Culp, Inc. (CULP) Earnings Call Transcript & Summary

I want to thank you for joining us. We are excited to have with us Iv Culp, CEO of Culp Inc.; and Ken Bowling, Executive VP and CFO with us today. We also have on the call Bud Bugatch, who partners with me at Water Tower Research and content creation on the furnishings industry and our work on Culp. A quick housekeeping item. Everyone except Iv, Ken, Bud and I are on mute. The live audience is on mute. So if you have a question for Iv or Ken, please type it into the appropriate field on your screen into the Q&A box, and we will pour those questions on to participants and they will respond to you directly. We may have a couple of minutes for questions at the very end. Let me give you a little background, Culp is a very significant manufacturer of mattress fabrics and upholstery. They have a history of product innovation and high-quality customer service. They employ about 1,400 people worldwide and they serve their customers from a global footprint that stretches from multiple locations in Asia to Haiti and it's home based in North Carolina. So let's begin with Iv. Of course, the pandemic and the aftermath have been tumultuous for the world and for Culp. Yet through it all, you remained debt-free. And last month, the company published a new investor presentation with the theme of repositioning for renewed growth in each of your 2 main operating segments. Iv, if you have a few minutes and take investors through that presentation. For our audience, you might find that presentation at www.culp.com on the homepage of the Investor Relations tab under Featured Reports and Presentations link. Iv, take it away.

Thank you, Rex. I appreciate the kind words and the introduction and really grateful to you and Bud for allowing us the time to spend with the audience here. It means a lot to us, and we're excited to talk about what we have put together. And let me just maybe from a high level -- the reason we want to do this fireside chat is we'd like to -- the outcome of this, we'd like to share with everyone what we've liked about this business for our 50 years in history. What's kind of -- what's happened in the last 2, 3 years, which is plenty. What we're doing about it right now and then why we like our market position as we look forward. So if we could accomplish those things, I think it would be an excellent use of time. And we did just very recently put together a new investor deck. We think after what's going -- what's transpired the last couple of years, it's very important in our view to tell the investor where we're going, what's happening. And I think this is a good way to do it. I think we'll just spend more -- no more than 20 minutes Rex, running through some highlights. This is posted on our website, as you talked about, just about 3 weeks ago. So we think it's important to kind of run through from our perspective. And then, of course, we can do some questions if that helps. So with that, I'm going to share my screen. And I'll just -- Rex, if you confirm for me, this comes up, okay.

Yes, it looks good. Yes.

Okay. So what we want to do is -- just give me a second, change the slides here. All right. What we want to do about the story. So you mentioned Rex, it's repositioning from renewed growth. And we want to hit this in 5 ways. #1, we're building on a strong foundation. It's built from lots of leaders before me that we think is important to share. We want to talk about how we're transforming our mattress fabrics segment. That's critical to the Culp story and something that we need to do. And I think we're well down the path to doing. We also want to accelerate our execution in our upholstery business. It's been more consistent. We want to tell you about how we're changing that. We want to speak to our disciplined capital allocation, which has been a hallmark of the company for many years. And then we want to share what we think is a pretty clear road map to renewing the growth. So we hit those 5 topics as we run through and continue to stay on a good task. To start, just want a high level, make sure everyone understands that Culp is really made up of 2 core businesses: mattress fabrics and upholstery fabrics. Within those businesses, we also do cut and sew, and there's other things like in the upholstery that have hospitality as well, but really 2 core segments for us, and they're about even in our revenue. About 50%, can vacillate a little bit, but 2 strong segments that we think is important to our story. The business is a little bit different. They have different supply chains, but actually, we're finding the business is getting more similar as we move forward, very globally based, very focused on having options to deliver in today's world. And I just think, again, these 2 businesses will make a difference for us long term, and we'll talk about each of them through the presentation. Just to maybe a short high-level understanding of kind of what's happened. I became CEO in January of 2020. I've been with the company a long time prior to that, but certainly took the reins of CEO on a pretty tumultuous time and we've been through a lot. And pre-COVID as I got started, we had and really for a long period, favorable long-term growth dynamics in both business. Through COVID, oddly enough after a bit of a shock, business grew during COVID and demand was accelerated for home furnishing across the board, which was unique because everyone was staying at home, and I don't have to tell anyone on that call about that on this call. And then after COVID, but it's gotten kind of slow for us. There was a lot of pull-forward demand, inflation has been a problem as we all know. And then a lot of our customers have been very heavy on inventory, which has impacted what we can be shipping. So we're looking forward to as we get past COVID and get past some normalcy. We're in our fourth quarter right now for this year. As we move into next year, we think we start to return to a more normalized market. And timing is unclear, might be 12 months, might be 24 months, but we're definitely coming off a difficult period, and starting to return to normalcy, which is hugely important for us. What are we confident about? What are the 5 main things we want to go through that -- why, we're confident. #1, we have a proven track record, 50-year history of navigating changing business conditions. We're positioned in what we think are solid markets. We're very strong with innovation. It's a critical piece of Culp story. We have a strong balance sheet, and then we have many multiple repositioning initiatives underway that we think will strengthen our future. So we'll get all these at a real high level. #1, think about Culp for 50 years. We've been founded in 1972. We have Mattress and Upholstery, which I've touched on. We've reinvented the business numerous times. In the early 2000s, we had to shift the whole business on the upholstery side to China. We've dealt with mattresses going to one side. We dealt with economic crisis in 2008. We've dealt with mattress imports. But the point of this is through a 50-year history, we've always found a way to adapt to those changes. It's never been smooth and perfect. We understand that. But as we look into 2022 plus 2023 now, we're starting to reposition ourselves to grow again. And that gives me a lot of confidence. Cofidence #2, we think over a long period, we're positioned in solid markets. And there are probably lots of metrics you could choose that would illustrate why these markets are strong, but we just picked a few. And if you look at the left side of that slide, both businesses over 20 years -- now these are pre-COVID numbers, over 20 years pre-COVID, had slow, steady, very predictable growth rates. We think, in time, the business will be that again. It certainly hasn't been the last period, but it will get back to that, and we think that's a good story for us. In the middle there, some management estimate here, but through industry studies and things that we look at, we believe that 10% to 13% of the mattress -- of people replace their mattresses each year. That's a really nice step for us and something that we think drive long-term demand. And then pent-up demand is there. A lot of millennials, younger folks are having trouble with costs and inflationary issues and housing unavailability. And so there's a lot of younger people living still at home. And as they move out, we think there's some pent-up demand past this period that will help furnishings purchases. So these are just 3 we picked, again, there's many, but giving you some context that we think we're in healthy markets. And then really, most importantly, #3, confidence reason #3 is we're very focused on innovation. And we do this in a number of ways. And innovation is not only about product. But at the top of that slide there, we do a lot of consumer-focused research. And we think about trends all the time in both businesses. And really, I guess the standout trends are cleanable performance fabrics is everything in upholstery today. Sustainability is growing in both segments and cooling is critical in mattress and even become somewhat important in upholstery. This is by no means the only trends, but these are ones we think are high level and worth mentioning in this deck. And then we have customized, very high-tech digital modeling, so we can sample differently today. We can present to customers faster. We can just do things in a much more speed to market way than we were in the past on sampling new items. And then on the platform, innovation in our supply chain platform is critical. We've learned that so much in COVID, being quick to market, having options in the supply chain, all around the world, operating and sourcing in 6 different countries, we think is important to drive our future. But I guess product is probably the most tangible innovation story, and we wanted to list out some things that we think we've done first that are really important. I'll just kind of highlight at a high level. In the upholstery side, we were the first to introduce suede upholstery to the commercial residential segment, and we did the same with faux leather products. We were the first to put stain-resistant performance fabrics at mid-market price points again, and that -- we see that now through iClean and LiveSmart brands. We were the first in to take iClean and LiveSmart performance and go sustainable with it as well and have our LiveSmart Evolve product line. And we are the first now to do Nanobionic wellness-focused fabrics for residential furnishings. And that's the next step in our performance products. On the mattress side, we were the first to adapt and have on-shore, near-shore and off-shore strategies for mattress covers. We are the first, as I talked about, the LiveFurnish 3D rendering that allows us to reduce sample cost and enhanced customization for our customers. And we're the first early adapter with cooling and sustainability combinations in mattresses. So you can see we're very focused on trying to be forward focus for our customers and provide innovations that matter to the consumer. I'll highlight, just to give an example of this, so in the upholstery business, the consumers were wanting everyday cleanable fabrics that were pet friendly, stain friendly, child-friendly. People are living differently on their furniture today. The challenge is to create something that would not stain and our solution was easy to clean performance products and look at the results of that. So since 2016, this has generated $185 million in sales. Today, 40% of our upholstery fabrics are now performance. And with our sustainability program, we've recycled over 100 million water bottles. So lots of good stories through our innovation that we think is important to our story. And I'm going to pivot to Ken for a minute to touch a bit -- bring him in Ken Bowling, our CFO, to touch a bit on our balance sheet and how we think about that in cash flow.

Thanks, Iv. During this very challenging time, it's been critically important for us to maintain a strong balance sheet. So we've been able to achieve that through controlled spending, through cost savings, through a major effort in controlling our working capital. That's worked very well. Obviously, we've been able to stay debt-free during this time. And we've actually been able to expand our credit agreement to give us more flexibility and more liquidity to the point where at the end of Q3, we actually had about $40 million in liquidity. So operating at a position of strength has been very, very important to us as we continue to navigate these challenging times. When you look back over the years, since 2011, we've actually returned almost $80 million to shareholders. And another measure of liquidity is free cash flow. I mean that's one of our key metrics that we watch and monitor very closely. And you can see over the last few years, we've actually done pretty well except for last year fiscal '22, when we like many companies got too much inventory on hand, and we spent the last year getting that inventory out and taking advantage of that. And so, this year through 9 months were actually positive free cash flow compared with a negative $24 million last year. So we're excited about that, and we're excited to continue that trend as we head toward the end of the fiscal year in the next few weeks. Iv?

Yes. Thank you, Ken. So that's confidence #4, just our strong balance sheet will support our future and supported us through this period and will support our future. And then #5, just we have multiple initiatives. We're not going to dig into those, but let's think about our story in this way. Currently, as we finish our FY '23, again, we're in our last month of our year, we're repositioning ourselves. '24, we expect stabilization in some early recovery and then '25, for our fiscal year, we expect renewed growth. So let's talk about how we get through those. And really, the highlight of our story or the most important part of our story has to be transforming our mattress fabrics segment. We recognize what this business means to Culp, and we've got some significant programs underway to make this business what it was in the past. Strengths of this business. We're one of the largest producers of mattress fabrics in North America, still are. We also have a really robust global platform with several country abilities to do things. We have incredible design capabilities, and we're a large player in a large market. This market share can grow. But today, we're already a large market share player and excited about where we are. We do kind of everything you need from a fabric standpoint for a mattress customer. We do design services, we formed fabrics or even a knitting and then we also do finished cut and sew covers. And we really are selling to who's who of customers in our space, and we just have a list there on the side. And this is really where we want to be and the customers that are doing business today, and we're positioned in a good spot with pretty much all. So happy about that. But what we need to do in a new mattress segment, understanding our performance has not been to par in this business, is we're changing how we're doing things. So this is forward looking, right now, looking kind of things. Leadership's being strengthened. Our organization is much more collaborative. Our goals in the Culp, we are going to be clear for this business. We're going to lead with price. We have a lag with price for the last 2 years, trying to catch up to rising inflation and rising costs. We're going to lead with price going forward. Our marketing strategy is targeted. We're going to pick customers that we can win with. Our operations are going to be more efficient, and our initiatives are focused. And we're going to talk a bit about all of this, but this is a really important slide of how we're changing that business. Some of the key initiatives, I'll hit them at a high level. Our leadership team is completely restructured, starting with our President of that business, who's been with us now for about 6 months and just doing a terrific job, thrilled with what he's bringing to the table. Tommy Bruno is his name, driving operational efficiencies. And first couple of things. We've already repositioned our U.S. cut and sew. That should save us $2 million annually, and we're highly focused on production scheduling and quality management, really important things for us to change in our new year. We have a new commercial approach. We've always talked about how good we are at design and how we can be specified and specific for every customer. But we need to change that a little bit. We need to have an open line for our small customers and a dedicated design services for our large customers, and we're working on that now. And we're executing an operational plan, restructuring operations team, continuous improvement is critically important. And we are going to start investing again in the business, not in capacity growing, not trying to get aggressive with growing the business, but to start paying back on maintenance CapEx. We've learned and we're figuring out and we know we can be profitable through operations, and we have to change that part of our business, strengthen that. So as the segment does come back, we're prepared to capitalize on it. Maybe just a high level on the targeted part of the business, targeting our customers. Again, look at the left side there, we have so many SKUs, and we are so good at designing for so many customers, but we don't have to design special goods for 2% of our business. We can have an open line, very curated, very stylistic, very strong that we can sell to a lot of smaller customers. And that's what we're going to be doing, and it's already underway and paying nice dividends. Ken, I'll let you maybe touch a bit -- clean me up a bit on the numbers on how that all rolls up. But obviously, the story here has been downward trajectory. And the only comment I want to make before you start, Ken, is we are not trying to find guidance on this slide. We are not trying to tell you this is where we're going to be. We're not trying to cap ourselves. We're just showing you what we can do in our mind, very clearly to get back to a normalized target. So Ken, with that intro, I want you touch on this segment.

Yes. This schedule shows really 3 things that shows where we've been, obviously, back in the cyclical peak where we are with fiscal '23 and what we feel is normalized. So when you look at fiscal '23, it's no surprise the challenges we face with inflation, labor challenges, tough market conditions, macroeconomic issues, all those come into play this year. It's been a very, very challenging year. So obviously, we are doing everything we can to address those. And so we look out to the right, what is considered getting back to normal. We feel 2 to 3 years of focus to get back to that point of $160 million, $165 million in revenue, and that close to 10% double-digit operating margin. So how are we going to do that? And that's the important part because we know what we have to do. There's -- as Iv said, there's operational improvements we can make. Obviously, growth with our key customers, new products with better margins, taking advantage of lower cost in our raw materials, all those things that we can do to get to that quarter-on-quarter normal level in 2 to 3 years of getting this business back. So really at that double-digit margin. And then beyond that, we will certainly work to go beyond that as well.

Okay. Thank you, Ken. So that sort of wrapped the story on the repositioning of mattress fabrics and that transformation cannot be understated what we're going through in that business. And I'm excited to share that over the next year. Next, we're going to touch on just accelerating the execution of our upholstery business. So that segment has been more consistent for us. But it's important to understand the differences of that business to the mattress business. It's a very fragmented market. There's a lot more people making furniture, a lot more people supplying furniture companies. So it's a fragmented market. We have a very asset-light, very flexible global platform. We have incredibly innovative products, and we have a good share in a very large market. This business is very important to us, but not looking -- not likely to grow the market share that we can grow in the mattress fabrics, although a significant piece for us. Again, very innovative products focused on higher-margin growth segments of upholstery. Performance products and then hospitality. And you can see some of the key customers we would target in this segment. Again, really large, mid-tier, strong financially customers that we want to be selling to. So who's who in our view of who we should be targeting. So many key initiatives underway. And again, remember, this business has been more consistent. We have adjusted our cut and sew platform in China, which should generate about $900,000 in savings and we're restructuring our upholstery cut and sew operations in Haiti, which is another $1 million savings. So those 2 will be nice tailwinds in the next year. We want to continue our innovative performance. LiveSmart, which is our cleanable performance products, LiveSmart Evolve, Sustainability and Nanobionic, the wellness focused. And we also want to grow our hospitality segment. We'd like that to maintain 25% of normalized sales, and that business should come at a better margin. So we're excited about that segment of the upholstery business as well. Ken, maybe a high level here, again, not guidance, but just normalizing how we see this business.

Yes. Same thing as before. Look back where we were. Again, fiscal '23 has been challenging with the pressures we've talked about them before, inflation. In this case, some of our -- many of our customers had to run off significant backlogs and that affected our demand. A lot of these pressures that were completely out of our control, but we've had to deal with. Again, as we look toward the right, what is normalized, getting to that 7% to 8% operating margin, $145 million in sales in the next 2 to 3 years. Again, how do we get there? It's addressing the operational challenges that we have today. It's new products with better margins, all those different factors that come into play and getting us back to that quarter-on-quarter normal range of 7% to 8% operating margin.

Thank you, Ken. So now we're going to talk about how we're maintaining our plans to maintain our disciplined capital allocation. I'm going to let Ken also cover this slide, if you don't mind, Ken.

Yes. This is -- again, we've talked about it before, maintaining a strong balance sheet is paramount. Having that line of credit in place if we need to use it, we'll be very careful and judicious in that use of that credit line. Obviously, as growth opportunities come to be able to invest in working capital, CapEx, we've been watching capital spending very carefully. We're evaluating projects that add value, and we're going after those. Obviously, acquisitions are always a factor, but the right facts and circumstances must be in place. And of course, we want to get back to that balanced capital allocation strategy of dividend, share repurchases. But right now, the most critical thing we can do is ensure the financial stability of the company, and that's focused on our balance sheet and our cash position.

Okay. Thank you, Ken. So let's now finish up this deck and talk about what we think is a clear road map to renewing our growth. And let's talk about potential tailwinds. So #1, we think sometime in our FY '24, again we're in our last month of our '23, sometime in that year, we're going to see an improved macro environment. But it's important for the investor to know we're not banking on that. That's not -- we can improve our business without that. We can win market share and we're winning market share, and we're finally starting to see innovation come to the market. I don't know if we touched on them, but for 2 years, there's been very little new product introduced into the market because of high inventories and kind of not need to do that. But now we're seeing on both sides of the business, lots of new innovation. We're going to grow our business and improve our business without an improved macro environment. But we're going to get that sometime in '24, I believe, certainly for us, and I think -- that's something that we can -- it's a tailwind, potential tailwind. New products and those normalized margins. The new products I'm touching on, they're priced right. We costed them right, and we're selling them at proper margins, which is a big deal versus trying to play catch it up to where we were. The impact of the quality and the efficiency improvements that are going on, primarily in CHF is going to be really important. And then we're finally starting to get a tailwind on raw material costs. And that's 60% to 70% of our total costs. So instead of constantly rising, those are starting to at least stabilize and improve for us, which is a big tailwind as we look ahead. Other things that just matter, these are forecasts -- totally not -- these are estimates that we read in the industry that the business will get back to some steady growth. This is a mattress look, maybe some estimates of what we think will happen with the growth rate over the next few years. And same with furniture and bedding kind of combination, this is an estimate of how we think the business may grow slow, steady growth, get back to that history that we're used to, so we can be more successful. So the time line for this, and we said this at the beginning. Right now, we're repositioning ourselves in a very good way, and I hope you're seeing that. '24, we're going to stabilize, an early recovery and regain our profitability sometime in '24. And then FY '25, we're going to go back and refocus on renewed growth. So a really good 3-year plan. Ken, you may want to touch on how this didn't roll up or touch on the consolidated numbers.

Yes. This is a culmination of the other divisional presentations. And obviously, this is the consolidated schedule. And it's something to keep in mind here that these margins includes the unallocated corporate that ranges $10 million to $11 million that they'll make the math work out to get us at 4%, 4% to 6% normalized operating margin out 2 to 3 years.

Okay. So last thing I just want to touch on is how we're going to measure this. How are we going to keep track of this that we're doing that what we say in FY '24. And what we expect and the plans include meaningful consolidated sales growth with specifically stronger improvements in the mattress fabrics segment sales. Return to consolidated profitability, strengthening throughout the year. So sometime in our year, we're going to hit that breakeven point and then start moving forward. Upholstery fabric is consistently profitable, building throughout the year and mattress fabrics breakeven in the mid part of the year to small profitability and moving on from there during the back half and then maintaining a very stable cash position with investment in working capital is needed to support that growth. So these are what we are going to measure, and we'll keep track of those as we go forward into '24. So Rex and Bud, that's our story and how we're repositioning Culp. I hope it's reading true to you and Bud. We're happy to talk through any questions you might have.

Well, that -- it's all very interesting and thanks. We're getting close to the end of our time, but we still have a couple more minutes. I wanted to invite Bud. He's been covering Culp, and he's been engaged with the furnishings industry for many years, and I wanted him to -- he's been through many cycles. And he's seen this before. I wanted him -- to get some reaction from him and maybe talk a little bit about the opportunity for investors here. Bud?

Yes. Thank you, Rex. Yes, it's -- I have covered Culp since about the 1980s, the mid-1980s and it's -- I have seen it go through a lot of different changes and a lot of cycles. I thought this presentation was terrific because I think it gives you and the investor a real clear growth. And I think for me, the confidence slide that if you refer back to several times, really was important. This is a company that has navigated through some very difficult times in the industry. And it is a company that does -- is subject to the macro conditions. But it is positioned with the significant market shares in each of its 2 major markets, and they are growing in their healthy markets. So what's new here is the innovation. And that's been new really since Iv really took over the corporate leadership. And it's very -- it's exciting to watch because those are, I think, really evidence of getting to outstanding and above margins. And the balance sheet remains strong. It hasn't always been that way for Culp. There have been times when it wasn't. But even through this difficult period, the company maintained a very strong financial condition. And I'm excited about some of the initiatives we've seen. So you've seen a way to get to what I think are pretty realistic margins. What strikes me as an investor is that there is a significant argument here that they've got something like a Ben Graham stock or Ken Fisher stock when you're looking on a price-to-sales basis, or if you look at it on a net total net asset basis, there is real excitement here with what Culp can do. And I've seen this stock do it before when it didn't have quite these strong growth initiatives and [ strike ] initiatives that I think will lead to a sustained level. So I think that's pretty exciting stuff. So -- from my standpoint, the risk looks like to me, it's maybe more time-based than price-based. Nobody can predict the time, Water Tower, we do not make stock recommendations. We try to help investors understand what drives the company here. I think you've got really a good perspective on that. So Rex, that's my takeaway here. I think this is a pretty exciting story.

Okay. All right. Well, thanks, Bud. Iv, you want to take a question if...

Yes, sure, Rex, I'm happy to.

Go ahead and click on the Q&A. And if you see something in there that you think you can respond to quickly -- let me go ahead and otherwise, we'll send some questions to you later.

Yes. Well, I do see one here talking about the mattress side. It asks about the share of import mattresses and what's driving import surge and is the current tariff -- and I know Bud, this is -- Bud's probably the best one in the world to answer this question. He studies this like a mad man. But yes, we -- certainly part of our story over the last few years has been, there were a lot of Chinese imports. And that was sort of a problem prior to COVID. There were a lot of low-cost beds being dumped into the business that was impacting our customers. And certainly, the new antidumping tariffs that are all mattress today are really changing where mattresses are produced. And we're seeing it in the recent numbers month-over-month, it's trending down. What is happening is so much of the import beds are now being done nearshore. Mexico being the largest beneficiary of that. But from a Culp standpoint, making fabrics and covers, Mexico production, we know where these beds are being assembled. So we know how to sell those products. What was difficult for us was when beds were being made all over the world, as good as we are trying to make good many countries, it's hard to find all those customers. So now we have a better sense and sort of settling down into 3 countries or so or most mattresses that are being made outside the U.S., it's easier for us to target that market. That's a tailwind for us as we look ahead. There's some share coming back to the near-shore. But, if you think, any different points, you can share, I know you study this a lot.

No, the overall share, you're right. We've seen the share move to about 30% and stay there for now a number of years of overall units, but a lot of that has moved to Mexico. Mexico is where the larger share has happened over the last couple of years, and you do have an opportunity to sell into that market. So that's different. I know that Culp itself has not been a petitioner for the tariffs. That's been through some of the actual producers, but the share market has been -- it looks like it's around 30%. And we do publish those numbers on a monthly basis, and I believe we'll have a note coming out in the next couple of days exactly on the latest numbers, which were just released by the ITC.

We don't want to make any excuses for the performance we've had. We have plenty of things we can fix, and we're fixing them on our side. But between that import surge that we had -- some of our customers going through some really difficult struggles, some retail disruption, a couple of bankruptcies that we've navigated in the last year, we've had a lot of impact to our revenue on things we can't control. And so what we're trying to do is garner back control of our business, manage what we can manage. And then as the business gets better, we know we're prepared for it to get better. But some of this, we've had to kind of wrestle through. Ken, there is one more question here if you're okay, Rex for time. There's a question about our SG&A. And maybe it's helpful for you to comment a bit on how our SG&A fluctuates and what we expect it to be in a normal range. How do you think about that?

Yes. I mean that's -- obviously, with unallocated corporate, that's one that tends to be pretty stable from year-to-year. It does fluctuate sometimes with executive comp. Sometimes we reverse our previous year accruals and sometimes better years, we have the higher expense. I think at the divisional level, obviously, with the sales amount that we are experience right now, it is relatively high as compared to historical levels. But overall, I think the SG&A has been pretty stable. We did somewhat bottom out during COVID when nobody was traveling, everything was being pushed back. I think over the last year or so, SG&A has gone up just getting back to normal, getting travel back and the salespeople out on the road. So I think over time, we'll -- obviously, we'll look at that and continue to rationalize where that level should be. But overall, it's pretty consistent year-to-year. Our goal and our job right now is to get the sales back up. And that's what we're focused on, and that's what we need to do.

Right. Well, thanks a lot for that -- for your answers there. I think we're getting to the end of our time. And Bud, unless you have something else to ask, I think we'll wrap things up here.

Rex, one other thing. There's a question here about normal margins. I think we addressed that in our presentation. I think the question was 1 to 2 years, we said 2 to 3 years. So I think going back to those slides, the question will be answered.

Okay. Very good.

Rex, the only thing I want to add is just thank you to our audience, and thank you to Iv and Ken for the presentation, and thank you.

Thank you all very much. Thank you all the participants for joining us. And thank you, Iv and Ken again. I look forward to seeing you again soon.

Thanks. And Rex, maybe I'll just say, Rex, we're also grateful again, thanks for the time. It's really fun to tell the story, and it's going to be more fun when the story starts to execute. And we're just excited to finish out our year here with 1 more quarter, 1 more month and set a new path for '24. So really, really thankful to everyone involved in it, and I can't wait to tell you the story. Thank you.

Well, I know it's been a tumultuous 2 or 3 years and a very difficult year this year. And I think you're on a path to getting things a little more stable, a little more forward-looking. Very good. Thank you for your time again. Thanks.

Thank you.