Ladies and gentlemen, please welcome Vice President of Floor & Decor's Investor Relations, Wayne Hood. Good morning, everyone. I'm Wayne Hood, Vice President of Investor Relations. I know I've met a lot of you over the years, and I wanna welcome everyone here, including those listening online, to our first analyst day since our April 20, 2017 IPO. I was reminded earlier that we did have a meeting at the Exchange where we tried to teach the analysts what laminate and vinyl and how all that was put together. We're really happy to be here today. We have a lot of exciting things to share with you. Before we begin, I wanna direct your attention to the forward-looking statements language included on slide two and three at the beginning of this presentation. Make sure you take notes on this, 'cause it's very important. We have a lot of exciting things to share with you today about how we plan to continue to deliver strong earnings growth and grow our market share, not only over the next three years, but decades to come. I know I was sitting in your spot a few years ago, and I know how important access to management is, so I wanted to make a point to, as we talked about it internally, to present all of our leadership team you'll hear today. At your table at lunch today, you'll have leaders there to speak to you as well, and then we'll go out to the stores where you'll get an idea of who our merchants are. Really great access to management. You'll learn about our culture, who they are. It's not one, two, or three people. It's a team overall that we pull this off day in and day out. Throughout the day, you'll be able to submit your questions through the online QR code, if you'd like to do that. We'll also have mic runners back and forth where you can ask questions. Following our lunch, we'll have a Q&A session with all the executives coming up, and you'll be able to ask questions during that. After lunch, we'll head to the Doral store. You'll go out to the gate and jump on a bus, and then we'll take a group to Doral, another one to the design studio, and rotate you that way around the stores. Let me now turn the conference over to our Chief Executive Officer, Tom Taylor. Wow. Thank you for that warm welcome. I know we're all a little out of touch from doing this. I was just happy my suit fit. It's been so long since I presented in one. I'm glad that you all got to meet Wayne and you all know Wayne. Today's Wayne's birthday, right? Happy birthday, Wayne. Since he's sat in a lot of your shoes, we thought, you know, you would appreciate. Last night, we pulled out his first research report on Floor & Decor, and he was completely off. We hired him anyway, but we know sometimes people get it wrong. Look, we're thrilled that you're here. We purposely brought you to this hotel so you could appreciate our opportunity in the commercial business space. If you just take a minute and look down at the floor, you'll see lots of opportunity for upgrading of hard surface flooring. If you paid attention in your bathroom this morning, you'll see lots of product that's out of style. We are the place to go for the Biltmore Hotel. In fairness, we are thrilled that you're here today. You are gonna see some fabulous stores this afternoon. It'll be the highlight of the trip. You're gonna go over to Doral and see the design studio. They're great. More importantly, you're gonna have the opportunity to meet our teams. Most of you know Lisa Laube, Trevor Lang, and I certainly from you know, being the face of the public part of the company since 2017. We've got all of our merchants are here. You're gonna get to eat lunch with them. Some of you eat breakfast with them, and you're gonna get to see them in the store. All of our senior officers are here, so you'll see the power behind us. We're excited to go through the presentations with you. We're a little out of practice. You know, it's been a while since we presented, so bear with us if we miss a slide here and there. Look, when I'm done, there are five key things that I'm gonna hit, right? First is, you know, I'm gonna talk a little bit about the model, how we're, you know, remind everyone of why we're, you know, disruptive in the marketplace, why we're high growth and why we're unique. I am gonna take a minute and do a little bit of a victory lap on how we executed during a very challenging time. I'm gonna share a little bit how I think about the strategy for the future, because as well as we've done and as much as we've grown since certainly I've joined the company and certainly since we've been public, we've got a long way to go. I'll touch upon and Trevor will spend more time on the addressable market. It's growing larger than the last time we talked to you, and we'll talk a little bit about that. Finally, we'll close and discuss a little bit about our capital allocation plan. As I get to just talk about a unique, disrupting retail concept, I would just wanna remind everyone, for those of you who don't know me very well, I used to be the young guy in the room. Now I'm the old guy in the room. I've been in retail part of it for 35 years, and I was in private equity for a few years. During my time in retail, I was fortunate to be on the sales floor of The Home Depot when it was a handful of stores. I was able to see customers' reactions to a retail company that really reinvented a category. If you know the history of home improvement, home improvement was historically done in, you know, lumberyard-type settings, small hardware stores, or a combination of both, and Home Depot really came in and reinvented the way that was done. I was on the floor when someone walked in and saw a store for the first time, and I saw their reactions and I saw how they were overwhelmed and they were, by the assortment, by what the store was. They'd complain, "Oh my gosh, this place is too big. Oh my gosh, there's too much stuff." I got recruited to come to Floor & Decor, and I walked into the Floor & Decor in Boynton Beach, and I was like, "Man, I had the same reaction as the customers that I saw in the eighties and the nineties. I knew it would be successful and was fortunate to be able to join and, you know, the rest is history. That experience of being on the floor and seeing customers' reactions in our stores was huge. What makes us successful? Just a little bit. I'm gonna talk about three things real quick. The first thing is just the size of our store. That 78,000 sq ft store gives us the ability to carry every hard surface flooring category under one roof. Everything. A customer comes in, they don't know what they want, we have it under that roof. It gives us the ability to have the largest in-stock assortment. We don't do much special order. Everything's cash and carry. Our in-stock assortment is broader than anyone else, and it really gives us the ability to inspire customers. I'll talk a little bit more about that in a couple other slides, but the amount of space we commit to showing off the product, inspiring customers is incredible. The next thing that makes us successful is our sourcing model. You'll hear Brian Robbins talk about it, you'll hear Ersan Sayman talk about it during their presentations. You'll hear me talk about a little bit further. You know, we're unique. This is a complicated category to do. We go to 240 suppliers in 24 countries. It's very, you know. Our products are sourced from all over the world. We try to use very little middlemen so that we can get the best possible price. By going all over the world, we're also able to get the best product, and so we're able to provide the best product at the best price. The next thing I think that really makes us unique is our approach to service is different in the marketplace, right? We have expert associates in every aisle. If you look at a home improvement center, they're gonna have a handful of associates on a Saturday to be able to take care of you. Our stores average 60 associates. They're very trained across every category that we sell. We've got dedicated designers in every store. We've got dedicated pro teams in every store. Our approach to service is different within the marketplace. We've got an excellent website where customers can interact seamlessly between the store and our website. You'll hear Lisa spend a little bit of time on our connected customer and what we're doing on that. Then lastly, we just have great services beyond the people part of it. We've got free storage. We've got a liberal return policy, no restocking fees, really all unique and hard surface flooring. Then finally, it's been successful, right? We've been growing at 20% units since I joined the company in 2000, which we started in 2013. We've got lots of years of growing at a fast pace. The team that we built around us, again, you're gonna meet a lot of them. We've just got an excellent management team that's been together for a long time. I just wanna talk about how we compete in the marketplace. If you think about this for a little bit, the big box is our store. People we compete with, this is the amount of space they dedicate to the category. First, if you just think about the home improvement centers. They've grown the space in the category, certainly over the time that I've been here, but typically it averages between 3,000-5,000 sq ft. That's a challenge for them. As much as they continue to try to reinvent their hard surface flooring departments in that amount of space, it's hard to have broadest in-stock assortment across every category of hard surface flooring. I'll use one category as an example. In a Floor & Decor, if you were to go in to buy tile, you would find in the average store over 250 options of tile. In a home improvement center, you would find 55-60. It's just the definition of in-stock in a big box store is certainly different, right? We have multiple jobs in stock. We can earn a pro's confidence, their trust. They know the product's gonna be there. It's just hard to do in a big box store. They're good, but what they have to deal with is different. The last thing I would say in that space is just if you think about our stores, our design centers alone are almost 2,500 sq ft. That's almost the size of their flooring department. Their ability to do inspirational displays is just challenged. They're good, but they're not, it's not quite the same as what a Floor & Decor is. There's specialty hard surface flooring stores. We put tile on the shelf, but there's a specialty wood store in every market. There's a specialty tile store, a stone store. They're typically about 20,000 sq ft, and they may do one category well. It's not uncommon for me to walk in and see a store that does tile similar to how we do tile, but they don't necessarily have laminate or wood or stone or a supply house attached to it. That space doesn't give them the ability to do it. They have one category, typically. Just not equivalent to what we do. There's the independent flooring stores, which are a large part of this market. Those are the stores you see in strip centers. They average anywhere from 5,000-20,000 sq ft. They typically, again, a lot of times will have one category. A lot of times they'll have a few categories, and a lot of times they don't have the inventory. They have the special order. You have to negotiate in price. Just makes it incredibly difficult to deal with that, to compete with us. Then you look at our stores. We've really reinvented the way this category is sold. Our stores average now 78,000 sq ft. That gives us the ability to, as I already mentioned, have the broadest, in-stock assortment, have all the categories under one roof, so when someone comes in, they don't know, "Hey, I don't know if I want stone. I don't know if I want wood." Doesn't matter. We can take you to every one of them and show them to you. Our stores are inspirational. Probably the biggest change we've made is the inspiration to the store. Those large stores, lastly, I would just say that it gives us the ability to be creative, to be innovative, and we're innovative all the time. We're adding things every day. We have the space to be able to do that and be able to try different things. Who we compete with just makes it very hard for those folks to win in the marketplace against us. This was a chart I just thought was interesting that we put together. Just shows how much square footage we dedicate to this category. We have between our warehouse stores, design studios and distribution centers, and we have 169 stores, 4 design studios and 4 DCs. We have 18.2 million sq ft dedicated to the category. That's more than anyone. What that does from a DC perspective, that gives us the ability to replenish our stores frequently, carry lots of inventory, keep the stores fed. It also gives us the ability to plan for future growth. We're opening 20% units that when I started, that was 8 stores a year. Well, now that's 32 stores in a year. It's a lot. Our DCs are planned way ahead. We're prepared to have that growth. From a store perspective, it gives us the ability to wow customers. They come in the stores, all the things I talk about, those large stores are just different. Customers come in, they've never seen anyone like it, and no one's doing what we do. The exciting thing is we execute our growth plan, you'll see we'll have up to 20, almost 30 million feet by 2024, dedicated to the category more than anybody. I mentioned this earlier. I mean, you know, I think probably the largest change since I've joined. Not all. There's been a lot of changes since I joined the company. Certainly between Lisa and I, we spent a lot of time with Ersan and the merchants in really making the stores look different and be inspirational. This is one of the things that I'm really proud of. We're in a fashion category now. The innovation within hard surface flooring from the fashion side has been significant in the 10 years that I've been here. Way more so than during my time back, you know, when I was with The Home Depot, it was different. Hard surface flooring, just the vendors themselves, they were slow to innovate in fashion. As the product's gotten prettier, we realize, hey, we've got to spend more in the stores to make them look better, and we do. We now, every store has 2,300 sq ft at least dedicated to vignettes that show customers what the product looks like. Different than this hotel, we update them all the time. You go into our stores every year, you're gonna see new product, you're gonna see fashion product. We wanna show customers what's possible within their homes. It's not just the design centers which you'll see. When you go to the Doral store today, pay attention. Every single department that we have, we pay attention to inspiration. Our wood displays are 4-foot by 8-foot. Our stone displays are 3-foot by 5-foot. We'll have tile end caps that are 8-foot long, so customers can see movement in product. We just spend a lot in keeping customers inspired when they come into our stores. We're fortunate that we've got three types of customers that our stores serve extremely well. Forget Floor & Decor associates, don't raise your hand. How many of you have done a flooring project within your home? Okay, this is good, right? You'll appreciate our stores and how they can service you. Typically, a homeowner is gonna only do that job a couple times in their lifetime. It's not something that they take on all the time. Our stores are great for them. We're able to inspire them, to show them what's possible. We're able to have knowledgeable associates 'cause no one knows exactly what they're doing. We've got the best price, so they can take on larger products. We do homeowners incredibly well. Although the homeowners only install 15% of the time, so they're working with a professional who our stores also serve extremely well. If you think about the professionals, they don't plan well. You know, it's like they're gonna need inventory, they're gonna need it Friday, but with us, we can get it, right? For an independent, that may be a challenge, so they don't have to plan for that. They need to trust price. They don't have time to drive around from store to store to store to find out who's got the best price. We know our stores have the best price. They need services, and we provide all the services they need between storage, delivery, design services, whatever they want. Lastly is the commercial customer, which is very similar to the pro, except they need more. They need larger quantities of inventory and better pricing and credit, and we have all of the things that help them. Currently, Lisa's gonna talk about this on kind of the composition of how our customers break out and what we're learning from all of our efforts there, but we got 2.9 million active homeowners and pros in our systems. I'm gonna talk about two services that I think make us unique. First is pro. When I joined the company, we had a Pro area in the store. It was two-by-tens and cinder blocks and a coffee maker. We have since evolved, and now we've got dedicated Pro areas within our stores that are in the back of the store. They're depending on the volume of the stores, how big that is, and how many people staff behind that desk. We've got a loyalty program that's a partnership program with our pros. We don't give cash back, but we give them the opportunity to use those points for services to help them grow their business 'cause they want them to be successful. We also go through and they can get trips and things like that to reward them for what they do. We've got great credit options. As I mentioned earlier, we have big stores that have free storage for them in the back, so if they're not ready to take their product, they can. We have an app where they can purchase, transact, communicate, and we're really excited about what we're doing on the educational standpoint with pros, where we're bringing in outside companies to teach the pros more. They do clinics within the store, so our clinic areas are focused on teaching the pros to become better business partners. All of it is just because we understand the importance of the pro. Again, Lisa will talk a little bit about this. Only 15% of our customers actually do it themselves. They are using a pro, so the services we provide to them is critical. The next service, which we're really excited about and we're really getting great traction on, and we've added this to our pillars for strategic growth, is design services, right? We know that, you know, whether it's a professional, they wanna send their customer in, and they want them to have help with a designer in our store, or it's the end user who's coming in by themselves, they need help. They don't understand necessarily how things go together. Last year, we promoted one of our best operators to kinda take charge of this, kinda build what we've done in pro within the design services, and it's working incredibly well. We have a career track for our designers now that you're gonna meet the design studio manager. She was promoted from within, from one of our stores, so we've got career paths for them. We're giving them excellent tools. If you just think about this, we have 160 stores at the end of the year. We did 323,000 design appointments out of 160 stores in 2021. Customers love this service and are using this service, and we're making incredible progress with it. I went the wrong way. See, I told you it's been a while. Okay. You're gonna see this chart three times during the presentation, so I'm gonna go quick because I mentioned this a little bit earlier. I think our sourcing model is unique in the marketplace. It makes it hard for people to be fast followers. It also gives us the ability to have incredible prices versus our competition, particularly the independents. We go direct to the source, 240 suppliers in 24 countries. We try to take out the middleman every time we can so we can have the best prices. You're gonna hear Brian Robbins talk about it when he talks about supply chain. He'll talk about some of the efficiencies that we get by doing that. You'll hear Ersan talk a little bit about that, but he'll also talk about going directly to the source and the partnership that we can build with our vendor to be able to get the best products to put in front of our customers. This is different, and I think a lot of times I'm asked, "Hey, why hasn't anyone, you know, fast-followed in this business?" It's complicated. You know, when you have that many suppliers all around the world, we're fortunate to have experienced. You'll meet our merchants today. We've got merchants that have been doing this for 18 years plus, buying the same category. They know where the product's accessed in the world, and they have the relationship with the suppliers that others don't. You put that all together, our tenured teams, large purchasing power, and supply chain capabilities, it gives us the ability to have the best price. If you've done a flooring job, hopefully you gave us a chance. If you gave us a chance and compared our pricing versus the independent or whoever you were working with, you'll find our prices are significantly better. It's because of all of the work behind the scenes with the supply chain and our teams. It's been 5 years since we went public. Feels like yesterday, right? I mean, it's funny. I was talking to a couple of folks before the meeting started, and it's like I joined the company in 2012 with the intention to take the company public, and the private equity teams that I was working with was, "We're gonna go public pretty quick." Then we stopped and started and stopped and started so many times because market's not right. This is a problem. There's this story. There's that. Then finally, we're like, well, there always is gonna be something. We went public in 2017. Think about what we had to execute through. Now I've been doing this a long time, but we had tariffs, times three. Not once, three times tariff issues that our merchants had to deal with. We had anti-dumping, countervailing, where we had to move product out of different countries we sourced from. We had a COVID pandemic that shut down the world. We've got global supplying issues. If you think about our ability and our track record of execution since 2017, it's like, man, what else can happen? What else are we gonna have to deal with? But I think we've demonstrated that we can execute in a very challenging market. I hope you see that. It's really because of this team, and you're gonna hear from them today. We've got exceptional leaders within the company, and you'll hear from these six today. We've all been together for a long time. It's not just them. The people that you'll meet, that you met at breakfast, the people that you're gonna meet in the stores today, the people you're gonna meet at lunch, we just have an excellent team. Even underneath the people you'll meet, we have such a bench of rising stars. Many people have wanted to join Floor & Decor because of the opportunities, because of the growth. There's not many growth retailers who are able to attract and retain excellent talent. That's why we're able to execute. What did we say when we were gonna go public? This is my victory lap time, right? We said we're gonna open a lot of successful stores, and we have. Since 2017, our compound annual growth rate in stores has been 17.8%. It would've been 20% if it wasn't for the COVID year where we had to stop 'cause the world shut down. We have 169 stores today and growing. We said we would have solid sales growth. I think you'd agree we've had pretty solid sales growth, right? 25.5% compounded annual growth in our same-store sales, total sales since 2017. We've had 13 years of consecutive positive same-store sales growth. We said we would grow our earnings, right? We have. Adjusted EBITDA has grown at a compounded annual growth rate of 32.2% since 2017, and adjusted EPS has grown at 37.1% since 2017. We've absolutely delivered upon what we promised. The good news is we're not done. I believe the company can be 5x the size that it is today, and I'll quickly take you through that. I've got a lot of associates that come to me, like, "Man, I wish I." You're gonna hear from Bryan Dodge, who joined the day after we went public, and, like, after he joined, he's like, "Man, I missed it." I'm like, "No you didn't. This is the early days, man. We got a lot in front of us," and today that's never been more true. As we go through today, and we talk about this on all of our earnings calls, we've got six pillars of growth. Each one of our presenters will touch upon them a little bit. Look, we're gonna open new stores. We're gonna grow same sales, same-store sales. We're gonna continue to invest behind our connected customer, and we're gonna continue to invest in our pros, expand design services, and you're gonna hear from Brian Robbins about how we'll grow our commercial business. It's an easy strategy. Everything we do, we know we cover a lot of detail in earnings calls because we don't feel like the strategy is all that complicated. We're very fortunate. Trevor will break apart this in much more detail than I will. I'll go at a quick level here. We're in a terrific market. Our TAM is large, and it's growing. It's different than when we went public and different than the last time we talked to you. As we've gone in, and we've added adjacent categories. That's... We don't think we're gonna dominate the adjacent categories. Some of the adjacent categories by themselves are bigger than hard surface flooring. We know we can get a piece of them. If you look at what we think our opportunity is in that's $8 billion-$13 billion. When you define hard surface flooring, and you put it in with the installation accessories, and it's been growing over the last few years, it's $41 billion. As I said, we have small market share today. Our opportunity to grow in this market is just immense. Then we also have the benefit of carpet. As you see, I'm personally working with the Biltmore to upgrade this carpet. Since 5%, we've raised over $1 million in a small company like this through our associates to help our associates in need. Our laminate and vinyl products, which you'll hear from Lindsay on the walk today, are 100% low VOC emissions, and we're committed to do more. There's just a lot more to do. As you think about us, I mean, we are the perfect investment proposition. We're a unique business model. No one's really doing what we're doing. We have a great growing market that we're able to participate in. We've got great value that we offer our customers. You'll see in the store, the product just jumps off the shelf. We've got a world-class team, not just Lisa, Trevor, and I, you know, all the people behind the scenes are even better than us. Market share, there is growth, is opportunity for us in the future. I hope you get a lot out of the conference. I know I talked fast, but I had a lot to cover. You're gonna hear great presentations today. I'm gonna be in the stores with you this afternoon at lunch with you, so I'll be able to answer more. With that, I'm gonna introduce, most of you know, Lisa's been here almost the same amount of time as me. Lisa Laube, our President, she started about six months before I did. She announced her retirement earlier, at the end of the fall. We were hoping she was like Tom Brady, where it's like, "I'm kinda retiring. Maybe I'm not retiring." I checked Instagram. Like, even today, I checked Instagram, thinking maybe she's gonna post that she's not ready to leave. She unfortunately, she's leaving. I'm thrilled for her. As much as I'm grateful for everything she's done for our company, we wouldn't be where we are without her. We're very blessed to have her involved with us. I'm happy for her because that's what this is all about, right? We wanna be able to create the opportunity for people to do well and be able to go on and move on to do better things. With that, I'd like to bring up Lisa Laube. Before Lisa gets started, Tom mentioned about investing in the floor here. We need to invest in Biltmore's Internet connection. I think some of you are having trouble getting access to the Internet, so the network connection should be Floor & Decor. If you drop into there and you use the code you had before, you should have access. In front of that, thank you. Thank you for that public service announcement. Yeah. We appreciate that. Hi, everybody. Welcome to our first Analyst Day, I guess it is. We are so happy to see everybody here in very warm southern Florida. As Tom said, I'm Lisa Laube. I've been with the company for just over 10 years now. I've been in retail for 37 years. I started when I was very young, obviously. I've always been on the front side of the business, the customer-facing side. Today, I'm responsible for merchandising, store operations, our visual merchandising, marketing, e-commerce, and a few other assorted categories. I've always been very fascinated by the customer. Always loved branding and understanding and have passion for why does the customer choose to shop where they choose to shop. That's what I'm happy to talk to you guys about today. We're gonna cover three topics in the little while I have with you. One is we're gonna talk a little about who is our customer and what we're doing to appeal to them. We'll talk about our marketing strategy and how that's helping us build awareness and retention. We'll talk about our e-commerce site and why that's so important to work alongside our stores for our very connected customer. First up, let's talk about our customers. We're also gonna talk about a couple of the big initiatives that Tom spoke about as well, that we have in place to increase our customer base. As we've mentioned on a lot of our earnings calls, we stood up our CRM system about two years ago, and this is the best information that we have had, and it continues to get better. In addition to our CRM data that we have about our customers, we do external research as well, where we understand who the customer is, what their behaviors are. Through this research, what we know is our customer base, as Tom mentioned, is 15% DIY, 45% BIY, and 40% pro. Now, what I'm talking about is the customer that's inside the retail stores. Brian Robbins will talk about the commercial customer, a little bit later. Before we dive, though, into this customer, I wanna just level set on the methodology because we look at this in two different ways. You might hear two different numbers from us, and I just wanna make sure no one's confused. One way to look at it is transactional, who's actually swiping the credit card. The other way to look at it is who decides that Floor & Decor was the place to come to shop. What we're gonna talk about today is that. If my pro sends me to Floor & Decor and says, "Hey, go over, work with our designer, Tanya, and she's gonna help you pick out your tile, and I'm gonna come pick it up and install it for you," we're gonna give the Pro Credit for that sale because the Pro decided that Floor & Decor would be the place to shop. When we think first about our homeowner, our homeowner, as I said, is 60% of the person that decides Floor & Decor is the place to shop. That's broken down, as I said, 15% DIY, 45% BIY. I think this speaks to that we have a much higher demographic. We have the do-it-for-me customer, the person that is using a pro. Our median household income is $96,000. Now, you've heard us talk in our earnings release that we're using ranges. Our highest penetrating range was $100,000-$125,000. We've hired a new external company to help us better understand our customer. They've given us a lot more insight and a lot more precise data. We're now switching to use median household income, and that's $96,000, and that will be the benchmark going forward. Their homes are a little older, which is good for us. 51% of them were built prior to the 1980s. They've lived there for about seven years, and they have a median home value of about $300,000. There's a few reasons why the homeowner chooses to shop us. As Tom mentioned, they don't do this project very often, and they need help. They really appreciate that we have knowledgeable sales associates and the design services. Of course, the on-trend product that you'll see later today are extremely low prices. It's in stock, it's innovative. Lots of reasons why the homeowner chooses to shop Floor & Decor. Then the Pro then is the other 40%. If you think about it, and Tom mentioned it, so if 15% DIY and 45% BIY and 40% pro, that actually means that 85% of the product that we sell is involving a Pro to install it. This is an incredibly important segment for us. Sometimes we know who they are and sometimes we don't, and that's the big opportunity, which we'll talk about in a few minutes. Most of our pros are smaller flooring installers. They're custom home builders, repair remodelers. They manage smaller businesses, and a lot of them are doing the work themselves. Why they shop us? Obviously, it's a one-stop shop. We have great in-stocks, we have great prices, and we have high-quality flooring, and that's important to a pro. They wanna be able to stand behind the product that they install. They, of course, appreciate our personalized service and the relationship that we have with them. We don't install. We've never installed. It has been from our founder's core foundation of the company that we would never compete with our best customer. We're able to create this great relationship with our pros. Now we know who our customers are, let's just talk about a couple of the ways that we're attracting more customers and increasing their wallet share with us. First, our Pro Premier Rewards loyalty program. That is a mouthful. We are gonna say it's our PPR program, just for everybody to know. We launched this a few years ago, and we have been extremely excited about the progress we've made. As Tom mentioned, this isn't a cashback program. You get points, you get partnership aid. With those points, they can buy a cruise for their family or they could buy iPads for their employees. We see lots of them buying and working with us on payroll processing or on web development tools or on tool rental. We wanna be part of their successful business, and that's the way we approach Pro services in our store. We're really happy with the results so far. 59% of our active pros are enrolled, and they spend 3x more than a Pro that is not enrolled yet. Our top 10% of pros purchased from us 37x last year, and their spend continues to go up. We're gonna keep testing ways to make this an even more powerful program. Later this year, we'll be testing tiering so that the more you spend, the more points that you get. In addition to our PPR program, we offer lots of services that are really attractive to our Pro Customers. Whether that's a Pro App, so they can over breakfast, place their order and swing by the store and just pick it up, the Pro Desk, where they've got the hotline to a person that can always help them and be there for them. We have credit, we have delivery. As Tom mentioned briefly, we have ongoing education. If we're introducing more large format tile and they wanna know more about how to install it, we have classes for that. If we're introducing a brand-new grout or mortar and they wanna know more about the benefits, we have classes to help them. Our goal with our Pro is to be that trusted partner that really helps them build their business. The better their business is, the better our business will be. While PPR is a really important way to attract and grow pros, Tom mentioned our design services is a great way to attract both homeowners and pros. We're in really late innings, as you'll see in the store later in the store experience. We love the vignettes that we've got, the way that we update that, the fashion that we have. I'd say we're in very early innings about the associate and customer experience, and Steve will talk about that in more detail a little bit later. As I said, our homeowners need guidance. They come in. The word I most often hear when customers come to our store is, "I'm overwhelmed. I don't know where to start." The designers help break that down. They help them understand what will make it be a great project for them. We know that if a designer is involved, the ticket's gonna be higher, the conversion's gonna be higher, the gross margin's gonna be higher, and the customer satisfaction is gonna be higher. Everything is working in the right direction. Our vision for this is for the design services to be a real competitive differentiator. Today, a person may come to shop us because of our broad assortment and our low prices. When they get there, it's like, "Oh, this is cool. They also have design services." We wanna flip that. Over time, we want design services to be one of those key benefits that someone chooses to shop for Floor & Decor for that. PPR and design are critical initiatives for us to attract and grow our customer base, but these are just two ways that we're able to do this. Other initiatives include leveraging our CRM system to grow our business. First, we capture customer data in lots of places. When you go to our website, you'll get a pop-up. You can choose to be a pro or a homeowner, and we will personalize that experience. If you have a design appointment, we're gonna ask you, "Who's installing for you? Who are you working with?" Well, guess what? If we have them in the system, terrific. This creates tons of leads. We get lots of names that we don't know, so now the Pro Desk has somebody to go and call and follow up with. Our PPR enrollment, our inspiration catalog. We have three inspiration catalogs a year. Lots of people like that mailed to their home. Well, guess what? Now we have your email address, we have your address to be able to send that to you. At the register, if you'd like to give us your email, we'll send you a digital receipt, and now we have the email. At our grand opening events, we do raffles and giveaways. Now we have all of your information. We've been able to create lots of different ways that we're able to access the customer information. Our CRM system, we use Salesforce. We'll connect all of those systems so that we have better visibility, so that we can action that data in a much more automated way. Going forward, as everyone has to become less reliant on cookies, we will be dependent on our own data so that it's, this will be much more efficient and faster for us to be able to access and action it. We've collected all of this data. We have it in a very robust system, and now we can start to target the channel, the content, the creative, and personalize those messages to the customer for something that is very relevant for them. The CRM is just a platform. It's that platform that basically enables us to deliver the right message to the right customer at the right time. This is a really powerful tool for the company in the future. We know who our customers are. We have lots of initiatives to track them and better understand their behaviors, offer services that improve the business. Let's talk a little bit about how we're doing. Every year, we do a brand tracker, and we are very pleased with the results. You'll see on the left side, the homeowner awareness of our brand has been increasing and is now up to 70%. As you can imagine, it's much higher than that in our established older markets, and there's still lots of opportunity to grow this in our younger, newer markets. The best news about our brand research is what we call the funnel. What the funnel is, it starts with have you ever heard of Floor & Decor? Have you ever shopped at Floor & Decor? Did you buy at Floor & Decor? The great news is once we get people in the store, over 80% of the time, they ultimately buy from us. If you look on the right side at pros, awareness is about 75%, but they ultimately purchase once they've been in the store 90% of the time. It's critical for us to continue to grow our awareness and get that first visit. Once a customer shops us, they understand why we're better, they understand why we're different, and we convert at an incredibly high rate. We know getting that first visit is really critical, and we are efficient with our marketing spend, and we target three main channels. One, the most money is spent in search and shopping. We want to be there. If you want Miami tile in Miami or hardwood in Denver, we wanna make sure that we're showing up, so we're capturing that demand. Next, we spend on TV and broadcast, and we use this to deliver a targeted but broad message to a broader audience, targeting both homeowners and pros. You'll see when you look at our TV commercials that we're promoting our benefits. We'll show a design appointment. We're gonna show the Pro Desk. You'll see the huge in stock. We always show the inside of the store. We're still a young and growing company, and we don't want people to mistake us for just a regular flooring company that they might know about. So you will see the inside of our stores. The third place that we spend money is in social. As I said before, especially for the homeowner, they need ideas, they need inspiration, and many start on social channels. We have a great partnership with Pinterest, with Instagram, with Houzz, and when the customer starts with the ideas and looking for a project, we wanna make sure that we're there for them. We manage, or we measure, excuse me, our channel marketing effectiveness on an ongoing basis. One way, of course, is the brand tracker. We ask customers, "How did you hear about Floor & Decor?" That drives how we determine where to spend our marketing dollars. You see here TV and search, as we talked about. Social media, having our stores in prominent locations, which Bryan Dodge will talk about in a few minutes, and our website, of course. As we get more stores and more markets, our awareness will continue to grow up, our customers will be wowed at the F&D difference, and we're gonna drive that first purchase, and then first visit, and ultimately that purchase. You just saw the website is an important way to drive awareness. Let's switch gears and talk about our website, our connected customer and what they expect from us and some of the initiatives that we have to grow that business. We talk about our omni-channel customer as a connected customer because we know that the customer is using our stores, our website, our mobile site, our app. They're using all of those things interchangeably. They bounce back and forth. Of the customers that have shopped in our stores, 79% of them have actually been on our website. Of those that have purchased online, 71% have been in our store. Still, over 80% of the product that people buy online is picked up in the store. You can also note, as most retailers see, that the customer that shops both stores and online spends significantly more than anybody in just one channel. E-commerce is now over 16% of our total sales, will likely be a billion-dollar business in the next year or so. Having that 80,000 sq ft store supported by this incredible website gives us a really big advantage. Of course, there's no such thing as Amazon-proof, but we like our model. This category is very difficult to buy. People. It is unbranded, it is hard to compare products, it's heavy, it's hard to ship, and so people want to experience that. Whether they start online and then they go to the store, they buy samples, they come home, they buy online, and then the Pro goes and picks it up in the store for them, this is something that we see happening all day, every day. The customer needs help, and so it's important for us to be able to support that, both stores and online. We researched actually a while back what the customer needs and expects when they start to make a flooring buying decision, either in store, in-store, or online. They told us three things consistently that they're looking for. One is inform. They wanna know what can they buy. As those of you that have done flooring projects, you know, it depends on do I have kids or dogs? Is my subfloor, what, is it concrete or is it wood? Am I in the Northeast? Am I in Florida? Is it humid? What's going on? The what can I buy, this is where people need a lot of help and assistance to make sure they do the right thing. The next piece is inspire, which is we call what should I buy. What's gonna add value to my home? What's gonna make my friends and family ooh and ah? What is gonna be on trend still five years from now? The inspire piece, people are looking for help. What should I buy? Last is install. What do I need to install it? This is very difficult for customers. Whether it's what products do I need or how do I find a good installer, these are things that people need help on. We do our best in stores to be able to answer these questions. Steve will talk to you about our care service model in a few minutes. Our sales associates are very knowledgeable. We have great signage. We have good packaging. The website is really the perfect place to start that process of inspiration and education. Many of our website initiatives are driven by these three I's of inform, inspire, install. First up is product visualization and inspiration. Whether that's room scenes to help people see what the product would look like, our product visualizer, where they can actually choose products, put it in their space, and get an idea of how that would look, or real people, real projects segment of our site, which is our user-generated content, all meant to inspire customers and give them ideas of how the product could look. You'll hear more from Ersan about product innovation and inspiration as well. Next is information and education. Customers need to know and have information to make these decisions. Whether that's how-to videos or product details or installation tips, we even have customer Q&A on our website where someone can post a question. We'll either answer it on the website or contact the customer directly. There's so much more that we can do here to both inform and inspire our customers as they start this journey. Mobile is also a big focus for us. It's only a third of our sales, but it's two-thirds of our traffic, and we wanna make sure that we have an easy shopping experience. People can set up a design appointment on our mobile site, and it needs to be seamless between the Pro App and the mobile site. We wanna make sure that we can text and notify people. Lots of work to do around mobile still. We wanna make sure that it's easy to get your product. Steve will talk about this in a few minutes. Tom, to my non-technical term for this is, "Where's my stuff?" We actually have real names for these things. Tracking, delivery, fulfillment options, drop ship from vendors, lots of information here, and this is something else we need to make it very transparent and easy for the customer to transact with us. Website is about 16% of our business and growing, and our goal is to be the resource for hard surface flooring. Whether the customer ultimately starts online or in the store or buys online or in store, we wanna make sure Floor & Decor is the place to go if you wanna start this project and you need this information and inspiration. To wrap up, three things to take away. One is that we continue to better understand our customer so that we can get more of them in an efficient and effective way and increase the wallet share of those we have, especially with the Pro Customer. Two, we wanna be able to leverage those key programs of PPR and design services as real competitive differentiators. Third, we will continue to build out functionality on our website and in-store and focusing on that connected customer experience to provide them that information and inspiration that they are looking for. As you heard Tom mention, we are only 8% market share, and we wanna be the place the customer considers when deciding to do a hard surface flooring project and continue to grow our share of this very big market. With that, I'm gonna turn it over to Ersan. As Tom mentioned, I am retiring in 44 days, not that I'm counting. I think it's like 44 days, 12 hours. Anyway, I know. I'm sad to leave, but I'm excited to go. I will be consulting for a while, though, so I think that'll be a good transition for everybody. Ersan, I leave you guys in amazing hands. Ersan has been with Floor & Decor for over 18 years. He's been in the flooring and building materials industry for 26 years. He speaks five languages, lives in three countries, so much more worldly than all of us put together. He's been to almost every country we source from and a lot more. He has huge global expertise and flooring knowledge, and you'll meet the merchants later, and they do as well. He has an amazing reputation with our vendors, has really created the relationships of those 240 that are out there. Beyond that industry expertise, though, he is an amazing leader, and he has a great developer of people, and you'll get to see some of that later. With that, I will turn it over to Ersan. Thank you, Lisa. I really appreciate the kind words. It's been a pleasure and privilege working with you and learning from you. Thanks for everything. Hi, everyone. I'm Ersan Sayman. As you heard Tom touch some of the merchandising points at a very high level. Now I will go over the Floor & Decor difference from the merchandising perspective, such as broad assortment of in-stock products, Floor & Decor merchandising model and capabilities, direct sourcing, everyday low price, and of course, different parts of the product. Before we jump into my topics, I want to cover merchandising leadership team. We have a very experienced industry expert merchandising team. In addition to being career merchants in retail, they've been working with Floor & Decor for a very long time. Across my leadership team and myself, we have over 100 years of Floor & Decor merchandising experience. We do not switch our merchandise categories much. They stay in the same category as long as we can, and we leverage their expertise. Just to give an example, John, who is our merchandising lead for tile category, has been running the tile for 18 years, and he's an expert in his industry, and he's doing better and better every year. Also, I'm very, very proud to say that we have an amazing team coming up from our development coaching and training programs. This team has been building strategic partnerships with our vendors for such a long time. What they think, say, or do matter in the industry. You will see their value through my presentation, but also you'll meet them in person in Doral store in the afternoon today. They will present their department's highlights, strategies, and value proposition. As a category killer, hard surface flooring retailer, our main target is to serve our customers with an in-stock assortment that satisfy customers' needs and keep the right quantities in stock so that they can finish the whole project at one-stop shop, and they don't need to go anywhere else. We offer our customers many choices of design and trends that will make them happy with their project. I think that this slide summarizes our assortment gap against the competition. If you look at the numbers on the top line, which gives a total assortment offered in an average store, in-stock and special order combined. Floor & Decor offers more than 4x against a specialty lumber retailer and home improvement centers. If you look at the numbers at the bottom, which compares in terms of in-stock assortment you can take home today, Floor & Decor offers 1,700 SKUs versus a maximum of 70 in the specialty lumber retailer, against a maximum of 50 in the specialty tile retailer, and 400-450 in the home improvement centers if they have a good job slot quantity in stock. Independents usually don't carry in-stock assortment, and they do special order, which could be 2 weeks plus to get it. In summary, Floor & Decor continues to be the leading retailer by far in terms of comprehensive assortment with in-stock job lot quantities. Trends and fashion change in our fast evolving society. Leading the change and adapting the assortment and floor space is art and science, part of our job we do very well. These two pie charts describe our trend business very well. The pie chart on the left shows our product mix as of 2016, and the pie chart on the right shows the 2021. The shift across the different categories is important to highlight, such as from tile, wood and stone with the red, black, and the dark red pie colors. You can see it's dramatic. The penetration went to laminate and vinyl and adjacent categories. Our assortment planning and execution, floor space allocations, capital investments to adapt to these changes give us the continued success. The reaction time also is very critical to capture and adjust to these changes. We design our store ranking and set up very flexible and easy to change as trends change. The flexibility and also the big stores, as Tom mentioned, give us a good opportunity to be able to optimize our space allocations. If I give an example, if when you visit the stores, you will see it too, but in the stone department, which was a declining business overall, we went from 2 SKUs per bay and 2 doors per bay for 8-foot bay to 4 SKUs. We, without reducing a lot of SKUs in stone department, but we gave that space to adjacent categories and vinyl and installation materials. Every store is different, and we flex the space on store level. In the next page, I'll explain our unique micro-merchandising process and localized assortment that will give you a point of view on why Floor & Decor merchandising model is very hard to emulate by the competition. Let me go through our assortment planning process at a very high level at six steps. The first step is to identify unfiltered opportunity, opportunities and needs in a line of communication coming from the field and interpretation of this request, and it is very important to our assortment and capturing the trend shifts. Our merchants travel the world and go to every flooring show, of course, pre-COVID, and starting as of next week, our team will start traveling overseas as well, meet with the vendors, review competition, and capture all of these, and with their knowledge and vision, and work with the manufacturers and design companies to turn them to the final products. After the first two steps, we do brainstorming session by bringing all the regional merchants that live... who live in the markets that their stores are located, and then we decide on a curated trend forward product assortment to go to stores with. After this third step, the more challenging part starts, our Senior Directors of Regional Merchandising start going to every single store and work with them for unique assortments on a store level, not market, not region. I'll repeat. On a store level, selected by the store leadership team, designers, and pro teams. Finally, steps five and six, get the innovative and trend right and trend right products selected by the stores in the right quantities at the right prices, hopefully the best price in the market. All parties in the process should have the knowledge and the expertise to make this more efficiently. Our merchandising approach to capture, strategize, develop, select, and execute in as quickly as possible in all the steps makes us unique and leading the industry. We have built systems and processes to use this competitive advantage scalable as we continue to add more stores. Micro-merchandising is key to our success and separates us from the competition tremendously, especially against the home improvement centers and specialty retailers. In partnership with the regional merchants, every store has its own unique assortment. The chart you see here shows a South Florida store versus a Virginia store. Their sales penetration is totally different. While tile represents 37% of the store sales in Pompano Beach, Florida, it's only 18% in Alexandria, Virginia store. Conversely, the wood department, which is in the black area, it's 2% in Pompano Beach store. It is 15% in Alexandria, Virginia store. Having one type of assortment in these two stores, like home centers and the specialty retailers would do, is not the right approach to serve the customers. Even the stores in the same market might have different categories, and we have to capture and adapt our assortment and space planning. Micro-merchandising and localized assortment are the moat around the castle and very important for our success. Now let's talk about our direct sourcing and everyday low price. You saw the chart in Tom's presentation, and Floor & Decor model's advantage on going direct and eliminating all parties in the middle gives us a competitive advantage, especially in price, simply by not paying their commissions or gross margins, but also on assortment. First-to-market products create a partnership with the manufacturers and help us eliminate inefficiencies and improve speed to market. We develop products in partnership with our manufacturers, but also we choose from their assortments, and we negotiate the cost, we control the cost, we decide which freight lane to use to get to our stores with the most cost-efficient way. You cannot achieve this without having industry expert merchants and supply chain teams who can handle the diverse origin base of 240 vendors in 24 countries, which we built in years. This process also helps us to diversify and vendors and the countries in more challenging business environment and against the geopolitical risks, which unfortunately we are facing a lot of them. We constantly work with our vendor partners to expand their capacity and investments to support Floor & Decor's growth. We also challenge them to diversify to either different parts of the country or different countries so that we can eliminate some of the risks in the future. When you ask a vendor partner to invest their tens of millions of dollars in a different country to produce materials for you need to have the relationship and trust built very hard over the years. We also have a good amount of new vendor partner additions per year, we expand our reach. Because of all these points, our reaction time to diversify was swift and efficient when we were hit with the tariffs, anti-dumping, and countervailing cases. Floor & Decor has a huge advantage because of all these points that I just mentioned. Now let's talk about a little bit more fun topic of leading with innovation, design, and trend. We are constantly working with on new technologies with our vendor partners to provide the features and benefits that our customers are looking for. We listen to our customers, and right now it's all about durability, waterproof performance, and ease of installation. As we are working with directly with our manufacturer's partners, and we were able to launch our first waterproof laminate program, AquaGuard Performance. This is a real waterproof laminate and not like some of the others. But also our first eco resilient flooring, which is Optimax, and the best specs in the industry. Lindsay will cover them with you in the store, in Doral store in the afternoon today. This is a direct result of our industry expert merchants and a very strategic long-term partnership with our vendors. Our diverse base helps us to be in the front line of innovation. Why do we need innovation? As Tom mentioned, we are in fashion business, and the needs of the customers constantly improve. We need to lead the way to bring them all the designs and technology that they might not even think about. We work with our vendors, partners, development teams directly, not the salespeople, not the CEO of our vendor partners. We work with the manufacturer's development team directly on our ideas, and we also work with their ideas on the idea stage, and we help them to get to the product and final product stage. In addition to meeting with our vendor partners, we meet with the machinery companies and raw material companies to see what they're working on, which normally no one checks what they are working on, to be able to see what could be benefit to us, and we lead the change with our vendor partners. Our customers expect us to be the trend leader. We want them to walk into Floor & Decor store and say, "If Floor & Decor doesn't have it must not exist." We take risks and push the trends forward. As a specialty hard surface flooring retailer, we should lead the industry in terms of the products. We have continuous attention on the trends, such as we look at the macro trends to see where our customers' lives go to. We look at the home industry trends that would relate to flooring at some point and will coordinate with. We look at the regional trends to understand the localized needs and our stores request. We look at the global trends to see where the flooring is going in the rest of the world. They might make it to United States or not. We look at the technology to shape the features and design elements to go with what we are seeing as trends. We look at the color trends to see where the paint or the accessory company's trends are going to because we might need to coordinate with. More importantly, we work and partner with the leading design companies worldwide, and this gives us another advantage so that we can control the design, and we control the cost because we can tell, "We love this design. This is our exclusive design," and we take it to a country or factory that we want the cost to begin with. For every product category, we plan our assortment with good, better, and best options for our customers' needs and preferences. We engineer our assortments to give options for every type of customer with the right features and benefits that matter to them. Tom, Trevor, Lisa mentioned, I'm pretty sure you heard several times about our better and best penetration increase. This is great. This helps us with the sales, gross margin, and average ticket, but more importantly, it's a good customer service. Good, better, and best planning is not only done on a category level, but on a lot more lower levels such as color, size, shape as well. In the example on the screen, with the opening price good, better, and best, Resilient Vinyl, assortment planning was done with the technical features and design elements combined. When you look at the other categories, it's mainly the design elements. It's not like this with the technical features don't matter much in the other categories. From DuraLux to NuCore Performance and Optimax, the improvements go with the overall thickness, wear layer, warranties, attach back, and square foot transition perspective. You will see in the store in the afternoon today what does those play a role for the upgrading the customers. Our assortment engineering on each part of the business is real differentiator for Floor & Decor. Now, let's talk about our newest incremental business and category Adjacent. We call it our new baby. Just to be clear, we are a hard surface flooring retailer, and we do not want to be like home centers in this new category. We added the Adjacent category based on the needs of our customers at the same flooring or wall application job that they were working with us. They constantly ask us that they love to finish the decorative part of their project with Floor & Decor. We offered a very curated better and best assortment, and targeted that part of the business. Our vanities, shower doors, custom countertops, and faucets have been done well so far. We wanna let you know that we are adding two new subcategories to Adjacent, bathroom lighting and bathroom mirrors. They will be starting getting to the stores starting next month. We intend to have three levels of assortment for adjacent categories. The smallest assortment will be in the stores, as you will see in the afternoon. The second one is we will offer, and we offer additional size and colors through our DCs for quick ship. The third one, ultimately, we will build a broader assortment at flooranddecor.com for the customers to have shipped to their homes or the stores. We are pleased with the categories that we have added so far, and we are continuously check and test and add new categories as they make sense in our customer's request. In order to improve our customer shopping experience in this new category, we are bringing our assortment displays to the front of the store for the customer's shopping experience and put these elevated presentations to our design centers. We will start with a small number of stores as we have space, and then we will continue to add if needed. As you will see in these drawings, moving the displays to the front of the store will help us to let the customers know that we have the programs available and also gives a higher-end showroom experience. The most important reason that we are moving them to the front of the store is we believe our designers will maximize the sales on this new category, and because they work with our customers on their total project. As we increase our in-home design services, this will become even more important to get the customers to have that shopping experience. Let's finish my part of the presentation in comparison to the competition. If you look at the pie chart, the Floor & Decor addressable market has been divided into one-third independents, almost one-third home centers, 14% specialty retailers, and 14% distributors. We see every single one as our competitor, and we believe we've been taking share from all of them. If you look at the chart on the right, we compare Floor & Decor to home improvement centers and independents in terms of critical merchandising and store strategies. We are in the lead on every front with them on at varying degrees, and we are planning to keep that lead and even extend it. Floor & Decor merchandising model has a lot of amazing advantages against the competition, and the model improves itself with better processes and getting in better and better experience levels by the teams. I thank you for your time listening to me on Floor & Decor merchandising advantages and model and strategies, but also seeing the Floor & Decor difference. Ladies and gentlemen, we will now take a short break. Our program will resume in 10 minutes. Ladies and gentlemen, please take your seats. Our program will resume in 5 minutes. Ladies and gentlemen, please take your seats. Our program will resume momentarily. Ladies and gentlemen, please take your seats. Our program will resume momentarily. Ladies and gentlemen, please welcome Floor & Decor's Senior Vice President of Real Estate and Construction, Bryan Dodge. Good morning. Wow. Thank you for that. I mean, that was nicer than you did for Tom, so I mean, I'm done. No. Good morning. I'm Bryan Dodge. I am the Senior Vice President of Real Estate and Construction. Officially, I have been in retail and store development for more than 20 years. I've developed store networks in the U.S., Canada, the Caribbean, and overseas. Unofficially, I grew up in retail real estate. My family will tell you that my career started at a very young age, strapped into the back seat of my father's Buick Riviera, scouting America for locations. My father was a leader in retail real estate in the home improvement industry, actually. I joined Floor & Decor five years ago, right after the IPO, and that was on advice of Wayne Hood who said, "You gotta pick your time to get in, man, and it's after the IPO." Thanks, Wayne. Before we jump into this, look, I wanna kind of bridge the gap of what's taken place since we were all together last. Bear with me for a second. Fresh out of the IPO, we had this vision and it was more stores, bigger sales, bigger market share, bigger NOP. To do this, we knew we needed to change some of the things that we had been doing for a while. We needed to locate ourselves closer to the potential, but in a different way. These needed to be stronger, higher potential locations. Locations that helped brand our differentiated customer experience at the curb, with high visibility that wins the first stop of the customer every time. We needed to build these stores faster while simultaneously also reducing occupancy. We needed to harness everything that we had learned up to this point, but also create a strategy of going where we needed to go, not where it fit a landlord or developer's need for us to go. That's what we did. We created a very methodical strategic plan, and we reevaluated the whole country for the potential of 400 core stores. We started by taking a look down from the top at the market, got that potential, and then built it from the ground up on a store location by store location basis. From there, the rest is what we're gonna walk through. I'd like to take the next 15 minutes. This is what we're going to walk through, but really what I want to kind of share with you is some of the context behind the data, maybe. How we've done so far, what we've learned, and how we're thinking about tomorrow, the future, and our path to 500 stores. Here's how it worked out. At the end of 2021, we're operating 160 warehouse stores. We had two design studios in 33 states. That equates to 12.6 million sq ft of retail stores, which is double the number of retail square feet that we operated in 2017. Now, what's interesting is that more than half of our stores have also been open since 2017. In fact, it's 57% of our fleet of stores. As a group, these 91 stores have an average age of 2.2 years. As I'll discuss in greater detail in a moment, we're not at all close to being done building out our store chain and growing our market share. Our strategic plan calls for continued aggressive growth at 20% new units per year for the foreseeable future. This base of young stores, relatively speaking, combined with our continued 20% new unit growth year- over- year, creates a very meaningful trajectory for long-term future comp sales. We're just getting started. Nope, going the wrong way. Look, I know you guys enjoyed it so much, I wanted to just rehash this. All right, back on track here. At $3.4 billion in sales in 2021, this relatively young chain, we've really only begun to scratch the surface of the potential of what we'll be when we grow up. At the end of last year, we were just a mere 32% built out. While we have significant white space for stores across the country, some of the largest pockets of potential are in regions of the U.S. that we've only begun to enter, and these are some of the most lucrative markets in the country. For example, only 11% of our stores currently are in that lucrative population-dense Northeast region. As you can see, unfortunately, only 68% of the population has the, you know, the joy of living within an hour of a Floor & Decor store. I'm gonna share with you more later, we're gonna move that number closer to 90%. In major metros, our customer base probably lives closer within 30 minutes of the store. How have we done? I always like to start with a report card. Here it is. At a glance, this is our annual report card. If we compare the new store class of 2018, which was the class that immediately followed the IPO, and it was also the first class that we were starting to roll out our new strategic playbook, and you compare it to the class of 2021, which is our most recent class, you can see rent is down 34% or $4 on a 70,000-80,000 sq ft box. Sales are up 19%. EBIT is 71% higher than the class of 2018. We're opening stores on a more balanced cadence throughout the year. We've increased the new store sales months in the GO year by 36%. That's important to us because I'll go back to what I mentioned earlier, that long-term, stable future trajectory of future comp sales. Now, the report card looks fairly decent, but we are, you know, more so than this, we're opening these stores in the locations that we have identified that we need to be in. These are the right locations, and they're some of the highest potential locations we've opened in, and they're main and main in these markets. Now, this is the result of just zealous execution of our strategic playbook, but it's also a change in our go-to market plan. Now, you've heard us talk about this in previous earnings releases, where we have shifted from landlord-funded projects to self-development and ownership of our stores and distribution centers. This has allowed us to create the opportunities that we needed to create for ourselves, but it's also given us profitable access to very high-cost markets, and it's obviously letting us self-manage our own destiny. Now, at the heart of our development engine is our new store model. I thought it would be kind of interesting if we compare our old new store model to our new new store model, or the current one that we use. I think if you take a look at this, you can see we used to invest a little amount. Honestly, frankly, probably too little. On average, we now invest $5 million more in a new store, and that is a substantial amount, but we get a massive return on this investment. You know, our year one stores, you know, our year one new store sales on average are $4 million-$6 million higher. These stores are ramping at a quicker rate from that initial year. This is generating an EBITDA that's on average $2 million more in the first year. By year three, we're doing double that of what was in the old model. Because we self-fund the development of our store projects rather than borrowing from landlords and repaying it in rent, on average, we avoid $7 million-$10 million of rent over a typical, say, 10-year period, a 10-year lease period. When you combine this with higher initial sales, we're realizing substantial returns on this invested capital. Now, our target average or performance target averages for our new store classes, you can see over here, 25% on a 20-year ROI, 50% on third-year cash on cash return. Our average payback for these new store classes is between two and a half and three and a half years, and sometimes we do better. You know, in addition to what you see up here in terms of our new store model, there's also additional intrinsic values that come from our philosophical commitment to, you know, investing in our stores and self-development. An example of this is our national vendor program or our direct sourcing program. Because of this, we're able to not only build our stores faster, but on average, 15% below the cost that a developer could develop and build the building for us. The building is engineered for our specific purpose. This equates to lower maintenance costs. An interesting fact, you know, the stores we open today are 30% more energy efficient than the stores we opened just 5 years ago, and that's very purposeful. The net of this is the store location we want, not the store location someone else wanted us to take, a better facility, a lower cost to build, lower controlled cost to operate, and increasing profitability as these stores mature. All this results in returns that are adding substantial profitability to the company, and it's also adding a better in-store customer experience. Let's talk a little bit about this path to 500 stores. You know, recently we publicly, you know, we announced that we're taking up to 500. This is an increase of 100 stores from our previous guidance. This is really a result of us maturing as a company, converting our lessons learned along the way with richer data into a more sophisticated understanding what's a larger addressable market. You heard Tom touch on this, and Trevor's going to give a master's class in this here shortly. Helping drive this is bigger demand for the hard surface flooring category, right? Hard surface flooring has taken bigger share from soft surface or carpet. In fact, hard surface flooring now accounts for more than half of the total flooring market, as we showed earlier. Experience has shown that we can do more infills. You know, we can profitably operate more infill stores than we once assumed. Harnessing the power of our people and the analytical platform that we have built, we can now model long-term network optimization, which maximizes sales, profit, and of course, a commanding market share. Now we can serve more of the country. Look, the sheer geography that we're able to profitably serve has increased, and this is due in large part to the strength of our supply chain network and their ability to now profitably move our very big and very heavy merchandise into nearly every corner of the country. This means that we can take that shock and awe value proposition of our warehouse store into markets that 4 and 5 years ago were cost-prohibitive to serve. Now, as I mentioned earlier, we have a playbook for our strategic plan. It's actually a book. We're very old school. We like to print things and put it in a binder. The playbook has various scenarios for building the store chain out to, we'll call it, 500-ish stores in 130+ markets. What I thought would be kinda helpful is I wanna share with you how we think about these trade areas inside these markets and kinda give you a range from a smaller market to a larger market. Now, these are trade areas, right? Typically, our trade areas, on average, have a population of 355,000-555,000. Housing units, 153,000-225,000 housing units. 50,000-97,000 are owner-occupied. A median household income of $64,000-$79,000. Now, don't confuse that with what Lisa showed you earlier, what our typical customer is. Remember, this is a trade area, so it includes of populations at a larger area. Now, I think it's important to understand that unlike other traditional retail, our store trade areas don't fit inside the defined conventional market boundaries. Depending on the urbanicity and the specific demographics of that market, these dynamic trade areas can range from a drive time of as little as 30 minutes to greater than an hour. As a result of what we've learned in putting this together, the average range of populations that we can now serve has widened. That's more stores. At one end, you have the denser urban metro populations that we've proven can support more stores. On the other end of the spectrum, you have the potential in the lower population-average population markets, and that's driven by higher levels of home ownership and the oasis effect of a larger trade area that these markets realize. As a result, look, we not only see a clear path to at least, make sure everyone got that down, at least 500 stores, okay? Work with me, people. We have a methodical plan to build 500 stores, and it's built on this new store model that we just walked through. Now, obviously, there are areas of the country that it's not feasible or practical to build a 70,000-80,000 sq ft warehouse store. There are sub-markets inside these or inside larger markets that are home to a customer segment with whom the traditional warehouse store experience simply does not resonate with. We now have a vehicle for reaching into these sub-markets and accessing these customers, and that's our Floor & Decor Design Studio. You know, our Design Studio was purposely conceived to resonate with an affluent customer segment. A customer segment that's seeking a differentiated, albeit elevated design-forward experience, where they can be immersed in inspirational vignettes from the moment they walk in. They're assisted with concierge-level design services and product selection. All the while, they still have access to the unmatched product breadth and depth of a Floor & Decor warehouse store. It's all a one-stop-shop, and it's conveniently located near them. Now, again, because we're reaching in and we're extending the reach of these existing stores, this drives incremental sales for us, market share and comp. Is, you know, one thing I have to love about this, it's comp without the cannibalization. Why? Okay. Because sister stores fulfill the sales that the design studios ring up. While we do see some shift in the customers and sales between the warehouse store and the design studio, it's important to point out that we still see appreciable incrementality even in those customers and sales that shift. The Design Studio unlocks an important customer segment for us. It's not necessarily a new customer segment for us, and you heard Lisa talk about this, the BIY customer, it's part of our bread and butter. It's an unlock of a more meaningful adoption of the higher end of that category, the affluent, BIY, customer. It's also the pro, who appreciates the convenience, the high-end experience, and the aided decision-making and product selection. Now, let's talk about deployment. How do we do on these? Ideal locations for the Design Studio are in areas with this high income, near this affluent customer segment. These can be also freestanding or in-store. Many of you probably heard, we actually just opened our first in-store Design Studio in Leesburg, Virginia. We're very excited about it and more to come on that. They range in size from 7,000-12,000 sq ft. As of today, in our book, that three-ring binder, we have plans for about 30-40. Now we know that number will change over time, and we'll adjust it as we continue to learn and adapt, this amazing vehicle. Look, I wanna share one last thing with you guys in closing before I introduce one of the most talented store operators to ever walk the Earth. I am more inspired today by what our teams are doing and are doing and thinking about for tomorrow. I'm more inspired by what the folks in our stores are doing and how they're bringing this all to fruition than I have ever been. I can truly say that the best is yet to come for Floor & Decor. Now, the best part of my presentation, I have the distinct honor of introducing Mr. Steve Denny, our Head of Stores. Please welcome Steve Denny. Thank you, Bryan. Wow. Well, good morning, everybody. I'm Steve Denny. I'm the Executive Vice President of our stores, and I've also been in retail about 35 years, primarily in big box retail, and I'm in my eighth, almost ninth year here at Floor & Decor. I'm really fortunate. I have a strong leadership team that has similar experience and tenure out in the field, and we've got a great bench of future leaders for the organization. We are very, very deep. You'll meet some of them today. We just got a really nice bench of operators. Today, I wanna cover 5 areas that really support our strategic initiatives. First, you know, how we support our growth, how we're gonna manage this 20% unit growth, how we win with customer service, and we're winning, using technology to improve our customer and associate experience, our free design services, and then building relationships with the pros in the store. How we're gonna support and scale our growth. Well, I'd like to start with how we're investing resources to drive each pillar of growth that Tom mentioned earlier. We have functional areas like HR, safety, LP, to support the regions, but these are really the key drivers around our strategy. By design, we invest most of our resources in a limited number of stores. We gotta keep the decisions closest to the customer. All of our leaders, as Ersan mentioned, they live right in the market. We have to be the local expert. Today, we have three division vice presidents. They cover 55 stores. We believe they can go up to 85, and that would be 6 regions per VP. Our Senior Director of Regional Operations, you'll meet one today, Ed Kahn. They've got a sweet spot of about 14-15 stores, and they focus on operations, but more importantly, talent management. We have talent planning to ensure that we're building that bench for 20% unit growth. As Ersan mentioned, the senior director of merchandising, that's their business partner. They're the ones who drive the localized product assortment. As a reminder, like Ersan said, there are no two stores that have the same product mix, not even at the market level. If you think about it, I can't think of another company that dedicates a true merchant to 15 stores. We have our regional Pro Director, and this ensures our strategy of growing our existing pro base, getting more share of wallet using CRM tools, and then really strengthening our relationship with our pros through our Pro Premier program. We've recently added three directors of design to really support our fifth pillar of growth, and we're developing that role today to how we mirror and make it support just like we do with Pro. In addition to that, we've recently hired 10 in-home designers, and that's gonna support our tests that we're currently running in Dallas, Houston, Miami, and the D.C. markets. The initial acceptance by our customers has really exceeded even our expectations. It's been incredible. Our founder, Vincent West, he really created a culture unlike any other big box retailer. He did it by challenging. You know, we no longer have a store manager. Ours are Chief Executive Merchants, and they have to play an active role in selecting product. They've got to have a passion for product. They have to know the competition. They have to know pricing. That really creates a true merchant-first culture in the store. Another group that makes us unique is our department managers, our assistant managers, and our associates. If you walk into any other retailer, you're probably dealing with a generalist, and that might include carpet. They're gonna have some knowledge of all categories. With us, we have dedicated flooring experts. They lead our tile, decor, wood, LVP, installation material departments. Our associates are trained and assigned to specific areas within the store so they can become the subject matter expert. We've got a dedicated team at our Pro Desk. We have very low turnover there. It's critical to our success when we're building relationships with pros. Then our design services supervisor, well, they really manage three distinct levels of design. The first one, we have a senior designer now. We have a designer and a design consultant. If you think about from project management all the way through a simple backsplash, we have somebody to serve each customer. Growing our future leaders, well, we've done an amazing job over the last 10 years creating opportunities in the company and developing new leaders. One of the challenges for any company is really building a bench. With our 20% unit growth strategy, we have to continue to invest in resources to ensure we stay ahead of the curve. Last year, we created a workforce management team, and they're focused on the talent planning process and supporting the staffing of our new locations as well. Once we've identified our best internal talent, our training department has to step in and provide leadership training to ensure readiness at every level, whether it's a chief executive merchant, an ops manager, a department manager, or a pro services manager. Today, 90% of our leaders come from within. From a DE&I perspective, in April 2020, we launched Women in Leadership. We've had great success, and our female CEM representation has grown 50% year-over-year. Lastly, we have a recruiting team that ensures we're always bringing in the best and brightest when they become available through our CEM and training program. Once we've identified our leaders, we need to support their growth, and we've made big investments in creating and developing leaders through today and for tomorrow through our care program. Over the last four years, we invested in our customers and our leaders at every level. Back in 2019, during our annual CEM meeting, we started with our care service model focused on the concept of consultative versus transactional service. Our service has to feel like an independent, but within 80,000 sq ft. In 2020, we followed up with inspirational coaching, helping our CEMs connect with their associates through feedback development, showing our associates really what's possible at Floor & Decor. In 2021, we launched Care for Our Associates, focused on hiring, developing, and retention through the entire associate life cycle. Then this year in Las Vegas, a couple weeks ago, we had our annual CEM meeting. It was great to get everybody back together finally after a couple years. We enlisted Blanchard and Associates for situational leadership, helping our organization at every level identify their leadership style and their opportunities to develop. Let's talk about how we're winning with customer service. All right. As Lisa mentioned, you know, why is our care model, why is it so important? We know that our customers have an idea of what they want, but they don't understand all of their options when they come into the store. We need to inform them of all of the possibilities within their space. Like Lisa said, it's not easy to bring it all together, and it's a big ticket. If it's tile, it's going to be permanent. We have to provide inspiration through our displays, our technology to ensure that their vision is brought to life inside the store. This is where our design team can really support the customer journey. Most customers, they're working with an installer. They want to understand all of their options from grout to underlayment, along with how the process should flow during their project. Again, it's a big investment, and they want to feel informed across the entire way. I'd like to introduce our Care service model, which is simple, connect, ask, recommend, and excite. Most companies have a customer service model. I'm sure this is not the first time you've seen something similar. The difference for most companies is weaving that into your culture. We've made nice gains in our service numbers since launching Care back in 2019. We have proven that this care model can stand up even in the most difficult of times. In our recent scores, we achieved over 90% on the CSAT, which is asking specific questions about their project. We got a perfect 100 with our associates when it came to recommendation, and that's delivering a tailored solution for their project. We know that when our associates engage with care, we get a better ticket, better attachment, and our service scores end up being best in class. We believe it's going to continue to improve as we come out of the last two years. We're focused on eliminating obstacles that prevent our associates from demonstrating care for our customers. We've got a couple new initiatives underway that we're excited about. I'd like to show you how we're going to remove some obstacles. We're never satisfied with our service. Although I believe it's better than any big box retailer out there, our team is always looking for ways to improve the customer and the associate experience. There's three tests that are being developed and implemented now. The first, because our designers, they really outperform all other positions in the companies that relates to ticket, installation material, and selling project-related goods or adjacent categories, as Ersan mentioned. We're going to open our first store in Q2. It's going to have only designers on the sales floor and pro representatives. Additionally, to make this happen, we're going to place a larger emphasis on the off-hours process. We're going to simplify our daytime processes and allow our associates to spend more time executing the care model. Lastly, we have our FIT team, which is our field installation team. They're traveling from store to store, and they're already being tested across several major markets. They're focused on taking tasks off the store, again, enabling our associates to spend more time in the care model. Our total service experience, we measure it across multiple platforms, and we're happy to report that we exceed best in class when we look across the average for retail. We're constantly monitoring our service levels. These numbers here, they really reflect our accomplishments in 2021. It shows our commitment to an elevated customer experience while navigating one of the toughest years in memory from a labor market perspective. Our latest score in February is a 79% for the overall customer experience. We're never satisfied. We want it to be better, but we know we're better than best in class. One key highlight is the design services appointment here. Our designers have a higher favorability when it comes to service. This is the reason we believe leaning into the design labor model is a game changer for the company. The ability to sell the entire project, including installation materials, adjacent categories. It's 2x-3x higher than our current red-vested associate. Look, our team's pleased with the results, but we can improve service to drive more sales through our customer experience. Every customer is important, but it's even more critical for our pros that are shopping multiple times a year. How are we using technology to improve the customer and associate experience? We're replacing technology, and you'll see a lot of it today in the hands of our associates on the sales floor. It gives them access to a variety of ways to serve the customer and stay informed on projects and direct communication. We have a think time platform that sends communication or tasks directly to the impacted store or associate, eliminating all the mass emails and communication. It helps us manage tasks centrally to understand task completion rates. We've got My Project that we just launched. It gives the associates the ability to build quotes, including delivery for multiple rooms, and we can quote them separately for the customer while simultaneously sharing them with their pro. Inventory accuracy, it's really critical, especially with our e-commerce model. We recently launched mobile inventory, which allows real-time adjustments while on the sales floor. It ensures that we have what our customers need. All of our technology is designed to keep our associates on the floor and engaged with customers. A couple other new ones. Look, we want to make sure every part of the journey reflects our commitment to best-in-class service. The ordering and pickup process must be as good as the in-store experience. With our free storage, customers now have the ability to choose the date and time through the scheduled pickup process. That ensures that we have the order pulled, and it's ready to deliver. This gives great speed and accuracy for our pros. They'll show up, it's ready to go. Like everyone else, we launched curbside pickup during the pandemic. That was fun. It continues to be a good option for our customers, though. Look, they can let us know when they're on the way, and again, it enables us to have the order ready when they arrive at curbside. For those of you that shopped at our store, and I hope you did while you were doing your projects. Look, wait times in the back, they can fluctuate in the stores because everybody tends to show up at once or nobody's back there. Providing visibility to our customers, we've already measured it. It drives a higher service score. We now have a tool that can estimate the wait time, and it has been accurate within five minutes during the pilot. We'll get that launched this year. Another exciting project underway is called View. I think Lisa called it Where's My Stuff? This will provide visibility to customers where their product is in transit, whether it's e-commerce, store transfers, DC shipments. They're all going to have more visibility with email and SMS text going directly to our customers to let them know where their stuff is. I want to touch on our fifth pillar of growth, our free design services. Our design services, as Lisa mentioned, it's a key advantage for DIY customers. It's also a huge benefit for our pros. The challenges on the left for a pro that does not have a designer on staff is a big attraction, you know, from your typical big box store. Just the ability to pull everything together with the latest trends for their customers while they stay focused on the job out in the field. When you're dealing with a flooring generalist from the competition, you might get the easiest option available, but not always the right one. Designers ensure that our customers are inspired by all the possibilities in their space. Like Lisa mentioned earlier, when we connect a customer to our designer, our service scores are significantly higher. Our designers have the ability to take a customer through all of the options with the latest trends. We have a variety of tools inside the store to help our customers visualize their final project. I know you'll see that today as well. Then we also have to sell the complete project with our design team. Again, highest attachment rate for installation materials, accessories, and leaning into our adjacent categories. Tom mentioned earlier, we recently added a VP of Design to create and drive a strategy similar to Pro. We also added a Director of In-Home Design. As mentioned, we also created three directors of design out in the field to support the stores. Look, we're already in the early stages on this, but we're already realizing the potential to further leverage design services. We recently launched a new career path strategy for our designers. That allows us to attract, you know, those with years of experience from the outside while creating opportunity for those that want to start their career in design. As Tom mentioned, I think you'll meet Bianca today. She came from within. Today, all four of our design centers have been promoted from our core stores, previous designers. For us, that's a key strategy for retention and driving an elevated experience in design. We touched on In-Home earlier, but we see this as another opportunity. It's going to differentiate from what the big box can do and help us compete with the independents. This also looks very promising. I would say, why are we different? No other retailer has a breadth and depth of assortment and can complete the project. Whether it's flooring or adjacent categories, we have it in stock today for our designers to sell. How we're building relationships with pros in the store. Look, our Pro strategy has been around a long time. As I mentioned earlier, it's embedded deep into the culture of our company. It's simple. We have to build it. That strategy is to expand our Pro customer base. We focus on grassroots efforts in the field, industry network events, in-store training, and through our partnership with the National Tile Contractors Association. Even just out, simply outbeating the street. Once we get them, we have to keep them, and we have to inform our pros of all the benefits available for them. For example, PPR, our Pro Credit Solutions, our Pro App, job site delivery, those are all tools to help them build their business and it creates brand loyalty for us. Then we've got to grow it. We have multiple CRM dashboards to understand the strength of their business, year-over-year sales and engagement with our benefits. It allows us to manage individual accounts and ensure the store teams are growing the business of their best pros and getting more share of their annual spend. As we acquire these new pros, and we take them on a tour in the store, our focus really is to introduce them to the largest in-stock selection, our inspirational and educational displays, and communicate all of our key benefits to enable them to grow their business. Our goal is to save them time and money while teaching them the latest trends and introducing new installation tools. Our award-winning loyalty program, our Pro App, credit solutions, and our dedicated associates at the desk are all helping our pros run their business from the office, from the job site, or in the store. Our investments in Pro continue to create loyalty to our brand. We talked about finding new customers and how are we doing that. We're focused on finding new customers that are already shopping at F&D, but they've not identified themselves as a pro yet. We recently added new ways for our pros and customers to help them identify as a pro. As Lisa mentioned, I think customers scheduling a design appointment can share the pro they're working with. We got 2,500 new leads in Q4. DIY customers who identify a third party as authorized to pick up their order, it's another 2,500. This is simple. We added a box on our website to just ask the magic question. Are you a homeowner or are you a pro? 10,000 new leads. Lastly, our store teams got refocused on that question in the aisle. We found another 1,000 already shopping in the store. Now we have 16,000 new pros identified that we can follow up and ensure they're aware of all the benefits that we have at Floor & Decor. Technology for our pros. We have a Pro App that's designed just for our pros. Mobile technology geared directly at them. They can schedule their design appointment right on the app. They can schedule specific orders for their customers to pick up. They can build quotes for their customers. They can check inventory availability by store. They can purchase their projects right on the app. It also shows their available PPR points, and they can redeem them directly from the app. Again, our goal is to save time and money for our pros by placing everything they need to run their business right in the palm of their hand. In summary today, we're investing in our people, resources, and technology to continue to drive each pillar of growth. I thank you for your time today, and I'd now like to welcome up my partner, Brian Robbins, Executive Vice President of Supply Chain. Well, good morning. I'm Brian Robbins. I'm the EVP for Business Development Strategy. What that really means is I'm over the supply chain. I'm over kind of challenged with this, with Bryan Dodge over at Real Estate. I'm over the business of the commercial and M&A. I've been with Floor & Decor for over nine years. I'm in my 10th year. I can't believe it's been 10 years since we did that walk in Kennesaw. It's been a wonderful 10 years, and I'm just proud as heck to be part of this executive team and what we've accomplished in the last 10 years. I've had a prior background in retail with the Big Box, with private equity, with one of the major private equity companies, and with one of the cutting-edge manufacturers in my past. It's all helped me to be able to do the job I have today. I hope today you'll walk away from my presentation with four takeaways. How direct sourcing, and in particular, the supply chain, creates a significant cost savings. How we see the logistics headwinds and tailwinds in the current environment that we're in, unprecedented environment that we're in. How we see the commercial market share opportunity and how it's growing, something we're going to take advantage of. Within that, how we've acquired Spartan and what that means to us as far as creating a unique value opportunity for us in the commercial business. You heard Tom speak about how we negotiate our products and Ersan to get first cost directly from the factory, bypassing the middleman. To do so, we have to have a supply chain that is equal to that task of creating a cost savings, so thereby we bring to everyone, our customer, the lowest landed cost to the stores. What you see here is what we call our value chain of the supply chain. I'm just gonna touch on a couple of these things just to show what we kinda do differently that maybe most cannot do. One, we started probably five or six years ago about trying to get long-term agreements with our ocean carriers. Mike Schultz, who's here with us this morning, he's our SVP for Global Sourcing and Compliance, is over that, and his team has been able to get long-term agreements with our ocean carriers. Now, long-term agreements seem, like, simple to do. They're extremely difficult to do in ocean. In fact, rarely anyone has a long-term agreement, and now everyone is trying to get a long-term agreement. Why is that? It's for continuity of supply, and that's why we had it five years ago, make sure we always had our inventory available to us. Today, those long-term agreements are getting more expensive as everyone tries to do this, as the rates go up. We're fortunate to have those long-term agreements 'cause it keeps us in stock, and it also allows us to keep away from the spot market. Something else I wanna point out here is the second bullet at the top, securing contracts with our dray providers. There's three reasons why, if you talk about where the problem is, you're gonna hear me say Long Beach and L.A. ports. The reason for that is for three reasons. One is the massive amount of ships coming into that port, unprecedented amount of volume coming into those two ports. Two, the labor shortages that's happened in the past year with the pandemic and has allowed them to get further and further behind, which is why if you follow this, you see all the ships parked out there in the ocean, not even by the port, but out in the ocean waiting to get in. Three, probably something people don't know is, they're lacking in digitization, no digitization at all, so it's a very manual process that has now raised its ugly head when you have all this volume. We felt that pressure. We felt that problem when we've tried to get our cans or our containers off the ships to our DCs and then back from our DCs to the port. That's called demurrage and dray. If you know anything about demurrage is the penalty for not getting your can off the ship fast enough, and detention is the penalty for not getting your empty can back to the port, back on the ship. When you have no visibility, you don't know what the problem's gonna be and how big that problem is for us. We've worked with new drayage providers who have software that will allow us to have that visibility and minimize that cost for us. We also look at. I'm gonna talk more later about the alternatives through the Port of L.A. and also our opportunities with domestic trucking with our dedicated fleets. When you look at our DCs, they're very strategically planted, and the 4 DCs that you see here in Moreno Valley on the West Coast, in Houston in Texas, in Savannah, and in Baltimore. Each one of these are at least 1 million, and the smallest one today is 1.1 million. Our largest one is 1.5 million, both in Houston, the newest one in Houston that Brian talked about, and in Baltimore. These help us where we are and how we do this to get costs down. They're extremely huge. It's amazing how much product we can put in that DC and how we service our stores. You look at the lines that I have with the number of stores that we service, we think we'll be servicing by the end of the year and its capacity. Now, when we say capacity, that's like 80%. We like to have room to move, so it's usually about 80% capacity. We can flex a little bit if we have to. But at the end of the day, if you look at Moreno Valley, you'll see that we're getting close to capacity, and that's why we're looking at a future distribution center in the Northwest, followed later by into Baltimore, 'cause we're growing so well in the Northeast. We're putting more stores in the Northeast. Those Northeast stores are comping very well. We're gonna need more space, so we'll be looking for a future DC in the Northeast. The fun part of my presentation is talk about the headwinds and tailwinds of supply chain, what we've gone through. As I said, for us as a company, for the merchants, for the supply chain team, for the stores, it's been unprecedented, and we're not the lone ranger. Everyone is going through this today. I wanna show you a slide that kinda tells you where we see things from a global situation and then from Floor & Decor's situation, when it started, where we are today, and where we think we're going. Simple kindergarten, red, yellow, green, try to tell you the story of the things that are major issues that we see. If you look at what happened, where we were back in October was actually the tipping point for everybody, not just us, for everybody, when we went, "Oh, crap," and we weren't able to get product, and the Ds and all the ports were having tremendous issues getting product into the ports. You see that's why you see all red. The same situation, North America logistics, lack of chassis and equipment, lack of drivers. It was because of the COVID. Everything was red for us, and we were challenged. Today, when it comes to the international logistics and what we see in the future, we don't see things changing too much from global to the F&D situation. What I can tell you is that three of the four ports we're working with have diminished in the issues that we have, which is why we're better in stock in the North, South, and the Southwest. We're still challenged in L.A. We will be challenged for probably the next 3-4 months in L.A. We hope, and we see an opportunity at the end of the year to see that break a little bit too. That's why we're not gonna ever probably put green in there till probably next year. But hopefully get it to yellow. We can start having a better opportunity to get product in through the Los Angeles ports. The bright spot is our North American logistics, and the reason for that is that we've been able, as you saw on the prior page, I talked about dedicated fleets. Dedicated fleets are where we are able to secure, specific drivers and specific equipment to go back and forth from our stores to the DCs and from the DCs back to the stores. That is a huge opportunity for us. We've been doing dedicated fleets for, my gosh, I think three or four years. This is all driven by Don Nichols, who's also here with us today, our SVP over North American Logistics and Distribution and Inventory. His team has been able to expand on those dedicated fleets. We have less issues with drivers, less issue with equipment, and more on-time delivery to our stores. That's really, really important when it comes to getting and being in stock. It's one thing to get it all to the DC. I still need to get it to the store on time. For all these things to work, everything has to be in sync. The more consistency we have and our ability to do that, i.e., dedicated fleets, the better we can do. We've seen that looking green at the end of the year because we're putting more of our contracts on dedicated fleets. People that run these logistics companies love working with Floor & Decor. The ocean carriers like working with Floor & Decor. I don't know if they love us, but they like us. That's because we do what we say. We give them a forecast, and we deliver on that forecast. When you do that, when you're in these kind of environments and these kind of industries, that's a huge win to have a customer does that. We've leveraged that as much as we can. I will dare say we're better in stock than most of our competitors because of these things. One disclaimer, I gotta make sure I say, is that we did not anticipate the fuel impact that was coming when I did this presentation. Obviously, we all know what's going on with Ukraine. I'm sure all of you follow the indices. You probably watch WTI, you probably watch the Brent oil. You also know it was like at $124 and change about a week ago. It's dropped down to the mid-90s as of about 5 minutes ago when I checked before I said this. To give you some insight into this, in February, it was at 90. Think about it, 90, 124, back in the mid. I don't know where it's gonna go. I'm looking at Trevor to tell me 'cause he seems to have a better crystal ball than I do, but no one really knows. We're trying to manage that. I don't know how material this is gonna be, but we are managing that cost and making sure we have the coverage for our retail. To give you a little better perspective on how the rates have hit us over the past 3 years, I'm showing a slide here with 2020. 2020, 2021, and 2022. You see in the ocean container, we were pretty flat in 2020. It started to climb when the pandemic hit in 2021, and you see where we are today. Again, these are on longer-term contracts for most of our shipments. We try to minimize going on the spot. We are gonna be paying more, a higher cost for our ocean carrier rates. On the flip side, as we get the dedicated fleets for North American logistics, you see hopefully by the end of 2022, we'll be close to being back to our rates we had in 2020. Again, before we understand the fuel cost challenges with diesel. Changing on things I really love to talk about, it's a lot more fun than what I just went through, and I'm anticipating a lot more questions on that. I'd like to turn to commercial. You know, when we started looking at this, if you think back, if you've heard us talk before, especially with Lisa and Tom talk about how the company was when Vincent ran the company, he saw an opportunity with a market that was highly fragmented and easy to disrupt. He loved to use the words disrupt. Well, we saw the same thing in commercial. Exactly the same thing. Maybe even more so of an opportunity to disrupt and more fragmented than the retail side of flooring. Looking at what we have when it comes to our supply chain, our suppliers, and the breadth of our assortment, we saw an opportunity to partner up and go very aggressively after the commercial business. We're excited about that. Trevor's gonna come right after me and talk more in detail about the size of the market. In his remarks, he's gonna show you and Tom had it on his slide, of $41 million in flooring for the addressable market for Floor & Decor. Inside that, we see a $17 billion commercial addressable market for Floor & Decor, i.e., Spartan. When we look at the market, we see two major sectors of it. The top part is 60% of that market we think is driven by a specifier. The terminology, I've been asked to explain that better. A specifier is Spartan. Spartan is considered a specifier, and they work with the architects, the designers, the owners to collect finishes or attributes, if you will, for a designed space that architect wants to do for their client. Once the architect or designer makes those selections, they become the specification or spec for that particular project. What Spartan would do is come in and help them find the solution for that spec. It's a hard spec, and they need to go find it. That's where I want Spartan to play and what we're looking forward with Kevin Jablon, who again is here with us as well. I know some of you cornered him this morning for breakfast, as he told me, so I guess we have a lot more to talk about at lunch. The other 40% is a term we call Main Street. Main Street is 30% of that or three-fourths of that is what we call a soft spec. There's a spec, but we may be able to flip it. We may be able to flip it to a Floor & Decor product, which is what our RAMs, our regional account managers, do in the store. They may be able to flip a hotel, a local hotel who says, "I want black tile at this spec, blah, blah." We may have something very similar to that, and we can flip them to our spec, which is opportunity for us and opportunity also for Spartan. Then there's 10% where there's no spec. "Hey, I need to do my flooring. Can you help me with what I can get?" We show them our assortment that we have. The RAMs are very good at doing that, and that's what the meat and potatoes of their business is. Between the 60% of specified hard specs and the 40% of Main Street, which we think represents all that $17 billion, you see the opportunity that we would have by leveraging somebody like Spartan with our prowess with supply chain, our prowess with our supply base, and our prowess with our assortment. Now, let's talk about Spartan. Spartan has been this amazing opportunity for us. I'm so proud to be associated with people like Kevin and his team. I've told you before about how everything that we learned from Spartan validated our strategy. He validated that it is a highly fragmented business opportunity. He validated that if he had the opportunity to have the power of Floor & Decor, the DCs where they are, that he could grow his business. We could grow it massively leveraging our DCs, our product, our supply chain, and our suppliers. I think when we bought them in June we had a certain mindset of what we thought we could do. Today, I'm gonna tell you it's increased. We bought the right company. We bought the right idea and how we can learn from that company and grow the strategy that we have. When we went into the idea of trying to find an acquisition and trying to find somebody like Spartan, we saw what we thought were four value creation opportunities. One was obviously product cost savings, both with the product and with the supply chain costs. That's exactly what we're doing today. We're leveraging our contracts with supply chain with Spartan. They were all totally on spot, for example, buying everything on spot. We're now getting them onto our long-term agreements, which is massively lower than spot. We also have an advantage with the first cost, if you will, of the same type of products that Spartan sells with what we sell. We saw the revenue lift. Kevin will tell you the first time he walked into the DC in Baltimore, his eyes bugged out. He could not believe he was walking through a 1.5 million sq ft DC with nothing but product that he could sell. That was the opportunity. In fact, he said, "I'm bringing all my customers here. I will not bring them to my home office. I wanna bring them here, so they can see this," because that gives them the opportunity to say, we can have the product here now. We can be on time, and we can deliver on time, and we'll have the volume that you need. We can do that. Also, when you think about there's four other DC or three other DCs that can do the same thing, imagine the growth opportunity we have. Third, we saw the opportunity to expand Spartan's product portfolio. For example, they're not indexed in tile, and they're not indexed in insulation materials. That's something that we do quite well, and we're looking at how we can leverage that for them to expand their portfolio and get more extra business that they couldn't get before. Fourth, we always think we have opportunities more to grow, whether it be organic or inorganic growth. Let's dive down to specifics about Spartan and what we had as a strategy. There's really three major themes for our strategy. We wanna enhance the existing sales volumes and gross margin, as I've talked about. We want to organically extend the sales footprint nationally with their sales offices and increasing their salespeople. We talked about expanding inorganically. The two big ways we can lever that is looking potentially at, obviously, other companies like Spartan, adjacent companies, maybe a tile company. We look at independent agents that sell product out there in different places or independent sales reps that we could roll in to Spartan and get immediate effect on their sales and their opportunities to sell Spartan products. Last page I'd like to show here is about our strategy for organically growing our sales footprint. Kevin and I sat down, we looked at the top 25 MSAs, and we looked at what the market size was and where we had current reps for Spartan. They're in the DMV area. If you know what that is, it's a D.C., Baltimore, Virginia area. That's where they're located. It's a $400 million opportunity. They have 11 reps currently there. That makes sense. That's where they started their business and where they mostly are located with the reps. We thought the market could hold maybe 12 reps. We're good there. You take another MSA, like the largest one, probably New York City, which is very close to our Baltimore-D.C., $730 million of sales opportunity. We only got three reps there. What would you do? We're gonna grow that business. We're gonna grow organically into that New York City area and leverage our D.C. as much as we can and the power of Floor & Decor. You look to the West Coast. We wanna be national. You look at Los Angeles, $430, about the same size we're in right now in Baltimore and the DMV area. We have nobody there, okay? We have a DC in Moreno Valley. That's about 50 miles, maybe not even 50 miles from Los Angeles. Obviously, we have opportunities. Where we have an MSA that's large and we have a DC, that's where we're going to go. We wanna be able to leverage our DC, show the customers what they can do there, what we have there, give us that credibility that we need to have in order to grow this. Look, to say the least, I'm extremely proud of my supply chain team, of Bryan Dodge, what he's done with real estate, and Don and Mike, what they do with supply chain. I'm really proud of also adding Kevin Jablon on with Spartan, and the option we have with commercial. It's a wonderful team. I've got top talent. We have top talent across the board. Every one of us knows we have top talent. I just wanna leave you with the idea that when we have challenges like we've had, and Tom talked about how many times we've had different challenges throughout my last nine years, seems like every year, now it's becoming every quarter, I'm amazed how better we collaborate. I'm amazed how better we work together. I'm amazed how the cream rises to the top, and our top talent people make it happen. We wouldn't be where we are today within stocks. We wouldn't be able to do the comps. We wouldn't be able to do this without everyone you've been seeing talk today collaborating together. It seems like the more challenge we have, the better we get. I think that's what you should take away is, you know, bring it. We're gonna take it on, and we're gonna grow and do the best we can. With that, I'm done. We're gonna take a break here, I believe, and then we'll have our final speaker, Trevor Lang, our CFO. Thank you very much. Ladies and gentlemen, we will now take a short break. Our program will resume in 10 minutes. Ladies and gentlemen, please take your seats. Our program will resume in 5 minutes. Ladies and gentlemen, please take your seats. Our program will resume momentarily. Ladies and gentlemen, please welcome Floor & Decor's Executive Vice President and Chief Financial Officer, Trevor Lang. Well, listen, it's great to see all these faces in person. I know we're all sick of doing Teams and Zoom meetings, and so for all you guys to take the commitment to come down here and spend some time with us is fantastic. You've heard some incredible presenters, and we're very appreciative of you taking time out of your schedules to come down here. I love being the last presenter between you and lunch, so I'll try to make this as brief as possible, but we've got some important things we wanna talk about. Most of us have been at Floor & Decor, this management team, as you've heard, about a decade here. While we're incredibly impressed with the performance, and we're gonna talk about that, what we're more excited is about the future. We absolutely believe that while our past has been great, our best days lie in the future. I'm gonna talk about what our growth goals are. You guys probably saw our press release this morning for the next three years. They're pretty straightforward and consistent with what we've talked about the five years we've been a public company. We think we can continue 20% unit growth for at least the next three years. We think when you take our new stores, our new design studios, our comparable store sales growth, plus what we're doing in commercial, we think on average, we can grow our sales 20% per year as measured over a three-year period of time. We believe that will allow us to double our EBIT. We did that in two years, but we're gonna do that in three years as we look to the future as you go back to our 2019 results. That would be on average 25% growth on average per year. We're gonna maintain a strong balance sheet and keep our leverage low. We'll talk about our investment priorities a little bit more detailed. We had the best year ever financially, but also including the best year for our return on invested capital. We take your capital very serious on how we invest that. We'll talk a bit about that, as we look to the future as well. I wanted to present that slide, this slide. When this management team got here a decade ago, Floor & Decor was a great company run by our founder, but it was a small, regional, outlet-based retailer. What our private equity firm realized and what we all saw when we decided to come here was, this is a great business, but it's gonna need a lot of investment in order to grow and scale. That's exactly what we've done for the last 10 years. We feel like we do a good job of blending the art and science of how much are we gonna invest versus how much are we gonna drive to the bottom line. Just a quick victory lap here. If you look at our sales back in 2012, our sales are 10x what they were on average growth per year of 29% to $3.4 billion last year. Our profits, even though we've made substantial investments, our profits are 15x what they were on average growth of 35% over a decade. As Tom said, you guys all live in the world, lots of changes have happened during that period of time. We've also, probably, as importantly, made substantial investments across every discipline of the organization. Our founder did everything on Excel and napkins when we got here. Now we've built a world-class management team. We've also got really good systems. We're continually investing in those systems. That really, in our opinion, is a virtuous cycle of we make these investments, we get a return. That drives the business for the next 3-4 years. We make more investments. That gives us a return. Most of you guys are familiar with Good to Great. That's an aspirational statement for us to think that we are a good to great company, but we continue to make those big investments. We'll talk about some of those big investments today that we're gonna continue to make that we think will keep that flywheel growing and keep that virtuous cycle of investing and seeing a return on those investments. The things that you've heard about today that we're gonna spend a little bit of time on just as I finish up here, we have a great management team. Not just the executive management team that you guys are gonna meet today. When you guys get into the stores today, you're gonna meet our merchandising team, you're gonna meet some of our pro and our design team. Those of you, then when you go to the design studio, you're gonna see what we do from a design perspective. We've got an incredible leadership team across all facets of the business. I'm gonna walk through the next slide a little bit more detail on our total addressable market and why we think it's gonna continue to grow. We have a very unique and successful model that we think is very difficult to emulate. I'm just gonna reiterate three things that my colleague said earlier. First, 240 vendors in over 24 countries, long-term relationships that don't happen overnight. That is very difficult to emulate. We have a very big infrastructure that we think wouldn't be easy to invest in, not only in the supply chain and technology, but in these big stores. We also think that's difficult to do. As Steve and Lisa and Ersan walked us through, I'm not aware of any retailer who can micro-merchandise at scale like we do. Ersan gave you a great example between Alexandria and Boynton Beach. San Antonio is different than Boston, which is different than Atlanta. We do a fantastic job. We've always built our business that way. We've got the technology and infrastructure to continue to micro-merchandise at scale. As Lisa walked us through, we know our four main customers, the homeowner that or we call the DIY, the BIY customer, which is a homeowner who's gonna use some help, our professional customer, and our commercial customer. We have a fantastic merchant group that really knows this place, and they are supported by a fantastic buying team and technology to continue to grow and invest in our supply chain. Our performance, as you can see here, has been fantastic. So overall, I think we're in a constructive housing environment. As we look into 2022 and beyond, we think we've got a good place, but there's some risks, and we wanna be open about that. Today, there's 127.4 million housing units in the United States. 80% of those housing units are over 20 years old. There's a natural replacement cycle that takes place when you have houses that old. Wood and laminate, depending on how much they're used, will wear out and need to be replaced over time. Tile and natural stone trends change. People wanna see different trends. With that housing stock being so old, there's gonna be a lot of replacement that's gonna happen over the next 5, 10, 20 years. Also, there's been just tremendous wealth created, especially in where we sit in that middle to upper income customer. One of the big banks put out a good piece of research here recently that said, since the first quarter of 2019, there's $6.5 trillion of housing equity value that's grown. That's 25% higher than it was in the first quarter of 2019. That's 6.5 with a T, as in trillion. We also read the same research that, you know, homeowners, especially the middle to upper income homeowners, have $3.5 trillion more in their bank accounts over the last few years because of the investments the federal government has made back into the economy. In the household, the value of the stock portfolio, while it's down from where it was 4 months ago, is still materially ahead of where it was before. As we serve a middle and upper income consumer, they have plenty of ability to invest back in their home. We know they've been doing that. Obviously, the home centers have been performing well. We have performed well. We think consumers are liking what they're seeing, and they'll continue to invest for a period of time. We're not done with innovation and affordability. The merchants still see lots of opportunities. You guys will get to see and hear some of that when you go to our store today. Tom showed us there's been a long-term trend over 20 years of hard surface flooring taking market share from soft surface flooring. We think there's continued opportunity there as well. Millennials are now the highest cohort buying homes today. What we know when those millennials gentrify new neighborhoods and new homes, they don't want the flooring their parents had and their grandparents had. They want someone to help them put that in. We think that's gonna be a good trend for us as well. Nontraditional use of flooring. You really can't walk into a nice home, a nice apartment complex, entertainment venue, apartment, and not see hard surface flooring going up the walls. A lot of tile, a lot of laminate, a lot of wood going up walls. That's also an opportunity for us. Last year, there was 1.5 million new households created. That's 40% above the 20-year trend. Lots of new houses being formed. People need a place to live. They're gonna need to make investments in that. There are some risks on the headwinds we see out there as well. Home prices have gone up a lot. We know mortgage rates have gone up and are likely to continue to go up as the Fed raises rates. That's making house affordability go down. We've now had five months in a row of existing home sales declining, and so that will be a risk that we'll watch, keep our eye on. Also just with inflation and what's going on with the global supply chain. Hopefully, that's gonna work itself out as we move throughout 2022. That's another thing that is everything's costing more. You know, there's risk that discretionary items could be impacted. We disclosed a little bit in this, our 10-K, and we posted all this on our website. If you guys want to get some of these slides, you're certainly more than welcome to. The far left side of this page in our 2021 10-K, we would have said just the hard surface flooring, not installation categories, or adjacent categories or installation materials at $23 billion. That business or that industry grew by about $2 billion. What's interesting, if you take our business, and you back out adjacent categories, you back out installation, we were 40% of that $2 billion growth just in hard surface flooring. Our, you know, 130 going to 160 stores last year was 40% of that market growth. Just tremendous in growth in market share that we're taking. The two companies that help us estimate this is a company called Market Insights and a company called Catalina, but they don't estimate installation materials. Nobody really estimates the size of the installation materials. Our finance team and our merchandising team sat down and said, "Hey, how much grout, thinset, mortar, underlayment, if you're talking about a wood or a laminate floor, moldings, sealers, sponges, buckets, all that stuff you need to put in the product." We put together what we think is a very thoughtful analysis, and that's the $11 billion there. That's roughly 37%. Whether you buy those products from us or you buy them from someone else, you have to have these materials to install the flooring. We've now put that in our market share. As Tom touched on briefly, we also pay one of our bigger consulting firms to spend a little time with us and really scale down the addressable market for all those adjacent categories that Ersan talked to us about. We're talking about vanities, sinks, bathroom fixtures, faucets, mirrors, lighting. Those categories are substantially bigger than this $8 billion-$13 billion. We know, for example, some people are gonna buy all of that stuff at a kitchen and bath store or a home center. We scaled those sizes down much smaller to what we thought we could address when someone's working on a flooring project. We think that's about $13 billion-$18 billion in market. You add those all up, you have your $49 billion-$54 billion in market. Last year, we think we were about 8% of the hard surface flooring market, a much smaller percentage of those adjacent categories. That's up from 6% the last year. Even on that previous slide where I showed you the substantial success we've had over the last 10 years, we still believe we have the minority wallet share and have tremendous opportunity to continue to grow. We're in a market that is also anticipated to continue to grow nicely over the coming 5 to 10 years. 20% unit growth. You know, we've been growing at 20% since 2013. We took a bit of a pause when COVID hit, just an abundance of caution, not knowing what that market was gonna be like. In hindsight, we probably didn't need to do that, but you know, who knew at the time? We're also adding commercial and design studios to that 20% unit growth. You can see on this map to the right, we've been successful across all states. We're in 33 states today. We add somewhere, depending on the year, 2-4 states per year. This year will be no different. We're gonna add new stores in Oregon, we're gonna add new stores in Nebraska, we're gonna add new stores in Minnesota. Feel really good about those markets that we're opening into. As you can see here, we believe we can continue 20% unit growth for at least the next 3 years. I'd also mention that our stores are profitable in all of our markets. We've executed this balanced portfolio, trying to open about half of our stores in existing markets, half of our stores in new markets. Bryan Dodge did a great job of walking us through the economics of those investments, and they've gotten much better as we've made more investments into those stores. This will be the primary, the biggest part of our new store growth and our total growth over the next three years. As I mentioned at the outset, open new stores, both warehouse format stores and design studios. I'm gonna spend a minute talking about why we think we can continue to grow our comparable store sales. We're gonna continue to grow our commercial business, both on the Spartan side as well as the Floor & Decor regional account manager side. Our history has shown that we've done much better than this, but trees don't grow to the sky, so we try to give conservative plans that we're gonna hopefully meet or achieve as we look to the future. Let's spend a minute on comparable store sales. We started double-digit comping in 2009, so that's 13 years, as Tom mentioned, of pretty significant comps. If you take out Hurricane Harvey that impacted our business and take out the COVID years that started in 2020, all but one year we've had double-digit comps. The last 10 years, you can see we've averaged 14.5%. We're obviously very proud of this stat. As we mentioned before, we still think we have plenty of opportunity to continue to grow because we have tremendous opportunity in each of the segments that we've walked through today, and I'll spend a minute talking about those. Probably, the industry is the most important part of that aspect. The most important metric that I think is relevant that I'm gonna mention again is 80% of U.S. homes are over 20 years old. There is a natural replacement cycle that's gonna need to happen. If you look since 2016, even with the craziness of tariffs and having to deal with all that complexity, and then that leading into COVID and then the global supply chain, on average, the hard surface market has grown by 4% each year since 2016. It grew by more than that in the years from 2008 to 2015. We're in a good industry that will likely continue to grow because we, as a country, don't have enough new homes. That's driving up values. People are gonna make investments in those homes. I think we're in a really good industry. 60% of who we compete with are smaller independents. This is companies, small public companies that act like independents. They just don't have the ability to get the inventory we have. They don't have the merchandising skill. They can't get to those vendors. We think we have a lot of opportunity to continue to take market share from our smaller competitors. Bryan Dodge showed us a great slide that said almost 60% of our stores are barely over two years old on average. It takes our stores a good time to mature. You know, new stores open up, we try to get them to be $14 million-$16 million in sales. Our stores over 5 years old now are getting close to $26 million-$27 million in sales. They comp at a much higher rate in the first year, in the second year. Third year, it comes down a little bit. Fourth year, it comes down. Somewhere between, whether it's a new market or an existing market, you know, it'll settle into that region average. We've got a substantial amount of our stores that are still going up that maturation curve. Those new stores give us a lift in our comps as long as we're executing 20% unit growth. As Steve said, as Ersan mentioned, certainly it's the ethos of this company. We're never satisfied. Our merchants have great ideas. You'll hear some of these today about how we continue to grow with better best. We're gonna continue to be the leader in low price, broad trend-right assortment. Our in-stocks have improved materially this year, but we still have certain categories where we have massive improvements to improve our in-stocks as we move throughout the year. We think that will help us grow our comp store sales. Adjacent categories, we're just getting started. We really started doing this in earnest probably about two years ago. As of the end of last year, it was close to 2% of our sales. We think long term, we want adjacent categories to be 5% of sales. We've got a very thoughtful in-store, in DC, and then kind of an endless aisle strategy as to how we can do more with adjacent categories that will lead to just additional sales comps. They're truly adjacent sales. It's not like you're gonna decide, "Hey, I'm not gonna get the flooring so I can get this vanity." No, you get the flooring and then you get the vanity on top of it. They're big-ticket sales that drive a lot of incrementality. We're doing great in pro in-store commercial. We actually do a fair amount of jobs, commercial jobs in the stores in design. Lots of opportunity to continue to get market share there. Our e-commerce team, I've been with the company almost 11 years now. The e-commerce business has grown at a very much faster rate of sales than our total sales. We think we've got great opportunity. As we all know, we live in a world where if you're not a great omni-channel retailer, you're gonna struggle. We have a fantastic team, a good technology. We think we can continue to grow there. It's all about information, about education, about inspiration. Then when you're ready to transact, let's make it easy for the consumer. Again, we've got a great team that continues to drive that business strong. Then we've got a great marketing team. We've hired some really smart people. We've got a great leader that runs that group that's been with us for a long time. We've invested in technology. We have this great CRM tool that gives us data. Lisa walked us through that. We know who our customers are. We know where we're getting good returns on advertising dollars, where we can continue to make those investments to drive that higher return on advertising. We're getting a lot smarter on how we spend our advertising dollars. All of that leads us to believe, even though we've had this incredible results for the last 13 years, there's still upside from a comp store sales perspective. We'll spend a little bit of time on how we think about investing for the future and how we think we can continue to grow our profits on a 25% on an average. I do wanna mention that it won't be a straight line. We've had some years, like last year, when our profits were up over 60%. We've had other years where the macroeconomic environment was a little bit slower or we had to make substantial investments where our profits didn't grow at 25%. What we wanna impart on people that I think we've tried to be consistent about for the 5 years that we've been public, when you measure us over a 5- or 10- or 3-year period, though, we think on average 25% is achievable. As we showed over a 10-year basis, we've done better than that. How have we done the 5 years that we've been a public company? Tom showed a similar slide. We went public in early 2017, so I took 2016 as the base year. When we went public, we had a very similar message. We felt like we could grow our sales about 20% on average over a 3-year period of time. We felt like over that same period of time, we could grow our profit by 25%. As you can see on the chart here, we've more than doubled our store count. That, along with our comp store sales and commercial and pro and all the other things we talked about, our sales are now 3x the size they were when we went public. That's an average growth of 27% per year, up to $3.4 billion. Our adjusted operating margins have also grown from 7.6% of sales to 10.2% of sales. That's 4x the size of adjusted operating income than when we went public or on average, 34% growth per year. Yes, we've had a great environment, but we've also executed well. There are other public companies that sell flooring, their performance has been nowhere near this, and we're all operating in the same environment. It's because of the unique culture and the way we go to market. Again, we feel like we've made substantial investments that will allow us to continue to grow this as we look to the future. The money slide, as Wayne calls it. Last year, we made $352 million in operating income, 10.2% of sales. We spend a substantial amount of time working collaboratively to build these 3- and 5-year plans that we work on. It takes a lot of time and effort, and it's not just the finance team in a back room pushing this out and telling everybody what they're gonna do. It starts with the strategies of the organization. It then starts with what are the investments we need to make to get to realize the areas where we know we have opportunity to take market share. It's a very iterative and collaborative process. Our long-term planning process takes about 2.5 months in the summer, and we build it at a low level of granularity so we can hold people accountable to their numbers. What we've done here is really just simplified that kind of 2- to 3-month planning process into three simple bar charts here. Our existing stores, we're hopeful to grow that by $225 million-$247 million in operating income. That's gonna be led by driving same-store sales. Gross margin, Brian Robbins walked us through a little bit of the challenging environment, but I think if we all have a little bit of optimism that the supply chain is eventually gonna work itself out. We said on the call a couple of weeks ago, we felt like our gross margins could approach 41%, so we're optimistic that we can grow our gross margins throughout this year. If that's the case, and the supply chain loosens up as we get to the end of 2022 and 2023, we see these $10s of millions we're spending on demurrage and detention and drayage cost and international container cost. If those costs start to come down a little bit, then we're gonna have the opposite impact of where our gross margin can start growing even more as we get into 2023 and 2024. I certainly can't predict the future, but I don't think we're gonna be in this global supply chain glut forever. That leads us to having gross margin operating leverage as we get into 2023 and 2024. Again, assuming, big assumption, that some of these supply chain issues work themselves out over the rest of this year. We also have said, you know, roughly 60% of our costs are a little bit more fixed in nature, so if we can drive the same-store sales, we can leverage rent, we can leverage depreciation. There's a fixed component of payroll and marketing that we spend on. That's how we're gonna get our existing sales component, of, again, somewhere between $225 million-$250 million. The new store equation is pretty simple. As Brian laid out for us, we open a new store. We think it does $14 million-$16 million in first-year sales. We model it to be hopefully around $2.5 million-$3 million in first-year EBITDA. As that store goes up that maturation curve, starts at 60% of mature store productivity. As it goes up that maturation curve, hopefully we get that store to doing close to $6 million, $6.5 million, maybe $7 million of EBITDA. That's what the middle bar there is. As I said, and those of you who follow this closely, we're gonna continue to make big investments in the business. I'll talk about CapEx in a minute, but you can see here we're not gonna be shy about investing into operating expense. We're gonna invest across all disciplines, again, because as we see, we make those investments in technology, it makes us smarter and better. As we see, we make those technologies in e-commerce, we can better service our customers. As Steve walked through, we make investments in our field team. They're great leaders. That allows us to micro-merchandise at a store level. Real estate, as we've increased our real estate department, they've made better decisions and are doing great returns. We're gonna make continued investments to keep that virtuous cycle going of growing our operating profit. If we pull that off, by the time we get to 2024, hopefully, we'll be somewhere close to $700 million in operating income, and we'll grow our operating margins. Let's talk about what are opportunities and risks to this plan. We said on the last call and really the call before that, as we do a holistic approach of the value proposition that Floor & Decor has, we think we have the ability to take pricing up, and we intend to do so. We said on the last call, the industry estimated their prices are up 8%. We think our prices are up below that. If you look at the investments we've made in the store with design and pro and visual inspiration, we think we have the ability to raise prices. That'll help with growing our operating margins. Our merchants have done an incredible job of raising our product margins. As we get bigger, we can get more scale with our vendor partners. We can get better rebate programs. We can lower our shrink and our damage. There's opportunity to continue to grow our gross margin, especially if we have a little bit of optimism about the supply chain as we get into 2023 and 2024. There is a fixed component of our operating stores. As we grow our same-store sales, again, we should be able to leverage depreciation, leverage rent. Our new store-owned economics, Bryan Dodge has taught us a lot in the 5 years he's been here. As you've heard us say, our CapEx has gone up. Once you invest that CapEx, you know, your rent and depreciation are pretty fixed. As that store starts at $14 million-$16 million, you grow up to $26 million, $27 million, you should be able to leverage that component of your P&L. You know, we're gonna own a number of stores. As of the end of last year, we owned three stores. We're gonna own seven more stores. Obviously, if you own a store, you're not paying rent, and so that also helps our economics as well. Risks to this plan, inflation, supply chain disruption. My crystal ball is definitely no better than anybody else's. You know, that's gonna be some short-term pressure that we've been working through, and you've seen that been reflected in our gross margin. Labor, we invest a lot like all high-quality retailers to attract, retain, motivate, and promote. We had a big increase in our labor costs in July of last year. We did another large increase. We're one of the few retailers that can say our minimum starting wage is $15. I don't think there's a lot of $3 billion retailers out there that are doing that, but it's an important investment for us, and we're starting to see real improvements there with retention and lower turnover rates. As long as we're executing 20% new stores, our new stores, while they're incredible return on investment, they're not nearly as profitable as our mature stores. As long as we're executing 20% new stores, that puts a little downward pressure because those new stores' profitability is not nearly as high as our mature stores. Then we're gonna make strategic investments in e-commerce. We bought a business last year. We've got some investments we're gonna make in technology and people headcount to continue to allow us to scale. All that being said, our goal, and you've seen us do this both on a 5- and 10-year basis, is to both grow our sales and grow our operating margins. Pretty simple slide here. Before we went public in 2016, we were private equity owned. They liked to live with a little bit more leverage on the balance sheet. So you can see we were at about 4x levered back then. Had 2 turns for our leases, which is the right way to think about it. So really, our lease-adjusted leverage ratio was over six or rather about just under 6x. Because of the IPO proceeds plus the strength of the business, we've continued to pay down debt while supporting 20% unit growth, doing some M&A, investing in those old stores. We've still been able to deleverage the business. We're gonna keep our leverage low while we're still in this 20% unit growth. Not only is it the right thing to do, but when these crazy exogenous events that nobody can control, I'll never forget when Tom said to us, when COVID hit, "Hey, we need to model what it might look like if we don't have our stores open for 6 or 9 months." Having low leverage in those types of environment helps us all run the business better, all the craziness that's going geopolitical. I think for now, we're gonna keep that leverage low. We will use the cash flow from operations to invest back in the business. Again, those of you that watch our return on invested capital, we've been good stewards of your capital. We plan we can continue to grow our return on invested capital over time. Because we're making big investments, owning more stores, we just bought a distribution center, we're probably gonna be cash flow negative for the next 2 years as we support that 20% unit growth. Our current modeling suggests we'll be modestly free cash flow in 2024. Really the huge unlock for us is we're not gonna grow at 20% unit growth forever. The math just doesn't work. We feel good about the next 3 years, but at some point, when we take our foot off the accelerator on 20% unit growth, that's when you're gonna start to see material free cash flow that we'll do what other companies do. We'll evaluate whether we ramp up M&A faster, whether we buy back stock, dividends. All those things to come in the future years. I wanna spend a little time on how we're thinking about capital and really just try and simplify the way we invest in capital, because it is a big piece of where we spend our cash flow, where we were gonna spend all of our cash flow. Last year, we spent $475 million in CapEx and another $64 million in cash up front to acquire Spartan. As we look at the future, if I really try to simplify this down, 60%-70% of our capital is gonna be spent on opening those new stores. As Bryan Dodge showed you, we are very confident based on a decade of doing this, that we're gonna get at least a 25% return on invested capital for those stores. Our cost of capital is in the high single digits, low double digits, depending on how you measure it and risk premiums you put on it. That's gonna be a very good return on invested capital. That's the majority of where we're gonna spend our time and our capital. We're gonna spend another 10%-25% on our distribution center. That also, we believe, is well above a 20% return on invested capital because it allows us to continue to grow. One simple example, you guys all know, I think, that we just opened a Houston distribution center. We bought the land, we built the building, we spent about $78 million to facilitate that opening of that distribution center. We know today we could flip that DC and make a substantial immediate return if we wanted to just get rid of it or if we wanted to lease it back. We don't intend to do that because it is such a good operating model for us. Again, that's the next biggest piece of our CapEx, investing in opening those DCs. Very good return on capital, well above. We'll get a return on capital well above our cost of capital. The next 5%-8% we spend on CapEx is really on enabling technology. We have a voracious appetite at this company for better technology to run the business more efficiently. We've got smart people who see ways to run the business, so investing a lot in e-commerce, a lot in merchandising systems, and supply chain systems. All of those will, again, continue this cycle of allowing us to scale and grow. Then finally, we're gonna spend about 15%-20% of our CapEx back into the existing stores. Most of us have seen a lot of retailers who under-invest in their existing stores, and that's a death spiral back to somewhere we don't wanna ever be. Frankly, most of that 15%-20%, we're gonna get a good return on invested capital. I'll just give you a couple of examples. The biggest area we're gonna be spending over the next 3 years is relocating existing stores. We've relocated 3 stores to date. We did one in San Antonio, we did one in South Florida, and then we did one in North Florida. In all cases, the sales and the profitability when we leave a small old store and open up a bigger store that's close by is materially better. I'll just give you one example. In North Florida, we relocated a very high volume store just literally across the street from where it was. That store did $5 million in four-wall EBITDA before we relocated it. Now, three years later, we've relocated it. That store does $10 million in four-wall EBITDA. We've got a handful of stores that we're gonna continue to relocate from the smaller stores, the older stores, and we're gonna get a good return on invested capital. The other thing is we're always investing back in the stores, whether it's more visual inspiration in the displays, adjacent categories. You've seen some pictures. You guys will see that. You know, it takes a little bit of capital to invest and move stuff around in the store to keep those stores looking fresh and having new opportunities. Finally, the last piece of our CapEx is we spend about 4%-6% on existing CapEx just for maintenance. You know, air conditioners break, dock levelers break. It's about $150,000-$250,000 per store. But our stores over five years old are getting, you know, well north of $6 million of EBITDA, so it's just the cost of doing business, but it's the smallest piece of our CapEx. Just quickly, I'm gonna run through these core investments. The top piece here is we expect to continue to get over a 20% return on invested capital. The middle section is we add RAMs and commercial. There's really not much investment we have to do there. We hire a salesperson, they go drive a bunch of sales. We invest in design, it makes our stores more profitable. On the acquisition front, we've done 1 acquisition in 20 years. We've been incredibly pleased with what we've done with Spartan. Some of you guys who may read the trade publications, Spartan actually just did a small acquisition themselves, a small tuck-in, in Wisconsin. We think there's more of that to be done, but there's other possible M&A. The way we think about M&A today is it must enable and encompass a strategic priority, something we know well. We know commercial, we know hard surface flooring. Spartan was a natural acquisition for us. We spent a lot of time with Kevin and his CFO building a long-term plan that we both agreed we could execute. We wanna make sure that when we buy this company, we spend plenty of due diligence to make sure that we understand what the profitability is gonna be. Over the long term, we think it's gonna be very accretive to operating income. The commercial business is a lower gross margin business, but it's a materially lower SG&A margin business, so our operating margins for 10%. You know, we see Spartan as being very accretive to that and any other M&A. Asset light, we've built this massive infrastructure within our business. Spartan just gets to use that infrastructure, so we don't have to make big investments. There's not much CapEx, there's not much working capital investment to grow Spartan's business and businesses like that. Obviously, we wanna use the things that we're expert in, merchandising scale and supply chain. Just finishing up here, our long-term growth goals are pretty consistent. 20% unit growth. We think with comps, new stores, design studios, commercial, we can get to on average 20% sales growth as measured over a three-year period of time. We think we can double our operating income over a three-year period of time. Our medium-term target for EBITDA margins is in the mid-teens%. Longer term, once we aren't executing 20% unit growth, we think we can get that to be the upper teens%. While we're executing a 20% unit growth strategy, we are going to keep our CapEx high. Because of that, we're gonna keep our leverage low. Because I think we're a little bit over on time, I'm not gonna go through the opportunities and risks. I've touched on most of these already anyway. I think all of us here feel blessed to be here. As I started the conversation, our view is that our best days still lie in the future. I think with that, we're gonna bring the management team up and take questions. We're gonna have rovers that are gonna have mics. If you would, hopefully wait for you to get the mic. I know there were some questions that were asked online, so we will take your questions. Who decides to take Tom? Just hang on to him in case I gotta run away. Thanks. Good morning. Chris Roberts from JP Morgan up here. Hey, Chris. I guess it looks like, and correct me if I'm wrong, you're sort of embedding mid- to high-single-digit comps in 2023 and 2024. Is that fair? You know, going back to your reference point on 2019 when you did a 4%, it was following, you know, a Fed tightening cycle. Yep. You know, the floor of mortgage rates versus where they are now seems a bit wider, and you have sort of share of wallet risk. I guess to what extent did you contemplate such a rise in mortgage rates? At what point do you think there's a breaking point where there could be some risk? I'll take a crack at it. I'll let Tom weigh in if he wants. You know, this year, I think we guided sort of 10%-13.5% comps. We also talked about retails increasing throughout the year as we take prices up, as we continue to expect our supply chain costs and our vendor costs to increase. We're gonna have an elevated comp this year. We were comping in the mid-teens when we had the earnings call. We had. Again, we still have retails to grow. I think this year's comps are gonna be a little bit elevated relative to that mid-single-digit comps. As we think about 2023 and 2024, again, hard to predict the future. If we do have some optimism that those supply chain costs are gonna abate and we're not paying, you know, $10s of millions more for container costs and drayage costs and detention and demurrage, then you can see retails going back down. Now, that's a good thing from a profitability perspective, there will be some headwinds on comp because you're now taking retails down. Profitability-wise, gross margin-wise, it'll be materially positive for us. Yeah, we are expecting that after having, you know, three incredible years of comps, if you take the back half of 2020, a very strong 2021, we expect 2022 to be strong. Because we would expect some of those inflationary things to go down, you could see 2023 and parts of 2024 comps be below that long-term algorithm only because the inflationary aspect moves away. That's kinda how we thought about the model. I think the other just one quick thing I wanna mention on the cycle is, every cycle is different. What's so tremendously different about this one versus when the Fed raised rates really high, the existing home sales fell off really quickly, there wasn't the level of wealth that exists today. I think that's where there's some optimism, not just with us, but when you talk to some of the home centers who've also had a really big businesses. Again, that $6.5 trillion of household value, the fact that they've got, you know, trillions of dollars sitting in their checking account and their portfolio's certainly down over the last 3-4 months, but they've got the ability to invest in their homes. All of those are the reasons. Yeah. I think the only thing that I'd add, Chris, is that, if you're an optimist, you'd also. This global supply chain pressure has affected everyone within our category. I do think that we're getting- Lots of new pros into our stores that have historically been loyal to an independent. When you can't get inventory, they're kind of forced to check us out. We know historically that if we get them in our stores, we're pretty sticky that we retain them. That could be some upside, as we look into the next couple of years, because I do think we're capturing share at a faster rate than we have historically. Good morning. It's Michael Lasser from UBS. Your operating margin target implies you'll get 130 basis points of margin expansion over the next few years. Your gross margin this year is gonna be down 120 basis points. Your margin expectation implies maybe you'll just get back to where you were last year and certainly not back to where it was in 2020. Why wouldn't that be the case? As part of that, what's a realistic long-term operating margin potential for Floor & Decor? You're gonna have a low double-digit operating margin next, you know, next year or this year, and yet you're gonna be a fraction of the size of some of the home centers out there that have mid-teens operating margins. Is it realistic for Floor & Decor to have north of 20% operating margin when you get to 500 stores over the long run? Thank you. I'll take the first part of the question, and Trevor or Lisa, you guys can feel free to weigh in. On the gross margin front, as we said on the last call, that our goal is to start getting back our gross margin. Now we've realized some of the costs are not a moment in time that they're gonna stick with us. We would, as I mentioned, you know, from what we see, the industry's taking prices at a much faster rate than we have. They were over 8% at the end of the year, and we weren't close to that. We would start taking prices, start building back our gross margin over this year, not to get back to historical levels, but to get to be improving and get closer to that 41 number, as we went through this year. As Brian said during his presentation, you know, the hopes are that, and Trevor just mentioned, the hopes are that the supply chain costs get a little bit better as the year goes on. They get a little bit better into next year. If that happens, that definitely helps us get back to our historical rates. The historical rates won't happen in a moment in time. We think that happens over a couple of years. Yeah. The 10.2 that we posted as our adjusted operating margin last year, that was the highest we've ever had. Last year was a record across all metrics, including the 10.2% operating margin. We'll see. You know, Michael, we have done better than that in our history, and we certainly have opportunity. I think at our core, you know, we are an everyday low price retailer, and we wanna keep those retails low. I think that's probably the other thing that we manage. You know, the art and the science of this business is we could have much higher operating margins tomorrow, but when we're the size we are, let's keep taking market share. I think, over the long term, you know, if you play this out and if we have time, we can come back to this question. Absolutely, I think we'll be a high teens EBITDA margin business. Right now you don't see it because we have 20% unit growth. I think we'll be just below, call it 15% from an operating margin perspective. You know, as long as we're executing 20% unit growth, it's hard to see 'cause there's so many of those new stores that are operating at 60% of mature store productivity. Once we take our foot off that 20% unit growth, which is many years out, you're gonna see those operating margins and those EBITDA margins grow quick 'cause you won't have so many new stores pulling it down, and you won't have to make the same level of investments to support that 20%. Yes, ultimately, this is a high teens EBITDA margin, probably 300 basis points, maybe 350 basis points below that for depreciation to get you to kind of a mid-teens operating margin versus the 10.2% we did last year. Jonathan Matuszewski from Jefferies. Two quick questions. First one, a ton of opportunity domestically. How does Canada factor into your long-term store target of 500? You guys have been talking about it high level over the past, couple of months. Sounds like it would be incremental, but, when would we expect to maybe see a presence there? It definitely is incremental. It's not included in the 500 store count. We've certainly talked internally about Canada. We continue to build out more here domestically. We have tons of opportunity here, but I can see us start thinking about it more seriously as we get into next year. Then, you know, possibly after that, start thinking more seriously. There's a lot of work that has to be done behind the scenes before we would open the first store, but I can see us taking it more seriously starting next year. Just a quick follow-up. On China, obviously a number of people locked down, 37 million over the past couple of days. Have you guys heard anything from your partners over there in terms of supply chain interruption or anything like that? Yeah. We can either let Ersan or. Are you comfortable, Ersan? Yes, we heard from our vendor partners. We are checking with them almost every day. The issues are mainly in the city centers, and our factories are located outside of the cities. There's not a major issue at all for us at this point. We'll check every day. Thank you. Hi, Kate McShane from Goldman Sachs. Can you talk a little bit about the new customers you acquired over the last 2 years versus the increased share of wallet? You mentioned that you have 8% market share today. Can you talk about the assumption that's in the 2024 target and what market share you'll have then? Market share target. We're 8%.[crosstalk] It'll be higher. I don't think I have a specific number, but Get your crystal ball out. I think it'll be. You know, hopefully it'll continue. It grows about 100-200 basis points. This is kinda how it happens every year, so I would expect this to continue to grow that 100-200 basis points next year as well. The other question was share of wallet. Yeah, returning versus new customer. Is that the question? Yeah. Yeah. The last couple of years obviously has been much more new customer, just with everything that's gone on through the pandemic. What we've seen in the last c all it six months is a bit of a flip to more returning and a little less new than. Still new is growing, but not like it was growing through 2020. Thank you. Hi, Karen Short at Barclays. Wanted to just ask within the $17 billion, if you could just give a mix of within your customers, how you see that evolving over time. Then the second question I had was just on personalization. So you commented that I guess the pro makes decisions at the last minute, so you have to be in stock because, you know, that's obviously important for them and they don't anticipate. So how do you personalize, and how do you tailor personalization to the pro in that context? The personalization piece that we're talking about, because we don't run sales, we don't market products. You just any marketing you see from us is gonna be much more brand driven. The personalization that we would do for a pro is why should you come shop Floor & Decor? We would talk about our pro services, about PPR. If they're a PPR member, that's even better. You have 30,000 points. Come on in. Let me show you how we can redeem them. Here's how you can get to 40,000 points and what that would mean for you. The personalization would be much more around the PPR program and then just the benefits of being a pro and working with Floor & Decor. $17 billion. Well, Bryan may weigh in, but you know, we have that broken out between how much is condos, apartments, hotels. As Bryan showed on his slide, 60% of that, we think there's a professional A&D firm. A company like Gensler would be involved that's actually working with the hotel or is actually working with the condo. That's most of where Spartan is gonna focus on that upstream A&D customer. As Bryan talked about, Spartan can play in the mainstream space as well, but we're gonna hopefully focus the RAM team on that. That's where they're having a lot of success, where it's a business owner, it's a small business owner, it's a general contracting firm, it's a commercial flooring installer. That 40% is where the regional account managers will focus most of their time on it. Yeah, I can add a little bit more color to that for Spartan specifically. Hospitality is something that we're not in with Spartan. Hospitality would be more a tile index type product. When you think about what we're trying to do and what we talked about earlier, that would be a very distinct customer opportunity that we're not tapping into at all today that we could heavily tap into if we do the right strategies in the next year or so. Thanks. Chuck Grom from Gordon Haskett. I also have a question for Brian. On the last call, you guys talked about the long-term opportunity to add about 300-500 RAMs, potentially doing $3 million-$5 million per RAM. I'm curious about the process to accelerate the growth of the RAM business, and if acquisitions could be part of the equation. For the RAMs? Yes. That's probably you, but I could say I don't think we see anything with acquisitions in that part for the RAMs. We see just adding more RAMs. That's our primary strategy. I think the only thing is that you could look at some of the bolt-on acquisitions that Spartan is considering is kind of they're not RAMs, but they're specifiers, but it's small, right? They're one or two or three people. Yeah. We like what we're seeing there, and we'll probably do that, not as quickly as Kevin wants, but we'll probably do it somewhere in between my conservatism and his, and his not conservatism. I think on the RAM side, Trevor manages the RAMs, and it's funny because he's the CFO, and he's supposed to be the guy, slow, slow, and he's been, like, fast, fast, fast, which is a good dynamic to see. We've added RAMs much quicker than I ever thought we would add. I'll walk a market now. It's not uncommon for Lisa and I to go be on a store walk, and I'll be calling Trevor going, "Why don't we have three RAMs in this city or that city?" We're gonna continue. As long as they return, we'll grow them at aggressive rate. I think this year we're adding I think we'll probably add 15, something like that. 12-15. 15 this year. Only thing I was just gonna add is, you know, both are having a ton of success right now because, again, of this incredible product we have. We just, you know, we were looking at a $1.5 million purchase order we got from a, it's a large hotel in Reno that's being converted into multifamily. Crazy ... purpose. Those are the kind of jobs that the RAMs are winning today. Again, Spartan's been doing this for even longer than we have. It builds off the back of this incredible product at a low cost, and we're not tied to some of the big domestic manufacturers where they've got to run with a line for two or three years. It will continue to grow. It's growing at a the commercial business is growing at a much faster rate than the retail business, but because the retail business is growing so well, you know, it's harder for you guys to see it, but we're gonna be aggressive. Last thing I'd say is, you know, we're still working through that, much like the design studios. We're really new in it. We kinda have to post around 20% unit growth from a person perspective, I mean, from a store perspective. At some point, we'll probably do that on the RAMs. It's hard to hire that many people to get them trained. We go to market very differently, so we have to retrain them. What we don't wanna do is hire too many people too fast and start disappointing our commercial clients. We're gonna continue to grow it very aggressively, but in a measured pace. Don't expect us to blow that up and have twice the size in a year or two. I think the other thing that I find really good and interesting is that you know, a lot of times when we hire a RAM, they bring a book of business, right? They've been selling in a marketplace for a while, and they got experience. As we've gotten more serious and we've built this RAM organization and now there has been an acquisition on the commercial side, you know, people are coming to us. Our awareness among that client group is better than our awareness against consumers. We're getting a lot of calls with a lot of good people that are interested in joining something like us. Steve Forbes, Guggenheim. Maybe just a two-part question on the real estate strategy. One of you guys. Sorry. Thank you. The [crosstalk] lights are on. You have no idea. I feel like I'm gonna have to step out of my car and give my driver's license any minute. Two-part question on the real estate strategy. The first is predictability of year one sales. Yeah, you think about $14 million-$16 million. Curious if that mix of the building blocks of that year-one sales has changed from local market share gains and/or just greater demand creation. Right? Is the model creating more year-one demand in the market? So if you can comment on just predictability year-one sales. Then the second part, the 130 markets, the 500-store target, have you sort of tested the densification of the urban markets? Where is your thought process on how dense or how many stores you can really put in some of these really densely populated high-value markets? I guess I'll start and let Bryan Dodge weigh in. I do think, you know, the more stores we get, the more data we have, the better predictability we have. I think that's what Bryan will probably say, that the more stores we get into the system, we're able to predict them a lot more. I think there's two things that I think. There's not two. There's multiple things that have helped our year-one sales. I mean, we execute. It's a really long list. Two things that I think you could get your head around. One is we've done a better job over the last three to four years of putting locations where people can find them. I'm not saying that they were. We just didn't always get corner A that we wanted, and I think we're doing a better job of getting those corner As. For the same reason, as we've opened more stores, we get more people knocking on our doors and our real estate team, because we self-develop now, they get opportunities to get dirt, and we're able to build something that makes better. I think our store locations are better. I also think our awareness is better. I think people starting to know who Floor & Decor is. When we open up in Garden City, you know, we open up in Farmingdale, they don't know who we are, but when we open up in Garden City, everyone knows who we are, and I think that helps. You wanna add? There's nothing to add to that. I mean, that was phenomenal. Sorry, I feel like I have to add one thing. We have a lot of control over that, Steve. Because Brian and his team are just, they have a really good team, and they have really thoughtful people, we literally have a portfolio-based approach. Yeah. For example, we open a store in Houston, it's gonna do way more than that $14 million-$16 million, and it's gonna do well north of that, you know, $2.5 million-$3 million of full-well EBITDA. We open a new store in Omaha, that's gonna be a smaller market. That's not gonna have the same population. It's a new market to us. That number is gonna be below that $14 million-$16 million, and it's gonna be below the profitability. Now, over a 6-year period of time, it'll ultimately get to that to be a good number. Bryan and I came up with a really simple spreadsheet. I mean, we literally, we look at that spreadsheet when we have our real estate meetings, usually kinda once or twice a month. On average, are we getting to 14-16? On average, are they getting to 3 million? That's also why we do half of our stores in new markets and half of our stores in existing markets. There's a lot of control. We could easily take that number way up and go open Houston and Miami and Phoenix and L.A., but we want like you guys have a balanced portfolio, we wanna have a balanced portfolio on how we allocate that capital so that we keep those consistent returns as we execute our strategy over the coming years. Yeah, the only thing I'd add to just about density within a market, which is a terrific question, and I think we're still trying to get figured out. I can't think of any. Well, like, besides a single store market or two, I can't think of any major market where we're done. And we've now got stores. This market's a good example. How many stores do we have in South Florida from West Palm down? More than 10. Yeah, it's like. It's like 11, [crosstalk]I thought, but okay. You're the head of real estate. Could be 10. Listen to these things. I mean, it would be like, you know, we, you know, before we didn't know how many stores we could have here. We have 10, and Brian and I could sit down right now and say, "I can think of 3 more off the top of my head, like we need tomorrow." This, I think we're seeing the same thing in Houston and same thing in Dallas, where we filled those major markets out. We're just not done. The thing for me that I look at that I'm always like, I don't, you know, I don't know what that final number is because there is still so many independents. You drive, and it's like, okay, the reason some of the time we're the independents thrive or survive is because we just don't have enough density, right? It's like there's a lot of independents in between stores and the value's gotta be, you know, significant, which we think it is, but it's just sometimes hard to get customers to come. As we get the stores closer, convenience goes away, and we think that, you know, we can take market share at a quicker rate in those markets. Long way around, and we're getting better education, particularly in the southern part of the country, but, you know, we don't have any idea in the northeast yet. We've got lots of stores to build up there to before we understand density there. Seth Basham from Wedbush up here. A follow-up to that question. When you look at some of your most mature markets like Houston or Dallas or Southern Florida, what is your market share in those markets, and how does that compare to your 8% overall? Do we get it? How does it compare to the 8% overall? In our more mature markets or those denser markets, the market share, the ones you've quoted, we're probably in the low 20s%. I can put the proxy as you build the model through. I will say this, we're not at all done building those markets out. Right. I mean, the upside is phenomenal from there. Yeah. A follow up, just in terms of brand awareness and pricing power in those more mature markets, is there a big difference? Could you potentially raise prices more aggressively there because your brand is so well-received? Yeah, I'll take that one. What would you do on that one? I think Lisa mentioned, you know, we are and have the ability to take price, but we're thoughtful with that. As we said, when we went, I think it was the fourth quarter call, we were like, "Hey, you know, we're gonna protect gross margin dollars, and we're gonna watch and see what we think is transitory versus longer term." As the year went on, we learned more, decided that we could be a little bit more aggressive. I talked to some of you in the hall, and I like, some of you have done projects. You're like, "Yeah, I quoted a marble job, and the, your competition was 50% higher, in products like that." We know we have some of those instances, but, you know, the founder's principle here, and the one that we've continued to carry is we're gonna democratize the category, and we want people to come in, and we want them to be able to not just do one kitchen or not just do one bathroom, but then say, "You know what? I can afford to do two. I can afford to do three because of the Floor & Decor's prices." I think we've done a really before, that spread was annoying because the independents would say that our product quality was inferior. They'd say, "Well, they don't sell quality," or, "They don't sell seconds." Well, you tell me. When you know you go to our stores and look, I mean, our products are as good as anyone's, if not better. We've narrowed that. Now, all that said, you know, price is one part of our value equation. We think it's an important one, but we know we offer something significantly different than most of the people that we compete with. We'll take price as time goes. You know, we're just gonna do it slowly and be thoughtful because this is also a time to take market share and we think staying aggressive will help that journey. Joe Feldman, Telsey Advisory Group. Kind of along those lines, as your awareness grows in markets, how does the customer change? Like, do you find like a more affluent consumer starting to come to you? Or does it change at all? Like, do you shift upmarket in some areas and maybe with the design element of it? Yeah, I don't think. You start, and then I'll add. We don't have the information by market. Andrea up there probably has it. By market, I don't know that we've really studied that. I think the bigger change that we see when we go from a brand-new market to you know several years later as we get more stores in the market is the pro penetration gets higher. The homeowners are probably a little bit easier to get at the beginning. Those pros have long-standing relationships. They go to Joe's baseball game every Saturday, and they fish on Friday afternoon, and it's hard to get that person away from those relationships. I think over time, in some of our more established markets, you see that pro penetration get a little bit higher. I do think that there's something to attracting more affluent customers. I think people walk into our stores in the Northeast where we've just opened the stores, and we'd appeal to all income level customers. I think in some of our older markets, you know, you have stores, you know, like down in this market that had been here from the beginning, and you'll talk to someone and go, "Hey, have you been in our store?" And like, "Yeah, I was there seven years ago, and I'm not going back. Like, it was an outlet center. It wasn't what appealed to me." I think as we've been reinvested in our fleet, getting customers back in there, I think we appeal to all income levels now. Yeah, for sure. For sure. You know, Tom, I think we'll take one more question to stay on time. Okay. Hey, it's Zachary Fadem from Wells Fargo. Question on how your average ticket has been trending, both pre-pandemic, post-pandemic for both DIY, buy it for me, and pro. Can you also talk about the impact or segmentation among good, better, and best and how that's trended as a% of the whole mix? Thanks. I'll take the ticket piece, and Lisa and I can tag team the good, better, best piece, or Ersan can. If you go back in history, we opened up in May, June in 2020 at the end of COVID, and the consumer business took off, and our transactions were like through the roof for like a year. Our pro business was, you know, not as strong, and that lasted for about a year. As you got to the summer of 2021 to the back half of the year, people started using the pros a lot more, and our pro business took off. Our pro ticket is over double the size of our consumer ticket. We've also been executing well on the designer. The designer ticket's a lot higher. As the merchants have done a great job, along with the supply chain team, of increasing the in-stocks and executing that better and best, what we've seen is the consumers and the pros are, I think, being more efficient, and they're putting a lot more on an individual ticket. Our square foot per ticket is up. Our consumers are picking the better and the best, so our average retail per ticket is up. That's what's been driving our comps. In my almost 11 years here, almost all of our comps have been by ticket, I mean, by transactions, almost 80% on average over the last 9 years. Changes from year to year, but on average, 80%'s been driven by transaction. Now because we're up against huge ticket numbers, and our transaction numbers, you know, we're seeing much more of that come from ticket. We were just looking at this yesterday when we gave this quote on the call two weeks ago. On a two-year basis, if you look at our transactions, they're up great. They're up in the high single digits, low double digits. Because we are up so strong on the consumer business last year, that's a big reason why our ticket's down. Transactions. Transactions. I keep getting it backwards. I think as we think about the rest of the year, we do think it's still gonna be a lot from ticket because, as we said, we really haven't taken that much in retail increases at the beginning of this year, but we plan on taking retail increases as we move throughout the year. We could see ticket even be a bigger piece of our comp, going forward as retail goes up. Can I just touch on better and best for a second? Hopefully all of you go to the store today, and each one of the merchants will show you some of the better and best products in the store. To me, this is, like, a magical thing that's happening in our business because customers are stepping up. But if you just put yourself into the customer's perspective, if you're redoing your bathroom, stepping up, you know, how many square foot are you really doing, right? So if you know, your bathroom is what? Gonna be, you know, seven by eight, ten by eight, I mean, you know, depending on the size of the home. Stepping up to the best product, man, it's not a lot. When you see it, when you walk our store today, look at it, and you'll go, "Oh, I get it." Because you know, our merchants are... We're probably more trend forward today, and the merchants have done a better job, which is why we've asked Lisa to leave and promote Ersan. The merchants have done a phenomenal job of getting the right product, and you'll see it, and it's just like when you get it's not a big step to get consumers to do it. I think that's why we're continuing to see the momentum there, and I think that's gonna continue to drive. Thanks, Tom. Yeah. I think we'll stop there with lunch. Just as a reminder, I mean, you've heard from all the leaders here today, but this whole back row are other leaders that will be at lunch today. You'll always be able to visit with Steve or Tom or others. Take an opportunity to meet the other leaders to understand our culture, what we're about, and you'll get a great opportunity to extend that even into the store. Tom, I don't know if- I think we'd agree. Please direct all of your questions at lunch to the back row. We didn't fly them here for their looks. We want them to engage. Look, I appreciate everyone's interest. I wanna thank the presenters. Some of you, it's your first time presenting, did a phenomenal job. I hope that you all got a lot out of it. We're glad to certainly take your questions. We hope you enjoy the store walks. I will say that I'm really proud of what we've accomplished, not just since we went public, but since we joined the company. It's been an amazing journey, but it's a journey that we're nowhere near close to completing. We're looking forward to the future. Thank you. Thank you, everybody.