Q2 2026 Tilly's Inc Earnings Call

September 2, 2026

Speaker #1: Greetings, and welcome to the Tilly's second quarter 2026 earnings conference call. At this time, all parties are in a listen-only mode. A question-and-answer session will follow the formal presentation.

Operator: Greetings, and welcome to the Tilly's Q2 2026 earnings conference call. At this time, all parties are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. It is now my pleasure to introduce your host, Gar Jackson with Investor Relations. Thank you. You may begin.

Speaker #1: If anyone should require operator assistance, please press *0 on your telephone keypad. It is now my pleasure to introduce your host, Gar Jackson, with Investor Relations.

Speaker #1: Thank you. You may begin.

Speaker #2: Thank you. Good afternoon, and welcome to Tilly's fiscal 2026 second quarter earnings call. Nate Smith, President and Chief Executive Officer, and Mike Henry, Executive Vice President and Chief Financial Officer.

Gar Jackson: Thank you. Good afternoon, and welcome to Tilly's fiscal 2026 second quarter earnings call. Nate Smith, President and Chief Executive Officer, and Mike Henry, Executive Vice President and Chief Financial Officer, will discuss the company's business and operating results, followed by a Q&A session with analysts. For a copy of Tilly's earnings press release, please visit the investor relations section of the company's website at tillys.com. From the same section, shortly after the conclusion of the call, you will also be able to find a recorded replay of this call for the next 30 days. Certain forward-looking statements will be made during this call that reflect Tilly's judgment and analysis only as of today, 2 September 2026, and actual results may differ materially from current expectations based on various factors affecting Tilly's business. Accordingly, you should not place undue reliance on these forward-looking statements.

Gar Jackson: Thank you. Good afternoon, and welcome to Tilly's fiscal 2026 Q2 earnings call. Nate Smith, President and Chief Executive Officer, and Mike Henry, Executive Vice President and Chief Financial Officer, will discuss the company's business and operating results, followed by a Q&A session with analysts. For a copy of Tilly's earnings press release, please visit the investor relations section of the company's website at tillys.com. From the same section, shortly after the conclusion of the call, you will also be able to find a recorded replay of this call for the next 30 days. Certain forward-looking statements will be made during this call that reflect Tilly's judgment and analysis only as of today, 2 September 2026, and actual results may differ materially from current expectations based on various factors affecting Tilly's business. Accordingly, you should not place undue reliance on these forward-looking statements.

Speaker #2: We'll discuss the company's business and operating results, followed by a Q&A session with analysts. For a copy of Tilly's earnings press release, please visit the investor relations section of the company's website at tillys.com.

Speaker #2: From the same section, shortly after the conclusion of the call, you will also be able to find a recorded replay of this call for the next 30 days.

Speaker #2: Certain forward-looking statements will be made during this call that reflect Tillys' judgment and analysis only as of today, September 2, 2026, and actual results may differ materially from current expectations, based on various factors affecting Tillys' business.

Speaker #2: Accordingly, you should not place undue reliance on these forward-looking statements. For a more thorough discussion of the risks and uncertainties associated with any forward-looking statements, please see the disclaimer regarding forward-looking statements that is included in our fiscal 2026 second quarter earnings release, which is furnished to the SEC today on Form 8-K, as well as our other filings with the SEC referenced in that disclaimer.

Gar Jackson: For a more thorough discussion of the risks and uncertainties associated with any forward-looking statements, please see the disclaimer regarding forward-looking statements that is included in our fiscal 2026 second quarter earnings release, which was furnished to the SEC today on Form 8-K, as well as our other filings with the SEC referenced in that disclaimer. Today's call will be limited to one hour, and I will include a Q&A session after our prepared remarks. I now turn the call over to Nate.

Gar Jackson: For a more thorough discussion of the risks and uncertainties associated with any forward-looking statements, please see the disclaimer regarding forward-looking statements that is included in our fiscal 2026 Q2 earnings release, which was furnished to the SEC today on Form 8-K, as well as our other filings with the SEC referenced in that disclaimer. Today's call will be limited to one hour, and I will include a Q&A session after our prepared remarks. I now turn the call over to Nate.

Speaker #2: Today's call will be limited to one hour, and I will include a Q&A session after our prepared remarks. I now turn the call over to Nate.

Speaker #3: Thanks, Gar, and thanks to all for joining us today. Good afternoon. A couple of weeks ago, I completed my first full year at Tillys, and I can say without a doubt that it's an exciting time to be part of the team.

Nate Smith: Thanks, Gar, and to all for joining us today. Good afternoon. A couple of weeks ago, I completed my first full year at Tillys, and I can say without a doubt that it's an exciting time being part of the team. The company has once again executed with discipline, delivering our third straight quarter of double-digit comp sales growth in the second quarter, with that momentum holding strong through back to school in July and August. In reflecting on this past year, we have clearly demonstrated a consistency in execution that we can be proud of. I'd like to acknowledge some important achievements that speak to the turnaround momentum that we have been building over the last year.

Nate Smith: Thanks, Gar, and to all for joining us today. Good afternoon. A couple of weeks ago, I completed my first full-year at Tillys, and I can say without a doubt that it's an exciting time being part of the team. The company has once again executed with discipline, delivering our third straight quarter of double-digit comp sales growth in the Q2, with that momentum holding strong through back to school in July and August. In reflecting on this past year, we have clearly demonstrated a consistency in execution that we can be proud of. I'd like to acknowledge some important achievements that speak to the turnaround momentum that we have been building over the last year.

Speaker #3: The company has once again executed with discipline, delivering our third straight quarter of double-digit comp sales growth in the second quarter, with that momentum holding strong through back-to-school in July and August.

Speaker #3: In reflecting on this past year, we have clearly demonstrated a consistency in execution that we can be proud of. I'd like to acknowledge some important achievements that speak to the turnaround momentum we have been building over the last year.

Speaker #3: First, we have now produced four consecutive quarters and 13 consecutive months of year-over-year comparable net sales growth, including our 12.1% comp sales increase in the recently completed second quarter, and our 14.6% comp sales increase in fiscal August to begin the third quarter.

Nate Smith: First, we have now produced four consecutive quarters and 13 consecutive months of year-over-year comparable net sales growth, including our 12.1% comp sales increase in the recently completed second quarter and our 14.6% comp sales increase in fiscal August to begin the third quarter. Next, we have now delivered seven consecutive quarters of year-over-year product margin improvement. We are not only seeing stronger full price sales overall, but we are also seeing significantly improved average unit retails on aged clearance items from the impact of the AI price optimization investment we made last year. We've been delivering higher sales on lower inventory levels so far this year, further aiding our product margin gains. Third, we have now posted five consecutive quarters of year-over-year profit improvement on the bottom line.

Nate Smith: First, we have now produced four consecutive quarters and 13 consecutive months of year-over-year comparable net sales growth, including our 12.1% comp sales increase in the recently completed Q2 and our 14.6% comp sales increase in fiscal August to begin the Q3. Next, we have now delivered seven consecutive quarters of year-over-year product margin improvement. We are not only seeing stronger full price sales overall, but we are also seeing significantly improved average unit retails on aged clearance items from the impact of the AI price optimization investment we made last year. We've been delivering higher sales on lower inventory levels so far this year, further aiding our product margin gains. Third, we have now posted five consecutive quarters of year-over-year profit improvement on the bottom line.

Speaker #3: Next, we have now delivered seven consecutive quarters of year-over-year product margin improvement. We are not only seeing stronger full-price sales overall, but we are also seeing significantly improved average unit retails on aged clearance items from the impact of the AI price optimization investment we made last year.

Speaker #3: We've been delivering higher sales on lower inventory levels so far this year, further aiding our product margin gains. Third, we have now posted five consecutive quarters of year-over-year profit improvement on the bottom line.

Speaker #3: This has been driven not only by improved merchandise assortments, tighter inventory planning and management, and sharper pricing decisions, but also through significant efficiencies in store and distribution labor management, and stable home office expenses as sales have grown.

Nate Smith: This has been driven not only by improved merchandise assortments, tighter inventory planning and management, and sharper pricing decisions, but also through significant efficiencies in store and distribution labor management, and stable home office expenses as sales have grown. Finally, the collection of these improvements has now returned us to profitability on a trailing four quarters basis, as well as on a year-to-date basis for fiscal 2026. It is just under $2 million of profit over the past four quarters and $400,000 of profit on a year-to-date basis. These are important milestones cleared in our turnaround story as we work towards producing what we currently believe will be our first profitable fiscal year since 2022. We are encouraged by our progress, but we are not finished. We intend to keep executing and building upon the momentum we have generated.

Speaker #3: And finally, the collection of these improvements has now returned us to profitability on a trailing four quarters basis, as well as on a year-to-date basis for fiscal '26.

Speaker #3: It's just under $2 million of profit over the past four quarters, and $400,000 of profit on a year-to-date basis, but these are important milestones cleared in our turnaround story as we work towards producing what we currently believe will be our first profitable fiscal year since 2022.

Speaker #3: We are encouraged by our progress, but we're not finished. We intend to keep executing and building upon the momentum we've generated. From a merchandising perspective in the second quarter, all departments but footwear posted double-digit percentage comp sales gains.

Nate Smith: From a merchandising perspective in Q2, all departments but footwear posted double-digit percentage comp sales gains. Performance was once again strong across both proprietary and third-party brands in apparel, with few exceptions. These results reflect an assortment that was well positioned for our critical back-to-school season. In terms of store performance, all geographic markets posted comp sales gains in Q4. Strong conversion units per transaction and average sale growth fueled the performance in our stores. We believe this demonstrates the strength of our assortment and the effectiveness of our customer engagement. In terms of store real estate, we opened one new store in each of late July and early August, and we currently expect to open one additional store in mid-November.

Speaker #3: Performance was once again strong across both proprietary and third-party brands in apparel, with few exceptions. These results reflect an assortment that was well positioned for a critical back-to-school season.

Speaker #3: In terms of store performance, all geographic markets posted comp sales gains in the fourth quarter. Strong conversion, units per transaction, and average sale growth fueled the performance in our stores.

Speaker #3: We believe this demonstrates the strength of our assortment and the effectiveness of our customer engagement. In terms of store real estate, we opened one new store in each of late July and early August, and we currently expect to open one additional store in mid-November.

Speaker #3: We also closed one store in mid-July and currently expect to close one store in each of late September and December, and two more at the end of January, to finish the year with 218 total stores in operation.

Nate Smith: We also closed one store in mid-July and currently expect to close one store in each of late September and December, and two more at the end of January to finish the year with 218 total stores in operation. In fiscal 2027, we are tentatively targeting to open five to eight new stores, depending on available opportunities and our ability to achieve appropriate lease economics. Our digital business grew by 20.9% in Q2. Expanding our presence across the platforms our customers use most, including TikTok and other emerging channels, has been an important evolution of our online capabilities. We believe our improved focus on social media platforms has helped reach new audiences based on our TikTok follower count, nearly doubling to over 325,000, and our one-year active loyalty program membership growing by 20% to 4.6 million members since this time last year.

Speaker #3: In fiscal 2027, we are tentatively targeting to open five to eight new stores, depending on available opportunities and our ability to achieve appropriate lease economics.

Speaker #3: Our digital business grew by 20.9% in the second quarter. Expanding our presence across the platforms our customers use most, including TikTok and other emerging channels, has been an important evolution of our online capabilities.

Speaker #3: We believe our improved focus on social media platforms has helped us reach new audiences, as evidenced by our TikTok follower count nearly doubling to over 325,000, and our one-year active loyalty program membership growing by 20% to 4.6 million members since this time last year.

Speaker #3: We need both stores and online performing well to reach our profitability goals, and we are encouraged by our customers' response to our product offerings and content across all touchpoints.

Nate Smith: We need both stores and online performing well to reach our profitability goals, and we are encouraged by our customers' response to our product offerings and content across all touch points. In terms of technology investments, I already noted our investment in AI price optimization that was launched in October last year. We are also about to launch an AI-driven smart inventory allocation tool to improve accuracy in terms of units, sizing, and balance across our fleet of stores and online. We will also implement RFID in our stores in early 2027, starting with footwear, to improve customer experience and in-store efficiency relating to size availability. These investments clearly indicate that we are moving forward with confidence and conviction as we continue to invest in the future of our business while we continue building our turnaround momentum.

Speaker #3: In terms of technology investments, I already noted our investment in AI price optimization that was launched in October last year. We are also about to launch an AI-driven smart inventory allocation tool to improve accuracy in terms of units, sizing, and balance across our fleet of stores and online.

Speaker #3: We will also implement RFID in our stores in early 2027, starting with footwear, to improve customer experience and in-store efficiency relating to size and availability.

Speaker #3: These investments clearly indicate that we are moving forward with confidence and conviction, as we continue to invest in the future of our business while building our turnaround momentum.

Speaker #3: In closing, I want to once again thank and recognize our stores, field management, distribution centers, and home office teams for everything they've accomplished together this past year.

Nate Smith: In closing, I want to once again thank and recognize our stores, field management, distribution centers, and home office teams for everything they've accomplished together this past year. There is still work ahead of us as we work toward returning to historical levels of profitability, but we are encouraged by the progress we've made and confident in the direction of the business. We look forward to updating you as we continue to execute against our long-term plan. I will now turn the call over to Mike to walk through the details of our fiscal 2026 second quarter operating performance and to introduce our third quarter outlook.

Nate Smith: In closing, I want to once again thank and recognize our stores, field management, distribution centers, and home office teams for everything they've accomplished together this past year. There is still work ahead of us as we work toward returning to historical levels of profitability, but we are encouraged by the progress we've made and confident in the direction of the business. We look forward to updating you as we continue to execute against our long-term plan. I will now turn the call over to Mike to walk through the details of our fiscal 2026 Q2 operating performance and to introduce our Q3 outlook.

Speaker #3: There is still work ahead of us as we work toward returning to historical levels of profitability, but we are encouraged by the progress we've made and confident in the direction of the business.

Speaker #3: We look forward to updating you as we continue to execute against our long-term plan. I will now turn the call over to Mike to walk through the details of our fiscal 2026 second quarter operating performance and to introduce our third quarter outlook.

Speaker #2: Thanks, Nate. Details regarding our operating results for the second quarter of fiscal 2026, compared to last year's second quarter, were as follows: Total net sales were $163.5 million, an increase of $12.3 million, or 8.1%.

Michael Henry: Thanks, Nate. Details regarding our operating results for the second quarter of fiscal 2026 compared to last year's second quarter were as follows. Total net sales were $163.5 million, an increase of $12.3 million or 8.1%. Total comparable net sales, including both physical stores and e-commerce, increased by 12.1%, marking our third consecutive quarter of double-digit comparable net sales increases. Total net sales from physical stores increased by 5.1%, despite operating 12 fewer stores, or 5.2% less than at the end of last year's second quarter, and represented 78.9% of total net sales for the quarter, compared to 81.1% last year. E-commerce net sales increased by 20.9% and represented 21.1% of total net sales for the quarter, compared to 18.9% last year. Gross margin, including buying, distribution, and occupancy expenses, improved by 300 basis points to 35.5% of net sales from 32.5% of net sales last year.

Mike Henry: Thanks, Nate. Details regarding our operating results for the Q2 of fiscal 2026 compared to last year's Q2 were as follows. Total net sales were $163.5 million, an increase of $12.3 million or 8.1%. Total comparable net sales, including both physical stores and e-commerce, increased by 12.1%, marking our third consecutive quarter of double-digit comparable net sales increases. Total net sales from physical stores increased by 5.1%, despite operating 12 fewer stores, or 5.2% less than at the end of last year's Q2, and represented 78.9% of total net sales for the quarter, compared to 81.1% last year. E-commerce net sales increased by 20.9% and represented 21.1% of total net sales for the quarter, compared to 18.9% last year. Gross margin, including buying, distribution, and occupancy expenses, improved by 300 basis points to 35.5% of net sales from 32.5% of net sales last year.

Speaker #2: Total comparable net sales, including both physical stores and e-commerce, increased by 12.1%, marking our third consecutive quarter of double-digit comparable net sales increases. Total net sales from physical stores increased by 5.1%, despite operating 12 fewer stores, or 5.2% less than at the end of last year's second quarter.

Speaker #2: And represented 78.9% of total net sales for the quarter, compared to 81.1% last year. E-commerce net sales increased by 20.9% and represented 21.1% of total net sales for the quarter, compared to 18.9% last year.

Speaker #2: Gross margin, including buying, distribution, and occupancy expenses, improved by 300 basis points to 35.5% of net sales, from 32.5% of net sales last year.

Speaker #2: Product margins improved by 140 basis points compared to last year, primarily due to improved full-price selling of inventories that were more current in terms of aging, and improved productivity from the selling of clearance items.

Michael Henry: Product margins improved by 140 basis points compared to last year, primarily due to improved full price selling of inventories that were more current in terms of aging and improved productivity from selling of clearance items. Buying, distribution, and occupancy costs improved by 160 basis points due to carrying these costs against higher net sales this year. Lower occupancy costs associated with our reduced store count were largely offset by higher e-com shipping expenses associated with e-com net sales growth. Total SG&A expenses were $49.9 million, or 30.5% of net sales, compared to $46.4 million, or 30.7% of net sales last year. SG&A improved by 20 basis points as a percentage of net sales due to carrying these expenses against higher net sales this year. Bonus accruals associated with our significantly improved operating performance exceeding budgeted sales and earnings targets added $1.5 million to the quarter.

Mike Henry: Product margins improved by 140 basis points compared to last year, primarily due to improved full price selling of inventories that were more current in terms of aging and improved productivity from selling of clearance items. Buying, distribution, and occupancy costs improved by 160 basis points due to carrying these costs against higher net sales this year. Lower occupancy costs associated with our reduced store count were largely offset by higher e-com shipping expenses associated with e-com net sales growth. Total SG&A expenses were $49.9 million, or 30.5% of net sales, compared to $46.4 million, or 30.7% of net sales last year. SG&A improved by 20 basis points as a percentage of net sales due to carrying these expenses against higher net sales this year. Bonus accruals associated with our significantly improved operating performance exceeding budgeted sales and earnings targets added $1.5 million to the quarter.

Speaker #2: Buying, distribution, and occupancy costs improved by 160 basis points due to carrying these costs against higher net sales this year. Lower occupancy costs associated with our reduced store count were largely offset by higher e-com shipping expenses associated with e-com net sales growth.

Speaker #2: Total SG&A expenses were $49.9 million, or 30.5% of net sales, compared to $46.4 million, or 30.7% of net sales last year. SG&A improved by 20 basis points as a percentage of net sales due to carrying these expenses against higher net sales this year.

Speaker #2: Bonus accruals associated with our significantly improved operating performance exceeding budgeted sales and earnings targets added $1.5 million to the quarter. Marketing expenses increased by $0.8 million in support of our net sales growth.

Michael Henry: Marketing expenses increased by $0.8 million in support of our net sales growth. Store payroll and related benefits increased by $0.6 million, but improved by 70 basis points as a percentage of net sales. Pre-tax income was $8.5 million or 5.2% of net sales, compared to $3.1 million or 2.1% of net sales last year. Income tax expense was $86,000 or 1% of pre-tax income, compared to an income tax benefit of $41,000 or 1.3% of pre-tax income last year. Both years' income tax results include the continuing impact of a full non-cash deferred tax asset valuation allowance. Net income was $8.4 million, or $0.27 per diluted share, compared to $3.2 million, or $0.10 per diluted share last year, representing an improvement of $5.2 million or $0.17 per diluted share compared to last year's second quarter.

Mike Henry: Marketing expenses increased by $0.8 million in support of our net sales growth. Store payroll and related benefits increased by $0.6 million, but improved by 70 basis points as a percentage of net sales. Pre-tax income was $8.5 million or 5.2% of net sales, compared to $3.1 million or 2.1% of net sales last year. Income tax expense was $86,000 or 1% of pre-tax income, compared to an income tax benefit of $41,000 or 1.3% of pre-tax income last year. Both years' income tax results include the continuing impact of a full non-cash deferred tax asset valuation allowance. Net income was $8.4 million, or $0.27 per diluted share, compared to $3.2 million, or $0.10 per diluted share last year, representing an improvement of $5.2 million or $0.17 per diluted share compared to last year's Q2.

Speaker #2: Store payroll and related benefits increased by $0.6 million, but improved by 70 basis points as a percentage of net sales. Pre-tax income was $8.5 million, or 5.2% of net sales, compared to $3.1 million, or 2.1% of net sales last year.

Speaker #2: Income tax expense was $86,000, or 1% of pre-tax income, compared to an income tax benefit of $41,000, or 1.3% of pre-tax income last year.

Speaker #2: Both year's income tax results include the continuing impact of a full non-cash deferred tax asset valuation allowance. Net income was 8.4 million dollars, or 27 cents per diluted share, compared to 3.2 million dollars, or 10 cents per diluted share last year, representing an improvement of 5.2 million dollars, or 17 cents per diluted share, compared to last year's second quarter.

Speaker #2: As Nate noted earlier, this represents our fifth consecutive quarter of year-over-year profit improvement, and we have now returned to profitability on a trailing four-quarters basis for the first time since the end of fiscal 2022. We are also profitable on a year-to-date basis for the first half of fiscal 2026.

Michael Henry: As Nate noted earlier, this represents our fifth consecutive quarter of year-over-year profit improvement, and we have now returned to profitability on a trailing four quarters basis for the first time since the end of fiscal 2022. We are profitable on a year-to-date basis for the first H1 of fiscal 2026. On our debt-free balance sheet, we ended the Q2 with total cash and investments of $62.2 million, an increase of $11.5 million compared to $50.7 million at the end of last year's Q2. We had no borrowings at any time, with available undrawn borrowing capacity of $63.3 million under our asset-backed credit facility at the end of the Q2. Total balance sheet inventory decreased by 1.3% compared to the end of last year's Q2, while being several percentage points more current within 90 days aged than a year ago.

Mike Henry: As Nate noted earlier, this represents our fifth consecutive quarter of year-over-year profit improvement, and we have now returned to profitability on a trailing four quarters basis for the first time since the end of fiscal 2022. We are profitable on a year-to-date basis for the first H1 of fiscal 2026. On our debt-free balance sheet, we ended the Q2 with total cash and investments of $62.2 million, an increase of $11.5 million compared to $50.7 million at the end of last year's Q2. We had no borrowings at any time, with available undrawn borrowing capacity of $63.3 million under our asset-backed credit facility at the end of the Q2. Total balance sheet inventory decreased by 1.3% compared to the end of last year's Q2, while being several percentage points more current within 90 days aged than a year ago.

Speaker #2: On our debt-free balance sheet, we ended the second quarter with total cash and investments of $62.2 million, an increase of $11.5 million compared to $50.7 million at the end of last year's second quarter.

Speaker #2: We had no borrowings at any time, with available undrawn borrowing capacity of $63.3 million under our asset-backed credit facility at the end of the second quarter.

Speaker #2: Total balance sheet inventory decreased by 1.3% compared to the end of last year's second quarter, while being several percentage points more current within 90 days aged than a year ago.

Speaker #2: Looking to the third quarter of fiscal 2026, total comparable net sales for fiscal August, ended August 29, 2026, increased by 14.6% relative to the comparable period of last year, marking our 13th consecutive month of comparable net sales growth.

Michael Henry: Looking to the Q3 of fiscal 2026, total comparable net sales for fiscal August, ended 29 August 2026, increased by 14.6% relative to the comparable period of last year, marking our 13th consecutive month of comparable net sales growth. Based on current and historical trends, we estimate the following ranges for the Q3 of fiscal 2026. Net sales of approximately $150 million to $155 million, translating to a comparable net sales increase range of 10% to 14% respectively, which, if achieved, would represent our fourth consecutive quarter of double-digit percentage comp sales growth. Product margins to be slightly improved relative to last year's Q3. SG&A of approximately $47 million to $49 million, excluding any potential non-cash asset impairment charges.

Mike Henry: Looking to the Q3 of fiscal 2026, total comparable net sales for fiscal August, ended 29 August 2026, increased by 14.6% relative to the comparable period of last year, marking our 13th consecutive month of comparable net sales growth. Based on current and historical trends, we estimate the following ranges for the Q3 of fiscal 2026. Net sales of approximately $150 million to $155 million, translating to a comparable net sales increase range of 10% to 14% respectively, which, if achieved, would represent our fourth consecutive quarter of double-digit percentage comp sales growth. Product margins to be slightly improved relative to last year's Q3. SG&A of approximately $47 million to $49 million, excluding any potential non-cash asset impairment charges.

Speaker #2: Based on current and historical trends, we estimate the following ranges for the third quarter of fiscal 2026: net sales of approximately $150 million to $155 million.

Speaker #2: Translating to a comparable net sales increase range of 10 to 14 percent, respectively, which, if achieved, would represent our fourth consecutive quarter of double-digit percentage comp sales growth.

Speaker #2: Product margins are expected to be slightly improved relative to last year's third quarter. SG&A is projected to be approximately $47 to $49 million, excluding any potential non-cash asset impairment charges.

Speaker #2: An estimated effective income tax rate in the low to mid-teens as a percentage of pre-tax income, with a continuing impact of a full non-cash valuation allowance on our deferred tax assets.

Michael Henry: An estimated effective income tax rate in the low to mid-teens as a percentage of pre-tax income, with a continuing impact of a full non-cash valuation allowance on our deferred tax assets. Net income in the range of approximately $2.2 million to $3.7 million, respectively, to net sales, and earnings per diluted share of $0.07 to $0.12, respectively, based on approximately 32 million diluted shares. This compares to a net loss of $1.4 million or $0.05 per share during last year's Q3. These results would represent a sixth consecutive quarter of year-over-year profit improvement for us. We expect to end the Q3 with 240 total stores after one new store opening and one closure during the quarter. This represents a net decrease of 10 stores or 4.3% compared to the end of last year's Q3.

Mike Henry: An estimated effective income tax rate in the low to mid-teens as a percentage of pre-tax income, with a continuing impact of a full non-cash valuation allowance on our deferred tax assets. Net income in the range of approximately $2.2 million to $3.7 million, respectively, to net sales, and earnings per diluted share of $0.07 to $0.12, respectively, based on approximately 32 million diluted shares. This compares to a net loss of $1.4 million or $0.05 per share during last year's Q3. These results would represent a sixth consecutive quarter of year-over-year profit improvement for us. We expect to end the Q3 with 240 total stores after one new store opening and one closure during the quarter. This represents a net decrease of 10 stores or 4.3% compared to the end of last year's Q3.

Speaker #2: Net income in the range of approximately $2.2 million to $3.7 million, respectively, to net sales and earnings per diluted share of $0.07 to $0.12, respectively, based on approximately 32 million diluted shares.

Speaker #2: This compares to a net loss of $1.4 million, or $0.05 per share, during last year's third quarter. These results would represent a sixth consecutive quarter of year-over-year profit improvement for us.

Speaker #2: We expect to end the third quarter with 240 total stores, after one new store opening and one closure during the quarter. This represents a net decrease of 10 stores, or 4.3%, compared to the end of last year's third quarter.

Speaker #2: We expect to end the third quarter with total liquidity of approximately $125 million or more, comprised of cash and investments of approximately $62 to $65 million, and available undrawn borrowing capacity of approximately $63 million under our asset-backed credit facility.

Michael Henry: We expect to end the Q3 with total liquidity of approximately $125 million or more, comprised of cash and investments of approximately $62 million to $65 million, and available undrawn borrowing capacity of approximately $63 million under our asset-backed credit facility. Operator, we will now go to our Q&A session.

Mike Henry: We expect to end the Q3 with total liquidity of approximately $125 million or more, comprised of cash and investments of approximately $62 million to $65 million, and available undrawn borrowing capacity of approximately $63 million under our asset-backed credit facility. Operator, we will now go to our Q&A session.

Speaker #2: Operator will now go to our Q&A session.

Speaker #1: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star 1 on your telephone keypad.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Our first question comes from the line of Matt Koranda with Roth Capital Partners, LLC. Please proceed with your question.

Speaker #1: A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys.

Speaker #1: Our first question comes from the line of Matt at LLC. Please proceed with your question.

Speaker #3: Hey, guys. Thanks, and nice job. I guess the August comp that you cited, approaching about 15%, is accelerating off of the 12% you put up in the second quarter, despite the tougher comparison that you've got going on a year-over-year basis.

Matt Koranda: Hey, guys. Thanks. Nice job. I guess the August comp that you cited approaching about 15%, accelerating off of the 12% you put up in Q2, despite the tougher comparison that you got going on a year-over-year basis. I guess maybe just speak to that acceleration that you're seeing, what's working in the assortment, any incremental benefit from the TikTok shops initiatives or other kind of drivers that are driving that acceleration.

Speaker #3: So, I guess maybe just speak to that acceleration that you're seeing. What's working in the assortment? Any incremental benefit from the TikTok Shops initiatives or other kinds of drivers that are contributing to that acceleration?

Speaker #4: Well, really, as we mentioned, almost everything was double-digit positive in the second quarter, and that continued on through August. All departments but footwear were up double digits.

Michael Henry: Well, really everything, as we mentioned, almost everything was double-digit positive in Q2, and that continued on through August. All departments but footwear were up double digits. It was broad-based across geographies. Really doing well just about anywhere you look. Really nice to see that kind of momentum continue all the way through the back-to-school season.

Mike Henry: Well, really everything, as we mentioned, almost everything was double-digit positive in Q2, and that continued on through August. All departments but footwear were up double digits. It was broad-based across geographies. Really doing well just about anywhere you look. Really nice to see that kind of momentum continue all the way through the back-to-school season.

Speaker #4: It was broad-based across geographies, so really doing well just about anywhere you look. Really nice to see that kind of momentum continue all the way through the back-to-school season.

Speaker #3: Okay. And then I noticed, I mean, inventory is really tight, and good performance there. Curious how you feel about sort of the assortment and the setup going into the fall period here.

Matt Koranda: Okay. I noticed, inventory really tight and good performance there. Curious how you feel about sort of the assortment and the setup into the fall period here as you gear up for holiday. Are we in chase mode? How should we think about sort of inventory movement in the back half of the year as you sort of set up for the holiday season?

Speaker #3: As you gear up for holiday, are we in chase mode? How should we think about sort of inventory movement in the back half of the year as you sort of set up for the holiday season?

Speaker #4: Yeah, good question, Matt. So, we feel very strongly about how we're set up. Throughout the back-to-school season, we were largely speaking where we needed to be.

Nate Smith: Yeah, good question, Matt. We feel very strongly about how we are set up. Throughout the back-to-school season, we were largely speaking where we needed to be. There was a little bit of a gap in footwear, and we chased some there, but going into fall and obviously heading into holiday, we feel good about where we are at. The team has done a nice job, obviously managing the inventories, where sales were up 8% on inventory, down 1% in dollars in Q2, which is a great sign. We feel good about Q2, and we feel strongly about how we are sorted and how we are preparing for Q3 and holiday. But overall, we continually sharpen our assortment. We like where we are at. We were well positioned for back to school, but our CMO and team are continually sharpening the assortment every single week.

Speaker #4: There was a little bit of a gap in footwear, and we chased some there. But going into fall, and obviously heading into holiday, we feel good about where we're at.

Speaker #4: The team has done a nice job. Obviously, managing the inventories or sales were up 8% on inventory down 1% in dollars in Q2, which is a great sign.

Speaker #4: So, we feel good about Q2, and we feel strongly about how we're sorted and how we're preparing for Q3 and holiday. But overall, we continually sharpen our assortment.

Speaker #4: So, we like where we're at. We feel well-positioned for back-to-school, but our CMO and team are continually sharpening the assortment every single week.

Speaker #3: Okay. And then maybe just one or two more from me here. I guess the inflection in the business and the acceleration that you're seeing in comp—has that changed the discussion with some of the vendors that, historically, you'd wanted to bring into the store? Some of the brands that you were looking at bringing in but hadn't been able to before?

Matt Koranda: Okay, then maybe just one or two more for me here. I guess the inflection in the business and the acceleration that you are seeing in comp, has that changed the discussion with some of the vendors that historically you had wanted to bring into the store, some of the brands that you were looking at bringing in but had not been able to before? Maybe just speak to where the assortment sits in terms of the brand portfolio that is in existence now and what you have available to you with the better performance here.

Speaker #3: I mean, maybe just speak to where the assortment sits in terms of the brand portfolio that is in existence now, and what you have available to you with the better performance here.

Speaker #4: Yeah, it's a good question. I don't think the inflection in the business has a bearing on those conversations. I mean, we are a strong retailer, and the brands that we are speaking to understand what we have to offer as far as customer base and our store experience.

Nate Smith: Yeah, it is a good question. I do not think the inflection of the business has a bearing on those conversations. We are a strong retailer, and the brands that we are speaking to understand what we have to offer as far as a customer base and our store experience. Generally speaking, the conversations we have with brands we want to bring in revolves more around, is it a great fit for Tillys, as opposed to the business is reaching an inflection point and now we are ready to engage with Tillys. We feel good about where we are at. There are some brands on our radar that we are actively going after, and we feel good about possibly bringing those in.

Speaker #4: So, generally speaking, the conversations we have with brands we want to bring in revolve more around whether it's a great fit for Tilly's, as opposed to the business reaching an inflection point and now we're ready to engage with Tilly's.

Speaker #4: So we feel good about where we're at. There are some brands on our radar that we are actively going after, and we feel good about possibly bringing those in.

Speaker #3: Okay. And then maybe just last one on what's built into the guidance from an operating leverage standpoint. I guess maybe, Mike, I would have assumed with the really strong positive comp that you're guiding for the third quarter, that maybe we'd get a little bit of leverage out of SG&A.

Matt Koranda: Okay. Then maybe just last one on what is built into the guidance from an operating leverage standpoint. I guess maybe, Mike, I would have assumed with the really strong positive comp that you are guiding for the third quarter, that maybe we would get a little bit of leverage out of SG&A, but it does not look like that is built in, at least at the midpoint. So maybe just speak to what are the things holding it back. I would assume maybe bonus accrual, but any other items to think about that are kind of keeping SG&A sort of growing in lockstep with sales?

Matt Koranda: Okay. Then maybe just last one on what is built into the guidance from an operating leverage standpoint. I guess maybe, Mike, I would have assumed with the really strong positive comp that you are guiding for the Q3, that maybe we would get a little bit of leverage out of SG&A, but it does not look like that is built in, at least at the midpoint. So maybe just speak to what are the things holding it back. I would assume maybe bonus accrual, but any other items to think about that are kind of keeping SG&A sort of growing in lockstep with sales?

Speaker #3: But it doesn't look like that's built in, at least at the midpoint. So maybe just speak to what are the, I guess, what are the things holding it back?

Speaker #3: I would assume maybe bonus accrual, but are there any other items to think about that are kind of keeping SG&A sort of growing in lockstep with sales?

Speaker #4: SG&A showed a slight improvement as a percentage of sales relative to last year's third quarter. Similarly to what you saw in the second quarter, we were 20 basis points better.

Michael Henry: SG&A should have a little bit of improvement as a percent of sales relative to last year's Q3. Similarly to what you see in the Q2, we were 20 basis points better. Bonus accruals are coming into that, right? Given that we have returned to profitability and generating strong product margins and everything, beating our targets significantly. That is an expense that has not existed in our model for four years. It is a non-comparable if you think about that. As long as we can continue to execute the way that we have been executing, you might see similar sorts of movements from bonus in particular, that would maybe add a little more to SG&A than what you would typically expect.

Mike Henry: SG&A should have a little bit of improvement as a percent of sales relative to last year's Q3. Similarly to what you see in the Q2, we were 20 basis points better. Bonus accruals are coming into that, right? Given that we have returned to profitability and generating strong product margins and everything, beating our targets significantly. That is an expense that has not existed in our model for four years. It is a non-comparable if you think about that. As long as we can continue to execute the way that we have been executing, you might see similar sorts of movements from bonus in particular, that would maybe add a little more to SG&A than what you would typically expect.

Speaker #4: Bonus accruals are coming into that, right, given that we've returned to profitability and are generating strong product margins, with everything beating our targets significantly. That's an expense that hasn't existed in our model for four years.

Speaker #4: So it's a non-comparable, if you think about that. And so, as long as we can continue to execute the way that we've been executing, you might see similar sorts of movements from bonus in particular that would maybe add a little more to SG&A than what you would typically expect.

Speaker #3: Okay, gotcha. I'll admit there, guys. Thank you.

Matt Koranda: Okay, got you. I will leave it there, guys. Thank you.

Speaker #1: Thank you. Our next question comes from the line of Gao Shui Shi with Singular Research. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of Gaushri Sri with Singular Research. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of Gowshi Sri with Singular Research. Please proceed with your question.

Speaker #5: Good afternoon, gentlemen. Can you all hear me?

Gaushri Sri: Good afternoon, gentlemen. Can you all hear me?

Gowshi Sri: Good afternoon, gentlemen. Can you all hear me?

Speaker #4: Yes.

Michael Henry: Yes.

Mike Henry: Yes.

Speaker #2: Yes.

Nate Smith: Yes.

Speaker #5: Yes. Nice quantity, guys. Just on the question of Q3 guidance—with August already at, kind of, $15 million, $14.6 million—what's the single biggest swing factor that decides, or barrier to, landing at the top end of the range?

Gaushri Sri: Yeah. Nice quarter, guys. Just on the question of Q3 guidance, with the August already at 15, 14.6, what is the single biggest swing factor that decides what or barrier to landing at the top end of the range?

Gowshi Sri: Yeah. Nice quarter, guys. Just on the question of Q3 guidance, with the August already at 15, 14.6, what is the single biggest swing factor that decides what or barrier to landing at the top end of the range?

Speaker #4: Yeah, good question. Most of the scenarios that we look at do point towards the upper end of our range. But when you look over the recent years, three of the last four years, our comp actually decelerated after back-to-school finished.

Michael Henry: Yeah, good question. Most of the scenarios that we look at do point towards the upper end of our range. When you look over the recent years, three of the last four years, our comp actually decelerated after back to school finished, and you got out of what I will refer to as the need-based period of the quarter. We did see three out of the last four years that September slowed by about eight comp points relative to August, and that was consistent through 2022, 2023, and 2024. Last year was the exception, where September was consistent with August, and then October actually accelerated. So, in putting together our range, we are taking into account where we are. More of the scenarios that we have looked at do point to the upper end of the range as being the most likely landing point.

Mike Henry: Yeah, good question. Most of the scenarios that we look at do point towards the upper end of our range. When you look over the recent years, three of the last four years, our comp actually decelerated after back to school finished, and you got out of what I will refer to as the need-based period of the quarter. We did see three out of the last four years that September slowed by about eight comp points relative to August, and that was consistent through 2022, 2023, and 2024. Last year was the exception, where September was consistent with August, and then October actually accelerated. So, in putting together our range, we are taking into account where we are. More of the scenarios that we have looked at do point to the upper end of the range as being the most likely landing point.

Speaker #4: And you got out of what I'll refer to as the need-based period of the quarter. We did see, three out of the last four years, that September slowed by about eight comp points relative to August.

Speaker #4: And that was consistent through '22, '23, and '24. Last year was the exception, where September was consistent with August, and then October actually accelerated.

Speaker #4: So, in putting together our range, we're taking into account where we are. More of the scenarios that we've looked at do point to the upper end of the range as being the most likely landing point.

Speaker #4: But we are allowing for the possibility that there could be a deceleration, as there has been in three of the most recent four years during the September–October timeframe, and acknowledging that October will be the toughest comparison of the quarter, even though it's the smallest month of the quarter, given it had the strongest performance.

Michael Henry: We are allowing for what if there is a deceleration like there has been in three of the most recent four years in the September-October timeframe, and acknowledging that October will be the toughest comparison of the quarter, even though it is the smallest month of the quarter, given it had the strongest performance of the quarter in last year's third quarter.

Mike Henry: We are allowing for what if there is a deceleration like there has been in three of the most recent four years in the September-October timeframe, and acknowledging that October will be the toughest comparison of the quarter, even though it is the smallest month of the quarter, given it had the strongest performance of the quarter in last year's Q3.

Speaker #4: Of the quarter in last year's third quarter.

Speaker #5: Gotcha. Okay. And you said the merchandise commitments, that there's no—that you won't be changing. But Q4 last year comped to around 10.1, and that's kind of generally a hard lap.

Gaushri Sri: Gotcha. Okay. You said the merchandise commitment that you will not be chasing. Q4 last year comped to around 10.1, and that is kind of generally a hard lap you faced. Does the two year stack, as you are seeing in August, give you confidence that you can hold a double digit comp against that? Are we still kind of planning for a single digit, or planning to go stack to flat now?

Gowshi Sri: Gotcha. Okay. You said the merchandise commitment that you will not be chasing. Q4 last year comped to around 10.1, and that is kind of generally a hard lap you faced. Does the two year stack, as you are seeing in August, give you confidence that you can hold a double digit comp against that? Are we still kind of planning for a single digit, or planning to go stack to flat now?

Speaker #5: You faced. Does the two-year stack, as you're seeing in August, give you confidence that you can hold a double-digit comp against that, or are we still kind of planning for a single-digit, or planning the stack to flatten out?

Speaker #3: Well, we haven't issued any kind of...

Michael Henry: Well, we haven't issued any kind of specific guidance for Q4 yet. We always just go one quarter at a time. But looking at the 2-year would suggest that we can comp the 10%, whether or not it's in single digits or double digits. We'll see that when we get into the holiday season. I'd really love, I think we'd all really love if we could see us double digit on top of double digit. That would be phenomenal. But I can't predict the future with any specificity to know whether that's coming or not. But I can tell you we're certainly planning for and expecting for us to have a positive comp in Q4. To what extent? I don't know. It's too early.

Mike Henry: Well, we haven't issued any kind of specific guidance for Q4 yet. We always just go one quarter at a time. But looking at the 2-year would suggest that we can comp the 10%, whether or not it's in single digits or double digits. We'll see that when we get into the holiday season. I'd really love, I think we'd all really love if we could see us double digit on top of double digit. That would be phenomenal. But I can't predict the future with any specificity to know whether that's coming or not. But I can tell you we're certainly planning for and expecting for us to have a positive comp in Q4. To what extent? I don't know. It's too early.

Speaker #4: Specific guidance for the fourth quarter yet? We always just go one quarter at a time. But looking at the two-year would suggest that we can comp the 10%, whether or not it's in single digits or double digits.

Speaker #4: We'll see that when we get into the holiday season. I'd really love, I think we'd all really love it, if we could see us double-digit on top of double-digit.

Speaker #4: That would be phenomenal. But I can't predict the future with any specificity to know whether that's coming or not. But I can tell you we're certainly planning for, and expecting, to have a positive comp in the fourth quarter. To what extent, I don't know.

Speaker #4: It's too early.

Speaker #5: Gotcha. With e-commerce, you said the low occupancy costs were largely offset by higher e-commerce shopping this quarter. E-commerce was around 28% in Q4 last year.

Gaushri Sri: Gotcha. With the e-commerce, you said the low occupancy costs were largely offset by higher e-commerce shopping this quarter. e-com run was around 28%, like Q4 last year. As the highest mixed quarter, at the mix, does buying and distribution and occupancy still leverage on a positive comp?

Gowshi Sri: Gotcha. With the e-commerce, you said the low occupancy costs were largely offset by higher e-commerce shopping this quarter. e-com run was around 28%, like Q4 last year. As the highest mixed quarter, at the mix, does buying and distribution and occupancy still leverage on a positive comp?

Speaker #5: As the mix is the highest in this quarter, with the mix, does buying and distribution and occupancy still leverage on a positive comp?

Speaker #4: It has been. As we've been producing the comps that we've got... Occupancy, from an accounting perspective, most of it is recognized on a straight-line basis over the life of a lease.

Michael Henry: It has been, as we've been producing the comps that we've got. Occupancy, from an accounting perspective, most of it is recognized on a straight line basis over the life of the lease. So occupancy dollars, all things being equal in terms of store count, you would expect occupancy to stay pretty stable dollars-wise. There are relatively fixed elements of distribution as well. The things that move within distribution are e-com shipping and shipping costs to our stores, depending on volume, number of units and boxes that we're shipping. So that's the variable element of distribution that can move around, and then buying is just the buying team. So it's the salaries and efforts of the buying team. So that stays pretty consistent from quarter to quarter as well.

Mike Henry: It has been, as we've been producing the comps that we've got. Occupancy, from an accounting perspective, most of it is recognized on a straight line basis over the life of the lease. So occupancy dollars, all things being equal in terms of store count, you would expect occupancy to stay pretty stable dollars-wise. There are relatively fixed elements of distribution as well. The things that move within distribution are e-com shipping and shipping costs to our stores, depending on volume, number of units and boxes that we're shipping. So that's the variable element of distribution that can move around, and then buying is just the buying team. So it's the salaries and efforts of the buying team. So that stays pretty consistent from quarter-to-quarter as well.

Speaker #4: So occupancy dollars, all things being equal in terms of store count, you would expect occupancy to stay pretty stable dollars-wise. And then there are relatively fixed elements of distribution as well.

Speaker #4: The things that move within distribution are e-com shipping and shipping costs to our stores, depending on volume, number of units, and boxes that we're shipping.

Speaker #4: So that's the variable element of distribution. That can move around. And then buying is just the buying team, so it's the salaries and efforts of the buying team.

Speaker #4: So, that stays pretty consistent from quarter to quarter as well.

Speaker #5: Gotcha. I'll make this my last question. Nate, you said this is your first profitable year since '22. I know your landlords must be hearing that too.

Gaushri Sri: Got you. I'll make this my last question. Nate, you said this is your first profitable year since 2022. I know your landlords must be hearing that too. So how many of your leases come up for renewal in the next 12 months? What part of that renewal spread would looking like versus expiring rent?

Gowshi Sri: Got you. I'll make this my last question. Nate, you said this is your first profitable year since 2022. I know your landlords must be hearing that too. So how many of your leases come up for renewal in the next 12 months? What part of that renewal spread would looking like versus expiring rent?

Speaker #5: So, how many of your leases come up for renewal in the next 12 months? And what does that renewal spread look like versus the expiring rent?

Speaker #4: I know Mike's got the actual numbers. And we're already engaged with many of our landlords every year. We have leases that expire and will begin negotiating in the prior year.

Nate Smith: I know Mike's got the actual numbers, and we're already engaged with many of our landlords. Every year we have leases that expire that we'll begin negotiating in the prior year. We're negotiating now for extensions on those stores that are coming due. No different than any other year. Mike, do you have the exact numbers?

Speaker #4: So we're negotiating now for extensions on those stores that are coming due, no different than any other year. Mike, do you have the exact numbers?

Speaker #3: Yeah, we have 20 lease decisions left to make for this fiscal year by the time the end of the fiscal year comes, and we would anticipate keeping all 20 of those stores.

Michael Henry: Yeah. We have 20 lease decisions left to make for this fiscal year by the time the end of the fiscal year comes, and we would anticipate keeping all 20 of those stores. Next year, we have roughly 60 to 65 lease decisions to make for leases that are expiring during fiscal 2027. We're starting to have conversations about 2027 expirations. We've agreed to certain things already. It's a constant effort, working through the lease expirations that are coming up anywhere in the next six to 12 to 18 months, and that'll continue. As we sit here today, we don't know of any additional closures that would come up. There likely will be some as we go forward, but it's just not clear what that number is. The great majority of our leases tend to expire towards the end of the fiscal year.

Mike Henry: Yeah. We have 20 lease decisions left to make for this fiscal year by the time the end of the fiscal year comes, and we would anticipate keeping all 20 of those stores. Next year, we have roughly 60 to 65 lease decisions to make for leases that are expiring during fiscal 2027. We're starting to have conversations about 2027 expirations. We've agreed to certain things already. It's a constant effort, working through the lease expirations that are coming up anywhere in the next six to 12 to 18 months, and that'll continue. As we sit here today, we don't know of any additional closures that would come up. There likely will be some as we go forward, but it's just not clear what that number is. The great majority of our leases tend to expire towards the end of the fiscal year.

Speaker #3: Next year, we have roughly 60 to 65 lease decisions to make for leases that are expiring during fiscal '27. If we're starting to have conversations about '27 expirations, we've agreed to certain things already.

Speaker #3: So, it's a constant effort working through the lease expirations that are coming up anywhere in the next six to 12 to 18 months. And that'll continue as we sit here today.

Speaker #3: We don't know of any additional closures that would come up. There likely will be some as we go forward, but it's just not clear what that number is.

Speaker #3: The great majority of our leases tend to expire toward the end of the fiscal year. So, as it relates to 2027, most of those decisions are still 15 or 16 months out.

Michael Henry: As it relates to 2027, most of those decisions are still 15 months out, 16 months out.

Mike Henry: As it relates to 2027, most of those decisions are still 15 months out, 16 months out.

Speaker #5: Awesome. Thank you, guys. Congratulations. I’ll get back to the phone.

Gaushri Sri: Thank you, guys. Congratulations, and I'll get back. Bye.

Gowshi Sri: Thank you, guys. Congratulations, and I'll get back. Bye.

Speaker #4: Thank you.

Michael Henry: Thank you.

Mike Henry: Thank you.

Speaker #1: Thank you.

Nate Smith: Thank you.

Speaker #2: Thank you. And we have reached the end of the question and answer session. I would like to turn the floor back over to CEO Nate Smith for closing remarks.

Operator: Thank you. We have reached the end of the question and answer session. I would like to turn the floor back over to CEO Nate Smith for closing remarks.

Speaker #1: Thank you for joining us on the call today, and we look forward to sharing more progress with you during our third quarter earnings call in early December.

Nate Smith: Thank you for joining us on the call today. We look forward to sharing more progress with you during our Q3 earnings call in early December. Have a good evening.

Speaker #1: Have a good evening.

Operator: Thank you. This concludes today's conference, and you may disconnect your lines at this time. We thank you for your participation.