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8c16a2d928b348bf097fc9618f38bca7 | Thanks. Good morning, and welcome Brian to the call. My first question is, your largest tenant tenant Arco, just curious if their listing changes anything for you all, whether that helps with -- maybe do they have a growth mandate? I think Mark you mentioned potential partnering with tenants with their growth and objectives and that being a source of deals, just wondering if any of that has a role in this? | Yeah. I'll maybe give you my perspective and then let Mark talk about the growth side to their business. But Arco is somebody that Getty's had a relationship with since the mid-2000s. We've got four leases with them today, it's certainly been very requisitive. We talked to them on a regular basis and having another tenant that's public where we can see their performance quarter-to-quarter, certainly, I think it's very helpful from an asset management and credit underwriting perspective.
Yeah. I'll just echo with what Chris said. We were in constant contact with not only them but most of all our tenants that have a growth program in our current portfolio. They've been a great partner. We share similar view on underwriting of both the real estate and the business opportunity, and they constantly make us aware of what they might be looking at and I think good partner and they seem to be remaining very active and we're happy to look at things with them. | direct | [
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9ac7014d17c06f54126b3f6b223707e4 | Okay. I mean can you talk a bit more about the deal pipeline and you did $45 million in a quarter or two. It's a solid run rate, if you can kind of keep that pace, but maybe if you could comment on whether you're seeing a large amount of flow or not in yields? | Yeah. I can talk specifically about the opportunity flow. There was a bit of a pause as we mentioned in our quarterly calls throughout last year and tenants focused on running their business in a mix of the early stage of the pandemic, but the rebound is noticeable, coming out at the end of the year and certainly coming through the beginning of this year. So we're pretty excited about the deal flow of opportunities that like we meet our initial underwriting criteria in the asset classes that we've summarized here on the call today.
So we're encouraged that that activity in the pipeline of underwriting will continue to generate opportunities for us to stay on pace through this year. | intermediate | [
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3384a66ae9c82d50fe3b1643d8864f3c | Okay. You said yield is consistent with your historical ops, can you just remind us kind of where those might be and whether or not, there has been much change in the market? | So the range that we always quote is the mid to high 6%'s through low 7% range. There is definitely a lot of activity around our asset class both convenience and gas and other automotive. There has been some slight pricing movement in the market with the activity in the interest in the assets coming out of the pandemic having performed so strongly and remained open as essential businesses, but we have again -- haven't seen a run-off in those opportunities coming our way.
We're doing our -- our team is doing a great job both maintaining relationships with the growing tenants, the deal sponsors and certainly has ramped up our business development activity where we're generating new opportunities that might not be as broadly marketed which would hopefully put some type of balance to the pricing versus broadly marketed deals. | direct | [
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971063c5f8021c439defb53f0af2065c | Hi, thanks. Good morning. Just wanted to follow up a little bit on the deal flow commentary there, and curious relative to the split that you saw in 2020, C-stores, I think you said comprised 62% of the year's acquisitions, other automotive was 38%. How should we think about that mix for future investments going forward? | Yeah. Well, just to be clear, right. The 62%-38% split that Mark mentioned, that's what we underwrote for the year. If you look at what was completed for the year, probably it was the inverse of that, right, where we actually acquired more in our other automotive categories. We view both the categories as how important to Getty and obviously we'd prefer it to be sort of 50-50 looking at as many opportunities as we can in both of those target markets, that's my perspective unless you guys want to add to that book.
Yeah. Again, we broaden our strategic underwriting about two years ago to expand outside of pure convenience, gas from crude oil and other automotive. So Getty's lifecycle, it's relatively new initiative. But that said, we've ramped up extremely quickly and made significant inroads to sourcing opportunities in the other automotive category.
I would expect that it will continue to grow as a component of the underwriting pipeline but not only that growth pipeline. So we really hope to [Technical Issues] and kind of maintain a growth of both new opportunities, new relationships in both in all those asset classes. | intermediate | [
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67148633d129b17bcb701ae1ea2843b6 | Okay. And then the portfolio, Chris, I think you noted, right, which was, it's been built around car driving as we sort of think about the reopen and make our way through '21, is there an opportunity, whether it's automotive or C-stores, is there an opportunity to do something larger on the investment front or strategic in nature to sort of gain leverage to the reopened for these assets? | We're always looking at opportunities, big and small. There's obviously -- our current sub-plans rise to continue to acquire portfolio, single assets like we've done, but we certainly feel that the consumer, right, is itching to get out, right, especially once everyone's vaccinated and get sort of back to normal as much as possible.
So we think it's going to be actually beneficial to our asset types as the year goes on, but again today that the plan is to continue to manage the opportunities that we have in our pipeline and underwrite new opportunities, something larger comes our way, we certainly think we've got the balance sheet and capacity to do it, but we'll just evaluate that as it presents itself to us. | intermediate | [
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5576f74a5dead5a712c1525b7b6c3f43 | Do you expect to see sort of an uptick or a flurry of investment activity and transaction activity within the space overall? | We've been seeing that Todd, over the years with this obviously been more and more interest, the convenience store has been one of the healthier segments of the retail that we initiated over the last couple of years, so there's certainly been more competition coming in. I think our other institutional and public real estate investors have always been focused on some of the other automotive asset classes. So there is a steady stream of competition there.
The term essential, right, it's sort of a new phrase, right. So we now know that our portfolio is almost 100% essential businesses. And I think you'll continue to see investors flock to that "essential basket". So you may see more competition but from our perspective, we think the competition has been there. We think we've been able to successfully bring opportunities in, underwrite those opportunities and close deals. So we're more focused on executing what's in our pipeline and what we can underwrite and bring in. | intermediate | [
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aef0d5531675148cd97c1b30c55ab351 | Okay and just last question for Brian. Brian, regarding the balance sheet here and the cash balances, is that expected to be whittled down by year-end? Is that sort of the first source of funding for acquisitions or do you expect to sit with a higher cash balance throughout the year? | Hey, Todd. No, I think you'll see us manage that as efficiently as possible. Sometimes you get those moments in time at the end of the year, at the end of the quarter, but we will utilize cash on hand, we'll utilize cash from operations after dividends, we'll utilize the revolver, which as we said had a small balance at the end of the year and we'll continue to be active with ATM. So I think you'll see us use the full suite of sources available to us, but certainly, our cash sitting on the balance sheet and cash from operations is a good place to start from a cost perspective -- cost to capital perspective. | intermediate | [
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1afb62c3a9d44bd50a59cb41ed2373bf | As you look out into the pipeline today, I mean, I guess, how does the acquisition opportunity set kind of bifurcate between maybe one-off deals, some of these mid-sized portfolios that you've done recently and maybe larger portfolios relative to the size of Getty? | So hey, John. It's mostly going to be weighting toward the mid-size portfolios. We continue to scour the marketed one-off opportunities to just supplement the pipeline, but those deals being kind of what the brokers call bite-sized deals in the $1 million to $2 million range, or if the real -- if we like the real estate and like the tenant and can get our returns, we will not ignore those. But it's hard to fill a program with those deals.
So, we're focused on the mid-sized pipeline deals -- mid-sized portfolio deals, I should say, the larger institutional deals we're aware of, but I think the buckets you just summarized kind of the mid-sized portfolio deals both marketed and as I said before, those opportunities are being mined by our business development team, we're trying to generate, relate new relationships to kind of work our -- both our tenants and our geographic diversity and just continue to grow the opportunity set for future transactions. | direct | [
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86372522f5c8fd18b1c2f0391acfb3f0 | Okay. And maybe -- and as you think about cap rates, have they trended pretty much the same in all three of those buckets or has maybe there's been more compression in one of those buckets versus the other? | I think there's been a general shift downward, right. You can see it from -- just little, what we've been able to buy over the last couple of years, and I don't think it's a dramatic shift, John but it certainly feels like there has been a steady tightening whether in the sector over the last four to five years. Again, I still think the market for what Getty is looking at is in that, Mark quoted earlier today that kind of mid-6s to low-7s, right. That's kind of our sweet spot. That's what we've been able to do in the last couple of years. And I mean, I think there's no change from our perspective and that is what we're looking for. | intermediate | [
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4dfb99b82af6e8bcb9f6f6e4e068bd3a | Okay. And then in terms of the other automotive bucket, it seems like that's primarily consisted of car washes and kind of tire, auto parts, etc. I mean I guess how wide could that opportunity set get, things like car dealerships potentially in that investment targeted area or is it pretty much just what's been completed, maybe over the last two years, three years? | I think the types of operation and what we do is other automotive or certainly the car wash, tire and battery, lube and oil change, collision centers. That's kind of the set we've been working on. We've not been pursuing the auto dealerships as part of that opportunity set as of today. We like the classes that I just mentioned are very similar to what we already own and are comfortable owning, they're [indecipherable] they're convenience-driven, they're in and around other retail generators or centers of influence, high traffic which kind of -- it lead to our real estate attribute underwriting criteria that we always referenced, although it's a great -- it may be a great car wash, great C-store, great tire and battery center, it's also to be a great piece of property for us to want to acquire.
So it has to have those underlying attributes of convenience, visibility, proximity to other traffic generators. So that's kind of the verticals that we would consider in other automotive. | direct | [
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96cf1801afc7d87120f5f5b205910e87 | Okay. And then maybe the flip side of the Arco going public Applegreen potentially going private. I mean does that impact you guys at all either in terms of the opportunity set or disclosure, anything to that extent? | All of those newer leases we get sidelined in our reporting, right. And that's how we kind of get our coverage that we disclosed in our investor presentation with Arco being one of our bigger tenants today it's certainly nice to get that public steady flow of information. We certainly have that with Applegreen, but we've got a good dialogue, and we know what they're trying to execute in our portfolios with them and we'll certainly miss having their reporting.
But it's -- we obviously can't control that, so we'll monitor all our portfolios to the best of our ability and I cannot speak on public or private. But we'll adjust accordingly. | intermediate | [
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8a2689d784d367f7bf7b53b0264a404c | Yeah, good morning guys. I hope everyone is well. Question, so you own a lot of well-positioned C-stores, automotive locations, any kind of discussions about adding elect EV chargers to a lot of those locations? Seems like it could be an interesting opportunity. | Absolutely. We're -- we talk to our tenants all the time about the purpose of the properties that we own [Technical Issues] today around charging and what the right infrastructure is to add to properties and where chargers can be done. I can't [Technical Issues] today, Josh. But there's certainly a lot of the stuff start going into how the convenience store in general adapts to changes in consumer needs, right, so the need to fuel changes, the desire to shop in C-stores requires a mix of product or renovation in the store, we're very supportive of all of our tenants changing our product mix or changing their business strategy to continue to support our assets.
And we, from time to time, either through redevelopment or through funding our tenants, also invest in our properties, right to make sure that they remain competitive. The C-store business obviously are in all corners and certainly a competitive business and everybody at Getty or our tenants needs to be aware that the consumer needs change and we've got to make sure that we adapt our properties or their businesses to meet the consumer needs. | intermediate | [
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a32e966d4778ee115f5f1dc70f888a3f | I wanted to start off on the utility end market. It sounds like into calendar year-end, there was some good activity there. And then as we look at the current quarter, maybe there's some softness, but then opportunity beyond. I think that's the way you've framed it up qualitatively. So any anecdotes you can give there on the puts and takes would be helpful. Thank you. | Sure, Tommy. You got it exactly right. So in the fourth quarter, we often will get some of this kind of money that we'd want spent before year-end, and we've had a little bit more of it this year than -- in typical, I guess it's not surprising because the spending has been somewhat restrained over the past six months or so. Our second quarter is always a softest quarter for Doble and so that's not going to be different this year, but I think it's about even with what we saw last year in the second quarter, so not really concerned. That's what our expectations are. And then we do think, going into the second half it should pick back up to more normal levels, because as we said before, you can delay this testing, but you can't delay it forever. And so my hope is, as we said in our prepared statements, is more and more utility folks get vaccinated that they'll allow more onsite visits and support, and that type of thing. But yeah, it's -- the way you stated is very consistent with what we see. | direct | [
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52df300bbedadb0a14f2b7ea96c06b42 | Okay. Thank you for that. And I guess for a follow-up, I'll hit on the directional outlook that you've given, really just to make sure we're tracking correctly, what you've communicated on the first half compare and the second half compare. Just want to make sure does that apply to both revenue and EBITDA. And then anything you want to call out maybe in terms of margin differences first fiscal quarter into second fiscal quarter that you want to make sure just to remind folks of would be helpful as well. | Okay. Tommy, I'll take the last part of the question first, because that's easiest. We expect the margin in the back half of the year to be meaningfully higher than the first half of the year and that's a combination. If you look back at our last probably five years, it's that same correlation, well before COVID and it's a function of two things. One, the revenue in the back half of the year has been consistently more heavily weighted, so because of the fixed cost coverage ratio there, we tend to have very strong Q4 margin contributions and usually Q3 is the second strongest. So that is going to continue. So as you think of kind of general correlation of how we're looking at this. Historically, when I say historical and talking about 2019 and 2018 going backwards, it was kind of in the ballpark of a 40%, 60%, meaning 40% of the revenue and profit came in the first half and 60% in the back. It's probably just few points different. So if you were putting it somewhere in the neighborhood of 35%, 65% somewhere in that range, you would get yourself from a weighting perspective, depending on how you modeled out with what your end goal is there. So then you can just kind of carry that up to the revenue side, because again we're looking at the same kind of relationship with 35% to 38% in the first half with the balance coming end of year. So hopefully that helps you directionally. | direct | [
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0e2c881ea1cff0f136e1d9ae61c33d05 | You mentioned, I think that your expectations for the year were mostly unchanged, but just given the strength that you saw in Q1, is there may be a slightly more positive bias to the year? Just given what you've seen so far or is there maybe something coming up that is a little bit more negative than what you thought before you finished Q1? | Well. Just given the environment we're in right now, we're five or four months into the year, I really would hesitate to make any big changes. I mean, we did have a great first quarter, I mean I think some of that was probably at the expense of the second quarter to be honest, but if we're going to get something done on the acquisition front or the markets open up a little bit quicker, then obviously there is a potential for upside, but I would hesitate to make any bold statements here in the middle of February, to be honest.
Yeah, I will take that. [Speech Overlap]
Hey Jon, just get a step forward. Just our commentary about we're seeing signs pointing in the right direction, but those signs haven't finalized themselves or put themselves in a finite bucket yet. So where we started the year, we got a pretty decent plan based on the visibility that we had, again not consistent with our past planning protocols. And when you look at it today, yeah, we're off to a good start. But I think the visibility window we have today kind of runs in three-month cycles instead of nine-month cycle. So we have pretty good clarity in the next -- or the quarter we're sitting in, but back half of the year, we're still taking a cautious approach.
There's probably enough balance there to protect the downside, but we don't want to commit this early in the year. And that's been our protocol for years not to come out in February and raise the guidance while you still have, as Vic said, 8.5 or nine months of time left. So I think it's -- we're off to a really good start, we have enough protection. But until we get more -- the year gets more mature, we're probably not going to comment other than directionally on the recovery and the signs of recovery that we're seeing. | intermediate | [
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aa69e897a4d1dedab408fd665da2d8d4 | Okay, fair enough. Thank you for that. And I just wanted to talk a little bit more about the commercial aerospace business. Are you getting any indication at this point that they're preparing to ramp-up production just given the boardings, given that they're taking their planes out of idle fleet or are they still maybe burning up inventory that they have on hand? Just -- are they telling the supply chain to get ready for more coming? | Yeah, they haven't yet. I mean, we see some signs of it, but nobody has called and said, hey, you need to make sure you're ready for this big ramp-up. I mean it's -- we track all the indicators pretty closely. And I would say that while things seem pretty solid, we've not gotten any indication anybody's going to pull anything forward at this point.
Jon, I think the only clarity we've obtained since the last time we spoke was, if you look at the OEM side of it, the build rate certainty was completely uncertain. We didn't know because the customer didn't know if they were going to build 10 planes or two planes or 20 planes. And I'd say that we're getting a little more clarity as you get through this stuff that we're getting a reasonable narrowing of that variability in the build rates. So we don't have to throw a dart at the wall and say, hey, Boeing might be building 20 or they might be building two. Now we're talking about deviation of two or three planes a month. So that helps us get comfortable with things, but it certainly doesn't, to Vic's point, it doesn't give us the visibility that says, let's rehire people and start spending money.
I'd say on the aftermarket side, what we track is, as Vic said, the TSA boarding profile, who's putting planes back in service and that sort of thing. And I want to remind people that even if a plane is half full, it's still flying. And so TSA boardings are one indicator of what's driving the aftermarket, but it's really a combination of that and plain miles, not just passenger miles. So that's stabilized for us as well. I mean, it's still down significantly, but again, we're seeing signs directionally that that looks like it's going to come back faster than the OEM side.
Yeah. One very anecdotal, but if you look at the TSA numbers, and so they've been tracking since probably December at about 40% -- 38% to 40% of the previous year. But then if you look at the three days after the first of the year, the first three days of 2021, they jumped up like 55%. And the only thing I draw from that is people are ready to travel. I mean they really want to travel. And if you look at vacation bookings and cruise bookings and all that, I mean, those are very strong. So I don't think there's any doubt that there's a strong desire there for people to get back to traveling and traveling by air. But it's -- and I think that the vaccine is going to make a huge difference when a lot more people are able to get access to that. | direct | [
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e9c75af8dded0ab053df9cd841991f4a | Got it. Okay. Thank you. We don't talk about it too much Vic. Can you talk about the pipeline for Test? My impression was that there were some larger projects that got deferred out of last year just because of the COVID situation. Are those now close to releasing or are they still in a holding pattern? Just kind of talk about the environment there and the demand that you're seeing. | I think the very large ones, I think, are still in a bit of a holding pattern, but we're seeing a lot of great activity in smaller chambers and here I'm talking $1 million to $4 million, $5 million of chambers. And so that's really been strong. I mean, the pipeline that we see today is as strong as it was when we were entering last year. And we're seeing a lot particularly in China. It's been a really great market for us recently. But I'd say that the Test market -- I should say that the Test end markets remained pretty strong. So that's an area, if you look at the results over the past nine, 12 months. I mean, that's held up very nicely. And we've not seen anything that's going to change that. And so my hope is that here in some near term, some of these larger ones will start freeing up, but again, we don't need those to kind of make the forecast that we have out there today. | direct | [
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8b2c9eb4702b8bd752461c0e886e28f3 | Got it. Okay. My last one is just any update on the CFO replacement, Gary? I know you're a hard act to follow so. | Yeah. Actually, I've been -- I don't get any specifics, but I've been very pleased with the quality of people that are showing a true interest in this. We've been working this hard. I don't want to get in a lot of detail. But I think that it will be really good candidates we have, and so I think that's something that we'll be able to get done here in the next quarter. So I think Gary will still be here for the next call for sure. But it will be a very orderly transition. He's committed to stay as long as he needs to, to make sure that whoever does replace him will be well schooled in what to do around here. But again, I've been very impressed with the quality of people we've been able to track. | intermediate | [
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de8c6a7537e2fedd42c91765122a38c3 | Yeah. I thought you referred to in your commentaries that there might have been some borrowing from the second quarter into the first quarter. Did I hear that properly? And if so, what businesses did you borrow from? | Yeah. I would say that just what we saw particularly in the Test -- I'm sorry, in the Utility market, I think they had such a strong first quarter. And my assumption is some of that probably got pulled out of the second quarter into the first quarter. | intermediate | [
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c5c779c6b8079f3c49b7885ffec9f16d | Okay. That's in the Utility market. And quick question regarding the tempo of the billings in aerospace and defense. Is that second half in A&D followed at 40%, 60% model or is it tilted more one way or the other? | Well, I think if you look at the A&D market, you're going to see a little more tilting to the back-end, because again, if I just focus on the large programs in that group, large meaning getting an order over $10 million, it's primarily around the submarines and the Space business. So we're in negotiations on the next pool, if you will, of Block V. And so we would expect not many orders on Block V in Q1 and Q2, because again, we got $100 million last year. So we should pick up another lot on the back-end of this year. And then within the Space program, at Boeing, the space launch system, the Artemis program, SLS, we're in negotiations as we have been. If you get that, it just -- it's a cadence of when they release the core stage numbers. And I think that should give us a nice book-to-bill in the back half of the year.
So we're burning off backlog in the first half on the large programs, we'll replenish that. And my guess or prediction for the order -- book-to-bill for the year will be fight to a tie, which to me is a home run, when you're burning off $100 million of running start from last year. So it looks pretty -- the profile looks pretty good. And that's why I wanted to emphasize the cadence of this. The book-to-bill is important, but it's really the sustaining of the backlog number as it burns off and it gets replenished in different quarters. So it's really just a mathematical kind of rejiggering of the quarterly profile, but the year looks great. | direct | [
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4af15de2d546693a5115e729a588d012 | On the rate outlook, do you take the fact that some of the lines are leveling out on rate increases, that perhaps the market is starting to approach adequacy, or maybe rate will start drifting down closer to loss trends over the next few quarters? I just wondered if you could comment on what you see in that trajectory. | Yeah. It's a good question, Gary. I think, the way I see the quarter, I actually see it as further evidence of a sustained hardening market. If you look at our rates, at 12% overall for P&C, we also achieved that double-digit rate with 3 points increase in the retention. So, it's three quarters of double digit rate and I think you're going to see in any one sub-segment, some lines can go up in a quarter and some can even go down, and some will stay flat because invariably you're going to have a different mix of accounts, of profitability, which ones might need more or less rate, where you might be going after, as an example, better terms and conditions.
And so, if you look at the quarter and where we got rate, we got strong rate in different areas that were higher. Our financial institution management liability was the highest, actually, in the fourth quarter. Healthcare, it does move quarter-to-quarter, again based on the book, but it's eight quarters, right, of double-digit rate on the rate, and I think all of the conditions that everyone has talked about, the dynamics of COVID, the low interest rate environment, elevated cat, the history of rate and loss cost trends, I think this market is going to persist in 2021, albeit you might see some fluctuation quarter-to-quarter.
If we look at January, Gary, there's really -- we just -- our activity in January sees the market persisting. And so, I'm not really sure when it will start to flatten out, but we see a lot of opportunity and, quite frankly, I think it's needed because it's going to take some time to make up all of the dynamics that everyone's been talking about. So that's how I see the quarter. | direct | [
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31db88ee6e6158a00f726a5ebdb41436 | So I can take from that you think the market is still -- generally has deficient rates, there's still a need for rate above loss cost? | I do, and I think you're going to see that persist in 2021. | direct | [
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6f54fcacbf5cabcde2114f4132909a1f | Another question on the overall distortions of 2020 in looking at your reserves and loss picks. I guess, I would assume that loss payments would be lower because courts were closed and maybe there's a little bit reduced frequency in some places. Does that mean we ended the year with proportionately more reserves, either case or IBNR, if you look at the numbers, or is the mix of reserves higher at the end of '20 versus '19? | Gary, I can take that, this is Al and good morning. Yeah. I think that's fair, Gary. If you look at our cash flow, you can see obviously our operating cash flow was up year-over-year, and as well our paid to incurreds are down, that is a reflection obviously of our stronger underlying profitability, but as well that we had a higher level of cat, including COVID, and some of which has not been paid out. So, our paids are down and our -- particularly our cat reserves are indeed up. | direct | [
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559a270fe2879e940ef6f1834fb8dd40 | And when you were picking your loss picks, were you just more or less ignoring 2020, kind of thinking about the trends from prior years, or how did you build in what you saw in 2020 in those loss picks? | Prior to the -- Gary, it's Dino. Prior to the pandemic, you'll recall and we had articulated it on several calls that we had seen -- we had increased some of our loss picks. We had increased our long run loss cost trends, actually about 100 basis points in -- over the prior year, a function of, as I had indicated, social inflation particularly in areas like medical malpractice and umbrella, etc. And so, we go into 2020 and COVID hits. And as I've indicated pretty well every quarter, it clumped up the court dockets. And so, we just -- we acknowledge some of the benefit, as we said on this call, and the rest we just held on and stayed the course on our loss picks, which are -- were elevated from prior. And we're going to just hang onto that margin that is portended by rates over long run loss cost trends until we get a little bit more clarity. And I think it's going to take still some time, as I said in my prepared remarks. | direct | [
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632c521274554313f505582dd0386df2 | Al, I'm wondering if you could talk a little bit about the dividend, the math behind how the special is calculated in conjunction with the decision to raise the quarterly dividend. What sort of economic factors were you looking at this year's dividend versus the long run dividend? | Yeah. Thanks, Josh. This is Al. Look, I think in keeping with the approach we've articulated in kind of our capital management strategy, right, we look at our net income, and our intent is unless we have opportunities otherwise, they're going to maximize return to shareholders. We're going to pay out the majority of our net income year-over-year, in this case, I think historically that's been in the 90%, 95% of net income. So, if you contemplate the new dividend that we declared, as well as the special, and you look at that relative to our net income for the year, that math should be consistent. And so, I think that's what I'd say in terms of kind of our approach, and nothing's really changed there. | intermediate | [
"direct",
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] | B |
c5bd46e3577498c717994f700f914096 | The comments you made about the general liability reserve development, I'm wondering if you can give some color about years and magnitudes. | Sure. So, Josh, that was premium development on general liability, and essentially ongoing we go through stake reviews that look at premium audit and we had some adjustments that would have gone back just the last few years, little positive adjustments and negative adjustments. The net effect was a $14 million adjustment to GL premium for those years. | direct | [
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21fb28b5ae22f9db2b0d150f145476e4 | Can I take from that, that the loss reserves throughout the business, while they'll be changing given yours are generally unchanged from where they were a year ago? I'm more talking about the recent reserves than I am talking about long-dated reserves. | Yeah. No material change in loss reserves for the period for GL. | direct | [
"direct",
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] | A |
fdaec5e8ae8dc382ef5b81ac9bf943e3 | Dino, I was hoping you could talk a little bit about whether there are any changes going on at Hardy that would impact the components of the combined ratio? I'm just assuming that the Lloyd's book is more subject to change in composition than your other segments. | Yeah. So, as you know, Meyer, we've been in a process over the course of 12 to 18 months of reunderwriting that portfolio, and which I had indicated would be largely completed in the fourth quarter, which it was. The biggest change was on the property side, in particular in our cat exposure. And over the course of the last four or five, six quarters, you saw a lot less impact in our cat results coming out of international, which used to be heavily impacted by the Hardy portfolio. So, the goal going forward in Hardy is to leverage the specialties that we have at CNA, develop here and expanding there, and lines of business and segments like our profitable specialty segments, our profitable commercial segments, and it's going to be a lot more in line with what we do in the United States. But the biggest change you'll see is in the cat exposure, and evidenced by a lot less catastrophe activity in the last six to maybe seven quarters. | direct | [
"direct",
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] | A |
111bdf25edecfdf5ab1e45d449d4b323 | I guess, a question for Al, so we've seen some of the limited partnership assets, I guess, move to Life from P&C. Is that process done, and does that have any impact on your ability to raise rates on the long care -- long-term care book? | Yeah. Thanks for that, Meyer. Yeah. So, at the end of Q3 and through the reserve review for long-term care, we decided on a modest allocation to limited partnerships, and as you could imagine given the long duration, that makes sense. That was a zero sum change basically across P&C and Life & Group. We wouldn't anticipate that's going to have any material movement on our ability to get rate there. Really, it was all really part and parcel to our evaluation of our discount rate and what we think we could reasonably earn on our assets relative to the discount on the liabilities. So, I don't anticipate that's going to -- given the allocation, that's going to meaningfully move anything on the rate adequacy front. | direct | [
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] | A |
1fad0be2b910a8d1c3ad6fffdcfdc85e | And just finally, if you could update us on commercial auto, it sounds like there were no reserve charges in the quarter. Does that product line seem reasonably priced? | So, we have been -- Meyer, it's Dino, continuing to get strong rate on our auto, and got about 13 points of rate in the fourth quarter and we've been doing that for a while. And we still have a ways to go on auto, but clearly it's moving in the right direction and we didn't need to act on loss cost trends or loss picks in the quarter. | direct | [
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] | A |
bf2377de7ba0d8e9ffeef97da0dd811a | Can you speak a little more about how the progression of demand and pricing evolved in March and then into April with the onset of COVID and lockdowns? Maybe you can talk about graphic and specialty and pulp segments separately. And then if you could touch on how you're thinking about demand and pricing as the U.S. economy reopens? And then also what plans do you have to idle production at your facilities in Q2, if any? And then touch on overall cost reduction efforts planned for Q2. | Sure. Yes, we don't normally guide on price, but I will tell you that we're seeing persistent downward pressure across all the graphic business due to the lack of demand. If you look at RISI's predictions, they're predicting a 5% to 7% erosion in 2020. So that's kind of all I can say on price. We are planning on idling production in the second quarter. We're going to try to balance our supply and demand. We're predicting 110,000 to 120,000 tons on the graphic side of things with really no downtime planned at all for our specialty pulp and packaging business. And what was the -- what was your last question? Cost reduction. Yes. Yes, so everything going on the table. We've got an austerity plan, an integrated action plan that we're working through. Obviously, most of this -- most of it comes out of the mills. We're taking things out that we don't deem as critical. Especially during our shutdowns, we're going to concentrate on doing all the regulatory requirements, anything that would be a safety issue. And we're obviously cutting nonessential spend everywhere throughout the mills, cutting back on operational-type purchases and things like that. And we've got a pretty good list going in the millions of dollars that we feel like is going to help us through the situation. | intermediate | [
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] | B |
c24237b2186bc6527275fbdd49ae816b | Given that specialty and pulp are trending relatively better, can you speak more about what you're seeing in each of those segments, the plans to lean into that relative strength then maybe how we should think about you potentially increasing capacity for up to kind of go after opportunities in specialty? Which types of products and capital investment you're planning for that? And then just generally, what opportunities do you see that you might pursue during COVID? | Right. As I mentioned, our pulp business remains strong. So we -- any potential opportunity with -- when we take downtime on the machines, obviously, and we can make pulp on some of our machines. So we'll take opportunity to make more pulp and sell it to the market. Our specialty business is doing well, specifically our release line of business on E3. So we're working -- and we've run some trials on some other machines with regard to that, and we've had a really good success with our release line of business. So we're ramping up that business. So those are the kind of things we're doing on the product development side of things. So those businesses are looking really good for us going forward. We don't see any decline happening. So we're going to concentrate on us moving as quickly as possible for as little as capital we -- as possible to get into those markets a little bit deeper. We don't plan on any significant capital. We're going to be very stingy with our capital through this period. | direct | [
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] | A |
839f152cf1937cd3879c35ac1addde94 | Just on the pricing pressures that you're seeing, is that being driven by customers or is that being driven by competitors? You had one competitor noting they took market share when they reported last week. | Yes. It's a little bit of both. I mean, -- but the pressure from the lack of demand, obviously, is there but we do have competitors that are taking the approach to fill the machines up and going after price aggressively. So we have to react to that. | direct | [
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5ba603fc33ce6c8af33c6935ef177003 | Are you changing any of your sales tactics in Q2 just given -- because of COVID and you guys, your projection of a 40% decline in shipments? | Yes. We're taking an aggressive approach with our -- with sales. I mean we're going to go after market share where we think we can get it. Obviously, the sales guys can't get enough on the road and do their normal kind of thing, but they're constantly working the phones and using technology to get out there and talk to customers. I would probably just say that we've ramped up our efforts with regard to that, speaking to customers more often, trying to get a feel for where they are at and making sure that we're there for them. Going forward, we -- and I would say we've seen a flattening of at least cancellations and starting to get some orders coming through. So we may be seeing a bottom to what's been going on here. | direct | [
"direct",
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] | A |
15614851cda52d385ef492e9a862849e | How much do you think the customer base is oversupplied right now because their business got impacted by COVID-19? And how fast you think the orders could ramp up once the economy gets going again? | Geez. I mean, if I can predict that, I'd be really good. That's a tough one. I don't -- we don't really have visibility with printer, what they have in inventory. So it's hard for me to comment on that. I apologize. | fully_evasive | [
"direct",
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] | C |
854d0e8650d3c0d5ef84877d587901fe | Can you give a little more color around your capital expenditures? You said you reduced the plan by $11 million this year down to, I think, you said $44 million. How is the $44 million being spent? What are your current thoughts on what's kind of maintenance capex versus growth capex? | Yes, no problem. The plan is to spend $10 million in quarter 1. Our heavy spend is in quarter 2 of $20 million, and that's really all driven by our mill outages. Quarter 3, we spent -- we plan on another $11 million and then I believe in quarter 4, $5 million. We're really focused on just -- at this point, it's just maintenance capital items. Nothing extraordinary. We did spend the Duluth capital that we said we were going to spend in the first quarter. We spent about $5 million to convert the machine to some packaging products. | direct | [
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8ec98880308be62ab97f2a0bd9258eea | And is that -- it's early, but is that hitting your return expectations? | Yes, it is. | direct | [
"direct",
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] | A |
75ea84f078cb54df255c88612835a82b | Hi. Good morning. Thanks for taking my call. I have a question about your pension contribution. When you guys announced the sale of the mills, you said you're going to put in $54 million into the pension to kind of upload the whole year. So could you explain if you're going to do that, if you're not? And I noticed you spent $12 million in the pension in Q1. So any more detail on what you're going to do with it? | The $54 million is still a placeholder that we have for the contribution. Our required contribution is a little bit less than that, so you'll see in the Q what our required contribution is. But it's our placeholder in that range for this year, yes, for cash contribution. | intermediate | [
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5cbe24c4fbeaba93ae19e180ace9ec32 | OK. So you're not going to have to put in the 50 -- you're not -- you didn't put in the $54 million at once, you're going to spend that roughly during the year? | That's correct. Larger payments in the third quarter. | direct | [
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7cfc9722090cca4545092794a9a62e3e | Got it. OK. Thanks. And is the Duluth spend over now? Was -- are you only going to spend the $5 million to do the small conversion? Is there anything further to do with Duluth? | Currently, that's the -- that's what we're planning on spending. We're still evaluating the first phase of that, and we'll decide later whether we're going to continue to invest in that project. | direct | [
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5f1c64e25357926f4ae39feff3072fdc | Got it. And what about industrywide shutdowns? Have you seen any of your competitors shutting capacity either here in the U.S.? I know in Europe, there's a big closure coming, I guess, in Q3, Q4. Anything further that's happening lately? | Yes. We've had a lot of competitors announced downtime. The last time I looked in a RISI report, it was north of 750,000 tons of announced downtime. And that includes some downtime in Europe. | direct | [
"direct",
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57e7f72aad64ef4b0d6bfc652db5a928 | OK. So who in the U.S. is shutting? Anybody you could specifically mention? | No, I can't mention that. I think it's in their earnings report. | fully_evasive | [
"direct",
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] | C |
068a57f93d41f9ee7cac8e1689a1c05e | OK. But it's globally 750,000 tons that you're hearing about so far? | Yes. That's -- I mean, that's what's been announced so far. Yes. | direct | [
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] | A |
ec4a69b021bc858c9cffb0745c787166 | Thank you, nice job. Vince and Mike for keeping everybody safe and navigating through this time. My question is what's currently preventing existing customer to migrate from your enterprise product to the Go platform? I know you built this based on the customer's mind. And secondly, is what is the sales strategy for the Go products, because right now, your competitor also said the renewal rate is 90%. So it's a sticky business. So what's your strategy there? | Sid, I think I heard your question. I'll try to repeat what I think you said, and if I got it wrong, just correct me. But the first one was, what was preventing us from selling our Spok Go platform. Spok Go platform sales have been put on hold because of the pandemic. Basically, these hospitals and healthcare institutions that we're looking at the platform has frozen up. We're starting to see that actually break loose. We're actually starting to see much better traction in April. But time will tell how long this pandemic is going to impact these hospitals. They were hit by an initial wave from the pandemic, and they were literally putting tents up in parking lots and conference centers and it wasn't time to do a whole lot of new purchases. We have continued to sell our CCS 1.9 upgrade, and that is to existing customers, and that has also the gateway to our Spok Go platform.
You have to have that installed first. We've had the customers not allow our professional services teams into their facilities. And obviously, you need the professional services teams to go into the facilities to install your premise-based software and that includes the CCS version 1.9. So this whole thing is still in a bit of a monkey wrench into our business plan. But we're hopeful that, that's going to be easing up and that long jam is going to break shortly. I think that gets to your question. Mike, is that what you heard? | intermediate | [
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ac3660f9a3aaa5769a01431877a2a867 | Hi. Vince and Mike, glad to hear that you're both well on the employee base at Spok are healthy and safe. The largest shareholder on your Board is Braeside, who you settled with in 2018. It appears that Braeside standstill agreement expires today. Has Braeside elected to extend its standstill agreement with Spok? And specifically, are you expecting Todd Stein, Braeside's representative on the Board to continue as a corporate director? | A couple of things. I want to keep our answers, as I said in my opening comments here to our historical financial performance. However, I think Todd is a fine Director. I think he does a great job and he has my support. Thanks a lot, Dave. | intermediate | [
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a4bd290a1fd580396c8deef5d591f4bf | Yes. Follow-up question is, what is the current sale strategy for the Go platform? Because it seems like your competitor also bringing out 90% renewal rates. So it seems like it's a sticky business. So and how do you position yourself better than some of the competitors that have equipment attached to it as well, consider only the software? Is it actually better to have only the software versus selling the equipment as well? | Sid, I really want to apologize, but I'm having a hard time understanding your question. I think you said something like with respect to a sales for Spok Go. So we've developed the Spok Go platform. We've been out there marketing it. We've got a very large pipeline right now. I think it's over 50 deals in the hopper right now. And I think the total is over $27 million in potential. We have to get that across the finish line, obviously, and it takes time to do that. But it's being very well received. We've built enormously flexible and powerful platform that's based on a cloud-native architecture. And we think architecture matters in the long run. We've partnered with AWS to do it. Right now, it has a very strong messaging capability associated with it. It has nursing workloads, including a workflow engine associated with it. It has on-call scheduling associated with it, which is a huge issue right now inside our healthcare customers, and we're also building critical test results into it.
There will be other service lines that we will be adding into it as the year progresses. We have shown this to many customers. They are very interested in this. We have shown this strategics. They have looked at it and told us that it's very powerful. We have shown this to huge financial sponsors that have a lot of experience in the healthcare industry that have said that you've built the best platform out there. So it's just a question of time. We think we've got a winner, and it will take some time. And this pandemic certainly did not help. We had 100-plus meetings scheduled at HIMSS. We have phenomenal booth space and location. But it is what it is, and we're going to make the best of it. And we're going to go forward, and we're committed to making our shareholders some money and appreciate the patience and support. | intermediate | [
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] | B |
83e4664d076beb716716842454fb8c63 | Thanks for taking the question and I'm glad that everyone is healthy. Vince, I'm just having trouble sort of rationalizing the valuation that you put on the firm in your press release of basically $3.50 for cash and $6.50 for the wireless. And in the last call, you had talked about you strongly believe that your best financial results were ahead, and you believe that remaining independent is the best way to maximize value. But as we sit here, the stock is trading at $11, basically is valuing the wireless, give or take, $20 million after the money you've invested and the amount of time that's gone on since you bought Amcom. How are we going to sort of close the gap in the value that you perceived in the company in a reasonable period of time rather than this long-term view that you keep referring to? | Well, I think a couple of things, Brad, and thank you very much for the question. First of all, none of us could foresee this pandemic and what it was going to do to us. I'd just be totally honest. We had huge expectations from what was going to happen at HIMSS. We have huge expectations for sales on the new platform as a result of that, and all that got pushed back. We are painfully aware of everything that's going on with our stock. And we are looking very closely at lots of options, lots of things we can do to create value. We think sale in Spok Go, is a very, very important way to drive our value north. We understand well the wireless business. We see this trends continuing to improve. It's going to be around a long time and has a lot of work.
We've pulled some significant levers now to make sure that we are free cash flow positive going forward. So we're not going to be burning cash from operations. We will, though, however, continue to be paying our dividends as we go forward. And as I said in my comments, yes, we're going to look at this very closely for the balance of this year. And if we don't see improvement, we can't make folks happy with respect to our share price. We'll look at other alternatives, and we'll find a way to either run this thing in a free cash flow maximization model or some other way to unlock more value. It's important to me as well as a shareholder. I know it's important to you as a shareholder. Thank you for your question. | intermediate | [
"direct",
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] | B |
55904e294fbd32c57fdbf5f89f246712 | It's one thing. I appreciate the obviously, the virus was not anticipated. But a lot of the issues that I'm discussing were pre-virus. So for example, the stock was trading between $9 and $10 before the virus and before B. Riley's bid. So we can't just sort of say the virus is the issue. There are other sort of bigger issues that need to sort of be dealt with. And I think that most shareholders, and I'm going to be speaking for myself, and there have been some other ones who have come out publicly, the discrepancy between your share price and the value that you perceive for the firm is way, way too wide. And I think that people's patience is being pressed. So I just want to press that upon you, at least from my perspective. | Brad, thank you very much. I don't disagree with you that people's patience is being pressed. My patience is being pressed. We are investing a lot of money to deliver this cloud-native platform. It has 0 revenue to show for it yet. That cannot continue. Either we're going to get revenue to show for it, we're going to start getting a return, get some appreciation in our share price as a result of that, but we won't be investing $28 million a year in R&D. And we'll be running cash flow maximization strategy. So I don't disagree with anything you just said. Again, we're very aware of it and we're taking steps, I feel, to address it. And there'll be more on that in future quarters and future releases for you, and we'll talk to you in July when we release our second quarter earnings, and we'll go from there. | intermediate | [
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] | B |
296a2071fe7f46157174527be3dbe788 | So, we've heard from a lot of builders over the last couple of days and it seems there's two somewhat differing views on the best way to approach the market these days, you've got some builders that are sticking to a kind of a to be build strategy and feel like that's what the consumer really is desiring today to kind of design and pick their perfect dream home. And then you've got other builders, that for a multitude of reasons feel like it makes more sense to wait until the home is started and kind of further along in the construction process perhaps to sell and I think at least those builders in the near-term are probably seeing a little bit of a greater lift gross margin, they're benefiting from those extra months of pricing power as well as maybe some increased visibility on their cost structure. And I know you guys kind of have a balanced sales approach, at least kind of historically. So I'm curious if you have a view one way or another, or if you've kind of shifted your sales strategy, one way or another to reflect kind of all the various trends and dynamics in the market today, uncertainty on costs, pricing, significant price appreciation, etc,. | Great question, Alan. I think my starting position on that is in an environment where you have near absolute cost certainty. Our value proposition for buyers tilts toward a larger share of our sales being to be built. But in the current environment, we're doing a couple of things because of pockets of uncertainty around costs, either slowing the rate of those to be built sales, or starting homes, so that we have that certainty on cost, and then selling them. So unfortunately, I don't have a red or blue, a yes or no answer for you. But it's a navigating through but the pivot for us is where we have cost certainty, we have more confidence than therefore to be built model allows us we think to be paid for our pillars for our choice plan, for our surprising performance. But I totally understand the point that it's tough to sell a home not know what your costs are, lock the price, and then end-up with costs that you didn't anticipate. And so we're managing that problem at a community level. | direct | [
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f49b36327f5bc7e6c38dd6cf29eb0743 | Got it. Your response, Allan makes a lot of sense and it's helpful. And I guess on that note, it seems like at this point, really the only limitation on sales are our production, maybe for your guys community count is a factor as well. But what is your production pace look like right now? How many homes are you starting per month per community if you look at it that way, or on an annualized basis, how many homes do you feel like your production machine is capable of starting? And is there any flex point on that, where you can potentially drive that higher, assuming demand continues to be as robust as it is, if not accelerate even further? | I think it can go up over time. But it's not the capacity, the throughput can't, there's no flip switch to flip to make that capacity go up in the next 30, 60, 90 days. And that's why you saw, I was talking about a meaningful part of our backlog delivering in Q1. I mean, we looked at the capacity for our throughput where we could have price certainty and deliver the right home the way we wanted and realize that the reality of that production environment is that, we won't have the backlog conversion that we've historically had in the third and the fourth quarter. It is going to get better, I think in terms of the production capacity for us and for the industry because I think that this whether it's $4 million or another number, this structural deficit I think is an undercurrent that is going to force us as an industry to expand capacity. We need to, the markets therefore, the trick of course is to keep it affordable. But I do think that that will increase over time. | intermediate | [
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] | B |
d246d3cf2778ac78ca5e85358bb8345f | I'm good. So you're obviously seeing a very strong price environment. ASP is expected above 400K next quarter. Can you speak to maybe how much more price can be driven in this environment? And kind of, how do you see that kind of unfolding and is there a breaking point eventually? | Well, I know the answer to the last part of the question for sure. There is a breaking point, it's affordability. And one of the things that that is different about this environment now compared to other times that have felt quite euphoric from a new home construction perspective is I'm comforted by the fact that mortgage underwriting has remained really disciplined. So qualification income levels are going to ultimately have a big effect on how much pricing power we have. And of course, changes in interest rates will factor into that as well. And I think that there is more room, I'm not panicked about some of the pressures in the cost side of the supply chain, I think we've got the ability to make changes to the product and accommodate those in a mix. But I don't think that, if I looked at macro numbers, the level of price appreciation we've seen across all new homes or new and used homes in the last year, I don't think that's a run rate that we're going to see sustained over multiple years. But we're in a bit of a short squeeze right now for the next few months, quarters. There's quite a bit of pricing power. | direct | [
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ad8ab4feb3bcd6648850ffed47601c4e | Got it. And with the strong demand for these being, are consumers looking for certain amenities, or has there been any change in consumer preferences in regards to configurations, floor plans at all and has that affected your product mix? | It has a little bit and it will come as absolutely zero surprise when I tell you that a place to home office and home school comes up in almost every sales conversation and I don't think that's a cynical view that forever we're going to work from home and teach from home. But I think when you realize, you don't have that opportunity, that flexibility. It feels like your product is functionally obsolete. And I think that's a big part of what we've seen over the last year. And I think it's got legs to it, I think we're very focused on having opportunities for people to work from home. And that that affects the architecture, the layout of the home, and in many of our communities and many of our floor plans where we're intentionally designing more than one, so that you've got the opportunity for quieter spaces, and more of them. And I think I talked last quarter, a little bit about the fact that you've got an interesting thing happening right now in architecture, or interior architecture, at least, which is we've all got the visuals from television and the Internet, what open floor plan, open concept, high ceilings, great rooms, keeping rooms, we call them here in Atlanta. Those look great, and they feel great. But they're not awesome for working from home, teaching from home. So there's a little bit of a challenge, how do you create those nooks and crannies and those purpose built spaces and still have these gathering places, these senses of place within your floor plans, it's actually kind of exciting thing to figure out how to do that. And that is definitely a major theme and product in our floor plans everywhere in the country. | direct | [
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] | A |
d66eea49414ae67619a16f2f0354f180 | Understood, and I guess just last one for me is if you could speak to any progress updates with your commitment to having all your homes being Net Zero Energy Ready by 25. And there's a current kind of unique demand backdrop accelerate that at all, or change that at all? | I don't know that it changes that, the opportunity to accelerate is really, it's kind of a function of community, new community count, it's tough to go into a community that you're two-thirds of the way told through entitled, permitted and have let contracts with sub and really, fundamentally change the way the home is built. So what will happen and the thing that will really play a big role in the rate of our achievement of that is, as we open new communities, our capacity to bring those features into homes within that community. Now, there's some larger communities where we're making changes in real time. And those are incremental changes. But, I was thrilled to be recognized to have the company recognized again, as a ENERGY STAR Partner of the year. Six years in a row is a big deal. Testing every single home for 10 years is a big deal. And I feel pretty confident. We're going to remain a leader in this category. I think we're very disciplined about it. Our team is excited about it. I think it's the future, and we're driving it. | intermediate | [
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5d534c86c485a0544b8164598b6d0236 | Hi, good afternoon, everyone. Just wanted to walk through the math, if your backlog that 3,300 of 700 homes that are going to close in 1Q 2022. And you're looking at high single digits, you're talking somewhere 1,400, 1,500 closings for the third quarter. Are you all thinking right now that your fourth quarter is going to be in line to maybe slightly higher on the total closing basis than what you're seeing in 3Q or do you feel like you can deliver those home, deliver a few more homes than what you're going to close in 3Q? | So Jay, we're not going to give specific fourth quarter guidance, you can kind of back into it, given what we said and what's in backlog and kind of what the spec level looks like. But we're not going to go to specific guidance. And I think as I mentioned in my comments, there's a bit of uncertainty between Q3 and Q4 with the production and kind of moving in between, so high single digits for Q3 and you can kind of back into it based on what's in backlog and the spec count. that's what you think for Q4. | fully_evasive | [
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ed9966fd6a2716d4a2e1ede02526bda1 | Right, well, and that's going to be my next question is on the spec, I mean is everything that you guys are starting right now mainly to meet the backlog or you trying to rebuild that spec count at all? | We're trying to and in some places, we've got the throughput to do that, Jay and candidly, in some places, the backlog of sold homes and started sold homes is that the throughput for a lot of additional specs is limited. So the answer differs by community. We do want to have a little larger spec number. We're a little bit off of our traditional number of specs per community and it really is mostly attributable to this excess that we had selling the spec. But we want to take care of the customers, we've gotten backlog and the balance there is kind of how we got to where we think, the second half of this year will get from a total perspective. And that's kind of why we focused more on the earning side than on the unit side, because I think there's going to be some movement, as Dave said, between Q3 and Q4, both specs and backlog. | direct | [
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9749a1c4c60f3c99b8713a82adcf4a28 | Okay, the communities that you're planning to start growing in 2022, is there any geographic specificity to those and then also, when you think about underwriting now, what type of monthly absorption pace are you underwriting these newer communities to? | I'm really glad you asked both those questions, Jay. The answer on the first one is no, there isn't really an asymmetric distribution of new communities, we've got growth in every market. And as part of the discipline of staying in the footprint, right, instead of getting excited by a new market A, or new market B. I mean, we've got great teams, we've got long histories in the markets we're in and we want to invest with our team and our markets that we know pretty well. In terms of underwriting, this is a question that that I know comes up a lot. These are really, really exciting frothy kinds of sales times, these are not the sales paces that we're using in our underwriting. We're using sales paces that look like our last three, four or five years not that look like the last six or seven months. | intermediate | [
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e4d6c1b05a8ddd2ce435d766ad641185 | Yes, hi guys. Thanks. I was hoping you could comment on your interest expense versus interest incurred. Obviously, interest incurred has been going down because you guys have been paying down your debt. But this quarter, we saw a jump in the interest that went through cost of goods sold. So roughly when can we expect those two numbers to be more in line? Is it maybe until next year? | Well, we've actually talked about it in the past. Absolutely, Allan mentioned in his commentary, in the script that we think we're going to see a benefit from the interest perspective, flowing through cost of goods sold. And overall in the income statement, as we look to next year in terms of winning that and amortize some together, it's a little bit further off in the distance. And there are some factors that go into it, as you know, between inventory turnover and encourage and beginning balance. But certainly the reduction next year's plan as Allan mentioned and a benefit from an income statement and earnings perspective as Allan referred to in the script. | intermediate | [
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e7bd092b98139a809a6501ab9f59cf3e | Okay, great. Thanks. And then, as I think about capital allocation, and I looked at your balance sheet, obviously, you guys don't have any debt maturing near-term. So I'm assuming you probably won't be delevering in the near-term. So what are the uses of cash at this point? Is it more to buy land? Is there potential for share buyback? How are you guys thinking about that? | Well, let me just correct one thing lightly, if I may, we're going to get debt below a $1 billion, we've committed to do that by the end of fiscal 2022. We've got, we structured intentionally a few years-ago a term loan with $50 million principal payments, so that we could balance the delevering with our growth ambitions. And we've been executing against that. So we'll have a term loan at the end of this year, another one, at the end of next year, we'll pick up a few other bonds in the market to make sure that the aggregate gets to total below a billion dollars. But that is for sure, going to be one of the allocation. Beyond that and frankly, the much larger dollar amount is investing in the business. The market is strong, we're seeing lots of opportunities, we're excited about, the commitments that we've made, the deals that we've tied up, we've given pretty bullish guidance as it relates to land spending in the back half of this year, and for the total year. And frankly, a lot of the deals that we're doing will have takedowns and other uses of capital in 2022 and beyond. So at this point, I'm excited about the returns, we can make investing in the business. So that plus paying down the debt to get below a billion dollars. That's really where our focus is from a capital allocation perspective. | direct | [
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e647f221bfbbfadfd42a0bedfbe30e52 | Got it, if I could ask another one. Your land balance didn't seem to go up year-over-year. So is that something that is in the works, to kind of line-up more with the growth, you guys are seeing in orders? | Yes, I mean, there are a lot of cross currents in the land balance. We had some formerly land held for future development assets that were pretty big. And as those have, we've been selling through them we have debt, we don't need to have the same number of lots that we had for the size of the business. The other thing that's happening and you've seen this in the option percentage, the option percentage has gone from 30% to over 45%. So our land balance or dollars, we constantly talk about the efficiency of our balance sheet, we want to have a big investment that no bigger than we need to have, so that we can drive higher and higher returns. And that's a big focus of our strategy is to make sure that we're growing our return on unlevered assets and our return on equity. So I think actually, that's a good thing, right, that we've been very prudent about the rate of growth in the assets. And we've been able to drive a lot of EBITDA growth without a lot of asset growth. But we're definitely growing assets, but we're more focused on growing returns than we're growing assets. That's what balanced growth is for us. | direct | [
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e11ae98b561d10460dee54d3d81de44a | Hey, guys, good morning. Max, maybe this one's best for you as you kind of talked about it a lot in your prepared remarks. But as you guys have started to see kind of the revenue tick back and obviously acknowledging the $200 million run rate that you set forth your expenses, clearly when you guys put those targets out there, it was probably some ambiguity as to what costs would need to return as revenue started to ramp. Given the result here, it doesn't look like a lot of that have returned, and obviously, a lot of it's on the lottery side, you spoke to somebody the incremental flowthrough drivers.
But have you noticed, you know, perhaps maybe that that estimate of cost that we're returning could perhaps be lower than what you were previously articulating as you've seen revenues start to ramp across the business? | Hi, Carlo. Look, at the end of the day, we have been able to bank on actions that we have executed throughout 2020 in the early part of the year. So, we are continuing to enjoy the same kind of benefit in nature than last year in terms of reduction on discretionary costs. As the year will unfold, and eventually revenue particularly on the gaming side will start to pick up, we'll probably be -- we'll probably experience a shift into cost-saving programs away from those discretionary cost savings more into structural permanent long-term savings as we have been announcing since the beginning of the year with these operational excellence initiatives and the product simplification coming to fruition.
So, we expect to still be able to beat our $200 million target for the full year, but the mix of the savings will change over time. | intermediate | [
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bf93306b9f65f573c079f6d3f8735dc5 | Great, Max. That's super helpful. I appreciate that. And then secondly and, you know, acknowledging there is some seasonality in the business.
But when you look at the digital and betting revenue business right now, I mean, you're kind of run-rating $230 million, $240 million if you were to just annualize the $58 million in the first quarter. How -- given the attention paid to kind of those streams, obviously, iLotterty, iCasino, and your OSB platform business. How much do you guys contemplate perhaps maybe breaking that business out even further down the road to give investors? Obviously, with the revenue disclosure, that's great, but, you know, obviously, that business is profitable for you guys as well. But how much have you thought about kind of featuring that a little bit more disclosure and maybe providing a little bit more granular color on kind of exactly how that business is doing from a profit perspective as well? | So, this is a very good question, Carlo. Obviously, we enhanced the visibility of our fast-growing digital and betting activities since we launched the new organization back in Q3 of last year. And we have also dedicated more time to talk about our business activities in digital and betting over the last few earnings calls based on the success that we have been able to track across the verticals in iGaming, iLottery, and sports betting, which is driving as you mentioned a phenomenal revenue growth. The number we generated last year in digital betting revenue of $170 million is in front of everyone and the further growth experienced in Q1 is very -- speaks by itself.
Obviously, the business continues to expand at a rapid pace we expect at a certain point. It may make sense for us to consider breaking out as a stand-alone segment. | intermediate | [
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bcfa82254c4cf15161c12930611897e8 | Hi. Good morning. Thanks for taking my question. I wanted to start on the gaming improvement, Max.
You said, you know, in the second quarter, you'll start to see this business start to come in. I wanted to focus on your installed base. I believe you said 75% of the units are currently active and I'm sure this differs across many jurisdictions where you have units. But how should we think about when, you know, more of these units will be turned on? And then by the end of the second quarter, do you think we can get closer to, you know, closer to 100%? And then finally on that, how should we think about the incremental costs that are needed as this comes back on? Should this mostly flow through to the bottom line? Thanks. | Good morning, Chad. I think while speaking in April, we had already 80% of our installed base active and we think we will progressively grow 'till the end of the year when we believe we will reach almost the totality of our installed base active. And we do not anticipate much additional costs in order to get it done. | direct | [
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b70797d1245e907bbe6da1f9b37c7b3c | Perfect. Thank you. And then just now that the free cash flow picture and your recovery to previous free cash flow levels is in sight, how are you thinking about an organic lottery growth opportunities? Are there other opportunities that you have your eye on, or tuck-in acquisitions either on the digital side or any of the other segments that could help position you guys for the future? Thank you. | No. For the time being, we are not working on any acquisition. I think we have a -- all we need to grow on all the digital verticals and regarding lottery in general, we do not expect anything to be acquired short term. | direct | [
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7e0ada6feb89a877049bbd3f60eb3b43 | Hey, guys. So, if you think you'll get back to 2019 EBITDA levels, and I guess that's with cost cuts netting with the sale of the Italy gaming B2C, I have a bit lower than your historical forex net leverage target by year-end. So, I guess the question is how are you thinking about capital returns like share repurchases and dividends here? | I'll take this, Marco. Obviously, returning capital to shareholders is an important objective for us. For now, although the priorities for capital allocation are still maintenance capex and paying down the debt until we achieve our four times leverage target. Having said that, since we expect leverage to return to pre-pandemic levels by the end of this year, there is potential for the board to reconsider restarting dividend payments as those results materialize toward the end of the year. | intermediate | [
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42910c4420e3b1591ae5d838d8501f6b | Got it. Got it. OK. And then just a quick one on the New York sports betting market.
We've got a couple inbounds from clients. Just curious how you're thinking about potentially bidding there as a platform provider. | Yeah. No, I think the visibility on New York is not as big as you know, but we are preparing ourselves to take advantage of any opportunity we might have there. So, we will learn more details on the potential opportunity, but we are still thinking that there will be further compelling opportunities for us. | intermediate | [
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5940e96d9a258510a1ea76348d61f72d | Hi, good morning. A couple of questions. The first is on the Italian lotteries, if you can give us the contribution of Scratch & Win. Because if I'm not wrong, they've been extremely strong.
And so, I -- if you can elaborate on the performance and if you see any mismatch between sell-in or sell-out or any one-off contribution? And the second question is on the savings. Let's understand how much of the savings have been flowing to the P&L, in particular, to the gaming compared to the lottery business. | Hi, Domenico. I will take the first question and Max will elaborate on the second one. But the first question, we do not see any mismatch on Scratch & Win in Italy. It is doing great, and we have great sell-in and great sell-out.
And of course, we are taking advantage by the closure of gaming goals and sports betting shops. But the business is doing very well with a high level of satisfaction from players accordingly to our research.
On the second question, Domenico -- hi, this is Max. So I was -- as I was elaborating before with Carlo, our OPtiMa program, combination of initiatives will shift over time. Right now, we see a little bit more contribution coming from lottery than what should be the run rate and a little bit less from gaming in terms of percentage of the total, but we are ahead of our -- we are in line and slightly ahead of our target so far. The gaming will ramp up as soon as these operational excellence initiatives will come to fruition, starting with the second part of the year and more so going forward. | intermediate | [
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7ca662be3a2fa39b8614dedfe61ea928 | Hi, good morning, everyone. Max and -- I guess everyone appreciates all the commentary. I wanted to -- I'm looking at Slide 16, which has the maturity schedule out there. And trying to think about the degree to which there, you know, could be more opportunities in there, given how well you did on the most recent raise.
You know, clearly, there's some bank debt and some, you know, bonds in the next few years. Have you gone through any sort of thoughts or math as to what those opportunities might look like to, you know, save some interest and drive some cash flow? | Yes. So for -- thank you for the question, David. I would first acknowledge the fact that with the two significant actions that we have taken and the second is of today with the make-whole on the euro 2023 debt. We're basically taking away towers fundamentally, public market towers we had in '22 and '23 now for good.
The next chapter is probably looking more into the bank situation, the bank debt situation. We have a term loan that will come due in '22 and '23. And then obviously, we have the revolver expiring in 2024. On the bonds, obviously, we can always opportunistically look at tendering some of those bonds.
We actually are now a couple of years out in terms of early calls that we started to create into the structure as we mature our issuance program in the last few years. So I would say the long story short, bank debt first and then bonds later on. But I think we're pretty happy now with the situation that we have achieved by lowering the total amount of debt by a significant amount and also reducing the leverage by one full turn versus year-end. | intermediate | [
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8cb86e2772aff2bf18f636ae41aa5bb8 | Yeah. Yeah. OK. And I mean, is it a fair -- I mean, maybe this is not the right forum, but is there a fair, you know, sort of thought that those interest costs are going to wind up being lower than where they were, directionally, at least on the bank debt? | Definitely, the bank debt is the low-cost liability -- financial liability for us. So, changing in the mix definitely improves our average cost of debt, which has come down probably 0.25 points in the last year or so. Obviously, we continue to look opportunistically at the capital market to see if there is any chance to construct the transaction that is effective. But again, I would really bank on the 60 million that we have now generated throughout the last two actions.
That will start to come to fruition on a quarterly basis, obviously, one-quarter of that amount starting with Q3 of this year. | direct | [
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74e48e8917a050e6851b33f337064f20 | Hi, everyone. Thanks for taking my questions.
Marco or Max, I wanted to ask a question on the iGaming business, you know, and where you're seeing your revenue lift. Obviously, you have a lot of content to provide. So I'm curious if you could help us unpack that revenue a little bit. It's mostly your slot content available on iGaming? Or are there other B2B services that you're providing iGaming customers, I guess, specifically in the U.S.
related to technology? And the follow-up question is, is that business -- iGaming in general, tied to revenue in terms of getting a revenue share? Or is it maybe fixed fee cost of services? How do we think about as the market -- the iGaming market grows? How should IGT grow with that market? | John, I think I can elaborate on this question. Let me start by saying that over 80% of our iGaming revenues is in North America, where we enjoy a 25% share in the U.S. based on the first quarter and 50% share in Canada. And so our performance is very good.
We expect for the full year to double our GGR as we expect the market will double. And the base of our strength that we expect will be maintained as the market grows -- stays on our game offering. Because our success is driven by the success of our games. For the time being, our share is driven by our proprietary games.
We are working on our strong franchises, Cleopatra, Wheel of Fortune, Da Vinci Diamonds, that are truly working well across all channels. Yes, the point is that you cannot adjust porting from the land base to the digital space, the games. But you have to rework them significantly to better attune them to the digital space. And that is where we devoted a lot of effort and energy in order to build up from solid brand and franchises a very good digital games.
In some cases, we have to change the mechanics. So in some cases, we change the payout because we need to make them stronger digital content. Sometimes in order to develop some specific feature, we ask the contribution from third-party studios. A recent example has been a collaboration for Wheel of Fortune Megaways that we have launched in New Jersey in Q4, and now is in Michigan, Canada, and it would be launched in Italy, too.
It means that we take features. We work the product with the third-party studios in order to enhance the quality of our offering. Third, we are also thinking about distributing -- to become a distributor of a third-party content. So, this is an emerging area of focus for us.
That can also bolster our market share. So it's all about content. And with that said, we are very well prepared to wave the solid growth profile of this business, considering the number of jurisdictions that might decide, especially in the United States to regulate this segment. And business model is revenue sharing.
So you have to look better to think about this business in terms of revenue sharings accordingly to the performance of our content. | direct | [
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85cf6862df1a555b119a8251b137259e | I guess, maybe the question that's topical, I think, through earnings season here is just component availability and supply chain impacts. And I get it, declining component of your business is coming from hardware these days. But can you maybe talk about what you're seeing on the supply chain impact on revenue, impact on margins? Yes, I noticed your inventory was down sequentially. So any more flavor you can give us there would be great. | Yes. We're obviously seeing the pressures that everyone else is seeing. We're trying, obviously, to accommodate it with longer commitments. And obviously, we're seeing also increased prices. But all in all, at least for the second quarter, we don't see a material impact from that. | intermediate | [
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3d8107a5cc54d2574c4e777c3bbdb325 | Got it. Okay. And then, I guess, I also wanted to ask about capital allocation. You guys are obviously buying back a fair amount of stock here in Q1. And I know there's been some talks stoically about you guys looking at acquiring businesses and businesses that are more developed. But can you talk about where you stand right now on capital allocation? What's the thought process on repurchase versus M&A versus other opportunities you have? Thanks. | Yes. So we continue to be active looking for companies. Obviously, some of the valuation metrics in today's market might be a bit challenging for us. But we constantly look and this continues to be the prime use of cash that we intend to. In the meantime, as we've announced previously, for this year, we have an $80 million buyback plan, which we execute $30 million already in the first quarter, and we have another $50 million. So all in all, in our side or in parallel to us looking for acquisitions, we are actively buying back our shares. | direct | [
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ca0f097a24961956d5a8d34f0a3e4864 | Hi. This is Peter Zdebski on for Tavy. Congratulations on the quarter and the solid results. I wanted to dig into the customer verticals a little. The sequential decline in carrier was a little surprising, since we've seen some improving trends in spending in that market, overall. Could you discuss some of the drivers there? And maybe your thoughts on next quarter? | Yes. So at a high level, our business is more focused toward enterprises and the cloud subscription and the product subscription are generally consumed by enterprise customers. So over the long term, we believe, and we've seen it also in previous results that our enterprise business or that portion of the business will provide a higher growth rate. In carriers, in general, we continue to play in the network. There are opportunities looming with 5G, and we are tracking them. But all in all, our company is highly focused on enterprise, cloud security. | fully_evasive | [
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29d37cf930d26c3ffec6aa06b48fab2c | Thanks guys. Can you talk a little bit about the competitive intensity and what you're seeing particularly from the cloud service providers or the larger cloud service providers and some of the new CDNs, how do you kind of compare and contrast? And how do you win business versus them? | Yes. So the public cloud providers, a lot of our offerings, they are also targeting companies that are actually putting their infrastructure in the public cloud. So for example, if you look on our cloud-native protector, that's exactly what it does. It protects customers' infrastructure within AWS or Azure cloud, and we see the need to protect better cloud infrastructure as one of the core drivers for future growth of the company.
What we provide there is a comprehensive and across all cloud, a multi-cloud comprehensive security with state of the art capabilities. We believe that security, especially for our target customers in the finance, technology, online, larger enterprise segments is paramount, and they would not compromise on the level of security. And hence, the ability to really protect end-to-end. Their on-prem data centers, their cloud data centers, hybrid, public, private, whatever form their application residing and to do it across multi-cloud is a very, very strong competitive advantage that none of the public cloud providers can offer.
Regarding the CDNs, I put Akamai aside on that. The other types of CDN, I would say, are less competitive as it relates to security per se. They are selling some security capabilities as add-ons to their CDNs. By the way, some of them resell our cloud solutions as add-ons under CDNs, but I would say we see them less in the large enterprise and financial markets in the world as direct competitors to us | direct | [
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7692ac2aa44377f713cfbf0bb05444e8 | Hey guys, thanks for taking my question. So obviously, you guys did really well with the OEM, but can you just give us a little bit more color into the checkpoint and Nokia OEM partnerships, specifically, I know they're a little less mature than Cisco, but any color there would be great. | We don't break specific OEMs, but all in all, I think all of them are providing with us wins and so on. In my script, when I gave the examples, those are examples that are spread across all our OEM partners. So all are contributing in different geographies, in different segments. Obviously, Nokia is helping us much more in carriers. Cisco might be across, check Point is more enterprise focused, but all of them are contributing. And I think one of the key points is their contribution to new customer acquisition. So we are really able to see very good results in leveraging their incumbency in customers to generate new logos for us, and that's been very successful, and we're planning to increase it further. | intermediate | [
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08d63afc845a55bc9f5243e22d2cea6f | Thank you. Just wanted to get a couple of details, first, for as question. Can you talk about the tax rate? It was 14.9%, I think you've been guiding to 14.5%. Should we be using 14.9% going forward? And similarly, on the interest line, do you expect it to decline sequentially as the interest rate on cash balances continues to decline over time. Just a couple of mechanics, and then I didn't catch our head count as well | Yes. So I said, in 2020, the effective tax rate that we take into consideration is approximately 15%, which represent the tax regime that we have. Last year, there was some tax relief in the U.S. that this year is not. So overall, 15% is the ETR that we take for Q2, similar to Q1 and for full 2021. As for the interest, yes, the answer is yes. Unfortunately, the yields are declining. So I believe that, right now, the level of $2 million, and assuming that we will continue to generate cash, maybe a bit more. But overall, this is with the interest rate that we see right now, it's less than last year. Last year, it was 2.7%. This year, 1.9%. So overall, full 2021 will be less than 2020. And as for the headcount. So we ended Q1 with approximately 1,100 employees, similar to last quarter. And similar to last year in a way. So overall, this is the level of employees that we right now have. | direct | [
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699a72c3c62276e345816f6be1287516 | I see. I wanted to ask a question on the operational side. When we look at the results out of that five, the company stated that they were quite surprised at a substantial increase in appliance ADC sale. So which vaulted to meet teen double digits. And they indicated that, that reflected a sort of snapback in demand there because traffic growth and application adoption had driven up processor utilization rates, which was a little bit counterintuitive. We had expected digital transformations to be driving more stuff toward the cloud. But nonetheless, the point is that ADC business, appliance business was much stronger than expected. Can you talk about whether you saw a similar dynamic where the underspend in ADCs over the last year because of COVID has now caused a pickup there? Or is this more on the software side and you're not seeing that dynamic? | Yes. We're seeing our customers transiting to the cloud. More and more, and we're seeing the plans on the on-prem, even if certain applications are definitely growing in capacity and usage, the total on-prem capacity is not, at least in our customers, is not seeing a dramatic increase. Furthermore, when I looked on other ADC vendors in the market like Citrix and A10, I didn't see in the reports similar indications. So I believe the transition to the cloud is happening. We were up on ADC. We had solid business there, but in line, I would say, with our guide and expectations, we didn't see this pent-up demand coming to the ADC on-prem market.
So what we are seeing is more applications moving to the cloud, more customers requiring more capacity and protecting more applications with cloud services, and that's where we're seeing the bandwidth upgrades and the number of application upgrades. Together with that, we're also seeing increase in the size of attacks. So we're seeing larger and larger attacks, which also, of course, increasing the demand. And by the way, forcing many of the enterprise to go into cloud solutions because they cannot handle with their bandwidth, there's just no way, unless they want to buy 10 times or 20 times the bandwidth they have today, they cannot cope with it in their own data centers. So we're clearly seeing a continuous strong move to the cloud. | direct | [
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14344f8fcb292f7f62ad856b09c97085 | That's very helpful. Thanks, Roy. Just if I could, on the cost side of the equation, flat headcount sequentially. The shekel impact increasing. Can you talk a little bit about whether you think your opex will continue to increase over the course of the year, based on the shekel or whether your hiring changes are going to accelerate? And to what extent that reflects back into the mix. If there's a delta between, say, sales and marketing and R&D? | Yes. So I would take the financial part and leave Roy to answer some of the strategic recruitment that we plan to do in in the next few quarters. But as for the numbers, so we took into consideration in second quarter, the impact, of course, of the schedule, I mentioned something like $1.3 million versus the 2020 rates. Although, the headcount is relatively flat, we do see some increase, obviously. And the good part is mainly because of commissions that we pay due to the increased performance and stuff like this. Together with some offset because of the COVID-19 impact on travel, etc.. So you see that we guided the first quarter approximately $47.5 million to $49 million, same guidance for second quarter. We are in this range, and again, mainly because of the FX.
Yes. So again, I mentioned it last quarter, and I will reiterate, estimation about the Israeli Shekel is continued to be strong in 2021. So give or take, $1.3 million this quarter, same as previous quarter. I assume that next quarters will be the same impact per quarter. I think that we mentioned last quarter, $0.10 to $0.12 impact because of the FX. It will continue unless something happened in this area, FX will continue to impact.
And as it relates to hiring, Alex, we were planning to increase hiring and in the following areas. First in field, in sales and system engineering. We see a lot of opportunities, demand there. And in cloud operations and in cloud R&D. So cloud security, coupled with increased go-to-market capabilities are the prime areas where we are planning to increase headcount, and with that obviously the opex will also increase regardless of the currency exchange rate. | intermediate | [
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637d8f3510bd96b453a17b40c658f2ac | This is Drew Smith on for Josh. Can you comment on the strength in bookings in Q1? And has there been any meaningful change in the performance of the business going into Q2? And would it be possible to comment just a little bit more on which products are specifically fueling the growth? | Yes. So in general, the growth is led by security, by our security business, and specifically, the cloud and subscription offerings there. I think it's across all our cloud security offerings, almost A to Z. Going into Q2, it's reflected in the guidance. We believe we've provided a strong guidance. We feel good about the business. We feel good on how we open the year, so we try to reflect that in our guidance. | intermediate | [
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07ffb50a4a54c0247e596eaab0621c4f | I -- I guess first question. You guys did $1 billion in the wind business in 2020 which, you know, extraordinary. You know, a really great year. How do you -- how do you think about that business in 2021, particularly in context of the revenue outlook? | We would expect similar -- similar outcomes in 2021. The -- the industry is expecting a -- a similar buildout, you know, depending on who you listen to. You know, you hear anywhere from 14 to 17 gigawatts for 2021. So, I would -- from the activity that we've seen, we would, you know, our -- our analysis is the market is very similar to what we saw in 2020. | direct | [
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] | A |
4b6a3cd87cfda3897a2e3fd31798e5ce | OK. And JP, the -- the wind maintenance business. You know, I know it's starting from -- from scratch there. Maybe could you just talk about what you're anticipating from the business in 2021, particularly sort of targets you're hoping the business can get to? | Well, we, you know, we haven't -- we haven't guided to a certain target for that mark -- for that segment of our business, Brent. But what I can tell you is management's extremely happy with how that's getting -- getting out of the ground, so to speak. And very pleased with the management team that we brought together. So, you know, I think as we've said in our remarks, we -- we do believe that it will be a meaningful contributor to both revenue and the bottom line for this year. But, you know, we're not prepared to come out with a spec -- with specific guidance for that business segment. | intermediate | [
"direct",
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] | B |
c21c746b8569c0b97c9f29b2cc46e7c6 | OK. And -- and the civil side objective is going to come back to that. And what -- what areas you're most optimistic about for growth in 2021? I mean, assuming we get some sort of an infrastructure bill, I -- I can't imagine it's necessarily a benefit this year but certainly end of the out years. But what do -- what do you see that you're most excited about in that business, you know, for this year in particular? | In specialty civil, you know, I -- I do think that, you know, as a benefit of the energy transition, you know, our environmental business which is embedded in our especially civil segment is -- is ripe for growth. You know, we -- we believe we're at the kind of the infant stage of that -- of that market as -- as we talked in the commentary. Only 15% of the coal ash to date has been remediated in this country. We, you know, we believe that it's in excess of a $50 billion addressable market over the -- the next decade. So, we do -- we do see some opportunities of relatively decent size coming in that market this year. We hope to get our fair share of those, but that doesn't diminish areas or other business. Obviously, we're -- rail business continue -- we continue to see quite a bit of opportunities as we continue to not only service our freight rail customers but expand our reach into passenger rail. And quite frankly, as we kind of wind up that segment in the transportation highway and bridge side, you know, we -- we've been cautiously optimistic all along about what, you know, what kind of spins out of the COVID pandemic in regards to the consumption taxes and such that drives that market. But yeah, so far, we're still seeing brisk bidding opportunity. And -- and I know -- I think, we've experienced some assistance in the -- in the COVID relief legislation that was passed back in December for that -- for that industry. So, you know, so far so good as far as opportunities going forward in -- in specialty civil. | direct | [
"direct",
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] | A |
edf73ed16729dc4dc3f861a8b415b54c | OK. Last -- last one for me just that, you know, that you talked about it Pete, the -- the cold across the country and all the stuff that's been going on. Any major disruptions to some of your ongoing projects that, you know, seasonally, this is a pretty slow period for you anyway. But anything out of the ordinary we should be aware of? | Well, you know, just like probably most -- anybody that's working in Texas, we did see a, you know, slowdown to work during that -- that climactic event that I think everybody is well aware of a few weeks ago. So, certainly, we were short-term impacted by that. But other than that, no. | direct | [
"direct",
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] | A |
3962ed45fe0f605a963df434dfdb0def | So, first, I just wanted to ask about, you know, these delayed awards. You know, obviously, a lot of positive things are on the horizon in terms, you know, and I think Biden is looking to do with renewable energy. But, you know, sometimes ahead of, you know, anticipation of stimulus or -- or some sort of -- with the market you can see a word slow. Do you think any of that is going on or do you think this is more related to, you know, COVID and -- and that sort of thing? That would be helpful. Thanks. | We -- we think it's almost entirely related to COVID. You know, just -- just everything works a little slower in today's world. You know, it takes a little longer for our clients to get -- get permits upfront. I -- I don't know of a client of ours yet, part -- particularly in the renewable side of our business that's back in the office like we are. So, you know, their internal processes for approvals and such just work a lot slower. And -- and of course, our, you know, our clients require financing. So, the, you know, the finance market's move just a little slower. So, nothing alarming. But, you know, and today, we're in that kind of new COVID normal where things just come into backlog just a little slower. | direct | [
"direct",
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] | A |
ce1413a2d8f4c5b109596141995f26fb | OK. Great. That's -- that's really helpful, thanks. And then, you know, second, obviously a lot of optimism across the contracting industry as it relates to the solar opportunities. Could you just kind of remind us of, you know, some of the kind of key differentiators you have as it relates to the solar market and, you know, why you believe you're the contractor of choice as -- as more and more of this work starts to come out? Thanks. | Well, good -- good question. Certainly, that market is -- it -- it lags the -- the wind market as far as maturation. You know, it is reaching kind of the stage now where the wind market reached what I would personally say was a decade ago, where now you'll see the largest developers or builders of -- of solar in the country are much the same as our wind customers. Large IPPs or large investor-owned utilities. And, you know, it's -- quite frankly, not -- not lost on any of us that if -- if you look at the largest solar contractors today utility-scale in the United States, it remarkably looks -- the list looks remarkably similar to our -- our wind list or the wind competitors. So, you know, certainly, have enough fam -- familiarity with -- with those customers. The -- and how they want projects delivered, the methodology, the -- the safety, the quality that they want the projects delivered are very important. And -- and I think as you know, Noel, the -- their -- well, price is important in renewables. It's a very relationship-based business, given the -- the short time span and the large capex involved with these projects. And, you know, our clients want contractors who have demonstrated time and time again the ability to get these projects in the -- in the ground on time. | direct | [
"direct",
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] | A |
1bfb0f63713751187b0e033d6e74e1c7 | Good morning, Owen and Scotty and Erik. Thank you for the long commentary. I think coming into the year, Scotty, you had mentioned that you were expecting to have, I think, you said 60% of your activity oriented toward intervention, maybe a little bit more than that, I don't know if that's changed much, and I hear you, Owen, that you expect P&A obligations to be deferred in this environment. But my question is, is there a window of opportunity now to transact for assets in this oil price environment what you did with Marathon or Droshky or is the commodity price too unaccommodative to continue that part of the business strategy right now? | I think that remains to be seen, Ian. Prior to Monday, we were actually getting calls of interest, so if you had asked me on Friday, I would have said it is becoming very interesting, the possibilities there. On Monday, of course, everything blew up and everything went on pause and we're probably in a period right now with everyone just sort of trying to see where everything settles. But yes, when commodity prices drop to a point where the expected liabilities of abandonment are high and we have a lower cost of abandonment that creates an arbitrage there for us to realize value. So, I think, we are entering a period where we will be very open to taking calls and talking with producers about what's possible. | intermediate | [
"direct",
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] | B |
edca3b61487a4664883d133c0b0f6ca8 | Yes, it just strikes me that the opportunity to [Indecipherable] utilization is one of the biggest levers you have right now in terms of preserving and EBITDA floor. And I think my follow-up question would be, maybe you could just update us on what your flexibility on vessel cost is as you have to tap dance between ready active vessels in warm stack, or if you go, it may be a little bit cooler than warm, what is the range of variability on variable costs as you pivot or think about longer-term states of readiness, maybe on a per vessel basis, it would be easy for us to digest? | I'll take that one, Ian. So, currently, our plan is that where we warm stack in the Q7000, lukewarm stacking the Seawell until work comes back, we are in discussions with clients for both of those vessels to have work later in the year. We have to wait and see if that comes together. But the range of stack costs from warm to sort of cold is anything from the low '20s down to about 4,000 a day.
It is far less than our usual operating costs.
Ian, I will just add, our sensitivity is sort of based on the possibility of stacking three vessels. Now whether or not they remain in stack or they come out for work is yet to be determined. So, for instance, in Seawell, we're starting off with a warm stack here because we are talking with producers about work further on this year, although we're not considering that work which should be considered upside to our current expectations. So, we will remain in cold stack, and if the work falls away, then it would revert to cold stack. So it's not possible for us to give you a number of days on specific vessels as to what will happen until the market unfolds a little more. | intermediate | [
"direct",
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] | B |
62c122a943548407aba74d06feb5a846 | Understood, thanks. But the three vessels that you're looking at would be the Seawell and the 7,000 and what's the third one? | Possibly the Q4000, but that's very uncertain at this point because the Gulf of Mexico, we sort of see the Gulf of Mexico remaining a little more active.
I'll add to that as well. We are in discussions with clients. The Q4000 has work into August. We're in discussions with four clients to work after that. In the North Sea, we're in discussions for other works for the two vessels. This morning alone, we were awarded a 30-day project for one of the vessels that has further add-on work to the Robotics company as well. So, it's not like the market is dead. We're in discussions for all these vessels. We are just taking a look at it. | intermediate | [
"direct",
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] | B |
89431312ed869cfdbacd24c0465bf3d3 | Hey, good morning everybody. Just kind of hoping we could talk for, you touched a little bit on capital allocation, we can all look out there [Indecipherable] debt today. Could you just walk us through sort of the options you have with respect to maybe thinking about bringing some of that in early? Is there any limitations that you have in your credit facilities that would stop you from doing so? | We don't have any limitations under the credit facilities that I am aware of Erik?
And that's from my side.
Well, let me tell just you, our capex for this year, we have lowered from $50 million down to...
$38 million or so.
$38 million. Most of that was already spent in the first quarter because of the high maintenance period. So, we have a relatively small tranche left for the rest of this year. Next year, our expectations are that it's going to be somewhere between $15 million and $20 million. So you'll see another reduction in capex at that point. So we are reducing -- we have reduced the capex expectations and I'm not understanding the move forward. We do have some flexibility on moving dry docks around which would affect capex, but we only have one maintenance period for next year that I'm aware of.
Okay. From that standpoint, we currently have here within, like Owen mentioned, $33 million still scheduled to pay off this year, $91 million scheduled for next year. So, we are being aggressive on paying that down. I think other than that, I do think that there are certain requirements within our credit facility as far as maintaining liquidity and things of that nature if we were going to try to accelerate any of the debt that's out there in '22 or '23. So, I think, there would be certain requirements we would have to meet.
I'm sorry, I thought you were talking about capex, not capital obligation, my apologies. | direct | [
"direct",
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] | A |
a2f9404bd8de483682aa666085ab2d3b | Yes. No worries, I probably asked the question poorly. And then if we just go and start thinking about the Robotics segment, are we positive, confident that we can maintain positive EBITDA in this segment through the cycle? And as we kind of think about fixed costs in this business, how should we be thinking about EBITDA on the segment level? | So, robotics, like we said we're expecting quite a solid year. I think there's a lot of moving parts with the robotic side of the business. But we've expanded our offerings in the renewable side. The trenching season that is pretty good in the North Sea. The GC II is on higher all year in APAC. We've picked up some other spot work, like we said the MV Pride is currently working in Australia. So, we should expect that our EBITDA is somewhat in line with last year, but it's also down to some of the cost reductions we've had up in our renewable services.
I think also remember in previous earnings, we mentioned that this year was expected to be an off-year for trenching for us with the recovery in '21. | intermediate | [
"direct",
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"fully_evasive"
] | B |
4566cd9d4e5ff8ae2f2be375ba1b503e | Hello, yes. My question is in regard to gross margin. I know this for Q1, it was at 1.1%, but historically, we have a 14.5% gross margin. I just want to know if you guys could speak to why the margin was reduced so much this first quarter? | Yes, I think if you look at our historical performance, if you go back five years, our gross margin fluctuates by quarter. Usually the first and fourth quarter, which are the quarters that we have challenged utilization, our margins are lower and I think that was the case here in the first quarter. The vessels, the Q4000, Q5000, which worked in the fourth quarter had I think about 70 plus days of idle time as they did their dry-dock recertification costs. So, idle asset utilization definitely hurts us in those standpoints and that with the addition of the Q7000 to our cost basis really drove our gross margin down in the first quarter. | direct | [
"direct",
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] | A |
c487fabd527a9749cb07c0b319e089bb | Hi, quick question. Can you clarify the $52 million of cash that's in restricted cash and when do those restrictions come off and in what conditions? | So that was restricted cash that we had to put in place for an LC related to our work in West Africa on the Q7000. That work is completed and the vessel has left the region. So, we expect that LC to be released here in the near term. | direct | [
"direct",
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] | A |
82d4a57b39e00554d9a76d398f676ad9 | On the ADR front, you noted a lot of on the leisure side of things. How should we expect to play that play out in the rest of the portfolio? Is there still a lot of low rate occupancy that should turn to higher rate business and are you still expecting the internship programs in Silicon Valley this summer? | Let me start by. And then Dennis, you can talk about the interns. Look, the business side of the equation is still, I think, challenged with ADR. We're doing about $15 or even up to $20 better in some cases compared even to the fourth quarter. When you look at the segmentation reports for corporate and business travel. But still, without the volume of business traveler there and without that also coming through the various reservation systems at the higher ADRs, you're not going to see the kind of results until that volume picks up. Dennis?
Yes. I think on the interim program, Aryeh, in Silicon Valley, which is normally where we have most of the four hotels are full with tech in terms. A lot of those programs are not occurring this summer, especially at the size that they did previously. We have heard certain companies are looking and believing they're going to do kind of late summer, early fall internships. But additionally, we do have -- and we think we have in even our Tysons, our Springfield hotels some intern and our DC hotels, some intern business on the East Coast, which is a little bit different for us than prior years. And then we expect a little bit of intern business up in Seattle. But it's certainly -- still this summer is not going to be the significant book of business than it was for us in 2019 and prior. But we do -- we are encouraged that we are going to see some of it.
I think what you want to look at from a macro perspective, it is just the amount of office reopenings that you read about online or in the newspaper or whatever and how surprising they may be in terms of announcements about office reopening that's earlier than most people had expected. And you're starting to see a little bit of that even in New York City. And when you see announcements from different states about the relaxation of restrictions, of course, not to make a political statement, but we live in quite an interesting state on that front. But anyway, as you see more of the relaxation and the vaccination rate go up, I think that you'll see a faster acceleration of that kind of travel. | intermediate | [
"direct",
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] | B |
97dec324049127648a76eb80e6c7cd8c | And then just on the labor side, how are you thinking about staffing as occupancy kind of ramp? And where do you think it ends up relative to kind of pre-pandemic levels at your hotels? | Yes. I mean, listen, it's a challenge, as I said in my prepared remarks. I mean we're we're throwing out all kinds of incentives to try and hire or retain talent. Thankfully, one of the -- again, one of the benefits of our portfolio, which is the extended-stay hotels. And as I talked about, our length of stay is still quite high compared to what it was pre-pandemic is given the size of our hotels, we aren't cleaning them as often.
So I think for us, we get a little bit of a benefit there, even though labor is a challenge and the fact that our guests are staying a little bit longer. Only in a couple of instances that we had an issue with turning rooms to drive revenue or sell rooms for the night. And quite honestly, that was in a couple of what I would call, those were not extended stay hotels. So we had a lot of room turn on a couple of nights. But that's, again, thankfully for us, it hasn't been a significant problem by finding labor over the next 90 days is going to be important and is a major focus of our operations team. | intermediate | [
"direct",
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"fully_evasive"
] | B |
3607ee1c5e78baa8e56235c042273287 | I was curious if you could talk a little bit more about the kind of demand you're seeing heading into the summer in Coastal Maine and New Hampshire? And maybe more specifically, the kind of booking momentum you're seeing heading into June? | Yes. I mean, it's very strong in Coastal New Hampshire. We've seen especially, over the last 45 days, a significant uptick in room reservation demand for our Portsmouth and Portland Hotels. I think we're very bullish on what that summer looks like as we talked about really last year, those markets were closed to essentially any inbound travel until I think it was July 15. So even on a year-over-year basis, that should be very strong. And as Jeff talked about, especially in those markets, we are pushing ADRs, and we believe those are markets that should even compared to '19. have pretty high, if not higher ADRs in 2019. So we're very encouraged by the booking pattern for those markets, we think it's going to be really strong. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
dd3e24c0572b9ca87ee6894ab5fb68bb | Great. And then as far as capital allocation is concerned, I was curious kind of how you're weighing -- looking at acquisitions -- I know you mentioned the pipeline is a little slow right now, but kind of how are you looking at acquisitions versus getting capex to a more normal level as we head through 2021 into 2022? | Well, on the capex side, I think we're conservative there. And in our hotels, because of the money we've spent over the years, are in very, very good shape anyway. So by having even up to 24 months of very little capex going on, we will come out of the pandemic in good shape. We have allocated some money to one or two hotels that have about 10 years into their cycle for what really is just a soft good cycle redo, not extremely expensive. So we'll -- on the capex side, we'll be looking just fine. And acquisitions are something that just will continue to dig for and work on to expand, particularly in the extended-stay arena our kind of presence there. And I think it's going to take, as we've commented, and I think others, a little bit more time here for some of these opportunities to really come to fruition. But we'll continue to utilize our kind of long-standing industry contacts and relationships, and I think we will make some deals down the road here. | direct | [
"direct",
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] | A |
a802b8c51ac057a1b044d3c4667e6c44 | First question for me. I wanted to zero in on the short-term trends and what you're seeing out there. And I appreciate all the color on April and appreciate all the market commentary as well. But it sounds like you expect continued sequential improvement into may broadly for the portfolio. Can you talk a little bit more about that? How much visibility do you have into the rest of May? And how much is seasonality, you think, playing into some of the stronger results that you've been seeing here? | Well, I mean, certainly -- Tyler, for our portfolio, November to February are always seasonally lower months and slower months. And then you start to come out of it in March and you build really through October, with October being historically one of the strongest months for our portfolio. I think from a May perspective, I think we do expect it to be -- continue to have RevPAR growth in May over April. I think you're in that kind of weird period where you're not in the spring break anymore. Schools are kind of starting, at least colleges are starting to get out of to finish their spring semesters in early May and as you move through the month. So we do expect May to be better than April, but I think once you get to June, July and August, I think you -- we expect to see really strong growth. So I think, yes, we expect that trend to continue. | intermediate | [
"direct",
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"fully_evasive"
] | B |
996ee27c959def75d32bac0972f6ece2 | Okay. Excellent. And then in terms of your RevPAR index design is really quite impressive and quite good. As we look going forward, do you expect to be able to hold on to that market share? Or perhaps level out as some of the other properties that are out there start to reopen and whatnot? | I mean, listen, I think we're certainly -- and you've seen over the last few quarters, it has started to come back closer to our 2019 RevPAR index of $118. I think we would like to -- we do believe that even over the next several quarters, that our index remains strong because, again, our ability to diversify our customer base. But certainly, I think, expecting it to stay 15% to 20% above is not realistic. But we certainly hope to hold on to some of those incremental gains as we move forward. | direct | [
"direct",
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"fully_evasive"
] | A |
a27af05c648f5e3857811360f334b209 | Okay. Great. And then just one last question for me to put a finer point on this labor discussion, certainly top of mind for a lot of investors out there. Can you quantify or talk more just about the labor needs in an extended stay hotel versus an extended stay versus normal select service versus full service? Just trying to get a sense of how much variance there is across the property types here in terms of how many employees are necessary to effectively operate once we get back to more normalized occupancy levels? | I mean, I think you started -- I think you first start with especially as we sit here today, and I think even for a little bit of the foreseeable future, which is our length of stay, which is longer. So where our length of stay is kind of four to five nights on average in our extended stay hotel, it's most likely half of that at something else. And therefore, you're going to be cleaning a room every two nights at least instead of every four nights. So we can manage to clean the rooms as they turn with essentially, just on a housekeeping perspective, half the labor. I think, just to put it simply. So that at least mitigates some of the concerns and problems we're seeing with hiring the right people, that I think other owners who have different types of hotels that are more one-two night average day or weekend days are going to be posed with the problems of cleaning rooms and flip them.
So you're really talking about housekeepers then and at least in our hotels, comparing a select service. And so let's start from the bottom. Starting with select service, comparing that to outscale extended stay. I mean, Dennis hit the nail on the head. You've got x number of housekeepers depending on the day and depending on the occupancy. But with stay overs, we're not re cleaning the room, and there is no expectation that we'll reclean the room, especially coming out of the pandemic. So that works well. As you move up the food chain -- and let me just talk a little bit about food and beverage.
On the food and beverage side, you've only got one or two dedicated employees in a select service hotel anyway to do the breakfast and to do the evening sort of complementary cocktail or otherwise. The evening hour in extended stay hotels, upscale is gone and probably going to stay gone. So there's savings there compared to before the pandemic. And what we're working on and the brands are helpful is a combination of kind of a service level between the front desk and what happens during the more limited breakfast time, breakfast hour. And so I think there's going to be ultimate -- actually, I know there'll be ultimate labor savings in that arena.
Now if you're a full service hotel, it's a different story because as occupancy comes back, unless full-service hotels want to keep their food and beverage facilities closed the way most are today then they're going to have, as you know, quadruple the employees that we've got in our hotels. So -- and if they keep the cost, then the ultimate difference between a select service and a full-service hotel really goes away, and that would be an interesting perspective from a sales and marketing point of view. So we feel, again, pretty good about the kind of hotels that we own. | intermediate | [
"direct",
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] | B |
7e81b42b26d4d06ad354016e8a53f9b1 | In some of the markets like Fort Lauderdale and New England, where you expect to maybe get ADR at or above 2019 levels, do you also expect to see GOP or wholesale EBITDA -- EBITDA, I guess, above '19 levels? And how much above, given the cost saving you just talked about? | Yes. I mean, listen, I think, Anthony, we do expect in some of those markets to have ADRs higher than 2019. And with the challenges and with -- I think there's a very efficient operating model at the moment, as evidenced by our flow-through that we've been producing. We do expect, in that case, GOP to be stronger. But that also assumes that occupancy is similar to what it was in '19, which we think demand is really strong, so it should be. So I think we're not going to step out there and say, on a same-store basis, operating margin should be 275 basis points stronger at this point. But especially, I think when you look at this summer, we think the operating margins will be pretty strong. | intermediate | [
"direct",
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] | B |
ac4ea12e63b7c8875f84533bfea59eb0 | Got it. And maybe just a broader -- I mean, I know you like the business. Any changes sort of regional or other other allocation as we look forward to buying hotels in the future, more leisure, more, just any change in your, I guess, your target markets or allocation as you look to the next? | Look, I think we're as favorably inclined as we were pre-pandemic, frankly. We were talking about Sunbelt. That's only come to be more obvious through the pandemic. But I think you have to be careful because there's a lot of money on the sidelines. And the herd mentality is we got to buy leisure. We got to buy drive two markets, you heard it, right? You heard it all. So -- and you've written about it. So that might drive the prices up to a point in those particular locations unless it's a special kind of an opportunity to make not a lot of sense. So we'll be careful about that. But we certainly -- as we look forward to the next five years, let's say, want to be fundamentally as we always have been in markets with good, diverse demand generators. And I think that's going to be the key. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
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