Q4 2024 Sleep Number Corp Earnings Call
Speaker Change: Welcome to Sleep Number's Q4 and full year 2024 Earnings Conference call.
Speaker Change: All lines have been placed in a listen only mode until the question and answer session. Today's call is being recorded. If anyone has objections, we may disconnect at this time. I would like to introduce Dave Schwannis, Vice President of Finance and Investor Relations. Thank you. You may begin.
Speaker Change: Good afternoon and welcome to the Sleep Number Corporation fourth quarter 2024 earnings conference call. Thank you for joining us. I am Dave Schwannis, Vice President of Finance and Investor Relations.
Speaker Change: With me today are Shelly Ibach, our Chair, President, and CEO , and Francis Lee, our Chief Financial Officer.
Speaker Change: This telephone conference is being recorded and will be available on our website at sleepnumber.com. Please refer to the details in our news release to access the replay.
Speaker Change: Please also refer to our news release for a reconciliation of certain non-GAAP financial measures and supplemental financial information included in the news release or that may be discussed on this call.
Speaker Change: The primary purpose of this call is to discuss the results of the fiscal period just ended. However, our commentary and responses to your questions may include certain forward-looking statements.
Speaker Change: These forward-looking statements are subject to a number of risks and uncertainties outlined in our earnings news release and discussed in some detail in our annual report on Form 10K and other periodic filings with the SEC.
The company's actual future results may vary materially.
Shelly Ibach: I will now turn the call over to Shelly for her comments.
Shelly Ibach: Good afternoon everyone. My sleep IQ score was 84 last night.
Speaker Change: As noted in our press release, the independent directors of our board have unanimously selected Linda Finley as the company's new president and CEO . She will join Sleep Number in that role on April 7th.
Speaker Change: The independent directors and I are confident that Linda is the right leader to guide the company through its next phase of growth. She will conduct the next earnings call and will share more about her background, perspectives on sleep number and the past forward.
Speaker Change: During today's call, I'll share highlights of our 2024 performance including important progress we made during the year to restructure the business and position it for accelerating returns as the industry recovers.
Speaker Change: Then, Francis will provide further details on our fourth quarter in full year 2024 financial results.
Speaker Change: The mattress industry faced an extremely challenging demand environment throughout 2024, a trend that has persisted into the first quarter of 2025.
Speaker Change: U.S. mattress volumes for 2024 were estimated at 24 million units, which is the lowest level since 2015.
Speaker Change: Historically low consumer sentiment and high interest rates have led to the lowest housing turnover in 30 years.
Inflation and economic uncertainty continue to suppress discretionary spending
Speaker Change: Driven by our team's high level of commitment and disciplined execution, we further advanced our operating model transformation throughout 2024, delivering a 43% year-over-year increase in fourth quarter adjusted Yvada.
Speaker Change: For the full year, Adjustity Bada was $120 million in line with the midpoint of our most recent guidance.
Speaker Change: Key drivers of this performance included growth margin rate improvement and operating cost reductions in 2024 that were nearly double our initial targets.
Speaker Change: Q4 Gross Margin reached 59.9% at the top end of our internal expected range, resulting in a full year gross margin at 59.6%
Speaker Change: 190 basis points increase over 2023 in nearly double hour improvement target of 100 basis points that we communicated at the beginning of the year.
Speaker Change: The ongoing improvement in operational efficiency resulted in a $28 million year-over-year reduction in fourth-quarter operating expenses, with a 2024 full-year cost reduction of $88 million.
Speaker Change: Q4 net sales declined 12% year-over-year to $377 million, slightly below our expectations.
Speaker Change: We remain focused on maximizing Nevada in generating cash, which requires demand driving trade-offs in this difficult consumer environment.
Speaker Change: We reduced our media spend by 18% year-over-year in the fourth quarter and 9% for the full year bringing an effect to 2019 levels.
Speaker Change: Despite these pressures, this discipline approach enabled us to reach the midpoint of our IBA guidance highlighting the financial resilience we've enabled in this week's market.
Speaker Change: The consumer environment took a sharp downward turn in late January 2025 with consumer sentiment dropping further in February .
Speaker Change: Consumer sentiment is now 12 points lower than it was a year ago. Consumer purchasing power also weakened after the Fed held interest rates flat. Potential tariffs were announced and inflation concerns returned.
Speaker Change: Declines were seen across all consumer metrics and demographics with a significant 19% drop in buying conditions for durables.
Speaker Change: As key macro factors, macroeconomic factors like consumer sentiment, housing and purchasing power worsened over the past month, so did search interest in the mattress category, impacting our President's Day event, the largest sales period in the first half of the year.
Speaker Change: In response, our teams have implemented contingency actions throughout the business to protect margin and cash flow, leveraging the robust transformational mechanisms we established over the past year.
Speaker Change: We remain disciplined in managing cost of acquisition, cost of serve, cost of goods and GNA R&D leverage.
Speaker Change: Additionally, we have proactively worked with our bank group to amend our 2025 financial covenants to ensure flexibility in navigating ongoing industry pressure. Francis will share further details shortly.
Speaker Change: While we are certainly not satisfied with our top-line performance in this challenging consumer landscape, we remain focused on optimizing our media and promotional strategies to drive demand and maximize returns.
Speaker Change: Our new leaders in brand segmentation, creative and media are rapidly advancing initiatives that leverage our strong brand equity and loyal customer base.
Speaker Change: Using deep consumer analytics, our teams are refining strategies to optimize engagement, traffic and consideration. We have seen green shoots in the following key initiatives.
Speaker Change: First, we are expanding data-driven efforts to reach consumer segments most likely to purchase now by using personalized content and messaging for higher conversion.
Second, we are leveraging smart, sleeper loyalty.
Speaker Change: Our repeat customers are strong advocates who deeply understand the value of Sleep Number smart beds and are quick to embrace our innovations.
Speaker Change: We are refining our messaging to amplify their voices, enhancing credibility and engagement with new customers.
Speaker Change: Third, we are strengthening our relationship-based selling execution. We have recertified all sleep professionals on our selling process and customer relationship management strategies, supporting a more personalized customer experience and improved conversion.
Speaker Change: In summary, over the past 18 months, we've transformed our operating model to enhance financial resilience in this persistently weak market. These sustainable actions positioned our premium brand and vertically integrated business model for long-term profitable growth once the market recovers.
Speaker Change: We remain disciplined in executing our strategy, focusing on improving efficiency, eliminating waste and driving innovation to deliver value to our customers.
Speaker Change: We are constantly striving for greater agility and response to market conditions and are taking decisive actions to prioritize cash, manage costs, and maintain flexibility. Ensuring Linda has a strong foundation in place to lead the company forward.
Shelly Ibach: As I prepare to retire from my role as president and CEO of Sleep Number, I am billed with gratitude for the passion and commitment of the Sleep Number team, partners and customers who have supported our company's transformational journey over the past 18 years.
Shelly Ibach: We built a beloved brand with industry leading innovations and story experiences that have positioned the company for sustained success.
Shelly Ibach: Sleep Number will always be in my heart, and I know this great team will continue to build a competitively advantage company.
Shelly Ibach: Thank you for your unwavering dedication to our shared purpose and relentless focus on serving our customers.
Shelly Ibach: It has been an honor to build our culture together and improve nearly 16 million lives through higher quality sleep.
Now Francis will provide additional details on our 2024 results.
Thank you.
Francis Lee: We made significant progress toward building a more resilient business model in 2024. We drove a 190 basis point improvement in our gross margin rate for the year, even with greater than planned demand pressure, while also cutting our 2024 operating cost by double our regional targets.
Francis Lee: The important progress we made in these two areas allowed us to offset a majority of the top line pressure for the year, while building a stronger foundation for the business as the industry recovers. [inaudible]
Francis Lee: Now let's turn to a more detailed review of our fourth quarter and full year results.
Francis Lee: 4th quarter net sales of $377 million were down 12% versus last year and approximately 3 percentage points below our expectations.
Francis Lee: As planned, our fourth quarter net sales included one to two points of pressure due to a 5% reduction in stores year over year.
Francis Lee: Our fourth quarter gross margin rate of 59.9% was up 330 basis points versus the prior year and at the high end of the guidance we provided for the quarter. Our gross margin rate for the last six months of the year was over 60%.
Francis Lee: Our fourth quarter gross margin rate increase was driven by the same key drivers we have been highlighting all year including material cost reductions
Ongoing Supplier Negotiations for All Material Components
Francis Lee: and year-over-year cost efficiencies in our home delivery and logistics operations.
Francis Lee: The fourth quarter also benefited from favorable product mix year-over-year.
Francis Lee: We have aggressively executed cost efficiencies across the business to deliver on our adjusted EBITDA commitments.
as we continue to navigate the challenging macro environment.
Francis Lee: We reduced fourth quarter operating expenses by $28 million versus a prior year pre-restructuring
which was well above our expectations for the quarter.
Francis Lee: Fourth quarter operating expense reductions were broad-based including a year-over-year reduction in media spending, lower selling expenses as we benefited from lower score count and labor efficiency and lower R&D spending.
Francis Lee: We recorded an additional $4 million of restructuring costs in the fourth quarter bringing our full year total to $18 million.
Francis Lee: The fourth quarter restructuring costs included buy-out and impairment costs related to the downsizing of our home delivery truck fleet, as well as a buy-out of a few additional store leases.
Francis Lee: These additional restructuring actions allowed us to further reduce our fixed cost structure heading into 2025.
Francis Lee: For the fourth quarter, we generated $26 million of adjusted deba-da [inaudible]
A 43% increase versus the same period last year
Francis Lee: As we drove a 330 basis point increase in our gross margin rate and reduced operating expenses by $28 million more than offsetting the impact of the 12% year over year that sales decline.
Francis Lee: Our 2024 full year results included net sales of $1.68 billion, down 11% versus prior year, with the manned down high single digits for the year.
Francis Lee: Our gross margin rate increased 190 basis points for the year which was well above our original expectations.
Francis Lee: We reduced operating expenses by $88 million or 8% for the year prior to restructuring costs.
Francis Lee: Full-year adjusted EBITDA declined 6% to $120 million, driven by the 11% net sales decline, partially offset by a higher-air gross margin rate and significant operating expense reductions.
Francis Lee: Our full-year adjusted EBITDA margin of 7.1% was up 40 basis points versus the prior year, despite the leverage from the year-over-year net sales decline.
Francis Lee: We also drove $4 million of positive free cash flow for the year, which was up $70 million from the prior year.
Francis Lee: The challenging macro-environment has continued into 2025 and kept pressure on the consumer and related spending for our category. Against this backdrop, our demand year-to-date remains down double digits.
Francis Lee: We have made significant and important progress in reshaping our cost structure over the past two years including significant fixed cost reductions and improving our gross margins. We will continue to transform our business to create greater efficiency while being highly responsive to the dynamic environment.
Francis Lee: We are also working to mitigate and offset impacts of the recently enacted tariffs and are actively monitoring the fluid tariff situation across various scenarios.
Francis Lee: We will use the muscle we have developed over the last two years to drive additional operating efficiencies across the organization this year. This will include an ongoing review of our store fleet, along with opportunities to further reduce both indirect costs and fixed costs across the business.
Francis Lee: Given the weak and dynamic nature of the consumer environment, we have also executed an amendment to our bank agreement to provide additional covenant flexibility through the end of 2025.
Francis Lee: Beginning in 2025, the leverage covenant maximum was set to return to 4.0 times Ebidar through the balance of the bank agreement which expires at the end of 2026.
The amendment extends our net covenant relief.
Francis Lee: which includes a covenant maximum of 4.75 times EBIDAR in Q1 and Q2, 4.5 times for Q3 and 4.35 times for Q4.
Francis Lee: More details regarding the bank amendment can be found in the 8K we filed today.
Francis Lee: Our top priority remains to generate cash to pay down debt and reduce leverage. We will continue to evolve our capital structure to put us in the best position to execute our strategy and deliver accelerating profits as the market recovers. This includes options where currently exploring to restructure our debt this year.
Francis Lee: Given the impending CEO transition, we are not providing a financial outlook for 2025 at this time.
Francis Lee: We want to give Linda the time and flexibility necessary to evaluate our strategies and business trends prior to issuing 20-25 financial guidance at a later date.
Speaker Change: Shelly, as you plan to retire, I want to express my gratitude for your vision and commitment to improving lives through individualizing sleep experiences for the last 18 years.
Speaker Change: You have transformed the business, inspired our teams and created a culture that is dedicated to serving our customers and advancing the mission of sleep number.
Thank you.
With that operator, please open the line for questions.
Speaker Change: At this time, I'd like to remind everyone in order to ask a question, simply press star followed by the number one on your telephone keypad. Our first question will come from the line of Brad Thomas with Keybank Capital Markets. Please go ahead.
Brad Thomas: Hi, thanks, good afternoon, and Shelley, all the best as you move into retirement.
Speaker Change: Francis, I was open to ask you a question on just some of the gross margin.
Speaker Change: puts in takes. You all have done some really good work on improving gross margin, understanding that things are a bit up in the air before Linda joins. Can you just help us think about the runway that you still have and some of the levers that you've been pulling to improve margins?
Speaker Change: Yeah, hi Brad, thanks for the question. As highlighted in my prayer remarks and as we've been indicating all year, we have a robust program in place to examine all of our costs.
and in Q4 we saw some product mix.
Speaker Change: also aiding with that. As we go into next year, we're going to continue.
Speaker Change: to drive the muscle that we have toward relentlessly pursuing cost efficiency and will also benefit from some of the benefits that came in partial year last year that should anniversary into 2025.
and thank you, Brett, for the good wishes.
You're welcome, well deserved [inaudible]
Speaker Change: and then maybe just one more follow up on the big picture here, again, understanding that...
Speaker Change: You know, we'll get more details on thinking about strategies and initiatives a year unfolds here. Is there any more road map, maybe that you could share with us in terms of dynamics like. [inaudible]
Speaker Change: George Leases, where you're on the hook for an opening, or ones that you're thinking of closing, or...
Speaker Change: Products will be hitting the floor as we approach Memorial Day, anything that's kind of locked and loaded on the horizon that almost certainly should happen that we should keep in mind as we think about the quarters ahead here.
Francis Lee: Brad, I think you know, one highlight in Francis alluded to it when he highlighted Mix being a part of the gross margin rate goodness. If you recall, we introduced our climate cool and have focused on our climate series.
we're growing at the top and...
Yeah.
Francis Lee: Losing at the bottom. So, the pressures at the bottom end of our line and...
Francis Lee: and the strength is at the top, and that's good for gross margin rate, but obviously not as broad as it needs to be to be driving our overall performance in this really weak market. But we expect to benefit from...
Francis Lee: that climate theory here in the first three quarters before we even, you know, laugh at the fourth quarter.
Great. Thank you very much.
Speaker Change: Our next question comes from the line of Bobby Griffin with Raymond James. Please go ahead.
Speaker Change: Thank you for taking our questions, and Shelley, we wish you all the best in your retirement. First I wanted to quickly follow up on tariffs. Can you remind us how much of cost of goods sold would be subject to the recently implemented tariffs? And based on what we know today, do you have any pricing actions planned for 2025?
Thank you.
Yeah, thanks, Alejandra. It's nice to talk to you again.
Speaker Change: Obviously the terror situation right now is a highly dynamic situation with the enactment of them happening.
Speaker Change: just yesterday and certainly it's news that we've been aware of and have been examining and putting in place mitigation plans to shift suppliers.
Move production to other companies and other countries. I'm sorry.
Speaker Change: Our largest exposure comes from Mexico, which has about a third of our materials from there. And as a reminder, about 70% of our cost of goods sold relates to material costs.
Speaker Change: Then you also asked about pricing, will be decisive with...
Speaker Change: You know, with pricing and other actions as we, you know, work hard here, we have been and we'll continue to.
you know, mitigate, you know, whatever we
Speaker Change: We can on tariffs and we also know that you know pricing has [inaudible]
Speaker Change: and Impact on the top line, which it's already a really pressured consumer for this discretionary category, so very well aware of that and thinking about it holistically.
Speaker Change: Thank you. That's really helpful. And then maybe just a follow up on the door count rationalization. Is there any carryover impact to 2025 top line that we should keep in mind? And then what are you seeing for a recapture rate in 2024?
Yeah, so...
Speaker Change: Our evaluation of our stores is part of our routine process where we are executing store openings, repositions, remodels and closures.
Speaker Change: Certainly in 2024 we took advantage of some lease renewals, lease expirations that were coming up, as well as opportunities around
around some stores where we experimented with...
Speaker Change: putting more stores in certain markets. And the transfer rate that we've seen on those, we're
Speaker Change: So we'll continue to run our playbook and our routine processes and obviously maximizing store transfer plays into our overall profitability equation.
Okay, thank you so much.
Speaker Change: Our next question comes from the line of Seth Basham with Leadfish Security. Please go ahead.
Hi, good evening. This is Matt McCartney on for Seth.
Congratulations Shelly, I wish you the best in your retirement.
Speaker Change: Just a quick couple of questions here. We see another quarter of outsized declines in the online channel. Just wondering what do you think needs to be done there to get online back to at least parity with the store channel?
Speaker Change: Yeah, it's really coming from the low end. I highlighted already that you know we've had pressure on the low end and and that's uh
You.
Smart Bad at $7.99 and it did $7.99, and it did $7.99, and it did $7.99.
Speaker Change: to make a difference in our online sales. So, just an example, you know, we keep...
Speaker Change: You know, iterating in this, you know, changing in weak consumer market that's, you know, pretty, pretty inefficient and that's a...
Speaker Change: That's the biggest pressure, is that the opening price point of the line, the classic series.
Speaker Change: But we liked the margin that we're getting at the high end of the line that ultimately need both.
Speaker Change: Great, okay, the kind of segues into my next question then. So just on an average revenue per smart bed, it saw some really nice growth there in the quarter. Just wondering if you could break down the drivers there between mix and promotion, that had an impact, and then y'all look going forward.
Yep, you're right. It's primarily mixed.
Speaker Change: Flat, you're over year as a percent to net sales, but it does come out a little differently in how we apply those promotions, but we manage the, you know, entire bucket, you know, fairly flat.
The, yeah, the driver is definitely the series.
Moving up the line, we're having success with...
Speaker Change: You know, a higher income customer who, you know, is very interested in benefit driven products and doesn't have the same level of purchasing power pressure that the opening price point customer does.
It's very helpful. Appreciate it.
Speaker Change: Our next question comes from the line of Peter Keith with Piper Samler, please go ahead.
Peter Keith: Hi. Thank you very much. And Shelly also wish you the best in retirement. Quickly, is wondering, did you guys give a demand comp for Q4?
Speaker Change: and I'll maybe just take a moment to touch on that further.
Speaker Change: The consumer's pressure, Halazine's frozen, the environment's very inefficient.
and were continuously making trade-offs between...
Speaker Change: Optimizing Profit and Investing in Demand. And Q4s is an example of that. We reduced our media spend Peter by 18% year over year and we saw modest leverage on our media spend in the quarter.
Speaker Change: and we recognize that, you know, other competitors may be spending in this more inefficient environment, you know, for us, you know, we're prioritizing, you know, the profit.
Speaker Change: and that's where we're focused right now. Obviously, we're not satisfied with where our demand is, but with our vertical model, we can see the consumer.
Speaker Change: Efficiency or lack of efficiency very quickly and we're making decisions.
Speaker Change: that tied to delivering the ROI and you know for us and in
Speaker Change: in the fourth quarter. You know, we missed ourselves expectation by a few points, but we were able to deliver the midpoint of our Eva Da in the quarter and drove a growth margin rate at the top end of our expectations.
Speaker Change: That's a good example of the kind of trade-offs that we're making right now in this pretty tough marketplace.
Speaker Change: Okay, I appreciate all of the feedback there. And maybe just looking forward to kind of appreciate it, it's a very tough environment. What I guess are there certain metrics that you're looking at when you could.
to begin to pivot back towards.
Speaker Change: Trying to take share or just implicitly increasing media spend than rather than decreasing. Are you waiting for what you feel is a good environment or is it a certain leverage ratio? What are you kind of looking forward to give you those indications to spend more?
Speaker Change: and definitely waiting for a more efficient environment. Now, I'll just share the context of where the category is at right now.
Speaker Change: in the in a normalized macro environment, the industry benefits from about 25% organic category traffic.
A year ago, that organic traffic was running at 12 percent.
In the back half of 2024, it dropped to 8%.
Speaker Change: and when we see volatility like we did at the end of January , early February , that can go down as low as 4%.
Speaker Change: and so, you know, when you think about the organic traffic returning to 20%, that's, you know, 10 to 12% efficiency improvement.
Speaker Change: So, you know, we are looking for a more efficient market so that we, you know, can, as we're driving to optimize our profits.
Um, we're not-
Speaker Change: Just sitting here waiting, we're certainly iterating every single quarter and we can see it really quickly.
Speaker Change: and a good example would be in this first quarter, you know, early January , you know, through the Martin Luther King event, you know, we were seeing the improvement that we were expecting and hoping for, and you know, and then there was a big shift at the end of January , early February , and...
Speaker Change: You know, at of course the wrong time is we're heading into the president's [inaudible]
Event.
Speaker Change: and you know we respond quickly but you can't always you know you don't always have as much
Speaker Change: Runway, as you wish you did, that we're ready and in the meantime, we're testing and iterating into key initiatives like I described in my prepared remarks.
Speaker Change: and finding the places where we can drive more demand but doing so in an efficient way. And we've got some good green shoots and we need to scale them.
Speaker Change: Okay, I appreciate that feedback and maybe the last question I appreciate the transparency on the current quarter. It actually aligns exactly with what we're hearing out there, but I think you're being a little more transparent in other companies.
Speaker Change: There's things in recent weeks even gotten worse. In other words, the light is a back half in February worse than the front half. Everyone's trying to figure out if this change
a temporary or maybe a sign of things deteriorating.
Speaker Change: Well, February , you know, inclusive of the president's event, which fell pretty late in the month, you know, I bet it does.
Speaker Change: It really comprises the most important telling period for the quarter. So, you know, how February goes, you know, that's how the quarter goes. So, I think it's too soon to say yet about March.
Speaker Change: But, you know, February was the presidency event and, you know, we're obviously disappointed in it.
Okay, very good. Thank you so much.
You bet.
Speaker Change: Again to ask a question, press star one on your telephone keypad. Our next question will come from the line of Dan Silverstein with UBS. Please go ahead.
Good afternoon and thanks for taking our questions.
Speaker Change: Our first question is, you know, understanding the company is waiting to provide a detailed full-year outlook. Could you at least help us with any expectations you have around industry demand this year to frame the potential scenarios for the business?
Speaker Change: and then on that note, if mattress demand remains soft this year, how much further opportunity is there to drive expense savings just given the large absolute amount you guys have realized over the past two years? Thank you.
Speaker Change: Yeah, thanks for the question on industry demand, you know what we, you know what we had heard prior to.
Speaker Change: You know, February was said everyone was expecting some industry recovery, maybe a couple, you know, two, three points this year with the majority of the pressured front half and the growth coming in the back half.
Speaker Change: It's really how similar to how we were thinking about...
The Shape of the Year.
Speaker Change: I suspect someone were to report cast at this point, they're going to look at this first quarter and first cast with a little more pressure and perhaps be more conservative on the full year as a result.
Bye.
Speaker Change: Dan, I can answer your question too, as we look toward the rest of the year, you know, we've been managing our cost structure progressively over the past couple of years.
Speaker Change: We noted, for example, our team member count, for example, is down 34% versus 2021.
Speaker Change: and our two-year cost reductions totaled $173 million across $23 and $24.
Speaker Change: where we took out about half of that being fixed costs, about $85 million of costs in 2023, $88 million in 2024, and those have been broad-based across the business.
Speaker Change: We're going to continue to operate with additional contingency plans to the extent additional actions are required and that's certainly a muscle we built and
and his friends. Thank you very much.
Speaker Change: Yep, that's across the four categories. It's the entire business where we're focused. And, you know, it really led, it speaks to the...
Speaker Change: Commitment and the innovation of the team and led to us, you know, delivering a far-figure number with more pressure top line here in 2024 and we expect to continue to perform in that manner.
Thank you. And maybe just one follow-up for Francis.
with the amendments to the credit agreement.
Speaker Change: Is there a revenue base that you can share as a minimum level for 2025 to stay within the new covenants at the end of the year?
Speaker Change: I know last quarter it was like 1.7 billion or so, any update there or this will come later.
Speaker Change: This will come later, I think it's probably tied into guidance, but I'll share that as we arrived at the covenant levels, we factored in our own expectations for the year and it'll provide appropriate cushion for us in 2025.
Speaker Change: Thank you and I would just I would just add to that Dan keep in mind that when we when we said the 1.7 [inaudible]
Speaker Change: That was based on the covenants returning to that 4.0 times EBITDA, our level for 25 so we haven't graduating down but now the covenant level by the end of 25 would be.
Speaker Change: 4.35, 3.5 times EBITDA, so obviously the revenue number would be lower than the 1.7.
Thank you to stay with some of the covenants. Yep.
Speaker Change: And that will conclude our question and answer session. I'll turn the call back over to the company for an enclosing comment.
Speaker Change: Thank you for joining us today. We look forward to sharing our Q1 2025 results with you late next month.
Sleep well and dream big.
Speaker Change: This concludes today's call. Thank you all for joining. You may now disconnect.