Q4 2021 Acushnet Holdings Corp Earnings Call
CSI drivers T series, Irons, FJ Premier and Hyperflex golf shoes, and many other successful new products.
And as Tom will address gross margins held up well throughout the year as the tangible impacts of supply chain related cost increases were more than offset by favorable sales mix as higher asps and reduced promotional activity.
Now looking at our business by segment titles golf ball sales of $668 million were up 32% on the year led by record sales of <unk>, one and probably one X models. The growth was led by the EMEA U S and Japan markets and we've been pleased to see demand for corporate customers.
Paul's begin to recover following the 2020 decline.
Title of clubs also finished the year up 32% led by new Tsi metals and with gains in every product category, which is especially notable given our two year product life cycles.
In achieving this growth our team has pushed the limits of supplier component availability and our own protection capacity as we chase steady demand throughout the year.
Title is tsi drivers had an especially strong year and we're the number one driver on the PGA tour in 2021, and we are very pleased with the early response to our new T series Irons as we enter the peak spring club fitting season.
Title Riskier posted a 29% gain on the year with growth in all product categories. As our team did great work to keep product flowing as we strive to maintain field inventories and keep pace with brisk demand.
And for choice business increased by near 40% led by footwear and apparel, which grew at accelerated rates.
<unk> brand is healthy and vibrant inspired by innovative footwear ranging from the classic inspired premier the athletic Flex and pro SL. The number one spike Lee Hu in golf.
And apparel and outerwear momentum, which is particularly strong in the U S EMEA and Korea.
While not reportable segments title of apparel in Asia, and shoes also posted robust growth for the year.
This was especially strong in the U S market, which was up over 50%.
Next to slide six and a quick look at our business by region here you see all markets were up over 20% for the year as demand for acoustic products was consistent across regions typically we see outlier markets for one reason or another but this was not the case in 2021 is the acoustic success story.
Playing out similarly across our largest markets in the U S EMEA, Japan and Korea.
This is a testament to the good work of our global sales and marketing teams and positioning our products and our supply chain leaders, who effectively coordinated tight availability to best meet global demand.
Now looking forward, we are encouraged by strong golfer participation and enthusiasm for the game, including a golfer base that grew in both 2020 and 2021.
Market fundamentals are strong trade partners are healthy and channel inventories are generally lean.
Looking inwards the talented <unk> team is motivated to build upon our momentum as we structure our business for continued growth in spite of supply chain limitations, which we expect will impact our business throughout the year.
The professional game is off to a great start in 2022, with especially exciting starts on the PGA LPGA and DP World tours. This energy around the tours, especially in the first quarter is an important catalyst as the golf season ramps up to a full opening in Q2.
Entitled US Golf ball momentum across worldwide tours is also strong with usage at 75% entitled Golf balls. When he 10 of the last 12 PGA tour events and winning every tournament played on the LPGA tour in 2022.
We recently launched new title list AVX velocity and true field golf ball models and are poised to also launch new towards speed and tour soft golf balls in Q2 you.
You will know the split launch timing is it changed from prior years as we strive to make the most of tight raw materials availability through the first half of the year.
And similar to 2021, we expect the title of golf balls will be on trade allocations for much of the year.
First half Titleist Golf club introductions are on schedule led by the launches of new <unk> wedges in March and New Scotty Cameron Phantom Putters in April .
<unk> wedges made the PGA tour debut as the most played wedge at the tournament of champions in January and have been number one in every PGA tour event this year.
In the first two months of the year Scotty Cameron Putters had one half the events on the PGA tour and added wins on the DP World and LPGA tours as you might expect we're excited about both product lines.
And Fortunately is off to a great start led by their new fuel footwear launch and we will soon introduce an expanded range of women's footwear and the new tour Alpha series in Q2.
FJ apparel and outerwear also carry great energy into the new year and trade response in bookings to our spring collections have been terrific.
Lastly, we have high expectations for shoes, and look to build upon our golf momentum and expect the ski category will begin to recover later this year following two years of retail disruption.
In closing we are optimistic about the structural health of the game and golf industry as golfers walking a golf shops in the coming months, they will be enthused to see and try a wide range of exciting new acoustic products designed to help them play their best golf.
Our team has a good handle on circumstances that are within their control and I am confident they will continue to excel at adapting to the uncertainties that we are sure to confront as we navigate the coming months.
Thanks for your attention. This morning, I will now pass the call over to Tom.
Thanks, David and good morning, everyone.
I would like to recognize all of our associates for the amazing efforts they put forth to manage through the continued impact of the pandemic and unprecedented supply chain challenges to deliver truly exceptional results for our Cushing it in 2021.
Starting with our Q4 results on slide 10, consolidated net sales for the quarter were $421 million essentially flat to 2020 on a reported basis and up 1% level FX.
Overall strong demand continued and this is a solid result, especially given the comp against our metals launch in Q4 of 2020.
Gross profit for the fourth quarter was $204 million down 7% versus last year and gross margins were 48, 6% down 380 basis points.
The key drivers here were higher inbound freight costs, which continue to escalate.
Higher materials and production costs, resulting from supply chain disruptions.
And lower sales volumes of golf clubs, partially offset by higher sales volumes and foot joy and higher average selling prices in golf balls.
SG&A expense in Q4 was $209 million up $35 million compared to 2020, and R&D expense was $15 million up $1 million.
Continued investment to take advantage of the increased levels of demand led to higher SG&A expense across all reportable segments, namely in advertising promotion and selling and distribution.
Income from operations for the quarter was a loss of $22 million down $49 million from 2020.
Other expense was $1 million down almost $8 million from the prior year, primarily from the absence of the reversal of an indemnification receivable related to an audit settlement that was recorded in Q4 2020.
And income tax expense was 700000 up $9 million from the prior year, primarily as a result of the absence of the associated tax benefits on the other expense item, which was recorded in Q4 2020.
Net income attributable to our Cushing at holdings was a loss of $26 million.
And adjusted EBITDA was a loss of $5 million.
Moving to our full year results consolidated net sales for the year to $1 5 billion up $536 million or 33% on a reported basis and up 31% level FX compared to 2020.
Gross profit was $1 2 billion up 35% and gross margins were 52, 1% up 60 basis points from the prior year.
Gross profits were higher across all reportable segments, which comes primarily from higher sales volumes and higher average selling prices during the year, but partially offset by higher inbound freight across all segments and higher raw materials and manufacturing costs, primarily entitled Golf balls.
SG&A expense for 2021 was $795 million up 30% compared to 2020, and R&D was $55 million up $6 million.
Much like I mentioned for Q4 investments, we made throughout the year to take advantage of the increased levels of demand led to higher SG&A expense across all reportable segments, mainly in advertising promotion and selling distribution and information technology.
In addition, our strong financial results led to higher employee related costs for 2021.
Income from operations was $260 million, which was up $114 million from 2020.
Interest expense was $8 million, which was $8 million lower than 2020 on lower borrowings and lower average interest rates.
<unk> expense was down $12 million, primarily due to the absence of the indemnification receivable reversal recorded in 2020 and a decrease in pension settlement charges.
And income tax expense was $64 million up $51 million, primarily because of higher income before taxes.
Net income attributable to <unk> holdings was $179 million up $83 million and adjusted EBITDA was $328 million up 41%.
There is a reconciliation of net income to adjusted EBITDA for Q4, and the full year and our earnings release as well as in the appendix of the slide presentation.
Moving to slide 11, we continue to benefit from the strength of our balance sheet.
At the end of 2021, we had about $280 million of unrestricted cash on hand.
Debt outstanding was approximately $316 million a decrease of $20 million from the end of last year.
And we had $386 million of available borrowings under our revolving credit facility.
Our leverage ratio was <unk> eight times at the end of 2021 down from one six times at the end of 2020.
Consolidated accounts receivable at the end of 2021 was $174 million down 13% from the end of 2020 on very strong cash collections during the fourth quarter.
Our days sales outstanding were 52 days, which were down seven days compared to 2020.
While continued strong demand and supply chain challenges impacted our inventory levels throughout the year.
We were able to selectively build inventory during Q4 to better position our business for the upcoming season.
At the end of 2021 consolidated inventories were $413 million compared to $358 million last year up $56 million.
The year over year increase was driven by foot joy, which was up 34% across footwear apparel and gloves and golf clubs, which was up 30%.
Cash flow from operations was 34 million for Q4 and $314 million for the full year of 2021.
This compares to $97 million and $264 million for the comparable periods in 2020.
And we continue to make investments in the business in the form of capital expenditures.
We spent $18 million on Capex during Q4 and $38 million for the full year, which was up $13 million from 2020.
For 2022, we expect our capital expenditures to increase to about $60 million as delays in receiving equipment caused by supply chain challenges shifted some of our 2021 capex into 2022.
Turning to slide 12, our strong financial results have supported the continued execution of our capital allocation strategy.
Our highest priority remains investing in the business with a focus on product innovation golfer connection and operational excellence.
And we continue to pursue acquisitions that align with our focus on premium performance products that appeal to dedicated golfers.
We believe these investments will advance our long term strategy and drive growth at a favorable return.
Our focus on generating strong free cash flow and returning capital to shareholders also remains a priority.
In December we paid our previously announced Q4 dividend, which increased our total dividends paid for the year to $49 million up 7% compared to 2020.
And as David mentioned, our board of directors today declared a cash dividend of <unk> 18 per share payable on March 25 to shareholders of record on March 11 2022.
This represents a 9% increase in our dividend.
And an expected Q1 cash outflow of approximately $13 million.
During the fourth quarter, we repurchased approximately 662000 shares for a total of about $35 million.
For the full year.
We purchased approximately one 4 million shares for a total of almost $66 million, which left about $98 million remaining on our current share repurchase authorization at the end of the year.
Through February 25th we had repurchased a little more than 1 million shares in 2022.
For a total of about $53 million, including $37 5 million from feeler, completing the share repurchase agreement we announced in November .
We expect to repurchase the remaining $45 million under our current share repurchase authorization between now and the end of 2022.
Our capital allocation strategy is a foundational element of our Cushing its value proposition, which we continue to believe creates a compelling long term total return for our shareholders.
Moving to slide 13, our outlook for 2022 reflects continued strong demand for golf and our products.
A healthy pipeline of new product introductions, and the replenishment of lean field inventories.
Our outlook also continues to be governed by supply chain limitations, which are causing raw material and component shortages and higher material costs across all of our businesses, which are driving up overall production costs.
And we continue to face elevated inbound freight costs, which we expect to continue throughout the year.
Taking these factors into consideration we expect our full year 2022 consolidated net sales to be in the range of $2 $1 75 billion to two to two 5 billion.
On a constant currency basis consolidated net sales are expected to be up between two seven and five 8%.
And we expect full year adjusted EBITDA to be in the range of 325 million to $345 million.
Within this we expect full year gross margins to be down about 20 to 30 basis points.
And we expect full year opex to be higher than 2021.
However, opex will grow at a slower rate than sales.
These expectations assume no significant worsening of the.
Impact of the pandemic, including additional supply chain disruptions and incremental closures of global markets.
We expect the timing of our business in 2022 to have a more normal cadence after having been disrupted during the past two years.
For the first half of 2022 consolidated net sales are expected to be a little more than 50% of full year sales.
And we expect first half 2022, adjusted EBITDA to be about 60% of the full year down from about 80% in 2021.
The decrease in first half adjusted EBITDA is mainly due to lower gross margins, resulting from increased supply chain and freight costs and from higher Opex as we continue to make investments to support our higher level of sales and to maintain the leadership position of our brands.
The second half adjusted EBITDA increase compared to 2021.
Comes from improvement in gross margins as we anticipate supply chain challenges begin to ease.
And from Opex decreases relative to 2021.
In conclusion, our associates and trade partners helped us manage through unprecedented supply chain and pandemic related challenges to deliver tremendous results for our Cushing it in 2021.
Looking forward, while we expect supply chain challenges to continue throughout the year. We are confident we will meet our financial goals for 2022 and deliver a solid long term total return for our shareholders.
With that I will now turn the call over to Sondra for Q&A.
Thanks, Tom operator could we now open up the lines for questions.
At this time I would like to remind everyone. If you would like to ask a question. Please press Star then the number one on your telephone keypad.
Your first question comes from the line of Greg Andrews with Keybanc capital market.
Hey, good morning, guys.
David could you maybe dig a little more into your generally lean channel inventory commentary I guess.
A multipart question, but what are you seeing from a weeks on hand are a month out an perspective.
The first part and then are there any differences.
Inventory levels, either geographically or by product category I think you mentioned balls staying on allocation here.
And then the last part of it I guess, how do you. How do you think channel inventories really kind of evolved throughout portfolio do we get back to normal this year at some point this year.
Where do we go into 'twenty three.
Yes, Okay. Good morning, Brett.
So in most regions really across all our segments their lean as we said and I would characterize that in the in the down 10% to 20% with balls and clubs most impacted right. So we're a little better off with with gear and footwear than we are with.
Then we are with balls and clubs.
Fair to say, we probably held ground in the fourth quarter in that in that any incremental production capacity was directed towards.
Building, our inventory inventory levels for 2022.
There are there are little to no discrepancies regionally right. It's a consistent story around the globe.
So that's really the framing of the inventory picture again macro call it down from our from our product.
<unk> products down some 10% to 20%.
And I'll remind you.
They are seasonally low right now right as they should be with so much of the golf market about to open up in March and April .
I think youll see youll see the marketplace in good shape.
Come March April as us and others pipeline new products into the market but.
But I do think we're going to be strained throughout most of 'twenty two it will realistically be.
Until the until the third quarter that we begin to get some semblance of normality as it relates to inventory, but we do expect.
We do expect to be tight throughout the first half of the year I mean, I made the comment earlier that as an example, with golf balls will be will be allocated on all models in all regions for at least the first six months of the year.
Got it. Thank you for that and then just thinking about EMEA and your exposure there is no breakout.
Between maybe eastern Europe , and Western Europe , and have you factored in any supplier demand disruption.
And to deploy to guide at this point, just trying to get a sense of the broader exposure there.
Obviously real time.
What's happening.
Over there.
<unk>.
The immediate impact to our business to the golf business is as limited if not if not minimal.
How the spreads throughout EMEA is still of course to be determined.
From a supply chain standpoint, the only the only thing we would point to is just the cost of oil right, which affect so much of our so much of our business, so, but but beyond that I don't expect in any.
Any supply chain disruptions that would be.
Above and beyond what we've what we've seen in the last couple of years, but the biggest.
Biggest variable here is certainly going to be what happens to the price of oil.
Got it thank you.
Your next question comes from the line of Daniel <unk> with Stephens, Inc.
Yeah, Hey, good morning, guys, congrats on the quarter and thanks for taking the question.
David I wanted to ask one on maybe the golf equipment and one on the apparel businesses.
On the golf equipment.
Obviously, you noted trends are strong and it seemed like the beginning of this year youre seeing continuation of those trends.
I guess as you're thinking about this year what data points are you looking at to get comfort that we are seeing growth in that core dedicated golfer cohort that you mentioned, which obviously drives those of yourself.
Then.
Given what youre seeing if reduce the overall rounds played down this year, because if you get back transitory golfers.
Think that we've seen enough conversion to more dedicated golfers towards the industry you could still grow in that environment.
Yes, good morning, Daniel So when you look back at our business, we would say.
Of course, we're experiencing strong demand and we know and expect that most of this comes from our core dedicated golfers. We know they are playing more we know there.
And greater levels of equipment, and apparel and adding to that.
More of the more golfers player more dedicated they tend to become and we're seeing this also and sort of I think fundamentally to your to your question is this is the group. These are the players, which most often prioritizes performance in their purchase decisions and I think fair to say this group has grown proportional to.
Due to the total golfer base. So that's that's sort of broad commentary on how we think about.
How we think about the market today.
As we as we look forward and that can I tend to agree with your with your premise that.
Hey, you are looking at 'twenty, one rounds that were at a record level.
And I don't I don't know that.
<unk> to decline would be because of golfers getting in and out of the game I think it's more going to be a function of just the evolution towards a new normal in society and as folks transition maybe from remote work to hybrid work, but I think I think at the end of it. All you are left with a game, that's still going to be up double digits versus 2019 and.
We're just going to be left with the ebbs and flows of <unk>.
How society responds in in year three of a pandemic, but I do think there are some really good habits and trends and fundamentals of the game, but that should stick, but again to wrap it up I agree that there should be some.
It should surprise nobody if rounds of play are down a bit.
<unk> 2022.
Broadly equipment.
Again, we like what we see we like we like current demand as I said a minute ago inventories are lean.
We think we can we think we can get.
Enough out of our supply chains to grow the business that that is a tall last given the base we established in 'twenty one.
But when you add it up golfer marketplace inventories demand, we think we're in a pretty good place as we as we head into the new year.
Got it Thats helpful.
Thank you and then only apparel side I think you mentioned spring pre books are looking stronger foot jewelry and shoes right now any indication on the early kind of back half selling taking preorders I think a lot of the pre selling going on right now would be a barrel.
And are you seeing any outsized strength and may be different groups of customers like resorts green growth or in any certain region.
On the apparel side as you look at the back half maybe preorder book.
Again, a lot of a lot of our business most of our business tend to be embroidered green grass apparel.
And Youre right.
Strong for the first half of the year.
They are strong. We're also we're also balancing.
We're also balancing.
What we believe is the proper amount to put in the marketplace, you've got you've got demand and you've got expected.
Turn and sell through so overall, the apparel space, which I think I think your question gets at the reality that it was probably.
If if if equipment began to recover in the back half of 'twenty and had a strong 21. The apparel recover really was a function of starting into in 'twenty, one and that was because.
Supply chain, just couldnt catch up in 2000, and you lost the spring season. So.
We are we are real optimistic about apparel as it relates to put yoy shoes, and even though our our timeless apparel.
And in the Asian markets.
But I do think the primary lead here. Daniel is is the first half story, and then theres going to be a.
A bit of a wait and see as to what plays out in the second half, but but initially.
Second half bookings are strong as well.
Great Super helpful. And then Tom just a quick clarifier on the model.
Terms of the Capex seasonality will get stepped up pretty meaningfully in the fourth quarter here, how should we think about the cadence of your Capex guide for years, and really more more back half weighted or maybe more.
Regular by quarter.
Yes, Daniel I think it will be more regular by quarter. The back half nature in 2021 was really a function of <unk>.
Delays in the supply chain and we have a lot of.
Orders out there now that are that are going to come in more evenly throughout the year.
Great. Thanks, Good luck.
Thanks Daniel.
Your next question comes from the line of Mike Swartz with.
Securities.
Hey, good morning, everyone. Just wanted to ask a quick question on guidance.
You laid out the case that you are still seeing supply chain challenges and some inflationary headwinds, particularly in the first half of the year, but maybe give us a sense just in terms of magnitude of what that means but maybe how much that's holding back your guidance for the year.
Yes, Michael good morning.
No.
As we called out headwinds they'll vary by category and maybe I'll break it down by category to give you some color.
With golf balls, it's really a story of limited raw material availability and thats, preventing us from operating our ball plants.
At full capacity at least in the first half of the year, we do think that eases in the second half of the year.
Different story in clubs, which is more a function of component availability and largely steel shafts last year. You may recall, we talked about our group's shortage now we've got a.
Some constraints on steel shafts.
And then custom production for us in golf clubs has been at capacity for quite some time.
And we do expect this to continue through the spring, which really has an impact on lead times, which are.
Improving although not as not as fast as anybody would like.
It's a different story as we get to as we get to footwear and apparel, we've got a JV footwear partnership it continues to serve us very well and our challenge is less about.
Making product producing product, it's more about moving it around the globe.
And thats, an especially acute issue in the U S.
And as an example, we've we've delayed the launch of a couple of footwear models by about two weeks.
In the U S. Just because of the complexities of port issues and congestion in our distribution network.
Not the case outside of the U S where things are on time, and I would add in apparel and gear similar to footwear, we're in decent shape from a.
From a production standpoint, the bottleneck because as much.
Port related distribution network network related and most of that exists in the U S. So.
Is there a minimum debt a framing around how do we think about some of the supply chain headwinds I will say coming off a year, where sales were up 30, some odd percent.
We think we did a pretty good job managing those supply chain headwinds and by virtue of us.
Planning for growth it should imply an does imply that we see a general sense of improvement in the supply chain environment, although still challenges and limitations.
Okay. Thank you for that and then maybe just talking about some of the investments.
You referenced I know that you've laid out a few.
Of those that came through in the back half of 'twenty one but.
What we're seeing in the second half is this incremental investment is the continuation of some of the investments you've made in capacity in <unk>.
Product beginning last year.
Okay.
Yes.
Continuation, we've the business has grown substantially from say 2019 levels and there's a number of investments we've had to make and we will continue to make to support the business at this level and we continue to invest in our technology infrastructure to optimize our <unk>.
In DTC platform so.
The investments are going to continue we think are.
Our opex is at sort of a new level. However, it has declined some relative to 2019, if you would as a percentage of sales. So we are seeing leverage but we are going to continue to invest at these levels.
Okay, great. Thank you.
Thanks, Michael.
Your next question comes from the line of Joe <unk> with Raymond James.
Thanks, Hey, guys good morning.
Go back to the 2000 <unk> guidance reflects particularly with the sales guidance in constant currency. It looks like Youre doing an increase about two 7% to 5% how much of that is coming from price increases how much of that is coming from inventory replenishment and how much of that is more underlying demand.
Yeah.
Good morning, Joe.
That's.
Pretty difficult to parse out at that level, especially when you think of our two year product lifecycle cadence.
As an example, you've got.
You've got appropriate one launch last year.
And in a price increase and as you think about 2022 <unk>.
<unk> launch it's in the second model year. So you would expect volumes to be down, but we're still going to benefit from from the price increase so as you think about that across the whole portfolio with puts and takes it gets difficult to parse it out into into those buckets.
Okay, Alright, Thats fair and I guess kind of shifting over to capital allocation you laid out your priorities nicely.
Your balance sheet looks a lot different today than it did a couple of years ago and I'm curious how that impacted the way you think about capital allocation going forward.
At this point I would say it hasnt impacted it very much are our.
<unk> and our strategy remain the same.
We are still coming out of of hopefully coming out of this pandemic cycle and theres still a lot of uncertainty. So we will continue to operate.
I'd say cautiously, but we did.
We did buy.
$65 million worth of shares last year and we did.
Pay our dividend.
At about $50 million and we would expect in 2022 that the dividend would be a little larger and were expecting two to complete our current share repurchase authorization, which would put us close to a $100 million of share repurchases. So David mentioned in his remarks, we we returned 115 million.
Of capital to shareholders in 2021, which was a record and we would expect that to be closer to 150 in 2022, So we're going to continue to.
To return capital to shareholders and we're going to continue to look for Emma.
M&A opportunities similar to what we have in the past, but I would say.
Despite the strength of our balance sheet at this point, we haven't had any significant changes to our strategy and capital allocation wise.
Okay. Thanks, Scott.
Thank you.
Your next question comes from the line of Casey Alexander with Conference point Research and trading.
Okay.
Yes. Good morning, most of my questions have been answered, but I do have one question in relation to issues, which you said had really strong growth.
In North America or U S.
Given your strong penetration into the Green grass channel is there an opportunity to introduce shoes into the green grass channel and continue to accelerate that growth.
Yes Casey.
Really the bulk and the majority of <unk> business is green grass.
So thats.
I don't know if that answers your question, but when we look at <unk> business I did make the comment that was up 50%.
It's primarily a green grass story.
Okay, Great. That's my only question my other questions were answered. Thank you. Thanks, guys. Thanks Casey.
Your last question comes from the line of Anna.
<unk> <unk> with Jefferies.
Hi, good morning, Thanks for taking our question.
Thanks for the color on inventory build by segment could you also provide some color.
On.
Between our existing.
<unk> is preparing for launches.
Are there any ear.
During the quarter.
Yes, so I'll start with that one.
Our launch schedule really for the first half as it is on track is on track as I noted, we have a couple of adjustments to our ball launch timing.
From what would typically be our approach in even numbered years and get a little more granular on that.
AVX velocity Trophaeal golf ball models launched in late January and we expect to launch new towards speed and tour soft and May.
And again, a normal year, we would have launched all of those together.
We felt this was the right approach as we manage.
As we manage tight raw materials availability and try to make the most.
Of our production capacity, so thats change.
We're about to launch new <unk> wedges in the next week and will launch Scotty Cameron Putters in early April both of those are on track and in good shape.
I mentioned for Joy.
I'm really excited about what's happening with <unk> in the first quarter and into April but a couple of footwear launches have moved have moved out a couple of weeks in the U S.
And and really as Tom noted our inventories up it's in better shape. This year than we were last year up 15% up over $50 million.
Year end, 'twenty, one versus <unk> and 'twenty.
We are obviously very pleased with this increase but ideally it would be even higher at a higher level, particularly in golf balls, where we're most where we're most hand to mouth.
Great and then.
All right.
Yes.
Got it.
Where are you expecting.
Carlos Nowadays the approach prior levels.
Yes.
On that.
Good question.
Yes, the supply demand relationship in the marketplace has been such for the last 18 months or so that there's been little to no promotional activity I don't know that we're going to get to a point of seeing meaningful promotional activity at least in the first half of the year.
In time, you're certainly going to see it resumed to some degree, but we think thats going to be that's going to be later not sooner and.
And unlikely to see at least in the first half of the year.
Great.
Thank you and thanks to everybody as always we appreciate your time and your interest in the <unk> company.
You all have a great spring and we look forward to catching back up after after.
After the first quarter. Thanks again.
This concludes today's conference you may now disconnect.
Okay.
Yes.
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