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Americold Realty Trust, Inc. (NYSE:COLD) Q4 2023 Earnings Call Transcript

Americold Realty Trust, Inc. (NYSE:COLD) Q4 2023 Earnings Call Transcript February 22, 2024

Americold Realty Trust, Inc. misses on earnings expectations. Reported EPS is $-0.8 EPS, expectations were $0.36. Americold Realty Trust, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Greetings, and welcome to the Americold Realty Trust Fourth Quarter 2023 Earnings Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. I'd now like to turn the conference over to your host, Kevin Reed, Vice President of Investor Relations. Thank you, and you may proceed, sir.

Kevin Reed: Good afternoon. Thank you for joining us today for Americold Realty Trust's Fourth Quarter 2023 Earnings Conference Call. In addition to the press release distributed this afternoon, we have filed a supplemental package with additional detail on our results, which is available in the Investor Relations section on our website at www.ir. americold.com. This afternoon's conference call is hosted by Americold's Chief Executive Officer, George Chappelle; President of Americold, Rob Chambers; and Chief Financial Officer, Jay Wells. Management will make some prepared comments, after which we will open up the call to your questions. On today's call, management's prepared remarks may contain forward-looking statements. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today.

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A number of factors could cause the actual results to differ materially from those anticipated. Forward-looking statements are based on current expectations, assumptions and beliefs as well as information available to us at this time and speak only as of the date they are made, and management undertakes no obligation to update publicly any of them in light of new information or future events. During this call, we will discuss certain non-GAAP financial measures, including core EBITDA and AFFO. The full definitions of these non-GAAP financial measures and reconciliations to the comparable GAAP financial measures are contained in the supplemental information package available on the company's website. Now I will turn the call over to George.

George Chappelle: Thank you, Kevin, and welcome to our fourth quarter 2023 earnings conference call. This afternoon, I will discuss key operational metrics and financial results for the quarter and for the full year. I will then discuss the current market conditions that are underpinning our 2024 guidance. Rob will provide an update on our recent customer initiatives and growth activity and Jay will provide a detailed walk-through for our full year 2024 guidance. Turning to our core business priorities. First, customer service continues to support strong occupancy in our portfolio. For the fourth quarter, our same-store economic occupancy remained strong at 83.7%, which was 53 basis points decrease over last year and a 30 basis point decline sequentially from the third quarter.

As a reminder, we delivered four quarters in a row of record-setting economic occupancy in the mid-80s, including the first three quarters in 2023. Last year's fourth quarter economic occupancy was aided by a counter seasonal inventory build as food manufacturers produced ahead of end consumer demand as they were seeing labor improvements, but this did not repeat this year. Considering this, the slight fourth quarter decline from prior year, combined with four quarters in a row of record-setting economic occupancy in the mid-80s continues to demonstrate our assets remain in very high demand. To further emphasize just how high the demand is for our assets, 2023 full year same-store economic occupancy was 84.3%, which is an Americold's full year record significantly beating our last record same-store economic occupancy of 80.5% by almost 400 basis points.

We are very proud of this achievement. We also derive 52.2% of rent and storage revenue from fixed commitment storage contracts in the fourth quarter, which is 180 basis points higher than the third quarter's level and set another record for this metric at Americold. Our high occupancy percentage and rising fixed commitment percentages continue to highlight our ability to grow our market share. Second, turning to our priorities around labor management. During the fourth quarter, we achieved a perm-to-temp hours ratio of 75:25. This is 200 basis points improvement to our fourth quarter 2022 permanent labor levels and on a sequential basis, roughly flat to the third quarter 2023 due to seasonality when we tend to use more temporary labor in the second half of the year, making the year-over-year metric more relevant.

Additionally, we continue to make progress on turnover, ending the year at approximately 13 percentage points lower compared to prior year. Compared to the end of 2019, a pre-COVID year, we ended December at approximately 9 percentage points higher. We are also introducing a new labor metric, which is the total percentage of Americold's hourly workforce that has less than 12 months experience with us. This metric, different than retention should correlate very well to increasing productivity and warehouse services margins as it measures the longevity of the hourly associate level necessary to delivering sustainable, reliable services performance. We ended the year with our percentage of hourly associates with less than 12 months on the job at 32%, down from COVID high of 41%, but still higher than our 2019 average of 23%.

Continued progress in this area, along with the hiring and retention metrics we currently disclose will provide the foundation for predictable stable warehouse services margins for the future. Third, we continue to make progress on our in-process development projects. During the fourth quarter, we completed our customer-dedicated automated facility in Plainville, Connecticut that supports a global retailer. At this point, all five of our automated developments that we outlined at the beginning of 2023 have been completed. With the completion of these five facilities, Americold is the first and only cold storage company to deliver automated solutions at all three key nodes of the supply chain, production advantage, major market distribution and retail distribution.

On our two customer-dedicated automated retail distribution facilities in Lancaster, Pennsylvania and Plainville, Connecticut while completed are currently ramping. Given the level of complexity and the importance of customer service to over 750 retail stores, we are being thoughtful on our ramp-up plan, and we are extending the stabilization dates. Combined, these facilities will redistribute over 75 million cases per year, and the level of testing and customer integration is the most complex in our portfolio. Rob will go into greater detail on this shortly. Lastly, we continue to effectively reprice our warehouse business. For the fourth quarter, rent and storage revenue per economic occupied pallet in our same-store on a constant currency basis, increased by 3.4% versus the prior year, which was partially offset by the reduction of power surcharges in certain markets.

Service revenue per throughput pallet increased by 9.1%. Turning to growth today. We are excited to announce an approximately $130 million greenfield development in Kansas City, Missouri, as part of our collaboration with Canadian Pacific, Kansas City or CPKC, one of North America's largest railroad companies. CPKC owns the first and only single line transnational railroad, linking Canada, the United States and Mexico. Our agreement with CPKC is a strategic collaboration in which Americold will build, own and operate cold storage facilities on the land located on CPKC's railroad network. In this inaugural project in Kansas City, we intend to build a conventional facility that will support multiple customers' product coming from and going to Mexico, which will be transported on CPKC's railroad.

This network solution provides a cheaper, faster and more environmentally friendly process for CPKC and Americold's mutual food manufacturing customers to import and export their products. Additionally, in December, we announced our plans through our RSA JV to build a conventional multi-customer major market distribution center in Dubai at DP World's Port of Jebel Ali Free Zone for $35 million. This planned development will be the first of its kind to combine Americold's global temperature controls infrastructure with DP World's port infrastructure and end-to-end logistics solutions. This strategic combination will result in an unprecedented optimization of temperature-sensitive food flows in and out of the countries of the Gulf Cooperation Council and provide redistribution opportunities across the region.

These partnerships with CPKC and DP World illustrate Americold's unique ability to create value by collaborating with global leaders in adjacent areas of the supply chain. Our investment in these partnerships will grow significantly over the next few years as we continue to identify opportunities to jointly grow our business. We expect $500 million to $1 billion of development opportunities combined from these two strategic partnerships. Turning to our fourth quarter results. We delivered AFFO per share of $0.38, a strong increase of over 31% versus prior year's quarter and a record level for quarterly AFFO per share. Our performance was primarily driven by our global warehouse same-store pool, which generated NOI growth of 8% versus prior year on a constant currency basis.

Our strong same-store pool results were driven by our pricing initiatives, record-setting fixed commit levels, aggressive variable cost management and improved warehouse services productivity. Throughput volumes declined by approximately 760 basis points versus prior year, improving the year-over-year decline sequentially by 140 basis points and consistent with implied fourth quarter guidance. While food manufacturers utilize promotional spending to bring more end consumers into the store, the temporary changes to end consumer demand and behaviors due to the challenging economic environment continued to weigh on throughput volumes. The bright spot for warehouse services in the quarter was our performance on margins. As you may recall, in the third quarter, despite the 900 basis point drop in throughput volumes, we were able to deliver services margins of 2.8%, which was approximately 30 basis points better than the first half of the year through aggressive variable cost management.

We accelerated this progress in the fourth quarter and overcame a 760 basis point drop in throughput volumes by achieving services margins of 6.1%. On a sequential basis, this is an incremental 330 basis point improvement versus third quarter 2023, which resulted in an incremental $10.5 million in same-store services NOI or roughly an incremental $0.04 in AFFO per share for the fourth quarter of 2023. On a year-over-year basis, the impact was equally impressive with an incremental $11.1 million in same-store services NOI. These productivity improvements are quickly taking hold after two years of hard work and give us a high degree of confidence of achieving our target of 9% services margins during the second half of 2024, likely during the fourth quarter.

Turning to our full year results. For 2023, we delivered AFFO per share of $1.27, which is the midpoint we guided to last quarter. Accounting for the $0.03 per share that we estimate we lost during the cyber event in the second quarter, our full year AFFO would have been $1.30, which is an increase of 17% over full year 2022 or an increase of 19% when adjusted for the exit of a large retail customer in a third-party managed business in the fourth quarter of 2022. This exceptional performance was primarily driven by our global warehouse same-store pool, which generated revenue growth of 4.3% and NOI growth of 12.8% versus prior year both on a constant currency basis. Our strong same-store revenue results were driven by a combination of record-setting same-store economic occupancy of 84.3%, which was almost 400 basis points better than any year in our history.

Our ongoing price initiatives and improving services margins, driven by increasing productivity. Our record-setting occupancy is attributed to two main factors: first, our intense focus on customer service, which led to an enhanced win rate on customer opportunities; and second, our enhanced commercialization efforts, which drove our fixed commits to record levels. In addition to new business, our customers publicly recognize Americold's performance. For example, Butterball awarded our Lowell, Arkansas facility with its Site of the Year Award. We appreciate this recognition and look forward to continued progress around our customer service initiatives. Before turning to our 2024 guidance, let me comment briefly on our recent leadership changes that strengthen our team and best position us for profitable growth.

In January, we hired Jay Wells as Chief Financial Officer. Jay is a veteran public company financial executive with more than 30 years' experience building and leading international teams and has considerable financial planning and transaction expertise. He joined Americold from Primo Water, a leading publicly traded water company, which operated across 21 different countries, including North America and Europe, where we served as Chief Financial Officer from 2012 to 2023. We are very excited to have Jay on the team and look forward to introducing him to the investment community over the next several weeks. We also announced that we realigned our executive leadership team to drive synergies and further enhance our customers' experiences across geographies.

With Rob Chambers assuming the role of President, Americold, and Richard Winnall, assuming the role of President, International. Both Rob and Richard have been with Americold for many years, and these changes to our leadership structure will allow our team to more quickly and effectively implement strategic initiatives across all markets and locations to better serve our customers. Lastly, Kevin Reed recently joined Americold as our Vice President of Investor Relations. Kevin joins us from ICR and Investor Relations consulting firm where we worked with Americold and many other REIT clients over the years. We are very excited to have Kevin on the team. Now on to the current market conditions that are underpinning our 2024 guidance. For the full year 2024, within the same store, we expect our economic occupancy to be slightly drawn from the full year 2023 level, which, as I commented on earlier, with an all-time record at 84.3%.

Given the current economic environment, we expect lower throughput volumes on a full year-over-year basis. However, we expect this decline to be most pronounced in the first quarter with a gradual improvement throughout the year. From a pricing standpoint, we expect to continue to cover inflation to benefit from our normal course annual rate escalations to reprice our longer-term agreements that come up for renewal and lastly, to underwrite new business appropriately. From an operational standpoint, we expect to continue to see warehouse services margins improve. However, please note the first half of the year may not be as strong as this recent fourth quarter 2023, given the continued declining throughput volume assumptions. Against this backdrop, we are guiding to a full year 2024 AFFO per share range of $1.32 to $1.42 with a midpoint of $1.37.

At the midpoint, this represents an approximately 8% increase from 2023 and approximately 5.5% increase when adjusted for the $0.03 of lost earnings previously disclosed as a result of our second quarter 2023 cyber event. At the midpoint, same-store revenue growth is expected to be 4% and NOI growth 8.3% driven by our continued pricing initiatives with aggressive variable cost management and improved warehouse services productivity. Lastly, before I hand it over to Rob, in line with our company value of giving back and our commitment to fighting hunger, we united with Feed The Children and their community partners to assist families across five states over the holiday season. Food and essential personal items were delivered to 400 families in underserved communities in each state, benefiting 2,000 families in total.

An interior of a modern temperature-controlled warehouse with industrial shelving units and workers in motion.
An interior of a modern temperature-controlled warehouse with industrial shelving units and workers in motion.

This initiative was part of our ongoing partnership with Feed The Children to focus resources on communities where we can have meaningful impact, which will continue in 2024. With that, I will turn it over to Rob.

Rob Chambers: Thank you, George. As George mentioned, our company delivered strong results during the fourth quarter, economic occupancy at 83.7% for the same-store pool and another quarter of record-setting fixed commitment percentage levels for our total warehouse segment. At quarter end, within our Global Warehouse segment, rent and storage revenue from fixed commitment contracts increased on an absolute dollar basis to $577 million compared to $420 million at the end of the fourth quarter of 2022. On a combined pro forma basis, we derived 52.2% of rent and storage revenue from fixed commitment storage contracts, which is an approximately 1,000-plus basis point improvement over the fourth quarter of 2022. Since our IPO in 2018, we have added over $379 million in annualized fixed storage revenue, a testament that speaks to both the benefits our customers derive from the structure, along with our best-in-class commercial practices.

Turning to pricing. For the fourth quarter, rent and storage revenue for economic occupied talent in our same-store on a constant currency basis, increased by 3.4% versus the prior year. Please note that during the fourth quarter, power surcharges decreased in certain markets, which was a headwind to our increase by approximately 100 basis points to 150 basis points. Service revenue per throughput pallet increased by 9.1%. We remain very focused on our pricing initiatives to ensure that we both offset inflationary pressures and price our business to reflect the value of the service we provide to our customers. We continue to take a surgical approach to pricing the renewal of existing business with embedded rent escalation that reflects the current operating environment, and we continue to price new business with a forward view of our cost structure and the current market rates.

Lastly, this past January, we implemented the majority of our annual General Rate Increases or GRIs for 2024. Within our Global Warehouse segment, we had no material changes to the composition of our top 25 customers who account for approximately 49% of our global warehouse revenue on a pro forma basis. Our churn rate remained low at approximately 3.2% of total warehouse revenues, consistent with historical churn rates. Given our strong operating metrics, we are continuing to accelerate the underwriting process and evaluating development opportunities across the three primary areas of focus that George has mentioned previously. Our CPKC and DP World collaborations, expansion projects and customer dedicated build-to-suit developments. Combined with this macro backdrop, along with our strengthened development platform positions us well to capitalize on these potential opportunities.

Let me comment on today's announcement. First, we are excited about announcing our plans to build a conventional multi-customer major market distribution center on CPKCs the intermodal terminal in Kansas City that will be approximately 22,000 power positions and 14 million cubic feet for a total investment to be approximately $130 million. This facility will be anchored by some of the world's largest protein, dairy and produce customers. We expect to break ground on this facility in the second quarter of 2024. The combination of the location of this facility and the value-added services we are offering is the first of its kind in the cold storage industry, and we are incredibly proud of this accomplishment. The unique services offered in this facility include inspection and free clearance of products shipping across the U.S., Mexican border.

By utilizing our facility and the associated services we offer, along with CPKC's Rail, our mutual customers get the benefit of reduced transit times and reduced transit costs, while at the same time utilizing less energy and reducing their carbon footprint. Also in December, we announced our plans through our RSA JV to build a conventional multi-customer major market distribution center in Dubai, a DP World's Port Jebel Ali Free Zone. This facility will be approximately 40,000 pallet positions and 8 million cubic feet, and we estimate the total investment to be approximately $35 million. The facility will be anchored by global food producers exporting products into the Middle East, North Africa and India, along with local market producers and distributors.

We expect to break ground on this facility in April of this year. The combination of Americold's global cold chain infrastructure and value-added services, but DP World's port and logistics infrastructure is expected to create a global end-to-end cold chain that unlocks unprecedented value for global food customers. Over the next five years, we expect $500 million to $1 billion of development opportunities combined from the CPKC and DP World partnerships. Second, as it relates to expansions. First, in the fourth quarter, we began ramping volume in our newly expanded facility in Spearwood, Australia. This automated expansion was completed on time and on budget and is supporting both food manufacturing and retail customers. The facility is ramping ahead of plan, driven by both customer demand in the market and the high level of service the automation is providing.

Second, we are making progress on our 11,000 pallet position expansion in Dubai and our RSA JV that we broke ground on in the third quarter of 2023. And third, we are expecting to begin construction on our 37,000 pallet position expansion at our Allentown, Pennsylvania site in the second quarter of this year. In addition to these in-progress expansions, we are also currently underwriting several additional new expansion projects in markets where demand currently outstrips capacity and expect more announcements in the coming quarters. Our third development priority is our customer-dedicated build-to-suit facilities. The pipeline here continues to grow and progress as customers refocus their efforts on long-term planning. Our long-term relationships with these customers position us well to secure these build-to-suit opportunities.

Finally, let me provide an update on our two recently completed customer dedicated automated facilities located in Lancaster, Pennsylvania and Plainville, Connecticut. As a reminder, these retail distribution centers are highly automated sites for one of the world's largest grocery retailers that combined, will serve approximately 750 individual stores in the Northeast and Mid-Atlantic U.S. As you will see in our IR supplement on Page 39, we've extended the expected stabilization date to the third quarter 2025 for the Pennsylvania facility into the fourth quarter of 2025 for the Connecticut facility. We made the decision in consultation with our retail customer, and we felt it was prudent to extend our ramp-up times and our stabilization dates due to the following two reasons.

First, the work being done inside these facilities is individual case pick selection, which is being completed by our automation systems. This is the high level of complexity that is taking some additional time to achieve our desired service levels. And second, it is taking additional time for these facilities to be integrated into our customer supply chain. The decision on the timing of adding new volumes is one we make jointly with our customer, and we are taking the necessary time to ensure a smooth transition. While this change impacts our overall non-same-store pool NOI in 2024 due to the shift in timing, we strongly feel it is the appropriate approach, and that is reflected in our 2024 guidance. Please note that our stabilization of return expectations have not changed, and we look forward to servicing our customer and delivering on the expected returns outlined for these projects.

In summary, 2023 was a year where we added tremendous value for our customers, and our customers responded by awarding us record levels of new business that led to our infrastructure reaching record occupancy and commitment levels. Five new automated facilities were completed, the announcement of three new development projects, the signing of our partnership deals with DP World and CPKC and now the announcement of a new development in Kansas City. We are able to continue to price the business to reflect the value that we're creating and deliver on both our customer service and our commercial objectives. Now I'll turn it over to Jay.

Jay Wells: Thank you, Rob. Before commenting on our 2024 guidance, I want to say that I'm honored to have recently joined Americold as CFO, and I look forward to working with the team to continue to strengthen the company's financial foundation and position the business for future success. I also look forward to getting to know the investment community over the next several months. Moving to our balance sheet. At the end of the quarter, total net debt outstanding was $3.2 billion. We had total liquidity of $797 million, consisting of cash on hand and revolver availability. Our net debt to pro forma core EBITDA was approximately 5.6 times. And as Rob discussed, we have announced our expansion in Allentown, Pennsylvania and our greenfield development in Kansas City, Missouri, both of which are expected to ramp up spending in the second quarter of this year.

Please see Page 39 of the IR supplement for additional details on our development projects. Turning to our full year 2024 guidance. We expect AFFO per share in the range of $1.32 to $1.42. Before reviewing the individual components of this guidance that are set forth on Page 42 of the IR supplement. Let me quickly comment on the new 2024 same-store pool for the Global Warehouse segment. Our new pool is now 227 facilities, which is approximately 95% of the total number of properties in our warehouse segment. A summary of the 2024 same-store pool historic performance for 2023 is presented on Page 38 of the IR supplement. We have 10 facilities that are in our 2024 non-same-store pools. Now turning to the individual components of our AFFO guidance and starting with our Global Warehouse segment.

We expect full year 2024 same-store constant currency revenue growth to be in the range of 2.5% to 5.5%. Let me provide more detail around the key drivers of this growth. With our segment occupancy and throughput volumes, we expect economic occupancy to be in the range of flat to a decline of 100 basis points compared to 2023 as we are lapping a record-setting year for occupancy and are expecting to continue to see a temporary change in end consumer demand in the first half of 2024 due to the challenging economic environment, partially offset by the benefit of recent commercialization efforts. We expect a slight decline in throughput volumes of 1% to 3% and as end consumer demand has slowed and basket sizes have shrunk due to the current economic environment.

With respect to pricing, we expect constant currency rent and storage revenue for economic occupied pallet growth to be in the range of 3% to 4%. We expect constant currency service revenue for throughput pallet growth to be in the range of 7% to 8%. The pricing guidance reflects our continued pricing and power surcharge initiative to cover known inflation. It also reflects our annual contractual escalation and GRI step-ups and the commercialization of market-based pricing for contracts that we underwrite or renew. For the full year, we are now expecting same-store constant currency NOI growth to be in the range of 6.5% to 10%, which is 400 basis points to 450 basis points higher than the corresponding revenue growth. With regards to the new 2024 non-same-store pool, as can be seen on Page 38 of the IR supplement, the new not same-store pool generated negative $12 million of NOI for the full year 2023 and positive $4.7 million of NOI in the fourth quarter of 2023 with the fourth quarter results being impacted by a short-term reduction in expense.

For the full year 2024, we expect the new non-same-store pool to generate NOI in the range of negative $3 million to positive $9 million. As Rob mentioned earlier, we have extended the stabilization dates for our Pennsylvania and Connecticut facilities to late 2025, and our guidance reflects the impact of this change. Turning to our managed and Transportation segment, NOI. For the full year, we expect these segments combined to generate approximately $45 million to $50 million of NOI compared to approximately $48 million of NOI in 2023. Turning to our SG&A expense, for the full year, we expect total SG&A to be in the range of $247 million to $261 million, inclusive of $23 million to $25 million of stock compensation expense and $5 million to $7 million of Orion amortization.

Similar to how we exclude stock comp expense from our total SG&A expense, we will also exclude this amortization charge to arrive at what we call core SG&A expense. For the full year, we expect core SG&A to be in the range of $219 million to $229 million. This range is higher than our 2023 core SG&A expense of $203 million, primarily due to higher costs associated with investment in cyber security measures and additional investments resulting from project Orion move to a SaaS environment. Speaking of Project Orion, we continue to make good progress and remain confident that Project Orion will deliver the benefits previously discussed. Turning to our interest expense. For the full year, we expect interest expense to be approximately $141 million to $149 million.

This range is higher than our 2023 interest expense of $140 million, primarily resulting from lower interest capitalization as we completed a significant number of developments last year. With respect to full year cash taxes, we expect 2024 cash tax to be approximately $9 million to $12 million. As a reminder, most of the corporate income taxes we pay at Americold relate to our international operations. Turning to our maintenance capital expenditures. For the full year, we expect this investment to be approximately $80 million to $90 million. In 2024, we expect to announce development starts aggregating between $200 million and $300 million. Please keep in mind that our guidance does not include the impact of acquisitions, dispositions our capital markets activity beyond that, which has been previously announced, and please refer to the IR supplement for detail on the additional assumptions embedded in this guidance.

Before I turn the call back to George, I want to discuss the $237 million non-cash goodwill impairment that we took in the fourth quarter of 2023 related to our European warehouse business. The goodwill impairment was driven by higher interest rates and a weakened macroeconomic environment in Europe. Please note, despite the goodwill impairment, in 2023, we grew the European warehouse business NOI by approximately 32% and expect this business to continue to deliver strong results. Now let me turn the call back to George for some closing remarks.

George Chappelle: Thanks, Jay. There is a lot to be proud of in 2023, such as growing AFFO per share, 19% when adjusting for the impact of the cyber event and the exit of a large retail customer and our third-party managed business. While setting work is an economic occupancy in the fixed commit contracts, completing five automated developments and increasing services margins in the face of declining throughput, all done with an eye towards building reliable and predictable earnings. As we start 2024, our development strategy is coming to life with our two strategic partnerships delivering high-quality growth opportunities that we are now turning into reality. As evidenced by our development guidance, we expect a very strong year for low-risk accretive development starts.

Our internal growth is underpinned by record-setting occupancy and fixed commit contracts in addition to services margin expansion supported by best-in-class labor management processes and tools that will not only add tens of millions of warehouse services NOI but do it in a way that's predictable and sustainable even as throughput is variable. All of this is enabled by the best-in-class customer service, our 15,000 associates around the world deliver day in and day out. To our associates, I say thank you for all that you do in support of our customers and our company. Thank you again for joining us today, and we will now open up the call for your questions. Operator?

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