Delta Apparel, Inc. (DLA) on Q1 2022 Results - Earnings Call Transcript
Operator: Please standby as we're about to begin. Thank you and good afternoon to everyone participating in Delta Apparel's Fiscal 2022 First Quarter Earnings Conference Call. Please note that today's call is being recorded. Joining us from management are Bob Humphreys, Chairman and Chief Executive Officer, and Simone Walsh, Vice President, Chief Financial Officer and Treasurer. Before we begin, I'd like to remind everyone that during the course of this conference call, projections or other forward-looking statements may be made by Delta Apparel's executives. Such projections and statements suggest prediction and involve risks and uncertainty and actual results may differ materially. Please refer to the periodic reports filed with the Securities and Exchange Commission, including the company's most recent Form 10-K and Form 10-Qs. These documents identify important factors that could cause actual results to differ materially from those contained in the projections or forward-looking statements. Please note that any forward-looking statements are made only as of today, and except as required by law, the company does not commit to update or revise any forward-looking statements even if it becomes apparent that any projected results will not be realized. I'll now turn the call over to Delta's Chairman and Chief Executive Officer, Bob Humphreys.
Robert Humphreys: Thank you. Good afternoon, and thank you for your interest in Delta Apparel. I'd like to start our call today by welcoming and introducing you to Simone Walsh, our new Vice President, Chief Financial Officer, and Treasurer. Simone joins Delta Apparel from Novelis Incorporated, where she served as Vice President – Deputy Controller. Previously, Simone served as Chief Accounting Officer for PRGX Global Incorporated and held senior finance roles at several other publicly traded retail and manufacturing companies, including Sony Corporation, Coca-Cola Enterprises, and The Home Depot in London and in Atlanta. Simone started her career at Ernst and Young and is both in Australia and British, a chartered accounted. She is also a U.S. citizen. We are extremely pleased today to tell you about our outstanding start to fiscal 2022 and strong first quarter performance, which outpaced our expectations and put us in place to meet if not exceed our revenue and earnings goals for fiscal 2022. Before we get to the financial results, I want to take a minute to recognize and thank our nearly 9,000 employees across the United States, Mexico, Honduras, and El Salvador. The last two years have been challenging on so many fronts, but our teams have remained focused on moving our company forward by executing our business plans, and providing outstanding products and innovative services to our thousands of customers across many channels of distribution. We havea long and proven track record of success, navigating challenging industry dynamics. Over the past several quarters, we have been faced with inflationary pressures, supply chain disruptions, and labor shortages, which our teams have tackled head-on with tremendous agility, flexibility, and innovative resulting -- innovation resulting in outstanding operating results for the many constituent groups we consider a part of our business purpose. As you saw in our press release, sales for our first quarter ended July 1st, 2022 for a $110.7 million, an all-time record for the December quarter, and represented organic growth of approximately 17% from the prior year December quarter. Our net income of $3.6 million was also a record for the December quarter and equates to $0.51 per diluted share ahead of our internal expectations. This was another quarter represented by broad-based performance, with shareholder value creation in both segments of our business. Salt Life Group achieved sales of $8.8 million up 24% from the prior year and ended the quarter with strong orders for our wholesale channel while at the same time, continuing to build direct consumer engagement on our social media platforms, which should continue to drive strong growth in our higher-margin direct-to-consumer channels of distribution. We opened one new Salt Life retail store during the first quarter in Texas City, Texas, and have already opened a new store in Sarasota, Florida this quarter and are planning to complete store openings in Fort Lauderdale, Florida, Foley, Alabama, Hilton Head, South Carolina, and Boca Raton, Florida over the next several months. We are in continuing discussions for several additional leases, and are planning to end this fiscal year with approximately 20 Salt Life retail stores in operation. For doors opened five quarters or longer, we registered same-store sales growth of 18% from the prior year December quarter. Consumer demand and engagement on our Salt Life e-commerce site has been strong despite going into the quarter with a limited inventory position that became more constrained as the holiday season progressed, limiting our revenue through this channel of distribution. To better service this important channel, and more directly interact with our consumers, we have recently strategically reconfigured space within our existing distribution center in Fayetteville, North Carolina, designed to reserve and manage inventory dedicated for availability and servicing our consumer shopping on saltlife.com. Salt Life continues on its journey of strong organic growth and the broad demand that our products has accelerated over the last six quarters, while we continue to navigate supply chain issues that face many in this current environment As you can see from our sales results, our team has executed magnificently to allow us to deliver strong revenue growth despite these industry challenges. We are shipping our spring wholesale business as we speak, and are expecting continued growth, and the associated margin expansion with our direct-to-consumer channels growth. Our Delta Group also delivered strong sales growth across all channels of distribution. And on a consolidated basis in this segment, we grew 16% for the quarter to a first quarter record of $101.9 million. We're now seeing channels of distribution that have been more heavily impacted by COVID start to normalize, and all channels are now in a growth mode, which will ultimately help us shelf our targeted product mix. Moreover, we continue to see additional retailers and global brands seek increased production from the vertically integrated supply chain that Delta Apparel has to offer. We're currently installing additional equipment in our textile sewing in spring print locations in Central America, which will allow us to continue to increase our output as the year progresses. The Delta Group, like many in our industry, continues to be impacted by limited suppliers for raw materials, transportation services, and other supply chain bottleneck. However, to date, we've been able to manage through these challenges, further building output by utilizing our vertically integrated manufacturing network. Our ability to meet customer demand has not only resulted in strong top line performance, but allowed us to broaden our services and offerings with both existing and new customers. Over the last year, we have increased selling prices on the majority of our products to mitigate most of the inflationary pressures impacting our supply chain. In addition, we are now providing more value-adding services, such as screen or digital printing and retail-ready services than anytime in our history, which further increases our average selling prices, resulting in increased consolidated revenues. Our increased unit growth along with a richer mix of services delivered is allowing us to also increase our operating profits by leveraging our fixed cost in our manufacturing and SG&A areas. During the December quarter, we also reached a number of significant milestones in our DTG2Go business. Our revenue was a new quarterly record with growth of approximately 17% over the prior year. We were able to move from a beta test mode to a production environment on our new printing equipment while we continue to take delivery of, and install, additional production equipment through the holiday season. As previously announced, we on-boarded several new customers on the DTG2Go platform during the quarter. This will provide the foundation for growth as the year progresses. Our digital-first methodology, which we developed in conjunction with a number of key market participants, was implemented in the quarter. We have made significant investments in DTG2Go digital-first retail model, ensuring digital graph prints meet the high-quality standards required for brands, retailers, and intellectual property holders. We believe the quality, look, and feel of the garments created through this process will continue to differentiate us in the marketplace, and will be a key driver of the growth we're expecting in this business. In addition, 55% of the DTG2Go units we produced in the December quarter were printed on Delta Garments, creating a more efficient operation, reduced garment costs for our customers, and lower working capital needs in the business. Now, let me turn the call over to Simone, who will review our first quarter business highlights and financial results, and then I'll join the call prior to our opening for questions. Simone.
Simone Walsh: Thank you, Bob. I'm delighted to have joined Delta Apparel at this exciting time for the company. Let me echo Bob's comments for both our Delta Group and Salt Life Group. First quarter fiscal 2022 results were outstanding and we are progressing with strong positive momentum. Over the past year, the company completed the integration of our Soffe brand into our active-wear business, consolidated and modernized certain distributionoperations and achieved record levels of manufacturing output. In addition, extensive investments in research and development at DTG2Go developed into our Digital First Strategy, which has already resulted in the on-boarding of several new key customer relationships. An extraordinary growth we saw in Salt Life in fiscal 2021, has continued to accelerate, and we have the foundation in place to further organic growth. Our multiyear strategic initiatives, many of which were put in place pre -pandemic are maturing nicely. And our first quarter results are reflective of our ability to capitalize on market opportunities to drive broad-based organic growth in our business. Now, I'll go through a more detailed review of our first quarter financial results. Net sales were $110.7 million compared to $94.7 million in the prior year, with Delta Group segment growth of 16.3% and 24.3% growth in the Salt Life Group segment. We saw growth across the Delta Group segment in Delta Direct and Global Brands and Retail Direct, with strong demand across the channels of distributions we serve. As a reminder, in our Global Brands and Retail Direct sales channels, we're a supply chain partner to Global Brands from development of custom garments to shipment of their branded products, with the majority of the products being sold with value-added services. We also serve retailers by providing our portfolio of Delta, Delta Platinum, and Soffe products directly to both the retail stores and through their e-commerce channels. During the quarter, we also saw increased sales in DTG2Go with the on-boarding of several customers and a strong holiday showing. The growth in Salt Life resulted from both strength in our wholesale business together with continued growth in our retail store sales, with same-store sales growing 18% over the first fiscal quarter of fiscal 2021. Gross margins contracted 60 basis points from the prior year to 20.8% of sales. Gross margin contracted in both business segments. This was in line with expectations, as we continue to see inflationary pressure in our manufacturing and sourcing platforms. Selling, General & Administrative expenses increased $1.5 million, representing 15.8% of sales, as compared to 16.9% of sales in the first quarter of fiscal 2021. We are seeing the benefit of the previously mentioned integration of our Soffe brand into our Activewear business, while also leveraging our fixed costs against increased sales. Operating income for the quarter increased 90% to $5.9 million or 5.3% of sales, compared to $3.1 million or 3.3% of sales in the prior-year first quarter. Net income for the December quarter was $3.6 million or $0.51 per diluted share, an increase of 313% compared to $900,000 or $0.13 per diluted share for the same period in the prior year, driven by higher operating profits and the lower tax rate. Our balance sheet is solid. Net debt, including capital lease, financing, and cash-on-hand, was a $139.6 million. While our debt increased from September 2021, this was in line with expectations as we continue to build inventory to make demand. Our inventory was $183 million at the end of the first quarter, an increase of $21 million fromSeptember. But below our target for the spring shipping season. This is both an increase in the number of units on hand, and a reflection of high inventory value resulting from increases in raw material, transportation, and labor costs. We expect to remain inventory constrained as we manage through the remainder of fiscal 2022. We continue to invest in the business, spending $1.8 million on CapEx in the first quarter of fiscal 2022. This amount is lower than we had planned for the quarter, as we experienced supply chain delays in receiving some machinery. We still anticipate spending approximately $20 million on CapEx in the fiscal year as we continue to invest in new retail doors at Salt Life, production processes in our Central American manufacturing facilities, and the continued investments in the infrastructure at DTG2Go. Additionally, we will continue to invest in IT infrastructure projects that support our vertically integrated supply chain platform. In the first quarter of fiscal 2022, under the previously announced share repurchase program, the company repurchased 74,232 shares for $2.1 million, bringing the total amount repurchased to $54.6 million. At the end of the first quarter. The company had $5.4 million remaining to repurchase under the existing authorization. Now, I'll turn the call back over to Bob for his closing comments prior to Q&A. Bob?
Robert Humphreys: Thanks, Simone. We know what most of you are interested in is how we see fiscal 2022 progressing, and how we will deal with labor shortages in the United States, supply chain disruptions, and high cotton prices. Well, I'll start by saying that without these headwinds, our fiscal 2021 full year and our first quarter of fiscal 2022 results would have been even better. We know that we will have further challenges as we progress through fiscal 2022, both known and unknown. We also know that we successfully navigated many economic cycles, trade law changes, consumer behavior and fashion changes, inflationary spikes in raw materials alongside many other challenges in our 21 years as a public company. That history and experience gives us confidence as we sit here today with the highest revenues and profits in our history, as being well-prepared for continued challenges as we manage through the remainder of fiscal 2022 and beyond. The opportunities Delta has to grow its top line and further expand profitability are probably the strongest we have seen in our history. While the current economic conditions present challenges for us, the changing global dynamics are providing many opportunities. Our key go-to-market strategies, Salt Life, Delta Direct, Retail Direct, Global Brands, and DTG2Go, combined with our vertical supply chain network, provides us with a powerful business platform which is in strong demand and provides us with many avenues for further growth. On our last earnings call, when we reviewed our full-year fiscal 2021 results, we reported that we expected top-line growth and operating profit expansion across fiscal 2022 quarters, resulting in all-time record revenue and earnings per share. Subsequently, we reported that we expect double-digit revenue growth for the full year. Our first quarter results reflect the building momentum that we have in our business, and positions us well to reach our full year objectives that we previously announced. And now Operator, you can open up the call for any questions we may have.
Operator: Thank you. . We will go first with Dana Telsey of Telsey Group.
Dana Telsey: Hi. Good afternoon, everyone, and congratulations on the results. Couple of things. Can you unpack inflation? What type of price increases are you passing on? How it's changed, how you expect that to change going forward, and with supply chain, how are you thinking about your inventory levels in order to meet demand as we go through the upcoming quarters with the double-digit revenue growth assumptions?
Robert Humphreys: So Dana, if you look at overall our price -- our average selling prices, particularly on basic product, are up about 20% over the last five quarters. And I would say about 15% of that is probably driven by just price increases where we are passing along costs. And maybe about 5% of that is due to increased services that we're providing and changing in mix. There's more price increases, they're going into effect in the basic at once business. As we speak, it seems like people are rolling them out in the calendar first quarter. We've seen price increases along other areas of our business in our Global Brands and Retail Direct businesses, where we priced them on a more forward-looking when delivered process and partner with our customer's own cotton pricing and those other raw material prices that have to be moved along. So I think a bit more to come and certainly wage rates have not abated. Energy rates have not abated. Cotton is still volatile right now. So it's just something that we have to look at and manage through really almost on a daily basis we talk and think about what increases we have, and how we're going to manage through that. And I'd say so far so good, but continue the work ahead of us.
Dana Telsey: And then on the supply chain constraints, any way and how you -- do you see it at all normalizing or what are you looking at over the next few quarters? And is this at all hindering your ability to get new customers for DTG2Go, because it certainly sounds like you are getting new customers?
Robert Humphreys: Yes. So I'd say a couple of different things. The thing that's been really interesting is you've had from what we see, and I think other apparel manufacturers and probably other types of business are seeing these supply chain problems be bubbles that move through the system. So as soon as we get it fixed in one area, then suddenly there's another shipping issue somewhere else or a labor issue somewhere else or equipment failure or a plant down. And so it's kind of been almost laughable if it wasn't so serious and we didn't have to spend so much time on it, where it's going to pop up next. But that's where I really just call out our manufacturing and planning teams that have worked tirelessly through this. Even in the depths of the pandemic, the amount of products we were able to get out of El Salvador to service our global brands, how we were able to start up our manufacturing facilities and keep our people safe, just a lot of work around. Our distribution centers in the US kept operating our DTG2Go print operations, kept operating on limited schedules or with different groups of people. So all of that added together has allowed us to keep operating and have sequential quarters of nice growth, which each time we get to the end of one, we kind of think, well, how are we going to do that next quarter?
. : We've opened up additional facilities this quarter already that are certified in our digital first process for customers. And we have one more facility that we'll be adding equipment to later this quarter that will do the same thing and all you got to do is look at the weather patterns in the U.S. over the last few weeks and different parts of the country shutting down and we had facilities that we could transfer production to and continue to print. So it's just I think a great testament of our ability and having non-different print locations where we can continue to operate. And it's just a great example I think of what in the new economy, our customers and consumers are looking for to keep things moving forward. So we are in good shape with the customers we have home boarded. There's a couple of others that we believe will grow significantly as they reevaluate their own current supply chain during the quarter. But I'd say our our vision for the rest of this fiscal year in DTG2Go We're not needing to go recruit a lot of new customers. There's growth on the table for us to execute against and manage together and they're expecting that I promise.
Dana Telsey: Thank you.
Operator: And we move next to Bill Fogel with DV Advisors.
William Fogel: Hello. Can you hear me?
Robert Humphreys: Yes, Bill. How are you doing?
William Fogel: I'm doing okay. How's it going, Bob. Great quarter, really spectacular performance, still amazes me that you guys are trading like a value company putting up these growth sort of numbers. But just a couple of questions. First, are you still capacity constrained? And how can we look towards that capacity coming online as we go throughout the year? And I think kind of a related question is, you talked about double-digit growth this year and revenues and you're on target for that. Can you give us a little more linearity clarity on that? I mean, clearly this quarter you're at 17%. Do you expect these sorts of numbers or is it going to moderate? And then finally, just on margins. How do we expect the progression of margins to be as we go throughout the year? Thank you.
Robert Humphreys: Sure. So as far as capacity. So we -- as we've been talking about for a couple of quarters, we have some new equipment on order that will go into our Central American facilities, that will what we call debottleneck, remove bottleneck processes in our textile facility there, that will add about 10% output. That equipment is a little bit late, but it's on a boat and moving towards us. So we expect that to affect our back half of this year with more production capability. I will say our leaders and employees in that area continue to come up with innovative ways to produce more products along the way. And so we have done that. And producing a little bit more now that we were expecting. Again, there's some constraints around raw material delivery and that sort of thing. But we do expect to continue to increase our output as we go there. We have additional screen print equipment on order for El Salvador and Mexico. It's been kind of interesting to us. When we first started in digital print, we thought it would one day maybe eliminate screen printing, and it's amazing how it's evolved but we are now screen printing more units than any time in our history and see stronger demand for that. And we love having the additional value adding services. So we will be screen printing over a million impressions a week in this quarter, maybe not every week we are building to that. And so we expect as we sit here today, setting aside a shot to the supply system where something is shutdown and really hurts our production that we can achieve low double-digit growth rate in totality for the full year. And my general expectation is that we're going to have gross margins for the year at a similar level to what we had in the first quarter. There might be some ups and downs through that. There's some more pricing increases that are rolling out in some areas in the marketplace but obviously that's a dynamic that a lot of participants ultimately influence so, too soon to tell there. Obviously if we can hold gross margins and lever our fixed costs then that helps our bottom line results. And that's what we're shooting for and plan on achieving.
William Fogel: Yes. And operating margins throughout the year because you had some good control of those expenses this quarter, how should we expect those to trend?
Robert Humphreys: Yeah. So I think our operating margins are going to be again in full year similar to last year, but over higher revenue.
William Fogel: Okay. And maybe I'll just try to corner you a little bit before I'll let you go. Double digit -- low double-digits. I mean, that kind of -- is it the kind of range -- is low double-digits 10% to 15% or 15% to 20%, 10% to 20%, can you that at all.
Robert Humphreys: Yes, I can narrow that range for you. So again, we would be proud of anything north of 10% for an organic revenue growth at this stage of where we are in our capacity constraints. And I think it would -- we can't sustain the 17% that we had in this quarter based on what we see today, it's not possible with our manufacturing. Although it appears that the demand would be there. We are telling customers no to business, particularly the ones that are looking for a place on our vertical supply chain, manufacturing and service platform. Major customers are asking us to provide more production in the back half of this year, and at this point, we're happen to tell them we can't do that. So demand is strong. Again, I think a lot of changing world dynamics, a lot of relationships that we've built, a lot of confidence that companies have in our people's ability to deliver and, so I think it just bodes well for our ability to organically grow Delta Apparel in totality.
William Fogel: Great. Thanks so much for your time. I guess, given that you're completely capacity constrained and cumulatively sold out, maybe you might think about -- I'm sure you are thinking about being more aggressive on the pricing side if you have people you're turning away. Maybe if you raise the price little bit, it might help. But anyway, thank you so much. Great quarter. We'll be in touch. Bye.
Robert Humphreys: Thank you.
Operator: And we'll go next to Jamie Wilen, Wilen Management.
James Wilen: Impressive results, fellows. Three different questions. First, could you tell us about the Central American and the low -- the operations of El Salvador and Honduras, do you have the same difficulty that we have in the States with the availability of labor and the cost of labor.
Robert Humphreys: We don't have the problem with availability of labor. And there, I think -- I hate to quote a number because I don't keep up with it, obviously, every day but I think unemployment rates in those countries are still in the 25% to 40%, probably still haven't recovered from pre-COVID production rates. We have a growing group of educated leaders in those countries. All of our -- Almost all of our leadership from management or VP of Manufacturing, plant managers, engineers, and what have you are from the region anyway, and or else have lived there and worked for long periods of time. And so my point is this is -- it's just really comforting and encouraging to see the work ethic and the enthusiasm they have for our company and their country, and help to make all of that better. So we don't have that problem. The infrastructure is not as good. You can have transportation problems, you can have electricity problems and other things in a less-developed country. But labor is not one of them.
James Wilen: Got you. On the Salt Life side, your same-store sales growth was 18%. How does that -- how do you look at that with the maturity of stores? Does most of that growth happen early on as you open up new stores from year 1 to year 2, or do they trend similarly throughout all your stores? And secondly, within Salt Life, gross margins of 53% sound rather impressive. Is that a number that you can still achieve? And then the last on Salt Life is, you still mentioned availability of product even with getting same-store sales up 18%, could they have been even better?
Robert Humphreys: Yes, I'd say two or three things on that, where we really suffered the worst on not having product was in our e-commerce business, because our stores were sucking out in the merchandise, our wholesale customers were coming in, and dropping orders that sucked up that merchandise. And that was the reason that our management team down there said that, hey, we got to do something better than this and so we will have merchandise specifically being for support of our e-commerce business. We don't want that to be inventory constrained. I would say particularly accessories and things that we can't make. Cables is a good example, bags. We were inventory, light -- very light during the quarter. So I think yes, we could've had higher revenue. As far as same-store sales goes, really interesting. If you dig in by-store, there's kind of a story behind each one. But basically what we do just as a measurement is try to go look at for stores that were already open before our measuring period started, what was their growth for the quarter, and we do that. Stores come into that as we open new stores. But I think Daytona beach is a great example that we opened maybe 2, 2.5 years ago now, it was a new outlet, an exit that was being developed, and the same-store sales growth there is really outstanding. But if you go ride by that exit now, there's a lot of stuff that has been added to it. So what we're seeing is these destination areas where people are going there, we're going to get our fair share business. So the more people who do stop in those areas, the more opportunity we have to sell them stuff. And so, I'd say our only thing with our stores is getting them open quickly and efficiently, and our team's doing a good job of that. Usually our longest hold-up is getting a building permit to do whatever we need to do, and then having enough product in there to service our customers. And again, our planning teams are being more aggressive to make sure we have those kinds of products available for our consumers when they shop there.
James Wilen: Okay. And also on the Salt Life, what's the outlook on the wholesale channel as you see your orders in line for the season?
Robert Humphreys: Unbelievable. The demand --
James Wilen: Okay.
Robert Humphreys: for product very strong, and our wholesale customers want more of it.
James Wilen: And is it geographical expansion, number doors, or where's most of that coming from?
Robert Humphreys: It's very broad-based. I mean, still strong in the Southeast, but it continues to grow more with retailers who have opened up in, I'll say non-traditional areas. The amount that we're shipping to California continues to increase, up the East Coast, Midwest. So our retail customers want Salt Life products in there, and I think it's probably a pretty good example of this whole omni -channel model that has worked for a number of people, and it's working for us, and it's resonating with the Salt Life consumer. And so right now, all of our channels are growing with only e-commerce being limited by our lack of product to get out there to consumers.
James Wilen: Got you. And on the DTG2Go side, two questions. You talked about new facilities in digital. I thought you had already done your footprint. Does that mean new facilities within -- as you did within a Hot Topic distribution center or I'm not sure what that is. And also, could you talk about the on-boarding of the several new customers? Are they different in nature than your existing customers? And unto themselves, what percentage of revenue growth can these new customers achieve for you who didn't exist last year that exist today?
Robert Humphreys: Yeah. So I probably was not clear about new facilities. So is our new digital first equipment in existing facilities. So we have that equipment in three now, one to go. It was in two at holiday, and the third one has parked and we have people who have already certified that production. That's in our Dallas facility. And so this is I think key when you think about this business, and really understand it and the go-to-market strategies. But these customers are different in that they are not just e-retailers or primarily e-retailers, but our larger customers who either have extensive license agreements or extensive OP that they own, or retailers or global brands all onboarding on that. and I think the thing that really sets the stage is the digital-first quality. And it's not just the quality, it's aesthetics, where even industry experts cannot really differentiate between how this garment is printed, whether it's digitally, or some combination, or screen printed. And so, when you get to that level, first of all, you have the quality comfort if you own a brand or an IP that you want that level of quality, and the consistency and the acceptance of the customer that that's what they're expecting. And so we can make very high quality and we still do and will for a long, long, long time on the digital equipment that we previously had. But then as a matter of, I might like it better and you might not like it as well versus having a standard that's really indistinguishable from how it's produced. So lots of good stuff there. I think these customers will no doubt -- there's three already on-boarded that will be the majority of our growth this year, and over time will help reduce the seasonality further for that business, which is also key.
James Wilen: Excellent. Thanks, Bob.
Operator: And we'll hear next from Chris Reynolds of Neuberger Berman.
Chris Reynolds: Yes. Thank you, Bob, for taking that question. And quick two questions. One, what exactly does it mean when you say you have to put some equipment into new facilities, and what kind of equipment is that and how expensive is it? And the second question is on the buyback and I like the buyback, a great deal. You've had a consistent record of doing that. What's the philosophy for stock repurchase. Because obviously, the growth rate of your company has gone up a lot but your multiple is low, so I assume you'll keep buying your shares, but things have changed over the last three to five years in terms of how your company is positioned. Thank you.
Robert Humphreys: So this new equipment is new technology. There's some confidentiality agreements and I'm not familiar exactly where they start and stop off the top of my head, so I will just say it's new equipment, we were the beta test sites. We've got basically first right of refusal for most of their production for some significant period of time. They are gearing up beyond that. So there will be other people that have the equipment. But as we've talked about in digital print for ending for a decade now, it's not just the equipment it's understanding the R&D, it's understanding apparel, it's having the technology for the equipment to then know what type of garment is on the machine and how to adjust everything automatically is the technology to manage the art, and how that's going to be applied to the garment, and then managing where that garment is and ultimately into the pile delivery to the customer. So there's a lot that goes into it. A significant part of what we have that differentiates us from competitors one, is our technology and systems that we've developed over 12 years now. And then secondly, having right now, nine different print locations where we can electronically move garments to where we have the garment to print on or what's closest to the end consumer, which lowers the shipping costs and is the speed to the consumer. So there's a lot of components here that we've been working on that really, I think, separates us from the majority of the players out there and create huge barriers to entry and then you add to that, that a number of them are sitting in our DCs. We've got garments there for them to use in print-on, we eliminate an extra shipping cost to get garments to where the printers are. And the only way you can really compete with that is by getting the apparel business, which is pretty daunting for most people who are digital printers. Those say, I'm going to be a vertical t-shirt producer, so I can compete with Delta Apparel. So those are the things that make that work for us and we expect that to continue. With that second part of your question, I'm sorry, with all that rambling I forgot.
Chris Reynolds: That was very helpful. It sounds like you've almost made your plants mobile in many senses, so you're able to shift the production to where the demand is. So that's very helpful for me. But your stock repurchase program, you've been opportunistic over the years and bought stock, and that's been terrific, but it seems like the growth trajectory of your company has changed, and I'm wondering what's the philosophy of stock repurchase. Has that changed at all?
Robert Humphreys: It certainly has evolved over time. Back in the day when we were doing a lot of acquisitions, I mean, it was an easy and fun math to do, where we can buy ourselves or we can buy somebody else. And it pretty much told you what you could pay for an acquisition, and no need to get too excited because our little joke internally was to do acquisitions, you got to work weekends, and you can buy your stock back during the week. So if in doubt, do that. And I just happen to see something today for a different reason, but I think it was in 2014, we had about $8 million shares outstanding and today we have about $7 million shares outstanding. I don't know off the top of my head exactly what our average prices share repurchases are but probably about -- probably less than half of our current trading values. So I believe for shareholders that works out pretty good. So our philosophy on that is really use of capital and return for our shareholders. I would say we see where the stock is trading versus where we think our -- the intrinsic value of the company is and then look at that versus opportunities for organic growth, particularly. You all know as well as I do the value of what organic growth can do for per-share earnings when we can lever other calls. So if we continue to see demand for production, then we'll put that into our formula of how much we can expand, and buy back our shares versus expand our manufacturing output. I will say at Quarter-End, I think our debt-to-EBITDA was really the lowest that it's been in modern history, about 2.5x debt. So I think we have good flexibility to organically grow our business and our stock is still thinly traded, more thinly than we think it should be. And so we'd like to have programs out there to buy shares when there's more selling pressure than buying pressure.
Chris Reynolds: Thank you.
Operator: And we have a follow-up question from Bill Fogel of DV Advisors.
William Fogel: Yes, just one follow-up. Given where the stock is, obviously the pieces Salt Life and DTG2Go probably worth a lot more than the current market cap of the company is. Would you consider at some point a sale or spin of either of those entities. And maybe it's not the right time because they're still growing so quickly, but just wondering what are your thoughts on that.
Robert Humphreys: We always consider all those things. And again, just look back over our history. We've done, I think, three divestitures. we've consolidated some things, when we feel like either we don't have a future view of success, but maybe someone else does, we will sell the business and take that capital. And that's how we got capital for DTG2Go and Salt Life just by selling businesses that have been good. We sold them above our carrying value and had to made money over the years and allowed us to harvest those profits, to redeploy them somewhere else. And I think, looking back now, at Salt Life and DTG2Go, that worked out well for all of us. I would also point out there is significant tax consequences to selling businesses that are valued much over their carrying value. So you got to take that into account too. And we're still a relatively small public company and you got some amount of fix, being public costs, and suddenly you might be spreading that over a smaller remaining business. But that's normal conversations around here, whether it's in the board room or .
William Fogel: Thank you very much.
Operator: And with no other questions in the queue, I will now turn the call back over to Bob Humphreys for any additional or closing remarks.
Robert Humphreys: Well, thank you all for your interest and questions. And we look forward to meeting with you telephonically in a few months and talking about second quarter results. Hope you have a good one.
Operator: That concludes today's call. Thank you for your participation. You may now disconnect.
