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04c2f484db567da2e0cff0fbdce63e04
And was that -- Was 300 basis points the total impact? So it was all on IP optical orwas there also some in Cloud & Edge?
There was a little on Cloud & Edge, Paul, but the -- obviously, with the margins where they are, it's kind of significant on the Cloud & Edge side.
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A
4ae9a96af752307efff93cb10f01d762
Got it. And Mick, or Bruce, with respect to normalized gross margin IP optical, I thought you all had been referencing a mid-40s to your credit model previously for that business, higher than I would have thought you could do, but can you just refresh my memory? What is the outlook for that business on a -- if we norma...
Yeah, so we're estimating low- to mid 40s, so it could be anywhere from 40% to 45% depending on mix and volume, etc. And as Mick mentioned, the -- let's call it 300 basis points impact of higher cost right now, we estimate that continuing in the fourth quarter which is why we're projecting margins in that segment, righ...
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A
5fce6db65c1c7aab26f1d3dc1e01f3fe
Yeah, but long term, Bruce, do you think it can be of low to mid -- as much as mid-40s business, normally.
I think you'll see that happen quarter over quarter, Paul. I think if you look over an extended period of time and do an average, it's probably in the 42%, 43% range. It'll just move around a little bit each quarter.
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A
15d443f9ad773e23dc962cb26a64fec7
Got it. All right. One more from me before I pass it on which is, Bruce, when these -- These impressive customer wins, the list of names of the customers that you're citing, Telecom Italia, etc., can you you give us a sense for the -- I assume the projects vary in nature but there is, of course, you're becoming the key...
Yeah. Yeah, that's a great question, Paul. So some of them are -- They are project-based. They're more, let's say, enterprise WDM services, so you'll do one project at a time and you may have more in a quarter or less in a quarter. It can vary. I think the real potential here for us, though, is if we get into the core ...
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B
d3c6a044944ffbf82395e711d9ef8f67
Each opportunity, you would side it at least double digits annually? Some larger --
No, I wouldn't say -- I would say some are probably less than that that tend to be more enterprise-oriented but the larger ones are in that magnitude.
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A
d619ccf0f6d1a66e09fafa41ce9db095
Bruce, can you give us -- I don't know if you want to, but can you give us, in the aggregate, those larger -- the incremental wins from the past quarter or two, what are those worth on an annual basis or quarterly basis?
Well, they, in a general sense, not to avoid the question, but obviously, it's sensitive information. They contribute toward our goal of 10%-plus growth on an annual basis. So that annual growth, 10% on $300 million-plus is annually $30 million worth of growth. That gives you an idea of what we expect out of kind of th...
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B
e7edb4fc674b43a5b27619dca11232eb
Thank you. Good afternoon. I guess, first question is regarding -- Mick, tax. You said 39% fourth quarter. Is that just for the fourth quarter or should we use that for next year as well?
Yeah, certainly. This will be only for the fourth quarter. We've had some changes in our regional jurisdictional tax mix for the full year that will then average out to be 31%. So effectively, Quarters 1 through 3 at 27%, an adjustment in fourth quarter so that the full year is at 31%.
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A
7afc755706c120be6a09b36e4db3488d
So how should we think about next year's tax rate? Back to 31% or --
I would say that, obviously, we would like to reduce it back to the 27% with some further improve but keeping it in that range would be about right.
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daee1403327c6a70aa58ca1e6fd863d4
OK. And then I guess I can't figure out opex for fourth quarter but how should we think about opex fourth quarter and beyond?
While you have seen that we have managed opex fairly well, we had unusually low opex last quarter, about $90 million that did have some one-time beneficial effects. This quarter, we were in -- closer to the mid-90s. We do expect the fourth quarter, as usual, to have a lot of variable compensation and other seasonal asp...
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74cfc7421defc4d74b3b9fd0778f86b0
Got it. And just a couple of questions regarding the supply chain situation. So how many ships are fairly tight or giving you problems? Is it onesies or twosies which one of your competitors talked about or is it more broad based?
The biggest area, I think, where we see pressures around writing silicon, IP networking silicon, that's probably the area that's most challenging, but we have a variety of smaller things as well, really a handful of things. All it takes is, obviously, one component to cause an issue. So whether it's a connector or a fa...
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B
e44391f973ac5c4ddc10ec72cfebfdd3
Okay. And my last question is on -- back to chips. My understanding is that some of these chips' lead times are, like [Inaudible] one, one and a half years. Month, one and a half might be a little bit drastic but maybe one year or so, and if prices are going up, wouldn't your gross margin be impacted when these higher ...
Yup. Yeah, I do think we'll see cost of goods pressure. You know we, of course, are attacking that on a daily basis with different programs across the company to continue to evolve the products and reduce cost and substitute less expensive parts, all those types of things, and really be able to try and manage that. You...
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e6f1776b56f33016e2c43426c9363e72
Got it. Actually, let me squeeze in one more. Some of the router companies have raised prices. Do you have that kind of leverage to raise prices on some of your products?
Yeah, I don't think of it so much as leverage as it's really what's the competitive balance. And as we're trying to win new business and position new products, we're looking for ultimately, for the best value for our customer, lowest cost for the best value. And that's actually something we're really good at, the advan...
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300490e8ff4970c1051fb1e8717879ee
Hi. This is Adithyaa on behalf of Mike Latimore. Could you tell me how much did Top 10 customers contribute to your overall revenue?
We'll look that up here for you. It's in the low-50 range but we'll look it up here and just get back -- Yeah. It is about that. The Top 20 is usually around 60%. Yeah, it's 47%. Bruce was almost exactly right at 47%.
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813197815de02ac7d3424de7db18b7cc
Forty-seven, all right. Fine. Got it. And could you give me some color on how the situation is in India? Like do you guys see a bit of improvement in 3Q compared to the previous quarter? Or just a little more color on what's happening in India.
Our third quarter was, I think, slightly better than the second quarter. It was very, very similar. We saw our deployment rates kind of recover in the July timeframe from earlier in the second quarter. And we do expect a stronger fourth quarter, certainly in India, versus the third quarter, just not as strong as I thou...
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00b912aae9e96e3bbac35d4470742ce9
I saw that you had -- Tim, I thought that you had mentioned that there were 4,000 patients in Germany on bempedoic acid. And so would you be able to help put that in perspective relative to the pace of the launch in the U.S.? And I guess, were any of these 4,000 patients in extended access programs? And yes, any additi...
Yes. Sure, Mark, this is Tim. So we provided the number. It is, I think, by all accounts, an impressive number. It really cements the decision that we made almost two years ago to partner with Daiichi Sankyo. As you'll remember, we had said at the time that they have an incredibly successful cardiovascular commercial o...
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495ef03888f8588227d71ad35d47256c
I'm just curious to get an update on how the rest-of-world partnership discussions have been going? And if there's any update in terms of how we should be thinking about potential timing or size of that potential agreement?
Yes. Yes, sure, Mark. So good question. So as we said in our prepared remarks that is tracking for completion this quarter. We feel good about that. It's -- I think we said earlier in the year and late last year, obviously, our goal remains to optimize the value ascribed to the rest of world. And so we -- again, we're ...
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c18fc3239f0134698e7f29c54587ed3c
Regarding the U.S. launch, I'm wondering if you could comment on script growth among lipid specialists versus GPs? And also maybe any prevailing geographic trends such as regional center versus community uptake? And then, Rick, U.S. revenue for 4Q implies an improving gross to net. So I'm wondering if we should expect ...
Yes, we'll do. Thank you so much. And thanks for the question. So as it relates to prescribing, what we're seeing is that, in overall prescribing, you may recall that JPMorgan, we showed where the HMG statins had decreased. We still see a decrease of statin use by about 9% currently. But we are seeing this slowly rise ...
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471f05690aeecd95333d4568e934a7ec
Do you feel like the patient volumes are picking up in the January, February time frame, maybe just talk about what you're seeing in the environment? We hear different things from different types of doctors and different types of medicines. So maybe just make a comment about that. And as that relates to your confidence...
Yes, will do. And thank you, Michael, for your question. Just as it relates to patients coming back, physicians coming back, we don't really have any quantitative data that we capture that we can speak to that. We essentially get information from the field. And I think what we're seeing is it's a slow trickle back. Jan...
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4a5b25bfe178e04f0aaa66c8f5938d1f
But I guess, in general, if patient volumes are steady or getting better, your commercial work should accelerate sequentially just because you should have people staying on in each quarter or each month, you should have more people coming on. Should you think that acceleration should be the right way to think about it ...
As we move forward with each quarter and as more patients are, I think, vaccinated, more offices, physicians, they themselves are vaccinated, yes. I mean our hope is that patients will resume going to offices. One thing that we've learned is that patients were not truly getting their physicals. Telehealth doesn't reall...
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abc227fac2f7269493679ac11d7b9793
Can you just -- you had a big number there in the slide deck. Can you just remind us how starter packs work? Do people stay on them for a while? Do they transition to commercial? Maybe just any comments and remind me how those work.
Sure. Yes. So starter packs are essentially -- it's really samples. It's distribution of samples. And our samples are distributed to essentially all physicians and our target audience. We have distributed quite a bit of samples and it allows the physician to try the patient on the drug. And it's typically a 7-day sampl...
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6910ea0509173b6a31e60e5d56807827
Tim, I wanted to ask you on BD going forward, is there an appetite to do deals that maybe are more mid-stage development and capable of driving growth within the next few years? Or at this point, is it mainly focusing on earlier stage programs? And then as a follow-up to that, is external BD becoming more of a priority...
Thanks, Olivia. I will have a very brief answer for you, which is, this organization, as you heard Rick say, is 100% focused on 2 things: one, the commercial success of NEXLETOL and NEXLIZET; and two, the cardiovascular outcome study, the CLEAR outcome study and the success of that study, which, I think, as you heard u...
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4d8fc06c89a9595184e5f23352b69e6c
Just taking a look at your 2021 OpEx guidance, and it's great to run a tight ship, especially with uncertainty in the environment. Just wondering with that pretty tight range and granted a very favorable comp to 2020, do you think you have enough optionality to pursue things in a more favorable environment. If -- obvio...
Sure. Yes. So I think -- based upon where we are today and the initiatives that we are putting in place, I think that we are equipped to be able to do what we need to do. I mentioned in the prepared comments some of the organizational changes that we've made, which will give, for lack of better words, greater line of s...
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01cc9e146150257ff88ec3f6f0190d6a
Sheldon, you did emphasize that part of going forward is going to be educating physicians on sort of the appropriate patient population to use the assets in and kind of where along the treatment paradigm NEXLIZET and NEXLETOL will fit. Is there a specific patient population thus far that you are surprised isn't coming ...
Yes, Craig. Yes. Oh, Tim, yes? Yes. So apologize for that. So as it relates to messaging and patients, etcetera, we actually have some work ongoing right now, which is specifically looking at patient segmentation. I think one of the things that we have, to your point, that was a bit cloudy with COVID due to the fact th...
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a31c610cb573ed411f15889b106e59cb
I was just wondering -- we're wondering if in 2021, are there plans for sustaining patient co-pay assistance throughout the year as the launch is hoping to improve throughout the year? And then my second question is whether or not there was any influence regarding inventory in this quarter's numbers.
Yes. So on those, the co-pay program is something that's important to us. We're obviously going to continue to evaluate that, but that is intact for '21 and short answer, no impact on inventory in terms of revenue.
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6769d0917e4eae316e9cc45a7e9b14bd
As Lihong said that the young children English learning market is very dynamic now, I think there are some big institutions bankrupt and exit the market, while at the same time, we see a lot of competition from the interactive apps for the young children. So what is the management's view on this dynamic and how this wi...
I do think that the market is quite dynamic now with some, I would say, entities that exit the market. We also see remaining players are improving in terms of the methods that they operate. At the same time, we also feel as an attractive market, there are new entrants. So for some new entrants, they rely on the so call...
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cda6620240344228451ea107b2703354
You have a pretty impressive improvement on the opex, sales and marketing and G&A. So wondering, now do you see the trend of customer acquisition cost? And with -- also with the off-line operation restart, do you expect more sales and marketing going forward in next quarter and -- in the third and fourth quarter?
So on the opex, as you can see that for the second quarter, we actually control our customer acquisition costs really well. Part of the reason is that we have the off-line network so that we can generate referrals and help the customer acquisition. In fact, the CAC number this quarter compared with same time of last ye...
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1e6eb21f42b31fff88a9c21b40437388
Can you also add some color on your franchise development plan given this current situation?
As I mentioned, our franchise network actually remains strong and healthy. We even add three more franchisees and also opened 11 new centers in the second quarter. Overall, they also see very strong recovery once they open the off-line centers. New students enrollment almost doubled every month system wide. And at the ...
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51b4cb4896725781a553f88867cb6dc3
Looking at current opportunities that you see in front of you, what are your views? Or what are you seeing out there on the ground on pricing? So that -- let's look at cost of capital versus cap rate. And have you seen any increase or decrease in competition for hospital assets?
Look, Derek, from a pricing standpoint, we're seeing essentially stable prices from what we've been announcing from the past year, which is that we'll continue to probably be in that 7.5% to 8.5% range. Primarily, we're looking at general acute care hospitals, both here in the U.S. and abroad. Our competition abroad ha...
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61b70532f33d78d19d9268937f3a0489
OK. And then secondly, what is the targeted mix between U.S. and International? And I guess where you see the exposure of general acute currently around 81% of pro forma? And then lastly, what is the right operator exposure mix in the U.S.? And that will be it for me. I'll requeue if I have anything else.
Sure. Derek, we have saying since we first went to Europe that we would like to see the range of international investments be in the 30% to 35% range. We're about 25% right now. Obviously, given our acquisition growth, it's not going to stay in one spot very long. But generally speaking in the 70%, 30% range with 70% b...
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6f14bfc35ce2af630db463ff46f56fd2
All right. Thanks. To Ed, you mentioned -- or actually, Steve, you mentioned few hospitals close -- or expected to close. Can you give us what type of assets they are? And where the location is? And why the closure? And maybe how large and what's the coverage of those master leases that they're in?
So these are very small general acute care hospitals, and as I mentioned, we've already reduced their carrying value to no more than what we expect to recover if in fact they're closed and we have to dispose of them in a stress situation. The go-forward rent is not included in our pro forma guidance and because there h...
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854d83d37ed89da8e94d2eba32938dc7
All right. And then on the upside, you made some -- more comments about larger pipeline and maybe some more consolidation in the industry. Can you fill that out with what you're seeing in the market? And where you -- how big you think the pipeline can potentially get?
Look, Chad, I don't think anybody believed me last November when I said we were actively working on $5 billion. So I need to give you the number again because I don't think anybody would believe me. But it's a big number. It's a large number. I do expect a good portion of it to close for the remaining part of the year....
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5a8a675a3e96531bf41c9cd69da84880
Hey, great. Thank you. So you gave the $1.56 to $1.58 normalized guidance. Are there any items that you're aware of now that would cause FFO to be different from normalized FFO? And then how do you expect the AFFO deductions to be trending, I guess, straight line being the biggest one?
You're right. The straight line will continue to be the biggest really, perhaps, only meaningfully sized adjustment to AFFO. And your first part of your question, I'll ask you to repeat. I think if you look at this quarter run rate, you should see it go up somewhat because of the lease of the couple of the large new le...
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B
62eea4980d9bc1669560239fba5a84b0
OK. To kind of piggyback down on the question you answered before, it seems like you've been buying up everything in your pipeline. As far as what might be on deck for the second half of the year, is there any way you could ballpark kind of the size of what we're talking -- potentially talking about? And then maybe the...
Well, Mike, let me remind you on the difference between the cap rates, the spread is actually probably larger in Europe than it is here in the U.S. From a standpoint of the remainder of the year, it's probably pretty close to 50-50 in the U.S. and abroad. And as we get a little bit closer, we certainly will let you kno...
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e74922201bd7b2c5abfe24d27d4df904
OK. And then just lastly for me, maybe a tough one to answer in this forum. But I'm just wondering if there is anything you could share that you gleaned from the Steward financials, which are now public. There were a lot add backs to get to EBITDAR. I was just wondering if you could comment on how you feel, where your ...
Yes. Overall, Steward is performing very well. I think the most exciting thing about the Steward portfolio to me is that the northeastern properties probably performed better than we expected. And when you look overall at their coverage being in the 285 range today, and we expect to see that continue to grow. We think ...
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7a54e875109e19069c657cb3a904acd7
Yes. Thanks. Ed or Steve, can you talk a little bit about the opportunity to partner with not-for-profit systems? I mean are these players more willing their real estate? Or it's just the Saint Luke's a little bit of an anomaly?
No, I don't think it is an anomaly. I think it's clearly an indication that we're in the early stages of more and more not-for-profit operators acknowledging the strong impact that this part of a capital strategy can have going forward for them. In the past, it's been difficult to get not-for-profit systems to even foc...
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e0703f88fb68dd51a03f51b9bf2da94e
OK. And what has changed there? Is that something in the marketplace that's changed? Or is this something that you worked with that executive team to help them see the benefits of selling the real estate?
Well, not-for-profit operators notwithstanding that that they don't have shareholders to report to, they still face the same pressures that any hospital service provider has today, whether not for profit or commercial. And they have to continue to find ways to operate more efficiently and they've been doing that for ma...
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081d83e29f313e4d31112a753c55ac5a
OK. And then I guess last question, I think Ed guess you mentioned that the Steward full financials would be released I guess in tandem with earnings or near earnings. Is that still expected to occur?
We do expect it to occur soon.
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b693f37f483ae584de50ed3f847dea22
Hi. HCA's stock took a hit this week after they said that hospital pricing was weak and admissions were down in some markets in the second quarter. You combine that with the CMS' proposal for price transparency in the upcoming election. How are you thinking about the macro backdrop for hospitals today?
Yes. We're still very positive on it, Karen. If you look at the HCA report they -- overall, they actually had strong admissions across their portfolio. The biggest disappointment for them I think was that they didn't see the increases from their admission in revenue they felt they were going to see. And they had pressu...
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5d645d164f4da830ad6ddf5c245209a2
Do you think that the price transparency discussion is going to have any impact on particular operators positively or negatively?
I do not. I think that there will be discussions with it, and you'll see some confusion around it. But I think overall, it's not going to have a negative effect.
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cbe0dea1faba87f5a07009fddcb0d1c8
OK. And then my last question is -- I think you mentioned in your prepared remarks that Prospect or one of the other new operators to your portfolio has significant outpatient facilities. Do you have any interest in acquiring those?
Not really, unless they are a part of the big overall campus in the acute care, but not the outlying outpatient facilities.
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dd86dd47b5cc6775e9fce3a064a8fb69
Hi. Thanks for taking my question. Just a quick one on the Prospect acquisition. So we saw an article that Moody's downgraded their credit to negative a few months ago. Could you talk about how you under ruled their credit?
Sure. And as you -- if you read the Moody's report you see that it primarily had to do with what they're outstanding debt load was at that time. And 100% of that debt has been paid off with the proceeds from our transaction. So we underwrite -- underwrote literally each individual hospital and are very comfortable with...
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45f5262556e3d18e382404be7af50966
Hi, good morning. Thank you for the very comprehensive comments. I have a few questions if you don't mind. The first one is for Tom or Paul, I got the color on your settlement, very helpful. And just curious, what kind of additional details can you give in terms of the revenue requirement that you agreed to in the base...
Sure, Hasan. As we've not been able to publish that yet because of the disputed issues. But let me give you a little bit of color if I can. Remember that the rate case was filed back in July of 2018 and since then we've received rate increase for the step rates or the escalation rate increase for 2019. That was about $...
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1d6f2680d90a29dfc89455b96eff4ba6
Okay. That's helpful. And the second, for you, Tom. Coming to the WRAM balance, the WRAM receivables. My question is, from an accounting rule perspective, how many months, do you have? Please remind me, do you have to collect these receivables?
So there is an accounting rule which allows for us to treat this as a current -- a current asset and liability as long as it's recoverable within 24 months, from the date that it was incurred. And if you look through our 10-Qs and 10-K, you will find description there where we are deferring a small amount for those bal...
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0becf12da653b2abd348de7882664fee
Yeah. I had noticed it, but just wanted to make sure I understand it. And just for argument sake, let's just say you're not able to collect any of the receivables or a big chunk of the receivables. Again, argument sake within that 24-month period, let's just say out your $60 million or so, you are not able to collect s...
Yeah. So this is -- when we are unable to collect the receivable, we reapply our collection and we reset the period for the collection of that amount. So, it -- there is more certainty of collection once the commission allows you to build the remaining amounts. And typically, the remaining amounts are small or minor. D...
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cc12a59e8d16a85fc586fdc2d48cbca7
Not quite what I'm looking for. Just very simply -- just trying to understand the accounting rules. And I'm happy to follow-up after this call. But my question really is Dave or Tom is -- let's just pick a number, $10 million, $20 million. Whatever the amount is of the $60 million that's currently outstanding or receiv...
Hasan, we understand the question, I think what you're missing is that, when we defer the revenue, we are also deferring a cost associated. So when you see the $30 million and you imagine that we have a scenario where that's not collectible within 24 months, there is a cost component associated with that, that accordin...
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f5aeb05de8f6d4b6cb695e241dfa7b2c
I just wanted to just start with the prepaid card fee line and you know in the past, the way I kind of try to model is looking at your growth in GDV and take some sort of margin off of that gross dollar volume number, but it seems like year-over-year, the margin continues to shrink. So maybe that's not the best way to ...
Yeah, see the last two quarters have been, well the whole last year has been an anomaly, but the last two quarters had very similar characteristics and disproportionate growth due to what's happening with COVID and stimulus. So in the fourth quarter, we had this weird November where spending dropped across the economy....
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70174e556a9214bcf964a5a289de1fe8
Is it still reasonable to look year-over-year and think, OK, GDV grows 20% year-over-year in a given quarter, then that you just -- you would assume the prepaid card fee line grows 10%, that's what you're implying, I guess toward or not even implying -- that's what you're saying.
Remember, it bumps around, what I'm saying is that, we should retain at least that much. So, it could be -- one month it could be 15% and another month it could be 8%, it really depends. I think when we get the full opening of the economy, I mean, New York just announced, they're not going to fully open until July. So ...
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dee564ff5c5f218fdb0cc9dd06c70df0
Just wondering as you had that obviously tremendous balance sheet growth and tremendous loan growth driven by the deposit growth in part, I guess. Just wondering as the leverage ratio has moved lower, your thoughts on continuing to implement the buyback program as you guys set it up, I mean, obviously in the first quar...
Yeah, no, we're going to continue to do that. We should expend another $30 million. If you look at the corporate level, that's where we're paying the buyback from. Remember, we raised $100 million of debt up there. So we don't really have any issues and our balance sheet should normalize as payments. That's why maybe t...
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6ef4c6d850f0d91dbad723a440167613
Paul, I wondered if you could -- I think I'm going to miss some of the numbers in terms of just the -- what flowed through NII this quarter versus last quarter from a PPP standpoint.
So this quarter, we had combined $2.4 million of the old PP and new PP that includes the fees and interest. Last quarter, it would only have been the old PP, so that would be like $1.4 million or so.
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dbf8eb634cf8e97506f7d5e81831309f
Okay, so that's $1 million pickup in terms of fee income through NII. And then you also mentioned the $1.4 million in fees related to the line, which is also related to PPP. So, that I think you noted also would be not -- something that you should consider non-recurring.
Yeah, so, except for the 2021 PPP where we collected the $3.4 million, we took -- most of that -- most of one quarter in this quarter and we'll have the rest of that over the rest of the year.
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2fc69daaa5a1c51ca3085e165871c0c5
Okay and should it be kind of fair in terms of how you amortize it, should be fairly steady through the rest of the year until those fees run off
It depends on the repayment, like it took the government much longer than anticipated and we kind of anticipate that would take long. We didn't think it would take over a year, but it actually took slightly over a year. So, we are being conservative and we're assuming that we won't get repaid fully until year end, but ...
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f3957ff58c072366bdc1c285840b01ba
Right, but you're still assuming. I guess, I'm just -- I should have looked, but I think you assume the fees over a shorter amortization period than the five years of the loan. So you assume it's going to get forgiven earlier than that, then you try and take those fees over that shortened time period.
Yes, it was basically 11 months for the first PPP and is 11 months for this one.
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c36601ce85047b24e466921de7e3d303
Circling back to the buyback, just real quick, are you, if at current levels in this '22 range, I mean would you anticipate that you will continue to buy at that $10 million per quarter rate.
Yeah, so we've raised that -- our internal target, we should have plenty of room to continue our buyback. We took another look at where we think we're going to be over the next couple of years. We still think the stock is accretive to purchase for shareholders and we're going to continue to do that this year. So, we ex...
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28fd9f6f1d3e355ea418ac2ba3f856e4
Looking at the balance sheet, you obviously had $1 billion or so deposits that came on. I believe you're saying these are related to the stimulus checks. Is the expectation that those will be spent relatively quickly, and if not, I mean, we're at close to $8 billion in assets, do you need to start thinking about ways t...
No, not at all. I mean we're doing, we've said before, we're doing this project called credit road map where we're thematically looking at different ways the balance sheet could grow and get a very good idea, but we have plenty of room and plenty of liquidity to make sure -- for the next three years to five years, we h...
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ed16917d53638843d975e31ca296039a
Okay, OK, all right. And so those were already in place.
Yeah, we've been developing tools for the last couple of years. So, we don't anticipate -- I can say definitively, we don't, at this current time, anticipate any issues with balance sheet size for the foreseeable future.
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633ebcfc0e8f4b52e22cd82aea1f2b4a
Okay and then on the income statement, you've got that gain on sale of loans line, it's been couple of million bucks the last two quarters. Is that related to the commercial loans that you've kept on balance sheet and they pay off now then and do you -- can you just accelerate the mark back through that line.
Correct. And so that, so we're going to -- on the real estate side, we like the asset class this new money in. We've talked about the red purple state mostly or if not all, multifamily. So we're going to keep our exposure at the current level, but if we do any additional loans, first of all, we're not going to do secur...
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128cd10d9e9c19dfaff205826b1f3508
Okay, all right, that's helpful and then just from my last question, Damian, during your prepared remarks you made a comment about investing in the franchise for the future and I just would love to know your updated thoughts on whether or not you're looking at new business lines or you're needing to continue to invest ...
The answer to that is yes to everything. So in each product area and that's part of the credit road map, but also we have the implementation of what we call Payments Ecosystem 2.0. We're investing across that every -- almost every part of the business. If you look at what we did over the last three years to five years ...
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20cd18ae51a790ea9623648c06ad9b2f
Tom, just maybe you can give us an update on how successful the strategic initiative spend is going thus far? Obviously, that's been kind of a key focal point for you guys given the mix issues you had. And then we kind of had a sense some of the frequency changes were coming here makes some sense, which -- can you jus...
Great. Yeah. So on the first part, Dan, on the investments, we're well under way with our investments. We're totaling $50 million. Our main focus is kind of in two areas. One, obviously, being in the digital business that we have and the other being in our consumer area. We've been adding a number of people in helping ...
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3256e7199a79d7fa844a1b56447c251c
Tom, either for you or Patrick, just since it's been topical lately. You get DISH back on, I don't know if you've seen kind of the sub file from DISH, but just overall, if you could give us an update on sort of general sub trends and how you're thinking about it over the next, call it, six to 12 months?
Yeah. Thank you, Dan. We, obviously, budget for certain percentage of sub losses year over year. I think during the quarter, they were a little bit higher than expected due to the rash of satellite outages across the United States. So I would say that it was a little messy. We have July numbers, and I think that we're ...
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bf3c29ce742a0a835f6f52e79d1bbe7d
Good morning, Soma. So it looks like you're pretty well on track to hit your target production chemicals to recover margins and as you're saying, you're now the pricings start has taken over the -- on the raw material side. I'd like to talk about what happens to this segment after that, in terms of kind of how the driv...
Yeah, Dave. Thank you. Let me first say that I'm fighting a little bit of a scratchy throat. So I apologize if my answers interwoven with a little bit of scratchy throat here. So going back to the question about, beyond 2022, I think, as you have seen, I think our teams are particularly in Production Chemicals, our te...
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0d603b77100cba1736ac821378388d1e
Yeah. Going back to the moat, that makes sense. On my second -- my follow question, I kind have a two-parter there on the artificial lift side. I was wondering if you could talk about in the US onshore business kind of year-to-date, what you've seen on ESP versus the rod-lift side. And then secondarily, kind of simila...
Yeah, Dave. Absolutely. As you've seen, our artificial lift and PAT, continue to post very strong sequential growth. You saw, we grow 10% sequentially in Q2 and we expect to grow nicely again in Q3 and international has been a really strong growth both in Q2 and we expect another strong growth in Q3. Going back to spe...
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86519d73167e87b88f565bf619f5e002
Hey, good morning, everybody. So I guess first thing on just your guidance, 3Q you kind of gave us obviously revenue and EBITDA, but I wanted to unpack the revenue a little bit. The guidance, it seems tough to kind of get to even the high end of the revenue guidance. So just walk us through each of the three segments a...
Yeah, Chase. I think, you're thinking about that right in the sense that we expect our PCT, PAT and drilling technologies all to have sequential growth in Q3. And that is being offset by the exiting of certain product lines in our RCT business as part of our restructuring. So and then the decline in the cross lab Ecola...
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ebe91787919781e749d48a3bf9f2c399
OK. Right. Perfect. I guess follow-up question is just really on the capital allocation framework and appreciate the slide and the details here. But, you've obviously hit your leverage ratio target and you bought back a small slither of stock in 2Q but can you talk about how you're thinking about, capital allocation a...
Yeah. OK. As said in the prepared marks, we stay committed to that capital allocation framework. As your pointed out, having gotten to our target leverage and we continue to invest in the organic investments like we talked about and we feel good about where our portfolio is. So any type of investments in technology ad...
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f09f6fa431dc03623030aae6a3fbeb1e
Thanks. Good morning, everybody. Two things for me, if you don't mind. What I would start with, I guess, is on the production chemical side. You had a step up in margin in the second quarter and you gave some targets for the end of this year. When you think about the progression and sort of the overall margin target o...
OK. So we are not providing guidance to the 2023 right now. But what I would say is that, given the margin progression we are seeing, and our increasing confidence in the exit rate of 18%, we feel that the 20% is there in the intermediate term, a very achievable number. That's what I would say. I'm not specifically me...
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80cb11d8a97f1626e3e1c3be502a496f
OK, thank you. And then when we think about the PAT business and what you're seeing both in North America internationally on the revenue front, but also, the margin flattish first quarter to second quarter, I think there were some transportation costs around that. Can you just talk about that business a little bit more...
Yeah, Steve, as you rightly pointed out, the Q2 was margin and PT was somewhat flat -- fairly flattish and primarily driven by, as you mentioned, increase in logistics and freight and fuel cost and, in the quarter, we have taken -- we have taken counter measures in terms of price increases and surcharges. So you should...
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56ae3abaf28bc291f811de324a855fa9
Thank you. The revenue growth for PCT for this year upgraded to high teens for mid-teens seems to imply very minimal sequential growth for the remainder of the year. Can you talk to the dynamic there? I think previously you had expected price increases to maybe result in some market share loss and it seems like that ha...
Yeah, Mark, I think if you've rightly pointed out that our teams have done a really nice job executing on this and I can tell you based on the tracking we do I would say that in every geographic market we participate, we have actually gained net market share in our PCT business. So I feel good about however teams are s...
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d265e2a068cce42c10095cb910c578e8
Hey, guys. In terms of the capital return strategy, do you think 60% of free cash flow over the longer term is a good way to think about it? What are the variables that you consider as you think about the right level of return -- overall return yield on equity between dividends and buybacks?
Yeah, Ati, again, as I mentioned before, again, I go back to our capital allocation framework and we stay committed to that. So in the second half, you should, as we mentioned, we did over 60% return in of free cash flow in Q2. We expect in the second half to be higher because of our increased cash flow profile and sub...
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ba9af6afb628bd3e154942d5d2d2228a
Good morning, guys. Thanks for squeezing me in. One thing you guys have historically talked about is a pretty rigorous process on tracking cost of raw materials, and this may be kind of something Mark was trying to get at earlier. Are you guys seeing any signs of cost going lower with raw materials, or is there anythin...
Yeah, Sean, with the rest in our, particularly it has been a pronounced thing in our Production Chemical side or our Chemical Technologies business. So our view right now, what we have built into our second half for forecast is in Q3 we expect another small increase in our raw material inflation, which is mostly just o...
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15515eef974dfafb1d260f67e6c36944
So, you touched on the Heidtman contribution there for the quarter. I think you said that was 50,000 tons that it had contributed. Is that correct?
Yeah that's, and that was for two months.
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e01c1b3166fc92ac9a9b4d7cc9e33dc9
Okay. So if we think about an annualized rate on that, is that something north of 300,000 tons for modeling purposes? Like 340?
It should be close to that. That's not unreasonable. I mean if you think about it, that was 25,000 a month, right, for two months.
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49da411a49df20db2054d96e9e6e7fd4
Okay, thanks for that detail there. And you called out potential inventory are likely inventory holding losses in 3Q as well. Any goalpost for the magnitude there?
Yeah. And we talked about this a bit last quarter, FIFO losses were smaller in Q2 than they were in Q1. We would expect that they would be smaller again in Q3 than they were in Q2 and if prices hold, no guarantees obviously, but if prices hold, we would be through those losses in Q3.
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1f86383e8c9cae90dc015115853a60bb
Okay. Through the losses in 3Q. Thank you for that. If I could one more on, you talked about the transaction costs in cabs and I think that was $1.5 million on a pre-tax basis, $0.02 per share. Is that correct?
The $1.5 million is the combination of the transaction expenses, and also the start-up losses that I would call them.
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70d413c07708947194e27eba76256bbe
Okay. And then you made a very quick comment about steel processing contract pricing, but I didn't quite catch that. Could you review that again and provide a little bit more context?
I think that was Andy's comment, just so far so good in terms of the contract season in Steel Processing.
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Could you say congratulations on the improvement and Merry Christmas to all, to John, if he is not on the call. Could you explain the turnaround in the Metal Framing business, a year ago it was losing a $0.5 million, now, equity income is $13 million over three quarters, that's a big change. And could you explain the r...
The easiest way to try and explain why we will have FIFO losses in the next quarter, John with that uptick in steel prices, which is accurate, is there is a one quarter lag. So, and the big driver of it for us is the quarterly index. So the quarterly index is still trending down. And then when you add the one quarter l...
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063a167ec300127d1020fd66402a5334
I can ask one more question. As we look out three, four years and Steel Dynamics builds a whole new mill, maybe Big River does or doesn't. And then there's three electric furnace mill doubling, Gallant and Big River and Delta and then may be JSW produces more and maybe they don't. But with all this new sheet output, ho...
Well, I don't think necessarily that just because we had capacity means there is more customers buying steel. So I would think about it as, what is the market for those product is going to be. And if the market is growing, then maybe there will be more opportunities. What I would tell you, as it relates to Worthington ...
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f48f80995948f063dcd97a3a90abf5bf
If the new capacity, for example, the one or two mills in the Texas Gulf Coast displays foreign steel, do you have a better opportunity of getting a processing or if it's a domestically produced time as opposed to an imported time?
I'm not sure that matters that much. What I will tell you about if there is less foreign steel in the US, there is less opportunities for some of our competitors who like to do very speculative buys at low prices and oftentimes will use that to try and buy market share, which I think it impairs margins in the marketpla...
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ee6d583f56b22bf94fc7f6fe4d1279c6
I was thinking that the mill sometimes are your customer if they get behind in their pickling department or whatnot.
Yeah. Yeah, I mean that's the interesting thing about our business, right. We have -- the mills are our customers, our competitors and our joint venture partners. It is, you almost have to take them all independently.
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dde6d3b178dcfa08793b3ac703e5ba07
When I looked at the Cylinders business, the sales came in line with expectations, but the margins were a little tighter, was there anything unusual on the SG&A side, because I know you sometimes move assets around at times have inefficiencies and it just look like the SG&A side, there were some pressure that I wasn't ...
Yeah. So margin wise in Cylinders, I think things were generally good, we mentioned a bit earlier, our European business is slow and is a drag on margin certainly. The consumer products business, the oil and gas business are year-over-year better. There are some pockets of strength in industrial and a couple of pockets...
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4bf2407f3c16bf387d2d559a8a867ed5
Okay. Thank you. And then, I think it was below the line. Net income to non-controlling interest $4.8 million, highest I've seen on a quarterly basis for quite sometime, which means something above the line was doing very well, presumably, what was that?
It's a couple of our consolidated joint ventures, specifically one that does tooling in the coated business.
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8b782c5dfccadc03a7d5a8d5b06a76ee
A couple of questions on the MSR investments. I guess, first, as you think about deploying more capital into that asset class and the sort of benefits it has relative to an agency portfolio, I mean, how are you guys thinking about sort of a target for capital allocation? And how much of your capital you could potential...
Good afternoon, Trevor. So today, with $67 million of capital invested there, we have not yet utilized the financing facilities that are available to us. And those financing facilities enable us to borrow not quite, but almost on a one-to-one basis. I don't think we envision that we would lever that significantly. But ...
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ce1c6541ee9f27aa50c287e2efab0ee2
Okay. Got it. And then in terms of the asset yield on MSRs, the number you reported on Slide 10 is pretty attractive relative to a lot of other fixed income assets in the market right now. I was curious is that nine-plus percent yield, is that something that particularly benefited from buying low coupons prior to the b...
Sure. So as you saw last quarter, we had initiated the partnership, during the course of the fourth quarter, I think probably in the latter part of the fourth quarter. And we had layered in, at that time, $10 million or $15 million or something like that of MSRs. We added another significant amount early in the first q...
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2929d2c374d45adf951221b065e65ead
Okay. Got it. And then in terms of your interest rate positioning of the balance sheet in the portfolio, looking at Slide nine, it seems like you have a fairly large amount of long-duration swaps relative to the agency book. And then in addition, you obviously have the MSRs and have continued to add to those. Can you ...
Yes. Great question, Trevor. Great question. Well placed. The -- at that time, we had not yet closed on a block of MSRs that we've been able to put in place in April. And so no surprise to your question, that's provided an opportunity to sort of shift our footprint a bit from a duration perspective. So you see in the c...
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a33ffda6de968275ece2357753982426
Rock, in the second quarter, have you guys increased your capital allocation at all to mortgage credits?
Slightly. I think we have begun to see more interesting opportunities, Chris, in mortgage credit in the second quarter, sort of very late in the first quarter, into the second quarter. So we've added a bit to that portfolio since the end of the quarter, and we are looking more closely at those as net ROEs have edged ba...
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8854d65098bbdce50a1df03cbd428294
And as you look at the second half of the year, where, conceptually, are you thinking you would like the capital allocation division to look like from where it is now?
Well, it's a good question. It will depend on relative risk-adjusted return opportunities. So as we've said now for a couple of quarters, we have been evaluating a number of opportunities across mortgage-related and some nonmortgage-related asset classes. We've made some progress there. I think I may have alluded in th...
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11feb5f40caf8743c4c933f2f4bd8048
My final question is for the mortgages underlying your MSRs, do you seek out a particular profile of the loan or borrower? And if so, what is that, please?
Well, you can see from what I said in the script with a 2.96% WACC, we're trying to be quite focused. We're trying to be quite focused on keeping the lid on the WACC and protecting against prepayment speed escalation as best we can in that process. We're probably sitting here today at a little -- in the neighborhood of...
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610a368ff8d5653eeb7002a5e9d369f0
Hey. Thanks. Rock, you mentioned in your prepared remarks the share repurchase authorization that you guys have. Curious how you're thinking about the trade-off between deploying capital into one of your target assets versus the returns you would get by repurchasing shares? Thanks.
Sure. So naturally, Josh -- good question, naturally, one that we're focused on every single day, as we evaluate alternatives. I think you know what the variables are, I think, pretty well in that, it is the magnitude of return on our opportunities versus the accretion that we can generate from repurchasing the stock, ...
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edb7f0157d954d11a8664d4d4a1cbf43
Rock, I was hoping you could elaborate a little bit more on your comment about non-mortgage, non-real estate opportunities. If it's -- how close we are to that? And sort of what realm of parameters you're looking at there? Thanks.
So a good question, Jason. I think we've alluded to this in the past that within the company, we have a range of intellectual property and expertise based on our collective many decades in financial asset classes, particularly related to housing and other credit but also in other areas. And so we evaluate those opportu...
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ea580fde679405587bf720e6c702c6cd
So I just want to make sure I've got a couple of things straight. It looks like maybe you raised your guide for organic growth, annual organic growth, for 2021 a little bit maybe. It was mid-single-digit to high-single-digit range last quarter. And now, according to the outlook section of your press release, it looks l...
Hey, Tim. This is Vijay. We are -- we continue to assert that we expect the business to grow mid- to high single digits. So we're not kind of changing that narrative. But you are correct, given the strong performance through the first half of this year, we expect to be at the high end of that range this year. But we're...
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84dcf712b8b5cdeaf40a23ba9b2496ea
You expect -- you now expect CTEH revenue to remain elevated in the second half of the year. I was wondering if you could unpack that a little more for us because is this elevated, above normalized level of kind of 20 million a quarter or significantly elevated levels similar to what we've seen through the first two qu...
Yeah. It's -- and so Tim, just stepping back, the $20 million per quarter that you referenced was off of the legacy kind of 60 to 80, and we now think it's more like 75 to 95 per year. So I think 20 to 25 we believe they will be elevated above their run rate through Q3 and Q4. It's a base hard to peg exactly what the n...
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7a607229375d79168e6cbee9753bfe2f
Just, I guess, I'll ask more question on CTEH. Look, clearly, there are some structural changes in the business. You sort of talked about more services, better market share. Could it become a more stable business? How do you think about margin profile change? And more importantly, going into '22, how should we think ab...
Yeah. Yeah. So let me take that piece by piece. So in terms of more services, more market share, I believe that that has structurally shifted the business in a very positive direction, and we've spent some time with the CTEH leadership team to understand the various levers there. And so, let's take incidents like the p...
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7e465c577aecaca38b1a398960b56112
Can you just tell us what's the contribution -- EBITDA contribution of the deals that you've closed so far versus your prior guidance in the second half?
Yeah, they vary -- yeah. So let me touch on the deal specifically, Andrew. So MSE was very typical of that segment on a run-rate basis, kind of high teens EBITDA margin. Vista is within the measurement and analysis segment and labs, right, tend to typically tend to run single digits, but this runs double digits on the ...
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0ad7ffd5f788401ec9743c9865aded37
So a question on the CTEH business is, if we see a little stronger revenue from at least the COVID-related business in the previous quarters, I think a lot of that was testing that went was, in some cases, outsourced to other labs. Should we assume that there will be a similar type of margin profile as that business is...
We're working with the team to kind of mitigate the impacts of the testing services through the CTEH P&L, Jim. And so, we're hoping that that's not a continued trend. We don't believe it will be. But into the foreseeable future, I think that's from a modeling perspective, I think that's a fair assumption for the back h...
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4f9e15f055faedacd58007253c063eec
I know it's early days as far as discussions and speculation about the infrastructure bill and what it could mean for Montrose. I'm curious, first, how you guys are looking at it internally? And the second question I have is, yeah, I don't normally necessarily think of you as doing a lot of outreach, but is this an are...
So we -- the infrastructure build to us represents opportunities, primarily on the advisory and on the testing side, Jim. So what I mean by that is the enactment of initiatives related to upgrading or building bridges or roads or water infrastructure creates inherent assessment and testing needs for our clients. And so...
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772a9f929c3c0af7661fb10818da6117
And last question for me is just on the acquisitions caught my eye, the California Environmental Intelligence. And obviously, given your expertise wildfire mitigation, which unfortunately continues to be in the news. And I guess what I'm wondering is, to what extent are there potential synergies opportunities with your...
Yeah. Yeah. I mean -- well, so I think there's a couple of levers of opportunity, which again, we tend to think of transactions over the long term, Jim. So in the immediate term, it's going to be more about integration of that team and cultural simulation, which we're really excited about. It's a great group of folks, ...
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380f26826b00b89c83272511d549e8e1
Yeah, guys, thanks for taking the question and for all the color. I apologize if you hit on this in the prepared comments. I had another call, so I hopped on late. But seems like a lot of momentum lately in physician partnerships versus healthcare systems. And I know the market in general with risk bearing appears to b...
Yes. Ryan, happy to. I think you're right. Within our provider sales segment, we are selling more frequently to physician groups, in particular independent physician groups over the last couple of years. As based on the last decade of experience, where we've had some experience at both health systems and physician grou...
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B
24b0c186e40214868ae49ecbe8b2cd17
That's very helpful. And then just in regards to the new metric you reported tonight on the New Century technology and services platform, is that 6.2 million exclusively the newer kind of lighter version of the offering that you launched this year? Or does that include lives from the core New Century that are in that a...
That's the newer platform, Ryan. And it's -- look, I'd just say it's a bright spot across the year. We had several bright spots. I think this is one of them. It's a nice way to rollout quickly across the larger plan, and it has a nice margin profile. And then it creates a really nice opportunity for us to come back aro...
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5dd28d80792b6a86aa0aa731d7e54bc0
Yes. I guess it's just -- it's in my math, if it's right, it seems like about $30 million run rate, which seems very impressive for a product you just launched less than 12 months ago. So I don't know if you would agree with that math, but is it around that $30 million run rate?
Ryan, this is John. Your math is about right. And yes, we're very pleased with the rapid rollout of -- and expansion of that product.
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420a0892ffa2875bece3387ef3f8fb03
And then last one for me. How should we consider the pipeline there versus kind of the core New Century? I mean we've talked about this in the past, but I'm curious now that they have this lighter starter version, if more clients are perhaps looking at this is a foot in the water before they go all in. So is it at all ...
Yes. Sure, Ryan. This is Seth, again. I can take that. Yes, we view it as incremental. And if you look at where we've rolled out these lives, a lot of it's with some of our national relationships and the larger payers. And what's nice about it is that you can go across the country, state by state very quickly. You don'...
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28a1939a6453a7993bbaf4ab671248d1
Great. Thanks for taking my question. This is Jack Rogoff on for Bob. And apologies, I also jumped on late. I guess, are Centene and Molina the only customers of yours that are using New Century Light or are there others that are also in this group?
No. We have a couple of others. And within some of our partners, they may have a little bit of both, right, some performance and some light, depending on the regions and the markets.
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730676cd487e70d6955039baf7d10b66
Got it. That makes sense. And then apologies if I missed this, but how do you define the full platform? Is that the full suite of New century? Or is that the full suite of Evolent services in some sense? Just trying to delineate if that's like pure New Century lives or is that more of a broad bucket?
Yes. The full platform life -- Jack, this is John. Think of that as our traditional life metric. So that's inclusive of New Century performance suite lives, as well as the Evolent Care Partners' lives, the lives in the administrative platform and so on.
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