Q4 2024 Guess? Inc Earnings Call
Product gross margins and disciplined expense performance.
The results speak for themselves and we couldnt be more proud of our team's accomplishments this year.
We closed our fiscal year with a very strong fourth quarter performance, resulting in adjusted earnings per share of $3 14 for the year.
The last time that our company has reached this level of EPS performance was 12 years ago in fiscal year 2012.
Revenues for the year increased to $2 8 billion up 3% in both U S dollars and constant currency.
And we delivered an adjusted operating margin of nine 2%.
Our ability to deliver this performance was a result of our strong brand momentum around the world.
The robust customer response to our great product assortment and the amazing attitude and discipline our teams continue to demonstrate.
Our performance in both the fourth quarter and the full fiscal year shows the benefits of our unique diversified business model and how we are leveraging our powerful platform across multiple product categories geographies and channels of distribution.
We are at an inflection point in our company's development and we couldnt be more excited about our future.
Speaker Change: Before I turn to our fourth quarter performance I want to touch on two exciting announcements first the special dividend.
Speaker Change: As you know returning capital directly to our shareholders is a high priority for our board.
Speaker Change: Over the past five years, we have returned nearly $840 million in capital to shareholders either through share repurchases our quarterly dividend.
Speaker Change: In line with our commitment to reward our shareholders. Our board approved a special dividend of $2 25 per share. In addition to the regularly quarterly dividend of <unk> 30 per share.
Speaker Change: Both of these dividends will be paid on May three 2024 to shareholders of record as of April 17 2024.
Speaker Change: We are very pleased with this action I'm proud of our performance that enabled it.
Speaker Change: Next I'd like to turn to our recently announced acquisition of <unk> with a global management firm WH be global.
This is the first acquisition in the 43 year history of guests.
Speaker Change: And we are thrilled to add such an iconic brand to our portfolio.
Speaker Change: As Paul noted at the time of our acquisition announcement.
Speaker Change: Our bone is a brand that is well known for its pre eminence in American fashion that over the years has stayed true to its roots and founding values.
Speaker Change: With an unwavering commitment to quality and authenticity.
Speaker Change: The brand is known for blending traditional craftsmanship with modern cultural references.
Speaker Change: And over the years it has become synonymous with effortless quality clothing for men and women with an innovative yet understated New York aesthetic and a strong expertise in denim.
Speaker Change: The brand appeals to a very attractive customer base that is complimentary to that of our guests and marciano Brian.
Speaker Change: Currently Ragen bond directly operates 34 stores in the U S and two stores in the U K.
Speaker Change: Our stores are highly productive and generate healthy four wall contribution there.
Speaker Change: The product is also distributed in high end boutique select department stores and through e-commerce platforms globally.
Speaker Change: Last year <unk> generated sales of $252 million.
Speaker Change: And adjusted EBITDA of $18 million.
Speaker Change: We are excited about the opportunities to grow this brand and I'll speak more about those later on the call.
Speaker Change: Now moving to our fourth quarter results.
Speaker Change: We are very pleased with our performance as we deliver results ahead of our expectations for revenue and earnings growth.
Speaker Change: Revenues grew by 9% in the period and adjusted earnings from operations reached $130 million growing 21% versus last year.
Speaker Change: We achieved an adjusted operating margin of 14, 6% in the quarter, which was 150 basis points ahead of last year.
Speaker Change: Our segment results were impressive this quarter as all of our five business segments grew revenues with Americas wholesale Asia licensing and Europe, posting the biggest increases to last year.
Speaker Change: All segments that Americas retail posted operating earnings growth in the period and deliver operating margin expansion.
Speaker Change: Regarding product performance, we continued to see different levels of performance across regions with accessories footwear and marciano performing best during the quarter.
Speaker Change: We closed the year with a strong inventory position in spite of the ongoing supply chain challenges, we are facing due to the red Sea crisis.
Speaker Change: Inventories were down 9% at the end of the year and our inventory composition was in line with our plan.
Speaker Change: During the last few years, we have been able to re architect our business to optimize inventory productivity and cash flow generation.
Speaker Change: We believe that this changes represent a permanent improvement to our model.
Speaker Change: During our last earnings call I spoke briefly about our strategic planning process and the six critical objectives that will be a focus on going forward.
Speaker Change: Just to remind you this relate to organization and talent.
Speaker Change: Growth.
Speaker Change: Brand relevancy.
Speaker Change: Customer centricity and visit all expansion.
Speaker Change: Product excellence and last optimization to drive efficiency profitability and return on invested capital.
Speaker Change: I would like to provide an update on our ongoing work in connection with these objectives.
Speaker Change: Starting with our organization and talent objective, we have completed an organizational assessment and have identified key opportunities to improve our accountability and facilitate decision making.
Speaker Change: We plan to act on this assessment and develop detailed plans in the next few weeks.
Speaker Change: In addition, we remain committed to building strong management capabilities across the organization to support growth and have launched three key searches for senior roles that will be based in Europe.
Regarding our growth objective, we made tremendous progress during the period.
Speaker Change: We have already completed the internalization of the G III license businesses.
Speaker Change: Analyze the design of our products, including full new collections of outerwear and dresses taken orders from our wholesale customers and we are in production as we speak.
Speaker Change: With respect to our new guest jeans brand. The first seasons collection has been developed and offered to customers around the world.
Speaker Change: The first sales campaign for <unk> has been completed and the results were ahead of our initial expectations.
Speaker Change: As part of the brand launch we have already secured a few locations to open new guest Jean stores in the U S and payroll TCT in the European market.
Speaker Change: We strongly believe that this brand and its products will serve gen Z consumers around the world very very well.
Speaker Change: In connection with the launch of the guests jeans brand Nicolai Marciano led to events to launch the brand worldwide.
In October <unk> launched exclusively to its top press and trade partners in Milan with a private exhibition hosted at <unk>.
Speaker Change: This was an exclusive immersive events showcasing the history innovation and sustainability of cash genes.
Following Milan guest.
Speaker Change: <unk> had its first public introduction at the January 2024 edition of PD warmer in Florida.
Speaker Change: With over 3000 people in attendance it was a monumental event for the brand.
Speaker Change: The exhibition.
Speaker Change: Spanned across four days.
Speaker Change: Featured at Denim center retrospective of the brand and showcase the first look of the next 40 years of denim.
With the introduction of guests Erewash, a state of the art sustainable alternative to stone in Washington.
Speaker Change: Okay.
Speaker Change: Also during the quarter.
Speaker Change: We negotiated the purchase of the gas business in Chile, and Peru, which was built over the last several years by our exclusive distributor in that market.
The business consists of 15 stores and e-commerce basis in our wholesale business.
Speaker Change: This acquisition was executed a few weeks ago by a joint venture that we formed with Grupo Axel our partners and our Mexico business for the last 18 years.
Speaker Change: The stores are well located and.
They have the potential to deliver about $20 million <unk> annually in the short term as.
Speaker Change: As we reposition and recapitalize the business, including strengthening inventory buys that have been insufficient for some time in the market compared to the potential of that market.
Speaker Change: And speaking about growth.
Speaker Change: Probably the most exciting news of all relates to our recently announced acquisition of Ragen bonds that I mentioned earlier on the call.
Speaker Change: Paul has jumped in with both feet to build on this stream.
Speaker Change: We have an ambitious vision for <unk> and we plan to expand its product offerings through our combination of foam product development and licensing specific categories that we believe has significant potential for growth.
Speaker Change: We also plan to expand the brands presence and distribution internationally.
Speaker Change: Guests and W. HP global combined.
Speaker Change: We have an outstanding global distribution network.
Speaker Change: And powerful licensees that will enable us to drive the growth of the Reagan bond business globally, leading up to the signing of the agreement to acquire arriving in Bonn.
Paul and I had the opportunity to spend time with Andrew Ross and chair of the board.
Speaker Change: And the Reagan bond management team.
Speaker Change: And we couldnt be more impressed with the quality expertise and depth of the leadership and of the overall organization, including store personnel.
Speaker Change: We can wait to begin working together.
Speaker Change: Turning finally to optimization of our operations, we just launched a project to convert our distribution center operation in the U S to a third party provider.
Speaker Change: We selected our logistics partners in Europe to run our facility located in Louisville, Kentucky.
Speaker Change: This company is the number one global company in the business.
Speaker Change: Our Kentucky Operation currently services, our entire U S retail and wholesale businesses.
Speaker Change: We also plan to sell that facility and our partner will lease it back to operated.
Speaker Change: We are currently negotiating a self transaction with several interested parties.
Speaker Change: This change should have a positive impact on our cost structure.
Speaker Change: And the expected benefits have been incorporated into our guidance.
Speaker Change: We look forward to further updating you on our strategic plan as the year progresses.
Speaker Change: This includes specific initiatives to address the observations our consultants have identified.
Speaker Change: The other with other key initiatives and strategies that we have developed such a plan to optimize our product assortment and pricing.
Speaker Change: Our digital business enhanced customer engagement and increase the use of data and technology all with the goal to improve our decision making on operations further.
Speaker Change: Moving to our outlook for the new fiscal year.
Speaker Change: We expect to grow our topline between 11, and a half and 13, 5%.
Speaker Change: And deliver revenues of over $3 billion for the first time in our company's history.
Speaker Change: We also plan to generate adjusted operating margin between seven and a half of 95% and adjusted earnings per share of $2 56 to $3.
Speaker Change: This outlook includes the benefits of the <unk> acquisition the growth of our core business and the other growth initiatives that I mentioned earlier.
Speaker Change: Markus will elaborate further about our guidance in just a minute.
Markus: In closing.
Markus: We are very pleased with our results for this year I'm very proud of our team's accomplishments.
Markus: The company's performance demonstrates how <unk> vision and our team's efforts over the last few years to elevate our brand and transform our business are paying off.
Markus: We are enjoying strong momentum across the world with the gaffer months General Brown.
Markus: And customers are responding well to our product assortment by category.
Markus: We appeal to three distinct customer groups with our guests guests genes in Marciano brand and now bye.
Markus: By adding dragonball into our portfolio, we are positioned to expand into a more affluent and very attractive customer base.
Markus: We have a strong and highly diversified business model and our solid capital structure.
Markus: We have built a platform that can power a bigger business jet.
Markus: <unk> generated synergistic growth and margin expansion and deliver significant value creation over time.
Markus: We have expertise in virtually every distribution model in which our products have sold.
Markus: We work with wholesale partners from large department stores to mom and pop.
Markus: And we have developed a network of licensee partners that support our portfolio of several different product categories.
Markus: Over the past 43 years those powerful capabilities have clearly served the guess brand, while bringing us to the precipice of a $3 billion company.
Markus: The inflection point there.
Markus: Evolution for US is that we view these capabilities as a platform to drive outsized growth.
Markus: Platform that gives us the power to do things that others simply cannot do.
Markus: The power to take a smaller regional or national brand and make it global.
Markus: The power to leverage our portfolio of product categories, and build a mono category brand into a lifestyle brand.
The power to make something exponentially bigger because we can grow it across multiple dimensions.
Markus: That's pretty easy to do.
Markus: But we feel that we have built the right platform to do it.
Markus: This is why we're so excited about our future.
Markus: As we build this bigger ecosystem.
We will continue to be opportunistic with our use of capital to drive our performance and create value, including continuing to invest in the business and Opportunistically consider strategic acquisition as well as continuing to return capital to our shareholders.
Markus: And with that I conclude my remarks and pass the call to Mark. Thank you Marcos. Please go ahead.
Thank you Carlos and good afternoon, everyone.
Mark: We surpassed our expectations for revenues operating profit and earnings per share in the fourth quarter.
Mark: We grew revenues by 9% spot.
Mark: <unk> gross margin and carefully manage costs.
Mark: All of which enabled us to deliver an adjusted operating profit growth of 21% compared to last year's fourth quarter.
Speaker Change: Let me take you through our fourth quarter results in more detail.
Speaker Change: Total company revenues in the fourth quarter were $891 million with all segments exceeding expectations.
Speaker Change: The fourth quarter's extra week accounted for nearly two thirds of the total revenue increased in the period.
Speaker Change: Turning to our segment performance starting with Europe.
Speaker Change: In the fourth quarter, our European business growth continued driven by the extra week and strong demand for our collections with revenues rising 9% in U S dollars and 10%.
Speaker Change: In constant currencies.
Speaker Change: Fourth quarter retail comps, including E Commerce increased 6% in U S dollars and 7% in constant currency.
Speaker Change: Our stores achieved a strong store comp growth of 12% and.
Speaker Change: In constant currency, which was mainly due to continued high AUR growth and higher conversion.
Speaker Change: Our e-commerce comps declined by 8% in constant currency compared to Q4 of last year.
Speaker Change: With our own website performing better than market places.
Our revenues in European wholesale improved 6% to last year when adjusted for currency fluctuations.
Speaker Change: Supported by the guest schemes launch our European wholesale orders for the fall Winter 2000, and 2024 collection have increased by mid single digits in constant currency.
The operating margin in our European business increased by 200 basis points to 18%.
Speaker Change: Higher initial markups and higher revenues were partially offset by the unfavorable impact from currencies and higher markdown.
Speaker Change: Americas retail posted a 1% increase in revenues in U S dollars and was flat in constant currency mainly.
Speaker Change: Mainly driven by the benefit of the extra week.
American retail comps, including e-commerce declined 2% in constant currency.
Speaker Change: In our North American stores.
Speaker Change: Comps also dropped by 2% in constant currency.
Speaker Change: While traffic remained under pressure similar to third quarter trends. We are very pleased with the improved conversion and higher units per transaction.
Speaker Change: Our U S and Canada E com comparable revenues decreased by 3% compared to Q4 of last year.
Speaker Change: Lower traffic to our website was offset by business initiatives that drove a higher average order value and a higher conversion rate.
Speaker Change: Americas retail posted a 15% operating margin compared to 15, 4% operating margin a year earlier.
Speaker Change: The 40 basis points decrease in operating margin was mainly driven by the unfavorable impact from negative store comps, partially offset by the favorable impact of currency.
Speaker Change: In Americas wholesale revenues increased by 44% in U S dollars and 39% in constant currency, mainly driven by higher shipments in the U S and continued strong momentum in Mexico.
Speaker Change: Operating margin reached 28, 5% a meaningful improvement of seven six points from Q4 of last year, mainly driven by improved product margins the benefit of higher revenues and expense leverage.
In Asia revenue grew 18% in U S dollars and 19% in constant currency.
Speaker Change: Revenue growth was driven by the extra week.
Speaker Change: Net new stores in Korea.
Speaker Change: E Commerce in Korea, and China, and our new business in India.
Speaker Change: Retail comps, including e-commerce for the region decreased 1% in constant currency.
Speaker Change: Operating margin improved 200 basis points to four 8% driven by higher revenues and partially offset by lower product margins and higher expenses.
Speaker Change: We are very pleased to return Asia to a full year profit.
Speaker Change: We improved our full year earnings from operations by $13 million from negative $5 million to positive 8 million, mainly driven by greater China and Korea.
Speaker Change: And finally, our licensing segment had a strong quarter and exceeded our expectations with revenues, increasing 15% in both U S dollars and constant currency.
Speaker Change: Handbags footwear and <unk> had a very strong performance during the quarter.
Speaker Change: Segment operating margin was 92, 7% and operating profit increased by 21%.
Speaker Change: In Q4 total company gross margin reached 45, 4%.
Speaker Change: Up 120 basis points from a year earlier.
Speaker Change: Improved I'm use and higher revenues were partially offset by a negative currency impact and higher markdowns.
Adjusted SG&A expense for the quarter increased 8% to $275 million from 254 million a year earlier.
Speaker Change: The 50, <unk> week accounted for more than half of the increase in the adjusted SG&A expense.
For the quarter, our adjusted SG&A rate improved 30 basis points to 38%.
Speaker Change: <unk> is due to leverage.
Speaker Change: Partially offset by moderate inflationary pressures on our cost structure.
Investments in our infrastructure, especially in Europe and currency headwinds.
Speaker Change: On a constant currency basis, our adjusted SG&A increased 7%.
We exceeded our expectations for adjusted operating profit as it rose to $130 million for the quarter.
Speaker Change: At 21% improvement compared with last year's fourth quarter.
Speaker Change: Our adjusted operating margin reached 14, 6% 150 basis points higher than last year's Q4, mainly driven by higher revenues and higher <unk>, partially offset by the negative currency impact higher expenses and higher markdown.
Speaker Change: In the quarter, we reported nonoperating net income of $13 million.
Speaker Change: Fee income was primarily due to an unrealized gain to mark our syrup and deferred compensation plan assets to market and a realized gain on the sale of other assets.
Speaker Change: And we recorded an adjusted effective tax rate of 17, 5% in the fourth quarter.
Speaker Change: For the fiscal year 2024 hour adjusted effective tax rate was 22, 2% three.
Speaker Change: Three five points higher than last year, as we recorded a discrete tax benefit in the prior year.
Speaker Change: Adjusted Q4 diluted earnings per share was ahead of our expectations at $2 and one.
Speaker Change: Compared to $1.74 of earnings per share in last year's fourth quarter.
Speaker Change: Moving to the balance sheet.
Speaker Change: We delivered on our plan to reduce inventories across all regions.
Speaker Change: We ended the quarter with $466 million.
Speaker Change: One 9% in U S dollars and 6% in constant currency compared to last year.
Speaker Change: Overall, we are pleased with our inventory composition and forward orders in CF, we are well positioned to support our business.
Speaker Change: Our receivables were at $315 million.
Speaker Change: An 8% decrease compared to last year's fourth quarter.
Speaker Change: On a constant currency basis receivables decreased by 5%.
For the year capital expenditures were $74 million, mainly driven by investments in store Remodels, new stores and technology.
Speaker Change: This compared to $19 million last year.
Speaker Change: Okay.
Speaker Change: We ended the quarter with $360 million in cash.
Speaker Change: <unk> $276 million a year ago.
Speaker Change: The most significant drivers of that $84 million cash built over the last four quarters include.
248 million of free cash flow offset by a $63 million in dividends.
Speaker Change: Debt repayments of $62 million.
Speaker Change: And 31 million of net outflows related to the January exchange of convertible notes transaction.
Speaker Change: We ended the quarter with a total of $392 million of borrowing capacity on our various global facilities.
Speaker Change: So roughly $752 million of available liquidity.
Speaker Change: Our annual cash flow significantly exceeded our plans for the year.
Speaker Change: That performance resulted both from our careful working capital management as well as sizable cash infusions from nonrecurring events.
Speaker Change: Including a litigation settlement and an investment sale.
Speaker Change: Also as we previously announced in January we exchanged an additional tranche of our 2024 convertible notes, which had been June next month's <unk>.
Speaker Change: <unk> $67 million of maturities into 2028.
Again.
Speaker Change: We are pleased with the strength of our balance sheet that enabled the bold decision to improve our special dividend of $2.25 per share.
Speaker Change: In addition to the regular quarterly dividend of <unk> 13 per.
Speaker Change: Sure.
Speaker Change: Okay.
Speaker Change: Turning now to our outlook for fiscal year 2025.
Speaker Change: Overall, we expect to see a cautious consumer that is mindful of discretionary repurchases in light of inflation and higher interest rates.
Speaker Change: Regardless of the external environment, we will remain focused and expect to make progress in executing against the critical strategic objectives that Carlos discussed.
Speaker Change: We are expecting opportunities that will transform the direction of our core guests and marciano businesses in fiscal year 2025 based on the growth drivers that Carlos mentioned in his remarks.
Speaker Change: Overall, we anticipate our core guests and marciano businesses to increase revenues in the low to mid single digit range in fiscal year 2025.
Speaker Change: We are very excited about the rack and bone acquisition and we expect to close this transaction in the latter part of the first quarter of fiscal year 2025.
Speaker Change: Therefore, we have included the benefit of this business in today's guidance.
Speaker Change: With the expectation that it will contribute roughly two thirds of this year's total company revenue growth.
Speaker Change: Based on these assumptions I've outlined for fiscal year 2025.
Speaker Change: We expect revenues will increase in the range of 11, five to 13, 5% in U S dollars.
Speaker Change: And $12 five to 14, 5% in constant currency.
Speaker Change: This includes a net adverse impact of roughly one five points on revenue growth from the loss of the 53rd reporting week in fiscal year 2020 call.
Speaker Change: Based on the prevailing environment currencies will be a headwind on revenues in the first half of fiscal 2025.
Speaker Change: As we considered this year's profitability, we expect the headwind on inbound freight from the Red Sea crisis as roughly two thirds of our global sourcing volume is impacted.
Speaker Change: We anticipate that the rate pressure will moderate in the second half of fiscal 2025 and have incorporated the development in our outlook provided today.
Our expectation is.
Speaker Change: That Reagan bone will be modestly accretive to earnings this year.
Speaker Change: These assumptions reflect the fact that we will make investments into the brand and support their distribution expansion in the U S and internationally throughout this year.
Speaker Change: In addition to support our growth drivers outlined earlier, we continue investing into our infrastructure.
Speaker Change: Based on these assumptions for the full year, we expect an adjusted operating margin between seven five and eight 5%.
Speaker Change: Adjusted earnings per share in the range of $2 56 to $3.
Speaker Change: Turning to the first quarter.
Speaker Change: There are a couple of factors to keep in mind as you model the revenue growth.
Speaker Change: Do you reckon bone acquisition is expected to close later in the first quarter.
Speaker Change: In European wholesale the timing of our deliveries will be a headwind of roughly $15 million on revenues in the first quarter compared to last year.
Speaker Change: Overall, our wholesale business in Europe continues to be health team and our shipments in the second and third quarters should more than compensate for the lower volume in the first quarter.
Speaker Change: As a result for the first quarter, we expect revenues will increase in the range of 1% to 2% in U S dollars and 3% to 4% in constant currency.
Speaker Change: We expect an adjusted operating loss margin between two three and two 8%.
Speaker Change: And an adjusted loss per share between <unk> 37 and 41.
Speaker Change: Overall, we do expect revenue growth to accelerate in the next two quarters of the year.
Speaker Change: The second quarter will be the first quarter to fully benefit from the wrecking bone acquisition and the first outerwear shipments in North America are planned to be delivered in the third quarter.
Speaker Change: Going into the fourth quarter, we expect that revenue growth will be impacted as we roll in grocery last year's 50 <unk> week.
Turning to operating margin.
Speaker Change: We do expect an adjusted operating margin of six 7% in the second quarter and a modest sequential improvement in the third quarter.
Speaker Change: The fourth quarter should represent an opportunity for adjusted operating margin expansion compared to last year.
Speaker Change: We anticipate generating a free cash flow of roughly $160 million for the full year.
Speaker Change: With the expected closing of the reckon bone acquisition later in the first quarter of fiscal 2025.
Speaker Change: Approximately $56 5 million of purchase price will become due.
Speaker Change: We are currently working with our bankers to include certain acquired assets from Ragen bone in the borrowing base of our asset based revolving credit facility in North America and increased our borrowing capacity.
Speaker Change: Our priority is to invest in our brands and businesses to support sustainable growth.
Speaker Change: We will remain highly disciplined in the way, we allocate capital across projects.
Speaker Change: In closing our performance in the past fiscal year and our plans for fiscal 2025 demonstrate the strength of our diversified business model and talented global team.
Speaker Change: And with that we can now open the call up for questions.
Speaker Change: Thank you Anna.
Speaker Change: A reminder, if you do have a question press star one one to get into queue and wait for your name to be announced until they draw their question simply press star one again.
Speaker Change: First question is from Cory <unk> with Jefferies. Please proceed.
Thank you and good afternoon.
Cory: Carlos Hi, Corey to.
Hi, how are you.
Cory: Very well thank you.
Cory: Right.
Cory: I wanted to ask you about the idea of <unk>.
Cory: Being a platform versus a brand and I think that this is maybe not something that's necessarily.
New to you, but it's definitely a point that feels like you are putting greater emphasis on more recently, given the announced acquisition of bragging about it. So I wanted to maybe it would be really helpful. If you could just dive into the aspect of guests that you believe positioned the business well from.
Cory: Platform perspective, and the scalability of the enterprise to build.
Cory: Other brands are bigger and to become more profitable overall as opposed to just a specific brand. So again this idea of a platform versus brand would be great to get your view on it.
Speaker Change: Yes, no I'd be happy Thank you very much for the question.
Speaker Change: Frankly, we are this is at the center of why we are calling this our inflection point for the company's development.
Speaker Change: Yes.
Speaker Change: As we have been reflecting in thinking and doing a lot of work on our strategic vision for the company.
Speaker Change: Became very obvious to us that over the last 43 years four and his brothers.
Speaker Change: They have built.
Speaker Change: Pretty incredible machine here, where one brand benefited from multiple capabilities, including understanding how to run each and every one of the channels, where we sell product with.
Speaker Change: So we have capabilities in retail in e-commerce in China.
Speaker Change: We know how to do wholesale business.
Speaker Change: We have probably every single product or a business model that you can imagine and our industry is represented in our network, one way or the other franchisees distributions distributors licensees and so forth.
Speaker Change: We happened to have a brand that has been.
Speaker Change: <unk> expanded into a lifestyle very significant lifestyle for volatile when a women and men.
Speaker Change: And.
Speaker Change: Yeah.
Speaker Change: And incorporates over 25 different per category that are part of this portfolio. So we have expertise and all of those product categories whether.
Speaker Change: Those have done internally or with the help of licensees that represent the brands for their respective products.
Speaker Change: And this relationships have very long term and we're talking about 2030 years plus in some cases.
Speaker Change: And that gives us tremendous strength.
Speaker Change: And it's an ecosystem that is very difficult to replicate.
Speaker Change: We happen to be in the international marketplace not just in one.
Speaker Change: Area, but.
Speaker Change: We are currently in 100 countries and we have representation locally in multiple markets.
Speaker Change: With our local management teams that run those territories, which is another incredible strength that the model has.
Speaker Change: So when you think about all of this for all these 43 years this whole ecosystem has surfaced.
Speaker Change: The guess brand very well.
Speaker Change: But then we started thinking well why couldn't we just bring additional business through this platform and really.
Speaker Change: Give them access to all of these capabilities and and also.
Speaker Change: You know just contribute to growing.
Speaker Change: Different opportunities.
Speaker Change: In different markets or different product categories. So we've put it all together and you think well.
Speaker Change: So you think about it on an opportunity like Reagan bone.
Speaker Change: Bonnie brings an incredible match to what we think that this platform can offer.
Speaker Change: Sure.
The customer base that Reagan bone.
Speaker Change: Just worked with.
Speaker Change: It's very complementary to all the other customer basis, so that we have as part of our portfolio.
Speaker Change: Brent.
Speaker Change: And we think that this brings.
Speaker Change: It's a great opportunity to really capitalize on that on a new market that is very attractive very ashwin consumers and <unk> and.
Speaker Change: Of course.
Why.
Speaker Change: It's based on the price.
Price positioning that Brian had which is very strong and very attractive.
Speaker Change: So just at the same time.
Speaker Change: Dragon bone is.
Speaker Change: It's relatively.
Speaker Change: Concentrated in terms of the business.
Speaker Change: In the U S not just I believe that life.
Speaker Change: 90% of the businesses.
Speaker Change: In the U S.
Speaker Change: And we think that this is a case where you have a.
Speaker Change: Very strong brands that.
Speaker Change: This is doesn't represent of the year.
Speaker Change: Potential and size of the brand itself.
So we feel that there is a big opportunity to really take that brand internationally.
Speaker Change: And offer additional product categories that today, maybe they they are representative of a very limited Lee or Theyre not representative at all and we have access to all of those.
Speaker Change: So we are just super excited about this opportunity to really bring those capabilities to bear to help the brand become.
Speaker Change: Significantly bigger become presence in multiple markets.
Speaker Change: It's not well known today.
Speaker Change: And and into product categories that we think that the.
Speaker Change: Those protocols belong with the lifestyle that the branded represent but but today. They are not representative that is just one example.
Speaker Change: Of.
Speaker Change: The type of business that we think our platform can benefit and.
Speaker Change: For that reason, we call it a platform as opposed to our brands.
Speaker Change: Of course the.
Speaker Change: The guess brand will continue to benefit from this and we think that they are.
Speaker Change: Either benefits that can come from it like just in the long term.
Speaker Change: Using a vendor base that could be really very.
Speaker Change: Additive to what we're doing in.
Speaker Change: With our brands internally today.
Speaker Change: I don't know maybe some days, we're going to find synergies, but frankly, if you go back to rather in bonds. That's not that's not what motivated us to do this acquisition.
Speaker Change: And that is not a priority today, our priority is to really invest in.
Speaker Change: Pending the awareness of this brand.
Bringing the brand to other markets, bringing the brand or products into the brand to expand.
Speaker Change: The region and the assortment that we offer to that consumer.
Speaker Change: Okay.
Speaker Change: That's great.
Speaker Change: Thank you Super exciting.
Speaker Change: Thank you.
Speaker Change: Great.
Speaker Change: Just have a follow up.
On the outlook for this year.
Speaker Change: Obviously, the organic growth as well as the acquisitive growth that you have planned in there from a sales perspective, it's very attractive.
Speaker Change: Just curious on the margin point.
Speaker Change: For the full year operating margins in fiscal year 2024 were over 9% and then at the midpoint for the outlook, you're looking for about 8% So a decline.
Speaker Change: Little over 100 100 basis points.
Speaker Change: If you could talk through some of the puts and takes.
Speaker Change: And headwinds and tailwind that you're anticipating to impact the operating margin for the full year of fiscal 2025.
Speaker Change: I'm going to just say a couple of words and then you know.
Speaker Change: Marcus.
Speaker Change: To answer this but.
Speaker Change: Yes.
Marcus: We are looking at this year.
Marcus: A year.
Marcus: Investment and.
Marcus: So a year.
Marcus: We continue to build capability to support the growth.
Marcus: We talked a little bit about investing in people in.
Marcus: Some new roles.
Marcus: We think that is.
Marcus: In this particular year.
Marcus: Just investing in the Bryan Russo will also take some some.
Marcus: Our marketing power.
Marcus: And we think that it's absolutely the right things to do not only for <unk>, but also for the new brand guest genes that we're launching and.
Marcus: And and all of that is embedded into our guidance and we feel that.
Marcus: Maybe we're being conservative but we.
Marcus: Think it's important that we anticipate the level of investment that is going to be required to really pursue the potential of.
Marcus: Our business.
Marcus: And in particular with this new branded half.
Marcus: So Martin Thank you Carlos Hi, Corey.
Martin: For the full year as you've seen from the press release on for SB projected 11, 5% to 30% revenue growth in total.
Martin: <unk> is a headwind for the full year of roughly one point.
Martin: <unk> seen in.
Martin: In the prepared remarks, I talked about that rugged Bowen Robert percent roughly two thirds of that revenue growth, we are projecting for fiscal year 'twenty five.
Martin: And Carlos nothing talked about several concrete initiatives that we have that will drive the growth.
Martin: In our core guests and Marciano business like X Gene's also like markets like India, Chile, and Peru also that Carlos touched on and internalization.
Martin: <unk> of the outerwear and dress category in North America.
Martin: If we look at the.
Martin: Odd about puts and takes I think FX of course is on the revenue side I think as a headwind.
On the revenue side also the 50 <unk> week represents a headwind.
Martin: The SBR won't be comping.
Martin: 50, <unk> week in the fourth quarter.
Martin: When we put all of it together or announcing getting too.
Martin: Operating margin Carlos touched on the investments in the infrastructure investments also.
Martin: Reagan bone as well Rick <unk> touched on it and also direct see crisis has an impact on our freight rates and on the inbound costs that we've incorporated in today's guidance.
Martin: We expect.
Martin: Increasing freight rates, especially in the first half of fiscal year 2005, and then Dave I expect it to be moderated in the second half.
Martin: For fiscal year 'twenty five.
Martin: <unk> acquisition, we expect that it will be modestly accretive so there will be some margin dilution from ragen bone and there were some other benefits that we've incorporated in our guidance like D. K by DC, Kentucky, PUC operations that have been outsourced to.
Martin: Logistics partner all of this has been incorporated in the guidance, we've been giving operating margin I've received between seven five and eight 5%.
Martin: For fiscal year 'twenty five.
Speaker Change: And then just I would add there.
Speaker Change: I mean, not everything is perfect here. We are also facing some challenging businesses North America has been tough for us, especially the U S. And we are seeing negative traffic into our stores. So that that continues to impact us and GE.
Speaker Change: Have to be prudent and careful we we wanted to sell product at full price. So we have been very careful not to over promote and and of course that is also having an impact on our top line. In addition to the customer traffic issue. So.
Speaker Change: We are incorporating this thought into our guidance as well and.
Speaker Change: I think as Mark has talked about this in his prepared remarks, but just we expect that in the first quarter, we are going to have some timing.
Speaker Change: In our wholesale European business that is impacting us in a negative way.
Speaker Change: $15 million, so I think that is.
Speaker Change: Number.
Speaker Change: The good news here is that this is not a reflection of the business contracting. This is only a timing issue and and we know based on our order book and everything that we're seeing in terms of trends in our business that we have.
Speaker Change: <unk> of <unk>.
Speaker Change: Volume coming in.
Speaker Change: Following two quarters.
Speaker Change: That is definitely more than compensating the.
The partial change in the first quarter because of the timing.
Speaker Change: Sure.
Speaker Change: Got it.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Very healthy.
Speaker Change: In the direct to consumer business, we had some weakness in e-commerce, but it has not been just something to be concerned about and we are seeing that.
Speaker Change: <unk> continued to do very well, we had a great fourth quarter in Europe, and and we think that is.
Speaker Change: Speaks loud and clear about not only our position in the marketplace as a brand but.
Speaker Change: Speaks loud and clear about the how good the product is and how the customers are embracing the product assortment that we have and the launch today. So.
Speaker Change: It's a good moment for us.
Speaker Change: Yeah.
Speaker Change: Great. Thank you so much.
Speaker Change: Yes.
Speaker Change: Thank you. Thank you.
Speaker Change: And as a reminder to ask a question simply press star one one to get into Kim.
Speaker Change: One moment for our next question please.
Speaker Change: It comes from the line of Mauricio Serna with UBS. Please proceed.
Mauricio Serna Vega: Great. Good afternoon, and thanks for taking our questions I was hoping you could elaborate a little bit more.
Mauricio Serna: Mark.
Mauricio Serna Vega: Hi, Hi, yes.
Mauricio Serna Vega: Maybe if you could elaborate a little bit more on what you saw and and.
Mauricio Serna Vega: In the Americas region, it was pretty pretty nice to see the comp sales improved but then like the commentary just provide it seems like things got a little bit.
Mark: Slow down a little bit in Q1, so maybe.
Mark: A little bit more detail on that and then it seems to Europe still perform very well and that should be the case.
Mark: This year maybe.
Mark: You know what do you think is driving that I'm going out performance.
Speaker Change: I don't know like if you could maybe give us an idea.
Speaker Change: If we just think about.
Speaker Change: The core gas.
And marciano businesses.
Speaker Change: Hi, Mike.
Speaker Change: Okay.
Mike: So it can be high, but excluding ragen, Boeing and maybe like any additional investments that you would be doing for that business. Thank you.
Mike: Okay. Thank you Mauricio well so let me start you know I was.
Speaker Change: Just talking a little bit about our Americas business.
Speaker Change: The challenges that we face with negative traffic.
Speaker Change: In the fourth quarter got a little better versus the trends that we had experienced in the third quarter and that that helped us and.
Speaker Change: We ended the quarter with a with a plus one I believe in terms of revenue growth, but that was impacted positively by the 50 <unk> week. So it's not you know our our comps were still negative and and we do not anticipate that that is going to change not just in India.
Speaker Change: The next few months.
Speaker Change: And that is kind of like in line with what we are experiencing today and that has been embedded into our guidance. We think is clearly.
Issue with traffic.
Speaker Change: We don't know exactly what's happening in the industry at large.
In our case this has been somewhat consistent and for that reason, we have been predicting the business and anticipating inventory buys.
Speaker Change: In.
Speaker Change: Just taking that into consideration.
Speaker Change: Interestingly enough in our business in the U S was the most difficult.
Speaker Change: Difficult one.
Speaker Change: But we had a very good business in Canada and.
Speaker Change: I'm talking about positive comps improved profitability not just a good conversion there and.
Speaker Change: Kind of like a very different story than what we see in the U S. So.
Speaker Change: We think that.
Speaker Change: Just then you look at the different pieces in the U S.
Speaker Change: The tourist stores did.
Speaker Change: Did better than the non tourist stores, we don't know exactly what to read into that because of the strength of the dollar and how that is impacting the pockets of of tourist.
Speaker Change: But that is.
The real numbers.
Speaker Change: And we are analyzing all of this as much as we can to really make the right decisions.
Speaker Change: When you go to Europe now on the other side.
Speaker Change: Yes.
Speaker Change: This sustained very very strong we had a great fourth quarter as I said before.
Speaker Change: <unk>.
Speaker Change: And positive comps have been now.
Speaker Change: Present, there for quite some time, we're talking about several quarters.
Speaker Change: And it has a lot to do with how good the product assortment is and how that customer is gravitating to towards the brand.
Speaker Change: We're seeing good traffic now just.
Speaker Change: Many of those markets have more than recovered from pre COVID-19 trends and that's very significant and also you know when you talk about Europe. This is not just one mass of customers. So one mass market is there is a lot of different.
Speaker Change: Just unique characteristics of each of those markets or countries. So we have some countries that have done incredibly well you know I think Turkey, we've talked about but you know there are many other examples like that and there are some other countries that are.
Speaker Change: More challenged like Jeremy.
Speaker Change: Germany has been just settlement and a more difficult play.
Speaker Change: Place.
Speaker Change: Just we were very pleased with our business in the Mediterranean basin during during the fourth quarter.
Speaker Change: Italy had a very good quarter, Spain had a good quarter I mean, there are lot of good things happening too in spite of of how challenging.
Speaker Change: Some of the markets may be I think that is probably unique to us again, because I think the brand is so strong and so well embraced by the customer.
Speaker Change: And you know the great thing about Europe is that if that market is working for us I mean that means that a lot of the companies working suggested that that business last year represented one $5 billion for us So that's a pretty massive.
Speaker Change: <unk> business and in a very big influence on how the company does if you are.
Speaker Change: Dropped as well.
Speaker Change: We have a very good chance to do well as a company.
Speaker Change: And it's not just the volume, but it's also the profitability of that business is very healthy we have a great wholesale business.
Speaker Change: The wholesale business I think during the last four years has grown like 30% from from about.
Speaker Change: 480 million euros.
Speaker Change: About 630 now so it is just when you think about that and this is with COVID-19 in between.
Speaker Change: No.
Speaker Change: I think this speaks loud and clear about the strength of the business.
Speaker Change: And the brands and those in those.
Speaker Change: The territories and I think that's something that we did very well this is.
Speaker Change: Credit to Paul also and the product teams is the expansion of key categories. Just we introduced at leisure as a new category to the assortment and this is this happened during the Covid times and that business went from zero.
Speaker Change: Literally zero, two representing about 7% of our apparel business.
Speaker Change: Business in about two or three seasons I mean it happened.
Speaker Change: So so quickly and then after Covid was behind US we didn't know what to expect about this brand because people are changing their lifestyles and so forth.
Speaker Change: But we are super pleased with that because we see huge strength from.
Speaker Change: From this category.
As recently as the.
Speaker Change: Seasonally we just closed.
Speaker Change: Jess are Felicia was one of the big growers within all the categories. So that's an example of just expanding categories can be very powerful for us to continue to grow our business.
Speaker Change: [noise] Corey if I may take the latter part last part of your question regarding the operating margin that we're expecting for the full year of fiscal year 'twenty five we talked about those opportunities for growth and not going into them again from a revenue perspective, the headwinds we had a 50 <unk> week foreign currencies.
Speaker Change: An operating margin perspective.
Speaker Change: Poland is modestly accretive so meaning in universe.
Speaker Change: It is a little bit of the margin dilution from <unk> and bone.
Speaker Change: That we have.
Speaker Change: <unk>.
Speaker Change: Yes.
Speaker Change: Incorporated in our today's guidance for the operating margin.
Speaker Change: If we talk Carlos talked about it before and if we you touched on it as well.
Speaker Change: We are making investments in our infrastructure, often Carlos mentioned or talked about several also bought the key searches were making we talked about the platform earlier I think that'd be a building.
Speaker Change: So this is all being incorporated in our today's guidance and in top of it. So I think as mentioned before and also prepared remarks, we have direct see impact on shipping costs incorporated on our total company guidance and the seven five to eight and a half operating margin incorporates the core guest and multichannel business as well as also about the <unk>.
Speaker Change: <unk>.
Speaker Change: Contribution from breaking ball.
Speaker Change: And the investment in marketing right, yes, exactly so marketing and the role so I think it is.
Speaker Change: It's fair to say that if you were looking at just the core business before Reagan barn, youll be looking at a higher operating margin tiny tiny, but higher operating margin and we don't think that this should be the case forever because we see that there is tremendous potential RASM gone too.
Speaker Change: So even being more profitable in the future, but for now and for this year. That's the way we're planning the business.
Understood very helpful. Thank you so much.
Speaker Change: Thank you Marissa. Thank you mhm moment for our next question.
Eric Martin Beder: And it comes from the line of Erik bass with small cap consumer research. Please proceed.
Eric Martin Beder: Good afternoon congratulations.
Eric Martin Beder: Yeah.
Eric Martin Beder: Two questions.
Eric Martin Beder: One yes.
Speaker Change: Yes genes when is that.
Speaker Change: <unk> previewed the collection to win when is it going to start to rollout.
Speaker Change: Or is the focus in terms of where the products going to be your own stores region.
Speaker Change: How should we be thinking about that rollout and how it impacts the guidance.
Speaker Change: Unrelated question.
Speaker Change: The special dividend as you've done a regular dividend.
Speaker Change: The.
Speaker Change: Stock repurchase program is completely use again, congratulations do you plan on revisiting that as we go forward in this year.
Speaker Change: Okay. Thank you Eric So let me start with gifts genes gift change, we're talking about a month.
Speaker Change: Ah months from when the product is.
Speaker Change: Coming so we're super excited about this.
Speaker Change: The the initially the whole brand as being offered as a wholesale opportunity so.
Speaker Change: Just we have a big <unk>.
Speaker Change: Drive and in Europe.
Speaker Change: So all of our showrooms.
Speaker Change: Presenting the product to their customers.
Speaker Change: And there is tremendous.
Speaker Change: Tremendous campaign that.
It's going on just we were just finishing the initial results I think I said it had been.
Speaker Change: Barry.
Speaker Change: Just ahead of what we had expected, but it is primarily a wholesale business.
Speaker Change: That being said, we think that there is a big opportunity here to start exploring the presentation of the brands.
Speaker Change: Its own environment. So for that reason, we have selected a few new locations.
Speaker Change: 2%.
Speaker Change: And one of them is in Melrose.
Speaker Change: In Los Angeles.
Speaker Change: Hollywood.
Speaker Change: It's an incredible location great corner.
Speaker Change: Tremendous traffic both cars and.
Speaker Change: Foot traffic and we think that it's going to be a phenomenal presentation for the brand and we are doing some selecting some other locations and.
Speaker Change: In key European cities, where we think that the brands, it's going to be well represented and will represent what what this whole lifestyle is for the brand.
Speaker Change: To attract that.
Speaker Change: Younger consumer, but also we don't see it as an exclusive young consumer type of product, we think that everybody will find what they're looking for in that store.
Speaker Change: So.
Speaker Change: This is not going to be a major expansion of stores you noticed that we are planning budget.
But we will consider opening strategically.
Speaker Change: To assess as the brand continues to develop we are working on marketing neutralized working.
Speaker Change: Very hard on the whole marketing campaign, and how we think about per setting.
Speaker Change: Brands.
Speaker Change: She is working on collaborations and so forth.
Speaker Change: And we will keep you informed when we have more to say, but you know.
Speaker Change: Overall, it's just it's all happening.
Speaker Change: Actual numbers are very good.
Speaker Change: We think that the product is right on.
Speaker Change: Reception from our wholesale customers has been very very positive and the two events that I mentioned during my prepared remarks that nikolaj, let an incredible incredible number one to really make this story known.
Also capitalizing on the Hill.
Speaker Change: History of our company and the experience that this company has.
Speaker Change: And then on category.
Speaker Change: Which is remarkable.
Speaker Change: Having discovered a strong Washington at the time.
Speaker Change: So.
Speaker Change: Just that not only that but you know just the.
Speaker Change: Creativity, there was displayed into this two events and showing how the product is being treated.
Speaker Change: Now what.
Speaker Change: A major change and sustainability.
So we're going to bring into the industry.
Speaker Change: It was really very compelling and people were just blown away with the level of innovation that was displayed during the two events.
Speaker Change: So all of that is a big way to really tell the story.
Speaker Change: Got tremendous coverage I think that there were I don't know, how many articles, but Miocene newspapers.
Speaker Change: TB.
Speaker Change: Programs all feature everything that was happening in both Milan and sure.
Speaker Change: So I'll stop there with respect to your second question.
Speaker Change: The special dividend.
Speaker Change: Just I think your question was more about share repurchases and Youre right. We don't have you know on an open call for share repurchase.
Speaker Change: You know that we will continue to be opportunistic in the way, we use capital and I think that we have proven that.
Speaker Change: Last five years.
Speaker Change: A lot of a lot of.
Speaker Change: Funds have been used to really reward shareholders and we believe strongly on that.
Speaker Change: And our board is completely.
Speaker Change: At the forefront of this and we think that.
Speaker Change: So far we have to use the capital in a very.
Speaker Change: Smart way and strategic.
Speaker Change: And the great thing is that we have plenty of capacity so that.
Speaker Change: We have very strong balance sheet I think as Mark has said just when you think about our debt.
Speaker Change: Just even.
Speaker Change: If you consider the convertible bonds that we just exchanged in the last few months.
Speaker Change: And you put that against our cash.
Speaker Change: At the end of the year.
Speaker Change: Just you were talking about.
Speaker Change: Nominal.
Speaker Change: Talking about less than $100 million.
Speaker Change: Of net debt. So the balance sheet is very strong and Thats why the board was encouraged and excited about declaring a special dividend.
Speaker Change: Great. Good luck for the rest of the year.
Speaker Change: Yeah. Thank you Eric.
Speaker Change: One moment for our next question please.
Speaker Change: Yeah.
Speaker Change: One moment.
It comes from the line of gas.
Speaker Change: B Riley Securities. Please proceed.
Speaker Change: Good afternoon, gentlemen, congrats on a stellar quarter and a great year.
Speaker Change: Maybe just mark us too.
Maybe used Q1 to drill down a little bit.
Speaker Change: <unk> questions about the operating margin.
Speaker Change: It would appear relative to last year, where the.
Speaker Change: Adjusted operating margin was 30 bps.
Speaker Change: There's probably a 250 to 300 variants.
Speaker Change: Year over year.
Speaker Change: If you can maybe just give us anything about where that's coming from in terms of the gross margin where the COVID-19.
Speaker Change: It's probably like a $25 million to $30 million swing. So any help there would be appreciated.
Speaker Change: For the question.
Speaker Change: The Q1 guidance some of the key initiatives.
That we have talked about benefit. The later part of the year first of all we have guests seems in outerwear I will think.
Speaker Change: Although benefit mostly the second half, we reckon Poland transaction as we talked about before close.
Speaker Change: Later part after Q1, and we will have a relatively minimal impact compared to the rest of the year.
Speaker Change: Carlos and I talked about it also in the prepared remarks, if you look at the timing of the shipments in Europe.
Speaker Change: We expect a headwind of roughly $50 million on revenues on the first quarter.
Speaker Change: Moving from the first quarter into the second and third quarter.
Speaker Change: Mainly due to a delay of product deliveries of <unk> impact I think you talked about but more importantly also in general do two hour delivery cadence that we have and how we plan to deliver the.
Speaker Change: The product to our customers.
Speaker Change: For us the start of our fall winter products.
Speaker Change: If you look at the first quarter as well and <unk> seen it also FX will be a headwind in the first quarter, but also in the second quarter as well if you look at the operating margin I think <unk> seen it yet.
Speaker Change: So our guidance two to minus 238 minus two 8% we've incorporated the impact of the timing of wholesale shipments and we talked about the <unk> impact on freight cost as well.
Speaker Change: That will impact, especially the first and second quarter and thereafter, we expect that impact to moderate and on top of it also now <unk> will close but in terms of the wall.
Speaker Change: <unk> expenses I think that also of course will then impact. The later part of the first quarter and we've incorporated all of these aspects all of these factors in our Q1 guidance.
Speaker Change: Why didn't we.
Speaker Change: Sorry, Jeff I, just wanted to say I think.
Speaker Change: Marcus hit all the key points.
Speaker Change: In the case of Ragen bone, we will pick up one month of their operation and.
Speaker Change: That is a.
Speaker Change: Significant number when it comes to the increase in expenses relative to our expenses and of course, the first quarter is a low productivity quarter for us. So so that it brings an additional level of.
Speaker Change: Pressure on the margin and profitability of that quarter.
Okay.
Speaker Change: You go towards the end of the year of course.
Speaker Change: So youre, saying rag and bone will close here.
Speaker Change: It's probably in the next 10 days and it's not it's going to close on April 25th.
Speaker Change: That explains it.
Speaker Change: No no.
Speaker Change: This numbers on this our expectations assume that it closes.
Speaker Change: Reasonably quickly.
Speaker Change: Okay that makes more sense for them in terms of if theres going to be an expense drag without.
Speaker Change: Commensurate gross margin dollar pickup.
Speaker Change: In Q1.
Speaker Change: Okay. Thank you exactly.
Speaker Change: Thank you Jeff.
Speaker Change: Thank you and with that I will close to Q&A and turn it back to Carlos <unk> for final remarks.
Carlos: Thank you well. Thank you all for your interest in our company.
Carlos: We just closed a great year with a solid performance from our teams on very strong results.
Speaker Change: As we look at the nuclear we are thrilled about our opportunities really.
Carlos: This includes our very exciting dragonborn acquisition.
Carlos: I'm sure you sense our excitement.
And also the multiple growth initiatives that we have identified including guest genes and some of the others. We look forward to updating you on the progress that we make with our clients.
Speaker Change: And we will do this as the year progresses. Thank you and we'll speak with you soon.
Speaker Change: Thank you and this concludes today's conference call. Thank you all for participating and you may now disconnect.