LSI Industries (LYTS) Q1 2027 Earnings Call Transcript

And we're beginning to see the benefits of that expanded platform in the conversations we're having across our customer base. A few weeks ago, we formally introduced our Category of One initiative at NACS Convention. NACS is the National Association of Convenience Stores, and it's one of our largest trade shows. This was an opportunity to bring together a full scope of LSI's capabilities and present them to many of the largest convenience stores and refueling customers in North America. The response was extremely positive. I think many of our customers are just beginning to appreciate the breadth of what we can now offer.

And while these opportunities take time to develop, the conversations we're having today are broader and more strategic than they were just a few years ago. Turning to our vertical markets. Refueling and convenience stores continue to perform well. Sales increased approximately 5% during the quarter, supported by activity across several of our largest customers. The 2,500-site renovation program we discussed last quarter continues to progress as planned with activity expected to build through fiscal '27 and into fiscal 2028. We're also working with another major convenience store chain on a potentially significant renovation program, beginning with store concept developments right now.

As we've discussed on previous calls, the competitive environment in the convenience store market continues to drive investment in new locations, remodels and the overall customer experience. We love it. We believe this is a long-term trend and one that aligns very well with our capabilities. Grocery also remains healthy. We're seeing continued investment across broad customer base and order activity in that vertical increased 12% during the quarter. Across Display Solutions, overall orders increased 4%, and our pro forma backlog also improved. These are encouraging indicators, particularly given the broader economic environment. Quick-serve restaurants remain a more challenging market. We've talked about the uneven investment patterns in QSR over the last several quarters, and those conditions have continued.

Some customers are moving forward with their programs, others are delaying investment decisions. The softness has affected both our sales and margin. However, we recently received some very encouraging news from one of our larger QSR customers. They approved a 3,000-store interior renovation program that we've been working on for some time and selected LSI as 1 of 3 providers. The program is expected to begin late in our third quarter fiscal 2027 and continue over approximately 3 years. It's another example of the opportunities developing within our existing customer base, and we're thrilled to be part of it. Turning to Lighting. The broader market remains soft.

Sales for LSI declined approximately 6% during the quarter, reflecting weaker demand across several key commercial and industrial applications. We did see growth in refueling, sports and banking, but that was offset by weakness in parking, smaller retail, warehousing and automotive. Despite the lower volume, our Lighting team improved gross margin during the quarter, reflecting continued discipline around pricing and cost management. Order activity was relatively stable, and we continue to invest in new product development, training and customer engagement. We've built a very competitive Lighting business over the last several years, and I believe we're well positioned when the broader market recovers. I also want to touch briefly on operational efficiency.

We spent the last several years building a broader and more capable organization. Now we're focused on bringing those capabilities together and identifying opportunities to operate more efficiently. One example is the consolidation of our Collingwood, Ontario manufacturing operation. We're bringing that into our existing Canada's best facility near Toronto. We expect to complete that transition through the end of this fiscal year, and we'll generate more than $1 million in annual savings through this move. This is the type of work we'll continue to pursue across LSI, not simply reducing costs, but improving the way our businesses operate together, making better use of our facilities and our equipment and creating a more effective organization.

Looking ahead, I want to be realistic about our near-term. We're seeing positive order activity and a number of encouraging customer developments, but the timing of that opportunities doesn't always align neatly with our fiscal quarters. We're also dealing with continued softness in Lighting and QSR, as I just spoke of a minute ago. Inflationary pressures and the normal seasonal slowdown in our retail renovation activity as we move into the holiday period is something else we need to consider. At the end of the day, I feel very good about where we're positioned as a company. Over the past several years, we've been focused on building a broader and more capable organization.

Through a combination of our organic growth activities and strategic acquisitions, we've assembled a platform that I believe is unique in the market that we serve today. As we look ahead, our focus is increasingly shifting from building that platform to realizing its full potential. That means expanding our share of wallet with existing customers, introducing those new products and capabilities and continuing to improve the efficiency and profitability of our operations. And importantly, many of these opportunities are within our control. We don't need to rely entirely on improving economy or others to continue to make this progress. We're approaching an important milestone in our strategic planning process.

In December, we expect to share our next multiyear strategic plan with the investment community, outlining how we intend to build on the progress we've made under the Fast Forward plan and continue to create long-term shareholder value. We've always placed a great deal of emphasis on our high say-do ratio, setting expectations carefully and delivering against them. That discipline will remain central to how we approach this next chapter. As always, I want to thank our entire team for their continued hard work and commitment. There's a lot going on across LSI right now, and I'm pleased with the progress we're making.

I'm encouraged by what we see ahead, and I'm looking forward to sharing more about our future plans in December. With that, I'm going to turn the call back over to Jim Galeese for a more detailed review of our financial results.

James Galeese:Good morning, all. LSI delivered $226 million in sales, over $22 million in adjusted EBITDA and just under $14 million in cash flow in Q1, and I'll comment on all 3 areas. Starting with sales, the year-to-year 44% increase was led by Display Solutions segment, which includes the incremental impact of the Royston acquisition. Excluding the acquisition, Display Solutions sales increased 1% versus prior year, with significant fluctuation realized across key vertical markets. For Display, both C-store and grocery generated mid-single-digit growth rates, sustaining a high level of customer project activity, while QSR and banking were soft, both down double digits.

In C-store, our largest customer generated double-digit growth in the quarter as we completed renovation work on additional pilot sites. The multiyear renovation program proposed by this customer has different renovation package options depending on the site, and we're working closely with their team on finalizing content and overall project planning. Also in the quarter, we began renovation work for the 2,500-site award we announced last quarter in the refueling vertical. The initial award did not include Royston, but now includes signage, representing an early cross-selling win. For grocery, demand also remains favorable, led by sales to large chains.

Notably, the nation's largest retailer completed their line reviews for the next calendar year, and the result is, LSI will be awarded additional share of product. As projected, the QSR vertical remains very soft as chains respond to inflation-driven lower consumer traffic. However, as Jim mentioned, a large QSR chain selected LSI as a supplier for renovation of 3,000 stores over the next 3-plus years. Separately, we continue to make progress on the Royston acquisition. Sales improved sequentially, and all 3 businesses realized pro forma sales growth versus the prior year quarter. Looking forward, Display segment orders and backlog both increased 4% compared to the prior year quarter as project release activity continues in our 2 largest verticals.

The operating environment has become more challenging with the number of customer schedule changes and pushouts increasing. Reschedules range from several weeks to several months. There's multiple reasons driving this, one being the status of project budgets as we near the end of the calendar year. Another is job sites lagging behind schedule and skilled labor availability is also an issue. We continue to collaborate closely with customers on scheduling, particularly as we enter the slower seasonality period as customers limit renovation activity ahead of the holiday, high sales and consumer traffic period. Shifting to the Lighting segment. Lighting sales were 6% below prior year, the result of ongoing softness in the broader commercial and industrial market.

While the near-term outlook remains soft, we remain focused on margin management, where alignment of selling price to current cost supported a 10 basis point improvement in the year-to-year gross margin rate. Lighting quote activity continues to exceed orders with quotes for the last 3 months increasing 5% over last year, while orders increased 1%, reflecting the ongoing delayed quote-to-order conversion process. Next, several comments on adjusted EBITDA. LSI generated adjusted EBITDA of $22 million in the first quarter or 41% above prior year.

To summarize, EBITDA and EBITDA margin was favorably impacted by the incremental impact of Royston and C-store and grocery volumes, all being unfavorably impacted by lower volume in Lighting, and vertical customer mix in Display Solutions and the continued cycling through the lower margin backlog in the SignResource business. Progress was achieved in multiple margin improvement initiatives in the quarter. Royston EBITDA margin, which is accretive to LSI, increased 100 basis points sequentially from the fourth quarter. All 3 brands realized improved margins, including the SignResource business. We expect SignResource margin improvements to continue, targeting a 200-plus basis point increase for fiscal Q2 over Q1.

In addition, processes have been implemented to ensure pricing on all Royston project quotes and orders are aligned with current costs and provide for changes in key commodity costs. Further, we remain focused on identifying and implementing synergy savings across the business. We have already identified and in process of implementing $1 million in incremental procurement savings across the company. Also, we recently announced the closure of the Collingwood, Ontario manufacturing facility and consolidation of production into the Toronto area, Canada's best facility. The consolidation will be completed by the end of the fiscal year and generate over $1 million of annual cost savings.

Our first quarter sales and EBITDA performance generated solid free cash flow of $13.8 million, serving to reduce net debt by $14 million. In the 6 months since the acquisition of Royston, LSI has reduced net debt by over $23 million, resulting in a net debt to pro forma TTM adjusted EBITDA of 2.6x. To conclude, we are encouraged by the increasing level of program interactions with our customers as well as the progress on our key performance improvement initiatives. While we may continue to incur timing fluctuations in our projects and markets, we are confident in our direction and path and will accelerate our execution throughout fiscal 2027.

I will now turn the call back to the moderator for the question-and-answer session.

Operator: [Operator Instructions] Our first question comes from the line of Aaron Spychalla with Craig-Hallum.

Aaron Spychalla:Maybe first for us on the C-store vertical. In the release, you mentioned a pilot program with an existing customer kind of early in the large-scale renovation. And then earlier on the call, I heard about kind of store concept developments with another chain. So I just want to kind of confirm or just understand, are those one and the same? Are those 2 separate? And then just any other color on kind of timing or size potential for number of sites and pull-through on the Royston side of things as you look to expand wallet share with those opportunities?

James Clark:Yes. And so, first of all, just to answer your question, the 3,000-store is a program we've been awarded and that will bridge out through the third quarter -- late third quarter, early Q4 of '27 here and then go into 2028. As you remember, with our -- some of our other programs, this isn't unusual for us to come in where there's multiple suppliers, but we've been very effective at capturing a bigger share of the initial award as we go forward, and we're hopeful we'll be able to do the same here.

The development is another separate customer, and we're in the early stages of that right now, but it's very encouraging, and we've just moved on through some actual field deployments. So it's always an encouraging sign because it usually indicates a final decision and a go forward. And then lastly, separate, but we still have the 2,500-site program that we talked about last quarter. And this is on top of our normal rhythm of business. So these are kind of newer projects that are rolling in and ones that we thought were worth mentioning.

Aaron Spychalla:And then can you just provide a little bit more detail on some of the significant opportunities to drive operating leverage? You talked a little bit about the facility consolidation, some on procurement. But just any other details there as you kind of balance that with just some of the other kind of macro issues that you're navigating as well?

James Clark:Yes. I mean, I look at them as all as opportunities, right? We're -- we've got 23 facilities spread out across the U.S. right now. There are locations where we could consolidate some things, we could make better utilization of equipment and time we have. So we're looking at all of those things. We've always said we were going to kind of commit back and do this. And I think this is really all about that focus to getting to our 12.5% EBITDA. This is where this efficiency comes from. Better asset utilization.

If we're using a piece of equipment right now on a single shift, 8 hours a day, we've got 16 hours we could be using that piece of equipment or at least a portion of that. Those are all opportunities for us. We've got -- we're moving product between 1 or 2 facilities, partial here, partial there to get a completed product. If we can get that all under one roof, that creates a tremendous opportunity for us. So I think over the next 2 years, you're going to see us really kind of invest in that. The Collingwood facility is a good example.

Taking that and creating a center of excellence for Canada in Canada has always been our idea, and it has shielded us from the tariffs and the cross-border communication and the issues going on there. Those may improve. Those may stay like they are, they may get worse. But when we have a business that's fully capable of supplying almost everything we can do in Canada, that's a big plus for us. And then the additional plus is bringing it all under one roof. So I think you're going to see us continue to execute on a lot of all the operational opportunities, and that's going to go right towards our margin profile and our effectiveness in running the company.

James Galeese:Aaron, I would -- Jim Galeese here. I would just add to Jim's comments. So as you know, we've talked before, quality of earnings is very important to LSI for a number of reasons. And so we take both our business improvement initiatives and synergies associated with the acquisition very seriously, and we have quite a road map of items to build on. Jim mentioned a few, and I'll just mention a couple more. I think I mentioned in my comments how we've identified and in the process of implementing $1 million of procurement savings in key commodity areas. And that's just a start.

And our alignment, our ability to continue to align selling price to current cost is -- continues to get better. That's something LSI has always had a pretty good competency in, and we're expanding that into the Royston product areas. And you're seeing that, and Jim commented on it, and I did as well, the sequential improvement we've seen there and the sequential improvement we continue to expect moving forward and we'll realize moving forward. So quality of earnings and margin management, margin realization is a high priority for us, Aaron.

James Clark:And last quarter, we talked about a little bit of softness in margin around some of the SignResources projects that rolled forward after the acquisition. We've already been able to go in there and make significant improvement. I mean, we've still got a ways to go. We said that it would take us through the remainder of the calendar year to kind of get us on par, but I'm very happy with some of the progress we've made there and the team has done. And that's just that pricing discipline that we've always been very good at.

Aaron Spychalla:Good. And then maybe one last one, if I could sneak in. Just on the balance sheet. Can you talk about the time line and kind of confidence in continued EBITDA to free cash flow conversion to get that leverage down below. I think the target has been 2x.

James Galeese:Yes. I think we've been very clear about our timetable in terms of driving our leverage ratio to 2x and lower. And we expect that we continue to expect that to happen within the next 12 to 18 months. We see no reason that our free cash flow will continue the pattern that it is and in fact, should improve once we see a little more uplift and release on some of these larger releases on some of these programs.

Operator:Our next question comes from the line of Brent Thielman with Oppenheimer.

Brent Thielman:I guess first question, there was a comment just around customer discussions becoming more kind of broader, more strategic than a few years ago. Jim, if you wouldn't mind just expanding upon that and to what degree that gives you visibility here even as it seems like we're working through kind of a dynamic macro right now?

James Clark:I never want to get the cart before the horse, but NACS is a big trade show for us. It's probably the biggest, and it's a concentration of very large customers, both from the Royston perspective and from LSI, and that's been historical. The -- I think that there was an epiphany, a realization, kind of a finger snap of I get it now from a customer perspective. And I just felt like there was a lot of energy about that realization. And it still takes time to mature because in every one of these cases, our customers are currently buying from some incumbent.

And we're going to make the assumption that, that incumbent is doing a good job for them. We need to continue to articulate that the benefits that we're bringing, the Category of One we're developing under one roof as a manufacturer and as the integration partner to help our customers get it installed has real value. And what I was commenting to is, coming off of NACS where you get a high density of customers in one location in a short amount of time, you get a lot of input rapidly. And the realization of I get it, that connection with what we can do across their stores was clear and apparent and the energy level was very high.

And so, I just come off of that whole trade show very kind of excited. It's nice to see the program, the dream that we've kind of built and sketched out connect with these customers. And now it's just realizing that forward momentum and creating it into something that we are able to capture more of that wallet share, and we are able to move from 2 or 3 solutions to 5 or 6 solutions. And I feel like there was a lot of connection at the show about that capability. And in individual conversations.

I'm just mentioning that when you're there for 3 days and you can connect it one after another, it really is -- it really creates some energy.

Brent Thielman:Appreciate that, Jim. I guess as a follow-up, on Lighting. Are you seeing a market that's starting to stabilize? I don't think it's been especially good for you in the last few quarters? Or is some of what you're seeing in the quarter suggest it's getting a little bit worse?

James Clark:Well, I think that if you look at from an industry perspective, I think we've been outpacing in Lighting for multiple quarters, particularly if you go back 2, 3 quarters, we were consistently outpacing the market. We were showing that growth. Most of our Lighting, as I said, we've got high activity in some segments, and we've got lower activity in others. And I think that lower is just a little bit more advanced than the higher stuff right now. So you're seeing that decline, that 6% decline. With that said, though, I mean, all these customers we're talking to, and it's kind of segment-driven, are talking about projects they have in the queue, but they're just being pushed out.

They're being pushed. We usually see a little bit of accelerated activity. We call this -- we actually call this our lighting season. The time right before the fall hits, people start recognizing, "Oh, I've got to get this building lighting done. I've got maintenance work to do. We want to button things up before the cold weather hits. There's a little bit of activity, a little bit of increased activity that didn't occur this year. And I think some of that is where capital budgets, dollars associated with things that were improvements and putting budgets at the beginning of the year.

Some of the companies are saying, wait a minute, hold on, we're going to roll that into the beginning of next year. So I don't see any of the projects going away, but I do see an increased amount of customers kicking things down the road. And that's what we're experiencing.

James Galeese:Brent, the proof point on that is, in my comments where I said, in the last 3 months, our quote activity is actually up 5%, right? But yet our sales and our orders up 1%. So that shows then that the delayed quote-to-order conversion cycle. So they're frustrating. But when we get into it, there's reasons for that and a lot of it is around what you just said, how things are rolling up and how things are rolling up to their budgets. And if they're over, then they have to go in and look at -- make some changes, reengineer some things and not just lighting, by the way, but other finishing elements as well.

So that's just created an elongated cycle that's -- but that pipeline is there. It's just backing up.

Operator:Our next question comes from the line of Min Cho with Texas Capital Securities.

Min Cho:Congratulations on your QSR award. Jim, you did mention that you were 1 of 3 on this award and that you had gained some share. Just want to know if this included -- if this contract included some Royston products? And are the other 2 vendors, are they providing products that you cannot provide? Or is this just a diversification strategy by the customer? And then a final question on that, are you providing the project management on this contract?

James Clark:Okay. Min, thanks for the question. This is an LSI project. This is not -- doesn't include any Royston at this point. And a lot of that is because I think we've been involved in this project almost 3 years. We've talked before about these -- the way these cycles work, you sit down, you have design discussions, you do material selection, what's your objective? How much do you want to do this? You put the designs to the materials, you show samples, there's adjustments made. So we're just at that point where we went out and did some actual test stores.

They -- the customer kind of committed a direction, but this was all way in advance of the Royston project coming on board with LSI. So this is an LSI-only project. Because it's an LSI-only project, our competitive forces are a little bit more stable and mature. And so those competitors, those other people that are providing it, they provide the same category that we do. They don't provide anything else that we don't. In fact, we provide more than they do. It's just that this project doesn't require that yet. We are providing project management resources.

And it's yet to be seen, but it's not uncommon for us to walk into a project like this with 1/3 of the project, but take more of it as we move along. And that's all based on our execution capability. So I'm encouraged. I'm happy with what we've got, and I want more. And hopefully, we'll get more as we move through the project.

Min Cho:Something that you highlighted, Jim, during your Royston tour in October was the importance of your adapt services kind of leading with the program management and such. Can you provide just a little more information around that? Like how large is this? How large is the opportunity? And what does it really provide you in terms of the actual product rollouts?

James Clark:Yes. I mean, I always talk about it like it's catch-up for our fries, right? It doesn't necessarily independently drive business, but it does help quite a bit add to the desire for us to provide more services. And that -- having that very discussion is germane to our whole thesis, right, which is one stop, you can come in and we can really offload that customer from the burdens and the capability. Our capabilities really shine through there. So if you go back 3 years ago, it was a $10 million business. Today, it's a $30 million-plus business, but it really enables kind of the sales that we do.

And that becomes even more important as we bring Royston in. And I would also mention that Royston has a similar service capability in their business, not quite as mature as LSIs, but we've already started the work of integrating those 2 and leveraging off of a couple of things they do that we don't and then leveraging off of more things that we do that they don't. And just for clarity, those services are not -- we don't dispatch trucks to a location. And a lot of that is because if you think of -- I'll just take electrical licenses, for example. State by state, they vary quite a bit.

So if you're in Ohio and you're in Indiana, you've got to have an electrical license in Ohio, you've got to have an electrical license in Indiana. And then county by county, the rules and the standards can vary and even by city by city. So local resources are important to us. What we provide is the overall management of those resources, the permitting, the insurance discussions, the scheduling, all of that, that's what our ADAPT Services group provides.

Min Cho:Great. And then just finally, any update in terms of progress that you're making on your partnership with Carter? Is there anything in backlog yet?

James Clark:There is a lot of -- there's transfer work that Carter already had in the works. There have been a lot of discussions bringing them into -- bringing Carter and the services into what LSI has right now in our customer base. I would say that we're still in the early stages of that. When we signed the agreement with Carter, we explained that, again, this is project cycle timing, and that project cycle is usually 12 to 18 months. So I think I'm encouraged by what we're doing. We've had some great wins already where we've been able to differentiate ourselves in our installation capabilities and coordinated schedules better, and the customers have seen that.

And I'm encouraged by the conversations we're in. But there's -- I wouldn't say there's any tangible momentum in new business quite yet.

Operator:Our next question comes from the line of Amit Dayal with H.C. Wainwright.

Amit Dayal:So, Jim, just from the recent acquisitions, et cetera, and the size of the company now, how much risk to quarterly variance is there from any customer scheduling changes or pushouts?

James Clark:I mean, I think that's -- and we've been dealing with this since COVID. I mean, if we're speaking historically, I think that we've talked about this before that disruption in schedule and timing, and there's a lot of things that have driven it. Coming out of COVID, I remember just getting permits through local offices, city offices and things like that were a major impact. Today, I think it's budgets. It is almost 100% budgeting.

And where they went in an initial budget said, "Hey, we're going to have $100,000 for each store, and we're going to do 10 stores, and we're going to spend $1 million." All of a sudden, by August or September time frame, they're saying, wait a minute, we're still going to spend $1 million, but we may only get 7 stores done. And so we're going to push these other 3 stores down the road because we don't have the budget for it. But the good news there is that, usually when you're doing one of these rebranding programs, that work is not going away.

They're not going to rebrand 10 of their stores and leave 40 of them in the old format. So I don't really have a lot of concern about the business being there and their commitment to getting the business done. But that inflationary pressure on a whole build-out and broadly across an organization is just putting pressure on their ability to meet their original commitments. So I'll just use that kind of 10 stores as an example. They're just not able to get 10 stores across the finish line with the same budget. Most of the businesses aren't making additional capital available.

So they adjust, we push these projects down the road a bit, and we're pretty confident that they're going to come back around.

Amit Dayal:And then with all the focus on integration and trying to create these synergies, does that take away any resources from product development in the near-term?

James Clark:It's certainly not product development. Product development for the most part, is a dedicated committed team across our organization. We've always -- and one of my marketing folks kind of hit me up the other day on it, Jim, you don't talk about new products as much as you used to on the calls. And I would like to just take a moment to say our commitment to new products is still -- is a vital part of our strategy going forward. And we're still very committed to it. We're still releasing 20-plus new products a year in Lighting. We're looking for all kinds of new materials and new ways of doing things in our Display Solutions.

We have technology upgrades and efficiencies we've been able to put into our refrigerated products. All of that activity is still going on. The integration activities, does it slow it a bit? I'd say Lighting is pretty much untouched. Lighting continues at the same pace it always has. I'd say some of the Display Solutions, minimal impact. Maybe a little bit more on the refrigerated product side because we're making big decisions with Southern Case Arts and JSI and EMI's refrigerated products, and we might have a greater slowdown there because we need to make sure we're making the right decision that spreads across all of them.

But I would also say that our speed and our commitment and our focus on getting some of this operational benefits out of the organization has definitely increased as of late. We've brought on Royston. I think we've got a good rhythm going with Royston. Now we're taking our operations teams, and we're saying, "Okay, let's focus on this efficiency. How do we get more out of this equipment?" Like I was saying earlier, having a great piece of equipment that we're only running 8 hours a day, there's a huge opportunity there, right? How do we bring more in-house where we might be subcontracting some work through an external partner?

How do we move that in-house because we know we can improve the margins. We have better control of our whole supply chain. So all of those activities are things we've been working on over the last, I'd say, in earnest over the last 3 months by program, more than a year. So we've already identified where we want to work. That work was done a year ago. I talked about our July meeting. We really kind of put a finer point on things. And then by September, we were really starting to execute and Collingwood is kind of a first visible piece of that. But there's other activities we're doing.

And I'm very encouraged by them because I think that's the last part of the equation on getting us to that 12.5% under that Fast Forward 2028 plan.

Operator:We have reached the end of our question-and-answer session. I'd like to turn the call back over to Jim Clark for any closing remarks.

James Clark:I want to just say that I'm encouraged by a lot of what's ahead of us, right? We're dealing with an inflationary environment, macro trends in the economic environment. And I think that as a team, as a company, we're doing a very good job of kind of adjusting. I mentioned in my comments that I wish everything fell into a 90-day cycle, and I think you're seeing some of that exposure right now where we're not able to control some of the things we're not able to control We've got good plans going forward to go back and get this operational efficiency. We put together all the pieces, all the ingredients for this opportunity that's in front of us.

Now it's going about measuring things out correctly and making sure we're mixing them correctly to get that recipe just right. And I'm encouraged by the work that we're doing. It was a smaller piece of my comments, but we are going to roll out an updated Fast Forward plan. We'll be doing that. We will be sure to give everybody notice, but it will be kind of mid-December, let's say, 12, 15, 16, somewhere in that bracket, and we will give plenty of notice to everybody. And it's not an abandonment of our 2028 plan. It's just a fine point on it, and it extends it out to 2032. And I'm encouraged by that.

We have in front of us the plans to get there. We have in front of us the opportunities to get there. And the overall economic environment can be a headwind or a tailwind for us, but it's not going to stop us from getting there. The most encouraging thing is, a lot of these activities we'll do are under our control. So there are things that we're able to do internal in the business. And so they should be a little bit more resistant to the economic swings. But obviously, there's things we need to do that still rely on an economy that's moving forward. But we have a little bit more control over it.

So I feel encouraged by our ability to kind of execute against those things. There's still a lot of good runway left in front of us. I still feel like we're in the early innings of this whole story. And I see a clarity and an acceptance by our customer base and an execution by our team that is -- that continues to just gain momentum, and I'm very encouraged by what we have in front of us. So with that, I'll just say thank you for joining us. And I know it's a little early, but we may not have an opportunity to talk too much directly. Happy holidays to all of you and your families. So take care.

Operator:Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.

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