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Good morning, ladies and gentlemen. And welcome to the MAV Beauty Brands Q4 and Year-end 2019 Earnings Call. [Operator Instructions] This call is being recorded on Wednesday, March 25, 2020. I would now like to turn the conference over to Craig Armitage, Investor Relations. Please go ahead.
Thank you, Jessica. And good morning, everyone. Thanks for joining us today. At the top of the call, we'd like to note that due to disruptions from the coronavirus pandemic, all of our Q4 results discussed today remain unaudited, and we expect to -- our audited financial results and MD&A to be filed on or about March 30. Also, our Q4 results include 7 weeks of The Mane Choice acquired in November 2019, and our fiscal 2018 results for comparative purposes exclude 3 months of Renpure acquired in March 2018. Also, please note that our remarks today may contain certain forward-looking -- sorry, certain information regarding our expectations, future plans and intentions that may constitute forward-looking statements. These are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information. I'd refer you to the factors described in greater detail under Risk Factors in the company's annual information form dated on or about March 30, 2020, for the year ended December 31, 2019, and the company's other periodic filings at sedar.com.I'll now turn the call over to Tim Bunch, President and CEO of MAV Beauty Brands. Go ahead, Tim.
Good morning, and welcome to our fourth quarter 2019 conference call. I'm joined today by Judy Adam, our Chief Financial Officer. In addition to covering the brand highlights and financial results this morning, we will discuss the impact of coronavirus and our mitigation plans. This is a rapidly evolving situation, and we do not have all the answers. But we will outline what we are doing to navigate the risks that are within our control. MAV Beauty Brands delivered double-digit revenue and profit growth in 2019, leading the relevant competitive set in our industry. Our North American business, which is 93% of the total, grew by 18% year-over-year. The North American results reflect the growth of our brands within existing retail partners as we continue to demonstrate our ability to leverage our operating platform and innovation engine to expand distribution. MAV Beauty Brands' portfolio has successfully extended distribution across North America, and consumer demand for our portfolio of products remained strong through 2019. The MAV portfolio, including The Mane Choice, had double-digit POS growth for 2019. MAV Beauty Brands is now the eighth largest hair care company in the U.S. market and one of the fastest-growing among the top 10. Although we don't break down sales by brand, I will provide color on each of the brands, what's been working and what we're emphasizing for 2020. 2019 was another strong year for the Marc Anthony True Professional brand, highlighted by double-digit POS growth in the U.S. market. While drug remains the largest channel today, the brand experienced strong year-over-year performance in mass in 2019 driven in part by the Strictly Curls collection. We were successful in expanding shelf space in drug and mass for 2020.Renpure also produced double-digit POS growth in 2019, led by the body wash and lotion products, which continue to perform very strongly. The hair business remained steady in 2019, and the core Renpure collections continue to perform well in the U.S. mass channel with above-threshold velocity. Renpure remains a very healthy brand and substantially larger than when we acquired it. Cake Beauty has delivered outstanding growth. Gross sales have increased roughly 7x since the acquisition. In 2019, the big story line was a highly successful initial partnership in the U.S. drug channel, which drove 6x increase in U.S. sales. Our goal for this brand is to maximize growth by expanding its footprint across North America in drug, mass and specialty. As you may have seen earlier this month, we used winning innovation to increase distribution at U.S. drug with 14 new hair care SKUs on a second shelf. We also announced the launch of 15 core SKUs at a beauty specialty retailer in the U.S. earlier this month. In addition to the strong results from Renpure, Marc Anthony and Cake, the North American results reflect the initial contribution of roughly 7 weeks of sales from The Mane Choice, our acquisition which was completed in November. Through this transaction, we added a complementary brand in the fast-growing natural textured hair market. The Mane Choice enter 2020 as a top 6 brand in the U.S. textured hair care category. Retailers are devoting more shelf space to the textured care category, and our goal is to leverage mass retail relationship network to expand distribution and capitalize on this trend. Already in 2020, The Mane Choice has expanded distribution to Canada and launched core collections at a U.S. specialty channel.As we look ahead to the remainder of 2020, our outlook must now consider new risks and challenges posed by the rapidly evolving coronavirus situation. I will focus my comments on both supply and demand. Beginning in January, as new coverage -- as news coverage of the virus increased, our supply team immediately began contingency planning for both product componentry and raw ingredients. As you may know, the majority of our manufacturing is done in North America through a diverse set of leading third-party suppliers. While we do not manufacture outside North America, we source some components from China and other regions around the globe. As well, in times like these, we are competing for supplies and capacity with other manufacturers that are reacting to China being effectively offline for a period of time.In recent months, our operations team has acted to minimize the impact by: increasing the inventory of finished goods and components, reducing lead times by having certain components shipped by airfreight, sourcing alternative components and identifying and readying additional suppliers should we need their capacity in the coming quarters. We believe these steps will help us navigate through potential supply chain disruptions. However, at this point, the full impact is unknown given the rapidly evolving environment. On the demand side, like many companies, we simply do not know the extent or duration of the impact to our business. For example, how will in-store traffic and demand for our products be affected in the short term? Here's our current understanding of the view. One, as of now, the majority of retailers in the food, drug, mass channels are expected to stay open this time period. A smaller channel for MAV Beauty is beauty specialty retailers, of which many have announced temporary closures to the retail locations. Unlike some of our competitors that only sell in the prestige beauty market, our portfolio of masstige brands sell mainly in mass and drug channels, both of which are necessary providers of daily essentials. We also have a solid presence in the grocery channel in Canada. Two, while we are in new economic territory, we know from decades past experience that hair care has been a resilient category. People will continue to wash and style their hair. And body wash and lotion products are also essential items. And three, with travel restrictions and store closures, the e-commerce channel may increase in importance and opportunity. While a smaller portion of our business, we have invested to develop our Amazon and retailer.com channels. Over the past year, our Amazon sales have increased significantly, and Mane Choice has a very well-developed e-commerce business.In short, our team is working hard to minimize the impact to our business in unprecedented and challenging times. With that, I will ask Judy to quickly discuss the Q4 financial results. Judy?
Thanks, Tim. Good morning, and thanks for joining us today. Our unaudited financial information was included in today's earnings release, so let me focus on the main highlights for the fourth quarter and full year.Overall, as Tim said, the fourth quarter results were consistent with the outlook we provided in Q3. Total revenue increased by 6% over the prior year to $30.8 million and includes the initial contribution from The Mane Choice. North American sales, which benefited from The Mane Choice acquisition, increased by 9.7% to $29.9 million for the fourth quarter. This was offset by significant decline in sales from our international region to $0.9 million partially due to year-over-year shipment variability.For the full year 2019, which includes a full year of Renpure and the initial contribution from The Mane Choice, total revenue increased by 15.4% to $108.5 million, with North America sales up 18% to $101 million and international revenues down 10.4% to $7.5 million.Gross profit for the fourth quarter, as reported, was $13.4 million, consistent with the prior year. The fourth quarter cost of sales increased mainly from The Mane Choice acquisition and a fair value adjustment to inventory of $1.4 million. As a result of these factors and the sales mix in the period, Q4 2019 gross margin, as reported, decreased to 43% compared with 46% last year. However, adjusting for the impact of the purchase accounting adjustments, gross profit margin was 48% compared to 46% in Q4 2018. For the full year, adjusted gross profit margin was 49% compared with 48% in 2018. Selling and administrative expense decreased by 2.5% to $6.8 million in the fourth quarter compared with $7 million in the prior year. Excluding stock-based compensation charges of $0.6 million, adjusted selling and admin expense was $6.2 million or 20.2% of sales compared with $5.9 million or 20.4% of sales in the same period last year. We are seeing the benefits of operating leverage from our platform starting to emerge and will continue to manage costs tightly to mitigate the near-term economic headwinds.Adjusted EBITDA showed strong growth in the fourth quarter with a 15.4% increase to $8.5 million compared with $7.5 million in Q4 2018. Adjusted EBITDA margin was $27.6 million (sic) [ 27.6% ] in the quarter compared with 25.4% last year. For the full year, we generated adjusted EBITDA of close to $30 million, an increase of 12.5% from 2018.Adjusted net income decreased to $2.3 million or $0.06 per basic share in the fourth quarter compared with $2.7 million or $0.07 per basic share in Q4 2018. For the full year 2019, adjusted net income was $11.4 million or $0.31 per basic share, up significantly from $3 million or $0.12 per basic share in 2018. Note, the basic share calculations do not include the consideration shares issued in The Mane Choice acquisition.Free cash flow increased to $1.2 million for the fourth quarter compared with $0.6 million in Q4 2018. As expected, free cash flow was affected by onetime acquisition costs from The Mane Choice transaction. In our disclosures, we have presented adjusted free cash flow, which removes these costs to show the normalized free cash flow profile.Adjusted free cash flow was $3 million in Q4 '19, up from $0.6 million in the prior year. And for the full year, adjusted free cash flow increased by $7 million to $9.8 million in 2019.As expected, CapEx was much lower in Q4 at about $0.2 million. However, we had increased investment in working capital in Q4, primarily accounts receivable, as revenue for the quarter was heavily weighted to the back half of Q4, which is traditionally our largest quarter as we ship for planogram resets the following year.In terms of capital allocation, we used approximately $0.2 million toward the NCIB program in Q4. For 2019, we used the full allocation on the NCIB program for a total of $4.3 million to purchase and cancel 812,500 shares.At year-end, our net debt stood at just over $133 million and pro forma the acquisition of The Mane Choice, our net debt-to-adjusted EBITDA ratio was approximately 4x. Recall that our primary covenant on our expanded credit facility allows for up to 5x for the next 3 quarters and then steps down to 4.5x by the end of 2020.At year-end, we had undrawn balance of $19.5 million on our revolver facility.Looking ahead, the majority of our onetime CapEx investments are now behind us, and we are taking steps to manage operating costs, especially in light of the market backdrop.I will now turn the call back to Tim for closing comments. Tim?
Thank you, Judy. In 2019, we have delivered above-category growth from our portfolio, and we acquired a great brand in an attractive category, giving us additional scale and diversification moving forward. We entered 2020 with strong business fundamentals and a team in place to execute on our plan. Looking ahead, there are many unknowns, but we are taking proactive steps based on the data available, and we will continue to navigate through the challenges ahead. As I mentioned, our team acted quickly to help minimize supply disruptions, and we have the flexibility in our supply chain to adapt to changing conditions. While the extent of the impact to consumer demand is unknown, we operate in a category that has historically been recession resistant, and at this point, many of our key retail partners remain open.We appreciate your support and look forward to reporting on our progress with the release of our Q1 results in May.We'll now open the call up to questions. Operator?
[Operator Instructions] Your first question comes from Joe Altobello with Raymond James. My apologies. We've lost Joe Altobello for that first question.Your question now comes from Steph Wissink with Jefferies.
Just a couple of questions for us. Tim, the first is for you. If you could just go back through some of those observations you mentioned, that the majority of your retailers in food, drug, mass are expected to stay open, your observations around the hair care resiliency in that category and then e-comm. If you could just give us maybe a state of affairs currently. Any sense of what patterns your retailers are seeing, how they're planning into inventory reattribution? Any cutbacks in orders? Maybe just give us a current state of affairs with respect to those retailers that remain open. And are their perspective on hair care as well aligned to yours?
Yes. So it is a dynamic that is changing very quickly. We've seen the surge of consumers in stores, hoarding necessary supplies. And what we're hearing from our retailers is that as of now, other categories that we play in are considered essential to their shoppers. And so as of right now, we're not seeing any type of canceled orders or things like that. What we are seeing is in some retail environments, they're making different choices in terms of retail promotions, what they're planning to stock, if they're having trouble keeping products on shelves. And so they're diverting people from stocking shelves -- promotions into stocking regular shelves. As I also called out, we have seen with some specialty retailers a complete close of doors. We don't anticipate that for the rest of our food, drug and mass outlets at this time, but we are seeing, in some cases, that they're doing reduced store hours. And right now, we just don't know the impact that, that will have long term on the consumer demand.
Okay. That's helpful. And then one for you, Judy. If you could just help us think through what costs within your cost of sales and your SG&A line items are fixed versus variable. Give us some sense, when you talked about doing what you can to contain costs, what are those buckets of costs that you're looking at to flex in a period that might be a little bit more variable on the top line?
Yes. I mean the majority of our cost of sales is variable. We will -- we anticipate seeing some additional costs in inbound freight and warehousing probably starting to emerge in the short term as we try to expedite componentry and keep our inventory levels appropriate for going through the short-term situation. And then in terms of SG&A, yes, I mean, the variable SG&A is really with respect to some selling expenses, brokers' commissions primarily in outbound freight. As we look at cost containment across SG&A, yes, we're doing contingency planning as we speak, actively looking at all of our costs and identifying the mission-critical spend versus costs that we can effectively defer or cut if needed. And so we're looking at all of that. And those kind of areas with discretionary spend would be in the areas of more along of marketing and other administrative expenses. So wherever we can perhaps defer or hold back in the short term without damaging our business. So we're looking at all of those.
Judy, can I throw in one more? I just want to make sure I heard you correctly that you mentioned your CapEx has been spent already. Is that a comment that you want us to assume that the needs of your cash flow going forward for the rest of the year are really related to operations, not capitalized expenses?
Yes. That's correct. I mean as you know, in 2019, we were pretty heavy on our CapEx in the first half of the year as we were building out our corporate offices in Vaughan as well as -- and ERP. So majority of all the costs is behind us. We are still working through our -- through ERP. So there still will be a bit of that going through. But definitely, CapEx is going to be much lower in 2020.
All right. Your next question now comes from Joe Altobello from Raymond James.
Can you hear me okay?
Yes, we can.
Okay. Great. Sorry about that. Just want to go back to COVID-19 for a second and maybe give us a sense for your retail footprint. You mentioned that food, drug, mass is largely unimpacted so far. Specialty, a little bit more impacted. So maybe, what percent of your revenue right now -- or your distribution right now is closed? And maybe how big e-commerce is for you right now.
Yes. So e-commerce has been growing. I'll start there. It was a smaller part of our business, but with The Mane Choice acquisition, that has increased a little bit more in size. We don't disclose those sectors of our business by exact percents. But if you'll remember from the IPO time, we did disclose it was smaller than 5%. That is growing now quite fast for us as we added The Mane Choice. As you look at the store closures, this is a much smaller segment of our business because it's public. Sally and Ulta have both announced that they are closing doors. We don't know for how long. Ulta is a smaller player within our total portfolio but still an important one. And Sally Beauty, which we have not historically sold to, is a larger retailer for The Mane Choice. So -- but both of those are still keeping up their retailer.com websites as we will continue to ship and supply those. Food, drug, mass is where we have historically really sold the far, far majority of our business. And this is one of the reasons that this category remains resistant within recessions and why we feel like we're set up in a better place than those who only sell to specialty or prestige markets. Now it is not to say that the food, drug, mass channels will not have impact. I think it's just too early to really tell what that impact will be and what shopping behaviors will be because we've already seen in the past month dramatic changes, increases and shifts in shopping behavior. And so it is an unknown point still of what does that even look like going into April.
Got it. Okay. That's very helpful. And maybe one follow-up, sort of big-picture question for you, Tim. You've -- you were named CEO back in February. Any major change in strategy that we should expect in 2020 and beyond or continuing to do what you and Marc have done over the last few years here?
Yes. There will not be a major change in strategy. I've been with the company now over 3 years, partnered with Marc and leading it during that time period. Marc still plays a very important role in our Board. And really, the strategy that we launched with -- about having innovative, fast-growing products that compete and take share from larger CPG remains the same. One piece of strategy that has shifted slightly is we're not looking at acquisitions at this time. We're very focused in terms of our debt leverage and debt paydown and, of course, navigating through this time with the coronavirus.
And you wouldn't foresee any issues with your covenants, 2020, at least as far as you know at this point?
Yes. For that one, I'll pass to Judy.
Okay.
Yes. Yes, as you know, we just recently amended and extended our credit facility when we did The Mane Choice acquisition. Yes, we don't anticipate any issues. We -- our credit syndicate is 5 large banks which -- and composed of the large banks in Canada, and our covenant has ample flexibility for 2020. As mentioned on our -- on the call already, our covenants are 5x for the next 3 quarters and then dropping down to 2.5x.We also have our revolver facility, a total of $20 million, and at year-end, pretty much undrawn. As well as, we have another credit facility, the accordion facility, for $50 million that's available to us when our net leverage goes below 3.5x. So we're -- we've got a very attractive credit facility in place.
Your next question comes from Sabahat Khan of RBC Capital Markets.
Understanding that the demand situation is a bit uncertain, can we maybe talk a little bit about the shelf space situation? Has anything changed from the retailer perspective based on what they may have allocated to you maybe earlier in the year? Have you seen any shifts among brands or anything in this environment?
We haven't seen any shifts in shelf space. Many of those were set actually before the coronavirus became as relevant in the U.S. and North America. And so drug retailers reset shelves early in January. What we saw is our portfolio made some very strong gains in shelf distribution and drug as well as mass retailers reset in late January. And so overall, our distribution grew as a portfolio, and we feel like we're positioned well going into 2020 based on competitive set.Now what has changed and I have called out is different promotions within retailers are shifting. Retailers are looking at their display in the promotional space and really focusing in on some core items right now that people are buying due to coronavirus. What we do see is hair care and body care remain essential items as you still have to wash your hair and you still have to wash your body. And so those are where we feel like we're positioned better than many other cosmetic or personal care companies, but the full impact is yet to be seen.
And then just one on the promotional side. I guess as you think about people being at home more and so forth, how are you planning on adjusting your specific promotional strategy? Do you think you'll try to drive some demand by using promotion? But then, how are you going to kind of manage that against sort of the margin and EBITDA dollar impact given the uncertainty? Just want to understand how your strategy may be shifting given current shopping patterns.
Yes. So consumers as of right now are still going in store. And so we still look at our investment of in-store as essential. That will maintain and sustain with the company because that is so tied directly to revenue. What we are looking at is, what are other ways to drive demand outside of store where consumers are spending significantly more time online and also in online shopping? So as I've talked to a couple of quarters, we made some investments on Amazon, having dedicated resources. And so we have really invested there. It's a smaller piece of our business, but it is growing fast. And also with bringing in The Mane Choice, they have a very strong e-commerce channel, which the brand started in e-commerce and has maintained a large competitive set -- a large consumer set. We're looking at how do we take some of those learnings from The Main Choice and now apply to the balance of our businesses. Cake has an e-commerce channel, and now we're looking at that across our portfolio where does that make sense. The other piece is a lot of our conversation whether retailers are shopping -- are shifting to the retailer.com. Well, this has always been a smaller portion of their businesses as well. It's a very hot topic, and we're partnering together with retailers to see what is the best path forward to make sure that we can continue to service our customers through their .com channels as well.
And then one last one for me on that e-commerce comment. Have you seen a notable pickup in your category and specifically your brands? And obviously, there's a broader shift towards e-commerce right now given the situation, but just want to understand if the hair care category, just given the shipping, weight and so forth, is also seeing the same pickup that maybe some of the other categories are seeing.
Yes. So for the e-comm direct, that is highly related to our different promotions and what we're doing there. And so we've had a strong movement on that since The Mane Choice became part of the total MAV Beauty family, but it's difficult to separate what are the trends of our promotional programs versus from coronavirus buying. When you look at Amazon, Amazon is not sharing that trend data as of now for categories. And what I would tell you is our business has continued, in many cases, doubling year-over-year. And so our growth trajectory coming into 2020 on Amazon was very strong. We're seeing that still. One piece that we have seen definitively pick up is we have seen some more body wash sales coming through on Amazon, and we believe this is because more consumers moving from single-item purchases to replenishing full household through Amazon. Too early to really call out specific trends, but we'll continue to monitor and to see how this affects us and adjust our plans accordingly.
Your next question comes from Vishal Shreedhar of National Bank.
I know you commented on this already to some extent, but I was just wondering. Specifically, because the situation is changing so fast, I know it's variable in the future, what are you seeing in POS, call it, in the last few weeks in March?
Yes. So for Q1 results and what we're seeing there, we're going to do our Q1 earnings call in May. That's when I can give you a better flavor. Right now, what I'll tell you is our team, we do a daily executive team call to monitor the changes, and our marketing team is pooling our POS reports weekly to really see are we seeing shifts in consumer behavior between channels, between categories and even segments of our business. So more to disclose on that as we go further into the year. But what I will tell you is our team is taking steps daily and weekly to make sure that we're adapting and reacting to any changes.
Okay. On the -- switching gears here. On the suppliers, I know you highlighted off the top that your team has been active in securing new suppliers. But with your existing suppliers, are any of those shut down? Or do you perceive shutdowns there in the future?
Yes. So for our core manufacturing, which is all done in North America, we have not had a shutdown of either manufacturing or warehouse. What we are seeing is, in some cases, we've had to go to reduce personnel on shifts, but then to mitigate that, we've added shifts on. So that is to make sure that our warehousing or our manufacturing doesn't have so many people it puts those employees at risk. So that's a great example of how we've partnered with our manufacturing and warehouse community to make sure that we can sustain the business and also adjust to protect employees from risk.
Okay. I'm going to lean a little bit on your experience here just given your knowledge of the industry. But given that people are working from home more and this trend may be persistent to some degree after the situation with the virus is resolved, do you see that changing demand for hair care products, maybe less focused on styling products or stuff of that nature?
I do. When we look forward, it's unknown on that trend. And I would say -- if we were back 5 years ago, Vishal, I would say definitively, maybe you'd see more of that. What I'll tell you I'm finding from our employees and also the people we work with, we had moved our whole community on to video. And so I am on video chat all through the day, and our employees are as well. And so I think for many employees, styling and taking care of appearance will actually remain important through this time period, as well as a huge part of our business is in our core shampoo, conditioner and body wash, which kind of speaks a little bit more to the personal health, which is also going to sustain through this time period. So while I don't want to make statements of saying that we won't be affected because we just don't know that at this time period, I also don't go to the other side to say that we fully expect that we'll have a negative consumer effect because of styling not being as important because we find that in this changing dynamic, and now it's more video community that styling can remain relevant.
Your next question comes from Matthew Lee with Canaccord.
So just wanted to get a little bit more detail on the international segment. Can you maybe give some more disclosure on what major markets are having trouble and maybe talk in more detail about how you plan to accelerate growth in those core markets?
Yes. I will also just call out this is a very changing dynamic because as coronavirus is spreading throughout the globe, many borders are closed and it's going to have various economic activities or impact across the globe. This could be a very fast-changing dynamic. So what we did see for 2019 -- going to 2019, one of the biggest impacts was shipment variability, which we called out. Shipment variability, had our shipments not had a shift from Q4 into Q1, what we would have seen is that international for the year would have been growing albeit at a slower rate than what we had anticipated. While I'm not going to start disclosing by regions and particular countries, what I'll tell you is we have really made a shift within our strategy, and I called this out a quarter or 2 ago. Our prior strategy on international, we really saw in terms of expanding our footprint. We accept and realize we have a strong footprint at this point. And what we're really focused on now is putting all of our resources and energy to our top 4 to 5 markets as well as securing very large, meaningful markets, something more like a Brazil or China mainland. And so that focus and energy is now kind of within those top 4 to 5 markets that are a far majority of our sales. And I think as we look to 2020, without coronavirus impact, I would say that we would be in a place of really returning that business to growth. With coronavirus impact, especially with more unknowns in international market, we will have to assess the situation and adapt and react as time goes forward.
[Operator Instructions] Your next question comes from Matt Bank with CIBC.
I just want to follow up on covenants. I know it was already mentioned a couple of times, but I just want to clarify, are you saying you're comfortable with your covenants because you don't expect to exceed them or because your bank partners will be okay if you do exceed them?
It's Judy.
So I'll pass this one into Judy.
Sure. Sure. No, I think we're comfortable that we're not going to exceed our covenants. We had it raised rate -- the covenant key rate to 5x for the next 3 quarters. And so that gives us ample room, and it had -- sorry, just some typing going on there. So yes. So to answer your question is we feel like we're in good shape.
Okay. And then as far as I can tell, you guys have an accordion feature. Are there any conditions or permission you need from the bank in order to pull the accordion?
The only requirement is that our leverage ratio is at or below 3.5x.
Okay. And then I also want to follow up on the supply chain discussion. So in your interpretation or as far as you know, is this type of manufacturing considered to be an essential business activity in places that would -- that either have or would put in that type of requirement?
So the essential definition, as I found out very clear this past week, really varies by region. But I'll go through our core regions of where we manufacture and where we're at today. What I will say overall today is at this time, all of our manufacturing and warehouse is deemed essential to our knowledge based on our interpretation of what the government has put out in each of those regions. Within Canada, it's been very clear that manufacturing and warehousing is essential. We do a lot of manufacturing across Québec and Ontario, as well as distribution centers is there -- well, there. In the U.S., where we manufacture, we also are deemed essential based on our definition or our interpretation of what has been put out. And so we continue to manufacture in all sites as well as warehouse. Now there are some restrictions that we are dealing with as we do have some places wanting to limit the quantity of employees. So a good example of this is one of our warehouses has extended shifts to make sure instead of having employees in very close contact, we now just have longer hours and people come at different hours of the day.
And we have no further questions at this time. Please proceed.
All right. Well, I would like to thank everyone for joining us today on today's call. Please reach out with any further questions and have a good day.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.