markets.

[Elizabeth Johnston, Analyst]

Okay. So I know you made commentary in the past that there is the expectation that increased pricing will help to offset the minimum wage aspect of this, how far are you along, if you're able to give us a sense of passing on those prices relative to last quarter, let's say, where you expect to be going into 2019?

[Linda Jane McCurdy, President, CEO & Director]

Many of them are reflected at the beginning of the year as annual increases. It really varies. It -- it's throughout the year but -- because every contract has a different annual anniversary date. But there is a meaningful portion of it that is a January 1 impact.

[Elizabeth Johnston, Analyst]

Okay. And I think, in terms of the tight labor commentary in B.C., Québec since that's not particularly related to hospitality revenues in the middle of the year, we should expect that portion of the pressure to remain, at least in the near term?

[Linda Jane McCurdy, President, CEO & Director]

I mean I think, it'll subside simply because, again, it's exacerbated by stronger volumes in seasonally strong months. It's not going to go away immediately, but it will be less of an impact just due to volumes. We managed it by -- and continued to manage it in Q3 through increased over time, which just by definition, goes away when there is less volume.

[Operator]

Your next question comes from Lennox Gibbs with TD Securities.

[Lennox Gibbs, Research Analyst]

My questions have been asked and answered.

[Operator]

Your next question comes from Maggie MacDougall from Cormark.

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

I was just curious if you could perhaps get into a bit of a deeper overview of your new business development initiatives and opportunities, and what you may, perhaps in general terms, feel comfortable discussing with regards to your pipeline at present?

[Linda Jane McCurdy, President, CEO & Director]

I think what we would say is we remain very positive and optimistic about top line growth in key markets where we have expanded capacity, Toronto, Vancouver, both on the healthcare and hospitality front in both of those markets. We've provided guidance in the Toronto market whereby we feel good about the $15 million top line growth, of which half of it has been secured. But I think that over the next 4 to 6 quarters, we feel good that we will be able to make meaningful progress in top line growth in both of those markets.

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

Do you have any concern that the labor situation in B.C. may be a limiting factor in terms of the amount of growth you could actually take on from new initiatives in 2019?

[Linda Jane McCurdy, President, CEO & Director]

Because we have such a significant capacity, I think the answer to that is, no. And we're running at 50% capacity. So I don't see that as a -- an issue. Do I worry about tight labor markets in particular -- or tight labor in particular markets? Yes, but we have to continue deploying strategies to secure labor and especially as we prepare for next summer, which is where we get hit the hardest. And then part of that will come down to different recruiting strategies and advertising in nontraditional forms, going to community centers, things that we've done in the past that we've been successful -- where we've been successful and -- pursuing some of those strategies.

[Operator]

Your next question comes from Ammar Shah from National Bank.

[Ammar Shah, Associate]

Actually, the majority of my questions have been answered. Just had one. The price escalators that you've mentioned, is it fair to assume that, that willfully or mostly offset the minimum wage increases? Or is that just going to be like a partial offset?

[Linda Jane McCurdy, President, CEO & Director]

I mean, every contract is different, and some are more closely aligned with minimum wage. I think, over time, the answer to that is, yes because as contracts come up, it will be priced in, but there is just no question, there is a lag.

[Operator]

Your next question comes from Justin Keywood with GMP Securities.

[Justin Keywood, Director of Equity Research]

Just on the Linitek acquisition. Now that it's closed, will you be sunsetting that associated facility and moving the volume over to your main plant in Alberta?

[Linda Jane McCurdy, President, CEO & Director]

Yes. Great question. We absolutely will be. We will be -- we're in the process of moving that volume into our Calgary plant. We will be decommissioning that facility and subletting it.

[Justin Keywood, Director of Equity Research]

Okay. And then what would be the potential EBITDA accretion? So if it was $600k prior, what's your expectations just moving that volume over?

[Linda Jane McCurdy, President, CEO & Director]

That would have assumed, Justin, an integration into our plant. That would have assumed -- that accretion would have assumed that that's the incremental EBITDA by moving it over.

[Justin Keywood, Director of Equity Research]

Got it. So what would the EBITDA be prior to that then?

[Linda Jane McCurdy, President, CEO & Director]

We did not disclose that.

[Justin Keywood, Director of Equity Research]

Okay. I assume though there is significant synergies from acquiring some of these tuck-in operators and sunsetting the plant and then moving the volume over. Is that fair to say?

[Linda Jane McCurdy, President, CEO & Director]

Yes. Absolutely, yes. Our plants are significantly more efficient and limited fixed cost would have to be added to move that amount of volume over.

[Justin Keywood, Director of Equity Research]

Okay. And then I was just hoping to get some greater clarity on the onetime costs. Kristie mentioned it declining significantly in Q4. Just wondering if we could get a figure on that. And if there's any remaining onetime costs going into next year.

[Linda Jane McCurdy, President, CEO & Director]

There will be onetime costs in Q4. It is going to be substantially below Q3, and I would say, below Q1, so I think that gives you a much tighter range in terms of what we would expect. But again, Q2 and Q3 were very significant quarters, being driven by decommissioning costs, being driven by labor, being driven by support costs from other facilities, but we do anticipate that's dropping off dramatically, certainly less than the $1 million range. Into Q1 and 2019, I would say, it would decline even further than that and be de minimis. We'll still be working on optimizing the plant, but the onetime costs will disappear.

[Justin Keywood, Director of Equity Research]

That's very helpful. And then just coming back to the expectations on the EBITDA margins returning to historic levels in the back half of next year, you mentioned 17% to 19%. Is that a consolidated margin number?

[Kristie L. Plaquin, Chief Financial Officer]

That would be for our Canadian division, Justin.

[Justin Keywood, Director of Equity Research]

Okay. I guess, I could do the math, but is there any expectations on a consolidated basis?

[Kristie L. Plaquin, Chief Financial Officer]

I guess, Fishers would be in the range we've given, of the 14% to 15%. So on a consolidated basis, somewhere in the -- I guess, that would be 16% to 18%.

[Justin Keywood, Director of Equity Research]

Okay. That's very helpful. And then what about the first half of next year?

[Linda Jane McCurdy, President, CEO & Director]

Yes. You know what, we haven't provided guidance on the first half. There will be improvements, for sure, from Q4, but it will definitely back -- be back-end weighted, Justin. And that's just a function of continuing to have to optimize the plants -- the Vancouver plants, and there's 2 of them.

[Justin Keywood, Director of Equity Research]

Got it. And just one more question for me. Just given the extra capacity you mentioned, is there any attention to possibly investing more in sales and marketing?

[Linda Jane McCurdy, President, CEO & Director]

I think it's fair to say there will be a significant investment in time and energy into that. Will there be more dedicated resources committed to that, that wasn't the anticipation -- we did not anticipate that.

[Operator]

[Operator Instructions] Your next question comes from Brian Pow with Acumen Capital.

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

I've got a couple of questions. So just looking at the Vancouver facility, when you sort of reach your stabilization next year-end or next year, what level of utilization will you be at there?

[Linda Jane McCurdy, President, CEO & Director]

About 50%.

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

Okay. And what sort of productivity gains are you expecting? You said 25% in Toronto. Where will you be in Vancouver?

[Linda Jane McCurdy, President, CEO & Director]

I would say that it would be higher than that range, probably about the 30% range when we are fully optimized between the 2 plants.

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

Okay. And as you work towards stabilizing your EBITDA in Canada, how much of that is really just driven by more -- driving through more volume and how much is just through getting your labor cost down?

[Linda Jane McCurdy, President, CEO & Director]

A very high percentage of it is coming from achieving productivity targets that we know we can achieve. So it is not, as like I would say, 85% of it.

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

Okay, great. And then just the labor issue is not unique to you. So maybe if you can just speak to the competitive environment and what you're seeing through this whole swing?

[Linda Jane McCurdy, President, CEO & Director]

Yes. It's a great point. In the markets that we have felt tightness that we haven't felt before, i.e., in both of the Québec markets and in Victoria, it is a common theme of anyone that we're speaking to, whether it be competitors or just other businesses with a high requirement for unskilled labor. And we have faced this before. This isn't new to us, and so what it comes down to is developing strategies to attract a workforce that is desirable work shifts, offering different things, transportation, potentially. And it will be a key focus for us to ensure we have those strategies in place for Q2 and Q3 of next year. Again, because it becomes our seasonally weak quarter, it impacts us dramatically less. It doesn't mean the problem goes away 100%. It's just not just as acute as we see in Q2 and Q3, but that will give us enough runway to develop the strategies and put them into play for next year.

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

Okay. And then just -- it's been pretty quiet on the Toronto healthcare front for you. You have picked up some volume from Trillium and things like that. But from an RFP perspective, have there been any RFPs that you haven't won? Or is it -- and then looking into 2019, are there some new RFPs that are expected that should help you fill that -- the capacity?

[Linda Jane McCurdy, President, CEO & Director]

I mean, there has been a number of smaller wins that we don't disclose just because of the size of them. There's been certainly nothing even close to Trillium or William Osler out there. But we do feel confident that into 2019, there'll be additional RFPs out there. There are several where there has not been decisions made at this point. But we still feel good about our ability to be competitive and put a good offering forward.

[Operator]

There are no further questions at this time. I will now turn the call back over to the presenters.

[Linda Jane McCurdy, President, CEO & Director]

Thank you everyone for joining us today. And should anyone have any additional follow-up questions, Kristie and I will certainly be available. Thanks so much, and we'll talk to you after the next quarter.

[Operator]

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