American Woodmark Corp (AMWD) 2007 Q3 法說會逐字稿

Good day and welcome to the American Woodmark Corporation conference call. Today's call is being recorded. The Company has asked us to read the following safe harbor statement under the Private Securities Litigation Reform Act of 1995. All forward-looking statements made by the Company involve material risks and uncertainties that are subject to change based on factors that may be beyond the Company's control.

Accordingly, the Company's future performance and financial results may differ materially from those expressed or implied in any such forward-looking statements. Such factors include, but are not limited to, those described in the Company's filings with the Securities and Exchange Commission and annual report to shareholders. The Company does not undertake any publicly updated or revise its forward looking statements even if experience or future changes make it clear to any projected results, expressed or implied therein will not be realized.

At this time, I'd like to turn the call over to Vice President and Treasurer Mr. Glenn Eanes for opening remarks and introductions. Please go ahead, sir.

Good morning, ladies and gentlemen. Welcome to the American Woodmark conference call to review fiscal 2007 third quarter results. Thank you for taking time to participate.

Participating on the call today from American Woodmark Corporation will be Jake Gosa, Chairman and Chief Executive Officer; Kent Guichard, President and Chief Operating Officer; and Jon Wolk, the Chief Financial Officer. John will begin with a review of the quarter and our outlook on the future. After John's comments, Jake, Kent and John will be happy to answer your questions. Jon?

Thanks, Glenn. This morning we released the results of our third fiscal quarter that ended January 31, 2007. In case you've not had the chance to read our earnings release, here are a few highlights. Net sales for the quarter were $161.1 million down 16% below the prior year's third quarter. Net income for the quarter was $3.8 million, down 38% below the prior year's third quarter net income of $6.1 million.

Diluted earnings per share of $0.24 for the quarter were 35% lower than the $0.37 we earned in the prior year's third quarter. For the nine months ended January 31, net sales were $594.8 million, down 4% versus the prior year's first nine months. Net income was $26.4 million, up 34% versus the prior year's first nine months and diluted earnings per share of $1.64 were 39% higher than the $1.18 per share in the prior year's first nine months.

We began recording stock compensation expense during the first quarter of the current fiscal year. The after tax impact included in these aforementioned results was $0.07 per share in the third quarter, and $0.19 per share in the first nine months of fiscal 2007. Excluding the impact of stock compensation expense our diluted earnings per share for the first nine months of fiscal 2007 would have been $1.83 or 55% higher than in the comparable period of the preceding year.

As we have discussed in our recent calls, we commenced a transition out of certain low-margin products, including the in-stock cabinet business at Lowe's in October 2005. I'm pleased to announce we've just completed the transition this month. As in the recent calls, I will provide a separate breakout of the transition impact. Regarding our third quarter sales performance. Our previous guidance anticipated sales of core products to be flat with prior year levels, during the second half of our fiscal year that ends April 30, 2007. Our actual core product sales for the third quarter declined by 7%. Sales of low-margin products declined as planned, down 78%, or nearly $18 million below the prior year's third quarter. As I stated earlier, we made our last shipment of this product set this month.

Our previous guidance for the second half of the fiscal year anticipated an overall sales decline of 6% to 10% below prior year levels, inclusive of our transition out of low-margin products. The overall sales decline of 16% in the third quarter was more of a decline than we expected.

In new construction, residential housing start forecasts for 2007 from the National Association of Realtors and the National Association of Home Builders were recently revised downward to approximately 1.5 million units, which would represent a drop of approximately 16% from the 1.8 million housing starts begun in 2006.

On the negative side, the reported backlogs of large builders to whom we sell continued to decline due to historically high levels of customer cancellations and reduced sales activity. However, on the positive side, a growing number of economists seem to believe that unsold inventory levels of new homes may have peaked at the present levels and 30-year fixed mortgage rates as reported by Freddie Mac continue to hover at approximately 6.3%, in line with where they have been for the last year and low by historical standards.

Order rates were lower than we expected, in turn causing our third quarter new construction sales to be approximately 20% lower than in the comparable period of the prior fiscal year following high single-digit declines from the first half of the fiscal year. Although the new construction market has not yet displayed signs of growth, we continue to aggressively bid and win new business.

Based on the value of our Timberlake product line, our extensive service reach, and our partnerships with many leading home builders, we believe we are growing our market share in what looks to be a relatively weak new construction sector for the next several quarters. For the remodeling market, economic fundamentals remain very sound. Existing home sales, a leading indicator for home improvement spending, closed out 2006 at 6.48 million homes, their third highest level ever. And forecasts for 2007 have home sale transaction levels at similar levels.

Inventories of unsold homes declined during December to 6.8 months of supply. The consumer confidence index remains stable and near recent highs and consumers feel increasingly better about the job market. The unemployment rate, as reported by the U.S. Department of Labor, stands at a healthy 4.6% and new job creation also remains healthy. However, despite these healthy indicators, a number of companies whose products are sold at the national home centers have recently reported sales declines.

During our third quarter, we experienced a remodeling sales increase in the mid-single digits. This followed a double-digit sales increase that we experienced in the first half of the fiscal year. Although our rate of sales increase moderated in the third quarter, we believe the fact that our sales continued to increase demonstrates that we continue to gain market share. We expect the remodeling market will be roughly flat with the prior year in the coming months.

We further expect that our market share gains and our market position as the value provider of goods and services, positions us particularly well during this less robust phase of the housing cycle.

Moving on to gross profit. Gross profit for the third quarter was 18%, higher than the 17.5% we generated in the third quarter of last year, but less than the 21.2% we earned in the first half of this fiscal year. For the first nine months of the current fiscal year, we generated a gross margin of 20.4% as compared with 16.7% in the comparable period of the prior year. The third quarter represents the weakest quarter for our business because of the seasonality of customer ordering patterns. As such, margins and earnings tend to be lower during this quarter.

Because sales volume came in less than we expected, our gross margins were about 1.5% less than we had originally expected for the quarter, with labor and manufacturing overhead costs increasing as a percentage of sales.

However, we continued to realize operational efficiencies from numerous operating initiatives launched a year ago that have significantly improved margins. These initiatives included focusing on operational efficiencies and disciplines, implementing selected pricing actions, rationalizing spending and head count levels and initiating our transitions out of the low-margin products.

Our transition out of a low-margin product commenced one year ago. The reduction of these production volumes has enabled a significantly improved sales mix of more core products with higher margins, as well as an enhanced level of focus on realizing operational efficiencies.

The impact of pricing options has helped offset inflationary pressures and material costs. And diesel fuel costs have returned to more normalized levels which has helped to reduce freight costs. The combined impact of these actions and market dynamics helped to maintain margins above prior year levels despite a challenging third quarter markets for sales volume.

Regarding SG&A costs, total SG&A expense was 15.1% of sales in the third quarter of fiscal 2007 as compared with 12.5% in the prior year. Total SG&A expense was 13.6% of sales in the first nine months of fiscal 2007 versus 11.6% in the prior year. Selling and marketing expenses were 10.4% of sales in the third quarter of fiscal 2007, up from 9.4% in the prior year, driven by the reduced third quarter sales level. Selling and marketing costs were 8.9% of sales in the first nine months of fiscal '07. in line with prior year levels. Selling and marketing expenses for fiscal 2007 included 0.1% of sales for stock compensation expense.

General and administrative costs increased to 4.7% of sales in the third quarter and first nine months of fiscal 2007, compared with 3.1% of sales and 3% of sales in the prior year's third quarter and first nine months, respectively. The increase over prior year reflected higher costs related to the Company's pay for performance incentive plans, stock-based compensation costs amounting to 0.8% of sales in the third quarter and 0.5% in the first nine months, and a provision of a $0.5 million for potential uncollectible receivables from one of the Company's new construction customers.

Regarding our capital growth plans, capital expenditures and promotional displays deployed during the first nine months of fiscal 2007 aggregated $17.9 million as compared with $21.7 million in the first nine months of fiscal 2006. Capital expenditures drove the majority of the decline, but outlays for promotional displays deployed at customers were also somewhat lower, as well. These reductions were driven primarily by timing.

We now expect capital expenditures and promotional displays deployed in fiscal 2007 will be roughly equivalent with the expenditure made in fiscal 2006, comprising a variety of small to medium sized projects but no new plant construction activities. The Company expects to continue to fund its capital spending from a combination of operating cash flow and existing cash on hand.

Regarding the balance sheet. The Company's financial position remains outstanding. Long-term debt to capital on a book value basis was 9.7% of book value capitalization as of January 31, 2007. Cash provided by operating activities was $63.7 million in the first nine months of 2007 as compared with only $41.8 million in the comparable prior year period. Free cash flow available for financing activities improved to over $45 million in the first nine months of fiscal 2007 as compared with only $20 million in the comparable prior year period. Cash on hand remained near $70 million, up over $20 million from the Company's prior year end in April 2007, and up over $35 million from this time last year.

The Company doubled its quarterly dividend, payable to shareholders during its second quarter, to $0.06 per share. The Company repurchased 35.8 million of its common stock during the first nine months of fiscal 2007, up from 12.6 million in the comparable period of the prior year. The Company exhausted its previous $20 million stock repurchase authorization issued by its board in July 2007, and commenced repurchasing stock from the $50 million stock repurchase authorization made by its board in November 2006.

In closing, overall, we are pleased with the Company's continued positive operational and financial performance. The Company's emphasis on improving the overall quality of its products and services has been well received by its core customers. The transition out of low-margin products has gone according to plan, with no negative impacts to our customers. As we have previously stated, we believe the Company should generate sustainable gross margins in a range of from 21% to 23%. The Company's performance in the first half of fiscal 2007 was in line with these expectations.

As we look forward to the last quarter of fiscal 2007, we continue to see a mixed housing environment that should support our slightly reduced sales forecast. From a market perspective for the next three months, we expect the kitchen remodeling market will continue to experience a flattish to slightly negative sales environment as compared with prior year comps.

New construction market sales will decline, we expect that new construction market sales will decline by more than 20% below prior year levels when housing starts were still nearly 2 million annualized units. We believe our Company has grown its market share during the first nine months of fiscal 2007 and remains well positioned to continue to grow its market share for the foreseeable future.

Our partnerships with the big box retailers, each of whom continue to grow their store counts and market coverage position the Company to capture a growing share of remodeling activity. Our market position as the provider of excellent products and services at competitive price points is extremely competitive in a more challenging retail sales environment. Most of our new construction customers expect to continue to gain market share. Our partnerships with these national and regional builders position us well to maintain and grow our market share. Through improved execution and focus on providing higher quality and best-in-class service, we have regained most of the new construction market share that we temporarily lost last year and expect this trend to continue.

For the fourth quarter of the present fiscal year that ends April 30, 2007, we expect we will continue to gain share in a relatively flat remodeling market. Following a successful first nine months of the year, we expect we'll experience remodeling sales growth in the low to mid-single digit range. We also expect we'll continue to gain share in new construction, although given weak market conditions, we expect our customers' construction timetables will continue to be elongated causing our sales to once again reflect a decline of approximately 20% as compared with the prior year's fourth quarter.

Because the magnitude of the decline in new construction sales will again outpace the increase in remodeling sales, we expect our core sales will be down in the high single digit range as compared with prior year levels. Our low-margin products transition was completed this week, faster than we originally expected. Factoring in the $22 million sales reduction in this product category, as compared with the prior year's fourth quarter, we expect that total sales will be between 15% to 20% lower in the prior year's fourth quarter.

We expect the Company's gross margin rate for the fourth quarter of the year will approximate the 21.2% we generated in the first half of the year. To maintain labor productivity in the face of lost volume from the completion of the low-margin products transition and slightly weaker than expected new construction sales, the Company will continue to modestly adjust its cost accruing levels in the months ahead.

We expect the Company will achieve a record level of earnings in fiscal 2007 despite the more difficult housing environment that has caused reduced earnings in the second half of the year. We now expect the Company's earnings per share will fall within a range of from $2.10 to $2.20 per diluted share. This earnings range includes non-cash charges for stock compensation expense of $0.26 per diluted share. And exclusive of stock compensation charges, earnings are estimated at $2.36 to $2.46 per diluted share, and 18% to 23% increase above the $2.00 per diluted share the Company earned in its prior fiscal year. This concludes our prepared remarks. We would be happy to answer any questions you have at this time.

Thank you, sir. The question-and-answer session will be conducted electronically. [OPERATOR INSTRUCTIONS] We'll take as many questions as time permits. [OPERATOR INSTRUCTIONS] Our first question is from Eric Bosshard from Cleveland Research.

Good morning.

Hi, Eric.

Couple things. First of all, from a demand standpoint, the minus 7 core versus the expectation of flat, I know visibility in your business is not tremendous, but can you just talk about what changed so meaningfully relative to those expectations?

Yes, Jake, Eric. It's pretty much in the new construction side of the business. It's just very, very soft and we went into a period in which we run a lot of seasonally down kind of activity anyway. And this December and January just was more exaggerated than we had anticipated. Remodeling was slightly softer, as well. And so just the overall, pall in the marketplace. December was just really, really soft. So it wasn't any one thing, we're just in a little bit of a situation where the market has just softened more than we anticipated.

I guess in line with that, the gross margin degradation was pretty material in the quarter, I think relative to what you would have thought. It was a couple hundred basis points less, yet the fourth quarter gross margin sounds like it will be not that different than what you told us three months ago. Can you explain a little bit of the difference of why 3Q gross margins were weaker on weak sales, yet 4Q gross margins kind of hang in there on weak sales?

It's seasonality. As the spring seasonality volume comes back in, we're on that footprint now and we're just pretty much projecting off of that. The degradation in gross margin is pretty much tied to what Jon indicated in his comments, which is trying to absorb fixed costs at significantly lower volume levels, so as the volume comes back, we'll get that back. From an operating standpoint the Company's operating extremely well. So there's no operating degradation in that gross margin number.

Is the fourth quarter gross margin down from what you had previously expected? Or is that where you expected it to be?

It's a bit less than we previously expected, Eric. Because we've reduced our expectation for sales growth in that quarter.

So I guess I'm trying to figure out if I'm -- is the 4Q degradation relative to prior expectations similar to 3Q? I'm just trying to figure out if there's something that was different in 3Q, or that you're assuming gets better in 4Q within that margin performance?

As Jake just said, Eric, what really happens is that in the third quarter we just sell a lot less because customers order less. It doesn't cover fixed costs quite as well. In fourth quarter you get a pick up with spring so you cover your fixed costs better, that's really all there is to it. We expect we'll operate, as I said, near where we did in the first half. Roughly [21%-ish] margin approximately for Q4. But you just weren't going to do that in Q3 and cover those fixed costs.

Perfect, that's what I needed. Thank you.

The next question is from Peter Lisnic from Robert W. Baird.

Good morning, guys.

Hey, Peter.

Jake, I guess if I could ask a follow-up to Eric's question there, I would have guessed your visibility for the new construction side would have been seemingly better than at least remodel on a relative basis, so I would have guessed that degradation of remodel would have been what caught you offguard. But can you just maybe speak to the fact of just kind of what your visibility is for new construction? Maybe not for the next quarter but even further out than that?

Well, the thing that's difficult is figuring -- I mean, we can look at what we've got, what people are planning, what we can't figure on is cancellation rates.

Okay.

And so that's -- as you know, cancellation rates are running significantly higher than historic levels, and in some markets they started to move down, but they're still high, and so that's sort of taking your historical reference points and really moved them around a lot. That's where we're kind of struggling is trying to get a grip on that.

You know, our view is -- has been and still is, that the general economy is good, and if you look at the major indicators that tend to drive housing and big ticket remodeling demand, for the most part they're positive. There still are a couple negatives out there, essentially, the big one is inventory overhang and other figures related to inventory overhang. And while we see that inventory -- it seems to be stabilized and in some cases coming down a little bit, it's got a ways to go.

So we think we're in for a couple more calendar quarters of tough sledding in the new construction business before you start to see some of these markets show some signs of life, and what we call a sign of life is when an increment of consumer demand gets serviced by a new housing start, as opposed to an increment of inventory. We just need to get some of that inventory out of the market.

My crystal ball isn't better than anyone else's, and right now, everybody, you know, we're sitting here in the middle of February, and we're kind of on the front end of the spring season, so we don't have a real strong feel for that yet. As we get into the spring, that question probably would be much easier to answer in about four to six weeks, and we see how the spring comes in on both the new construction and the remodeling side.

What we're forecasting is kind of just projecting forward off of a pretty slow rate of business that we're experiencing. We just don't have any visibility yet of anything concrete that would tell us that something is changing. We have our intuitive sense that tells us that at some point in time you come off of this thing.

We do have a lot of things that tell us that we've probably bottomed. But we don't have anything concrete out there that would say, hey, you know, we think this thing's going to turn itself around here in 60 days, because we've got some new orders in the hopper and, you know, that sort of thing, we haven't seen that yet.

But have you -- it sounds like most of that commentary at least is on the new home construction side. I'm just wondering, there's been -- everyone's heard the discussions or the facts, if you will, that remodel is a relatively stable market and there's not -- seemingly not a whole lot of concern that that market will suffer any sort of significant or protracted decline. Are you getting any sense or any worries on that front that remodel could be a market that's at-risk for, maybe not next quarter but as you look out two, three, four, six quarters, that maybe something structurally changed in the remodel side of the business?

I don't think anything structurally changed, I think that the likelihood that the remodel business would be better four, six, eight quarters out is higher than any kind of a negative probability. And so that's what I would be planning. We have seen the remodeling business soften and I -- you know, most of you guys out there you've heard me say many times before that the old adage that remodeling hangs in while new construction goes down is just not true. But it is relatively more stable and we're seeing that now.

But the remodeling business, you know, the bloom's been off of that rose now for quite some time. And so it is softer than the economic fundamentals tell you it ought to be. But I don't see anything structurally changed in the remodeling business. In fact, if anything, I think that we're more optimistic about the remodeling business over the next several quarters coming back than we are new construction simply because of the inventory dynamics and other kinds of things. The macro factors.

Okay, and then, Jon, if I could just ask one question. The shares you bought back in the quarter, at what average price?

The shares we bought back during the quarter, Peter, were toward $40 per share average price. In that vicinity.

Okay. Great, that's all I had, thank you very much.

You bet.

Sure.

Our next question is from Linc Werden with H.G. Wellington.

In view of evidently, of broad over optimism on the part of some analysts for the current fiscal year, whether you could give us some guidance for fiscal '08 and whether we should bring down earnings that estimates maybe in the 260 to 280 range for that year and in view of the realities of today's new construction and overall markets?

What we've done is, we're going to guide on 2008 in our next conference call once we've got a little bit more data under our belt and have a better sense of where our order patterns are for the spring selling season. In the conference call that we'll do in the beginning of June, that's when you can count on that guidance coming out.

But in general, as a background, would you say that the estimates for '08 perhaps have been overly optimistic and need to come down some without specifying exactly how much?

Without getting into specifics, I think that certainly, as Jake just just talked about, there's not yet a lot of positive visibility in the market. And given that dynamic, given, the large home centers still reporting negative comp store sales decline, our builder customer is not yet reporting sales increases. I understand where you're going and we're trying to factor that into our estimation process, and we'll have it out there in about three months time and we'll tell you exactly what we think is going to happen.

Okay.

[OPERATOR INSTRUCTIONS] We have a follow-up from Peter Lisnic from Robert W. Baird.

All right, I'm back in. Jon, the 150 basis points gross margin lower than you expected in the quarter. Can you give us a sense as to what the pieces behind that were in terms of labor, overhead, materials, et cetera, and how you can kind of turn that margin around for the fourth quarter? I understand the seasonality aspect of it, but I'm just wondering how quickly you can flex the cost structure to support a higher margin in the fourth quarter?

Peter, primarily the falloff in margin was really in labor and overhead cost, those were the things that were -- that went down. The accretive parts of margin versus prior year were in the materials and freights side because of this positive mix transition that we've done. So generally speaking when sales volumes are a bit lower, we aren't quite as productive in working our direct labor force and we don't leverage our fixed plant overhead costs as well. So that's where you see it.

And will you, can you give us some components of that because I think you typically disclose it in the 10-Q? I'm just wondering if I can get it now.

No. But we will disclose it in the 10-Q once we have a little bit more time to work all the numbers through.

I guess --

In answering the second part of your question in terms of how it turns around in Q4 and hopefully beyond, that's simply as you get more sales orders coming over the transom and getting processed by the factory and so forth, we can load our factories better, we're much more productive on the labor side, labor costs comes down as a percentage of sales, and we leverage the overhead better and that's where you get the turn around.

Okay. Are labor and overhead kind of equal in terms of their drag on the margin relative to your expectations? Can I at least ask that?

I think that overhead was probably a bit more of a drag just because of the lower sales volume in Q3. And that's really, that's really the best answer to that question.

Two-thirds, one-third? I'm trying to maximize how painful I can be in asking questions.

Well, you're getting there. [LAUGHTER] No, in all seriousness, it's a fair question, it's a similar impact.

Okay. That's good enough. Thank you, Jon.

You're welcome.

Our next question is from [Suh Leaf] from Royal Capital.

Couple quick questions, one, it looks like the tax rate was lower than you experienced in the past. Can you give a reason?

Yes. The effective tax rate was a little bit lower as we factored in the full effect of our expectation for the full fiscal year of having a higher cash balance, earning more tax exempt interest and the impact upon our tax rate because it's tax exempt. That got factored into a full extent in this quarter, you can expect the effective tax rate to be a similar 36.5% in the fourth quarter.

And I guess in your previous guidance of 240 to 250. Did you factor in any lower tax or is this unexpectedly low?

This is a little bit lower than had been reflected in our previous guidance.

Okay. And D&A for the quarter?

Depreciation and amortization?

Yes.

It was consistent with the earlier quarters of the year.

About $9 million?

Roughly, yes.

Last question. Seems like you still have a pretty large cash balance. Any plans aside from the stock repurchase program you currently have in place and the dividend?

At this point in the time, we don't need to do any planned construction activities at this point in time, we feel like we've got more than adequate capacity relative to where the market is at. So we have this large buy back that we initiated last fall, and we plan to be active with that and look at the possibility of dividend increases in the future.

Even considering the size of your, I guess the larger size of your repurchase program, it still seems like you have an oversized cash balance. What's the reason for that?

The reason for that, we've generated a lot of cash from operations, we've been profitable and have had a good year and we haven't needed to put it back in and invest it into capital expenditures for the business. As I indicated in my opening comments, nearly three quarters of the cash flow from operations that we've generated we put back in and repurchased stock with, we think we've been pretty active, we've been buying back stock at a record pace, so we think we're deploying it as we need to.

Will there be any acquisitions that you would feel would be incremental to your business that you may look at?

This is Jake. We've never been acquisitive. Over the years, if you factor in the withdrawal from the low-margin business that we got out of, which is a decision to walk away from -- in excess of $100 million in the top line. You can you see in the last 10 to 11 years the Company's had a very, very strong mid to high double-digit compound growth rate in sales.

So we've focused on organic growth. We continue to focus on that. And we don't think there are a lot of obvious or attractive strategic buys out there in the industry. And we really feel that growing organically is the way ahead. We're in a -- you know, soft batch with the current housing downturn. We'll work out way through that. But I don't see any fundamental change to that growth strategy.

And last question is G&A, seems like it was down a little over $3 million, quarter-over-quarter. Is that just because of pay for performance incentive comp?

Pay for performance is a big part of that. Also, the provision for the potentially uncollectible receivable was in the second quarter, that was about $0.5 million, as well. Those two factors taken together caused a sequential decline in G&A from Q2 to Q3.

How does the pay for performance work? What metrics are you incentivizing on?

Primarily net income.

Okay. Great, thank you.

You bet.

We have a follow-up from Eric Bosshard with Cleveland Research.

How would you characterize the price/cost situation you're facing right now?

Do you mean from a customer pricing pressure or a cost inflation pressure? Eric, how do you?

Yes, I'm sorry, it wasn't a very clear question. Yes, exactly that, Jake. How are you dealing with pricing product to your customers, how are you -- what are you seeing in terms of cost pressures from your suppliers?

From -- on the supply side. I think it kind of comes out in the comments, it caps maybe -- just recap it and say that, you know, material costs have gone from a couple years ago being a real problem to being much more in the manageable phase. We still have seen some pressure here and there, but we've managed to get some offset. There is some pressure out there in certain material categories, we've managed to get those covered with some reasonable modest price increases.

As far as the customer side of the business goes, the big question has been on the new construction side. And as you know, new home builder margins really skyrocketed during the last two or three years of this housing expansion. Some of them doubling their operating margins. Suppliers tended not to participate in that run-up.

And so what has happened as the market has softened, builders have cut prices, they've gotten into some givebacks and what have you. We're seeing builder margins structures return to a more historical norm, but it's tended to come out of that excess margin that they generated during the latter days of the expansion.

So, the market has been rather firm out there, and we have not seen a lot of price cutting to get business, because we don't think people are in a position to do that. And so it's been relatively stable from that -- actually, from both sides it's relatively stable. So we haven't seen a lot of regressive activity either way.

Okay. Thanks.

We have a question from [Bryan McCauley] with Anchor Capital.

Thanks, guys, my question's been answered.

It appears there are no further questions. I'd like to turn the conference back over to you, Mr. Jon Wolk, for any additional or closing remarks.

Thank you, everybody. Thanks for taking the time to listen in, and we appreciate your continued interest and support. Thank you.

And that does conclude today's conference. Thank you for your participation. You may now disconnect.