Roots Corp

TSX:ROOT

Earnings Call Transcript 2021-Q2

[Operator]

Good morning. My name is Chris, and I will be your conference operator today. At this time, I would like to welcome everyone to the Roots Fiscal 2020 Second Quarter Conference Call. [Operator Instructions] On the call today, we have Meghan Roach, Chief Executive Officer; Mona Kennedy, Chief Financial Officer; and Kristen Davies, Head of Investor Relations for Roots. Before the call begins, the company would like to remind listeners that the call, including the Q&A portion, may include forward-looking statements about current and future plans, expectations and intentions, results, levels of activities, performance, goals or achievements or any other future events or developments. This information is based on management's reasonable assumption and beliefs in light of information currently available to Roots, and listeners are cautioned not to place undue reliance on such information. Each forward-looking statement is subject to risks and uncertainties that could cause actual results to differ materially from those projected.The company refers listeners to its fiscal 2020 second quarter management's discussion and analysis and/or its annual information form updated May 29, 2020, for a summary of the significant assumptions underlying forward-looking statements and certain risks and factors that could affect the company's future performance and ability to deliver on these statements. Roots undertakes no obligation to update or revise any forward-looking statements made on this call. The fiscal 2020 second quarter earnings release, the related financial statements and the management's discussion and analysis are available on SEDAR as well as on the Roots Investor Relations website at www.investors.roots.com. Finally, please also note that all figures discussed on this conference call are in Canadian dollars, unless otherwise stated. Thank you. Ms. Davies, you may begin your conference.

[Kristen Davies, Head of Investor Relations]

Thank you, operator. Good morning, everyone, and thank you for joining us. Meghan Roach, our Chief Executive Officer, will discuss our fiscal 2020 second quarter operational performance. Then she will turn the call over to Mona Kennedy, our Chief Financial Officer, who will discuss our financials in greater detail. After which, we will open up the call for questions. Meghan?

[Meghan Roach, CEO, President & Director]

Thank you, Kristen, and good morning, everyone. I hope all of you are well and that you and your families are staying safe. Before we get into our results for the second quarter, I want to take a moment to say how incredibly proud I am of the entire Roots' team. While I have said it on multiple calls, it really cannot be said enough. Their commitment and agility have enabled us to take decisive actions during the pandemic and to effectively navigate the challenges we have faced in the current operating environment. During the second quarter, Roots continue to experience the impacts of COVID-19 on the business. With the limitations we face due to store closures and new requirements around physical distancing, we experienced meaningful declines in our store sales, which were partially offset by the strength of our e-commerce business. However, as a result of our improved DTC gross margins, excess controlling costs and the benefit of the Canadian government wage subsidy, adjusted EBITDA improved year-over-year. Before I pass the call on to Mona to discuss our financial performance in more detail, I want to discuss our progress on our strategic pillars. During the Q1 call, I discussed the areas of strategic focus for Roots in the medium term. Specifically, I mentioned enhancing our understanding and focus on our target customers, creating brand love, making irresistible products and enhancing our omnichannel experience, all of which are underpinned by a continuous commitment to operational excellence. Rather than discussing all areas each quarter, I will be focusing on the key areas of development within the period. This quarter, I will be highlighting our omnichannel and product focus initiatives.In this prolonged work-from-home environment, our product assortment continues to resonate well with our customers. Notably with sweats having become an increasingly important product category for consumers since March. It is worth calling out that Roots as a brand is a sweat spectrum. We launched our first sweats in 1979, over 40 years ago. Since then, we've innovated in the category continuously, improving our fabrics and silhouettes as well as adding in new products. While still maintaining a title inventory focus, we had complimented our long-term core favorites with exciting new offerings such as our organic selection. Although this collection was only sold online due to our store closures, it performed incredibly well. We've also launched a number of exciting web exclusive capitals this quarter, such as collaborations with Billy Bamboo; and Camp Tamakwa [ or a Founders Nest ]; and limited edition, DIY sweatshirts, all of which sold out quickly. In addition, Karuna Scheinfeld, our new Chief Product Officer, officially joined us in early July, and she has hit the ground running. With an eye on building long-term sustainable success, the team is working on 2 main areas. The first is product assortment. We have numerous iconic products that have become synonymous with the brand, which comes from a long track record of building successful franchises. We plan to continue leveraging our core favorites and protect our brand builders, while also seeding new programs for best sellers. The second is building the product experience through the lens of the customer. As we continue to further enhance our understanding of our customers, we will be increasingly leading with their perspective in the design process, what they want, need and expect from our products from the starting point of design. Outside of making great products with the pandemic forcing fleet-wide store closures, our omnichannel shopping experience has become even more important. Our single view of inventory across e-commerce and retail continues to enable us to get the product to the customer through the most appropriate channel.During the quarter, it was hugely impactful for us to have more inventory stored in our distribution center and to be able to use the inventory across retail and e-commerce based on the demand. At the DC, we successfully fulfilled significantly elevated order volumes while maintaining full physical distancing precautions. In addition, we were able to leverage our ship from store and buy online, pick up in store capabilities to meet demand. This helped to service online demand while also clearing store inventory that was trapped during the closures.We will continue to work to further enhance our e-commerce shopping experience, given the growing importance of the online retail channel across the industry and increased demand from our customers. A good example is adding alternative payment services and other features and capabilities that improve the experience for our existing customers or attract new customers. We're also continuing to evaluate the best way to use our storefront print to connect with our customers and create unique brand experiences.While we saw the impacts of COVID-19 on overall retail traffic, customers shopping in our stores had a higher intent to purchase, which is reflected in stronger conversion during the quarter. With more affordable rents and the greater availability of short-term leases, we're also seeing opportunities to take advantage of pop-up to showcase key products and collections, capture event-driven or seasonal traffic or testing markets. For example, we brought our pop-up back to Muskoka, the cottage area outside of Toronto, this summer with great success. We also launched a kids pop-up at Sherway Gardens in Toronto last month, and we are pleased with early indications. The circumstances of the past 6 months have served as a strong reminder of the importance of remaining a company with authentic values and continuing to play an active role in supporting our communities. When we launched our made-in-Canada non-medical masks in April, we committed to donating a portion of each sale. We have raised over $200,000 for the Frontline Fund to date. And in the month of August, committed our donations to Black CAP. In September, we are partnering with the Holland Bloorview Kids Rehabilitation Hospital, and we will continue to seek out charitable partnerships that support our communities going forward. In addition to our partnership with Brands for Canada's, United Hearts for Canada program, we have donated more than $1 million in products to support charitable organizations across the country that directly benefit the local communities where we do business. We are also committed to using our brand platform to celebrate diversity and be it for inclusion and equality. For example, we have challenged ourselves to push harder on our campaign casting in all aspects of diversity. This includes signing the Dear Everybody agreement with Holland Bloorview earlier this year and commitment to include a greater representation of disabilities going forward.We also recently launched our new Sweatpant Fit Guide online, which showcases, for the first time, more size inclusiveness in our models to help our customers find the perfect fit for them. In addition, I signed the Black North initiative CEO Pledge, committing that Roots will do our part to combat anti-Black systematic racism in Corporate Canada. Internally, we are focusing on bringing people together from across our company to create a greater connection between diversity, inclusion and equality activities and our broader business strategy. While we're making progress, it is important for us to make lasting change across the organization, which will undoubtedly take time.This pandemic continues to challenge all of us to work, behave and think differently. Even though we have had to adjust plans, and in some cases, rethink our approach to the business because of the impact of COVID-19, what remains unchanged are Roots' strong fundamentals. We are a trusted brand with a compelling product offering, well-developed omnichannel capabilities and strong commitment to our communities. While we will likely continue to operate in a period of uncertainty for some time, we believe the steps we have taken have enabled us to overcome short-term adversity and better position Roots for the future. On that note, I will pass it to Mona to discuss the financial results for the quarter in greater detail.

[Mona Kennedy, Chief Financial Officer]

Thanks, Meghan, and good morning, everyone. I'd like to start by saying that I too am incredibly proud of our entire organization and our ability to work together, moving quickly to sustain the business and maintain financial health in the face of a global pandemic. With our temporary store closures and then a phased reopening with reduced hours and lighter traffic trends, our stores were closed for approximately 40% of the quarter. As a result, we saw a decline in our topline results. Total sales were $38.2 million, down 38% from $61.7 million in Q2 2019. Our decline in store sales was partly offset by stronger e-commerce performance, with us recording DTC sales of $28.5 million, down from $48.2 million last year. On the partners and other front, sales were $9.7 million, down from $13.5 million last year. This was primarily a result of COVID-19 related declines in our partner-operated Asia business. For the quarter, our DTC gross margin was 62.2%, up 590 basis points from 56.3% last year. As we noted last quarter, prior to the significant effects of COVID-19, we were executing on the plan to reduce promotional activity and drive more full price selling. We acquired the strategy in Q1 and maintained a disciplined approach in Q2. We reduced the number of events that are aligned with industry typical promotional windows and tested consumer response to lower discount rates. We also honored our heritage collections, such as Salt & Pepper as well as our best sellers by excluding them from our promotions. We are committed to these efforts over the long term. However, we will remain nimble, responding appropriately to market conditions especially as we move into the more naturally promotional second half of the year. In the quarter, we also benefited from a shift in mix towards our higher-margin core sweats offering, as the work-from-home continues to be the reality for a lot of people. We recorded $21.4 million in selling, general and administrative expenses for Q2 2020, down from $40 million last year. Of the $18.6 million decrease, $11.8 million was related to COVID-19 driven cost reduction efforts. We realized personnel cost savings related to store closures and our phased reopening with reduced operating hours and labor managed in accordance with store sales. We finalized the agreements with certain landlords for rent abatements. And we benefited from a reduction of corporate costs in numerous other areas of the business.We also realized $2.5 million in savings as a result of the permanent closure of 7 of our U.S. stores in Q1. In the quarter, we benefited from $6.1 million in government wage subsidies. We recorded $4.3 million in SG&A, $0.9 million as a reduction to COGS and $0.9 million in capitalized labor at our leather factory. While some of our cost reductions are isolated to this quarter, there are others we plan to continue to carry forward to future quarters as we continue to navigate challenges of the current environment.We're still in discussions with some of our landlords and remain confident we will reach mutually agreeable outcomes. We will also continue to work with our partners, suppliers as well as service and logistics providers to identify opportunities for potential further cost reductions. As a result of our gross margin expansion, cost savings and the benefit of government wage subsidies, we recorded adjusted EBITDA of $1.1 million. This is compared to a loss of $4.4 million last year, which included $1.3 million in losses related to our 7 closed U.S. stores. Now turning to inventory. Our inventory balance at the end of the quarter was $58.6 million, up $4.6 million compared to Q2 2019. As we noted last quarter, in response to COVID-19, we have been working to carefully manage inventory and derisk our overall assortment. We have reduced inventories by prioritizing key collections and product categories and scaling back in others. We have shifted goods out into later quarters. We have also implemented a pack and hold strategy for key perennial favorites, which we will put back on the floor when they are seasonally relevant again.With this approach, these items will remain in our reported inventory numbers until the same time next year. Also keep in mind that perennial favorites and enduring icons, like our Salt & Pepper sweats, which are available year-round from our Cabin Collection, which is offered every year, comprise approximately 70% of our inventory, giving us the flexibility to apply many of the inventory management strategies mentioned. In addition, with our Toronto-based factory, we have the ability to quickly react and respond to changing market conditions. Free cash flow for the quarter improved approximately $20 million over last year as a result of a reduction in CapEx and improved working capital. At the end of Q2 2020, we have $39 million in unused borrowing capacity on our $75 million revolving credit facility and net cash of $7.9 million. Net debt was $101.3 million, down from $137.8 million last year. We're also in compliance with our covenants. Navigating the past 6 months has been challenging. In the current environment, managing our business for near-term liquidity and cash flow remains our priority. However, we will continue to do so without losing sight of our long-term opportunities, while positioning us for success in a post-COVID world.Operator, that concludes our prepared remarks. Please open the line to questions.

[Operator]

[Operator Instructions] Your first question comes from Stephen MacLeod of BMO Capital.

[Stephen MacLeod, Analyst]

I just wanted to follow-up. I just want the sales number. Can you talk a little bit about how sales sort of progressed through the quarter and how in-store sales are performing now that the stores have been reopened?

[Meghan Roach, CEO, President & Director]

Yes, absolutely. So I mean, I think that the way we characterize it is, I mean, we're a more seasonally relevant brand, obviously, in the [ unprecedented ] time period. So when we look at our sales, we did see some improvements in the trends as we went into the back-to-school period. But it's been a bit difficult for us to look at a specific trend as a result of the fact that we're really seeing a prolonged tactical period now, with provinces really changing when they're going back-to-school and especially in Ontario, really segregating and then moving around when they're doing that throughout the last couple of weeks. So we've been pleased so far with the way our business has trended in the last couple of weeks as we go back into our peak period. But we've seen a lot of variability across the country and across our different formats of the stores.

[Stephen MacLeod, Analyst]

Okay. That's helpful. And then can you talk a little bit about in terms of the cost. So SG&A was down quite substantially year-over-year. And Mona, you addressed a little bit of this in your prepared remarks, but how much -- are you able to quantify how much of that $18.6 million decline is recurring versus onetime in nature? Maybe not onetime, but more related to COVID-19, I guess.

[Mona Kennedy, Chief Financial Officer]

Yes, absolutely. I mean when you look at the cost savings that we see with the quarter, one of the large ones was obviously the government wage subsidy, which is going to be recurring to the extent that we qualify in future quarters. In terms of other costs, the closure of our U.S. stores benefited us by $2.5 million. That's going to continue into future quarters, as we've discussed previously. We're going to continually manage our labor at the stores in relation to our sales and add labor as needed. From a rent perspective, we're in negotiations with our landlords, and we should expect some savings in the future quarters, but that's dependent on the outcome of the negotiations. And for the past 6 months, we've been making shifts in how we manage expenses and our corporate savings, and we're going to continue to do that in a fortunate and a disciplined way.

[Stephen MacLeod, Analyst]

Okay. That's helpful. Of that $11.8 million, which was the large year-over-year decline bucket, are you able to quantify the breakdown between lower wages, labor, I guess, rent and overall corporate costs? Like how much of that larger bucket is -- how that breaks down between some recurring and some sort of contained to this period?

[Mona Kennedy, Chief Financial Officer]

We don't provide that level of details, unfortunately.

[Stephen MacLeod, Analyst]

Okay. No, that's fine. And then maybe just finally, in terms of the inventory. You talked a little bit about -- I just want to make sure I understood this correctly, but it sounded as though a lot of those perennial favorites will stay in the inventory. Is that a shift? I don't understand correctly. Is that a shift in how you're managing inventory currently versus how you've managed it previously?

[Mona Kennedy, Chief Financial Officer]

I mean, absolutely, right. We have stayed nimble in the way that we manage inventory over the past 6 months, and we've kind of gone ahead of it early on, and implemented a number of different strategies. One of those was the pack and hold strategy, where we're packing and holding certain inventory that was going to be rolled out this year and introducing it into future quarters. And yes, that is a new strategy. Normally, we wouldn't be sitting on inventory, but given that stores were closed for a couple of months that's the strategy we're implementing. But our perennial favorites and enduring icons, there are items that are true to the huge brands and been repeating or part of that come into sales throughout the year. And we can -- it allows us to manage that pretty effectively and derisk our inventory.

[Operator]

Your next question comes from Brian Morrison with TD Securities.

[Brian Morrison, Research Analyst]

Mona, can we just review that inventory number again? I just want to make sure I understand it correctly. In terms of -- did you say -- because it looks like inventory year-over-year is up about 10% or 7% to 10%. You say 70% of that inventory is perennial and enduring icons. And should we expect any promotional activity with the remaining 30%? Or can you just clarify that point, please?

[Mona Kennedy, Chief Financial Officer]

Yes, absolutely. The 70% number is a number that is kind of a general approximate number. That's how we manage our inventory normally. And yes, 70% of perennial favorites and enduring icons is at less of a risk, and the other 30% is seasonal product normally. And from a promotional activity perspective, we're staying on top of the inventory and we'll be introducing promotions as we needed to kind of get through this inventory. But yes, the 10% increase in inventory is partly due to the pack and hold strategy, and we should expect to kind of see elevated levels of inventory going into kind of the end of the year as some of this is held for next year.

[Brian Morrison, Research Analyst]

So it shouldn't have an impact on gross margins?

[Meghan Roach, CEO, President & Director]

No. I think, Brian, on the promotional activity, to your point, so we've been pretty disciplined this year in terms of promotional activity, as you can see from our gross margins in Q1 and Q2. As we get into the second half of the year, we tend to have more consistent commercial activity with the industry. So while we're continuing to be disciplined in our promotional activity, we will continue to look at seasonal stock and determine whether or not we have to take deeper discounts. So far, we've been happy with our strategy there in terms of how that's flushing through. I think what Mona is alluding to is the fact that when we came into the pandemic, we made a specific decision to actually pack up some inventory that we would bring into the -- it's back into the company, either the second half of this year or into 2021. And as a result, you'll see reductions in our inventory buys to balance that off. And so the inventory that you're seeing, the excess inventory you're seeing now, part of it relates to a strategy we've specifically taken to pack inventory up and bring it back into other seasons, which we can do given the amount of our product that's core.

[Brian Morrison, Research Analyst]

And then, Meghan, perhaps you can talk about with the shift to e-commerce and the success of your pop-ups, I remember we talked about the potential for rationalization of the Canadian footprint last quarter. Where do we stand in terms of that?

[Meghan Roach, CEO, President & Director]

Yes. So I mean, I think as we talked about last quarter, coming into the pandemic, 90% of our Canadian stores are profitable. And so as we've been going through the pandemic, we continue to evaluate our store breakthrough in a number of different ways. So we're looking at how the store performed pre-pandemic, how the store is currently performing, where we're seeing some shifts in retail hubs and how brand accretive the store location is to us. And then we're making a decision around when we close those stores. Really what we've done is we're looking at both the store expiries this year as well store expiries next year and taking a really close look at what we think the right footprint is based on our store expiries. So we will -- we are looking at the right size of the store network for us, but it's not just reducing stores. We are also looking at new and relevant pop-ups in the marketplace. So where we see decent rents or an opportunity for us to test out a new concept or test a new product or get into a market that we think we have more upside potential, we are also opening pop-ups. And at this point, we've done 2. We have 2 more opening actually within the next week. And so that will also be a strategy we look at as we look at our store footprint overall.

[Brian Morrison, Research Analyst]

Okay. And then last question, just in terms of the pillar of understanding your customer base. You just elaborate on what data you have in terms of numbers, in terms of demographics and your ability to increase that data to use it in a more rich manner?

[Meghan Roach, CEO, President & Director]

Yes, absolutely. So I think we talked about in the last quarter the fact the we had done a customer survey of 20,000 customers. And so we have quite a lot of data from that customer survey, which is completed at the end of last year, and that's something we will focus on refreshing as we go into the second half of this year and into 2021. In addition to that, we do have a CRM database, which is agile one, which allows us to capture quite a lot of rich information about our customer bases, both in an online and in-store manner. And so we have the opportunity to really mine into that customer data to find out quite a lot of things about them in terms of their shopping habits with us. And then also layering on to that from our customer surveys, demographics and other information on how they use their products. So we do have an availability of data, and we're turning our attention to mining that data and then taking insights from that data and applying that across the company.

[Operator]

Your next question comes from Sabahat Khan of RBC Capital Markets.

[Sabahat Khan, Analyst]

Just want to get some thoughts, maybe high-level thoughts on how you're thinking about e-commerce and your store footprint. And you indicated that obviously, there's a big spike over the recent months with e-commerce, are you maybe thinking about rejigging some of your stores to be maybe even more sort of e-commerce friendly, maybe shrinking some footprint, if necessary? How are you thinking about that sort of medium and long term?

[Meghan Roach, CEO, President & Director]

Yes. So I'll take that. So I think the good thing about Roots is that you're coming into this pandemic, we really had a pretty strong omnichannel business. I think we alluded to at the end of the Q4 that we had in excess of 20% of our sales are in e-commerce. And we already had the capabilities to do ship to store, ship from store, pick up at store and curbside. So the benefit of coming into this pandemic with that strong omnichannel capabilities means that a lot of our systems and capabilities are already in place to leverage our store network to fill from an omnichannel perspective.I think as I just mentioned to Brian's question, as you look at our store footprint, we are looking at that store footprint in the context of how they performed prior to coming to the pandemic, and how they're currently performing. And we are balancing off what stores we are going to continue to keep open versus stores that we might rationalize, taking into consideration a number of different factors including how brand accretive they are, where the mutual hubs are and also what we're seeing in terms of our ability to recapture the sales from an e-commerce perspective. So we are definitely looking at that, but we feel pretty confident with our capabilities right now from an omnichannel perspective given the investments we had previously made in the business, actually pre-pandemic around our ability to use our integrated store network in this environment.

[Sabahat Khan, Analyst]

Great. And then maybe as we look sort of to the back half of the year, and you made some commentary on your inventory position earlier on. And do you still expect to kind of benefit from some of that positive mix shift towards some of these higher-margin sweat type products, given that this work-from-home situation continues and maybe kids stay at home to some extent? How are you thinking about maybe the mix shift for the back half of the year?

[Meghan Roach, CEO, President & Director]

From a back half of the year perspective, we don't expect to continue to be at margins to the level that we have in the first half of the year. We're entering a highly promotional area for the industry kind of in the second half of the year. And we will be promotional as others -- we will be as well. We are committed to long-term plan to reduce promotional activity and bring margins. From a shift mix, I think I would expect that some of that will continue into the next quarter but obviously, the customer will kind of determine what they buy. But we have an expectation that, that might be happening. And we're going to stay flexible within the current environment and stay nimble as need be, whether customers show up or downturn and kind of change strategy as is required.

[Operator]

[Operator Instructions] Your next question comes from Matthew Lee of Canaccord.

[Matthew James Lee, Associate Analyst of Telecom and Media]

I know that a lot of companies that have had earnings recently have started to state that Canadian wage subsidies are going to be lower in September. Can you provide any color on what you're seeing on that front? Or maybe some idea of what you expect to receive for Q3?

[Mona Kennedy, Chief Financial Officer]

Yes. So as you might know, the wage subsidy has been restructured for September onwards and the structure that is quite dependent on sales declines for companies, and there are a number of components to it. So as a result of that, the wage subsidy that we receive is going to be dependent on sales. We don't want to provide any guidance on sales. So, I can't really provide any guidance on how much subsidies we expect to get. But I would imagine it would be less. Up to this point, it has been 75% of wages and the rates have been reduced by the government. So we would expect to get less.

[Matthew James Lee, Associate Analyst of Telecom and Media]

And maybe you can give us a little bit more color on your strategy going into the back half with regards to maybe spurring retail traffic, given the potential for COVID-19 to push even further into F '21? I know you've been really judicious about offering discounts, but we have seen promotions teed up over the last couple of weeks. I mean, is that something that you can maybe use to push customers back into those retail stores?

[Meghan Roach, CEO, President & Director]

Yes. I think we're going to continue to be disciplined around promotions. We have a long-term strategy at Roots of being less promotional overall. We think we have some really excellent products. And we don't think we need to consistently offer them on sale to drive the existing customers to purchase those. And we actually have seen that so far this year despite the pandemic that our customers are buying our products with zero promotions around the first half of the year. As we go into the second half of the year, I think as Mona alluded to, it's generally a more promotional period industry-wide. I mean you have Black Friday, you have boxing league, you have a lot of those different types of things. So we will continue to be consistent in terms of the way we operate within those typical promotional period.We are trying to maintain some flexibility. I mean, no one knows what's going to happen with the pandemic, whether or not we'll have a second wave. And so undoubtedly, if there's something significant that happens then we have to move more to being more promotional. We will definitely be open to that. However, our long-term strategy is not to do that. I think from a traffic-driving perspective, we are looking at mostly with way to drive traffic outside of just using promotions. And I think we feel strongly about the fact that we have a good product offering that should encourage our customers to go in our stores regardless of promotions.

[Matthew James Lee, Associate Analyst of Telecom and Media]

Can you maybe highlight some of those other ways that you're driving traffic?

[Meghan Roach, CEO, President & Director]

Sure. So as an example, we have different promotions down the road, different events that we're running in stores over the next couple of weeks. So we have things like come to the store and buy a sweater and you may do a customized package. We're doing more advertising around our ability to come to stores and do customized jacket, which is something that we can uniquely offer given our leather factory in Canada. We're doing a lot more around things like pop-ups, where we have the kids-only pop-up that opened in Sherway Gardens, and that for us, especially is very successful to have kids-only store, and we're doing a couple of more of the kids-only stores in a couple of other locations within Canada. So we're doing a lot of different things, a lot of different marketing activities as well as a lot of different communications to our customers that provide a unique experience in stores that other brands cannot offer.

[Matthew James Lee, Associate Analyst of Telecom and Media]

That's great. And then can you give us any kind of color around how much rent abatements were in the quarter?

[Mona Kennedy, Chief Financial Officer]

Yes. I think actually, that's disclosed in our financials. So the rent abatements recorded in the quarter were about $1.3 million. And that's not the full extent of the abatements. We can recognize the abatements as we kind of sign contracts with our landlords. So we should expect more in future quarters.

[Operator]

There are no further questions at this time. I will now return the call to Ms. Roach for closing comments.

[Meghan Roach, CEO, President & Director]

Thank you, operator. That concludes our prepared remarks. We thank everyone for joining us today, and we wish you all a great week.

[Operator]

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