The AZEK Company Inc. (AZEK) Earnings Call Transcript & Summary

Good afternoon. I'm Anthony Pettinari, Citi's homebuilding and building products analyst, and we're very pleased to welcome Jesse Singh, CEO; and Peter Clifford, CFO, of The AZEK Company. I think many of you know AZEK either by owning the stock or owning an AZEK deck, and some of you may not. So I think, Jesse -- welcome. Maybe if you can start off with a quick introduction of the company, and we'll move on to questions.

Sure. Thank you. And first off, great to be here. If I squint a little bit, it's -- we are staring into a pretty bright light. Just very high level on the company itself, for those that don't know us, we are -- we make Deck, Rail & Accessories through our TimberTech brand. We make Exteriors through our AZEK brand. We play in the home exteriors market. We play in a market that is really around wood replacement. So we use the language of our goal is to revolutionize outdoor living and to create a more sustainable future. So if you double-click on what that means, in our categories, 60% of our market is wood. And wood on the outside of homes means you have to paint, stain and maintain. And every year that goes by, that market is converting to our types of products. And so when we talk about revolutionizing outdoor living, it's really giving people the opportunity to build outdoor spaces that are more usable. And it really is around solving that problem of maintenance, but also getting the beauty and the wood look around that. When we talk about sustainability, building a more sustainable future, our single largest raw material is recycled. In 2020, 46% of our extruded raw materials were recycled. As we moved to 2021, that's 56%. The great thing about using recycled materials is it has a dual benefit. It's clearly a more sustainable way to go. In our case, every pound of recycled that we use drives up our overall margin. And so then you take a step back. We play in markets that have a tailwind. That's outdoor living, repair and remodel, but it also is this material conversion. 1 point of material conversion in decking, for example, will increase the market size by 4 points, right? And we've been talking about an accelerating conversion. So if you step back on what that means, over the last 10 years, our residential business has an 18% compounded annual growth rate. Over the last 5 years, the company has been growing at 16.8% CAGR. We grew at 16% prior to the pandemic. We have guided effectively that we will be a consistent double-digit grower. On top of that, over the last 5 years, we've expanded margins by 260 basis points. And we have also guided that we will expand margins by 500 basis points off of 2019 base. So if you add all that up and you project to the middle of the decade consistent growth rates actually lower than our historic growth rates, but in that -- guiding to that 10% range, by 2025, well, this is a -- the difference between a CEO and a CFO, I would say, by 2025, we should be about $2 billion and 27.5% EBITDA margins. That's consistent with our guidance. What Pete would say is we'll get there in '26. And so there's a little bit of a debate on what we should go to. But that's really, if you look at what we've said historically, that's there. And to summarize, that's really coming out of a significant market with significant tailwinds driven by material conversion and this opportunity that we have to really drive margins through recycled. I'll add one other element that I'm sure we'll get into. Part of what we've also faced in the last 18 months to 2 years is significant raw material inflation. We've offset that with pricing and productivity. And that, actually, for us, is an additive element as we move into the next few years of giving us even higher confidence on our ability to achieve that 500 basis points of margin off of 2019 baseline. So with that, I'll -- a brief introduction. I'll turn it over to Anthony.

Yes. Great. Thank you. Thank you. So Jesse, I think we'll talk about the spring season and how the business is doing right now. But before that, just to give folks a little bit of background, can you talk a little bit about sort of the unit economics, however you want to define them between wood and composites, and why, for a consumer, does it make sense to own a composite deck versus a wood-based deck?

Yes. So we've gone through a cycle -- I started here in 2016 as CEO. We were kind of mid-teens composite penetration in decking, about 16%. We're now at 22%. And the drivers of that, from our point of view, are the aesthetics of the product, communication and engagement with consumers and a bit of a network effect, right? Anyone in the room, chances are you'll interact with someone. And if they've installed a TimberTech deck in the last couple of years, they're going to brag about it. They're going to get you engaged, right? And so, for us, we believe conversion fundamentally, and research backs this up, is driven by the quality and the aesthetics and the value proposition. People want to be on something natural when they're outside. They want to be on something natural-looking. And our research shows that of the 75% that hasn't converted, 1/3 is price conscious and will go to the lowest cost, 2/3 is really focused on what's right for them in terms of how they want to expand the room. Now of course, within that, you have to be within a certain range. I think, historically for us, at entry level, we've been able to convert a lot at 2 to 3x the price of wood on a direct basis. That's at the retail price point. But in general, we price things -- and our products are 7, 8x the price of wood or higher at times, right, for our most premium product, which is actually one of our best-selling products. And so in general, on the margins, there might be an impact from our value proposition versus wood. On the price standpoint, the value proposition is typically much broader and really involves that aesthetic.

Great. Great. Can you talk a little bit about the spring season and what you've seen in terms of early buy sell-through? And then maybe any commentaries around inventories.

Yes. So as we've progressed, like many industries, we were -- well, our industry specifically, we were capacity-constrained as we went through '20 in particular. And as we moved through '21, we started bringing on enough capacity that we could start to work our way through the constraints. And so in '21, part of our growth in '21 was rebuilding inventory. And we're in -- as we exited '21, fiscal '21, which for us is end of September, we were in a pretty good position in inventory. And so we are moving to a more normalized buying process where people will take on product and they will stock, not driven by a view of scarcity or trying to overstock, but they will stock based on what they expect to be future demand. And I probably could have been a little clearer on my commentary for those that listen on the call. Early buy for us is really a winter negotiation, where you're talking about -- you're working with your dealers about getting a shelf position for the entirety of the year. So we had a really good process by which we gain shelf position within the pro dealers. We will see that revenue materialize as we work our way through this year and into next year because those are pretty meaningful shifts in position. In terms of underlying demand, we've got really solid demand right now. The thing we look at, at this point in the season, are things like contractor backlogs. And our contractor backlogs right now continue to be at historic highs, right, 9 to 12 weeks, which is we got there during the pandemic and has sustained. And if you just think about it anecdotally, you don't -- if you have a contractor and you want something done, you're going to hang on to that contractor. It's -- the gating item right now is really the ability for consumers to engage contractors at a broader sense. And so all of that demand and backlog has sustained, and we think we're set up for a pretty good season.

Great. Great. In terms of cost inflation, can you put a finer point on the inflation that you've seen maybe last fiscal year and year-to-date as well as pricing initiatives? And when we think about your '22 revenue guide, maybe assumptions in terms of volume versus price, broadly?

Great. Pete, do you want to...

Yes. When you think about late 2020 and fiscal '21, what we expect this year, the business is really going to have incurred generically about $150 million to $180 million of commodity, material inflation into the business, which we've articulated last year as sort of being about 10% pricing and ultimately, this year, not that dissimilar. So the reality is we've offset $180 million of inflation as we get through this fiscal year. And obviously, that's one of the things that we look at structurally as we view our price increases as very sticky in terms of being able to hold if there is deflation, that you don't really have to envision that $180 million unwinding a whole lot for it to be really material from a margin expansion perspective or a tailwind for us in the business, that every $15 million of that $180 million comes down, it's 100 basis points gross margin for us. So we're positioned very well. As we've kind of said previously, we covered the dollars through the first half of this year. We expect to actually start offsetting rate as well as dollars in both the third and fourth quarter.

Great. Great. And obviously, it's been, I think, a number of years since anybody has seen a normal price/cost environment. But in a kind of a pre-COVID, pre-hyperinflation environment, what was pricing like and what would you sort of aspire for trend pricing to be like long term? Is it sort of one price hike a year or...

Yes. I -- coming in, really starting about 2017, we started pushing through really, really modest increases and I would say, increases that reflected inflation. Now we had done enough analytics to know that there was an opportunity to price above that. And we were -- we had evaluated that, but we wanted to do it over a period of time. And so we've accomplished a lot of that price-to-value movement in the last couple of years. As we move forward, we would fully expect to be able to get price to be able to offset a more traditional inflation number, call it, 2% to 3% a year. We haven't built that into our models. We typically would -- we're not committing to that. But it's just something that we believe that we've seen historically that would play out in the future.

Got it. And one question on margins. [Operator Instructions] In terms of the 500 bps in EBITDA margin expansion off of the 2019 base, can you talk a little bit about sort of the puts and takes or sort of underlying drivers there and where you are in that journey?

Yes. I'll start...

Hey, Pete. Yes, go ahead.

So look, I would say, look, we've got a portfolio of actions really to drive the 500 basis points and certainly recycle as a key lever in that piece. And we kind of think of recycling in sort of 2 or 3 buckets. One, we've got an opportunity to increase recycled content as a percent within the products that we sell. It's mostly a PVC comment. Secondarily, more on the capped composite side, we have an opportunity to move the lower-grade recycled materials to save cost. And I think you can argue there's a third, that any time we can bring that conversion in-house on the recycled, there's also some margin spread there. Secondarily, look, we have the ability to source and just buy better and smarter. We're kind of going through that sort of mid-cap phase where we've got opportunities to continue to mature. Third thing is just the last 2 years had been challenging in our space because of capacity constraints. And I think with us now, with the capacity that's come online and with what's still to come online this year, we can start to get back to what I would call a more optimal level of utilization in our plants, which is probably closer to 85%. We've got enough slack to actually run our plants productively and get productivity on a consistent basis as well as volume to leverage. And then I think we see a path, in most years, not every year, but I think most years, we would say, hey, we aspire to get some modest leverage on SG&A within the business.

Got it. Got it. And maybe just following up on a couple of those. In terms of the availability of recycled resin, I mean, we hear kind of different things about how readily available it is. In terms of the gating factors to get you from kind of the mid-50s, I think, to more like the 60s, can you just talk about that and -- yes...

Yes, we deal with 2 separate recycle streams. One is more developed, which is the polyethylene recycle area. But within polyethylene, there's high-density polyethylene, which is everyone wants it, right? It's a really good product. You can increase -- you can -- on your ESG report, you can talk about increasing the amount of recycle. And at times, depending on the grade, it can be as expensive as virgin. On the low-density polyethylene and polyethylene films, think of it like packaging materials, you go into a warehouse, they strip down a pallet. They consolidate all that film. That market, there's plenty of availability and there's not that many companies that can use it. And so with respect to high density, there is demand. It lines up with virgin. Low density, there is a lot less demand. It tends to be meaningfully cheaper than virgin, and that's the opportunity. But there is an existing network, and there's plenty out there. It's a matter of accessing and at times, stepping past the supply chain to go directly to the sources. On the PVC side, which is a meaningful part, and I think a big differentiation for us, there's not real -- it's a very nascent undeveloped recycle infrastructure. And so in that case, we're actually building out the sourcing capability, where we're going directly to companies. We're sourcing and intercepting product from going into landfills, and we're bringing it back in-house and processing. We were limited in our ability to do that over the last couple of years with what we've done to expand. And our most recent acquisition, we're now in a point where that supply chain is no longer a gating item. So we've addressed that. But the great -- it's a pretty unique scenario, where we're having to build out the reverse logistics. And we do think it's a competitive advantage in terms of what we're doing there for the long term, and it opens up a lot more products we can develop using that stream.

And I would just add that besides the cost impact, right, it's really been impactful, especially in fiscal '21, that every pound that we can move to recycle has been kind of a natural hedge against inflation as well as availability concerns on virgin. So it's been a very important part of our story.

And then, Jesse or Peter, can you remind us in terms of your assumptions around cost inflation, especially on the resin side and on PVC, and sort of what you're seeing in the market right now?

Yes. And just a high-level comment on sort of supply chain and commodities, what I would say, on the major commodities, availability and product flowing is definitely sort of back to, I'll call it, at least pre-hurricane and nearly pre-pandemic levels. I would still say, on specialty materials as a general statement, those are still a fair amount of expediting and some modest inflation that we're still kind of dealing with. But as far as our deflation assumptions in our original guidance, we kind of didn't expect a lot of deflation on PVC, and expected modest amounts in the back half of the year on polyethylene. I would say the answer, net-net, still feels the same, but the pathway there is a little bit different, where I think right now from what we can see. There's probably a little bit of PVC deflation that we didn't expect. And it seems like polyethylene is coming down, but it's not coming down at the same rate that was sort of expected earlier in the year. So...

A couple of questions we got by e-mail. In terms of buyer behavior, are you seeing any meaningful mix shift in terms of consumers mixing up or mixing down in terms of your product portfolio? I mean on one hand, you have great homeowner equity gains that maybe would move somebody to a higher-priced product, but you also have price increases flowing through. Like anything that you're seeing or that you anticipate for the year that's meaningful?

We haven't seen it. We haven't seen any movement in the data relative to whether or not -- so we play in, let's call it, in the decking area, 4 different categories, right, good, better, best and then premium. Good, better, best reflects how our competitors talk about it. They've been public longer, so we follow that. And then premium is really our most premium product, and that's the most premium in the industry. We've seen remarkably consistent growth across each of the categories. And I think it gets back to, on a relative basis, our products are a part of, call it, 20% to 30% of the job depending on the decking side, depending on which price point product you use. And so it's a minority part of it, but it's such an important part of it. So in general, we haven't seen that in the data.

Got it. Got it. And you're obviously in a high-growth category. Can you talk about sort of share shift or share evolution? I mean you and your large kind of publicly traded competitor, I think, have 60%-plus market share combined, or at least that was maybe toward the time of the IPO. Are you maintaining share, growing share, share erosion? Just -- and then any thoughts about kind of going forward?

Yes. In general, as you take a look at the 2 -- on the decking side, the 2 largest competitors clearly have a strong position in the marketplace. I think as we went through the process, in '20, of being sold out into -- '20 in particular, maybe a bit in '21, we -- it's really hard to get a sense of share position. I think that maybe some -- there may have been some transactional benefit that some of the really smaller players got in the space just because of a lack of availability. I think as we've moved through this particular season, where we have enough capacity to meet the demands of the market, we're seeing really good momentum on the shelf. And probably, potentially at the expense of some of the smaller players, as we're able to -- we've got a differentiated value proposition that we're really excited about, that includes service and quality and look of the product. We also now have availability and an ability to engage the market broader. So I think, in general, we feel like we picked up a little bit over the last year to 2 years just based on our product portfolio and our service platform. But I think it's going to be really noisy as we work through that. But in general, I'll come back to the comment which is the way we pick up share is to pick up a disproportionate amount of the wood conversion. And this is not one where -- I used to use Coke and Pepsi, I don't know if that's appropriate, where you're kind of measuring market share against each other. It's very much one where you're trying to get after that wood conversion opportunity. And if any of you in the room put down a wood deck given the sort of lifestyle you have and your professional nature, that would frustrate me more than probably if we lost a job to the other guys, right? It's that opportunity that we really need to get after.

Right. Right. And lumber spiked last year. It kind of came down and is spiking again. Do you see, kind of in the very near term, an impact from those kind of lumber spikes? Or is it just too noisy to really move the needle?

If you are in -- if you are a DIY customer in a retail store and you see that difference, it may have you choose a composite over wood just because the price has normalized. So there's a modest transactional impact, we believe. But the flip side is also true, where elevated wood prices creates -- elevates the cost of a job overall, no matter what the remodel job is. And so there's trade-offs in terms of you might pick up a little bit of ability on the incremental side, but you also have some challenges relative to the cost of the job. Now there are areas where we are able to drive greater wood conversion based on the specific species. So for example, cedar, cedar has a -- it's a niche product on a relative basis. It's used in a lot of exterior applications, think trim or shingles or that kind of stuff. As cedar has experienced both an elevated price and also more difficult availability, it's given us the opportunity to drive more wood conversion in our AZEK portfolio, which is our Exteriors portfolio. We like that a lot because we find once a contractor uses our material, we've gotten past that initial resistance. It's a lot easier to work with, and we tend to hang on to those customers. So a long-winded answer. It's not as simple either/or, but kind of the availability of some of these niche species of woods, redwood or cedar or some of the -- those types of products, we do like that because it allows us to engage in a conversation and drive that wood conversion faster, especially on the Exteriors side.

Got it. Got it. And you talked earlier about kind of market share or market position. Can you talk a little bit about how AZEK is positioned with dealers versus retailers and just kind of remind folks how you sell and maybe opportunities in those channels going forward?

So if you just step back, as a reminder, the aggregate market for Deck, Rail & Accessories, and it's a little bit different in Exteriors, but let's just say, roughly, it's the same, 1/3 of the market goes through retail, about 2/3 of the market goes through what we define as the pro channel, right? So your contractor, if you're doing a new construction, will buy through a specialty player. Obviously, the retail folks are aggressively going after that business, but let's say, 2/3, 1/3. Within that, we are roughly equal share on the pro side. You could -- I would say roughly, right? There's noise in the system. We've got a terrific position in the pro. And historically, we've been under-indexed in retail. Now we have gone from 5% of our business in retail to 10% of our business in retail. And it's really a strategic shift we made a few years back. That's given us an opportunity to have accretive growth from retail. As we continue to focus, as we're a really strong brand with the pro and a really strong brand with consumer, it's given us an opportunity to continue to expand with those companies. And so from a macro share position, we would be more indexed to the pro. Now that's in the decking side. On the Exteriors side, less of the market is with the pro, but we have a really good position on the Exteriors side within our retail business. In general, every year that goes by, we incrementally are engaging and investing, and we're seeing a good return out of that.

Got it. Got it. And then kind of relatedly, can you talk about either sort of regional opportunities or new product opportunities or sort of adjacencies that you've pursued either through new products or M&A?

Yes. We launched -- one of the differentiating characteristics of our company is we believe in new product vitality and we believe in new product vitality in the core. It's what allows us to continue to launch products that hit on trend. We also believe in new product vitality or new products to be able to access adjacencies. And so in the Deck, Rail & Accessories side, we have launched new products over the last couple of years. Because of our capacity constraints, we haven't fully been able to support those new launches. We've had to constrain one of our premium launches to a limited geography. We've actually had to constrain some of our opening price points and kind of entry-level launches. And so now that we're at capacity, we're able to fully service both of those product lines. And so we believe that's part of strengthening our position in the core, is being able to fully get after that. On the Exteriors side, we continue to launch niche products that drive adjacency. And so I mentioned shingles, right? So shingles is a niche siding product, right? It typically is painted. We've launched a shingle that is a great replacement for cedar shingles. And we've launched what we call a paintable trim. It's very targeted on those markets that paint their trim. We've seen really significant uptick in growth in those categories. And what it's allowed us to do is incrementally gain some additional share. We haven't talked about our most recent acquisition. But we bought a company called StruXure. So think about our Exteriors business as the wall of the house, our decking is the floor, railing is kind of the safety element. StruXure is an overhead pergola, that's a smart pergola and kind of a prepackaged pergola. And it allows you to round out an outdoor room. So we had a great display at the builder show. They are also in process of launching a new product that is they're semi-custom, you configure it, you place an order, they deliver it to the contractor. They're launching a lower-cost, more mass-market prepackaged version of that product that we also think, over the next couple of years, we'll be able to expand their addressable market. So a long-winded way of saying -- now by the way, for them, the opportunity is for us to continue to support them as they're sold out, right, which is why they haven't been able to fully fulfill on that product. So we're giving them some modest working capital, getting them to 3 shifts a day as opposed to 1 shift a day, those kind of changes that will allow us to fully support those -- their new product launch. So you can tell by the amount of time I seem to answer that, that new products for us is really important. We've got a great core market. We can continue to grow there, but it's these new products and new initiatives that allow us to potentially drive growth above that double digits that we've gotten to historically and address some of these adjacencies.

Great. Great. And Jesse, can you talk a little bit about the Idaho greenfield and what -- you touched on it a little bit earlier, but in terms of what that new capacity does for you, maybe sort of lessons learned in terms of bringing it online during the pandemic and a lot of supply chain challenges? And then as we kind of think going forward, sort of how long does that -- do you need additional capacity or ability maybe to add brownfield capacity in other plants or just your footprint, broadly, can you talk about it?

Yes. We went public in June of 2020, and we used the proceeds to get our balance sheet in order and drive down our leverage. And really around that time as we worked our way through the early months of the pandemic, we decided that it was going to be really important that in a high-growth market, that we have the capacity to meet the growth of the market and drive the potential for an accelerated growth profile. And our return on capital, return on tangible assets is really good. And so that's the best place for us to invest money. So as part of that, we've gone through the process of announcing an 85% increase. And most recently, we updated that to a 100% increase in our decking capacity. We brought 55% of that online already. We'll bring the rest of that online in the next 12 months. A part of that was, to your question, a greenfield facility -- brownfield facility in Boise, Idaho. That facility is large enough that what we're doing over the next 12 months only fills up half of it. And why did we think it was important, as you look at the potential growth rates in the market, we're going to need capacity moving forward. So we wanted to get that kind of that early, get the building, get it set up out of the way, as fast as possible. And then that gives us optionality to scale capacity as needed. We can always slow the addition of machines. We can always accelerate the addition of machines depending on what we see. But the longest lead time item is getting a building. And I think what you've seen is one of our smaller competitors and our larger competitor have since announced greenfield sites, and we think we're 2 years ahead of the market in terms of being able to meet the potential for an accelerated conversion and accelerated demand. So that decision in the middle of a pandemic, we made very quickly, and it was really based on the fact that we're building this thing for the long term. And the other thing I'll just highlight, we have an ability to manage -- in one of my previous lives, I managed the chemical business. And the first pound off a chemical plant is $1 million, the last pound is free. It's -- you have this utilization model. In our case, we're dealing with extruders that are, by their very nature, very modular pieces of equipment. And so if you have 10 extruders, you only need 8, you just shut 2 of them down. It's not a big deal, right? You reduce the labor there. 70% of our costs are raw material. 20% of our costs are variable. It's a really easy model to manage. So you're better off having excess capacity. You can manage the profitability much better than if you don't have capacity just because of the modular nature. Think of it as just the cells that you turn on or turn off.

Right. And kind of piggybacking on that, just broadly in terms of capital allocation and capital intensity, I don't know if you can talk about that, or maybe Peter, and as well as sort of target leverage.

Yes. We feel like, in '23, CapEx will still be a bit elevated but below '22. And in '24, we would envision the business settling into more of that 5% to 7% of sales as a more traditional CapEx. And you could think about half of that is sort of maintenance and the other half being investments in productivity as well as modest expansion.

Yes. So then if you look at the macro capital allocation strategy. For the last 18 months, we've talked about reinvesting in the business, which Pete just walked you through. From a capital standpoint, we're starting to normalize. And there's still growth capital even in that 5% to 7%. And then you add to that acquisitions. I think we've shown that we're going to do tuck-in acquisitions because we really like our business model and we don't want to mess it up. We like the double-digit growth. We like the margin expansion. That's a terrific profile. We're going to be really selective on acquisitions, some of which, by the way, are helping our recycle supply chain. If you do the math, there's a fair amount of cash leftover. And I think as we near our second year as a public company, it's not lost on us that we're well below our goal of leverage it in the 2s. And so as we look at it, we do believe that it's the right time to consider what that next tranche of capital allocation is going to be. And it's something that Pete and I and the Board will obviously look at because it's a relevant point, especially when we're kind of going through a temporary dislocation of where equities are now relative to the opportunity. So we believe that that's something we need to explore.

Right. Right. And then, Jesse, I mean, we were talking about this earlier, but there are names that are kind of viewed as COVID beneficiaries or pandemic beneficiaries. And for a subset, maybe that benefit goes away, and then for another subset, there's just a change in consumer behavior and buyer behavior that maybe is more of a secular change. Kind of any thoughts about that? I mean outdoor living was doing well before COVID. So...

Yes. I think that's -- we -- I'm sure all of you have kind of the same joke that during the pandemic, a lot of people's business models all of a sudden were perfect, right? You're -- I don't know, I don't want to pick a specific industry. I think, for us, as we looked at -- or as we look at it, right, I gave you the 10-year CAGR of 18%. We were growing 16%. Trailing 12 before the pandemic was a thing. And as we've worked our way through, you start to look at what -- step back, what are the drivers of growth. Drivers of growth are material conversion, a focus on using your outdoor space in a more effective way, combined with this demographic additive component, which is millennials having their second kid and expanding their households, right? That existed pre-pandemic. It existed during the pandemic. And if anything, the focus on the house and the importance of those trends are stronger as good or stronger exiting the pandemic, right? So I think it's important to note that we didn't see a change in behavior. That behavior was already there. Now if you kind of step back and say, all right, what's our growth rate. We've been growing double digits. We've had 2 years of effectively double-digit price. If you extrapolate that out, the 2-year stack, '20 to '21, puts us at a CAGR of about 17% -- or 17% growth each year, if you average it out, right? That's not outside of what we saw pre-pandemic, right? And even if there were excess demand, we've had limiting factors relative to either contractor capability or capacity and our own capability to meet market demand. So we feel good about our guide. If we're -- if there's any year that we're lapping things, it's this year, right? So implied in our guide is we're lapping some inventory fill. And we feel good about our guide. And so as we move into '23, '24, those trends that carried us through before we're expecting to continue or sustain. And so -- even during the pandemic, I was trying to pull people away from, no, we're not a COVID story. We were there before. The momentum has continued, and we fully expect that to continue as we exit the pandemic.

Got it. Great. Well, Jesse, Peter, this is an extremely helpful update. And thank you again.

I really appreciate the time.

Great.

Thank you so much.

Thank you. Thanks, guys.

Great to chat with you all.

Thanks.