Simpson Manufacturing Co Inc (SSD) 2011 Q3 法說會逐字稿

Good day. Welcome to the Simpson Manufacturing Company third quarter earnings conference call. I would like to turn the meeting over to your Chairman, Mr. Barklay Simpson. Please go ahead.

Good morning, everybody. Thanks for joining our CFO, Karen Colonious, soon to be our CEO and myself and for the first time, Tom Fitzmeyers who will have my job next year and is here to listen this morning and not to answer questions. He will have plenty of chance to do that in the future.

The third quarter was a real mix with the U.S. economy and housing starts remaining in the tank, but our domestic sales were up 11 percent. China and Asia were just the opposite. Sales down and they are an important part of our future. We are working on two essential things, broadening our line of products and figuring out how to attract and keep the best people, and that's a tough one. We will get these essentials done but probably it will take several years. Excuse me. To establish a brand name just as it has in Europe. Speaking about Europe and, also, despite bad economics there, our sales were up 11 percent there, too for the quarter and profitable.

What should be of future help for sales and profits is the Socom acquisition, Liebig mechanical anchors which has enabled us to get started in Europe with anchor systems. Not incidentally, a strong balance sheet enables us to spend money for developing future profits around the world in areas important to our future, rather than just concentrating on short term profits.

Hiring and keeping the best people is, of course, the key to success in any business. And people join us for a career, not as a bus stop. It's been a long time since we have felt it necessary to go outside for a key position. Karen, our new CEO shortly, is a primary example.

She's been with Simpson Company for 27 years. So she understands the culture that has built this Company. She came to us in charge of engineering and since has a strong management background for several years, being VP in charge of largest branch, Stockton and sharpening her financial skills as CFO. Tom is a tough act to follow. He has done a fantastic job building this Company well over 30 years. But Karen is his ideal successor.

A major key to our success is that we really are a long range company. We are not for sale. And our people know this. Our gross margin remains strong due to a slight percentage decrease in material costs and a substantial percentage decrease in labor costs, the latter has been a major objective, especially since the start of the recession. Thanks to our (inaudible) manufacturing VP, and the people in charge of production at our branches, we have used both, both simple and significantly sophisticated methods of reducing costs with a lot of success.

Acquisitions, it is such a pleasure to tell you that Simpson has entered into a definitive contract to acquire a European company that manufactures and sells engineered materials or repair, strengthening and restoration of concrete and masonry construction. These materials can be used for roads, bridges, tunnels and buildings as well as other things. The Company currently operates in six European countries. Their estimated revenue is $ 20 million. The purchase price is approximately $62 million at today's exchange rate. They have a very good gross margin, and we estimate that the business will contribute to our profits in the first year.

The deal is scheduled to finish all of the legal stuff in January, 2012. This is our first step toward developing a complete concrete repair, strengthening and restoration product offering. This acquisition is a significant component of our Companies strategy to expand our product offering beyond residential products and to include commercial, industrial, and infrastructure offerings and a larger global presence. So, that's it. Questions.

(Operator Instructions). We will go to the site of Trey Grooms from Stephens, Inc. Go ahead.

Hi Trey.

Good morning, Barc, Karen, Tom.

Good morning.

First off, I want to congratulate you, Karen, on your new role.

Thank you very much.

And Tom, you as well. Just wanted to ask about the west, midwest and southeast regions, it sounds like they were especially strong in the quarter. In your opinion, first off, what's driving that?Is there something in particular in the quarter, you know?I know there was some storms and things in some of those regions earlier in the year that I was just wondering, you know, if that played a role in some of those markets or if they are really starting to see some kind of real sustainable demand improvement there, do you think?

Well they aren't showing any demand increase. We are doing it with new products, better sales, all kinds of things. But not that the economy in any of those areas has turned around.

Okay. I got you. And then just looking, also, to get your thoughts on the big box guys. I mean it sounds like, you know, you are seeing improvement everywhere except for that channel.

Are they just, you know, not restocking?Are they just taking a more conservative approach and, also, have you started to see any improvement there, you know, with those guys in October?Is it kind of much like the same as we saw before?

Trey, you mean the Home Depots of the world?

Yes, sir.

Okay. Well, over time, we have found out that they have some pretty tough restrictions on inventories and they will all of the sudden get way down and then they have to order heavily for a while. And this last quarter was not true. They apparently had more inventory than they thought they needed.

So they didn't order much. I would suspect. And that's all it is. A suspicion that this fourth quarter probably compared to last year, the inventories may go up some.

Got you. That's real helpful. Also, Karen, in quarters past you have given us some color on your expected gross margins, you know, in the future coming quarters. Can you give us your best guess on the 4 Q or for the year?

The fourth quarter traditionally is a slower part of business for us just based upon construction and what's going on with weather conditions. Typically, we see our factory tooling absorption increase. I anticipate we will be in the 40's but in the low 40's for fourth quarter.

Low 40s. Okay. Thank you. Then my last question and then I will just back in queue.

And this is another kind of housekeeping question for Karen. It's if I remember correctly, earlier this year, you said that you expected the tax rate for 2011 to be in the kind of mid 40s range. And the tax rate in the quarter, it was lower. It was lower, you know. Can you update us on your thoughts there?

We are estimating the tax right around the 38% to somewhere between 38% and 39%.

That's for full year '11?

For full year, correct.

Thanks a lot and again, congratulations.

Thanks.

Thanks, Trey

We will go next to Arnie Eschner from CJS Securities.

Hello, Arnie.

Good morning to you. First of all, congratulations of the European company. I have looked on my machine. I don't think you gave us the name of the company.

No, we can't yet. There is some kind of legal restrictions that I have no idea why, but they are there.

And obviously paying three times 2011 revenues, you obviously are buying what you believe would be a strong growth vehicle. So a couple of questions about what has their growth rate been?

Karen?Karen, by the way, did the negotiating here.

Congratulations.

Thank you. It's very strong company. It fits very well within our strategy and as we mentioned we want to expand our portfolio of products to allow us to get into more markets in Asia and Europe and the U.S. and those markets associated with concrete structures, bridges, roadways, verses wood structures. So its a company that's been in business for a very long time.

They have been seeing double digit growth in the past three years. It's very strong product from the standpoint of, you know, it is a specified product. It fits very well into our model which is differentiating the product from the standpoint of not only quality of manufacturing but also the engineering standing behind that.

What differentiates the product?Is there know reason it hasn't been in the U.S. market so far?

They were in our talks with them, that was one of the directions they wanted to go, was to bring their products into the U.S. market. It's something we would be looking at. I just want to answer the question.

The reason we haven't given the name is we very recently signed this. They need some opportunities to talk to their employees. We will file an 8 K next week with more information for you.

Following up with Trey's question a little bit on the tax rate this quarter, you also took the one time of Key Mark Enterprises. How much did that, how should we think about the tax impact they may have had in the quarter if that's part of the explanation.

The main reduction of it is lower tax rates, the biggest impact was from Key Mark, we saw some pretty significant reduction there, and also we had some enterprise zone credits that we got from our Stockton facilities but certainly Key Mark was the largest part of that reduction.

My final question for you is, you've been running what we call atypical expenses for quite awhile, duplication on the facilities and some other costs you have a sizeable jump in professional fees. Can you comment a little bit on what we would call the atypicals and how we should think about going forward.

The professional fees, a large part of that is our acquisition work that we have been doing, there's certainly due diligence from the financial standpoint as well as due diligence from the legal standpoint. That's a large part of our SG&A increases that you are seeing. Those are really the keys that have been hit. Also, keeping in mind as we look at the SG&A as we have increased we are looking at increased profit sharing for employees as well as paying options that were earned in last year. As well accruing for options that appear will be earned for this year based on our target.

Were there duplicates facility expenses that were worth mentioning.

No, as far as we have wrapped up the riverside facility, there was about $300,000 of moving expenses. So there will be no longer any one time expenses based on that move.

Thank you very much.

Yes.

We will go next to search line. Go ahead.

Good morning. I wonder if you could tell us how sales were progressing throughout the quarter, if there was any lumpiness from month to month. And how you see sales progressing to Q4.

I think I will let Karen answer that one. It's a tough one.

Sales weren't consistent month-to-month, always have some fluctuations, which are not really easily explained. It's whether our customers decide that want to bring some inventory in or not. We still do know that our customers are very, very closely watching all of their inventory. We are not seeing any buildup. I think they are taking similar approaches, as Barclay mentioned, on looking at things just as Home Depot does.

The trends typically in fourth quarter are to have a slow down especially as we get close to November and December. That's a function of weather, so if we don't have some snow storms that hit in the Eastern areas, typically their sales will continue fairly consistent. As soon as weather starts to hit it closes down the northeast part of our entire business. That's probably my best estimate I can give you.

That makes sense. You are referring to sequential trends, the third quarter to the fourth quarter as it pertains to the weather?

Correct.

If I could drill it a little deeper on Arnies question on the professional fees. We have seen this for the last couple of quarters, you know, sounds like there was some due diligence cost there. Assuming you are still looking at acquisitions, given your balance sheet, should we anticipate those costs won't necessarily go away after this acquisition that you mentioned closes?

I think we will still have some of those costs but again, as we continue working on acquisitions, we do have a little bit over a $1 million legal fee, which is a one time fee, that you are seeing in the third quarter, so that one will certainly go away we continue to look for acquisitions that fit within our growth strategy.

Okay. Karen, could you provide a breakdown of sales between the U.S., Europe, and Asia?

Well, internationally, we are roughly. By internationally, outside of the U.S., we are about 29%

Okay. And is it possible to say how much Asia was down year over year?

I haven't got that number.

Okay. Lastly on Key Mark, should we think of this as a one off opportunity or is there an opportunity for you to build on Key Mark and perhaps establish another platform business for you.

There is an excellent opportunity. Karen?

The Key Mark software is very critical for one of our directions that we are currently looking at and so we would be working with enhancing that software to take care of designs and the engineer's trusses for some of the structures. It also does truss design and wall design for light gauge steel structures, so we will be using that software and continuing to improve it. It will help some of our sales efforts as we go forward.

Great. Thank you very much.

We will go next to Peter Lisnic with Robert W. Baird. Go ahead.

Hello, Peter. I look forward to seeing you.

This is Josh filling in for Pete. Okay. Sorry about that.

We will accept you, too.

Okay. Thank you. Just following up on the acquisition you told us about, I guess two questions is there a reason that you looked over in Europe given I would think some of the opportunities you would have in the U.S.?Also, the second question would be, is it safe to assume that this new company is more profitable on the an operating basis.

The products are so important that we keep lessening, or dependence on housing out of wood. These products are just ideal for getting started there this is a successful company. So it isn't like the usual acquisition that it's for sale because they are in big trouble, that's not true in this case. I hope haven't been this excited about an acquisition in a while.

Is there any comment about the relative profitability of this business compared to, let's say, your overall average.

Karen has been right in the middle of it.

This company will be accretive to our bottom line because it is a highly engineered and specified product, it has the opportunity of having very good gross margins.

Okay. Great. And then my final question is, I guess historically, if steel prices were to decline, how does Simpson typically respond to that?Do customers come to you for a price change or does it get adjusted automatically?What is the process there?

The change in the price of steel only has a short term effect if it goes down substantially and we have a sizeable inventory, it costs us in the short run. If it goes up substantially, and we have a substantial inventory, we gain in the short run, but everybody's costs go up or down if the price of steel goes up or down. So you have a price increase. If it goes up significantly and you have a price decrease if it goes down significantly, and everybody is affected.

Okay. Great. Thanks for the details.

I think that our relations with the steel mills in the U.S. and elsewhere are as good as anybody else for over 50 years when we make a commitment, we follow through. When the bill comes, we pay it.

We will go next to Steve Chercover from DA Davidson. Go ahead.

Hi, Steve.

How are you, Bark?Is this your last call where you are actually hosting it?

Yes, I think it is unless Tom wants me to stick around. But I doubt if he will.

I want to thank you. You are a terrific guy. The corporate world could use more like you.

Oh, thank you, Steve.

So I have a couple of questions on mystery European company as well. When you say good margins, do you consider your margins in the mid 40s to be good?

What do you think, Karen?Not too bad.

I think the margins in the mid 40s are pretty good.

Okay. So probably similar. And can you give us the size of the overall market opportunity?Perhaps, you know, by geography, Europe, Asia and the U.S.?

I don't have it quite broken down in that matter, but the size of the opportunity for products associated with repair strengthening and restoration of roadway, buildings, bridges, those sorts of things throughout combined U.S. and Europe is over a $2 billion market.

Okay. So how did you identify it?Was it with one of your bankers you have been working with?

Well, we have had two outside firms do some market studies for us, looking for companies as well as the product lines that can work in this market area. And as mentioned again, we are very interested in expanding that portfolio product that we have. We have some of these products that are in our anchor systems line right now. This will company's products will complement those.

They will give us a larger portfolio. So as we are having opportunities in China and other really concrete parts of the world, we've got more things to cover. So finding them came from our studies as well as one of the M&A firms we are working with.

Great Okay. Thanks. We look forward to working with you more.

We will go next to Barry Vogel with Barry Vogel & Associates.

Good morning, Barry.

Good morning ladies and gentlemen. I wanted to drill down on some of these percentage changes in sales because, you know, it is sort of haphazard when you answered the first questioner. If we look at the change in sales in California first versus last year.

Go ahead, Karen.

Verses last year or the quarter.

The quarter verses last year.

California is up 6.3.

West Coast excluding California.

12.4

South, Southeast

14

Midwest

13.4

And northwest?

3.

As a whole category, home centers in the quarter, percentage change?

Home centers down 3 1/2%.

Your largest customer.

Is down 9 1/2%.

Okay. Now, as far as your sales changes, Barclay you answered the questions about sales changes, Europe was up 11% versus last year. Is that true?

Correct.

Can you give us an idea what operating profits were in Europe in the quarter?

Have we got that number?

Yeah.

For the year, they are up around 20 percent.

Operating income in Europe sales $31 million, operating income $3 million.

$3 million of operating income.

Correct. $1.8 net income.

Yeah. That's good. That's good considering what's going on Europe. Anchoring system sales change versus last year in the quarter?

Anchor systems increased 5 1/2%.

Can you give us an idea of what you would call truly operating profits of anchoring systems?

Boy.

I know that's tough.

At this point, no.

You don't know?

No number, Barry, that would mean anything. We've got so many things going on there, making products in Ireland to go to China. It's going to take another couple or three years to have it settle down to where we can give you numbers that really mean something on that sort of thing.

Let me ask it this way. Was anchoring systems operating profits negative?

Yes.

So still losing money?

Yes.

Okay. And going back to Liebig for a moment, I remember at the end of last year

Why do we have to go back to that?

I'm sorry. You talked about possibly having to take some actions that might result in a write down. And I am wondering the way the manufacturing situation is right now.

It's a question mark as to whether to keep that operation going or not.

Okay. Strong walls, what was the sales change versus last year?

Strong walls are up 8 1/2%.

How did you do that considering new housing construction is pretty poor?

Many of our steel strong walls are being used on some of the multi family projects.

That's good.

Yeah. The steel strong walls have got some higher capacities so when you look at some of these two or three story multi family types of projects, the steel strong walls are being used.

That's great. Were they profitable?

The steel strong wall are profitable.

What kind of profitability?

I don't have that broken out.

Okay. Okay. So for the year, Karen, can you give us an update on capital expenditures?

We have spent $23.5 million.

And what is it going to be for the year?

$30 million for the year.

And the depreciation and amortization for the year?

Year to date, we've spent $15 million, estimated for the year, $21 million.

As far as China, I know we have talked about China in the past few years. They've been losing money and it was problems in retaining people. Can you give us some idea about the China losses this year on an operating basis?

Gosh. What do you think?

China lost about $250,000.

That's not too bad. What are we looking for, for the year?

I'm not sure we have a number for that.

Sorry. Trying to be sure we got you the right number. China is probably going to lose about $1.5 million for the year.

What was the last year?Do you recall?

Last year, China lost close to 800,000.

As far as your share buy back program, I would assume Karen is in charge of this as your Chief Financial Officer?What is the strategy there?

Actually, Barry, I am in charge of that .

I am sorry. You bought a very small amount of shares, about 120,000 of shares in the quarter. Why such a small amount given the fact that you obviously intend... I'm sorry. The $100 million worth of shares?How is that going to play out to the rest of the year?

I am not sure yet.

Thanks very much, Barclay. It's been a long run here it's been 15 or 16 years of these conference calls.

17.

17. I am glad you keep track of it. If I have a sneaking suspicion because you are blessed with such great health and attitude you will be around a long time.

Thank you, Barry. I hope so, too.

I know you do.

We will go necessary to Chris Harrell from Capital Assess.

How are you, Chris?

Good. Good morning. I was interested in the acquisition you announced and wanted to know a little bit more about the products of the concrete repair company that you guys just bought..

The problem .

Is that the fiber reinforced polymers?

They do have some. Fiber reinforced polymer. They have a group of four distinct product lines. The product lines have a form of a frp material used in conjunction with the other materials to deliver the strength of the.

Is this like mortars, mixtures?Epoxy.

It would be a combination of epoxy's and FRP materials.

Are there already concrete repair type products here in the U.S. that Simpson is currently selling or is this the first entry into owning their products?

We have some concrete repair products in our anchor systems line. It's a crack repair type of product. But this will definitely compliment our anchor systems line to be able to have a larger offering.

Ok, is that current crack repair product a sort of a more commodity product or is it more of the higher end you are describing in this acquisition?

No. Our current crack repair product would be a higher end, it's necessary that we can prove that we bring the strength of the concrete back, the concept of a weld where you would want to be sure it was strong at the joint.

Ok, and then a question on lobor costs, you mentioned earlier the improvements in gross margin were a slight improvement in material cost and a substantial improvement in labor cost and called out (inaudible) efforts which I am obviously interested in her efforts around lean. But it seems still that it's very early. Are the labor costs improvements just a function of absorption, you know, in inventory build, or is it, you know, something more significant around some of her new efforts?

It's methodology, ways to get things done, like we've made a substantial decrease in the set up time for a product. Our products are, the tooling is very significant in terms of being several stages kind of thing, and we had all kinds of time in between which we have cut way, way down and that is just one example.

Would you attribute a material labor cost improvement to that already?I thought you described a big jump in the gross margins being a big improvement in labor costs.

Chris, we have things we have put in place with liens, one of the key things, differences that we have seen from a labor standpoint is we have not needed to have overtime hours in order to be responsive to our customers needs .

Okay.

To a facility that has been put in place over the year and really that flexibility is in changing those we would be able to immediate all of our customer's needs and have good delivery times without having to take the charge of overtime hours and traditionally we have been in, you know, what we used to call busy season. We would like it to be, the means of being able to ensure that we met our customers needs was to have quite a bit of overtime hours so that has been basically greatly reduced and that has been a significant part of why our labor component has come down.

Okay. Thank you. Last, just do you have the cash flow from ops year to date or for the quarter?

$24 million for the quarter.

All right. Thanks that's it. We will go next to Keith Johnson from Morgan Keegan.

Good morning, Keith.

A couple of quick questions, most of mine have been answered. I want to circle from gross margins in opening comments, you guys suggested material costs were down a little bit year over year. That helped gross margins. Is there a way you can put a basis point around that, Karen, or is there a way to think about that improvement.

I think when we discuss material I thinks it's really important to keep in mind that does not just mean steel. As we get more products and our product offering changes, for example, we have increased sales in the anchor systems. We have sales going in to our Fastener line.

When we look at our Anchor Systems and Fastener line, those are buy out items, and one of our initiatives has been to work with Debbie Tulles who is working on supply chain and based on what we have done with anchor systems and what Debbie has been able to do with the supply chain, we have seen some improvements from a material standpoint on our anchor systems products and I believe we will also see some on our fastener systems. As we look at material and especially as we expand into more markets and product lines it's key to think of that as not just meaning the steel that we put in connectors, so our supply chain has definitely helped us buy better and, therefore, reduce some of the materials associated with the buy out program.

Okay. That's helpful. I notice inventory was up somewhat year over year. I didn't know if that was, I remember in the second quarter, you guys, because you were making the switch with Brai, I didn't know if that went with the third quarter or combination of steel.

Yeah, we always like to build atleast a little inventory when we are moving a plant. So you were seeing a little of the effects of that, as I mentioned Brai completed 100% of that move in third quarter, so there was still a little bit of build up to make sure we could meet the customers needs.

I know a lot of questions on the acquisition. One quick one, you said there were four product groups. One had the FRP. The rest of them were more of the specialty construction chemical types products that are geared toward concrete. Is that the way to think of this acquisition.

So this acquisition has four product lines, and all four of them use an FRP component in them.

Is it in addition to what they also offer on the chemical side of concrete repair?

No. This acquisition has FRP products, and epoxy products which are used to install the FRP. They do not have the chemical side.

I guess when you were saying the market size, you were including FRP plus the epoxy to get to that number, I think you said $2 billion in the combined US and European markets?

Yes. That number is on repair and restoration market. So that includes FRP materials, it includes specialty chemicals, grouts, it's basically every component of material need in that market space.

The companies you bought offers products that are in smaller segments?Is that the way to think about it?

That's correct.

And then, I guess, just a final question, any update on the CFO position with the management changes that have been implemented thus far?

That isn't decided yet. I appreciate the help.

Okay, Keith.

(Operator Instructions). We will go next to Kevin Leary with Spitfire Capital. Go ahead.

Hello, Kevin.

Hello Barc, Karen, Tom, a quick question on operating expenses. Let's say today we are in mid 500s housing starts. Over several years, we get up to sort of the 7 or 800 range again.

I am just wondering how operating expenses have to grow to keep up with that sales growth. You know, I suspect that selling expense almost increase in line, increasing sales commission, but how much to R&D or G&A have to do to keep up with, you know, significant sale growth in the future?

What do you think, Karen?The tough questions, I always want her to answer.

As you mentioned, our operating expenses, the selling effort is key, and that is where we have additional focusing this year. We have added some sales folks to the European market and the initiative for the anchor product there. Conditional salespeople and our investor lines.

So you kind of tie in to housing starts, I guess, I would say, tying it more to the initiatives in different directions we are going and from the sales standpoint that's where we see some increased operating, you know, R&D in the marketing associated with expansion as we need to get reports, assessing and marketing information out to our associates and our customers so they are, they all go hand in hand. I don't have a specific figure now, but really, as sales grow from either housing, housing starts increasing or different acquisitions or different market opportunities, you will see though increases.

Great. Focusing on the U.S. market, you know, going back to start. Let's say starts to go up significantly.

Would that give you reason to really, you know, ramp R&D or, you know, just focusing on the U.S., would you add a lot of head domestically to keep up with the sales growth, you know?Again on the G&A side, not the sales side?

I think from R&D, it never really stops.

Yeah.

You are continually for exampled on R& D because that's a key point in the growth strategy. Even though housing starts are down now does not mean they have not continued to focus on R&D effort. We are focusing on all areas if you see were looking from starts, to take your customers' needs but the R&D in the marketing the manufacturing, all of those things continue even in the slow times, and that's really what we can use to help differentiate us.

All right. That helps. Thanks, guys.

We will go last to Robert Kelly from Sidoti and Company. Please go ahead.

Hey, Barclay. Karen. Tom. Don't suppose you will give us some accretion guidelines for the acquisition you spoke about earlier?

Not yet. Not yet, but this acquisition is really exciting. You know, adding products that do not have, do not need wood construction or do not need housing, that is so important for the long range future of the Company and this is an unlike most acquisitions, this is a successful Company, very successful. And we think we can fit it right in and just go charging ahead these products. And all over the world.

I did miss some of the detail earlier in the call. What type of sales do you expect from the Company you acquired?

We haven't made those acquisitions yet. We don't want to talk about them publically.

Yeah. Those are the ones that you are targeting?

I beg your pardon?

Did you make an acquisition, or are you speaking about that's the direction you want to go?

Well, we always I will let Karen why don't you answer that?

Yeah. We have signed the definitive agreement to buy their Company and their estimated revenue for 2011 is $20 million.

Okay, tacking into the smaller type company, bolting it on and tacking it into the Simpson network. I also wanted to kind of follow up on the previous caller's question, which was, you know, the operating expense, the leverage has been a pretty big headwind here in 2011 despite spectacular gross margins and above market sales trends.

At what point do we start to get a little bit of leverage on the SG&A line? Do you need to see a sustainability higher construction spending environment globally? Do you need to see US housing rebound, is there a point where SG&A expense stops increasing?

That's too tough of a question.

That's what we are here for.

Karen, what do you think?

You need to keep in mind that a portion of this SG&A expense that you are seeing, actually quite a large portion of it is the legal and professional fees that we are working on for these acquisitions, so that is a pretty significant difference that you might be seeing. The other main component is that as sales go up, which we all want, we have compensation component that our employees get, so as those sales go up you will see the commission structure as well as our compensation structure for employees go up. So that is the other large piece that you are seeing.

Okay. So is it double digit revenue growth is it high teens, 20% plus where we start to see leverage on that type of SG&A run rate?

I don't think we could give a reasonable estimate at this point.

Fair enough. Good work in the quarter.

Thank you.

And we have no further questions in queue.

Okay. Thank you all.