Ladies and gentlemen, thank you for standing by and welcome to the Sally Beauty Holdings Second Quarter 2021 Earnings Call. At this time, all lines are in a listen-only mode. [Operator Instructions] I would now like to turn the conference over to Mr. Jeff Harkins. Please go ahead.

Thank you. Good morning, everyone. Thank you for joining us. With me on the call today are Chris Brickman, President and Chief Executive Officer; and Marlo Cormier, Chief Financial Officer. Before we start, I want to remind everyone that we have made a presentation available for today’s call that can be viewed from the link provided on our investor site at sallybeautyholdings.com/investor-relations. I would also like to remind you that management’s remarks on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the Risk Factors section of our most recent Annual Report on Form 10-K and other filings with the Securities and Exchange Commission. Any forward-looking statements made on this call represent our views only as of today and we undertake no obligations to update them. The company has provided a detailed explanation in reconciliations of its adjusting items and non-GAAP financial measures in its earnings press release and on its website. Now, I’d like to turn the call over to Chris to begin the formal remarks.

Thank you, Jeff, and good morning everyone. I want to start by commending our teams for their commitment to the business during these remarkable times. We’re all pleased to see store closures and restrictions, easing in certain markets, but the global environment remains dynamic and requires that we continue to operate with added discipline, and agility. Our teams continue to perform at a high level in Q2, and most importantly, they remain focused on serving our customers. Due to their hard work and dedication, we achieve net sales growth of 6% despite store closures in many of our international territories, and the shutdown of California salons in January. Traffic and sales trends, started picking up in the latter part of February, and accelerated more substantially in the final month of the quarter, resulting in stronger than expected performance across the P&L. There are a few key factors that drove the top-line. First, we saw increased demand and Sally U.S. from improving consumer confidence, and government stimulus actions. Next, reopenings in Canada, and easing restrictions in the U.S., drove stronger than expected pent up demand, as both Sally and BSG. As you may have seen the Province of Ontario subsequently shut down again in early April, but this is a Q3 dynamic. Lastly, in the final month of the quarter, we saw a significant shift in trend at BSG as salons were permitted to operate at higher capacity levels. At the same time, we continue to see a trend towards more independent stylists, as they are displaced from their salons and moved to booth or sweet rental, these stylists are increasingly likely to become BSG store customers. The combination of strong consumer demand and the effectiveness of our promotional strategy, allowed us to maintain solid gross margins above our target level…

Thank you, Chris and good morning everyone. We’re pleased to deliver strong results across the P&L during our second quarter. The outperformance on the top-line primarily reflects the combination of improving consumer optimism, easing restrictions in the U.S., including California salon reopenings during the latter half of the quarter, and U.S. government stimulus actions. Net sales were up 6.3% versus prior year. And same store sales increased 6.5%. Similar to last quarter, in our open locations, traffic decreased versus prior year, while other key measures increased, including units per transaction, average unit retail and average ticket. Our global e-commerce business remains strong with consolidated sales up 56% on a year-over-year basis. We’re pleased to see the investments we’ve made our digital capabilities continue to bear fruit, particularly as our team work to deploy and scale our new fulfillment options and enhance tools. From a gross profit perspective, we continue to deliver margins in line with our 50% plus target levels. Second quarter gross margin came in at 50.4%, up 110 basis points to last year. Adjusted gross margin was 51.2% and excludes a $7 million, writedown of PPE inventory. For perspective, when the pandemic hit in early 2020, we took immediate steps to build a position in PPE inventory to ensure we could protect our associates, assist our salon professionals to help them safely open their businesses and serve our retail customers and communities who came to us for in demand items like masks, gloves, and sanitizers. As pandemic headwinds began to abate, we are taking steps to bring our PPE levels in line with anticipated demand. In addition to the $7 million writedown, we also made the decision to donate approximately $31 million of PPE inventory that will be disseminated to organizations in need during the second half of…

[Operator Instructions] And we have – line of Oliver Chen with Cowen. Please go ahead.

Hi. This is Joan [indiscernible] for Oliver today. Thanks for taking our question. I’m just curious, you noted haircare saw strong demand. What are you seeing in terms on the cosmetic side? Have you seen any improvement there? And then as we think about the promotional cadence throughout the year you noted obviously lower promotional candidates [ph] this quarter. How are you thinking about it for the remainder of the year? Thank you so much.

Joan, let me remind you that Cosmetics is a very small percentage of our business, less than 6% of Sally and even less than BSG. So it’s not really a high traffic category for us. That being said, it continues to be down as a category, but obviously our larger categories like color and care are significantly up and that’s carrying our business. In terms of promotional strategy, I think, we feel like we’re at about the right cadence so we don’t see any significant change in our promotional strategy at this point. We’re much more focused on the recruitment of color customers rather than promoting shorter term sales. So I don’t see any change in that through the back half of the year.

And our next questions are from Rupesh Parikh with Oppenheimer. Please go ahead.

Good morning. Thanks for taking my question. So, I guess, first Chris congrats on obviously a great quarter. As we look at your comp performance during the quarter and clearly, there were some seamless benefits out there, but at the same time you guys had some headwinds related to severe restrictions, especially, international markets. As you guys look in totality like – do you guys think the headwinds were more than a tailwind like do you think cosmetic business – potentially have been stronger than what we saw during the quarter?

Rupesh, it’s obviously hard to disaggregate. But if you just look at Sally and the Sally segment disaggregating that really helps. So Sally U.S. was up 13.9%. You know, it’s a huge performance in the quarter. Some of that is optimism and some of that of course is stimulus. What happened of course is that the results in Europe where we had significant shutdowns lower the overall segments result up 4.9%. So you see the headwind of international dragging Sally down by 900 basis points. Sally U.S. delivering an incredible performance of 13.9%. And again, you’re exactly right some of that is optimism, some of its demand and some of it is stimulus. It’s very hard to disaggregate those but they all played a role.

Okay. Great. And then from a, I guess from a market share perspective. Do you believe you gain share whether in the Sally Beauty segment or in BSG during the quarter?

Well, I think Sally again Sally’s really the only outlet that sells professional color to the consumer for home use. And so it’s hard to gauge market share there. I’ll talk about the BSG in a moment. The reality is obviously it’s growing significantly in color out 27%, clearly we’re outgrowing the category. So if you go look at some of the alternatives consumers have whether its box color or others I’m pretty clear it wasn’t a 27%. So we’re outgrowing the competitive options for the Sally customers have and that gives us confidence. On the BSG side, comparisons with our next largest competitor who is significantly smaller are hard for two reasons. They’re clouded for two reasons. One is geography, which is that we cover Canada, and they don’t, so Canada as you know it’s been through significant disruption, and that’s absorbed in our numbers, and they don’t cover Canada. The other one is just footprint, which is we really have a national footprint, other than a small franchise business in Texas, Louisiana. They make much more extensive use of franchisees throughout the middle of the country. And as a result the footprints don’t really match up and that’s why we have more than double the number of stores. The reality though is we look at the data, the metrics we look at to think about the health and strength of the business competitively would be first, color growth. So color is up 17% for BSG in the quarter, which is that if you recruit a stylist, you get their color. That’s the high frequency category they buy. And then the next adjacency is care and care was up 16% of BSG. So those numbers are obviously encouraging. The other thing we look at is growth on directly competitive brands. So although most of the brands in both businesses are our exclusive, there are a couple of brands that are sold within both that are of scale, and the two largest brands that we sell that overlap with our next largest competitor are matrix and Olaplex, and they’re at scale obviously. These are big brands. And if you look at the growth of those in the U.S., where we both compete Olaplex was up 106% BSG in the quarter and matrix was up 20% in the quarter. So again, when we look at those metrics, although we don’t have external market share data, we look at those metrics and feel both very good about how the business is trending and the customers trending, as well as very good about how we’re competing for sharing that business.

Okay. Great. Thank you. I’ll pass it along.

And next, we’ll go to Steph Wissink with Jefferies. Please go ahead.

Thanks. Good morning everyone. Just a couple of housekeeping if we could, could you talk a little bit about your CRM and what you’re seeing in terms of your new to file customers?

Yes, first of all, Stephanie, thank you for the question. And I’ll cover a couple of parts on CRM. In terms of new to file, obviously, as this is a pandemic hit, we saw – didn’t have a CRM program or a loyalty program at that time. It did have a customer file based upon people registering with a license, but Sally had a large customer file based on the loyalty program. And we saw a decline in the file at the beginning of the pandemic is a lot of customers just stopped coming out, not surprising. We have seen that continue to come back in a significant portion over the last quarter or two. And it’s accelerating. It is not all the way back to where it was at the beginning of the pandemic, but its well on its way. And of course, the BSG CRM file is really just starting to pick up now that we’ve launched the loyalty program last fall. The better part about the CRM program is the new technology we’ve launched and the capability to team we’ve added and our ability to add custom journeys for every customer. As an example, just in color now for Sally, there are 20 unique custom color journeys that we take the customer on based upon what they buy in their first purchase. And therefore, how do we follow up with them in terms of advice we give them, content we provide them as well as follow up ideas on other products they might like. So what I really like is how much better use we’re getting out of the data we get, but I still think there are customers to come back, whether it be an older customer who has been reluctant to get out or other customers who are just intimidated by the pandemic itself. There is still some coming back that’s going to happen, much of it’s already happened, but there’s still some that left.

Our next question from the line of Mark Altschwager with Baird. Please go ahead.

Hi everyone. This is Sarah Goldberg on for Mark. Thanks for taking our question. I was hoping you could update us on some of the cost pressures you might be seeing such as labor or any inflation on the cost side? And then also on the digital side, as you continue to scale the digital offerings such as BOPIS and leveraging your delivery services. How should we be thinking about the unit economics?

I’ll take the first one on the cost side. Yes, we are seeing some cost pressure, certainly seeing some wage inflation and inflation on the cost side, in the cost of product as well. We do feel very confident in our ability to hold our 50% margin targets, and believe we have ability. As those start to come our way, have the ability to pull pricing levers in the near term. As for the SG&A side, certainly we’re seeing wage inflation coming here in the near-term as well over the long-term. We expect to be able to offset that with some good work we’re doing on our e-comm profitability improvement measures as well as the work we’re doing around our store fleet optimization, initiatives that we have under way as well. But when we look at the back half of the year, we are seeing sequential increases, back half to front half on the SG&A side. Part of that is inflation, but a larger part is due to just the fact that as economies and markets are opening back up, we’ll be investing back into payroll and opening stores as well as marketing, and we do have continued investment in our IT side of house, as we continue to scale and optimize our technology tools. Probably, the two biggest ones are the BSG is at least performing that’s happening now, and should be completed at least by the end of this month, and we’re on track for that. And then we’re also finishing via the JDA implementation and ramping up our North Texas distribution center in the back half of the year as well.

And in terms of e-comm channel profitability, BOPIS is effectively at store margins. So it’s effectively the equivalent of store margins. As we launch the two hour delivery at BSG and three hour delivery at Sally, they will be either at or just slightly below store margins. We use an outside third party delivery partner, BSG is passing the majority of that on and I think they’re subsidizing just maybe 20% of that cost and Sally plans to pass all of it on to the customer. So the reality is that BOPIS and same day delivery should look very similar to store margins overall.

Great. Thank you for that.

You bet.

And next from the line of Simeon Gutman with Morgan Stanley. Please go ahead.

Hey guys. This is Michael Kessler on for Simeon. Thank you for taking our questions. First, I was wondering if you could provide maybe a little more detail on the magnitude of the acceleration that you saw as we came into March. I’m curious, you know, we’re – how we’re trying is tracking in line with your expectations before that point? And then, I guess, how much above would you, relative to the different kind of factors that came into play in March that we saw playing on that – in that month? And I think based on your sales guidance, it would seem that it seems like maybe April trends, seem to be – continuing on a similar basis on the underlying level, I guess, is that been what you’ve seen? And lastly on this, any indication you’re seeing of, restocking up post some of the, I guess, miniature shutdowns that we saw earlier this year?

Yes. There’s a lot of questions in there. Let me try and take a few. If you wanted to....

Maybe I’ll just start on the sales trends and what we saw in and then you can deal with the color.

Perfect.

You know, month-to-month, I mean, we’ve seen this throughout the entire pandemic since very, very choppy. And it continued on [indiscernible] in Q2. Sally like Chris had mentioned earlier delivered almost 14% in the U.S. Sally had a very strong January, that was a month where we did have round a stimulus and then had a very challenging February. And then we started to see things take off further than we expected, as we got to the end of February and end of March, where again we had another round of stimulus. On the BSG side, BSG faced challenges. That improved as we got into the latter part of the quarter. And then the international market faced headwinds really the entire quarter with closures and heavy restrictions throughout the quarter. And so there’s a number of puts and takes that were going on throughout the quarter. And in January we had closures and Salon restrictions, especially, in California that significantly impacted BSG. Like I said, also in January, we had a round of government stimulus. And then January was a challenging month for the international markets and to a lesser degree for BSG. January though, like I said was super strong for Sally. February traffic and demand slowed through the first few weeks, but by the end of the month we started to see trends in the US pickup. And then that’s when the acceleration really took off and more substantially in March. And so we had stimulus, but we also saw some improved optimism is the vaccine rollout in the U.S., we’re taking hold and ramping up. We start to see vaccine optimism and so and then also in March, I guess, in terms of the compare, that’s what comparisons start getting tough. Last year was the first month where COVID shutdown on a global basis took hold. So that’s where you see the year-over-year compares. But overall traffic like said remained really choppy. And obviously we have a very dynamic environment. So actually giving us some concern, and we’re being very cautious as we look into the balance of the year, making sure that we continue to pull the levers as needed, but also make sure that we’re there when the demand is there

And to your question, we’re obviously we’re not going to give out results in the – in April in this quarter, but we do see strengthening consumer confidence would be the slowly, but surely, and then as Marlo mentioned mixed in with some continued closure. So there Canada, the Ontario province has closed down again. And that has shutdown a number of our stores, and Europe – continental Europe, especially, has significant restrictions still in place and there are some closures in Latin America, especially in Chile as well. So, it’s a blend now of strengthening consumer demand along with some ongoing turmoil from the pandemic and we expect most of it to be gone after this quarter, which is great, but we obviously going to continue to be agile.

Great. Thank you for taking apart my – mobile part question. I could just squeeze in one more. I wanted to just be curious, get a little more color on the kind of store closure tests that you’re about to start. And I’m just curious if there’s a baseline expectation for what you might see from those. And how to even assess that just given you know level of disruption that we’re still seeing and the kind of volatility. So, I mean I don’t know if there’s kind of a longer term expectation as far as store count and how you’re thinking about that and is there kind of a – I don’t know a benchmark that you’re going to be measuring against as you proceed on these tests. Thank you, guys.

Yes, no doubt, and thank you very much for the question. I think you know the reality is we’ve always been open that we’re trying to balance the need for a broad storefront of footprints so that we can supply e-commerce out of the store, especially in a very efficient way. And our store footprint is part of what makes us able to do two hour delivery out of BSG to salons and three our delivery to consumers’ homes out of Sally. So the store foot comes in as a strategic advantage and I think other retailers have mentioned that as well. That being said, as we mentioned on the call, there is significant wage inflation that we think will come in the next few years, and we’ve got a balanced store economics with that need for a large store footprint. So we do have – the number one metric we’ll look at although there are many metrics. The number one metric we want to look at is the accretion of those sales to either other stores or e-com, and we can follow that quite closely by customer. And so as we close store, we have 90 stores I mentioned. We have a detailed marketing plan in place to contact customers, to notify them of where close by stores are, to notify them obviously of their e-com options. We’re going to do that 90 days out, 60 days out, 30 days out, we’ll then execute the closure. We will track the customers where they buy at. Do we lose any customers and how many. And as we get through all of that that’ll really inform us about how much of this consolidation can we really do and how profitably, as well as what is the need and when do you – at what point do you lose customers and how do we need to be cautious there. So we’ve got a lot of tracking in place. We’re going to learn a lot in the next couple of quarters from it. And then, we’ll then use that to guide our thinking on the overall portfolio long term.

Thank you. Good luck for the rest of the year.

Thank you.

Our next question is from Joe Altobello with Raymond James. Please go ahead.

Hi, good morning everyone. This is Adam on for Joe. Thanks for providing detail in a cadence of results throughout the second quarter. That was a particularly helpful. You alluded to a stimulus boost in January and then another one in March, while acknowledging obviously that it’s tough to quantify the impact. I was just curious, have you seen the impact of stimulus wearing off at this point or maybe I’m overstating the impact just a little more detail that would be helpful.

Let me start and then and then Marlo can jump in and provide any extra color. I do think, at this point now in May, we think most of stimulus is worn out – worn off. I can’t tell you that for sure. But we think a lot of it is past. And what we’re seeing now is just increasing optimism and competence from the consumer as they get vaccinated and as case counts drop and it was very interesting in April, you could actually see in markets where there was a resurgent versus markets where there was not you could see a difference in demand patterns. So as we see the whole country if it continues to move in this direction of reduced cases and greater competence, we think that’s a positive for the business and that that’ll be the primary driver going forward.

Great. That’s very helpful. And I wanted to briefly ask if you guys saw any impact from the Texas storms from a couple months ago?

Yes, I mean it was a significant weather event, and it was blended into a month where, as you know we were just coming off peak cases and peak hospitalizations in the US. It’s hard to forget that now that where we’re at now. So, I think it added to some of the challenge of February, no doubt. It was, I think roughly 1,000 stores of ours were closed and many others were impacted by the weather, even if they weren’t closed. And they weren’t closed for just one day. They were closed for multiple days. So it was a significant impact. I don’t know if it’s better or worse than most other winters, but it was concentrated in February.

Thanks Chris. I can squeeze in one last one. I was curious and I know you guys aren’t providing guidance. So it’s may fall on ears here but I was just curious if – I mean, EPS perspective, typically Q3 is biggest of the year. Would you expect that to be a case again this year, or you’re not ready to make that statement.

Yes. I mean I think we did is best that we could try to give you a range of 35% to 40% versus last year. There’s just a lot of puts and takes. We felt a lot of puts in taking Q2 and we expect you know the environment to be dynamic as we continue into Q3 and into Q4. So, Chris has mentioned a lot of the positives with the consumer optimism. I think getting better in the U.S. We still have a lot of closures internationally, and so, again, I think that’s, probably the best guess we can give you at this point.

No. That’s very helpful and thank you. Congrats on the strong quarter.

Thank you very much.

And next we’ll go to Rupesh Parikh with Oppenheimer. Please go ahead.

Thanks for taking me on again. So I guess I just want to follow-up on the operating margins. You guys had nearly 12% operating margins this quarter. Just any thoughts in terms of whether that’s a sustainable level, I guess, maybe longer-term or, whichever period you can comment on.

Yes. Longer-term, I think we’re very confident that we believe in a normal stabilized environment growing it low-single-digit, same-store sales is something we’re very confident in. In that growth model, we believe we would leverage SG&A. In the near-term, we are living in a very dynamic environment, and as we mentioned, I gave you some pretty good guidance I believe on top line. When I think about gross margins, the 50% target has very much insight and something that we believe we can maintain. And then on the SG&A side, again just looking as we get back into opening economies and opening markets, we will be investing back into payroll and back into marketing, while we continue to invest in our strategic priorities. So longer term yes. Near term, it remains dynamic and we will continue to invest in the long-term, while balancing the near-term. And what we could do to keep our sights on cash. And as you saw, we continue to deliver well and continue to maintain very strong liquidity. And so, that is our focus in the near term.

Okay, great, and then maybe just one additional follow-up. So the Q4 guide at this point for, I think flattish sales growth versus the prior year. Would you say that’s conservatism at this point just given the environment and, given so a volatile environment out there. Is that the right way to think about the Q4 commentary?

Yes. I think it’s balanced. The reality is that we don’t know how this will all play out. Will there be any second waves? Will there be any other additional closures internationally? Will there be a new variant spread. We just don’t want to get out over our ski tips yet given how dynamic this has been. I mean, let’s be clear. Think about last September, October when we were having a great quarter and it looked like the virus was over after a great summer and all of a sudden we had the worst wave yet. So, I think you just see some reluctance on our part to get over our ski tips at this point in time. It’s better just to play it down the middle

Okay.

And last Q4 was strong, very strong Q4.

It was, yes.

Given the environment.

Okay, great. Thank you.

And next we’ll go to Steph Wissink with Jefferies. Please go ahead.

Thank you for the follow-up, I just wanted to connect, Chris your response to my prior question on CRM? And kind of the rebuild of the new to file customers with your comments on vivid color earlier in the call. I think you mentioned it’s almost a third of the business now. What I’m curious is, if you’re seeing new customers coming to you for vivid, for the new range of color that you’re offering. And if that feels like a stickier customer, as we kind of move back into a period of normalcy? Or if it’s, you’re seeing old types of customers come back and then find you and discover you for new things, just trying to think through your customer sequencing as we kind of move back toward a normal cadence. Thank you.

So thanks for the question Stephanie. And you’re right, color – vivid colors are now 27% of Sally’s color business. Not quite as much in VSG. And the reality is it does skew younger although it’s surprisingly across a larger age group. It was a sick day growing category, even before the pandemic hit so I don’t want to suggest that it went from, you know, five to 20 it was already in the high-teens before the pandemic. And it has been growing for multiple years. I think there’s a general trend toward self expression and freedom of self expression. And that trend was accelerated obviously, as we went into the pandemic. And they’re now coming out. I think the reality is that the, work models will continue to be hybrid. I think companies are in general wants to be more accepting of people’s differences and their desire to express themselves in different ways. So I think there’s going to be more openness in society to vivid colored hair or tattoos or piercing or any other form of self expression. So I don’t think this naturally necessarily goes away. The other side is. We have an incredible lead in terms of our assortment. We carry almost over 300 options of vivid colors in our stores, out of a 1,200 option color assortment. And if you go to the next, largest color seller in the United States, they might have 25 to 30. So we have this incredible breadth of assortment that is really appealing to the customer as well. And so yes, I do think it’s bringing some new customers to the fold. I do think there is a general trend toward self expression and feeding of expression. And I and we’re going to pick up on that in some of our marketing that you’re going to see coming in June around you by Sally and us enabling the customer to, express themselves. I don’t know, if it’ll I think, I don’t think 53% growth will sustain itself. I think that will slow down, But I still think it’ll be a growing category.

That’s great. Thank you, And Marlo, can I have one follow up on wages, can you just remind us where you are on the minimum wage curve. I know some of your peers have done proactive hikes to the $15 level, just wanted to clear up where you are on that arc of wages.

Yes, we haven’t released that amount of detail. What I will say is, think about our associates, you know they are they’re well informed. Beauty enthusiasts and consultation, experts on the color and care side of the house. So, they tend to be higher paid. When you think about that, relative to what I would say as a fast food worker, or other general retailers.

Yes. So I think that the reality is that an even more so on the BSG side.

Right.

So, but we still believe there is wage inflation coming. And we’re prepared for it.

Thank you everybody.

Thank you.

Our next question from Carla Casella with JPMorgan. Please go ahead.

Hi. Just two questions here. One, I think I missed it, he gave guidance on store openings for the remainder of the year, and your thoughts on that going forward and then one follow up.

Yes. Although we do have a few stores opening, we also mentioned that we’re actually going to be closing 90, 70 Sally and 20 BSG as a test to understand, how can we increase those sales to other stores. So I don’t actually have the net openings. But I’m thinking it’s probably down, down slightly.

Handful.

Yes.

So the net openings are down slightly. Okay. Great. And then e-commerce, did you talk about how much percentage of sales, it is right now at Sally and BSG, but I’m more also curious on where you think that settles in, and if you’re seeing any kind of normalcy, where it could settle in post pandemic?

It’s in the high single-digits right now across our – yes, I think it’s seven across the entire enterprise excuse me 8,

7.8.

Yes, 7.8 across the entire enterprise. And there’s markets that are above that like the UK, BSG is quite strong, Sally’s a little below that. But the reality is that we think it’s going to grow. I don’t know exactly how big it’ll be, but I think in, two to three years to think of it being a 15% to 20% of our business is completely reasonable. And again, we think a lot of that will be fulfilled from stores either through bogus or two and three hour delivery from store.

Okay. That’s great. Thank you so much.

And next we’ll go to a William Reuter with Bank of America. Please go ahead.

Good morning. I know you mentioned that you don’t expect that the stimulus payments have been making – will make substantial I guess impact in terms of your future sales, but were you able to track it all when those payments went out this year and whether you saw spikes in sales during the second quarter?

Yes. No, we definitely did as Marlo mentioned in her comments, we saw them especially in our Sally business in early January and in late March. And so we did see them drive purchases in our stores during those kind of four weeks of the quarter.

I think the March and March enthusiasm had some consumer optimism in there too, so it’s a bit of a hard read, but we did see the acceleration in March.

Okay. That’s helpful. And then you’re currently at net leverage of 2.3 times, which I think your leverage target is a net leverage target the 2.5 times. So I guess how should we think about capital allocation at this point. Will you think about returning cash to shareholders in terms of share repurchase? What are your thoughts there? And that’s all for me. Thanks.

Yes. Thank you for the question. And, as you pointed out, we’ve had really strong cash generation through the first half of this year and we expect, again, another $100 million of cash generation in the back half of the year. So our focus has been on maintaining really strong liquidity positions going forward, we expect to do that. And we’ll continue to prioritize in the way that we have been throughout this entire pandemic which is balancing investing in our strategic growth, as well as working to pay down debt to reduce leverage. So we are continuing to make great progress. We did again, subsequent to this quarter with the April paid down with the 5.5% notes. And then as things stabilized in the macro environment gets more predictable when we come out of the pandemic. We will evaluate optimal tax to return value to shareholders.

Great. Sounds great.

And to the presenters on the call, we have no further questions. I’ll turn it back to you.

Just like to thank everybody for joining us today. We continue to be excited about both the health of our business as well as the speed with which we’re executing on our core strategic initiatives, and the value those will create for customers going forward. Thanks again for your time today and we look forward to talking to you soon.

Ladies and gentlemen that does conclude your conference for today. Thank you for your participation. You may now disconnect.