Prompt:
Human: We encourage you to review all of these materials.
Today, you will hear from our president and chief executive officer, Tom McInerney; followed by Dan Sheehan, our chief financial officer and chief investment officer.
Following our prepared comments, we will open up the call for a question-and-answer period.
Our actual results may differ materially from such statements.
Also, references to statuary results are estimates due to the timing of the filing of the statutory statements.
We reported a very strong operating performance in the second quarter, continuing the reasonable momentum across our businesses while making progress on our strategic plan to create long-term value.
mortgage insurance business, now known as Enact, as well as in our long-term care insurance business.
Enact reported very strong results with adjusted operating income of 135 million compared with 126 million in the prior quarter and an adjusted operating loss of 3 million in the prior-year period.
Relative to the prior quarter, Enact reported higher new insurance written, lower earned premiums and a 32% decrease in new delinquencies.
Results reflected a loss ratio of 12%, which compares favorably to the prior quarter due to lower losses from new delinquencies and higher reserve strengthening in the prior quarter.
U.S. life insurance reported adjusted operating income of 71 million for the quarter compared with 62 million in the prior quarter and an adjusted operating loss of 5 million in the prior year.
Results were primarily driven by LTC insurance, which reported adjusted operating income of 98 million, reflecting higher earnings from in-force rate actions, including benefit reductions related to a legal settlement and higher net investment income versus both the prior quarter and the prior year.
We successfully managed capital levels during the second quarter, ending the quarter with a very strong PMIERs ratio of 165% in Enact or nearly 2 billion above published requirements and risk-based capital in our principal life insurance company, GLIC, of approximately 270%.
Genworth also ended the second quarter with a very strong cash position of 842 million in cash and liquid assets at the holding company level.
Our strong performance over the past several quarters provide a solid foundation for us to write the next Genworth's chapter.
As our long-term shareholders know, Genworth's financial stability and flexibility have significantly improved over the past several years.
We are now on a more stable trajectory as a result of continued strong operating performance particularly at Enact.
Strategic actions we've taken to reduce debt and excellent progress to further reduce risk associated with our legacy LTC insurance blocks.
We have adequate liquidity to meet our financial obligations, valuable expertise and capabilities and a focused strategy to drive long-term shareholder value creation.
Moving forward, our primary strategic focus in the near term is to continue to reduce holding company debt.
In July, we fully retired our remaining 2021 maturities, reducing parent holding company debt by an additional 513 million to approximately 2 billion, including our previously disclosed liability to AXA of approximately 345 million.
Our goal is to reduce holding company debt to a sustainable level of approximately 1 billion, creating more financial flexibility for Genworth to return capital to shareholders and make prudent investments in future growth.
Since 2013, we have reduced wholly company debt by a total of approximately 2.2 billion.
Related to the obligation to AXA, I mentioned last quarter that AXA has initiated a lawsuit in the U.K. against an insurer seeking to recover payouts it made to policyholders for missed payment protection insurance, a significant portion of which Genworth agreed to reimburse as part of the 2020 settlement.
AXA's lawsuit against an insurer is an ongoing matter.
And as with typical litigation, we expect the process to pull out over the next 18 to 24 months.
As I've said before, Genworth is entitled to certain recoveries AXA may receive from Sendentera.
While any recoveries will be very positive for Genworth, our plans are not reliant upon those potential reimbursements.
Beyond that, we can't comment further on this litigation.
To further accelerate our efforts to reduce debt, and improve it, Enact and Genworth credit ratings, we remain focused on partially monetizing our ownership of Enact through a minority IPO of up to 19.9%.
As we have considered various options for Enact over the past several years, our objective has been to protect and ultimately unlock its value, enabling us to maximize value for Genworth's shareholders in any potential transaction.
The board and I continue to believe that a future IPO of Enact is the best option to do just that.
We maintain our positive long-term outlook for the MI sector based on the strong positive trends in the U.S. housing market and expected tailwinds as the economy continues to recover from COVID-19.
We continue to monitor the market and will remain prepared to recommence the IPO process, subject to various conditions and approvals when market conditions improve.
However, as a reminder, we are currently in registration with the SEC.
And as a result of applicable publicity restrictions, I won't provide any additional details about or discuss the timing of the potential offering.
We will be very limited in our comments about Enact other than reviewing its quarterly results.
We expect our majority ownership stake in Enact to generate a significant dividend stream in the future as we work to move our legacy LTC books to breakeven and build a profitable new LTC company.
We have received approval from the North Carolina Department of Insurance to dividend 200 million of capital from GMICO to Enact Holdings in the fourth quarter of 2021.
Subject to market conditions, business performance, other regulatory approvals and compliance with applicable GSE requirements.
This increases our confidence in Enact, issuing a 200 million dividend in the fourth quarter.
Following the planned IPO, we intend to maintain our ownership of Enact for the foreseeable future, while preserving the option to distribute the remainder to Genworth's shareholders and a tax-free spin-off with that as an attractive option in the future.
Next, we are working toward stabilizing our legacy LTC portfolio through our multiyear rate action plan or MYRAP, which will enable us to focus on our long-term LTC growth strategy.
we have made exceptional progress on this effort with over 15.5 billion in net present value from LTC premium increases and benefit reductions achieved since 2012, including an incremental 49 million in rate actions approved during the second quarter.
These rate actions provided more options for policyholders, including reduced benefit and stable premium options, which continue to be selected at a higher frequency by our policies.
We are working to develop even more benefit options for our policyholders to choose from when faced with the rate actions.
As of June 30, 2021, approximately 59% of Genworth's LTC policyholders have accepted all premium increases in full, 27% have taken a reduced benefit option and 14% have opted for a non-forfeiture option.
Reducing our legacy LTC liabilities through the MYRAP and other rate action initiatives is critical to achieving breakeven on an economic basis with the legacy LTC business over time.
Our current long-term cumulative improvement target on a net present value basis is roughly 22.5 billion in rate actions, which is the amount needed to address the current expected shortfall in our legacy LTC books of business.
Having achieved 15.5 billion against the current target of 22.5 billion means we are approximately two-thirds of the way toward achieving breakeven.
I would note that we will complete our annual LTC assumptions review later this year, and this target could change over time as our experience evolves.
Given that state regulators have and will continue to spread LTC premium increases over several years, returning our legacy LTC portfolio to breakeven on an economic basis is likely five to seven years or more away.
We are proud of our steady progress toward this goal and the MYRAP remains an important strategic initiative for Genworth since achieving breakeven will expand optionality and increase the potential long-term value of our overall company to shareholders.
With these key initiatives underway, we have begun to focus our growth strategy on the future of LTC insurance and we are advancing our plans through a new insurance company to create a leading profitable LTC insurance business in the U.S As I said before, there is a great need for long-term care solutions in the U.S. with 54 million Americans, aged 65 and older, at the end of 2019, and with that number expected to increase to 95 million by 2060, while at the same time, care costs are rising rapidly.
COVID-19 has heightened the focus on long-term care among legislators and the general public.
We believe it also has accelerated the long-term trend of seniors increasingly seeking to receive care in our homes as was evident throughout the pandemic, if not well before, enabling more must be done to protect and empower seniors, enabling them to remain in the setting of their choice and receive the services and support they need to maintain their dignity as they age.
Unfortunately, many older adults, especially those in the middle class, have limited options to pay for long-term care and the existing funding gap is simply is too large for either the public or private sectors to fill on their own.
That's why we believe partnership with the public and private sectors is critical.
We believe the government and private sectors can collaborate successfully to address the long-term care dilemma, and we are encouraged to see an acknowledgment of this necessary alliance and recently introduced legislation including the well-being insurance for seniors to be at home or WISH Act proposed by U.S. rep Tom Suozzi.
We are especially pleased to see that public education is a vital component of his legislation.
Focusing greater awareness of the likelihood of requiring long-term care during one's later years, the programs that make cover care needs and the options available to enhance care, we encourage families to have the necessary conversations with our loved ones and take appropriate steps to ensure that resources are available to fund their long-term care needs.
We expect these recent developments, we will reignite conversations about reforming the long-term tariff system in the U.S. And we are eager to participate and lend our unique expertise in this effort.
There are only a few players in the LTC insurance market today due to severe financial challenges arising from our legacy LTC business.
We know the key to success in the future is to learn from the past, to design new insurance products with lower and more predictable risks.
Through our extensive experience with LTC, we've also identified several opportunities adjacent to insurance, including products and services that help people navigate a complex and fragmented support system to find the best care.
We believe a successful reinvigoration of the U.S. LTC market will address both financing and services and ultimately will hopefully reduce the likelihood of people needing care and/or lessening the care that they need.
and are working hard on developing a new and improved go-to-market strategy.
As we've mentioned previously, we also see compelling long-term opportunities in China, but have decided to focus our efforts on launching a U.S. business in the near term.
Our plan is to launch this new business sometime in 2022 in partnership with highly rated third parties.
While Genworth's most significant contribution to any potential partnership would be our intellectual property and expertise, we may also invest a prudent level of capital.
We look forward to updating shareholders with more details in due course.
To sum up, we are laser focused on five key priorities.
One, reduce our holding company debt to approximately 1 billion.
Two, maximizing the value of an Enact.
Three, returning capital to shareholders.
Four, achieving economic breakeven and stabilizing the legacy LTC portfolio.
And finally, preparing to launch a new LTC joint venture in the U.S I believe the current market value of our shares does not reflect Genworth intrinsic value and that the key to driving significant shareholder value will be our execution on these five priorities in the near term.
After reaching our 1 billion debt target and realizing the resumption of dividends from Enact to the parent company, we expect to generate reliable and sustainable future cash flows that will enable Genworth to consider returning cash to shareholders through a regular dividend and through share repurchases.
We know this is an especially important step for our shareholders who've been extremely patient throughout the last several years of uncertainty.
We will also be in a strong position to continue to prudently invest and new LTC business opportunities where we are uniquely qualified and positioned to win.
We are extremely proud of the work we've done to put the company on this path.
Genworth has an engaged board and leadership team, a skilled and dedicated workforce and the unparalleled experience and expertise to create long-term value.
I'm pleased with the continued progress made during the quarter with strong earnings and capital ratios in our Enact U.S. mortgage insurance segment, strong results from our long-term care insurance business and increased liquidity at the holding company.
We ended the quarter with more than 842 million in holding company cash.
Subsequent to quarter end, we retired our remaining September 2021 debt of 513 million, which reduced parent company debt to approximately 2 billion, including the AXA liability.
We reported net income available to Genworth shareholders for the quarter of 240 million and adjusted operating income of 194 million.
Included in net income for the quarter was 46 million in non-operating items, mostly consisting of mark-to-market increases on limited partnerships in our investment portfolio.
Turning to the Enact segment.
The U.S. mortgage and housing market continues to demonstrate positive momentum characterized by a large origination market, increasing home prices and the continuation of decreasing new delinquencies from their pandemic-driven peak.
Despite the challenges of low housing inventory and rising home prices, affordability remains favorable, supported by prevailing low interest rates.
During the quarter, we estimate the originations market accelerated its transition to purchase originations, which is a positive trend for the private mortgage insurance industry as we experienced approximately four times higher penetration in purchase originations versus refinances.
For the second quarter, Enact reported adjusted operating income of 135 million and a loss ratio of 12% compared to adjusted operating income of 126 million and a loss ratio of 22% in the prior quarter.
The improvement in results was primarily driven by lower new delinquencies compared to the prior quarter.
In addition, insurance in force grew approximately 10% versus the prior year, primarily driven by over 100 billion in new insurance written over the last four quarters.
New insurance written in Enact was 26.7 billion in the quarter, up 7% versus the prior quarter, driven primarily by a larger purchase origination market and down 6% versus the prior year, primarily driven by lower estimated market share.
A healthy and prudent MI market has enabled us to continue to write new business at attractive low to mid-teen returns.
We see the market and underwriting conditions, including the pricing environment as being well within our risk-adjusted return appetite.
Ultimately, we expect our second quarter new insurance written with its strong credit profile and attractive pricing to positively contribute to our future profitability and return on equity going forward.
Our persistency increased seven points compared to the previous quarter and four points compared to second-quarter 2020 driven by a modest increase in interest rates and the decline in the percentage of in-force policies with mortgage rates above prevailing rates.
However, the overall low interest rate environment and resulting refinance activity continued to drive low persistency across our insurance portfolio.
Premiums were lower versus the prior quarter and flat to the prior year, impacted by lower single premium cancellations, higher ceded premiums and lapse of older, higher-priced policies, offset by insurance in force growth.
While single premium cancellations remain elevated, we did see a 6 million decline to 20 million this quarter versus 26 million last quarter and 35 million last year.
Ceded premiums were up 2 million this quarter to 18 million versus 16 million last quarter and reflect the expansion of our credit risk transfer program.
Since June, we've been providing investors a monthly reported delinquency activity and have now seen four consecutive quarters of improving delinquency trends with sequentially lower new delinquencies and cures in excess of these delinquencies.
For the quarter, cures of approximately 14,500 were up 7% sequentially and continue to outpace new delinquencies.
Our new delinquency rate or new delinquencies over policies in force, was 0.7%, which reflects a return to pre-pandemic levels.
We're encouraged by this milestone, which reflects ongoing recovery from the pandemic.
New delinquencies of approximately 7,000 during the quarter were down 30% sequentially with 45% reported in new forbearance plants.
These delinquencies resulted in 30 million in loss expense in the quarter.
Additionally, we released 4 million of IBNR reserves related to June delinquencies that have not yet been reported by services to us and which we expect will be lower than had been assumed in our prior IBNR reserves.
The release of IBNR reserves was offset by other losses.
Consistent with the prior quarter, our expected ultimate claim rate on new delinquencies was approximately 8%.
We ended the quarter with approximately 33,500 total delinquencies or a delinquency rate of 3.6%.
In total, approximately 64% of our total delinquencies are in forbearance plans.
Importantly, 94% of our delinquencies have mark-to-market loan to values, reflecting at least 10% borrower equity and 60% of mark-to-market loan to values, reflecting at least 20% borrower equity using March 2021 home prices.
We believe this level of embedded home price appreciation across our delinquencies could have a positive impact on future claim rates and severity of claims, as forbearance plans expire, and foreclosure moratorium ends.
We reported adjusted operating income of 71 million in the quarter, which compared to adjusted operating income of 62 million in the prior quarter and an adjusted operating loss of 5 million in the prior year.
Overall results in this segment were driven by strong variable investment income and benefit reductions in long-term care.
Mortality was lower in the quarter as impacts related to the COVID-19 pandemic have lessened.
In long-term care, adjusted operating income was 98 million in the second quarter compared to 95 million in the prior quarter and 48 million in the prior year.
I do want to remind investors, while we have a positive lifetime GAAP margin on our long-term care block, the emergence of profits over time is uneven.
Under GAAP, we deferred a portion of our LTC profitability by accumulating the profits followed by losses reserve to help cover projected losses in the future.
As of the second quarter, the pre-tax balance of this reserve was 957 million, up from 625 million as of year-end 2020.
This had an earnings impact of 125 million after tax during the quarter.
For the quarter, variable investment income in LTC was up 35 million after tax versus the prior quarter and 63 million after tax versus the prior year, reflecting higher limited partnership income, gains on treasury inflation protected securities and bond calls and prepayments.
As we look forward, we would expect this investment performance to moderate.
To remind investors, we had previously established a reserve of 158 million for mortality experience during the pandemic to reflect our view that the remaining claim population is less likely to terminate than the pre-pandemic average due to the pandemic impacting our most vulnerable claimants.
However, with the significant decline in mortality in the second quarter, we did not establish additional reserves for this mortality adjustment or reduced a portion of the cumulative balance, leaving a remaining reserve of 143 million.
As the pandemic continues to develop, mortality experience may fluctuate in the near term and we would increase or decrease the COVID-19 mortality adjustment accordingly.
Although new active claims trended up gradually in the first half of 2021, incidence remains lower than pre-pandemic levels, and drove continued favorable IBNR development during the quarter.
Pending claim submissions, which are a leading indicator of future new claim incidents increased during the quarter and based on this experience, we expect incidents to continue to trend higher in the quarters ahead.
Earnings from in-force rate actions increased versus the prior year and prior quarter, driven primarily by benefit reductions, including the impacts of benefit reduction elections related to a legal settlement that favorably impacted this quarter by 71 million or 22 million after adjusting for profits followed by losses.
At this time, it's difficult to assess the overall impact the legal settlement will have going forward as full implementation of the settlement will take another two to three quarters.
This settlement applies to a subset of our choice on policyholders or approximately 20% of more than 1 million long-term care insurance policyholders and provides additional clarity into future rate actions with expanded benefit reduction at nonforfeiture options.
We also have an agreement in principle for a nationwide settlement on a basis similar to the Choice 1 settlement, subject to full documentation and court approval, which applies to our PCS 1 and PCS 2 policy forms that comprise approximately 15% of our long-term care insurance policyholders.
Shifting to in-force rate action approvals for LTC during the quarter, we received approvals impacting approximately 81 million of premiums with a weighted average approval rate of 60%.
For the first half of 2021, we received approvals impacting 477 million in premiums with a weighted average approval rate of 43% compared to 257 million in premiums and a weighted average approval rate of 30% for the first half of 2020.
While quarterly approvals are uneven, we expect approvals in the second half of 2021 to be strong based on pending filings with a few large states.
We do expect to complete our claims assumption review in the fourth quarter.
We're monitoring emerging experience, particularly in mortality and benefit utilization.
While this work is ongoing, preliminary indications are that our claim reserve assumptions are holding up in the aggregate.
In the fourth quarter, we also plan to complete our review of our active life reserve assumptions, including mortality, benefit utilization, interest rates and in-force rate actions, among other assumptions.
Any assumption changes that result in pressure to our active life margins will be assessed for inclusion in our multiyear rate action plan.
for 2021 assumption updates, we're generally not including data from 2020 and setting any long-term assumptions as we do not yet have sufficient information around longer-term effects of the pandemic.
Turning to life insurance.
Overall mortality for the quarter continued to be elevated versus historical experience, although improved versus the prior quarter.
The second quarter included an estimate of approximately 9 million after tax in COVID-19 claims based upon death certificates received to date.
Despite improvement versus the prior quarter from the decrease in COVID-19 claims, mortality remained higher than the prior year.
The impact of term life insurance products from shop lactis has moderated as a result of the reinsurance agreements in place related to the 20-year term block issued in 2001.
Total term life insurance stack amortization, reduced earnings by 12 million after tax versus 13 million after tax in the prior quarter and 27 million in the prior year.
We will likely see additional shock lapse amortization next year with a 20-year block issued in 2002, which is not reinsured, although the impacts are anticipated to be smaller than 2019 and 2020, given the smaller size of the block.
In our universal life products, we recorded a 13 million after-tax charge for DAC recoverability and down from 17 million in the prior quarter.
The charges in the first two quarters of this year reflected the unfavorable mortality experience and continued block runoff.
Similar to LTC, we'll also complete our annual review of life insurance assumptions, including mortality, persistency and interest rates in the fourth quarter.
As we complete our review, we're closely monitoring our elevated mortality experience, including older age mortality as well as mortality improvement and potential changes to our assumptions could negatively impact our earnings in the fourth quarter.
In fixed annuities, adjusted operating earnings of 13 million for the quarter was lower compared to the prior quarter and prior year, primarily from lower mortality and single premium immediate annuities and unfavorable impact from the decline in interest rates during the quarter.
In the runoff segment, our adjusted operating income was 15 million for the second quarter versus 12 million in the prior quarter and 24 million last year.
Equity market performance was more favorable versus the prior quarter and less favorable versus the prior year.
Rounding out the results, corporate and others adjusted operating loss was 27 million and was improved from last quarter in the prior year.
primarily driven by lower interest expense.
Our deleveraging efforts this year and moving forward are projected to decrease the losses in this segment in the quarters ahead.
Turning to capital levels.
In the Enact segment, we finished the quarter with an estimated PMIERs sufficiency ratio of 165% or approximately 1.9 billion above published requirements.
The improvement in our PMIERs sufficiency versus the prior quarter was driven by strong business cash flows, lower required assets related to declining delinquent inventory, continued capital credit from our forward excess of loss reinsurance transaction and the execution of an insurance-linked note on a portion of our 2020 book, which provided approximately $300 million of PMIERs credit origination.
As Tom mentioned, subsequent to the second quarter, GMICO, our flagship MI entity, received approval from North Carolina Department of Insurance, our domestic regulator, to dividend 200 million in the fourth quarter.
While subject to market conditions, business performance and other regulatory approvals, including compliance with the applicable GSE requirements, our confidence has increased in Enact, issuing a 200 million dividend in the fourth quarter.
We expect capital in Genworth life insurance company, or GLIC, as a percentage of company action level RBC to be approximately 270%, up from 254% at the end of the first quarter.
U.S. life statutory earnings in the second quarter benefited from LTC earnings from the impact of in-force rate actions and claim experience.
Statutory earnings for LTC are generally higher than GAAP earnings because the concept of profits followed by losses does not exist for statutory accounting.
Statutory earnings are more aligned to taxable earnings, which has contributed cash tax payments to the holding company over the last few quarters and which we expect to continue.
Turning to the holding company.
We're very pleased with the improvement in our liquidity and financial flexibility as we've retired more than 1.2 billion of debt through July while maintaining prudent cash buffers for forward debt service obligations.
As I mentioned earlier, we ended the quarter in a very strong cash position with 842 million in cash and liquid assets were 655 million above our targeted cash buffer.
This excludes approximately 284 million in cash held at Enact's holding company.
As we look forward, we believe that our liquidity and financial flexibility profile should improve even further.
With cash on hand, expected intercompany tax payments, the planned minority IPO of Enact and resumption of their dividends, our financial flexibility should improve meaningfully.
Once our parent debt level reaches approximately 1 billion, we'll be in a better position to return capital to shareholders and make prudent investments in future growth.
In closing, we've taken numerous steps to improve the liquidity and financial flexibility of our holding company and the position of our businesses.
We're pleased with our financial progress and remain focused on providing value to all key stakeholders.
 Assistant:

Chosen response: planned ipo of enact remains a key strategic objective for genworth.


Prompt:
Human: Certain risk factors inherent in our business are set forth in filings with the SEC, including our most recent 10-K and subsequent filings.
We caution you not to place undue reliance on these statements.
Some of the comments made refer to non-GAAP financial measures, such as adjusted net revenue, adjusted operating margin and adjusted earnings per share, which we believe are more reflective of our ongoing performance.
Joining me on the call are Jeff Sloan, CEO; Cameron Bready, President and COO; and Paul Todd, Senior Executive Vice President and CFO.
We delivered record third quarter results, despite the incremental challenges that emerged during the period from COVID-19.
Highlighting the resiliency of our business model and our ongoing track record of execution across market cycles.
We also surpassed $2 billion of quarterly adjusted net revenue for the first time in our history with record margins and produced all-time high quarterly adjusted earnings per share and adjusted free cash flow.
As we detailed at our investor conference just a short time ago on September 8th.
The trend toward accelerated digitization coming out of the pandemic has benefited our business by reinforcing that mode of competition, and this quarter provided further proof points of the wisdom of our approach to drive differentiated growth across the four pillars of our strategy.
First, we extended long-standing relationships with both CITI and CIBC, as a reflection of our promise as a top quartile software-as-a-service or SaaS technology company with unmatched worldwide payments expertise.
Our durable partnerships with some of the most sophisticated and complex institutions globally speak to our competitiveness, well into the remainder of this decade.
Starting with CITI, we are delighted to have furthered our relationship with one of our largest commercial card customers for another eight years.
This agreement highlights a key element of what is already today a successful B2B business at scale.
More on this new pillars to our strategy in a moment.
We're also pleased to have renewed our issuer relationship with CIBC a top 10 customer in North America that spans both its consumer credit and debit portfolios for an extended term.
As we discussed in September, we also continue to build our pipelines with AWS to include additional fintechs, neobanks and embedded finance players spanning multiple geographies.
We now have 25 active prospects in our issuer pipeline with AWS, up from 20 last quarter and four at the end of 2020.
We also currently have 10 letters of intent with institutions worldwide, six of which are competitive takeaways; two of our recent LOI's have gone to contract.
We're also excited to announce that together with AWS, we signed an agreement with London based 10x to integrate its cloud native, core banking platform with TSYS is payments as service capabilities.
Allowing us to collaborate on modern core banking and issuing solutions for neobank and traditional financial institution customers.
As we announced at our Investor Conference, we now have a terrific partner in Virgin Money for our first use case combining issuing and acquiring capabilities to offer transaction stream optimization solutions.
It's worth noting that Virgin Money is also a significant competitive takeaway for us.
Simply put, we're winning in our Issuer Solutions business, because we are selling more market-leading technologies to more distinctive and defensible distribution channels in more markets than we ever have previously.
And our vertical markets businesses where we lead with SaaS at top of the funnel, we were delighted to announce our new partnership with Mercedes-Benz Stadium in September.
As we highlighted, we believe that we were successful, because of our ability to seamlessly and uniquely combine software, hardware and payments across in-person mobile and online channels.
We expect to facilitate a best-in-class fan experience through market leading commerce enablement solutions.
We're now in pilot with Mercedes-Benz Stadium and we expect to be fully live early in 2022.
We're gratified that after combating the payments landscape an extensive RFP, including with a full spectrum of new markets entrance.
This sophisticated institution terminated their existing relationships and chose us for our software and payment technologies with a commitment well into the back half of this decade.
Further across our merchant technology enabled businesses, our POS software solutions generated revenue growth of nearly 70%, compared to 2019 in the third quarter.
And our central education business in Australia grew over 50% versus 2019, despite lockdowns in that market.
In addition to the key win at Mercedes-Benz Stadium, our GO [Phonetic] business delivered record bookings in the third quarter and also had notable successes with Subway, Whataburger, Bojangles, RBI and Wendy's.
Spanning software, hardware payments and data and analytics.
These results highlight the benefits we're seeing from the accelerated digitization in our markets.
Our e-commerce and omnichannel businesses drove growth in excess of 20% again this quarter.
This business is another example of pandemic induced accelerate digitization benefiting us with current growth rates one-third faster than pre-COVID-19 levels.
A few examples of durable success here this quarter: we broadened our relationship with Uber and Uber Eats into an additional market in Asia Pacific beyond Taiwan.
We expanded our long-standing relationship with the Swatch Group to now include e-commerce alongside the solutions we provide in-store today across North America and Asia Pacific.
And we went live with Google as a merchant in multiple markets in Asia Pacific exactly as we said we would.
We remain on track to launch Google run and grow my business this quarter.
And we're already working on the launch of the next phase to help our merchants grow faster by connecting additional Google services, including online ordering, retail inventory and reservation to our digital platform.
These solutions will over time drive more consumers to our merchants and dramatically expand our value proposition with one of the leading technology players worldwide.
We are also very pleased to announce today that we have extended and expanded the scope of our relationship with PayPal, one of the most sophisticated payments companies globally.
This multi-year partnership leverages our unparalleled e-commerce technology footprint across cross-border in North America, Europe and Asia Pacific.
And it will dramatically expand our target addressable markets over its term.
We've added new geographies additional verticals and support crypto currencies for the first time.
Together with CITI, Mercedes-Benz Stadium, Virgin Money and CIBC, what better testament to our current and future competitiveness.
As we said in September, we continue to benefit from ongoing innovation in our ecosystem, including Buy Now Pay Later or BNPL Technologies.
We expect to enable more than 1.5 billion BNPL transactions this year alone and we anticipate issuing more than 15 million virtual cards with more than $23 billion in volume.
It's a market we know well, because it's a market that we've been serving for decades globally.
As BNPL continues to grow, we believe we're well positioned given our presence worldwide and our unique offerings the benefit.
Examples of our exposure include through network initiatives, traditional issuers, private label or charge card and program management, virtual card issuance, non-traditional issuers, including fintech, start-ups and neobanks, unique collaborations with AWS and Google, large existing scale players looking to expand BNPL globally into new markets and with added functionality.
And of course the acceptance from our unmatched virtual and physical footprint with BNPL is just one of the many services at the point of sale in our commerce enablement ecosystem.
At the end of the day, the entity is cash and check and further digitization including BNPL is the mode of competition.
Our ability throughout the pandemic to sustainably expand our rates of growth relative to our markets has been indicative of our technology leadership.
This quarter was no exception with our global merchant acquiring businesses delivering 900 basis points of outperformance relative to the credit trends reported by the card networks last week.
Our consistent track record of share gains during the pandemic is something we highlighted at our Investor Conference.
I'm also delayed to report that we have successfully closed our acquisition of MineralTree in October.
After having announced our formal entry into the B2B market in September.
As we highlighted, then we have many of the elements of a B2B offering post our merger with TSYS in 2019.
And in addition at MineralTree's digitize payable solutions serves to enhance our B2B product suite and expands our opportunity set in one of the largest and most under penetrated markets in software and payments.
We intend to further scale our business rapidly.
In addition to MineralTree and the extension of our commercial partnership with CITI, we had several other notable B2B achievements in the third quarter.
These include a new relationship with WeatherTech in our Heartland business for B2B, as well as B2C acceptance.
Near 50% payroll solutions growth in the third quarter, compared to 2019.
And a 10-fold increase in the number of customer locations using our Tips solution from our business and consumer segment for disbursement, since the beginning of the pandemic.
We continue to have tremendous firepower to conduct strategic transactions with billions of available capacity.
Of course this is on top of the $2.5 billion we have already invested over the last year.
During the pandemic in acquisitions consistent with our strategic focus, including our emphasis on faster growth geographies.
And it's in addition to the nearly $2 billion, we've returned to shareholders over the last year.
To that end, we are pleased to have now closed our acquisition of Bankia's merchant acquiring business together with our partners at CaixaBank last month, deepening our presence in one of the most attractive markets in Europe.
And through our Erste joint venture, we also very recently closed the acquisition of Worldline's PayOne Austrian POS acquiring assets, enabling us to bring our distinctive distribution and market leading technologies at scale to get another attractive market.
And our pipeline remains full, despite the investments we have already made over the last 12-months.
The majority of which has been in software assets in furtherance of our long-standing technology enablement thesis.
Our financial performance in the third quarter of 2021 exceeded our expectations, despite incremental headwinds from COVID-19 and the delta variant during the period.
Specifically, we delivered record quarterly adjusted net revenue of just over $2 billion representing 15% growth, compared to the prior year and 10% growth, compared to 2019.
Adjusted operating margin for the third quarter was a record 42.8%, a 170 basis point improvement from the prior year and a 420 basis point improvement relative to 2019.
The net result was record quarterly adjusted earnings per share of $2.18, an increase of 28%, compared to the same period for both the prior year and 2019.
Taking a closer look at our performance by segment.
Merchant Solutions achieved adjusted net revenue of $1.36 billion for the third quarter, a 21% improvement from the prior year and a 13% improvement, compared to 2019.
We are also pleased that our acquiring business is globally generated 22% and 19% adjusted net revenue growth, compared to the third quarter of 2020 and 2019 respectively.
This was led by continued strength in the US, while we also benefited from improving trends in international markets, including Spain, Central Europe and Greater China.
Focusing on our technology enabled portfolio, we continue to see consistent growth in our Global Payments Integrated business as we deliver a vertically fluent suite of commerce enablement solutions across dozens of vertical markets.
As we highlighted at the Investor Conference, a number of our businesses, including our integrated business have grown right through COVID-19 and are now at levels that we would have otherwise expected them to achieve, absent the downturn.
Our worldwide e-commerce and omnichannel solutions delivered growth in excess of 20% year-on-year, once again this quarter as we continue to benefit from our unique ability to seamlessly blend that difficult and virtual worlds and create frictionless experiences for our customers on a global basis.
As far, our own software businesses in the US, we are pleased that the overall portfolio delivered strong sequential improvement as the recovery begins to take root in some of the more impacted vertical markets.
Given the positive booking trends we have seen throughout the pandemic, including this quarter we are confident that the business is most impacted by COVID-19 in this portfolio remain on a path to recovery.
We delivered an adjusted operating margin of 49.3% in the Merchant Solutions segment, an increase of 200 basis points from the same period in 2020, as we continue to benefit from the underlying strength of our business mix and the realization of cost synergies related to the merger.
Moving to Issuer Solutions, we are pleased to have delivered $458 million in adjusted net revenue, a 6% improvement from the third quarter of 2020.
This performance was driven by the continued recovery in transaction volumes, as well as growth in accounts on file, while non-volume based revenue increased mid single-digits during the period, including low double-digit growth in or out with services business again this quarter.
Issuer adjusted operating margins of 43.4% were up slightly from the prior year.
As you may recall Issuer Solutions achieved margin expansion of 500 basis points in the third quarter of 2020 over 2019, fueled by our focus on driving efficiencies in the business.
We are also pleased that our Issuer team signed five long-term contract extensions during the quarter, and our strong pipeline, including the growing list of opportunities we have in collaboration with AWS continues to bode well for our future performance.
Finally our Business and Consumer Solutions segment delivered adjusted net revenue of $208 million, representing growth of 2% on a reported basis for the third quarter.
Adjusting for the stimulus benefits and higher unemployment volumes last year, our adjusted net revenue growth was in line with our targeted growth range for the quarter.
Adjusted operating margin for Business and Consumer Solutions was consistent with the prior year at 25.6% after expanding more than 700 basis points during the third quarter of 2020, as a direct result of our efforts to streamline costs and drive greater operational efficiencies at Netspend.
Further, we are pleased with the early progress we are making on our strategic partnership we announced last quarter with AWS in this business.
While we also launched and began selling our earned wage access solution to existing B2B clients and into new vertical markets during the period.
The outstanding performance we delivered across our businesses this quarter serves as a further proof point that we continue to gain share and that our four-pillared strategy positions us well to capitalize on the accelerating digital trend coming out of the pandemic.
From a cash flow standpoint, we generated roughly $850 million during the third quarter and remain on track with our target to convert roughly 100% of adjusted earnings to adjusted free cash flow.
We invested approximately $132 million and capital expenditures during the quarter in line with our expectations.
We have now successfully closed our acquisitions of MineralTree, Bankia's Merchant Services business and Worldline's PAYONE Austrian assets consistent with our expectations.
We expect the contribution from these acquisitions to adjusted net revenue to be immaterial in the fourth quarter.
We are pleased to have also returned cash to our shareholders this quarter through the repurchase of approximately 4.2 million of our shares for approximately $741 million.
We ended the period with roughly $2.5 billion of liquidity after repurchase activity and funding of the Bankia Acquisition.
Our leverage position was roughly 2.6 times on a net debt basis, consistent with the prior quarter.
We remain encouraged by the trends we are seeing in the business and we are raising the lower end of our guidance for adjusted net revenue to now be in a range of $7.71 billion to $7.73 billion, reflecting growth of 14% to 15% over 2020.
We are adding $10 million to the bottom of the range despite anticipating an incremental headwind from foreign exchange rates, since our last report and absorbing the impact of the delta variant of COVID-19.
We also continue to expect adjusted operating margin expansion of up to 250 basis points, compared to 2020 levels, excluding the impact of our already announced and closed acquisitions.
As previously discussed, we expect those transactions to result in a headwind to our margin performance and we now expect adjusted operating margin expansion of around 200 basis points for the year.
At the Segment level, we continue to expect Merchant Solutions adjusted net revenue growth to be around 20% for 2021.
We also continue to expect our Issuer business to deliver growth in the low to mid single-digit range and for our business and consumer segment to be in the mid to high single-digit range for the full-year.
Moving to non-operating items, we still expect net interest expense to be slightly lower in 2021 relative to 2020, while we anticipate our adjusted tax rate will be relatively consistent with last year.
Putting it all together, we now expect adjusted earnings per share for the full-year to be in a range of $8.10 to $8.20, reflecting growth of 27% to 28% over 2020, which is up from $8.07 to $8.20 previously.
Our outlook presumes the macro environment remains stable worldwide over the balance of the year.
And now includes an incremental headwind from currency.
Finally, we are pleased that our unique strategy that capitalize on the acceleration of digitization impairments, our ongoing technology enabled mix shift, our exposure to expanding TAMs [Phonetic] including now B2B and our track record of disruptive M&A provided us with the confidence to raise our cycle guidance at our September 8th Investor Conference.
In particular, we continue to expect adjusted earnings-per-share growth in the 17% to 20% range over the next three to five years on a compounded basis.
Our strategy has been centered on digitization, since we started running the company a little over eight years ago.
By accelerating the underlying trends toward technology enablement, the pandemic has reaffirmed the wisdom of our approach, and we now target three quarters of our business from these channels over the next cycle as we said in September.
Our formal entry into the B2B market reinforces the existing legs of our stool, including software primacy, a leading e-commerce franchise and an unmatched presence in many of the most attractive markets worldwide.
These strategies are complementary and interrelated and provide us with substantial and incremental growth opportunities for years to come.
The record results for the third quarter that we reported today in our raised cycle guidance in September, our expressions of our confidence in our strategies and are the most recent examples and best evidence of their success.
We just delivered a record quarter and any number of basis in the best year in our history during the midst of a once in a century pandemic.
I think you can see why we view the glass as full.
We exit the pandemic better off than we entered it, judge for yourself.
Before begin our question-and-answer session.
I'd like to ask everyone to limit their questions to one with one follow-up to accommodate everyone in the queue.
Operator, we will now go to questions.
 Assistant:

Chosen response:
q3 adjusted earnings per share $2.18.
provides updated outlook for 2021.
sees fy adjusted earnings per share $8.10 to $8.20.
sees fy 2021 revenue $7.71 billion to $7.73 billion.


Prompt:
Human: We're pleased to be here today to provide an update on our progress after the second quarter of 2021.
Hopefully, everyone has had a chance to review the news release we issued earlier today.
These risks include those related to the impact of the COVID-19 pandemic and measures taken by governmental or regulatory authorities to combat the pandemic on our business and our operations as well as the business and operations of the consumer, our customers, suppliers, business partners and labor force.
These risks also include those detailed in our various filings with the SEC, which may be found on our website as well as in our news releases.
Given the short-term volatility of comparisons due to the impact of the COVID-19 pandemic, we have focused our comparisons to 2019.
Please note that unless otherwise stated, all comparisons are to 2019 results that have been rebased to reflect the move of our European innerwear business to discontinued operations as well as the exited C9 program at mass and the DKNY intimate apparel license.
With me on the call today are Steve Bratspies, our Chief Executive Officer; and Michael Dastugue, our Chief Financial Officer.
I can't express enough how grateful and proud I am of their dedication, their focus on safety and commitment to serving our consumers and customers under extremely challenging circumstances.
Our associates are our greatest strength, and I want to make sure they're recognized for all their hard work.
To that end, over the past month, I've finally been able to get out, see parts of the business and interact with some of our amazing associates.
I'm inspired by their commitment and talent.
There is a lot of excitement around our Full Potential plan and our associates are fully engaged.
I visited some of our retail stores and came away impressed by the knowledge of our associates and their energy around serving consumers.
And let me tell you, consumers are out shopping.
It was exciting to see high levels of traffic in our stores.
I also had the chance to tour our New York Design Center, spent time with that incredible team and see a wide range of innovative new products in our pipeline for both innerwear and activewear.
It's hard to believe it's been a year since my first day at HanesBrands.
Reflecting back, it's clear this is truly an amazing global company with a number of competitive advantages, iconic brands, distribution scale, owned manufacturing, a deep commitment to sustainability, a strong balance sheet and 61,000 passionate associates across more than 47 countries.
We've accomplished a lot in a relatively short period of time.
We refreshed the leadership team, which is setting a new pace and driving change.
We underwent a deep assessment of the business that not only highlighted competitive advantages I just mentioned, but also underscore the opportunities ahead of us and the changes we need to make.
We developed our Full Potential plan to unlock growth, which we shared with you in May, and we've taken action to simplify the portfolio, streamline decision-making and organize the business to optimize future growth.
We're still early in our journey.
However, I am encouraged by the progress we've made, and I'm excited about the opportunities ahead as we execute our Full Potential plan to generate higher, more consistent levels of revenue and profit growth.
Today, I'll focus my remarks on two key topics.
First, our strong second quarter performance and our increased outlook for the remainder of the year; and second, a brief update on our Full Potential plan.
Looking at the second quarter, we delivered strong results despite the increasingly challenged global environment and higher levels of inflation.
Revenue, operating profit, operating margin and earnings per share all exceeded the high end of our guidance range.
We delivered strong operating cash flow performance in the quarter, and we further strengthened our balance sheet.
With the volatility from the pandemic impacting short-term comparability, like many of you, we are anchoring our comparisons to 2019.
For the quarter, sales and operating profit increased 15% and 14%, respectively, compared to the second quarter of 2019.
Revenue momentum continued to build across both our innerwear and activewear businesses globally.
In U.S. innerwear, sales were 19% higher than second quarter 2019.
Over this time period, we gained 160 basis points of market share with gains in each product category across basics and intimates.
In addition to the strong underlying performance of our brands, the category experienced above-average growth due to certain transitory items such as retailer inventory restocking, government stimulus and pent-up consumer demand.
In U.S. activewear, sales increased 15%, driven by growth in Champion.
We were pleased to see continued growth in Champion brand with global sales up 21% from 2019 levels.
And In International, sales were 11% higher than 2019 with double-digit growth in Champion and high single-digit growth in innerwear in spite of COVID headwinds around the world.
With respect to our outlook, we raised our second half and full year expectations for sales, operating profit and earnings per share to reflect stronger-than-expected momentum in our business as well as benefits from the Child Tax Credit Payments in the U.S. What's most encouraging to me about our second half outlook, despite higher-than-expected inflation, we're well positioned to generate higher operating profit dollars while continuing to execute against our brand investment strategy.
Investing in our brands is critical to the long-term success and health of our business, and we remain committed to it.
Now turning to the second topic, our Full Potential plan.
They were only in the early stages, we made progress in the quarter, and we're encouraged at how the plan is unfolding.
Without going through every initiative that we spoke to in May, let me provide a couple of updates.
With respect to our Champion growth initiative, in May, we told you we were going to do three things to grow the brand, grow our core sweats business, expand our women's and kids product offering and expand into adjacent categories.
In the U.S., we're introducing several new products in our core fleece category.
We've added a number of new performance and lifestyle products in our women's line.
And in footwear, in the first half, we've more than doubled our points of distribution and the number of pairs sold as compared to 2019.
We believe the initial momentum in our footwear business underscores the consumers' affinity for the Champion brand, and their brand interest across product categories.
We feel good about the momentum we're seeing in Champion and there's a lot to be about around the globe.
We remain confident in our Full Potential plan to grow this brand to $3 billion.
Looking at our U.S. innerwear initiative, we're encouraged by the underlying momentum and market share gains we've seen in both basics and intimates.
Our latest Boxer brief innovation, total support pouch, continues to perform well, with a dedicated marketing effort that targets consumers differently than we have in the past.
Total Support Pouch is attracting a younger consumer to the Hanes franchise.
We've significantly outpaced our initial sales projections.
And as we highlighted in May, we increased our second half marketing investment behind Total Support Pouch to build on our momentum.
In terms of our direct-to-consumer initiative, agile teams are deployed and driving improved site experience, conversion and speed as we continue the journey to know our consumers better.
We've increased our digital marketing investment at the top and bottom of the funnel with consistently better returns.
As a result, we're encouraged to see trends improving in certain digital metrics.
As compared to last year and 2019, conversion and average order value are both up.
The number and value of repeat consumers continues to increase across all of our brands.
Repeat consumers not only spend more they're an important indicator of consumer engagement.
While it's very early in our journey, we remain confident in the significant growth opportunity ahead.
Lastly, we're making progress on our cost savings initiatives.
As we mentioned in May, while we don't expect the savings and investments to match dollar for dollar in every period, we're confident that we can fully offset our investments over the course of our Full Potential plan.
We've identified a number of opportunities in SG&A and cost of goods.
For example, as we work through our SKU reduction initiative, one of the benefits is greater manufacturing and distribution efficiencies as we produce fewer, more profitable SKUs.
We're also working on a number of multi-global initiatives or big ideas that can generate large year-over-year savings, things such as global vendor consolidation and raw material platform.
We feel good about the opportunities we are finding, and we'll continue to update you along the way.
Then I'll return with some closing comments.
I'm excited to be finishing up my first three months here at HanesBrands.
As I evaluated this opportunity, there were three things that really attracted me to HanesBrands, the people, the brands, and the Full Potential plan to capture future growth opportunities, all are exceeding my initial expectations.
It's great to be able to speak to such strong results on my first earnings call.
We exceeded the high end of our expectations across all of our key metrics, driven by continued top line momentum in both global innerwear and activewear businesses.
In my remarks today, I'll be comparing our results to the second quarter of 2019.
For the quarter as compared to 2019, sales increased 15% with double-digit growth in each of the segments.
Operating profit increased 14%, cash flow from operations increased 43% to $195 million, and our leverage improved to 2.9 times.
With that summary, let's turn to the details of the quarter's results.
Sales increased $233 million to $1.75 billion.
The impact from foreign exchange rates contributed approximately $26 million or 175 basis points to the quarter's growth.
Adjusted gross profit increased $102 million or 18% compared to 2019, while adjusted gross margin increased approximately 75 basis points to 39%.
The margin expansion was driven by leverage from higher sales, the benefit from product mix and the impact from foreign exchange rates.
These items more than offset the higher expedite cost and sourcing premiums we experienced to meet the stronger-than-expected demand in the quarter.
Adjusted operating profit increased $29 million or 14% to $236 million.
Adjusted operating margin of 13.5% was approximately 15 basis points lower than the second quarter of 2019.
Higher investments in brand marketing essentially offset the fixed cost leverage from the higher sales.
Adjusted earnings per share from continuing operations increased 24% to $0.47, while GAAP earnings per share from continuing operations increased 2% to $0.42.
Now let me take you through our segment performance.
U.S. innerwear sales increased 19% or $123 million over 2019 with comparable double-digit growth in both basics and intimates.
The growth was driven by two factors: first, the strong underlying performance of our brands, which resulted in market share gains across our basics and intimates product portfolios.
And second, the benefit of certain transitory items such as stimulus, restocking and pent-up consumer demand that drove category growth rates above historical levels.
For the quarter, innerwear operating margin of 23.8% was 150 basis points above 2019.
The margin improvement was driven by volume leverage and sales mix, which more than offset higher expedite cost and increased investments in brand marketing.
Turning to U.S. activewear.
Revenue increased 15% or $53 million driven by growth across the online, wholesale and distributor channels.
Our sports and college licensing business increased significantly from last year.
However, it remains below 2019 levels as on-campus attendance in the spring was still below pre-pandemic levels.
Looking at Champion brand within the activewear segment, Champion increased 20% as compared to 2019.
Activewear's operating margin of 10.2% declined 290 basis points compared to 2019 as the leverage from higher sales was more than offset by higher expedite and distribution costs to meet the higher-than-expected demand as well as increased investments in brand marketing.
Switching to our International segment.
Revenue increased 11% compared to 2019.
On a constant currency basis, sales increased 5% or $22 million.
We experienced growth in Australia behind our Bonds brand.
We also saw growth in Europe and the Americas, while sales in Asia Pacific declined driven by ongoing COVID headwinds in Japan.
For the quarter, the International segment's operating margin of 12.9% was 250 basis points below 2019 levels, driven by increased investments in brand marketing as well as deleveraging Asia Pacific from lower sales.
Touching briefly on Champion in the quarter.
Global Champion sales increased 21% over 2019 on a reported basis and 18% on a constant currency basis.
Champion sales in the U.S. which include all Champion brand sales in our activewear, innerwear and other segments increased 25%.
Champion sales in our International segment increased 15% on a reported basis and 9% in constant currency as compared to the second quarter 2019.
Turning to cash flow.
We generated $195 million of operating cash flow in the quarter driven by strong operating results and focused working capital management.
Looking at the balance sheet, inventory is coming down, our turns are improving, and we're on track with our SKU reduction initiative.
And our leverage at the end of the quarter improved to 2.9 times on a net debt-to-adjusted EBITDA basis as compared to 3.7 times a year ago.
And now turning to guidance.
However, I'd like to share a few thoughts to frame our outlook.
Similar to our prior remarks, my guidance comparisons will be to 2019.
At a high level, we increased our second half guidance for sales, operating profit and earnings per share by $375 million, $35 million and $0.08, respectively, compared to our prior outlook.
And we have factored the following puts and takes of the current environment into our guidance.
First, we're staying committed to our strategy that we rolled out in May.
Long term, we believe it's the right thing to do for our business and our brands.
We're going to continue to increase the investment behind our brands, and we're excited about the consumer reaction that we're getting.
Second, we see stronger-than-expected demand in both our innerwear and activewear businesses, which is being further fueled by the benefits from the recent Child Tax Credit Payments in the U.S. And third, rising COVID cases continue to weigh on the macro environment.
It's creating headwinds from additional lockdowns, most recently in Japan and Australia.
It's also creating incremental disruptions to supply chains around the world.
This, in turn, is driving cost pressure as well as higher levels of inflation relative to our prior outlook.
One of the advantages to owning our supply chain is that we have very good visibility, which allows us to be proactive.
Our supply chain team is doing a great job managing these challenges as well as identifying additional savings and efficiencies to partially offset the increased inflation pressures.
The estimated increase in cost and inflation pressure is approximately 40 basis points of operating margin pressure in the second half relative to our previous outlook.
Looking at our key guidance metrics.
From a revenue perspective, we raised our second half and full year outlook.
For the full year, we increased our revenue guidance by $550 million, bringing the range to $6.75 billion to $6.85 billion.
We also issued third quarter revenue guidance of $1.78 billion to $1.81 billion.
And at the midpoint, our guidance now implies revenue growth of 11% for the third quarter, 15% for the fourth quarter and 13% for the full year as compared to 2019.
The higher revenue outlook is driving our increased operating profit and earnings per share guidance for the second half and full year.
Our full year guidance for both GAAP and adjusted operating profit increased $65 million.
We now expect full year adjusted operating profit to be in the range of $880 million to $910 million.
For the third quarter, we issued adjusted operating profit guidance of $235 million to $245 million.
Our full year guidance for adjusted earnings per share from continuing operations increased $0.17, bringing our range to $1.68 to $1.76.
With respect to our guidance for cash flow from operations, we now expect to generate approximately $550 million for the full year.
I'm incredibly pleased to have you on the team.
So we certainly have a lot of good things going on in the business.
As I step back, the key highlights I see coming in the second quarter are we delivered strong results, which exceeded the high end of our expectations.
We're upbeat given the momentum in our underlying business, which is reflected in our increased outlook for the second half.
We plan to continue to increase investments in our brands in the second half despite the challenges in the global environment.
We remain committed to our growth strategy and investing in our brands is critical to the long-term success of HanesBrands.
Our Full Potential plan is in place, and we're rapidly executing against it to generate higher, more consistent revenue and profit growth.
 Assistant:

Chosen response:
q2 adjusted earnings per share $0.47 from continuing operations.
q2 gaap earnings per share $0.42 from continuing operations.
q2 sales $1.75 billion versus refinitiv ibes estimate of $1.59 billion.
sees q4 adjusted earnings per share $0.37 to $0.42 from continuing operations.
sees fy adjusted earnings per share about $1.68 to $1.76 from continuing operations.
sees q3 gaap earnings per share $0.42 to $0.45 from continuing operations.
sees q3 sales about $1.78 billion to $1.81 billion.
sees fy sales about $6.75 billion to $6.85 billion.
sees q4 sales about $1.71 billion to $1.78 billion.


Prompt:
Human: For the first quarter of 2020, net income on a GAAP basis was approximately $22 million or $0.42 per diluted share compared to net income of $110 million or $2.14 per diluted share in the first quarter of 2019.
Excluding nonrecurring, other income and losses, non-GAAP adjusted net income for the first quarter was $20 million or $0.39 per diluted share compared to $2.30 per diluted share in the first quarter of 2019.
Adjusted EBITDA was $62 million in the first quarter of 2020 as compared to adjusted EBITDA of $181 million in the same period of 2019.
The quarterly decrease was primarily driven by a 31% decrease in average net selling prices and a 13% decrease in sales volumes.
Our adjusted EBITDA margin was 27% in the first quarter of 2020 compared to 48% in the first quarter of 2019.
Total revenues were approximately $227 million in the first quarter of 2020 compared to $378 million in the same period last year.
This decrease was primarily due to the decrease in average net selling prices and sales volumes in a weaker market environment than last year.
The average net selling price per short ton decreased approximately 31% in the first quarter of 2020 compared to the same period in 2019.
As you may recall, last year's first quarter saw stronger met coal demand and higher pricing.
The Platts Premium Low Vol FOB Australian Index averaged $51 per ton lower in the first quarter of 2020 compared to the same quarter last year.
Demurrage and other charges reduced our gross price realization to an average net selling price of $122 per short ton in the first quarter of 2020 compared to $176 per short ton in the same period last year.
Mining cash cost of sales was $151 million or 68% of mining revenues in the first quarter compared to $182 million or 49% of mining revenues in the first quarter of 2019.
Cash cost of sales per short ton, FOB port, was approximately $83 in the first quarter compared to $87 in the same period of 2019.
The decrease is primarily due to lower price-sensitive costs such as transportation and royalties that vary with met coal pricing, offset partially by 13% lower sales volumes.
SG&A expenses were about $8 million or 4% of total revenues in the first quarter of 2020 compared to approximately $9 million in the prior year period, primarily due to lower corporate expenses.
Depreciation and depletion expenses for the first quarter of 2020 were $29 million compared to $22 million in 2019.
The increase quarter over quarter was primarily due to the high level of capital spending during 2019.
Net interest expense was about $8 million in the first quarter and included interest on our outstanding debt plus amortization of our debt issuance costs associated with our credit facilities, partially offset by interest income.
This amount was $1 million lower compared to the same period last year primarily due to the early retirement of a portion of our debt in last year's first quarter.
We recorded noncash income tax expense of $3 million during the first quarter of 2020 and $28 million in the same period last year.
These results primarily reflect the utilization of our net operating losses, or NOLs, with a corresponding decrease in the balance sheet account deferred income taxes.
We paid no cash taxes in the first quarter of 2020 or 2019.
We continue to expect the utilization of our NOLs will reduce our federal and state income tax liability to 0 until the NOLs are fully utilized or expired.
We expect this will continue to drive significant free cash flow conversion over the next several years.
Turning to cash flow.
During the first quarter of 2020, we used $5 million of free cash flow, which was the result of cash flows provided by operating activities of $21 million, less cash used for capital expenditures and mine development costs of $26 million.
Free cash flow in the first quarter of 2020 was negatively impacted by an increase in net working capital.
The increase in net working capital was primarily due to higher accounts receivable and inventory, partially offset by an increase in accounts payable.
Operating cash flows were significantly lower in the first quarter of 2020 compared to 2019, primarily due to lower average net selling prices of 31% and lower sales volumes of 13%.
Cash used in investing activities primarily for capital expenditures and mine development costs was $20 million during the first quarter of 2020 compared to $30 million for the same period last year.
Cash flows provided by financing activities were $63 million in the first quarter of 2020 and consisted primarily of the draw on our ABL facility of $70 million as a precautionary measure, less payments for capital leases of $4 million and less payment of the quarterly dividend of $3 million.
Of note, our balance sheet remains strong with a leverage ratio of 0.52x adjusted EBITDA.
In addition, we have ample liquidity without the fixed costs associated with legacy liabilities with the low and variable cost structure.
Our total available liquidity at the end of the first quarter of 2020 was $303 million, consisting of cash, cash equivalents of $257 million and $46 million available under our ABL facility, net of borrowings of $70 million and outstanding letters of credit of approximately $9 million.
As I mentioned earlier, we drew $70 million on our ABL facility as a precautionary measure to increase liquidity and reduce risk during these unprecedented times.
We intend on retaining the funds and cash to preserve liquidity amid the growing uncertainty surrounding the COVID-19 outbreak.
In summary, the first quarter results for production and sales volumes turned out as expected and previously disclosed.
The overall financial results were primarily driven by lower net selling prices and slightly lower sales volumes compared to last year's first quarter.
Now turning to our outlook for the remainder of the year.
In light of the uncertainties regarding the duration of the COVID-19 pandemic and its overall impact on the global economy and the company's operations, we are withdrawing our full year 2020 guidance issued on February 19 at this time.
We're also appropriately adjusting operational needs, including managing expenses, capital expenditures, working capital, liquidity and cash flows.
For example, as precautionary measures, we have delayed the $25 million budgeted for the development of the Blue Creek project until at least July 1, 2020, and have temporarily suspended our stock repurchase program.
We will continue to evaluate the impact of the COVID-19 pandemic on our business for the remainder of the fiscal year and expect to provide further updates to our financial outlook and the development of the Blue Creek project during our second quarter earnings call to be held in late July.
We're continuing to pay our quarterly dividend at this time, but we'll continue to monitor liquidity in light of the COVID-19 pandemic.
Before we move on to Q&A, I'd like to make a few more comments.
While we were pleased with our first quarter results, the rest of the year is less certain.
We are clearly seeing the impact of COVID-19 on global steel production and overall met coal pricing in light of reduced automobile manufacturing and a slowdown of construction projects.
Although we did experience some reduction in sales orders toward the end of the first quarter, it is now apparent that the full impact of COVID-19 on met coal demand erosion may not materialize until the second quarter of 2020 and possibly beyond.
And as a result, the unprecedented level of uncertainty in our customers' markets has made the job of forecasting, which was already challenging, even more difficult.
We continue to regularly update our business continuity planning on global steel production and met coal demand for various potential developments related to COVID-19 and will continue to take precautionary measures as necessary or advisable.
We've kept and will continue to keep close contact with our customers during this period in order to optimize our sales orders and capitalize on opportunities if and when they appear in the marketplace.
Regarding met coal pricing, we expect all indices to remain under pressure as long as the supply and-demand balance remains stressed by the uncertainty of current events.
Despite the unknowns, there are a few important reasons that our business is well positioned to weather any prolonged economic challenge: one, we have a strong balance sheet and adequate liquidity; two, our low and variable cost structure enables us to drive high margins and free cash flow across most business environments; three, we've made significant investments in our operations over the past three years, allowing us to now reduce capital expenditures as needed without impacting operations; four, we maintain one of the world's highest quality met coal portfolios, and we have strong long-term customer relationships; and five, our highly talented workforce is committed to safely and efficiently driving results.
As a result of these factors, I'm confident we will emerge from this health crisis ready to achieve our long-term growth potential.
 Assistant:

Chosen response:
q1 adjusted earnings per share $0.39.
q1 earnings per share $0.42.
warrior met coal - withdrawing full-year 2020 guidance issued on february 19, 2020 at this time.


Prompt:
Human: After my remarks, Dell will review our results in additional detail, and then you'll have the opportunity to ask questions.
During the first quarter we saw COVID-19 the Chinese fail on Australian calls have a continued impact on both pricing and demand across the mecole industry.
We continue to take the necessary measures to adjust our workplace environment to comply with social distancing, and personal hygiene guidelines set forth by various health organizations to protect the health and safety of our employees while maintaining our operations.
Despite these challenging headwinds, especially on NET Core pricing, we were pleased to be free cash flow positive for the fourth consecutive quarter since the pandemic began.
We remain focused on preserving cash and liquidity while managing the aspects of the business that we can control.
Importantly, we achieved our second lowest quarterly cash cost per tour done since going public.
As the Chinese ban on Australian coals continue during the forced first quarter, we were able to monetize our higher than normal inventories on Chinese spot volumes, which partially offset some of the impact of the depressed pricing environment experienced in our natural markets.
growing market fundamentals persisted across all geographies during the first quarter, allowing our customers to benefit from record high steel prices and strong demand for their products.
Global steel production remains on its recovery path to pre pandemic levels.
The world steel Association has reported a 6% increase in global pig production for the first quarter, with China leading the charge with a year over year increase of 8%.
Excluding China the rest of the world grew at a more moderate pace of 2%.
Unfortunately, the metco markets remain split in a two tier pricing system due to the ongoing Chinese ban of Australian coal imports.
On one side, you have non Australian premium hard coking coals imported into China benefiting from a stable and elevated CFR base index price that was range bound between 214 and $223 per metric ton for most of the first quarter.
On the other side, you have Australian base premium calls that have been impacted by high volatility and low pricing.
We saw the Australian index price climb from its low of $102 per metric ton at the start of the year, and peak at a high of $161 per metric ton in late January.
At this point, the price started its gradual decline, hitting its low of $110 per metric ton in late March.
The prolonged import ban by China has also created shifts in trade patterns, as more Australian calls are making their way into Japan, South Korea, India and Vietnam and also in our natural markets of Europe and South America.
As anticipated, Chinese by Nicolas was low, join there.
New Year's celebrations in February.
However, it remained subdued for a longer period than expected following the holiday.
However, an uptick in transactions and interest was observed prior to the end of the quarter and has remained active since.
We had expected contracted sales into our natural markets were strong for the entire first quarter.
sales volume in the first quarter was 2 million short tons compared to 1.8 million short tons in the same quarter last year.
Our sales by geography for the fourth quarter were 30% into Europe 14% into South America, and 56% into Asia.
production volume in the first quarter of 2021 was 2.2 million short tons, compared to a similar amount in the same quarter of last year.
The mines ran well in the first quarter, and we built a little more inventory.
As planned and previously communicated, inventories remained elevated at the end of the first quarter compared to pre pandemic levels, call inventory levels increased to 220,004 times to 1.2 million short times at the end of the first quarter.
The higher than normal inventory levels allow us to continue to supply our valued customers during the rest of the year.
Our gross price realization for the first quarter of 2021 was 95% of the Platts premium lowball fob Australian index price and was higher than the 89% achieved in the prior year period.
Or better gross price realization was primarily due to a higher percentage of our sales to Chinese customers that the CFR index price or spot sales volume in the first quarter was approximately 48% of total volumes, compared to a normal expectation of approximately 20%.
The end of our first quarter also coincided with the exploration of our collective bargaining agreement with the United Mine Workers of America on April 1.
While we continue to negotiate in good faith with the NWA to reach a new contract, the new NWA has initiated a strike that continues today.
I'll now ask you to address our first quarter results in greater detail.
The company record a net loss on a GAAP basis of approximately $21 million, or a loss of 42 cents per diluted share, compared to net income of $22 million or 42 cents per diluted share in the same quarter last year.
Non GAAP adjusted net income for the first quarter, excluding that non cash charge for Tax Valuation allowance was eight cents per diluted share, compared to 39 cents per diluted share in the same quarter of 2020.
Justin EBITDA was $47 million in the first quarter of 2021 as compared to $62 million in the same quarter last year.
The quarterly decrease was primarily driven by a 13% decrease, in average net selling prices partially offset by higher sales volume.
Our adjusted EBITDA margin was 22% in the first quarter of 2021, compared to 27% in the same quarter last year.
revenues were approximately $214 million in the first quarter of 2021, compared to $227 million in the same quarter last year.
This decrease was primarily due to the 13% decrease in average net selling prices, partially offset by an 8% increase in sales volume in a weak price environment as was noted earlier.
The Platts premium lowball fob Australian index price average $28 per metric ton lower or down 18% in the first quarter of 2021.
Compared to the same quarter last year, the index price averaged $127 per metric ton for the quarter.
The merge and other charges reduced our gross price realization to an average net selling price of $106 per short term in the first quarter of 2021, compared to $122 per short term in the same quarter last year.
cost of sales was $154 million, or 75% of mining revenues in the first quarter, compared to $152 million, or 68% of mining revenues in the same quarter of 2020.
The slight increase in total dollars was primarily due to higher sales volume, offset by lower variable cost and a focus on controlling cost of sales per short ton fob port was approximately $79 in the first quarter compared to $83 in the same period of 2020.
$79 per short ton, was our second lowest quarterly amount in the last four years.
Cash costs and price sensitive costs such as wages, transportation, and royalties that vary with net co pricing were lower in the first quarter, along with a focus on cost control.
tissue, the expenses were about $8 million, or 3.6% of total revenues in the first quarter of 2021.
And we're 10% lower than the same quarter last year, primarily due to lower professional fees and employee related expenses.
depreciation depletion expenses for the first quarter of 2021, with $33 million, compared to $29 million in last year's quarter.
Increase quarter over quarter was primarily due to a higher amount of assets placed in service and higher spending levels.
The interest expense was about $9 million in the first quarter and included interest on our outstanding debt plus amortization of our debt issuance costs associated with our credit facilities, partially offset by interest income.
This was approximately $1 million higher compared to the same period last year, primarily due to incremental borrowings on our abl facility and lower returns on cash balances.
We record an income tax expense of $24 million during the first quarter of 2021, compared to inexpensive $3 million in the same quarter last year.
The first quarter is tax expense included a non cash charge, recognized upon the establishment of a valuation allowance against our state deferred income tax assets.
This result was due to a change in Alabama State tax law in February, that became effective as of the beginning of the year.
In essence, our export sales are no longer subject to Alabama state income taxes.
And therefore the value of our state net operating losses have been written down to cash flow in the first quarter of 2021, we generate $23 million in positive free cash flows, which resulted from cash flows provided by operating activities the $45 million less cash used for capital expenditures in mind development cost of $22 million.
free cash flow in the first quarter of 2021 was positively impacted by a small decrease in net working capital.
Operating cash flows were higher in the first quarter of 2021, compared to the same quarter last year, primarily due to higher sales volumes and lower cost.
pressures and invest investing activities for capital expenditures and mine development costs were $22 million during the first quarter of 2021, compared to $26 million in the same quarter last year.
We continue to rationalize spending during these unprecedented times.
The company spent $13 million per 58% less on capex in the first quarter of 2021 compared to the same period last year, which was largely offset by higher spending on mine development cost.
Cash Flows used by financing activities were $13 million in the first quarter of 2021 and consisted primarily of payments for capital leases of $8 million in the payment of a quarterly dividend of $3 million.
Balance Sheet remains strong with a leverage ratio of 2.4 times adjusted e but we believe our liquidity is adequate to navigate these uncertain times.
Our strong balance sheet with no near term debt maturities, combined with a low and variable call structure has allowed us to continue paying our quarterly dividend during the pandemic.
Total available liquidity at the end of the first quarter was $272 million consisting of cash and cash equivalents of $222 million with $50 million available under a abl facility which is net of borrowings of $40 million and now saying letters of credit for approximately $9 million.
Now attorney drawer an outlook is the ongoing uncertainty related to our negotiations with the Union, the covid 19 pandemic, the Chinese ban on Australian coal and other potentially disruptive factors, we will not be providing full year 2021 guidance at this time.
We expect to return to providing guidance once there's further clarity on these issues.
We continue to appropriately adjust our operational needs, including managing our expenses, capital expenditures, working capital, liquidity and cash flows.
We have delayed the development of the blue Creek project, and our stock repurchase program also remains temporarily suspended.
Before we move on to q&a, I'd like to make some final comments.
We still do not have a clear view of when the trade of seaboard metals will return to normal and efficient market conditions.
Although we continue to believe that a partial or full easing of a Chinese ban on Australian coal is most likely to happen at some point in time.
We expect current pricing bifurcation in the markets to remain in place as long as the band remains in place.
We expect the difference between the Australian fob and the China CFR indices to narrow once the ban is lifted, returning to normal levels.
However, the correction may take some time.
Is there a plenty of floating vessels of Australian calls off the coast of China, as well as large volumes of calls in the ports that have been offloaded but have not cleared customs.
We believe that the demand for coal to remain strong for the next few quarters, as indicated by our customers buying patterns.
Also, we believe that our markets remain vulnerable to COVID-19 related demand disruptions.
Mostly in Asia, Europe, South America will remain focused on serving our customers through the duration of our ongoing labor negotiations while taking advantage of spot volumes when possible.
As I mentioned earlier, our contracts with the NWA expire on April 1.
And the NWA has initiated a strike that continues today.
We believe that we are well positioned to fill our customer volume commitments for 2021 of approximately 4.9 to 5.5 million short tons through a combination of existing coal inventory of 1.2 million short tons and expected production during the rest of the year.
For now, we have idle mind for we expect production to continue at mine seven, although at lower than usual rates.
While we have business continuity plans in place to strike may still cause disruption to production, and shipment activities.
And the plans may vary significantly from quarter to quarter in 2021.
Finally, as we navigate through these headwinds, we will continue to execute our business continuity plans to meet our customer demands.
 Assistant:

Chosen response:
will not be providing full year 2021 guidance at this time.
warrior met coal - has delayed development of blue creek project and its stock repurchase program also remains temporarily suspended.