The Cheesecake Factory Incorporated (CAKE) Earnings Call Transcript & Summary

Welcome again. Everyone, I'm Brian Harbour, I cover restaurants and food distributors here at Morgan Stanley. Thank you for joining us. And now we're joined by The Cheesecake Factory. David Gordon, is President; Matt Clark is CFO. Thank you guys for being here, appreciate it.

It's our pleasure.

So I always start with the bigger picture question. I guess, how would you sort of characterize the demand and operating environment right now as you see it? Is this sort of a new normal? And as you sit here today, do you think it can be better in '25? We have seen sort of below-trend growth, I think, in '24. And so what are the key drivers of that in '25 as you see it now?

Well, I think our thesis all along has been that 2024 would be the most normal year since the pandemic, and I think that has played out, absolutely. I mean, our traffic at Cheesecake has been very consistent, right around flat all year. Business trends have been very predictable, very consistent. The input cost, the labor environment, it all feels pretty good, Brian, to be honest, I think some people have talked about like the middle of the year, there was maybe a little bit of decline in the environment in July. I think our thesis was that -- was a lot of optics lapping a really tough comp, you have to take into consideration multiyear stacks. And really, since that point in time, I think it's been an upward trajectory. As some of the inputs there would be that wage growth has outpaced inflation as inflation has come down and wages continue to be mid-single digits. And I think the consumer now can afford what they did last year or more, right? So going into 2025, I think that's a pretty positive backdrop, right? So we've seen really good trends in our own business. And I think that's augmented by the fact that consumers are probably in a slightly better spot than they have been in a while, and those are positive tailwinds.

Yes. And I mean, you have given us some guidance into next year, right? So it's fair to say that you're sort of assuming recent trends continue as you think about both fourth quarter and into '25. Is that fair at this point?

I think that's a very safe assumption.

Okay. Sounds good. Maybe we talk about some of your sales drivers specifically. And of course, so 4Q kind of continuing recent trends for the most part for Cheesecake, anything around sort of like the holidays in your view that we should be mindful of, maybe just sort of a near-term comment.

I think the holiday is generally, we're anticipating to continue to be very stable for us. There's not really that much of a shift other than New Year's Day, moving into Q1 of next year that would have any impact, but that's already in our plan for this year and for next year. So the stability we've seen coming into Q2, Q3, certainly, we feel very positive about. Just to touch on some of the sales drivers that you asked about earlier. I think we're still continue to be pleased with our rewards program which has now shot a year -- 16 months in fully rolled out across the country. And thus far, it seems to be very successful. As you know, it's a -- not a traditional program. It's published and unpublished rewards. It's not a points-based program and it's really published rewards driven around reservations, access to reservations at Cheesecake Factory. So some of what we believe our lift has been is probably a little bit contributed to from the rewards program. And our operators have just done a terrific job over the past 12 months with the stability we've seen in the labor market, our best-in-class retention. I think our restaurants are operating as well as they have historically, if not better even than 2019. And we're taking market share from think the rest of casual dining and some of the independents as well.

Okay. As we go into next year for the Cheesecake brand specifically, do you -- what else are kind of the key drivers as you see it? Will rewards play more of a role? Is there anything sort of in-store that you're particularly focused on as sort of a sales drivers as we go into next year?

Well, great execution, wonderful hospitality and delicious food has always been the hallmark of Cheesecake Factory. So we're going to continue to drive that level of focus for the operators to ensure that the experiential dining that we offer is something that is craveable for the consumer and continues to exceed guest expectations. So that's just the fundamentals for Cheesecake every day. Rewards certainly will continue to be a big part of where we believe we can pull some levers in a one-to-one relationship with our guests. We now have acquired a lot of data about people. We know their behaviors. We hadn't known that historically. So if we want to drive incrementality to a specific daypart, we can do that now. We now know whether or not you've only come at dinner for the past 12 months. And if we want to try and drive some activity from you at lunch, we can now promote to you lunch awareness. And perhaps if you don't decide to come just based on the awareness, even a promotion, it could be a slice of cheesecake, if you spend $30 or more type of promotion, that type of activity. So having the data we have today, I think, is a lever that we haven't had historically that we'll be able to strategically use throughout 2025.

Have you done any of that yet or you're just at the stage?

We're just at the stage now where we're just starting to do that.

Just to add on that from David though, like if you think about the execution side, NPS scores are an all-time high for us. And for the rewards members, they're 10 points higher than that. That's a great leading indicator for us. So we tend to get a tail when we drive the execution, we drive guest satisfaction. So that is a real sales driver and it tends to pay dividends in the future.

What's driven that primarily? Is it just labor stability? Or this is something that like, look, you've really focused on with your managers.

Labor stability certainly has been a benefit. Where our attrition rates are best-in-class historically. Right now, they're at all-time lows, retention is at an all-time high. And that's at the hourly level and at the management level. Also coming out of the pandemic, we sort of had a focus on back to basic restaurant, great operations. Our general managers conference last year was really focused on getting those operators back to all the systems and processes that have been the hallmark of Cheesecake for so many years and I think we did that really well last year. The stability we've seen over the past 12 months has led to great execution. And so that's where those all-time high NPS scores are coming from, great stability, great execution, higher productivity, lower over time, lower training costs in the restaurants, all a product of that lower attrition.

And any numbers you can throw at us in terms of like wait time, sort of like table turn times, like any of that, that would help bring that to life?

We don't really share wait times. You're welcome to come in on Saturday and check them out.

I can measure it.

Or you can join rewards and make a reservation. You won't have to wait at all. But I would just say that throughput is as good as it's been. Productivity is it really it's sort of record highs. We have more people cross-trained today than we've had historically, so they can work in multiple stations on the line, which leads to better productivity.

Do you think that sort of the mix -- I know mix is partly channel mix shift, right, but it's also just sort of like customer behavior. Do you think that changes as much as we go into next year?

No. I mean for us, it's kind of a unique story for The Cheesecake brand, the mix really for the past 4 years went up and then it came back down relative to party size. Parties of 2 by about 20% more than a party of 6 or 8. And during the pandemic, we definitely saw smaller parties coming in, right? There was a social distancing. If you think about attachment more traditionally and you compare it based on those cohorts, we're at or above 2019 levels for Cheesecake sales for alcohol sales, it's been remarkably consistent and steady.

How was the pickup in delivery channel done? Is it status quo at this point? Or I mean do you want to lean into that a little? You of course, just have DoorDash, right? And I think you've still been happy with that arrangement.

Yes. So we've been at a 21% off-premise sales mix now for quarter after quarter, probably 6 quarters in a row now. So it's very, very stable. Of that mix about 40% of that 21% is delivery, which, to your point, is exclusive through DoorDash. That continues to be a very valuable relationship for us. It means that we only take about 2% to 3% pricing on our delivery, which is a competitive advantage, certainly. We have great marketing through the DoorDash channel. DoorDash has fully integrated the rewards program, so you can redeem rewards or sign up for the program directly through DoorDash. So that channel has remained very, very consistent. Partly, I think, because of the value proposition of Cheesecake Factory and off-premise, right? It's a very large portion. You can feed a family of 4 with 2 entrees and an appetizer, complementary bed and you're paying about $20 a person for your family and to get a burrito these days with extra protein delivered is about $20. So the value is there, and it's great quality. So I would anticipate that, that level of off-premise is sustainable for the long term.

Okay. How about kind of your pricing philosophy as we go into next...

Well, long term, our pricing philosophy is really to offset inflation, right? We don't view it as a margin driver. But I think it's the balance, like we always talk about the Fed has the dual mandate on employment and inflation. And for us, it's guest traffic and its margins. So we really look at being middle of the road. We do our own internal pricing analysis where we look at about 2 dozen national competitors, and now it's up to like 70 markets. And they run from fast casual to fine dining because the Cheesecake Factory has the no vito really wide demographic, and we typically target to be in the middle of that range, right? And so I think as long as we maintain that position, then our value proposition that David was talking about, is sustained because keep in mind, too, it's not just what you do, it's what you don't do and during the pandemic, we didn't take anything away from the guest. We kept the large portion sizes. We kept our incredibly large menu we didn't take any labor out of the service equation of it, right? So we feel like we've probably actually extended that value proposition. I actually think some of your research recently maybe pointed to that as well. So we feel good about where that's at, and we'll continue with that disciplined approach on the pricing.

Okay. Makes sense. Have you -- you skew higher end than many of your peers, right, have -- and I think actually sort of the aspirational customer though has been kind of like a weak spot for the industry. I mean have you seen that as well where the lower end customer has been a problem for you as well or not? Is sort of like the experience of it, still a draw. Maybe talk about that a bit?

I think that steady state we talked about earlier is across all the cohorts, whether it's somebody who's coming 1 to 2 times a year, that more aspirational guest or our best guest who's coming 10 to 12 times a year. People, when they think about where to celebrate Cheesecake Factory is built for celebrations, we can handle large parties all over the restaurant, right? Parties up to 20, 30 people, we're built to be able to execute that. So when they do decide maybe that they want to come out for that celebration, whether it's a birthday or an anniversary and spend a little bit more, cheesecake fits that need state really, really well, and we haven't really seen that guest celebrations decline or that aspirational guests trail off at all.

It is kind of a funny anecdote, my son worked at Cheesecake factory over the summer. I helped to get him that job. But he was a host and, he would come home and it would be funny like on a Friday or Saturday night, and he would talk about how many bar mitzvahs or concierges like how the restaurant was for to fit them all in. And so I think we've definitely seen that component of it really sustain, if not flourish.

Okay. Good. North Italia, where do you think comps sort of run there? And I guess you're also building a lot, right? So could you maybe talk about sort of the impact of new units as we look at top line for North Italia?

I think that's a great way to talk about it, Brian, actually, because part of it is that we know that most North locations ramp over time. Where Cheesecake Factory typically owns at like 150% of steady-state sales. North would the time open about 70%, right? So what we saw kind of from the comp over the past year or 2 is that during the pandemic, we didn't open as many locations. And so you didn't have many coming through that cycle and posting positive traffic. Mature locations are going to be really flattish pricing, maybe slightly up, but the new locations do contribute to a comp. So as we continue to ramp that back up to our 20% target for the concept, we would expect comps to move over the next year or 2 back into the mid-single digits with a slight positive traffic combination with the pricing.

Okay. Yes, makes sense. What of the other brands, right, which of those do you think sort of has the most growth potential? I mean is it still your expectation that AUVs kind of the blended AUV comes down there. I think that's a reflection of just which brands you're building. It's not a statement about like same-store AUVs, but could you talk about that? Have you -- are the same-store sales there sort of similar to the other brands? I thought you said Flower Child was actually higher, but maybe we can talk about those other brands a bit.

Sure. So we've -- just to start with North, North, we said that we believe there could be up to 200, North Italia domestically. We opened up 7 this year. And with this sort of the comp run rate that Matt had mentioned earlier, and those are in some infill markets and some new markets. So that ramp-up really is dependent on whether it's a new market or not. Flower Child, we haven't thrown out a national number yet, but certainly could surpass that 200 number. And it has worked incredibly well in every new market that it's moved into, just opened in Utah for the first time, some of the highest sales in the opening weeks of any opening that we've had thus far. On the AUVs there, roughly around $4.2 million to $4.4 million. So for fast casual, pretty, pretty strong in a 3,000, 3,500 square foot box. After that, we're testing out Culinary Dropout is maybe the next potential vehicle that could have up to 100 units domestically. We're slowly moving into some new markets. We'll open in California for the first time next year, which will be an important test to see how well we can do in California. And next year, the openings for FRC are really centered around culinary dropout and The Henry, which is a concept, there are 6 of them today. We'll open a few more next year. See how well that travels. It's also a casual sit down sort of American Brasserie type of restaurant. And so we really want to test them out, decide which one we think could be a national concept, before we say we're ready to launch those the way that we said we're ready to launch North and Flower Child.

Right. Just on kind of the mix Dave you talked about. I mean that's true. I think optically, like you will see the aggregate company come down because, ultimately, we will grow many more Flower Child's from here forward than a Cheesecake Factory, right? But I think important for investors to understand is our focus is really on the unit economics. And we believe that we can be accretive, whether it's with a Flower Child that could be 30% plus cash-on-cash or North of 25% plus, right? We're adding value as a total portfolio company rather than thinking about it independently because of the synergies that we're creating from the size and the scale that we have, whether it's in supply chain or people or the back office. And so we have sufficient capital to grow each one of those, so long as they're developing and providing the returns for our investors.

Right. Can you say what the AUVs are for those other couple of brands you just mentioned?

We haven't.

Okay. Maybe at some point. Okay. I think that.

Well, it's Culinary Dropout, we have said roughly around $10 million AUVs.

Are some of those co-located with other brands that are already there? So you sort of know the site well, at least.

They can be. It really just depends on the site. Our strategy is always A site-dependent strategy. We're only going to look for the best site. Some of those may be where there is a Cheesecake Factory already in North Italia. It could be a new project. I think when you think about the development pipeline, one of the reasons we feel strong that it continues to be very positive, is that landlords are excited about all of the brands under the entire portfolio. and that you could have a new build somewhere that has a Flower Child and North Italia and a Cheesecake Factory unit or a Culinary Dropout, Henry and a Flower Child. So I think that's part of our strength of the development pipeline is being able to have such a strong portfolio of unique experiential dining.

Okay. Maybe just talk about the margin side a little bit. So I mean you were able to show good store margin upside this year, right? And certainly, a lot of that was food, but -- what else do you think kind of helped with that, right? Waste, I think was mentioned, you said productivity, but what were sort of the key drivers of that?

I think it starts and ends with people. right? So we've definitely seen, I think, as we've talked about, retention is an all-time best. It really started to improve actually about 5 or 6 quarters ago and then sequentially improved every single quarter since middle of '23 and we're actually better than pre-pandemic, right? And so that drives a lot of a virtuous cycle within a very complex, big restaurant, right? So we're talking about lower overtime costs, lower training costs, better productivity, lower waste in addition to the better service and hospitality that our guests are getting. So certainly, we originally guided to I think 50 to 75 basis points on the 4-wall, we're probably going to be north of 100 this year. And the delta is primarily in that labor category. And I think that provides a good tailwind for next year as we think about lapping over, if we just hold where we're at today, we're going to reap some of those benefits in the first 3 quarters of next year because we're in a better spot than we were this year.

Yes. Okay. As you think about sort of further upside in '25, I mean how conservative do you feel that is based on what you're expecting for inflation? What other initiatives sort of help there?

Yes. I mean, I think we've tried to take a conservative bent overall with expectations given that the environment this year wasn't superlative, right? And so I think that's been a good course of action for us. And certainly, it depends on whether we see the labor environment remain as stable as it has been and a continued flight to quality. But I think we feel like we're really in control of the business, and we'll be able to pivot if need be, right? So overall, I think we have a range of opportunities, and we're trying to exceed them.

And you did also specify sort of low to mid-single-digit inflation overall. I mean could you talk about some of the different pieces of that, what you see as more pressure on what could be more?

Yes. I mean commodities might be a tick higher for us, specifically going into next year, particularly around the dairy and the cocoa. Certainly, we sell a lot of chocolate cheese cakes, right? And so that's a unique contribution to it, but it's still manageable. Like we're talking about this year being 1 to 2 and maybe next year is 2 to 3, right? So within that range and as long as that we're able to contract sufficiently as we have been in the past. It's not something that we're concerned about. We're just adjusting for it. I think labor on the other hand, could be slightly less than this year and may be an offset, right? And I think to cap it off. We've finally gotten to the point where that other OpEx line is steady and predictable, right? We may not get leverage in it, but at least it's where we want it to be. And the trades have settled down a little bit for the time being in the R&M category. So again, I kind of go back to every week, we open up the pro forma, and it looks equal or better than we thought. So the business is really in control.

Okay. How do new units play into that mix of new units or because Cheesecake does run at higher margins, obviously, but how does that sort of affect next year?

Well, as we open more, it's not incrementally too much more. So I think that the ramp-up is sort of already incorporated in that. But certainly, if you think about like actually Flower Child margins are better than Cheesecakes today. So it's a balance and pretty neutral overall to us. And we also hope to continue working towards that balance cadence of the new unit openings that we were able to achieve this year. So if we can get more of them open in the first half, then certainly, that will help as well, right? Because we'll get more productive months out of those units in the back half of the year. So overall, right now, we feel it's pretty neutral.

I guess, broadly, what's kind of the biggest opportunity versus where you think you should be, right? I mean thinking about some of the other brands, too. Is it labor efficiency? Or what's sort of like out of whack there versus what you think is sort of the eventual margin opportunity?

I wouldn't say anything is out of whack. I think that there's an opportunity in people practices at all of the other concepts and improved retention at all the other concepts that could be meaningful to them because they, too, would then have the ability to be reducing over time, be more productive. Historically, at Cheesecake Factory our people development skills and our ability to retain staff and managers above industry averages have always benefited us. These other concepts haven't had that. So the more that we put some of those practices in place. An example of that would be a Cheesecake Factory, we have something called Cheesecake Factory Institute, where we bring about 100 managers a few times a year to our corporate office and do learning modules with them, help them understand what our operating standards are, talk about our culture. We're doing that for the first time with North this year in about a week. So the more of those type of practices we put in place that will also help us with the ramp up of being able to be prepared with the right type of leadership for all the new restaurant openings that are coming up, whether that's for Flower Child or for North. So I think that's probably a big area of opportunity. Supply chain will continue to be something that we will explore. We've made good progress at Flower Child with supply chain and at North. I think the rest of the FRC concepts can benefit from our supply chain scale as well and our teams are doing a terrific job of slowly incorporating what we think are the right type of products into some of those concepts without taking anything away from what the concept traditionally has been.

And certainly, if the environment continues like it is now on more of a slightly upward trajectory for the consumer, mix normalizes, traffic is flat. All of our concepts get another 1, 2 or 3 points of comp that's the best leverage you can get, right? And so you've got things internally that are running right. And so if we continue with the external component in the way that it's at, I think that there is a lot of good opportunity.

Okay. Makes sense. We talked a little bit about new store development, but maybe we can focus on that. I mean, you can probably get to your 7% unit growth target next year, right? You're a little bit short of that this year, but can hopefully accelerate. And is that sort of -- are you very confident that going forward, would you surpass it, if you start to sort of I don't know what your development team's capacity is for that, but if you start to lean into some of these other brands more?

Well, I think the people part of it is really crucial. So we can find the sites and we have the capital to build them, but you have to have the right leadership in place to be able to execute. So that's sort of why we put our own internal limiter of about 20% unit growth on any individual concept. They're complex businesses, the full-service restaurants at North, we're making everything fresh from scratch. It's not a simple concept to operate. It's certainly not a Cheesecake Factory, but it's still relatively complex. In Flower Child for a fast casual is definitely more complex than your traditional assembly line bowl type of concept. So having the right type of leader, general manager, executive chef in those restaurants is really important. So the development stuff I talked about earlier, is part of making sure that we have that right type of leadership in place. And over time, if that continues to develop well, could we accelerate from 7%? Possibly. That's certainly not in the near term.

Right. With those other brands, what are you -- do you sort of like reach a certain threshold and you say, okay, this is working really well. We're going to lean into it versus do some of them get sold off, for example, if you don't think that there or close down if you don't think that they kind of have broader growth potential?

I think in the longer term, I think that's a potential, right, I mean, right now, today, the ecosystem is working really, really well. Obviously, we're not going to be operating restaurants that don't provide positive cash flow. So that's just a nonstarter. If the lease comes up, and it's not, we would just close it down as we have in recent history. And I think if you extend it out over the next 3 to 5 years, you're going to have some winners that do present themselves. We will lean into those more and the others will either support that or could go away. And that would be fine, right? I mean think about the 7%, right, that's in today's environment, but as North, Flower Child maybe a Culinary Dropout progress and become bigger and can open at 20% unit rates, that number could go up, right? And it could accelerate the unit growth rate.

Makes sense. Is the mix of brands likely similar next year to what you saw this year?

Yes, very similar. I think 3 to 5 Cheesecake Factory, 7 to 8 Flower Child, same for North and the rest comprised of FRC.

I think unit potential for North and Flower Child, you said it was 200 each.

200 for North. We haven't said for Flower Child, but certainly could exceed that 200.

That or more, yes. And have you said it recently for Cheesecake? I mean you still build a few year, right?

We do. We said 300 domestically for Cheesecake, we're at 216. So still plenty of runway. And if we add more great sites for Cheesecake, we certainly could open more than 3 to 5 a year. And as those sites come about, we just evaluate that annually.

Yes. Okay. Matt, you said you've sort of answered this, but what -- like returns on some of the other brands, where are those today? And like new store productivity on those other brands?

Yes. So Flower is 30% or north of that for the cash on cash as I said, the margins are actually ahead of Cheesecake and we target about 2 to 1 sales of investments. So it's in a really good spot. North is about 25% cash on cash compared to Cheesecake being at 20% so it's still accretive. And again, we're looking at that at that 3-year mature level those. And so all in all, we feel like we're creating value on an incremental ROIC basis. And it's really about making sure that we keep all of the things that have kind of come together at this point moving forward in a positive way.

Okay. Any other closures that you'd expect because you did have 1 or 2 this year, I believe.

Yes. A couple that were sort of, I mean, very unique but what I have been saying is you should expect at least one or so, particularly where Cheesecake is at, we do have leases that come up and if the trade area has moved and things like that, we will consider that but that's kind of in the ballpark. It's not going to be a lot, but it could be 1 or 2 a year.

Okay. Makes sense. Let me just talk about your balance sheet a little bit. What -- where -- any changes to your debt structure you'd expect kind of like leverage target. I think you've also talked a little bit about using the convert market. Is that still sort of your intention going forward?

Yes. When the Board has had the conversations and we've talked to investors, I think both of those have come together to say, about 1x funded debt is kind of the comfort level and the optimal capital structure. And we think about that, obviously, on a cash basis, what it excludes the equity comp and some of those pieces. And so next year, we think we'll be pretty close to that, right? So that seems good, and we've liked the convert. I think the economics are attractive for us. So the Board has currently considering rolling that in the middle of next year, let's say, if the opportunity in the market continues to be positive. And if we kind of bundle that together with what's currently sitting on the revolver, we actually think it could be neutral to slightly positive from an EPS perspective. So a good opportunity to be in a good spot with the cash flow we're generating. We're actually very attractive to those investors today and sort of a unique unicorn in that space. And so that's likely to be our path.

Okay. For your capital budget next year, I mean, obviously, building new units is what it is. Any other specific projects in there sort of like increasing you'd expect?

We have a little bit in there for the third bakery that we started. We did close on the purchase. We don't expect doing significant amounts of work, so it's not material at this point in time. And certainly, we'll provide more perspective once we get a little farther into that project. And then of course, if we think about sort of the totality of capital allocation, we really focus on accretive new unit growth as being the priority and then obviously maintaining the dividend. And then we want to at least offset the equity comp with share repurchases. And like I said, if we combine, I think, the debt piece of it, rather than pay it down materially, we would get a benefit just by creating synergies between a new convert and the existing revolver.

Okay. Was your expectation that if you had -- so obviously, you got the dividend, you have your capital budget and then just sort of increased buybacks would be the rest of it next year?

Yes, for sure. I mean we're bullish on our stock. We've been buyers of it over time. And as we continue to expand our margins, we'll have more opportunity to do that.

Yes. Okay. Are there any -- no one knows, but I mean are there any policy -- U.S. policy issues that you're particularly engaged on or care about at this point? Or that affect your planning for the next couple of years?

I think we care about all of them. We always have. I don't know that there's anything in the near term that we haven't been through before. I guess I would start with that, right? So whether it's a tariff outlook or what might happen with minimum wage somewhere, those are all things in our 45-plus year history that we've been through before. We know how to react to, if we have to and are certainly part of our ongoing conversations all of the time. So we'll wait and see and what happens. Sometimes what's said is not what actually materializes over time. So we'll see what the next few months bring.

We have a saying we like to control, we control in the 4 walls, right? And we've been through many, many administrations, good times and bad times. And I think David said it right. We know how to operate in any conditions.

Okay. Great. Maybe let's finish with the lightning round questions quickly that I've asked of everyone. Just thinking about demand background for the year ahead relative to recent trends, would you expect it to accelerate, hold, decelerate?

I think it will accelerate given the wage and inflation dynamic that we talked about and the job market continues to be robust and interest rates have come down. I mean, all of those are all positive signals. And I think we've seen most of the restaurant index data that came out for October, so it's the same thing.

In margins for the year ahead, up, down, neutral?

I think we'll have better margins for us specifically. I think all of the tailwinds from the work that we've been doing, combined with that better consumer environment is an optimal scenario for continued margin expansion.

And then we talked about this a bit, but capital allocation prioritization between CapEx, buybacks, dividend, debt pay down, any of those moving up or down in importance?

We're going to open more restaurants. So we're definitely leaning into value creation through accretive unit growth. And so we'll continue to put CapEx to work to build long-term EBITDA growth which we think creates value for our shareholders. But we will also pursue those other opportunities I mentioned with the balance sheet, which I think will also be accretive to our current shareholders.

Okay. Great. I think that's all I've got. So David, Matt, thank you very much. Appreciate it.

Thanks Brian. Thank you very much.

Thanks.