Q1 2022 Apogee Enterprises Inc Earnings Call
Please press Star zero.
I'd now like to hand, the conference over to your Speaker today, Jeff have Shen. Please go ahead.
Thank you and good morning, everyone and welcome to Apogee Enterprises fiscal 2022 first quarter earnings call.
With me today are tight silver Horn Apogee, Chief Executive Officer Officer in the sheet Group Chief Financial Officer, I'd like to remind everyone that there are slides to accompany todays remarks.
Are available in the Investor Relations section of Apogees website. During this call we will reference certain non-GAAP financial measures definitions of these measures and a reconciliation to the nearest GAAP measures are provided in the earnings release. We issued this morning. This is also available on our website I'd like to remind everyone that our.
Our call will contain forward looking statements, reflecting management's expectations.
Which are based on currently available information.
Actual results may differ materially.
More information about factors that could affect apogees business and financial results can be found in our SEC filings.
And with that I'll turn the call over to Utah.
Thanks, Jeff and thanks, everyone for joining us this morning.
First quarter was a solid start to our fiscal year and I am proud of the results our team delivered.
This morning, I'll review, the highlights from the quarter and the trends, we're seeing in our business.
Also give an update on our key initiatives then the sheet will provide more details on the quarter and our full year outlook. After that we'll be happy to take your questions.
So let's start with the highlights from the quarter, which can be found on page 4 of our slide deck.
Our business rebounded strongly compared to last year's first quarter when the pandemic had a significant impact on our results.
I'm pleased to report that in this year's first quarter, we grew both the top line and the bottom line.
Let's start with revenue.
We grew sales in all 4 segments.
Our biggest dollar growth came from large scale optical which is now fully recovered from last year's pandemic impacts.
Architectural services also performed well delivering double digit sales growth as we continue to execute projects in our backlog.
Let's turn to profitability.
Compared to last year's first quarter profit has improved significantly.
Again, lso led the way.
That segment is now back at its typical levels of profitability.
We also achieved year over year margin gains in both architectural glass and framing systems, despite some inflation in material and freight costs.
Earnings per share nearly tripled coming in at 42.
This compares to adjusted earnings of <unk> 15 per share last year.
From a cash and a balance sheet perspective, our financial position remains strong.
We have relatively low debt significantly lower than a year ago, and we returned $18 million of cash to shareholders this quarter through share buybacks and dividends.
Based on the strength of our first quarter results and our outlook, we are increasing our earnings guidance for the full year to a range of $2.20 to.
To $2.40 per share.
That's up from our previous guidance of $2.10 to $2.35 per share.
Now, let's look at our end markets.
While nonresidential construction remains in a downturn we are encouraged by the positive trends we're seeing.
In the near term, we remain cautious as we still face uncertainty, especially in the shorter lead time parts of our business.
The latest data on construction spending from the U S census Bureau shows that non residential construction activity is down 6.5% compared to pre pandemic levels.
Notably spending in every segment of nonresidential construction debt apogee participates in is lower compared to a year ago.
However, the trends in forward looking indicators like the architecture Billings index and the Dodge momentum index are much more encouraging.
These indicators turn strongly positive in recent months and remains so.
That suggests we could see nonresidential construction returned to growth at some point in the next 12 months.
In our own business, we are seeing early signs that sales pipeline and bidding activity are improving.
Also we are experiencing fewer project delays and a few cases, we are actually seeing projects schedules accelerate.
While some uncertainty remains both in how quickly the market recovers and in the supply and cost of key raw materials, we do see increased reasons for optimism.
In addition to the solid financial results. We also made very good progress on our key initiatives during the quarter.
Those initiatives are outlined on page 5 of our earnings presentation.
Let me touch on a couple of areas starting with enterprise transformation.
During the quarter, we began to work on several foundational projects to enable our enterprise transformation efforts.
We are working to strengthened core processes and systems and provide new digital and back office capabilities across several functional areas, including finance human resources and supply chain.
Our level of effort and the spending on these investments will pick up in the next couple of quarters.
These investments also support our cost saving efforts, ensuring we sustain and build on the work already underway.
Over the past year, we started the long term work to build a more competitive cost model.
We are driving cost and operational improvement initiatives that will provide near term benefits and we see an opportunity to drive further gains over the medium to long term, primarily in our architectural glass and framing systems segments.
The efforts to further improve our cost structure will remain a top focus for the rest of our fiscal 'twenty, 2 and will be a key pillar of our strategic work going forward.
Finally, we made substantial progress on our new enterprise wide strategy.
Last quarter I mentioned that we had just started to develop a strategic roadmap to better position the company for long term sustainable growth and to improve our overall financial performance.
We began by taking a systematic outside in approach.
We are using a third party together extensive input from dozens of key customers and to provide detailed competitive benchmarking.
This work is clearly identifying our strengths as well as areas, where we can make marked improvement.
Addressing these areas will allow us to consistently grow above market at better margins and deliver stronger value to our customers.
The pandemic and the subsequent downturn in nonresidential construction are bringing change to our end markets.
We recognize the imperative to adapt our business so that we can succeed in the future.
We are now deep into analyzing our current mix of products services and capabilities, along with the markets and the customers that we serve.
Our goal is to identify the best avenues for future growth with better margins.
We are also evaluating how we compete.
This will ensure we have the right operating model and capabilities needed to deliver consistent profitable growth.
Through our work so far we have gained valuable insights and we're excited about the opportunities we see ahead for apogee.
Importantly, our strategy work has validated the opportunity to achieve significant improvements in margins and raise returns on invested capital.
This work will continue through the summer and we look forward to sharing more details in the coming quarters.
But we will begin executing elements of our strategy as the work is completed.
The implementation will be well underway as we head into the fall.
So we anticipate hosting an investor day at the end of this calendar year to share more details on our strategy as well as our longer term financial goals.
Look for more information on our Investor day in the coming months.
With that I'll turn it over to Ashish to provide more details on the quarter and our full year outlook.
Thank you Ty and good morning, everyone.
As Diane mentioned, the first quarter was solid start to our fiscal year with strong growth on both the topline and the bottom line.
This gave us the confidence to increase our guidance for the full year.
Just as important the work we have begun on our key initiatives is laying the foundation for even stronger performance in the future.
Let me start with the financial reserves, which are on page 6 of our earnings presentation.
Total revenue grew by 13% with growth in all our reported segments.
Large scale optical led the way.
It rebounded from last year's first quarter.
Architectural services grew 19%.
Operating income more than doubled compared to the last year's first quarter.
Operating margin improved to 4.9% up from adjusted margin of 2.7% last year.
This was mainly driven by the recovery in lso and by margin improvements in both glass and framing segments.
As Dave said, we achieved these margin gains despite material and freight cost inflation, which impacted both glass and framing.
I would like to remind everyone that last year's first quarter included $4 million of benefits from temporary cost actions. We took in response to COVID-19.
Those actions have since been reversed and did not repeat this quarter.
Also corporate costs were higher this quarter.
This was driven by enterprise transformation investments along with higher healthcare expenses.
While we are pleased with the margin gains in the quarter weighted.
We recognize we haven't opportunity to drive more stronger profitability over the long term, especially in glass and framing segments.
This will remain a top focus for our team as we take actions based on our strategy work.
Turning to the non operating lines on the income statement net interest expense continues to trend lower.
It is $1.2 million in this quarter compared to $1.4 million a year ago.
That was mainly driven by lower debt balances.
Our tax rate was 25, 3% net.
It is slightly above our full year expectation of 24, 5%.
Our diluted share count declined to $25.8 million driven by stock repurchases.
Putting it all together earnings increased to 42 cents per diluted share.
That's well above adjusted earnings of <unk> 15 per share in last year's first quarter.
Now, let's dig into the individual segment results, which are on.
Slide 6 of our presentation.
Starting with architectural framing systems revenue grew slightly compared to last year's first quarter.
Coming in at $152 million.
Operating margin was 5.3%, that's up 40 basis points compared to last year.
We are beginning to see the benefits from the cost actions, we've taken over the past year.
Those savings are helping to offset cost inflation, we like the progress, we're making in framing systems, but certainly see the opportunity for further margin gains.
Finally, <unk> backlog increased to $422 million, that's up 3% compared to the last quarter.
Turning to architectural glass rare.
Revenue grew 8% to $83 million.
That was driven by increased volume and a more favorable sales mix.
Operating income improved to $2.1 million.
That is compared to an operating loss in last year's first quarter.
Let me say a word about profitability in architectural glass segment improved by 320 basis points.
3 factors helped increase profitability.
We improved productivity in our glass manufacturing facility in Owatonna in Minnesota.
We had favorable product mix and volumes were higher.
All of those help offset the higher cost of materials and freight.
We are encouraged by the profitability improvements in glass, but we see an opportunity to drive larger gains over the long term.
We continue to monitor the performance of velocity that is our initiative for small glass projects.
Volume remains well below our targeted level and we're looking at several options to improve these reserves.
Architectural services.
Revenue grew 19% as we continued to execute projects in the backlog.
Operating income and margins decreased compared to the prior year.
This was due to isolated project performance impacts and a less favorable project mix.
As a reminder results in services segment can vary from quarter to quarter, because performance is driven by a small number of large projects.
We remain confident in services overall execution and the outlook for the full year.
We're also encouraged by improving order trends in architectural services.
Net order flow has increased in the past 2 quarters and we are seeing more bidding activity.
Turning to large scale optical segment.
Lso bonds back strongly from the Covid shutdown in last year's first quarter.
Revenue was $24 million, that's more than triple last year's revenue.
And as a return to its normal level of profitability.
Operating income was $5.8 million this quarter compared to a loss of $3.1 million in the first quarter of last year.
Turning to page 7.
Our financial condition remains very strong.
Cash flow from operations was $6.9 million.
I would like to remind everyone that apogees first quarter tends to have relatively low cash flow. That's due to the timing of annual incentive payments and insurance premiums.
Capex in the quarter was $4.7 million, which was below last year's level.
We continue to expect full year capex of about $45 million.
We slowed spending in the first quarter pending the outcome supports strategy work, we expect more capital spending tied to the enterprise transformation initiatives in the back half of the fiscal year.
We continued to return cash to our shareholders.
$17.6 million in this quarter from share buybacks and dividends and that's up from $9.6 million in the last year's first quarter.
Our balance sheet remains very strong.
Net debt is $128.5 million, that's down from net $199 million a year ago.
We have no significant debt maturities until June of 2024, and we have no borrowings on our $235 million.
Volume credit facility.
This strong financial position gives us significant flexibility as we develop our new enterprise strategy.
In the near term, we remain committed to maintaining strong balance sheet.
High return investments on our business and returning cash to our shareholders through dividends and opportunistic share repurchases.
Now, let's turn to our outlook for the rest of the fiscal 'twenty to.
This is on page 8 of our presentation.
Based on the first quarter reserves.
We are increasing full year earnings guidance to a range of $2.20.
To $2.40 per share.
That's up from previous guidance of $2.10 to $2.35 per share.
As Tom mentioned, we are encouraged by the improving trends we are seeing in our end markets.
In the near term we continue we see continued softness on nonresidential construction markets.
We have limited visibility in the short lead time parts of framing and architectural glass business.
This gives us some uncertainty about revenue in the second half of the year.
Also as we gain insights from our strategy work, we may choose to step away from some of the less profitable products and customers.
This could impact revenue in the coming quarters.
We expect to make continued progress on efforts to improve our cost structure and productivity.
This should benefit margins as we move through the year.
However, we will continue to face a headwind from the reversal of temporary cost actions, we took last year.
That headwind is about $20 million for the full year.
The biggest impact will be in the second quarter, a headwind of about $10 million year over year.
We continue to expect full year cost of $7 million to $10 million related to enterprise transformation.
The biggest impact from these investments will come in the second and third quarters.
I would like to remind us of 1 more item during quarter 3 of fiscal year 'twenty..1 we book gains from new market tax credit in our glass segment of about $7 million.
<unk> been non be repeated this year.
We also continue to see pressures from inflation for the rest of fiscal year inflation, mainly impact framing systems and architectural glass, we will continue to take price actions to mitigate the inflation impact.
As I mentioned earlier, we continue to expect our full year tax rate of about 24, 5% and capital expenditures of about $45 million.
We are pleased with our first quarter reserves and our improved outlook.
I look forward to working together with Ty and our management team to continue this momentum for rest of the year with that I'll turn it back over to Tyler for some concluding remarks.
Thanks Ashish.
To wrap up the first quarter was a positive start to our year as our team delivered significant top and bottom line growth.
We are encouraged by the improving trends in our end markets.
And we are increasing our outlook for the full year.
Our financial position remains strong, giving us the flexibility to invest in our business and continue to return cash to shareholders.
We made good progress on our initiatives, which are laying the foundation for long term profitable growth.
Our strategy work will continue through the summer, but we will also begin to execute elements of it as certain portions of that plan are completed.
I look forward to sharing more details on our progress in the coming quarters. So with that we'll now open it up for your questions.
As a reminder, task a question you will need to press star 1 on your telephone.
Draw your question press the pound key please standby, while we compile the Q&A roster.
Our first question comes from the line of Chris Moore from CJS Securities. Your line is now open.
Good morning, guys. Thanks for taking a few questions maybe.
Maybe I realize you're not providing specific guidance on revenue, but when you look at it Q2 to Q4 and fiscal 'twenty 2.
Do you expect year over year growth versus fiscal 'twenty 1.
Chris Good morning.
This is the sheets.
We definitely are seeing positive trends in the end markets, but we are cautiously optimistic about.
The near term as you think about our business, we have long lead times in many of our businesses and we want to ensure that we see the positive trends coming through architectural billing index and Dodge in the coming months to see how our revenue is going to get impacted in the future quarters.
As you know we are working through our strategy and as mentioned in the earnings release, we are working through certain the number of projects customers, which they remain step away from businesses that are non profitable.
That should drive a revenue challenge in this year and therefore, we are not providing any revenue guidance.
Got it and leave it there.
Services margins, 6% versus $10.5 last year, you talked about kind of isolated performance impacts and less favorable project mix can you can you separate those 2 a little bit I'm just trying to understand if if that level of margin is likely to continue for.
The next quarter or 2.
Yeah, Chris as you know this is our services business, where we have.
Small number of customers with large projects and that drives that drives the variability in margins over the quarters, it's kind of uneven returns. So if you think about these 2 isolated projects that we're referring to those are those.
Those are likely to get even out over the rest of the year and in terms of project mix, we see the unevenness in these projects as we start executing the good news is that we have certain number of very large projects. We are executing on and we are booking our backlog volumes are higher in the services business and we remain very optimistic about this business.
For the rest of the year and future years, Yes, I'll just add to that we commented in the last quarter call. We did expect some margin pressure in that business and that will probably carry through for a while given the downturn, but the business is executing where we expected it to be and so we see it being in good shape and meeting our expectations.
Through the rest of our fiscal year.
Got it that's helpful I'll jump back in line. Thanks, guys.
Thank you. Thank you.
Thank you. Our next question comes from the line of Eric Stine from Craig Hallum. Your line is now open.
Good morning, everyone.
Good morning.
I'm just wondering if you can give a little more detail or color on your comment just about.
Looking at your business and potentially stepping away from some areas that maybe are suboptimal from a profitability perspective is that is that more cash.
Customer specific or is that something that we should view as <unk>.
Certain parts of the market whether it's.
Yeah.
While parts of the market or different geographies.
Maybe if you could break that down a little bit.
Yes. Thanks for the question. This is Ty I mean from the strategic work that we're doing so far we're deep into going through the detail right now looking at just what you touched on geographies products and project types and really understanding where are we differentiated in terms of the value that we can provide customer.
Cash and how does that translate in us to generating higher margins around those businesses and product offerings going forward. So as we're going through that work, we're assessing that mix and it is likely that there are certain portions of let's say just certain product types or certain types of projects across.
It's primarily.
Primarily in our framing in our glass business that it may not make sense for us to continue to pursue those going forward. So as we get through that strategy work will start to shape those activities and I would think of it more right now as kind of a pruning.
What we have in our offerings today as we look to raise our financial performance overall going forward, we want to generate value for the customers and then and then earn the value of ourselves for providing that in the in the form of higher margins as we go forward.
Got it understood and then maybe a good segue then to velocity and it sounds like that is 1 where.
Rather than looking to tone that back you are looking at ways to accelerate that and how better to approach the market just curious.
What that May look like if youre able to answer it I mean, I would assume on the cost side, you're somewhat limited because of the level of automation.
Any details would be helpful.
Yes, I would tell you that we continue to monitor the performance there and we're making a shift in how we've been trying to drive improvements we started that during the quarter. So revenue volumes, although they have improved sequentially. There is still well below our targets and theyre actually continue to be well below.
Our breakeven numbers. So we've started to once again look at types of projects that were pursuing through that what is the value that we can deliver and can we achieve reasonable margins with respect to that business. So the team's been taking some actions through the quarter now, including looking at pricing beyond.
Just raw material inflation that there are certain parts of that business that it's clear to us and its come out through some of the strategy work that we will have to be able to generate higher prices in order to get to acceptable margin levels. So that's a that's a work.
And process and it will be evaluated with the rest of our product lines as we complete the strategy work.
Okay.
I guess last 1 from me just your commentary on projects.
Some of those are actually moving faster.
Just curious I mean, do you view that more as a catch up as things start to improve here.
Or is it something that you actually view as more sustainable going forward.
I would say early on signals are there are certainly some catch up some things that are getting accelerated projects that were in Q4.
We saw that as a driver as part of our Q1 results and then as we look going forward.
On a medium and longer term perspective bidding and quoting activity is picking up and that's consistent with what we're seeing with the longer term indicators like the architectural billing index. So we're starting to see that activity in our sales pipeline and our quoting activities.
Across our construction business has started to pick up.
Okay. Thanks, a lot.
Thank you.
Thank you as a reminder to ask a question you will need to press star 1 on your telephone.
John Your question press the pound key.
Our next question comes from the line of Brent Thielman from D. A Davidson your line is now open.
Great. Thanks, good morning tie in sheet.
I guess first 2 part question on.
On framing what was that negative impact.
Higher raw material costs and freight margins and then as a follow up to that when we think about the business overall or I guess framing and glass specifically.
Did the inflationary headwinds get worse this quarter, just given timing and inventory turns and then move up in cost overall.
Yeah, Brent good morning.
I would like to remind that we have been working for the last 2 years and our procurement journey and we have a very strong procurement organization that is doing their best to offset the inflation as much as possible.
They are able to offset most of it so to answer your specific question. We had let's say roughly about $13 million of total inflation over the course of this quarter and that was much higher than previous quarters that we've seen.
<unk> taken a lot of actions in terms of price increase.
Procurement initiatives and the net impact is about a $4 million debt there was impact in this quarter. After all the actions taken in prices and procurement.
And framing was the big part of that in terms of that net negative impact and they have been more aggressive at going after price with respect to that so we expect to see that GAAP close to some extent, but theres still going to be significant headwinds as I'm sure you are seeing and hearing across not just.
Construction, but many of the markets right now.
Yes, absolutely.
Second question was again on the framing segment.
Just wanted to see if you could.
It looks like you've sort of stabilize the backlog there and things are getting a little bit better maybe talk through.
Some of the businesses are exposures within that segment.
What youre seeing in particular debt.
Looks a little more positive in this environment.
Yes.
As we normally do we wont give any specific guidance or talk specifically about business units within the segments.
But I can tell you that you remember architectural framing about half of that business is longer lead time and roughly approximately half as shorter lead times. So.
We saw some benefits in Q1, where some of that shorter lead time business picked up some of that was tied to projects restarting and accelerating trying to finish out projects and then in general where they're like the other businesses, we're seeing a lift in quote activity and bidding requests but for that business. The shortly.
Time part of that is as difficult to forecast the sheet out and if you have something else to add 1 more thing to think about here is as we are consolidating the framing segment more and more we are not looking at those individual pieces. We are looking at what is the value we offer through our products to our customers. So as we talk to the performance, we really look at the <unk>.
Sorry related framing segment.
We move forward Brent.
Understood.
Last 1.
To glass I mean pretty pretty good return in growth this quarter margins, obviously, moving up but I'm sure not where you want them to be yet Jim.
Setting aside some of the initiatives you're looking at internally can you just talk through what.
What do you feel like you need to see per those margins to get back.
Back towards that upper single digits.
The range that debt.
Segment, historically been accustomed to.
Yes, we're looking at that business through that strategic work and assessing both the product offerings. The type of projects they pursue and looking at and in addition to the cost structure overall the debt business has and how can we strengthen that so we're not giving at this point, you know margin guidance or communicating a target.
It will actually get through that through this strategy work, but certainly we see an opportunity to improve significantly from where they are.
And our strategy work is really pointed both from an external benchmarking standpoint, 2 significant opportunities to raise debt margin as well as taking another look at our product mix what types of projects, we pursue that business and how we can really leverage where they have strong differentiation in the marketplace.
That delivers value for customers that in turn generates better price and therefore, a better margin for us going forward.
Okay. I appreciate you taking the questions. Thank you.
Thank you.
Thank you. Our next question comes from the line from Julio Romero Sidoti and company. Your line is now open.
Hey, good morning, Todd Good morning Ashish.
Good morning.
So really exciting news regarding enterprise wide strategy in the upcoming Investor day, and I really appreciate the comments earlier you gave on you gave some good granularity on areas in the portfolio, which you might step away from.
And I certainly appreciate that I wanted to ask about.
Can you speak to some of the positives you found as you're evaluating the portfolio and maybe provide an example of an area where you are differentiated and where maybe you can play some offense.
Yeah, I would just say there is.
Really opportunities across all 4 of our business segments.
Clearly services continues to outperform from an overall market perspective.
1 of the things that we're doing through that strategy work is how can we leverage that model that they've implemented that not only allows them to win business execute well and deliver above market margins, but how can they then leverage that into other areas and continue to grow that business.
Our <unk> business, we have actually validated we've got some some very good technology and process capabilities within that business. So thats pointing us to start to think about how can we leverage that into other adjacencies, whether it's construction or non construction market opportunities.
And then glass and framing I've talked about we need to be a much more active portfolio manager and that goes all the way down at the product and service level and so that's 1 thing that we're driving in this analysis is just looking at the products that we offer today that we bid and quote on for different types of projects.
Some of those it's coming out clear that we can differentiate better in terms of the product and how we perform we've got certain strength in our service capabilities, which certain customers in certain markets and applications value immensely until that's pointing to areas, where we can better amplify that.
Message to our customer base and put some additional emphasis on those attributes of our offerings. So that we can win more business and drive higher value as we go forward. So.
With being more effective in managing our product mix.
Excellent I appreciate the color there.
On your on your change in <unk>.
Leadership incentive structure can.
Can you maybe speak to how that's been received by by the team and any benefits you're starting to see year to date either in terms of either.
Building out your enterprise wide strategy or just getting overall feedback from the organization.
Yes, I would say that it has been very well received obviously from our leadership team that we're providing very clear objectives and expectations starting on debt, we need to improve our return on invested capital. If we're going to invest money, we have to get stronger returns for our shareholders as part of that.
And so that being an overriding mark metric from a long term incentive perspective, and then near term putting that emphasis on EBIT on profit dollar generation and that's been critically important for them to use that and communicating with their teams as we're going through this strategy work debt.
It is steel and old analogy I mean revenue is not king profit King and if we can't generate profit. It means were not generating value for our customers and were not generating value for our shareholders. So that's been very good in helping the teams work through this strategy work and really thinking about how can they manage and ship.
Their own mix within their respective businesses that they can lift that profit overall and we've kind of taken off the guardrail of its okay. If there is some revenue that maybe goes away in the short term because we're not going to chase those types of projects with those types of products going forward, because we know we can't make the right margin levels.
And the overall very positive, but we're on a journey like everything else, Yeah, and 1 more thing just encouraging signs already we don't talk about ROIC numbers on a quarterly basis, it's more of an annual kpis for us, but we obviously calculate it internally and we are seeing positive signs and trends already coming true on rois year over year. So the team is getting.
And they are executing faster because of north star is clear it's on ROIC.
Understood if I could sneak 1 more in here.
As you evaluate avenues for growth and markets products geographies et cetera.
Are you looking at any areas, where you could see either a direct or indirect benefits from a federal infrastructure Bill.
Well I think anything that is pointed at infrastructure is going to drive some benefit for the overall markets certainly some of the areas.
For transportation, if you think about.
Institutional types of projects education market. Those are all things that look like are going to have some benefit.
Through this latest infrastructure bill and while like everything else. It's a long cycle business that will take time to flow through in terms of projects and then the opportunity to turn those into revenue for apogee, but those are positive signs as we look out over the medium and long term as well.
Got it thanks for taking the questions and look forward to the Investor day later in the year.
Thank you.
Thank you at this time line is showing no further questions I would now like to turn the call back over to Ty Silver Horn for closing remarks.
Well, thanks for joining us today.
We've highlighted we had a good start to the year, but we've got more work to do to fully realize the stronger returns for our business. We're.
We're seeing good signs on operational execution, but we're at the very beginning of that journey and I expect to see that to continue to improve as we go through the year and like we highlighted our enterprise strategy work is progressing very well and we look forward to sharing more insights on that in the coming quarters.
With that have a great rest of your day and a fantastic weekend and I look forward to talking to you on our next earnings call in September.
This concludes today's conference call. Thank you for participating you may now disconnect.
[music].