Q4 2024 The North West Co Inc Earnings Call
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This conference is being recorded so it schools, we hope it does as you say.
Daniel G. McConnell: Please be advised that this conference call is being recorded when it's up to the North West Company I am seat fourth quarter results Conference call I would now like to turn the meeting over to Mr. Dan Mcconnell, President and Chief Executive Officer. Mr. Macro. Please go ahead.
Daniel G. McConnell: Okay. Thank you very much and good afternoon, and welcome everybody to the North West Company fourth quarter Conference call, John King, Our Chief Financial Officer joins me here today, So I'm going to start the meeting by asking you John to read our disclosure statement.
John D. King: Thank you Dan.
John D. King: Before we begin today I would remind you that certain information presented may constitute forward looking statements such statements reflect northwest current expectations estimates projections and assumptions.
John D. King: Forward looking statements are not guarantees of future performance and are subject to certain risks, which could cause performance and actual financial results in the future to vary materially from those contemplated.
John D. King: Forward looking statements.
John D. King: Any forward looking statements are current only as of the date. They are made and the company disclaims any intention or obligation to update or revise any forward looking statements whether as a result of new information future results or otherwise other than what's required by law for additional.
John D. King: Information on these risks please see north West's annual information form and MD&A under the heading risk factors.
Alright, Thanks, Jonathan.
None: Let's dive right into it.
None: First quarter consolidated sales were up one 3%.
None: Net earnings increased by two 5%.
None: As mentioned in our Q3 investor call.
None: Software growth was expected as we were coming off very strong results from the previous quarter and also last year.
None: Canadian operations continue to drive results in the fourth quarter with same store sales can you give us an another solid quarter by Northstar.
None: These results process softer performance in our international Division, which for two.
None: 2023.
None: Favorable macroeconomic conditions compared to last year.
None: Related to slower snow sports.
None: Turning to fund dividend benefit in Alaska.
None: These factors combined with lingering inflationary cost pressures affecting demand.
None: With customers prioritizing their spending on food.
None: The last thing for discretionary merchandise spending.
None: Despite these top line results, we are happy with your overall tour.
None: Translating sales and gross profit, which increased six 7% in the fourth quarter.
None: Only one basis point.
None: Great sales.
None: The increase in gross profit rate resulted from several factors.
None: First greater pass through of cost inflation on steel prices compared to last year.
None: Wanted to note that our retail pricing philosophy has remained consistent.
None: And we are continuing to monitor and adjust prices using a balanced approach.
None: Our customers top of mind and striving to maintain margins and sales volume competition and our markets has started to react and we are actively optimizing our key value items to ensure we have the most compelling offerings in terms of value and availability just wanted every new products or services.
None: Second an improvement in execution, but a decrease in both markdowns and shrink.
None: I'm sorry to say.
None: Glenn including higher airline revenue and more warehouse clubs cost U less sales as a result of a store closure earlier in the year.
None: On the other half selling operating and administrative expenses increased six 3% with inflationary headwinds in areas, such as labor costs and the impact of new stores.
None: As the company delivered strong results earnings from operations increased by eight 1% of second quarter and eight 6% for the year.
None: Net earnings increased two 5% for the quarter and six 7% for the year.
None: Alright, So let me unpack these starting with the Canadian operations.
None: Sales in Canada were up 4% of total upstream.
None: On a same store basis.
None: These results are mainly attributed to three factors.
None: First our improving in stock position on our EPS.
Items in our assortment, which has enabled us to capture additional sales.
None: Have been relentless in our focus on operational efficiency with an active focus on maximizing output across our supply chain.
None: Concludes transport mix optimization, which leverages leverages lower transportation costs and ensures our stores always carry stock of essential products to meet our customers' needs.
None: Income support payments were also a factor in the quarter.
None: <unk> benefited from payments to individuals through just curious of Canada to help mitigate the higher cost of living in the north.
None: I don't know these payments flowed at a slower rate, especially when comparing to Q3 of 2023.
And third food inflation continues to be a factor, but to a lesser degree than the previous quarters.
None: In addition to the results in our retail business with Northstar here has benefited from greater third party cargo and passenger charter demand, which contributed to another solid quarter of top and bottom line results.
None: These factors combined with an increase in gross profit rate contributed to the strong results in Canadian operations in the quarter.
None: On the flip side headwinds in our international operations.
None: For the quarter and year. However, our teams did a good job at mitigating the impact of these headwinds through well managed expenses.
None: International sales in the fourth quarter decreased two 6% or down 2% on a same store basis.
None: As I mentioned earlier lower slower overall snack and U S territories and lower PFD in Alaska resulted in a shrinking wallet for our customers, we shall themselves having to make some tough decisions on how to spend their cash.
None: This is evident in our sales results with same store same store fuel sales declining by 9% and general merchandise down 11, 2%.
None: We expect a stronger performance on snack sales as we lap Covid, we expected stronger performance on slab sales as we lap COVID-19 top ups this quarter and although snap sales performance did improve somewhat the momentum was mixed across the different U S territories, where we operate.
None: As noted last quarter. There was also a 60% reduction in the Alaska permanent fund dividend payment. This year from around 30, 302, <unk> hundred dollars per resident there.
None: There were some lingering impact in Q4 from that reduce payments and our customers pulled back their discretionary spending which was reflected in our general merchandise sales performance.
None: Gross profit increased <unk>, 7% compared to last year and expenses were well managed.
None: Increasing only <unk>, 6%, which ultimately resulted in a modest increase in earnings from operations in the quarter.
None: This is a good moment to transition and expand on our consolidated gross profit results.
None: As previously noted gross profit rate decreased by 171 basis points in the quarter.
None: Across both Canadian and international operations inflationary cost pressures on both retail supplier and frames your costs have started to moderate when compared to the rapid inflationary increase in 'twenty one 'twenty two.
None: This change in trend combined with competitive pricing actions has enabled greater pass through inflationary cost compared to last year. So keeping a balanced approach in line with our values of being customer driven.
None: Changes in sales mix.
None: Driven by higher third party cargo and passenger sales at North Star Air coupled with improved aircraft utilization areas also contributed to an increase in gross profit range during the quarter.
Two optimizing controller margins with instrument, although we have sound inventory management.
None: Let me speak briefly about that.
None: Product availability is a top priority for our organization.
None: We have essentially increase the inventory of Canadian operations deliveries lower freight costs as we refine our transport mix and find better ways to make our logistics costs more productive while improving our in stock levels on most relevant our service for our customers.
None: We have also increased inventory on key items in anticipation of increased consumer demand from water settlement payments.
None: During Q4, a small portion of the settlement payments received by customers, although the volume was low.
None: As we anticipate water settlement monies to continue to trickle in over 2024, we have stocked up on relevant general merchandise inventory, mainly concentrated in motorsports inventory such as snow machines.
None: <unk> posted holders given.
None: Given the durability of these items the relevance they have in the communities. We serve we expect good sell throughs of this inventory throughout 2024.
None: Alright, let's talk about expenses for a minute.
None: Throughout 2023 cost control has been a top priority in order to help mitigate inflationary pressures on expenses.
None: She will continue to focus on controllable just touch as possible without compromising customer and employee experience during the quarter in spite of inflationary headwinds in labor costs expenses increased by six 3%, which is lower compared to the six 7% growth rate and gross profit dollars.
None: Interest and income taxes were also headwinds in the quarter as we lapped lower interest and tax expense from last year.
And any net impact net impact of these factors was a two 5% increase in net earnings for the quarter and a six 7% increase for the year.
Okay, I'll wrap up my remarks, right now by providing a brief commentary on our strategic initiatives and our outlook.
None: Our goal is to drive productivity and efficiencies and Mr cost savings optimize margins and reinvest for faster and more sustainable growth all while delivering meaningful ESG outcomes.
None: Our teams continue to uncover untapped opportunities across different areas of the business, including merchandising pricing store labor planning and throughout our supply chain networks, all through a customer driven and labs.
None: As we wrap up the fiscal year, there are tailwind and headwinds that underpins our 2020 for outlook.
None: We expect merchandise and freight inflation will continue to moderate and that our operational excellence efforts will mitigate some of the impacts of escalating selling operating and administrative costs.
None: Having said that we already experienced some moderation of cost increases in the back half of 2023.
None: Somewhat limits opportunities to improve gross profit and expenses rate trends observed this past year.
None: Our strong in stock position will help us Steve do you expect to the increasing consumer demand rising from the first nations drinking water settlement payments in Canada. However, it is very important to note that there have been a minimal number of settlement payments received by claimants and there is uncertainty regarding the timing and amounts of these payments in the period for filing claims was extend.
None: It to March 2024.
None: Additionally, inflation relief payments received by customers in 2023 in Canada are not expected to replicate given the moderating inflationary trends mentioned previously.
None: On the other hand, our international operations in 2024.
None: In 2024, we expect to lap the decline of the pandemic your stimulus in the U S territories observed in 2023 and have normalized snap.
None: Payments, which effectively will reset our comparison baseline.
None: Just to finalize I am excited about the opportunities in Germany in 2024 and beyond as we work to take our business to the next level and live up to our true value creation potential.
None: Thank you very much.
None: I will now open it up for any questions.
None: Thank you.
None: So let me now take questions through the telephone lines with you have a question. Please press star one on the device keep that.
None: The second item you wish to Quinn to cancel the question, Chris tell us too.
None: And the first question is from Mike Olson.
<unk> Securities. Please go ahead.
None: Hey, guys, it's Evan in for Mike.
I just had a few questions.
Evan: So in Canada, you had called out.
Evan: Changes in sales blend and it's one of the factors driving a higher gross profit rate.
Evan: Can you explain what that favorable blend wise. It was it just lower wholesale sales or was there something else yes.
None: Yes, Laura wholesales sales overall with the with one of the major impacts of there is also north star Air in.
None: In general merchandise sales.
None: Okay.
None: So I.
None: I guess staying on the topic of North Star Air is there still room.
None: For it to contribute more or are you getting close to maxing out your third party.
None: Cargo and passenger capacity.
None: It's run pretty efficiently, we don't we don't expect.
None: Suitable growth.
None: Know that better over the next.
None: Couple of quarters now we think it is.
None: Yes.
None: Okay great.
None: So.
In terms of that.
None: The drinking water Sullivan I know, it's difficult for you guys to know.
None: You mentioned it.
In the outlook statement in on the call.
None: I think you mentioned on the call that you expect.
None: Payments to continue to trickle in through FY 'twenty four.
None: But can.
None: Can you give us any sense as win win.
None: Spectation is for those to ramp up or to accelerate.
Is it in the second half of this year or is it in 2025 order.
None: But I'd say late 'twenty, four Wouldnt surprise me and into 'twenty five, but it's it's something that.
None: We don't have a scientific answer for you Unfortunately are exactly.
None: Kind of projection as to when that might be but I would say later later 'twenty four and even trickling into 25 years.
None: It's kind of where our heads are at right now.
None: Okay. Thanks.
None: Is there any update that you can give us on that.
None: <unk>.
None: On the expected timing of the payments from <unk>.
None: Oh settlement.
No no not at all.
None: We don't have any any insights that we can share on that at this point in the sector.
None: It's anybody's guess at this point we expect.
None: Probably to hear more as time goes on but right now we have a we don't have any.
None: Any more information that we've offered.
Okay.
John D. King: One for John.
John D. King: As for the debt.
John D. King: <unk> minimum tax legislation.
John D. King: Can you maybe give us.
John D. King: Yes.
John D. King: Arrange or like a ball.
John D. King: Ballpark estimate of the percentage of sales.
John D. King: Sure.
John D. King: Earnings from operations debt debt.
John D. King: Headcount for international from those three areas. So the came in Barbados and VDI combined.
John D. King: Evan I think I'm going to hold off on giving you an estimate on that for now.
John D. King: We did put some.
John D. King: Disclosure in our outlook and in our financial statements, but it is.
Operator: ? ? ? ? ? ? ? ? ? ? ? ? ? ? This conference is being recorded, the call is being recorded. Welcome to the North West Company Inc. Fourth Quarter Results Conference Call. I would now like to turn the meeting over to Mr. Dan McConnell, President and Chief Executive Officer. Mr. McConnell, please go ahead.
John D. King: It's more directional I'm, saying listen global.
John D. King: <unk> is out there there will be an impact.
Don't expect.
John D. King: It's hard to tell right now when that is going to come into play and as as the rules and things get firmed up then we'll provide some more guidance on the impact but.
John D. King: I guess I would.
John D. King: Summarize that by saying as well.
Daniel G. McConnell: Okay, thank you very much, and good afternoon, and welcome everybody to the North West Company fourth quarter conference call. John King, our financial officer, joins me here today, so I'm going to start the meeting by asking you, John, to read our disclosure statement. Thank you, Dan.
We've identified the three markets. So they are.
John D. King: There are an important part of our business is all stores are but in the whole context of northwest.
John D. King: No it's not.
John D. King: You have to take that in with the materiality of the size of the company.
John D. King: Before we begin today, I remind you that certain information presented may constitute forward-looking statements. Such statements reflect Northwest's current expectations, estimates, projections, and assumptions. These forward-looking statements are not guarantees of future performance and are subject to certain risks, which could cause performance and actual financial results in the future to vary materially from those contemplated in the forward-looking statements. Any forward-looking statements are current only as of the date they are made, and the company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future results, or otherwise, other than what's required by law.
None: Okay great.
None: Okay. Thanks very much.
None: Thank you and the next question is from Mr. Stephen Macleod BMO capital markets. Please go ahead.
None: Yeah.
Stephen MacLeod: Thank you good afternoon guys.
Stephen MacLeod: Just a couple of more good afternoon, just a couple a couple of follow up questions here.
Stephen MacLeod: Just.
Stephen MacLeod: Maybe starting with <unk>.
Stephen MacLeod: Gross margin is when we saw gross margin kind of come back nicely.
Stephen MacLeod: As expected in the quarter.
Stephen MacLeod: It sounds like from your.
Stephen MacLeod: From your outlook commentary.
Stephen MacLeod: Like a lot of those prices have been loved that inflation has been passengers I was just wondering if you'd give a little bit color around.
Daniel G. McConnell: For additional information on these risks, please see North West's annual information form, and it's in MD&A under the Heading Risk Factor, were up 1.3%, and net earnings increased by 2.5%. As mentioned in our Q3 investor call, softer growth was expected as we were coming off very strong results from the previous quarter and also last year. Canadian operations continued to drive results in the fourth quarter with same-store sales gains and another solid quarter by North Star Air. These results offset softer performance in our international divisions, which through 2023 face less favorable macroeconomic conditions compared to last year, particularly related to lower SNAP support in general and a lower permanent fund dividend benefit in Alaska. These factors combined with lingering inflationary cost pressures affected demand, with customers prioritizing their spending on food, leaving less income for discretionary general mercantile spending.
Stephen MacLeod: Sort of where you think where you see gross margin kind of settling in as we work through the year.
None: Yes so.
None: I wouldn't say that we pass it all on but definitely.
None: We've passed on more than we had in the past I would say that.
None: We.
None: Wouldn't expect it to be.
None: At the Q4 levels, but more on the annualized more in line with what we have if you were to annualize our margin for the year.
None: Okay. Okay. That's that's helpful.
None: And then and then just understanding the uncertainty around the water settlement payments.
None: You mentioned that volumes are low, but just curious if you'd give a little bit of color of what you're seeing.
None: In markets, where you have seen the settlement payments coming through if there's any sort of color you can provide around what impact that's had on some of those markets.
None: I'm not sure. If this is going to be much help but I can tell you that.
None: We are pleased with the capture that we have.
Daniel G. McConnell: In spite of these mixed top-line results, we were happy with the overall torque we were getting when translating sales into gross profit, which increased 6.7% in the fourth quarter and 171 basis points as a rate to sales. The increase in gross profit rate results from several factors. First, a greater pass-through of cost inflation and retail prices compared to last year. However, it is important to note that our retail pricing philosophy has remained consistent, and we are continuing to monitor and adjust prices using a balanced approach. With our customers at the top of mind and striving to maintain margins in sales volumes, competition in our markets has started to react, and we are actively optimizing our key value items to ensure we have the most compelling offering in terms of value and availability on everyday products and services. Second, an improvement in execution with a decrease in both markdowns and shrink.
None: We've been able to.
None: In the markets that are that has received funding as far as we understand the funding at this point.
Daniel G. McConnell: And third, a shift in sales blend including higher airline revenue and lower warehouse club to cost you less sales as a result of a store closure earlier in the year. On the other hand, selling, operating, and administrative expenses increased 6.3% with inflationary headwinds in areas such as labor costs and the impact of new stores. As a whole, the company delivered strong results. Earnings from operations increased by 8.1% for the quarter and 8.6% for the year. Net earnings increased 2.5% for the quarter and 6.7% for the year. Sales in Canada were up 4% in total and 3.7% on a same-store basis. These results are mainly attributed to three factors.
None: Hopefully that helps you.
None: Right, Yeah, I think Directionally I have no that's yes that's helpful.
None: Not much different than what we would expect but yes, that's certainly helpful.
And then I know with last quarter with the Q3 results you kind of gave some directional guidance for Q4.
None: I know that was sort of onetime in nature and you didn't provide any Q1 commentary, but just wondering if there's something you're able to give a little bit color around on that one quarter looking ahead to the basis no.
None: No no.
None: No I don't but I did I did that last quarter only because.
Was just trying to caution the market that we.
None: We had such a strong third quarter and typically our fourth quarter was.
None: His stronger than the third quarter, but I just wanted to caution the market that that might not be the case, given the strength of the third quarter. So if it was yes. It was.
None: It was an anomaly that's why I tried to give a bit of a heads up but it's not something that we're looking to do on a forward going basis.
None: Yes, no. Okay that makes sense, that's kind of how are you.
None: Figure it out.
Okay.
None: Thats great. Thanks, Dan Thanks, John appreciate it alright, Thank you have a great day.
Speaker Change: Thank you. So there are no further questions registered at this time I would now like to turn the meeting back over to Mr. Johnny Mac Hummel. Please go ahead.
Speaker Change: Okay, well. Thank you operator, and thank you for all those that have joined US This afternoon and.
Speaker Change: We will look forward to speaking with you again for our Q1 call.
None: Thank you. The conference has now ended please disconnect your lines at this time. Thank you for your participation.
Daniel G. McConnell: First, our improving in-stock position on our key items in our store, which has enabled us to capture additional sales. We have been relentless in our focus on operational efficiency with an active focus on maximizing output across our supply chain. This includes transport mix optimization, which leverages lower seamless transportation costs and ensures our stores always carry stock of essential products to meet our customers' needs.
Daniel G. McConnell: Second, income support payments were also a factor in the quarter as our customers benefited from payments to individuals through Indigenous Services Canada to help mitigate the higher costs of living in the North. However, as a note, these payments flowed at a slower rate, especially when compared to Q3 of 2023. Third, food inflation continued to be a factor, but to a lesser degree than previous quarters.
None: Yeah.
Daniel G. McConnell: In addition to the results in our retail business, Northstar Air benefited from greater third-party cargo and passenger charter demand, which contributed to another solid quarter of top and bottom line results. These factors, combined with an increase in gross profit rate, contributed to the strong results in Canadian operations during the quarter. On the flip side, headwinds in our international operations dampened results for the quarter and year. However, our teams did a good job of mitigating the impacts of these headwinds through well-managed expenses. International sales in the fourth quarter decreased 2.6% and were down 2% on a same-store basis.
Daniel G. McConnell: As I mentioned earlier, lower overall SNAP in U.S. territories and lower PFD in Alaska resulted in a shrinking wallet for our customers, who found themselves having to make some tough decisions on how to spend their cash. This is evident in our sales results, with same-store food sales declining by 0.9% and general merchandise down 11.2%. We expected stronger performance on SNAP sales as we lapped COVID, and although SNAP sales performance did improve somewhat, the momentum was mixed across the different U.S. territories where we operate. As noted last quarter, there was also a 60% reduction in the Alaska Permanent Fund dividend payment this year, from around $3,300 to $1,300 per resident.
Daniel G. McConnell: There were some lingering impacts in Q4 from that reduced payment, and our customers pulled back their discretionary spending, which was reflected in our general merchandise sales performance. Gross profit increased 0.7% compared to last year, and expenses were well-managed, increasing only 0.6%, which ultimately resulted in a modest increase in earnings from operations in the quarter. This is a good moment to transition and expand on our consolidated gross profit results. As previously noted, the gross profit rate increased by 171 basis points in the quarter.
Daniel G. McConnell: Across both Canadian and international operations, inflationary cost pressures on both retail supplier and freight carrier costs have started to moderate when compared to the rapid inflationary increase in Q1 and Q2. This change in trend, combined with competitive pricing actions, has enabled a greater pass-through of inflationary costs compared to last year, while keeping a balanced approach in line with our values of being customer-driven. Changes in the sales mix, driven by higher third-party cargo and passenger sales at Northstar Air, coupled with improved aircraft utilization rates, also contributed to an increase in gross profit during the quarter. To optimize and control our margins, it is instrumental that we have sound inventory management, so let me speak briefly about that. Availability is a top priority for our organization.
Daniel G. McConnell: We have intentionally increased sealant inventory in Canadian operations to leverage lower freight costs as we refine our transport mix and find better ways to make our logistics costs more productive while improving our in-stock levels on the most relevant assortment for our customers. We have also increased inventory on key items in anticipation of increased consumer demand from water settlement payments. During Q4, a small portion of these settlement payments was received by customers, although the volume was low.
Daniel G. McConnell: As we anticipate water settlement monies to continue to trickle in throughout 2024, we have stocked up on relevant general merchandise inventory, mainly concentrated in motorsports inventory, such as snow machines, ATVs, boats, and motors. Given the durability of these items and the relevance they have in the communities we serve, we expect good sell-through of this inventory throughout 2024. All right, now let's talk about expenses for a minute. Throughout 2023, cost control will be a top priority in order to help mitigate inflationary pressures on expenditure. Our teams continue to focus on controllables as much as possible without compromising the customer and employee experience. During the quarter, in spite of inflationary headwinds and labor costs, expenses increased by 6.3%, which is lower compared to the 6.7% growth rate in gross profit dollars. Interest and income taxes were also headwinds in the quarter, as we lapped lower interest and tax expense from last year. The net impact of these factors was a 2.5% increase in net earnings for the quarter and a 6.7% increase for the year.
Daniel G. McConnell: Okay, I'll wrap up my remarks right now by providing a brief commentary on our strategic initiatives and our outlooks. Our goal is to drive productivity and efficiency gains for cost savings, optimize margins, and reinvest for faster and more sustainable growth, all while delivering meaningful ESG outcomes. Our teams continue to uncover untapped opportunities across different areas of the business, including merchandising, pricing, store labor planning, and throughout our supply chain network, all through a customer-driven lens. As we wrap up the fiscal year, there are tailwinds and headwinds that underpin our 2024 outlook. We expect that merchandise and freight inflation will continue to moderate and that our operational excellence efforts will mitigate some of the impacts of escalating selling and operating administrative costs.
Daniel G. McConnell: Having said that, we already experienced moderation of cost increases in the back half of 2023, which somewhat limits opportunities to improve the gross profit and expenses rate trends observed this past year. However, our strong in-stock position will help us meet the expected increase in consumer demand arising from the First Nations drinking water settlement payments in Canada. However, it is very important to note that there have been a minimal number of settlement payments received by claimants, and there is uncertainty regarding the timing and amount of these payments as the period for filing claims was extended to March 2024. Additionally, inflation relief payments received by customers in 2023 in Canada are not expected to be replicated, given the moderating inflationary trends mentioned previously.
Operator: On the other hand, our international operations in 2024, we expect a lap to decline in the pandemic air stimulus in U.S. territories observed in 2023 and have normalized SNAP and PFD payments, which effectively will reset our comparison baseline. To finalize, I'm excited about the opportunities and journey ahead in 2024 and beyond as we work to take our business to the next level and live up to our true value creation potential. Thank you very much, and I will now open it up for any questions. Thank you, so we will now take questions through the telephone lines. If you have a question, please press star 1 on your device keypad. At any time, if you wish to cancel a question, please press start.
Evan Frantzeskos: And the first question is from Michael Van Aelst from City Securities. Please go ahead. Hey guys, it's Evan on behalf of Mike.
Daniel G. McConnell: I just had a few questions. So, in Canada, you'd call them changes in sales when that's one of the factors. Please explain what that favorable blend is.
Daniel G. McConnell: Lower wholesale sales is overall one of the major impacts of. There's also North Star Air and general merchandise sales. Okay. So I guess. Staying on the topic of North Star Air, is there still room for it to contribute more, or are you getting close to maxing out your third party? Cargo on 5.
Daniel G. McConnell: It's run pretty efficiently, but we don't expect considerable growth out of that banner over the next couple of quarters. I think it's, yeah. Okay, great. So in terms of the drinking water solvent, I know it's difficult for you guys to know, as you mentioned in the outlook statement and on the call. But I think you mentioned on the call that you expect it to continue to trickle in throughout 2024, when the expectation is for it to ramp up or accelerate in the second half of this year. I'd say late 24 wouldn't surprise me and into 25, but it's something that we don't have a scientific answer for you, unfortunately, or an exact..., kind of projection as to when that might be, but I would say later 24 and even trickling into 25 is... That's kind of where our heads are at right now.
Daniel G. McConnell: And. Is there any update that you can give us on... None at all. We don't have any insights that we can share on that at this point. In fact, it's anybody's guess.
Daniel G. McConnell: We expect probably to hear more as time goes on, but right now, we don't have any more information that we've offered. Okay, and maybe one for John.
John D. King: It's for the potential minimum tax legislation. You may give us, you know, a range or like a ballpark estimate of the percentage of sales or account for international business from those three areas, so the Cayman Islands, Barbados, and BDI combined. Evan, I think I'm going to hold off on giving you an estimate on that for now. We did put some disclosure in our outlook and in our financial statements, but it's more directional in saying, listen, the global minimum tax bill or two is out there. There will be an impact. We don't expect...
John D. King: It's hard to tell right now when that's going to come into play, and as the rules and things get firmed up, then we'll provide some more guidance on the impact. But I guess I would. Summarize that by saying, as well, we've identified the three markets, so they're an important part of our business, as all stores are, but in the whole context of the North West, you know, it's not, you have to take that in with the materiality.
Operator: Okay, great. Okay, thanks very much. Thank you. And the next question is from Mr. Stephen MacLeod, BMO Capital Markets. Please go ahead. A couple of follow-up questions here, maybe starting with the gross margin.
Stephen MacLeod: We saw gross margin come back nicely, as expected, in the quarter. It sounds like, from your outlook commentary, a lot of that inflation has been passed through. Can you give a bit of a color around where you see gross margin settling in as we work through the year? Yeah, so... I wouldn't say that we've passed it all on, but definitely, we've passed on more than we had in the past.
Daniel G. McConnell: I would say that I wouldn't expect it to be at the Q4 levels, but more in line with what we have if you were to annualize our margin for the year. Okay, okay. That's helpful. And then just understanding the uncertainty around the water settlement payments, you mentioned that volumes are low, but just curious if you could give a little bit of color on what you're seeing in markets where you have seen the settlement payments coming through, if there's any sort of color you can provide around what impact it's had in some of those markets. I'm not sure if this is going to be much help, but I can tell you that... We' Hopefully, that helps. Right, yeah, I mean, directionally, yeah, no, that's helpful.
Daniel G. McConnell: Not much different than what we would expect, but yeah, no, that's certainly helpful. And then I know with last quarter, with the Q3 results, you kind of gave some directional guidance for Q4. You know, I know that was sort of one-time in nature, and you didn't provide any Q1 commentary, but I was just wondering if it's something you're able to give a little bit of color around on that one-quarter look-ahead type basis. No, I don't, but I did that last quarter only because I was just trying to caution the market that we had such a strong third quarter and, typically, our fourth quarter was, is stronger than the third quarter, but I just wanted to caution the market that that might not be the case, given the strength of the third quarter.
Daniel G. McConnell: So if it was an anomaly, that's why I tried to give a bit of a heads up, but it's not something that we're looking to do on a forward-going basis. Yeah, no. Okay, that makes sense. That's kind of how I figured it out.
Stephen MacLeod: Okay, that's great. Thanks, Dan. Thanks, John. I appreciate it. All right. Thank you. Have a great day. Thank you. So there are no further questions registered at this time. I would now like to turn the meeting back over to Mr. Daniel McConnell. Please go ahead. Okay, well, thank you, operator, and yeah, thank you to all those that have joined us this afternoon. We will look forward to speaking with you again on our Q1 call. Thank you. The conference has now ended. Please disconnect your lines at this time, for your own good budget.