Good morning, welcome to the Culp, Inc. Q2 Fiscal 2023 Earnings Conference Call. All participants will be in listen only mode. Should you need assistance, please signal conference hosts by pressing the Star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press Star then one on your telephone keypad. To withdraw your question, please press Star then two. Please note this event is being recorded. I'd like to turn the conference over to Dru Anderson. Please go ahead. Good morning, welcome to the Culp Conference Call to review the company's results for the Q2 of Fiscal 2023. As we start, let me state that this morning's call will contain forward-looking statements about the business, financial condition and prospects of the company. Forward-looking statements are statements that include projections, expectations, or beliefs about future events or results, or otherwise are not statements of historical fact. The actual performance of the company could differ materially from that indicated by the forward-looking statements because of various risks and uncertainties. These risks and uncertainties are described in our regular SEC filings, including the company's most recent filings on Form 10-K and Form 10-Q. You are cautioned not to place undue reliance on forward-looking statements made today, and each such statement speaks only as of today. We undertake no obligation to update or revise forward-looking statements. In addition, during this call, the company will be discussing non-GAAP financial measurements. A reconciliation of these non-GAAP financial measurements to the most directly comparable GAAP financial measurement is included in the tables to the press release included as an exhibit to the company's 8-K filed yesterday and posted on the company's website at culp.com. A slide presentation with supporting summary financial information is also available on the company's website as part of the webcast of today's call. I will now turn the call over to Iv Culp, President and Chief Executive Officer of Culp. Please go ahead, sir. Good morning. Thanks to everyone for joining us today. I would like to welcome you to the Culp quarterly conference call with analysts and investors. With me on the call today are Kenneth Bowling, our Chief Financial Officer, and Boyd Chumbley, President of our Upholstery Fabrics business. I will begin today's call with some opening comments, and Ken will then review the financial results for the quarter. Following that, I will provide further updates on some strategic initiatives and opportunities specific to each of our operating segments, and Ken will then review the business outlook for the third and Q4 of this Fiscal Year. We will be pleased to take your questions. Our sales and operating results for the Q2 reflected ongoing pressure from the continued slowdown in consumer demand in the domestic mattress industry and to a lesser degree in the residential home furnishings industry. As previously announced, our operating performance was significantly affected by inventory impairments and inventory closeout sales for our mattress fabrics division, as well as higher than normal inventory markdowns and restructuring and related charges associated with our upholstery fabrics segment. The timing of this inventory impact was mostly driven by our customers' focus on new product offerings to introduce at the retail level, as well as inflationary pressures, changes in consumer spending and ongoing macro conditions. We expect to ultimately benefit from a focus on new products as we continue to win new placements in both divisions. But it is difficult to predict the timing of new product rollouts due to the ongoing excess of retail and manufacturer inventory. I am pleased with our continued focus on cash generation and working capital management, including inventory reductions throughout the quarter. Maintaining a solid financial position has been our major priority through these challenging times, and I am grateful to both of our segments for their excellent work in this regard. We ended the period with a higher cash position than the Q1 of Fiscal 2023, with $19.1 million in cash and investments and no outstanding borrowings. We also generated cash flow from operations of $6.2 million and free cash flow of $4.8 million for the first six months of the Fiscal Year. Additionally, based on market dynamics for cut and sewn products and the strength of our Asian supply chain, we took action during the quarter to rationalize and adjust our model for this platform with the closure of our Shanghai cut and sew facility, resulting in certain restructuring and related expenses. We also began to implement a rationalization of our U.S.-based mattress fabrics cut and sew platform during the quarter, moving our R&D and prototyping capabilities from our High Point, North Carolina location to our Stokesdale, North Carolina facility and initiating the closure of 2 U.S. facilities associated with this business, which is expected to be completed during the Q3. We believe both of these moves will generate meaningful cost savings, estimated at approximately $3 million annually, without sacrificing our ability to support our customers, grow our cut and sew business, and maintain our competitive advantages through our lower cost manufacturing and sourcing operations in Haiti and Asia. Importantly, we continue with a very robust platform for cut and sewn products, driven both for market pricing and reactivity to customer demand for rapid prototyping as well as ramp ups. I remain encouraged by the market positions of both of our businesses and the actions our management teams are taking to improve performance in the face of extraordinarily difficult conditions. Later in these remarks, I will provide more color around specific strategies in each business with detail around Culp Home Fashions. I'm encouraged by our leadership transition within the Culp Home Fashions business to generate improvement for the future. Across both segments, we are optimistic about new customer programs that are expected to launch in calendar 2023, as these programs will have the benefit of being priced in line with current market conditions as compared to the price cost lag we have experienced for the last several quarters. Looking ahead, we will continue to diligently manage the aspects of our business that we can control, including execution of our product-driven strategy, ongoing cost reduction measures, and consideration of further adjustments to rightsize and restructure our operations to align with current demand levels. We are pleased to have entered into a term sheet for a new credit facility that will give us more flexibility as we navigate this difficult environment, and we remain focused on taking the necessary steps to weather the current headwinds and meet the needs of our customers, both now and as conditions normalize. I'll now turn the call over to Ken, who will review the financial results for the quarter, and then I'll talk more about some initiatives we have planned for both businesses as we move into the second half of the Fiscal Year. Okay, thanks, Iv. As mentioned earlier on the call, we have posted slide presentations to our investor relations website that cover key performance measures. We've also posted our capital allocation strategy. Here are the financial highlights for the Q2. Net sales were $58.4 million, down 21.7% compared with the prior year period. The company reported a loss from operations of $11.9 million, compared with income from operations of $1.6 million for the prior year period, and it compared sequentially with a loss from operations of $4.7 million for the Q1 of this Fiscal Year. As Iv touched on, the loss from operations for the quarter includes $5 million in inventory impairment charges and loss on sale of raw material and finished goods inventory associated with our mattress fabric segment. It also includes approximately $1 million in higher-than-normal inventory markdowns associated with our Upholstery Fabrics business and $713,000 in restructuring expense and related charges associated with the closure of the Upholstery Fabrics segment's cut-and-sew facility in Shanghai, China. I'll comment in more detail on the visual sales and operating performance in a moment. Net loss for the Q2 was $12.2 million or $0.09 per diluted share, compared with net income of $851,000 or $0.07 per diluted share for the prior year period. Our overall operating performance for the Q2 was primarily affected by lower sales, impairment charges due to the write-down of inventory to its net realizable value, and inventory closeout sales for our mattress fabric segment, markdowns in inventory due to our aged inventory policy for both segments, and restructuring-related charges associated with our upholstery fabric segment. Notably, we benefited from $829,000 in other income for the Q2 as compared to $404,000 other expense during the prior year period. The change from other expense to other income is due mostly to more favorable foreign exchange rates applied against our balance sheet accounts denominated in Chinese renminbi to determine the corresponding US dollar financial reporting amounts. During the Q2 of this Fiscal Year, we reported a foreign exchange gain associated with our China operations of $1 million, which is mostly non-cash, compared with a foreign exchange loss of $151,000 during the Q2 of last Fiscal Year. The effective income tax rate for the Q2 of this Fiscal Year was a negative 10.4%, compared with 34.3% for the same period a year ago. Our effective income tax rate for the Q2 this Fiscal Year was affected by the company's mix of earnings between our U.S. and foreign subsidiaries. We incurred a significant pretax loss in our U.S. operations during the Q2 this Fiscal Year, but we were unable to record an income tax benefit in connection with this loss due to the valuation allowance applied against our U.S. net deferred income tax assets. This, with the fact that all of our taxable income for the Q2 was earned by our foreign operations in China and Canada, which have higher income tax rates than the U.S., resulted in the negative income tax rate for the quarter. Our cash income pay, income tax payments totaled $1.7 million for the first six months of this Fiscal Year. We currently expect cash income tax payments of approximately $3.2 million for the entire Fiscal 2023 year. Importantly, our estimated cash income tax payments for this Fiscal Year are management's current projections only and can be affected over the year by actual earnings from our foreign subsidiaries located in China and Canada versus annual projections, changes in foreign exchange rates associated with our China operations, and other factors. Let's take a look at both of our business segments. For the mattress fabric segment, sales for the Q2 were $26.2 million, down 35.8% compared with last year's Q2 and down 10.7% compared sequentially with the Q1 this Fiscal Year. Sales for the quarter, which included pricing and surcharge actions that were in effect during the period, were significantly pressured by the ongoing slowdown in consumer demand in the domestic mattress industry. The impact of this industry softness was heightened as mattress manufacturers and retailers continued to work through excess inventory, delaying the timing of shipments and new product rollouts. Operating loss for the quarter was $9 million, compared with operating income of $3.1 million a year ago. Our operating performance for the Q2 this year was significantly pressured, primarily due to operating inefficiencies driven by lower sales volume and $5 million in inventory impairment charges and losses on the closeout sale of raw material and finished goods inventory. For the Upholstery Fabrics segment, sales for the Q2 were $32.2 million, down 4.5% over the prior year, which was affected by COVID-related shutdowns in Vietnam. Sequentially, sales for Upholstery Fabrics segment were down 3.3% compared with the Q1 of this Fiscal Year. Sales for residential upholstery fabrics products were pressured during the quarter by reduced demand, driven by the slowdown in new retail business for the residential home furnishings industry. Demand remained solid in our hospitality business, with higher sales in both our hospitality contract fabric business and our Read Window Products business as compared to the prior year period. Income from operations for the quarter was $262 thousand, compared with income from operations of $1 million a year ago. Our operating performance for the Q2 of this Fiscal Year as compared to the prior year period was primarily pressured by lower residential sales and approximately $1 million in higher than normal inventory markdowns, as well as operating inefficiencies in this segment's Haiti cut and sew facility. These pressures were partially offset by a significantly more favorable foreign exchange rate associated with this segment's operations in China, as well as an improved contribution from our Read Window Products business. I'll turn to the balance sheet. We reported $19.1 million in cash and investments and no outstanding debt as of the end of the Q2. This compares with $18.9 million in cash and investments and no debt as of the end of the Q1 of this Fiscal Year, and $14.6 million in cash and investments and no debt as of the end of last Fiscal Year. Cash flow from operations and free cash flow were $6.2 million and $4.8 million, respectively, for the first six months of this Fiscal Year, as compared with cash flow from operations and free cash flow of negative $1.3 million and negative $5.8 million, respectively, for the first six months of last Fiscal Year. Our cash flow from operations and free cash flow during the six months of this Fiscal Year were favorably affected by working capital management, including higher accounts payable and lower inventory. Importantly, since the end of the Q3 of last Fiscal Year, inventory reduction has contributed approximately $13.7 million to the company's cash position. Consistent with our focus on inventory, we are tightly managing our capital spending with an emphasis on business critical only. Capital expenditures through the Q2 of this Fiscal Year were $1.1 million, compared with $3.9 million for the same period of last year. For the full Fiscal Year, we expect capital expenditures to be in the range of $2.5 million-$3 million. We also executed a non-binding term sheet during the quarter for a new revolving credit facility of up to $40 million secured by the company's assets. This proposed credit facility will replace our existing secured credit facility and, based on the information available at this time, is expected to provide improved borrowing availability with minimal financial covenants. While we do not currently foresee a need to borrow under this facility, we are pleased that it will give us more flexibility as we continue to navigate a difficult environment. The completion of the credit facility is subject to the parties entering into a definitive agreement, which may contain additional or different terms from those that I've just described. The company did not pay any dividends during the Q2 of this Fiscal Year following the suspension of our quarterly cash dividend on our common stock earlier in the year. The company also did not repurchase any shares during the Q2 of this Fiscal Year, leaving approximately $3.2 million available under our current share repurchase program. Despite the current share repurchase authorization, we do not expect any activity during the Q3 of this Fiscal Year as we remain focused on preserving liquidity and being positioned to support future growth opportunities. With that, I'll turn the call back over to Iv. Thank you, Ken. I will now provide more comments about our strategic focus and initiatives for each division as we look ahead, beginning with the mattress fabric segment, Culp Home Fashions. Despite the headwinds in this business, Culp Home Fashions has remained focused on inventory reduction and cash generation. This focus on inventory reduction will remain as we move into the Q3, as there are further reductions possible in both finished goods and raw materials. I am very pleased with the cooperation and support we have had in our transition of leadership within CHF. Sandy Brown and Tommy Bruno are working very well together, and Tommy is learning quickly and engaging the CHF team on a transformation plan in this business, where every aspect of our operation is being reviewed, including the organizational structure, renewing the strength of our global platform with a continued and strong focus on North American supply opportunities, employee engagement, and quality, design, sales, and of course, operational processes. In the short term, the focus for CHF will be on free cash flow, turning our inventory into cash, controlling and reducing costs, and working on overall improvement in every facet of the business. Innovation remains a hallmark for CHF, and customers continue to accept and prefer our design and product development. As mentioned earlier, we are optimistic that as new business placements move to retail floors, we will grow our sales commensurate with these market share gains. Additionally, these new sales opportunities are placed at current market costs and conditions, which will be better for our go-forward margins. We are also working to implement new order procedures to firm up customer commitments. We are focusing on SKU rationalization via an open express line that we will offer to various segments of the market. We are revising minimum run sizes and implementing specialty raw material controls. We are also improving our cut and sew platform so we can still meet customer needs for rapid prototyping in North Carolina and speed to market via our Haiti location, but saving $2 million annually with the closure of our two High Point facilities. We will still have strong and competitive production and sourcing capabilities in both Haiti and Asia. Regarding operating costs, we are pleased that we're beginning to see raw material pricing relief and a stabilizing labor force. We still need to work through some long supply chains for raw materials, and we must continue training our newer associates. It is positive to see trending towards a better, more normal condition. I do wanna call out a bit more our stabilizing labor force. Over most of this calendar year, we have been faced with significant turnover, up to 40% of the total workforce in some North American locations and departments. The good news is that today we are much more stable and in a good position with jobs being filled by talented associates. It's important to note this is inexperienced talent that is still learning, and as they grow, our efficiencies can improve. We also have a tailored focus for CapEx within CHF that will not involve any major platform expansion, but rather fine-tuning, updating, and maintaining equipment to produce quality products at competitive prices. While we do expect the current economic environment will continue to affect the mattress fabric segment through at least the remainder of Fiscal 2023, our market position in this business remains solid, and we believe we are well positioned for the long term. We know that CHF is a business that we must quickly improve, and we are optimistic that we will do so. As mentioned, the business is undergoing a significant review, and forecasts are being built from the bottom up, factoring in the baseline, closed-out sales from impaired inventory, as well as the layering of the exciting new programs we've spoken of. We are confident that our new strategies, along with our innovative products, creative designs, and global manufacturing and sourcing platform, will serve us well into the future in Culp Home Fashions. Now a few comments on the upholstery fabric segment. Despite changing consumer spending trends affecting the residential home furnishings industry, Culp's business remains well positioned for the long term with its scalable global platform and innovative product offerings. Through Q2, our upholstery business is performing better than CHF in these tough conditions, supported in part by our strong contract hospitality business. We remain excited about opportunities within contract hospitality, especially with fabric development. We also continue to pivot and diversify our sourcing strategies to develop additional geographic options to service customers. We remain extremely proud of our associates in China and the great job they have done in difficult circumstances. We have maintained excellent customer service via our China platform, and we continue to develop products of great value in China. We also understand the need to de-risk our supply chain, and we have options for supply around the world. We think a diversified strategy is critically important to our customer base. Innovation certainly continues within Culp as we see growing success with our portfolio of performance products, including LiveSmart and LiveSmart Evolve, as well as our recent new introductions of AnySpace and Culp powered by Nanobionic, a fabric featuring infrared technology that promotes recovery and wellness. Customers are reacting positively to our product lines, as reflected at the recent Interwoven market, and we believe we will see overall residential business improvement as our customers clear inventories from their system and new products are delivered to retail. Ken will now discuss the general outlook for the third and Q4s of Fiscal 2023, and we'll be happy to take some questions. We continue to navigate a convergence of headwinds, including significant inflationary pressures impacting discretionary consumer spending, high inventory levels at manufacturers and retailers, a stabilizing but inexperienced labor force, and other macroeconomic uncertainties. Although we remain well positioned over the long term with our product-driven strategy and flexible global platform, current conditions are likely to continue pressuring results through at least the remainder of Fiscal 2023. Due to the continued volatility in the macro environment, we are providing only limited sequential financial guidance for the second half of this Fiscal Year. We expect net sales for the Q3 to be moderately lower as compared to the $58.4 million in net sales for the Q2 of this Fiscal Year, with sales for the Q3 affected by fewer billing days due to the longer than normal holiday shutdowns, both internally and by customers and suppliers, as well as the timing of the Chinese New Year holiday, which falls primarily within the Q3. We expect a consolidated operating loss for the Q3 of this Fiscal Year that is meaningfully lower than the $11.9 million operating loss for the Q2 of this Fiscal Year, but that is higher than the $4.7 million operating loss for the Q1 of this Fiscal Year due primarily to expected lower sales. We also expect our cash position as of the end of the Q3 of this Fiscal Year to be lower than the $19.1 million at the end of the Q2 of this Fiscal Year, but higher than the $14.6 million at the end of last Fiscal Year. Looking ahead to the Q4 of this Fiscal Year, we are cautiously optimistic for some improvement in business conditions. With an expectation for sequentially improved sales and a reduced operating loss as compared to the Q3 of this Fiscal Year, with a cash position that is expected to be comparable to slightly lower as compared to the $14.6 million at the end of this Fiscal Year. As we weather the current challenges, we will continue to be laser-focused on prudent financial management with the goal of always maintaining a strong balance sheet, especially with regard to ensuring a strategic balance in our working capital. We are optimistic about Culp's future, we know that financial stability is paramount to our success. With that, we will now take your questions. We will now begin the Q&A session. To ask a question, you may press Star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press Star then two. At this time, we will pause momentarily to sound our roster. Our first question will come from Rex Henderson with Water Tower. You may now go ahead. Thanks for taking my call. Iv and Ken, congratulations on really doing a great job of maintaining liquidity in a really difficult environment. With that, I wanted to ask a couple questions about, you know, your guidance seems to imply, you know, it doesn't seem that you're quite as bleak as you were in the pre-release a couple of weeks ago. It seems like you're thinking that there's some stability and maybe a little bit of turn towards the end of the year. Can you give me some color on why you think that's possible, what you're seeing in inventories downstream from you? Can you give me a little bit of color on what impact the billing days and holiday shutdowns will have on the Q3 as a percentage of revenues or you know, some metric that'll help me understand what impact that's gonna have? Rex, thank you. This is Iv. I really appreciate your kind comments about working capital management and just trying to maintain our balance sheet. It certainly is something that's drilled into me from our board and from our management here and from leaders before me, and we definitely make it a paramount importance to us. It's one thing we can hang our hat on, and we're gonna keep our focus there. Thanks for mentioning that. To your questions, let me see if I can wrap those in. Good, really good questions. Maybe I'll couch it as kinda you're asking, are we seeing any improvement as we look ahead in the run rate? We're trying to touch on that in the outlook. Certainly, there is some Q3 concern. I think you mentioned, there are some billing days out of the cycle in Q3. You know, we have the normal holidays where we are hearing that some customers are taking one and maybe even two weeks out of their schedules. Chinese New Year is also a primary, Q3 impact for us. We recognize that there will be considerably lower billing days in the Q3 than we might have in a normal quarter just from shutdowns. That may be as many as four to five days that could impact us in billing. That's why we're being a little cautious about Q3. Overall, we probably feel more optimistic about Q4 sales lift, mostly driven by the focus we keep talking about on innovation. You have to also break it down, Rex, just as I'm thinking through this, you gotta break it down by our segments too. We said, or I said, Culp Upholstery Fabrics has been more stable, and we are seeing solid conditions in contract hospitality. Our residential business does still remain pressured, but we're optimistic about new innovation that we have in that business. We have a great opportunity with performance fabrics, and we feel certain we're positioned well. CHF, Culp Home Fashions, is the business where I really detailed we have to see quicker improvement, and we are starting to see it. We've done a really detailed approach to the business. We've built up the forecast really in-depth in three buckets, from a baseline of business, to closeouts that we're shipping somewhat from our impairment of inventory and other things, then new programs that we see, we're layering those on to get a forecast. We understand the baseline is pressured today. We know business is a little bit tight, but we're optimistic about reducing inventory further and driving that cash, and we're really optimistic about new market share wins. We are certain in both businesses, retailers seem excited to drive new products on their floors, and that's gonna be a benefit to us, and we've been waiting for these rollouts for some time. Lastly, I just, I hate to not mention it. The good part about new products hitting the floor is that they are placed in line with market costs, which is, I mean, it seems obvious, but that's a big deal for us 'cause we've been lagging on price increases most of the year. To get some new products to the market that are costed on in line with current market is gonna be very helpful. Yeah, we're cautiously optimistic that we can begin to improve our run rate, especially as we think about in Q4. Okay. That's a long answer. I hope I got all your questions. If I missed something- That's helpful. In your remarks about CHF and inventory rationalization there, I should be looking for Q3 inventories to be again lower than they are at the end of Q2. Is that more further cash generation from inventory reduction going into the third and Q4s? Is that right? Yeah, Rex, this is Ken. Yeah, Q3 especially, you know, Q4 may require a little bit of build when we come out of, you know, with the projected sales growth that we're looking at. Right now we're looking for further reductions in Q3. Okay. Finally, one point of clarification on the credit agreement. If I recall correctly, you just executed you know, a new credit agreement, I don't know, what one or two quarters ago. I'm wondering- Yes ... you know, what's the improvement here? What is it, first of all, is this additional or is it replacing the existing agreement? You know, what's the benefit of the new agreement for you? Yeah. Rex, this is Ken again. you know, it is replacing the current agreement. It comes down to giving us more, really a higher ability to borrow with the way it's structured, and also a lot more flexibility with minimal covenants. Those are the two main benefits of that. With this new agreement, it really positions us well, going into the future. What's the extent? Is it out for a year, two years, five years? What's the limit on it again? Well, right now we're looking at the current one is three. We're looking at three again. We're still going through all the motions. Right now we're looking at three years. Okay. Then finally, one thing, one question about China. You know, we've been reading a lot about disruption of business in China due to the government's COVID restrictions. Have you experienced any of that? Has it had any impact on you? Rex, this is Iv Culp. I'm gonna let Boyd answer that. He is certainly very close to our China operations. I'll let him make some comments. Good question. Yes, Rex. Thank you for that question. In terms of from a business perspective, no, we have not been experiencing disruptions in China through this time period of the restrictions that have remained in place there. It has not had any effect or impacts to our managing our business or to our supply chain there. Quite frankly, our China supply chain has been functioning and operating very well to support our business, so no issues there. You know, it is important to note, as we've noted before, we have pivoted some of our platform to other locations just as a diversification strategy, which includes Vietnam and Haiti and Turkey, more recently Turkey. We have continued to diversify our global platform just to have options for our customer base. Um- Okay. Yes, to your question, we have not experienced any business-related disruptions due to those restrictions. Okay. Well, thank you again. Good job in a difficult situation, and I'll let someone else ask a question now. Thanks. Thank you, Rex. Have a good day. Appreciate it. Our next question will come from Anthony Lebiedzinski with Sidoti & Company. You may now go ahead. Good morning, and thank you for taking the questions. Yeah, likewise, it's good to see that you guys are proactively managing your liquidity as well. I guess, you know, just first, just a quick housekeeping question. I think, Ken, you mentioned that there was some pricing and surcharge actions taken in the Q3. Can you just share with us, you know, how much of that was impacted, you know, as far as the quarter here? You know, as you know, Anthony, we took, you know, we started those pricing actions last year, we really had them out all throughout last Fiscal Year. We're getting the benefit of having the, you know, when you compare to last year, the benefit of having the third and Q4 increases in there. You know, I can't quantify exactly what those amounts are, they're certainly helping. You know, we're trying to navigate the pricing with all the different cost measures and efficiency projects that we've got going on. As compared to last year, it's definitely some tailwind there. As we've said in the past, you know, especially on the CHF side, we did lag in our ability to keep up. That's one thing that, as Iv Culp said in his remarks, that with these new products, we're hoping to really get better pricing to reflect the current market. Anthony, just, thank you for the question. Right. Ken answered it well. Just add a couple things. You know, we've touched on it a lot. We've been chasing price to cost in both businesses all year. We've passed on several price increases, and we have always lagged. It's never been enough. You know, we're thankful that we're now seeing some relief in ocean freight, not inland yet, but in ocean and in raw materials, which will be a big help going forward. Certainly it takes a little time to work through the system, but seeing costs finally become I think we can see costs maybe become a tailwind for us in the medium term. I just wanna call up, don't discount our labor stabilization that I've touched on. Getting some stability with our associates and having them trained effectively will definitely be a cost control measure going forward. We have done some surcharges and increases, but we've lagged demand. I think that can turn for us in the back half of our year. Okay. That's good to hear. Just to follow up on the labor front. You know, in your experience, I mean, what's been a typical learning curve for new associates or like, you know, like, when would be a reasonable timeframe as to when you expect your labor force to be as efficient as they should be? Yeah. Good question, Anthony, I'm glad you picked up on that. I tried to call it out, especially. For a while, labor's been a big challenge for us. As I mentioned, our North American facilities, which has primarily impacted Culp Home Fashions, some in Culp Upholstery Fabrics too. We've had turnover of 35%-40% in some locations. Now we don't have that kind of issue in other parts of the world, but in the U.S., it's been challenging. Today, our turnover's rate is very low, and we have a lot of talented people placed in roles, but they're new. We're not a major skilled labor operation, but we are skilled labor, and it does take some expertise to run equipment and to understand what's acceptable and to view it and inspect it properly. You know what? It just takes a little time. We'd like to have a one month type of training for any associate. Then we would say it may take them two to three more months to get up to what's a normal cadence. It could easily take a quarter to get someone fully trained. It doesn't mean they can't be productive, but to get fully trained and really start to improve. For many years, we had the benefit of a very stable, high retention labor force. That just changed in the last year, and we're getting back to a place where we can build on some people in place, which had always been a hallmark for Culp is our people. We value that as much as our balance sheet. People are so important. We gotta get the right folks in the right places and give them time to succeed. Well, that's great to hear. So you mentioned obviously our ocean freight costs have come down, and you're expecting some labor stabilization. Any other cost tailwinds that you're seeing or you expect to see? Raw materials. I mean, I think when we think about costs, Anthony, outside of that, certainly we're starting to see some tailwind with raw materials. We know we gotta work through supply chains, and in some cases, we have to work through some inventories we've already built. We are seeing raw material tailwind, and that's the biggest portion of our cost on the CHF side. Seeing raw materials turn in a positive direction for us is very helpful. The 3 main cost savings we called out too. Certainly the cost savings from adjusting the cut-and-sew platform. Yes, sir. Yeah. Yeah. Yeah. Right. Right. As far as that, just to follow up on that, will that be mostly SG&A or more cost of goods as far as that $3 million number that you called out? It's a little bit of both. It's just now starting, so we're seeing some impact in Q4 and then beyond. It's really, you know, it's lease costs, that's a big piece of it. Labor cost is a big piece of it. Other fixed expenses down. There's just an array of different areas that incorporate that close to $3 million savings. Gotcha. Okay. Lastly, you talked about SKU rationalization and better inventory management. Just wondering, you know, how quickly can you do that? You know, how should we think about the significance of this? Yeah, that's a good question, too, Anthony. That's specific to the CHF business, and we're just trying. We have become over time, a very custom design business, and we don't wanna say no to any customers, and it's just not in our makeup. What we can do a better job is of having a more rationalized product line with more rationalized raw materials to be able to develop still a lot of very fashionable and exciting looks for some segments of the market that we don't need to develop custom. That just is the process of designing and then selling and marketing that project. Easy to do. Just takes a little time to flush through to the market. You know, certainly for our bigger customers, we are always gonna do things they wanna do, and we'll do custom work. For some of the smaller opportunities, we need to make products off common raw material banks. We need to make them with efficient processes, and we need to have customer commitment to take the goods. Those are all pretty much blocking and tackling things that we just need to get better at. I'd say, I mean, it's gonna take us. I mean, you're gonna see the fruits of that in FY 2024 for sure. I'd like to have it go quicker. It depends on how quick we get these products released and placed. So much of what's driving us is when we get them placed into the market. I hope that helps. Yeah, absolutely. Well, thank you very much and best of luck. Thank you, Anthony. Thanks, Anthony. Thanks. This concludes our Q&A session. I would like to turn the conference back over to Iv Culp for any closing remarks. Thank you so much, operator. Again, thanks to everyone for your participation and your interest in Culp, and we look forward to updating you on our progress next quarter. Happy holidays. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.