Capri Holdings Limited (CPRI) Earnings Call Transcript & Summary

Good morning, and thank you for joining us for this next session of the Goldman Sachs Global Retailing Conference. My name is Brooke Roach, and I cover the apparel, accessories and brand sector here at Goldman Sachs. I'm very excited to introduce our next session with Capri Holdings. Capri Holdings is an accessories-focused portfolio of brands, including Michael Kors, Versace and Jimmy Choo. Here to tell us more about the company's strategic transformation and growth initiatives are John Idol, Chairman and CEO; Tom Edwards, COO and CFO. Tom, John, thank you so much for joining us.

Thank you, Brooke. We're very excited to be here today to present the story of Capri. Thank you for having us.

Excellent. John, I'd love to kick it off with a discussion on Capri's growth initiatives. How do you see the long-term growth opportunities at Capri across each of your 3 brands?

Well, Brooke, as you know and many of the people on this call know, we made a decision a few years ago that it was very important for us to take the strong cash flows of our company and to begin to build a luxury group. We were fortunate around 4 years ago to be able to acquire Jimmy Choo, and about 2 years ago, to acquire the Versace luxury house. We now have 3 extraordinary luxury brands in our portfolio. And when you look at these brands, and I'll start with Versace, which we said in our first quarter earnings call, we'll do approximately $1 billion this year. And I'm so proud of what the group has achieved in doing that under really quite extraordinary circumstances. And we have a very clear vision that we laid out a few years ago of how we're going to grow Versace to $2 billion. And we're very much on that path and achieving many of the milestones that we need to really get to $2 billion. And again, I want to remind everyone, there are many, many luxury companies who we compete with, who are far in excess of that size and scale. So I think our road map to $2 million -- to $2 billion is very reasonable. And we've got, probably, one of the most exciting luxury brands in the world to do that with. Jimmy Choo, we have a goal of about $1 billion for this brand. We did see a little bit of a downturn during the -- during, obviously, the COVID period of time. The brand is very much on the upswing again. Business is excellent at Jimmy Choo. And again, we think we are very much on the road to an exciting growth trajectory. And then Michael Kors, we reset our objectives for Michael Kors. It was starting really pre-pandemic, but during the pandemic, we kind of decided we're going to pull back, and we'd rather be smaller and more profitable. And what's happened is by doing that, we actually see demand rising as we reduced the amount of product that was available in the marketplace, and we focused less on certain promotional aspects. And again, the promotionality of the business is more of a North American story, not internationally. And the brand heat is quite strong right now. So we see 3 companies that have the ability, Versace to add $1 billion, Jimmy Choo to add a little under $500 million and Michael Kors to add about another $500 million, to its current trajectory. And that, we think, will get us to probably north of the $7 billion that we have been talking about over the last few years, but feel excellent about the portfolio of luxury houses that we have today.

Great. And you've seen some nice operating margin expansion lately as well. Could you talk to your outlook for operating margins for Capri in total?

Sure, Brooke. I'd be happy to do that. Capri's delivered strong margin performance from the execution of our strategic initiatives that were put in place before COVID across all 3 brands. On the gross margin side, we've seen significant improvement driven by 3 areas. The first and most important is extraordinary product design across all 3 of our luxury houses. That's supported by our focused assortments, a reduction in SKU count as we build out our core business and engaging customer communication, which combined storytelling with data analytics. So we really engage as we develop our full-price sell-throughs across all of our businesses. Second, we're implementing select price increases at Jimmy Choo and Michael Kors. This started over 2 years ago, and we're already seeing the benefits of today. And we'll continue it through the next calendar year and continue to assess the price increases as we see costs, and potentially, pass-through costs, if needed. Third, we're growing our accessories and footwear brands. And we expect these to be higher-margin businesses and to help deliver greater gross margin over the next several years. From an SG&A perspective, we've also seen great expense leverage as revenues have increased, and we've also benefited from the expense savings we put in place over the past year. Going forward, we expect to continue to see leverage as sales increase, store densities improve, and we close on profitable locations. So looking ahead for total Capri, we see the benefits from these strategies contributing to continued margin growth and are confident in our long-term goal and outlook of 20% margins for Capri Holdings.

Great. Thank you. John, I was wondering if we could switch back to you for a moment and learn a little bit more about what you're seeing across the overall luxury environment and how the consumer is behaving? Can you talk to your outlook for the handbag, accessories and footwear categories into 2022 and beyond?

Certainly. The luxury business, and again, when we made this decision some 4 or 5 years ago to acquire luxury brands, one of the reasons why we wanted to go into this area is because it has shown tremendous year-on-year CAGR growth and been very resilient through economic crises, unfortunately, I guess, through other health crises that have happened, in particular, in Asia. And now we're seeing the same thing happen on this very difficult global pandemic. This is a category where consumers value what luxury brands stand for. Luxury brands are obviously built around quality, heritage, history, storytelling and also around fashion. Luxury today is fashion, and it's fun, but people want to invest in things that will stand the test of time. And I think we have companies now that are really standing the test of time when you look at Versace, Jimmy Choo and Michael Kors, all looking at -- certain at 4 years, certain at 25 years. And these are companies that are really standing the test of time. And I think you also saw the consumer react during the pandemic. The companies that did the best, at least in our fashion world, were the luxury companies. So we think that, that market will continue to grow in the mid-, and even in some cases, high single digit worldwide. We know that people will continue to look for accessories and footwear as a way of expressing their own self-image. That's been something historically, and we don't see that changing. So we think that this category is a category, in particular, in the accessories and luxury footwear area, which has come on quite strong in the past 5 years, are perfect areas for us to continue to grow in, and it's also where our expertise is. Again, we're led by Donatella Versace, Sandra Choi and Michael Kors, all original founders of their businesses. So they know a little something about luxury, and we think that we're really in good hands with their leadership.

Excellent. One of the key drivers of luxury demand over the course of the past few years has been China. Can you talk to the trends that you're seeing among consumers in China? And where you see the most meaningful long-term potential?

Well, China, obviously, has been a very big growth story for the luxury industry. We believe that by 2025, 50% of all, and I'll focus on the luxury accessories business and luxury footwear business, will be driven by Chinese consumers. There is an explosive growth of the middle class in China. Obviously, the GDP is growing very rapidly over there. And that middle class is getting wealthier. And as they do, as you'll see in many countries that are developing over time, that consumer wants to express the way that they have achieved things in life, and luxury helps do that. Obviously, luxury in housing, luxury in cars, luxury in other products as well. But clearly, fashion luxury expresses how people feel about themselves. And we think that, again, our 3 houses, all have very interesting stories to tell for that consumer so that they can project that lifestyle. We also believe that while there are going to be some bumps in the road, as China continues to work through many different issues, it's going to be a market that you can't stop. It's going to continue to grow. It's going to be a market that will be a very significant part of our revenues. And one of the interesting things and great opportunities is we're actually underdeveloped as a company in that marketplace. We believe that all 3 of our luxury houses will double revenues in China over the next 5 years. So that's quite an extraordinary opportunity for us. And we talked a bit about that in our last earnings call, where we said we'll be reinvesting additional earnings above our guidance into marketing and a significant amount of that additional investment will go into brand building in China because the more you make your brand important in China, the more you tell your story to the luxury consumer in China, the more they will embrace that. And the same thing, by the way, holds true for us in Japan as well, where we are underdeveloped as a group, and we see great opportunity for us in terms of growth.

That's great. One of the things that's very topical among investors right now is supply chain. Can you discuss what is happening with Capri's supply chain, both at the factory level and with logistics?

Sure, I'd be happy to cover that, Brooke. Thanks. So I'd mentioned on our first quarter earnings call, we have been experiencing increased delays to receiving merchandise due to global transportation challenges and factory closures. This was primarily in the Michael Kors brand. We were also seeing higher transportation costs compared to the prior year. Since that time, factory closures in Vietnam have extended longer than we originally anticipated, and transportation costs continued to rise. We're diligently working to mitigate both factory and transportation delays, and we now expect to have higher freight costs in the second half of our fiscal year, including air freight. However, if we take a step back and look at our overall outlook, based on our current expectations, we continue to believe we will achieve Capri's revenue and earnings outlook for both fiscal '22 and the second quarter. One thing that's helping us is the strategic initiatives that I was talking about just a moment ago, and John has also mentioned, which are delivering higher-than-expected margin benefits and helping offset the higher transportation costs.

Great. That's so helpful. It's such a dynamic time for retail. Can you give us an update on the current trends that you're seeing, both by geography, given some of the upticks in recent COVID cases?

Certainly. The North American marketplace, which is where I'll start, it's our largest marketplace in the world, is really very healthy. The consumer has definitely come out. You're seeing a lot more of social engagement. People are going to visit one another. They're going back to restaurants. They're going out to parties. They're wanting to be dressed up. They're wanting to show that the world is getting back to some level of normality. And so we continue to see the consumer very healthy in North America. And we think that, that will continue to be the case. Again, I want to remind everyone, we've said this before, there are going to be bumps in the road as we continue this -- through this pandemic. We're not out of the woods. We all know that. But I think the American consumer has decided that they're going to live their life, and we're seeing the benefits of that. I also think that our strategic initiatives globally around what we've done from an e-commerce standpoint, omni standpoint and clienteling standpoint have really served us well. Again, we've started way before the pandemic. We want to serve the consumer wherever he or she is, how they want to be served. And we think we've got the technology in place, not 100% in every single one of the brands, but we're getting there to be able to do that. So when the customer wants to be served online, we can do it. When they want to be served in the store, we can do it. And when they want to be served at their house, we can do it. And you see that, probably, most of it play in North America. Europe, we're seeing quite a strong rebound in the business. We knew it would be the back half of this year. I think we talked about that at the beginning of the year. And that is starting to happen. What's quite interesting about Europe for us is, in particular, in the last 30 to 45 days, in some countries, we're reaching pre-pandemic sales velocity and growing higher than that. And what's interesting is we're doing that with the local customer without some of the tourism. So again -- and I think that speaks to the power of our brands and how the consumer is engaging with all 3 of our luxury brands. So we're seeing a very, very nice trajectory in Europe. Again, long way to go. We would like to see, in particular, in the travel retail side of the business, that return, that has not returned in Europe. So when I say we're seeing this trajectory, it's more on our e-commerce and our stores, not in the travel retail side of the business. In Asia, the recovery is really quite slow still. Japan and Southeast Asia are still struggling. We have many stores that are closed, or they reopen and then get shut down. Consumers are definitely facing restrictions in Southeast Asia and in Australia. So I think it's going to be -- continue to be a very bumpy road in Asia. As you all know, China did see a resurgence in cases later part of July and through August. We did see store closures. We did see slower traffic as the consumers and certain of the large cities were mandated restrictions. There's been a little less travel internally inside the country. Again, nothing I'm telling you, you're not reading in the press, et cetera. And we did see some effects from that, although we see the rebound happening now. The consumer is getting back out there. And like I've said a number of times, you'll hear me continue to say there's going to be some bumps in the road. I think what's most important is, and we said this during the very beginnings of the pandemic, we have strategic growth plans for all 3 of our luxury houses. We never changed those plans during COVID. And if anything, it made it stronger. We reduced the size of our assortments, became more focused. And in the case of Michael Kors, decided to make the business a little smaller and more profitable, and that's definitely happening for us. So I think that, in general, North America is strong. Europe, rebounding. Asia, slower, outside of China in terms of getting the recovery in place as vaccination rates get higher. We believe there's going to be -- continue to be some bumps in the road. But I think we'll see a good fall season -- fall holiday season and even a better calendar 2022.

That's great. Let's pivot now to each of your key brands, and maybe we can start with Versace. Can you discuss the opportunity to grow Versace revenue to $2 billion?

Certainly. So I think -- and Jennifer, I think you're going to put one of the slides up, if I recall correctly. As I said, we started with a strategy when we bought Versace, and just to remind everyone, we shut down about $150 million worth of business when we bought the company. There were multiple lines inside the company, and we decided to focus purely on the luxury aspect of the business. And in addition to that, we reduced SKUs. And we set out a goal for ourselves that we would grow our accessories business to 50% of the overall revenues. I have to take my hat off to the entire team there because, for us, to be able to move as fast as we have to create 3 incredible pillars around accessories. First was the Virtus. And I tell the story consistently that we sat down with Donatella, myself and Jonathan Akeroyd, the CEO. And 2 weeks later, Donatella came back with this incredible V -- Barocco V, which is now -- has developed into very, very quickly an icon for the company, and we're seeing strong sales across, not only accessories but footwear, belts, other parts of ready-to-wear. Then we came back with La Medusa, which has always been a house code, and Donatella was very, very focused on wanting that to be at the forefront of the house, and it has -- the sell-throughs have been spectacular on the product, again, in accessories. And we're far outpacing what we had imagined. And now we're launching, you can see it from the photograph with Bella Hadid, the new La Greca pattern, which will be shipping into stores literally as we speak. Hopefully, there's some of that there right now. And we're very excited about the 360 campaigns that are going to go around that to develop that. If you would have asked me 2 years ago, could we have 3 pillars to be driving what we think will be a $1 billion accessories business off of? I would have never thought we could have been where we are at this point, and we're here. And so I think we're even more confident than when we thought we would be. And we did this all during the pandemic, which gives us just an incredible vision for what this can look like once we hopefully get out of this situation over the next probably 6 to 12 months. We also see our footwear business moving very, very rapidly, again, faster than what we had anticipated. And while a fair amount of that's driven by the active category, a lot of it is driven by the dress category. So we're seeing very strong acceptance from the consumer. And so we think based upon those initial executions of our strategy along with the fact that we're going to renovate every single store worldwide, I think we've got about 40% of that done now, and we think we'll have majority of it done in the next 18 to 24 months, and hopefully, you'll get to see the new store down in Greene Street that opened recently or new Paris flagship or new London flagship, flagships opening in China, et cetera. We've got a new one that's coming in Japan. I think this brand is going to be very, very powerful. And then lastly is our e-commerce, which is growing at a very, very fast rate, much faster than, obviously, our store rates are growing right now. And even when the stores reopened, the rate of our growth at e-commerce has kind of stayed very, very high, well above our expectations. So I think we believe we have the house codes. We have the strategy in the right areas that are going to generate high margins to be able to grow this business to $2 billion.

Fantastic. And can you comment on the gross margin and sales leverage drivers to drive that expansion in operating margins at the brand?

Sure. I'd be happy to do that, Brooke. First, we're extremely pleased with the margin progression that we've seen with Versace. The team there has done just a wonderful job. And given the strength, we recently increased our long-term margin target, our operating margin from the mid-teens to the low 20% range. And to your question, we expect to achieve this target by doing 3 things. First is really increasing the full-price sell-through across the business. We're expanding the offering and the core of the offering, as John mentioned, with La Greca. We're expanding in accessories, and that's going to help increase full-price sell-through and drive margin. Second, we're improving store productivity. This remains a significant opportunity for Versace across their global store fleet, and we believe it's a very large upside as we move forward over the next years. And finally, leveraging SG&A on sales growth. Versace is already growing at very strong rates. And as we continue to grow, we would expect to leverage SG&A going forward. So overall, very confident in our goal for the low 20% range for this wonderful luxury brand.

Fantastic. Let's shift now to Jimmy Choo. At Jimmy Choo, can you talk to your clienteling initiatives for the brand, the growth that you're seeing in that customer file? What you're seeing in e-commerce and that path to get to $1 billion in sales?

Certainly. Jimmy Choo has obviously got an incredible history. While it's short 25 years, it's really got an incredible track record. And Jimmy Choo has been growing every single year since it was founded, unfortunately, except for last year during the pandemic. So we've got a luxury house that has a strong connection with the consumer and really an incredible brand image. I'm very excited to talk about the fact that we -- and you saw it on the very first slide, Hailey Bieber is the face of Jimmy Choo. The campaign just launched. And we're really going back to some of the roots of this company, which is much more about glamor. And really, we believe that over time, glamor will still be one of the most important codes in luxury. People want to get dressed up, people want to look beautiful, people want to express themselves in a way that we think Jimmy Choo will be part of that. One of the biggest areas of growth continues to be the whole bridal business for us at Jimmy Choo. And it's one of the ways we actually begin our journey with our customer as well. So as we've seen that business return as people are getting married again, that's been a really strong movement for us on a development basis. We reported last quarter that our database grew by 14%, which is, again, a very strong growth for this company. We believe the accessories business is also an area that we can really enter the luxury closet of our consumer. We've seen excellent initial results from our pillars in that area. We've just launched our new JC logo, a program, which, again, is off to a very nice start. And then we have our Crystal Madeline, which incorporates the Crystal C. And we see those as becoming iconic real pillars for the company. And we're using that not only in accessories but we're using that on footwear as well. And we think we can grow the accessories business to at least 30% of our revenues. And quite frankly, we have objectives that are going to be much higher than that. The additional thing is that we see our ability to grow our store footprint as in Versace up to 300 doors. We think the same is true for Jimmy Choo from our approximately 225 doors today. So there's going to be great growth opportunity there. Again, these are in the best luxury cities in the world. As a part of all of that, Jimmy Choo has always been about clienteling. And it really stems from its very beginnings whether that's making bespoke shoes for consumers, whether that's, again, bringing the product to their homes. One of our stores actually out in Beverly Hills in California is doing 40% to 50% of its business literally outside the store with consumers bringing the product to their house. So this was all happening well before the pandemic. So clienteling is a very important part of the Jimmy Choo growth story. And we believe that we're going to be implementing not only with Jimmy Choo, but with Versace and Michael Kors, the digital tools to continue to enable our customers to have those virtual visits as well as in-personal visits to support that journey with the consumer. So we believe that Jimmy Choo will grow at continued high single-digit, double-digit rates -- low double-digit rates, and we will get to the $1 billion goal over the next few years, and it will be led by this renewed focus on marketing, on our continued growth in the footwear business, and in particular, we're really growing not only the dress part of it but our casual and then the growth of our accessories. So we're feeling much stronger than we have. And I've been very frank saying that we probably had a couple of bumps in some of our strategy initiatives in the first few years that we owned Jimmy Choo. But I think we are very, very clear on how we're going to continue this growth and the pillars around that are in place.

Tom, can you discuss the opportunity to expand margins to the mid-teens range for this brand?

Sure. I'd be happy to, Brooke. So first, we're very happy with the margin recovery at Jimmy Choo. We are seeing gross margin expansion and significant leverage on expenses as sales recover. And going further, as we look to expand margins to the mid-teens longer term, it's really going to be driven by a few things. The first is expanding that accessories offering. As John mentioned, we're targeting near-term 30% from approximately 17% penetration and more even beyond that. And that will certainly help support margins. Second, increasing pricing. Jimmy Choo has been priced below competitive peers in the luxury space. And this pricing increase is going in as we speak and has an opportunity to continue to support margin growth going forward. And the final piece is leveraging SG&A on sales growth. And that's both via store densities and improving our productivity in stores, but it's also just growing revenues. When we purchased the brand, we had about 150 stores. We're now at about 230. And the brand, given its size, is going to be very sensitive to improved and higher sales, which we've seen in the last few quarters and expect to see going forward. So we believe we're on track to get to our 15% longer-term margin target and seeing all of our initiatives play into that.

Great. And finally, let's move to Michael Kors. You have several growth initiatives in place to drive Michael Kors to a $4.4 billion brand. As you look within your channel growth outlook for that brand, can you talk to the most important near-term and medium-term drivers you expect to improve store productivity and to grow the company's e-commerce business?

Certainly. Well, Michael Kors have a big smile on my face because, obviously, this is where we started Capri, and this has been one of the most explosive growth stories in the luxury fashion industry. We grew -- there's been a couple that have grown faster than us over a short period of time, but we're right there with the best of them. And I think what we -- the decisions that we made about a year-or-so ago to look at this business differently, which was more about profitability, and not to say that revenue growth isn't important. It certainly is. But really, we focus on profitability first. So if you go back 2-plus years ago, we had made the decision to remove the logo product from the line. That was not a very good decision on our part. We pivoted quickly and went back to focusing on signature as a very strong statement for the brand, and it has created enormous consumer desire. We are running well north of 30-plus percent of our all products in the entire company that have signature or some identifiable hallmarks on it. And in our accessories world, it's well north of that. It's well north of 40-plus percent. So the consumer is definitely reacting to that. It gives us the opportunity to have more product that has a longer life cycle, therefore, having less markdowns, which is also helping our margins. As Tom mentioned, we are also raising the prices of these products because we've been underpriced versus some of our competitors around the world. And we're seeing no pushback from the consumer on that. And I want to remind everyone on this call, we are going to continue price increases all through next year with Michael Kors as well as Jimmy Choo. And we think that's going to continue to elevate the brand. So when you look at what we've done, we never walked away from our focus on our Jet Set image, which is speed, energy and optimism. And she's always on the go, he's always on the go, they're all traveling. Today, that traveling looks a little different, but they are having a very good time wherever they are. So we've got this optimistic brand and a code that, I think, is quite valuable. That's now really anchored with our signature and our iconic product, and that is giving us this trajectory for growth that we, quite frankly, didn't see quite as big as we're now seeing. Additionally to that, we've entered a bit more of a fun, casual, sport-type market called #MKGO with our product. I'm sure you've seen a lot of the campaigns that have been launched online recently. It's doing extremely well for the company. So -- and I think it's quite timely given what's happened with the pandemic and more people are dressing quite relaxed. And we're going to see what return-to-work looks like, how much of that's going to be dressed up, how much of that's going to be more sport attitude. But we think that's a huge opportunity for us. And then lastly, Men's is a completely undeveloped business in this company, only a few hundred million dollars, and we think that, that's ultimately a $500 million-plus business. So when we look at what we already started with, how we repositioned this company, how the consumer is reacting to that repositioning, and then lastly, how -- once again, we are very, very omni-capable with Michael Kors. Our e-commerce business has, quite frankly, been extraordinary. We've got the capabilities worldwide to fulfill again, where she needs it. We have endless aisle capabilities in the store. And our clienteling, we're ramping up those capabilities for our sales associates. And so we think when you look at all of that and then combine that with -- in the fact, in North America, we're closing stores, in Asia, we're opening stores, really optimizing our fleet for productivity. We think we're going to be a much healthier company with growth and with much higher profitability.

We are almost out of time, and I want to make sure that I get to 2 final questions. The first one is for Tom. Can you discuss your capital allocation priorities and any color that you can provide on potentially M&A? And we'll go from there.

Sure. Happy to. So first, if you look at our capital allocation, our free cash flow is very strong. We're generating a lot of cash as the brand and the company has done in the past. So that is the first point I'd like to make. As we invest in the business, that's always going to be our first priority. Second, we'd like to reduce debt. And we have been doing that rapidly over the past quarters and expect to continue to do that over the next year. Our third priority is share repurchase. And we want to demonstrate our strong cash flow generation by purchasing our shares, which we started last quarter with $50 million, and we have shown over the past that we can do both share repurchase and debt repayment given the strong free cash flow generation. And longer term, we plan on making acquisitions in the luxury space, and this will position us well with a strong balance sheet to pursue that if opportunities come up.

And Brooke, I'd like to add one thing to Tom's comment. I think that there was a lot of fear in the marketplace about our ability to acquire companies, execute on those acquisitions and pay down debt. And I think given the growth of Versace, now the renewed growth of Jimmy Choo, I think, we've proven that we can do that. And as Tom said, we're going to pay down debt. And quite frankly, at the end of next year, we'll have very, very little debt. So we'll be in a very strong position to be in the market for at least one additional acquisition. And our goal is to hopefully do that over the next 2 years or so if a quality asset becomes available.

That's really helpful color. My final question for the day is about the upcoming leadership team transition. You've recently announced a leadership transition with the appointment of Josh Schulman as CEO of Michael Kors. Can you talk to your confidence and enthusiasm for this next step for Capri? And perhaps, any other details on the transition that might be worth noting?

Certainly. Well, number one, Josh was not only appointed CEO, and he's actually sitting in the office next door to me right now of Michael Kors, but he will be taking over CEO -- as CEO of Capri Holdings in September of next year. And I don't think we could have found a better candidate. Josh has worked at Saint Laurent. He's worked at Gucci. He has -- was 5 years the CEO of Jimmy Choo. And quite frankly, one of the real architects of that company's growth. And we're still revisiting lots of the things that he did and put in place there, which were all tremendous. And then he joins us recently where he was CEO at Coach. So he knows the luxury industry. He knows the broader accessible luxury industry, and he really has a great vision for how to build luxury houses, how brands work. And he's also a terrific leader, and he's demonstrated at all of the companies he's been in. He's had growth at every single company he's been in. And that's a track record that we admire and think will be perfect for this company. So Josh is the perfect candidate to take over for the CEO of Capri. I'll move to the Executive Chairman role, and I'll be spending my time on working on strategy with Josh, but also it will free my time up to be able to look at these acquisitions. Again, we have some competitors out there who will be looking at acquisitions as well. So we won't be the only one out there, but this will give us, I think, a leg up to be able to have a bigger voice in that conversation.

Thank you so much for sharing those thoughts. And with that, we are at the end of our time here. So I want to thank you to John. Thank you, Tom. We really appreciate you joining us today. And we're hoping that everyone who's joined us on the line can join us for the next session. Thank you all, and have a great day.

Thank you, Brooke.