Skechers U.S.A., Inc. (SKX) Earnings Call Transcript & Summary

Hey, good afternoon, everyone. Thanks for joining us. I'm Warren Cheng. I'm 1 of the senior softlines analyst here at Evercore. Very pleased today to be hosting Skechers. With us today we have CFO, John Vandemore. For those that aren't familiar with the Skechers story, Skechers is the third largest footwear company in the world. They have a value proposition rooted in quality, comfort and value. I think the latter of those 2 are real differentiators against the other really scaled footwear companies out there. And also really excited to dive in today because they have a very unique vantage point across a much broader spectrum of distribution channels than the competition that we usually hear from and also just a really good pulse on Middle America. So thanks John for being here and good afternoon.

Thanks for having me. We're happy to be here and happy to talk today.

Great. Maybe just to kick it off, there seems to be a little bit of a pendulum swing back to wholesale going on right now. So we heard from Macy's and DSW in the last couple weeks that they're bringing Nike back into their stores. The new CEOs of Adidas and Under Armour both also seem to be a little bit more positive on the wholesale channel. So if we do see a little bit more of that swing and the pendulum is back to wholesale from the big athletic names, I'm curious your thoughts on how that would affect Skechers and perhaps you can -- as an analog you can review for us what happened the last few years when those same players were exiting a lot of the shared retailers.

Yes, first, I'd just point out, this is a pretty dramatic change of strategy clearly from some of these players. A couple of years ago many of these retailers were deemed to have been undifferentiated. I don't know if they've since differentiated themselves enough to qualify to sell those goods, but it's not a strategy we took particular interest in as a company. We generally take the view that we want our product to be available to consumers wherever they choose to shop. We want to afford them of an opportunity to shop in a beautiful store like the 1 behind me; virtually, of course, as well as where they choose to shop. That ensures for us the ultimate outcome, which is if you want and need a pair of Skechers footwear apparel, it's available to you. And so, for us, we never really held much interest in or faith in the notion that you should pick and choose your wholesale partners whenever you want and then leave them and then come back to them or whatever the case may be at any given point in time. I think relative to this particular interest, I would say, in part, we probably need to wait and see what that means. There's been a habit for some brands of going back to retailers for a moment when they need to liquidate items, when they need to sell through pent-up inventory. I don't know that that's the case here, but it certainly wouldn't be out of the question of possibility given past practice. Ultimately though, at Skechers, that's not 1 of our highest concerns. We focus on building product that, as you pointed out, is stylish, high quality, comfortable and reasonably priced. And those latter 2, I think as you pointed out, are really what distinguish Skechers. We want to make sure that you're getting great value for the money. Again, not the least expensive, not the most expensive, but great value for the money, and you're extremely comfortable. And we find that those messages resonate with consumers, no matter who else is selling footwear out there. I think it's also important to recognize that a lot of what we sell is not in direct competition to some of the bigger name brands. There's many categories in which we participate, where those brands aren't prevalent. And so the competitive landscape for us is not singularly 1 or 2 names but rather a combination names across a combination of categories. And I think what we've proven time and again, when they're in wholesale, when they're out of wholesale, when retailers are differentiated enough and they're not differentiated enough, or when they need to liquidate inventory, when they don't, is that Skechers can continue to grow. Our growth has never been contingent upon somebody else's presence or not in a marketplace. We've continued to grow on the back of our own value proposition to the consumer, on the back of our own execution, and really ultimately on the back of our product and marketing, and that's what really distinguishes us. So we'll see what this situation holds for the future. We're certainly cognizant of it, and we will watch the marketplace carefully as a result. But it to us it seems like just another pull or push from a strategy that was in vogue couple of years ago and maybe that's not a strategy anymore. I don't really know. It's a little hard to get a read on that. And the last thing I'll say is our strategy has been the same strategy for the last 7 to 10 years, which is we want to produce great product, we're going to market that product, so you're aware of it, and then we're going to grow internationally and we're going to grow direct to consumer, and that's combination of stores and online. And so those are really our growth pillars and they have been for the last 7 to 10 years. Against that we expect a stable domestic wholesale business, but our growth really stems from driving opportunities for the brand across the globe. And that's what we expect in the future, too.

And maybe just on that topic of opportunities across the globe, if we can just zoom in on China a little bit. I know in the first quarter the performance there, the reopening a little bit stronger than you expected, which was a pretty consistent theme we saw across our universe. Maybe just your updated thoughts on what you're seeing on the ground in China right now. And then another thing I struggle with a little bit for Skechers is just how we should be benchmarking that "normalized level" for your China business. Is it the 2019 level, 2021 level, maybe you can just talk about the changes in the business -- in the China business over the last 3 years.

Yes, to the latter part of your question, in all honesty, I struggle with that myself. I don't -- if I look back to '19, which was the first -- the last pre-COVID near, I think, well, maybe that's the right benchmark, but in another respect we're a completely different company today than we were in 2019, different products, different foci, different capabilities so. And in all honesty, I don't have a great answer for you other than I think it's probably a little bit of using '19 as a benchmark reference point, but not necessarily the only and then thinking about the future of the business. In terms of China, the first thing I would note is nothing that's occurred over the last 3 years has diminished our long-term appetite to continue to grow in that market, and we [ see ] the opportunity. China is a fantastic market. It's going to inform consumers. Where our product does well it does well, for the same reason it does well globally. And so it's the same 4 value proposition points I mentioned earlier. So there's nothing that's diminished our appetite to continue to invest in and grow in China. That's evidenced probably most acutely by the fact we're in the midst of building our second wholly-owned distribution center in that market, so long term, no change really to our view on China as a massive opportunity for the brand to continue to grow. In the near term, I think we all have to admit coming out of 2022, there wasn't a lot of clear visibility into what we can expect. What we've seen in China over the previous couple of years was innumerable challenges stemming from COVID, and as a result, some, I'd say, relatively unique behavioral patterns at the consumer level. In some instances that evidenced itself with reasonably strong demand online and extremely diminished appetite in physical retail. And so 1 of the things that we were looking for out of this year is kind of a steady climb out to a more stable base. The first indications of that, from our view, were always going to be a return of retail -- of physical retail. And so as we plan this year, we plan for a steady climb back to normal, which as you mentioned in the first quarter, we did meaningfully outdistance, but also that it would take time. It would take time for the market to get healthy again. What we've seen that is encouraging is just that return to retail that I mentioned. What you're hearing in market is that there's more activity in retail, dining, and entertainment than there has been the last couple of years. That, to us, is the clearest signal yet that the consumer is coming back. We've seen, as a result of that, increased sales trajectories within the physical retail, which is very good in particular for China where franchisees are an incredibly important part of the marketplace. And so we continue to view optimistically both this year as a recovery year, if you will, but then also a return to a springboard level where that market can grow at its more customary levels, in the low teens, high 20s. Now that's not going to be uniform in every market, every point in time. But we do believe that's the type of trajectory we can see in a market like China where you continue to see very positive demographic trends from a consumer discretionary standpoint. And so, again, I think, it really depends on your initial point of view, but I would characterize China is performing better than we expected with encouraging signals, but that might also need a little bit of time to develop more fully to a stable marketplace, which we think probably happens near the end of the year, but could happen a little later, could happen a little sooner.

That's really helpful. And if anyone in the audience has questions, there should be a chat box on your screen that you can use, and we'll work those into the conversation. The next question I have is just on trade down. It's very topical in the market right now, who's seeing it, who's starting to see it, who is not. Can you just give your thoughts on what you're seeing and whether trade down is good or bad for your business?

Yes, I have to say, I don't have a particular affection for the term trade down because I think what it symbolizes rather than what we're seeing is that consumers are sacrificing something, and I don't think that's the case. I think what we enjoy about our position is, as I've said, we're really focused on delivering value for the money. Now clearly there's a condition in the market where sooner or later consumers are going to feel a little bit more duress from the impacts of inflation, of lessened stimulus, of other demands on their dollar. And in that type of environment, I absolutely prefer being Skechers to being any other brand because what I think we excel at, like we said, is those 2 categories of comfort and reasonable value for the money, and I think if you think about footwear needs generally, not all of them are focused on the newest, high-priced, high top sneaker. There's a lot of buying occasions that are very well suited to what we excel at. And so we think those remain strong. And I would say, generally speaking, we don't fear an environment where consumers have to make that tradeoff because we think we do excel. Now, don't get me wrong, we're not in any way arguing for or excited to see economic duress in the United States or elsewhere. I think that's definitely the inverse of a rising tide lifting all boats, so we're not encouraged for that. But I would say in that type of environment, I'd much rather be the Skechers brand than anyone else. I would also point out, just as you think about our business globally, nearly 60% of our sales are derived from outside of the United States. And so when you think about a business as an exposed business to any economic duress, you really have to think about the factors that would make that coincident globally because that's not something we've typically seen. And so, we do think there's some diversification benefit in our portfolio globally that ensures against the most extreme impacts from any environment. The end-all to your question, though, is, I have no idea. I have no idea if somebody's purposely deciding not to buy a pair of HOKA because they're buying a pair of Skechers or they're not buying a pair of Golden Goose and they're buying a pair of Skechers. We can't see that. But what we see is strength in our brands, strength in our consumer, irrespective of the economic environments that we've seen recently. At the end of the day, though, probably the most significant point I would make, Warren, is that we really haven't yet seen a signal from the consumer that suggests they're not equally well positioned today as they were last month or 6 months ago to engage in activity with our brand. We, in the first quarter, experienced direct to consumer growth north of 20%, both internationally and domestically. And so, if we're being data-driven relative to how we think consumers are feeling, right now, there's nothing to suggest they're feeling anything but continued bullishness on their discretionary income patterns because they're continuing to spend, they're continuing to seek out the brand, and they're continuing to choose comfort and value vis-a-vis our product.

Great. It actually touches on 1 of the questions I had about just the general health in middle-class consumer that you're seeing. So, it seems like overall you're not seeing any pullbacks or slowdown there, but are there -- is there anything underneath the surface that you can talk about? Are there pockets of the business where you're seeing pullback or pockets of the business where they're showing surprising strength?

Well, in all honesty, the surprise is the strength, and it's the fact that it's relatively uniform both geographically and across income demographics. The demographics of our consumer are not decidedly skewed heavily 1 way or another. It's a pretty broad reach. And again, what we've seen is general strength across. I think that has been surprising, that it's been as robust as it is. Now, to be fair, in a fashion-driven business, sometimes it's a little hard to tease out because you could be riding a wave of product strength into the face of a situation like that, and that could mask some of the effects. And I would say right now, as we look at our product assortment, we couldn't be more bullish on what we're bringing to market. Again, around that theme of comfort, in particular, we're bringing Skechers Hands-Free Slip-in technology, which is a new way to enter a shoe. It's extraordinarily comfortable, it's extraordinarily easy, and it's just beginning to percolate in our line. But we're also leveraging a lot of the innovation we've launched in the last couple of years around comfort: our arch fit product, our max cushioning product, our wide width, our hyper burst outs, all of that focused on delivering comfort to the consumer, and that's what we think is really resonating. So, it could be we're somewhat seeing that success from a product and marketing perspective mask what might otherwise be a challenge, but my guess is ultimately what we're seeing is a little bit of both: a very healthy consumer willing to spend, willing to come to the brand, and then a very strong appreciation for the qualities we're bringing forward in terms of value, style, comfort, and price.

That's great. And maybe we can switch topics to margins for a second. Can you talk about the path from -- if we think about your long-term EBIT margin goal of 11% to 13%, the path from here, how much of a lift do you get just from normalizing some of these short-term headwinds, and what are the other components that bridge us back to that long-term target range?

Well, if anything, I think the last couple of years have shown us what it really means to be a short-term headwind because it seems like we've all dealt with 1 after another. I would say, look, in 2019, we achieved an operating margin of 9.9 -- I believe it was 3, but don't hold me to that -- enough that I couldn't round it up to 10% for sure. And so our first stated objective is to get back to that level. Now, I think if you take last year, which is impacted by 2 extraordinary exogenous factors, I think you can see the margin would have been pretty close. Those 2 factors were: 1, elevated extenuated freight rates for ocean-bound freight, so the transportation between factory and distribution was absurdly elevated. The other was because of some of the logistics issues that reverberated from COVID, we saw massive arrival rate on goods and products last year in the back half of the year that they quite literally stretched our distribution and logistics capacity beyond their limits, and as a result, we had to spend significantly to ingest that inventory and to process it in a way that we felt was prudent for the long term, which I think is evident now. But if you take those 2 extraordinary cost pressures and you back them out of last year, you'd see that operating margin is pretty close to the 2019 level. Now, once we get to that midpoint, I'd say the algorithm we've sought to employ in the business to drive operating margins to that 11% to 13% range, which we've always talked about, is just how we're going to grow the business. We're going to grow on the international side, which is margin accretive. We're going to grow in direct-to-consumer, which is margin accretive. And those 2 together, from a mix perspective, as they grow relative to our domestic wholesale base, will add basis points of operating margin growth, and that's really how you engineer getting there with a degree of certitude. On top of that, I would throw in, there are certainly opportunities to look at margin leverage vis-a-vis SG&A. It's not something that we want to rely on principally because that's also the same expenditure base we use to grow the business. And so we don't want to cut off longer-term growth. Our goal isn't to get to $10 billion and then stop. It's to get to $10 billion and keep growing. And so, there are certainly opportunities for G&A leverage in addition to the overall mix benefit of growing international, growing DTC, but that's not a cornerstone of how we expect to get there.

Got you. That's great. And just looking at the second half of the year, I know the slip-ins launched last year, was a good product for you. One of your biggest competitors is really centering a lot of their current campaign around slip-ins. They have their own product that they're pushing really hard. Can we just -- how should we think about the lapping of that launch? It's obviously a big launch, but it's still a really strong product, so I assume it's still going to be a pretty big part of your second half plans. So can you talk about the lapping of that compare and also what percentage of your DTC business, your overall business does slip-ins represent now?

Yes. So I think, probably the most important thing to recognize is the Skechers Hands-Free Slip-in technology is really unique. It's a very particularized technology that we're employing in our shoes that nobody else has. Really, and if you haven't tried it out there, if you haven't seen it, definitely go to our website. You can see videos, but more important, go to a store and try it. I find it's 1 of those features that you don't really appreciate how beneficial it is until you try it, and then you don't want to live without it. So the first point I'd say is it's incredibly new. This is the first real year of selling. It's not in any way fully into our line this year, this selling season, but will become increasingly so. I think the other thing to keep in mind is it's not an outsole style, it's not an upper style. It's a feature that we can add across the lineup. So the benefit of those types of developments really are that we can extrapolate their value across the broad spectrum of what we produce. And you know Warren, as do many on this call, that we have a significant breadth to our product assortment, and so the ability to take a technology like Skechers Hands-Free Slip-in and put it into a lot of different categories is, I think, wholly unique. I do think the notion of what it means is still out there. It's still a little bit underdeveloped at the consumer level. That's 1 of the reasons why we want to spend actively this year on marketing to help inform the consumer what exactly this technology is. Like I said, you really have to try it to understand it, but the next best thing is showing people what it means and why it's comfortable and why it works. And I think that is just beginning. I would also add, the first iteration of any technology is almost always going to be its least elegant. It's just how you start, right? You want to get into production, you want to get it useful. And I think our design teams did a great job incorporating the early technology into our footwear. But since then, I've seen a radical improvement along the way of how it's being incorporated into a wide variety of footwear solutions that, in all honesty, I would never have anticipated they would be applicable to, including golf. Golf is more of a sport-featured shoe, but putting Hands-Free Slip-in technology there, along with some fastening, is actually proving to be an incredibly attractive proposition at the consumer level. And so I would also point out, we're just getting started on how we incorporate that into our shoes. I think someday it might be very similar to aspects of what we put into our shoes, like memory foam. It's around, there's a lot, it's valuable, it's valued by consumers, but it's what people expect almost in some of their footwear solutions. So I would say still really early days. We look forward to when it's more populated both domestically and globally. We think it has a lot of play globally, in particular in markets where it's very customary to be taking your footwear on and off as you enter homes and offices, and this plays very well into that. And so we expect this to be a multiyear effort and 1 that we expect to be getting the benefit from over that horizon.

Got it. That's great. And the next topic I want to touch on is just channel inventories. So your own inventories are in pretty good shape, but based on what we've heard, we entered where we exited last year with a really big glut, it seems like it's been a little bit slower to work down. A lot of the companies have reported in the last month, it's been a little bit slow going in working that down. And another takeaway from the most recent earnings season is it seems like it's not very uniform, so there are pockets where things are actually quite clean and pockets where they're still in a pretty big glut position. So from your vantage point, what do you see on channel inventories, and are there certain areas that are the largest concern for you?

Well, I think the first thing I would mention is harkening back to a previous response, in that recall last year, we all faced the similar situation because it was largely, yes, the elasticity in the supply chain that caused that onslaught of inventory. And so our focus was to spend really whatever it took to deal with that issue because we felt it could become a point of strangulation in the future if we didn't, particularly around introducing new products like Skechers Hands-Free Slip-in and the like. And so we spent a lot, and we certainly recognized that to deal with it as quickly as we could. But I think that's 1 of the reasons why we're in a beneficial position today because we are fairly clean as a company. We're certainly significantly below on-hand inventory levels than where we were at the peak, nearly half. So I think that part of our strategy, while expensive, was certainly prudent and has proven out to be enormously beneficial to us today. I would echo your comment, in that what we see in terms of channel-level inventory is very disparate. There's some that are clean, that order patterns are normal when sell-through is there, and we've seen the sell-through and it remains encouraging. And then there's others that aren't. And I think our bigger concern is that for those that haven't yet fixed whatever inventory issue they have, they run the risk of falling into that reinforcing -- self-reinforcing negative cycle of, if you don't clean the inventory, then your inventory is a little bit stale; if it's stale, you have to discount; if you have to discount, that starts to breed within the consumer an expectation of discount; and if you don't clean it out the inventory, then you've got to go back to the [ well ] and discount again, and now you're doing even more stale inventory, et cetera, et cetera. And so what we're looking for is broadly, in particular on the domestic wholesale side, some cleansing on certain accounts, certain channels, subchannels of that excess. Cautiously optimistic that perhaps back-to-school will offer a decent opportunity to do that, and then in the back half of the year, we'll see some openness to more normalized booking and receipt patterns. But in all honesty, that remains to be seen. I would say, some of the inventory challenges that we've seen are lasting a bit longer than we would have originally expected, although again I would emphasize not all customers are in that position. There's some out there that are doing exceedingly well. I think for us, the added benefit of having such a strong direct-to-consumer business is a very nice cushion because it means that we can still get our product to consumers irrespective of some of that channel availability.

Great. And just working in a couple of the questions from the audience. You have a very broad view across not just distribution channels but also geographies. I think you're in close to 200 different countries. Are there any markets that aren't growing? And do you think, given all this, the challenges we've discussed with U.S. wholesale, do you think U.S. wholesale can get to a point of growth this year?

On the latter point, that's going to be tough I think. I think it's going to be entirely contingent upon the consumer. I think it'll be somewhat better known after we get through back-to-school, but in terms of the markets that aren't growing, the one is that domestic wholesale market. I wouldn't confuse that with the domestic market because, again, our direct-to-consumer business is going well. So it's probably not a clean answer to that question, but that's certainly a component of the marketplace. I think in terms of our global view, there are a couple of markets, usually what's happening in those markets where growth is challenged, because maybe it's not that there's no growth, but growth is subdued is that there's an exogenous factor impacting the business. So call it political turmoil, social turmoil. The good thing about working in so many different countries there's always something going good and something going bad at the same time. Usually, they at least offset, or if not, prove to be a net positive. But there's always challenges out there. There are 1 or 2 markets out there that are experiencing some level of duress because of, again, exogenous factors. But I would say, 1 of the shocking aspects of the business over the last 1.5 year or so for us has been how broad, how consistent, and how meaningfully the multitude of markets we operate in have grown. And it's been an incredibly encouraging signal to us about the health of our business. And just a point of focus. Last year, I think in the fourth quarter, in Asia, China didn't grew, but our Asia-Pac business grew. And keep in mind, China is our second-largest market. So think of the strength prevalent in the balance of the marketplace to be able to offset a drag of that proportion. So I think it's a good example of, again, that diversification strength I mentioned, the balance of our portfolio having opportunities to offset challenges in 1 with growth in another. But again, mostly what we've seen, certainly over the last 1.5 year has been dedicated growth across most markets and in most channels.

Great. And maybe just clicking in on that a little bit. International, historically a very powerful component of your algorithm, usually the majority of your growth. Can you just talk about what inning you think we're in there and how we should think about the relative contribution of international?

Yes. I always have to restrain myself when this and similar forms of this question get asked because I'll just start rattling off all the markets that we think offer opportunity for growth. I would say it is very market dependent. There's almost no international marketplace out there that, I would say, is in, if I use the baseball analogy, late innings. Most are early or in the latter stage of beginning, if you will. There's a couple more mature markets that we've been in for a while that are probably not going to grow as fast as many of the other emerging markets, but I've also honestly been surprised at some of the growth rates in those markets. Because again, we're bringing newness, we're bringing product that works and resonates, and so there it's probably more of a share gain effect than anything else. So I would say, in all honesty, you could go down the list. You could talk about China, India, the balance of Southeast Asia, you could talk about South America, even Europe. Even some of the developed markets in Europe have been growing high double digits and then take into account the underdeveloped markets of Europe. We think opportunities continue to abound in the Middle East on our distributor relationships, and in Australia-New Zealand and other distributor markets. So I would say, no, there's just really nothing out there that gives us any pause in any of the markets. We certainly recognize that it's unlikely for all the arrows to point up at the same rate at the same time every year, but the strength of our portfolio is that we don't need every market to contribute toward that goal of getting to $10 billion and then moving beyond, because that diversification effect really advantages us at the end of the day from a total company perspective.

Great, okay. And just circling back to 1 of the first questions I asked on why some of your competitors made the decision to reduce their wholesale exposure. That's always been a really good, extremely profitable channel for you. Can you just help us understand why the decision criteria was a little bit different for you? And why that's been such a profitable channel over time?

It's a profitable channel because we've been in it for decades, and we have a well-honed presence. I think we do a very good job of delivering retail margins, so I think we're a pretty good partner. We certainly are a good partner relative to delivering on time and in full. And while that may sound like a trite comment, it's actually very important from an operational perspective to customers. Look, I think, we could banter around for a while why we think other brands made the decision they did. I don't know that it's worth ranting about because they clearly have changed their minds completely again. So I can't really speak to what drove them. I think, again, for us, what we know is the most beneficial consumer out there for us is the consumer who's purchased more than 1 pair of Skechers. But you can't buy 2 or more until after you've bought 1. So the most important aspect of our business is getting you into a pair of Skechers shoes. And so that argues for as broad and wide a distribution as is an aggregate net positive to the brand, right? We wouldn't put our shoes in a liquor store just to get them out there. It's got to be treated right. It's got to be in the right context. But the opportunity to get a consumer into a pair of Skechers affords them the opportunity to learn about style, comfort, and quality at a reasonable price, and then the onus is on us to make sure they understand that quality value proposition exists across multiple categories. And so the most frustrating comment, but also the most encouraging 1 we always get is, oh, I didn't know Skechers also made this, right? So I've got somebody in our golf shoes and they say, oh, I didn't know they make work shoes. I didn't know that they made casual shoes. I didn't know they made running shoes, right? And so the trick for us is to transition them to that second pair of shoes. That's when you see the LTV climb crazy. And what it does is, I think, it really reinforces to the consumer those value propositions, which is, it doesn't matter if you're in a work footwear or you're in your casual, once you have 2 pairs, you know that 4 things are going to be consistent: style, comfort, quality, all at a reasonable price. And now we've got you convinced on why you should seek out Skechers. It may not be for every purchase occasion, we understand that. But there's a lot of purchase occasions that really value off of those 4 criteria. And so, that's our strategy, is to get people into our shoes, to see what we offer, and then get them into the next pair. And then once we do, we generally have somebody who's going to be a customer in 1 form or fashion for life. Of course, the icing on the cake is when we can get them to also buy for other members of their family. That's when we go from hitting a double to a homerun, and that's what we love most.

Right. Okay. And I think we just have time for 1 more. So I think I'll just end it with a couple higher-level questions. What in your mind has been the secret sauce that's contributed to the -- that's driven that growth? And then as we think about the algorithm, from here going forward, what do you want investors to keep top of mind for the Skechers story?

Yes, the primary vehicle for growth for any consumer-facing brand like ours is product and marketing. I think the added element that we bring is a flexibility to operate in markets in a market attuned to fashion. And I think that's what's unique. We don't go into a market commanding this pattern of growth. It's responsive to what the market will bring, what the consumers want. And I think that flexibility is really helped turbocharge our growth, which, again, founded on product and marketing, but accelerated by that flexible approach. And you can expect us continue to prosecute our growth opportunities across the globe with that same mentality.

That's fantastic. I think that's all that we have. John, super-insightful, as always. Thanks so much for the time -- taking the time to speak with us today. And thanks, everyone, for your interest.

Thank you, Warren.