Greetings, and welcome to the Grocery Outlet Q4 and Full Year 2024 Earnings Results 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. It is now my pleasure to introduce you to your host, Christine Chen, Director of Investor Relations. Thank you, Christine. You may begin.

Good afternoon, and welcome to Grocery Outlet's call to discuss financial results for the fourth quarter and fiscal year ended December 28th, 2024. Speaking from management on today's call will be Eric Lindberg, Chairman of the Board, Jason Potter, President and Chief Executive Officer; Chris Miller Chief Financial Officer and Dorian Bertsch SVP of Strategy and Finance. Following prepared remarks from Eric, Jason and Chris, we will open the call for questions. Please note that this conference call is being webcast live and a recording will be available via telephone playback on the Investor Relations section of the company's website. Participants on this call may make forward-looking statements within the meaning of the Federal Securities Laws. All statements that address future operating financial or business performance or the company's strategies or expectations are forward-looking statements. These forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from these statements. A description of these factors can be found in this afternoon's press release, as well as in the company's periodic reports filed with the SEC, all of which may be found on the Investor Relations section of the company's website or in sec.gov. The company undertakes no obligation to revise or update any forward-looking statements or information. These statements are estimates only and not a guarantee of future performance. During today's call, the company will also reference certain non-GAAP financial information, including adjusted items. Reconciliation of GAAP to non-GAAP measures, as well as a description, limitations, and rationale for using each measure, may be found in the supplemental financial tables included in this afternoon's press release and the company's SEC filing. And now I'd like to hand it over to Eric.

Good afternoon, everyone and thank you for joining us. We had a solid fourth quarter and are pleased with the progress we're making on our biggest areas of focus. We delivered on key value metrics and we’re able to generate comps that were above expectations, driven by customer count, demonstrating that our model continues to resonate. As you know, Grocery Outlet is known for delivering unbeatable value, a unique treasure hunt experience, and amazing customer service. On the surface, this is a simple business that performs very well when operations are executed properly. Due primarily to our system's conversion, 2024 was a year in which many critical operational elements were out of sync, which was further exacerbated by trying to do too much too fast. But we're working urgently to get back on track. As interim CEO, my intention was to slow things down, focus on executing the basics really, really well and to reevaluate some of our strategic initiatives that were impacting our execution. We have made great progress on many fronts, but there's still more work to be done. As we discussed in our last earnings call, my immediate focus was around a few key areas, namely appointing key leaders to take us forward, improving our value proposition, progressing on systems transition work and reviewing our strategic initiatives and priorities. Let me provide you with a brief update on each one of these. We have put in place a talented and experienced team to drive the mission and vision of the company forward. I am really excited to welcome Jason Potter as our new CEO. Jason brings over 30 years of experience growing and scaling successful grocery concepts, including franchise-driven models. Spent a lot of time with Jason recently and his vision, values, and hands-on leadership style align well with our goals and our culture. Since he just started at the beginning of February, he won't have a big role on the call today, but I wanted to take this opportunity to have him introduce himself and say a few words. Jason?

Thank you, Eric. I am thrilled to join the team here at The Grocery Outlet. The Grocery Outlet has a unique business model that combines the capability of opportunistic buying at scale with the potential for nimble execution by local independent operators. I was attracted to this business because The Grocery Outlet team has over many decades, developed this differentiated concept creating an incredible customer experience that generates that feeling of the thrill of the treasure hunt. We have so much opportunity to grow this business, which creates very exciting opportunities for our team, customers, suppliers, and our shareholders. As Eric has pointed out, while we have some near-term challenges related to systems implementation and new store performance, these challenges are actively being addressed and will be overcome. These challenges and opportunities are familiar territory for me as I've spearheaded multiple turnarounds across many grocery models. In each case, we were successful in driving sales, profitability and ultimately returns for all stakeholders by improving collaboration, execution and the customer experience. Earlier this month, I hit the ground running with the support of the GO Board. We are aligned on the core objective of delivering consistent and disciplined growth. I understand what it takes to lead and scale this business and I look forward to working with the team, our independent operators, the Board, and our suppliers to maximize the full potential of The Grocery Outlet.

Thanks, Jason. In addition to Jason, we also welcomed our new CFO and CIO in January. Chris Miller joined as CFO and has over 40 years of finance and accounting experience, including 20 years of public company experience in wholesale and retail industries with a great track record of delivering on execution and profitability objectives. Lindsay Gray, who has been serving as our Interim CFO for the company since March of last year will continue in a role as Senior Vice President Accounting and Principal Accounting Officer, which she held prior to and during her appointment as Interim CFO. I'd like to thank Lindsay for stepping up and leading us during a pivotal year for the business and we are very fortunate to have her continued leadership over our accounting and reporting function moving forward. Next is Kumar Mishra. He joined as our CIO and has 25 years of experience in IT leadership, including extensive experience implementing and fixing SAP and will be instrumental as we continue our systems conversion journey. Most recently, he was the VP of Information Technology at Reynolds Consumer Products and also has worked at Nielsen and the OLAM Group. Now, moving on to our value proposition, comparable store sales increased 2.9% in the fourth quarter. driven by a 3% growth in comp count as customers responded to our healthy assortment of WOW! items featuring our deepest discounts. Our value metrics are all improving and we continue to take advantage of the tremendous availability of opportunistic products that are available in the marketplace. While we're beginning to see value move in the right direction, we can do more to best communicate our industry-leading value to our customers. Our marketing team is working on a more targeted approach with some exciting new messaging during the first quarter…

Thanks, Eric, and good afternoon, everyone. Let me start by saying that I'm incredibly excited to be part of Grocery Outlet and to partner with Jason and the team to drive the business forward. The main reason I joined Grocery Outlet is for its unique business model and the significant growth opportunity it presents. We believe we have the right priorities and strategies in place to optimize that model and combined with our strong balance sheet, I believe we can grow profitably, while driving higher returns on capital over the long term. We are pleased with the progress we made during the fourth quarter. We delivered on our key value metrics and traffic continued to drive comp, demonstrating that our model remains very relevant with consumers. We continued to see significant availability of opportunistic goods and our buyers were able to execute on driving value for our operators and customers. This drove comps ahead of our guidance and earnings that was within our guidance. With that overview, I will now share our fourth quarter results in more detail, then review our outlook for 2025, which includes the 53rd week. Net sales increased 10.9% to $1.1 billion for the fourth quarter, due to new store sales and a 2.9% increase in comparable store sales, which represents 5.6% comp growth on a two-year basis. Comp transactions increased 3%, while average basket was flat. We opened five new stores during the quarter, ending the year with 533 locations, which is approximately 14% unit growth for the year. Our fourth quarter gross profit increased 8.4% to $323.9 million. Gross margin was 29.5%, a decline of 70 basis points year-over-year. While an increase in opportunistic sales positively impacted margins for the quarter, this was more than offset by lower margins realized in our deli category,…

Thank you. [Operator Instructions] Thank you. Our first question comes from the line of Krisztina Katai with Deutsche Bank. Please proceed.

Hi, good afternoon, and welcome, Jason and Chris. So, I have a three-part question. One, just starting with the leadership appointments, I'd be curious if you could discuss what attracted you to Grocery Outlet? Two, just within the 2025 outlook, can you just bridge for us the adjusted EBITDA to EPS outlook? I think you cited higher interest expense, but does the bottom-line also include the restructuring charges? And then lastly, just on the more narrowed focus with the new store openings, is that indicative of a change in the go-forward algorithm as well? Thank you.

Good afternoon. Thanks for the warm welcome. It's Jason here. I guess the first part of the question I'll answer. Many things attracted me to Grocery Outlet. First and foremost, it's got a fantastic differentiated business model. The culture here, the people involved, a record-winning, all gives me great confidence in the potential this business has. I think the model itself, when you - when I learn more about these opportunistic supply that generates this thrill for customers as they shop really paired with this opportunity for local operators to execute is a really interesting and powerful combination. And my experience, I guess my background also, I really am excited to help and help drive change here and results. So I think that was the first part of your question. The second part, I'll pass to Chris. I think he can best answer that.

Yeah, hi. Yes, you cited interest and that is certainly one of the reasons why EPS is not growing at the same rate as adjusted EBITDA. The adjusted EPS does not include the restructuring charges. So the other component that's impacting EPS is higher depreciation and amortization. So between those two items, that's why EPS is growing at a lower rate.

Yeah, hey, Christina, it's Eric. I'll take the third part. We think the number that we've chosen for this year is going to help us address the executional challenges that we have. So think about it. We're going to go to work on two things. One's the new store in kind of new market, non-adjacent market underperformance. And then second is sort of this creeping higher cost that we've seen. We need to better execute and we think this is a year to do that, give the team the time to go and open 33 and 35 stores. As a reminder, we were probably on a plan to open something more like 55 to 60 stores, which I think would have been a mistake. So, this will help us get out and execute and have some wins in those markets. And I think it's right now.

Thank you. As a reminder, please ask only one question. Our next question comes from the line of Anthony Bonadio with Wells Fargo. Please proceed.

Yeah. Hey, guys. Thanks for taking our questions. So just wanted to talk about the gross margin and the systems issues. It looks like the gross margin came in quite a bit softer than guidance. So can you just talk a little bit more about what changed on the system side versus where you sat on the last call, how you're thinking about the path to recovery there? And then anything you can do to quantify the impact in Q4.

Yeah. Hi, Anthony. It's Chris. So the Q4 margin, as I mentioned in my remarks, we did see, better value in the fourth quarter, which helped margins, but offsetting that was the impact of eggs and pricing and supply, which had about 50 basis point impact for margin in the quarter. And then, as you point out, the inventory shrinkage and continued issues around our systems and not being able to drive down shrink, that was the other component for the fourth quarter.

Thank you. Our next question comes from the line of Robbie Ohmes with Bank of America. Please proceed.

Oh, hey, thanks for taking my question. My question is, maybe for Eric. With the phase-in in the second quarter of the improved tools for the operators, will it – when you get everything phased in, you want the systems working the way you want, will the systems be better for the IOs than the old systems were? Or will they just be better than obviously their underperformance now and – have you lost any IOs due to this system disruption?

Yeah. Hey, Robbie. It's a great question. I'll take the second part first. I don't think we've lost operators due to the system. I think it was a tough year. We all know starting in ‘23 and then getting to ‘24, those were just challenging times. And just as a reminder, the overall turnover was kind of right in where it's been for historical last 10 years or so. We are moving towards getting most of the systems back by Q2 that we had before and that will enable us to call the system, the environment, efficient, effective stabilized, pick the word you'd like. And then, we go to work on the enhancements that will make the system better than it was August of 2023. We were on a legacy system that was unsupported and we chose a new system and obviously we know the history on that. We are hoping to be able to tell you by end of this year that we're there, which is, things are working. We're back to being as efficient. We have some new tools in the arsenal, both for operators, in internally and that's the buyers and the financial team that will make us better, more efficient and more effective. So all eyes on that. And I feel like we're making pretty good progress against it.

Thank you. Our next question comes from the line of Oliver Chen with TD Cowen. Please proceed.

Hi, it's Tom Nass on for Oliver. I was wondering if you could discuss the pace of comps throughout the quarter as well as the exit rate. And then how should we think about the balance between investing in price versus prioritizing margin consistency for the year ahead?

Hey, Tom. This is Eric. So, Q4 felt pretty good, sort of the near-term comp standpoint. I'd say customer count continued to be healthy and solid. In fact, transactions were positive across all geographies. That's great news. We think a lot of that is directly attributable to the work that the buyers did in terms of restoring value and really shifting back to value. That's what we talked about in the last call. And then, following that was messaging the value in a different way than we did most of 2024. We do have some work to do in the basket. Obviously, if you just look at the composition, we think that's addressable in assortment and in some merchandising initiatives, which we're starting now. Transfer to Q1, I would say the first quarter has started out a little softer than we'd like. If you go and look at the data reported for other retailers sort of the all-outlet data, we're following the same sort of trend. That is January a little stronger and then there's a deceleration in February. That's exactly where GO is, looking at our Jan and Feb. We believe some of that's just tied to sort of general economic trends, but we have more variability in those numbers than across the geographies than we'd like. So we have some work to do. And then, as Chris mentioned, the guide for the quarter is all around that start, plus that Easter swing is going to cost us about 100 BPS against the quarter.

Thank you. Our next question comes from the line of Mark Carden with UBS. Please proceed.

Good afternoon. Thanks so much for taking the questions, everyone, and welcome, Jason and Chris. So to start, Jason, you led a turnaround at Fresh Market, which serves a bit of a different end-market, but at the same time, it's a smaller grocer with a unique go-to-market proposition. I know it's early days, but have you seen any parallels between the two organizations, and along those lines, opportunities to address similar improvements or low-hanging fruit off the bat?

Yeah, I've spent the first three weeks or so here listening, learning, gathering information, clearly that's going to help inform my thinking for the long term. My experience recently at the Fresh Market was a total team effort. We were proud to say we grew both sales and profitability and obviously returns for the shareholders in a pretty substantial way by focusing on a few things. One, improving execution, focusing on the guest experience. We worked hard there to build a service culture and really working as a team on a clear-defined strategy. And so there is some things there to take away and to utilize here. Clearly, when we execute at a high level, we experience at the Fresh Market, we were able to really shift the guest experience. And maybe as evidenced as our - at that time, during my time there, we were able to achieve Reader's Choice Award at USA Today for ‘21, ‘22, ‘23, Best in America. And for sure those are things that I'll take forward in my thinking here. But as Eric said, the near-term priorities are clear and we've got to make sure we're focused on the key focus priorities as we go forward.

Thank you. Our next question comes from the line of John Heinbockel with Guggenheim. Please proceed.

Hey, Eric, two quick things, historically, you guys have picked up market share in tougher macros. Is the issue now with UPT just level of inflation, right, versus what you might have seen historically? So it's not you as much as it is macro. And then secondly, where are we with UGO right, in terms of moving that to an IO model? Is it possible, could you use a company-operated model in certain geographies and just keep it company-operated and not IO or you don't believe in that?

Yeah, let me touch on the first one and then maybe a couple of us can talk about UGO just philosophically. Yeah, look, you guys have looked at our basket. We're blessed by traffic, transaction, customer count, what you want to call it, has been really healthy for a lot of years. We have some work to do on the basket. We probably have more questions than we have answers to be quite honest. It's been a lot of fun and very engaging to have Jason here asking a lot of questions that, frankly, we need to do some deeper work on. So let us put a pin in that one and come back with a better thought perhaps next quarter or in a separate call. But UGO philosophically, the magic of having an operation that is different than the operator model is that you can test and learn. We don't have a hard date that tells us we need to go execute the IO plan today. I would say that it is in the plan as we integrate into the future. We've got 41 stores. We've got distribution. We've got a DNA that's very much steeped in buying opportunistic. We've got a pretty good following in the southeast. And we think we've got lots and lots of opportunities from our playbook that we've learned over 400 plus stores to go and apply there. Relative to other UGO integration, Dorian, you may want to just sort of give the one, two, threes of where we are.

Yeah, just a couple of main things we're working on there, as we've talked about before. First, store refreshes. Second, product introductions, really expanding assortment, and then broader integration that Eric alluded to. Good progress in the back half of the year on refreshes. So completed about five across the network seeing a nice uplift in sales there. We continue to introduce new products really on a weekly basis. That includes both some of our everyday assortment that were gaps in the UGO assortment before, as well as introductions to vendors that we've been doing business with for a long time, but maybe have not done business with UGO, so feeling good there. And then to Eric's point, we've got some work to do there first to really drive sales and then over time integrate more broadly including the operator model.

Thank you. Our next question comes from the line of Corey Tarlowe with Jefferies. Please proceed.

Great, thanks. I guess, my question is to Eric. Eric, does the restructuring plan cause you to think differently about the right cadence of store openings and/or margin profile over the long-term?

Yeah, hey, Corey. I wouldn't say the restructuring plan made me think differently. I would say, the execution of the business made me think about we needed to do something different. To me, we have to address the sub-performance and we need to do something different than we were doing before. And when I talked in the last call, I talked about reducing the priorities. Let's narrow down to the things we can execute well. We're going to start with value. We need to fill the leadership team. But in that was, look, we were going to try and open too many stores in too many new markets that did not have connections to adjacent markets. And that's really hard to do. You start with sort of four or five things that you need to be successful, market awareness. You need people power, meaning you've got to be able to recruit them and train them and support them in region. You need some distribution and marketing synergies. And then you've got to have the messaging that's going to hit in a market with lots and lots of stores. And we were not doing that. So, that execution informed I think the start of the look at the reorg and the real estate, then we can go a little deeper on supply chain. And then, at home here for SG&A, we worked with some really talented outside folks on costs. And, we made cuts where we're actually pulling back on priorities. So, we sort of put the three of them together. That's the way we think about it.

Thank you. Our next question comes from the line of Anthony Chukumba with Loop Capital Markets. Please proceed.

That's, Chukumba but that was close enough for government work. So, first off, let me just add my welcome to Jason and Chris, as well. I guess my question was on how you feel about your value? And I ask the question because I remember on the last earnings call you were talking about the fact that you felt like maybe the value wasn't as compelling as it has been historically in the second and third quarter. But you felt like you were sort of getting that back and certainly our pricing work showed that we saw very compelling value pricing relative to a very large company in Bentonville, Arkansas. But we just love your perspective in terms of kind of where you are on values and whether you are where you want to be. Thank you.

Yeah, this is Dorian. Let me talk a bit about value. So first off, really pleased with the value progress we made through Q4. If you remember back to the last call, really talked about a couple of different measures that we used to gauge value. The first overall basket, the value we deliver on a basket, we target 40% savings versus conventional grocer 20% versus discounters, feeling good about where that is. Second, the share of sales that we generate from items with 60% or greater savings versus conventional. I Think of this as the extreme value treasure hunt driving items that friends - people tell their friends and families about. This is where we said last call we had some work to do and we really improved that throughout the course of the quarter. The last piece is price parity with discounters on a targeted list of commodity items and we're where we want to be there. So feeling good about the value delivered versus conventional and discount retailers. We feel that's translated into traffic as well in Q4 with the 3% traffic increase. So continuing to focus on those and then also looking at execution now of that value as well. How do we just get all the credit for those great deals throughout the supply chain, in our stores, through marketing and that's a focus now.

Thank you. Our next question comes from the line of Joe Feldman with Telsey Advisory Group. Please proceed.

Thanks, guys, for taking the question. So I wanted to follow up the CapEx budget for the year. I think it's a little bit above this past year. And I'm wondering with the reduction in stores, maybe you could share some thoughts as to where you're allocating the CapEx dollars?

Yeah, sure. I'll take that. So you're right, our guidance is for $210 million CapEx for this year versus the 185 or 186 last year. It's actually more stores because we opened 26 stores last year. And then, of course, we have the UGO stores acquired and we're looking at 33 to 35 this year. So that's driving a big part of it, as well as some CapEx related to our new distribution center in the Pacific Northwest. Those are probably the two main drivers of the increase overall.

Thank you. Our next question comes from the line of Mike Baker with D.A. Davidson. Please proceed.

Thanks. I just wanted to follow up on a previous question and ask about the long-term margin profile. This had always been a 6%, even mid-6% EBITDA business. You're obviously below that now. All these changes you're doing, focusing on existing markets, all the supply chain savings you're doing, et cetera, is the idea that that gets you back to that 6% range? Does that get you above that 6% range? Or is that range sort of not in the cards anymore?

Yeah, so, we believe we've got a lot of opportunity in front of us. Eric talked about the amount of white space and this company has performed very well historically. We've put out our guidance for this year. We're not really prepared to talk about past that and future years. So I think we're just going to leave it at that at this point.

Thank you. Our next question comes from the line of Leah Jordan with Goldman Sachs. Please proceed.

Good afternoon. Thank you for taking my question. I just wanted to talk about the comp guide of 2% to 3%, because this is below your historical runrate of mid-single digit, which you typically do in a normalized food environment, which we appear to be in right now. And we've talked about a lot of the puts and takes you guys are working through around restructuring. But I guess my bigger question is, has anything changed in the competitive environment today that makes it more challenging for you to maybe get back to your older algo over time? As it sounds like we've still had a year plus of issues, but we're still needing to advertise more, improve our value. And then now I'm hearing about increased merchandising efforts, as well. So any color there would be helpful. Thank you.

Yeah, let me jump in quickly on competition. Nothing we feel has fundamentally changed in the competitive environment. Promotional environment remains pretty rational. Data suggests it's back around pre-COVID levels. Obviously, promotional environment changed in 2020 and for a couple years. We continue to aim for prices 40% on the basket, 70% plus on our best deals. Feel like we're delivering that. So our relative value proposition feels like it's good. Again, our model, really flexible to deliver in different competitive environments as they change we've proven that over the last, you know, many years to do that well, and we'll continue to do so. So nothing on the competitive side that makes us feel differently about comps this year going forward.

Thank you. Our next question comes from the line of Simeon Gutman with Morgan Stanley. Please proceed.

Good afternoon. Welcome to everyone new. I wanted to ask first on systems. I guess at one point, we thought that it was temporal. It seems like they're continual. And at what point in ‘25 are systems issues behind the company? That's part one. And then, Eric, you mentioned something that was intriguing. You said Jason's asking a lot of questions and we need to, I guess, zoom in on them a bit. Can you hypothesize the kind of things that you're looking at as far as, I don't know if it's merchandising, because you mentioned you have the footsteps, but you're not getting the basket or the conversion, localization value. What are these questions and then what are you probing? Thank you.

Yeah, let me take the first one. We, Simeon, we have made a lot of progress. I think ‘25 is going to be a completion year and then put us in a position to harness the capabilities that we've installed. Systems are working. The financial visibility that we talked about, some of the kinks from 2024 behind us systems functional. we still do not have all the tools that we need to execute as efficiently or cost-effectively as before but those are coming. Some of the critical tools specifically are ones that we need to manage the inventory holistically, but really for operators to optimize opportunistic products and their inventory management in the stores. So you've heard us talk a little bit about inventory shrink. So that's something that's getting better, but it's not improved to 100% of where it was. So there's still some fixes, but we are feeling very good, very confident. I'll take a shot at some of the things that I'm seeing from Jason and maybe he can add to it. But he is asking a lot of questions around trip, why people are shopping Grocery Outlet? How we improve the trip? How do we improve the execution of the stores? I've never seen someone more comfortable out in the store looking at how we make money, challenging what we do, how we do it, and doing it from an operator-friendly or centric perspective, because he has managed franchise operations. In fact, there was a day he wanted to be an operator of his own store. So he thinks about the store and how we make money. And that lens comes across as he's going to dig very deep on how we operate. The second piece I'd say, and then I'll turn it over to him, is all about data, data integrity, data management, starting with the truth and then, you can do a lot. And I would say our data is still somewhat imperfect, but it is on the list of things to get done this year. But that connecting the insights from a retailer who's been very, very successful to the data that we have, I think is going to be pretty powerful. So, those are a couple examples from me.

Thanks, Eric. Yeah, I guess I'm just really curious at this stage. So, as I mentioned, I'm going to a learning mode and listening mode and a gathering information mode to make sure that I have everything I need to make quality decisions on behalf of everyone that touches this business, including the shareholders. I am very excited about what I see for opportunity here, just to be clear. I think we have a lot of upside in the future with, at least the way I see the business and there's a lot of fantastic things going on here, but there's also things that I know we can work on and get answers to and find new ways to drive the business in successful ways. So, it's been a really interesting three weeks and we intend to work hard to make progress every day here. So, thanks for the question.

Thank you. Our next question comes from a line of Jeremy Hamblin with Craig-Hallam Group. Please proceed.

Hey guys. Will on for Jeremy. Thanks for taking my question. I'm just curious about the progress you've made with the private-label penetration. And then, as a follow-up, I'm wondering if you can share how the private-labels are performing versus the rest of the business? And then maybe any specific categories or items you've seen the strongest response to so far? Thanks.

Yeah, happy to chat a little about that. So, overall, pleased with the performance of a private-label product that we've introduced so far. Customers responded positively and while it's still a small portion of our business, a lot of these items are becoming top sellers in their categories. We launched about 180 items by the end of last year. That's ahead of our original plan when we were thinking more 100. We'll launch another 150 or so this year, as well. In addition, we think we're hitting the mark on better value to the customer, more consistent inventory, which is something our customers have told us they want. And these initial products are delivering some margin incrementality as well over some of the items that they're replacing. So that's benefiting both Grocery Outlet and our operators. In the future, plan to introduce, continue to introduce items, differentiated items, as well. Right now, we're focused a lot on core necessities, but we'll continue to put in some differentiated items that we think can add to the treasure hunt experience even more as we continue to grow this area of the business.

Thank you. Our last question comes from the line of Jacob Aiken-Phillips with Melius Research. Please proceed.

Hi, everyone. Good afternoon. I wanted to ask another one on the unit growth. So, I understood that about 20 stores were reduced this year in the new markets. But I'm curious how you're thinking about building up the pipeline for new stores in, like to the future beyond 2025? Like, what's the timeline for that? And then also like I assume that there's, like, a pipeline for independent operators and like how is that affected? And what's the pipeline for building up that as well? Eric Lindberg Yeah, pipeline's healthy on both sides. Obviously, we had access to what we needed to open for ‘25 and ‘26, so we did the reduction. And I think the gate that we're going to go through is execution, and we're going to have to test some things. We've got some things underway. We reduced some of the - I'd say, non-adjacent markets so that execution risk goes down and performance goes up. So those will play out this year. Relative to IOs, it's still far north on the top end of the funnel of what we need if we're recruiting approximately 100 operators a year or so. Selectivity should be the name of the game in drawing in the most capable operators, training them and deploying them successfully. But I would say no issues on the top-line funnel for either new storage, real estate nor operators. This is all about what we're going to execute, what we're going to choose to do so that we can improve the ROIC in the model.

Thank you. There are no further questions at this time. I'd like to pass the call back over to Eric for any closing remarks.

Thanks, Haley. Thanks, everyone, for your questions, your input, your interest. I'm really excited to spend some more time with you and Chris and Jason. So we will be on with you in a few moments with follow-up calls. So, thank you operator. Thanks everyone. Bye.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.