Q4 2019 Earnings Call
Where do you know walk into the JNJ snack.
Its.
First quarter earnings comp.
Paul.
Hi, My name is Charlotte Applebee, your operator for today's call.
Okay.
At this time all participants are in a listen only mode.
Okay.
They do we will conduct.
A question and answer session.
Good.
During the question and answer session. If he ever question. Please press Star then one under Touchtone phone.
Yes.
Please note that this conference call is being recorded I will now turn the call over to Dennis Moore.
Sir you may begin.
Hi, This is Jerry Shriver.
Dennis.
Sure.
Sure.
Good.
Okay.
But I can begin whenever you're.
[noise].
[noise].
Sure.
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Yes, I'm here.
Okay.
Sure he schreiber.
When you say.
No.
Okay are you hearing gearing up.
<unk>.
Third can begin.
Good morning, everyone and welcome.
Two.
Fourth quarter conference.
I am Gerry Shreiber, and I will lead the discussion and then we'll turn it over to or the people who are tending with me.
And they.
They are.
In order.
Sure.
Opera data <unk>, who is our COO.
Dennis Moore, our CFO .
Okay.
Hey.
A senior vice.
<unk> sales.
Hi, Jerry law.
Senior Vice.
He is president.
Marjorie.
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Right.
Schreiber.
Who is.
Our head of legal.
Both.
Oh, sorry.
Fields.
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Our food.
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So.
I will now begin.
The cool.
[laughter].
The following.
Liggett.
But.
Forward looking.
Hey.
Sure.
My subject.
Certain risks and uncertainties.
That could cause.
Yeah.
Actual results.
Yes.
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Yes.
Oh sure not.
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Absolutely.
I do realize.
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These forward looking.
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Matt.
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It's always.
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Where do you take no obligation to publicly.
For.
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Okay.
Thanks.
Like events or circumstances.
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Okay.
After.
To date hereof.
Results.
Net sales.
Yes.
<unk> increased.
Four.
The.
An increase.
Four.
For the.
Uh huh.
With water.
Was 31.
$1.1 million.
Both years.
<unk> increased 6%.
Well.
He million dollars.
For the year.
Foodservice.
Sales.
Foodservice.
Oh.
Yeah.
In.
About 1% for.
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Sales of soft pretzels.
Were.
Okay.
Brazil.
We had.
The sales.
The final okay.
Yes.
Upside.
Experts.
[noise].
Sure I was up.
In Brazil.
Rosen novelties.
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And bakery.
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Okay.
<unk>.
[noise] handheld sales were down.
The year foodservice sales were up.
Who present with increased sales himself.
Fred.
Bakery products.
Okay.
Rosen juice.
Yes.
I'm sure.
Handheld sales.
Were down nine.
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For the.
Retail.
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<unk> gross.
Sales.
Products to retail.
Mark good for.
Less than.
For instance.
The.
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And down.
One.
For the.
Okay.
Here so.
All pretzel.
Yes.
We are down.
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The border.
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Oh.
It was the.
[noise].
[noise].
And a half a.
For the.
[noise].
Excuse me minimal.
Yeah.
[noise].
Sales.
Frozen.
Whose bars.
Hi.
Ice is.
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Four.
Okay and down one.
Sure and helps.
Were.
24%.
For the quarter.
And.
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12.
[noise].
Here I see.
In frozen.
Beverages, which.
Our next last.
Slush.
Frozen.
In beverage and related.
Product sales were.
Our team.
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In the water.
Yeah.
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Year beverage related.
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In Brazil.
The.
Okay.
And then in.
Every year.
Yeah.
Yeah.
Gallons sales.
Hi from.
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Our.
I.
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Yes.
Service revenues.
For others.
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10%.
An 8%.
Machine revenues.
It is.
Yes.
Sure.
41.
For the quarter and 60%.
For the.
Good.
We are solid.
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Gross profit.
As a percentage of sales.
An important.
Degrees today.
20.
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Yeah.
The point.
I agree.
<unk> last year.
<unk> was 29.
Bye.
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This year.
And 29.
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Yeah.
Yes.
For the year.
The benefits.
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Operationally.
That several of our man.
Your.
Two facilities.
[noise].
And so.
Yes.
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Its pricing were offset by.
Right.
Increases and lower margin sales of.
In our.
I see.
And frozen.
As in beverage.
The increases a lower margin.
As a bakery.
A bakery.
Your products.
Our foodservice.
Operating.
You can come in.
Our.
Fourth quarter.
It was 31.
<unk>.
1 million.
For both years.
Yes.
And increased.
Experts.
200.
Sure.
$30 million.
Yeah.
Our EBITDA that's earnings before interest.
Taxes, depreciation and amortization.
Sure.
For the past.
12.
Uh huh.
And.
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You know.
[noise].
Total operating.
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As a percentage of sales.
Yes.
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One point.
Abramson.
Fourth quarter.
[noise].
Were down slightly from last.
20.
Okay.
Oh.
For the year the.
This decrease.
It is.
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And 7%.
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Okay.
Eight.
A year ago.
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Capital.
Well.
Looking at.
Cash flow.
Our.
And investment Securities.
He is valid.
Yes.
300.
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$43 million.
29 million.
But my.
This.
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Yeah.
He seven.
Once a year ago.
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We.
Continued.
Hi.
As a use of our cash.
Hi.
20.
8 million of.
Our investment.
Alright.
<unk>.
Bob.
For the yield to maturity 2.8.
Capital spending.
15.
In dollars.
Can you.
Sure.
And.
<unk>.
Our spending for the year.
50.
Yeah.
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In.
Yeah.
$3 million.
In.
Well here.
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Cash dividend.
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50 cents a sheer.
Thanks.
Our board of.
If I board of directors.
As a.
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Sorry.
2000 and.
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We did not.
Bye.
Any.
Shares of.
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Okay.
Yes.
Got five.
Any shares.
Quarter.
Other.
Sure.
Hi, Good service.
Fragile.
Continued its recent.
The strong sales growth.
Yes.
<unk>.
In convenience store chain.
Sales to rest are unchanged.
I've been down so.
Sure.
Continued to be strong.
<unk>.
I was.
Stores.
Got it.
Okay.
<unk>.
<unk>.
We.
You to do well is.
Those bakery sales were.
This quarter as we had.
Significantly higher.
One customer.
And sales a handheld sales were down 23%.
<unk>.
Yes.
<unk>.
Washington.
A drop off.
Oh.
Sales to rescue.
Okay.
Right.
Frozen.
As far as.
I used to sales.
What happened.
The.
And the year.
Our duty.
The increase.
Sure.
<unk>.
Overall sales.
Just a restaurant.
Ron.
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Validate your.
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Sales to.
The schools.
And.
Right.
Operating income.
Our foodservice.
It is down.
5%.
To 18 point.
9 million.
In dollars.
It wasn't overall.
In.
Non recurring.
<unk>.
Resulting from ramping.
Production.
<unk> increased bakery sales demand from a single customer.
Increase was from $74.1 million.
In 2000 $18 million to $78.1 million in 29, T., resulting from benefits of improved operations at several of our manufacturing facilities.
And to some degree some increased pricing.
Soft pretzel sales and our supermarket.
Segment.
Were.
Around 4%.
For the quarter.
[noise].
Clause.
Decreases.
[noise].
Like frozen novelty sales.
<unk>.
Four person.
<unk>.
Due to.
The price.
Wins and.
[noise].
Operating income or <unk>.
Retail.
<unk>.
Yes.
It was.
$1.1 million.
On a.
<unk> Baird to.
And last.
On.
Yes.
And.
Increase.
<unk>.
$3 million.
<unk>.
Okay.
Point $9 million.
Okay.
For the.
Right.
The primary.
Interviews.
Due to higher operating.
Income.
On that issue it was.
Sales in our frozen.
Beverage segment.
<unk>.
Strong.
13.
Service revenue was.
Wondering.
This business.
Thank you.
Strong sales growth.
Yes.
And machine sales and revenues were.
40.
One.
Yeah.
What.
Point $5 billion.
Yeah.
[noise].
I see.
Great.
Year was.
<unk> $2.1 million or 8% due to strong sales growth.
Was down 180.
One.
1000.
And.
For the.
<unk>.
<unk>, mainly due to inventory.
But.
[noise]. Thank you for your continued interest and I will now I'll turn it back to be listening audience for any questions or comments. Thank you.
Thank you we will now begin the question and answer session. If you have a question. Please press Star then one under Touchtone phone if you're using his speakerphone. Please pick up your hands that first before pursuing any numbers.
Once again, if you have a question. Please press Star then one I never touched on phone sandy by progression.
I'm. So I can you repeat what do you just.
Said.
Anyway.
Oh, Okay. Okay. Our first question comes from John Anderson, John Your line is now open.
Hello, John Anderson how are.
[noise].
Hi, Jerry I'm I'm very good how are you.
Yes.
Good.
Thank you.
[noise].
Yeah.
I hope.
Everyone else around the table as good as.
Yes.
Body.
Including.
The.
Two dogs I have here.
Sure.
[laughter].
<unk>.
[laughter].
Well.
It's it's been a.
Then a.
Hi, good year for you and.
Yes.
You have lots of Crow about.
Yes, yes, we do.
From my.
In fact of at least.
These early.
In the year.
Yes it.
It's good for next.
Sure.
Well maybe.
That's a good place to start.
You know you had had another.
Successful you're a 19.
And as you look ahead to.
2020.
What are.
Some of your.
Our main.
The main priorities.
You know for 2020 at this point, what we want to continue our growth and we're looking for solid mid.
Within our overall business.
<unk>.
And.
Well be.
Only.
They buy some of our.
Your.
That were.
Yeah.
We're doing.
<unk> President.
Okay do you.
<unk>.
Yeah.
Since you mentioned new.
How do you feel about that.
The innovation pipeline.
Today relative to maybe the last year to are you.
Our average.
Yes, good adds better.
Well we're.
Hopefully it's at least that's good.
Perhaps.
A couple.
Okay.
<unk>.
It's even better.
Okay.
But.
We continue to invest.
Okay.
In.
In our.
You're factoring.
Did you lose our.
Randy.
We.
Abroad.
<unk>.
The pipeline.
[noise].
Yeah.
We plan on introducing.
Okay.
And next.
The next.
So.
Well.
[noise].
Okay.
Yes.
No not Jerry law.
Yes.
We haven't.
Most pipeline.
Rentals.
Frozen.
[noise].
Funnel cakes.
As we.
You can you.
To add products.
C store.
Yes.
With care.
I'm sorry.
We continue to see.
Yeah.
Thanks.
Who knows.
Yes.
Let me pause for a second.
A few years ago I.
And then the sessions.
Our.
Our.
The.
Overall.
Our presence.
It's convenient.
Or convenience store.
Thanks.
Can you have done that.
Continue and now we think.
I think we have some.
Well.
Behind them to continue that for the next several years.
Good good that that's great to hear.
Its a.
So.
Yeah.
Thinking about so.
Pretzels.
For a minute.
It it seemed like.
There was.
It was a little little less strong than the in.
The quarter.
Okay.
No.
Not overly concerned about an individual quarter.
But.
So.
Right.
How do you think about the.
Pardon.
The business.
Your customer base because.
It's been a.
Area for you for multiple years.
And I'm just wondering are you.
You still see the kind of opportunity there.
For further.
Our product penetration or you feel like you've got a tap that now and and need to look beyond.
C stores.
They are.
No no other.
You'll recall that we entered that.
That business.
About.
Five or six years ago.
We jumped out at the show.
Yeah.
Got it.
$50 million.
Overall.
So quickly.
Like that it had a couple.
Look back.
Back to your declines for no. Other reason then deconsolidation.
That they were going.
<unk>.
Now it.
It's about $60 million overall in our.
And we have.
Specifically.
Right.
Specific.
The.
Range that we.
Plans.
<unk> increased that for this year. So we're looking ahead.
The next.
Certainly.
Your to win there.
Yeah.
A good degree.
Tom.
Excellent to here.
Yes.
Okay.
<unk>.
What's holding back.
Yeah.
Disappointed because I think.
The top line at the top.
It's been strong.
And I always kind of thought that if you've got a certain amount of.
Revenue growth.
Now that the margin.
<unk>.
Gross margins would follow.
I know you've been doing a lot of working here.
Supply.
Do you feel like.
Your.
The middle innings of that or are we know.
Getting to a point where.
Our mid single digit growth can translate into.
Higher margins as well.
And as you want to comment on.
Our.
Yes.
Yeah.
Yeah.
Yeah.
<unk>.
Yeah.
Randy.
<unk>.
<unk>.
Furthermore.
R&D.
Right.
Yeah.
Yeah.
Yeah.
Okay.
<unk>.
Hi.
Oh.
Okay.
<unk>.
Right.
<unk>.
Okay.
Right.
Yes.
<unk>.
Yeah.
Yeah.
<unk>.
I would do.
Overall the.
Manner.
<unk>.
Sure.
Hi.
Hi.
Right.
Yeah.
Yeah.
Yes.
And actually John as a.
Little bit.
Thanks.
We have won.
On.
Customer.
<unk>.
<unk>.
It begins with an.
We got.
<unk>.
Okay.
A.
[noise] bunch.
Business.
<unk>.
From.
<unk>.
Fourth.
Looking ahead for the next year too we will.
Before.
Better.
With.
Yes.
But we had some issues and just.
Absorbing it all.
Into our couple about.
Yes.
Yes, John .
This is.
It was much lower than what.
<unk>.
<unk>.
Okay.
As the disruption.
[noise].
And where we.
We have built aligned to take on.
On the business.
Yes.
[noise].
But.
In the business came in it.
It's.
Yes.
Two facilities.
<unk>.
We're.
And our.
Ramp.
<unk>.
Yeah.
<unk>.
These people.
<unk>.
And John and I apologize may have a very a buddy.
That sounds like Elaine.
Excuse.
Six your chicken would one leg it is a lamb.
As we will do better.
Okay.
Okay.
Right.
I guess, that's a high quality.
The problem to have.
Philly too much.
Yeah.
Okay.
Last one for me.
Yeah.
I.
I think at one point.
Over the years.
As we've talked.
Yes.
Someone mentioned hey.
If we built.
Cash and.
You know.
Pile, but.
Good.
It exceeded $200 million something like that.
We would really look at.
Being a little but maybe more proactive and.
You know putting that cash to.
Returning to shareholders.
I think you.
You know your cash and.
Right.
This is now north of 300.
In the 40 million.
So.
What's the thought process.
There.
Well.
The thought process is to use that cash.
And the most.
The efficient way that.
Even though.
Now I am.
The largest.
I am really.
To redistribute.
This.
Back to.
But we.
We.
Okay.
Okay.
Continually.
Looking at.
Yes.
Some.
Some.
I will.
The best.
Just for that.
[noise].
And my estimation.
Yes.
As for.
And.
Fair enough fair enough.
Part of it.
Again.
Good good year in something to Crow about.
Can you should take.
Good.
[noise].
[noise].
Our next.
Hi.
Problems from.
Deborah.
Your line is now open.
[noise].
Hi, This is Deborah man.
From Lee.
Good capital.
Just.
<unk>.
A quick.
Question.
Gary a lot of your revenue growth. This year was attributable to frozen beverage machines.
Which were above historical averages.
Ill.
As you.
Do you anticipate these levels or.
Sustainable.
Or would you expect a reversion.
Next year.
Yeah, you historical averages.
Okay.
Sure.
In fact shneur.
President.
Our froze.
Good.
Division.
Absolutely.
Okay.
And Dan is on a.
He is on a remote listen Dan you why don't comment for that but.
Let me just say this.
As generally.
In frozen.
Beverage machines.
Out and.
Okay.
It is.
As a.
<unk>.
It's almost.
Hey.
Hi, Matt.
Yeah.
<unk>.
Draw.
<unk> revenue growth.
Can succeed.
Yes.
Yes.
Dan why.
As you take that question.
And.
Yeah.
Better.
Okay.
Sure.
Hi, Debra.
[noise].
Yes last.
Last year.
For 2019, with a great year for us that equipment sale.
2020, I think and.
Expect to be also a good year.
Probably slightly down because one a bar.
Our large customers a.
I'd seen won't be repurchasing.
Equipment sales are somewhat cyclical.
But I expect the good year in 2020, as well and they don't.
Follow any.
He kind.
Specific.
The.
Equipment.
Yeah.
It does bring.
The promise of.
<unk>.
<unk> revenue.
<unk>.
For the next.
<unk>.
Shell and then service.
In it.
Right.
Thank.
Yeah.
Our.
Next question.
Comes from.
David Mann tell your line.
Let's now open.
Hi, good morning.
Good morning.
Yeah.
Yeah.
The bad.
I don't think we have this is my first time.
The pleasure.
Okay.
Congratulations on the a strong year.
Thank you.
I wanted to get into a couple of.
Question, one regarding on the anti Annie's.
Where are you.
Do you see.
It looks like there there was some cannibalization.
Superpretzel.
Are you seeing that across the board in.
And most.
<unk>.
Both places with that.
<unk>.
Correct.
And was that a negative margin.
<unk>.
For.
Jerry Law, you want to comment on our analysis.
We.
He cannibalization of Super.
At all.
The.
Yeah.
The lower.
Hi, Bill.
In the quarter.
Right.
In the quarter, we had.
Our pricing.
There's a little lower.
Less.
In summary.
Okay.
Yeah.
<unk>.
Early.
Yes.
Okay.
No.
<unk>.
This.
Jerry.
Okay.
Any and this was.
Hey formidable.
Competitor for a number of years.
We bought.
Yeah.
And we were.
Okay.
We're integrating it within our system.
[noise].
And as we haven't.
<unk>.
Last years.
But other.
Our.
Okay.
And when licenses so.
Correct.
Rental sales.
Two.
To grow.
However.
No.
Modestly or strongly.
Right.
And by doing these things that we.
This year in the.
As five or six.
There's mix.
Overall business.
Yes.
This war.
Our bullish.
Got you that makes sense.
Thank you.
Okay.
When I look at your convenience.
Distribution.
I know we just.
Yeah.
Scott.
I'm wondering if your opportunities for the future is kind of.
Phase.
Expansion.
Okay.
I see I see kind of like.
Five or six.
6% ACB, we desire I here.
Right.
Yeah.
Now.
Are you.
Second the how high can that get and also are you expecting to increase your assortment a convenient.
We are and if you go if you go into any of the national convenience stores you look at that.
Yes.
We.
Add dreams.
Getting on.
On.
In 10 years ago.
Yeah.
Now were there.
Yes.
Thank you.
Display.
Speech, even wrongs and wrong.
Press.
I would just.
Correct.
90%.
All the soft pretzel.
Okay and convenience stores today.
Right.
From a.
Okay.
We expect to.
<unk>.
With.
In the country.
[noise].
With all of that.
That seems it seems like there's a lot of white space and my.
And my last question is regarding acquisitions, just want to tackle that.
And.
Where are you seeing valuations now and are they.
<unk>.
Are they in line with where there were kinda last quarter have they backed up a little.
And.
In terms of foodservice and retail.
Yes.
We look.
Growing our business.
As always.
Strategically.
Conservatively.
[noise].
Yeah.
And given.
Our.
Our major share.
For a dominant share in.
<unk>.
Right.
Each.
Back you're.
Into.
Our.
Okay.
Yes.
[noise].
I.
I think.
Thanks.
Pricing is a little bit.
So what it.
Two or three years ago.
Oh.
It's not.
Quite what it was.
10 years ago.
Well, we continue to.
Before.
But.
Space.
I, just white space good space for us in there.
As we continue to grow our soft pretzel market.
Well, thank you for answering my questions and I'll pass it on thank you.
As a reminder, if you ever question. Please press Star then one on your Touchtone phone again, if you ever question. Please press Star then one.
I never touched.
On.
I think or is that.
I'm showing no further questions in queue.
Yes.
[noise].
Alright, and let me.
They.
This.
Vince.
And again.
Yeah.
And.
It's a pleasure.
Speaking with everybody and we.
Okay.
The board.
Two.
Many many many more.
<unk>.
Orders in years.
Sorry.
Good.
Oh, thank you.
[noise].
And thank you ladies and gentlemen this.
Today's call.
Thank you for your.
So you shouldn't you may now.
I cannot.