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ba77362951aad65a5cdbaad8b88f9810 | I guess I'll start with the obvious one, the first quarter based second quarter guidance is ahead of consensus and there is no guidance range raised for the full year. Is this just conservative, we've only done one quarter or do you see any headwinds in the back half of the year? Just any commentary you've got around that. | Sure. So let me start off by saying, we really feel good about the year, how we started the year. The Q1 performance going into Q2, we even have more confidence with the increased backlog, the pricing actions we took so far. Having said that, as you stated, right, we're only one quarter in the year, being conservative due to the inflationary pressures and raw materials, waiting for that to stabilize. There is also some uncertainty around COVID, specifically in France, India, potentially Brazil. So overall, yeah, we feel really good about the year, some uncertainty and as we gain better visibility, we'll update the guidance. | direct | [
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6720f0a70ba02fb3b80a9ae07a54893b | Then on price cost, I wanted to just particularly look at USA. So I know you guys had signaled that you were going to have some margin pressure there in the first quarter as it takes time for some of these contracts to reset. And I was maybe a little bit surprised to see that price mix line there actually negative. Can you talk about that? And when these contract times will reset? When you'll be able to get that pricing through, and how we should think about the progression of margins as we go through the rest of the year? | Right. So really where that's coming from is going into the year is the pricing we had in the backlog. So that's why you see the negative pricing, because you raised the pricing, but you won't see the impact, as we said, until the second half. That's why you're seeing the kind of the negative pricing, if you will, but as we go into the second half, we will see that you will see that turnaround there with the pricing higher than the cost, and that's where we'll get the improvement on the LP side. Yeah, Nathan. This is Steve. Most of that backlog was priced prior to the indices moving up in the -- probably the second quarter and third quarter of 2020. So it was before the steel moved up, the indices were actually down. So it was our volume that really made the difference in the quarter. As we go forward, we would expect somewhere in the lines of 200 to 300 basis points improvement on the back side of the year when you look at utility. | direct | [
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16a74214db1ac082d54930a82cfe5a8a | So we should think about the second quarter margin for utility kind of in a similar range to where it was in the first quarter and then we'll see the step-up from the increased pricing running out of the backlog as we get into the second half? | Yeah. And actually toward the end of second quarter we'll already start seeing the improvement there in the margins. Yeah. | direct | [
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2c260c331d0e37a2234c1a02f62cb49f | I'm just wondering are you at least willing to concede that you're trending toward the high-end of the guidance range that you stuck with, because I'm just looking at that you did over $2.50 in the first quarter. You'd have to do like $2.10 in the next three quarters, when you just clearly told us that things are getting better in so many different ways. Would you say you are trending toward the high end of the range? | Yeah, I mean, coming out of the gate with the number that we did. That's where we're trending. As Avner pointed out some of the hesitation was just around the fact that's raw materials have not really stabilized, and as you can see in the Utility segment, depending how quickly they rise, we don't always get it back in price, and then you take just the project nature of the business. We have a couple of big projects, if there is any movement in those, that will have an outsized effect on us. So we're just being cautious, only being one quarter in, as we get to the end of the second quarter, we will obviously have a much better look at the rest of the year, and be able to update guidance at that point. | direct | [
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1114922d5916e3a6435ae9f42e010a37 | As you look at the the year, where could the upside come from to if we end up looking back at 2021, and say we did over -- this is my number I'm throwing out there. Let's say we end up over $10 in EPS, where do you think that upside would come? | There is a couple of areas, obviously, continued strong performance in irrigation, has a very large effect on us. The telecom area is as we said is trending upwards 15% to 20% growth. If that accelerates, that's very margin accretive for us. And even in the rest of ESS, if the delays that we've seen around construction projects -- this is global, not just the U.S. If the COVID impacts were to go away a little quicker, then we would see in places like Europe and India, where we do have some nice backlog is just not shipping because of the issues there. And those are things that would tend to move us toward the top side of the range. | direct | [
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c26f790ef7f3b965c159b12be132a8fc | So, on the ESS side, when we're talking about short-term market softness in transportation. As you sit now is that over the next couple of quarters or we're not sure if it's going to be till mid-fiscal '21 and until there is some improvement there? | Now we had expected -- so seasonally, Q2 is usually stronger than Q1. Just because that's when a lot of projects do get started. But even the market softness, we kind of anticipated from the first part of the year here, the first half, and we expect that to improve in the second half of the year. The timing that we saw kind of in the third and fourth quarter delays, really just translate into that kind of first half for us. And then with vaccination rates, with budgets kind of being made hold by some of the earlier actions were the states' got replenished, due to the stimulus spend. We feel that the second half of the year lines up well for a lot of road construction projects. | direct | [
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1da20e9687e2258120aab88fa65e8cff | Talk about solar in North America, on the utility side. So, obviously, you kind of talked about it, it takes a while to get these approvals in place with utilities, for the most part, it looks like you're in good shape there. Just trying to understand kind of the sales cycle at this stage on the utility side. | Yeah, the projects have a long gestation. They take some time to develop as developers get their own approval, they get bids, they go back, it kind of goes back and forth. There is some supply chain disruptions overall around microchips and the PV panels and how that fits in. And then you had the whole change in the tax credit situation. So there are some delays in some projects that we would expect more toward the back end of the year to move forward. But you're talking a six to nine months and the sales cycle really to secure a backlog in that area. Now once it ships, it tends to ship pretty steadily because of the construction angle. It doesn't go through the kind of the same permitting changes that you may see on a traditional utility line. So once we have confidence in the project moving forward, they tend to just go and ship complete. So, maybe a long-winded answer, but again six to nine months and very much impacted by changes in tax credits and some of the supply chain issues, at least in the early part of this year and that's what we've seen and heard from others in the space as well. | direct | [
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2dc8372308eb4b00def905285d0ab640 | The two new orders in utility, do you start to execute on those immediately and even kind of wondering where you sit from a capacity perspective and also how we think about the burn rate at this is large utility backlog? | Yeah. Those orders are actually out, they're into 2022 and 2023. So those were given just as confidence in our performance today and our ability to hit their shipping schedules. Our backlog right now is already set from what we had received earlier. So this doesn't impinge or impact our capacity at this point. | intermediate | [
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3459e0f163f360d5956096b0996d5a4a | Okay. I mean, considering that as seen some other activities that are going on behind the scene in terms of new work coming. I mean, do you look at this business over the next two to three years as a $1 billion plus sales business? I mean, is there that much visibility out there right now that you can achieve that? | Yeah, absolutely. We are very confident it will be north of $1 billion over the next few years. | direct | [
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3edf4c24e97de23e30d31df1d54e2774 | So, I mean obviously, it seems like you're pretty clearly telegraphing a bit of an upside there and I think if you look historically, I mean the way people will look at guidance, is that, let's say, at least the midpoint is a fair reflection of risks being balanced up and downside in their quant models that kind of price and value stocks based on that. So, I mean, are you sort of telling us that that's not how we should look at the midpoint, the midpoint of guidance, isn't really your point estimate of really where you think that the risks aren't balanced up and downside to that is that a fair statement? | Ryan, I would say that the midpoint is still a good proxy an indication of our balance of looking at on the downside of the raw materials and the inflation because it's so uncertain and it tends to have an outsized effect on our various businesses. And you take India and France and potentially Brazil, and that's why we're a little bit hesitant to say let's move up. On the top side, there are drivers that are in place that I talked about on the earlier question, that could be balanced upside as he talked about getting toward maybe somewhere in that north of 970 number. So it really depends and it's early. Again, I think, after we get another quarter in, then we would have a more firm backlog as we look at the back half of the year to know where it was priced in relation to our cost models. So there is positive tailwinds to our businesses and I think that's what we're projecting is that there -- is at least positive tailwinds. And it's not solely on or operational -- executional risk. | direct | [
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2b4ad8d1482665935902a47af33fd281 | First on, you talked a lot about precision ag and precision irrigation and obviously a lot of big value proposition there. But we've been following this issue of this, quote-unquote right to repair legislation that there's more and more farmers and others saying and there's too much tech embedded in products and they're actually trying to make sure that they're able to fix things without having to consult the dealer in your case for example. Do you have any comments on that and how it impacts the sort of adoption of precision ag and what Valmont's doing to address those issues with customers? | Yeah, I mean, first off, we're very open platform. So everything that we do is built with the service ability. The fact that it's off the shelf kind of technology and easy to maintain and upgrade is kind of a driving R&D principle for us. So we believe we're on the right path with the grower in that sense. That if it needs to be self-serviced, it could be and it was easier for them to bring in a dealer they make that choice. In terms of the overall big picture of adoption, we saw this in cars, we've seen it in other types of capital goods as well where tooling is specialized and it's not easy to work on things that are computer base. I think that's just a function of technology. And I think, while there is some initial push back because people were used to hopping under the hood, ultimately the technology benefits outweigh the fact of being able to service it yourself. We're going to try and -- on the side of making it easy, so that as long as we can, because the value proposition for a grower is they can go out and do it themselves. So we're going to stick with that is a guiding principle, but know that the market eventually will probably to succumb to the fact that if there is people out there that are making it a closed system, we'll see how that goes. I think only legislation would change that at this point. | direct | [
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9da2bb79b7ff976a9880a636bae06e0b | And then my last one was just a real big picture, and I know you don't have a crystal ball anymore than anyone else Steve, but I mean in terms of the cycle, the duration of this ag cycle as we shape this up, we've obviously been through a pretty lengthy hangover after things got maybe too good for a while, and that was -- there was some fallout that lasted from that, and now we've got corn up above 620 a bushel yesterday, and things just seem to be really taking off. I mean, what's your view on on the duration of this one? I mean, can we -- can we be in for a multi-year cycle or is there a risk of things kind of overheating and and getting too good, too soon? | Well our perspective is that the government payments last year, and frankly in the year before really help shore up the balance sheets of the growers, and now that they're getting of a real quote-unquote net farm income and it's coming from the fact that the supply demand ratios are where they're at. If you look at protein stocks, very low. If you look at grain stocks, very low. That sets up at least for a multi-year event. When we look back at our history, where we have seen our cycles as we get about seven years of up, followed by seven years of kind of a declining market. That's what played out if we came off the 13 super cycle, as we trended down and now it tends to move back up. If you throw another weather event that gives you more confidence, that that duration will last even longer. But right now, again, all the fundamentals are there to support the higher price of the grains at least well into next year. Beyond that, obviously, it is more a little bit of a crystal ball, but there are just low stocks. And there's a lot of use. So we feel like it's -- it should be, have at least a good duration here. | direct | [
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f7b1112d18796ad0c7b7d2579d37c630 | I just wanted to ask one on cash flow, just given the inflation to likely increase in inventory. Can you just talk about what you're expecting from a conversion standpoint this year or an investment in working capital standpoint? | Yeah, so and over the last couple of years we actually had really strong conversion 1.3%, 1.4%. This year it's possible we'll go a little bit below 1%, just due to the inflationary pressures that you combine the three years definitely will be over that 1. So as always with inflation, it will put pressure on inventory receivables etc. We are taking a lot of initiatives to optimize our inventory, to manage our whole conversion cycle, which will have a strong benefits on our cash flow. So we'll have a strong year on cash flow with some pressure from from steel. | direct | [
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5dbd7d964c2dfbb1c6eaa4e8824d0815 | Darrin, my first question, I like that slide eight, you all have, it really shows the deep inventory, so my question is around that deep inventory. I know kind of the next 80 or so wells you have planned certainly seems like there's high confidence there. Could you talk -- again, without obviously going in too much detail, but it talks about here that even of your 500 locations, you all have the confidence that 2/3 of these are estimated to have sort of that 55-plus IRR at 55. And so I'm just wondering, is that all -- looking at that slide, is that all kind of in that general area. I'm just wondering how far out if I would draw the circle, I mean is the confidence continuing? And is this all just -- I guess my second part of that is really just this year, next year, would you consider most of this now just sort of pure development activity. | Yes. The -- We do have a great inventory, and I appreciate you acknowledging that. The -- when you think about where these wells will be drilled, they're really all across our acreage. The longer laterals generate better returns. And so we can have longer laterals. Where they show up on our acreage, generally, they rise to the top. So there isn't really one particular area or areas that generate the best returns. It's really all across the acreage and plays to function well spacing and lateral length play a role in those economics. | intermediate | [
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b3467fee2fb5d7eaf307a3e646b2dd68 | Okay. Okay. And then just lastly, just looking at cost, maybe for you or Rusty, it looks like for us that the costs had gone down a little bit. I'm just wondering, based on sort of assumptions, not only OFS, but just again, just ops cost in general. I'm wondering if you could talk a little bit about that, kind of what expectations are for at least the remainder of the year for that. | Yes. So relative to well costs, we're working to drill our wells from existing pads to utilize existing facilities where we can to put as many wells onto one pad as we can and to drill the longest laterals that we can. So those are all things that we're tweaking to improve and lower the cost of the total wells relative to the lateral lengths that we complete. So from an inflationary standpoint, we didn't really see any direct inflationary pressure in the first quarter. And by and large, in the second quarter, we're overcoming what little inflationary pressures we see out there with efficiencies in our drilling and completion program. | direct | [
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2c705d6a079cc8078df6615d466f50ab | On the new pricing actions that rolled in a little bit late, what do you see there typically in terms of attrition or other impacts kind of downstream when you go about rolling those in? Is that a risk factor for later? | We have seen zero attrition that I can think of. It is not a matter of risk of implementation, but it is very much a matter of timing. The process is more complicated than simply notifying someone because many merchants utilize our offerings for buying down rates. The conversation involves how programs will change and what buydowns will look like going forward. We underestimated the complexity and timing, especially having these conversations in Q4 with merchants. From a consumer price standpoint, we continue to believe there is very minimal elasticity, so we don't think there's a measurable impact on the top line and top of the funnel. | direct | [
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3334026aa5826fece7563437ff5e5a01 | I also noted that more of your GMV was coming from interest-bearing loans, and as you called out, the highest ratio in the corporate history. Can you just kind of comment on how we should expect that to trend going forward? | It's generally reasonable to expect as the Fed rate continues to go up or remains elevated relative to last year to see more interest-bearing loans versus zeroes. However, subsidies to reduce rates or eliminate them entirely come from both merchants and platforms as well as manufacturers. Overall, the trend should be expected to be toward more interest-bearing loans, but we're still very much in the business of finding ways to offer consumers attractive deals that contain no interest at all. These are just obviously far more valuable now that the overall borrowing cost for consumers has gone up. | direct | [
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f66f1403a2b195727d1b191736a4e506 | The new guidance, especially in the second half of '23, points to lower volume and revenue growth and RLTC that's actually going to be down year over year. I know you stuck to the profitability target, but how are you thinking about the longer-term margin and profitability of the business? | We continue to believe that the long-term range of the revenue less transaction cost as a percentage of GMV should be in the 3% to 4% range. Q2 has some timing factors distorting it. The business is a mix of split pay and longer-term monthly installments that mix to reliably predict the 3-4% range. We feel good about the quality of assets originated this quarter. From an operating profit standpoint, we're in a volatile macro environment, so we're not holding ourselves to the framework outlined a year and a half ago. We laid out our profitability commitment for the end of this year to get ahead of that from a framework standpoint. | direct | [
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544490236d07cb0cc7224cd2dfe8fb70 | I wanted to explore the long-term profitability question again. But from the viewpoint, I feel like I've heard you say at conferences like one of the biggest toggle points is really kind of the human capital aspect of your business. You just obviously just did a very large reduction in force here. So my question is -- that seems to be helpful today. But to the extent that you're able to sustain long-term profitability, are you going to have to lean into something that requires a lot more automation on your part? | The reduction in force rolled back six months of engineering hiring. This is not about everything being replaced by robots. We've shifted geographic hiring focus to Poland where we can attract exceptional talent at lower cost. We're reducing the scope of engineering projects we're investing in currently. We're not building things concurrently that will create the next $1 billion business three years from now - we'll have to build those a year from now instead. We're still writing a lot of code and will continue to do so, but we've narrowed our focus for now. | direct | [
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66dc497b999b4bb8cc9b7e273b086614 | As you increase APRs up to 36% is the cap, and then you're also, I guess, toying with the idea of increasing MDRs on the 0% APRs, which kind of puts a burden on merchants, I'm just wondering, do you kind of foresee any, I guess, diminishing returns associated with that? From a merchant perspective, I know you have to get some approvals, it sounds like, in order for you to actually take those caps up, but I'm just wondering how those discussions have gone and what that kind of feels like from a merchant perspective. | Everyone, merchants and Affirm alike, are keen on more volume. We are fundamentally governed by yield and risk management. If we can increase compensation for taking risk, there are many situations where merchants are willing to pick up increased cost to pass savings to consumers. This works well for direct-to-consumer brands. In other cases where brands can't shoulder more cost, if we can raise rates, we'll increase approvals. It's not about expanding margins, but helping merchants sell more in a period of consumer slowdown. The conversations are not difficult with merchants. We've tested 36% vs 30% APR and found consumers understand the small difference in true cost. | direct | [
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61c24ae1b720eeb351f031289edc766e | I just wanted to start on GMV. I'm just looking at the new outlook there. You talked in the shareholder letter about some slowdown in discretionary consumer spending. But just wanted to take your temperature on how much of the lower outlook on the volume is that versus other factors, whether it be competition or just some tightening of the credit box. | Discretionary spend is down. We saw electronics down about 11%, homewares and sports equipment down in the high 30s around the holidays. People are digesting pandemic purchases. We expect this to remain muted for at least a few quarters. On credit, we set the loss rate we're willing to live with and manage everything toward that, which is why delinquencies look good. We're willing to compromise GMV to maintain industry-leading loss rates. Consumers are pulling back spend, especially on discretionary items. To reaccelerate growth, we're focused on Debit+, off-line and lower average value transactions, and launching new products with merchants. | intermediate | [
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532a6f221094a146da71b760ab8e0795 | Just looking at your FY '23 guidance, you're calling for cut at the midpoint on revenue of 8% and transaction costs to be cut by 2% at the midpoint. Just wondering what that -- why there's that big differential. Any call-outs there? | The guidance for the back half of the year on transaction costs reflects continued volatile macroeconomic conditions, especially in capital markets where we expect pressure on yields for capital partners. The pricing initiatives we discussed should help, but are not fully reflected in the mix yet. We expect this to be a source of near-term pressure. | intermediate | [
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9f4b4c21417729ff694f6d1481744c48 | Can you just provide us an update on how the Shopify partnership is ramping and how that runway for growth looks like from here. | We're very happy with the Shopify relationship. These partnerships typically take 2-3 years to get to full deployment. We're still at a stage where meaningful improvements in GMV or profitability come from new projects and rollouts. We have a significant percentage of effort dedicated to our 'Powered by Affirm' component that powers Shopify and other platforms. There's still quite a lot of opportunity there. Generally, we're very excited about the relationship and spend a lot of time working with Shopify. | intermediate | [
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2318b2b242393f7b4ddda8be834a05e6 | Michael, by all accounts, it would appear that capital markets are maybe healing a little bit, and equity as a percent of the total funding platform is up pretty substantially quarter on quarter. So I guess a couple of questions. One, how do you sort of assess the state of the capital markets from a funding standpoint? I noticed you expanded capacity. And two, do you think you're going to be able to stay below that sort of 10% pre-IPO equity funding threshold through the cycle? | The capital markets are healing. The new year did a lot for debt capital markets broadly. We're seeing the ABS market open up and more constructive conversations with forward flow partners. The tone is markedly better as volatility appears to be reducing. We feel much better today but remain cautious given ongoing uncertainty. Regarding equity funding, we will absolutely stay below 10%. We think this is near the high watermark. The seasonality of our GMV causes a big step-up in total portfolio that we don't expect to continue growing as quickly in the back half of the year. We feel confident in our ability to execute securitizations and add new capacity with forward flow partners. | direct | [
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0cd82cbbdddd3199ea4d22ba34d898e1 | On the loan loss reserve, I know it's -- you've been admonish as not to necessarily consider that as we would a more traditional financial, but can you just discuss sort of the 5% reserve and where you think that goes in the current environment should it fall given the slowdown in growth? | The 5% reserve is linked to delinquencies. We have a target loss rate, and our delinquency trends are pointing down unlike other players. Our asset turns over very fast, so we're not building allowances for loans we don't own yet. The 5% reflects the quality of recently originated loans given the velocity of our book. It's connected to the declining delinquency trend and reflects strong credit performance. We're in control of credit outcomes by changing our credit posture as needed. | intermediate | [
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2c6ce43852ae4cbe5e666dcac74001c6 | I guess just thinking big picture here, Michael, what surprised you versus the guidance you just laid out last quarter? Was it the pullback in consumer spend? Was it that you thought the pricing would get all pushed through? Was it the mix of loans? I'm just trying to get a handle on the reduction in the guidance going forward and kind of the surprise in that, that caught you by surprise? | The main surprise was overall consumer demand, which impacts both aggregate GMV and the mix. There was some progress, like Peloton performing ahead of expectations. But there was legitimate slowdown in broad line merchants and durable goods categories. We also continue to manage credit very tightly, which creates some short-term top-line headwind but ensures excellent credit performance and continued access to capital. | direct | [
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6516f833226297c143b29d021071a450 | Can you update us on Debit+ and the prospects of profitability there? | We spent the last 6-7 months studying Debit+ usage and optimizing profitability. Initially we encountered some unprofitable transaction types, but after significant machine learning work, every class of Debit+ transaction is now profitable. We've also improved the onboarding process. Soon Debit+ will be integrated directly into the main Affirm app rather than being a standalone app. We're very bullish on the product but I won't give specific numbers. The team knows the pressure and excitement we have for Debit+. | intermediate | [
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15dc304563946fb4808f33b6bf186a6e | I wanted to ask about the merchant accounts actually. So see the data on the slight decrease in total merchant counts, and I understand that's driven by smaller merchants as you're showing a very helpful disclosure on what's happening with the larger merchants. So even with the larger merchants, there's a pretty noticeable slowdown in kind of the incremental merchants added to the network. Just wanted to ask about that, what's sort of driving that in your view? And what's your expectation for that trend going forward? How important it is to the overall growth of your platform for that kind of number of larger merchants, let's say, to keep growing at a decent pace? | Merchant count is a bit of a vanity metric at our scale. We're well-penetrated with huge merchants. Mid-sized merchants are important for incremental volume growth. Small merchants can become inactive over a quarter. The true count of installed/activated merchants is larger than what we publish. We're focused on GMV growth rather than just merchant count growth. The growth of the merchant base is a set of weights for total GMV, which is what we're entirely focused on. | intermediate | [
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4e365aae218a569261f710bae223c7af | Wanted to ask about the Affirm app and kind of the transactions that are initiated through your app, through your website. I think of kind of looking at these numbers correctly, the proportion of that has declined a little bit sequentially. But my question is really broader, sort of what are the -- what are your initiatives around improving the engagement with the app? And again, how important it is to keep investing in it? And what are you doing to keep driving traffic through it? | The app is extremely important to us. We're investing heavily in the app, especially as a companion to our card product. We have many experiments and new features in progress to improve engagement. While the proportion initiated through our app may be slightly down, we're impressed we've held it constant given rapid growth with large partners like Amazon and Shopify. As growth from those partners attenuates, we expect our share to pick up. The overall health of the network is reflected in engagement stats, user growth, and transaction count growth. | intermediate | [
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9edc4b1e3fde69bf37aa30e2ad7c3161 | I wanted to start kind of high-level question. You've done a fantastic job on the balance sheet, on the expenses, taking out expenses and on the new product development. But obviously, for many reasons, the pandemic being one of the biggest, there's been no traction so far on the top line. And I guess, it's pretty easy to see, certainly, that coming back in the near term. Could you take a step back and just talk more about the competitive dynamics? And what gives you conviction that you'll be gaining share with all the new products going forward? So you probably have to break it down by categories a little bit. But just beyond the kind of recovery in the near term from the pandemic, talk about the opportunity for share gains and the competitive dynamic out there, please? | Yes, sure. I think we had a lot of lessons coming into the end of 2019, which probably for everybody seems like forever ago. But with the new products at that time, we learned a lot about what we needed to do with the commercial team and marketing programs, engagement with customers. And we saw that growth in the most recent pre-pandemic quarter, which was first quarter 2020, especially in North America with power mobility where we, at the time, had a very new set of products that had just launched. Then the pandemic hit, and of course, first quarter this year is still heavily impacted by the pandemic, remembering that part of our business has a 90-day quote-to-order cycle.
So even though vaccines are happening, and in some parts of the world, quarantines are being lifted, that's got 90 days trailing timing in North America, and there's still many jurisdictions where we're not fully resolved from the pandemic, particularly in Germany, France, U.K., which are big markets for us in Europe. But in general, Bob, when we look at our opportunities to grow, we look at respiratory, which has been strengthened in response to the pandemic. We have new product refreshments going out in that portfolio for years to come. And we think the improved features and lower total cost of operating those devices for our customers will be a compelling reason to continue buying from Invacare in the long term and grow that part of our business. On the power mobility business, we went through the pandemic absolutely unabated in terms of our R&D efforts, which was really one of the benefits of the breadth of the company's product portfolio. The parts that were going well allowed us to fund R&D and parts that were retracting a little bit during the pandemic.
And so we launched a lot of products last year, and we're launching products this year. Essentially, we'll relaunch the products last year -- that were launched last year this year for anybody who didn't get the full encounter because of quarantine measures through the pandemic. So we think that will add to an especially strong portfolio for our commercial team globally to be in front of customers, engaging with interest and helping their end users find great ways to be independent and have mobility. Those products that are coming out now have really compelling features, great user interface, very intuitive, more powerful, faster, lighter, just all the kind of attributes that end users and customers want. And then on the lifestyles business, long-term care is still largely unopen around the world.
And while we've been doing a nice job fulfilling demand for people who are providing care in home settings, we still have to see the turn back and sales opportunities to address needs of our long-term care operating customers. And there are a lot of benefits of our new products that long-term care customers will have in terms of reducing their worker injuries, back strains and other kind of injuries that happen, taking better care of patients. Newer products are more cleanable, which is obviously very important these days. So we think, as those customers open our mix shifts back to support them, that will support growth. So Europe and North America, which is 95% of our sales, I think, have dynamics that are improving in the marketplaces.
I think respiratory looks like it should grow. Lifestyle should grow in mix and total revenue as we address the customer segment that's been somewhat normal for a year. And mobility and seating, we still see a lot of pent-up demand coming into the market this year and a lot of new products that should help us get more interest with our customers than we've had in the recent past. | direct | [
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4b2070a08b8c05c0b777f64bada0fede | Okay. Got it. That's great. And then just kind of following up on that. The other portion that's important for the thesis is the improvement in gross margins. And I think, obviously, in North America in this quarter, quite a nice job of maintaining margins despite the down revenues. So maybe talk about how much room there is to grow gross margins? And what will it take? Is it just operating leverage on higher sales? Is it the new products coming in at higher margin and shifting the mix to the new? Or how are you thinking about getting the gross margin expansion? | Yes. Those are all the ingredients, Bob. I think all of our new products are designed with more value for our customers, which should afford a better value exchange for us, and they're all designed to go more smoothly through our supply chain at higher efficiencies and lower cost. We've got some temporary inefficiencies, especially in the first quarter, as there were a lot of stutter stepping in the factories to deal with the supply challenges that happen on short notice. So you can imagine factory managers maybe not quite having all the parts to complete a day's production in one area and shuffling over to do something else to keep everyone productive and then catching up the following day.
We just had a series of those kind of rolling inefficiencies, which took us a little backwards on variances this quarter. But that will get resolved as the supply chain normalizes globally and we're taking steps to get more inventory, so we're a little less susceptible to day-to-day variances and when things arrive. And then just in generally, although we don't have big plant consolidations planned in the future, we've got a lot of interesting work to do inside the four walls of our factories to get more efficient. And the IT tools that we continue to deploy will help our team make the right decisions, a little more precision to help get cost out. We have a great workforce that's been very diligent in supporting our customers and getting us ready for, I think, what's going to be a really strong year of growth. | intermediate | [
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3723f0de6b551d320794c7e022eceaef | This is Brett Fishbin on today for Matt. I wanted to start on the broader trends. Just wanted to start on the broader trends in Europe. I think you mentioned some improvement already. So maybe a little bit more color on what you're seeing just given what we've heard about the ongoing pandemic impact in the region and understanding there are differences by country. | Yes. I think probably the most relevant countries to talk about in terms of prolonged quarantines are Germany, France and the U.K., which are probably our top three markets in the European Union that we serve. While our customers are still open, and that's different than in the second quarter last year, so those would be often dealers in municipalities around those countries, customers aren't going to them for the kind of normal healthcare needs that we would expect in the nonpandemic period. So there's more demand than there were at the low points, but still prolonged restrictions that are somewhat affecting us.
We believe pretty strongly that as the weather continues to get nicer, people get vaccinated, that the market will grow quite strongly. People are going to want to get outside. It's been a long time since people have been emulating. There are a lot of foregone product uses last year that will come into the market in the form of pent-up demand and seeking to have solutions for independence and care of this year. And we think it's going to be very strong. We see early trends of that in all the markets. The Nordic markets have been relatively resilient throughout the quarantine. So I don't know that there's a lot of change there.
They administer our kind of products somewhat differently, dispensing those through places that are not normally used for acute care delivery. So people have access to durable medical equipment without having to encounter potential exposure to COVID. And other markets are kind of a mix. But we feel very strongly that the measures that the European governments in Germany, France and the U.K. will get those populations through this, so that as the weather gets nice, things get back to normal pretty quickly. And we saw that in the third quarter last year. A strong example is France, where they went through a period where restrictions were lifted and sales came raging back as people got back into the market to get the devices that they need. So we think that will be replicated pretty shortly here. | direct | [
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c93a70551681f91635f2d11a23578713 | All right. Great. And then just wanted to follow up on some of the supply chain commentary. Have some of the investments that you guys have made over the last few years around manufacturing optimization help alleviate some of the headwinds that you're currently seeing? And do you think that they could, going forward, provide some sort of competitive advantage in potentially an increasingly inflationary environment? | Well, our team has certainly been well exercised since late 2018 when we were forced to mitigate some short-term tariffs that we fully offset in the meantime. And they did that by looking at alternative sources and figuring out ways to devise our supply chain to be affected despite those increased costs. Those same kind of challenges now with new talent also coming into the organization and new IT tools that help the organization plan better. So we've taken steps like increasing inventory for fast-moving goods so that we're not so susceptible to containers being a day late or two days late, we've got a better buffer. People in every industry have encountered prolonged transit time. So trans-Pacific, transoceanic shipping times have probably doubled in the last year. We plan for that or more than that now. So we're not surprised when it does take that long. Those are relatively routine.
We have great 3PL and logistics partners who were better aligned with in routes of trade. And then just some of the things that settled down that happened during the quarter. We already probably don't talk very much about Brexit. But in the first quarter this year, people remember the pictures of trucks waiting for days in line to cross the English Channel. And those things have all resolved now, and you can get carriage relatively predictably in routes like that. So I think the team and the tools are doing really well, and our global organization is much more attuned to deal with things like this. I think the economy is going to heat up as well predicted by economists and business leaders around the world, and we're facing into that with, I think, the right set of assumptions. So even if it continues, our business shouldn't be as impacted in the future. | direct | [
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15f69b61bcaa0395f761925440a733f8 | Can you talk about where you're at globally in your ERP implementation across the business? And what gives you confidence that you'll get continuity of operations going forward? | The Alpha acquisition has give us an opportunity to evaluate where we go next with our strategy. And we're taking a little bit of time right now we're coming off of a tough implementation down at the Richmond plant. So it is the right time for us to take a breath and evaluate the next phases and it's really a question of the sequence and what are the priorities and we are in the midst of that evaluation right now and it will be, it's going to be a long journey, it was always going to be a long journey and we should have the clarity, we hope to in the fall be announcing kind of the next phases and where we go with our digital core investments.
I think most of it will be tied the way it feels right now, Noah is -- it will be more focused on the distribution side of the business and the configurations part, especially with a lot of the modular new products and a lot of the Alpha systems, we're getting a lot of traction with the customers from the system side. So I suspect, more of our emphasis is going to be there versus going into the traditional manufacturing factories and plugging away out an MRP system. So we don't have that exact color right now. But we'll certainly give you that update in the fall. | intermediate | [
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019b2721e9f076a60e22230b1a273d49 | You highlighted the increased CapEx to build out the TPPL capacity and I guess a related question to this idea of continuity stability (ph). How do we think about the future flexibility of those factories to serve different end markets? We can see that many different -- different verticals and other different skews you're manufacturing, a lot can move around in your individual markets in any given time period. How do we think about what these investments will provide, not just in terms of added revenue, but maybe the flexibility to serve different markets? | It's a solid question and it was a driving influence to the specification of our new high-speed automated line actually. So, to your point, we have to have an envelop on these machines that can carry the full spectrum of products. You bring up a good point, the history of this technology started way back in aircraft batteries a long time ago and, but one of the key drivers for our growth over the years in terms of operating performance has been the expansion of that core technology into new markets and the block sizes are getting bigger and bigger and that's been one of the big challenges for the factories over the last year or so, has been this rotation into these bigger blocks, especially as we get into more and more motive power.
So it's very clear that we have to specify new equipment going forward that can accommodate the full spectrum of the range and that's what's driving a lot of our decisions right now and we also want to have plant redundancy, most of our customers want at least two factories that are tool for these high runner products. So these are, it's an astute question and it's very clearly one of the things that's driving the capital investment, we have to build flex -- flexibility, we're building modularity into the products and we have to build that same flexibility into our assembly equipment. | direct | [
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be7f734a649e4c9f839c6118917a6e53 | I think in your remarks you mentioned the customers you're serving with the Alpha EnerSys integrated offerings are having problem with other suppliers. Can you maybe speak to that a little bit more in terms of what challenges are being encountered and how do you think you're differentiating? | So, Drew gave me a call last night, was after still laid on the West Coast, but he gave me a call last night before the call and here just left a meeting with one of the large wireless customers. And that's Drew Zogby is the President of the Energy Systems business. He came over with the Alpha transaction. And so, and the feedback from Drew was, we're working on a big project, which we're excited about and it's a combination of a per sale and closure, Alpha cordex rectifiers and EnerSys batteries. And the ability for that customer to provide a single purchase order with a single configuration part number just dramatically eases that and then we even have the ability to do full engineering furnish and install as well related to the site. So that's such a, it's so much harder when they have to coordinate multiple purchase orders, try to coordinate what fits, when is it going to arrive and then when there's problems or if there's problems, there's a lot of finger point typically, as people are trying to suss-out who's to blame for whatever is going on. And what we are offering is really one throat to choke and it's especially in today's telecom world where there's been so many headcount reductions and that tends to be the future, I don't think, I see any letup in that the big Telcos just don't have the expertise, they used to.
So they're going to rely more and more of their suppliers. And so we feel like the strategy and the combination is positioning us extremely well before and we -- and really we wanted to get this set up and ready. So that when the 5G investment starts in earnest, we can really take a leading position and simplify the lives of our customers. That's the host. That's a major driving part of the whole strategy. | direct | [
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f0af2b417cf0b110d18bbf6196054e9b | Dave, I just want to continue on that last point you made from what I recall cross-sell had some sizable customer concentration and that became something of an issue. This Alpha has similar customer concentration or not? | I think, John, the issue is the industry has customer concentration, so whether it's wireless or whether it's broadband there's just dominant in these industries and so you can't avoid it. So Verizon and AT&T and Sprint T-Mo that's it, is really three customers. And I apologize, I'm getting a little echo here. And then on the broadband side, Comcast and Charter are dominant. And so in any one of those customers decides to take a little break on spending or to lock down their balance sheet for a little bit, we're going to feel it and that's the nature to be, so, yeah, I would say it's not so much Alpha, is it just the industry, but we -- we try to cast as broad and that is possible and we try to maintain relationship approval at all the various carriers broadband companies. | intermediate | [
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ac77607b09886ea95df9b4bff690df91 | So, last quarter you kind of thought that the Telco spending would recover in the second half of this fiscal year. Is that still the case or not? | It's dealing more -- getting more confident every day. That phone call last night was helpful in that regard. And as we alluded to in the prepared remarks the -- we just think that there's certain of these types of investments, especially on the maintenance and operations, the operating budgets of these company that -- you can forestall some of these things like battery replacements, but you can't -- eventually you're going to have and get them done. So -- we're confident that recovery is going to occur. It's really two accounts and I don't want to name names, but it's pretty well publicized. One in the broadband space, one in the wireless space that have their own reasons for locking down some spending, I think a large of it. My sense is -- is that everybody is trying to get their strategy and their balance sheets ready for the inevitability of major investment in 5G. So, I like to thank, if it is the calm before the storm. But I can't give you a definitive answer on when 5G is going to start in earnings. | intermediate | [
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2f969a278fed737bd4a94fb8c819badc | Regarding first quarter guidance. I just want to make sure, I understand some things regarding Richmond and the motor side of the business. How much revenue was deferred from Q4 into Q1 in that business or was that revenue actually a loss. And how much you said some of the cost are going to be incurred in Q1 and is that embedded in your guidance? Or you'd be excluding those cost associated the ERP roll-out in your guidance? And maybe you can quantify that number also. | Our guidance includes that knock-on impact from Richmond in incurred in Q4 as it rolls out into our Q1. The total number on the revenue is a big number 25 type million of which we would anticipate some -- we have the ability to probably pickup $10 million to $15 million of it in the upcoming quarter, now. How much, if any of that has been lost, I think it would be hard to argue that we didn't lose some of those quarters that went elsewhere. But we -- it's for us it's -- well we hate to lose an order, it's more that -- that customers next order comes back our ways it's much more important item for us. And we are hopeful that our customers will hang with this and understand the situation. So the -- I would say that there is about $3 million as I said in my remarks of drag on impact that is 21 (ph) that is reflected in our guidance. | direct | [
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c64a36216f069401afdf3cd0742c849d | First question is -- it looks like you've given us an estimate on the content per small cell site for Alpha. And I just wanted to drill down on that a little bit is the estimate roughly $1,000 per small cell site for Alpha content? | Yeah, yeah, that's a good, that's a good rough out of the number. And you can see it's -- it's two ways that is there and that's why we tried to depict there, one of the gate -- the Gateway solution is really tied to HFC Hybrid Fiber Coaxial networks and then the line powering solution, which is the other picture we showed, is using a kind of a traditional Copper Twisted Pair way of bringing power to the small cell site. We have both and we really like the situation where they're using the existing HFC networks to provide power (ph) to the small cell sites. We think that's a great win and we hope and we encourage many of the wireless Telcos to use those HFC networks for backhaul for real estate for power. | direct | [
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66c2d42cff80d97fd3caa9749d1f7604 | Then I was under the impression that maybe there would be more components required in some cases than what you're depicting in those pictures like the downconverters, the power supplies the... | Okay. So you're right, that's a -- Brian it's a good point that the downconverter is at the small cell site, but there is an upconverter in an enclosure with DC rectifiers and battery somewhere at a node, somewhere else, that's not depicted, but yeah you're right, there is more to that line powering then you see in terms of the Gateway remember, what's happening there is the tower is coming through the co-ax. So it's actually pulling the power through the co-ax. So as they add more and more loading onto the co-ax that's going to require either more or larger XM3 UPS systems and Alpha cell batteries, which again we have a very good market share in that outside plant powering for those coaxial network. So, yeah, there's much more of the store. But, and the numbers we quoted were very specifically and narrowly on just the small cell side stuff. But to your point, there is a lot more to the story than just that.
But, Brian, this is Mike. The -- one of the attractive features of the product offering, is it doesn't take that much to get in the business. And so it is that the fact that there isn't that much more to add until you build up significant maps to have that upconverter and the power supply. So they can get into this game with less cost and maybe other solution.
Right. So we had, we had three small cell site industry experts address our combined sales meeting. And that -- my takeaway Brian as I told as you always need three things. You need real estate, you need a place to put the small cell site, you need power, you have the power the small cell site and you need backhaul, you need to get the data from that radio back to the network. And we think that -- the especially the Gateway solutions where they're using those small cell sites on existing HFC networks is perfect and to Mike's point you can pop those in very quickly. So if a wireless carrier wanted to roll-out 5G in a geographic area that has a lot of HFC network already there, like my neighborhood. I can't walk more than few feet without seeing an Alpha box on a hole somewhere, that it provides an opportunity for the carriers to deploy very rapidly. So we're excited about the products and the positions we have, and we like the fact that we're getting things organized before the 5G spending starts in real earnest. | direct | [
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4431195c8b2e52d0dd985697176c407e | You mentioned that the $25 million in cost synergies is on track. Can you comment more specifically on, what has been realized or what are we seeing in the numbers so far and what do you think you'll, that we'll see in the numbers in fiscal 2020 versus fiscal 2021 of that total realized gain? | Well, the -- total target within the $25 million to $26 million range, Brian. And our estimates for this year range from $10 million to $16 million depending on whether you're talking calendar or fiscal period. You can see or I will inform you that the sequential step up from our Q4 period ended March 31, to our Q1 period ended June 30, as stepped up by $4 million. So, there is a little bit higher volume in that timeframe, but it also reflects some of those synergies are taking hold. So, if you were to put it in a range, that range right now is in the $10 million to $16 million. So if I drew it at line and said it's somewhere $13 million to $14 million for this year with the other half going into next year.
And one of the opportunities we have because, we assumed we would lose some existing customers and we deflated our total estimate with the assumption that we would have some lost sales and we really haven't seen that yet. So there is upside potential to do better than that. Albeit those higher sales, the not lost sales are should be fairly, immediately, but the sales we're connecting our products and selling them elsewhere -- where the world are benefits that's what takes at least a year to catch hold. | direct | [
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49efbfd604db1818c6850d28f827e757 | Okay, Mike. And then just to really clarify at this point. So if you say $10 million to $16 million. First of all, so $16 million sounds like that's how we should think about it, if it's a fiscal year that we're thinking about and then, is this a run rate that you would exit, the year having achieved or is that actual $16 million reduction in cost in fiscal 2020? | So, certainly that should be the exit rate that we achieve, and it would be. So I would expect, as I said we are somewhere between $10 million to $16 million in fiscal 2020.
And exit by the time we exit next year we're at $25 million to $26 million. Now, the timing of it for exactly when we hit that full stride is a little bit harder to predict, but it should be pretty close by next year to getting that in the full year. | direct | [
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91774f0c2e0ba0f20615f45e2df168f1 | I was wondering if you might be able to provide a little more clarity on your 2021 guidance. It looks like revenue guidance was roughly flat year-over-year, while you expect LINZESS U.S. net sales to grow 3% to 5%. Is that discrepancy due to higher AbbVie-Ironwood commercial costs or is there something else we need to consider? And I guess are there any additional details if you could provide on how we should think about these costs moving forward? | So if I understood it correctly, I think you're asking about the decline in revenue despite the fact that -- decline of Ironwood revenue despite the fact that we are guiding to increased LINZESS revenue. So maybe just a quick reminder that the Ironwood revenue includes a bit more than the collaboration revenue that we've recognized from the LINZESS collaboration with AbbVie.
The other revenue, for instance in 2020, included a small amount of API sales. We had just a wrap-up of the API sales to Astellas and AstraZeneca in 2020 from the restructured arrangements in 2019. We actually had significant revenue in 2019 related to those agreements and then a small amount in 2020, that's done now. At this point, it's wrapped up and we're not expecting revenue to continue in 2020. So that's one part of it.
And the other part of it is related to the $10 million that I called out as part of the guidance. The 10 million is included in the overall Ironwood revenue, and it's actually down a bit year-over-year or expected to be in 2021 versus 2020. And that is in part due to the restructured Alnylam agreement that we mentioned as well. In 2020, we received fixed payment plus royalties. And in 2021, going forward, we are expecting to only receive royalty. | direct | [
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e7a2f79e136501e633b1f8f86eb47dcf | I believe generic amenities entered the market the other month. I'm just curious if you could kind of speak to what impact you have seen since they entered the market? And has it resulted in any pressure on LINZESS pricing? And if so, how does that impact on pricing compared to your expectations coming into the year? | So yeah, you're absolutely right, generic entities or the single source generic is now available. I think as far as its impact, it's been -- its market share has been eroding over time. Keep in mind, it was the market leader when we entered the market. And obviously, really within the first 18 months, we were able to actually catch it and actually surpassed it with regard to market share. And these -- it's important to remember, these are very different molecules and the overall efficacy and tolerability looks quite different. And the piece that it was been driving LINZESS growth over time has been the high level treatment satisfaction both on the part of the payer -- the part of the physician and the patient.
As far as pricing pressure, yeah, I think it's important to remember, we've been playing in a generic market since we launched with Generic PEG. And so there has been multiple generic options available to patients. And I think it also is important to note that the far majority of patients still continue to be treated by OTCs even though they're not satisfied, and that's really where our source of business comes from.
Hey, we all anticipate further pricing pressure from a variety of areas, including the government. But as we've mentioned before, this year, we've guided to stable price, which we realized. Next year, we did show up a couple of contracts. So there will be some price erosion that Gina had mentioned. But I think the important thing -- the most important thing is how healthy the brand is. And when you look at its demand growth, its ongoing demand growth and what we're seeing certainly as we finished last year and we're heading into this year, I think we're very confident in the ongoing viability of the brand in the marketplace. | intermediate | [
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752a13dafdfc583d9648d67d4675d170 | Just wondering if there is any further color on potential transactions that you're thinking about in the organic GI space, particularly around size of the deal and speed of developments in a target asset? And whether the change in leadership might have any impact on timing? | Yes, as Mark -- as both Mark and Gina mentioned, we're really focusing on these serious organic diseases. We've identified a number of assets, as Mike mentioned. And mostly, these are held by fairly small companies with limited development expertise and essentially no commercial expertise. So obviously, we're really focusing on particularly assets that we can leverage our internal expertise to accelerate time to market.
So we're really looking for an asset that where there is clear incremental value to be created. So we have a very high bar. We've looked at a number of assets to date. But we will continue to strive to make sure that it is the right next move for us as far as where we're going. I mean, obviously it is built -- it is very complementary to LINZESS with regard to the commercial model. But obviously, Mike and his team bring very deep scientific and medical expertise to make a good choice. And then obviously working with Gina's corporate development team to make sure we get the right deal done.
I mean, I might just continue to add, I don't expect it to impact -- the leadership change to impact our ability to be able to continue to execute hopefully our transactions this year. One, I just have a lot of confidence in Tom, especially working with him over these last seven years plus in addition to the fact that Julie has stepped up in giving us additional time as Executive Chair. So I think the combination has put us in great hands.
I would also just remind you that we just talked a little bit on the last question about that small amount of revenue and the fluctuations in API and royalty for instance or milestone payments, but the core business is strong. So the collaboration revenue related to LINZESS is incredibly strong and growing year-over-year. And with that fundamental for growing revenue of our core business and cash generation, it just positions us in a great place to be able to have the financial capacity to be able to not only afford the upfront related to our development stage asset, but also gives us the ability to continue to fund it through development. I guess, this is a P&L based to maintain profitability at the same time. | intermediate | [
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97e0075b3ca88d38b2f24b9dd39a0392 | Can you talk about the trend in gross to net discounting and the outlook for that over the next several years? | Yes, I'm happy to. Especially since 2020 was certainly a great year and one we were quite pleased with. Tom mentioned, we originally guided to net sales price for the year. We actually did recognize price. If you think about the year-over-year growth in net sales, it wasn't just due to the strong demand, it was also price depreciation as well. That price depreciation was really due to thoughtful plan design changes that we implemented at the beginning of the year. So beginning of 2020 where, for instance, we were no longer exclusive in certain plans. But fortunate for us, we didn't see a dip in demand because of those changes.
We also had -- and that was the bottom of the change. We also had some small, I would say, unfavorable -- small unfavorable adjustments in 2019 related to gross to net typical adjustments from time to time. But because they weren't repeated in 2020, it did add to some price depreciation for the year. So then looking forward to 2021, we've obviously we've guided to mid-single-digit price erosion for the year. That is also due to contract changes that we are aware of.
We continue to see pricing pressure, mainly due to some competitive pressures in addition to the fact that [Indecipherable] is going generic. But our strategy for demand growth hasn't changed. We continue to invest fully behind the brands, believe that it will continue for many years to come through demand. And at the same time we want to focus on broad payer access with an affordable co-pay, which is for most of our patients is $30 or less. So in order to maintain that broad access, there are times year-over-year that we need to make changes to make sure that our patients can still access LINZESS at an affordable price. So that's the change this year.
You've heard me say this before that I would expect price depreciation as the norm. I'm personally -- I'm pleased with 2020, but I wouldn't expect that going forward. I do expect continued pressure even pressure throughout 2021. We've guided to the mid-single-digit price erosion, but payers don't always wait till the contracts expire to knock on the door. So we'll just continuing to monitor and execute according to plan, right? Focus on demand growth and broad payer access at the same time.
Boris, just one last thought, and this is really kind of an awakening for us this year. As you know, the far majority of our major plants were preferred unrestricted, meaning we're one of one. And we have made -- we made a couple of decisions last year to forego the exclusivity and move to basically one of two or even a non-preferred position. Yet, we continue -- in those plans, we continued to drive growth, like double-digit growth.
So I think it offers us some flexibility knowing where we are with these plans as far as other options that maybe we wouldn't have normally had. And I think it speaks to how strong the brand is with regard to the preference that physicians or payers want. I completely agree with Gina, as we move forward, I think you have to anticipate some price erosion year-on-year, which is a reason why we have to continue to drive demand. | direct | [
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8670bcd5f796e455790ec324f528b7cb | I think not so long ago, we're talking about our previous prescription option becoming over the counter and how that was contributing to your price growth. Can you kind of -- is that still out there? Is that still helping prescription growth? And maybe can you provide any update on that altogether? | Yeah. I think, specifically, you're talking about removal of Generic PEG from the prescription market. Is that...
Yeah. So there is no question at the end of last year we saw -- not last year, the year before '19, we saw this removal and we saw a bolus, an influx of prescriptions. But I think the big thing that we saw was dynamic change in the market because you've just eliminated the market leader. It's available by prescription. So if they're going to choose a prescription drug, we just eliminate an option and obviously that had a significant impact in people's choice to LINZESS because when patients are frustrated with OTC, the last thing they want is another OTC walking out the door. So not only does LINZESS have a great clinical performance profile, level of satisfaction, but now it's one of actually fewer options with the exception of the recent new entrants into the market, which really are not differentiated at all and have struggled to gain share, as you know.
So we've continued to see LINZESS thrive. The far majority of the business is coming directly from the OTC market, which is where it needs to come from. And we're continuing to increase our overall market share in the marketplace. So I think it's this dynamic change of choice, which has also helped fuel the growth of LINZESS. | direct | [
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093cb0f230dbd95adf66039b4af1f594 | I just have a follow-up question on your guidance. If I just -- on your revenue guidance, if I just take kind of the midpoint of your revenue guidance and take out the $10 million that you mentioned for other, it kind of implies collaboration revenues flattish or up modestly year-over-year. And I was just wondering, is that point to kind of a reduction in the commercial margin or higher investment or what's the explanation there? | Sure. Of course. We do expect LINZESS revenues to continue to grow over time. We also expect margin to continue to expand over time. Just through growing revenue, thoughtful investments. The investments have been -- we've been investing fully behind the brands. If you see -- if you take a look at the numbers this year, I think they're about $10 million last year-over-year. So I think we can still fully invest behind the brand and make more thoughtful investments with the higher ROI as well.
I will go back to thinking about it as we guided to growing LINZESS sales of 3% to 5% for the year, roughly same level of investment. And just to remind you that obviously we get 50% of that increase, right? | intermediate | [
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c65c91dd5d4225dc5a8e9aa2afc8f549 | First off, wanted to just ask about the buyback, the $300 million you guys authorized, it looks like it expires in a little bit over a year. Is the intention to kind of use that is like $75 million bucks a quarter or would you consider doing something like an accelerated share repurchase program? | As we mentioned, Alex, all the alternatives are on the table. As we continue to move on and disclosures are required, we will move on. Obviously, market conditions are the driver to determine the exact amount on timing. So, as soon as we -- something comes up that we have to disclose, you will know about it immediately. | intermediate | [
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847f01fea8199310d2ea68195dbfb5a8 | Okay. And when can you actually start being in the market repurchasing shares? | We expect by May 1 to be in the market, we expect. | direct | [
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761371230d1545b3ed14a097121a161f | Okay, great. And then, I wanted to drill in a little bit more on some of your commentary on the potential rebound for loan growth in the second half. I think you alluded to some reconstruction projects, may be helping to drive that and obviously the economy reopening. Maybe it would be helpful if you could elaborate a little bit more on some of those projects. And then, there are certainly a lot of people out there that think that as some of the stimulus wanes that loan growth could really explode, whether it's later this year or earlier next year. And maybe you can talk a little bit about how you're positioning the balance sheet over the next couple of quarters in order to really be able to make sure to monetize or to take on as much of that loan growth as you possibly can. | Well, first of all, it's -- market conditions on execution is a combination of both. If you look at it by business, we expect the mortgage business to continue its trend of hybrid refinancing and actually we have seen an increase in purchases. There is actually new construction in Puerto Rico for the first time in many years that are being -- are into closing and are into being delivered. Even though that doesn't necessarily achieve growth in our portfolio, obviously the run-off is being accelerated. At some point in time, that run-off will also level.
Look at the consumer, we saw -- obviously the liquidity in the consumer hands, as we all know, is extremely high. When you look at the deposits, auto sales continue to grow. They have shown sustainable increase. We expect that to continue. We also expect -- when you look at the unsecured consumer business, we see good traction in the quarter. And we expect some recovery. PPP loans disbursements are -- will be done this quarter. So that liquidity should also help us go back to the small business lending and the small commercial groups, which will benefit from it. Obviously we do expect that after that, obviously some incremental utilization in the credit lines.
Commercial deals are -- you have to be out there, you have to be competing, you have to be trying to get the deal. There's deals going on out there and they just take time to get to them and be the winner. We have a large portfolio, which we also have to protect and take care of our clients. We're also looking into opportunities. There is reconstruction in Puerto Rico going on not only in infrastructure, but in private projects, in schools, in new housing. So we're starting to see the municipalities have significant number of projects that are still related to the funds deployed for Maria. CDBG funds, the $8 billion were restated with more simplified rules a couple of weeks ago. So we expect -- we're out there, it's really being out there, execute and obviously we recognize that we're also working on integration. At the same time, we are happy to say that we completed the commercial team's integration this quarter. So, obviously incremental focus was back to the business also.
So -- and then Florida, we continue to be an active participant in the market. Same way, same strategy that we use prior years, you have to be on top of it and try to make -- look for opportunities to compete and grow the portfolio. Obviously, I don't see that happening this quarter obviously because that is not what the market is showing. | intermediate | [
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] | B |
37d831db98d66ab1cbc4d5bdd7c139d5 | Yeah, I'm doing well. Congratulations on the buyback. It's been a long time coming. And this is a recognition of all the work that you guys have done at the bank over the last 10 years. Some of your competitors have said that long-term capital ratio, specifically CET1 on the Island, could be entering kind of a new inflection point, given all the stimulus on the Island, the return to growth, this is moving out of a perennial state of recession. I know we just got the buyback today, but thinking forward, how do you think about long-term capital on the Island? Could you go down to the 12% range CET1 over time? | Well, again, look at the economy cycles, as always has been. As a point in time, Puerto Rico had very beneficial economy for banks to be in a different position. Obviously we've been in many tough times for the last 15 years. And it's about time to do the recovery, it continues to show and we probably have the better opportunity to get to that level that you mentioned based on the -- what is the designated funds and the activity that we're seeing. So, very difficult to predict. But when you look at all the evidence and elements that are taking place, it's a possibility.
Yeah. I don't see any reason why not. It's seen significant improvement trends over the years and in the number of components. So, as that continues, we definitely see the need for high capital ratios not being there as much as it was before. So, we see a space on some of these key regions like the common equity Tier 1 that you mentioned. | direct | [
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096b3f6ae3241037972efe37f6352bd4 | Okay. As we kind of look through and assess credit and we've been moving our banks down to that kind of CECL day one level, how would you compare the assumptions in your current level of reserving versus what you were assuming at CECL day one back in January 2020? | Still we -- we have to look at components. The CRE index, it's still worse than what we were seeing before when we did CECL day one. HPI, it's moving in the direction and the new projections are moving in the same direction, we're going to get there. And on employment, the unemployment levels, we feel, are going to be at similar levels going forward. So, we still see -- I mean, there is a little bit of -- we want to be able to see that the trends continue to show that same way as being projected and that will take us there. But with the expectation on the economic front and assuming there is no unexpected thing with the virus that changes the lockdowns, we've seen more normalization of the economy and all of that. So we are seeing that we should be able to get to those levels that we saw before in terms of projected economic -- macroeconomic numbers. So, it would -- not yet there, but we are in track in that direction. | intermediate | [
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f2766ab4376a1e2afe129215d5063126 | Okay. And then, just two quick cleanup questions. It looks like you've recognized about $36 million in pre-tax merger charges. $48 million was the original projection. Is that still a good projection? And then, on the premium amortization, how much premium am could be left in the securities book? | What we had announced was about $76 million of expenses associated with the transaction. The $48 million was more broadly you were calculating synergies based on what we had mentioned, the synergies based on Santander and ongoing running expenses. So, it was $76 million in expenses what we were expecting.
Which started in 2019, Glen.
Yes. And the $48 million also..
Premium amortization, you mean, related to what, to -- you're talking about portfolio -- investment portfolio or you're talking about something else?
The thing is that there is premiums on most recent purchases of a level of premium associated with the coupons that were available in the market. So it's a function of what happens with the trends in rates. I can see with rates coming back down, a little bit of reduction, I don't have exact number of premiums we have on the portfolio at this point, not going to give you that number. I would need to check that and broadly I'll include something on the Q then to disclose that since we haven't specifically mentioned the number on releases. But there is a level of premiums, because most portfolio purchases over the last few months have had a level of premium involved in all of them. | intermediate | [
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dc264be0ce9b575f676b7da936f20ed0 | Hi, gents. There's a lot going on in Washington, D.C. with the new administration. And it seems like PR has a good partner in the White House and Congressional leadership, whether it's efforts to increase pharmaceutical manufacturing or infrastructure spending. But what are the key areas, I guess, that you folks are watching that will affect the business here as far as Washington, D.C. and various initiatives there? | Well, definitely, the -- obviously every time they talk about tax reform, we open our eyes. This has been a long-term matter. The corporations that -- the tax benefit that applies to corporations that specifically manufacturing more than anything else. So, it's always been -- it's been a risk for some time. It's been mitigated. I think this time, better than ever. Broadly, there's a lot more visibility of the challenges that Puerto Rico faces and how these potential changes could impact. So, I think we all have to make sure that we provide the right feedback and the right education and we understand this is also a focus on the fiscal board.
Manufacturing, still 45% of the GDP, so it's a key component, plus the supply chain that is behind it. So it is important. Obviously we know tourism is growing and it's a future opportunity. Foreign investment from Act 20 and 22 are also an opportunity. So, I would say, those are the two elements that we have to continue watching and providing feedback and making sure that the private sector provide feedback to Congress in terms of what potential implications it could have in Puerto Rico.
I think everybody is aware of the challenges. What is the objective of obviously improving tax collections in the US or increasing to pay for definitely the very expensive stimulus that we have all received. So definitely it's a priority, but yes, the manufacturing sector will be our primary concern. | direct | [
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] | A |
83e3d8c0c7cd9f28c0f50eb8c123765c | I was just trying to think about the CDCO proceeds. Now that you have approval or you expect to receive about $142 million in the third quarter, do you have any goals related to the deployment of that capital? Would you deploy it for loss mitigation or potentially buy -- to buy down some of your outstanding debt? | Hi good morning Giuliano, that's a question. It's something we're still evaluating from a capital allocation perspective, but we have a couple of different uses that we're evaluating and expect to make a decision in the near term. But unfortunately, I don't have an answer for you this morning. | fully_evasive | [
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e579238b440d1ee1dbbc7b9339d66c24 | Now that you also have the Ballantyne transaction done, are there any opportunities for either new business or capital releases from Ambac U.K.? | Yes. Giuliano, so we're getting closer on the Solvency II capital position as we disclosed that that hole in Solvency II standpoint is down to about GBP 133 million. It's about a GBP 130 million improvement over first quarter. So we expect that, that will continue to improve over the next few quarters and hope to reach Solvency II thresholds in the next couple of years. We'll have to have discussions with the PRA because much, of course, of what happens in the U.K., particularly from a capital release standpoint, is subject to regulatory approval. We'll have to have discussions and engage with them about the path forward from there in terms of capital releases.
But nonetheless, we're optimistic that we'll be in a position to meet our Solvency requirements in the next couple of years. And as we de-risk the book and continue to produce positive earnings there in the U.K., we'll get there sooner rather than later. On the new business front, again, that's in U.K., it is something that we are evaluating in terms of how to use what is a very talented staff in U.K., while albeit, a relatively small staff. It's a process that's under evaluation, and we're considering the opportunities for things that they can do primarily in a capital-light type of a business approach. We'll have more to talk about that in the future, if that's appropriate. | intermediate | [
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b56aed432869e89962976b614b4517db | Are there any onetime costs associated with completing those cost savings initiatives? | There is and will be some severance expenses, and we did have additional severance expenses at the margin in the second quarter. There will be potentially additional marginal severance expenses in future periods, but nothing too material. | direct | [
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fc3ed143d5a75dc4eaa3e9a431349eba | Just had a question on the gross margins, obviously, very strong at the 27% level. Just wondering on the sustainability of that going forward, just expectations on raw material costs and everything else baked in there as far as just modeling that margin out? | Sure. Jason, as we pointed out in the back part of my commentary, we expect in the second quarter for commodities to be essentially flat and then to turn modestly inflationary in the back half of the year. We do think we're going to be able to offset the commodity inflation through a combination of our Lean Six Sigma program, and our disciplined PNOC program that we have in place. So I think generally, that gives you a view for things of how we see them today.
I don't know, Tom, if you'd want to add anything?
Yes, I mean overall, we're -- it was a very strong quarter. And as Dave highlighted, we did benefit from some commodity favorability in it that we do expect to moderate as the year progresses. | direct | [
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c1f4978064ade24d456ccd83db726b69 | And could you quantify what that benefit was as far as the lower raw material costs? | So it was approximately $2 million in commodity favorability. We also had some procurement savings that increased that number, but it was roughly around $2 million. | direct | [
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2e83e3bb37ccbfcf1f17c248323c84b4 | And then just as far as the costs that you're incurring to automate processes at Omni and Bantam and expanding distribution at Bantam, I wonder if you could kind of give us an idea of what those were in the quarter? And how we should be thinking about those going forward? | Sure. I'll describe them for you a little bit on the front end. First of all, with Bantam, essentially where we're spending there is, two areas, one of which is in slotting to help continue to expand the distribution of the product in Retail. The second area in Bantam where we're investing is, in essence, we're building an end-to-end automated line for this product.
Today, where it's manufactured, we literally have in vision dozens of people or more than a dozen people that are working on a line that are manually filling the Bagel balls with cream cheese or eggs or whatever the filling is. The new line will be completely automated, and it's going to take that manual labor off. And it's also going to run at a considerably faster pace to allow the product to continue to scale. We've been negotiating with the equipment manufacturers.
The project has begun. And as we mentioned in my prepared comments, we expect that to be complete at the end of our third quarter. So I think roughly, March timing somewhere around there. As it pertains to Bantam, what we're doing there is, it was November of 2018 when we bought it.
They were -- and are a -- they were a co-packer for us at our New York Texas Toast business. They did about half of our volume. We bought the business and over the course of the last year what we've been doing is investing in upgrading ovens, freezers and automating some of their processes as well. And the nature of the costs that we're taking on there, in some cases, are capex and others, it's expense.
I'll give you a case in point. When we need to replace a -- repair a floor, if we replace an entire floor in a building, we can capitalize that. If it's a portion of a floor, it gets expensed. The other area that we end up taking on headwind with that project, in particular, is whenever we do these heavy maintenance or heavy investment projects, we end up shutting the factory down for several days at a time, two, three, four, five days at a time, which results in a lot of absorption in the period.
You put those together, they're both running, I would venture to get somewhere in the low- to mid-single digits in the period. And we're going to expect those to continue on and then taper as we work into the back half.
Yeah, the impact combined of the two was a low seven-digit impact on the quarter's results. | direct | [
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1f46b7e299ea20d0f8bffa27d1acfe40 | OK. That's helpful. And just finally, obviously, Bantam is doing well with the expanded distribution Starbucks, how much of a contribution can that make to the top line in fiscal '20? | I think it could be material. I don't know, have we disclosed -- I am looking around here in the room? Have we disclosed how big the business is?
Yeah. At this point -- yeah, I don't -- I think the -- I think, at this point, we're very optimistic about the growth potential of the business. But given that we're in kind of a rollout mode, we don't want to put a specific number out there for you right now. But as we get better visibility as we progress, we'll certainly be happy to share that information. | fully_evasive | [
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8d26a3d5d23cb2ce1448d8ad74be228f | Hey, I was wondering if you could talk about the benefit in the quarter. I don't know if you quantify this at all, either from a margin or not just the benefit, but maybe the head -- how it impacted the quarter from revenue from eliminating some SKUs that last year wasn't very profitable. So obviously, that had a bit of a headwind to your revenue going into the quarter, but you probably benefited, I guess, on the margin side, if you could talk about that. | Right. And I think I would probably point to two cases in point, where we have -- several cases in point where we focused here. One is Sister Schubert, where if you remember, we announced a restructuring project. We closed our Saraland facility.
We discontinued some items there. If you're looking at the IRI data, you could see some headwind on that business. If you look at the profit, we don't disclose by segment, it was a pretty significant pickup on the bottom line. And that same thing would be true on Angelic and on our flatbread wraps, and it was roughly to the tune of about what we'd call it a -- well, go ahead, Tom.
Yes. I would say the tune together about 100 basis points of growth impact.
Yes.
And Frank, the Angelic will lap that in October and the flatbread will lap that in November. | direct | [
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05f1036bedab7a7665eeb48a77f2841a | OK. That's helpful. And then my other question is just sort of on the food service side, the strength that you're seeing there, particularly, you mentioned the national accounts. Can you just give us a little more color on that as far as -- are you seeing it from, obviously, the underlying accounts must be doing good, but is it because they're opening more doors? Is it because they're just doing well overall? Can you just talk about -- are you gaining more customers? I assume it's not the past, what I said, but if you can kind of talk about that? | Sure. Well, the single largest component of the growth is an increase in same-store sales growth from some of our key customers. Another contributor to that would be some store openings, but the lion share of it has been from our biggest customers in increase in same-store sales growth. And then in other cases, we are selling more to some existing customers as well.
But if you're trying to think your way through how to think about this, I would say half of it at least is being powered by same-store sales growth of our largest customers. The next piece would be coming from store openings of some of those customers. And then the last would either be new sales to existing customers or just new customers altogether. So it's overall a pretty healthy mix on our national accounts.
And on the branded side, we're just -- we're -- we've talked about it for a while now, we're building share and we're driving penetration. | direct | [
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771645518c7af75d8730ae895070ab7e | Yeah, maybe just start with the operating margin. Adjusted margin -- operating margin in Q2 was 9.5%. Midpoint for Q3 is 8.5%. Maybe you could just talk a bit about where the margins are likely to be lower in Q3. | Yeah. Chris, this is Steve. Just to kind of put some color to that, when we looked at the models, this is historically a low point in the year for irrigation. And as such, that is our number one profit driver. So, that was one of the factors that we took into consideration. The other is the fact that the coatings market, which is our second most profitable segment, also has some still -- some traction to gain back steam from the economic slowdown. And then, in Utility, there is more of our revenue coming from international markets this quarter, and that tends to have a little bit lower margin profile than just the North American market. | direct | [
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b34560fd77a8eb2531a5c06cf31ce4dc | Got it. Very helpful. And just maybe switch gears, the $17 million lattice structure order with Locweld, can you talk a little bit more about that partnership moving forward? Does it have any impact on margins when you partner with them or kind of how you see that moving forward? | Yeah. So, Locweld is based in the Quebec province of Canada, which tends to be one of the largest lattice structure markets in the world. And so, it's a real good combination for us to work with them. We can bring a lower cost alternative out of India, and that helps them to service their customer base. And they have the relationships there that are not always the easiest otherwise to break into. So, from a margin profile, it should provide relatively good lattice type margins, which are not necessarily as good as the monopole margins. But, again, as we look globally to expand the lattice market, 95% of all structures around the world are lattice. So, it provides a real good growth avenue for us and high utilization of our plant in India that we purchased a couple of years ago. | direct | [
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330ea16023654794245f38c5144a40a3 | Hey, Steve. Really kind of more of a broader question, if you could just talk about actions by competitors maybe that you're seeing around the globe of your operations just around pricing and discipline around it. Anything that causes you concern there? | It varies segment to segment. But what I would tell you is, just from our own commitment, is we will be the price leader. And we have seen at times some competitors that back off of that. They want to give back steel, let's say, some of the decrease in steel and zinc even though the markets are robust. And so, we are going to stay disciplined around the fact that we're going to get a market-based price and not a price that's based upon the raw materials because there are so many other inputs, there are so many other challenges in delivering, particularly our engineered products, to the market that that seems to be very counterproductive. We've not seen anything on a large-scale of any kind of price erosion with the, let's say, softer steel markets, the softer zinc markets. So, we've seen pretty good discipline with the exception of a couple of players here and there on an order by order basis. Tends to be that way. The larger the order, you tend to maybe get a little bit more discontinuity in the way people price, but, generally, I think most of the market players are behaving. | direct | [
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c4625a49ce52ca86eea8f3bfdecb5bfe | Okay. Okay, thanks for that. And then, I guess, maybe if you could just talk about the outlook or prospects or any visibility you have around the kind of the larger international irrigation projects and what that sort of looks like to you over the next 12 months. | Yeah. We have a very good pipeline of potential international orders. The strong US dollar, as we've mentioned before, can impact the timing because they have to raise capital in some of these markets in order to open up LCs with us, but the food security issue has really been a strong driver in project activity internationally. As we mentioned, we saw organic growth in all of our international markets despite everything else that's going on, and Brazil particularly strong. So, between just the organic nature of some of the developed markets as well as the project base piece in, let's say, Eastern Europe, the Middle East and Africa, it looks pretty good as we look out over the next year. Again, the timing will be uncertain, but the project level is definitely increased. | direct | [
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93bcc129f9bffc693dec155e387b090c | First, I was just wondering, on the lattice structures order, you touched on the Locweld partnership. I was wondering if you could just talk a little bit more broadly about that business and the traction in that business and kind of what your strategy is there. | Yeah. The lattice business being the predominant structure type globally has been an emphasis for us over the last couple of years. We have purchased a facility in Holol, India little over two years ago. And it takes time to build a portfolio in the lattice area. So, one of the things that Locweld does for us is give us a nice large project, so-called a library of structures, that now we can use in bidding other lattice projects around the world and in North America. We're strategically located in India from a cost perspective. And India tends to be one of the -- it is the most dominant lattice providers outside of China for China itself. And so, we feel very good that the Locweld partnership will help them and help us and really provide a growth platform for us outside of just the monopole market. | direct | [
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] | A |
95a7cf7e0f264ad686c2d5535beee942 | Thanks. That's really helpful. And then, just switching gears, on the large European transmission order, did that order begin to ship at all this quarter? Can you update us on what the timing for that is? And is there any potential for further work with that customer going forward? | Yeah. So, there was no shipments in the second quarter. We will be shipping on the back half of this year and into the first half of next year. It is a large customer. These are big projects for interconnections of alternative energy across Europe, and so there are some follow-on potentials thereafter. So, we feel, with strong execution, good quality, good timing of our shipments, there is definitely the ability for us to have some follow-on work. | direct | [
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4b0a342a475e3884c2d614ddb8ad99df | Steve, in the face of this COVID-19, a lot of companies really slashed their budgets and laid off people, furloughed people and so on. That really wasn't the case at Valmont, was it? And there weren't a lot of necessarily cost reductions because of COVID-19? Is that the case? | That's correct. We kind of tried to quantify it there with the $2.5 million impact in the quarter. That was our additional costs. Some of that was retention bonuses for our frontline personnel. We'll probably have about $0.5 million of drag per quarter as we look forward just for distancing, PP&E, some people being quarantined as they come in contact with others. But generally, we worked through the majority of the quarter with the rare exception of about a handful of plants internationally that we had to shut down. So, those, we didn't have the revenue, we didn't have the operating profit, but we also didn't have the costs. So, they kind of self-correct as everything comes back online. But we did not lay off anybody as a result of the pandemic. Our demand profiles were within, let's say, our budgetary and kind of our forecast of where we expect it to be. So, there is some attrition maybe that's not been replaced, but there's not been any need to have to slash costs. | direct | [
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b52c416a8de94964092a34fd873c5896 | Okay. Okay. And then, secondly, as we approach the end of the year, the states -- you mentioned it, state and local budgets probably are going to get tighter and tighter. When do you think you might get a sense as to the impact that these tighter budgets might have on infrastructure spending, highway spending and so on? When do you think we might get a better sense of what's going to happen next year and so on in that area? | Well, from a federal level, I would say that after the election would really be the time that we would think about, is there going to be an infrastructure spend, how are they specifically going to allocate money to the states as a result of the effects of COVID. At the state level, it's still going to be kind of a patchwork based on budget cycles, based on the impact of COVID in states. Texas, as an example, is a large market for us. It was starting to reopen and then, boom, now they are going the other way. And so, it's still hard to see clarity there. California, Florida, these are real big transportation markets. And so, what we've seen on our order intake side as related to that is we may get a couple of weeks that are down and then we get a couple of weeks that are up. And it's really hard to tell if it's based on the fundamentals or simply that there is people now working that are improving projects and allocating the funds. So, I think obviously based on just duration, as the third quarter goes on and some things get settled between federal bailouts and some budgetary things at the state level, hopefully, we'll get to see a little bit more clarity around that. But I think it will probably be into the first quarter of next year before we really have a good outlook of particularly transportation spend. | direct | [
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b47c0be59ef3743aab53c470a12c39f6 | Maybe following up on that $0.5 million drag from social distancing. Is there anything in addition to that that maybe impacted productivity in your manufacturing facilities? And then, on the flip side, are you guys learning any ways to drive productivity? Are you getting any gains from, like, work from home, anything like that? | Yeah. We definitely are seeing some productivity gains. It just comes from having to travel less, less time for people to have to spend in meetings, just some real things that are probably broad and macro across many different organizations. We've seen that. The $0.5 million that we call out is really more around additional PP&E, some things around how we service food within the facilities, as well as just the quarantining of people that have to be there. So, that number over time may decrease slightly, but it's a pretty good benchmark at least until the pandemic and a vaccine comes out. But from a productivity perspective, we had a very productive quarter, and we've been seeing productivity gains both from first quarter to second quarter and we're anticipating the same as we look at the third quarter. So, not necessarily a pop in productivity, but just simple blocking and tackling, lean and agile type of gains as we look forward. | direct | [
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242d6cfd17a8f58f99c547a113d26abf | Okay. And then, switching over to the 5G commentary, sounded pretty positive. I think you mentioned work from home might be accelerating some spend, more people on cellular networks. Is there anything you can quantify? Going forward, any investment there or any other color on 5G? | Yeah, I wouldn't say that it's pulling forward any investment. These are mostly planned investments. What it has done is the carriers have had to re kind of allocate their coverage as people are not going into downtown areas. They are sticking more to the suburban areas, the work from home, the school at home has done exactly the same. And that would tend to help our business more than being concentrated in a city center because it would tend to be done more on towers and poles. The rural broadband initiative, it is probably the only way that you bring 5G type speeds to rural areas because you can't run fiber to the home to cover those kinds of connections. So, in a way, the pandemic will kind of change the demand profile of how 5G rolls out, but we think the investment itself will be around the same, and we've seen that reaffirmed by most of the large players in the industry. | intermediate | [
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98713c2d452930e376a783facc5a364c | Nikhil, I wanted to just focus in on maybe two comments you said during your prepared remarks and opportunities that you're getting ready for, and two of them were accelerating the -- your ANDA pipeline, bringing those products to market. I was wondering if you could comment on how big of an opportunity for you that is. And, I guess, what's changed across the broader generic market to allow you to do so? Are you seeing more stability and stable competition opening up pockets of opportunity?
And then number two, you mentioned inorganic M&A. I was curious to get your philosophy on leverage and maybe talk around your strategic priorities out of the gate. Are you focused a little bit more on brands, on generics and kind of what strikes you as particularly attractive as you kind of evaluate the landscape? | Yeah. Thank you, Dana. So I'll take, I think, the three parts to your question. The first one is on accelerating the ANDA. So we have a large library of about 19-plus ANDAs and a pipeline of ANDAs through various acquisitions and BD deals. And several of these products have limited competition and potentially higher value. And this is something that we're monitoring on a regular basis, both in terms of understanding what's happening with the competitors that are on the market, but also in conversations with our customers. And so, we're working to prioritize and accelerate time-to-market for these launches. This is something that I have done successfully in the past and I'll bring that experience here.
You then asked about the overall trend in the generic market, and I think there is some evidence of improvement in the slope of the decline. I think COVID has made buying groups more conscious of the quality of the supply in addition to price consideration. The competitive intensity remains high. There are still good opportunities in this sector. And with the broad push, regardless of who wins the election, which President wins the election, generics will continue to be part of the answer of bringing the cost down of drugs, 80%-plus of US volume is in generics, and there is a significant push on US manufacturing. And US is -- I'm sorry, and ANI is very well positioned to capture that with almost 200,000 square feet of manufacturing footprint in the US and another 100,000 square feet of manufacturing footprint in Canada.
When it comes to acquisitions, with the deal environment is very rich, especially those that help us enhance our capabilities and scale, there is definitely more activity right now than there was six to nine months ago. Having said that, we continue to take a disciplined, measured approach to evaluating opportunities that will allow us to enhance our scale and capabilities in branded products, CDMO, and generics business lines. This includes pursuing both commercial and pipeline opportunities.
And I think the third part of your question, Dana, was on the overall strategic path forward. So, look, as I mentioned in my prepared remarks, I'm in the process of conducting a comprehensive assessment of drivers of our operating performance, execution, capabilities, talent and culture and putting together a map of where we are strong, where improvements need to be made, and where the attractive opportunities are in the market for ANI. I'll share our ambition, long-term strategy, and operational plan along with the full-year 2020 results in February. | intermediate | [
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5a97902a00a944a81a4bd939770185ea | I wanted to ask a couple of financial questions just real quickly of Steve. Specifically, could you just maybe walk through some of the components of operating cash flow trends in the quarter? Looks like, cash flow from operations was negative $40 million and not sure I can see all the elements that necessarily led to that. Just want to get some perspective there.
And any early commentary on 4Q trends, I guess, in light of resurgence of the pandemic in certain areas? I know that we talked earlier about numbers kind of getting back to pre-COVID levels and sequential growth throughout the year. I'm just wondering if that's still kind of a realistic expectation in the fourth quarter based on what we're seeing currently. | Sure. So, good morning, Elliot, and thanks for the insightful question. So, on the cash flow and just, I think you misquoted, I think you said, it looked like the quarter was negative $40 million. I think it's more like $400,000. So, yeah, our year-to-date cash flow generation at -- you added a zero or two there.
But that's fine. That's fine. It's early yet. No worries with that. But yeah, so good observation. So, cash flow from ops for the first nine months of the year is essentially equal to cash flow from ops for the first six months of the year. And the main part of that phenomenon is really kind of a continued, I'll call it, a cash flow hangover from the Amerigen acquisition. So, while we purchased a portfolio of currently marketed products, right, and slotted them directly into our sales and marketing group and we're kind of selling them out of the gate day one. That portfolio -- even though we do that from a commercial standpoint, it's essentially operating as if we launch those products day one on January 9 that entire portfolio. And so, given the strength of the customers in this environment, right, and the consortiums and certain clauses in terms of launch products, you do get a delay of cash flow from those "launches." And so, I do anticipate that the start turning here, as we round the corner into the fourth quarter, and certainly, as we round the corner into the first quarter of the coming year. So that's the phenomenon there.
In terms of the fourth quarter trends, look, we -- I think as you see in the sequential numbers today, right, the third quarter numbers were fairly stronger as compared to Q2. As we talked about on the Q2 call, right, ANI is not immune to the COVID-19 impacts that we're seeing kind of industrywide. And in a likewise manner, in the third quarter, we've seen a nice rebound in terms of prescription volume sequentially, but it's still not to the levels of pre-COVID-19 levels. And so, the wild card, right, as everybody looks forward to the fourth quarter is, how does COVID-19 develop? Whether it's in pockets across the US or more nationally? Obviously, we're all hoping that that does not occur, but that's clearly the wild card. For the industry and by extension, it's the wild card for ANI. So, barring any significant trends there, we remain optimistic as we look out to the next couple of quarters here, but we're always going to be cautious, given the evolving COVID-19 situation. | direct | [
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bbccde160005099cad3698e0aacf9dd1 | Just want to get a sense of your perspective of sort of the relative opportunity set the Company has in front of it in terms of being able to reintroduce various pipeline assets, ANDAs have been acquired over the years and whether or not that in and of itself would be sufficient to drive growth in the short-term? I mean, obviously, financial market seem to value the Company in line with other larger generic companies that frankly have declining businesses and no real prospect of turning those around. So, just want to get your perspective on whether or not you think that there is a positive growth outlook here in the short-term based on assets in the books or maybe transactions that are kind of a later stage of evaluation versus having to actually go out and buy assets to drive growth in the business? | Yeah. Thank you, Elliot. So, look, I think in terms of growth drivers, Cortrophin Gel is a crucial opportunity for the Company. We are preparing what we expect will be a robust package ready for refiling in Q1 of 2021 and a subsequent launch. So, I think that would be growth driver number one.
I think, the other areas of growth, which are important to consider is: number one is, leveraging the increasingly important US and North America manufacturing footprint, including the hormone facility that we have in Baudette. So, this is a manufacturing network that we can leverage a lot more given the increasing important and value that is being assigned to US manufacturing.
As we spoke about before, the value capture from bringing accelerated new launches from our portfolio of ANDAs in our pipeline and library, especially those with limited competition, is -- will be an important step and maximizing the value capture from our existing branded and generics assets and the CDMO clients. I mean, remember, we acquired the Amerigen business and a number of those products were launched this year. There is still opportunity to deliver more share and revenues from some of those products. And so, that's something that we will look to continue doing.
And look, even prior to me showing up, ANI has done a tremendous job of doing very thoughtfully and disciplined executed deals. So, we continue to evaluate strategic inorganic opportunities to enhance the scale and capabilities in all three segments, brand products, generics and CDMO businesses. | intermediate | [
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b5ad107c923c311d0ef2a12a8e1856c9 | Maybe Nikhil, if I could just follow-up and ask you a question with respect to kind of where you see sort of the best relative opportunities in terms of discretionary capital deployment, whether it be pure generic assets, branded assets, 505(b)2s, obviously, or all of the above? And, I guess, the question is, the Company historically has done a very good job of doing high ROIC deals in the branded arena, buying products that generate significant returns, but necessarily -- don't necessarily have any growth associated with them. So, just wondering how you are kind of viewing those opportunities vis-a-vis what seems to be sort of an increasing demand from financial markets for evidence of growth versus just high ROIC metrics. | Yeah. So that's a good question, Elliot. I think couple of responses. One is, look, these are good questions that I'm evaluating. As I mentioned previously, I will share our ambition, long-term strategy, and operational plan along with the full-year 2020 results in February. So, I will do that. And then, as I mentioned in the prepared remarks, I am a growth-oriented leader. It's -- I oversaw a period of rapid growth in -- as CEO of Cipla US and that's how I am oriented, and it's fortunate that the markets reward that too. So I do plan to continue that strong track record of delivering results and delivering growth. And the path to that, I will share along with our full-year 2020 results. And the relative, I think your question is allocation of capital and allocation of resources between the business lines, I will share more about that in -- when we share the full-year 2020 results in February. | fully_evasive | [
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7ee0c51fb34625feb58df370dea8e75e | You talked about manufacturing footprint. Can you just give some color in terms of your capacity utilization in those facilities? Is it a fair capacity or should we think about you replacing current clients with maybe higher value line there?
And then, secondly, I know Steve talked about the undrawn revolver. But Nikhil, how do you feel about your financial flexibility to execute on M&A, as well as potentially invest behind the Cortrophin launch next year? | Yeah. Thank you, Brandon. I think there was two questions you asked, I think. The first one was on the manufacturing capacity. I'm happy to share with you that there is capacity available across all three sites, both the sites at Baudette, as well as the site in Oakville, Canada. So when we talk about leveraging the manufacturing network, it's by increasing the utilization, and there is material opportunity there. Obviously, we have to work through how to operationalize and capture some of those opportunities, but there is opportunities to drive growth by leveraging that manufacturing network further.
And then coming to the capital allocation, I'll start, but then Steve if you want to jump in. Look, we take to -- continue to take a disciplined, measured approach to where to allocate the capital across the different areas. Regards to -- as regards to Cortrophin, Cortrophin is a crucial priority for ANI, and we have appropriately dedicated our resources to advance this product and plan to continue doing so. As you are aware that we are getting ready for a robust full sNDA submission in Q1. And in parallel, we have started working on operational and commercial readiness for the launch, right? This includes market access, demand generation and patient support plan. So, absolutely, Cortrophin is a crucial priority opportunity for ANI.
Sure. Yeah. I'll just add to that. Clearly -- on the M&A front, clearly, you'll continue to see kind of the diligence and the discipline in terms of balancing the opportunities, which the balance sheet discipline and not getting too far over our skis in terms of leverage profile. I think within that, right, [Phonetic] and kind of what you've historically seen ANI do is to pursue assets that are EBITDA generating, right. And so, whether that's in the form of continued portfolio tuck-ins or something broader that starts to enhance ANI's organizational and structural capabilities. I think in this phase, it's always going to be toward -- with an eye toward EBITDA generating and cash flow generating assets. So, that's part of the balance there, Brandon.
And, obviously, as embedded in your question and as Nikhil says, right, Cortrophin, we're laser focused, not only on the regulatory filing and pushing that to success, but also readying the organization for the efforts that will be required to successfully launch that product. And so, that's part of the plans that we're evaluating. But I would point out in terms of capital allocation, we're not starting from a zero dollar spend there. You would have seen, in 2020, the Company invests behind pre-launch inventories roughly, right, big picture, little bit over $8 million year-to-date. And on a full-year basis, we have -- I think the forecast of between $11 million and $15 million depending on how the timing of certain shipments fall and break around December 31, right? So, some of that spend will not need to be replicated in advance of the launch, right? So, we'll be able to allocate some of that spend toward the sales and marketing efforts and build from there. | intermediate | [
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d4ad87d7346ddbc2179046f0b98b0b92 | Steve, one follow-up, if I may. That $8 million you referenced in terms of inventory, is that across the portfolio or was that Cortrophin? | That's Cortrophin-specific, right? So, if 2020, it's kind of building pre-launch inventory, so I'm not saying there will be zero of that in 2021, but I would expect that to moderate as we start to pivot toward SG&A-type activities. | direct | [
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8c0fe57dae95fd0d4536c561f7cd6f54 | And then maybe just following up on that. What is the shelf life of your Cortrophin product? So, I think Atacand [Phonetic] is 18 months. So just any color on your shelf life would be great. | Sure. Right. I didn't want to say exactly the same thing. But as you're aware, as you will appreciate that, from a competitive standpoint, it is best for us not to share specifics of this information right now. We are confident of the quality of our filing and the quality of our product. And also, this is with the FDA or will be with the FDA and the FDA gets to adjudicate that. So, we would prefer to not share specifics on that right now. | fully_evasive | [
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9173c9e57dab20a67b8f75f85c351755 | Vic, I wanted to start on A&D, sounds like you exceeded your internal expectations this quarter on the top and bottom lines. So any context you could give us there about what came in better than expected? And then a related follow on, as you look ahead. It sounds like there's -- there may be some structural benefit to your margins after some of the cost out last year, at the same time as the end markets recover presumably there would be some OpEx you'd look to layer back in. So what kind of incrementals should we be thinking about? Or what's the approach as you balance those competing considerations? | Sure. So on your first question, as far as what we saw in the A&D, we see a couple things, the non-commercial aerospace part of our business to space, the Navy, and the small amount of commercial aviation -- I'm sorry, our defense aviation, all we're a little better than what we anticipated. In addition to that, while the commercial aerospace is still a bit behind schedule and it is recovering, but we were able to get a good bit of non-recurring engineering from customers for some new product development. So that really helped. As a result, because it's not something we initially anticipated getting this quarter in this first half of the year. So obviously, those are the major things that we saw to the upside.
As far as your second question is, certainly, you saw in the leverage, I mean, particularly USG, where our sales were down, our margins were up pretty significantly. And that's really just a matter of the cost that we took out, really across the business in the second half of the year. And so what we have to do, I mean, when business starts to grow again, obviously, you're going to have to add some folks. But I do think we've kind of reset the bar on the cost structure. And we're going to be very, very diligent about any cost back. And I think we will be able to, as a result of that be able to have better margins than what we've seen in the past in some of these businesses. | intermediate | [
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494433e1220c5ddead63f481d83059bb | Just as a follow up, I want to talk about balance sheet and M&A? It sounds like optimizing your capital structure and acquisitions are two sides of the same coin. So we fast forward to a natural comfort zone or an optimized balance sheet in your mind. What were the brackets around where you're comfortable with leverage? If you think about that without putting an exact timeframe around it, but just the most likely scenario to get from point A to point B is that probably one larger acquisition to think about it a longer dated time horizon with multiple deals. A context you could get us there and any more context on the pipeline how activities by fill expectations would be helpful as well? | Sure. So obviously, we can handle a good a bit of debt now we're not going to go out and do it too quickly or too large of acquisitions. I mean, typically, where we've been successful is, you know, larger acquisitions, somewhere between $20 million and $100 million, $150 million, something like that purchase price. And so that you would expect, that's what we'll continue to do. There are some opportunities out there that are bigger than -- I think we would have to take our hard look at those as well. But we think we've been pretty successful and integrating, smaller, middle sized businesses into in our portfolio, pipelines really strong. I mean, I'm surprised seems like we're getting a new book, every couple of days, or at least once a week. And so there's a lot of activity out there.
I think everybody's aware it's a very competitive market right now. So we work hard to try to get into areas before -- before there's an auction -- before there's an auction with a lot of strategic, at least. But the amount of money out there is pretty amazing right now. So I had thought going into the pandemic that maybe the multiples be coming down. And unfortunately, that's not what's happened. And so I think we have to be realistic about what we're going to do is we add to the business. We're probably looking a lot harder at returns now than maybe the multiples that we're paying is, that's what I think really makes most sense. And now -- we're looking for opportunities where we can really see some synergies in the businesses that we acquire.
And Tommy, this is Gary. Let me add something to that, because that that philosophy is not going to change with me going away and Chris coming on. But the first part of your question on the comfort level, one thing we do for the board, as Vic mentioned that they're very supportive. I think I might have mentioned it to you, when we spoke after Q1 is we kind of keep a mathematical profile in front of them and just being this underleveraged. Today, we just had board meetings last week. And if we were to spend roughly $250 million and bring along $25 million of EBIT the 10 times obvious multiple, that would only put us at 1.5 times leverage into care that math exercise a step forward. If VIX posts were 2.5, we could spend another $230 million which together says we could spend $450 million and a 10x multiple only be levered up to 2.5, which I think from an ideal capital structure was not something that would be uncomfortable. That's not -- I'm not implying that's what we have in the pipeline. But just to put some posts around how this math carries forward.
It'd be ideal, if we could find $450 million to spend and bring along $45 million of EBITDA, but just really just calibrating 2.5 is something that would be extraordinarily comfortable for a company of our size. | direct | [
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cfdd1026ca2d3a223012a61db06527d2 | You answered a lot of the questions previously, just wondered if you could kind of talk about how you look at potential infrastructure bill. All seems like would be positive for you. But just wondering -- wondering any specifics in there that you guys are focused on? | Yeah, I mean, we've used that question a lot. It's so well defined right now. It's hard to say, I don't think there's a downside to those, that's for sure. I do think that some of the things will be going into renewable energy some of the things will be going into the grid. Those kinds of things, I think should -- should be have the potential to be very helpful to us. But, it is pretty ill to finance, it's probably the biggest area where we would see a positive impact. And the other thing I think, that we look at a lot is what the defense budget is, right? I mean, you get a bit of our business now as AMD. And it looks like that's holding up pretty well. And as we've talked about before, we really think more about it in the areas where we participate. So, looking at the Naval side of it, particularly submarines, which is where the vast majority of our -- much of our products goes. And that's really rock solid -- changing at all.
And then the other thing, obviously, look at from a budget perspective, is NASA. We have a great position on the SLS program and that appears to be very solvent as well. So, I think the infrastructure bill gets a lot of attention as it should and I think that will be helpful to us. But as we look at it, those other two budgets in many ways are just as important to us. | intermediate | [
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721e1fb83532a955e3cbecaf280569a7 | As far as the test business, competitor of yours was recently sold, just wondering if that's changed the competitive environment at all or anything special you're seeing there. | No, the reality is we didn't compete with them a lot because they're really very focused on aerospace and defense. We do some of that. But I'd say that's a business -- it's a bit different than ours. We do some work with them. In fact, we're doing some work with them down and they will continue. They work more on the sensor side, I think we have a good bit more footprint on the chamber side and on the absorber side, and that's a place where we have teamed historically and hope to continue doing that going forward. | direct | [
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4b5ca6e21cb5349b828a2288673d88e8 | Just a follow-up on the test segment, you talked about it returned to more normalized level. Are we talking about normalized level pre-COVID or normalized level not what you do in the second half of fiscal 2020? | The test business has been pretty solid. I mean I think year-over-year we're within a couple million dollars -- I think we're up a couple million dollars thus far this year over last year. So, that -- is higher -- and the margins are higher for sure. So, I mean, if you look at the three segments, the test businesses been the one that's been least impacted by back COVID thus far. | intermediate | [
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801a63c94890fa5bd6bd4399a842f6f1 | And what's driving the margin improvement in test? | Big day is project execution. We have some in mix. I mean we've been getting more EMP filters and more components. But I'd say the biggest -- and those carry higher margin than the underlying chamber business, but I'd say -- it's that and it's just project execution, just the overall process that they go through and execution on the large projects has improved over the past several years. | direct | [
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31776c5cb6843b83f31c94bf89723bcc | And in the USG, you said that the opening up post-COVID restrictions will be beneficial to the business. Are you starting to see any kind of pickup in order activity, be it spring-related turnaround easing or any kind of activity that backs up that thesis? | Yes, at the activity level certainly has picked up, I think, for a couple of reasons. There's kind of entering the test season, if you will and that's when they typically start buying things. Then the people getting back to work, I mean, the issue is -- I'd say most utility that historically -- they've been doing more work from home than a lot of other in the markets and so as you're getting back into the office, that's really helped that activity as well.
Hey, John. This is Gary. Sorry to interrupt. Just to supplement what Vic said, if you look at the Q2 order profile in the back of the release there, you'll see that the order book is up about 10% in Q2. So that's a precursor to the conversation that Vic just alluded to, which is evidence that the momentum starting there. Because it's generally a quick turn business in the backlog. It's not uncommon to get an order on Monday and ship it on Tuesday. So seeing that growth in Q2 is certainly beneficial. | direct | [
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d0c065cf5a89ac86613db8b979aaf785 | You kind of alluded to it, I think, in a response to another question about costs coming back. How much staffing do you think you still need to add this year? And in which segments do you think the most definitely you'll be bringing back? | So, I would say, the areas where we'll probably be adding some folks and we're not talking large numbers, I can say. I think, the people have done a good job of managing this. But as some of the programs ramp up, particularly in the Navy side, there're some specific people we need to add there.
We're always looking to move our engineering workforce or add to our engineering workforce. And so, as things return to normal, and we're able to afford more that, I'm sure we added some folks in the technical areas as well.
No, no. So, I mean, I think if we look at sheer numbers, what we'll see is, as sales pick up in commercial aerospace, we're going to have to add some direct labor people. But obviously, that funds itself. We wouldn't be adding those folks unless we had to work for them for formula. | intermediate | [
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a2d6f0d7c744cbe42320af7771bbb462 | First, what are you seeing as far as underlying trends for IMVEXXY net price that led you to increase the top end of guidance? I believe it was previously $70. Is it more attributed to the relative customer mix, meaning cash pay versus non-cash pay and I guess more favorable profitability across this mix? | No. It's still $65 to $70. We have not changed that. But to your point, so we did see -- so we raised the cash pay price of $75. We had a really -- we expected two months of downward trend. We had about a month in the turnaround in February, and now we're seeing meaningful growth at much higher nets. So we expect the blended average for the year of $65 to $70. So you're going to see it continue to appreciate throughout this year. So that average of $65 to $70 will stay. But to your point, since we came in at $61, you should see upward trend -- a strong upward trend from here. So a great movement there, and it works. And the large PBM contract is helping as well, and we're working on others in that arena, other large PBM contracts for preferred position. So we're feeling good about IMVEXXY, its net revenue per unit and its volume going forward. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
452fa6869014a17931ff8d6daa703235 | ANNOVERA, what percent of total covered lives does ESI represent for ANNOVERA? And then additionally, as far as the patents go, are they composition of minor patents method of use? Just trying to get a sense of what's contained and what claims are in the patents. | Yeah. So I'll take the patent one, and then I will turn it over to Dawn for the ESI portion, which, by the way, they're approximately 15%. So the IP growth that we've had is significant, and it's strategic, and its durability are really where we would hope to get them and are really, really proud of our team that's gotten that done. And the extra five months are nice to have through 2039. But really, it's structured strategic value of the types of IP we have in the placement of it, given the regulatory pathway that's there to protect our assets. Dawn, you want to comment on ESI? Sure. And thanks, Devin for the question. So again, as Rob mentioned, it's about 15%, but I just wanted to remind on a couple things with ESI. The first is that the decision was made at a class level, not a brand level. And it's actually happening in multiple classes. So what we're really lucky with is that in the birth control class, we have the protection of the ACA. And ANNOVERA has been very successful with that, given the uniqueness of the product, which has allowed doctors to continue to provide ANNOVERA for those patients that want it through the Letters of Medical Necessity. So we haven't seen an impact. Yeah. We have no impact from the ESI change at all because of Letters of Medical Necessity. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
a74c63660f6f38e6fc608694b3833976 | Could you just remind me, have you given guidance on where you expect the net price for BIJUVA and for the year going forward? | No, we haven't. In this -- I think this quarter, it got a little bit of an anomaly. It could a excel a little ahead of itself. I think it's comfortable to say to be in the 60s somewhere, could be low 60s, could be high. We're not -- it's not a focus, so we haven't been putting a lot of color there. But it's a trend somewhat similarly to IMVEXXY in our opinion, and that's about as far as we've gone. Does that help? | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
fc38b47d816f8e40e4c694f526d925bf | I have two questions here. I guess just to start, for the low-dose BIJUVA, can you go more into detail on what you're looking to get out of the May meeting and maybe what's the base case time line for next steps? And then my next question is, I know during your remarks, you mentioned that the highest spending due to investments is expected to occur in the second quarter. I just first want to confirm that you're talking about SG&A there and -- or is this just SG&A that you're talking about? And how extensive is that increase expected to be? And related to that, is it fair to say that at least for the third quarter and fourth quarter, then the first -- like what we saw in the first quarter is sort of a good example of what spend could look like? | Sure. I'll take the BIJUVA expectations and what we plan to get. Maybe, Dawn, you might want to add something. You're closer to it than I am. So we thought BIJUVA low dose should have been approved when we originally submitted it, and it wasn't. So we filed an appeal, and that appeal was granted by the FDA very recently. We're going to meet with them in May to look at the next steps there, and there is a very challenging division here at times and we don't know whether they're going to want to move it forward really quick or it's going to move forward slowly. So I don't want to set any expectations at all to that right now. But the good news is that they -- the office level of thought, it should have been approved originally. And they made that pretty clear in the summary, and it's in good shape. Jen, it's Dawn. I think the only thing to add is, as Rob said, the FDA agreed that the data originally submitted should have supported approval. As far as timing, I think you asked on a base case. We won't know that until we have the meeting in May. And when we have something to update, we will. And, Jen, it's James D'Arecca to answer the questions on spending. So the spending that I'm talking about is our opex. Our total opex line, excluding non-cash items, that's the same thing we've been giving guidance on and consistent in the past. So last call, we indicated that we expected the average per quarter of our opex to be between $45 million and $48 million. We're going to -- we're sticking to that for this year. In terms of this trend, as you know, with launched products, there is a lot of seasonality. And your point about using last year as a comparison, I think, is a good one. I think last year, you saw our expenses kind of peak toward the middle of the year and then ease out toward the end of the year, and we would expect a similar phenomenon this year. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
184364927a662a798de6acda664bbe85 | I think previously, you've mentioned that for ANNOVERA, your goal was to increase annual TRx per writer to 15%. I'm just wondering, is that still the case? | For a certain type of writer, yes, absolutely. So we have loyalists, influenced dabblers, different types. So if you go back to our strategic operating plan for 2021 that we shared at JPM, this quarter was exactly in line but lower -- a little bit lower on the spend than what we've put out there or a good bit lower on the spends. So we're going to continue that plan. We'll deliver. And I think some of the new things that we found that Dawn has talked about here, we think should really accelerate some growth in areas where we've had great growth. So far in pilot stage, we're implementing into full bore in Q2 and Q3, and we're really excited about that related to ANNOVERA. So, yes, to answer your question for that type of provider, 15% is the goal. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
fef6f539eb54389b3ce9d23036b82d61 | Just really quickly in terms of the ESI change, and I know it's been fairly recent. But just curious how long is it taking to get the Letters of Medical Necessity approved? And sort of should we think of this for at least -- for just that group of patients you're sort of pushing out the curve and do you have a sense of sort of the success rate from when a physician wanted to initially describe that to getting that the LMN done, what's the sort of pull-through rate that you've seen so far? | So the pull-through rate constant to what it was before, if anything, it's better for us actually, Doug. So it's -- so far it's been excellent. I don't know if you've seen that we've been growing since this has happened and the pull-through rate or the approval percentage that we have has been identical to what it was before, so we feel really good. Give ESI credit, they're following the letter of the law, right, and they're doing a good job. And ANNOVERA, uniquely not all birth control has this unique form. So when the Letter of Medical Necessity goes through, it gets approved, unless there's certain like religious exclusions and things like that. So there's been 0 impacts, and we're growing. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
36708cdf1d264b617be1df8f256c9f11 | And are you -- sort of have you implemented any operational changes to support physicians, just to ensure that that continues, just sort of to, it sounds like -- | Yeah, we have. Sorry, Doug, I cut you off there. Yes, we have. We obviously are driving some education around this whole process related to LMNs, and it's pretty well understood out there already. And Doug, what I was mentioning with vitaCare, how we are supporting an initiative to support patients to make sure expectations are shared with the LMN process and really doesn't take that long but just making sure that all the paperwork's complete, that the doctor submits, and again setting those expectations of patients and that really helps with the pull-through as well. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
3a096e087cbcafd6d5fea07af8c3c771 | Hi. I had a couple of questions. First, just if you could quantify what your property losses were in 1Q and what they were the year-ago period, so people get a better sense of your loss ratio, ex sort of catastrophe or other events. And then relatedly, if you could give us the -- or if you could quantify any impact you had on your loss ratio from prior-year development. | Jimmy, this is Andy O'Brien. Thank you for your questions, and thanks for your participation. The property losses, we had some property losses coming out of the Texas ice storm. And then we had a couple of large building losses in Michigan. All of these losses were heavily reinsured and together do not have a terribly material impact. But they did up our loss ratio a little bit. We had no negative adverse development during the first quarter from prior years. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
73413e12746a3387babe82f1c462395e | Any positive development because you've had that consistency over time? Or was there no development period? | We did not recognize any development [Inaudible] in the quarter. Yes. It's very minor, like $26,000 of [Inaudible]. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
a23cff8090b41a5406757acfb05e237a | Got it. And then if you could just talk about pricing in workers' comp, and I think, obviously, you're more of a player in a specific niche of the market. But a lot of companies have been hopeful that prices would start stabilizing and potentially improving at some point. But are you seeing that in the market overall? | I think that the market has stabilized. It certainly varies by geographic area. I would say in the Southeast and in parts of the West that the market has stabilized. We have, the last two or three months, had some success in getting some positive rate movement in California. So we're happy about that. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
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