Prompt:
Human: On the call today are CEO, Mick Farrell; and CFO, Brett Sandercock.
Other members of management will join us during the Q&A section.
During today's call, we will discuss some non-GAAP measures.
We believe these statements are based on reasonable assumptions.
However, actual results may differ.
More details and information, including an agenda and how to register, will be available on our investor relations website approximately two weeks before the event.
OK, Mick, over to you.
I will discuss execution highlights against our top three strategic priorities and our urgent and ongoing actions to address current industry supply chain issues and opportunities.
I'll then hand the call over to Brett for further detail on our financial results.
Let me start with the situation that has generated many stakeholder questions in the last month and a half.
During the quarter, demand for ResMed's sleep and respiratory care devices surged dramatically after a competitor's recall announcement, putting additional pressure on an already challenging environment for our industry's supply chain.
Global supply chain limitations, including a shortage of electronic components, as well as ongoing freight constraints and costs are impacting our ability to respond to the unprecedented increase in demand for ResMed products.
Executive teams across automotive, consumer products and communications technology industries have confirmed on their recent earnings calls that they are struggling with the same issues.
Some major producers have suggested the chip and electronic component shortages could extend 12 or even 18 months.
We are working incredibly closely with our global supply chain partners to ensure access to additional supply of the critical components that we need to further increase production of our medical devices.
During this June quarter, the demand spike was so high that we have been forced to allocate products due to the unprecedented demand and these real-world supply chain capacity constraints.
In doing so, our guiding principles are very simple.
We are focused on the highest acuity patient needs first.
It's very similar to our approach to ventilator allocation during the peaks of the COVID crisis these last 18 months.
We will continue to coordinate with all of our stakeholders as the situation develops and we begin to open up these supply constraints.
We understand this is a frustrating situation for all of our customer groups, including physicians, home medical equipment providers, payers and most importantly, the ultimate customer, the patient.
It is a unique time in our industry with steady recovery of patient flow after COVID-19 peaks in various countries with these global supply chain constraints and with an unforeseen competitor recall all occurring simultaneously.
I wanna be clear that, through it all, our priority will always be patience, doing our best to help those who need treatment for sleep apnea, chronic obstructive pulmonary disease and other respiratory diseases.
Our goal is to ensure that patients get the therapy that they need and when they need it.
Let me be very clear about a couple of things.
One, ResMed's sleep apnea and respiratory care devices are safe to use.
They are the best in the market.
They are the smallest, the quietest, the most comfortable and the most connected therapies.
And positive airway pressure therapy remains the gold standard for the treatment of sleep apnea.
And two, ResMed will not be able to fill the entire supply gap that has been created by this situation caused by a competitor just seven weeks ago.
They were the No.
2 player to our No.
1 leading market position in almost all of the 140 countries that we compete in worldwide.
We are doing everything that we can to partner further and further up our supply chain in order to increase our access to the supply of the parts, the pieces and the components that we need to manufacture at scale.
We expect to be in a somewhat supply chain-constrained environment throughout fiscal-year 2022.
This news from our competitor was only released to the market on June 14, so we are in the first 7.5 weeks of our response.
However, we have already partnered with our global supply chain team, both internal and external.
And although we expect the current quarter and the December 2021 quarter will be the most supply constrained, we do see room for expansion of supply ahead.
We expect that the flow of ResMed products will accelerate significantly during the March 2022 and the June 2022 quarters.
We are focused on partnering with physicians, providers and distributors to ensure that our devices get to newly diagnosed patients.
And while that human impact is the most important, I know our investors and our analysts need to model the future financial impact of this accelerated growth on our ResMed financials.
Based upon our latest supply chain information and analysis, we see a path to $300 million to $350 million in additional revenue in fiscal 2022, over and above our previously planned revenue growth for fiscal 2022.
Importantly, we see a clear opportunity to increase our long-term sustainable market share as patients, physicians and providers experience our ResMed market-leading device and integrated cloud-based software solutions.
Our experience over the last seven-plus years since we launched our online platform called Air Solutions at scale is that when providers adopt and embrace our suite of digital health solutions, they can lower their own labor costs by over 50%.
They can drive their own patient adherence rates up to over 87% and beyond.
After doing that, they don't want to go back to an inferior solution.
And yes, during the near distant future, we will be starting the full product launch of our brand-new next-generation platform called AirSense 11.
Let me now turn to overall market conditions in our industry.
As we discussed last quarter, the countries we operate in are at various stages of the post-COVID peak recovery process in terms of sleep apnea and COPD patient flow.
We are seeing continued improvement in patient flow country by country.
But there is a wide variance in that total patient flow from 75% of pre-COVID levels in some countries around the world to 95% or even 100% of pre-COVID levels in other countries.
Vaccines are steadily rolling out country by country, and at the same time, new variants, including the Delta variant, continue to cause disruption in some geographies.
Our team remains committed to working with hospitals and healthcare providers to provide the ventilators, masks and training that they need for acute care.
We will continue to support frontline respiratory therapists and physicians, as well as providers, patients and our ResMedian team throughout the 140-plus countries that we operate in.
A few things that have become really clear during this pandemic is that every country in the world has: one, increased its adoption of digital health solutions; two, increased its focus on respiratory hygiene and respiratory health; and three, increased its investments in healthcare treatment outside the hospital and particularly in the home.
These are all catalysts for ResMed's long-term growth.
We are pleased with the steady progress that we are seeing in diagnosing new sleep apnea, COPD and asthma patients.
During the fourth quarter, our sales team delivered very strong revenue growth across our core sleep apnea and respiratory care business.
This incredible double-digit growth was despite the headwind from lapping $125 million of incremental COVID-related ventilator sales in the June 2020 quarter and with some tailwinds from our competitors' recall right at the end of the quarter.
While I am proud of the team for this 10% constant currency revenue growth in the quarter, I'm also very proud of their achievement over the fiscal year, with over 6% growth in revenue throughout fiscal-year 2021 to over $3.2 billion in total annual revenue and with leverage producing over 12% growth in our non-GAAP operating profit, and all the while, fighting for recovery of patient flow and battling COVID-19 impacts.
Quite a performance from our team of 8,000 ResMedians, helping people in 140 countries.
We expect to see steady improvement in patient flow for sleep apnea and respiratory care therapy as we move throughout our fiscal-year 2022.
We are encouraged to see patients, physicians and providers adopting digital health tools for remote patient screening, for home-based testing, for patient monitoring and for ongoing population health management.
As the leader in digital health for the treatment of sleep apnea, COPD and asthma, as well as other chronic respiratory conditions, we are well-positioned to drive this growth with our healthcare delivery partners.
During the quarter, we generated over $227 million of operating cash flow, allowing us to return $57 million in cash dividends to shareholders these last 90 days.
Today, we announced an 8% increase in our quarterly dividend for shareholders to $0.42 per share.
We are pleased to return your cash to you, our shareholders, reflecting our confidence in ResMed's resilient business and our ongoing cash flow.
We also increased our R&D investments in digital health technology during the quarter, as well as our research and development for masks, for devices, for embedded device software and for global clinical research, all the while maintaining fiscal discipline with SG&A and keeping other operating costs in line.
We are reinvesting for long-term growth.
We lead the field of remote patient engagement and population health management with over 15 million cloud-connectable medical devices in the market.
Our increasing investments in digital health innovation will ensure that we provide superior value to patients, to physicians and to providers to be their partner of choice.
We don't take our leading market share position for granted.
We have to earn it every day with every product, every solution and every service and every customer interaction.
Customers vote with their wallets.
And right now, they are voting for us, and we plan to keep earning their support.
Our digital health technologies are a growth catalyst for our business.
We have an exciting pipeline of innovative solutions that will generate both medium- and long-term value with an industry-leading intellectual property portfolio, including over 8,200 patents and designs.
We now have over 9 billion nights of respiratory medical data in our cloud-based platform called Air Solutions.
We have over 16.5 million patients enrolled in our cloud-based AirView software solution for physicians.
And we recently upgraded our patient engagement tool called myAir.
This app is now cloud-native and serverless in the cloud.
This new myAir 2.0 release supports our next-generation platform called AirSense 11.
The AirSense 11 platform comes to the market with new capabilities, with improved data delivery, with scalable architecture and with support for full-cycle teams.
And what that all means is that we have the opportunity for accelerated innovation in our ecosystem.
We have over 110 million patients managed within our Software-as-a-Service network for out-of-hospital care.
These incredible data assets allow us to unlock value for all of our customer groups, for patients, for physicians, for providers, as well as for private and government payers and the communities that they serve.
Let me now update you on our top three strategic priorities.
These are: one, to grow and differentiate our core sleep apnea, COPD and asthma businesses; two, to design, develop and deliver world-leading medical devices, as well as digital health solutions that can be scaled globally; and three, to innovate and grow the world's best software solutions for care delivered outside the hospital and especially in the home.
Last quarter, we previewed our next-gen platform called AirSense 11.
Responding to the current industry situation, our market-leading research and development team accelerated the launch of the AirSense 11.
First, by expanding the controlled product launch to additional customers just this last month; and second, by moving to an earlier full product launch date.
We now expect to launch in the United States before the end of this current quarter and then, to other countries gradually over time.
This AirSense 11 device launch will be a device launch like no other in the history of ResMed.
Previously, we carefully timed new product platform launches to minimize the selling overlap of device platforms.
We are in a unique situation today.
Our market-leading AirSense 10 continues to be very strongly adopted, and we believe that it is better than any other device currently on the market.
In short, it makes sense to continue to sell the AirSense 10 at scale, particularly as this will help maximize the overall CPAP, APAP and bi-level volume available for our customers for sale given the unprecedented demand for new patients to receive ResMed devices in the market right now.
The bottom line is that we're gonna be selling both the AirSense 10 and the AirSense 11 in parallel for quite some time as we meet this extraordinary market demand over the coming fiscal year and as we continue to expand the availability of AirSense 11 to new markets and new geographies around the ResMed world.
We are very excited to bring the AirSense 11 to market.
And I am understating the results when I say that the response to our controlled product launch has been very positive.
AirSense 11 benefits patients and bed partners, and the device and software platform combination will also benefit physicians, providers, payers and overall healthcare systems.
As I said earlier, we make the smallest, the quietest and the smartest and the most comfortable devices on the market, but they are also the most connected and the most clever devices.
All AirSense 11 devices are 100% cloud-connectable with upgraded digital health technology to increase patient engagement and adherence, to improve clinical outcomes and to deliver proven cost reductions within our customers' own healthcare systems, engaging patients directly in their own digital therapy like never before in the industry.
Let me now turn to a discussion of our respiratory care business, focusing on our strategy to better serve the 380 million chronic obstructive pulmonary disease patients and the 330 million asthma patients worldwide.
Our goal is to reach these many hundreds of millions of potential patients with our respiratory care solutions, including noninvasive ventilation and life support ventilation, as well as newer therapeutic areas such as cloud-connected pharmaceutical drug delivery solutions and high flow therapy offerings.
We announced that our respiratory care business benefited this time last year in the June 2020 quarter as we sold incremental ventilation devices and mask solutions to meet the growing demand for COVID on an acute scale to the tune of $125 million in sales.
During the current June 2021 quarter, we had modest COVID-related ventilator sales.
They were not material to our overall results.
They were under $20 million in sales, just under.
As the Delta variant of this coronavirus surges in various markets and regions, we will still be there to support governments and healthcare systems and the patients that they serve in their acute need.
But we do not expect the resulting revenue from COVID to be material to our global business.
Of course, the broader humanitarian impact is immeasurable, with preservation of life through our ventilation solutions a top priority in all of these countries.
Our supply chain focus is for Astral, our life support ventilator; then Stellar, our noninvasive ventilator; and then, our Lumis and AirCurve platforms to ensure that we can help patients who need our support the most.
Demand for our core noninvasive ventilation and life support ventilation solutions for COPD are experiencing the same steady recovery in new patient flow as we see in our sleep apnea business.
We are balancing the growth in demand with the supply of ventilators that made it to market throughout the last 18 months as customers balance their inventory with ongoing acute and chronic ventilation patient needs.
We continue to see rapid adoption of the AirView for ventilation software solution that we launched in Europe this time a year ago.
We are now expanding this technology to regions around the world.
The value being provided through AirView for ventilation has been helpful to physicians, not only during the COVID crisis, but it is also increasingly valuable as an ongoing clinical tool for them and for the healthcare systems that they operate in.
In summary, we are helping to ensure that digital health is the new standard of care for respiratory care.
Let me now review our Software-as-a-Service business for out-of-hospital healthcare.
During the quarter, our SaaS business grew in mid-single digits year on year across our portfolio of markets, including home medical equipment, skilled nursing facilities, home health, hospice, private duty home care, home infusion and life plan communities.
The continued growth of home-based care is providing tailwinds for our HME and home health products.
And we continue to grow with customers as they utilize and optimize our resupply solutions to improve patient care.
The COVID-19 pandemic has been challenging for some verticals in our SaaS business, particularly skilled nursing facilities or SNFs.
However, we are seeing positive trends as census rates improve across SNFs and other care settings.
We are watching this very closely as COVID peaks and decays at varying rates around the country.
We expect there to be pent-up demand for our software purchasing that provides opportunities for us to increase our pipeline as COVID restrictions continue to ease state by state.
Our leading position as the software provider of choice to the HME market enabled us to help customers manage through the pandemic and to maintain a healthy business.
Our Brightree-branded software solutions are allowing HMEs to work through current challenges within our industry, including the need for increased patient support, the need for management of product shortages in some categories, as well as ongoing growth in the resupply of much needed home medical equipment.
As we look across our portfolio of solutions, we expect our SaaS revenue growth to gradually accelerate, increasing from its current mid-single-digit growth to high single-digit growth by the back end of this fiscal year.
As always, our goal is to meet or beat these market growth rates as we continue to innovate and take market share from competitors.
Additionally, we see opportunities on our radar screen to drive growth through further SaaS acquisitions to augment our existing organic growth.
We have a good history of thorough due diligence, ensuring that ResMed is the best owner of the asset and, of course, that we can bring additional value for our customers with the new offering and of course, additional value for all of our shareholders.
In summary, our SaaS offerings are well received in each of the verticals that we serve, and we see an increasing opportunity to leverage analytics to minimize acute care episodes for residents, patients and clients in our provider network; and ultimately, to allow people to age in place, away from a hospital and preferably in their own homes.
Looking at the portfolio of ResMed's businesses across both sleep and respiratory care, as well as our SaaS solutions, we remain very confident in our long-term strategy and our pipeline of innovative products and solutions.
Our mission and specific goal to improve 250 million lives through better healthcare in 2025 drives and motivates ResMedians every day.
The light shining on the importance of respiratory health and hygiene is brighter than it ever was due to this pandemic.
COVID has also highlighted the importance of digital health, its accelerated awareness and adoption of technologies that can be used for remote patient screening, diagnosis, setup, as well as patient monitoring and management.
We continue to invest aggressively in R&D to ensure ResMed solutions remain market-leading and provide a catalyst for long-term growth.
With over 1.5 billion people around the world suffering from sleep apnea, COPD and asthma, we see incredible opportunities for greater identification, enrollment and engagement of people within our digital health ecosystem.
We are relentlessly driving innovation and development to provide the scale needed to expand the impact of this technology across all of the 140 countries that we operate in.
Before I hand the call over to Brett for his remarks, I want to again express my sincere gratitude to the more than 8,000 ResMedians for their perseverance, hard work and dedication during the most unusual, almost perfect storm of circumstances.
You have helped save the lives of many hundreds of thousands of people around the world with emergency needs for ventilation these last 18 months as we suffered through COVID.
And now you have rapidly pivoted the company back to provide ongoing support for our customers and patients during very challenging industry dynamics and supply chain constraints with unprecedented demand.
With that, I'll hand the call over to Brett in Sydney, and then, we will go to Q&A with the whole team.
Brett, over to you.
In my remarks today, I will provide an overview of our results for the fourth quarter of fiscal-year 2021.
Unless noted, all comparisons are to the prior-year quarter.
Group revenue for the June quarter was $876 million, an increase of 14% over the prior-year quarter.
In constant currency terms, revenue increased by 10% compared to the prior-year quarter.
Revenue growth reflected increased demand for our sleep devices and masks, which was, in turn, driven by both sleep patient flow recovering from the COVID-19-impacted reduced levels in the prior-year quarter and by increased demand in response to the recent product recall by one of our competitors.
The increased year-over-year demand for our sleep solutions during Q4 was partially offset by a significant decline in COVID-19-related demand for our ventilators and related accessories.
In the June quarter, we estimate the incremental revenue from COVID-19-related demand, primarily in India, was approximately $20 million, a decline of $105 million compared to the prior-year quarter.
Excluding the impact of COVID-19-related revenue in both the June '21 and June '20 quarters, our global revenue increased by 29% on a constant-currency basis.
Going forward, we expect minimal revenue from COVID-19-related demand.
Note, as a reminder, in Q1 FY '21, we have COVID-19-related incremental revenue of approximately $40 million.
As I mentioned before, during the June quarter, one of our competitors announced a product recall on certain sleep and respiratory devices, which, in turn, has resulted in significantly increased demand for our devices.
We estimate that we generated incremental device revenue of approximately $60 million to $70 million in the June quarter due to our competitors' recall.
Taking a closer look at our geographic distribution and excluding revenue from our Software-as-a-Service business, our sales in U.S., Canada and Latin America countries were $472 million, an increase of 18%.
Sales in Europe, Asia and other markets totaled $308 million, an increase of 11% or an increase of 2% in constant currency terms.
By product segment, U.S., Canada and Latin America device sales were $268 million, an increase of 30%.
Masks and other sales were $204 million, an increase of 5%.
In Europe, Asia and other markets, device sales totaled $210 million, an increase of 2% or in constant currency terms, a decrease of 6%.
Masks and other sales in Europe, Asia and other markets were $98 million, an increase of 36% or in constant currency terms, a 24% increase.
Globally, in constant-currency terms, device sales increased by 12%, while masks and other sales increased by 10%.
Excluding the impact of COVID-19-related sales in both the current quarter and the prior-year quarter, global device sales increased by 46% in constant currency terms, while masks and other sales increased by 16% in constant currency terms.
Software-as-a-Service revenue for the fourth quarter was $96 million, an increase of 5% over the prior-year quarter.
Looking forward to fiscal-year '22, we expect several factors will drive demand, including the general recovery of the global sleep market from COVID-19 impacts, the launch of our next-generation AirSense 11 platform and share gains during our competitors' recall.
However, while we are working hard to increase capacity, we will not be able to meet all the expected demand resulting from our products compared from our competitor's recall, primarily because of supply constraints for electronic components.
And we expect these constraints to be more limiting in the first half of FY '22 than the second half.
As Mick mentioned, we believe component supply constraints as they stand will currently limit incremental device revenue attributable to our competitor's recall to somewhere between $300 million and $350 million during fiscal-year '22.
During my remaining commentary today, I will be referring to non-GAAP numbers.
Our non-GAAP gross margin decreased by 260 basis points to 57.3% in the June quarter, compared to 59.9% in the same quarter last year.
The decrease is predominantly attributable to a negative product mix impact, specifically a proportional increase in sales of our lower-margin sleep devices, ASP declines and unfavorable foreign currency movements.
We also continued to experience elevated and significant freight costs.
Moving on to operating expenses.
Our SG&A expenses for the fourth quarter were $181 million, an increase of 10%, or in constant currency terms, SG&A expenses increased by 4% compared to the prior-year period.
SG&A expenses as a percentage of revenue improved to 20.7%, compared to the 21.5% we reported in the prior-year quarter.
Looking forward and subject to currency movements, we expect SG&A as a percentage of revenue to be in the range of 20% to 22% during fiscal-year '22.
R&D expenses for the quarter were $60 million, an increase of 14%, or on a constant-currency basis, an increase of 9%.
R&D expenses as a percentage of revenue was 6.8%, which is consistent with the prior year.
We continue to make significant investments in innovation because we believe our long-term commitment to technology, product and digital solutions will deliver sustained competitive advantage.
Looking forward and subject to currency movements, we expect R&D expenses as a percentage of revenue to be in the vicinity of 7% during fiscal-year '22.
Total amortization of acquired intangibles was $19 million for the quarter, and stock-based compensation expense for the quarter was $17 million.
Our non-GAAP operating profit for the quarter was $260 million, an increase of 7%, underpinned by strong revenue growth.
As I reported last quarter, we estimated and recorded an accounting tax reserve of $255 million during the previous quarter, which was net of credits and deductions for a proposed settlement of transfer pricing audits by the Australian Taxation Office or ATO.
During the quarter, we progressed our settlement discussions with the ATO and have refined our tax reserve estimate.
As a result, we have determined the required reserve is $249 million or $6 million lower than the previous-quarter estimate.
And accordingly, we have recorded this as a reduction in our GAAP tax expense in the June quarter.
Next steps involve concluding a written agreement with the ATO and obtaining final approvals from each side, which we hope to achieve this quarter.
On a GAAP basis, our effective tax rate for the June quarter was 18.4%, while on a non-GAAP basis, our effective tax rate for the quarter was 21.5%.
Our non-GAAP effective tax rate for FY '21 was 18.7%.
Looking forward, we estimate our effective tax rate for fiscal-year '22 will be in the range of 19% to 20%.
Non-GAAP net income for the quarter was $198 million, an increase of 3%.
Non-GAAP diluted earnings per share for the quarter were $1.35, an increase of 2%.
Our GAAP net income for the quarter was $195 million, and our GAAP diluted earnings per share for the quarter were $1.33.
Cash flow from operations for the quarter was $227 million, reflecting robust underlying earnings, partially offset by increases in working capital.
Capital expenditure for the quarter was $28 million.
Depreciation and amortization for the June quarter totaled $42 million.
During the quarter, we paid dividends of $57 million.
We recorded equity losses of $1.3 million in our income statement in the June quarter associated with the Verily joint venture now called Primasun.
We expect to record equity losses of approximately $2 million per quarter for fiscal-year '22 associated with the joint venture operation.
We ended the fourth quarter with a cash balance of $295 million.
At June 30, we had $655 million in gross debt and $360 million in net debt.
Our debt levels remained modest.
And at June 30, we had a further $1.6 billion available for drawdown under our existing revolver facility.
In summary, our liquidity position remains strong.
Our board of directors today declared a quarterly dividend of $0.42 per share.
This represents an increase of 8% over the previous quarterly dividend and reflects the board's confidence in our strong liquidity position and operating performance.
Our solid cash flow and liquidity provides flexibility in how we allocate capital.
During the pandemic, we have focused on paying down debt.
Going forward, we plan to continue to reinvest for growth through R&D.
We will also likely continue to deploy capital for tuck-in acquisitions such as Citus Health.
And with that, I will hand the call back to Amy.
Rob, let's go ahead and start the Q&A portion of the call.
 Assistant:

Chosen response:
q4 non-gaap earnings per share $1.35.
q4 earnings per share $1.33.
qtrly revenue increased by 14% to $876.1 million.
quarterly dividend increases 8% to $0.42 per share.


Prompt:
Human: These statements are not guarantees of future performance and therefore you should not place undue reliance upon them.
Also, our discussion today may include references to certain non-GAAP measures.
I'm joined today by Harp Rana, our chief financial officer.
Following our strong performance in the second half of last year, we carried forward the momentum into 2021.
In the first quarter, we generated record bottom-line results of 25.5 million of net income and $2.31 of diluted EPS.
Our growth initiatives helped to reduce our typical first-quarter seasonal liquidation and the impact of new stimulus payments, which in turn drove strong revenue performance.
At the same time, we maintained a superior credit profile with historically low 30-plus day delinquencies.
Despite pressure from a combination of tax refunds and two stimulus payments in the quarter, our core small and large loan portfolio grew by $18 million, or 2%, over the prior-year period, and was down only $28 million, or 2.5%, quarter over quarter.
This strong result was driven, in part, by the new growth initiatives that we implemented in 2020, which continued to perform very effectively.
We originated $231 million of loans in the quarter, up 1% year over year and up 5% from the first quarter of 2019, with 29 million [Inaudible] originated loans derived from new growth initiatives.
The second round of $600 stimulus checks appeared to have been spent relatively quickly.
The third round of $1,400 stimulus checks led to a temporary period of higher loan payment activity along with some weakening of loan demand.
As a result, while the stimulus payments impacted first-quarter demand, the overall impact on our typical first-quarter seasonal loan portfolio liquidation was much lower than we expected and much lower than what some others in our industry and in the prime credit space experienced.
Our large loan portfolio actually grew sequentially in the first quarter by $4 million or 0.6% as the stimulus measures disproportionately impacted our higher-rate small loan portfolio.
Loan demand remained relatively soft in April due to the impact of the distribution of the remaining 20% of stimulus payments along with additional tax refunds.
However, we saw demand start to pick up in the latter part of April, and we expect demand to continue to rebound in May and June, which should enable us to generate modest loan growth in the second quarter.
We continue to believe that loan demand in the second half of the year will be strong as the economy more fully reopens.
Credit quality continued to remain very solid in the quarter, and our balance sheet remains robust.
Our net credit loss rate during the quarter was 7.7%, a 280 basis points improvement from the prior-year period.
And we ended the quarter with a record-low, 30-plus day delinquency rate of 4.3%, a 230 basis points improvement from the end of March of 2020.
As of April 30, our 30-plus day contractual delinquency rate further improved to approximately 3.7%.
We expect that our credit performance will continue to be strong throughout 2021.
Any COVID-related net credit losses will occur in late 2021 at the earliest, though we anticipate that our delinquency rate will begin to normalize throughout the balance of the year as the benefits of federal stimulus dissipate.
Given our continued superior credit performance, we released $6.6 million in COVID-19 reserves in the first quarter and $3.8 million of additional reserves as a result of the seasonal runoff in the portfolio.
our 139.6 million allowance for credit losses as of March 30 first continues to compare quite favorably to our 30-plus day contracts of delinquency of 47.7 million.
Our allowance includes a 23.8 million reserve for additional credit losses associated with COVID-19.
We remain conservative in our maintenance with COVID reserves as the overall economy has not yet fully recovered from the pandemic.
We also continue to further strengthen our overall balance sheet and liquidity position.
In April, we enhanced our warehouse facility capacity by closing on two new warehouse facilities with our current lenders, Wells Fargo and Credit Suisse, and by adding a third warehouse facility with a new lender JPMorgan.
While our prior facility only funded large loans, the new facilities fund multiple collateral types, including small loans, large loans, convenience checks, and digitally originated loans.
We are very pleased with this outcome.
It represents yet another step in the evolution of our capital structure as we continue to pursue new avenues of funding diversification and additional capacity to support our business growth plans and our capital return program.
To that end, we are happy to announce an increase of our quarterly dividend by 25% to $0.25 per share.
In addition, in May, we completed a $30 million stock repurchase program that began in the fourth quarter of 2020, having repurchase, in total, 951,841 shares at a weighted average price of $31.52 per share.
Our board of directors recently authorized a new $30 million stock repurchase program, which we plan to commence later this month.
Our outstanding performance and financial results over the past year have enabled us to maintain and expand an attractive capital return program for our shareholders.
As we discussed on our last call, 2021 is a year of investment in our long-term growth.
We remain focused on investing in our digital capabilities to complete our omnichannel model, geographic expansion into new states, and new product and channel development to drive additional long-term growth.
In the first quarter, we completed development of and began testing our improved digital pre-qualification experience for our customers.
Digitally sourced originations represented 33% of our total new borrower branch volume in the first quarter and 25% of all branch originations we bought remotely in March.
We are very pleased to see the success of our digital and technological investments, and the adoption of our expanding omnichannel model by our customers.
In the second and third quarters, we expect to roll out the new prequalification experience to all our states and to begin integrating the new functionality with our existing and new digital affiliates and lead generators.
In addition, within the next few months, we will begin testing a new guaranteed loan offer program, which is an alternative to our convenience check loan product and offers online settlement with ACH funding into a customer's bank account.
We also remain on track to be in testing our end-to-end digital origination products for new and existing customers later this year.
And by the first quarter of 2022, we expect to roll out an improved online customer portal and the mobile app.
As we communicated previously, we entered Illinois, our 12th state, in mid-April and are excited to begin offering our valuable loan products to millions of new consumers in the state.
We plan to open 15 to 20 net new branches in 2021.
We also expect to enter up to two additional states by the end of 2021 and an additional four to six states over the next 18 months.
Our geographic expansion will be supported by our digital and new growth initiatives, allowing our branches in these states to maintain a wider geographic reach, resulting in higher average receivables per branch and the need for fewer branches.
Our digital investments and geographic expansion will also offer new products to our customers including our new auto secured product which we began testing in the first quarter, and we expect to roll out to all our states by the end of the third quarter.
We are very excited about the rest of this year and what the future holds for our franchise.
We will continue to invest throughout the year and our growth initiatives while maintaining our focus on credit quality and optimizing our overall underwriting capabilities.
As of March 31, approximately 70% of our total portfolio had been originated since April 2020.
The vast majority of which was subject to enhance credit standards that we deployed following the outset of the pandemic.
Our credit performance and underwriting capabilities continue to be foundational to our operational success and provide us with confidence as we pursue our long-term growth strategies.
We could not be happier with our first-quarter performance, which is a testament to the strength and dedication of the entire regional team.
We remain fully committed to our customers and our path forward, and we are in a prime position to generate strong top and bottom-line growth for the full year.
As we execute on our priorities this year, we are also looking ahead to 2022 and beyond.
We are focused on our key strategic initiatives of digital innovation, geographic expansion, and the development of new products and channels, all of which will allow us to gain market share and create sustainable, long-term value for our shareholders.
Let me take you through our first-quarter results in more detail.
We generated net income of 25.5 million and diluted earnings per share of $2.31, resulting from our growth initiatives, stable operating expenses, lower funding costs, and strong credit.
As illustrated on Page 4, branch originations were comparable to prior year as we ended first quarter, originating 169.7 million of loans.
Meanwhile, we grew direct mail and digital origination by 9% year over year to 61.7 million.
Our total originations were 231.4 million, 1% higher on a year-over-year basis and 5% higher than the first quarter of 2019 despite two rounds of government stimulus payments in the first quarter.
Our new growth initiative [00:13:13.23] [Inaudible] 29 million of first quarter origination.
Page 5 displays our portfolio growth and mixed trends through March 31.
We closed the quarter with net finance receivables of 1.1 billion, up 3 million from the prior-year period as we continue to successfully execute on our new growth initiatives and marketing efforts.
Our core loan portfolio grew 18 million, or 1.7%, from the prior year and decreased only 2.5% from the end of the fourth quarter, in line with normal seasonal liquidation despite the two rounds of government stimulus.
Small loans decreased 8% quarter over quarter due to the disproportionate impact of the stimulus payments on this portfolio, while large loans grew slightly at 0.6% versus the fourth quarter of 2020.
For the second quarter, as Rob noted, we expect some trailing impact from the third round of stimulus and tax refunds due to the extended tax season in April, followed by a rebound in demand this month and next.
Overall, we expect to see modest quarter-over-quarter growth in our finance receivables portfolio in the second quarter.
On Page 6, we show our digitally sourced originations, which were 33% of our new borrower volume in the first quarter.
Another high watermark for us.
This demonstrates our commitment to meeting the needs of our customers and serving them through our omnichannel strategy.
During the first quarter, large loans were 64% of our digitally sourced originations.
Turning to Page 7, total revenue grew 2% to 97.7 million.
Interest in field increased 10 basis points year over year, primarily due to improved credit performance across the portfolio as a result of the government stimulus, tightened underwriting during the pandemic, and our overall mix shift toward higher credit quality customers.
This resulted in fewer loans in nonaccrual status and fewer interest accrual reversals, offset in part by the continued product mix shift toward lower yielding large loans.
Sequentially, interest in field and total revenue yield decreased 80 and 90 basis points, respectively.
Due to a combination of seasonality, our continued portfolio mix shift to larger loans, and the second stimulus payment, which is noted previously, had a disproportionate impact on our small loan runoff in the first quarter.
As of March 31, 65% of our portfolio were large loans and 81% of our portfolio had an APR at or below 36%.
In the second quarter, we expect total revenue yield to be approximately 30 basis points lower than the first quarter, and our interest in field to be approximately 20 basis points lower due to the impact that the third and largest stimulus payment is expected to have on our higher-yielding small loan portfolio.
Moving to Page 8, our net credit loss is 7.7% for the first quarter, a 280-basis-point improvement year over year, while delinquencies remain at historically low levels.
Net credit loss is roughly 80 basis points from the fourth quarter.
This is due to normal seasonal increases of NPLs in the first quarter, but the rate of increase of 80 basis points in frst quarter was below the 150 and 180 basis point seasonal increases that we experienced in 2020 and 2019, respectively.
Due to government stimulus improving economic conditions and our lower delinquency levels, any COVID-related losses will occur in late 2021 at the earliest.
As a result, we expect that our full-year net credit loss rate will be approximately 8%.
Our 30-plus day delinquency levels as of March 31 was a record 4.3%, a 230 basis point improvement from the prior year and 100 basis points lower than December 31.
At the end of April, we saw 30-plus day delinquencies dropped further to a record low of approximately 3.7%.
Moving forward, we expect 30-plus day delinquencies to gradually rise off the April low to more normal levels.
Turning to Page 10, we ended the fourth quarter with an allowance for credit losses of 150 million or 13.2% of net finance receivables.
During the first quarter of 2021, the allowance decreased by 10.4 million to 12.6% of net finance receivables.
The decrease in reserves, including the base reserve release of 3.8 million from portfolio liquidation and a COVID-19 reserve release of 6.6 million.
As a reminder, going forward, as our portfolio grows, we will build additional reserves to support this new growth.
At the moment, the severity and the duration of our macro assumptions remain relatively consistent with our fourth-quarter model, including an assumption that the unemployment rate will be below 10% at the end of 2021.
We will review these assumptions every quarter to reflect changing macro conditions as the economy begins to rebound.
Our 139.6 million allowance for credit losses as of March 31 continues to compare very favorably toward 30-plus day contractual delinquency of 47.7 million.
We remain confident that we remain sufficiently reserved.
Looking to Page 11, G&A expenses for the first quarter of 2021 were 45.8 million, an improvement of 0.4 million or 0.9% from the prior-year period.
Primarily driven by reductions in executive transition costs and operating costs related to COVID-19, partially offset by an increase in personnel expenses, marketing expenses, and investment in digital and technological capabilities to support our new growth initiatives and omnichannel strategy.
Our operating expense ratio was 16.3% in the first quarter of 2021 compared to 16.5% in the prior-year period.
On a sequential basis, our G&A expense rose 1 million, in line with our expectations due to lower deferred loan origination costs and fewer seasonal loan originations in the first quarter as compared to the fourth quarter.
Overall, we expect G&A expenses for the second quarter to be approximately 2.2 million higher than the first quarter.
We expect to further ramp up investments in the back half of 2021 as we continue to invest in digital capabilities to complete our omnichannel model, geographic expansion into new states, and new products and channels to drive additional long-term growth.
These investments will help drive our receivables growth and lead to improved operating leverage over the longer term.
Turning the Page 12, interest expense was 7.1 million in the first quarter of 2021 and 2.6% of our average net finance receivables.
This was a 100 basis point improvement year over year and 3 million, or 30%, lower than in the prior-year period.
The improved cost of funds was driven by lower interest rate environment, improved funding costs from our recent securitization transactions, and a favorable 785,000 mark-to-market increase in value this quarter on our interest rate cap.
We currently have 400 million of interest rate caps to protect us against rising rates on our variable priced funding, which as of the end of the first quarter, totaled 193 million.
We purchased 100 of additional interest rate caps in the first quarter to take advantage of the favorable rate environment.
We purchased a total of 300 million of interest rate caps since the beginning of the pandemic at a LIBOR strike price range of 25 to 50 basis points.
As rates fluctuate, the value of these hedges will be marked to market accordingly.
Looking ahead, normalizing for the hedge impact in the first quarter, we expect interest expense in the second quarter to be approximately 8.5 million.
Our effective tax rate during the first quarter was 24%, compared to a tax rate of 36% in the prior-year period.
For 2021, we expect an effective tax rate of approximately 25%.
Page 13 is a reminder of our strong funding profile.
Our first-quarter funded debt-to-equity ratio remained at a very conservative 2.7-1.
We continue to maintain a very strong balance sheet with low leverage and 140 million in loan loss reserves.
As of March 31, we had 573 million of unused capacity on our credit facilities and 207 million of available liquidity, consisting of unrestricted cash and immediate availability to draw down our credit facility.
And as Rob noted earlier, we recently enhanced our warehouse facility, capacity closing on three new warehouse facilities with our current lenders, Wells Fargo, and Credit Suisse, and adding JPMorgan to our roster of lenders.
Our total warehouse capacity has expanded by 175 million to 300 million, and the average term on the new warehouse is approximately 22, roughly a four-month extension from the prior facility.
As of April 30th, we had 758 million of unused capacity on our credit facilities, providing us with even more capacity to fund our operations, our ambitious growth plans, and our capital return program.
In the first quarter, the company repurchased 352,183 of its common stock at a weighted average price of $33.57 per share.
under the company's 30 million stock repurchase program.
The company completed the 30 million stock repurchase program in May, having repurchased in total 951,841 of its common stock at a weighted average price of $31.52 per share.
As Rob noted earlier, the company's board of directors has declared a dividend of $0.25 per common share for the second quarter of 2021.
The dividend is 25% higher than the prior quarters' dividend and will be paid on June 15, 2021, to shareholders of record as of the close of business on May 26, 2021.
In addition, as Rob mentioned earlier, we are pleased to announce that our board of directors has approved a new 30 million stock repurchase program.
Overall, we are very happy with our top and bottom-line performance, resilient balance sheet, ability to turn excess capital to our shareholders, and our prospects for strong growth.
That concludes my remarks.
In summary, it was an excellent first quarter for Regional, as our omnichannel operating model, new growth initiatives, and superior credit profile contributed to record performance.
We're excited to execute on our key strategic initiatives, which will position us to sustainably grow our business for years to come and ensure that our customers continue to receive the first-class experience they have come to expect.
Through our long-term investments in digital innovation, entering new markets and developing new products and channels, we are positioned to expand our market share and create additional value for our shareholders.
Operator, could you please open the line?
 Assistant:

Chosen response:
q1 earnings per share $2.31.
q1 revenue rose 1.7 percent to $97.7 million.


Prompt:
Human: These statements are not guarantees of future performance, and therefore, you should not place undue reliance upon them.
Also, our discussion today may include references to certain non-GAAP measures.
I'm joined today by Harp Rana, our chief financial officer.
Our team executed extremely well and delivered strong results in the fourth quarter.
We generated $14.3 million net income or $1.28 of diluted earnings per share as a result of continued quality growth in our loan portfolio, a strong credit profile, disciplined expense management and low funding costs.
We leveraged our new growth initiatives to take advantage of an increase in consumer demand in the quarter.
We originated $359 million of loans in the fourth quarter, which was comparable to the prior year and up nearly $51 million or 16% from the third quarter.
This drove sequential growth in our total portfolio of $77 million or 7%.
Our core small and large loan portfolio grew by $80 million or 8% quarter over quarter.
And on a year-over-year basis, our core loan portfolio grew by $19 million or 2%, and an impressive result considering the circumstances presented in 2020.
Credit quality also remained stable in the fourth quarter, and we continue to maintain a very strong balance sheet.
Our net credit loss rate during the quarter was 6.9%, a 210-basis-point improvement from last year, and we ended the quarter with a 30-plus day delinquency rate of 5.3%, down from 7% last year.
Our $150 million allowance for credit losses as of December 31 continues to compare quite favorably to our 30-plus day contractual delinquency of $60.5 million and includes a $30.4 million reserve for additional credit losses associated with COVID-19.
This reserve assumes an unemployment rate of 9% at the end of 2021.
We continue to believe that we have ample coverage to absorb future credit losses.
In addition, with $452 million of unused capacity on our credit facilities and $203 million of available liquidity as of February 5, we have access to more than enough capital to invest in our business and fund our ambitious growth plans.
Earlier today, we also amended our ABL facility to provide an additional $20 million of flexibility to return capital to our shareholders in the future, whether through dividends or share repurchases.
In addition, earlier this week, we priced our latest securitization transaction, which is expected to close on February 18.
Approximately $250 million securitization garnered wide interest from investors, and priced at a record low average-weighted coupon of 2.08%, nearly 80 basis points better than our previous securitization.
The proceeds from the securitization will be used to retire our RMIT 2018-2 securitization, thereby significantly reducing our cost of capital and further strengthening our balance sheet.
Before looking ahead to 2021 and beyond, I'd like to take a moment to reflect on the accomplishments of the past year.
From the beginning of the pandemic, we maintained our focus on serving our customers, supporting our team members, delivering assistance to our communities and generating value for our shareholders.
For our customers, we provided effective avenues for continued access through our valuable loan products.
We introduced curbside service for payments, loan closings and all other types of servicing activity, and we quickly created and rolled out electronic remote loan closing capabilities, enabling our customers to extend and expand their relationship with us from the comfort of their homes.
In December, we closed 20% of our branch originations through the remote loan closing process.
We also offered borrower assistant programs as a necessary bridge for those most impacted by the pandemic.
And in combination with government stimulus, we experienced historically low delinquencies throughout most of the year.
Importantly, we ensured our customer safety while continuing to provide the best-in-class service experience.
For our team members, we expanded our paid time off policy to provide them with flexibility to address personal obligations and to assist in situations where they were unable to work remotely.
We implemented enhanced safety measures in all of our branches, covered the cost of virtual health visits for our team members, and offered paid leave for those exposed to the virus.
At the end of the year, we announced significantly enhanced benefit programs.
For our communities, we introduced retail reach, an employee-led initiative dedicated to creating positive social change and goodwill through community service, charitable giving and diversity, equity and inclusion initiatives.
In the spring, we partnered with the American Heart Association and led all upstate South Carolina companies in fundraising for the Heart Walk.
More recently, we partnered with local food banks throughout our footprint to raise tens of thousands of dollars and collect literally tons of food for distribution within local communities.
For our shareholders, we grew our loan portfolio, maintained a stable credit profile, appropriately managed our operating expenses and decreased our funding costs, resulting in excellent bottom-line results.
We fortified our balance sheet, and we maintained access to significant borrowing capacity and liquidity.
We made considerable progress on our digital investments and initiatives, including by migrating our technology infrastructure to the cloud at the end of the year.
The resilience of our omnichannel operating model was clearly validated in 2020.
As we turn the page on what was for everyone, a very challenging year, I could not be prouder of our team and how they stepped up to navigate the crisis successfully.
We entered 2021 in a position of considerable strength and ready to embark on our next chapter.
Looking ahead, we're excited about the opportunities that we see for sustainable growth.
We remain focused on expanding our market share, maintaining the credit quality of our loan portfolio and extending our competitive advantages.
Over the next 18 months, we will acquire new customers through innovation and geographic expansion.
We will continue to prioritize our investment in digital capabilities to further enable our growth and make sure that we're always available at our customers' convenience.
During the first half of 2021, we expect to roll out an improved digital prequalification experience for our customers, including expanded integration with existing and new digital affiliates and lead generators.
We're also moving ahead with our pilot of a new guaranteed loan offer program.
This will be an alternative to our convenience check loan product and may be fulfilled online with ACH funding into a customer's bank account.
In the second half of 2021 and into early 2022, we expect to test a digital origination product and channel for new and existing customers.
At the same time, we will complete the development of our mobile app and enhancements to our customer portal, allowing our customers easy access to payment functionality and additional features.
In parallel with our digital investments, we will expand our operations into four to five new states over the next 18 months.
Doing so, we'll make our valuable product set, including a newly enhanced auto secured product available to millions of new customers.
To that end, we plan to open between 15 and 20 net new branches in 2021.
We believe this branch expansion strategy, supported by our digital initiatives will enable our branches to maintain a wider geographic reach and higher-average receivables per branch.
This will ultimately further expand our revenue and operating efficiencies and lead to stronger bottom-line growth.
Our accelerated state expansion will begin with Illinois in the second quarter.
While Illinois has recently passed legislation to cap the all-in APR at 36%, we feel that it remains a terrific opportunity to enter a new market with our digitally enabled business model and take advantage of the competitive disruptions from the recent legislation.
As of year-end 2020, 80% of our loan portfolio had an APR at or below 36%.
While we have significant plans to invest in our growth in 2021 and beyond, we will not sacrifice the credit quality of our portfolio, which remains of paramount importance.
As of year-end, 61% of our total portfolio had been underwritten using the enhanced credit standards that we deployed during the pandemic.
It's our credit performance and underwriting capabilities that provide us with confidence in the pursuit of our long-term growth strategies.
We will continue to invest in our underwriting capabilities over time, including advanced machine learning tools to ensure the sustainability of our growth.
As we've said previously, any additional stimulus such as the recent $600 stimulus checks, will push COVID-related losses into the second half of 2021.
Any subsequent stimulus will continue to positively impact credit, but will reduce loan demand early this year.
As we experienced in 2020, we expect a strong second-half balance in loan demand as vaccinations become more widespread and the economy begins to reopen more fully.
In sum, we had a fantastic end to a year that challenged everyone.
We executed across all facets of our business, and we have set ourselves up for an improved 2021 on both the top and bottom lines.
Our team continues to go above and beyond to ensure that our customers receive the best possible experience.
We are excited about and confident in the sustainability of our omnichannel operating model, the resiliency of our customers and our team's ability to execute on our growth plans.
Let me take you through our fourth-quarter results in more detail.
We generated net income of $14.3 million and diluted earnings per share of $1.28, resulting from quality growth in our portfolio, a strong credit profile, disciplined expense management and low funding costs.
Page 4 shows our strong portfolio growth in the second half of 2020, driven by increased loan demand and our new growth initiatives.
We grew $114 million from June to December of 2020, with $77 million of this growth in fourth quarter.
We also increased our core finance receivables by $120 million from June to December of 2020 with $80 million of this growth in fourth quarter.
Page 5 displays our portfolio growth and mix trends through year-end 2020.
We closed the quarter with net finance receivables of $1.1 billion, up $77 million or 7% sequentially and $3 million year over year.
Our new growth initiatives drove $36 million of the $77 million of sequential growth.
Our core loan portfolio grew $80 million or 8% sequentially and $19 million year over year.
We continued our mix shift toward large loans, which represent 63% of our portfolio as of fourth-quarter 2020.
Moving to Page 6, as Rob mentioned earlier, originations continued to rebound in the fourth quarter.
Branch originations grew from $233 million in the third quarter of 2020 to $272 million in the fourth quarter, a 17% improvement.
Meanwhile, direct mail and digital originations increased from $75 million in the third quarter to $87 million in the fourth quarter, a 16% improvement.
Total originations in December increased 7% year over year.
For the first quarter, we expect to see our normal seasonal patterns, lower originations and higher runoff, as customers receive tax refunds and utilize their most recent stimulus payments.
As in prior years, we expect our net finance receivables to liquidate quarter over quarter with the timing of any new government stimulus reducing the loan demand temporarily.
On Page 7, we show our digitally sourced originations, which were 29% of our new borrower volume in fourth quarter, the highest we've seen.
This demonstrates our commitment to meeting the needs of our customers and serving them through our omnichannel strategy.
During the fourth quarter, large loans were 60% of our digitally sourced originations.
Turning to Page 8.
Total revenue declined 1% due to the continued product mix shift toward large loans and the portfolio composition shift toward higher-credit quality customers.
On a year-over-year basis, total revenue yield and interest and fee yield remained relatively flat.
In the first quarter, due to our seasonal pattern, we expect total revenue yield to be 180 basis points lower than fourth quarter and interest and fee yield to be 140 basis points lower.
Moving to Page 10.
Our net credit loss rate was 6.9% for the fourth quarter of 2020, a 210-basis-point improvement year over year and a 90-basis-point improvement from the third quarter of 2020.
The credit quality of our portfolio remains stable, as can be seen on Page 11.
Our 30-plus day delinquency rate of 5.3% in December, continued to track near historic lows, even with the usage of borrower assistance programs remaining at pre-pandemic levels of 2.2%.
Our delinquency level of 5.3% is 60 basis points higher than the third quarter, primarily due to normal seasonality, but it represents a 170-basis-point improvement year over year.
We expect the recent government stimulus will keep delinquencies muted for at least the first quarter of 2021 and perhaps longer, depending upon the level of the additional stimulus.
Turning to Page 12, we ended the third quarter with an allowance for credit losses of $144 million or 13.6% of net finance receivables.
During the fourth quarter of 2020, the allowance increased by $6 million to $150 million or 13.2% of net finance receivables.
The base reserve increased by $7.5 million due to portfolio growth and was partially offset by $1.5 million of COVID-specific reserves, resulting in $30.4 million of COVID-specific reserves as of quarter end.
The severity and the duration of our macroeconomic assumptions remained relatively consistent with our third-quarter model, including an assumption that unemployment is 9% at the end of 2021.
Our $150 million allowance for credit losses as of December 31 and compares favorably to our 30-plus day contractual delinquency of $60.5 million.
And at our current reserve levels, we are confident that we are sufficiently reserved if the pandemic continues for an extended period.
Flipping to Page 13.
G&A expenses in the fourth quarter of 2020 were $44.8 million, up $3.9 million year over year but better than our sequential guidance for the quarter by $0.7 million.
The increase in G&A expense was primarily driven by $3 million in higher marketing expenses and digital investments to support our growth initiatives.
As Rob noted earlier, in 2021, we remain focused on investing in our digital capabilities and marketing efforts, all to drive new revenue opportunities, enhance our customers' omnichannel experience and create long-term operating leverage.
Overall, we expect G&A expenses for the first quarter to be higher than the fourth quarter by approximately $1 million, encompassing investments in increased marketing, our digital capabilities and our state expansion plans.
We will continue to invest in our new growth initiatives in 2021 to drive receivable growth and to improve our operating leverage over the long term.
Turning to Page 14.
Interest expense of $9.3 million in the fourth quarter of 2020 was $1 million lower than in the prior-year period due to the lower interest rate environment.
Our fourth-quarter annualized interest expense as a percentage of average net receivables was 3.3%, a 40-basis-point improvement year over year.
We purchased $50 million of interest rate caps in the fourth quarter to take advantage of the favorable rate environment.
In the first quarter, we expect interest expense to be approximately $9 million.
As Rob mentioned, earlier this week, we priced an approximately $250 million securitization at a record low average-weighted coupon of 2.08%.
Proceeds from the securitization will be used to retire our RMIT 2018-2 securitization, which had a weighted average coupon of 4.87%.
In the fourth quarter, we accelerated $0.8 million for the amortization of debt issuance costs related to the RMIT 2018-2 transaction in advance of the expected repayment this quarter.
The new securitization transaction will further reduce our cost of capital and strengthen our balance sheet moving forward.
Our effective tax rate during the fourth quarter of 2020 was 23.3%, compared to 24.5% in the prior-year period, better-than-expected due to tax benefits on share-based compensation.
For 2021, we are expecting an effective tax rate of approximately 25.5%.
Page 15 is a reminder of our strong funding profile.
Our fourth-quarter funded debt-to-equity ratio remained at a very conservative 2.8:1.
Low leverage, coupled with $150 million in loan loss reserves provides a strong balance sheet.
As of February 5, we had $452 million of unused capacity on our credit facilities and $203 million of available liquidity, consisting of a combination of unrestricted cash on hand and immediate availability to draw down cash from our revolving credit facilities.
In summary, we have more than adequate capacity to support the fundamental operations of our business, as well as our ambitious growth initiatives.
During the fourth quarter, we repurchased 435,116 shares at a weighted average share price of $27.58.
As of the beginning of the year, we still had $18 million of availability remaining under our $30 million share repurchase program announced in third quarter of 2020.
In addition, our board of directors recently declared a dividend of $0.20 per common share for the first quarter of 2021.
The dividend will be paid on March 12, 2021, to shareholders of record as of the close of business, February 23, 2021.
We are very pleased that our strong balance sheet enables us to return excess capital to our shareholders.
That concludes my remarks.
In summary, 2020 was a challenging year for everyone.
But when times were the hardest, our team rose to the occasion.
As a result, we entered 2021 particularly well positioned to grow our market share while also maintaining a very strong balance sheet and excellent credit profile.
We're excited for the future as we continue to provide our customers with a best-in-class experience and deliver additional value to our shareholders.
Operator, could you please open the line?
 Assistant:

Chosen response:
q4 earnings per share $1.28.
as of december 31, 2020, company had net finance receivables of $1.1 billion and outstanding long-term debt of $768.9 million.


Prompt:
Human: The slides for today's call can be found on the Investors section of our website, along with the news release that was issued today.
These uncertainties could include economic conditions, market demands, and competitive factors.
Also the discussions during this conference call may include certain financial measures that were not prepared in accordance with Generally Accepted Accounting Principles.
Reconciliation of those non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the slide deck for today's call, which is posted on the Investor's section of our website.
Demand was strong across much of our business, and especially in the EV/HEV market where sales grew rapidly.
Rogers was not immune to the global supply chain challenges experienced by many manufacturing companies in the second quarter.
These conditions were more significant than anticipated, and tempered our top line growth and resulted in margins and earnings per share that were below our guidance.
Specific issues we faced included, supply constraints, labor shortages and raw material cost increases, which we're proactively managing through commercial and operational actions.
Our operational excellence and capacity expansion programs are on track, and as supply conditions improve, we expect to achieve our 40% gross margin target.
Turning to a review of our markets; in the second quarter growth was strong in several of our strategic focus areas.
Sales in the EV/HEV market continue to grow at a rapid pace, with Q2 revenues increasing at a mid-teens rate, compared to the prior quarter.
Led by a rebound in solar and wind demand, clean energy sales grew at a double-digit rate sequentially.
Defense market sales were again strong, and revenue improved at a high-single digit rate.
Industrial market sales were relatively flat, following a sharp rebound in the first quarter.
ADAS sales declined relative to the prior quarter, due to inventory adjustments.
after three strong quarters of growth.
We believe this is a temporary situation, as the ADAS market outlook is robust, which I will detail in more in a moment.
And our leading market position remains extremely strong in ADAS.
Our sales in the Portable Electronics market decreased slightly in Q2 over Q1, due to the manufacturing disruption at our UTIS facility.
Excluding UTIS sales, Portable Electronics' revenue increased 5% quarter-over-quarter, reflecting the ongoing strength of the Portable Electronics market.
Overall, we are very encouraged by the healthy demand across much of our portfolio and especially in the EV/HEV market.
Our competitive positions continue to be strong, and we are seeing the benefits of our strategy to leverage our innovative and high performance solutions, in markets with long-term secular tailwinds, such as Advanced Mobility.
Turning to slide 5; I'll provide an update on the longer-term growth outlook for Advanced Mobility.
I'll begin first with ADAS before discussing the EV/HEV outlook.
In ADAS, we continue to expect a mid-teens growth opportunity in auto radar units over the next five years, driven by further market penetration and increasing levels of vehicle autonomy.
Next-generation radar technologies are essential to the future of autonomous vehicles, and Rogers is helping to drive innovation in this space.
We continue to strengthen our leading position in this market with design wins in both current and next-generation programs.
Moving next to the EV/HEV market, the long-term outlook continues to be very robust, with an expected annual growth rate of more than 30% over the next five years.
Recent trends continue to support this strong outlook.
For example, year-to-date sales of plug-in EVs and HEVs in Europe accounted for 15% of the market.
In China, electric vehicle sales reached a new milestone in the second quarter, exceeding 10% of the market.
Third party analysis also points to an acceleration in EV/HEV adoption, driven by growing consumer preference for non-ICE vehicles and supportive policy changes.
A recent E&Y report highlighted that combined plug in EV and HEV sales in the U.S., China and Europe are now expected to surpass sales of all other powertrains five years earlier than previously anticipated.
In addition, growth expectations for full electric vehicles also continue to accelerate.
For instance, the latest projections from HIS, estimate that full electric vehicle production will reach close to 40 million units globally over the next four years.
This is an increase of 25% or about 8 million vehicles, compared to their forecast from only two years ago.
Reflected in these estimates are the growing number of automakers, who have announced plans to transition their entire fleet to full EVs within the next decade.
To take advantage of the strong growth outlook in Advanced Mobility, we are investing aggressively in new capacity and capabilities.
We plan to double our capital spending this year, in order to invest in new capacity to support growth in the EV/HEV market.
Our next highlight, Rogers' strong portfolio of products for this market, and how we are positioned to benefit from both the acceleration of the market and the trend toward rising degrees of electrification.
For EV/HEV manufacturers reliability, safety and performance are critical design elements, and Rogers' solutions address these needs.
In the AES business, we have content opportunities with both our ceramic substrate and power interconnect products.
Increasingly, EV and HEV designs are incorporating wide bandgap semiconductors to improve vehicle efficiency and range.
These semiconductors require high performance packaging that our ceramic substrates provide.
Our substrate content increases with higher degrees of electrification and is more than five times higher in a full EV, as compared to a mild hybrid.
We are encouraged by our success in this market and recent design wins are adding to our growth.
Power interconnects provide an additional content opportunity in EV/HEV.
They are critical components that distribute power and are essential to the performance and reliability of the vehicle.
We have secured design wins with several leading entrants to the EV market.
This opportunity is expected to grow, as these customers ramp up volumes in the coming year.
In our EMS business, we have leveraged our expertise in polyurethane and silicone materials, to develop innovative solutions that improve the performance and reliability of EV batteries.
Our content opportunities include.
battery compression pads for plug-in HEVs and EVs, and other solutions, such as vibration damping pads, and battery pack sealing systems, which can be used across all battery types and sizes.
Battery compression pads have been larger content opportunity, which increases with battery size.
Sales of our other EV battery solutions have increased significantly this year, driven by a number of important design wins.
In addition to the opportunities in Advanced Mobility, there are also compelling growth opportunities in other areas of our market portfolio, such as clean energy, Portable Electronics, and defense.
These markets comprise approximately 30% of Roger's total sales, and we expect these markets to grow at a high-single digit rate over time.
In clean energy, we have exposure to both solar and wind energy markets with our ceramic substrates and power interconnects.
Year-to-date growth has been strong and the combined solar and wind market is expected to grow at a 10% CAGR over the next five years.
In the Portable Electronics market, sales of 5G smartphones are expected to nearly double this year, as the overall market grows at mid-single digit rate.
The higher performance and advanced features of 5G smartphones, means that our content can range from 10% to 30% higher versus the previous generation of phones.
Our near term Portable Electronic sales are tempered by lower UTIS capacity, but we expect 5G demand to remain robust for the next several years, which provides Rogers with a good growth opportunity, especially, as we rebuild our UTIS capacity.
The longer-term outlook in the defense market continues to be promising, as funding of technology programs, such as missile and radar systems, is expected to drive increasing demand for Rogers' advanced circuit materials.
Turning to slide 7; I'll recap the key messages from today's call.
We are encouraged by the strong market demand that we continue to see across much of our business.
This includes, faster growing markets such as EV/HEV, but also in other attractive market opportunities like clean energy and defense.
Near term, we are not isolated from the current global supply chain challenges, but we are making progress managing these issues and our operational excellence programs remain on track.
We continue to add to our strong competitive positions, with new design wins, and we are seeing the results of our strategic focus on growth opportunities in our market portfolio, and especially in Advanced Mobility.
We are moving forward rapidly with our investments in new capacity and related capabilities, to help ensure our leadership in the EV/HEV market, and to take advantage of the significant growth ahead.
I will begin on slide 9.
As Bruce mentioned in his overview, we continue to grow our top line.
Q2 revenue improved 2.5% sequentially to $234.9 million, which was at the midpoint of our guidance range.
Gross margin of 38.2% and adjusted earnings per share of $1.72, were below our guidance range, primarily due to the impact of raw material shortages and cost increases in the quarter.
In the slides ahead, I'll review our second quarter 2012 results in detail, followed by our third quarter guidance.
Turning to slide 10; Rogers delivered Q2 revenues of $234.9 million, 2.5% higher than Q1.
Volume increased 2.8% and were slightly offset by unfavorable currency rates of approximately 0.3%.
Q2 sales growth was tempered by raw material supply constraints, and disruptions to our UTIS facility.
AES revenue increased 6.5%, to $140.4 million, due to strong demand in power semiconductor substrate and RF solutions.
EV/HEV applications revenues accounted for 15% of the segment revenues and increased 34% sequentially.
Ceramic substrates, used in power semiconductor devices, had a very strong quarter and revenues for the business grew over 40% sequentially.
Clean energy sales accounted for 17% [Phonetic] of AES revenues and grew 11% sequentially.
We believe that renewable energy demand will have a meaningful long-term momentum.
Within RF Solutions, the Aerospace and Defense business was 19% of the business segment revenues, and grew 8% versus Q1.
Wireless infrastructure revenues grew mid-single digits sequentially and accounted for 16% of the segment revenues.
ADAS was 15% of AES revenues and declined modestly versus prior quarter, due to customers adjusting inventory levels.
The EMS business finished the quarter with revenues of $89.3 million, 3% lower than the first quarter.
Market demand continues to be very strong, but sales for the quarter were impacted by the raw material shortages and lower unit revenue.
EV/HEV sales, which represents 11% of EMS revenues, were relatively flat compared to Q1 due to order timings, Q2 general industrial sales which made up 46% of the segment revenue were also relatively unchanged versus prior quarter.
Lower use production resulted in a 7% decrease in Portable Electronics revenue.
Our plan is to restart production of certain use products by the end of 2021, with full capacity ramp up from the first half of next year.
Turning to slide 11; our gross margin for the second quarter was $89.8 million or 38.2% of revenues, 80 basis points lower than both Q1 and the midpoint of our guidance range for the quarter.
Our operational excellence programs are on track, and we benefited from the higher volume in the quarter.
However, higher than forecasted supply chain constraints resulted in the lower Q2 margins.
Gross margin for the quarter was negatively impacted by 130 basis points due to raw material shortages in EMS. Additionally, raw material cost increases in both AES and EMS unfavorably impacted margins by 70 basis points.
Although the raw material supply situation has since improved, we expect some challenges to continue into the third quarter.
As mentioned previously, we have taken commercial actions to mitigate increasing commodity and other raw material costs, these actions will have a positive impact on our Q3 results.
Also, on slide 11, we detail the changes to adjusted net income of $32.5 million in Q2 compared to adjusted net income for Q1, of $36 million.
The adjusted operating income for Q2 of $40.8 million or 17.4% of revenues was 150 basis points lower than Q1.
Adjusted operating expenses for Q2 of $49.1 million or 20.9% of revenues were 80 basis points higher than Q1 expenses.
The higher adjusted operating expenses, were mainly due to increase in performance based compensation cost, based on a stronger outlook, timing of certain expenses, as well as reinvestments in the business.
Other income expenses was $1.8 million unfavorable compared to Q1.
Although the copper hedging portfolio gains were positive in Q2, it was meaningfully lower than Q1, due to the steep decline of copper prices to the back end of the quarter.
The higher adjusted operating expenses and lower other income, just described were the primary reasons for the decline of net income and earnings per share versus prior quarter.
Turning to slide 12, the company generated free cash flow of $11.9 million in the second quarter and $44.8 million June year-to-date.
We ended the quarter with a cash position of $203.9 million.
In the quarter, we generated $29.7 million from operating activities net of an increase of $13.9 million in working capital.
We repaid $4 million of our credit facility and ended the quarter with no outstanding debt.
In Q2, the company spent $17.8 million on capital expenditure.
We continue to guide our capital expenditure of $70 million to $80 million for the full year 2021.
The company continues to have a very strong balance sheet and generate robust free cash flows, that provides us the flexibility to accelerate the investments necessary to support organic and inorganic growth opportunities.
Turning now to third quarter guidance on slide 13.
We see continued sales growth across most of our portfolio in the second half of the year, led by EV/HEV.
However, this will be tempered by the lack of availability of certain raw materials.
Based on these factors, we are guiding our third quarter revenues to be in the range of $235 million to $245 million.
We expect Q3 gross margin to improve sequentially, driven by higher volume, continued operational excellence initiatives and ongoing commercial actions.
These items will offset the impact of certain supply chain challenges that will continue into Q3.
For these reasons, we guide third quarter gross margin be in the range of 38.5% to 39.5% to the midpoint of 39%.
Q3 operating expenses are forecasted to increase sequentially, mainly due to a $3 million one-time cost to support strategic growth initiatives.
We are guiding GAAP Q3 earnings in the range of $1.50 to $1.65 per fully diluted share, we guide fully diluted adjusted earnings in the range of $1.70 to $1.85 per share for the third quarter.
The effective tax rate for the full year is guided to 24% to 25%.
 Assistant:

Chosen response:
compname reports q2 adjusted earnings per share of $1.72.
q2 adjusted earnings per share $1.72.
q2 sales $234.9 million.
sees q3 2021 net sales $235 million to $245 million.
sees q3 2021 earnings per share $1.50 to $1.65.
sees q3 2021 adjusted earnings per share $1.70 to $1.85.
sees 2021 capital expenditures $70 million to $80 million.


Prompt:
Human: I'll share a broad commentary on our consolidated performance for the quarter.
Please note that our comments will be on an as-adjusted basis and all comparisons are to the third quarter of fiscal 2021 unless otherwise indicated.
For the third quarter of our fiscal 2022, RPM generated record consolidated EBIT and sales despite a difficult comparison to the prior year.
These results were driven by our associates worldwide who persevered despite an extremely challenging operating environment, including ongoing raw material and labor shortages, omicron-related disruptions that were particularly acute in the third quarter as well as material wage, and freight cost inflation.
Our consolidated adjusted EBIT growth was driven by three of our four segments: construction products, performance coatings, and specialty products, which leveraged selling price adjustments and operational improvements to the bottom line.
Our consumer group is the outlier.
Mike will discuss this in more detail when he presents our segment results.
With our primary raw material costs up more than 40% on average versus a year ago, our consumer group will need to catch up with significant selling price increases, which will be instituted at the end of this month.
We have been fast to respond to supply chain challenges by quickly scaling up in-house resin production at a manufacturing facility we acquired in September.
Additionally, due to our ongoing investments in the fastest growing areas of our business, our high-performance building, construction, and coating systems have generated accelerated growth.
Construction and industrial maintenance activity is robust and energy markets have recovered while consumer takeaway remains strong.
Due to three years of extraordinary work by our associates to implement our MAP to Growth operating improvement program, we have made structural improvements to RPM while maintaining our entrepreneurial culture, which is the core strength of RPM.
As a result, our performance coatings group and construction products group are operating not only at record sales and EBIT but at record margins in the third quarter.
Our specialty products group is trending toward this same performance with record results in sales and EBIT and improving margin performance.
And we are making good progress in our consumer business.
In short, we are playing offense almost everywhere, investing in accelerating organic growth, significant increases in capital expansion, particularly in the areas of Nudura ICF, roof restoration coatings, and a number of our consumer product areas, all of which are building positive momentum as we go into the fourth quarter and we roll into fiscal 2023.
During the third quarter, we generated consolidated net sales of $1.43 billion, an increase of 13%, compared to the $1.27 billion reported during the same quarter of fiscal 2021.
Organic sales growth was 13.4% or $170.1 million.
Acquisitions contributed 1.4% to sales or $17.8 million, while foreign exchange was a headwind that decreased sales by 1.8% or $23.4 million.
Adjusted diluted earnings per share were $0.38, which was unchanged compared to the year-ago quarter.
Our consolidated adjusted EBIT was up 0.8% to a record $80.6 million, compared to the $79.9 million recorded in the fiscal 2021 third quarter.
On a double-stack basis, comparing fiscal Q3 '22 to pre-pandemic Q3 of FY '20, sales, EBIT, adjusted EBIT, net income, diluted EPS, and adjusted diluted earnings per share all achieved double- or triple-digit growth.
Similar to the first and second quarters of fiscal '22, our third quarter performance reflects the benefits of our balanced business portfolio where softness in one segment is generally offset by strength in the others.
During the third quarter of fiscal 2022, three of our four operating segments, construction products group, performance coatings group, and specialty products group generated strong double-digit sales growth.
Combined sales in these three segments increased 19% while sales in the Consumer segment were up modestly.
Again, after removing Consumer, the remainder of RPM produced exceptional adjusted EBIT growth of 97%.
Our consumer group continued to be disproportionately impacted by inflation as well as by omicron-related labor and supply chain disruption, particularly during December and January.
This instability in supply caused inefficiencies and continued to negatively impact conversion costs, resulting in a decline in adjusted EBIT at our consumer group for the fourth consecutive quarter.
Later in the call, we'll discuss the actions we're taking to address these challenges affecting this segment.
Our construction products group generated third quarter record net sales of $482 million, up 21.7% compared to the fiscal 2021 third quarter.
Organic sales growth was 23.2% and acquisitions contributed 2.2%.
Foreign currency translation headwinds reduced sales by 3.7%.
CPG record revenue growth was largely due to the segment's ongoing success in promoting its differentiated restoration solutions, which offer particular advantages versus new construction, given the current raw material and labor shortages.
These same challenges have continued to help speed the adoption of the segment's innovative building envelope products.
CPG's fastest-growing businesses are those providing roofing systems, insulated concrete forms, commercial sealants as well as concrete admixtures, and repair products.
The segment's international operations generated strong top-line growth in local currencies, which was muted by the strengthening U.S. dollar.
CPG fiscal 2022 third quarter adjusted EBIT increased 89.7% to a record $35.1 million.
Despite a difficult prior-year comparison, CPG was able to dramatically increase adjusted EBIT and EBIT margin to third quarter records due to improved product mix, volume growth, and operational improvements.
All of these factors, combined with selling price increases, helped to offset higher raw material inflation.
Our performance coatings group's fiscal 2022 third quarter net sales were a record $270.9 million, an increase of 19.6% over the year-ago period.
Organic sales increased 17.8% and acquisitions contributed 3.4%, which were partially offset by foreign currency translation headwind of 1.6%.
PCG continued its momentum with all of its North American businesses generating double-digit organic sales growth.
PCG's businesses serving emerging markets generated explosive growth and its European companies continued their steady rebound.
Driving its strong top line were increased industrial maintenance spending, recovery in energy markets, and price increases.
PCG's best performing businesses were those providing polymer flooring systems, corrosion control coatings, and raised flooring systems.
Adjusted EBIT increased 89.9% to a record $26.8 million during the third quarter of fiscal 2022.
Adjusted EBIT increased as a result of volume growth, operational improvements, and a more favorable product mix.
Additionally, adjusted EBIT margin was a third quarter record.
Specialty products group reported record net sales of $189.4 million during the third quarter of fiscal 2022, an increase of 11.9% compared to the fiscal 2021 third quarter.
Organic sales increased 11.9% and acquisitions added 0.8%, which were offset by unfavorable foreign currency translation of 0.8%.
SPG generated record sales as a result of strong performance at nearly all of its businesses, with the highest growth coming from those serving OEM and food additive markets.
In addition, this segment's sales of disaster restoration equipment rebounded after securing the supply of semiconductor chips and reconfiguring its products to accommodate them.
This is an example of how our businesses quickly adjust to challenges, demonstrating a key advantage to RPM's entrepreneurial culture.
This business did face a tough comparison to the prior-year period when demand for its restoration equipment was inflated because of Winter Storm Uri.
Adjusted EBIT was a record $26.6 million in fiscal 2022 third quarter, an increase of 5.4%, compared to adjusted EBIT of $25.3 million in the last year's quarter.
This record-adjusted EBIT was largely due to operational improvements.
Our consumer group achieved record net sales of $491.6 million during the third quarter of fiscal 2022, an increase of 2.9% compared to the third quarter of fiscal 2021.
Organic sales increased 3.6%, which was partially offset by unfavorable foreign currency translation of 0.7%.
As we anticipated, the segment grew revenue in part due to its ability to mitigate the severe alkyd resin shortages it had experienced by leveraging the new Texas manufacturing facility we acquired in September.
During the third quarter, sales and productivity were challenged by unreliable shipping and supply, resulting from labor shortages caused by the omicron variant, particularly in December and January.
Speaking of challenges, the consumer group also faced a difficult comparison to the prior-year period when sales increased 19.8% and adjusted EBIT increased 48.6% due to elevated demand for its home improvement products during the pandemic's first phase.
Fiscal 2022 third quarter adjusted EBIT was $17.2 million, a decrease of 63.9%, compared to adjusted EBIT of $47.8 million reported during the prior-year period.
Due to the nature of its products and the markets it serves, inflation has been more impactful on the consumer group than RPM's other segments.
And raw material inflation, in particular, has had the most significant impact on EBIT.
Partially offsetting these factors were price increases and operational improvements as the consumer group is currently investing in capacity and process improvements to meet customer demand as well as build resilience in its supply chain.
The consumer group is continuing to implement price increases to catch up with the inflation this segment has experienced over the last four quarters.
Lastly, I'd like to note that we have significant liquidity, which enables us to fund internal growth initiatives, make acquisitions, reward our investors with cash dividend payments, and repurchase our shares.
Helping to keep our liquidity strong is a $300 million bond offering we completed in January.
Also during the third quarter, we repurchased $15 million of our common stock.
For the fiscal 2022 fourth quarter, our operations and those of our suppliers are expected to be impacted by ongoing supply chain challenges and raw material shortages, which will exert pressure on revenues and productivity.
The strengthening U.S. dollar will also unfavorably impact the translation of our results in international markets.
In addition, the war in Ukraine is creating some supply and inflationary pressures, which Frank will address in a little bit.
While it's too soon to tell, rising interest rates may slow business and consumer spending in the coming months.
Despite these challenges, we expect to generate fiscal 2022 fourth quarter consolidated sales growth in the low teens versus a difficult comparison to last year's fourth quarter sales, which grew 19.6%.
On a segment basis, we anticipate sales growth in the low teens in all four of our operating groups as a result of strategic investments we are making to capitalize on market opportunities and industry trends.
We anticipate that consolidated adjusted EBIT for the fourth quarter of fiscal 2022 will increase in the low teens versus the same period last year when adjusted EBIT was up 10.6%.
We expect that earnings will continue to be affected by raw material, freight, and wage inflation as well as by the impact on sales volumes from operational disruptions caused by raw material shortages.
Our consumer group will be disproportionately impacted by these issues.
Its EBIT margins have eroded all three quarters of this fiscal year due to inflationary pressures, which have a greater impact on the consumer group than RPM's other segments.
We continue to work to neutralize these factors by improving operational efficiencies, employing additional price increases to catch up with inflation, and adding manufacturing capacity to improve resiliency.
This concludes our prepared comments.
 Assistant:

Chosen response:
q3 sales rose 13 percent to $1.43 billion.
q3 adjusted earnings per share $0.38.
fy22 q4, co's, suppliers operations are expected to be impacted by ongoing supply chain challenges and raw material shortages.
rpm international- expects to generate fy22 q4 consolidated sales growth in low teens versus a difficult comparison to last year's q4 sales.