Hostess Brands Inc (TWNK) 2018 Q2 法說會逐字稿

Greetings, and welcome to the Hostess Brands, Inc. Second Quarter 2018 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Ms. Katie Turner, Investor Relations. Please go ahead, madam.

Good afternoon. Welcome to Hostess Brands' Second Quarter 2018 Earnings Conference Call. By now, everyone should have access to the earnings release for the period ended June 30, 2018, that went out this afternoon at approximately 4:05 p.m. Eastern Time. If you've not received the release, it's available on Hostess' website at www.hostessbrands.com. This call is being webcast, and a replay will be available on the company's website.

Hostess would like to remind you that today's discussion will include a number of forward-looking statements. If you will refer to Hostess' earnings release as well as the company's most recent SEC filings, you'll see a discussion of the factors that could cause the company's actual results to differ materially from these forward-looking statements.

Please remember the company undertakes no obligation to update or revise these forward-looking statements. The company will make a number of references to non-GAAP financial measures. The company believes these measures provide investors with useful perspective on the underlying growth trends of the business and have included in its earnings release a full reconciliation of non-GAAP financial measures to the most comparable GAAP measures.

Now I'd like to turn the call over to Hostess Brands' President and CEO, Andy Callahan.

Thanks, Katie. I want to start by thanking the many Hostess team members, partners and customers who have spent extra time over the past 3 months investing energy and knowledge to get me up to speed on the great Hostess business. It's been a terrific on-boarding; the passion and enthusiasm for Hostess is clear.

What's also clear is the foundational pillars for continued industry-leading profitable growth of Hostess remain strong. Hostess has multiple paths for value creation and differentiating assets to unlock this growth within the core business as well as continued strong operating cash flow and the opportunities to acquire adjacent businesses. We are currently sharpening the focus on the most impactful pillars to support our growth.

Tom will discuss in more detail Q2 results, which were a significant miss versus expectations. Q2 was directly impacted by the quickly escalating inflationary costs in the supply chain and a decline in retail inventory and consumer pull due to lower promotional support from one large retail partner as well as additional allowances with customers to drive growth. Although the expenses associated with the transformation of Chicago were significant in the first half of 2018, we expect to perform in line with our original acquisition model in '18 and remain very optimistic about the accretive opportunities it provides in '19 and beyond.

Despite the short-term impact of these headwinds, consumers continue to purchase Hostess at a rate ahead of the Sweet Baked Goods category, which is the foundation for long-term growth. Let me go through some second quarter highlights. Hostess branded point-of-sale increased 2.4% for the 13-week period ended June 30. This is well ahead of the category. Point-of-sale for the top 7 Hostess sub-brands increased 4.4%. These sub-brands represent nearly 66% of our Q2 net revenue and 84% of total point-of-sale dollars.

Hostess Brands' market share was 17.5%, up 42 basis points. Hostess Brands also gained significant point-of-sale and market share growth in important sales channels. Let me go through some highlights here.

Point-of-sale within convenience channel was up 6.4% for the quarter, and share was up 192 basis points to 23.1%, which is a record high for the new company and solidifies Hostess Brands' #1 share position in this important channel.

Point-of-sale within food channel was up 4.3% and market share was up 43 basis points to 13.4%, also an all-time high for us. And additionally, Hostess point-of-sale dollars within club were up 152%, while share was up 108 basis points.

As I mentioned, this impressive consumption increase was partially offset by 12.6% lower POS at a large retail partner due to a change in their corporate product display philosophy and the corresponding reduction in retail inventory, which we expect will moderate moving forward as we move into the back half, back-to-school merchandising.

Our focus in the second half of 2018 is to align our business and accelerate our growth while working to recover inflation-driven cost increases. We are focused on 5 areas to support this profitable growth: Aligning our price and merchandising program to improve the top line; continuing to manage our distribution and operations network to reduce cost; increasing display support across all key channels; driving the innovation agenda; and continuing the transformation of our Chicago Bakery. We are working on plans to restructure our customer pricing and merchandising programs to manage inflation while maintaining growth and profitability. We believe the inflationary pressures of the CPG industry are systemic and here to stay for the balance of 2018 and into 2019. As such, we will implement a retail price increase and incremental retailer programs to help offset the inflationary headwinds we and others in the industry are experiencing. We believe Hostess is highly profitable for our customers and our strong brand strength and large lift on display provides us with a lot of flexibility to balance covering inflation while driving growth.

We will begin selling in these programs in the second half of '18 and expect the majority of the impact to be in '19. We are also intently focused on the execution of bakery and warehouse efficiency programs. We are putting emphasis on the proactive evaluation of SKUs to optimize our portfolio and deliver increased profitability. We are also completing an evaluation of our warehouse locations and other bakery savings initiatives to drive profitable growth opportunities, including the continued optimization of the Chicago Bakery, which I previously discussed.

We have good line of sight to increase in the display support behind Hostess in third and fourth quarter at one of our largest retail partners. Their corporate change in display philosophy during Q2 not only impacted Hostess, but also drove share loss for this customer. Consistently across many examples, when Hostess performs well and is growing through merchandising and innovation, Hostess and our customers consistently grow market share together. This particular retailer has been a great partner to Hostess since the relaunch and my discussions with them have been collaborative and focused on profitably growing the category. We are pleased with the merchandising support we have secured from all of our large customers during the important back-to-school period, which should help support the sequential improvement we expect to achieve in the third quarter.

Additionally, our innovations around Bakery Petites and breakfast are very encouraging. Both of these innovations are platforms highly incremental to the portfolio and extendable. The Bakery Petites platform specifically continues to build distribution and added 36 basis points to our market share for the quarter. We continue to gain distribution in Q2, growing Bakery Petites to an ACV of 40% over the 4-week period ended June 30.

Recent consumer data showed that 91% of Bakery Petites sales were new consumers to the Hostess franchise and nearly 70% were incremental to the Sweet Baked Goods category. Our innovation approach of driving new users to the Sweet Baked Goods category is working with Bakery Petites, and we plan to extend this platform with new innovation items in the future.

We also continue to develop other new and innovative products within All Day Snacking subcategory, including the introduction of TOTALLY NUTTY, an upscale peanut butter wafer bar.

For breakfast, the addition of Chicago gives us the firepower to drive meaningful improvement to our share of this subcategory. Breakfast represents 51% of the Sweet Baked Goods category, while Hostess-branded share of breakfast is currently 15%, a 600 basis point share gap when compared to 21% share of All Day Snacking subcategory. We are excited about expanding into breakfast category with new products, including Jumbo Donettes, multi-pack Danishes and cinnamon rolls, and we are very pleased with the strong support from our largest retailers, including commitments for our Danish offering, which we expect to launch this fall.

To give an update on Chicago, the bakery transformation is going very well. While over half the margin compression this quarter compared to prior year was associated with Chicago, we have good line of sight to growth and profit and expect to exit the year with run rate profit. The feedback from large customers after touring the facility has been terrific, and we are confident it gives us another platform for growth in breakfast as we continue to work to expand further into this subcategory. We are leveraging our strong Hostess infrastructure industry knowledge to support the Chicago transformation and are extremely pleased with what our team has achieved within a few short months. While the short-term operational costs to transform the Chicago Bakery are significant, we are expecting significant future returns. And as I mentioned, in 2019, we will be highly accretive in both revenue and EBITDA from Chicago.

As we enter the second half of '18, the team has focused on our priorities with a sense of rigor and urgency. We are taking significant steps to recover higher inflationary cost while returning to growth. As we look ahead to '19, we are confident that our efforts will deliver results. The fundamental strength of the Hostess Brand, the innate pricing power it provides and our strong balance sheet provides us flexibility to add the right assets to our portfolio and will continue to fuel growth and create sustainable value for our shareholders.

Now I will turn it over to Tom to go through the details of the quarter results.

Thanks, Andy. I will now review our second quarter financial performance and other data from today's release. Net revenue for the quarter was $215.8 million, a 6.2% or $12.7 million increase from the second quarter '17 revenue of $203.2 million. Our top line results were driven by the product acquisitions from the Chicago Bakery, which contributed $20.8 million of revenue.

Offsetting this incremental revenue was lower revenue from a large retail partner, as Andy already discussed, resulting from reduced display space, along with retail inventory reductions. Excluding the acquisition -- excluding the impact of the Chicago acquisition and the lower revenue at this partner, our net revenue is up slightly when compared to last year.

We generated $66.9 million of gross profit for the second quarter of 2018, and a gross margin of 31%. As we fully integrate the Chicago operations into Hostess, the cost structure has already been combined and resulting in less comparable margin information on a stand-alone basis. The Hostess margins were negatively impacted for the quarter by the transformation to rebuild in Chicago. But as a reminder, we acquired this business for $25 million, which included $10 million of inventory. This business was losing significant amounts of money, which we have already reduced substantially. We expect to end the year with positive run rate EBITDA and expect incremental margin improvement in 2019.

Consistent with others in the CPG industry, escalating inflationary pressures, including transportation and other supply chain costs, were more pronounced than we anticipated, resulting in a 447 basis point decrease to gross margin.

SG&A expenses, including advertising, were $27.9 million or 12.9% of net revenue. This compares to $32.6 million or 16% of net revenue for the second quarter of the prior year. The decrease in SG&A dollars was primarily attributable to lower corporate incentive expense. We generated adjusted EBITDA of $47.6 million or 22.1% of net revenue, compared to adjusted EBITDA of $63.2 million or 31.1% of net revenue for prior year. The decrease in adjusted EBITDA was primarily due to the cost of the transformation of the Chicago Bakery, higher transportation costs and other inflationary pressures as well as a reduction in branded display volume at our large retail partner.

Going forward, although the new breakfast margins from Chicago -- from products out of our Chicago Bakery will reduce overall Hostess EBITDA margins, we expect accretive EBITDA dollars from this platform going forward.

Our effective tax rate, including the impact of the noncontrolling interest, was 0.8% compared to 28.6% in the prior year period. This decrease was associated with a discrete tax benefit of $5 million resulting from a change in the company's state apportionment factors. The lower federal statutory rate enacted by tax reform also impacted the effective tax rate for the quarter.

Adjusted EPS, which excludes the net income allocated to the noncontrolling interest, along with other items, was $0.14 per share compared to $0.17 for prior year. Of this, our EPS was impacted by $0.02 from the acquisition of Chicago.

Our cash flow generation continues to be strong, with operating cash flows for the 6 months ended June 30 of $81.2 million compared to $66.2 million for the first half of last year.

Our CapEx for the first half of the year was $21.2 million, mainly for property and equipment to support our new cake line installed in Columbus, Georgia and investments in the operations of the Chicago Bakery. We had cash and cash equivalents of $115.3 million, and net debt of $873.5 million as of June 30. Our leverage ratio was 4.22x.

In terms of our outlook for '18, we continue to expect organic revenue to grow above the Sweet Baked Goods category average for the year and expect the revenue contributions from the Chicago Bakery to be $70 million to $80 million. From a profitability perspective, we are updating our guidance and now expect adjusted EBITDA to be in the range of $190 million to $200 million. This revised guidance reflects our year-to-date results and the expected headwinds in the second half of '18 from inflationary pressure and reduced display volume. We expect adjusted EPS of $0.52 to $0.58 per share.

Our expected tax rate for 2018 is approximately 20% to 21%, giving effect to the noncontrolling interest, a partnership for income tax purposes. We anticipate ending the year with a debt leverage ratio between 4.2x and 4.45x.

Now I'll turn it over to Andy for some final remarks.

Thanks, Tom. In summary, we are being impacted by escalating cost and display merchandising changes that impacted our short-term results. However, as seen in the point-of-sales results, consumers continue to purchase Hostess at a rate ahead of the category, and we believe that will continue. As we execute our strategy to increase merchandising, expand innovation, reduce cost and finalize the Chicago transformation, we see significant profitable growth ahead.

With that, Tom and I are available for your questions, and I'll turn it over to the operator.

(Operator Instructions) The first question is from Ken Goldman, JPMorgan.

I'm just trying to get a little bit more color, Andy, if I can, on the issue with your large customer. But I guess the question I have is, the tone that I heard from you was somewhat constructive on a recovery in the back half of the year. You say your discussions have been collaborative. It sounds like you anticipate some of those promotions returning in the back half of this year. But I also didn't hear anything necessarily official, in terms of agreements or anything like that. So I'm trying to get a sense of the recovery that you have, at least in your head or as part of your guidance, is that realistic based on what you're seeing in the marketplace? Or is it more of a hope at this point, just based on your history with that customer?

Thanks, Ken, appreciate the question. Just 2 things. One is, we don't -- we're not commenting specifically on any programs with the customer, I'm sure you can appreciate that. But as we look to the back half, I am very confident that we will see sequential improvement in our merchandising from Q2 to Q3 to Q4, especially against our highly profitable core business, as we move forward. So that is -- we are not -- this is not speculative on the merchandising that we have included in our go-forward plans, it could certainly be better. What's most important across all of our retailers is we know, and consistently, when we do well, and I mentioned this in my remarks is, when Hostess is being supported and we're driving share growth for Hostess, we also drive share growth for our customers. And Hostess is highly profitable for, in general, for our customers. So we see very strong collaboration across the board. So it's not speculative, but we continue to look for opportunities to find ways to build our business across all of our customers. So I would think that there's upside, if not -- that it is our best on any merchandising, but it is our best call of what we anticipate right now.

That's helpful, and that's great. If I can just push a little bit in to make sure I understand, because the first thing you mentioned is you're not talking about any one customer, but you are talking about one customer. You guys are clearly stating that one of your larger customers has removed some shelf space for some promotions. So I'm not quite sure why you can't talk about that customer on the call if you're talking about it publicly. And I'm just trying to get a sense for where that confidence comes from, because I'm hearing some [vagaries], but I'm not hearing anything specific that says we have agreements to get stuff back on shelf by x day. I'm just kind of missing something there, in terms of getting my confidence back this would really work.

Well, we do have line of sight. When I said we don't talk about specific customers, we don't -- we're not going to outlay the specific contracts or agreements we have going forward. What we do have, basic -- what I have line of sight to it as a sequential improvement, it expands the stores, it expands the number of products on display, all of those are improvements. And so I have confidence with a great degree as I look through over the majority of the year, we are going to see improvement on it. And we continue to work with the customer to profitably grow their business and improve upon that.

And as a quick follow-up, is it costing Hostess anything in terms -- to get back on shelf, so to speak, in terms of better terms for the customer? I'm just trying to think of the profitability for -- the cost of that in terms of getting back to where you were previously.

No. No, it's about building joint growth plans with the customer.

The next question is from Farha Aslam, Stephens Inc.

A quick question on, first, modeling. The tax rate that you've given includes the $5 million for state considerations, is that right?

I don't -- it doesn't. I think the 21% to 22% is our go-forward rate. It doesn't include that.

Okay. So your operating number excludes that one-time tax benefit in the second quarter?

Yes.

Okay, that's helpful. And then just on your wheat cost and commodity outlook, you guys highlighted that you faced inflation on transportation. How should we think about the recent run-up in wheat and how that will impact you?

Yes, so we noted transportation inflation. We've also had some packaging inflation and expect some inflation in commodities next year. We have not -- we're hedged pretty far out on wheat, so we haven't seen this -- the short-term wheat increases hasn't impacted us to date. If it's sustained over the long term, it would. But to date, it hasn't.

Okay. And when you price, will you price for transportation, packaging and wheat? Or will you think you need to come back to the market for wheat?

No, we're going to price for the broad inflation across the business and also look across multiple levers to make sure that we balance growth and recovering the cost. So for example, we have mix, we have display activity, we have a comprehensive program that we'll bring to our customers. But for sure, it will include a price increase across most -- all channels.

We have a question from Mr. Bill Chappell, SunTrust.

Andy, I guess, going back to the Walmart issue, I guess, I'm a little confused on the change in guidance today, because I think you talked about -- I mean, you've known that they changed out buyers, probably 5, 6 months ago, that you had lost the shelf space, I think when you were out back in May. So what's changed that you didn't already know, 3, 4 months ago in terms of the outlook in the second half?

Yes, that's specifically to what our go-forward merchandising plan was. Very clearly, the magnitude of the merchandising was greater than we had planned, which we're negotiating at the time, still kind of working through. The second component was the associated meaningful reduction in inventory that's associated with not only the display but also days of supply that, frankly, we didn't have line of sight to. So those 2, and then coupled with, obviously, the quickly escalating cost increases, were 2 meaningful deltas versus May.

So just to go back. You just didn't have the systems kind of in place to understand what the magnitude would be, is that the quickest way to look at it?

Are you talking about the cost increases?

No, I'm talking about Walmart.

No, it wasn't the systems in place. It was just working with the customer to have the right levels of merchandising, trying to get back -- understanding, selling what's best for the customer, our line of sight and what we anticipated it was at, at the time. We did not pull the associated inventory reductions into our forecast.

Got it. And then going to Cloverhill, Dean on the last call said the goal was try to get it closer to breakeven by the end of the quarter on a monthly basis, and it sounds like it may be taking some steps backwards if you're going back to your original kind of full year guidance. Is that the right way to look at it? And then how do we get confidence that it turns a profit in the fourth quarter, and then it can get to that $25 million goal next year?

Yes, I feel very confident about '19. When we acquired the business, one of the first things that we did was get the systems in place and build a -- which took some time, to get it onto our SAP, align the cost, get a full cost picture. There's been a significant amount of cost that we put in the business, just relative to resources, other things, fixing some fundamental issues. The important piece about Chicago is we have good line of sight, the progress is tremendous relative to it. We will exit the year with EBIT and revenue above our acquisition economics and are confident that 2019, we believe, will be better than our acquisition economics in both revenue and EBITDA. So we know a lot more now just based on pulling the system together versus what we were -- saw during the acquisition.

The next question is from Michael Gallo, CL King.

Just a couple of questions. Andy, Tom, I just want to kind of parse out again what your expectations are now embedded for Cloverhill in the back half of the year. It looked like sort of back of the envelope, it lost about $6 million-ish in the quarter. You're sort of saying, I think it's going to break even kind of by the end of the year on a run rate basis, suggesting kind of loss of kind of Q3, Q4, albeit lower than Q2. But how should we think about the cadence of getting to the original $20 million to $25 million? Is it just kind of things are set back a quarter or 2 and really, your overall view of being able to get there is unchanged? Or is there something structural about that mix of business that makes you think it might be harder to get there overall?

Yes. Thanks, Mike. Chicago's going very well and one thing along the way is we're deploying a significant amount of capital during this quarter and next quarter during Q3 and Q4, which really flattened out the business for now, and then we'll start to -- we'll build in those Hostess breakfast multi-packs in the fourth quarter and we'll exit the year, as we said, EBITDA -- run rate EBITDA positive. But some of that requires a significant amount of downtime, down days, just so we can get the equipment in. So we've limited production to a certain amount, and that gives us confidence that, one, we'll get the Bakery right, we're investing the right assets in the Bakery, we'll get the productivity improvements. We'll get the automation that we're putting in. And then we'll turn to '19 and build out the breakfast portfolio.

And then just on the base business, obviously, point-of-sales continued to do well, you're in a --- some of your innovations continue to do well. I think this is the first time I've heard you talk about pricing in quite some time. Given the overall product category macro trends, are you confident that you can push pricing without losing share? Do you think you'll have to get it more from just innovation, perhaps carrying higher price points? Or what gives you confidence that you'll be able to get pricing in a category that's kind of stagnated?

Thanks for the question. So you're right, we have not priced in a while, which is why we're going to do the analysis and do it right. So you mentioned a couple of things. One is innovation is a very important part of our growth program and it will continue to be. Our ability to recover the high-escalating costs is an add to that, an additional to that. So there will be a pricing component. But we're going to do it in a way that leverages all of the levers to be able to do that. We're going to look at the, not only the absolute everyday price, the discounts, the amount of the discounts on display, we're going to look at all those and put together a program that we believe optimizes the recovery of the cost, while balancing the growth. So we're doing that detailed analysis now, because we're going to get it right. And we'll begin -- start selling that in '18, but we expect the majority of the impact to be in '19. So we're going to -- we're looking at it across all elements to be able to make sure we do it right.

We have a question from Mr. Steven Strycula, UBS.

Two-part question. The first one would be on pricing. Just a clarification, have you guys already sent out your price notifications to retailers? Or is this more of a plan to do so in the coming weeks and months? And is that across what percentage of the portfolio?

We have not sent anything out to our retailers yet. We expect to do that beginning in the end of Q3, Q4 time frame, and we do anticipate it being broad-based across the programs. And as I said before, we'll balance the recovery versus the growth.

Okay. And then I have a follow-up question for Tom. Tom, can you unpack -- you guided down -- or the company guided down, rather, EBITDA about $30 million to your new range for midpoint-to-midpoint, and I was just -- a lot of investors would like to unpack that a little bit and see how much was attributable to the large customer inventory adjustment, how much of that was inflation, how much of that was Chicago Bakery? If you could kind of just, for round numbers, give us a little bit of a feel for how that $30 million breaks down across these variable, that'll be very helpful.

Yes, I think we're not going to break out the numbers in detail, but obviously, the display, and you can see our organic revenue decline was 4%, which was more than we guided to. At the beginning of the quarter or last quarter's call, we guided that more flattish, so you can see -- you can kind of estimate that. And then we have been seeing inflationary pressures in the 2% to 2.5% range, and that's up to 4.5% -- 450 basis points against margin, and that's kind of the spread there carrying that forward.

Okay. What was the delta on the inflation piece relative to what we saw from the start of the year? I mean, freight has been inflationary since, I think it's had its sharpest point in February. So what were the incremental pieces that kind of led to that 2.5% to 4.5% hike?

Thanks, Steve. There's freight involved in that, there's some wage and benefit inflation involved in that. We've started to see more and more corrugate and a little bit of raw material inflation that we're starting to see along with that. And we've seen some customer allowances to drive growth, we're continuing to drive growth, and we're continuing to invest in our customers.

(Operator Instructions) We have a question from Mr. Brett Hundley, The Vertical Group.

Just to make sure I'm clear. So to follow on that last question, when we talk about freight, labor, raw material cost increases, is that around a 400 basis point impact to gross margins for the full year, am I in the right neighborhood there?

Yes, it escalated to 4.5% this quarter.

Okay. And so as far as the full year impact, it would be up towards that 400 basis point number?

Yes, that's where we're estimating, or a little more than that. As we continue to -- transportation continues to get more expensive. So through the quarter, it got more expensive.

Okay. Yes, I can appreciate your guys wanting to take your time on pricing strategies and all that, but I'm trying to get an early sense for what the company might look to potentially recoup in 2019. I also wanted to ask you about your core Sweet Baked Goods sales growth. So would the hope be that by Q4, that the number that we start to see -- the number that we see in your results starts to better approximate point-of-sale trends, would that be the hope?

Yes, you'll start seeing sequential improvement, and you'll start seeing the core business start really getting to what you saw a year ago. There's one exception to that. We had a disproportionate new product display that won't be launched at the same magnitude, but that was just a trial vehicle that'll impact, given the size of it, that'll impact us behind Bakery Petites. But if you break out the core business, you'll see that growth continue and get better as we see sequential improvement versus Q2, as we mentioned at one of our large retailers.

Yes, okay. And then I just have a broader M&A question for you guys, actually, and then I'll yield the floor. When you guys evaluate potential deals across the landscape, one of the common themes that we always hear from you is talking about branded opportunities. But I wanted to ask you just how important the existing branded mix of a target might be? So I guess, in other words, if there was a potential target out there that had really compelling return attributes but it wasn't necessarily a branded-focused business, maybe it offered channels, maybe it offered other opportunities, is there a case to be made for looking at and acquiring such an asset, so long as it may ultimately allow for potential branded distribution as well?

Yes, I think the headline of that would be yes, there would be that opportunity. There's certainly -- when I think about M&A and the team things about it, there's really close to the core and then there's things that will be add value and value creation and leverage our very strong cash flow. Take Chicago, for example. Chicago was opportunistic. Some may argue that it wasn't purely a branded, but it's going to be, as we mentioned, highly accretive in both EBITDA and revenue in the back half. It gives us access to some value brands that gives us -- we're able to expand into then and into other urban channels that we didn't have before, with Cloverhill and Big Tex, and it also gave us bakery, a breakfast platform, of which we're going to bring the Hostess brand into. So by connecting capabilities, there's a broad range of things that we can do. So the short answer is yes, and we believe that there's going to be opportunities out there that's an important part of our focus going forward.

Ladies and gentlemen, at this time, we've reached the end of the question-and-answer session. I'd like to turn the conference back to management for closing remarks.

So just to close, obviously, in the short term, we're impacted by some short-term impacts. We're working extremely hard to recover those. What's most important is that the fundamental growth thesis and value creation of the Hostess Brands remains extremely strong. And as we move through the back half of '18 with great urgency on our initiatives, we will move through the year with great tailwinds behind Chicago, behind recovering our cost and behind maintaining and even accelerating our point-of-sales growth that we've experienced year-to-date. So thanks for your time. I appreciate your thoughts and questions. I'll now close it out.

Thank you.

This concludes today's conference. You may disconnect your lines at this time, and thank you for your participation.