Academy Sports and Outdoors, Inc. (ASO) Earnings Call Transcript & Summary

Hi, everyone. We're about to start our second session with Academy Sports, which everybody probably knows the sporting goods and outdoor retailer with 270 total stores in 18 states. Today, we have with us Steve Lawrence, Chief Executive Officer. Steve has been in the role and on the Board of Directors since June 2023. We also have Carl Ford, Executive Vice President and Chief Financial Officer of Academy; and Mike Mullican, President of Academy. So thank you, everybody, for joining us today.

Thanks for having us.

Congratulations, by the way, on all the promotions to all of you. But all 3 of you have been with the company for a good amount of time, but I thought maybe we could start with discussing, what we could expect that could change under the new leadership.

Well, I think the good thing about Academy is we worked really hard on our succession planning and building our bench strength over the last couple of years, certainly under Ken's leadership as the prior CEO and the management team that we have has been together for a long time. And we've been -- we've managed through the pandemic together. So most of this have been together at least 5 years. So we were instrumental in creating the long-range plan that we just presented back in April. So I don't see any big fundamental changes from a long-range plan that we presented. I think our strategy is going to be the same. We've got 3 main focuses for growth, opening new stores. second is getting our dot-com penetration up to a more reasonable level at around 15% and then driving productivity out of our existing stores. That's not going to change. I think you're going to see us lean into maybe some more finite tactics around how we do some of those things. We've learned a lot around new store openings, in terms of how we pace them out, what time of the year works better, marketing needed for each store, et cetera. So I think you'll just see us lean more into those strategies and fine tune those, but I don't see any big fundamental change.

Okay. Maybe we could start talking about industry trends before we go into Academy specific questions. Could you maybe talk about what you've see in the sporting goods industry today and maybe versus relative to before the pandemic? And as we move beyond what we've seen in the last few years, do you think the higher level of demand for the category is sustainable over time?

Yes. I mean, obviously, our industry went through a pretty big upheaval during 2020, 2021. And we saw elevated demand for all the categories that we carry, sports and outdoors. And we've seen it contract a little bit since coming out of the pandemic. Certainly, when we looked at 2022, we saw it as more of a rebaseline year. And our plan was as we got into this year that we'd see growth come back, and I think we probably didn't quite have a good beat on what's happening with the customer. And obviously, there's some softness in the customer out there that the previous panel talked about. But it's still way above where it was in '19. I mean we're tracking up about 27% versus '19. So we think a lot of these activities are sticky. We think people started enjoying the sports and outdoor in the pandemic and there -- some have gone back in some of those hobbies and we've got some categories like fishing, which are closer to where they were in 2019, still above but closer to it. And we've got other categories like team sports, which are way outpacing where they were in '19. So I think in general, we're going to hold on to a lot of the volume. And I think the industry is seeing great participation, and that's going to continue forward.

One question that we asked in the last session was one area that we continue to see a lot of pressure on is big ticket discretionary whether it's because the big ticket was already bought, whether it's because the consumer maybe is under a little bit of pressure, I know there's a lot of big ticket that you guys sell. Could you maybe talk about any trends that you're seeing that might be changing, if the decreases or maybe decelerating? Can we expect to see any kind of stabilization there in the near term?

Yes. It's really interesting because we have a lot of categories to your point that fall in a big ticket. So we've got some long replacement cycle businesses like fitness equipment, right? So if somebody bought a treadmill during the pandemic, it's not likely they can come on by another treadmill anytime soon. And so that business has continued to be soft. We've seen other categories like Kayak and things like that start to stabilize this year. And then we've got some big ticket categories like outdoor drilling, which have been some of our best businesses. And I think there, what's really driving that, there's a lot of newness and innovation. So I don't think you can paint with one brush what's going on with big ticket. It's really different by different categories. But one of the consistent things we've seen this year kind of 2 things that really played out. First, customers gravitate towards value, which certainly plays into our sweet spot where the value driving sales. But second, newness, if there's newness and innovation out there, and it's something that the customer doesn't have, they'll spend up for it and almost ignite the price. And so that's what we're looking at in some of these big ticket categories that have been a little bit more sluggish is how do we inject more newness in there. And obviously, we need the industry help with that in some cases. But newness is a way to kind of reinvigorate those categories.

And service. The service we provide there. We've added service to those areas in the stores. So we haven't waived the white flag on big ticket. If you merchandise it well, you buy it well, you provide good service and you get great value. We've got some big ticket categories that are still growing.

Okay. That's helpful. You mentioned value. And so I thought maybe we could talk about that a little bit since I do think it differentiates you in the marketplace. And one thing I think during your Investor Day that you talked a lot about was addressing your depth of product offerings. So the best example I heard to kind of wrap my mind about what you guys were doing were in baseball gloves. That was the example where you were very good at introducing that introductory glove, but then as the child, it got older got more expertise, maybe you weren't offering the same amount of product. So curious how you balance the idea of value with that strategy? And maybe what inning are you in, in terms of this initiative in terms of introducing new price points?

Yes. This is something we actually started on pre-pandemic. And one thing we talked at our Investor Day that what Academy has been good at is the good level of the assortment. So I have 3 kids, and when my son started out playing baseball, T-ball, Academy can place in our marketplace, we come by the bat and all the balls. You can get all that for $100. And then the next month when he decided he won't want to play base ball, want to play soccer, I'd come in by the shin guards in the ball. And we're always good at that opening level, but we didn't have the better, best end of the assortment that could really take a customer on that journey through sport. So we started building that out pre pandemic. And so in the past, we're talking about fielding gloves, we probably didn't sell fielding glove over $100. Now we sell fielding gloves upwards $300, the base of the business though is still the value component. That's still the big chunk of our business. But what it's allowed us to do is kind of take that customer on that journey and not lose them or have them go to another competitor, to find their goods. Now that being said, we're still not where that elite athlete is going to look for a baseball glove. Right? We'll take you through starting out T-Ball to playing in directly, maybe even in high school ball or traveling ball, but we're going to play college well for all print the place to find a baseball glove. But that's the middle chunk of the business, which is the biggest piece of the business. In terms of where we're at, I would say middle innings, no pun intended. We have different categories at different levels, right? So certainly, we've built out the baseball and sporting goods assortment this to a pretty good degree. Fishing is another one we really lean into grilling but other categories like firearms, we're still, I think, building out that better best level. So we've got some categories that we're still working on, on that, and we think there's still opportunity there.

Maybe if we can shift to how your relationship is with the vendors. Maybe with regards to this initiative or just in terms of how you think things will settle out between brands going direct versus distributing through retailers. Can you talk about what differentiates you from other retailers that may be getting back some brand distribution from the athletic brands?

Yes. I would say that I think the vendors have -- certainly during the pandemic with the risen.com, I think vendors still in love with the B2C business in some cases. But I think they've realized that they need a good wholesale partner as part of the mix. So we've seen a reversion to more of that. That being said, we never lost access to a lot of these brands. And I think one of the reasons for that is when you think about our positioning in the space, being the value provider and being that entry point to support, a lot of our core customers, active young families. And when you talk to a Nike or an Under Armour or an Adidas, One of the reasons they really value us is because we're in that place where that kid finds this first glove or get this first soccer ball. And that entry point to sport and the belief that if the kid starts out with that brand, he's going to take us through his life is a very powerful thing for these brands. And so that's what we really represent to a lot of these companies, and that's why they really value our partnership. The other thing we also can do that a lot of other retailers can't is, we can sell them, the basketball would love the cleats, right? They can find the apparel, they can find everything in our store and a lot of places don't do that. So that's really been helpful for us. It's also helped us open up inroads with new emerging brands, right? We've got big positions in brands like UFO that we've talked about or BURLEBO, which is a small regional brand. And we're continuing to build those out. We're always launching with ideas like bog bags. And so I think kind of the relationship and the position we have in the market with the vendors has been very attractive for them. And I think we're getting more and more vendors coming to us with new ideas.

That leads us to a question about market share. I think at your Investor Day, you talked about $175 billion TAM. How do you think about Academy's market share position today and the opportunity going forward? And are there any particular areas where you might be looking to gain more share?

We've consistently gained share for the past 4 or 5 years across most of our categories, really all of our categories since 2019. And Look, I don't know ultimately the size of the TAM and what it will be. We're a more diversified business. I think than most people realize with equal parts, footwear, apparel, outdoors, sports and recreation. So the good thing about our strategy is with the unit growth. Wherever we go, we're going take share. We just opened stores store in Indianapolis. We have 2 more coming in the next few months. We've got a store we just opened in Illinois. It's our second store went away. So all of our new stores will create market share opportunities for us.

I'd also say we're seeing the outdoor category has been a tougher category, right? It's contracted back. That being said, it's still way above where it was in '19. We shared, I think, on our last earnings call, our animal business has been challenging, but it's still up almost 100% versus where it was in '19. So it's still a very big business for us. And we're seeing competitors pull back on that space. And we think that having that true diversified assortment when you think about it, and it's in our name, we're sports and outdoor, right? And when you think about how many retailers really support all those categories, there's not a lot. And we think having that diversified assortment and staying in the outdoor business, the degree we have, I think, makes us a great place to pick up material. I think we have a really good opportunity there.

Okay. Great. Michael, you mentioned unit growth as a way to capture some market share. But this is definitely I guess, more aggressive newer part of your strategy, where you just announced that you're going to open 120 to 140 stores by 2027 with a long-term opportunity of 800 locations. So could you maybe talk to us about how prepared Academy is to embark upon this new initiative? what do you think will make Academy's offering successful in other regions? And when entering a new region, how do you introduce the Academy brand?

Well, we're off to a pretty good start. And you asked if we're prepared for you, we've been preparing for this for many, many years. We had a real estate department that we disbanded prior to the pandemic when the company, we needed to invest in improving the overall business so we expanded the real estate department. We started building it back really in 2020 and 2021. We've been able to get talent from all over the country to come work for Academy because we're one of the few retailers that has the unit growth opportunity that we have. And for those of you in the room that aren't terribly familiar with us, we're doing well over $6 billion in revenue out of 270 stores. We're only in 18 states.

271.

271, 271, that's right. On Friday. I forgot. We did so on Friday. That was a good opening for us. And a couple of those states, we're not even really in. Our Northern Met store is PRA Illinois, which we just opened a couple of weeks ago. We don't go any further west than Texas, no more further in the Northeast than Virginia, which we've only got one store. So we've got an incredible unit growth opportunity. We're able to fund that growth with existing cash flow, which is fantastic. So we've been in a down year, we've been able to invest in the business and grow the business. We opened 9 stores last year, 6 of those stores aren't even a year old yet and we're already contributing to positive cash flow. And so this is a good model. We want to do more of it. We're looking at the return on invested capital, the stores that we have in the last year, we have a 20% hurdle they'll clear that relatively easily. And so we're going to go slow in loan as we go. This year, we've got 14% that we believe will hit 13% to 14%. I don't see any reason why we won't get through this year, and then next year, we'll accelerate from there.

And you mentioned this before you're funding it with internal cash flow, but if it were to be a more difficult macro backdrop as we get into the next year, should we expect to see any kind of change in unit growth or really just any other.

Look, it's hard to see us slowing that down just because the stores are so profitable and successful. We always evaluate as we go. That's why we're doing it at a very measured pace. But we're not investing for the next 6 months or the next year, the next 2 years. We're opening stores to be there for 15 to 20 years. And so we're pretty committed to the plan.

Thank you. Shifting over to inventory. A key topic has been elevated levels of inventory. Again, we talked about high-ticket discretionary categories. I think we just heard from another competitor about high inventories in outdoor that had to be worked through. You mentioned on your second quarter call that your inventory position is well positioned to support the business heading into fall and holiday. Could you maybe characterize that a little bit more for us in terms of how you're positioned? Are you happy with your in-stocks? Do you have room to chase? How should we think about that going into the end of the year?

I think we'll tag team this one. I think at a total level, we're very happy. Our inventory was flattish from a dollar perspective, down 2% units. And then when you look at it on a per-store basis, down 5% because that's one of the things a lot of the inventory investment we put out there is to fund the new stores, right, as we're opening them up in the back half of the year. But I would say inventory management has been kind of a strong suit of the team throughout the pandemic, and I think Carl has got some points on that.

I would agree. I think if you look at what the company has done with inventory management since back to 2019, Steve got the company in February of 2019, our first opened to buy together, when I look at how we manage inventory compared to them, it's really night and day, it's structural differences that it's built on. If you look at how the category role and intent, the merchandising and planning systems that we put in place, the open-to-buy discipline, seasonal product, markdown, discipline around that. We feel solid about where we are from an inventory position. I think through the pandemic, we were able to keep inventory in front of the customers when there were supply chain challenges associated with the movement of goods. The same management team feel solid about where we are with inventory. We're opening 6 new stores in the third quarter. So that per store, I think, is the way to look at it as we're ramping up units and feel good about where we are going on holiday.

It's the first time since I've been at Academy, I've been here most 7 years. I would say the bed is not too hard. It's not too soft. It's just right. In '19, we were overbought in the next 2 years, we were under bought as we were chasing. I think we're in the perfect spot. We're very comfortable with our inventory levels.

Okay, great. And I can't ask about inventory without bringing up a question about shrink because that definitely, I think, in the last 2 quarters, has emerged as a real theme and negative theme. In retail. I think you guys were a little bit early in terms of flagging it. So maybe could you walk us through what you're seeing in terms of shrink, what's baked into your full year guide? And just any other thoughts on the subject?

Yes, it's a topic that we get a lot of conversation about a lot of questions about. So we started seeing elevated shrink levels in the third quarter of '22. We take our inventories throughout the year for the stores. So really in spring of last year, didn't see it elevated in third quarter, there was a pronounced increase was up about 40 basis points in the third quarter of last year. How do we deal with that? There's some analytics that we've leaned into. There's some technology packages, very strong partnership with law enforcement. As it relates to going into fall, well, first quarter was up significantly. It was above last year where we didn't see that elevated level of increase -- improved sequentially about 42 basis points in the second quarter compared to that first basis points. Now we're beginning to anniversary some of the things that we saw pop in the third quarter of last year. And so I don't think it's going to be a huge tailwind, a huge headwind associated with -- when we take those physical inventories, we adjust the accruals going forward. We think we've got that baked into the guide but recognizing that fall, we're up against where we already started to see.

I'll expand on that. I think it shrinks obviously [indiscernible] But we spent a lot of money and energy trying to defend against it. And then you lose sales, right? If you don't own the goods, you think you -- so we've been really focused on kind of a multipronged effort there. Carl has shrink as one of his responsibilities, and we've been really smart about where we position high-shrink categories in highly visible places. We do a lot of off-cycle counts so that at least even if something is gone, we can replace it and get the sale back but it's something we really think a lot about because we don't want to lock everything down and turn our stores into a museum where people can't touch the product, feel the product because a lot of it we sell is experiential. . So there's kind of a balance there. We will, in some cases, maybe lots of cable down if we have to. But really having people on the floor and having people visible is kind of the antidote to that. And that's something that we're really focused on is providing great customer service and making sure we got somebody there to help the customer. And that really kind of, I think, helps tamp down shrink in our stores.

And that was going to be my final question on shrink. Just as we think about you've had the cost of just the loss of the product. But is there the incremental cost of maybe having to put more people on the floor, it sounds like maybe not because Sorry, you have that customer service piece.

Yes. That initiative was in play in a store that don't have a return to them. Steve comes from a merchant background. And merchants are quick to just move things around the store, something's not working, move the stock from the back wall to the in-cap. And we took a lot of that stuff out of...

A little more of thoughtful.

I know you are, I know you are. But the point is anything we do in the store has to have a return to it. And we took a lot of that meaningless stuff out of the store. When we schedule trucks. We make sure the trucks are on schedule, people there to unload the truck. And when the truck is not coming, we take the labor out of the store and we've been able to invest that labor to customer-facing hours. And so our total store hours in the store are down roughly 20%, 25%. We run a 30% increase since 2019, and we've given more hours, actually more hours to the customer. And that, to your point, is the best way to control shrink. It's have people out there selling and interacting with the customer. We got ahead of this a year ago. We saw the train coming down the tracks. We added all the stuff that Carl said. So we think we've taken most of the pain on shrink from a financial standpoint. Knock on wood, we've got that's actually Brass, but that will work, too. But I think from a financial standpoint, we've got this one covered again through all the actions that we've taken. But labor for us is management of the labor has absolutely been a source of strength.

Some concern out there, there might be some inventory build in certain pockets of sporting goods retail right now, whether it's more on the lifestyle side of footwear or maybe some softening in apparel that we've heard about during the second quarter, Academy's EDLP, could you maybe talk to us about how you manage promotions. And I think, Steve, you had said earlier that you're seeing a good response between promotions and newness, just how you balance that in the face of...

Yes. So what I said was value is kind of what they're responding to. So promotions can be a value. So we're -- for those who are not familiar with us, we're everyday value. So about 75% of our sales come from our everyday value proposition at regular price. We take our private labels, which is about 20% of our business, we price those at really sharp prices day in and day out. We also take some of our national brand partners and we price those goods T-shirt shorts, things like that, about $5 below where the MSRP. So we provide a great value every day on national brands well as private brands. We do promote -- we tend to promote around kind of the big market share time periods when you're trying to win that driveway decision and customers are coming in to shop for mother's day, the father's day, their back-to-school holiday. And that's really where we target a lot of our promotions. We did see promotions creep up a little bit, starting last year, I mean, I would say through the first half of '22, it was pretty benign promotional environment. As we got into holiday, and people got back into stock, we saw promotions creep back in. That being said, it's still not back to 2019 or prior levels. That continued into spring, and we anticipate that's going to continue through the back half of this year. We've got that baked in our forecast and feel like we've got a pretty good grip on it. But you'll see us be promotional and offer value that way during holiday on a lot of those categories that are kind of in and out categories, you think things like game tables, ride-ons and stuff like that, that we sell. Those tend to be the things we're leaning into more promotion, and we lean into everyday value on more of the everyday assortment new carrier around.

Okay. I always talk about 3 types of promotions. The first type is where you get overbought, you don't do your job very well and now you've got a clear merchandise. We don't have that problem. And we've been really diligent around that. The second type that is the promotions that you plan for. And we buy to those, and we've got some of those coming in the back half. Those are built into our plan. You buy for them specifically to run them. And the third is where you've got a counterpunch where other people's problems become your problems. We haven't seen, frankly, a lot of that. We do have the flexibility in the financial plan for the rest of the year to if we see the environment becoming more promotional, we've got the flexibility to match others and do that.

Okay. That's very helpful. I wanted to ask you about margins since Academy has seen such significant gross margin expansion, and you have this long-term goal of EBIT margins of 13.5% by 2027. A lot. I think..

We achieved that goal by the way.

You already there. Yes, you're already there. But could you maybe talk to us about the strategies that maybe were employed before when you were embarking on turning Academy or improving Academy before the pandemic and what still lays ahead in terms of, again, trying to get margins higher?

Yes. I think the things that I rattled off associated with inventory management, the flip side of that is margin. So if you compare back to 2019, our margins were up about 500 basis points. If you look at the second quarter that we just finished, our gross margin rate was about 30 basis points above last year. All of those disciplines that the leadership team put in place, I really think is the special sauce associated with the margin profile and the inventory positioning of the company. So again, a lot of systems work, a lot of localization of what we're carrying a lot of price optimization, especially in the reg space prior to the leadership team getting here, markdown discipline wasn't in place. So there's seasonal goods, you would be carrying those in to try to sell AquaSox at a really odd time period. And so -- and it degraded the margin profile and the whole promotionality associated with needing to promote because you were overbought and because those disciplines weren't in place, I think, was something that the team has been very diligent about. So from a margin profile standpoint, we just feel like those structural improvements that we've made are going to be the discipline that carries the team, and we sit monthly with all the merchants and open to buy, and we talk really specifically about what's over the horizon associated with their business and how they're carrying their inventory. And so those are real structural changes that we've made, and we feel good with it and we're happy that it's paying off now in the form of no type of reversion that we're seeing in the margin profile and actually up year-over-year.

I just want to reiterate something Carl's, because I think sometimes we get these questions where I think people associated with the margin gain because it happened during the pandemic with the pullback in promotions across the industry and for us, that's really not the case for us. What drove it was all the structural enhancements that Carl talked about. I mean, it ends and begins with inventory management. And we were not good managers in inventory before. We always carried way too much inventory. We're always chasing the mark down to the back side. So putting in place better upfront buy quantifications, better markdown discipline, better allocation disciplines, all those things, which are structural and kind of built into the DNA of the company now is what drove that 500 basis points of improvement. And we're a different company today, right? We don't plan on going backwards consent.

Okay. And my last question before we go into a quick lighting round. On the Q2 call, you called out strength in key back-to-school areas, as we're now in mid-September, is there any update? Or can you characterize the back-to-school season so far?

I'll stick with the comments made on the call. Our back-to-school in the South are a little earlier. So we did see generally, our back-to-school starts kind of the last 2 weeks of July and carries into August. We saw strength in the back-to-school categories, kids apparel footwear, which are very need-based, right? You have to replace those over your backpack, hydration, things like that. And we saw that carry into August. At the same time, what we also recognize is and the behavior we've seen this year so far is customers coming out during those time periods and they have to shop, and they're kind of pulling back in the loans in between. And so once we get past back-to-school and start to hunt season and tailgating, we kind of go into a loan until we get to holiday, and then we expect them to come back and shop again for holiday, and that's how we've modeled our forecast and plans, and we think it's going to play out that way.

Okay. Thank you. We're asking 4 questions to each company so we can get just a sense of what's going on in the world. And the first question is on the health of the consumer, just do you see the consumer facing more headwinds or less next year compared to '23.

I'm just trying to get through '23. We haven't given guidance for '24 yet. I think with what we're seeing, it's certainly -- I don't think they're going to have less headwinds than they're facing currently. I mean I think inflation is still going to be out there, although it feels like it's mitigating a little bit. I think household debt is still very high. I will see that coming down, and you've got the added impact of potential student loan repayments, although I think it's still up in the air, whether people punt on that and start paying deferring for a year. So I think those things are all going to be challenged. That being said, we look at our value positioning in our space. And we think we're in a great place for a trade-down customer, right? We haven't seen a lot of that yet so far. We've maybe seen a little bit of us trading our customer down in lower income customers consolidating trips but we haven't seen trade down from other retailers into us yet, and we think we're well positioned for that. So we think that could definitely be a tailwind, particularly with our value position that we have out there.

Okay. And the second question is on share of wallet. Again, we talked about this when we were talking about big ticket items. But is there one more important factor to drive higher spending in discretionary specifically next year?

I think a big unlock for us is going to be our CDP. We talked a little bit about that on our call. We've been -- we've had a database customer database. It was our customer data right now had in the past has resided across multiple platforms. It wasn't real time. We really couldn't speak to the customer on a one-to-one basis. And so we just implemented at the end of Q2, a new database. And that's -- it's already giving us a lot better visibility in terms of file segmentation. We can see migration across the different segments. And I think our -- it's really opening up our ability to be able to target market and drive more traffic into our stores and be much more personalized with our marketing messages in real time. I mean, in the past, it would take us -- we could create an audience who might take us weeks or even months in some cases to say, okay, we want everybody who bought a grill in the past 6 months to give us that listen and we can send them to buy some spices or now. So I think that's going to be a big unlock for us in terms of getting the customer to come back and shop this regularly.

Okay. Our third question is on pricing. Do you anticipate prices to be higher, lower, just maintained Next year?

Yes. I will tell you that we -- because of our value positioning in the marketplace, we really study pricing a lot and have fought very hard to maintain pricing we call them KPIs, Key Value Items. So these are touchstones for value, where customers can compare what our price is relative to the marketplace. So kind of a poster child for us, we talk about a lot is we've got collapsible holding chair that people take to the sidelines, right? You've probably seen those if you were going to a soccer match and it has our name on the back of it. That share is priced at $5.99. It's been at $5.99 for at least 5 years. We've had cost pressure there. We've held on to that and have not raised that price. We found other places to raise price. We sell over 2 million of those a year. So we're looking at those kind of items and saying, we're not going to raise price on those. We're looking for pull ways to add other new items into that. So we launched the 9999 gas grill this past year that we ran from Memorial Day through fourth of July. It's a great success. We're also looking at ways to even add new value items to that. So I think you'll see us protect price and hold price in a lot of those categories and items that the customer knows us for and to Carl's point, we do have a pretty robust regular price optimization model that we can run on certain things that are less visible and less easy to kind of discern price on. If we take a creative water up $0.20, that's really not going to stop from shopping us because we're not coming in to buy the water to an add-on purchase at the end, but being very thoughtful about how we manage that. The protecting value is going to be gained. We're not going to raise our prices on those visible items that are customers looking to us for value.

Okay. And our last question is on destocking, which doesn't really apply to Academy just given what you talked about with inventory before, so we can skip that one. And with that, we are done with our fireside chat. Thank you for joining us.

Thank you for having us.

Everyone in the room.