Floor & Decor Holdings, Inc. (FND) Earnings Call Transcript & Summary

Good afternoon and welcome to the Floor & Decor Holdings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Wayne Hood, Vice President of Investor Relations. Please go ahead.

Good afternoon and thank you for joining us on our conference call today announcing our agreement to acquire 100% of Spartan Surfaces, a leading commercial flooring, specifying and distribution company headquartered in Bel Air, Maryland. Joining me on today's call is Tom Taylor, Chief Executive Officer; and Trevor Lang, Executive Vice President and Chief Financial Officer. Before we get started, I'd like to take this opportunity to remind you that our remarks today will include forward-looking statements reflecting management's current forecast of certain aspects of Spartan Surfaces' future. These statements are based on current information, which we have assessed but which, by its nature, is a dynamic and subject to changes. Actual results may differ materially from those contained and/or implied by these forward-looking statements due to risks and uncertainties associated with our business, including those we have disclosed in our most recent filings with the SEC, in our annual report on Form 10-K and our quarterly reports on Form 10-Q. Any forward-looking statements that we make on this call are based on assumptions as of today, and we expressly disclaim any obligation or undertaking to update or revise any of these statements as a result of new information or future events. Before we begin, I'd like to point you to the Investor Relations section of our website, ir.flooranddecor.com, where we posted a slide deck that we'll be referring to during this call. Today's call is scheduled for approximately 45 minutes, so please limit yourself to one question to give others the opportunity to have their questions addressed. Let me now turn the call over to Tom Taylor.

Thank you, Wayne, and thank you all for joining us on such short notice. I hope you had a chance to read our press release and download the slide deck from our Investor Relations website that details some of the more important aspects of our acquisition of Spartan Surfaces. Let me begin by providing some additional details on the strategic rationale behind this exciting transaction that will incrementally accelerate our growth and market share of the $13 billion total addressable commercial flooring market, which includes $2 billion in installation products. We have seen nice growth in our commercial flooring sales over the last several years. Last year, we formally assessed our growth opportunities within the commercial flooring market in a way that leverages our large warehouse stores, our core merchandising and supply chain strengths and the capabilities of our regional account managers, which we refer to as RAMs. As part of this assessment, we have learned that the commercial hard-surface flooring market is served by 3 sizable customer segments, that include third-party architectural and design firms, or A&D; large owners, builders and developers; and general contractors, installers and small owner-builder developers. To resonate with the matter, we have added 24 RAMs over the last several years, and they are successfully winning orders within the $6 billion commercial flooring market, focused primarily on general contractors, owners, builders and developers. We are very pleased with our market share growth and the prospects of strong future growth as revenues tied to our RAMs have increased 6x since 2018 and tripled in fiscal 2020 and from 2019. We also know that there's a larger $7 billion hard surface flooring opportunity among A&D firms and large owner builders that is complex and requires a unique set of capabilities to successfully serve. This larger segment requires prebuild consultative design support, product selection through strong specification expertise and turnkey installation coordination capabilities, to name a few. Said another way, this large segment has a different value proposition in selling relationships when compared with our existing retail and RAM business models. We believe the acquisition of Spartan Surfaces will enable us to incrementally accelerate our growth into this large and highly fragmented commercial segment by overcoming the growth barrier of being a retailer and allowing us to quickly acquire missing capabilities to serve this market while, at the same time, providing significant benefits to Spartan Surfaces, which should allow them to accelerate their growth and profitability. As we have gotten to know Kevin and the Spartan Surfaces team, we also believe there is cultural alignment, and we can teach each other aspects of the commercial hard surface flooring business that makes the sum of the parts more than the whole. As we look to the future, we see 3 main exciting value creation opportunities for Spartan Surfaces. First, Spartan Surfaces has a strong culture of informed and experienced flooring consultants that have industry-leading relationships, which drives top-of-mind awareness among architect and design end users and commercial flooring contractors. These relationships are fostered by the company's prebuild design consultation and solution-oriented approach and its ability to oversee delivery and logistics in a commercial setting. These factors have led to the company's success and strong regional brand equity, particularly among the health care senior living, multifamily residential, hospitality and education end markets that we can expand upon. We are excited that Spartan Surfaces' strong relationships and market approach will now enable us to interact upstream early in the project with end users that utilize in-house A&D teams or no A&D team, ensuring our products are incorporated into the designs well before an installer becomes involved. Second, we believe that our access to a range of consistently high-quality products and our reliable distribution and logistics capabilities across the U.S. will serve as a key selling point for Spartan Surfaces customers focused on reliability and near-term supply. This capability will enable Spartan Surfaces to increase its win rate in its existing markets and expand outside its core regions with the support of a supply chain powered by the strength of Floor & Decor. Spartan Surfaces will no longer face growth headwinds from a less reliable supply chain or long lead times when bidding on projects. We have a 1.5 million square foot distribution center in Baltimore just miles away from Spartan's headquarters, which will give Spartan's customers a level of inventory confidence that we believe is unmatched in the commercial industry. We are excited about the strength of our supply chain, and our resources will also enable Spartan to accelerate its growth plans by adding flooring consultants to reach many untapped markets across the United States. Third, we expect our purchasing power will lead to significantly lower [ blended ] product costs on overlapping hard surface flooring SKUs. We believe just over half of what Spartan sells today will benefit from lower cost Floor & Decor sourcing. Additionally, we see an opportunity to use our significant scale and sourcing capabilities to value-engineer distinct commercial products to expand Spartan's existing design library and ensure final selection into projects. We also see an opportunity to expand Spartan's expertise in tile where we can leverage our deep and existing product access. In summary, we are excited about the prospects for Spartan to incrementally accelerate growth in the fragmented commercial flooring market and create value through revenue and product cost synergies. Let me now turn the call over to Trevor, who will discuss some of the financial aspects of the transaction.

Thank you, Tom. I also want to express my excitement about the growth potential that Spartan Surfaces will bring to Floor & Decor and our shareholders. We believe it represents a low risk, asset light-enabling acquisition that will quickly give us a unique set of capabilities and is synergistic with our commercial growth strategy and merchandising sourcing capabilities. It will allow us to accelerate our market share growth with a large segment of the commercial market that would have taken us an extended period with greater risks to develop organically. As we go on Slide 4, the company was founded in 2007 and has been successfully led by its founder, Kevin Jablon, who will continue to lead the company upon closing. The company has a history of strong growth, with revenues growing more than 20% on a compounded annual rate basis for 2015 to 2020. Over this period, the company has been consistently profitable and its operating margin exceeded that of Floor & Decor in fiscal 2020. The company's business model requires minimal capital expenditures and working capital, which leads to a high return on invested capital. Let me briefly discuss some of the higher-level financial aspects of this transaction. We expect the transaction price to be $90 million, $5 million of which will be Floor & Decor stock and the rest will be financed with our cash on hand. At closing, we will pay $67 million in cash and $5 million in Floor & Decor stock, with the remaining $18 million earned through fiscal year 2024 based on our profit goals. While it is not expected to be material to our diluted earnings per share in fiscal 2021 and 2022, we do believe it will be accretive in both years, excluding transaction and integration costs, which we intend to call out separately in our earnings release. The company will operate as a subsidiary of Floor & Decor Holdings, Inc. and will continue to be led by members of Spartan's senior management team. The transaction is expected to close in the second quarter of fiscal 2021. Operator, we would now like to take questions.

[Operator Instructions] The first question is from Michael Lasser of UBS.

Tom, when you look at the commercial opportunity, what exactly is it that you said to -- and the management team said, we're not gaining as much traction as we would like, so we really need to pursue an M&A strategy to inflect higher within this segment. And b, when you look at all the risk factors, you looked back 3, 4, 5 years from now and it doesn't work out as well as you think it might. Why would that be the case?

Okay. Michael, so the first thing before we get started, I do want to introduce to everyone on the call Brian Robbins. Brian has been on our team since right after I joined the company. He's our Executive Vice President of Strategic Business Development, and so he will jump in from time to time depending on the question. So I'll take the first part of that, or actually more than the first part of that. So the first thing I would say is we've been extremely pleased with what's been going on in our commercial business. We've known it's been a big opportunity for a long time. Our RAM strategy has exceeded my expectations. In fact, we have accelerated -- or continued to accelerate this year from where we had originally planned to be. So this is much more of -- there's a segment of the commercial space that is very difficult to penetrate that we don't have the expertise, and that our RAMs don't have the expertise. And we looked around the industry and we got to know Spartan and they have the expertise. And when you look at the 2 companies and what we can provide them and what they can provide us, this helps us go faster and helps us learn, and we're just excited about the opportunity. We think the commercial space has got a lot of fragmentation, and a lot of the advantages that Floor & Decor has on the retail side of the business exists on the commercial side of the business. So we're very excited about the potential. This is a -- look, this is a small investment. This is -- it's something that we're just -- we're looking forward to helping them and looking forward to them helping us. So when I look back on risk factor of, say, okay, what will I look in a few years and what didn't work, I would say that a lot of our theory is -- here is that we can help Kevin and his team go faster. They've had -- they've been tremendous growers and have done incredibly well, but we think we can help them go faster. We -- their ability to access our supply base and utilize our supply chain will be a competitive advantage for them. And then our ability to help him go faster in putting sales people in markets that he's not today, we also think, is a good advantage. So if something didn't work, I would say that we had a people problem probably on that, that's why not getting the right salespeople in the right markets would be where I would say the largest risk is. But Kevin's shown that he can grow in markets outside of where he started and has done a good job, and we think we can help them get there quicker.

The next question is from Simeon Gutman of Morgan Stanley.

My question is, if I'm a commercial project, and I saw some -- I looked at the Spartan websites, they sell high-rises, gyms, hospitals, how does the process begin for me trying to find a flooring contractor? Do I work with the GC and the GC goes out and speaks -- who can bring in the flooring? How does the process work? And I guess I'm trying to think how you're going to get more [ books ] nationally for this. Or is it regional play that -- a foothold you can grow from?

This is Brian. I can answer that question for you. Kevin's team usually will market to the A&D world, but the decision-maker is always going to be the owner or the general contractor. So that's where the decision point starts. So they market to the A&D and they become their consultant. And actually, they'll become their expert on the flooring opportunities that they are looking for. So that's how they go to market, and that's how they usually get most of their wins.

Got it. And that's how they find you. Can you -- I guess, I don't know if this is relevant, because if you bring in the scale of both companies, the gross margins will improve. But can you talk to, high level, the gross margin that are -- exist in the commercial market in comparison to, I guess, the retail market or where Floor & Decor punches?

Simeon, this is Trevor. So you guys can see our gross margins in our 10-Qs. We're in the low 40s today. The commercial industry is lower than that. We're -- we think it's kind of, for us and our -- what we're seeing in our regional account managers, that number is kind of in the upper 30s today. We do think, over time, that's a big part of the thesis here that we can help. First of all, access, 7,000 or 8,000 SKUs. As you guys know, we sourced from 220 vendors in 24 countries. Just having access to that incredibly trend-right product at a much lower cost is a huge part of this. And we think, over time -- this won't happen overnight. But we think over time, we can get Spartan's margins to be closer to that kind of mid- to upper 30s that we're seeing in our commercial business today. The rest of that equation, though, I do want to point this out because it's important, is the SG&A in this industry is materially below the retail industry. And so when you look at the overall flow through, and as I mentioned in the prepared comments and we put in our deck, Spartan is a company that's a lot smaller than us, actually has a slightly higher operating margin than us today. And so it's -- that's why it's very accretive. And as I also mentioned, it's very asset-light, but most of this stuff is bought to order. There's really not much in the way of CapEx. And so those big investments that we've made in our infrastructure and supply chain, they're going to get the leverage, that they're going to get incredibly good-looking product at a low cost. And again, we've done a lot of homework on this. We're very excited about it.

The next question is from Steven Forbes of Guggenheim.

Tom, Trevor, maybe just focusing here on Slide #7, where it talks about the synergies, right, for -- with F&D's existing regional account managers. And I would also imagine there's -- there appears to be some opportunity to improve the productivity, right, of Spartan's business development team members. Maybe just talk through, if you can quantify, right, sort of the maturation of Spartan team members versus the commercial rands. Or even just qualitatively, just speak to the synergy capture that you foresee.

Yes. And if I really boil this down to try and make it simple, some of this is in the materials. We think because of our infrastructure, our massive distribution centers, our logistics capabilities, our ability to source inventory and get it here on time, we believe we can make their sales reps more productive. And more importantly than us, Kevin believes he can make his sales reps more productive. We also think we can add more reps quicker. You guys heard us, I think, we said on the last call, we're going to add about 14 RAMs ourselves this year. Historically, they've added 2 to 4 RAMs or reps on -- for Spartan. We think we can hopefully ramp that up a bit. And then there's -- as we said, there's some margin accretion on the product just because of our buying power, buying billions of dollars versus them. So that's where the business case simplified. As we've done a lot of due diligence, and we've been working on this for, as you might expect it, quite a long time, the sales rep -- per rep is fairly similar to ours. You hire a new rep, they're hopefully doing $0.5 million to $700,000 in the first year. And by the time they get up the maturation, by years 3 and 4, we're hoping those sales reps are doing $2.5 million to $3 million in sales. And we see a very similar trend with our RAMs is what Kevin and his team sees. So yes.

The next question is from Jonathan Matuszewski of Jefferies.

Congrats on the deal. Tom, could you characterize your appetite towards future M&A beyond this transaction? Is this now part of your corporate development team's playbook to continue identifying additional bolt-on deals for the commercial side of the business?

Yes, no problem. I would say that it is way too early to answer that question. We felt like of that $13 billion commercial market, we could penetrate a good portion of that with our RAM strategy. But there was a void on the A&D side of the business, and this was an opportunity to buy a company that excels in that arena that gives us access to that $7 billion, and that's why we did it. We have to learn more. You can't learn everything through due diligence. We've got to work with Kevin and his team. We've got to continue to understand his business. We have to understand how our -- what we bring to the table and how it helps them grow. And in time, we'll decide if there needs to be another acquisition. But for right now, this is a -- commercial business is very important to us. And as I said earlier, I mean, I think all of the advantages that we have on the retail side of the business, we have on the commercial side of the business. This just gets us into another segment of the market. And as we learn more, if we think we go faster -- if we can even go faster by bolting something else on, we'll make that decision at that time. But it's just too early for us to know that today.

The next question is from Karen Short of Barclays.

This is [ Scott ] on for Karen. How do you think about the integration process? And are there any nuances to the integration that we should be aware of going forward? And can you provide some vague estimates on how to think about total dollar integration costs and transaction costs, even though they'll be onetime?

I can take the first part. This is Brian. I can take the first part, the integration. First and foremost, we want it to be a separate business, and we want to make sure that they keep their culture separate from our culture. So when we think about integration, it's going to be a lot about the things that are materially important to us as a publicly-held company. And of course, there's a lot of stuff that we would do with compliance and things like that. And we hope -- where we can add value to their business, we can do that for them, but they'll be asking for that versus us requiring it. I think the biggest part of the integration is going to be on the supply chain side. That's what we bring to the table, and that's what they're wanting for this. And where they -- when we do that successfully and leverage us, that integration will be manifesting itself into the benefits of the revenue and the gross margin we've been talking about earlier.

Yes. And then on the cost side of that, because we haven't been an acquisitive company, we're bringing in a high-caliber firm to help us with the PMO office and then we've spent some work with our accountants and lawyers and things of that nature. So we'll be somewhere between $1 million to $1.5 million in costs. Our current intent is to call that out in our press releases for the next few quarters, just because we'll incur a lot of that in Q2 and Q3.

The next question is from Peter Keith of Piper Sandler.

Also, my congratulations on the deal. So with Spartan, it looks like they would have maybe about a 6% share of the $13 billion TAM. It sounds like they're one of the bigger operators. So who are some of the other primary competitors in the space? And do you have a sense of what their -- what the competitive market share is out there?

Yes. So we did spend a lot of time last summer studying this space as we were having success with our RAMs, and that's kind of how we figured out bifurcating this market, that there's probably $7 billion in this market that would be better handled through a company like Spartan. And as we were studying that with the firm that was helping us do that, today, we see the majority of the market is handled by the big domestic manufacturers, companies you guys all know well. The other 30% to 35% is companies like Spartan that exist throughout the United States. Some -- a lot of them are a lot smaller than them, obviously. And then there's some components that are handled by traditional retail as well. But today, the lion's share of this industry is handled by the big domestic manufacturers and their sales forces.

The next question is from Liz Suzuki of Bank of America.

So does the relationship with Spartan now open up the opportunity to work with that second group of commercial market customers, the larger builders and developers? Because you've got the RAM strategy that targets the general contractors and smaller builders, and now a strategy more targeted at the larger commercial customers. So just wondering if a different approach is being considered for the middle customer tier or if you can kind of fill in from either side?

I don't know if it's a different strategy for the middle tier. I think the middle tier is going to be handled somewhere between Spartan and our RAMs, probably more than likely the RAMs. We like what's going on with our RAM strategy. This is really to get to the really much bigger customers that depend on A&D firms to make their decisions. And we just think Spartan is the best partner that we could have to help us learn more about that space and access more of that market share.

Great. And just one quick follow-up. Just will the results of Spartan as a subsidiary be presented as a separate line item or just included in the overall P&L but excluded from same-store sales?

I'm sorry, I missed the first part of the question. Could you repeat it?

Sure. I was just asking if Spartan's results will be reported separately and going forward once this closes.

No, it's too small. It will be 3% of our sales. Over time, I hope it would be. And we -- obviously, I agree with the rules. As it gets close to 10% of sales, the accounting requirements, are such that you have to disclose the segments. And so we hope someday it will be disclosed separately. But for now, it's not material enough to do so.

The next question is from David Bellinger of Wolfe Research.

Sort of following up on that last one. I mean this is a bigger picture question, so annual sales around $80 million or so for Spartan here. Your organic commercial business is still small at this point. So as it builds and gains traction, how big can commercial become over time? So what level of sales would you characterize as a success if we look out 5 years? And is there a certain tipping point that you're really targeting that would unlock significant margin expansion from here?

Yes. So if you start from the macro, as we said, we think this industry is about $13 billion in the commercial industry. As we studied some of the larger competitors and some of the big domestic manufacturers, as we understand it, some of them have over 500 sales reps. As I mentioned earlier, a good sales rep, we think, can be doing $3 million a year in sales. So if you have 400 of those reps doing $3 million, that would be $1.2 billion. 50 reps doing $3 million, that obviously be $1.5 billion. We think the industry will continue to grow. So you could see this being, optimistically, probably not 5 years from now, but you could see this being $1 billion to $1.5 billion business, if we're able to execute on those strategies, which we think, again, layers in nicely with those 400 stores. As we've said before, our 400 stores grew over $22 million, closer to $23 million of the stores that are over 5 years old now. So it's -- they work nicely together. But I think that's where Brian and Tom [ might say ] is that someday in the future, we would get there. I will come back and just -- one thing. We've been very disciplined about our growth at this company. We could have always grown faster. We could have always done more than 20% unit growth. We feel like to manage the businesses and to have the quality of the business we want, we put ourselves right around 20%. So I'm not saying we're not going to have more reps. We are going to have more reps, but we want to do it in such a way that we can teach and train and mentor and grow these people such that they have long careers. But Kevin has done an incredible job of that, and that's important that he sees the same way. We want to have that measured growth. So I don't think about us going to 300 reps in 3 years, but we will be adding many over the coming years, but we want to do it in a measured way so that we do it right.

The next question is from Alex Maroccia of Berenberg.

In the presentation, you highlighted some of Spartan's geographies that appear largely East Coast- and Midwest-focused. Is this an industry that allows for significant organic growth into new geographies? Or would you have to pursue a West Coast or Rocky Mountain Spartan to build a presence near the other coast?

Alex, this is Brian. Most specifiers like Spartan are very local or regional. And I think, again, when we talk about it, 1 plus 1 equals 3 here, having Spartan powered by Floor & Decor, given our DCs and where they are nationally, 1 million square foot DC in Los Angeles, 1 million-plus square foot DC soon to be in Houston, 1.5 million square foot DC in Savannah, that allows Spartan to have a national presence, to have a national footprint. And when Trevor talks about adding salespeople to go after that, that's what Kevin and I talked about, to grow him nationally and be that present, with the power of Floor & Decor behind him to allow those opportunities for those future salespeople. So we see a national growth in the future. We'll crawl, walk, run with that. But that's our intention to do.

Got it. That's helpful. And then just a clarifying point, you've been referencing $7 billion additional here. But previously, your commercial TAM was $9 billion, and now you have it pegged as $13 billion. So what's the difference?

So when we put our market share together in our 10-K, we had historically carved out components of the commercial industry that we thought weren't accessible to us. So for example, large homebuilders was someone that we thought with our retail/RAM strategy that we wouldn't sell. There were hospitals and other big commercial industries that we carve down from there. And so doing this from memory, and I may come back, but that $22 billion, I think we said $16 billion was residential remodel, with the remaining being commercial. And so I think the difference between the $13 billion and that smaller piece that I referenced, in our $22 billion to $23 billion, is that we scoped out parts of the commercial industry that we thought we couldn't do before. But obviously, now with Spartan, we think we can address the whole market.

The next question is from Steven Zaccone of Citi. Great.

Most of them have been asked already. But I just was curious if you could talk a bit more about the competitive dynamics in this area of the commercial space that made you buy rather than build your own sales force over time? Is it certain industries that you just weren't in that you wanted to get bigger in? And then I assume, presumably, it's a very relationship business-driven business. Then just a brief question, too. Do you ever have any plans to integrate Spartan into some of your stores just to build brand awareness as you go -- take it to some other regions?

So I think there's 2 parts to that question. The last part is pretty easy. No, we don't plan on integrating Spartan into our stores. The first part of the question, Brian, why don't you go ahead and talk a little bit about the competitive landscape?

Yes. You asked about the markets that they're in. They're in the health care, they're in the multifamily education and a little bit in hospitality. That's an opportunity. Hospitality is something, I think, does provide an opportunity for Spartan to grow into. I think our products that we have, that they may not sell as much, will allow them to get into that market. That's what we're hoping for. We have a portfolio of products that -- there are some of those things that they don't really sell. There's a couple of things that they sell that we don't sell. So I think when we sit down and try to strategize how we go to market, what we want to do, we want to enhance their ability to go into their existing industries. But we certainly think, at least I think, they have an opportunity to grow bigger in hospitality that they haven't done in the past. Does that answer your question?

Yes, that's perfect.

The next question is from Zach Fadem of Wells Fargo.

So in the presentation, it looks like Spartan has been growing at a 20% plus CAGR over the last 5 years. And I'm curious if you could talk a bit more about the underlying drivers of their growth and their growth strategy, particularly across new customers versus existing customers, channels, geography, et cetera. And as you think about the integration here, how do you think about the step change in the CAGR for their business?

Okay. A lot of questions there. The first part, I can tell you, first and foremost, one of the most appealing things to us about Spartan was the way they go to market. They're extremely about service and customer service, the most of anything. I saw that being a big win for us to see how they grow and how they do that. They have an excellent sales team. They have an excellent executive team, and they're very, very aggressive about growing. Most specifiers kind of stay in their backyard. They stay in their region or their local market. Kevin and his team have grown. They've gone out to Chicago. They've gone to other markets, which was appealing to me because it told me that they have that ability to do that. And I think that's what -- can I -- made me go more for them than some other ones. So I think that was the -- I may have missed your -- second part of your question.

No, I think that's helpful. I guess the second part of the question was just on the step change in the CAGR going forward. But I think that's good. I just had a follow-up question for Trevor on the purchase price. And just why you think the earnout strategy was the right way to go versus paying -- just paying straight cash?

Yes. I mean the structure is such that we have incentives for him to reach sales goals, gross profit goals and EBITDA goals, and we felt like it was a good alignment. We expect and hope and look forward to paying out every penny because it will be a very good deal for both of us if we are able to -- if we do pay out that earnout.

The next question is from Joe Feldman of Telsey Advisory Group.

Two quick ones. First is, is there any seasonality to the business that we should consider? And the second one is, would you consider rebranding Spartan as Floor & Decor, or your commercial sales force that run the RAMs at Spartan as you kind of broaden out? If you thought about that yet?

Yes. So I'll take the first one, and then Brian can touch on -- very much -- I'll let Brian touch on the seasonality. So the first thing I would just say is that we acquired Spartan so that we can work together with Spartan. And no desire to change their name. We want them to continue to run the excellent business that they run, and we think that they can -- we can help them grow faster. And so no desire to do that. And the same thing with -- on the other side of that equation, we're very happy with our RAM strategy. It's work, as I said earlier in one of the earlier questions, that we have accelerated the amount of RAMs that we put in the markets. And what they do, they do well. And we think the Floor & Decor brand with them makes a lot of sense and has worked for us so far, and we'll continue down that path. Brian, do you want to talk quickly on that...

Yes. It's a simple answer as well. There's really -- I have not seen any seasonality with their commercial business.

And the final question today comes from Greg Melich of Evercore ISI.

It's maybe a follow-up on the strategy and the rollout. Is -- can we think of Spartan as now the brand and the flag to go into commercial? Would you consider buying other commercial specialist -- businesses or other areas that you'd look to expand to?

Yes. I think it's kind of -- I said it in an earlier answer also that it's too early to know that. We -- this is our first acquisition. We have been very thoughtful about this. We wanted to be able to penetrate a space that we were -- that's a difficult space to penetrate in the commercial side of the business. But we want to learn. And we're not going to go too fast. We want to make sure that we take thoughtful steps in continuing to grow this business in a nice way. And as we learn more, we may come to the conclusion that there's a -- that we have to do or that we should do another acquisition. But it's too early to tell. It's not -- we just -- we're going to take our time with this, like we do everything else, and make sure that we're being thoughtful in the way we move forward.

And -- this is Brian. Having said that, we're very pleased with the branding of -- he's got a great reputation now, and Kevin's team got great reputation. Spartan has a great reputation. And again, that was part of our requirements of what we were looking for in a company. So that's not something we're thinking about. To Tom's point, [ later, that can change, but ] right now, we are very happy with his brand and his reputation in the industry.

Congrats and good luck.

Yes. Just -- Matt and I will be around, so is Trevor, tomorrow and next week. So if you like any follow up calls, feel free to e-mail us and we'll schedule a call. Thanks for calling in today.

Thanks, everyone. I appreciate your interest. Sorry for the short notice. Thank you.

This concludes today's conference. Thank you for attending the presentation. You may now disconnect.