Distribution Solutions Group Inc (DSGR) 2018 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to Lawson Products' Fourth Quarter 2018 Earnings Conference Call.

This call will be hosted by Michael DeCata, Lawson Products' President and Chief Executive Officer; and Ron Knutson, Lawson Products' Chief Financial Officer.

They will open the call with an overview of the fourth quarter results.

There will be a time for questions and answers.

This call is being audio simulcast on the Internet via Lawson Products' Investor Relations page on the company's website, lawsonproducts.com.

A replay of the webcast will be available on the website through March 31, 2019.

During this call, the company will be providing an update on the business as well as covering relevant financial and operational information.

I'd like to point out that statements on this call and in the press release contain forward-looking statements concerning goals, beliefs, expectations, strategies, plans, future operating results and underlying assumptions that are subject to risks and uncertainties that could cause actual results to differ materially from those described.

In addition, statements made during this call are based on the company's views as of today.

The company anticipates that future developments may cause those views to change.

Please consider the information presented in that light.

The company may provide at some point to elect to update the forward-looking statements made today but specifically disclaims any obligation to do so.

I'd now like to turn the call over to Lawson Products' CEO, Mike DeCata.

Good morning, and thank you for joining the call.

This morning, I'll comment on the quarter and our overall progress in 2018.

Ron Knutson, our CFO, will provide a more detailed review of our financial results, and then we'll take your questions.

Before I jump into the detail for the quarter, I wanted to congratulate our team and thank our customers and say how excited we are about 2018 results for the full year.

Looking back, our full year adjusted EBITDA of $25.2 million or 7.2% of sales are the best results we've achieved in over 10 years.

It's been the hard work of all of our teammates and investments that we committed to many years ago that have driven these strong results.

We continue to successfully execute our three-part growth strategy of adding sales reps, increasing sales rep productivity and pursuing a disciplined approach to acquisitions.

As a result, sales growth and operating leverage were strong.

For the quarter, we reported a 7% increase in sales growth year-over-year and nearly 70% increase in adjusted EBITDA.

In addition, our value proposition continues to resonate with our customers.

Through actions that we have taken in 2018, we have reduced our overall churn by approximately 1 full percentage point.

We anticipate continued improvement in 2019.

From a strategic perspective, we completed the Screw Products acquisition in the fourth quarter of 2018.

As a result, Lawson is well positioned to further penetrate the small production manufacturing market, often referred to as MROP, and growing sales in both Screw Products and Lawson.

In addition, on October 22, we also opened a new Bolt Supply branch in Port Kells, a suburb of Vancouver.

The branch is beginning to ramp up as planned and is servicing customers in British Columbia.

We continue to dial in our inventory in Alberta distribution center in support of both Bolt and Lawson customers.

Now let's discuss some of the details.

Total sales grew 7% for the quarter versus the fourth quarter of 2017 and 14% growth for the full year.

Our organic sales grew 6.2%, and the Lawson segment achieved a 5.6% increase for the quarter.

Sales rep productivity grew 5.4% for the Lawson segment.

Despite facing challenging comps, on a year-over-year basis, every market segment grew.

Our strategic accounts increased 3.2% versus the fourth quarter of 2017 and 10% for the year.

We remain very optimistic about the future growth of strategic accounts.

Between our conversion process and the addition of new strategic accounts, we added well over 400 strategic account-buying locations.

Beyond the conversion process, which we've discussed previously, we also developed a new lead generation program.

This program encourages the sales reps to generate new strategic accounts and win the support of teammates across many territories.

Our Kent Automotive segment also grew by 3.3% for the quarter.

We continue to be pleased with the growth and monthly trajectory of our government segment.

We achieved over 17% growth for the quarter, and the government segment built positive momentum as the year progressed.

The segment increased over 7% for the year.

Over the past several years, we have broadened our government focus to a balance between federal, state and local business.

This strategy has produced a more diverse government business.

We also recently added several sales reps dedicated exclusively to military bases.

While the dedicated military base initiative is new, it is showing very promising results.

For the year, we won or renewed 85 government contracts.

We also reengineered several critical processes, which makes it easier to transact with federal entities using our GSA contract.

Turning to our Canadian MRO business.

It grew by 6.5% in local currency, and Bolt Supply grew over 14%.

Every product category at Bolt Supply grew.

Bolt has a total of 28 territory managers, and we are planning on increasing that number in 2019.

Solid margin trends continued in the quarter.

Our Lawson gross margin percent for the quarter was 61.2% compared to 59.9% a year ago, and our overall gross profit percent was 58.5% before expense reclassification.

This represents over 6 years of consecutive gross profit margin between 59.9% and 61.7% for the Lawson segment before the reclassification associated with accounting rule ASC 606.

Several initiatives have contributed to this accomplishment, including a sharp focus on distribution center productivity as well as effective management of our no-charge items, such as bins, cabinets and hydraulic crimpers.

We also work hard every day to earn our customers' business, which has enabled us to pass small price increases along when necessary.

Talent development and further embedding of our culture of continuous improvement remains central to successfully driving our strategy.

I recently had the opportunity to meet with our entire Lawson and Kent sales leadership team, including district sales managers, region sales managers as well as strategic account and government account managers.

During that meeting, it was clear to me that we have experienced a significant shift in the orientation and dialogue of the sales leadership team, from suggestions for process improvements and foundation building to a real enthusiasm and excitement for share gain, the addition of new customers and the penetration of new market segments.

It's great to see and experience the excitement for the state of the business.

Turning to growth.

Our three-part growth strategy is working.

First, growing our sales team.

This quarter, including Bolt Supply, we finished with 1,022 sales reps versus 1,005 at the end of the third quarter.

We will continue to focus on incrementally adding sales reps for the foreseeable future.

We have also seen encouraging signs of improved sales rep retention, due in part to a more robust approach to sales rep onboarding and the application of Lean Six Sigma to onboarding.

Second, increasing productivity.

This quarter, Lawson sales reps achieved 5.4% improvement in sales rep productivity versus the fourth quarter of 2017.

We measure this as sales per rep per day.

We are currently rolling out several tools which will enable sales reps to improve our customer retention while also increasing volume by adding product categories to fully serve customers' consumable MRO needs.

These tools were developed with the help of our field sales team.

I would characterize these tools as a simple and pragmatic use of very sophisticated analytics.

Third, growth through acquisition.

We continue to fill our acquisition pipeline with a broad range of opportunities but remain disciplined in our approach.

Overall, we are committed to proactive cost management while investing in growth.

For example, the Lawson segment reported 59% adjusted EBITDA leverage for the fourth quarter and 51% for the full year.

Looking forward, the systematic and methodical execution of our strategy is delivering good results.

Our adjusted EBITDA margin has improved from approximately 5.2% for the full year of 2017 to 7.2% for the full year of 2018, and we expect continued progress in '19.

This quarter represents excellent progress toward our previously stated target of 10% adjusted EBITDA margin.

Also, the fact that we were able to slightly increase our Lawson segment gross margin percent is further evidence that our customers recognize us as a critical partner in their success.

We feel confident in our previously communicated range of 25% to 30% leverage for 2019.

We believe that our strategy will lead us to continued share gain, improved EBITDA and more robust performance.

Now I'll turn it over to Ron for more insight into the fourth quarter and the full year financial results.

Thank you, Mike, and good morning, everyone.

As Mike mentioned, the fourth quarter reflects a continuation of the strong first 3 quarters of 2018, with favorable operating leverage and significant improvement in adjusted EBITDA.

As I go through our financial performance, I'll comment on both the organic Lawson business as well as the consolidated results that include Bolt Supply and isolate the impact of Screw Products on the quarter.

And as a reminder, Screw Products transaction closed this past October.

Let me share some of the Q4 highlights.

First, sales were $86.3 million for the quarter.

Consolidated average sales were up 7% versus the year-ago quarter.

Excluding the Screw Products acquisition but including Bolt Supply, sales increased 6.2% over a year ago.

Second, our adjusted EBITDA for the quarter was $5.1 million compared to $3 million a year ago, an increase of nearly 70%.

This improvement was primarily driven by a $1.9 million improvement in our organic MRO and Bolt Supply businesses as a result of increased sales and associated operating leverage as well as $160,000 of EBITDA contribution from Screw Products.

Third, in line with our expectations, our consolidated reported gross margin percentage under the new method of allocating certain service-related costs into gross margin, as discussed in previous quarters, was 53.4%.

Excluding Bolt Supply, Screw Products and the service expense reclassification, our organic Lawson MRO business segment gross margin percentage was 61.2% compared to 59.9% for the year-ago quarter.

Fourth, we reported diluted EPS income of $0.28 for the quarter.

And finally, cash flows from operating activities were $10.1 million for the quarter as we drove earnings and managed our working capital, allowing us to end in a net positive cash position of $1.9 million at the end of the quarter.

I'll now discuss some of the drivers for the quarter and also provide some commentary on our full year results.

We generated sales of $86.3 million in the quarter on 61 selling days.

This was the same number of days as in Q4 2017 but 2 fewer days than Q3 of 2018.

As compared to a year ago, our fourth quarter sales benefited from the following: First, Bolt Supply generated sales of USD 8.9 million for the quarter, an increase of 12%, driven primarily by widespread demand across its product categories and newly introduced items.

Second, MRO sales grew 5.6% and benefited from several initiatives which added to growth in all of our segments for the quarter.

For instance, as Mike mentioned, we continue to convert new locations of our existing strategic relationships.

In addition, our talent development initiatives are yielding benefits to the organization as we improve the onboarding process of new sales reps, which has driven improved retention rates.

As a result, sales per rep per day productivity continued to improve with an increase of 5.4% over the year-ago quarter.

We ended the quarter with slightly less than 1,000 Lawson and Kent sales reps plus 28 territory managers in the Bolt Supply business.

Our focus remains on profitably growing our sales force, improving sales rep productivity and retaining talent.

The 5.6% Lawson sales increase was broad based with all segments growing for the quarter.

On an organic ADS basis, U.S. sales were up 5.9%, while our Canada ADS, excluding Bolt Supply, were up 6.5% in local currency.

From a sequential average daily sales basis, the Lawson segment's October sales were $1.263 million, November was $1.276 million, and December was $1.231 million.

In addition, from a Lawson segment standpoint, strategic account sales were up 3.2% over a year-ago quarter and represents 16% of our MRO volume.

We realized growth of over 17% in our government segment, 4.6% growth in our Lawson core business and 3.3% in Kent Automotive.

With Q4 sales ending strong, our full year sales increased 14.3% to nearly $350 million.

In line with our expectations, reported gross margin for the quarter was 53.4%.

And similar to prior quarters this year, gross margin was impacted by $4.4 million of service-related expenses that were reclassified into cost of goods sold in addition to lower Bolt Supply and Screw Products gross margin profile than the Lawson segment.

Prior to the expense reclassification, Bolt Supply and Screw Products, the organic Lawson MRO gross margin was 61.2% compared to 59.9% in the year-ago quarter and 60.9% in Q3.

While we are seeing vendor cost increases in this inflationary environment, we've been able to proactively stay ahead of them from an overall margin perspective through effective pricing and operational efficiency initiatives in our product fulfillment process.

Selling, general and administrative expenses were $42 million for the fourth quarter compared to $46.8 million a year-ago quarter.

Prior to moving a portion of selling expenses to gross margin as required under the new revenue recognition standard, total expenses were $46.4 million.

On a year-over-year basis, the decrease was primarily driven by lower stock-based compensation expense of $1.6 million, partially offset by higher selling expenses to support increased sales and the inclusion of Screw Products in the quarter.

Excluding nonrecurring items, such as stock-based comp, severance and impairment charges, operating expenses were up 2.9% to support our 7% sales increase.

This also reflects our focus on controlling total operating expenses as a percent of sales and further leveraging our existing infrastructure.

On a Lawson basis, adjusted EBITDA leverage was approximately 59% for the quarter and slightly ahead of our expectations.

This puts the second half of the year Lawson leverage at 49%, above our previous guidance of 35% to 45%.

Full year operating leverage for Lawson was 51%.

Operating income was $4.1 million for the fourth quarter.

Adjusted non-GAAP EBITDA, taking into account stock-based comp, severance and acquisition costs and a building impairment charge on a discontinued operation, was $5.1 million for the quarter compared to an adjusted EBITDA of $3 million in the year-ago quarter, an improvement of nearly 70%.

This puts our full year adjusted EBITDA at $25.2 million, our best performance in over 10 years.

Net income for the quarter was $2.6 million or $0.28 per diluted share, an improvement of $0.17 on an adjusted basis.

For the full year, we generated $20.3 million of cash flows from operating activities with $10.1 million of that being generated in the fourth quarter.

Capital expenditures for the quarter were approximately $900,000 and $2.5 million for the full year.

We expect our capital expenditures in 2019 to be in the range of $3 million to $4 million.

Let me now provide some commentary as we consider 2019.

We are optimistic regarding demand, given trends over the past few quarters, complemented by our internal initiatives to further drive growth and earnings.

Current economic indicators in our sector remain strong.

In addition, we expect to remain disciplined in our acquisition activity.

Second, we remain focused on improving rep productivity, adding to our sales force and improving sales rep retention.

And third, we continue to monitor inflationary trends and the potential tariff impact on our business.

We will take the necessary actions to ensure that we stay ahead of increasing product costs.

I'll now turn it over to the operator for questions.

(Operator Instructions) Our first question is from Kevin Steinke from Barrington Research.

So I wanted to start off by just talking about the sales force retention improvement that you've seen.

And also you had a nice increase in the rep count in the fourth quarter, the largest you've seen in a few quarters here.

So do you feel like you're at the point now where you have the rep onboarding process working as you'd like and you're kind of getting some momentum there?

And then was the rep increase we saw in the quarter a combination of increased hiring efforts along with retention improvement?

Or any comment on there would be helpful.

Thank you, Kevin.

This is Mike DeCata.

Yes, there are a number of actions that we've taken.

We'll always say that there's always room for continuous improvement, and we will continue to work on refining that process.

Having said it, a combination of better analytics, the refinement of the Lean Six Sigma process that we've discussed previously, which is applied both to the initial hiring process, and then we did a separate Lean Six Sigma project a while ago on onboarding.

We continue to refine both of those.

They're having a positive effect.

As well, I alluded earlier to analytics that we put in place look better.

And when I say better, I mean simple pragmatic tools in the hands of sales reps to help them with their effectiveness and their efficiency at a customer location.

So it's a combination of a handful of things that are all driving for better retention.

Still, it's a bimodal distribution as it has been in the past where higher turnover initially and lower turnover as sales reps mature in their territories, and we continue to see that.

Once they get 3, 4, 5 years into the company, the retention goes way up because now they've figured out how to manage in their territories.

And they've generally become very successful.

So it's a lot of moving pieces that we will continue to refine.

I think another thing that's an overarching opportunity for us is as we get stronger operationally, and that's also a continuing evolution -- and I'm talking about order fill rates, and inventory effectiveness and marketing communications and all of the other things we do -- all of that has the effect of making us more attractive in the marketplace.

So we continue to attract the quality and caliber of talent that we want while we're working on retaining them after they get here.

So we're feeling very good.

It will remain a work in progress.

Okay, got it.

And then the comment about confidence in 25% to 30% incremental EBITDA margin leverage in 2019, is that for the Lawson core MRO business and Bolt, excluding Screw Products?

Yes, Kevin.

So this is Ron.

So generally, we try and isolate both the Bolt results as well as Screw Products and also report separately on the MRO business.

So what Mike referenced in the 25% to 30% was -- is really for the organic or for the primary Lawson MRO segment of our business.

However, I would say that, and I know we've talked about this on some previous calls, is that the Bolt's EBITDA margins will typically run closer to that 10% for -- which is our Lawson segment target as well.

And then with the acquisition of Screw Products, they actually run north of that, given their business model.

So again, the 25% to 30% is more on the kind of core Lawson segment.

Okay, good.

Thanks for clarifying that.

What does the acquisition pipeline look like as you move into 2019?

And what's your appetite for closing deals as we move throughout the year?

Yes, Kevin, this is Mike.

It's really -- the appetite is unchanged.

We would like to be doing larger acquisitions.

The pipeline is looking pretty encouraging.

We've had many discussions, and some of them are ongoing discussions, some of them were a while ago that are coming back to the front.

So like any pipeline, stuff accelerates and then slows down and vice versa.

We feel good about the pipeline we have.

And we certainly have an appetite for larger acquisitions.

Though, I have to say, opportunistically, we would be willing to pursue smaller acquisitions if they really fit nicely, or much larger acquisitions than we have done in the past, substantially larger, again, if they fit nicely.

So that part of our strategy is unchanged.

It's central to our three-part growth strategy.

We're committed to it broadly throughout the company.

And we're feeling good about the pipeline that we have.

Okay.

And on the Lawson organic business gross margin, again, very strong at 61.2%.

Just talk a little bit more about the initiatives you have in place to keep that so strong and your confidence in keeping it at those levels, even with the vendor cost increases in the inflationary environment that you referenced.

Yes, Kevin, let me jump in, and then Ron will, I'm sure, want to jump in as well.

At its core, the gross profit is a reflection of the value proposition in the marketplace.

And the value our customers put on, the service-intensive vendor-managed inventory.

Bearing in mind that our average piece price is $0.94, our customers value the service intensity, the superior product that we have, again, highly engineered for the maintenance mechanic.

So at the highest level, we use that as sort of a yardstick about the value proposition.

Now underneath it as we see cost increases from suppliers, we do pass them along.

We've always done that.

And there's no change really in that part of the strategy.

We continue to manage operationally our distribution centers, transportation, what we call no-charge items.

All of these are levers that we pull.

But it's about continuous incremental improvement rather than a response to something going on externally.

We feel good about the nature of the value proposition.

So we feel good about maintaining that kind of range we've been in.

We don't see any changes to any aspect of that.

And we will continue to drive operational improvements as we see them.

Yes, Kevin, so this is Ron.

Just a couple of quick additional comments.

So -- and I would agree with Mike relative to the confidence moving forward.

And we've said in the past, remaining in that kind of 60%, 61-ish range should not be a problem for us.

That's really where we're managing the Lawson margin to.

The other benefit that we picked up on a little bit this quarter was we have managed our, what we call no-cost items a bit tighter, so we are seeing a little bit of a lift in the overall percentage because of that.

But as Mike indicated, we've been able to manage offsets to those vendor cost increases, which we are seeing along with thinking everybody else is probably seeing as well.

It's a combination of some tariff impact and certainly some inflationary impact as well.

Okay.

And when you mentioned the no-cost items, that's like bins and cabinets that you're trying to recoup, just recoup some cost?

That's right.

And use that investment wisely.

I mean, it's just a smarter focus, a sharp focus on -- it is an investment, our customers value, we value it.

We just want to be smart in using that investment.

Okay.

Lastly for me here.

What sort of trends are you seeing thus far in the first couple months of 2019 in terms of sales and just the overall demand environment?

It sounds like it remains pretty positive but just any additional color would be helpful.

Yes, that's correct, Kevin.

We are not really seeing any changes in the marketplace across -- again, with 75,000 customers, very diverse in nature, we're not seeing any change from '18 to '19.

And when I think back, we've seen really good progress in the marketplace from about the fourth quarter of '16 through all of '17, now all of '18, we've been pleased with our performance throughout that period.

And we don't see any evidence of change in '19.

For the first couple of months of the year, we feel good about January and February.

I will say that the last couple days of January, when most of the U.S. was in extreme deep freeze, we did see a little bit of a slowdown for a couple of days.

And I think back about the role of a maintenance mechanic having to repair something outside in 20-below weather makes me appreciate the nature of our customers and what they do.

But the short answer is, we don't foresee and we haven't seen any evidence of any change in '19, which, considering the market in '18, we feel great about no change in '19.

(Operator Instructions) Our next question here is from Ryan Mills from KeyBanc Capital Markets.

Sorry if I missed anything, I hopped on the call a little late.

But nice ramp in sales reps during the quarter.

Could you talk about expectations for rep additions in 2019?

Yes, I think our strategy, Ryan, is similar to what it's been in previous years in that we will continue to incrementally add sales reps.

You might remember that starting in 2013, we started with 757 sales reps and now 1,022.

There were periods over those years where we saw very significant run up in sales reps.

I think those days of very significant runup are likely behind us apart from an acquisition we would do, which is just acquiring the employees.

You'll see continuous incremental increases in the number of sales reps, but again, I emphasize incremental.

More important at this stage is the performance of the sales reps, and that's where the retention process and the analytical processes and tools that we put in place are really paying dividends.

So it's a combination of the first leg of the stool, incrementally adding the second leg of the stool, which is about productivity and providing tools to enable our sales reps to be even more effective.

And then, of course, the third leg is unrelated, that's acquisitions.

But the short answer is incremental continuous improvement or addition to sales reps.

Okay.

And then solid rep productivity during the quarter despite the ramp in rep additions.

Can you talk about what's driving that productivity?

Is it more a factor of just the demand environment and the improved onboarding process?

Or are you taking additional steps internally?

Yes, Ryan, this is Ron.

So I would say that it's a combination of both.

So we certainly did see increased demands across really all of our product categories as well as all of our segments.

So that certainly helps on that overall productivity.

And if you look at the last -- I think the last 6 quarters, we've seen increases in rep productivity versus the prior year quarter.

So one, certainly overall demand market has been strong.

And to Mike's points earlier, I mean, we continue to refine and provide information to our sales reps to really help them become more efficient in the field.

And if that's technology or if that's being able to track orders easier or if it's Microsoft Teams where sales reps can answer questions on behalf of other sales reps.

So we continue to make those investments and understand that getting that rep productivity is asking more of our field team -- sales team on a day in and day out basis.

So we're doing everything we can on this then to make that easier for them and at the same time supporting expansion within our existing customers as well.

Okay.

And then it sounds like trends are remaining favorable in early 2019.

Could you give me an update just on your end markets?

Yes, let me jump in first, and then Ron, if you want to add.

So broadly, again, we talk about a very significant percentage at the application level, not at the market level.

We talk about stuff that's, what we call a fleet, which is stuff just not bolted to the floor.

It could be an over-the-road trucking fleet, it could be a construction equipment rental fleet, it could be fracking equipment.

So it's a broad spectrum of stuff not bolted to the floor.

And again, across that market, we see really continuing solid performance.

We see continuing solid performance in strategic accounts.

And I'm going to come back to some of the overarching drivers of that.

We see solid performance in government.

And again, especially excited about the diversity and resilience of government now that it's nicely balanced between federal government, including Department of Defense but beyond Department of Defense, just GSA federal government as well as state and municipal governments.

So that balance provides a more resilient sort of a business orientation for that.

Canada continues strong.

We have the Western Canadian distribution center, which we are still optimizing the inventory in Alberta.

And again, the needs of Western Canadian customers are a little different than the needs of customer service by other distribution centers in the U.S. and in Eastern Canada.

All -- every one of them has positive momentum.

And we feel great about everyone of them going forward.

But let me comment on the overarching drivers beyond the market.

And I would argue that operational excellence, the onboarding of sales reps, analytics, put more effective tools in the hands of sales reps, all of those things are the things that we control and we influence and are the result of investments in processes we've put in place.

The market will do whatever the market does.

And we're very happy about what happened in '18, and we're very optimistic about the market in '19.

We feel even better about our ability to influence our own destiny through our own processes in continuing broad-based operational excellence.

So I think that latter point is the most important because market cycles come and market cycles go, but if we're able to refine our process, we are more attractive as an employer, we're more important and critical as a supplier to our customers and partner to our customers.

And over the very long term, that creates the resilient and robust company we're looking for.

Really good color.

And then just 2 housekeeping questions for me.

Can you provide the selling days by quarter in 2019?

Sure.

So we actually pick up 1 selling day for all of 2019.

We had 251 selling days in '18.

There's 252 in '19.

So by quarter, we have 60 -- in '19, we have 63 days in Q1, 64 in Q2, 64 in Q3, and that's where we pick up the additional day.

And then we have 61 days in Q4.

Okay, and then last question.

Expectations for tax rate?

Yes.

So in 2018, it was low, and that was a result of some of the Tax Jobs Act change, actually, what was implemented at the end of 2017.

So our more normalized rate should be in that 28% to 30% level.

And that's a combination of the weighted average between the U.S. rate, the Canadian rate as well as the state tax rate also.

(Operator Instructions) And if there are no further questions, I'd like to turn the floor back to Mr. DeCata for any closing comments.

Thank you, Matt, appreciate that.

Thank you for joining the call today.

Lawson Products had a great quarter and a great year.

We continue to demonstrate consistently solid results, reinforcing the strength of our execution and strong customer value proposition.

As a result, our adjusted EBITDA growth is exceeding the pace of revenue growth, and we expect this to continue in 2019.

While our 2018 leverage of 51% is extraordinary, it benefited from some non-reincur investments we made in 2017.

With that said, we expect to achieve 25% to 30% leverage in 2019 and continue to demonstrate the inherent leverage in our business.

Lastly, our teammates across the company are committed to extraordinary customer service.

I appreciate every day their dedication and commitment to customer service.

Thank you, again, for joining the call today, and we look forward to speaking with you again in April.

Have a great day.

This concludes today's teleconference.

You may disconnect your lines at this time.

Thank you, again, for your participation.