The Lovesac Company (LOVE) Earnings Call Transcript & Summary

Thanks. Morning, everybody. Joining me today are Shawn Nelson, our Chief Executive Officer; Mary Fox, President and Chief Operating Officer; and Keith Siegner, Chief Financial Officer. Prior to beginning, please note that certain items we'll talk about contain forward-looking statements about upcoming events and how our finances will perform going forward; that covers comments on what we expect ahead, our financial projections, plus our plans and prospects. What actually happens could vary materially from what those statements describe. To understand these risks and uncertainties, please look at the company's SEC filings, among them today's press release. Our forward-looking statements shouldn't be treated as forecasts of what will occur later. Every forward-looking statement we're making during this call rests on assumptions and beliefs held as of today, and we assume no duty to revise them, unless applicable law demands it. Today's discussion will also cover non-GAAP financial measures, among them EBITDA and adjusted EBITDA. These non-GAAP measures ought to be viewed alongside our GAAP results, not as a replacement for them or on their own. A reconciliation from the most directly comparable GAAP financial measure to that non-GAAP financial measure appears as supplemental financial information in our press release. At this point, I'd like to hand the call to Shawn Nelson, Chief Executive Officer of the Lovesac Company.

Thanks, Rachel. Morning, everyone — glad you could join us. I want to start by walking through the highlights of our fiscal 2024 second quarter, then give you a brief operational progress update, and finish with our guidance. Following me, Mary Fox, our President and COO, will get you current on where things stand with our strategic initiatives; and then Keith Siegner, who's just stepped in as CFO, will take you through the financials and a number of other items related to our outlook in more detail. Before we dive in, I want to thank all of you for your patience while the financial restatement was being completed. We hold ourselves to very high standards of integrity. Nothing matters more than having financial statements that are both accurate and reliable. As of today, all amended filings are done. Beyond that, we're bolstering our teams and establishing processes and disciplines as we work toward becoming a world-class organization that can drive growth for many years to come. Now to results: we're pleased with how the second quarter went, because revenue and profit both exceeded the outlook we initially provided back in June. The economy remained difficult, with macro pressure making consumers more cautious, which continued to weigh on the home category. Although we felt that pressure as well, Lovesac was operating from strength, leveraging our 25th anniversary campaign and omnichannel expansion to continue our track record of outperforming the category and posting positive net sales growth. It's also worth noting that we delivered this growth against a difficult comparison, as we were lapping 45% top line growth in the second quarter of fiscal '23. Specifically, total net sales were $154.5 million, up 4% from the same period a year ago, fueled by total comparable sales growth of 7.2% for the quarter; on a 2-year basis, net sales climbed an impressive 51%. Adjusted EBITDA was $5.3 million, versus $12.3 million in the prior year period. As we expected, significant investments in growth offset gross margin expansion. The deleverage in marketing and advertising came from our 25th-anniversary celebrity campaign and from the launch and support of our Angled Side innovation, and both will pay off in the quarters ahead. We're also continuing to make the disciplined infrastructure investments we need so that the foundation exists for profitable growth that beats the category over the long term. These investments will be less of a drag later in 2023, and we'll share more on that shortly. Operationally, we made solid progress reinforcing our Infinity flywheel, which is what underpins our differentiated business model. Mary will detail the progress on specific growth strategies, but let me give you a quick update. On the innovation front, as we've said previously, we rolled out Angled Side officially in the quarter. It brings benefits that improve appearance as well as comfort, and importantly, it closes the number-one style gap identified in our research. By broadening the pool of potential buyers we can reach, we attract additional customers — new ones and repeat ones — and since Angled Side launched, we've seen a meaningful weekly contribution. We continue to expand our physical footprint in a disciplined way, which builds awareness and aids our e-commerce business, and together these things deliver a seamless omnichannel experience for customers. Our marketing is becoming more efficient thanks to new approaches, including hyperlocal efforts designed to drive traffic. Lastly, we keep making prudent investments in technology and R&D so that innovation continues to flow, which further elevates the overall customer experience and ensures our foundation is strong enough to support the long growth runway ahead of us. Looking toward the second half of the year, we expect the macro environment to remain challenging and to continue pressuring the home category. We are not assuming any meaningful rebound in category growth this fiscal year. On promotions, we anticipate intensifying competition as we head into the holiday period, and we expect industry-wide discounting to grow both more frequent and deeper. We've adjusted our own plans accordingly and will remain highly agile through the holiday season. Even accounting for all of that, our confidence is unchanged that Lovesac will continue outpacing the category and, yes, post stronger growth in the back half than in the first half. Our guidance reflects this: we project third quarter revenue of about $154 million and are tightening our fiscal 2024 net sales guidance range to $710 million to $730 million. Given the macro backdrop, we're operating with a high degree of caution. Efficiency is our focus, and we'll maintain strict control over expenses. This will become clearer as we lap the foundational investments that were needed and that started in the back half of fiscal '23, which created peak pressure on bottom-line growth during the second and third quarters of this year. After including certain discrete expenses, primarily professional fees related to the restatement of approximately $4 million, we now anticipate fiscal '24 net income in the range of $20 million to $29 million. In summary, our dedication to the customer never falters, as we deliver our distinctive design for life platforms through circular operations and an omnichannel experience. We're pleased with our performance so far in fiscal '24, growing net sales and comping positively in a category that is shrinking, while we fund critical investments in long-term growth and maintain a very healthy balance sheet. While navigating today’s conditions and building on our history of taking share—something that should be clearer in upcoming quarters—we remain dedicated to operating with strong discipline. Our confidence in what lies ahead is high. We also think we are positioned well to meet the guidance we’ve set for the remainder of this fiscal year and to seize any opportunities presented by the macroeconomic picture. I want to offer my thanks and appreciation to the entire Lovesac team. It is their execution that makes possible our leading financial and operational results and fuels both my confidence and enthusiasm about what’s next. That said, I’ll hand it over to Mary now so she can take us through our strategic priorities and the progress achieved, along with additional detail. Mary?

Thank you, Shawn, and good morning to all of you. It's a pleasure to report that we've carried forward our streak of sector-leading expansion through quarter 2 as well as quarter 3, which our preliminary results make clear. Net sales for our second quarter rose 4%, which remains well above the category, and what matters more is that this represents a 221% increase measured on a 4-year basis, offering a comparison against where things stood before the pandemic; and despite the deliberate SG&A deleverage Shawn brought up, adjusted EBITDA margin is up by more than 1,000 basis points across that same 4-year span; our distinctive and powerful design for life platform, together with the nearly unmatched value it delivers, is what allows us to keep capturing share profitably despite the market conditions we currently face. Backed by an unambiguous growth strategy and sharp execution from a team united behind the priorities that underpin that strategy, we keep advancing operational excellence throughout the company and are making headway, as the highlights I'm about to walk you through will show. Let's begin with product innovation. As we announced earlier, our much-anticipated new offering, the Angled Side, made its debut in May alongside the campaign marking our brand's 25th anniversary. Customers have responded very warmly. As we've noted previously, Star ranked as the #1 factor causing shoppers to abandon our purchase funnel, and the Angled Side tackled our largest opportunity tied to that purchase barrier. Yet the gain isn't merely visual; we've likewise gotten positive responses regarding improved comfort from both existing and new customers. Over the course of third quarter, we broadened distribution, and since the close of July the Angled Side has been offered throughout our showroom base in addition to our e-com platform. A comprehensive media campaign that rolled out during the summer provided support and helped push the Angled Side's share of total size sold above 40% in recent periods. We expect to keep building market share via this new product introduction as awareness and appreciation keep expanding. Moving to our omnichannel experience; we keep operating as a genuine omnichannel retailer by pairing our physical touch points with our digital platform. In second quarter, we launched 18 showrooms along with 3 Best Buy shop-in-shops. Our achievement in generating strong efficiencies between construction and opening let us pull forward certain openings, with 15 among the 18 showrooms opening earlier than originally planned; as for our Costco partnership, sales climbed 15% in Q2, fueled by a larger pop-up-shop footprint compared with last year. Our e-commerce channel results kept impressing, rising 12.8% for last year, counting costco.com and bestbuy.com, and adding meaningfully to our category outperformance. Foundational to every channel and evidence that our plan is delivering, our customer satisfaction scores keep getting better and rising sequentially, thanks to targeted initiatives sharpening the digital experience and service improvements backed by technology investments in our customer-loved teams. Number three, our brand ecosystem. Marketing that performs well—especially our solid ratio between customer lifetime value and acquisition cost—sits at the heart of our ecosystem and works as a powerful engine for building fan awareness and bringing in customers. On the back end, we're extremely deliberate about where we spend on marketing, looking at where the traffic and the eyeballs actually are, while we keep expanding our customer aperture through both product innovation and our marketing strategy and tactics. We keep rolling out new marketing approaches, which includes ongoing investment in programs that perform with high ROI and expanding hyper-local marketing so relevant traffic reaches our touch points. Customer acquisition remains our focus, and we've been using vehicles like direct mail campaigns that give us strong ROIs. As mentioned earlier, we've also started taking advantage of prime and linear TV buys to keep building reach and deepen the love for our brand. When we launched Angled Side, the goal was to widen our aesthetic appeal so we could reach the market segment our existing assortment wasn't serving. That's why we worked with Architectural Digest, a style leader, on the product launch. This launch partnership covered content and advertising on architecturaldigest.com and with their partners, plus a launch event in New York City featuring designers and influencers, which produced extra content that drove awareness of the launch. So far, this launch partnership has generated more than 750 million impressions for us, and we're genuinely pleased not just with the reach but with how high-quality the coverage has been. Turning to our circular operations initiative, we've made solid progress on our open-box inventory as we concentrate on sharpening executional effectiveness and the brand experience. As one key measure for this initiative, we're seeing returns back to start improve by over 20% compared with last year. And finally, disciplined infrastructure investments and efficiency. In fiscal '24, we're putting money into technology and research and development to best fuel our Infinity flywheel; our focus is on continuously boosting customer satisfaction by continuing to deliver orders in just days. Beyond that, we think our recent supply chain investments will help drive inventory product improvements of 20%; we're happy with how the team has progressed so far and are on track to deliver this by year-end. As we've noted previously, we expect these initiatives to produce a significant gain in working capital efficiency along with related cost reductions across inbound freight and warehousing, which we began realizing in quarter 3 and will keep realizing in quarter 4. The AI pilots we brought up last quarter give generative AI-guided experiences to our customer-facing service associates to improve customer service, and we're pleased with the initial results. So it's still very early. We continue to believe this could enhance the overall customer shopping experience, and we're already seeing the benefits in the specific customer service satisfaction for improvement. One element of what we're doing to invest in our people infrastructure is that Carly Kawaja has just been named our Chief People Officer. That move reflects our ongoing effort to strengthen what we're capable of and to shift how the organization is structured, all with an eye toward scaling this business successfully. Drawing on the deep HR expertise we have, we'll act with real strategy, growing the company by striking the right balance between our human resources and technology that delivers impact and efficiency. Let me be clear: operational excellence is our singular obsession as we steer both our cost structure and how we allocate capital. Per what Shawn said, that will show up more plainly in the quarters ahead as deleverage abates. So to wrap up, we feel good about how we've performed so far this year and we're set to make the fourth quarter count, since it matters so much; our team makes us extremely proud, and they keep executing on our strategic initiatives, which only makes our competitive position stronger and drives our Infinity flywheel. At this point I'll hand things to Keith so he can walk through our quarter 2 results along with our quarter 3 and full-year outlook. Keith?

Thank you, Mary. Before I begin, I'd like to say how thrilled I am to be joining this incredible team, this extraordinary brand, and this genuinely distinctive business model. Having worked 16 years on Wall Street analyzing consumer companies, and then serving in leadership at both a large-cap consumer business and a start-up, I can tell you that the potential for profitable growth at Lovesac is something really special. With continued expansion and share gains for Sactionals and Sacs, plus new product and category launches and eventual geographic growth, the opportunity ahead is enormous. All right. Let's move to a brief recap of the second quarter, then our outlook for the remainder of fiscal '24. In the second quarter of fiscal '24, net sales climbed by $6 million — a 4% increase — to hit $154.5 million. Growth compared with the prior year was driven by our web business and showrooms. That figure landed right on our forecast for the quarter, boosted by our July 4 promotional campaign and our 25th anniversary celebration. Showroom net sales for the second quarter of fiscal '24 rose $5.8 million, or 6.3%, to $98.2 million, compared with $92.4 million the year before. The showroom gain reflected a 2.7% increase in comparable Showroom sales, which came from more point-of-sale transactions alongside less promotional discounting than last year, plus the net addition of 49 net new showrooms relative to the prior year period. Before we go further, keep in mind that the sales figures we report as comparable are based on orders taken in our showrooms. Those orders don't necessarily line up with when the customer actually takes control and when we book net sales. For the second quarter of fiscal '24, internet net sales rose by $5.9 million, a 16.6% increase, reaching $41.4 million. A year earlier, that figure stood at $35.5 million. Meanwhile, other net sales — which include pop-up-shop, shop-in-shop, and open-box inventory activity — dropped by $5.7 million, or 27.7%, landing at $14.9 million in the second quarter of fiscal '24. The main driver of that decrease was a lower volume of open-box inventory transactions, which came to just $2.8 million, compared with $9.5 million in the second quarter of fiscal '23. Just to note, the deals we do involving open-box stock and ICON are part of our circular operations, design for life, and ESG efforts. We're moving ahead well in reviewing each possibility for this returned merchandise so that it fits with our sustainability objectives, and that ought to also let Lovesac retain a larger share of profit; we anticipate a number of these programs will pick up steam in Q4. At the same time, we might carry out a modest amount of open-box inventory transactions with ICON to help our warehouses operate as efficiently as they can; in fact, an extra $2.5 million in open box sales will occur during the third quarter, and those are factored into our outlook. Now on the product category side, Sactional net sales for the second quarter were up 3%. Sac net sales rose 18%, and our other net sales, which include decorative pillows, blankets and accessories, rose 12% over the prior year. In the second quarter, gross margin rose 650 basis points, reaching 59.8% of net sales, compared with 53.3% in the same period a year earlier. The main driver was a 720 basis point drop in total distribution and related tariff expenses. Higher promotional discounting created 70 basis points of pressure, which partly offset that gain. The year-over-year decline in total distribution and related tariff expenses stems chiefly from an 880 basis point favorable swing in inbound transportation costs, partly offset by 160 basis points of higher outbound transportation and warehousing costs. Just to remind everyone, we'll continue to get a boost in Q3 from lower inbound freight rates, but that tailwind will be a bit less significant. As a percentage of net sales, SG&A came in 840 basis points higher, driven primarily by deleverage in employment costs, selling expenses associated with the Lovesac credit card, and ongoing investments for current and future growth, plus professional fees; looking at dollars, employment costs were up $5.7 million, mostly due to additional new hires made in fiscal '23. Overhead expenses increased $6.2 million, primarily reflecting a $3 million rise in professional fees and $3.2 million more in infrastructure investments and other miscellaneous items. On rent, we saw an increase of $0.9 million, which reflects $1.9 million in rent expense tied to the 49 showrooms we added on a net basis, though that was partly offset by a $1 million decrease in percentage rent. For the second quarter, we figure the nonrecurring incremental fees tied to restating prior period financials came to about $1.7 million. Turning to advertising and marketing, those expenses climbed $7.4 million, or 39%, reaching $26.5 million in the second quarter of fiscal '24, up from $19.1 million a year earlier. As a share of net sales, advertising and marketing came to 17.2% in the second quarter, versus 12.9% in the same period last year. The biggest reason that percentage went up was the kickoff of the 25th anniversary campaign. That's going to underpin a large share of the marketing messaging we roll out for the rest of this fiscal year. We posted an operating loss of $1 million this quarter, versus operating income of $8.1 million during last year's second quarter, and the reasons we just walked through explain that swing. As we move on to net loss, net loss per diluted share and adjusted EBITDA, take a look at the terminology and the reconciliation showing how each adjusted metric lines up with its closest GAAP counterpart, all of which appears in the earnings release we put out this morning. For this quarter, we posted a net loss of $0.6 million, which works out to negative $0.04 per diluted share. That compares with net income of $5.8 million, or $0.37 per diluted share, during the same period last year. In the second quarter of fiscal '24, we had an income tax benefit of $7,000, while the second quarter of fiscal '23 included a tax provision of $2.3 million. That shift in the provision largely reflects the net loss we recorded this quarter. Adjusted EBITDA for the quarter was income of $5.3 million, compared with $12.3 million in the same period a year earlier. Our second-quarter adjusted EBITDA beat our expectations, primarily due to gross margin performing better than we had forecast. Now on to the balance sheet. Total merchandise inventory stands where we projected it would, and it has flattened out, consistent with what we mentioned on the previous call. That holds true even with the addition of Angled Side SKUs, and in our view this clearly underscores how unique our business model is. We feel extremely positive regarding the quality and the quantity of inventory we hold, along with our capacity to sustain in-stock positions and delivery times that lead the industry. We closed the second quarter with a very strong balance sheet, including $54.7 million of cash and cash equivalents, plus $36 million of availability under our revolving line of credit, with no borrowings drawn. For additional information about our second quarter financial performance, please see our earnings press release; so now for our outlook, and let's begin with the fiscal third quarter. We project net sales of $154 million. That figure includes roughly $2.5 million in open-box inventory sales, against $4.2 million during the third quarter of fiscal '23.

We're projecting adjusted EBITDA to land somewhere from positive $0.5 million down to negative $1.5 million. Gross margins fall in the 56% to 57% range within that. Merchandising and advertising come in a bit over 14 as a percent of net sales, while SG&A runs a little above 44 as a percent of net sales. Our net loss estimate spans $3.2 million to $5.2 million. That figure carries roughly $1 million in nonrecurring incremental expenses tied to restating prior period financial statements. For diluted loss per common share, we're looking at $0.20 to $0.33, assuming 15.5 million weighted average shares outstanding. Turning now to the full year fiscal '24. For the entire year, we now expect net sales to land somewhere between $710 million and $730 million, a tighter band than before. Adjusted EBITDA is projected to fall in the $51 million to $63 million range. Breaking that down, gross margins come to $57 million to $57.5 million, merchandising and advertising expenses represent slightly more than 13% of net sales, and SG&A costs account for 37% to 38% of net sales. We estimate net income will be somewhere from $20 million to $29 million. Those fiscal '24 figures include approximately $4 million in nonrecurring incremental expenses related to restating prior period financial statements. Diluted income per common share is expected to range from $1.21 to $1.75, based on roughly 16.5 million estimated diluted weighted average shares outstanding. Just a reminder that the extra week in Q4, that 53rd week, ought to contribute about $6 million to net sales. Now, a brief comment about where we expect our cash balance to land. Given when new touch points open and the way we schedule incoming inventory to arrive before the fourth quarter's seasonal peak, the third quarter is usually the point where our cash balance at quarter end hits its lowest level for the year. I'm glad to share that we finished the fiscal third quarter with roughly $37 million in cash, which is a big jump from the $3.8 million on hand when fiscal '23's third quarter closed. Looking ahead, as we turn inventory into sales during the peak period, our expectation is still that when fiscal '24 comes to a close, our net cash balance will sit above the level we finished fiscal '23 at. To sum things up, the second quarter left us feeling good. With market share gains, foundations that are getting stronger, fresh growth drivers that are exciting, and a balance sheet in good health, Lovesac finds itself in a position many would envy. Having just arrived here, I take real pride already in how the team has executed, especially given what remains a tough macro backdrop, and in how enthusiastic they are about making the most of the opportunity in front of us. Growth remains the priority, supported by a measured approach to reinvestment grounded in ROI, and that gives me confidence about what lies ahead. I'm going to hand things over to the operator once more so we can kick off the question-and-answer portion.

Nice, congratulations on those results, and welcome aboard, Keith. Let me ask something at a high level. I'd like to hand you a chance to tackle something I suppose we hear from investors frequently. Your company is excellent, with strong gross margins, and yet looking back, free cash flow hasn't been substantial. What factors held that back previously? In what ways could that shift going forward? And once you reach a stage where meaningful free cash flow is being produced, what are your plans for it, whether that means putting money back into operations, repurchasing shares, or pursuing strategic M&A?

I understand the thinking behind that. Shawn here. For roughly 10 years, Lovesac has been growing at a fast pace. When we examine our CAGR over a great many years, it's remarkably high. As we approached the pandemic — right before the pandemic, it delivered growth unlike anything we'd seen, and our attention was simply on pursuing that, capturing share of the market and expanding the company in whatever manner we knew to be most profitable; at this point, since we've reached the scale we have now, my belief is that even right now, proof of free cash flow increasing and delivering the sort of outcomes that you're — that I think investors would want and anticipate from a company that's the most affordable type of scale will become apparent, and that has us truly thrilled. Clearly, at this point, we're reporting on Q2, a solid path given the restatement process; however, we've provided a flash on Q3. And although we haven't discussed cash in specific terms, those results leave us feeling quite optimistic, and I believe the proof of this company's capacity to create free cash flow will be plain to see. So I look forward to sharing additional details on that, and I'll pass it to Keith, who can likely offer somewhat more insight.

Appreciate that, Shawn. This subject is something I care about deeply. Hearing all 3 of us speak — Shawn, Mary, and me — I believe what came through is an unmistakable dedication to a disciplined method of reinvesting, both into the company and into the drivers of growth ahead. Still, to offer a few figures as evidence, as they say, of the pudding. Take SG&A deleverage: in Q2 it came in at slightly above 840 basis points. Once you factor into your model the G&A ranges I provided for Q3 and for the entire year, you'll notice that SG&A deleverage in Q3 — roughly half, let's say, of the 2Q figure — and then, looking at what emerges for Q4, there's an even bigger drop from that point. So this commitment isn't limited to fiscal '25. Over the coming couple of quarters, you'll begin to see it come through.

To begin with, I'd like to inquire regarding your Q4 forecast, since it suggests a fairly broad span for revenue expansion during your largest quarter. Could you perhaps explain what is baked into your presumptions, at both the low end and the high end of your guidance? And after that, I have one brief follow-up.

Absolutely. So I'll begin with a few figures relating to this, and then if Shawn or Mary care to chime in at a high level. Essentially it's a $20 million span on a major quarter, given the macro environment that stays somewhat uncertain, as you're hearing from virtually everyone in the consumer space, especially in our — including in our close-in categories. The manner in which we're considering tackling that span is to plan cautiously and allot expenses cautiously. We possess a truly distinctive business model that enables us to respond to upside surprises and demand far more swiftly than others, since we aren't merchandising led and can fulfill orders in retail inventory very quickly; so we believe it's a superior approach. We're going to know far more when we speak in a month following the all-important Black Friday holiday; but I think what we're attempting to do is demonstrate to you that we're going to handle this more cautiously. The shifting elements for us at present are, generally, macro conditions and macro demand within the category, number 1. Number 2 is the promotional environment. And you heard both Shawn and Mary discuss this previously, how promotional is the category; we are tackling this from the standpoint of somewhat more promotional than we have been in the recent quarters, but still less promotional than we were pre-pandemic and less promotional than the peers. It's working for us. We're taking market share. We're expanding gross margins; we think that's the correct way to tackle this. And hopefully, that provides you with a bit of color regarding that span for fourth quarter. I don't know, Shawn or Mary, if you wish to add anything else.

Yeah, the economy's in a pretty uncertain spot right now, I'd say. Like Keith mentioned, we're taking a cautious approach, and honestly we feel fortunate to run a company this dynamic—one that's captured so much share and competes so strongly within our space. And just like I figure everyone else is doing, we're watching to see how things play out when it comes to the consumer. Still, based on what we've observed up to this point, this is the strongest forecast we're able to provide, taking into account both the potential positives and the potential negatives. We're putting real care into this. What we're aiming to create is a company that lasts 50 years—or at minimum, a legacy brand built to endure. Chasing only near-term results doesn't interest us. That said, our emphasis has been on constructing a profitable enterprise, one capable of managing extremely rapid expansion while still delivering profits and, as you'll notice, free cash flow. So we're eager for the fourth quarter, and hopefully there's a bit of upside in store too.

Understood. That's clear. Then second, I realize you aren't giving guidance past Q4, but how ought investors be looking at the main growth catalysts for the coming year — perhaps showroom growth, the shop-in-shop approach, the product road map? And Keith, you mentioned this briefly, but could you discuss where in your P&L you see room to operate more efficiently and perhaps protect margins should conditions stay difficult next year?

Yes. Thanks for asking, and I'd like to request some understanding and forbearance from everyone, since this is my first quarter and during the past couple of months we got somewhat sidetracked by the restatement, which slowed my onboarding into the company somewhat. There will be far more for us to discuss regarding fiscal '25 when we report fiscal third quarter results in roughly a month. Still, the way we view it is that the components behind market share gains truly haven't changed. It's smart, deliberate showpoint — showroom and touchpoint expansion; and it will — you will observe it through every one of the same channels we've been pursuing, correct? So you'll observe additional Best Buy shop-in-shops. You'll observe additional ones via our other partner channels. You'll observe additional formal showrooms. You'll observe additional volume via the website too, right. We have an outstanding customer experience and our configurator that's delivering for us, and I believe it will keep paying dividends. Everything there is going to remain as is. New items are coming out across the year, and those launches will sustain customer curiosity and affection, which in turn supports revenue. On the expense side, we've said this more times than anyone can count during today's call, we're keeping our discipline, and that covers both SG&A and marketing. The campaign for our 25th anniversary that we've talked about is bringing us plenty of gains, though as a percentage, the intensity won't match that when we head into the next year. So my sense is you'll get the same story from us, and that story is delivering results, isn't it? This represents expansion that's profitable, gains in market share, plus improved translation into bottom-line results and cash flows compared with what we've experienced previously. There's more on that coming later, though essentially it's a continuation of the same pattern.