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d22cc65121464b544203dad555660345 | Yes. That makes sense. I would say I think it's probably helped not hurt to shed more light on the granularity of ADTech for the market understanding your business or your evaluation. And when you get to the point of having scale with all these different energy transition opportunities, even if it's initially total addressable market, and then at some point current revenue run rate, I imagine that would be helpful for your story as well. Do you have some aspiration to put more specificity on those numbers for current business and prospective business maybe during 2021? | I think we'll probably be cautious. I like the idea of understanding what the capabilities are. But I think we're going to be conservative as always that we don't want to oversell something that doesn't have the right scale. So I want to make sure that we're misleading anybody by getting excited about the ideas before they have meaningful financial impact. But the point will take. I think we will try to at least give glimpses of where we're going and then with all the cautions of how long it takes to get there. But I appreciate the comment. | intermediate | [
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c1582bc3f9bab457370d0c4c4be0c19f | Thanks. Good morning. And appreciate all the guidance and the time to hear. I wanted to circle back on to Subsea Robotics. It seems like a pretty flat outlook for the floater account baked into what you're contemplating for 2021. We'll see what the back half has in store for potential acceleration there. You talked about already talking about the Gulf of Mexico. I'm just wondering, as we start to get a few more floaters into the water here and the market starts to normalize, whether it matters all that much, if it's an existing customer of yours or if it's a new customer. I'm just wondering if it's existing customers that are adding more rigs as opposed to additional customers coming into the market what the market share implications could be for you on the robotic side. | Great question. Obviously, it's easier if it's an existing customer. It's especially easier for already on the rig. And we've been talking a lot about trying to stay on the best assets, the ones that are most likely to go to work and we've been very effective. So I think that really helps us with the new customers is, they were already here, reduces your mobilization costs and we've got a track record established with that rig, which they can tell you that if they're satisfied with that relationship as well. So just watch kind of the rigs, but that actually plays in our favor because of our position on those high-quality assets. So we fight for all of them, as you might expect. | direct | [
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943238b644aeea81c59c4b4e4be6e491 | That makes sense. And then for my follow-up, I think it would be tough for me to go through the working capital, especially with all the moving pieces in your outlook. So maybe from a free cash conversion perspective from EBITDA perhaps, could you just walk through now that you've reoriented and rejiggered some of your segments. How would you characterize each in terms of high free cash conversion versus low free cash conversion? The reason I'm asking is if we see obviously growth upside and downside in each line that could impact the free cash flow conversion, ultimately, moving forward. Thanks. | Yes. I think the way most people have kind of looked at it in the past Blake is going in and looking at EBITDA and kind of how you convert and then going at $185 million as your midpoint. If you look at our capex guide, $50 million to $70 million, a midpoint of $60 million, which is consistent to what we did this year. Interest expense cash about $40 million of net interest expense, and then cash taxes midpoint of $37.5 million. So if you look at that, you get to a number of about $47.5 million if you just take the midpoint of all of those. And then we said on our last call that we did expect to generate working capital release associated with some project milestones this year as well. And then that gives us the confidence to kind of give better than the 2023 cash flow. And then one thing that's our operating that's coming out. And then we also have the CARES Tax Act that Rod had in his prepared remarks. It's another $27 million, $28 million that we would anticipate on top of that. | intermediate | [
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e2f20d73060e3e1d3a4bc8bdf0a58aa5 | Totally understood. So we have a down for 2021 because you've given such good guidance. I'm just wondering for maybe the out years. I mean, I don't want to lead too much, but if we see ADTech continue to grow in excess of the cyclicality of some of your energy segments, I mean, is this a materially capitalized business for you such that the conversion over time starts to improve? | Yes. If you look at both IMDS and ADTech, those do tend to be more or less very light in capital intensity. So those are ones that â we do like the growth prospects, and the returns are nice. | direct | [
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e2a00948a0e0368152907586bbe02e3e | Can you speak to the revenue mix in engineered polymers this quarter between monomer, raw material pass-through, and derivatives and where that could trend over the course of 2022 as it relates kind of to your margin expectations on that business? | Yeah. Thanks. So in general, our mix for derivatives versus monomers, we expect that to continue to be more toward derivatives. From a volume standpoint, that mix didn't change too much in 2021 as all areas of the engineered polymers business grew quite significantly. But as we described over time, our focus and working closely with our customers is to continue to drive the derivative sales in both polyols and thermoplastics. And as evidence of that, of course, we're very much looking forward to getting the start-up of our new polyol facility in DeRidder here in the middle of this year. | intermediate | [
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459f6396a7bd119634fa2e80f010e90e | Just staying on performance chemicals, could you discuss your CTO costs and importantly your availability heading into 2022 on the portion of your supply that is not covered under long-term agreements? | Yes. So we had anticipated, and we're seeing raw material cost inflation on CTO. In terms of availability, we anticipate being able to get what we planned for. That's what we entered the year believing in our outlook continues to demonstrate that. Put another way, Vincent, I mean, out of, call it, 320,000 tons of stuff that we're using, it's pretty much everything for the year is under contract for about except for about 15,000, right? So we're going into the year, and this sort of always is the case. We go into the year -- we have a great line of sight for 2022. Yeah. And I guess the other thing to add, and as was mentioned in the script, we have anticipated the inflation, we're seeing that inflation. But from a market standpoint, our price increases are -- continue to go very well and we believe in the fine chemicals market we're going to be able to more than offset any inflation in CTO with price increases during 2022. | direct | [
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497118bb7781d6e46b82e47dd489acff | I'm just wondering if there's any progress that you can share on your A&G technology? And have conversations changed at all, particularly on the fleet conversion side as we've seen fuel prices surge recently? | Yes. Vincent, this is Ed. We're actually seeing kind of great opportunities in front of us with the fleets that we're engaged with. We're engaged with over 50 fleets that range from natural gas utilities to municipalities to energy industry companies. But the challenge we're having is the same that we're having across the United States and that the availability of pickup trucks are constrained. Once that -- once we get more vehicles in production, able to build inventories to more trucks, we do expect to expand the not only the number of feet but the volume that each fleet will be using within their industry. | intermediate | [
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] | B |
d00db24e835521bb025355a65a55322f | I was wondering what were the exact expectations for auto unit sales within the ranges of your guidance, the practice I guess, that you're thinking about? | Yes. John, this is Ed. Typically, when we're looking at auto volumes, we primarily focus on our highest value market, and that would be North America. Right now, let's say, ended up in 2021 at 13 million vehicles in North America being produced. IHS' forecast is currently 15.2 million vehicles for 2022 and so we're effectively following IHS numbers as far as what we are plugging into what our economics will be for the full year of 2022. | direct | [
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bedd89ef68b06881f7f56cbbf54d7d0c | I was just wondering if you guys had any commentary just on any exposure to Eastern Europe and the conflicts there either on the supply demand side, just have you thought about that? And what are you doing to mitigate that risk? | Yeah. I mean, look, I'll kind of take that more broadly, right? I mean, look, as you guys know, we're somewhat fortunate that we're a pretty U.S.-centric business. Europe as a percentage of sales is sort of 16%. And in fact, we went through and it looked Eastern Europe were at large. So that includes all of the countries that are contiguous to the former -- or I guess Russia is about 4% of sales, right? So it's not a huge number. It is true that there is some auto production in Poland, right? So but Poland obviously is not -- while it's adjacent to all this, it's not being affected by the activities in the Ukraine. So I mean obviously to the extent this causes disruptions in markets globally, there'll be some impacts to it. But directly speaking, the situation in Ukraine is not going to affect Ingevity. | direct | [
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266baff908482ede53bc7344e5f4d3c0 | Just any update on the Euro 7 mandate and when they might be officially set. | Yeah. This is Ed. I'd like to talk about Brazil first that we've got implementation of new regulations in Brazil. We feel that as it's implemented this year, we'll go from low single-digit millions last year to -- on the high single-digit millions. So we're seeing good regulatory growth in Brazil. Euro regulations are still kind of under review. The first draft has kind of been pushed into June. So we're -- we'll be kind of working around what that means for us toward the middle of the year. And then China and China 7, which is effectively implementing a Tier 3 U.S. style, we still expect implementation to be around 2026 at the earliest. But all three of those, obviously, with Brazil, already implementing, Europe looking at implementing, and China looking at implementing, we're very confident that we're going to see some nice regulatory growth over the next several years. | direct | [
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b2bdd23dcf4a81c958b550dd33c8f84b | I guess for performance materials, did a really nice job in getting pricing. How much of that pricing flows through into 2022? And do you need to seek more pricing if the inflation outlook gets worse from here? | Yes. This is Ed. We've obviously had a very good sizable price implementation, and it kind of doubled over. We had two price increases that compounded in last year. We do have more pricing coming in this year, and we'll continue to add price across our business as necessary. | intermediate | [
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34c7e7c0505c29aeaa168154f5ac8718 | And then in terms of the guidance for 2022, when I think about performance materials, do you get most of the EBITDA growth in the second half of the year, given kind of the commentary that you still have some microchip issues in the first half. | Yeah. Mike, I mean I think of it as being sort of symmetric, right? I mean if Q1 and Q2 were strongest last year; Q3, Q4, weaker, our guidance sort of assumes a reversal of that. So a weaker Q1, Q2, with some improvement in Q3, Q4. And as I said in my prepared comments, I mean, to the extent this happens quicker or with more force, we would see ourselves moving toward the higher end of that guidance. And as we also have mentioned, I mean, look, from our best estimates, we think $60 million or $70 million of revenue was sort of lost this year because of this. So that should give you some sense of sort of the order of magnitude of what the snapback could look like. It's just a question of how that sequences in overtime. | direct | [
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a0bbea41452ad58bc7c58233ab39bbf1 | And then just one follow-up on performance chemicals in terms of pricing as well. Again, another good quarter there in terms of pricing. You fully offset inflation. Does it become incremental to EBITDA as we head into the first half of the year? Or is it more catch up and then maybe a little bit more incremental in the second half of the year? | Yeah. I actually think the pricing overall for the year, the pricing improvement in dollars will more than offset those inflationary costs, energy, raw materials, logistics, etc. As you can see from the trajectory, essentially half of the price increase for the entire year occurred in the fourth quarter. So I think that from a comparative basis, we're going to start to see a significant price increase versus prior year as we start 2022. | intermediate | [
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] | B |
1c2a87f416f0d4c2b9f368c2de312baa | What are you seeing in your energy business? Are you anticipating like improvement in sales this year versus last year? | Absolutely. That would be correct, yes. Absolutely. We had a great Q4. The outlook this year versus last year looks very strong. And it's as much of a matter of supporting our highest margin business and really pushing a price increase across all the pine chemical businesses, which, of course, includes our oilfield business. | direct | [
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c839e93180095b653b20ebaa0cf86c2e | How should we think about margins in your two segments in going from Q4 to Q1 given all these moving parts, inflation, and whatnot? Are you expecting margins to improve as we get into Q1 on a sequential basis? | Yeah. I mean Paretosh, as you know, and we've said this for years, right? I mean you have to be very careful looking at our business quarter by quarter because, a, you've got that sort of asphalt seasonality that goes in. And then b, the businesses, engineered polymers is a good example. It's a, call it, $185 million, $200 million business. If it takes an outage, it can have an impact in any given quarter, right? So you have to be sensitive to that. What I would say is, as we talked about, I think our expectation is that in Q1, the performance chemicals segment will move to more normalized margins from what you saw in Q4. There's a couple of reasons for that. We had some downtime in the U.K. in engineered polymers. Asphalt winds down. It's typically our weakest quarter for margins. So -- but we see Q1 normalize into what I would say is a more normalized run rate margin for that business on more of an annualized basis, recognizing that first quarter is a little weaker than sort of the average for the year, right? Another way of thinking about that is that revenues are going to catch up with some of the prices. The price increases will take hold relative to some of the costs that they've dealt with, right? And I think with regards to PM, it's really not going to be that different from where we sat in Q4 of this year, so. | direct | [
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de721c94998a0b6634ee384f3a47ba39 | With regard to your activated carbon for methane capture applications, can you provide some color as to what you're seeing there, and if you're factoring in any sales to that market in your forecast for this year? | We're not really factoring in direct sales this year, although we may get some. Our green gas initiatives are, frankly ahead of plan, and they continue to have opportunities and you will probably see us continue to invest in that business and others like it. But we take a pretty conservative approach, Paretosh, forecasting to the extent things are accelerated there, that would be upside to the forecast we have. We see it being more of a revenue contributor in 2023 and 2024. | direct | [
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] | A |
0eb9a6ece7236795b90f65ae4f4e4395 | I believe in your prepared remarks you signaled you had some share gains in adhesives. And I was just wondering if you could unpack that a little bit. | Yeah. Sure. I mean, look, adhesives represents a tremendous market opportunity for us, right? When you look across the -- obviously, first off, the adhesive market is quite large when you look at all of the different types of adhesives that are out there. Historically, our focus vis-a-vis our sort of more direct competitor has been away from adhesives and into other applications. But I think we did a great job this year, and my hats off to the industrial specialties team and Rich is here. We did a really terrific job in being able to deliver supply to customers who needed it under -- in a very dynamic and stressed environment. And as a result, we've gained share, we expect to keep that share. And we expect to grow that business. I mean, we have a huge opportunity on a relative basis. Those of you who know us know that our adhesives business is sort of maybe fifth or sixth of the size of one of our competitors. So we have an opportunity there, and we will continue to be aggressive. So I don't know if there's anything else you want to say, Rich. No. But thanks for the question, John. Our adhesives business, as you probably already know, is heavily weighted toward the road striping aspect of the business. But certainly, we've seen expansive growth in the packaging side, particularly into the Asian markets and in Europe in this last year. So we're really excited about that. And as John said, we still see a wealth of opportunity out there for this particular area of business for us. Thank you. | intermediate | [
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] | B |
edb15c74d2d27c90a0f76d5bbafa88aa | Are there new [Inaudible] upgrade programs that started in Q2 that you can -- I know you can't name them, but maybe touch on kind of some of the dynamics around those or new programs that will start in Q3 that you expect to contribute to revenues? Or is it more ongoing demand from programs that have been under way for several quarters? | Well, it's a little of both. We did have programs that began -- one that I can think of, we can't name all of these players, but one in Q4. We had another one in Q1. Some of the growth in Q2 was contributed to by -- just those programs growing in deployment. We also have some new programs that were coming along as well. So it's a layering effect. We did have a few of these programs. But some of them didn't launch in Q2, they launched -- one of which I can think of was in Q4, but it's grown since Q4. So it's a layering impact. Do we see more of these? Yes, there's probably some more that are coming, both the remainder of this year and in the next because there's almost a constant redesign of these programs. And obviously, there's a lot of players who haven't introduced their next generation quite yet but are working on it. So we think this is something that will occur over the course of the next many years. | direct | [
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] | A |
6f643ae83cc72b03049992c50cfbba97 | And then just regarding the Mexico production, can you speak more about where you are in terms of the volumes and efficiencies versus where you ultimately would like to be? I guess I'm just trying to get a sense of how close to optimization you are at this point? | Yes, Jeff, it's Bryan. As far as Mexico is concerned, from a unit perspective, we've transferred by far the majority of the units that we're going to transfer by the end of Q2. We started in Q4. We've moved more units in Q1. And then in Q2, we layered on probably another 50% approximately. So the pace that we're transitioning in Mexico is accelerated versus what we did in China initially. So it's a -- we've put together an aggressive schedule, but we need to. So from an efficiency standpoint, we're not where we need to be. And it's something we're -- we know that, and we're working to improve. The same effect happened actually in China when we sold the southern factory and we moved the production to the remaining two factories. There's a point in time when you start moving over units and then you hit a point where you struggle a bit and then you get better. And we're kind of in that point right now with Mexico where I expect Q3 significant improvement over Q2 and then Q4 as well. | direct | [
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3861398f3e9336b9261803569dad23ba | OK, but yet you're still -- I mean, in Q2 you put up a pretty substantial increase in gross margin. Some of that would be contributing from the Mexico shift. But it sounds like more gains to come. Is that fair way to put it? | Yes, I don't guide to gross margin but I do expect gross margin to improve Q3 versus Q2. | direct | [
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4272354555e30cb2672a62f55ae7d404 | Could you just give us the 10% customers in the quarter on what was Comcast and any others? | We have one 10% customer. It was Comcast, and they're at 16.2%. | direct | [
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9bb7f6c11494df0a0a2f4d3cff142b5c | And then in terms of the upgrade cycle in the cable broadband markets, historically or in the past you've given us some numbers around maybe the number of MSOs that have deployed or the number of subs that are covered under platform -- the number of subs covered by your advanced platforms. Is there any numbers you could update us with in terms of that front and on how far along the upgrade cycle is? | Yes. I can't give you an exact number of how many subs are covered, but that number probably has grown a little bit. When we disclosed that prior, we had said that they were between 150 -- in other words, 150 million-plus subscribers covered by the companies that we're working with us on an advanced platform. That number probably has gone up a little. But obviously, that is a huge number worldwide. Obviously, that number is greater than the entirety of the United States' market. So we're working on deployment with that set of customers. And again, you're beginning to see the effect of it in our numbers. These advanced platforms bring higher value add to the customer. They're two-way, voice driven, as I said in my prepared remarks. And just implementing the ones that we currently have is a major accomplishment for us. That number has probably gone up. We haven't measured in the recently, but it's gone up. It's probably not over 200 million though. | intermediate | [
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] | B |
de15c4c42bce2c3a95812c454f8b4117 | OK. And do you know what -- or can you share with us like what percent of that 150 million is actually in deployment versus may be still in the pipeline? | Well, unfortunately I can't. Most of our customers don't -- if we know they won't let us disclose unless they have. I think Comcast has made public comments on that. They are the furthest along. And I think today they're probably about 60% of their subs. But they started -- they were the first to go through this and that was I think about four years ago now. So we're at the early stages of this with obviously a number of people who are starting it, who started it maybe late last year or last year or are starting at this year. There's a ways to go in their deployment. Obviously they don't get it out to 100%. No one would get it out to 100% of subscribers in three months. It will take years for them to fully deploy. | fully_evasive | [
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032e3cefb3267e3dfdfb27528c9333cc | OK. So, Bryan, some of your commentary around maybe some of the investments you need to make in the back half. So should we take that to mean we should expect OPEX to trend higher sequentially over the next quarter or two ? Or how should we view that versus the run rate you've been at for the first half of the year? | Yes. When I made that comment, I just mean in general. It depends on the projects because we're talking about from a long-term perspective where we may have -- we're going through cost efficiencies here, one of them being moving from California to Arizona and from Hong Kong to Mainland China for a number of employees. So that was a big cost-savings initiative for us. And all I'm saying is that there could be a time where you have projects in place. If someday comes up with [Inaudible] this could help fuel growth. And in any given quarter, we'll make the decision potentially to make that investment. So I don't mind investing in R&D when it yields positive sales growth or ASP expansion. So that's what we mean by that comment. | intermediate | [
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04fe7b7fda4b23e08bd3096c488b6df8 | Paul, there's been a ton of focus domestically on the uptick in churn among the MSO customer base. And you can kind of think of that doing one of two things, it could cause those customers to pull back or it could cause those customers to accelerate their next-gen plans. So my first question is what do you think that uptick in churn does to the customers you're already working with or have in the pipeline? And secondly, what's the pipeline look like, international customers versus domestic? Like, are we looking -- are we obviously earlier in the international launches, and do you have multiple international launches still to come or in the early days? | Yes, we still have a number of them to come because the -- essentially, what's happened, I'll answer the first part of your question first, the churn has always been a common term used for subscription broadcasters since the beginning of cable and particularly over the last couple of decades. The churn increase is probably driven by -- when there are good, viable alternatives from others, it will potentially raise churn. So I think what's happened is companies in home entertainment are viewing that these platforms are not just interesting, they're becoming the price of entry because the -- if consumers have alternatives, obviously -- and they're great, they give you automated setup, will control all of the media you wish to watch, whatever you want to watch through whatever service you wish to watch it, and you can get it through the simple utterance of a command. And then another system has a one-way remote control where you have to use a guide and peruse through 360 channels by hitting page down 35 times. This could lead to greater churn because the systems, these new systems, competitive systems are great. So I think in the prepared remarks, we said that they see this as the future of home entertainment. We're seeing this fairly widely, both here domestically, but also in most of the -- if not all of the high-ARPU markets of the world, Western Europe, major countries within Asia. We're seeing this movement toward these two-way, voice-enabled systems that bring entertainment to people much easier than they've ever gotten it before. And as more of them come out, it becomes the price of entry because your competitor, the person who you may have lost those customers to in churn have those systems. And that might be partially why those customers are leaving you to go to the new one. So I think this is generally what's happened, the companies that are introducing these realize that this is where they need to go. It pleases the customer, it makes them potentially more loyal to you. It's less likely that you're going to find a competitor's product that you truly like because you now truly like the one you have. And I think they recognize that, many are doing it. We've been working on, as you know, we've been working on some of these for a while. Some of them took maybe a little bit longer than we expected. But nonetheless, these companies are committed to this business and want to maintain those customers. So we see this happening over the course of the next number of years. | intermediate | [
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7667e692c1f946fa0a1a44518834c9ff | And you mentioned some new product activity at IBC. Just give us just a little more detail on what's the incremental innovations that you're going to have customers focus on at IBC? | Yes. Well, we're working on platforms for or systems for all different software platforms. We do see some emerging platforms that will probably be more popular among the medium sized to smaller sized operators. As you know, major operators typically will build their own interface, but some of the medium sized to smaller will rather use an open source or third-party interface. So we've built product that will run perfectly, voice-enabled, two-way, IP-connected platforms that will run on those and bring the more common now features, voice. We have another one called adaptive control where it's context sensitive based on what the screens. The button functions can change. So in one function, it's up, down, left, right. In other function, it may be page up, page down. On the cable -- I'm sorry, the buttons can actually relabel themselves based on what's on the screen at the time. So we're bringing new features like that. And of course, all powered by QuickSet and the other innovations that we've brought about. So the products you'll see both at IBC and on the AV control side at IBC and here in the U.S. will be based on these technologies. | direct | [
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] | A |
9a9146ddfc43c791dfc8204d488c178b | Nice recovery in free cash flow. To what extent is that kind of systematic? Now that you moved production to Mexico, is this improved free cash flow something we should expect for the next few quarters versus maybe any one-time factors that happened in Q2 that led us there? | For the rest of the year, Steve, I expect to have positive cash flow from operations. And I wouldn't bank on $24 million each of the quarters. In Q2, accounts payable went up a decent amount. But I do expect the back half of 2019 to have positive cash flow. So I think we're on the right track. | intermediate | [
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361af76c03f3908e0ebff068fe7938e4 | And then just big picture, that shift of U.S. volume to Mexico, kind of what does that save you in dollars of inventory? You, by not having to have it on the water, may be able to turn it faster. | I mean, I think we should be able to get our churns in the 4 to 4.5 range when all is said and done with the move to Mexico. | fully_evasive | [
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a8bb7edfb41afe645be910d2c6cf78af | OK. And other than doing kind of what happened in China, which is -- just need more experience running on all these SKUs to get the gross margins up, is there anything you need to do to the facility or anything else that needs to happen to get to normalized margins out of Mexico? | No, I think it's similar to China where we made the comment. It's time, time and experience. So like I said previously, we went through this similar situation in China, and we had -- there were some bumps in the road and we improved. And right now, we are manufacturing very efficiently in China. So I expect the same in Mexico. It's just going to take a little bit of time. But we have the right equipment. We have it staffed. We're putting the right people in place. But right now, I think the variable right now is going to be time. And I expect us to improve in Q3 and then Q4. | direct | [
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684239b0ab5640cda169b1b9d990971d | If I heard correctly, you're mostly done with the rollout of six VGTs. As you look through your portfolio, does the focus now shift toward replacing some of the underperforming units, both at the existing and the acquired locations? I guess the question is, how do you think about that opportunity? | The -- we look at the opportunity to replace equipment on a constant basis. It's something that we do literally weekly evaluating underperforming equipments in specific locations where maybe in that particular micro market that certain pieces of equipment is desired, and we therefore look at where -- what is the demand in that market from the player and then we often shift equipment in there. So it's a constant process we do. We keep a significant inventory of equipment in our warehouse. So we're not having to wait to replace the equipments or update it. So it's an ongoing process, and it's something that we do as a company to optimize the performance for our establishment partners. | direct | [
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"intermediate",
"fully_evasive"
] | A |
d3975ec61c3ae6a3fbbd9437f1ed9aef | Are there regions or a portion of the portfolio that may be underperforming or under indexing relative to the broader part of the portfolio? | Yes. I mean the State of Illinois is many different -- has many different demographics. And there's obviously stronger income levels and stronger demand in certain markets as opposed to others, and that may be because there's lack of alternative entertainment options. It's been one area versus other. As an example, the Peoria area because there's a casino that's very close to a lot of the establishments performs at a lower level than some of the northern suburbs of Chicago, where there's not quite some of the casino and then there's stronger income levels. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
209aadc15f932a6f7507a1e2829f70cc | You kind of touched on it in your prepared remarks in terms of the new license issuances, which also unsurprisingly dipped last year due to COVID. Do you get the sense that there is maybe a desire to catch up on your organic commission front and the need to generate tax revenues? | To be honest, I don't know exactly their motives, but they have done their best to try to go through and authorize as many applications as possible. Even in today's environment, they're somewhat restricted due to their workloads, and they've got a tremendous amount of workload with the new casinos that they're still trying to authorize or review the application. So our gaming board has done the best they can with the staffing that they currently have. They're not staffed to take on a bunch of new casinos plus a rapidly growing industry at once. They're on a normal staffing level. And the additional casino expansion is definitely putting strains on some of their resources. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
293d14277752589e8f0cab1f343c0aa8 | As we see new state markets legalize video gaming, what kind of gives you new confidence that Accel can get early player operator in those markets? | Greg, as we look at these markets, a lot of them were pretty active in working with the legislators or working with the local business partners in those markets. We historically have been a great business partner to the local operators in markets. And we think that historical success and that reputation of being a good business partner, whether it's to the establishment or to the local operators, will continue to be our kind of secret to success. And as we've gone into some of these markets already, we've been able to establish great partnerships. And I think it will play out with a position of market leadership as the market opens up as we've demonstrated over the last 10 years that Accel can continue to thrive in dynamic markets. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
e339b1d43801e2f06de2dddaf5341e56 | You talked about seeing a good number of M&A opportunities that you mentioned. I wanted to ask, I guess, are those mostly Illinois focused? Or are they new markets focused? And then maybe how have those opportunities changed since the last couple of quarters? Are you seeing more? Or is it maybe a little harder to find opportunities now that we're a little bit more out of the pandemic? How are those trends? | First part of the question is we continue to look at Illinois opportunities, but we -- our focus has really broadened into new and legacy markets. And I think to the second part of your question, those opportunities are as good or better than they were a few quarters ago. The uncertainty during the heat of the pandemic created a pause for many of operators or potential business partners. And as there's greater visibility to their earnings or greater visibility to their potential, both parties are more easily able to come to an agreement on what a partnership would look like. So I think you'll see us continue to pursue opportunities in Illinois and outside in these other states, and I think it will probably be an accelerating rate in the next few years. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
99e33e6b580d6f23812123c2780a86f4 | Margins were pretty impressive for the quarter. Can you talk about what you're doing on the cost side and the level of sustainability for these levels moving forward? | Yes. Thanks, Steve. The -- a lot of the -- was due to the -- obviously, increased revenues. So the incremental revenues come at a much higher margin. On the cost side, we haven't been in a cost-cutting mode. We're more in a growth mode. And we are continuing to invest in systems, people to ensure that we can grow both same-store sales as well as future opportunities. And I think the margins will probably kind of move more toward the high 19, low 20s as we get into a more sustainable revenue performance. So I think you'll see that the investment with order growth will bring those margins kind of down a point or so and -- but it will also ensure that we will have the growth that we've demonstrated in the past and we expect to do in the future. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
d5aed183c4665ac5fd54e9226a666b6f | Now that you've been in Georgia for about a year now, can you talk about what you've learned in the market and how big you view the opportunity to be there? | So Georgia has been an interesting year. We feel very strongly that it's -- that it can be a very successful market on a long-term basis. And we've invested in kind of building our infrastructure, working with the state on a pilot where there's -- where you can use a -- you cash out with a redemption part. And where we've seen that redemption card in the pilot, it's made significant improvement in performance or a play at those establishments. So we're very excited and hopeful of the expansion of the redemption card. And I think on a long-term basis, the market can be meaningful in the overall Accel portfolio. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
c3d9e4e7077c6cd18f10a09606d41010 | With respect to your guidance, I guess, you have July in the books here. I was wondering if you could kind of give the puts and takes on what it might take to hit the bottom or the top half of your guidance range for revenue for the year? | Well, basically, where our current run rates on revenue, we think will be on the higher side. So it's timing relative to the lower side, it all depends on how we're investing, as Andy mentioned, whether it's internally for building out the Illinois infrastructure and/or for the national platform. So based on current run rates, though, I think we mentioned in the -- a few minutes ago that we thought we were taking a higher -- or I'm sorry, a little conservative approach with those guidance and that there is upside. But it's -- I just want to take it month-by-month and see how it goes with everything. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
f03806e17306766ffa722e36b39b610d | You've mentioned it in your prepared remarks, the backlog is pretty strong right now. I was wondering if you could just give us color on kind of where it sits now versus maybe at the end of 1Q or even faster levels like in 2019 or so? | Yes. I would say that we're actually gaining momentum with our backlog. And part of that is due to the fact that we're seeing businesses start to reopen for new ownership in businesses that have closed as we've kind of -- people have kind of moved past the kind of concerns around long-term effects of the pandemic. So I think we have a good 12 months of building the backlog ahead of us. I think where you'll see strength in the increase of the locations that we have under contract. And in the past -- and I think we'll reach levels probably closer to '19. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
537699ddb816c498979c6799c76f428d | Just questions on Leaf River here, you mentioned accretive, is there anyway that you can give kind of a range that's embedded in your guidance for that? | Yeah, Travis this is Pat Migliaccio, we've indicated it's nominally accretive in fiscal year 2020 after taking into consideration the dilutive impacts of our equity issuance. I think, if you think about this from a long-term perspective the guidance we provided is I think about this. In terms of a double-digit ROE, but on the lower side. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
722fdefb538ada0c47acb8d27bab2a4c | Okay. Okay, and then when we think about strategically, was this just an opportunity that you saw come up at a good price, and good growth potential good return or is this something that you see is more strategic for the non-regulated segment, perhaps expanding more projects down there in the Gulf Coast or other LNG type related infrastructure? | Hey, Travis. This is Steve. I think we've shared with you before that we've been in this market for quite some time looking at midstream assets, especially in certain areas that provide for growth and where we think there is some significant future opportunity. Leaf River fit that on all counts, so we're able to make the investment, able to meet it at a price that we thought we think is good for us and our shareholders and we're going to continue to pursue these types of assets in the market, it's just a matter of -- it's hard to predict on when we'll be able to achieve the next acquisition or when the next one will come in, but certainly we're going to pursue this in the future. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
a458d6606a8a250e702be9f04178aa0e | Sure. Okay. And then just one real other quick one here, the contracts you mentioned that 80% contract that -- what's within those contracts just in terms of variability? Is their price exposure or volume exposure? And what's kind of the sensitivity around those contracts? And then also on the uncontracted part? | Travis, they are traditional contracts where majority of the dollars coming in are fixed demand charges. And then the portion that isn't contracted are taken to the shorter term market. So I would imagine one year, maybe less type time-frame, park and loan type transactions. I think it's a typical mix for storage facility, but really the attractive part of this are a majority of the revenues are fixed demand charges coming from customers in a longer contracted period. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
a9569dbea73b2e3e47e7848c5bc183b8 | So just one question. The incremental equity that you guys announced for 2020, I think some of it was shifted from '21. Have you provided any kind of -- is there any sort of question if we get PennEast gets further delayed? So as we sort of think about your projected balance sheet metrics like FFO-to-debt, has the incremental equity raised, provided some sort of a cushion? Should we get any sort of potential cash flow implications from further delays? So I guess where do we stand around your balance sheet capacity? | Sure. This is Pat Migliaccio. So I think it's fair to say that the equity issuance contemplates PennEast in it and should that result in a delay that would provide us a little bit of cushion in the future. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
cb699ae9af08e94d3636a475933feb1b | Okay. I just want to confirm, is the equity was not solely attributed to the Leaf acquisition? A part of it is building a cushion, if there was a PennEast delay? | Yeah, so if you think about this from the purchase price, Leaf River purchase price was $367 million. If you looked at roughly at 50-50 debt equity mix, break that down, was $140 million and so the balance would be, what I will call, regular way equity needs that would satisfy capital expenditures for PennEast and/or Adelphia Gateway and other items that we have in our capital plan. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
7245d7c131ac0d2637cf5de3d6714cae | Can I just ask. Pat, what's the level of cushion, right? So if can you just give me a little bit of a sensitivity toward sort of what your balance sheet capacity is, especially when you look at your credit metrics, FFO-to-debt, assuming that, let's say, the PennEast project gets a further delay? So like I guess what have you accounted for as far as the delay in the project? | Shahriar, as you can appreciate, there are a number of variables that go into that, not the least of which is energy services performance of any year, because that's going to impact our equity side. So I don't know that I can provide you any more specific guidance than we already have today. | fully_evasive | [
"direct",
"intermediate",
"fully_evasive"
] | C |
611cb954e19b0dbc77cabe55b26de4b8 | I was hoping you could dig in a little bit more within pharma. The two campaigns or programs that you added intra-quarter, when might those start? And then as well, you went over some of the new opportunities within Patient Affordability fairly quickly. And if you could go over those a little bit in more detail, and if you have had some early success today in those areas, could you let us know? | Yes. So I'll touch on the two pharma programs that Mark referenced and that we referenced on the last call that were added in the first quarter. If you recall, Pete, we talked about ending the year with eight, but adding back two, getting back to 10. And so those two programs that we referenced, one of them is live, but the other one has not gone live. They both started up and have generated a little bit of start-up fees, kind of professional fees to make those programs active, but one of them's loading a little bit. The other one has is giving themselves a little bit more time before they begin loading. So that's the status of those two programs.
With respect to Patient Affordability, our CEO is better suited to answer that.
Yes. With in respect to Patient Affordability, we're talking along the lines of pharmacy, co-pay cards and vouchers. I mean, most of what we're providing is in support of our hub service providers and other folks that are providing co-pay sales and other co-pay sales organizations. So basically, we're providing tools for them to meet brand needs and the goals of the brands, such as pharmacy co-pay cards and vouchers; virtual debit cards; physical debit cards; medical claims, such as processing of payments of paper and electronic medical claims and patient affordability programs; centralized billing solutions used to deliver solutions to limited network medical practices and to address patient-specific needs, such as travel and/or per diems; and also patient prescriber portals designed to deliver affordability products direct to a prescriber or patient. These portals can show various levels of detail to enhance the patient or prescriber's awareness.
So those are some of it's obviously a large topic of conversation to cover, but those are some of the just some of the solutions that we're offering. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
e2f3274f78928330b22d0eddc1695845 | Got it. That's helpful. And then whether this is related or not, I thought I'd also heard you said you had started offering digital banking services enabled by the PaySign Premier Card, did you say for corporate accounts. So that would be like for travel or per Diem. Is that correct? | Yes. Digital banking services around very similar to the PaySign Premier card that we're offering. It would be it's being offered to other businesses. And that could be I mean you could think of that in the way of insurance companies or other companies that might have a need for those types of services for distribution of funds. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
8845189e6db0553bf71403328e6dde53 | Got it. And so generally, onetime use cards? Or was those reloadable? | Those would be reloadable in most situations or onetime. I mean it depends on the opportunity. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
5492c376d6b1ad73f362484066030391 | Can you talk about the gross margin in your in just the plasma segment and how it compares to the last quarter when you noted you had some less favorable transactions that led to a bit of contraction there? | Yes. Give me a moment to take a look at that, Austin. So we did see an improvement in both revenue conversion rate and gross margin for plasma in quarter one relative to quarter four. So we are seeing some normalcy there. We see a what's interesting is, typically, we see a slightly lower revenue conversion rate in the first quarter as customers receive other tax benefits and other monies that they don't have as much of a need in February, March time frame to convert the revenue that they donate. So you see a little bit lower spend and revenue conversion rate in the first quarter.
However, that said, and I think partly addressing some of the, I would say, lackluster performance in the fourth quarter on the revenue conversion rate for plasma, we actually saw an increase in the first quarter compared to the fourth quarter. And our margin improved several hundred basis points on the plasma business relative to the fourth quarter. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
2701355fd5673d9e31c9121d29d0443d | Got it. And I think I heard a comment on blood working with blood centers. Can you sort of clarify what you meant when you mentioned that, and if it means you're partnering with other kinds of donation centers? | Yes. In relation to blood collection and blood product collection centers, those are just some new product lines that have come into our pipeline and something we're pursuing. So those are opportunities that are available to the company. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
485077221011cf8945d4fa4e28a311f1 | Got you. And one last question, if I can. Can you you mentioned that, I think, the pipeline is robust for plasma and pharma. Is there any more color you can give to form a contract as you did last quarter, kind of maybe anticipated signings or closing? | Yes. Probably not. I mean what we can say, and we don't like to talk about things until they occur. We indicated to you, when we did our call last, even though we hadn't closed the first quarter, since we had that slight delay in the year-end call, we mentioned to you in the first quarter that we signed new pharma two new pharma clients. If we had something signed in the month of April or the beginning of May, we'd certainly want to go ahead and tell you about that. We have several opportunities that we're well into, but it would be premature to say more than that. | intermediate | [
"direct",
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"fully_evasive"
] | B |
31eb14bb0150a4fe678c00492c254ba0 | Okay. Could I get a little color on the what you expect for your SG&A levels to kind of grow this year on a year-over-year basis? | Understood. Understood. Yes, I haven't rolled up into a consolidated line. So let me just back let me take a look specifically at SG&A. I have to make sure I give you halfway decent direction on that. Nothing mysterious about that. And actually, I was going to say 42.5%. It looks like it's about 42.6% at the moment is what we've got modeled. There's some play in that as we look at different opportunities, and we're making sure we make the investments for the future of the company.
And as Mark just talked about, the Patient Affordability business, that's a tremendous opportunity, a very significant total addressable market. And we're making investments in people, in infrastructure, in technology capabilities. And so that's something we don't want to be light on to achieve a short-term objective. We want to make the right investments and build it right from the get-go. And so that's what you're seeing in that first quarter. But we should see about kind of in that 40% to 45% range is what we're projecting for this year. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
947147a630982e44eaaa790c4586426e | Okay. And then can I ask a little bit about the competitive environment for the plasma? Your main competitor is having some, I don't know, maybe financial difficulties, it looks like. Is anything changing there? Do you see plasma centers unhappy? Or I mean I know you've gathered quite a few last year. Can you talk about that at all? | I mean I understand what you're saying about our competitor that is having the problems. And I can't really speak too much to that at this point in time. I mean we're going to do what we always do, which is continue to go out and try to take market share. In relation to pre-empting that with anything further, I think we're going to take a pass at this point. | fully_evasive | [
"direct",
"intermediate",
"fully_evasive"
] | C |
10eed8e17da1a277bd8b63a289a7ee64 | Okay. So you can't comment if it's getting easier or harder to take market share? | I mean, right now, I don't think it's currently making too much of a difference. I'm sure that it's not wearing well on our competitors, but, yes, I don't have too much else to say about it. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
e3ccd83c33bf936a0b6f403a876de4ec | At the very end of your comments about growth for the year, did you say that you expect similar revenue growth year-over-year as in 2019? Is that what I heard you say or not? | No, similar gross margins. We expect to see continued growth and as a separate statement, similar gross margins to 2019. Revenue growth, I think we haven't changed anything. If you go back and look at the prior call, we gave a range on guidance for revenue growth. That was about all we said. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
d06ea93e48e88058e9fd665cd4a4ffc5 | Just a couple of quick follow-ups. Could you give us a projection, maybe a range of what we might see in terms of net new plasma centers this year. You have some in the contract. If you can talk about it, and, if so, kind of the timing that they might come on through the year. | Yes. Don't have a projection. As you know, we added, 32 to 40 centers, something like that last year. This year, at the moment, I think we're sitting with 287 centers, 10 pharma programs and four other programs. So that's where we sit right now, at 301 combined programs. Difficult to project. We would be guessing. There's obviously conversations occurring for new business. In some cases, those can be a handful of centers. In other case, that can be a large number of centers. And therefore, picking exactly which item in the pipeline is going to be secured is a bit tenuous. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
f7aa09fcde1da68c0492e79d4bc8b1a2 | Got it. And just in terms of the decline then in terms of when you were talking about plasma in April, I believe that was a revenue figure was down about 15%. And so would that be almost exclusively units, number of units were down the same amount as revenue? Or were there other changes in terms of revenue conversion or anything else you should think about? | Yes. I didn't go back and look specifically at the conversion rates for the month of April last year. We did look at revenue. We did look at the current conversion rate for April of this year. We did look at the quarter and the fourth quarter and the quarter last year, but not specifically at April's conversion rate last year. So I can't comment on that. I would tend to think it's probably dollars loaded, i.e., donations being down, and similar conversion rates, and therefore just that trickling through to overall revenue being down. But yes, go ahead. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
84a27dfe4456763260e695a8fd90dc9d | So that's good. And so, Mark Newcomer, you're the only one on the call, I think, who has a reference for the financial crisis. But historically, when you've seen spikes in unemployment and a slowing economy, has that generally resulted in core volumes coming through the system? And if so, does that have any effect on the compensation that plasma centers are giving? Or does that stay constant volume for those? | I mean there are several factors that change the compensation that they're giving. I mean whether or not it's specialized plasma and things like that, it's quite possible that it could raise some of the prices that they're offering as they try to collect more plasma, and they try to I mean it's a very competitive market out there to collect the plasma. So but I can't speak too much to what they will do. Typically, in these downturn markets, however, that from what we've seen, we've done fairly well. And we haven't seen much of an effect. If anything, it seemed to be an upturn, not a downturn.
Yes. I mean, obviously, COVID-19 is a completely different animal.
Well, I think we're still trying to understand and get our hands around the COVID-19. and until that starts to stabilize a little bit, it's hard to say. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
bdaa9d319dea7d3b98ee8ace2082ac70 | Can management share with us the COVID impact on supply chain and consumer demand across business lines, especially in Shanghai where the headquarter is located? And what are the key assumptions behind our second quarter guidance? So looking forward, what are our expectations on the second half of 2022? | During the quarter, the impacts of the pandemic were limited to several provincial capital cities, including Sichuan, Tianjin, Changchun and tier one cities such as Shanghai and Shenzhen, with a stronger impact on offline recycling business. We consider this quarter's results as only a cross-sectional view of the pandemic's overall influence on our business.
From the perspective of our C2B recycling business, starting in mid-March, regional lockdowns posed short-term challenges for our business in Shanghai. To comply with the zero COVID policy, our Shanghai-based employees started to work from home and all offline stores in Shanghai were temporarily closed. Although our 1,400 AHS stores are located throughout the country, the most productive ones are in the 600 self-operated stores, mainly located in the first- and second-tier cities, where users have stronger recycling awareness and the unit price is high, but they are negatively affected by the lockdown. We have 102 stores in Shanghai, 89 in Beijing and 56 in Shenzhen, respectively.
At present, Shenzhen has returned to normal, but the control measures in Beijing and Shanghai are still continuing. That is to say, in the second quarter, we estimate that the operation of one-third of self-operated stores has been affected to varying degrees.
For our B2B platform business, strict pandemic control policies disrupted our interactions with merchants. Although our operating centers and city-level operation stations are geographically dispersed and can support one another during lockdowns, which reduced some pressure on fulfillment, we still face significant difficulties in terms of operations and expanding local merchant coverage. In addition, soft consumer demand for new phones also affected the volume of supply of preowned devices for supply merchants, especially for the number of cellphones ordered shipped out during the first quarter.
For the B2C retail business, although we faced headwinds, including the decline in consumer spending and recent logistics interruptions, we are optimistic about consumers' need for good value products, a particular virtue in shoppers' eyes during a recession. We also feel confident that in the mid to long term, compliant refurbishment at scale can increase the proportion of goods recycled from our service offerings that are still to go for D2C retail. This helps to include more dots to the industrial chain and realize the optimization of product quality, as well as profit from value-added services.
We have also seen hopeful signs of a recovery. According to the Shanghai officials, starting June 1, pandemic controls will be downgraded to a regular level and a gradual recovery of work and life is expected. Although we are still facing challenges in the near term, we are very confident in our business model, the resilience and flexibility of our supply chain, and additional margin improvement from compliant refurbishment. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
b3605eef8e3c699a765582d62963c0a9 | I would like to ask how is the progress in the first quarter of our city-level service integration, as it was the strategic focus of the company mentioned for this year, but we are facing a new macro situation, which you see in challenging economy and also the risk of pandemic new wave. So we would like to know like if the management are going to like have any change or like an adjustment in terms of those service integration strategies or the launch of like new software nationwide. | Thank you. We will be even more meticulous when assessing market conditions. Considering lockdown restrictions are still in place in some parts of China, the impacts created by the pandemic are ongoing. Therefore, we will increase our focus on cost management, efficiency improvement and healthy cash flow this year.
And our goal to achieve a positive non-GAAP operating income for this year remains unchanged.
In terms of store network expansion, we are targeting the same number, opening 200 to 300 new stores for this year, with a more disciplined approach, while prioritizing the opening of jointly operated stores. This enables us to expand our branded recycling network nationwide, sharing profits while handling risks together with local partners.
On the third-party merchants and retail end, we continue to acquire new local customers through city-level service integration, enhancing the penetration rate of the secondhand market through the rollout of intracity business. Among the 16 cities where growth exceeded the nationwide average, we achieved high double-digit year-over-year growth of our C2B plus B2B business in Suzhou, Hefei, Kunming, and Shaodong. Growth momentum was especially strong in Shaodong, where we achieved about 120% year-over-year growth in January for C2B business, and almost 200% year-over-year growth in January for B2B business. These are our benchmarks for implementing the city-level service integration model in terms of sourcing supply and penetrating local markets.
The pandemic remains a challenge for us. In April, the recurrence led to stricter controls in many regions across China. We faced interruptions in both connecting with merchants and providing platform services on the retail front. Growth temporarily slowed down in those pilot cities, but we saw GMV and other volumes in those cities demonstrated higher resilience compared with the national average.
We pay more attention to our own operating efficiency. For sales and marketing expenses, we will further optimize our cost. Instead of spending on short-term promotions, we will pivot to the longer term by further investing in building the brand equity of AHS Recycle and acquiring greater consumer mind share by providing timely and quality services to our customers. In addition, we work well in controlling our back office fees, in particular, general and administration expenses.
We have kept these at a low level for four consecutive quarters by implementing our compact, but organized structurefor our mid and back offices.
Macro headwinds and consumption slowdown are challenging issues to almost every industry. In the long run, what we see is a huge and underserved secondhand electronic transaction and service market. As we mentioned earlier, we believe in our core strategies of expanding the city-level service integration model to increase the penetration rate, using a tiered store strategy to offer differentiated services, continuing to improve cost efficiency by investing in automated quality inspection technology and seizing the chance to profit from the open policy window in the electronics refurbishment market. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
1577fc2d1d29fba38616e73dff76c76a | In the PR sharing, the management mentioned the new recycling policy of the industry. Are there any specific business plans to share with us? | OK. Thank you, Jin. So I will take this question. In Apple, since they issued the first guidelines for electronic product refurbishment, which for the first time clarified the boundary of engaging in compliance refurbishments, including the source of goods must be legal, the purpose of repairs to the stores, the function and tariffs, official accessories, also third-party accessories with quality assurance can be used such as batteries and screens of third-party brands.
Personal battery must be strictly clear. When recycling, products should be clearly marked as preowned or refurbished to avoid confusion. Quality warranty should be included. Traditionally, the repair and refurbishment industry had many holdbacks.
The refurbishment was mishandled by merchants as there were no relevant regulations. Merchants were worried about potential risks and they operate on a small scale. Meanwhile, mobile phone brand manufacturers control the supply of repairing components. Since they do not recognize the use of third-party components, the supply of high-quality goods suitable for 2C sales in the market is insufficient.
As a leading platform, ATRenew has always carried out operations cautiously to avoid selling risky products. And since it had little participation in refurbishment, it has always lacked that segment of the industry chain profit. We believe the guidelines for refurbishment can benefit the industry and the company. More merchants can conduct repair and refurbishment with confidence, which will help expand the scale of recycling and sales.
We also aim to save such opportunity and hail our plan. We're here to combine repair and refurbishment on a large scale and increase profits reasonably. Previously, our self-recycling products and third-party supplies were not repaired or refurbished. Hence, we only earned gross profit in service fees from testing and reselling.
Our value chain lacked maintenance and better analytics. Recently, we conducted our pilot project, which verified that by changing the screen and the battery, the gross profit per unit can be increased by 15%. Excluding the cost of the component, on average, a phone which has B2B selling price of RMB 1,600, after compliant refurbishment, can be sold on the B2C platform at around RMB 2,100. After deducting the component cost, the gross profit per unit increased by RMB 300, about 15%.
After deducting the labor cost and the platform fees, the net profit margin per unit is about 6%. By further carrying out compliant refurbishment in operation centers, we are confident to obtain high gross profit and service fees brought by such added value to the industry. With standardized refurbishment, we aim to increase the proportion of our recycled products that are suitable for D2C retail. Doing so can help us to achieve our closed group circular economy model and maximize the value of reused products.
In the past, any product sourced from users had various defects and cracks, but 100% of them were suitable for D2C retail if no repairs were done. We believe that in the future, combined with refurbishments and scale, we can further increase the proportion of sourcing products that are suitable for D2C retail so as to improve the gross profit on product sales. We have just begun to engage in refurbishment and there is a lot of room for growth. We shall gradually explore such as selecting some types of products to sell overseas after compliant refurbishment. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
f9532cfb11277b228ab9bbd08746eb7e | We saw some [Audio gap] longer term? And if so, how are you planning to reduce the impact? | I'll take this question. In the first quarter, especially since March, we see that OEMs are facing greater downward pressure on new phone shipments, and the replacement cycle is also expanding from about a year to more than 20 months now. But we do have several advantages against downside risk.
The total addressable market of the secondhand consumer electronics is huge, and now we only have obtained some of it. Thus, we are poised to further expand our penetration rate. Besides, we believe that consumers demand for instant cash back increases as economic growth becomes flattish, and there are opportunities for converting more recycling orders.
Secondly, the key brand we serve is still growing. The main model we recycle is Apple, which accounted for 45% of the total C2B plus B2B recycling transaction volume in 2021. Compared with other brands, Apple has maintained a higher growth rate of new device shipments. So our recycling fundamental is relatively stable.
This year, the pressure on new phone shipment is mainly from domestic brands. In this case, we work closely with JD.com to provide brands with trading solutions as a better promotion measure.
Thirdly, we are also trying to deploy multi-category recycling beyond mobile phones, such as luxury goods, camera equipment and other high-value products to meet customers' varied demand for recycling. We believe that to carry out multi-category recycling, the most important things are brand trust, delivery scenarios, and quality inspection capabilities. AHS Recycle has a long-term accumulation of brand recognition, and we believe that multi-category is an extension of our recycling brand and services. Also, our national stores have set a good basis for fulfillment, and we do not have to budget for extra investment to handle the non-3C categories.
In terms of quality inspection, we aim to achieve it through self-build or collaboration with specialty retailers. As such, we trust online quotation platform line fulfillment makes the best combination of recycling services. Although new phone shipment flattened, we remain prudently optimistic about our business outlook. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
a4aacbfa08a92e4d876ccf9aba9df2be | I guess on the PROPEL study, that seems as if that was delayed, just wondering if you could kind of talk through that, whether that's kind of good news delayed or just an abundance of caution? | Yes, sure thing. Peter, thanks for the question. So one of the good things that happened in that study is as COVID kind of ebbed in Europe, we saw a very fast rate of enrollment from European sites. And what that did is over the last two months of 2020, we saw very, very rapid patient accrual. And we enrolled approximately 60 patients into that trial. And so the situation then is now the patient population is in the study, but they've only enrolled within the last couple of months. And so our intention is to provide the most robust, rich data set that we can. And so given the number of patients that are enrolled, right, it's very important that patients are in the study for a long enough period of time to allow for the duration, of follow-up and the treatment duration to extend. And then for us, when we report data, we want to report a minimum of two scans for all of the patients that we've enrolled into the study.
So the reason why we targeted the second half of the year was really to provide the most comprehensive and complete and mature data set that we can. And in terms of the kind of information that we'll be targeting to provide later this year, so as you know, the study has patients split across the different PD-L1 expression subgroups: the less than 1%, the 1% to 49% and the greater than or equal to 50%. And so we'd be looking to report the response rates as well as the proportion of patients with a deep response, including CRs, the duration of response, any available accumulation of data, not just the ORR, but any longer-term follow-up data that's available as well, as well as the safety profile and additional translational biomarkers. And we're looking forward to presenting that later this year. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
d075fc079ea2f2408a78c9e095d6fcf6 | Congrats on the collaboration with Merck for the combination study in squamous cell carcinoma of the head and neck. I was wondering if you could comment on the role of HPV in that disease setting and whether you expect to see different levels of response to BEMPEG in patients who are HPV-positive versus negative? And also maybe if you could talk about how BEMPEG may differentiate from IL-15 in that setting? | Sure. Yes, thanks for the question. Very insightful question. So one of the interesting things about this tumor type is, as you've looked at the presentation of the disease with time, it's kind of changed, right? And so there was a time when the majority of patients were smokers and you saw this associated with lifestyle, but probably within the last one or two decades, you're seeing a much greater increase of patients with HPV involvement, many of them younger and not maybe necessarily smokers, but they present with the disease anyway. So HPV status, right, is an important [Indecipherable] driver. And it's an important component of the patient population in the study. So those patients are definitely included and in terms of their presentation of disease, there are some differences. You're really, really smart to cue in on those. So we know that this is already an immune sensitive tumor type. And we know that there are pretty high mutational burden in these patients. And what you find in HPV patients is they have additional viral antigens, right? And so you actually have the potential of an even greater kind of T cell response for patients that have HPV-positive tumors. And that certainly was in our thought process with the BEMPEG mechanism of action, with the kind of T cell priming that it induces, knowing that HPV-positive patients will have even more tumor-associated antigens that you can prime T cells against. So that's definitely something we're thinking a lot about. And then we're focusing on BEMPEG in this tumor indication. That's -- it's a combination with a checkpoint inhibitor, right, with PD-1 and PEMBRO.
We really think that's much more of BEMPEG guided mechanism than per se for 255. But with 225, right, we're considering other indications, even though we're also using head and neck. In the study where we're combining with cetuximab, there we're targeting the second line or later and we're targeting the refractory population. And the mechanism of 255 in that setting is really to potentiate the ADCC component of tumor targeting associated with cetuximab. So they're kind of two different mechanisms, intended to have two different kinds of combinations because of the different combination partners. And then also, of course, the different line of therapy? Thank you for the question. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
ea91a7f21782b8b547b8456246d1f9c0 | Did Merck see any of the PROPEL lung data that you're generating with PEMBRO in the context of the talks on the head and neck study? And can you remind us of the PEMBRO monotherapy benchmarks for each of the PD-L1 expression levels in PROPEL? | Jessica, look, Merck certainly spent a lot of time vetting BEMPEG before they entered into the significant collaboration. I mean, remember, they're going to be providing drug for a 500-patient study, and while you can't be precise on the number of vials or the exact amount, that's somewhere between -- somewhere between, if you ballpark it, $50 million to $70 million worth of drug. So they clearly have vetted BEMPEG very well and I think they strongly believe in the mechanism. I can't tell you that they've looked at the lung data. We haven't disclosed that yet. So I think you'll have to just assume that they've looked at everything they can look at.
Yes. So they're taken from various KEYNOTE studies, Jess. So in the early KEYNOTE-1 study, there was a little bit of data for single-agent PEMBRO in the PDL less than 1%. And there, they saw about a 7% to 8% response rate for single-agent PEMBRO in this setting. And of course, PEMBRO is combined with chemo in that setting, right? So that's what they studied. But for single-agent PEMBRO, there was 7% to 8%. For the 1% to 49%, there's data from KEYNOTE-042 that showed about a 17% response rate for single-agent PEMBRO. And then for the greater than or equal to 50% subgroups, there's both data from KEYNOTE-024 and data from KEYNOTE-042 and they're in the 40% to 45% range for ORR. So those are the kinds of bars or metrics, benchmarks, that we're using to compare the PROPEL data against the single-agent PEMBRO data in each of the different PD-L1 subgroups. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
1c120b7c3b1ed70873d4bf8cf650033a | I wanted to maybe turn back to your collaboration with Merck in head and neck. And specifically, with regard to your identification of front-line patients, I think the market data currently shows that PD-1 therapy is in excess of 50% already in the front-line setting. So I was wondering if you could maybe first comment on how you think about the recruitment time line for your Phase II and Phase III? And then versus the monotherapy arm that you will include in the trial, how you think about what sort of margin you would look for in your interim futility analysis? | Sure. Yes. So thanks, Paul. So roughly 80% to 85% of patients with head and neck cancer actually have PD-L1 positivity. They'll have a combined CPS score of greater than or equal to 1. So it is very immune sensitive. And it's a tumor type that already has a pretty high baseline of positivity. And then what we found from earlier Merck's KEYNOTE studies, is that the distribution of patients, the, say, the two categories that Merck used, the one to 19 and the greater than 20 CPS breakdown. That was about 50-50 in that patient population. So there's a pretty high proportion, right? Patients that basically qualify, almost all of them will be -- will have a CPS score for inclusion into the study. So we think there's a really good opportunity to enroll this trial pretty quickly because in addition, every patient will get either the standard of care PEMBRO or the experimental arm, which is PEMBRO plus BEMPEG. So it's the standard of care plus a mechanism that could provide synergy. So this is a very nice option for patients.
And it's a very nice option for physicians, right, because the opportunity to put a patient onto a trial where they're going to get standard of care, or standard of care plus, I mean, that's just a very favorable setting. So we expect this trial could enroll quite quickly. And then I'm sorry, I missed the second part of your question. Do you mind repeating it, Paul?
Yes. Okay. Sorry I missed that. So yes, so we have a prespecified futility. And it's when 200 patients would be enrolled and followed for a short amount of time and looked at by ORR. We haven't given the kind of guidance on what the futility margin is, but it's something that, obviously, a part of the study design. It's something we discuss with health authorities, something we discuss with Merck as well. And it's obviously a part of the statistical analysis plan for the study. Thanks for the question. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
06b72d19c96998b4df7b8510703eb82b | So my question is really around the CMC for 358, do you expect making 358 to be as complicated as BEMPEG a couple of years back? | Sure. Difei, thank you for the question. So the 358 molecule is quite different than the BEMPEG molecule. So on the one hand, it is also interleukin-2, right? So in terms of the kind of fermentation, that's all the same. But the PEG is completely different. You, for example, you know that the PEG is releasable in BEMPEG, whereas the PEG is stable, it's a stable linkage in 358. And you also know BEMPEG is a prodrug, whereas 358, again, differs in that regard. It's an immediately active molecule. So it's quite different. And it's under a totally different set of controls, both within -- in process as well and totally different set of specifications for release. I also think it's important to mention that the nature of the agreement that we had with -- we have with Eli Lilly, Nektar was responsible for executing Phase I and also we were responsible for manufacture through the early part of Phase II. But after that, Lilly assumed control of the entire program. And so in fact, Lilly is now responsible and executing, not only on the clinical study, but also on the manufacture of NKTR-358. And they're, of course, scaling it and moving it into commercial manufacturing.
And I -- this is Howard. I would just add one more thing to that. If you look back at the BEMPEG manufacturing issue, which, of course, you're alluding to, I'll remind you that, that was one bad lot of intermediate that unfortunately got its way into two production lots for clinical studies. But that was -- those were bad lots that were made in 2016. So the problem has been resolved and is long behind us. I understand that it has shown up in a terrible way, but the manufacturing problems were associated with a bad lot of intermediate. There are no ongoing manufacturing problems or issues with anything that we make at Nektar. I just wanted to make that clear. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
c48b3b13c1490e6d87c44fe3154bbfd5 | So JZ, I think you reminded that kind of the melanoma study and kind of talked about kind of the immune profile a little bit. So just wondering, so for the five patients who had 100% tumor size reduction but did not qualify for CR, in terms of their durability and PFS, did they look more like a CR or like a typical PR? And I've heard this from other investigators, just curious if fever is like an early proxy for response based on across all the BEMPEG trials that you're seeing? | Yes. Andy, thank you for the questions. So let me take them in two parts. So the first thing that we've noted in the melanoma data set, as we reported at SITC, it was a very long PFS, right, 30.9 months. And actually, when you look at some of that distribution, for patients that had very, very deep responses, either the 100% target lesion clearance or the CRs, they really stratified like the FDA meta analysis indicated. You saw very, very high durability, very long disease control, right? And in fact, for those patients that had those kind of depth of response, right, we've not seen relapse, at all. So they are very much -- yes, like, again, our data is -- it's like a page out of the meta analysis. The depth of response really, really has a very profound effect on both PFS and OS. And when you stratify those kind of curves, that's exactly what you see. Now to your second question, you raised a very interesting kind of comment. And going all the way back to Steve Rosenberg studies at high dose IL-2 in 1980, people have been looking so closely for kind of correlates of immune activation, whether they're AEs or whether they're cell types or others, to see if those kind of AEs or cytokine-related activities that you can measure throughout the clinical manifestation are associated with that. And there isn't really like convincing publications, but people have looked at things like pruritus, things like the cytokine itch and the cytokine skin reactions that you can see. They've looked at eosinophil, right? As we know, they can be induced by the IL-2 pathway. And I do have to say that we don't have like a, like a clear trend in our data sets that we can point to.
But the empirical observations that are made clinically, which is like what the investigators you're speaking to are indicating, they're empirically kind of consistent with that. The patients that have very pronounced cytokine-related AEs, which can manifest like flu-like symptoms, right? They can manifest like fever. They can manifest like different kind of rashes. There may be some trends that link those kind of outward manifestations, but nothing that jumps out at you statistically. They are the kind of trends that particularly really good clinicians that really treat their patients well and really do great diagnoses and do really great bedside patient interactions that can spot, but statistically, it's a lot harder to make those kind of inferences. The things that we're really excited about, if you remember from our SITC presentation, we did find in our data set two on-treatment early detection biomarkers that seem to really correlate with patients that eventually went on to respond. And we reported those in Adi's presentation.
So remember, Adi talked about eosinophilic increases seen in patients after BEMPEG very early on, right in the first cycle, which occur like weeks before the first scan, that those could be a potential predictive biomarker for patients that ultimately go on to respond. And the other biomarker that I think is even more convincing to me was the single cell cytokine data, which showed that in CD8+ T cells, the polyfunctional strength index was really dramatically elevated just a week after the first BEMPEG treatment in patients that ultimately went on to respond and even have a first scan, positive tumor shrinkage. So those were two additional biomarkers that we showed that were really interesting. And especially in the case of the single-cell cytokine, quite novel kind of information that was very prognostic in potentially predicting early responses. Thanks Andy. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
1cae4943d71a76a15c56c44a1ed43ae5 | Just a quick question on the 358 program. I guess as you expand that into -- beyond lupus into these different disease settings, like how do you think about dose, a dose schedule of 358? And is the Phase I informative here? | Sure. Yes. Ben, thanks for the question. Yes. First of all, the Phase I study is indeed informative. It basically gave us a lot of information regarding the relationship of dose to the induction and the degree of induction of regulatory T cells. It also gave us information regarding how high you can go up, where you maintain exquisite selectivity for just simulation of regulatory T cells. And as you know, or I hope you know that it was really very well tolerated. So we had a good feeling for taking all of the doses that we studied in the -- in the Phase I program, taking it into later phase studies. So in the later phase studies, basically, all of them basically were looking to see, which, and we don't know in each of those diseases, which of these doses are most likely to generate the greatest degree of clinical impact. And is it the highest dose that generates the highest number of Tregs? Is it a middle dose that generates just elevated levels? Or is it a low dose that stimulates regulatory cells at a low level? And the exquisite selectivity also perhaps at the highest dose is somewhat less than at the middle dose. So at the moment, that's what we need to find out. And I would say to your question about we don't know whether different diseases might have different dose levels that would maximize the clinical response. I think that's the excitement of doing this broad scope and looking at a number of Phase II studies in a number of different indications. Thank you. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
2fe9bb7ad12c3f28262d3c11afc5f4d9 | I was wondering if we could do a bit of a retrospective on fiscal 2019. So you ended up generating $132 million on EBIT guidance, started the year at $135 million to $145 million. But in thinking about bridging those two numbers, there was a much more substantial material cost headwind that arose as fiscal '19 went on. Can you quantify what that ultimately ended up being? And then discuss some of the actions and Modine's control operational actions that allowed you to mitigate that impact? | Yeah. Hey, Joe, it's Mick. I'll kind of take a stab at the material cost impacts and then let Tom comment on the operations side.
So, in fiscal '19 it was a combination, just as a reminder of several items for us and I think others. The first was the direct impact of the tariffs and net of any recovery that we got from customers. That was about $2 million approximately. In addition, the tariffs started to create some cost challenges. And Tom has talked about in the past, particularly with one or two domestic suppliers that increased prices toward the end of the calendar year. That had it a net impact of about another million.
And then, while the LME was -- the underlying metals were only up about 4% or 5% last year. The transaction premium on aluminum more than doubled, it's up about 115%, and that was about a $5 million impact. So from where we started the year and where we finished, at least $8 million of material costs increase that we needed to absorb or try to set -- offset from the operations standpoint.
Yeah. From other actions, clearly CIS and Building HVAC over performed versus planned when we started the year. So, again -- demonstration of being the diversified focus that we could leverage that growth and convert that effectively. Procurement team did a fantastic job and over performing last year as well on beating our expectations or our budgeted amounts for procurement savings by a significant amount.
And then, as you know, we dug ourselves into a hole coming into the year with launches, specifically one plant in China, one plant in North America where we had significant launch ramp up activity, kind of 24/7 type of coverage that we had to offset as well at the beginning the year when we progress through the year, significant progress. And I'm pleased to say that we're back nearly where we should be, specifically in China. I feel very strong where we are at our plant near Shanghai. It's operating at -- KPI are at our expected level.
And in North America, again, with a lot of change, focus and discipline we've got the trend rigorous there going in a right direction. So, let's say, CIS pulling each back offsetting some of those challenges that Mick described procurement, effectiveness with what we've invested in with resource and talent. And then you're turning -- starting at the moment and turned around toward the end of the year to help us get back as well. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
d5f683151fa8f2910d8310f179aeccbe | And then -- Those are helpful. Can we have a similar conversation, just in terms of what's contemplated in the 2020 outlook. It sounds like Vehicular operationally should be better in 2020 relative to 2019. Unfortunately, it seems like later in the year we're going to see a receding in volumes from some of the commercial vehicle in off-highway markets, fairly it sets a possibility. So maybe, cyclically you're dealing with new pressures in Vehicular. Do you think that pretty much contemplated? And could CIS and HVAC be the offset again. So you feel it's always tough to call, but you feel like the $135 million to $145 million range, ultimately that includes some buffer in the projection? | Yeah. Joe, it's Mick. Yeah. I think we'll run through that. There's a lot there. You've covered, but it's good that it's kind of laid out, we see it. So, back to VTS, yeah, I think we see the same market dynamics. You guys are seeing the challenge, biggest challenge in the VTS area right now is not seeing that market lift from a volume standpoint. We do have the full year impact of the tariff, the direct and indirect tariff. So, while operations is improving in a normal year, we'd like to see some margin improvement and you'd expect to see that. The tariff will be about an incremental $7 million or so cost to us as we go to the full year impact of the direct and indirect tariff.
The actual traditional metal exchange numbers are neutral to slightly positive for us this year. So the biggest headwind is lower volume and the tariff impact. And then, from the other side, we continue -- we ended Q4 obviously really strong on the building HVAC side and across all of our markets. The indications are, we're off to a really strong start and we feel good about the run rate heading into the year on building HVAC, both in the US and in the UK and in Europe. From a CIS standpoint, we've got first half of the year probably a little bit more difficult comps. We had record level sales of data center business last year, we're expecting the second half and some good indications from our markets and customers about some pickup in the second half of the year from a CIS standpoint.
So I guess before I turn it back to Tom, the way I'm thinking about it is a little bit tougher comps from the CIS standpoint, but we feel like the dynamics and the markets there and data centers globally, Building HVAC seems to have a tailwind as we head into this year when you think about whether it's a cushion or just comfort that's feeling good. And then, biggest challenge we have is more flat markets on VTS combined with tariffs that we need to find a way to offset. Tom, do you want to add anything.
No, I think you said it right. About 180, maybe a little bit higher of our sales now are directly tied to data centers. That's with the whole megatrend on digitalization. We're really pleased that we have some really good engagement both in North America and on to the UK with those two businesses that we want to make sure that we take advantage of and grow. And we see good indications, as Mike said, in both regions that continuing this year. We will continue to focus on our procurement efficiency, which, again, I'm very pleased with. And I expect productivity to be gaining in VITS significantly this year. So we offset some moves challenged to make it laid out. So I think that's the best summary we can put together for that. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
c7c2a00d9ee9f150aa420fba2fec728f | Okay. Great. Specifically on HVAC, based on a lot of your commentary, it seems like the share gains that took place in fiscal '19 that's sticking based on the order book and you maybe continuing to grow market share. Is that a fair characterization of what's happening in that business? | Yeah. We definitely gain market share in fiscal '19 over '18, which was also as strong year, specifically on heating. And we're really seeing it pick up on UK from a precision cooling and chiller standpoint as well, where we're gaining share in those regions with the data center business and related products there. So moving forward, we have a heavy focus on continuing with that and concentrating on regions where we see share gain possible in North America, as well as capitalizing on potential Trans Atlantic opportunities that may develop from chiller sales from the UK needed in the US by certain customers. So, again, really good momentum across all segments -- within all subsegments within Building HVAC. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
a43120fa6eae9325d701910e63449a23 | And so, I'm thinking of the trend for that business. When you start to compare against 15%, 20% revenue growth in the second half of 2020. If you're maintaining that market share, even though, of course, there is probably growth moderation. Would you expect to be down year-on-year. It doesn't sound like if you maintain market share and you're continuing to grow high you would necessarily be down. | Yeah. No, we think we'll be up slightly maybe not quite that the jump that we had last year to your point, because of the share gain and we have that same look forward, but we expect to be up. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
723a09ae1b79a8a4db1b31c0e2e6ef0c | Okay. Great. And then my last question, more of a housekeeping item. How much of commercial vehicle business is still left to roll off in Europe? | Yeah. Europe and there's a little bit in the US on service, approximately $40 million, Joe, in fiscal '20.
As you've been stating, of course, we have some new model launches that are starting to prepare for North America with recent business wins and good core activity still going on with European customers. So -- this is going to be a roll off year this year yet net roll off, but yet with gains coming in behind it. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
276cf3abe7c2a303e38f561d016ee4ea | Okay. If you here let me with one more, my two last question. On the automotive business, so you've obviously communicated this to the market. I'd imagine you're having conversations with customers, what has been the feedback on the decision? Is it having any ramifications on bookings activity that might influence ultimately the value you're able to get for the business? And then, any spillover effects to what Modine ultimately intends to retain. And VTS segment. | Well, let me handle the first part and I'll make sure I understand the second part later. So the first part is, yeah, we're in discussion with customers and, obviously, they're very curious as to how this is going to proceed. Clearly they are staying close, nobody is necessarily taking us off any player platforms. But I would, say we're kind of in close watch. It will -- and we think that there's a prospective buyers that could add value with this valuable asset that we have as they think of subsystem integration and we would put that together with maybe people are thinking of diving into thermal management.
So still I think it's just like a close watch and not really being -- not hampering this at the moment, but one that we stay in close contact with customers. And what was your second part of the question, Joe?
Great point. I was thinking clearly from an automotive customer standpoint. On a commercial vehicle off-highway side, very positive feedback from customers. I personally visited several and make sure it's clear that our focus is to be able to do this to give us more resource capability, whether it's capital or human resource to focus in on not just the industrial portion of the business, but we we think the off-highway commercial vehicle tucks in very nicely within industrial business. I want to make sure they saw that, there's a long term strategy we have. So very positive feedback from truck and off-highway customers. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
afe0c2cf11edcb0039b2f894047259e8 | Starting with the CTWS integration. I think you made a reference to an accelerated process out of COVID-19 or some impact there. Could you speak a little bit more to that impact? And maybe how the opportunities have changed from where they were a year ago? | Sure thing, Richard. Thanks. It's been nine months since our close, and I would emphasize the cultural aspect of the integration is really ahead of schedule. I think most would agree that the cultural integration side of a combination is just super critical to the long-term success of a combination such as this. And the fact that we've had this common cause to work together on, I think that's what's really driven forward the cultural integration and alignment across the organization.
In terms of the structural integration, it can be more challenging without the ability to travel and whatnot. But we are delivering our synergies and mitigating increases across a variety of cost streams, including the public company costs and cyber and IT and water treatment chemicals and many other areas you would expect. So we feel like we're really right on track on that front. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
70a4580d139e9f1dd3e41ddd40e75ad4 | Got it. And then I believe your GRC filing in California was due last month. So I just wanted to check in there kind of what you see as the major requests in the upcoming rate case. Particularly, I think you alluded to, on one quarter, potentially looking to address that water supply issues that are impacting your results this year. | Sure thing, Richard. I'll make an initial comment, and if Jim has anything he can add, that would be great as well. Richard, actually, our next general rate case filing is the final filing is due on January four of 2021, and then our next cost of capital proceeding isn't until March of 2021. And so we have not yet finalized our application. That is in process. So I really don't have too much that I can comment on yet, but you did put your finger on an issue, obviously, of great concern, the whole aspect of the sort of the cost balancing approach toward our water supply mix.
There's also a proposed decision out on another matter that kind of, to our surprise and I think the industry's surprise, included discussion and a resolution on the WRAM that we currently don't enjoy. So we're watching that PD. We're active in providing some commentary to it. And we think that ultimate decision will color our approach in our upcoming case. So I'd just ask you to stay tuned on that. And I suspect next quarter, we can provide some more color. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
1a0588a3a9db70b7f4342f2101f6e08b | Good so on the $0.03 of COVID expenses that you singled out, are those I was thinking you're tracking them in those memo accounts for future recovery, but until you actually get it, you just can't book the offsetting revenues. Is that right? | Yes. Jonathan, this is Jim. That's right. In at least three of our operating utilities, we have got an authorization to capture those costs in trackers at this point. And in the fourth, we've gotten an indication that we should be tracking them so that we have an opportunity to have a discussion with the commission at a later point in time. But at this point, we are recording the expenses and not recording any associated recovery of those expenses. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
f7dcca8835535e9c7876b37f781d76f2 | Okay. Great. Any updates on the AMI deployment request in California? I think it was a Q4 decision anticipated there, but didn't know where in the docket we were on intervenor's position, stuff like that. | Jim, I'll start, and if you have something to add, please do. But Jonathan, that proceeding, we feel, went very well. We're continuing to work on it. We are hoping and would expect a fourth quarter result. We're really pleased with our business case. We think it's exceptional. And with state water budgets looming in 2025, I think there's a clear call for this type of technology. And the proceeding was very fact-based, and we really sensed that we turned a corner this time and that it was much better received and there was interest in engaging in some dialogue around it. So feeling pretty optimistic about it, but still a ways to go. And we're going to be looking toward a decision in the fourth quarter. Jim, did I miss anything?
No, I think that's right, Eric. In addition to what you discussed, we do have ongoing conversations with the advocate in California regarding the program, and those have been constructive. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
db3e62f48ead202cb7eb3b9614193398 | So in terms of those conversations, is that potentially something that could lead to a settlement? Or has the prospects of a settlement kind of passed? Or was there ever the option for a settlement? | Yes. Jonathan, there's there definitely still remains opportunity for settlement, at least with OPA. And of course, there are other parties that would be involved, including the staff at the PUC and WRATES, a local advocacy group. So we remain very open to settlement, if that can be done. And if not, we do think we've laid out a very strong business case and the importance of this further step here. So again, remain optimistic that this time will be different. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
80998b76c763cce6c1624b214be8060b | Okay. Great. And then I think the plan in Connecticut was to file a base rate case around midyear. Has that been filed? Or kind of what's the updated plan there? | Yes, sure. We will be providing further color on that in the third quarter, Jonathan. We have not filed yet in Connecticut. We would anticipate filing probably in the next six to 12 months, and we're looking forward to getting that accomplished. As you know, we had a stay-out that expired on July one this past year. So from this point forward, we're in a position that we could file, but of course, we want to make sure the timing is just right and our capital program is in a good state. And we'll be providing an update in the next quarter. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
1f0b8a627d1f7ce1d721efd89a6029e4 | Okay. And then bouncing back to California. I've seen some reports about customers receiving abnormally high bills recently. Any thoughts on what might be going on there? I know you've had some billing issues and disputes in recent years. | Yes, sure. I can definitely talk about that and turn it over to Jim as well. I mean basically, Jonathan, what occurred was because of the pandemic, we put a pause on meter reading. So we estimated bills for a couple of months until we were sure that our employees could be safe out there reading meters. And as you probably know, the methodology for estimating bills is use the same period a year ago as the basis. And so 2019 was kind of a cool, wet year. So now that we've been out catching up and actually getting actual meter readings, it's really catching up. Usage has actually occurred. We're absolutely sure there's no billing errors or issues. It's just a catch-up.
And our team of customer service reps are really working hard to manage that and help our customers. And we have been very clear that we're not exercising any terminations or collection activities. We're willing to work with our customers and enter payment agreements and the like. And so I think it's just a byproduct of the pandemic, and we're confident that it will be resolved here fairly shortly.
Yes. Eric, I think that captures it really well. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
7e13be1daba61cbf0209667641500793 | Okay. Yes. So I mean, has that like put some additional pressure maybe on like the bad debt expense that you're tracking and stuff like that? I guess that stuff hasn't flowed through the accounts receivable enough to really do that yet, but. | Yes. So I'll start, Eric, and maybe you can play follow up on some additional information on it. So in California, Jonathan, we read the meters or we estimate the meter reads, as the case was during the pandemic, on a once every two month basis. And in Connecticut, we actually bill quarterly. And so in our view, the pandemic kind of really took effect and hold on our folks with the stay-at-home orders that were issued in late March across the various states that we operate in and so we're just starting to see the impact of the pandemic and the follow-on impact on the economy and people's ability to pay and also increased usage as it's starting to matriculate through the different meter reading cycles across our different states.
So a little too early to see if there's been any kind of a significant trend toward activities that are going to lead to higher bad debt. We are seeing, as Eric mentioned on the call, an increase in our past due 90 days. And so we're keeping an eye on that as well as activities at the federal level to either reup the unemployment insurance program or if not, what additional steps they may be taking in order to facilitate folks to pay their essential bills.
Yes. The only thing I would supplement to Jim's comments is, personally, I've just been very, very pleased by what we've seen in terms of collections. I mean customers have really honored their part of this. And our collection activity has been our cash flow activity has been great. We arranged payment agreements for some customers. And I think the longest that was reported in our workshop last week was 12 months, but most are two months. And so anybody having a payment challenge, we invite them to call and work out the arrangements with us. But as I said, we've been very, very pleasantly surprised by the collections and cash flow. It's been very good. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
ad5d13a7af20e192642213b3067d76d9 | I wondered if you could give us a sense for what rent collections look like today for your multifamily book, both for rent regulated and non-rent-regulated what you're hearing anecdotally from your customers. | Yeah. Hi, Mark, it's Stu. Generally speaking, you have to look at it really on a granular basis on it building by building level. Because we have customers that are -- that are not in deferral, and that's -- the vast majority of our loans that are collecting rents fairly normal pre COVID in terms of their actual collections of 85% to 90%, which is what they were pre COVID. And then -- and then you have those that are in forbearance or those that have commercial aspects to their abilities in terms of mixed use and retail that are obviously at lower levels and thereby causing their requests for forbearance.
So it's really a tale of two stories you got, the vast majority collecting in very close to what they were historically, and then you have those that were more affected by COVID and those percentages are obviously significantly less, although improving as you see the migration in our first tranche of forbearance loans that can do on July 1 where payments are starting again starting to come in on those loans as well and on -- and collections obviously are driving those payments. So it's really bifurcated in that -- in that fashion. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
3dfa6922d09d5ec563ff56c10d0ab46e | I was curious, the yield differential between business banking loans today and your core sort of multifamily commercial real estate stuff has really collapsed, the difference between the two. So I guess I'm curious, does that mean you'll probably do more traditional multifamily stuff again or not necessarily? | So, Mark, there was a bit of a mix shift this quarter because we did more of the back-to-back swapped loans. So it's not really a apples-to-apples comparison. So we're putting on floating-rate assets on the balance sheet that have a fee income component associated with that. So in this quarter, we did around $150 million of loans out of a swap. So obviously we have floating rate there. So it needs to be viewed in -- in that context. Obviously, on the multifamily portfolio we're retaining clients and we're trying to keep some of them out over there. But over time, given the opportunity on the deposit side to lower costs over there, I think we're also trying to get the balance sheet more to a neutral perspective. And so that's what's kind of driving that.
Also, on the on the business banking side, we've reduced the cost of those deposits as well. So when you think about the net interest margin of that business, it's still in that 3.70% to 3.75% area and we really manage that business on a NIM perspective, keeping in mind what percentage of floating-rate assets we have on the books over there.
Yeah. Okay. Mark, just to go further on that. In a lot of what we booked in the second quarter, in terms of early in the second quarter, were loans that were committed pre-COVID and those swap transactions were committed pre COVID as well. Since that time, we have instituted floors on -- LIBOR floors on our swaps and have actually increased those LIBOR floors and our spread over LIBOR on those swaps. So you're going to see higher yielding -- it was just a -- a group of loans that were committed and closed just after the COVID and were committed pre COVID. So, we've taken steps to ensure that we maintain our spread and our NIM. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
1ed280053b7de7f4b410ccd40a69f6ab | I think you said there was $875 million of CDs that were scheduled to reprice [Indecipherable]. Is that in the third quarter, in the back half of the year? | No. It's -- it's the second half of the year.
So over the -- over the course of the next six months. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
a76bffa3682faf8dc3032318de64d7ae | And those realistically reprice sub 1%, I assume. | Well south of sub 1%. I mean, our highest rack rate right now is 45 basis points. So we'd expect -- typically on the CDs, we see around 75% retention. So, we'd expect to retain around 75% at 45 basis points to 50 basis points and the remaining 20% odd, we can do with borrowings, which right now has a cost of 40 basis points to 50 basis points as well. So I would assume a full 100 basis points on that $875 million. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
f714ef26766ad1d03837a2ceb76aa9d3 | We should expect stock buybacks to continue in the third quarter or will be precluded because of the merger from doing more buybacks? | So, Mark, so, in the prepared remarks, I mentioned that we suspended our 10b5 plan on July 1 with the merger announcement. So, obviously till the shareholder vote, we'll be out of the market, given some of the rules out there. So we're not in the market right now and do not expect to be in the third quarter at this point. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
a4a5d0ec19e5e32a5cc48edd7e3165eb | Just a quick question. Obviously, you guys have been very successful in layering in some of these additional commercial loan products, the back to back swaps or so. Just curious, maybe what your outlook is for continued growth or level of commercial swap loan fees heading into the back half of the year. | Yeah. I mean, obviously business is still very strong. We're seeing -- we have a very nice pipeline. I think this quarter was extremely strong. I would expect that our swap fee income would be -- would revert back to similar to first quarter, but still very strong and we still have a very good pipeline and we see that continuing to grow throughout the year. I don't know that it will be quite as significant as the second quarter but in line with where we were for the first quarter and our budget going forward.
And Dave, it's also going to be a function of the rate environment, right. If the curve is flat, this is what the customers want at this point in time, so in our internal budgets, we're probably seeing on the real estate side probably half of our transactions are going to be swapped loans in the second half of the year. I mean, that's -- that's the current expectation. But it's obviously in response to what the customers want.
Yeah. I think we do see an uptick in SBA related fee income with the -- with the focus on PPP lending at the SBA moving back toward traditional SBA lending. We had a significant pipeline of loans waiting to close, but since the SBA was so involved in PPP, those things were delayed. So we see a significant positive impact of normalized SBA gains on sale, and that's a positive for remaining six months of the year as well. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
4629fd8f644fd7f19eb527148ea1fa2c | I was wondering maybe you could, it sounds like there could be some -- several items sort of impacting the reported margin next quarter. I was wondering if you could just walk through some of those headwinds again a little bit more granular, and then as that sort of imply a relatively flat to down margin here for the third quarter. Just maybe what you're thinking just from a reported versus maybe core basis? | Yeah, I'll start with the core basis, Dave. So, in the prepared remarks, I did say that with the CD repricing opportunity that we have and our deposit costs, which on a spot basis, the deposit costs at June 30 was 73 basis points, which already is lower than the cost of deposits for the full quarter of 88 basis points. So there is a significant room over there. What I did say was in Q3, there's probably three items that are unusual. The first one is with the PPP loans. We're going to have a full quarter impact of those average balances, right. So keep the forgiveness side aside for a second because nobody knows exactly how that's going to play out. But just because we have more average loans on the balance sheet that are PPP loans, that's going to probably be 2 basis point to 3 basis points negative on the -- on the third quarter margin.
Then we have some escrow deposits, which usually leave the Bank at June 30 and December 31. And so, as we build those balances back in the first three months, you got to replace it -- replace non-interest funding with interest bearing funding. So that's probably 0.5 basis point to 1 basis point. And then the last piece is on the borrowings. Some of our borrowings are tied to LIBOR. We synthetically create long-term advances basically through the swap market and receive three month LIBOR and pay the FHLB the three month rate. So, on that piece, that's probably going to be 2 basis points to 3 basis points negative because LIBOR was elevated in Q1, as you know.
So you add all those up. That's probably 5 basis points to 6 basis points of a negative impact in the third quarter on the core margin. But in terms of the deposit cost that we're going to be able to reduce, that should more than offset some of these unusual items.
What I mentioned on the reported basis was our reported net interest margin had prepayment fees of $1.7 million. We've been saying for a while we expect those numbers to be lower but every quarter we still kind of have that $1.5 million to $2 million run rate. We've not seen that number be below $750,000 to $1 million anytime recently. So that probably would be the low end. But even despite all of that, I would still expect the reported margin to trend upwards and the core margin definitely would have an upward bias in the third quarter and then definitely in the fourth quarter as well. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
67af2952058ddf67e1c06f5425a50af5 | Just sort of broke out the amounts reaching the end of deferment. Just curious, some of the more recent conversations here. Any sort of insight in terms of sort of the procure [Phonetic] rate that you're expecting for this next tranche that are coming off their first initial [Indecipherable]? | Well, we are certainly expecting at least a similar migration. What we are seeing is positive shoots in terms of New York City coming back to life. We're obviously entering phase 4. And you can -- you could see in our reports that even COVID related industries are beginning to come back and pay. So at a minimum, we expect the same 40% and 65% [Phonetic], if not better. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
64e914939d0f920026b8f6f934a72f2b | I just wanted to start I guess with loan growth, and maybe for the second quarter, how much of this quarter's growth or origination activity had come from the pre-pandemic era and just how the loan growth pipeline and the composition of that pipeline is going forward? | Yeah. I mean, as I mentioned earlier, we are still seeing quite a bit of business and a very strong pipeline. We had originally given growth guidance earlier this year and we are comfortable with that current guidance. We expect originations to hold. And so we're -- at this point, we're very comfortable with our original growth projections. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
7b36b97c05777e30eb7b7c3f3ae4f866 | You noted that I think just over $100 million or so were PPP related deposits, but obviously overall deposit strength this quarter was extremely strong. Have you seen any of those PPP deposits roll out as we head into the third quarter or any of the outside strength this quarter kind of start to fall off as customers deploy those funds? | We expect that. I mean, clearly over the timeframe, we've actually deposited almost $325 million in deposits. And as Avy mentioned earlier, those numbers at June 30 are down to $104 million. And the purpose of those PPP loans were for people to use that to pay employees, etc. So we do expect that to continue to trend down, and it has. That said, our commercial growth -- commercial deposit growth has remained -- non-PPP has remained very strong. And as we continue to garner new business and relationships from our commercial business bankers as well as some new customers from -- and permanent customers from PPP, we're seeing continued growth and stability in our commercial deposit base. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
5b1d13fb958affd31f4b523e5849b205 | On the service fees -- and obviously they impacted by customer activity and branches being closed, etc. during the crisis. How do you see those rebounding in the second half of the year? | Well, I mean, at this point, service fees truly are a function of transactions, and it's also a function of the amount of deposits that customers are keeping. So we have significant customers that have higher balances. So we're seeing less in terms of analysis fee income and access charges, etc., because they have the balances. So I do see that recovering somewhat as businesses begin to open up and transactions continue to increase, but we do expect it to trail what we expected, say, from the first quarter on. But the offset to that is higher balances and lower cost of funds. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
3e75c9fc77215bee649dec9b3595e412 | I've got a question actually about the merger. I apologize if it's a little off topic. But my understanding, and correct me if I'm wrong, is that both parties are taking change of control provisions. And I didn't think that was customary in a merger of equals when the parties taking the change of controls are maintaining their jobs, and I'm curious what the rationale for that was. And also, if it was taken, was it taken in cash or stock and why? | Good morning, Howard. All that information, I'm afraid you'll have to wait for the merger proxy to have the background for that stuff. | fully_evasive | [
"direct",
"intermediate",
"fully_evasive"
] | C |
5570147a6937cf18f1614d5922c5ac2c | So that hasn't been publicly announced either way? | No, Howard, it has not. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
082aeac0a796494f6a56f512a74b0aca | Can you talk about your view of the traditional watch category and where you see that going in the coming years? It would be helpful to understand your perspective on the category in general, as well as consumer demand, particularly as it relates to the pandemic? | Yes, it's very interesting to see the changes in the wash consumer globally. There are three things that we are seeing. First, we're seeing an increased demand in the United States, as we mentioned earlier, and the business is healthier than it was before the pandemic. We have some accounts that are seeing a double-digit growth versus 2019.
Secondly, and maybe a bigger opportunity on the first is that we're -- what we're seeing in Asia, which -- especially in China, and that is that the emerging customer strong affinity for watches and accessories is coming to hold. Keep in mind, China was up 81% over 2019. As more and more people in Asia join the middle class, their increasing demand for watches and accessories is a significant long-term opportunity. And the third is the increasing overall acceptance for the consumer to buy watches online.
It is now 40% of our total sales and 50% in Asia. Our digital activities enable rich storytelling engagement and will enable us to build global digital communities. As we accelerate our investments and capabilities in our global digital platform, this is a long-term game changer for the company. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
4da936882f331e962b533d0b25580b0a | Can you talk about the demand signals you're seeing across all of your channels, e-com, wholesale and third-party partners? And where do you see that going as we head into the second half and holiday in particular? | First, the most important demand signal we're seeing is broad-based strength in traditional watches across channels. And in Q2 in the U.S., we achieved positive sell-out comps versus '19 in our core channels, including traditional wholesale, licensor boutiques, e-commerce and others. The reemergence of traditional watches is all about innovation and storytelling amplified by digital marketing. In Q2, we launched new products focused on sustainability, important cultural moments like Pride Month and limited edition collaborations like Space Jam.
Across all of our brands, we are also distorting product icons, which both celebrates existing iconic watch designs and launches new designs inspired by each brand of authentic DNA. There's no better example of this than Michael Kors, where their consumer is responding to newness in iconic boyfriend and heavy pave watches $40 to $50 price range, which is creating brand heat and meaningfully lifting AUR. Although we are pleased with the Q2 performance, we're just getting started ramping up our product innovation and accelerating our marketing spend, leveraging the capabilities we've built over the last few years. We believe we're at the beginning stages of a consumer trend in traditional watches that will carry us into the back half of the year and beyond.
The second demand signal worth noting is the emergence of jewelry as a category that's meaningfully contributing to growth. Globally in Q2, jewelry is up triple digits versus 2020 and 68% versus '19. And is hitting growth rates even higher than this in the U.S. We expect growth in jewelry to continue into the back half of the year and beyond.
Collectively, we believe jewelry, our new imminent Gen 6 smartwatch launch and opportunities we see in leather goods will nicely augment the strength we're seeing in our core traditional watch business. The third consumer demand signal the callout is digital, where we are up 82% versus in 2019 globally, and seen similarly strong performance in the U.S. We've been investing in digital channel development and marketing for several years and believe we're finally nearing the point where growth in digital will more than offset the headwinds from brick-and-mortar. We're very pleased with growth in our owned e-commerce and pure play e-commerce businesses, but we've also been very pleased with the strength in our licensor.com and wholesale.com businesses as well.
And believe we're poised to continue to leverage this channel trend into the future. The last thing I'd like to note in the U.S. is the healthy margin structure we're delivering, which is due to three things: First is product mix with the strength in high-margin traditional watch and jewelry businesses. Second is increasing AURs and product margins as a result of a reduction in markdowns and a more controlled approach to our off-price channel.
We're just simply much healthier and cleaner in our channels. And third, a step function reduction in our infrastructure expense. Collectively, these things are delivering healthy margins we haven't seen in our U.S. business a while.
While this commentary is U.S.-focused, we're also seeing margin health in our other regions as well. We couldn't be more proud of what our teams are accomplishing and expect to build on this momentum throughout the rest of the year. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
6ca3713437a78e6944c2a6fb5a097a2e | Could you provide some color on the sales and EBITDA guide you provided today? | Christine, yes, sure thing. From a sales perspective, Q1 and Q2 fairly better than our expectations, driven by outperformance in the Americas. And that helped to offset some of the ongoing pandemic pressures that we saw in other parts of the globe that are slower in the recovery from the pandemic. When looking at the balance of year net sales projections, we think it's helpful to consider trends versus 2019.
Our Q3 2021 net sales growth range of 5% to 10% versus 2020 implies minus 12% to minus 15% versus 2019, which is a sequential improvement versus our Q2 results, which were down 18% to 2019. From a regional perspective, we continue to see strength in the Americas, particularly the U.S. market, driven by healthy consumer, significant vaccination efforts, underlying operational strength that Greg spoke about. These trends, as well as trends in Mainland China continue to outweigh lower near-term expectations out of the balance of Asia, given the pace of recovery from current pandemic conditions.
Lastly, actual FX rates through the second quarter have been slightly favorable versus our expectations. But at this point, moving forward, prevailing rates are generally closer to last year. So all told, with a better Q1 and Q2 and an improved outlook for Q3 and Q4, we've been able to lift our net sales guidance to 14% to 17%, which is up from our May estimate of 12% to 16% and also up versus our beginning of the year estimate of 10% to 15%. From an adjusted EBITDA margin standpoint or perspective, year-to-date results are just shy of 5% adjusted EBITDA margin, driven by stronger gross margins and solid expense controls and some temporary expense savings and timing shifts that were a result of the pandemic conditions in some parts of the globe.
On a full-year basis, however, our adjusted EBITDA margin guidance of 6% to 8% is an increase from our most recent prior guidance of 5% to 7% and our beginning of the year guidance of 4% to 6%. Included in our revised adjusted EBITDA margin guidance, we factored in some of the following: some projected cost increase for transportation and labor costs given the current trends in the operating environment, which we expect to persist. And we've also increased the marketing spending key markets as we invest behind strong consumer demand signals to drive continued growth in Q3 and Q4. On balance, our outlook on expenses -- for the balance of the year, while up versus 2020 levels are expected to leverage as a percent of sales versus 2020.
And when you compare expenses to 2019, expenses will still be down versus 2019, and we'll also leverage 2019 as a percent of sales. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
4f228ba4e4501643b288ba1309bd396d | Sunil mentioned macro headwinds around shipping and wage inflation, which are well documented. Can you provide us with some additional granularity around those factors, how it's impacting thoughtful and how you're planning for that? | Certainly, Christine. On the shipping front, we are seeing minor disruptions but nothing really material at this point. Most of the shipping disruptions, other companies are reporting, are due to imbalances in ships and containers in the ocean trade channel coming out of Asia. Our most significant product categories, watches, smart watches and jewelry are shipped via airfreight, given the relatively small size of our product in high average unit retail.
Our other pro ducts, however, are shipped via ocean freight and have experienced some delays. Our teams are doing a great job getting product from Asia to the West Coast. But we have had a few minor misses in delivery schedules for some handbags and small leather goods. That said, given the relatively small size of our leather business, it represents under 10% of our sales, along with a limited number of disruptions.
These delays have not had a sizable impact on the results so far. On the inflation front, we are seeing some cost pressures mostly in the shipping area, as Sunil mentioned, in both the air and ocean freight channels. Wage increases and product cost hikes have been more muted versus what we're seeing in the freight area. However, with these various cost pressures we are experiencing, we are planning on price increases in our largest product categories, in watches.
With these planned pricing actions along with our enhanced inventory management programs, we expect to fully offset expected cost pressures with a net accretive impact to gross margins. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
8f0655b97542625475628c3b7b263eef | Hi, thank you fo taking my question. Just wanted to, first, dive into your guidance and how -- your EPS guide in particular. It would just imply that on a flat -- on a sequentially flat revenue guide, you probably have to see a significant dip in the electronics marketing margin and possibly even premier. Maybe you could help me bridge the gap. | Sure, Param. I'll take it first, and I'll pass it on to Tom. So what we saw in the back half of the quarter was a falloff in the catalog space. And as you know, lead times are coming in significantly. And then there's a migration, as I pointed out in my remarks, from the catalog space back to broadline guys, which impacts our margin, because the mix then changes between Farnell and the core. Core held up pretty well with respect to margin. So in the next quarter guide, which you'll see as a full quarter of Farnell, at a different place that we saw into this quarter. And that explains the majority of why the guide is down the way it is.
Tom?
Yeah, not much to add. Hi, Param. Demand softened throughout the quarter and pricing softened throughout the quarter. Pricing was somewhat across the board, but most notably in passives. So what you're seeing from Q4 to Q1 is Q1 has the full effect of what we saw. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
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