Watsco, Inc. (WSO) Earnings Call Transcript & Summary

All right. We'll jump right into it, given we're a couple of minutes late here. Very happy to have Barry Logan from Watsco. What's your title now? It's like Grand Poobah of Watsco or something like that?

Executive Vice President. Something abstract and generic like that after 30 years.

Executive Vice President of Watsco; and Pat Baumann, who does the distributors here at JPMorgan. We're going to kind of tag team here a little bit, but I'll kick it to Pat and then we'll start off, unless you wanted to give a little preamble.

No, let's get going. I'll preamble throughout the -- I want to make the formal informal and the formal informal. So that's what I'm going to do.

All right. I'm still trying to figure that one out. But I'll kick it over to Pat.

So I mean we sat down for dinner last night. So maybe we'll touch on some of those topics. I guess first off, from a demand perspective, just because that is topical, we saw a tried unit data down, I think, close to 20% in January. I know it's 1 month, it's like not a very important seasonal month. But curious if you could provide some perspective on kind of how you're thinking about trends developing through the year, starting with this quarter for Watsco and what you're seeing from a kind of -- how we should read that sell-in data that we see from AHRI, from an industry perspective?

No. I think that's a critical phrase, the sell-in data versus as a distributor us selling to contractors who actually are doing the work in the homes and actually drawing product from us kind of on a real-time basis versus in the distribution channel, us navigating the inventory transitions and kind of big movement going on with product. So at the level set what that kind of means in less than 2 or 3 minutes, is -- in distribution, if we're a $7 billion business, carrying $1.5 billion worth of inventory to support that level of activity, we do so in almost 700 stores, 19 million square feet, 20,000 SKUs on average per store. And I only say all that for the dramatic purpose of now saying half of those products transitioned and are transitioning over the last 90 days to new products because of a government mandate to raise energy standards. Many of the OEMs redesigned and then we needed to convert our inventory to new products or at least new efficiencies that would satisfy the government requirement. And most importantly, have fun this year in 2023 selling a higher mix of products as a result. So I would say the last 60 to 90 days is, I said in an earlier meeting, kind of the exclamation mark on what's been the most kind of tumultuous kind of channel activity between us and manufacturers -- between distribution and manufacturers of our careers. And exclamation mark is now all these new products coming in. So I'm not sure there's a great ability to surmise what that means for the OEMs, if they're down or up this time of year. It's not business as usual, it's not normal conditions, it's not a return to normal. It's been the most kind of outrageous product transition you can imagine over the last 2 or 3 months. So time will tell. Things will kind of either flatten out or at least pan out in a way to give you a better indication. What we worry more about, obviously, is our sales to our customers. And as I said -- we said in the first quarter -- I mean, in the year-end call, we've been seeing dollar growth, not unit growth. This is the smallest time of the year. We're also up against 30% comps from last year in the first quarter. So to have dollar growth given the comp, we're actually pretty satisfied with that. Again, those things kind of flatten out, those things kind of neutralize as we get into the season. And if we're going to start the year with some growth against very strong comps, I think it speaks a measure of confidence that we have for growth this year.

So most of the OEMs are calling for kind of down mid-single-digit units for the year? Do you think that's a reasonable assumption? Like what are you guys thinking?

Yes. I wish I had more insight into the season because that's when our business grows 30% seasonally in May, June, July and August. I don't have as much insight in February and March as I would like relative to that, honestly. But if that's the assumption, I think part of that assumption is inventories that are in the channel that have been built either through the product transition or because of longer lead times to the extent either lead times begin to lessen, honestly, that would affect our inventory, the amount of inventory we carry. So I think this year, it could be a little bit of a year of transition for the OEMs because of the lead time situation. I'm not sure the end market will reflect the same. I wouldn't make the same assumption at the end market level, at the contractor level. Part of that is the commercial market -- light commercial market. We expect to be up certainly somewhere around 20% this year if I had to throw out a number. It's been 20% growth in the commercial market for the last 7 or 8 quarters for us. We're investing in that inventory as well. The backlogs are extraordinary, and again, there are more moving pieces than just residential units. There's price, there's mix, there's commercial. And then our own initiatives to grow share, our own initiatives to add products and brands and capacity to our network is going on. And, so I think it's probably safe what they're saying. I'm not sure anyone really knows what to say until we get into the season and things kind of get tested with a little bit calmer waters than all of us have had over the last 2 or 3 years.

What are you doing strategically with your inventory right now? I mean are you -- obviously, there's some shortages in some of the key products like Rheem had trouble delivering, York had trouble delivering, although they are not a big supplier of yours. How are you -- where do you expect to be positioned coming out of 1Q when it comes to inventory?

Yes. The idea is obviously to be -- have all our stores filled with the products that are the new products for the season. And hedge long on inventory, given that this has been a huge transition for the manufacturers to catch up to over the last, again, 3 or 4 months. So I think if anything, we will be long on inventory as we enter the season on purpose. That's to protect our growth and to protect our service levels, to protect our customer availability and then sort out, again, either how calm or not calmer waters are in the fall in terms of inventory levels as we end the year. So I can speak for us that our idea is to serve customers and to build that inventory to serve customers. And to the extent we are either nervous or want to be competitive with inventory, we will build inventory as we head into the season.

If 100 is operating where you would expect, whereas where was Rheem in the fourth quarter, where are they now?

I don't like to make real commentary specific to them. I would say that as a collection of OEMs, everyone was operating around 80% last summer, 90% as we close the year and still playing catch-up in some respects, depending on which manufacturer. So Rheem in particular and Carrier, in particular, decided to basically redesign their product lines as part of this transition. It is new product, it has new features and benefits. It has a new look and feel. The conformity was not just tweaking a few things, it was bringing a new product in. So despite the short-term feel of that, of long term, it's a terrific opportunity to sell product. And we would rather sell refreshed products than tweaked old products.

Sorry, one more for me.

Yes, yes. Go ahead.

And then lead times on commercial. I mean they were out 52 weeks, which is as the distributors were saying that's kind of a fake lead time. I mean it doesn't even really qualify as a lead time. Where are those now on the...

Yes, it's a similar story where we're not worried about lead times as much as making a promise to a customer of when product will come and that's gotten better over time. So I think both commercial backlog and lead times are still relatively extreme. And I don't know if it's 52 weeks or not, but it's not 90 days as maybe typical for commercial products. But I think everyone's in that boat together, I think it's now -- what we are -- what we like is now we can manage customer expectations much better. And the backlog will play out over the next 12 months. And again, a year from now, I would expect kind of better availability.

And the demand on light commercial, is that -- how does that now split between new and replacement? Obviously, warehouses, data centers represent a new almost slice of the pie chart over the last 5 to 6 years, relatively from a new perspective. Is new now more important than replacement used to be for that market or not?

Well, I think for us as the kind of in the channel distributor with inventory deployed in the field, we lean more towards the replacement market anyway as that's kind of our business model. If Home Depot is going to build a new store with 10 rooftops 2 years from now, we may not even be involved in that equation. It could be a commercial applied job or so. It could be some kind of other sales channel than us. So we really focus on the aftermarket and what I would say disproportionately larger than our competitors in the aftermarket for commercial. So that's someone's CapEx, that's someone deferred, renovation deferred and upgrade, deferred something and now that project is playing out. It could be a school system, it could be a bank branch, it could be a small profile building. It could be VRF, where we sell VRF products into that channel. There's almost not a product group. And I think most of it is driven by an aftermarket need as opposed to whether the -- we're not involved in building the new airport or building a new school or building a new university. That's not us. When we say commercial, it's the small profile building where the contractors finally get into that project or the project owner is finally getting to do the work after maybe putting it off for a couple of years. So a new build or new construction or new commercial would be disproportionately smaller for us versus some of the more direct integrated channels like a JCI or even like Carrier or Trane.

Sorry, one more on market. HARDI was up like mid-single digits on a revenue basis. Is that kind of the right trend line on -- from a revenue growth perspective for the first quarter that you're seeing?

Yes. I would say there's consistency there. That's what we saw in the fourth quarter. It's what we commented in our February call about what we were seeing. So again, relatively consistent.

So that's double digit -- still double-digit price year-over-year?

Yes. I would say it's not probably quite double digit, but I don't think it's that strong. We'll tell you in a month.

So down mid-single -- low to mid-singles in volume sell-through, if you will?

That's probably fair.

Okay. Sorry.

No, that's good. I mean they will go to price...

Very similar -- I mean, very similar to what we saw in the fourth quarter. First, it's the off-season. Secondly, again, extreme comps versus a year ago. The first quarter is even a bit more of a no man's land. It's not cooling season anymore. It's not the heating season either. It's kind of a spending season, if you will. And again, to the extent there's revenue growth versus the 25% comparisons, we're satisfied with that.

And similar mix because you guys had some nice parts, and there's parts moving around. There was the ductless stuff growing like similar profile.

Yes. They're very consistent.

Okay.

So on pricing, maybe we could just talk about that a little bit. So the OEMs all put through March 1 increases, but there's all this noise in the channel around certain manufacturers discounting more, being more aggressive to go for share. Can you help kind of parse all that and tell us what you're seeing?

Sure. Well, again the bread and butter contractor, the average customer that is hustling in the market, the pricing has actually been very, very accepted in the market because they're also getting service, they're getting products, they're getting everything else for it. And as [indiscernible] OEMs, the pricing timing as well as amount has been pretty consistent. Where the scrum can occur, where the fight can occur, where the aggressiveness can occur is large accounts, national accounts, builders, kind of volume players that ask for a better price all day long. And if a promise is given for a better price, perhaps more volume follows. I said this last night at dinner, I called it the edge of the empire. That's not the daily grind. That's on the fringe, on the margin as opposed to how well a guy with 3 trucks is being serviced in Hollywood, Florida this afternoon with us selling him product. That guy's not demanding the last dollar quote. He's demanding great service all day today. But again, I'll go back to Home Depot. Home Depot is going to replace 1,000 systems this year. They want the best price imaginable. That's not where we fight that battle. Again, the manufacturers tend to fight with each other on those types of categories. That doesn't mean we ignore it, but it means I can tell you, I think our yield on a 6% price increase will be better than average because of the types of customers and segments that we focus on.

What were the increases put forth in March? Was it high single digit?

I am sorry?

What were the increases that were put forth, that was about high single digits the OEMs are putting through in March?

No, 6%.

It was 6%, okay.

Yes. 6% has kind of been the generic number. Again, it's the variations by product group or customer type, but the composite was around 6%.

And then so last year, the price in resi, I think on an ASP basis was low teens maybe for Watsco.

Correct.

How are you thinking about how that might trend this year? And can you parse out like the mix impact from the transition versus just like-for-like price growth that you might see?

Well, again, a lot of moving pieces there. But to break it down maybe 2 or 3. First, I mentioned half of our products are transitioning to a higher SEER level by mandate, half of our products. That's just a mix change that's selling something more expensive every day at the baseline of what we sell. The manufacturers talked last year about yielding a 10% to 15% price requirement on those new products, assuming that their cost was going up 10% or 15% to make them. I think that's held pretty true. If I say 10% to go to the bottom end of the range, that 10% mix benefit occurs mostly this year. And in the Sun Belt entirely this year, Northern part of the country, it's a transition in. But the industry and us will see a mix benefit by simply showing up and having a higher efficiency product as a baseline. So there's inflationary type price increases since then as March 1. I don't know what inflationary forces the OEMs will face for the rest of the year, but we like the idea of a price increase early to be effective this season and plays into some of the calculus for this year's price support. The other -- third thing would be the commercial market. If commercial market is growing at a faster rate, obviously, those are higher price points. I'll suggest also that in the concept of tough inventory and low availability and high demand, I'll say that we can expect, I think, to yield a better margin out of our commercial business this year. We should be merchants with our inventory and we intend to be. And so there's some margin benefit and average price benefit as well in the commercial market, not just higher volumes. I think also there's been an absence of higher SEER product in the industry the last 2 years, variable speed, high SEER, kind of the high end of the market. There's been an absence of those products because of availability. That's where the chips are. That's where the variable speed inverter products are. I think the OEMs as a community missed sales of those products over the last 2 years. So there's an average selling price benefit. I don't know what it will be until I know fully what those products will look like in the field, but it has to be more than 0 benefit because the last 2 years have been greatly affected by not having those products. So I think the industry can accept more pricing, it has. I think the manufacturers are -- they can tell you, but I think they still face a lot of inflationary risk and forces. And to the extent the market can accept increases, so far so good. We're seeing that already this year. We're not seeing pressure on margin as we start the year.

Anything else on pricing?

Yes. I mean, I guess, is there just -- there's 0 elasticity in this market?

Yes. I think, again, if -- well, 2 things that help, there's no such thing as no elasticity. I think first in the value chain, if you will, if we buy a system from our OEM for $2,000 or $3,000 and sell it for $3,000 or $4000, contractors installing it for $7,000 or $8,000. So my 10% price increase I received from Carrier or Rheem or Mitsubishi becomes just a component of the value chain for what it cost the consumer to get the product. So either it's invisible or not as material or the contractor can have the flexibility to move his price to get the job done. So there's -- if there wasn't value beyond us in the channel, I think there would be risk. There's a lot of value beyond us in the channel with profitability at the contractor level. That's very material and provides a bit of a cushion. And secondly, maybe thankfully, air conditioning and heating only gets replaced every 10 or 15 years. It's not a commodity, it's not a loaf of bread or a dozen eggs. It's you buy once in your home's lifetime. And I think that -- and you have to have it -- you must have it when it breaks. So it's always been, I think, a good industry from that perspective. But I wouldn't say there's ever 0 elasticity. We can't charge $50,000 for these things. We can charge 8% more if that's the direction that's being pulled through the channel across the value chain.

Well, I guess we'll see in the next 18 months.

Time tells all, right? We'll be smarter then, that's for sure. But 30 years of it and seeing the -- what's interesting about, I'd say, 30 years of experience, every 5 or 6 years, there's been some catalyst to help our industry not become a commodity. It's either refrigerant changes, it's energy efficiency changes, it's tax credits, it's something to provoke upgrade or provoke higher efficiency, which costs more to produce and install. And over the next 2 or 3 years, there's 3 things happening in that respect. So maybe it will test what a consumer will pay for these things, but I'm certain that people [ won't ] live without it, and people will take the contractor's advice because they can't do it on their own. And to an extent, it's something that will have to be dealt with as a consumer.

Isn't the commodity though just cold air, like ultimately?

Yes, it's comfort. It's obviously what is comfort worth in your home. What is that worth? And what would you trade for it? Would you trade it for new kitchen cabinets? Would you rather have new kitchen cabinets for $10,000 or more comfortable heat pump air conditioning system for $10,000? I'll take the trade of our industry versus Home Depot selling kitchen cabinets. All day.

My family has a few more expense items in the pie chart than kitchen cabinets and air conditioning, unfortunately...

Yes. What's interesting is a car costs $40,000, and we don't mind replacing that every 4 or 5 years, right? And part of what allows us to do that is the financing vehicle -- the financing capacity to go do that every 4 or 5 years. We don't wring our hands having to spend $40,000 on a car because we know we can lease it for $410 a month. So our industry has been somewhat dinosaur-like and providing financing to homeowners and contractors who have to deliver that financing. And we are doing a lot of things with technology to evolve that. That will be a holy grail if we solve it. It is to have every transaction of consumer sees in their home, have that same financing elegance and capacity for every transaction. So that's another 1-hour session we can schedule with anybody that wants to hear what we're up to, but we're doing in-home selling, in-home financing, in-home data streams, in-home elegant proposal tools for our contractors to evolve that. And provide, again, the capability of doing this on scale where our competitors really can't. So maybe that's another solution is to bring a financing capacity that doesn't exist today on scale.

And you would say that about -- I don't know, the feedback I get is about 30% of the industry is financed in some way, shape or form right now?

Yes, 30% is finance, but it's because it's -- 95% of that 30% is within a very select group of mega contractors who qualify under very specific criteria from Wells Fargo City Corp. It's like the most lead contractors get access to that product and not -- and what we're doing is bringing technology to democratize that to any contractor with an iPad that can go in and present something to a homeowner and fintech sitting behind that -- not us but partners sitting behind us to provide a cascade of financing to any contractor for most homeowners that qualify. It has to be the way the furniture guys do it or the way other industries do this. How do you go to a furniture store, buy $10,000 of furniture and not pay for it for 2 years. It is because software exists in every single retailer to do that with fintech behind it, supporting it. Our industry doesn't have that. So we're working on that project, and we have some inventions that are done and tested. Now we need to spread the religion with contractors to go do it. And I think it could relieve some of the stress over how am I going to pay for a $12,000 new system that I have to have.

Right. Maybe switching gears on profitability. Talk about gross margins a little bit, which is always topical, but more so than ever because of how much they've improved in the last 2 years. So maybe talk about why you've gone from kind of what was previously like 25% type of entitlement to 27% now. And why you think that's sustainable.

Sure. Well, gross profit first and over our careers is let's do everything we can to increase it every year. And if that's value to our customer, if that's better negotiation with manufacturers, if that's -- let's have better data about pricing itself in the market. And typically and historically, that was very federated, again, in a sales force that we give commissions to and regional managers that we rely on their intuition in markets to determine and set price. And at Snowflakes, if we have 90,000 customers that we sell 20,000 products to per branch, the mix profile, the price profile, the customer profiles were Snowflakes. Literally extrapolate that, that may be how many different pricing scenarios we had in place for our customers historically. I'll make it even worse. We also buy from our OEMs and manufacturers at different prices, depending on the market, depending on the customer type, depending on -- so it has to be -- we're not the airlines and we're not pharmaceutical, but we have to have one of the most complex pricing models of any industry. And in our case as a distributor, because we let salespeople, for the most part, determine what was best, how to set margins in their markets. So I've said a few things there that I'll synthesize into 2 points, which is improving margin with our manufacturing partners was a big priority a few years ago because we didn't know what would happen during the pandemic. We didn't know how it would play out. What we thought was, if we invest and grow and throw technology dollars and train our customers and gain adoption and kind of change the game quicker, we're going to grow our business no matter what happens during the pandemic. We're talking about ramping up technology spending from $25 million, $30 million to $50 million over the last 2 years. And going to an OEM community and saying, you're part of this, you need to help us. And we're going to our OEM community and saying, for us to grow, we need to add people, we need to add inventory, we need to add cost, you need to improve our margin equation to allow for that. It's a 2-way street, not a one-way street. And our partners did that. We've raised margins with most of our top 10 vendors. We've made investments in SG&A for new people and branches. We've grown share of 200 basis points. We've added technology. We've added users. Everything has played out and people have done pretty well. Our OEMs have done well, and we've done well. That's structural. That's not something we intend to unwind, and we're not being asked to renegotiate that. It's a good feeling for it to have worked and now we're asking for more, frankly, not less because we think the market share gain will be even more important over the next 2 or 3 years. The other thing I mentioned about Snowflakes is technology. Over the last 2 years, we introduced a layer of technology that extracts pricing and margin customer data out of our ERP. We are able to synthesize that into a much better data integrity and knowledge about pricing and margin, make quicker decisions, have really, frankly, Bloomberg style data to look at quickly and make decisions. 2 or 3 years ago, we print a P&L, a lot of branch managers see it once a month and try to make either pricing or margin decisions off of a monthly close. That sounds ridiculous. So fortunately, again, to make matters worse, we had 600 vendors with unprecedented levels of pricing actions over the last 2.5 years. And I think the technology was terrific to have in place to administrate that and to optimize that. So if 3M raised the price of duct tape 5 times, I'm certain we're not just selling duct tape at a higher price. We've optimized margin in ways that have helped our bottom line. And again, customers that they're being properly served, that margin will be yielded in our customer network. So what we -- the negative, which was a variable that helped us. I mentioned this last night was to the extent there are inflationary price increases going on in the past 2 years that helped our margin. To the extent there isn't going forward, it affects our margin going forward. That's just one of the algebra factors of being distribution, Fastenal, POOL, all of us have either the honeymoon benefit or the honeymoon risk of that. And I think we saw this year as we're getting into a normal zone of price increase once a year. There's probably some exposure this year. We've said that, we've categorized that when we talk about a 27% target. It accounts for that risk. In the last 6 months so far, so good. Last 6 months, there really haven't been many pricing actions by OEMs or manufacturers, other kinds of manufacturers and margins have held given what I've said. So culturally, is the intangible. Culturally, if everyone is used to this, then everyone's going to seek this and more. And that's a customer level, that's a salesman level again. And we still see acquisition candidates with margins higher than ours. I should say that. I think that would surprise you. There are merchants out there in this industry that are north of where we are. So I think there's plenty of -- there's still opportunity to improve what we do.

Maybe on that front -- on the M&A front, can you talk about the pipeline there? And more so, I guess, I'm interested in it just seems like there's activity outside of Watsco that's going to increase the weight, whether it's Daikin buying their distribution or there was a European distributor that bought a company called Heritage over the last few months. Just more activity. It seems like -- maybe not. But maybe it seems like there has been.

Yes, a bit more. Yes, again, this is the landscape. So if the industry is around $50 billion round number, I would say, $40 billion of that -- $40-something-billion of that is independent distribution. The OEM distribution community that distributes its own product, I would guess is, I don't know, $6 billion, $7 billion, something like that. That's Lennox, Trane, Goodman, JCI to an extent. The rest is 1,300 independents. We're the largest of the 1,300 at $7 billion. People like Ferguson would be probably a $3 billion player in our markets. They have bought companies in our industry through the years. We don't have to -- the Warren Buffett, Surman. We don't have to swing at every pitch just because something is for sale are choosing, this will be people that want to do business with us. We've never hired a banker, never hired a broker, never paid a fee. If someone wants to conduct an auction, we're kind of -- I want the last dollar and want to retire on their way out and leave the keys on the desk. That's probably not for us at any price, honestly. So to the extent private equity wants to do that or a competitor wants to do that, that's a risk that they can take. We'll talk to them in 4 or 5 years. And say are you interested in selling it to us after having taken that risk for those 4 or 5 years. So we're choosy about it. And at the same time, there's no lack of candidates. There's 100 companies that do $100 million or more in our industry. These are local superpowers that control brands, control markets, have exclusivities that no one else has. We bought the largest in Chicago 2 years ago. We bought the largest in the Philadelphia market 3 years ago. And they've doubled their profitability over the last 2 years. And the families that sold them to us are all still there, advocating to other families that we're talking to. And that's where our success has been is, is getting this kind of community of families that have known each other for a long time to work with us and do this with us, where Daikin, for example, decided to buy a few of its independent distributors, we certainly knew those families, too. And in some cases, the families said we're done. This is yours now. And it's somewhat either defensive on their part or just long-term protective on their part. That's their prerogative as the manufacturer to protect their distribution. It tells us with the value of what they believe their distribution is, if they are worried enough to buy it. It tells you the value of distribution in that respect. So that's happened before. It will happen again. We've been growing for 30 years this way and we'll keep growing this way. It's been very disciplined, and we're not too surprised. We're surprised at some of the valuation. But when you want to be in the market, then maybe you have to pay what it takes to get in the market, but nothing that is scaling to a point where it looks like Watsco. We're still more than twice the size of our next competitor.

Any questions out there?

Yes. Just to...

Sure. The question, for the webcast, is JCI mentioned about digitization and some of the next technology maybe in the market and how that influences thing. Well, first, in the commercial market, I think that's table stakes, ultimately, is having a system in this building, speaking to its facility manager at some computer screen that's managing every nuance of what's going on. Commercial market has been, I think, maturing that technology over time. And the OEMs that do that stuff against each other are competing at that level. That doesn't affect us really at all. We only have that product in maybe 2 markets. And it's a long-term space race probably in that community of OEMs. Our focus in a different way, but with the same intent, is how do we bring our contractor closer to the homeowner every day, given that there's a value that is available to that. So we call it Sticker 2.0, for example. It's a ridiculous fun statement. Sticker 1.0 is, I'll put a sticker when I'm working on your machine. You'll call my company to come service it again because I put the sticker there. That was the technology. As a distributor, we would help them design the stickers by the way. As a distributor, we used to help contractors design Yellow Page ads. That was like part of our value. So Sticker 2.0 is something that our team invented. We bought a small company in Waterloo, Canada and their Silicon Valley in Canada to help us bring it to life. And there's sensors that can be added to any -- or any installed system at the residential level, any brand, any system, 10 minutes to install and begin to monitor that system for any kind of anomalies or issues. And then the contractors advise when there's an issue going on and they can call the homeowner and say, I'm seeing this, would you mind if I come by; or a service and maintenance contract that connects the home to the contractor and they can diagnose and see an issue maybe before it happens or while it's happening. So I don't have to compete with JCI, Carrier and Trane doing that in this building. What we want is a contractor that has 500 homes in Miami as customers connected to his business and help him with a lifetime value of that relationship at a reasonable cost. So everything I've just said is more in start-up mode than commercialized in the market. But just get the sense that we don't want to ignore that type of technology, but our application for it is a little bit different and something we're working on. To get beyond just selling a box at a margin and is it going to go up or down? And will we be good at this in negotiations, whether it'd be cyclical or not cyclical, we're actually doing things that will change the way contractors deal with homeowners and what's an $80 billion, $90 billion market well beyond just selling a box with a brand on it. So a lot going on. Again, that's another 1- or 2-hour technology discussion. If any of you like to have, we'll get you on with the guys wearing flip flops where they're talking to you on Zoom, and you can listen to their long-term strategy. There's a lot of good stuff going on in that respect.

Any other questions? All right, we're out of time here. Thanks, Barry. Appreciate it.

Thank you very much. Thanks, everybody.