Q1 2020 Earnings Call

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At this time, all participants are in listen only mode.

After the speakers presentation, there will be a question and answer session.

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I'd now like this critical over to your speaker today Sina Mcdonald director of external reporting. Please go ahead.

Thank you Josh.

And everyone. Thanks for joining us today to discuss all those first quarter 2020 results with me on the line today, we have our chairman and CEO and Ryan Greenawalt, and our Chief Financial Officer, Tony Colucci.

We will begin with some prepared remarks before we open the call for your question before we begin I'd like to remind you that today's call contains forward looking statements, including statements about future financial results or business strategy and financial outlook and other non historical statements as described in our press release.

These forward looking statements are subject to certain risks uncertainties and assumptions, including those related to all those girls market opportunities and general economic and business conditions.

These statements also include our expectations regarding risks related to the continued impact of the Qubits 19 pandemic, when our business operations and financial results.

We have based these forward looking statements largely on our current expectations I'm projections about future events and financial trends that we believe me affect our business financial condition and the results of operations.

Although we believe these expectations are reasonable we undertake no obligation to revise any statements reflect changes that occur after this call.

Descriptions of these and other risks that could cause actual results to differ materially from these forward looking statements are discussed in our reports filed with the it's easy including our press release that was issued today.

During the school, we May present, both GAAP and non-GAAP financial measures a reconciliation of GAAP to non-GAAP measures is included in today's press release, which is available at investors that also cookman thoughts go.

And with that I'll now turn the call over to right.

Thank you Saddam and welcome to Altice first quarter 2020 earnings conference call.

I hope all of you on the call today are well my focus my remarks on what we're seeing in the actions we've taken to effectively operate our business during the covert 19 pandemic Tony Colucci. Our CFO will then provide Q1 financial result, an update on our liquidity and capital structure.

We got off to a strong start for the year and saw relatively limited impact from the cobot 19 pandemic into first quarter financial results in fact, while the first quarter feels like a long time ago, it's worth noting that our performance demonstrated the underlying power of our business model. Both in terms of parts and service driven organic growth and our ability to identify and close act.

Sessions.

When we spoke when we last spoke with you in late March we were just starting to see the change in the business environment as shelter in place mandates went into effect across many of our markets rapid change in the business climate materialize in March and we immediately began executing the playbook that enable us to emerge in a strong position from a great recession of 2008 nine.

While the current crisis is different and more multifaceted the same dexterity in the model allowed us to take aggressive mitigation actions that we had that have helped fortify the business and position, although for the economy's reopening and recovery.

The last six weeks have been some of the most difficult we've seen in our careers, but we are open for business at all of our locations. We are beginning to see some bright spots in our markets and indications of to increase demand for products and services.

As you heard me say on the road show and our recent earnings call or financial model is driven by our parts sales and service business that deliver hype.

Delivers high margin recurring revenue and steady cash flows.

We don't focus on short term variability in new and used equipment sales as near term reductions are unlikely to have a long term impact on equipment population in our territories in our experience equipment sales tend to bounce back relatively quickly coming out of economic downturns when replenishment cycles are extended and demand for new equipment as pent up to reiterate.

Strategy is to populate or geography, as with new use and rental equipment and then harvest the installed base to grow parts and service revenue and we do not projecting koby 19 will have a material long term impact on equipment populations in any of our territories.

Our strategy to expand into new geographic markets and diversify our customer base.

Proved valuable in the current environment as different regions are affected in different ways by the crisis and looking at our two operating segments, both of which had been teams essential businesses. Our construction equipment business has been less impacted on the industrial equipment side than the first half of the current quarter quarter.

However, the industrial segment continues to be highly cash flow positive with a healthy contribution from parts and service revenue streams, we look at construction as as more in a growth mode with our Illinois construction equipment business continuing to mature and with the addition of Flagler in Florida, which continues to perform well and also benefits from less seasonal weather and less impact from the Corona.

Virus epidemic.

Overall, while some manufacturing markets like automotive have slowed considerably other life sustaining services like bio pharma medical food and beverage and experienced strong demand spikes particular, particularly in areas with large and dense population.

Looking closer to home the state of Michigan went into shelter in place mode and late March and Detroit has been one of the hardest hit metro areas in the country, while it's hard to predict whether we'll have a V or U shaped recovery. We have seen early signs that the worst is behind us and we're starting to see better operating conditions in our local market.

Once we get outside of the Detroit area, our business in Western Michigan has remained healthier. Meanwhile, Illinois has been much more important than our other Midwest locations, particularly on the construction side.

The Illinois construction market represents a significant opportunity to increase share and we are growing the feel population in rough replicating the strategy, we used in Michigan to grow our parts and service business.

Alters ability to move quickly and effectively would not be possible without our most important asset our people. We're an essential business operating 43 branches, serving a wide variety of and industrial and construction customers across several great lakes in northeast States as well as Florida, the hard work and dedication of our people have allowed us to remain.

An open across all regions and businesses in order to support our customers and communities today, we continue to maintain strict operating policies to protect our people on customers, including new work guidelines across the organization and the creation of a task force with active participation from all operations teams to coordinate prompt communications with our supply chain and OEM partner.

Ours.

Have you the Ulta culture as a critical driver of our success and we have long emphasized a one team mindset alt employees have embraced the spirit of shared sacrifice, which has enabled us to an act temporary furloughs and other cost saving measures, while continuing to meet the needs of our customers.

In the current crisis. The Ulta team has demonstrated the best of our culture and continues to build on are harder and 36 year track record for delivering the highest quality equipment parts and service support.

Our skilled technicians continue to prove provide us with a key competitive advantage in the markets we serve.

They are essential to providing aftermarket parts and services to our installed base of industrial construction equipment customers also has the distinction of being an employer of choice due to our ability to recruit train and develop the specialized talent.

We've been able to increase our skilled labor force by approximately 20% in Florida over the last six weeks as business activity has continued to near normal pace is your call. One of our goals was when we acquired Flagler earlier. This year was a great opportunity to significantly add skilled labor in the Florida region to maximize their potential.

We continue to enjoy excellent relationships with our OEM partners and we are grateful for their partnership our team has worked closely with heister, Yale Volvo and JCB and or other Oems to ensure were collectively supporting customers as best we can.

Given the evolving business environment I'd like to provide additional perspective on how we're managing our capital spending in operating expenses Tony will provide further comments in his formal remarks.

I've already mentioned are quick action to implement our playbook from the financial crisis back. Then also was a very different business much smaller where the sole focus on industrial equipment and significant concentration with Michigan automotive customers.

While we saw a significant drop in equipment sales 10 years ago, our parts and service business held up real held up well and we preserved gross margin profitability and cash flow today through organic growth in acquisitions, we're significantly larger far more diversified in terms of end markets and geographical footprint and more resilience a challenging macroeconomic conditions.

The same approach applies to preserving the business fund fundamentals since late March we've been adjusting our inventory on a daily basis across the organization balancing our rental fleet and labor utilization and working closely with our OEM partners to service and protect customers. We've continued to reduce spending in all major capex projects and have limited space.

Ending on rental Capex.

We've also took swift action in April to manage our cost structure, we've eliminated all non essential spending, meaning meaningfully reduced executive and senior level compensation and instituted a combination of workforce reductions and furloughs. These actions have enabled us and have enabled our business fundamentals to stabilize and allow our margin profile the line up with the expectations.

Discuss at our Investor presentations earlier this year.

Looking at the balance sheet, there has been very little change in our capital structure and credit profile. Since we last spoke with you in late March we have ample liquidity and financial flexibility to continue to navigate the.

And efficiently manage our business.

We entered the second quarter in a more favorable cash position than we expected earlier. This year our acquisition pipeline remains full and discussions are ongoing though we are closely balancing decisions in the near term with the immediate priorities of our business and our people.

We are in the enviable position of being well capitalize and highly regarded in the equipment dealer market and we will be opportunistic and engaging with opportunities to build our business and geographic footprint.

As we look ahead visibility remains limited and conditions are evolving across the markets. We serve however, we are confident in the strength of our business model and believe the immediate actions we've taken puts us in position to weather the storm and emerge stronger as the economy begins to reopen.

We have a solid operating platform exclusive agreements with high quality industry, leading Oems and a diverse group of customers that sort of growth markets. Our unique business model, which consists of populating our territories with new use in rental equipment, and then harvesting the field population to grow higher margin parts and service revenue positions us well that continue to produce said.

He cash flows over the long term as business conditions improve.

In closing I want to thank our employees for their dedication and perseverance, our OEM partners for their support and our customers and shareholders for their confidence during these truly unprecedented times.

With that I'll now turn the call over to Tony Colucci for his formal remarks.

Thank you Ryan.

Good evening everyone.

And thank you for listening in today and for your continued interest in Ulta.

Like Ryan I want to first thank all volt as employees in the families as their efforts understanding and professionalism.

Nationalism have been an inspiration to myself in the senior leadership team during the past few months as we navigate the covert 19 crisis together as one team in line with one of our guiding principles.

I also want to think also senior leadership team for their guidance experience and support.

You guys have made difficult decisions in tight windows balancing the needs of all voltus stakeholders and we've done it with the proper amounts of do care expertise and big business acumen. Thank you.

My remarks today will focus on four areas a brief recap of financial performance in Q1, 2020 versus Q1 18, focusing on organic figures.

No formal review of trailing 12 month financial metrics given that the de spec is now behind us and Flagler Liptak are now part of the Ulta story I'll touch on our capital structure and focus on 331 leverage and liquidity levels.

And lastly, I would like to present the impact scope at 19 has had on at Ulta from a financial perspective, and get some insights into our financial playbook, which I'd point, the MMR or measure mitigate and recover.

This acronym mimics our financial management philosophy over the past two months.

First financial performance in Q1, and I'll be focusing specifically on organic metrics overall, we believe we had a solid quarter.

Revenue grew to 118 million for the quarter or 15% on an organic basis with two thirds of that growth coming from the C segment.

Product support was up 11% on an organic basis across the enterprise.

Gross profit.

Grew to almost 30 million for the quarter or up 8% on an organic basis. Despite that revenue growth EBITDA on an organic basis was off just over a million dollars primarily due to the margin pressure in our legacy CE business.

An increase in necessary as cdna costs related to be public.

And the impact Kobin 19 had on our rental business in the last two weeks of March.

Going segment by segment, a few highlights our industrial segment was up 11.6% organically with sales in the sales and rental departments being the primary drivers of that growth.

That segment saw 38% of its revenue come from the all important high margin products support departments.

And the industrial business Q1 saw stable margins in each department across the segment as the industrial segment continues to benefit from a large and more mature field population relative to our see our construction business.

For construction in Q1, we continue to see the growth in maturation of this segment.

The team, 0.6% organic revenue growth overall with almost 30% growth in the product support departments as opposed to the 38% of the total revenue in the industrial segment product support accounted for 27% of total revenue for construction in Q1, showing its relative use Bert youth.

The industrial segment important to note that in Q1 of 2019 the product support.

Mix of revenue was 24% for the segment showing it remains on the path toward maturation.

Overall management is pleased with Q1 performance, especially given some of the organic growth figures and the headwinds that develop toward the end of the quarter.

Having discuss Q1 at this point I'd like to turn our attention to some of our enterprise wide pro forma numbers, which are inclusive of the acquisitions of Nicole Flagler and lift tech all of which impact our trailing 12 month performance metrics and assume that Ulta had owned each of the companies for the entirety of the timeframe.

Frames noted.

Specifically, we have Q1 2020 pro forma revenue of $208 million and 18.8 million in adjusted EBITDA.

No. It's important to note that the seasonality of our business suggests that approximately 20% of our fiscal year. EBITDA is usually generated in Q1 applying this factor to the 18.8 million of pro forma EBITDA will put us just around $94 million of EBITDA, assuming no growth.

From some of our target acquisitions. This figure will not be too far off of where we expected to be during our recent capital raise process.

Also of note on an enterprise wide basis is that our segment revenue has shifted and is more heavily weighted to our construction segment.

On a pro forma basis revenues now, 52% construction 48 industrial versus 44% construction, 46% industrial pre IPO in the acquisitions of lift tech and Flagler.

The construction segment inherently has slightly lower gross margin profile than industrial this revenue mix shift will impact our consolidated margin percentage trends going forward, but importantly, the added volume will certainly be additive to the nominal amount of gross profit the businesses generated.

Like to get into the third area of my prepared remarks on the capital structure.

A few key points, our capital structure and liquidity position remains a strength for us as we navigate these current business conditions as Ryan mentioned in his comments, we have more liquidity than we expected early on in Q1, given the larger than anticipated amount, let's back holders that rolled into ulta as equity.

As a 331 the company held $150 million in cash liquidity that liquidity is driven off of 247 million dollar collateralized borrowing base related to our ABL revolver, and then $97 million net draw of that same revolver.

Moving on to leverage.

Which finished the quarter at 3.1 times net debt to trailing 12 month, EBITDA and senior leverage of 1.4 times.

Debt to EBITDA senior debt to trailing 12 months EBITDA, giving us comfortable amount of room Covenant wise.

I just wanted to point out for those that may not be familiar.

That given the recent capital raise all of our debt maturities are long dated and nothing of significance is scheduled to mature for approximately five years.

Wanted to spend a minute on capital allocation few comments here first management halted the stock buyback program that was announced in late February almost as soon as it started.

And that buyback program has been halted until further notice notice in total the company bought back just less than $3 million of the LPG before the program was ceased.

Moving on to rental fleet and our plan there to start it's important to note that the impact of coven 19 on our rental fleet utilization was different amongst our segments in geos. Once I certainly did not fit all in this regard.

For instance.

Our Florida construction rental fleet held up better than our Michigan construction rental fleet utilization wise.

Having said that our plan as it always has been is to target a benchmark level of utilization across our fleet and we're paying close attention to these utilization levels. While there's no doubt that our utilization was impacted in April we see it coming back in May as restrictions lift at this point, we don't have any plan to drastically reduce the.

Fleet, but we will be prudent and my follow up our utilization statistics as we constantly monitor our fleet in size it appropriately given business conditions.

I also wanted to highlight that our fleet is relatively useful just about 40 months old on average and we have room to age our fleet without investing in Capex in the short run.

For the last portion of my prepared remarks remarks, I'd like to present the impact Kogan 19. This at all to from a revenue and earnings perspective.

I should note there are some slides on our presentation, which was just released probably to our call that presents the impact of coven 19 in greater detail than what I will get into verbally here today I encourage everybody on todays call to review our presentation and the coven 19 slides specifically.

First I'd like to point out that our geographic than in most market diversity of acted as a tailwind to our business throughout the pandemic and to be certain our size and that diversity makes ulta more apt to handle situational switch situation like this versus any other time in the company's history, we're thankful for our growth.

Both.

In terms of impact I mentioned previously previously on the call my acronym MMR or measure mitigate and recover.

First I'd like to focus on the measure portion of that acronym.

The measure that management has been focused on daily is the demand for labor hours of our skilled technicians. This is a metric that we believe gives us real time data on business activity levels and our various geographies in segments.

In the middle of March starting with the automotive shutdowns in southeast, Michigan, we incurred what was effectively in immediate 25 to 35, 25% to 30% reduction in demand for labor hours across our service operation.

A few items of note one we believe we found a floor on this metric in mid April two we believe.

We have been seeing upticks from that floor on this metric as may has gone along.

Now for the second EM in the acronym mitigation.

As Ryan mentioned management is taken measures the offset what we believed to be a short term lack of demand for skilled labor and segments of our rental fleet.

First is times like this where the dealership model shows the strength specifically over two thirds of Ulta is normal cash cost our variable, allowing for natural cost relief in the sales.

And parts departments second alters management teams expertise and experience in navigating a downturn led to quick reactions to the lack of demand by reducing the supply of labor as Ryan as suggested on a temporary basis as difficult as that that decision maybe.

This quick decision, making allow for Walter.

To hold labor utilization at benchmark levels for those that are unfamiliar labor utilization is defined as our technicians billable hours divided by the total supply of technician billable hours technician labor hours.

Holding later labor utilization I can't emphasize enough how valuable leadership and experience in making these difficult decisions have helped us in the past two months.

So what does that all mean in terms of impact.

From an illustrative perspective, and an average month setting aside seasonality and based on our trailing 12 month EBITDA of 93 million.

Ulta would average approximately 70 million in revenue and 7.8 million EBITDA on a monthly basis.

Given the departmental revenue impacts we observed in April our internal modeling suggests that in unmitigated or worst case scenario would reduce that seven point million of EBIT $7.8 million of EBITDA to 2.4 million, taking EBITDA margin down to 4.1%.

We've also internally modest modeled out what we believed to be best case scenario.

Where the revenue impact would be offset by 100% variable cost structure.

In this scenario EBITDA would drop for 7.8 million to 6.6 million of EBITDA.

No having laid out the best and worst case scenarios for this illustrative month and based on what we know as of now we believe our mitigation efforts will help us to retrace approximately half of the gap between the best and worst case scenarios or roughly four and a half million EBITDA in this worst case.

Downside scenario.

Lastly, as it relates to go but 90 minutes input 19, and its impact I want to focus on the last letter of the acronym recovery.

As I mentioned earlier, we believe we saw a bottom in mid April and since then as industries and geographies started to open up we have seen upticks in our labor hour metrics and rental utilization.

It's early yet, but we've seen an approximate approximately 20% to 25% retracement since mid April on these key metrics and it started calling our skilled labor force back to work.

Last point.

We took great care and doing what we could to make our cosmesis measures and in particular, a reduction in workforce feel as temporary as possible.

Doing things such as keeping health benefits in place for furloughed employees with the seminal idea that we weren't saying goodbye to our valued colleagues, but we're seeing see you soon.

And from what we can see barring no setbacks soon appears to be just around the corner.

Thank you everyone for your attention.

Afford to further discussion down the road and at this point I will open the call back to the operator for questions and answers. Thank you.

Thank you. Your first question at this time comes from Alex Rygiel with B. Riley. Please go ahead.

Thanks, Good evening, Ryan, it's only congratulations on a strong quarter.

Thanks, Alex good evening.

Could you do me, a favor and dig a little bit deeper into the very strong organic growth in the quarter anything unique about the customers or the geography or the service line.

That experienced strong organic growth.

Sure sure Alex.

The organic growth.

He is kind of.

Runs right parallel to our business model in terms of.

Taking over what was a more dormant territory in Illinois for for Volvo and so we continue to populate or have you have great field population.

Then follow that field population with more and more mechanics.

Which leads to took parts and service.

And so the primary driver of that growth.

His into construction business.

The Illinois side of the this segment.

Very helpful and then relative to the two acquisitions Flagler list.

How it performed.

Relative to your expectations since you've owned.

And how are they staring during coded.

I'll take this once this is ryan so they are very different businesses and very different markets and responses decoded. So.

Lift Tech was upstate New York basically all of New York, excluding the the Metropolitan area.

And that business.

It is we need to start.

Rebuilding their sales effort there the market share is not where it needs to be kind of lags the national average for the brands that we have there.

And so that business is it will will be having a lot of attention and rebuilding the field population in the sales effort.

Florida Flagler in contrast, and then this is something that we messaged a lot on our on our road show.

We were stepping into a territory that actually had very good market share for the Volvo brand and the the low hanging fruit for us in Florida really was to bolster their product support business and I think it's remarkable that in the in Q1 with this.

A headwind of of the co bid hitting on the to tail ended the quarter that we were actually able to grow that.

Head count of service technicians over 20% in Florida, just it's taking it over so that was our mission was to hit the ground running there and start adding skilled labor and.

We we were able to do that even in a you know what what have turned into more difficult conditions.

The business you can also sort of delineate that construction is primarily outdoor most most markets. The construction businesses held up better than our industrial and material handling type products, which are had been more impacted by the stay home stay safe orders that have impacted the different geographies. So.

Florida is definitely for us it's the brightest spot we had we not only if we hit the ground running in terms of the.

Product support ended the business and bolstering that and that and adding technicians, but we've also we've had some very successful conversations with some of our OEM partners in it and have.

Some some early wins and expanding that product portfolio, taking some of our our legacy relationships from the north down to Florida, and having more products to sell into that market.

And as it relates to the 20% increase in skilled labor and Florida.

Whats your target goal, there and what kind of timeline should we think about for you to achieve that target.

The.

Yes, headcount target or target near term is to more than doubled that the with the run rate that we have of.

Adding that was over dozen mechanics in two months, that's we'd like to continue that pace.

So it really that will be driven by demand, but what's the difference in Florida is that we have even it even as the market is any maker are coming down a bit there's there's demand for service on the field population Thats, there I would say pent up demand, where they had done a better job selling.

Volvo's and other machinery into the market than they have done harvesting the product support and kicked in.

Taking care of the customer need and that's where I'm kind of had some early success and that's that's.

Thats all to culture. That's all does vision is to be a service. We're service first and so we're going to raise the bar in terms of what the Florida customers are used to experiencing in it it's exciting what's going on down there and all that will build from there.

Okay, and then on cash flow how was your cash position and casualty change subsequent to the ended the quarter during kind of co bid and how should we think about cash flow.

Mitigated versus test case mitigation efforts.

Alex.

I'll take that one in terms of our cash liquidity position.

Like I mentioned in my prepared remarks were actually in a better spot than we expected to be coming out of the de spec.

We have been able to maintain collections.

Throughout this throughout this epidemic here.

With very few issues kind of on the collection side. So cash flow in that regard has been has been fine.

In terms of the cash flows I would refer you to our.

Our economic EBIT metric.

Which is holding right around 50% of EBITDA from a from a conversion perspective.

Now at the levels that I've mentioned in terms of the the severe downside case.

We we would not be replenishing fleets, we would aged out and so and then in the late in the event that we would start deep deep leading to rightsize our fleet.

We think we could stay cash flow positive.

In in that in that extreme downside case so.

We want to use our fleet kind of as a lever for cash flow now as you are de fleeting, you're also giving up borrowing base and so there's a given it take to that.

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But thats, how we see it.

That's very helpful. Thank you very much.

Very much appreciate the detail slide deck.

Thank you thank you Alex.

So Mike Shlisky Dougherty <unk> co. Please go ahead.

Good evening guys.

Hey, Mike Mike Hi, there so.

Just one quick housekeeping item the way.

The table in the press release.

Directly but looking at the end of the release the EBITDA table.

Justin you've done table.

The onetime items in that.

Listing.

Of course, but the various transaction costs.

Extinguishment.

All I was.

Just trying to get to a net income.

Yes.

I am kind of calculating that.

$15 million.

Hi.

More normalized net income for the quarter so perhaps.

Loss of 17.

Hi.

Little bit less than that.

Mike you nailed it.

That's exactly right. We had you have about $15 million of add backs all associated with.

The de spec process and so.

If you if you added back like you said.

Net income losses of 2 million.

Keep in mind that Q1 is usually.

Our our worst quarter on that metric just given seasonality.

And while we continue to build out in the in the construction segment.

The industrial segment as you'll note when you get that ended in Q remained profitable throughout.

Throughout the.

First quarter.

Got it.

They give us direct guidance here, but you did mention that.

First quarter EBITDA.

EBITDA for the year and I guess in a more normal year.

Can you give us any kind of direction.

How different this year is going to look like from.

I know you've only just bought.

Two months ago.

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Hello.

How roster Q2 numbers my looks very broadly speaking.

Yes, Mike that I could speak to that that was.

The commentary in the slides were purposeful in terms of the impact that we saw in April.

And we think as we mentioned that we we found the bottom here in April so.

You know dealt downside that's case like I mentioned my remarks, we feel like Weve for April at least might come in right in the middle.

Given all of our mitigation efforts.

And we're we're starting to retrace some of that some of that downturn.

We're hopeful that automotive comes back in a strong way.

But there has been kind of fits and starts to to that process.

And if that comes back that will that will help us tremendously.

Helped us last week was the lifting of the restrictions on.

Commercial construction here in Michigan, and we've seen a big chunk of our rental fleet that was otherwise sitting go out and.

And so I don't know that we're going to be able to fully retrace.

Here in Q2.

But to the extent things open up.

I would expect.

Just to be somewhere between.

What I mentioned was that middle ground on a monthly basis and something more normalized.

Yes, or no do you mean.

Call or even or even better than that.

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So probably more of the.

The latter.

Because we would expect the revenue to to return.

Got it correct.

Hi, guys.

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Talk with if your Counterparties.

Hi, Steve has been put on hold since.

But you're still having some active discussions with the new partners.

No. It's it's the latter this is Ryan we are still in active discussions in our.

And our last call we had.

Spoken to maybe re shuffling some priorities given.

The the uncertainty in the market so that there are some.

Conversations emerging out of this volatility, but but the things that we've been working on are still moving forward and they're just they're too preliminary to disclose at this time.

Okay.

On the.

Skilled labor question.

It sounds like you've got some areas. We are hiring of course is Florida and other areas.

Those are some.

Since.

I guess, maybe given the broader picture across the country and I would imagine across your footprint.

Are you seeing more interest from promising graduates.

The other careers switched into a more stable.

Skills payroll.

Or is that still too.

Hello.

Mike I think it's too early to tell on that you know it's on one of the themes that we've.

Always talks about is that we want to be a preferred employer in our industry there aren't enough skilled people coming into the trades in our industry and we.

We're very deliberate and train at pipelines of a bring talent in.

There is that right now our efforts had been on retaining managing through this volatility in keeping our team intact and retaining the talent that we've invested in developing and so.

Right now we don't have an issue with of meeting talent there is an overcapacity.

Of us of Ah labor out there that for what the market is but we think that will snap back. So we're continuing.

We're not taking our foot off the gas in those in those development areas are recruiting efforts, we obviously don't need additional capacity in areas hard hit like Michigan or upstate New York, but in Florida.

And then construction in general there's a there's still a need and we'll be continuing to.

Put attention on that.

Great.

Appreciate it.

Could you tell in your slides greatly appreciate it thank you.

Thanks, Mike Thanks Bye.

Currently no further questions at this time I'll turn the call back to the presenters for any closing remarks.

Okay.

This is Tony just want to thank everybody.

For joining you know I think the overriding theme for us is.

We're thankful.

That that we were named in essential business.

And we like to think that we were part of were part of this solution in a lot of ways you know theres been pockets of our business.

That have ramped up and we supported.

Medical supply end markets food and beverage.

Of course infrastructure in terms of just being able to people.

Move around that needed to so.

We're thankful that.

Given our position relative to other industries and other verticals of the impacts here, because we know it could be worse.

And we're also kind of bullish on maybe some of the macro themes that could play out.

From a robotics perspective.

Or a potential infrastructure play here. When this is all said and done so anyway. Thank you everybody for joining and we appreciate your interest and Ulta.

This concludes today's conference call. Thank you for your participation you may now disconnect.

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