MTY Food Group (MTY), a prominent player in the quick-service restaurant industry, has reported its first-quarter 2024 earnings, revealing a challenging period marked by adverse weather conditions that impacted sales across various regions. System sales, especially in the Frozen treats segment, saw a decline due to cold weather, with same-store sales falling in Canada, the US, and internationally. Despite these setbacks, MTY demonstrated financial discipline by doubling its operating and free cash flows, reducing debt, and increasing its dividend payment.
Key Takeaways
- MTY Food Group's Q1 2024 earnings were affected by extreme weather, leading to decreased same-store sales.
- The company opened 75 new locations but closed 79, ending with 7,112 locations.
- Normalized adjusted EBITDA fell by 7% to $59.5 million, while operating and free cash flows more than doubled.
- MTY repaid $34.6 million in debt and raised its quarterly dividend.
- CEO Eric Lefebvre discussed pricing strategies, customer responses to new legislation, and initiatives to improve store performance.
Company Outlook
- MTY Food Group is prioritizing debt reduction and building a treasury trust for new opportunities.
- The company is investing in initiatives to improve store performance, particularly in the Cold Stone brand.
- There are plans for more cost containment initiatives, although the full benefits of the ERP system implementation will take time.
- The $50 million cap on distributions to shareholders will remain for the near term.
Bearish Highlights
- Same-store sales decreased by 2.7% in Canada, 3.6% in the US, and 7.4% internationally.
- The company's major contributor, Papa Murphy's, experienced a slight downturn in Q1, excluding EBT impact.
Bullish Highlights
- MTY Food Group is satisfied with its store pipeline and focus on enhancing existing locations.
- The company has successfully deployed capital through buybacks and is exploring other value offerings to meet customer expectations.
Misses
- The company faced a net closure of 4 locations in the quarter.
- Consumer spending has declined compared to the previous year, though the company remains optimistic about customer visits.
Q&A Highlights
- Lefebvre addressed the impact of new California legislation on pricing and consumer response.
- The company aims to respond to the competitive landscape in the pizza segment without resorting to deep discounts.
- There is no significant inflationary wage pressure or labor shortage in Canada or the US.
In summary, MTY Food Group's first quarter of 2024 faced operational challenges due to weather conditions that affected sales. However, the company's strategic measures in financial management and store performance initiatives indicate a proactive approach to overcoming these hurdles. CEO Eric Lefebvre's commentary during the earnings call provided insights into the company's future plans and ongoing efforts to adapt to market changes and consumer behavior. As MTY continues to navigate the competitive landscape, particularly in the pizza segment, it maintains a focus on value offerings and customer experience to drive growth.
Full transcript - None (MTYFF) Q1 2024:
Operator: Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the MTY Food Group, Inc. First Quarter 2024 Earnings Conference Call. At this time, all participants are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] Before turning the meeting over to management, please be advised this conference call will contain statements that are forward-looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. I would like to remind everyone that this conference call is being recorded today, Friday, April 12, 2024. I would now like to turn the call over to Eric Lefebvre, Chief Executive Officer. Please go ahead, sir.
Eric Lefebvre: Thank you. Good morning, everyone. Thank you for joining us for MTY's first quarter conference call for fiscal 2024. The press release and MD&A with complete financial statements and related notes were issued earlier this morning and are available on our website as well as on SEDAR. During the call, we will be referring to forward-looking statements and to certain numbers that are non-IFRS measures. You can refer to our MD&A for more details. I also remind you that all figures presented on today's call are in Canadian dollars, unless otherwise stated. Following two years of strong system sales growth amid a challenging economic environment, first quarter results were adversely affected by extreme weather, primarily in January and the first-two weeks of February. Extreme cold temperatures throughout most of North America cause significant downward pressure on our system sales, especially to the Frozen treats portion of our QSR restaurants, while poorly timed snowstorms affected sales in the Northeast portion of our portfolio. MTY's performance was more or less aligned with the industry data for casual dining restaurants. However, our QSR restaurants lagged the industry mainly as a result of the significant weight of our Frozen treats brands have in our portfolio, as well as to the material impact on Papa Murphy's sales of the decrease in government funding of the Supplemental Nutrition Assistance Program. More specifically, EBT sales represented 14.69% of system sales for the brand last year compared to 8.75% this year. Canada and the U.S. reported same-store sales decreases of 2.7% and 3.6%, respectively, while the international region was down 7.4% compared to the first quarter of 2023. Consistent with what I just described, the decrease in same-store sales is primarily attributable to extreme weather patterns in certain regions during the quarter, which compounded the impact of uncertain economic conditions and sluggish consumer spending. The first quarter has historically been a challenging period for both new store openings and control of store closures as the months of January and February tend to be the most difficult for our industry. Despite that seasonal reality, our network once again came within a few locations of breaking even in terms of openings versus closures in the quarter. During the first quarter of 2024, we opened 75 locations and closed 79 others for a net decrease of four. Although, we are not pleased with falling short of our objective to be net store positive, we are encouraged by the trends we are seeing. We ended the first quarter with a total of 7,112 locations, of which 97% were franchised or under operator agreements and 3% were corporate owned. The geographical split of MTY's locations remained stable year-over-year at 58% based in the U.S., 35% in Canada, and 7% international. In terms of financial results, the lower sales volume did affect the EBITDA for the franchising and corporate locations segment negatively, and as Renee will explain in a minute. The Retail segment was also under pressure in the first quarter, resulting in our normalized adjusted EBITDA reaching $59.5 million, down 7% from $64 million last year. Despite system sales and EBITDA being slightly lower than last year in the first quarter, MTY generated the highest operating cash flows in the company's history at $54.2 million. For their part, free cash flows net of lease payments more than doubled to $36.9 million in Q1 2024. The strong cash flow generation enabled debt repayments of $34.6 million in the quarter bringing total repayments to $103.5 million in the last 12 months. Given the high interest rate environment, we believe debt repayments are a good use of our cash -- of the cash we generate, as we reduce the burden of interest payments and build a treasure chest for future opportunities. As announced in January, we also raised our quarterly dividend payment to $0.28 per share for the quarter and repurchased $3.6 million worth of shares under our normal course issuer bid, rewarding shareholders who support our long-term value creation strategy. Our share buybacks are done in a systematic way keeping in mind the limitations imposed on MTY by its credit agreement, which limits annual distributions to shareholders to $50 million. This amount includes both dividends and share buybacks. I will now turn the call over to Renee, who will discuss MTY's financial results in greater detail.
Renee St-Onge: Thank you, Eric. Good morning, everyone. As mentioned by Eric, normalized adjusted EBITDA, which excludes acquisition related expenses and SAP project implementation costs amounted to $59.5 million in the first quarter of 2024, down 7% from $64 million in the first quarter of 2023. Company revenue meanwhile, declined 3% year-over-year to $278.6 million in the first quarter, mainly due to less recurring revenue streams that were tightly correlated to reduced system sales. In Canada, revenue from franchise operations decreased 7% year-over-year, while food processing, distribution and retail sales dropped 8%. Lower revenues from these subdivisions were partially offset by an 11% increase from corporate owned stores due to a net increase in such locations year-over-year. In the U.S. and International segments, revenues from both franchise operations and corporate owned stores decreased 1% year-over-year while the retail segment dropped $17.7 (ph) million, mainly due to the termination of a retail licensing agreement. The lower revenue level from the franchise and corporate owned store subdivisions were mainly impacted by the decrease in recurring revenue stream similar to Canada. These were partially offset by higher sales of material and services to franchisees and greater initial fees, demonstrating the strength of the company's pipeline for new openings. U.S. revenues were also positively impacted by the acquisitions of Wetzel’s Pretzels and Sauce Pizza and Wine, which were finalized in December 2022. The year-over-year decrease in normalized adjusted EBITDA was primarily driven by lower system sales in all geographies, slightly lower cost of doing business, as well as a decline in the performance of our Retail segment. In terms of net income attributable to owners, it amounted to $17.3 million or $0.71 per diluted share in the first quarter of 2024, slightly lower from last year's $18.4 million or $0.75 per diluted share. This decrease is attributable to the lower year-over-year EBITDA as well as impairment charges taken on the value of the property and equipment of a few U.S. corporate restaurant locations and one trademark in Canada. Looking at liquidity and capital resources. As mentioned by Eric, we generated all-time record high cash flows from operations of $54.2 million in the first quarter of 2024, up $20.7 million from $33.5 million in the same period last year. The increase is mainly attributable to an improvement in non-cash working capital items, which is primarily the result of improvements in our accounts receivable collection, including the collection of a few large transactions related to insurance, gift card and taxes owing to the company. Excluding variation in non-cash working capital item, income taxes, interest paid and other, we generated $59.1 million in cash flows from operations compared to $63.3 million in the same period last year. Free cash flows net of lease expenses, meanwhile grew 139% to $36.9 million or $1.52 per diluted share in the first quarter of 2024 compared to $15.4 million or $0.63 per diluted share in the first quarter of 2023. In the first quarter of 2024, we reimbursed $34.6 million of long-term debt paid $6.8 million in dividends to our shareholders and repurchased 70,800 shares for a total consideration of $3.6 million on top of paying $12.3 million in interest on our bank facilities. At the end of the quarter, MTY had a cash position of $50.6 million and long-term debt of $736.2 million mainly in the form of bank facilities and promissory notes on acquisitions. Our revolving credit facility has an authorized amount of $900 million, of which $536.3 million has been drawn. Hedging strategies, including three year and two year fixed interest rate swaps have provided the company with a quarterly savings of approximately $1.9 million on interest payments. Following the quarter end, we successfully extended the maturity of our revolving credit facility by 17 months on March 15 -- to March 15, 2027, while maintaining our current interest rate stable. Finally, our net debt to EBITDA -- our net debt to normalized adjusted EBITDA ratio stood at 2.6 times at quarter end, a sequential improvement from 2.8 times in the fourth quarter of 2023. And with that, I thank you for your time and we'll now open the lines for questions. Operator?
Operator: Thank you. |We will now begin the question-and-answer session. [Operator Instructions] First question comes from John Zamparo of CIBC. Please go ahead.
John Zamparo: Thank you. Good morning. I wonder if we could start on the same-store sales performance of your recently acquired brands, specifically the BBQ Holdings (NASDAQ:BBQ) portfolio and Wetzel’s?
Eric Lefebvre: Yeah. Both brands in Q1 were affected similar to the rest of the network. I mean when the severe weather started impacting the network, it's not one or two brands that started going downwards. It's all of our portfolio went down at the same time, which tends to indicate it's not something related to specific brands or something we would have done, it's more macro. But more specifically, Wetzel’s, small environment, people for a lot of regions were more or less shelter in place because of the weather. So affected for a few weekends predominantly and also for the Disney stores for a little while. While BBQ affected very similar trends to the rest of the industry. So if you look at the industry in December was a little bit under and then January was a severe dip, and BBQ followed the same pattern. So it doesn't help us, but we more or less follow the rest of the industry.
John Zamparo: Okay. Understood. And thinking about pricing and traffic, is it fair to say that, I know there's a lot of different puts and takes for this. But on the whole, is your networks pricing in line with CPI, what do you say?
Eric Lefebvre: Yeah. It's -- some brands have started preparing for the April increase in California. So I would say California is probably a submarket in our portfolio where price increases are a little bit more. So, but more towards the end of the quarter, maybe March and obviously, April. For the rest of the network, prices were more or less stable, probably a little bit below CPI, I would say, on average.
John Zamparo: Got it. Okay. Now maybe we can stick with California. I know it's only been a couple of weeks, but I wonder what you're seeing in terms of customer response with AB 1228 (ph) and can you remind us what's your mix of corporate ownership in California?
Eric Lefebvre: Yeah. It's too early to tell what the consumer will -- how the consumer will react. I think there are various brands. We have a few brands that decided not to increase price, just to wait and see we have a few brands where we did increase prices between 4% and 8% on average. We have, I think, one brand that's a little bit higher than that because there was a catch-up to do. And we do have a few corporate stores, especially for Wetzel’s Pretzels, we have a few. We have a few also in the BBQ Holdings portfolio and a few Baja Fresh as well, not where we have the most corporate stores, but we do have some.
John Zamparo: Okay. That's helpful. Thanks. And then just a couple on the store network. It looked like almost half of your openings in the quarter were from non-traditional sites. I wonder if you could provide some color there?
Eric Lefebvre: Yeah. Well, I'd have to look into what type of non-traditional they would be, but non-traditional can mean a lot of things. It can be a food truck or it can be an airport store. So I’d have to look into the specifics. I did not notice that trend to be honest with you. So it's not something that -- it's not non-traditional in the sense of coffee jug on a counter or something like that.
John Zamparo: Okay. Fair enough. And then just one last one. I wonder if you could talk about the pipeline for openings for this year. I know closures, you don't have as much clarity on, but how are you feeling about the pipeline either relative to what you did in Q1 or for 2023?
Eric Lefebvre: Yeah. We're really happy with where the pipeline is. We have a lot of stores under construction. We have a lot of new stores coming. So pretty bullish about the future projects then that will take -- still take a little bit longer than they used to, to build and finalize, but really happy with where the pipeline is and teams are doing a fantastic job on development.
John Zamparo: Okay. And I appreciate the color. I'll pass it on. Thank you.
Operator: The next question comes from Vishal Shreedhar of National Bank. Please go ahead.
Vishal Shreedhar: Hi. Thanks for taking my questions. In the materials, it says that management will focus on the success of existing locations and assisting franchisees with sales and profitability. Wondering if you could unpack that for me and specifically, does that mean incremental investment from MTY and how should we perceive this focus on existing locations to manifest?
Eric Lefebvre: No. It doesn't require more investments from MTY. It's just the way we decide to focus where we decide to focus our energy. Obviously, we did some acquisitions, maybe 1.5 years ago, a year ago. And now, I think the focus is more on instead of acquiring new companies, it's more on the existing locations we have in the network. So what you described there is more or less the job of the franchisor. Our job is to try to help our franchisees realize their goals. They invest in restaurants to make money and to earn a return, and we try to be the best we can be. We are training our staff to be the best we can as business consultants more than just supervisors. As you know, more than half of our people are on the field and visiting stores every day and trying to help our franchisees be the best they can be in their stores and try to satisfy guests every time they come into the store and this is the primary focus for us at the moment.
Vishal Shreedhar: Wondering if you could isolate the impact of weather. I know it's an imprecise measure at best, but you do have examples of when the quarter wasn't implemented by this unseasonable weather. So could you give us a sense of what the quarter may have looked like if it were for this weather events?
Eric Lefebvre: Yeah. That would be very speculative on my part. I don't necessarily feel comfortable. We know weather has a major impact, especially on our Frozen treats category. As you know, ice cream and smoothies are not the most popular when it's super cold or when there's a snowstorm, but it's hard to quantify exactly the impact of weather versus other macroeconomic factors versus other factors that might impact the economy or the spending or preferences. So yeah, I won't speculate as to how much exactly weather means in the same-store sales.
Vishal Shreedhar: Okay. Regarding capital allocation, you talked about a priority of paying down debt. You also talked about building the treasury trust for new opportunities. The balance sheet is improving with the free cash flow generation. So how should we think about your priority of capital allocation. Is -- are buybacks -- I know you bought a little bit back, but is that going to be increasingly involved for you increase in focus or would you prioritize acquisitions above it? And if you do think about acquisitions, kind of what kind of deals are you thinking about QSR, corporate store, casual dining, those kinds of basic questions.
Eric Lefebvre: Yeah. In terms of acquisitions, I wouldn't expect anything of significance this year. Obviously, there could always be something coming up that we can't miss and we really want to go for it. But at the moment, we're not contemplating anything of significance might be some smaller deals here and there that happened. But nothing that would significantly increase our debt level. So I mean, we're not in that mode at the moment. And in terms of capital allocation, buybacks are one way for us to return capital and to acquire a business we like, acquire a business that has no execution risk, and that we believe is undervalued. So we will continue to be systematic in our approach, at least for now. Obviously, the Board can always change the strategy at any point in time. But we're limited in how much buyback we can do. As I mentioned earlier, the cap on distributions to shareholders is $50 million a year, that includes dividends and share buybacks. So if you take out the dividends, you see that the amount we can spend on share buybacks is limited. So the systematic way we're doing it now might not get us exactly to the ceiling, but we'll get us closed. So this is the approach we chose for now. It might change in the future, but we do believe that share buybacks are a valid way to deploy capital.
Vishal Shreedhar: Okay. And just one last question. Eric, you've been over the last year, implementing a number of initiatives to improve performance at the stores, new systems, marketing approaches, digital initiatives. Maybe have you seen the results that you wanted to in some of those initiatives, and maybe you can highlight some of them that you feel like are delivering results with all these -- the consumer issues and the weather issue is difficult to understand what's driving the underlying business. So maybe you can talk to some of your bigger initiatives and how they're delivering for you?
Eric Lefebvre: Yeah, for sure. Yeah. Where we have been able to implement these initiatives and it all starts with collection of data and then the intelligence we can build around it and the systems we use. And that I won't get into the complexity of which tools we use to collect the data and to analyze it and then to deploy the marketing campaigns, but where we have been able to do it and successfully for brands, for example, Cold Stone is probably the best example. We do see really good results, and we can measure it a lot better than traditional marketing. For example, if we have loyalty customers or any other customers that come to our stores, we can easily track the volume and the repeat business and the frequency of their visits and the average spend for each visit. So that's been hugely successful where we have been able to deploy it. We do have some more initiatives coming. We are lagging still in Canada, when it comes to technology and data and the usage of it, it's one thing to have the tools to use it. But if you don't have the proper data or clean data, then you're a little bit limited in how much you can do and that takes time. We want to collect data and we want to accumulate the size of a sample or size of a number of customers that's sufficient for us to really be able to deploy good marketing campaigns around it. And it takes a little bit longer it takes time for us to assemble that data. So we’re in the process of doing that. There’s a lot more to come in the coming months, but we feel like a lot of the pieces of the puzzle are falling in place now.
Vishal Shreedhar: Thank you.
Operator: The next question comes from George Doumet of Scotiabank. Please go ahead.
George Doumet: Yeah. Good morning, Eric. I'd be curious to get your take on the Canadian versus the U.S. consumer kind of, if you're seeing any notable differences there in terms of demand perhaps?
Eric Lefebvre: Yeah. I think it's -- I would say it's pretty uniform at the moment. I don't notice major variances in how Canadian or U.S. customers behave. So I know some people in some industries have mentioned that Canada might have been a little bit slower than U.S. in terms of spending or vice versa depending on the industry. In our case, I don't necessarily see a big gap between the two types or the two geographies.
George Doumet: Okay. That's helpful. And can you talk a little bit about our value offerings across our banners. Have we seen a tick up there? How easy can we maybe shift that mix more towards value, I guess, if things continue to be soft going forward?
Eric Lefebvre: Yeah. Obviously, especially in January and February, it's a little bit more important to bring these value offerings to customers. It's always the case every year. Right now, I'm not seeing the competition being super aggressive on value. And when I say value, I shouldn't use that word, but on pricing or discounts. So, but it might be coming, so we need to be prepared. But in our case, we always say that value is relative to the performance you deliver. And if you have a higher price, there's also higher expectations from the guest. And if you meet those expectations, then the value works for them. So we can have discounts and we can direct customers to certain products that might be interesting for our franchisees in terms of the food cost, but also for them in terms of the price point. But ultimately, whether you have a high or a low price point, if you don't meet expectations, you're still going to miss out and decrease traffic. So we really need to work on that guest experience and make sure that we meet their expectations every time.
George Doumet: Okay. That's helpful. And good cost containment this quarter in the franchise segments. Just wondering, are there any more levers that can maybe push there or is it just -- or do we need to implement the ERP to really start to see perhaps some more benefits going forward?
Eric Lefebvre: Sorry, I missed the first part of your question, really good what?
George Doumet: Cost containment like in the price cycle, I think we're flat year-over-year despite, I guess, inflation in wages. Just wondering if there's anything -- if there's anything we can do more there or do we need -- I guess we need the ERP to help us out?
Eric Lefebvre: No. Well, the ERP will certainly help, but that's only still more than a year down the road. There are some modules that are being implemented, but the real efficiencies will come when we have the full solution in place. But yeah, there is more cost containment coming. We did have some initiatives in Q1. And obviously, you haven't had much time to look at the statements, but we do have some restructuring charges in there. You will see more restructuring charges in Q2 as well. We're not announcing anything massive in terms of restructuring, but we are, once again, systematically going about try to analyze how differently we can do things, how we can be more efficient in our approach and be more cost effective. So there are a number of initiatives that are taking place right now. We're doing them one at a time instead of everything at the same time, so we don't disrupt the business. But yeah, there will be more cost containment going forward.
George Doumet: Okay. Thanks. Just one last one for me. How quickly, can we remove this $50 million cap that you spoke about earlier? Is that something that we're planning on doing in the near term, call it, like, I guess, this fiscal year?
Eric Lefebvre: The cap on the distributions to shareholders?
George Doumet: Yeah.
Eric Lefebvre: No. We're not necessarily planning on removing it. This is -- this gap has existed since 2016 when we had this credit agreement, the first time. So we've had the same cap for eight years now. We've just renegotiated our credit agreement. Our terms are very favorable. This is something that gives comfort to our banks and to our syndicate that we're not going to go crazy and take all the business resources and distribute to shareholders and that we're going to be disciplined in our approach. So this is not necessarily something we're looking to change. If we do see that we do need to change, obviously, our banks are always supportive and they will -- I'm sure they will accommodate, but this is not something we're necessarily planning on doing at the moment.
George Doumet: All right. Great. Thanks, Eric for your questions – your answers. Appreciate it.
Operator: [Operator Instructions] The next question comes from Derek Lessard of TD Cowen. Please go ahead.
Derek Lessard: Yeah. Good morning, everybody. Eric, I just maybe wanted to maybe ask Vishal's question another way. Do you think that are you able to answer whether or not the impact on the business came more from consumer spending versus the storms?
Eric Lefebvre: Yeah. But again, this one is probably a little bit easier. We did see the sales go down drastically as weather started in January, and we did see sales rebound in the back half of February and in March. So it tends to indicate, I think, the consumer, there might have been something in the consumers' mind in January, I don't know. Maybe it coincided with weather, but definitely, the spending did come back up after the weather normalized. So I would tend to say that the consumer spending is not what it was a year ago, for sure, but it's not as -- it's not a disaster either. I know a lot of people are talking about lot of different things in consumer spending, but ultimately, people still want to treat themselves. And if we offer them a guest experience, they'll come to our stores.
Derek Lessard: Okay. That's helpful. And maybe just more specifically, I wanted to touch on Papa Murphy's. Obviously, it's a big contributor to your numbers. Just curious about the performance there. I know you said it was impacted by Snap, but you've put in a few or numerous initiatives over the last couple of years. Just wondering how those initiatives are playing out and sort of what you're seeing on the -- I guess, on the competitive landscape in pizza in particular?
Eric Lefebvre: Yeah. There are a lot of initiatives. There's actually a lot more coming. We did make some significant changes in Papa Murphy's and the leadership of Papa Murphy's and also on the team in general. So a number of things are coming. For the first quarter, our sales are down but only very slightly if you exclude the EBT. So we're relatively flat with Papa Murphy's. Obviously, EBT is something we don't control. So we need to find a solution to make that up, and that's what the team is trying to do now. But yeah, it's still really like the brand and product is still very relevant. We just need to make -- to find a way to make more sales and to make up for the lost sales with EBT.
Derek Lessard: Okay. And I guess, any changes in the competitive intensity in that segment?
Eric Lefebvre: Not really. Pizza is always very competitive. There's always various offers with different price points from our competitors, I suspect that will not change. I don't think it can necessarily intensify because it's always pretty intense, so it is what it is. And on our side, we just need to find a way to respond without necessarily going too deep into these types of discounts because ultimately, we need our franchisees to make money.
Derek Lessard: Okay. And maybe just one final one for me on the labor cost, but more tied in Canada, that wage as a percentage of revenue was particularly high this quarter. Just wondering if that's just wage inflation and if there's any other market where you're seeing some inflationary wage pressures or labor shortages?
Eric Lefebvre: Yeah. I mean, sometimes there’s a lot of noise into these metrics. We have more corporate stores, for example, in Canada versus last year at this time. So it does impact the amount of wages versus revenue. But no, there’s not necessarily a lot of inflationary pressure at the moment in Canada or in the U.S., to be honest, on labor, other obviously then minimum wage increases in California. But for the rest, it’s really stabilized in terms of availability of labor and in terms of the cost of labor. So it’s still a tight environment, and it’s still complicated, but it’s not worse than it was before the pandemic, and it’s probably going to be the same way for the next decade or so. So yeah, it’s -- I would say it’s a normal environment at the moment.
Derek Lessard: Okay. Thank you, Eric.
Operator: This concludes the question-and-answer session and today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
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