Culp, Inc. (NYSE:CULP) Q3 2024 Earnings Call Transcript

Culp, Inc. (NYSE:CULP) Q3 2024 Earnings Call Transcript March 7, 2024

Culp, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day and welcome to the Culp Inc. Third Quarter Fiscal 2024 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Dru Anderson. Please go ahead.

Dru Anderson : Thank you. Good morning and welcome to the call conference call to review the company’s results for the third quarter of fiscal 2024. As we start, let me state that this morning’s call will contain forward-looking statements about the business, financial condition and prospects of the company. Forward-looking statements are statements that include projections, expectations or beliefs about future events, or results or otherwise are not statements of historical fact. The actual performance of the company could differ materially from that indicated by the forward-looking statements because of various risks and uncertainties. These risks and uncertainties are described in our regular SEC filings, including the company’s most recent filings on Form 10-K and Form 10-Q.

Additional risks and uncertainties that we do not presently know about or that we currently consider to be immaterial, may also affect our business operations and financial results. You are cautioned not to place undue reliance on forward-looking statements made today. And each such statement speaks only as of today. We undertake no obligation to update or to revise forward-looking statements. In addition, during this call, the company will be discussing non-GAAP financial measurements. A reconciliation of these non-GAAP financial measurements to the most directly comparable GAAP financial measurement is included in the tables to the press release included as an Exhibit to the company’s 8-K filed yesterday and posted on the company’s website at culp.com.

I will now turn the call over to Iv Culp, President and Chief Executive Officer. Please go ahead.

Iv Culp: Thank you, Dru. And good morning, everyone. And thank you for joining us today. I would like to welcome you to the Culp quarterly conference call with analysts and investors. Joining me on the call today, are Ken Bowling, our Chief Financial Officer; Tommy Bruno, President of our Mattress Fabrics business, and Boyd Chumbley, President of our Upholstery Fabrics business. I’ll begin the call today with some detailed comments. And Ken will then review the financial results for the quarter. After that, I will briefly review our business outlook for the fourth quarter of this fiscal year. And we will then take your questions. We are pleased to report continued year-over-year and sequential improvement in our consolidated sales and operating performance for the third quarter.

Both of our core business segments reported increased revenue year-over-year which is impressive, considering the challenging demand environment in the bedding and furniture industries. Additionally, our consolidated operating performance for the quarter was better than our revised outlook announced on January 17, 2024, due to stronger improvement in our Upholstery Fabrics segment. In short, Q3 was in line with our sequential improvement story that we have been executing throughout the first nine months of this fiscal year. Culp Upholstery Fabrics achieved a year-over-year increase in residential sales for the first quarterly period since the end of last fiscal year, driven by both the timing of the Chinese New Year holiday, and some improvement during the quarter and customer demand for residential fabric products.

While this increase in residential sales was offset somewhat by lower sales in our hospitality contract business due partly to weather related events in January and short term supply chain issues that affected read window, overall demand remained solid for our hospitality contract business. Also, our Upholstery Fabrics segment once again saw a significant improvement in operating performance driven primarily by higher sales, a more profitable mix of sales and fixed cost savings. We are encouraged by several factors within Upholstery Fabrics, especially the recent hiring and steady transition underway with Mary Beth Hunsberger. Boyd Chumbley and Mary Beth are working well together and we are grateful to have time for an orderly and successful transition of leadership.

We are also excited about a cadence of new residential fabric placements that we saw the previous Las Vegas furniture market, and that our plan for the upcoming High Point market. Our upholstery product designs are being received well, as we are continuing to see a desire for new fabrics for manufacturers. And our portfolio of LiveSmart performance products remains quite popular. The acceptance and the innovation of our product in-stills confidence for our future. Additionally, we remain pleased with the solid demand and backorder and our hospitality contract business and outside of some pressure we incurred in Q3 due to weather and other events that affected read window. We do expect go forward improvement from our hospitality contract segment.

Lastly, we are furthering our pivot within our production and sourcing capabilities to establish the more varied global options in our supply chain for improved costs, and to optimize supply to best service our customers. In our Mattress Fabrics segment we continued our significant year-over-year improvement in sales and operating performance, driven largely by focus on new fabric and cover placements that are priced with proper margins and are in line with current raw material costs. However, the sequential results in this segment as compared to the second quarter reflects the ongoing market weakness for the bedding industry, as well as internal efficiency issues primarily related to the startup and production of certain new products and the cost for these program launches that occurred during the quarter.

As we have been noting this year, we are driving hard to win profitable new business on both fabrics and sewn covers. And we are having success with this initiative. Our competitive market position is improving in a difficult macro market. And we are flexing our strengths across our global platform. But in some cases, as we expedite production schedules and push to meet accelerated deadlines, there are some inherent costs and internal quality pressure that impact results. These are not long-term impacts, rather they affect current profitability and the ramp up. In addition, CHF also has some lingering legacy products that are still operating at lower than desired margins due to hangover from improper pricing at previous elevated cost levels.

Our Mattress Fabrics team is working daily to replace or re merchandise the skews while supporting customers and maintaining attention on new products, as I just mentioned, but we do still have some more work to do. We are encouraged by the management team in Mattress Fabrics and some new faces we have on board to strategically target new sales opportunities. We were pleased with our customer placements of the Las Vegas market and we have our largest trade show for the mattress business, which is called ISPA occurring next week, and that will give us a chance to present our newest innovative offerings to the vast majority of our customers. We maintained our solid balance sheet during the quarter with a continued focus on prudent financial management, while allowing for critical capital expenditures to ensuring a strategic level of working capital to support the needs of our business.

We ended the quarter with $12.6 million in cash, no outstanding borrowings and $26.2 million in borrowing availability under our domestic credit facility. So now as we enter the fourth quarter, we continue to implement improvement initiatives within our Mattress Fabrics segment to support future profitable sales growth and enhance operating efficiencies. As I’ve discussed a moment ago, we are diligently focused on winning new placements to drive revenue and increase margins. And we are optimistic about mid to long term growth potential for this business. However, while we knew the timing of Chinese New Year would be an impact to quarterly revenue. The industry demand backdrop in both of our businesses has weakened much further than expected during the first few weeks of the fourth quarter, especially in our Upholstery Fabrics segment.

We are currently trying to ascertain what that means for the remainder of our Q4 in March and April, it is important to note that we do not expect to remain the low level of February demand. And we are not altering our view of our trajectory of growth for the midterm. But the near term is certainly unpredictable. We remain confident in our market position in both of our businesses. But to keep our sequential progress, we need some macro industry and in consumer support. Also, the internal efficiencies relating to the startup and production of new products in Mattress Fabrics that impact us from the third quarter will also affect operating performance during the fourth quarter. As a result of the challenges, we now expect that our return to consolidated operating profitability will be delayed from the end of our current Q4 into fiscal 2025.

In the face of these various ongoing macroeconomic headwinds, our attention is on managing the aspects of our business we can control, with the uncertainty of consumer demand in the near term, we are also evaluating strategic actions to adjust and right size our global platform to align with the current demand levels. While of course still supporting our value customers. Two points are very clear to us. First, we understand that near term demand is uncertain, and we must adjust our capacity levels and costs to match demand. And we cannot tolerate continued operating losses. We had been making our intendant progress through the first nine months of this fiscal year, but we expect to step back in volume and profitability in Q4. We have the potential to see up to 10% or more consolidated revenue reduction both year-over-year and sequentially, with more pressure on upholstery fabrics, which is currently our solidly profitable business.

This revenue reduction is mainly driven by macro and consumer demand in our space, and to some degree the timing of Chinese New Year. Second, specifically in Mattress Fabrics, we are finding some growth opportunities in fabric accessory products, and cutting sewn covers that will likely not need the same level of North American capacity. Therefore, we are reviewing all possible actions and synergies across both of our segments to adjust our business, our capacity and our costs to focus on restoring profitability in fiscal year ‘25. Importantly, we remain well positioned with our solidly performing Upholstery Fabrics, business and recovering Mattress Fabrics business and I will repeat that we are not wavering on our growth trajectory for the mid to long term.

And again, we are committed to taking steps to position our business for renewed profitability in fiscal ‘25. And we are confident in our ability to leverage our competitive advantages, including our innovative product offerings, creative designs, global manufacturing and sourcing platform and solid financial management to support our future growth. And especially when market conditions improve. I’ll now turn the call over to Ken who will review the financial results for the quarter. And they’ll come back and review the outlook for the fourth quarter of this fiscal year.

Ken Bowling : Thanks, Iv. Here are the financial highlights for the third quarter. Starting with consolidated results, net sales were $60.4 million, up 15% compared with the prior year period. Gross margin for the third quarter of this fiscal year was 12.7% compared with 4% for the same period last fiscal year, and 870 basis points improvement. The company reported a loss of operations of $1.7 million for the quarter, which included $111,000 in restructuring related credit. This compares with a loss from operations of $7.8 million for the prior period, which included $711,000 related to certain restructuring expenses. Importantly, the $1.7 million loss of operations for the quarter compares favorably with a $2.2 million loss from operations for the previous quarter.

Net loss for the third quarter was $3.2 million or $0.26 per diluted share, compared with a net loss of $9 million or $0.73 per diluted share for the prior period. The key drivers for this improvement include of higher sales and more profitable mix of sales for both the Mattress Fabrics and Upholstery Fabrics segment, a more favorable foreign exchange rate associated with our Upholstery Fabrics operation in China, and fixed cost savings in our Upholstery Fabrics segment. These factors were partially offset by higher SG&A expense during the period, as well as production inefficiencies related to the startup of certain new product launches in the Mattress Fabrics segment. SG&A expense during the quarter was up compared to the prior period due mostly the wage inflation and higher personnel costs.

An increase in the provision for bad debts, higher travel and tradeshow costs and an increase in sampling expense driven by new product rollouts partially offset by lower incentive compensation expense. Importantly, with regard to SG&A expense, as business conditions improve and demand for our products rise, we believe that we will get significant leverage from the increased sales. Adjusted EBITDA for the 12-month period ending with Q3 was a negative $3.3 million as compared to adjusted EBITDA of negative $20.5 million for the comparable prior year period. The effective income tax rate for the third quarter of this fiscal year was a negative 47.5% compared with the negative 3.3% for the same period a year ago. Our effective income tax rate for the quarter continues to be impacted by the company’s mix of earnings between our U.S. and foreign subsidiaries, with an operating loss in the U.S. while China generated income that was taxed at a higher rate compared to the U.S. Based on our current assumptions, we expect cash income tax payments of approximately $3.2 million for this fiscal year.

Importantly, our estimated cash income tax payments for this fiscal year are management’s current projections only and can be affected by a variety of factors over the course of the year. Now let’s take a look at our business segments. For the Mattress Fabrics segment, sales for the third quarter were $30 million, up 21.6% compared with last year third quarter. This increase in sales was mostly driven by new fabric and sewn cover replacements that are priced in line with current costs, and to a lesser extent SKU rationalization and the repricing of some underperforming skews reflect current costs. In each case, this has resulted in a higher average selling price compared to historical unit prices. Operating loss for the quarter was $1.6 million, a significant improvement compared the $4.2 main operating loss in the prior period.

This substantial reduction in loss was driven by higher sales coming mostly from better pricing and a more favorable product mix partially offset by production inefficiencies related to startup of certain new product launches as well as higher SG&A expense during the period. For the Upholstery Fabrics segment sales are the third quarter were $30.4 million, up 9.2% compared with last year third quarter. Sales for residential upholstery fabrics products were higher than the prior year period, driven by the timing of the Chinese New Year holiday, which this year fell primarily in the fourth quarter, rather than the third quarter last fiscal year, along with some improvement during the quarter and customer demand for residential fabric products.

However, sales for a hospitality contract business were moderately lower than the prior period due primarily to the impact of winter weather events and short term supply chain issues that affect the production in our read window business. Notably, sales for the hospitality contract business accounted for approximately 26% of the Upholstery Fabrics segments total sales during the quarter. Operating income was $2.1 million for the third quarter up significantly compared with an operating loss the $420,000 in the third quarter of last fiscal year. Operating margin for the third quarter was 6.9%, again a significant improvement compared to the prior year period. The key reasons for this improvement were higher sales volume, a more profitable mix the sales, a more favorable foreign exchange rate associated with operations in China, and lower fixed costs resulting from the previous restructuring actions.

These factors were partially offset by lower hospitality contract sales and higher SG&A expense during the period. Now turn to the balance sheet. We reported $12.6 million cash in investments and no outstanding debt as of the end of the third quarter. For the first nine months of this fiscal year, cash flow from operations and free cash flow were negative $6 million and negative $8.2 million respectively. As expected, the company’s cash flow from operations and free cash flow during the period were affected by operating losses and plan strategic investments and capital expenditures mostly related to the Mattress Fabrics transformation plan. Importantly, both segments have done a solid job of managing the key components of working capital, which are accounts receivable, inventory and accounts payable.

Capital expenditures for the first time of this fiscal year were $3.2 million. Based on current expectations, cash capital spending for this fiscal year as it is projected to be in the range of $4 million to $4.5 million, and will center mostly on maintenance CapEx and quick payback projects focused on improving quality and efficiency in our Mattress Fabrics business. Based on current expectations, depreciation for this fiscal year is expected to be approximately $7 million. With respect to liquidity, as of the end of the third quarter we have $38.8 million consisting of the $12.6 million total cash and $26.2 million in borrowing availability under our asset based domestic credit facility. The company did not repurchase any shares during the third quarter of this fiscal year, leaving $3.2 million available under our current share repurchase program.

We do not expect any share repurchase activity during the fourth quarter of this fiscal year, as we remain focused on preserving liquidity and being positioned to support future growth opportunities. With that, I’ll turn the call over to Iv to discuss the general outlook for the fourth quarter of this fiscal year. And we will then take your questions. Iv?

Iv Culp: Thank you, Ken. Due to the uncertainty in the macro environment, we are only providing financial guidance for the fourth quarter of this fiscal year. We expect consolidated net sales for the fourth quarter to be lower as compared to the fourth quarter of fiscal 2023. This is due partly to the timing of Chinese New Year holiday, which this year falls primarily in the fourth quarter, as compared to the third quarter last year, but more due to weakness in the industry demand environment that is expected to pressure sales and both that accompanies business segments, especially in the Residential Upholstery Fabrics business. We expect consolidated operating loss for the fourth quarter of this fiscal year that is comparable to the $4 million operating loss in the fourth quarter of last fiscal year.

While macro industry conditions are certainly pressuring near term demand, we believe these demand conditions represent bottom levels, and will improve over the mid to long term, as consumer spending trends return to more normal levels. We are well positioned with our strong market positions in both businesses when this occurs. However, in the face of these headwinds, we are evaluating and we are committed to strategic actions in both of our businesses to align our capacity and cost with demand and to restore profitability in fiscal year 2025. So with that, we’ll take some questions.

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Q&A Session

Operator: We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Budd Bugatch with Water Tower Research. Please go ahead.

Budd Bugatch : Good morning, Iv. Good morning, Ken. First, congratulations on the keeping the balance sheet in good positioning during this troubling time and difficult times. So I think you all deserve credit for that. I would like to just make sure we understand that third quarter mattress sales were up significantly, is that pretty much all price? Is that the way to think about that?

Iv Culp : Yeah, Budd, I think — this is Iv. I’ll surely let Tommy comment to it as well. We’re making a really big deal in our comments about how we are driving very hard to win new business at proper pricing, and factoring in actual cost. So yes, we’re improving our margins. And so a lion’s share in a weak environment is price for our increase. And we’re proud of that will pay more dividends when volumes are better. But it is primarily just execution of price and margin. Tommy, you think, you would say different?

Tommy Bruno : Yeah, no, Budd. I think that’s spot on. We’re seeing about an 18% increase in our ASP. So it’s primarily price and a little bit of mix.

Budd Bugatch : And, Tommy, I think there’s still some legacy programs out there at less than favorable pricing. You kind of maybe give us a quantification of what you may have left in the sales book for mattresses that are not at prices you would like or at the margins you would prefer.

Tommy Bruno : Yeah, I think as a part of our initiative to improve our margins. We probably have about a third of our book that we need to optimize in order to get in line with our expectations.

Budd Bugatch : And how long do you think that will take?

Tommy Bruno : We’re going to make that were going to make that a major priority to address it very quickly. I don’t know exactly how long it will take those are individual conversations by customer by skew. But ultimately that is something that we’re going to make go faster than it has so far.

Budd Bugatch : But investors should think about that as a one quarter, two quarter, one year, two year kind of situation, or how many? How would you?

Tommy Bruno : Yeah. I would quantify it in quarters, no more than a year. But I think a lot of it will get addressed within the first two quarters, I would assume.

Budd Bugatch : Okay.

Iv Culp : I think, Budd, maybe I would just comment on the legacy sales. We’ve been dealing with this for some time. And we are a very well respected and very, we love to business. So we’re trying to do the right thing by our customer base. But as we’re starting to think about some strategic actions, we need to take in the face of the pressure demand, that’s obvious something we just going to have to do faster. We want to be responsible to our customer and do things the right way, but likely have to accelerate that.

Budd Bugatch : Yeah, I totally concur with the view that you just, you espouse in terms of the way Culp is respected. So that’s, I would expect no, nothing different on that. You talked about the inefficiencies for the startup of new products. How close are we to being it through that particular — those particular challenges?

Tommy Bruno : Hey, Budd, it’s Tommy. I would expect that we will be primarily through that by the end of Q4 at the very beginning of Q1. You would not expect it to continue beyond just the very beginning of Q1 of 2025.

Budd Bugatch : Okay. And if we’ve seen the mattress business go through some travails before. And obviously, we’ve gone through an anti-dumping refresh as well. Shouldn’t that help Culp’s volume in the intermediate term?

Iv Culp : Yes, Budd. I would agree with you. I think there’s a lot — it’s an interesting thing to talk about in the face of weak current demand. But I do believe and tried to state it in the remarks that we are confident in the mid to long-term volume potential for us. We think we’re positioned very well. We think we’re winning more than our fair share. And we think that the industry dynamics are playing to our favor, whether that be anti-dumping or consolidation. We just think there are advantages that we can flex to grow our business. But we just been so surprised by the current demand level, which we know won’t last. But obviously, we’re just trying to get our arms around the timeline for that improvement.

Budd Bugatch : And as you step back and think about that, and the surprise, is there any change in the structure of the industry? I know the industry has got some structural changes that are going on anyway. But in terms of where you think that the demand issue is, in terms of are there different types of mattresses that are winning share or something going on there, like we had for viscose back at the turn of the century or Bed In A Box starts to develop?

Iv Culp : Yeah, I don’t know. I don’t know that there’s anything dramatically, fundamentally different Budd. But we are, in our remarks, we did note that we are seeing unique growth opportunities in products and aren’t necessarily traditional fabric by the yard sale. So whether that be a fabric accessory product, or a cutting sewn cover that becomes a roll packed bed. And some of those unique opportunities don’t necessarily flex all of our North American assets. Now we have really strong manufacturing and sourcing capabilities worldwide. And that doesn’t in any way deter our positive nature. But it may be a little different, we may supply it a little different. And so maybe that’s fundamentally changed, but it’s not changing to impact our ability to attack the market.

There’s traditional players and e-commerce players and omni-channel players but we have a way through our fabric and cover manufacturing and sourcing platform to reach all of those. So confident with some normalized demand that we’re in really good position.

Budd Bugatch : Okay. And last two things for me. One, you talked about right sizing the business. Any idea as to how long that will take when you make those decisions. What’s the timeframe looking in that?

Iv Culp : Budd, we just don’t have time for that decision to be long. So if we said we just can’t tolerate further operating losses, our business is too good and too strong to be performing in this demand environment. So in the current demand environment, we have to make those changes quick. We want to do this ASAP, and we’re reviewing all possible actions, whether it be synergized operations, or a capacity reductions or cost management. But everything’s on the table, and we’re looking at it in the immediate near term.

Budd Bugatch : Got you. Okay, and is there a risk that you might cut too far?

Iv Culp : That’s something we always will think about. And I would love to have the problem of needing more capacity, we’ll find it. So I don’t anticipate cutting too far. And I do think that, as I was touching on are really strong manufacturing and sourcing capabilities that we have ways to react to any demand that might be in front of us. So I’m not worried about that. But we’ll be careful.

Budd Bugatch : And Ken, your inventory metrics look like they’re back to somewhat normal at pre-COVID levels in terms of days outstanding? Is that the right way to look at it? We don’t really have an over-inventory problem, at least not inside the company right now. Maybe some of our customers do, but the company doesn’t.

Ken Bowling : Yeah, I think that’s fair. I think both divisions have done, over the last year and a half a fantastic job of getting inventory in line with demand. And, again, we look at inventory, they look at inventory every day, we look at it every day. And we are committed to keeping that in line with demand. So right now, I think, Tommy, boy, I think we feel that we’re in line with what we expect to for the coming weeks and months.

Budd Bugatch : Okay, I’ll let others have a crack. Thank you very much for answering my questions. Good luck.

Ken Bowling : Thanks. Have a good day.

Operator: Next question comes from Anthony Lebiedzinski with Sidoti & Company. Please go ahead.

Anthony Lebiedzinski : Good morning, gentlemen. And thank you for taking the questions. And certainly, nice to see the balance sheet remaining strong. And certainly, great to see the sequential and year-over-year improvement in sales and operating metrics as well. So I guess, first and just the follow up as far as the question as far as the right sizing of the business and taking actions. So does your guidance for the fourth quarter, does that include any restructuring action? Or anything else? Or just wanted to get a better understanding of that?

Ken Bowling : No. And this is Ken, it does not. It does not. We’re as if said, we are in the middle of planning for that. But it does not include any of those actions, potential actions.

Anthony Lebiedzinski : Understood. Thanks for clarifying that. So there could be potential upside, I guess, I suppose. Okay. And then, you’ve done a nice job, certainly pricing products in line with costs. At this point, and kind of going forward, just curious to get your take as to what you’re saying, from a cost perspective, if you could just go over the various puts and takes in regards to your cost structure. And whether or not you think the pricing pieces that you’ve put in place, whether those are sustainable going forward?

Ken Bowling : Yeah, Anthony this is Ken. I think from a raw material standpoint, I think things are stable. And obviously, we’re monitoring that very carefully. I think, labor, that part of it, as far as demand that seems to be steady as well. So as far as being able to, first of all getting our costs, right, I think we feel good about that. We’ve got to deal with the variances, which we are, but as far as pricing. I mean, we’re working with our customers every day to make sure we have the right price for the right product.

Anthony Lebiedzinski : That’s great to hear. Okay. So you’re not getting significant pushback, I guess. In terms of, being able to pass that along. It sounds like you’re able to do that.

Ken Bowling : It’s not really I wouldn’t call it a — we’re not passing on prices on current items, generally. The new things that we’re developing our new products being developed with the right prices. We’re not overcharging, we’re just pricing things properly. Some of the things that we’re having to re merchandise Yeah, we either have to offer alternatives or adjust pricing, but that’s not a push back being Anthony. We’re not trying to drive our competitive price. We just are running a better business on new product.

Anthony Lebiedzinski : Okay. That sounds great. Okay. And then you also mentioned that your CapEx, you’re focusing on projects that increase efficiencies, improve quality, especially at CHF. So can you share any details in regards to that? And as far as when do you expect those projects to pay off for Culp?

Tommy Bruno: Hi, Anthony, it’s Tommy. Most of those projects are being implemented now and will come online in the middle to the end of Q4. And then we would expect to start seeing efficiencies from those as early as Q1 of 2025. And really start to see the majority of that benefit, probably starting in Q2 of 2025.

Anthony Lebiedzinski : Got you. And is it possible for you to like, share, give us some examples as to what you’re doing now? And how to think about the potential, say cost savings as you get more efficient?

Tommy Bruno : Yeah, I would say most of the projects that we’re doing are helping to eliminate waste of our chemical raw materials, as well as to measure and monitor our fabric formation. So we can price our goods accordingly. I would expect about a 2% improvement, and starting in the middle of 2025 in terms of our gross profit against those initiatives.

Anthony Lebiedzinski : Profit. That’s very helpful. Well, thank you very much. Best of luck, and I’ll pass it on to others.

Tommy Bruno : Anthony, thank you.

Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Iv Culp for any closing remarks.

Iv Culp: Thank you very much, operator. And again, thank you to everyone for your participation and your interest in Culp. We look forward to updating you on our progress next quarter or before. Have a great day.

Operator: The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.