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maec-2020

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2015

DISCA

DISCA #Sure. It's really too early, <UNK>, to get a sense of where the calendar upfront is going or cancellations. We don't see right now anything that gives us a sense that things are better or worse. The only thing that we see that's attractive is the advertising market in the third and fourth has been consistent, and is better than it was in fourth, first, and second. On the Eurosport side, we've been quite aggressive about going out and doing deals. So far what we've learned a couple of things. We've learned that we can grow viewership significantly without buying big-time soccer. We've also watched as big-time soccer has grown in terms of rates across Europe ---+ 60%, 70%, 80%, 100% in terms of fees; and in many cases it's big distributors that are fighting for that; and in many cases there has to be more than one distributor that gets it. So it's created a feeding frenzy around that content. The good thing for us is we've ducked our heads on that. And because so much economics has gone to soccer, and because we're the only player that can offer a pan-European platform, we've been able to sweep in 60-plus deals of very compelling rights ---+ whether it's speed skating, ski jumping, most of winter sports, summer track and field, more cycling, more tennis ---+ at mid-single-digit. And we're even having discussions with some players that bought soccer that are looking to pick up some extra economics by selling some of these niche sports. For us, those niche sports are looking like those are the drivers that are quite attractive for the Eurosport app. Those are the super fan groups that love ---+ that want to see all the speed skating or want to see all the cycling. So right now I think we're quite comfortable that we already committed that Eurosport will not go upside down; it will be profitable. We took the profitability margins down from in the 20%s to single digits, and we think over time that we should be able to not only be profitable but we should start to get some of the benefit of the app, which is all incremental, and the viewership gains that we're getting now, which we'll get the benefit. And we've seen in some markets already that when you put Eurosport together with our 10 traditional channels, we get benefit. And by selling Eurosport locally we're getting benefit. So I'd say so far so good. And just, <UNK>, some financial parameters on that. One thing that we've spoken about is this investment in sports not only is going to allow us to at least double our Eurosport-specific ad sales over the next five years, but as you know the combination of the sports and the Olympics and our share of viewership across pan-Europe is going to really help drive the top-line affiliate as well. And we will ---+ after Rio the Olympic rings will go on our Eurosport channels. We also have Eurosport.com, which is the number 1 online site for sports scores and clips; the rings will go on that. We're working very effectively with the IOC. It's very early days but we're having some very interesting conversations on multiple platforms about the fact that we own the Olympic IP for the next decade. Yes, sure, <UNK>. Look, there's no question that you're right, we are seeing a ramp of our nonlinear ad sales. Looking specifically at the third quarter, the majority is still very much from linear. <UNK> talked about the traction we're seeing, the 200 million monthly views. Clearly there is a growing, growing opportunity for us to monetize that. But specifically for the third quarter, it still is very much our linear ad sales driven by pricing and demand. The good news ---+ the bad news is we haven't done a great job in monetizing that. And when you look at the overall effort, it's about breakeven, with all the effort that we've made. That's the bad news. The good news is that more and more we're talking to advertisers that like the scale that we have. We're changing our approach in how we're selling, to take advantage. We see a lot of players like Vice who have done, candidly, an extraordinarily good job of monetizing their streams. So this is another thing that Paul and our team is looking at, that we've been, I think, best-of-class with linear and over the next two to three years if we could really build up our capability and our expertise in digital, I think that will be a significant upside. Because we haven't been great at it. It's way too difficult to prognosticate where the advertising market is going. It moved away quickly in the fourth quarter; we didn't quite know why. It flattened out, and now there is no question that volume has been much stronger and pricing has been good. A piece of that, candidly, is that we're outperforming. There are a number of players in the industry that are ---+ ratings have dropped significantly, and so there's been a meaningful ADU issue in the marketplace. So if you want to put money to work, the fact that our ratings are up ---+ and more importantly our share is up ---+ we didn't have that issue, so we were open for business. The other thing is that our channels are on-brand. Discovery has never been stronger, and the ability to get aligned with the number 1 network for men and now we have ID, which was the number 1 network for women ---+ ID is still meaningfully underpriced. And when you look at the CPM differential between broadcast and cable in general, it's still over 30%, and we can deliver with Gold Rush. We can be number 1 for men and beat the broadcasters. ID's length of view was so high. We have super-fan groups around Oprah and Tyler and Science. So I think that being on-brand has really helped us, and we have a good momentum story by having gone back to brand and the fact that our share is growing. So we're just going to have to see. I think right now Joe Abruzzese and his team are doing a very good job, and so are our programming teams in the aggregate here in the US. So we're going to continue to ride this out and hope that the advertising market stays. We'll see. Yes, <UNK>, look, it's a very fair question and one that we talk a lot about. The good news is this. We talked about earlier this idea that we're going to ---+ we expect to buy back about $1.5 billion of our stock the next 12 months. The good news is, given our still prudent but slightly more aggressive leverage target as well as our really expanding cash flow profile, we're still going to have a lot of powder on top of the $1.5 billion. So we still sit here today and say: our stock is cheap; it's a smart allocation of capital; and we still have an enormous amount of capital available beyond that for some opportunistic either buying of IP or investing in scale. So it certainly is not one or the other. The good news is ---+ and maybe surprising for investors ---+ is that we still can achieve both, given what we see as our cash profile and given the slightly increased level of leverage. Thanks, <UNK>. First, the cycle internationally in general tends to be more like three years versus five or six or seven years here in the US; that's first. And this won't surprise most of you, but there really is a difference historically in pricing of distribution deals. The way that it's worked historically is that you get your extra pricing by growth. So price has been relatively flat over the last 10 years for most of us in the content business, and it's because distribution was growing pretty aggressively almost around the world. We still see aggressive growth, meaningful growth, in Latin America ---+ particularly Brazil and Mexico, although Brazil has slowed down a little bit with the economy. And India we're seeing meaningful growth, and Eastern Europe. There are a lot of other markets that are more mature now, like Western Europe and a number of the markets in Japan. What we've been able to do or our strategy, which is starting to come through and will take a shorter time than it did here in the US, where the cycle is longer, is we have been scaling up in Europe over the last four or five years. With the Olympics, with Eurosport, but more importantly just with the overall scale expansion ---+ because we've been growing our market share double digit for the last six consecutive years in Europe and Latin America ---+ we now sit with distributors, and we started about a year and a half ago where, in Western Europe, since there is very modest sub growth it's not going to work for us. So the good news is we have enough scale, we believe, to drive price, and we've been able to do that as our deals come up. The same way we had an attack plan to drive a step-up in pricing here in the US, we have that outside the US. We're not executing it everywhere, because there are a number of markets where you're getting better than double-digit growth just because gestationally these continue to be higher growth markets. And then those markets we'll play the old game, where we're continuing to grow share, we're getting our channels carried, distributors are promoting us, and we're getting double-digit growth. In the more mature markets, we are being quite aggressive. Look, in Sweden, we pulled our signal and we were off for four days, and then we went back on; we were able to get better than double-digit increase. Across much of Europe on renewals we have been very clear that our scale is up, our investment is up, and we need significant increases. So you'll see those come in over the next couple of years. You know, one other point, <UNK>, that I think we could provide that I think is meaningful is that TV Everywhere and SVOD is becoming a big part, particularly TV Everywhere and VOD, across those mature markets. We have a 20-year library in language, and we also have the Olympic IP, and we also have sports IP. So the ability for us to have a win-win ---+ which is you take our channels, but in addition we'll give you some more content for TV Everywhere, because we have a ton of it ---+ it's a win for them, it's a win for us, and it helps us further substantiate the pricing rather than just the old shootout at the OK Corral. Thanks, <UNK>. As you know from our Investor Day, we assumed as the industry started to show very slight decline that that was going to continue. There is a lag because we tend to get paid two to three months later. But looking at the earnings reports from the distributors, I think it was very encouraging. Some of them have gained subs; others are declining at much lower rates. If that flows through, that will be meaningful upside for us to what our plan is, because we've assumed that there'll be a slight decline. And even at the numbers that we were seeing in the recent earnings reports, that's better than what we have in our plan. So we'll just have to see. It's a ---+ for us, the good news is we're very protected on the bundle. We could've gotten more price and structured deals where there was more flexibility to move some of our channels. We opted to have the maximum security for our channels and get price. So we will track pretty closely what the universe estimates are, because we did build into our deals over the last four years less flexibility to play ---+ to move around our channels. Well, <UNK>, we certainly don't want to give too much expectation today about 2016. But look, we're very encouraged by that 12% trend, and I think it continues to speak to our share of viewership being meaningfully higher than share of wallet. We talked about the third quarter, the second quarter being a bit of an anomaly; so us being back in the double-digit range is where we should be. For me, I continue to think that's where we're going to stay for a while. We just have so much growth potential and opportunity across so many of our key markets and regions, and so I think the third quarter trend not only is encouraging but I think indicative of a lot of the core ad sales metrics we're seeing across our International markets. <UNK>, look, this is something that we've thought about and debated the merits of for quite some time, quite frankly. We had one of our Board meetings in October. And look, when we look at our portfolio we look at our free cash flow growth; we look at the fact that 80% of our US affiliate deals are done with tremendous rate CAGRs; when we look at our cash tax rate and what we're doing there to drive that down ---+ when we compare ourselves not only to those operating metrics but then we compare ourselves to our peers around, as I mentioned I think before, our interest coverage ratios, our free cash flow to debt yield, it's the right capital structure for us. We have a derisked US business model. We have an accelerating cash flow model. I'm extraordinarily comfortable with the seat I'm in that we can sustain this higher level of leverage, still being fully committed to and maintaining our investment grade, and allow ourselves to drive a higher level of return on equity while still being very prudent with our debt and capital structure. So it just was very much the timing of not only Board discussions but then just operationally how confident I feel now about our growth profile.

2015_DISCA

2016

SSP

SSP #We gave guidance for the full first quarter on that, and talked about on core and total revenue up 11% to 13%, but we didn't say anything about January. We have an unfunded liability at the end of 2015 of about $200 million and we will be making a pension contributions to the plan in 2016 of something between $5 million and $10 million. Yes. I can start and maybe <UNK> can add-on as well. The TV group was very mindful about making sure that as the political race unfolds we are able to take the most advantage of that. And there were some expenses in terms of promotion at the station, would be one of them that we had incurred in Q4, to make sure that we were where we needed to be to capture most of those dollars. Hi <UNK>, it's <UNK>. Let me kind of give it to you at sort of high-level then I will let <UNK> give you a little more detail. As we said, if you look at the digital segments you've got several things going on at the same time. The local piece, which I believe as <UNK> said is about 65% of the revenue. You know that more by the day becomes a knowable business, where we can see what we think the revenue growth is going to be in the future, and it is going to continue to be strong and a sense of the expenses. So that keeps us moving toward profitability. But I have to tell you, we can get it to profitability much faster, but we have not been in a big hurry. When we look at the impacts also on the on air side that digital has, we have been pleased to just continue to build out what we believe were the market-leading digital brands and we think there will be value there. So we'll get to profitability over the next couple of years. We could make that quicker if we wanted, but we don't think it's wise. Midroll, the second piece, is profitable and growing. Although there is some investment in there as well as we add other elements to it and try to round out what is already a very strong position we have in podcasting. And in Newsy is, Newsy is the one I think you and I have talked about. We have an opportunity here, we are building a very strong brand with have a somewhat uncommon content strategy and programming strategy. Carriage agreements with pretty much all of the players. But you know that marketplace will shake out over the next couple of years. But you know the faster we see growth in Newsy viewership, probably the more aggressive we will be on the investment side. So I sort of look at how the pieces have fall together, we did not budget that segment ---+ we didn't start out with well, here's what revenue and cash flow needs to be in that segment. We are focused on building value in real businesses inside of it and then the segment number falls out at the bottom. We don't know want to show losses in any segment for any longer than we have too. But while we are building value we are going to kind of keep our foot on the petal. Here's <UNK> for a little more detail. Yes, for the fourth quarter we bought about 300,000 shares, in Q4. And we don't comment about whether we are currently active or not. We have been buying under plans very consistently since the window open again after the journal transaction. And I would continue to expect that ---+ you and I have talked a lot about capital allocation over the last year or so, 2016 will be a strong cash flow year from us. And I expect we will continue all of the above strategy of continuing to pick up national digital brands, TV stations in attractive markets, and continue with the share repurchase program. Thanks What I think we've said about 2017 and 2018 is, that we expect a nice double-digit growth in 2017 and 2018. And then of course the Comcast contract comes due in 2019. So we will see a stairstep increase when the impact of that kicks in. That is correct. Very much like we've been saying for the past six months or so.

2016_SSP

2015

VICR

VICR #Thank you. Possibly. So, obviously there is any for capacity in general that, if not satisfied ---+ I am talking about computing capacity ---+ if not satisfied by the next generation of processors, needs to be satisfied by the existing one. We will have to wait and see with respect to that. I think the point here is that any fine-tuning of the scale with respect to VR13, will have ramifications with respect to the level of business on VR12.5. And needless to say, that cuts both ways. Right. If VR13 it's accelerated, we will be selling fewer of the VR12.5. And conversely, if it were to be further delayed, we will sell more of the older one but we would like to see the new ones come about sooner than later. Because we have more opportunities for the new ones, yes. I am not going to pinpoint applications and customers beyond saying that we are spreading our coverage suggesting the past two applications other than processors. We are expanding our coverage applications of VR13 other than the data centers. And the level of interest in our solution across a different place in the industry is rising considerably, because it's not a mystery that the early adopters have done well with our solution. And they have achieved good success in terms of improved performance and capabilities. To be clear, not to potentially create confusion, the ramp that we are talking about in the second quarters, the bookings ramp, is distinct from shipping. And so, as suggested earlier, we are looking at the actual ramp in shipments to ---+ for VR13 to start in Q3. We have a good level of capacity in place and we expect to be able to reach production rates well above past peaks with capacity that we already have in place. For that reason, as suggested in earlier parts of this discussion, our focus over the last six months has been to actually expand capacity in the VIA space. We are starting from very little and we need to bring about significant capacity before we take the next step with respect to a particular chip manufacturing capacity, which is at the core of point of load, the processor type applications, as it is with respect to other kinds of applications in frontends and other areas. We think we've got still a bit of time to take the next step. With respect to Picor products, that is an established model that has got a good deal of scalability built in. So, we think we are well-covered over the next few quarters with respect to, in particular, data center type of applications. I think that would also be VR13, so I think the timing is unfortunately the same. That is correct. We have had ---+ ---+ divided solutions for quite some time now. So, in fact, we have been advancing the capabilities beyond that which was already cable enough, literally six months ago. I think if there is one more question, we will take it and ---+. I think you've got a believer in me. We've invested nearly [$200 million] in being about this capability and I do expect to see a very large return on that investment, so. I am a patient fellow, so. (laughter) Thanks a lot. Thank you, <UNK>. So with that, we will conclude. Talk to you next year. Yes, talk to you all next year. Take care.

2015_VICR

2016

MASI

MASI #Hello, everyone. Joining me today are Chairman and CEO, <UNK> <UNK>; and Executive Vice President of Finance and CFO, <UNK> de <UNK>. This call will contain forward-looking statements which reflect Masimo's current judgment, including certain of our expectations regarding fiscal 2016 financial performance. However, they are subject to risks and uncertainties that could cause actual results to differ materially. Risk factors that could cause our actual results to differ materially from our projections and forecasts are discussed in detail in our SEC filings, including our most recent Form 10-K and Form 10-Q. You will find these in the Investors section of our website. I'll now pass the call to <UNK> <UNK>. Thank you, <UNK>. Good afternoon, and thank you for joining us for Masimo's second quarter 2016 earnings call. We're happy to again report results that surpassed our projections. As in the first quarter, we continued to see strong worldwide adhesive sensor growth, which we believe was attributable both to increase in hospital sensors and our growing base of new customers as evidenced by the prior two quarters' growth and another strong quarter of driver shipments as we shipped 45,300 additional SET and rainbow SET oximeters in Q2, excluding our handheld and Finger Pulse oximeters. Here are some other highlights from our second quarter. Our product sales grew by nearly 12%. Our second quarter 2016 GAAP earnings per share was $0.55, including an $0.08 per share gain related to the new accounting rules for gains realized on stock option exercises and an approximate $0.04 FX benefit. This is a 57% increase from our GAAP earnings a year ago. Important new clinical studies were published during Q2 continuing to validate the growing list of Masimo technologies and products that are reducing cost and improving patient care. And we received two important FDA clearances, which will expand our domestic product portfolio, and on which I will discuss later in today's call. We're encouraged that our 10-year plan to achieve strong earnings growth, built on a solid foundation of breakthrough products and strong and broad service has continued to become more visible and consistent over the last two years. Encouragingly, our results for the first half of 2016 have exceeded our original projections and as a result, we are very happy to be able to once again increase our financial guidance for the rest of 2016. Next, <UNK> will review our second quarter financial results in more detail and also provide you with our new 2016 financial guidance. I will then discuss some additional second quarter business, product and clinical highlights. <UNK>. Thank you, <UNK>, and good afternoon, everybody. Our second quarter 2016 total revenues were $172.6 million, which was up 10.9% from $155.7 million in the prior year period. Total product revenues rose by 11.5% or 11.1% on a constant currency basis versus the second quarter of 2015. Product revenues for Q2 exceeded our expectations too, as <UNK> noted, to both continued strength in attracting new customers, notably in some of our key OUS regions as well as an increase in US hospital sensors. Rainbow product revenues for Q2 totaled $14.9 million, which was up 10.6% from $13.5 million in the prior year period. This increase is consistent with our projected total annual rainbow growth of approximately 10%. Our Q2 SpHb revenues declined to $3.6 million from $4.4 million in the prior year period. This decline was due primarily to a difficult comparison involving two large license orders last year, as well as a slight delay in the shipment of an OUS order, which will now be realized in Q3. Our worldwide end-user or direct business, which includes sales through just-in-time distributors, grew 12.7% in the second quarter to $140.9 million versus $125.1 million in the year ago period. Our direct business represented approximately 86% of total product revenue in the quarter versus 85% in the prior year period. OEM sales comprised the remaining 14% and rose by 5.1% versus the prior year period to $23.7 million. By geography, total US product revenue increased by 10.2% to $117 million compared to $106.2 million in the same quarter of 2015. Our total OUS product revenues of $47.6 million rose by 15% versus $41.4 million in the same prior year period and were up 13.6% on a constant currency basis. OUS revenues represented approximately 29% of total Q2 product revenues, up from 28% in the prior year quarter. Our second quarter 2016 GAAP product gross margin was 65.1%, up by 90 basis points from the previous year's 64.2%. This improvement is attributable to a number of factors including a more favorable product mix, the continuing benefits from our value engineering efforts and other manufacturing cost initiatives, as well as favorable FX movements, including the year-over-year decline in the value of the Mexican peso versus the US dollar. Reported second quarter 2016 total operating expenses were $78.7 million, an increase of $3.6 million or 4.9% versus $75.1 million in the prior year period. Our SG&A expenses were $63.9 million, an increase of $2.2 million or 3.6%, while our R&D spending was $14.8 million, an increase of 10.6% versus the year ago period. The increase in R&D expenses related to additional engineering resources to support both ongoing Masimo new product development efforts as well as additional staffing related to our commitment to reinvest the medical device tax savings. Second quarter 2016 operating income was $36.4 million compared to $27.8 million in the prior year period. This significant increase in year-over-year operating income is the result of a combination of factors, including strong product revenue growth, improved product gross margins and continued operating expense control. Encouragingly, for the third quarter in a row, our operating income margin has exceeded 21% and in fact, was up over 300 basis points above the same prior-year quarter. Q2 2016 non-operating income was approximately $500,000 compared to non-operating expense of $1.1 million in the prior year period. The $500,000 in Q2 non-operating income includes approximately $1 million in net interest expense related to borrowings under our line of credit less other interest income. This interest expense was more than offset by approximately $1.5 million in favorable foreign exchange translation gains resulting from changes in foreign exchange rates from April 2, 2016 to July 2, 2016 on our OUS local currency denominated balance sheets. Our second quarter 2016 effective tax rate fell to 18.6%, down from 30% in the same period last year and well below our expected rate of approximately 30%. This lower than expected Q2 effective tax rate was due to a $4.1 million benefit we recognized related to our adoption of ASU 2016-09, the new accounting rule regarding the reporting of tax benefits resulting from the exercise of stock options. As you'll recall, the new accounting rules require that the tax benefit related to the exercise of stock options reported as a discrete benefit to the current quarter effective tax rate as part of the profit and loss statements. In the past, these tax benefits were recorded directly to equity. Without this discrete item, our adjusted Q2 effective tax rate would have been 29.7%, very close to our 30% projection. As a result of this new accounting rule, our Q2 2016 fully diluted EPS was increased by $0.08 per diluted share, following a $0.02 increase in Q1 2016. Our average shares outstanding for Q2 were 52.7 million, down from 53.7 million in the year ago period, but up from 51.9 million in Q1, 2016. During Q2 quarter, we repurchased an additional 400,000 shares, increasing our year-to-date purchases to 1.5 million shares. The sequential increase in our Q2 weighted share count was primarily due to the impact that a higher stock price has on the diluted value of stock options outstanding under the treasury stock method. Second quarter GAAP net income increased by approximately 55% to $30 million or $0.57 per diluted share including the $0.08 per diluted share benefit related to the discrete Q2 accounting change and the 4% benefit from movements in foreign exchange rates. As of July 2, 2016, our DSO was 47 days compared to 52 days as of April 2, 2016 and compared to 46 days as of January 2, 2016. Our inventory turns remained at 3.7, consistent with the April 2, 2016 level and were down from 4.2 as of January 2, 2016. Total cash and cash equivalents as of July 2, 2016 were $116.1 million compared to $132.3 million as of January 2, 2016. During the first six months of the year, we have generated approximately $56.7 million in cash from operations and $19 million from the exercise of stock options. These funds were used in part to repurchase 1.5 million shares at a cost of approximately $63.4 million and to repay approximately $10 million in our line of credit borrowings and to fund our operations. During the most recent second quarter alone, in addition to the repurchase of approximately 400,000 shares at a cost of approximately $20.5 million, we also repaid $50 million on our line of credit, lowering our total borrowings outstanding from $225 million at the end of Q1 to $175 million at the end of Q2. Now I'd like to take just a moment to update our fiscal 2016 financial guidance, which is based on the best information we have available to us. We are now projecting that our total fiscal 2016 GAAP revenues will be approximately $689 million, including $658 million in product revenues, up from our prior estimate of $647 million, which was (inaudible) from our original fiscal 2016 guidance of $640 million in product revenues. We now expect our annual GAAP 2016 product gross profit margins to be approximately 65%, up from our prior guidance of 64.7%. We now also expect our fiscal 2016 operating expenses to be approximately $314 million, which is up slightly from our prior guidance of approximately $312 million. We continue to expect that our tax rate for the remaining six months of fiscal 2016 will be approximately 30%. We are projecting that our average quarterly weighted shares outstanding for the rest of fiscal 2016 to be between 53 million and 54 million. And as a result of these changes, we are now expecting our 2016 GAAP EPS to be approximately $2.01, up from our prior estimate of $1.83 per diluted share and our original projection at the start of the year of $1.69 per diluted share. And with that, I'll turn the call back to <UNK>. Thank you, <UNK>. I want to congratulate our team for our performance through the first half of the year. We intend to continue to achieve results that exemplify our greater growth potential, stemming from our breakthrough technologies that have had a profound impact on patient care and cost of care. As <UNK> just described, we have once again boosted our full-year forecast to incorporate a more positive outlook for 2016. We are realizing higher revenues through drivers across our installed base as utilization has risen. In addition, steady growth for Rainbow and recent regulatory clearances for important new products provide us with greater confidence that we'll exceed our prior target set at the beginning of this year. We're consistently winning new hospital conversions for Masimo SET and Rainbow SET oximeters. During Q2, we received two noteworthy product clearances from the FDA. First, we received FDA clearance for our O3 Regional Oximetry monitor, enabling us to participate in an estimated $125 million market that is growing by 10% annually. Given the accuracy and ease of use of O3 compared to competitive monitors in the field, we hope to capture meaningful share in this market in the next few years. In fact, one of the world's leading centers for cardiovascular medicine and transplantation, DHZB, the German Heart Center in Berlin, has adopted our O3 Regional Oximetry and SedLine Brain Function monitoring technologies to monitor their patients in the operating room and intensive care unit. DHZB is a specialized hospital dedicated to the diagnosis and treatment of cardiovascular and thoracic diseases, implantation of mechanical circulatory support systems and heart and lung transplantations and treats more than 7,200 in-patients and 24,000 outpatients annually. The second notable FDA clearance we received in Q2 was for our wearable tetherless Radius-7 monitor with Rainbow measurement capabilities. The Rainbow version of Radius-7 allows for patient mobility within the hospital and includes continuous hemoglobin measurement as an option, which may be useful for detecting post-operative internal hemorrhage. We also recently initiated the launches of next-generation SedLine and next-generation SpHb products in Europe, both of which incorporate substantially improved technology that increases their clinical utility. On a related note, we are happy to report that the rollout of Rainbow parameters within both low acuity and high acuity monitors made by Philips has commenced. GE is also now selling Rainbow in its low acuity monitor line. Unfortunately, we've recently learned that GE's rollout of Rainbow in their high acuity monitors would likely be delayed by two years to three years. On the clinical front, two papers are recently published that support the clinical utility of Masimo's innovative technologies. In a study utilized ---+ using the first generation Pronto Pulse CO-Oximeter to non-invasively measure total hemoglobin in 114 patients. SpHb was successfully measured 89% of the time. With mean lab-based hemoglobin values of 12.6 grams per deciliter plus and minus 1.9 grams per deciliter and mean noninvasive SpHb values of 12.3 grams per deciliter plus or minus 1.6 grams per deciliter. The authors, Dr. Ryan and colleagues, at the University of Tennessee Health Science Center, the Le Bonheur Children's Hospital found that non-invasive and invasive measurement correlated well and that the rapid availability of results and the lack of requirement of the venipuncture non-invasive hemoglobin monitoring maybe a valuable adjunct into initial valuation and monitoring of pediatric trauma patients. They also noted that non-invasive SpHb testing may be most effective in determining when invasive testing of hemoglobin is warranted. A paper just published in transplantation proceeding, authored by Dr. Lee and colleagues at Chang Gung Memorial Hospital in Taiwan investigated the utility of PVI and concluded that PVI may serve as a reliable estimate of cardiac preload status in patients undergoing or topic liver transportation as higher PVI values correlated with lower right ventricular end-diastolic volume [values] so that an increase in ventricular preload status could be inferred from a decrease in PVI during OLT. We also noted that right ventricular end-diastolic volume was better correlated with PVI than with other static filling pressures, such as central venous pressure or pulmonary artery occlusion pressure, therefore giving a safer, faster and better estimate of fluid responsiveness. These two papers are just the latest examples of the high clinical value that our technologies provide to clinicians as they strive to improve patient care. In fact, we estimate that the use of SET Pulse Oximeter, Rainbow SpHb and PVI will save an average hospital $1.3 million a year. In the age of both the Affordable Care Act and the expansion of ACOs, technologies that help clinicians get it right the first time are what hospitals want. In closing, our focus on delivering on our 10-year plan is based on our guiding principles of remaining faithful to our promises and responsibilities. We are encouraged that our first half of 2016 financial performance has exceeded our original [2016] guidance, and in doing so, has allowed us to once again increase our financial guidance for the year. We are looking forward to what will be a record year in 2016 as we head into the final stretch of our 10-year plan in 2017. As always, we remain focused on our mission to improve patient outcomes and reduce the cost of care by taking non-invasive monitoring to new sites and applications with our breakthrough non-invasive monitoring technologies. With that, we'll open the call to questions. Operator. Certainly. Certainly value engineering work that we've been doing the last few years is resulting in some of those gains. Our value-based pricing with our customers and our discipline with that along with the expansion of the new products, obviously, we've been talking about rainbow for a while, but we're seeing excellent growth with SedLine, excellent growth with capnography, and now O3. So adding SET, Rainbow and now Root, which has these new modalities together, along with the open connectivity and creating the connected ---+ for the hospital, we think will help us drive strong revenue gains as we manage our expenses to what we believe are sustainable given the initial investment we made in the first 60%, 70% period of this 10-year plan. Well, not to get too much into the minutia, all I can say, had we had that order in Q2, our revenues for hemoglobin would have grown 10% instead of being in decline, also given some of the factors of the last ---+ same quarter period ago. But what I can tell you on the Middle East, we're working really well with them. The run rate of sales have been excellent. We did regain the tender that we had won last year, and in fact hospitals' run rate for that was probably 2 times, 3 times of what we did last year with them. However, there is pressure from the Finance Minister for these hospitals to not automatic, get what they ask for, so they will be working towards getting what they want, but instead of it being pre-approved for the whole year, they'll have to seek it on a regular basis. So while all of that will mean not much for this year for us, because we've already projected worst case anyway, and we're more than happy to meet that with the new projections we gave you, we'll have to track what really happens on the street in Q3 and Q4 and then hopefully in Q1 of next year, we can tell you what to expect for the rest of the year based on the historical usage patterns, because unfortunately we can't rely on the tender request and tender win that we had given the way the Finance Minister has, I guess reined in that freedom from the hospitals and we'll request additional demands on a regular basis. We haven't reached any new agreement, but we still remain optimistic that royalties will continue till October 2018, given that we won the IPR on two of the patents that they went to try to eliminate. The one that we won goes till October 2018, the one that we partially lost expires next month. So that ---+ obviously the royalty haven't changed. So we think things will remain till October 2018 and if we can do something more with Medtronic, we'll be announcing it as soon as we have it. Yes, directionally it's exactly right. Working (multiple speakers) we had in the second quarter made us confident enough to take up our projected revenue guidance for both Q3 and Q4 in the range of about $2 million. We also though, because of the higher amount of weighted shares, ended up essentially, you could say effectively, losing $0.01 because of the impact of the now projected higher share number for Q3 and Q4. So the combination of that, the higher revenue of about $2 million each quarter offset by slightly higher weighted share numbers resulted in a net increase of about $0.01 for both Q3 and Q4. Correct. Yes, we actually can't because of the discrete nature of those. We can't even include those in any kind of forward guidance, number one, because it's very difficult, of course, to project what kind of stock option exercises might occur. And secondly, because it's simply isn't allowed as part of your forward effective tax rate guidance. Sure. On the GE, given that, of course, we are in possession of confidential information that I cannot disclose, all I can tell you is this delay had nothing to do with us. It's something that is an internal issue for them, but with their permission, we wanted to share with you where they are. The good news is Philips has fully rolled out, Drager has been out there for a while with Rainbow technology, Welch Allyn, ZOLL and many other OEMs. So we're anxious to get GE out there, but I know they're doing everything they can. But unfortunately things like this sometimes happen in the product development cycle. As far as our litigation with Philips, as you know, it's been broken up in four phases. We won phase 1 for $467 million verdict, which was not finalized, which actually may end up being a good thing because Supreme Court recently changed the standards for willful infringement. We think we have a great willful infringement case against Philips, which will be ---+ now we'll bring it up on the phase 2 coming up in January, but we'll seek to bring back on the phase 1 victory as well, where they have admitted that they infringed our technology before even the trial began. For us, the phase 3, that'll be the antitrust suit and patents use case against us, that will happen in March of next year and then phase 4 is some additional patents we have against them along with our antitrust suit against them and that has not been scheduled yet. So in summary, if I was going to tell you what I think will happen, I think hopefully ---+ assuming we win the antitrust and patents use in March, probably about 18 months after that, I'm sure Philips will appeal to the Court of Appeals, Federal Circuit Court of Appeals, which we expect we should win. And so we think sometime in about two years from now, we'll have our first check from Philips. And maybe with the pre-judgment interest, post-judgment interest, if there is willfulness found (inaudible) that could be much bigger than the $467 million that we secured in the phase 1 trial and post-judgment rulings by Judge Stark. We don't really know what our market share is, those are difficult to assess. We do believe we are growing 2 times to 3 times the rate of growth in the pulse oximetry market given that we're now ---+ we've been growing for almost two years at above 10% rate. So unfortunately, that's all I have for you. I know there's surveys that are done by independent surveying companies, I don't know how much I can trust those. So therefore, I don't want to state what they say because I know there are ways of guessing that those numbers as not as scientific as how sometimes they're truly done when economists get involved in big case trials and so forth. Sure, <UNK>. I think as we've been articulating for the past couple of years now actually, we changed really our direction towards planning our future level of total investment in operating expenses and we changed it from a perspective of identifying various targeted opportunities and ways to expand the business and essentially determining whether to fund those kind of expenses. It's one in which we just simply said, there is a fixed amount of operating expense that we're willing to invest each year and then we work very, very diligently internally to prioritize all of the various spending initiatives that we have. But at the end of the day, we're limiting ourselves to X amount of dollars outstanding growth. So because of that approach, obviously there is a tremendous amount of control in terms of our ability to dictate essentially what level of spending we're going to be at and that's something we started at the end of 2014, it's continued all the way through 2015 and it's obviously continuing through this year and as we look forward for the next couple of years, there is no intention to change that type of forced prioritization of investments in order to hit a fixed amount of aggregate spending dollars increase. Well, I don't think anything has changed on pricing. We see Medtronic do the same thing that Covidien was doing pricing wise. Given that we ---+ from clinical studies have data that shows (inaudible) save an average hospital of 250 beds about $1.3 million a year, we, not to mention the lifesaving impact of our technology, the [eye] damage reduction and (inaudible) of our technology, we believe our pricing is just right. And that's not too low, but consistent to wanting to help our customers reduce cost of care. We always calculate that into our pricing strategy. So the good news is, customers are willing to give us a small premium for the value that our technology brings to them that both save them money, big money, not small pennies but also help them take better care of the patients. Thank you so much, <UNK>. And I want to just add one thing, the reason we can grow our expenses the way that <UNK> mentioned, in a very disciplined fashion, is because we had grown, as you know, our infrastructure a little bit ahead of plan, normal times, the way we would do things, given the royalties we're gaining from Covidien, Medtronic and that has allowed us now ---+ and I guess the last part of our 10-year plan to not have to grow our expenses, yet not be choking the Company when it comes to both product that saves lives and helps people as well as the number of people we need from an infrastructure perspective to treat our customers as they're accustomed to. So we're really happy that the 10-year plan is working. We're happy that our investors have stuck by us and now are seeing the stock working, so we knew this commitment to you and look forward to our next quarter results. And if you must, thank you all for joining us.

2016_MASI

2017

AMSF

AMSF #Good morning. Welcome to the AMERISAFE 2017 Second Quarter Investor Call. If you have not received the earnings release, it is available on our website at www.amerisafe.com. This call is being recorded. Replay of today's call will be available. Details on how to access the replay are in the earnings release. During this call, we will be making forward-looking statements. These statements are based on current expectations and assumptions that are subject to various risks and uncertainties. Actual results may differ materially from the results expressed or implied in these statements if the underlying assumptions prove to be incorrect or as a result of risks, uncertainties and other factors, including factors discussed in today's earnings release, in the comments made during this call and in the Risk Factors section of our Form 10-K, Form 10-Qs and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statement. I will now turn the call over to <UNK> <UNK>, AMERISAFE's President and CEO. Thank you, <UNK>, and good morning, everyone. Before I discuss the operations this quarter, I'd like to provide some color regarding the workers' compensation industry in general as competition continued to intensify this quarter. As reported by NCCI in May, the workers' compensation industry, excluding state funds, reported a 94% combined ratio for 2016, which was unchanged from the 94% combined ratio reported for 2015. To add perspective, the P&C industry's combined ratio increased from 98% in 2015 to 101% in 2016. Workers' compensation was the only line within the P&C line whose combined ratio did not worsen from 2015 to 2016. Also adding to the competitive environment, loss costs continued to decline in the second quarter. NCCI reported, through May, approved rates were down 6.7%. I share this industry overview to provide background as we are pleased with this quarter's 81.9% combined ratio and the financial strength of AMERISAFE, which was achieved by focusing on underwriting discipline and consistent approach in handling our claims and expenses. Now on to the second quarter's operational results. As I've already stated, competition increased this quarter, and our gross premium written decline of 15.7% reflected it. The decline was driven by both policies written in the quarter as well as audit and related adjustments for policies written in prior quarters. Of the policies written this quarter, renewal premium was down 6%. However, policy retention remained high at 92.2% for those policies for which we offered renewal. Our renewal premium was obviously impacted by declining rates. In the aggregate, pricing in the quarter, as measured by ELCM, was a 1.68, down from a 1.73 in the second quarter of 2016 but slightly higher than the 1.65 in the first quarter. While comparing consecutive quarters is not apples-to-apples, I do feel this emphasizes our commitment to risk selection with appropriate pricing for long-term stability. As for audit premiums and other adjustments, audit premiums themselves were positive. However, the change, quarter over prior quarter, for audit and all premium adjustments was a headwind to top line, decreasing gross premiums written $4.1 million. Moving on to losses. The loss and LAE ratio for the quarter was 56.1%. The current accident year ratio was 69%, and the prior accident year loss ratio was a negative 12.9%. Here are some key metrics to note regarding loss expenses. Reported claims in the calendar year were down 5.1%, and the open inventory of claims was down 5.8% for the first half of 2017. The $10.7 million of favorable development this quarter resulted primarily from favorable case development, most impacted accident years 2015, '14 and '13. To delve more into the financial metrics, I will now turn the call over to <UNK>. Thank you, <UNK>, and good morning, everyone. For the second quarter of 2017, AMERISAFE reported net income of $15.5 million or $0.81 per diluted share compared with $16.6 million or $0.87 per diluted share in last year's second quarter, a decrease of 7%. Operating net income in the second quarter of 2017 totaled $15.7 million or $0.82 per share, slightly below last year's $0.85 per share in the second quarter. Revenues in the quarter decreased 7.8% to $89.9 million compared with last year's second quarter. Net premiums earned decreased 8.8% to $82.7 million when compared to the second quarter of 2016. Net investment income was $7.5 million in the second quarter of 2017, an increase of 20.5% when compared with last year's second quarter. The significant driver of this increase was the decline in value of a limited partnership hedge fund in last year's second quarter. This limited partnership is marked to market through net investment income each quarter. Without the hedge fund, net investment income was up 9.6% compared to the second quarter of 2016. The tax equivalent yield on our investment portfolio at the end of the quarter was 3.3%, up slightly from 3.2% at the end of the second quarter of 2016. There were no impairments of securities or significant realized gains or losses during the quarter. The investment portfolio continues to be high-quality, carrying an average AA- rating. Our duration of the portfolio at quarter-end is 3.69, and we hold 57% in municipal securities, 25% in corporate bonds, 11% in U.S. Treasury and agencies and the remainder in cash and other investments. Over the past year, our allocation to municipal bonds has increased slightly, and our allocation to corporate bonds has decreased slightly. Approximately 51% of our investment portfolio is classified as held-to-maturity, which is in a net unrealized gain position of $11.5 million. These gains are not reflected on our book value as these bonds are carried at amortized cost. With regard to operating expenses, our total underwriting and other expenses decreased 10.5% in the quarter to $20.2 million compared to $22.6 million in the same quarter last year. We saw decreases in insurance assessments and commissions during the quarter compared to last year's second quarter. By category, the second quarter of 2017 expenses included $6.6 million of salaries and benefits, $6 million of commissions and $7.6 million of underwriting and other costs. Our expense ratio for the second quarter was 24.4% compared with 24.9% in the second quarter last year. Our tax rate decreased to 30.1% in the quarter, down from 32.4% in the second quarter last year. The decrease reflects the larger amount of tax-exempt income compared with taxable income during the quarter. Return on equity for the second quarter of 2017 was 13.1% compared to 13.7% for the second quarter of 2016. Our operating ROE for the quarter was 13.3%. On July 25, the company's Board of Directors declared a regular quarterly cash dividend of $0.20 per share, payable on September 22 to shareholders of record as of September 8. And finally, just a couple of other items of note. Book value per share at June 30, 2017, was $25.02, up 5.5% from year-end. Our statutory surplus was $406.4 million at June 30, 2017. That was also up $12.4 million from year-end. And then finally, we'll be filing our 10-Q for the second quarter later today, after the market close. That concludes my remarks. And we would now like to open the call up to investors for our question-and-answer session. Operator. Right. That's a really good angle. We individually underwrite every account, so we do monitor the ELCM in the aggregate. But we do base it on the risk that we're evaluating at that time. And I can tell you, in the quarter, I was surprised at some of the lower ELCMs that we have that quoted and failed. So there are some pricing out in the marketplace that is well ---+ significantly below AMERISAFE's. And at that point, we're not going to chase the price that low. It's just not what we do. And <UNK>, I think sometimes, we see a mix shift, and maybe the retention was in states where we had higher ELCM, so that can drive the number a little bit in terms of what's happening, where we've renewed. But as <UNK> mentioned, there were some quotes out there that were pretty low relative to an ELCM and much lower than where we would want to go. We're not seeing any specific trends that I think are of note. We're probably ---+ I'm probably going to be a little bit more cautious on this call than maybe we have been in prior calls in giving state-specific data because it is highly competitive out there, and I wouldn't want to give away competitive data. But obviously, you know our larger segments, our construction and trucking, we see declines in both. From an audit perspective, oil and gas was still negative audits. But the payrolls were improving from prior quarter, so we take that as a good sign. No, actually, audit premiums themselves were positive. Now when we add them in with endorsements and cancellations, yes, they were negative. But audit premiums themselves were positive. It's the quarter-over-quarter change that brought ---+ was the $4 million decrease. But the only class of business where we've actually had negative audit premium in the aggregate is oil and gas. No, the $2.6 million is audit premium, endorsements and cancellation premium. We see and typically, you see this in a competitive environment. You see more cancellations. We've seen a slight uptick. It's not been dramatic, but certainly, we're seeing more cancellations than we saw last year. Someone gets a better rate partway through their cycle and cancels the policy with us. It doesn't happen as often, but that drove some of the change in the quarter. It's pretty consistent. It's just that it tends to be in more competitive markets, and it also tends to be in those classes of business that have the highest rates, right. They're much more price-sensitive if you're a roofer versus if you're a landscaper, for instance. Brokers are, in some regards, in the same predicament that insurance companies are. They're looking for premium because their base of their commission is premium. So they're very protective of their large accounts in placing those and making sure that they get renewed at appropriate rates for the client, that the client can accept, at the same time, commissions that are beneficial to the agent. Yes, that's a good point. I haven't really seen a swing in the distribution, no. Yes, <UNK>, I'll give the same answer I gave last quarter, which is we sort of expect the expense ratio to be 24% to 25%. And obviously, if net earned premium declines, then we'll be towards the higher end of that range. But we're not expecting any dramatic changes. But we're aware that we're in a soft market, and we have to continue to manage our expenses the way that AMERISAFE typically has, with a pretty frugal culture and focus on underwriting. Yes. I appreciate you asking, <UNK>, but we typically wouldn't give out those numbers until the quarter is over because, as I mentioned with the second quarter, it varies month by month. I just have a couple. Just going back in investment income. Was there anything unusual outside of the mark-to-market on the alternatives like bond prepayment or anything unusually good in the quarter just from kind of a core yield perspective in the general account. Yes. I think we've been increasing our duration and investing in higher-yielding securities, particularly when yield spiked up in the muni market and overall in the fourth quarter. So we're starting to see some of that come into the portfolio. There were some calls during the quarter that did influence investment income a little bit, but that is sort of the components. It can be volatile. But it certainly was up, still 9% or so, without the hedge fund adjustment. Okay. Yes, that's helpful to have in the model. And then just on capital. So presuming that the top line continues to be managed in light of a competitive market, the premiums-to-capital measure gets to be pretty darn low. And so I just kind of be curious how you're thinking about that. I mean, the company isn't well capitalized, but it's ---+ I got you like 0.8 to 1 right now, premiums and surplus, and that could move lower even with special dividends. So is there any change on how you're thinking about it. Because I feel like you're kind of moving from being overcapitalized to maybe really overcapitalized. And I don't know if there's any thought of kind of how to manage that if you have to continue to be really selective in a soft market. Randy, that's a good question. Our board does discuss our capital situation every quarter, when they look at the regular dividend, and they'll continue to evaluate that. Certainly, you're talking about all the right dynamics in terms of the things that they look at when they look at capital, what are we going to need that capital for, organic growth, M&A, whatever it might be, and then what is the likelihood. And then being disciplined about returning that back to shareholders if we cannot use it through dividends and other means. And so they'll continue to look at that. But you're right. If the ratio continues to go lower, it certainly causes us to be more capitalized ---+ more well-capitalized than in the past. Is there any thought that there could be some opportunity out there from a business perspective. Or is the market just ---+ I guess what I mean is, if you go back maybe 3 or 4 years, there was this idea that some folks could have some issues out there. Some blocks might become available. It seemed like maybe there were a couple of things that came around, but they went for pretty high prices. Are we just past that part of the cycle now. And where - which any kind of strategic opportunities be within comp. Meaning to allocate some of that capital writing more business in size or in bulk. Right. I think when you're talking about buying books of business in a declining environment, I'm not quite sure what we would be buying at this point because consumers ---+ the end consumer is expecting rate declines. And given our underwriting discipline, I would assume we'd be a little bit more pricey than they were accustomed to or looking for. So if we were to purchase a renewal book, I'm not quite sure how much of that we would actually retain. Yes. But we do look at it from time to time, and it is something that we think about as a use of capital. I think, as <UNK> points out, it's probably less likely in this market than a few years ago. Thank you. AMERISAFE has a consistent history of turning risk into opportunity through the experience and performance of its employees, evidenced this quarter in our 89.1% combined ratio. Our commitment to maintaining discipline enhances our financial stability for the protection of our policyholders and our shareholders. Just this month, Ward Group named AMERISAFE to its 2017 Top 50 in the P&C industry. This recognition was for outstanding financial results in the areas of safety, consistency and performance over a 5-year period, 2012 to 2016. Congratulations to the AMERISAFE family on this achievement. Well done. And with that, I'd like to thank you for joining us on the call today. Have a good day.

2017_AMSF

2016

WEX

WEX #It's both. If you look across the businesses ---+ and part of what I like about this quarter is you can actually really see the organic growth coming through in each of the lines of business that we have. And that's driven largely by a lot of work that's going on the front end just to progress business through the pipeline. So I'd say that it continues to look really good. And as you get into this part of the year, you certainly have much more visibility into what's going to play out towards the end of the year. So we feel good about that. In terms of the M&A pipeline, there's always going to be big ---+ there's a lot of opportunity. For us, we're obviously spending our focus delevering the Business, but we will continue to look at M&A opportunities, regardless of what's happening within the marketplace because we want to make sure that we are participating. I will take those in reverse. If you look at the Travel segment, the biggest impact that happened with Travel ---+ we talked about this ---+ was we had one large customer that signed a new contract in April of last year. So that's anniversarying in. And at the same time we also had some customers hit higher tier levels, just because the spend volume has been really strong ---+ stronger than what we anticipated. So we've got the impact of both of those things affecting this quarter. And they will ---+ if you're looking for more of a forward view, we think that the impact of that is reflected in this quarter. And that's what you would expect to see as the baseline going forward. A piece of that is the hybrid contracts that we have in the business. So as fuel prices have dropped, it makes the rate go up, and a piece of it is just blended mix across the portfolio. So there's nothing really that's novel that's happening. <UNK>, hi, this is <UNK>. At the top of our range, EPS guidance, if you remember, was $4.10 in February. We have move it, you are correct, to $4.37 for the full-year 2016. As you also said, domestic [PPG] for February was $1.97, and now we are raising it to $2.14. We are maintaining in the 2016 [meet for] guidance, the revenue is about 10% growth and 20% on earnings, assuming constant currencies and also the matched fuel prices and no impact on hedging. What I would tell you also is that there are a lot of puts and takes, and that the majority of the EPS increase is due to changing domestic fuel prices, as you mentioned. But we have a portion of the first quarter [profitability], and so more that is more anticipated contraction in the spreads and volume in the US. Thank you. Yes, same-store sales were down 4%. It's actually a little bit worse sequentially than it was in the fourth quarter. And I would say similar trends, though, when you really get into it ---+ it's largely driven by oil and gas, a little bit more affected by large fleets than smaller fleets. Transportation ---+ actually still down. And in construction ---+ is a little bit softer this quarter than it has been. So if there was a standout from quarter to quarter, construction is probably it. It's not quite as strong as it had been in the previous couple of quarters. I would think of this as the normalized rate. So what we reported in the first quarter is something you would see as the baseline as you go through the year. The pieces that affect the rate are mixed. As transactions occur geographically, there's obviously significant differences on rates. But there's also typically corresponding differences in rebates. While it has an impact, it's not as large as you might think. The other thing that affects it is customer blend, and as a customer hits their different spend levels, then that can affect the overall rate. Generally, I think that you're going to see a little bit of a downtick in Q2 and Q3 because there's just a seasonal mix to travel. But you shouldn't see the same type of decline you saw from Q4 to Q1. Again, think of this ---+ what we're reporting this quarter ---+ as more of the baseline going forward. Not to get too customer specific, the larger customers in our portfolio had some pretty significant spend volume increases. And that's a piece of it. And that travel happens everywhere. It's truly global. And then we've had a customer ramping in Europe. It's more than one, but the one that's notable enough that it's actually affecting the volume mix. That's a trend that we are expecting to continue as well. As I mentioned, the win with Ctrip, which we're really excited about, is still in the very early stages and it's kind of too early to know what the ramp is going to look like. But it's a customer we're obviously really excited about having into the mix and could affect the future results. The 9% positive is payment processing transactions. I would bridge it more ---+ if you look at the total transaction number, it's probably a better bridge. And then you add the negative 4% to that to think about how we're actually growing organically. That's what ---+ we still believe it's going to be breakeven this year. On an operating income basis, and we're progressing well on that front. The key pieces to that, that we've talked about, are continue to grow the portfolio, making sure that the pricing is set at market. And then working on operational efficiencies, and the team in Europe is doing a great job of progressing on all of those fronts. I'd say it's very much on track, if not ahead of where we expected it to be. We had said that on $0.10 of fuel price movement would translate into $0.16 of EPS. That was unhedged, so the underlying presumption is you're looking at the Business unhedged. We also had said that's domestic US only. And so the pieces that affect fuel price movements ---+ you still can get some movement in Australia; you just can't translate it to the NYMEX. And in addition to that, in Europe you've got the counter to that with ---+ you've got movement in spreads. And then so in this quarter, when we're giving an update on guidance, <UNK> talked about the fact that we're expecting fuel prices to go from $1.97, which we gave on the last call, to $2.14, based on the NYMEX curve on the full year. So you're getting the benefit of that, but we're also getting ---+ we're anticipating that's going to have some effect on fuel price spreads in Europe. That's where we're kind of buffering those two things together when we're looking at our full-year guidance number. I think that has been a trend in the US. We have signed ---+ when you think about transaction processing, for us, it's largely ---+ it's just a technology play where people are outsourcing the technology. And over time, we tend to build confidence in the fact that they can move from just the technology to some of the other areas of expertise that we have around ---+ the whole host of products from a credit perspective all the way up to ---+ in some cases, we're doing sales. We're doing that more and more, where we're actually the front end for a lot of the oil companies, because we have an inherent competency in that area. So I would say that it has been a trend we've seen over the years. And it is something that we ---+ when we look at a business, we're interested in doing the whole host of services. And obviously from our perspective, the relationship is deeper when you're doing more than just processing the transaction. I don't know that I would generalize; I think in this case, that was true. It depends largely on the portfolio and how it's been managed historically. It's something that we were able to do, and it was part of how we thought about the portfolio. It was a piece of how ---+ when we talked about moving it to operating margin breakeven, it was a piece of the plan in doing that all along. I put that in the longer-term category in my mind. There's nothing really new to talk about. There's still RFPs that are in process and kind of making their way through the path. I think it has more to do with the ---+ the mix isn't really the right word ---+ but some of the contract renewals that we've gone through, that mix of moving one other portfolio into ---+ from that transaction processing relationship to payment processing relationship. All of those things are coming together that are affecting the rate in this quarter. So it's not really anything that's new other than a normal process that we're going through and renegotiating with our customer base. There's about $70 billion worth of spend, if you look at US, Europe, Asia PAC and LatAm. So we're about 28% of that, so if you kind of do the math on our spend, comparatively. You asked about the merchant model versus agency model, so we're playing heavily in the merchant model, which is where we get involved in making the payment on behalf of the online travel agency, as opposed to the consumer making the payment directly to the hotel. And typically, the spend volume is roughly half and half. I haven't seen anything that's really updated that, nor have we seen trends that would make me think that's changed much. Yes. Mathematically, that's probably right. Yes, we had set long-term growth targets of revenue 10% to 15%, and earnings 15% to 20%. And we actually, with the exception of fuel prices, I'd say we've largely been on track with that. When we think about the Business over the longer term, part of what we've been trying to do is diversify the Business away from the fuel price exposure. We thought hedging was an okay strategy for a shorter period of time. But over the longer term, the intention was to increase the other parts of the Business in areas that we thought we had expertise that would also reduce that exposure. And so I would still stand by the numbers, as we think about the Business on a longer-term basis that we're seeing that represent in the quarter. If you take out the impact of fuel prices and FX, we grew 12% top line and 16% on an ANI basis, again, adjusted for fuel prices and FX. Underlying the Business, you're still seeing that level of strength. We've gotten to the point where we're starting to see fuel prices, hopefully, lift again. But regardless of whether that happens or not, we're making sure that we're gearing the Business on a longer-term basis so that there isn't as much sensitivity longer term to fuel prices. You were right in using the US calculation, but as a contra to what we're picking up in the US. You're saying that $0.27 is largely based on the fuel price changes happening in US fuel prices. We're expecting to see some contraction in spreads in Europe. So we're buffering some of the expectations we're going to have in fuel prices, because what typically happens is you get a little bit of an offset to that. And at the same time, we're pushing through the piece of favorability we saw in the first quarter that wasn't timing related. There's a little bit that was timing, but the majority of it, we actually are including in increasing the guidance. You asked about Ctrip, and I think it's kind of early for us in that stage to really know what that's going to ramp to be. Something like that, we typically are anticipating a ramp of new signings when we give out guidance. Something that's larger like that, and unpredictable ---+ we won't necessarily factor in until we have better insight into what that's going to look like. If you were to normalize ---+ <UNK> had said this earlier ---+ but if you normalize for those factors, the mid-point of our revenue guidance is a little bit more than 10% and mid-point of our earnings guidance is a little ahead of 20%. It's a little bit better than what we had said on the last call, but pretty comparable. Thank you, Raquel, and thank you, everyone, for joining us this quarter. We look forward to talking to you next quarter.

2016_WEX

2016

CRL

CRL #Given my nationality, maybe I will make a comment on the Brexit. And as you mentioned we gave you some of the immediate implications to Brexit being the impact on the foreign exchange. In terms of looking forward, it's still early stages in the UK. My personal belief is that as each week passes, I think it begins to stabilize a bit. I think, Prime Minister May has done the right thing in terms of not signing article 50 until she's got her ducks lined up. And I think it's becoming a much more thoughtful approach to the exit than I think it was looking like a few weeks ago. And while we're involved in a number of industry workshops in the UK, just to quote a couple, The Association of British Pharmaceutical Industry is one, the Bioindustry Association is another, and we have a seat at the table of these associations, and they have been formally asked to look into the implications of the EU, UK exit, and I think that the workshop called the Life-Sciences Transition Group, which is giving some advice to the British government. So, and of course we are keeping closely aligned with tax advisers, banks, and others to assess the impact on tax, trade, imports and regulatory methods. I've got a caveat, of course it's early days, but from what we're picking up, for our industry, the impact of Brexit should be a lot less than many other industries. The mood music at the moment seems to be that this may not be cause for major concern in our sector. That said, I do want to caveat that it's still early days and of course there's still plenty of room to go, and get things wrong. But it looks good at the moment. I assume you are asking principally about safety. Let me just, so I'll comment on that first. We're continuing to get 5% increase over prior year. Which we are pleased with. We have a very healthy mix of general and specialty toxicology which also benefits margins. And our efficiency initiatives have been quite powerful as well, so we're really pleased with how nicely we've, continuing to drive margin, and the space stays relatively full. When I say relative I'm talking about all of our competitors and clients as well. But, space seems fuller than it has been in years. So, as space continues to be relatively full, we have some level of confidence we will be able to continue to get price. And, so, we're pleased with the value proposition given the level of our investment and the quality and complexity of the work that we are doing. So far prices are 5% over last year. So, we'll start with the last part first. You should think that having an operating margin over 35% is extraordinary, and we would love to do that on a continual basis. It's not something we are ready to promise yet. We, our longest term goals are to have operating margins in this segment in the low 30s which we have always done and are quite confident we can continue to do. Obviously we are very serious about driving efficiency, and getting price when one can get it, and having new products and enhanced services. So all I can say is our goal will be continue to drive those higher, and further, but I would have to stop short of promising that 35 is here to stay, although that would be our goal. There's a lot of factors. We had very strong productivity enhancements with our new manufacturing in our Microbial Solutions and improved inventory status so we just sold a lot of cartridges and a lot of handheld units. That business has three parts, all of which are performing really well. Our Celsis business is performing quite well, also at, or ahead of where we had anticipated. Also as we said in our prepared remarks, our biologics business which is obviously driven by the increasing strength and availability, and success of new biologic drugs is really driving the demand for that sector so again our capacity utilization is good. There is some price in there, and we are utilizing, we've got a very good mix. We've made some investments in our facilities and I think those are bearing fruit. We are quite confident in that segment's ability to grow at least in low double digits and certainly to have operating margins remaining at least at low 30s. But as I said earlier we are really pleased with the quarter, and while we aspire to, we are not ready to commit to it. Sure, <UNK>. Well look on the capacity side, we work really hard with all of our businesses, to have capacity in sync with demand. I should also say that we have some efficiency initiatives in place, and being further integrated into our operating modalities, such that I think we will be able to continue to use our facilities in a more efficient and more robust fashion, which should help to enhance our operating margins. We are not concerned that we're not going to have enough space if that's part of your question. So I'd say that the demand curve these days is driven by, we have price, we have a mix, with sales of inbred animals, and immuno-compromised animals and sort of higher value animals. We definitely continue to take share, I would say generally, but perhaps more focused on the academic sector given our shares are very large in pharma. We're getting significant increase in China, which is obviously a very large, very new and very large growth market for us, so we are going to continue to build space and service that locale from multiple geographies. Many of those small cities there of course are more than 10 million people. And we are getting some service revenue, which again, sometimes it's not as linear as we would like it to be, but some nice service revenue in our genetically engineered models business and our diagnostic business and our insourcing solutions business. The business has stabilized, it is affected by large reductions in pharmaceutical infrastructure. We saw a little bit of that in the second quarter, we saw virtually none of that in the first quarter, kind of hard to predict what we will see in the third-quarter but short of that, the business feels stable. We are really pleased with the operating margins, and obviously pleased to kind of be at our longest term growth goals for the first and second quarter. So we are quite confident we can continue to grow the business low double digits. I would say that we had a little bit of a blip in the first quarter because we were changing over our manufacturing modality, in the Microbial Solutions business. So that is unusual. And I would say that businesses very unseasonal, if that's a word, it's quite consistent. The biologics business is hard to predict from history, but I would say, tends to have a slightly softer first quarter usually, and then a better back half of the year. But doesn't have the kind of seasonality related to holidays and summers that we typically see in the research model business, when people just don't buy animals because they won't be there to do research with and on them. And the other piece in that sector which we didn't call out this quarter is smallish but nicely operating egg business which is, has a couple of clients that buy more at certain points of the year but I wouldn't say that from portfolio point of view is very seasonal. I'd have to say that whole segment is not seasonally impacted much at all, and certainly not research models perhaps even the safety assessment business may or may not so that's a good thing. There's lots of competitive, it's interesting, it's, at the moment our most profitable segment and a very high-growth segment on an organic basis, it's quite competitive. We have lots of big competitors both in the biologics piece, companies our size or larger that are well-financed and do good work, and we have growing competition in the microbial space. The distinction though, is that they tend to be siloed approaches for a lot of our competition. These businesses are in a larger context, for us, so when you talk about revenue synergies, we have lots of pharma clients who buy a whole bunch of products and services from us, but also want us to help them with quality control aspects of the manufacturing facilities or testing drugs before they go into the clinic or after they go on the market. And of course in the egg business the products are used to manufacture vaccines and a lot of our big pharma clients have veterinary pharmaceutical subsidiaries. Sales synergy is quite good, although the microbial and biologic sales forces tend to be more technical and a little bit more siloed than some of our other sales organizations. But there's still some connectivity. Very strong segment for us that is quite consistent and quite predictable, and we really do think that without additional M&A, and there may or may not be M&A in that space we can continue to grow it, at least at low double digits and we will obviously work hard to continue to drive the margins up. But as I said to an earlier question, while we strive to get to the mid-30s we can't promise that yet. I had a little trouble hearing the question. I don't think I know that off the top of my head. Our biotech revenue is pretty substantial and there are thousands of clients that comprise that. Yes we have lots of sales with a lot of the big players. I won't mention any by name even though you did. But we have a lot of virtual biotech companies and we have a lot of what I would call kind of second-tier biotech companies that are public, that have substantial market caps that are in late phase 3 or have their first drug in the market and look like they'll have serial one. We called out Moderna in a press release recently which is a very hot technology that cuts across multiple therapeutic areas. And again, we don't have any clients, even our biggest pharma clients, that comprise more of the 5% of our revenue. Look, there's going to continue to be churn in our client base, there has been forever, <UNK>, forever. And our biotech clients will merge with one another and get bought, and occasionally some will go out of business, and every year hundreds more will start up. Look, so all we can do is do the best quality work for them and even if companies get bought, it's likely that the buyer is a Charles River client and it's likely that we will continue to have the work. Every once in a while we are going to have, whether those big biotech companies get bought by big pharma companies, that maybe does less with us than others, that would be a good thing as well. While anything can be disruptive for a very short period of time, we think it all gets sort of meted out in the scale of the work that we do. We are confident that we will continue to get appropriate levels of enhanced price in our safety assessment business, commensurate with the demand and available capacity the complexity of the work that we do, and the synergies that we have with other lines of business. All of it is subject to the long and short-term contracts that we have with clients. We have different pricing modalities with all of them. We have seen a classic and appropriate supply and demand curve here, as our spaces fill over a number of years. You have been on this journey with us, and we are essentially full. Appropriately full now. We're using our facilities well. We acquired a little bit of incremental capacity with WIL, and of course we have opened a little bit of incremental capacity with Massachusetts, and a couple of other sites, both last year and a little bit this year, that, I think as long as the demand is persistent, and we are able to accommodate it with the appropriate amount of increased capacity and we don't have large amounts of unused space that we would be able to get, continue to get price. And then clients are very interested in, particularly the big ones as they shut down space and having access to us as the, particularly as the studies get more complex, access to us, helping them design the study and interpret it. Hard to phrase what I'm about to say but I would say that price continues to be important but I would say it's often less emphasized than it was in prior years. That everyone is really interested in quality of work in science, speed and responsiveness, I would say, and collaboration kind of, second, third, and fourth, and while price is in the mix, we rarely start conversations that way. I'm sure we do sometimes. It's not the principal focus, and I think that's obviously a good thing, and it's an appropriate thing given the level of our investment in the fact the clients are increasingly relying on us. Yes so we have a wide range of clients in our discovery business from the very biggest pharma companies to start up biotech and everything in between. I wouldn't say it's particularly focused upon or used more widely by any particular segment of clients. Our very, very early discovery assets are small molecule-based. So maybe there are less classic biotech companies in that segment. We are seeing enhanced interest in our discovery capabilities. We called out some integrated deals which we recently signed in three therapeutic areas. We are working really hard on those. We have lots of conversations like that ongoing with large and small clients. It's very complicated scientific fields that tend to be multi year and multi million dollar deals. Sometimes there are milestones, sometimes there aren't. And we are working hard to be able to sell across that whole discovery portfolio, not just the in vivo piece but in vivo and in vitro and we're also working hard to have pulled through from discovery into safety, which sometimes happens, eventually happens. We do the discovery work and then the drug is looking good and the client uses us for safety assessment. Our aspiration is to have those conversations up front. Some clients will contract that way and others won't. Some of the integrated work is a lot longer sell than we had originally anticipated. That's okay. And a lot of it just has to do with educating the client base that our services are available and the nature of them. They tend to be very highbrow scientific conversations between our scientists and the clients' scientists. So the sorting out how we can help them and what we can do for them that they can't do themselves. I would say the sale is among the most complex that we have, and to that point we have a very sophisticated sales organization. Most of those people are PhDs so we are going toe to toe with our clients. We are pleased with the trajectory and the potential and some of the recent wins that we have had. Yes, as I said to the last questioner, the sell takes a while and we really have to have time to go in, so while I keep using the word sale, its way more sophisticated than that. So you're really going in and saying, look, we have the scientific capabilities which we believe, if you need them, can be quite helpful to you. Sometimes the initial feed back is, yes, we do discovery, why on earth would we need you, thanks for coming. But often when we dig down and we tell them we've found 65 development candidates, a third of which have gotten proof of concept working through the clinic, their eyes open up and we talk about the therapeutic areas where we have had success. We have a lot of clients that some of our discovery capabilities are what I would call industrialized aspects of some of the things that they do, but we do on a more routine basis, and we do more efficiently, and I would say that we do actually better science because we do more of it. When you get the client to listen, I would say, look, increasingly clients are more collaborative and open-minded, and are looking for any edge they can get, with anyone, whether it's another pharma collaborator, an academic collaborator, or a CRO collaborator, who will help them either discover something or enhance something that they've discovered or help them develop it, either to elimination, or to move it through the clinic. So I would say that clients are increasingly more open and interested in hearing our story and as the discovery portfolio gets larger, and we have greater therapeutic area coverage, and of course we start quite early in that process. There is more to talk to them about and I've always thought that a critical mass is important for us to get their attention and I think we are doing that, increasingly doing that well. Particularly for clients who are now working across our portfolio, starting with them and discovery, particularly for the smaller clients is really magic, because they tend to stay with us during the lifecycle of that drug and perhaps additional drugs coming down the pipeline. Little bit hard to do. The research model business, the research model, so the RM part of RMS, we're getting 2% to 3% price, and I would throw mix into the pricing comment as well. We have higher value animals. That's playing through there, you get a little bit of share gain. You've got pure, de novo available business in China, so you just have market availability which is increasing all the time. And then the service business, I would say, we have slightly less pricing activity in the service business, but the volume has increased nicely over the prior year. So kind of all of those things in the aggregate give us that 4% increase. I think you asked a couple of questions. We continue to be interested in expanding our portfolio, strategically, and scientifically. So we are both more important and more helpful to our clients. And as we said many times before we are emphasizing discovery. We are interested in probably in vitro capabilities. There are some geographic areas of interest for us and we would not foreclose expansion in any of our current businesses that are growing. I would also say that we have an extremely active and robust M&A operation and we have several deals in which we are in discussions at the moment. But that's sort of always the case with us. But we are very focused and there are a lot of things available at the moment. So as we delever, as we promised, and get below three turns, you should not be surprised if we do something meaningful. I would use the term meaningful to describe something not gigantic, but meaningful that it moves the top and bottom line and also gets us service capabilities that our clients like. Specifically on the safety assessment side which you asked about, all I can say is that all of our competitors, including WIL, which we bought, but all of our competitors traded in the last two years, three of them traded in the last 12 months. Several of them have traded to private equity, which means that sometime in the future they will be available again. And I couldn't really comment, I wouldn't comment anyway but I really couldn't comment on what we may or may not do in that space. It will depend on if and when those markets, when those businesses come to market, and how strong the demand curve is then. I wouldn't rule anything out. If it could help us support our clients in a more holistic way. You said discovery so I'm going to assume that you were talking about discovery and not safety. I would say that with a big pharma companies, more of the activities that they periodically do, so good example would be in our oncology franchise, we do something called zenographs, which we put human tumors into immuno-compromised animals. So, in some of the big drug companies where they're doing cancer research, they will do that themselves, but they kind of do it periodically, and, not the best use of their time or their people and while it's not trivial, and it's reasonably complex, it's much better in our hands where we do lots of that were lots of clients. That's an example of something that even the big drug companies say, well fine, why don't you do that for us because you do that better and more efficiently. I would say small clients, we can help them with target identification and enhancing their targets. We can help them with the medicinal chemistry and we can certainly help them with the in vitro and in vivo aspects of our business. I would say that our discovery assets are appropriate for clients large and small. It really depends on their view on outsourcing. I would say that almost all of our big pharma clients are increasingly more open and interested and actively doing outsourcing. There are a few that remain reluctant to do that, but they're, you can see they are beginning to think about it. So the client base, both large and small, will be significant and I continue to believe that the scale and depth and complexity of our portfolio and our ability to explain it to clients and sometimes link it with our safety assessment businesses or our Biologics business will be very increasingly more important to our clients. Safety, look, is very much outsourced already. At least 50% of the work is outside. I know of only one big drug company that does long-term tox studies internally. A lot of them do the early stuff internally, but even that, they are doing less of. And of course almost all of the biotech companies have no toxicology facilities and no interest or capability or need to do that. We feel that the outsourcing volume will over time, go from 50% or maybe 55% to 75% or 85% or higher. And the only thing that would retard that growth is lack of capacity or staffing, neither of which we intend to have a problem with. It's a scientific activity that's highly regulated, that we do better than the clients, and we do a lot more of it than the clients, and we do it in multiple geographic locales, so it's quite, we are quite confident that work will continue to be outsourced. Thank you for joining us this morning. We look forward to seeing you next week in New York at our meeting with Management. This concludes the conference call. Thank you.

2016_CRL

2015

XLNX

XLNX #We're not really seeing anything that significant in the price increase area. I was concerned on the second part of your question about the demand impact, particularly on smaller customers. We have seen ---+ we had strong channel sales in this last quarter and we are forecasting strong channel sales again, including European, which I assume is the biggest source of your question, including on the European side. It's really not ---+ at this point, has been a big of a deal as I was fearful of, because while we had maybe a soft quarter a quarter or two ago, things have come back pretty nicely. The Zynq product offering was a breakthrough offering. It was the ---+ generally the last part of the roll-out. And as such there was a large number of design wins. Now those design wins which were targeted at somewhat slower-moving markets like industrial and automotive, those design wins are moving to production. It's a unique product. The number of design wins is phenomenal. We're learning because of its nature that in some cases it takes longer. It's also a more sophisticated product. Hence, it takes a little longer to do the design. It requires both software and hardware. It has a high performance embedded process, a system. The number of design wins is just huge. And the overall magnitude of the design win value on [think] is very encouraging. It's very significant. And now it is finally starting to grow a very healthy clip. Until last year it was relatively negligible in terms of the portion of revenue, but now it is growing at a fast rate as these applications in automotive, wireless and mill arrow and industrial control are starting to hit production. I think also, you asked specific about design kits and our design board environment. In terms of numbers of kits and boards, it just totally swamps in terms of numbers all previous FPGA boards because of the nature of the cost point and the price point that many of these applications are going after. More of the $700 versus the $800 or $900 kind of an ASP. Both our distributor and Xilinx have a number of inexpensive boards and kits. The numbers of those that have been shipped out over the last couple of years is just really phenomenal. We really think we are seeding the industry really well with these capabilities. Thank you. So, Joe, we really haven't had any, I would say, any appreciable lead time increase on a broad perspective. There is a class of products that we have had a little bit of ---+ we've had some lead time increase, but I wouldn't say it's going to be that material of an impact to anything, our logistics. I don't think that has been a particularly ---+ there's anything there to concern anybody with from a logistic supply perspective. What was the second part of your question again. The fab cycle time. No, we have seen no push-out or lengthening of any fab cycle time. We are getting all the wafers we order when we order them. There is nothing going on there either for us. No, not really. It was a rep network where we're ---+ and we've terminated a variety of reps. In Japan, we are transitioning. We have a number of reps in Japan. The nature of that business is a little different than the rest of the world. We are transitioning one of the reps into our other rep network. That's the only really transition that we have ---+ excuse me, distributor in China, not reps. Distributor in China. One distributor moving into our other distributors in terms of the business. But nothing other than those two things. Reps in the US and Europe, generally we're transitioning to direct sales. Then in Japan there is a distributor that we are terminating and moving that business to other distributors that we already have. There is a lot of questions there. We think there is an opportunity there. That's why we have the SDAccel product, which now we're releasing (technical difficulties) to our customers. And we strongly believe that that, together with a stronger focus on this market should enable us to reap the benefits of it. We think it's a significant market. Whether it is tens of millions or several hundreds of millions of dollars, we think it's going to take time to grow to those larger numbers, and it'll take quite a long time. We are committed to having the best solution with regards to acceleration which addresses those markets. And whether it's x86 based or Ohm-based or whatever approach, then we are going to pursue solutions for that market. I think we are well-positioned. And the key to our leadership is now in this software which enables achieving or getting at that acceleration in the most efficient way. That's how we view it. It's a big market, but maybe not quite as huge in the short term as maybe others have positioned it. Single die helps but comes with a cost and the cost that you get typically is flexibility. The nature of these applications is they're very, very fragmented. Every one of them tends to have a different payload. Actually that payload is dynamic. If you are using it to accelerate some sort of algorithm, the algorithm that you are accelerating changes all the time. And so if you do too much integration and you tend to have a very inflexible solution, you might end up losing. When we talk to the customers, and these tend to be a different class of companies. Their approach is they want to retain as much control over their acceleration path. And they would rather not give that to anyone else. If you look at the way their approach has been, typically they do not buy from the traditional server companies. They actually build their own and they try to come up with a very specific solution which is the most valuable for them. There is a case to be made for integration, but what you lose when you do the integration is a lot of the flexibility which is inherently important to this market. I would say it is gray. In some cases it might go towards integration. In others actually having a separate solution and being able to maintain the flexibility there is a huge benefit. We have not seen a pause as a result of whatever has been in the newspaper and their stated position on this. <UNK> was only, I think, talking in general about when two companies get together what can happen in terms of how their organizations meld together. At this point in time, as best as we can tell, this is not going to be consummated in, at the earliest, later this calendar year, maybe in next calendar year. We're not seeing any sort of pause with our business with either company at this point in time. Thank you. Next question. We have now restructured our sales force to be tiered with two direct elements and the third element which goes through DiSTI. We are managing that a lot more closely than we have before. With the largest accounts, primarily in Communications and data center, we believe that we would benefit from a more direct interaction because fundamentally level of engagement needs to be deeper than it was before. Are we doing this later than ideally we should have. We probably are. In retrospect, this would probably have benefited from making this transition a year or two ago. I think also, I mean, it's not just ---+ this is not only a focus at one end market. There's going to be some transitions going on even in our aerospace and defense market coverage to more direct sales. I know some of these don't ---+ some of these kind of wins don't turn into immediate revenue. They are slower, but it does have both Industrial, Aerospace and <UNK>fense, test and measurement, as well as the Communications segments impacted. I think it is a net positive for us. As best as we can tell, and this is more about a CapEx China macro, I don't [want to] say macro, but China macro-related CapEx spend and the pace that they're getting funded internally to do things. I don't know what else. Some of it, there is always the politics between the FD standard and the TD standard. It's hard to tell whether that is still causing delays in FD as a result of TD trying to be ---+ and China Mobile trying to be more dominant. I don't know that I'm qualified to comment on whether how much of that is true or not. <UNK>finitely the wireless business, because of the volume and concentration of customers, tends to have a drag on our gross margins. So we would expect, and we have modeled this, that the second half would be lower than the first half as a result of that. I'm not going to get into the real specifics, but the second half would be lower than the first half. We are still confident in delivering our ---+ in our stated goal from investor day. This is a topic which is very sensitive. We have the capacity; you can tell by our track record that we do this very, very cautiously. The nature of our business is such that it has a unique element to it. So doing acquisitions for acquisitions' sake is not trivial for us. The answer is, we can do it. We know how to do it. At this point, if you look at where we are and what we have done, it's primarily been technology acquisitions as opposed to acquiring other companies that have a totally different business model and modus operandi.

2015_XLNX

2016

HRL

HRL #Yes. Sure. <UNK>, this is <UNK>. Again, from a sales perspective or brand perspective, clearly very pleased with the work the team did on continuing to grow the SPAM franchise. The SKIPPY business, the introduction of SKIPPY P. B. bites continues to go well. Our Mexican foods portfolio also continues to perform well. As we mentioned, we did have some increased advertising cost, but that's, from our perspective, a positive to support the ongoing and future brand growth. And there's no doubt, we have a couple areas in the unit that are work in process. The chunk meats category, which it's not a huge part of the portfolio, but that's become competitive and our team's working on really taking a different approach with the product offerings that we have there. Again, we talked about Compleats being down, and we're working very strategically to expand the availability of some of the value tier offerings and really increasing the sales or unit rates. And so for them, it was a mixed bag. But I think we still feel very positive on the outlook for Grocery Products going forward. I think one other thing to consider for this quarter, it would be more of a product mix issue. Some of the canned items are not typically high sellers at this time of year. But overall, feel very positive about the transformation of the portfolio and where GP's headed. And I would just add to <UNK>'s comment that we saw quite a run-up in trim, which is an input on a lot of the Grocery Products items. So while they experienced favorable cost of goods in a lot of areas, that was one area that did negatively impact them. Thank you. <UNK>, good morning. This is <UNK>. I think just as a reminder, when we took over the Applegate business, clearly we knew that there were some raw material or supply issues in terms of supporting that business, and then those were compounded with the outbreak of avian influenza. So in the short term, the team has worked really hard to get raw material supply back in place and we feel good about where we are today. So that certainly made the volume growth a battle for the team, and so we the had to regain some lost distribution. But the growth, we've seen some growth, we've seen some increased distribution. From our perspective, we love the brand, we love what the future holds for the brand. And again, on a short-term basis, it's clearly on target to deliver what we said it would deliver at the time of acquisition. He's saying for all of Refrigerated Foods. Oh, well, I think, again, as we think about the different parts of the Refrigerated Foods portfolios, our meat products team continues to be focused on the value-added items and they're doing a nice job. Our food service business continues to outperform the industry and we expect that to continue. The Applegate business will continue to show growth, now that we've got returns of supply. So overall, we feel good about that portfolio, as well. And I would just add that as we transition, particularly when you look at an Applegate that is more of a sales driven business than a volume driven, and as we continue to value add the portfolio, volumes become a little less meaningful as you compare it to prior quarters or years that may have had more of a commodity element. Are you talking about any particular part of the grocery store or our business or ---+. I think, <UNK>, our position on that is clearly we're focused on the effectiveness and our ability to not only deliver a return for us, but for the retail partner. And so we continue to look at categories individually and where there's opportunity to be effective with additional spending, we certainly will take advantage of that. But can't tell you today that there's a significant specific plan in any one given category. Really, we look at our share repurchase being an opportunity to offset stock option exercises. We still believe that using that as a compensation element is appropriate to drive our business. So we're constrained because of the ownership of the Hormel Foundation at about 48% to 49% these days. So we've agreed that they should be under 50%. So that would be the biggest constraint. Obviously, took advantage of some pressure on our of stock this past quarter to be in the market and acquire some of those shares. Thank you, Savannah. This is <UNK> <UNK>. I'll go ahead and conclude the call for us. As some of you may have heard, we actually celebrated our Company's 125th anniversary recently here in July. This provided us a unique opportunity to bring many of our Company's employees together to celebrate the occasion. After visiting with these employees from across the Company, I've never been more optimistic about our Company's future and our ability to deliver growth. I'm very proud of our team's performance this quarter and I look forward to continued excellent results going forward. I want to thank you all for joining us today.

2016_HRL

2018

SPSC

SPSC #Thanks, <UNK>, and welcome, everyone. 2017 was a year of strong execution for SPS Commerce in a retail market undergoing significant transition. For the full year, revenue grew 14% to $220.6 million, and adjusted EBITDA grew 23% to $32.6 million. Additionally, recurring revenue grew 15%, customer account grew 4% and wallet share grew 10%. In the past several years, we have seen tremendous change in the retail industry as we continue to engage with retailers to adapt their businesses to the evolving retail environment and enhance their omnichannel capabilities. In 2017, we expanded our network to include such notable brands as Walgreens Boots Alliance, a $100 billion global conglomerate; Lidl, a German grocer and one of the largest retailers in the world; and Mills Fleet Farm, a full service retailer for life, work, home and recreation products. Throughout the years, SPS Commerce has partnered with many early adopters to successfully deploy new e-commerce strategies and continues to offer unmatched capabilities to those undergoing the transition today. It's imperative for retailers to improve shipping and fulfillment capabilities to compete. And enhancing customer experience may involve offering online educational webinars, loyalty programs, subscription boxes or repeat order programs. Retailers understand the need for retail and e-commerce efficiencies, but they must all also learn to differentiate themselves and win customer loyalty to be able to compete against the retail and e-commerce giants of the world. SPS offers a comprehensive cloud-based platform and a broad-based retail network to enable thousands of trading partners to communicate in real time and adapt quickly to the ever-changing consumer demands and the complex retail environment. The numbers speak for themselves. We now have over 75,000 customers and over 25,000 recurring revenue customers. We have over 2,100 customers to pay us more than $20,000 annually. As we move upmarket, we are seeing an increase in customers integrating with us through our channel partners, and this year, channel sales contributed 22% of all new business. Our leadership position continues to drive growth in our channel strategy. As a result, we have developed strong alliances with some of the world's largest system ---+ global systems integrators and value-added retailers like Capgemini, and most recently, Pw<UNK> With the world's largest retail network, SPS continues to be a strategic partner of choice, enabling robust omnichannel capabilities. As the retail space continues to evolve in complexity, many retailers are now looking for real-time collaboration, inventory visibility and data, which is critical to satisfy elevated consumer demand and realize efficiencies to address the high cost of doing business in the omnichannel world. These trends are fueling the adoption of our broad suite of products. In 2017, our analytics solutions comprised 17% of total recurring revenue, growing 4% year-over-year. As we noted on our last call, the retail environment changes. Bankruptcies and consolidations are impacting the sale of analytics. As a result, our analytics business grew slower than fulfillment in 2017, and we expect this trend to continue. Fulfillment remained strong at 18% year-over-year growth, driven by strong demand for our cloud solution despite lower enablement activity. In 2017, we rolled out the next generation of our web fulfillment product to our customers, which moves beyond traditional EDI and allows us to develop more strategic, consultative relationships with our customers by enhancing their ability to consult with SPS directly through the interface to address the needs of their trading partners. In the fourth quarter, we engaged with Mills Fleet Farm, an Upper Midwest retailer since 1955 with a diversified offering of merchandise of over 120,000 SKUs across a broad range of product categories. Mills recently launched an expansion plan to double its size in 6 years, which began with making significant improvements to their supply chain, including the construction of a new distribution center and an overhaul to their legacy technology and processes. Mills needed to quickly onboard vendors and ensure compliance with their new EDI requirements and turn to SPS for our expertise. We ran a community enablement campaign to quickly onboard hundreds of vendors in time for the opening of their new distribution center in early 2018. These types of community enablement campaigns demonstrate the increasing requirements for retailers to upgrade their legacy technologies and are also an important lead generation source for SPS Commerce. In summary, SPS is the largest retail platform to enable fully orchestrated retailing across all channels, a platform architected for today's complex omnichannel environment, which includes brick-and-mortar, e-commerce and drop-ship. We have a multibillion-dollar global opportunity in front of us, and we feel confident in our momentum exiting 2017. With that, I'll turn it over to Kim to discuss our financial results. Thanks, <UNK>. We had a great fourth quarter. Revenue for the quarter was $58.2 million, a 14% increase over Q4 of last year and represented our 68th consecutive quarter of revenue growth. Recurring revenue this quarter grew 15% year-over-year. The total number of recurring revenue customers increased 4% year-over-year to approximately 25,800. For Q4, wallet share increased 11% to approximately $8,400. For the quarter, adjusted EBITDA increased 14% to $8.5 million. For the year, revenue was $220.6 million, a 14% increase. Recurring revenue grew 15% for the year, and adjusted EBITDA grew 23% to $32.6 million. We ended the year with total cash and investments of $169 million. In an industry that is in transition, SPS Commerce has adapted its business model and set new targets to ensure we continue executing and delivering results for our shareholders. We continue to position our company for the long term and have aligned our sales force to thrive at a dynamic retail environment. We exited the year with a strong sales organization of approximately 295 quota-carrying sales headcount, and we believe this set us up well to deliver on our 2018 expectations. Going forward, we will no longer provide specifics on headcount on a quarterly basis. We may provide periodic color as relevant. We delivered strong traffic growth while investing for the long term, and we implemented a buyback program to repurchase up to $50 million of SPS shares. Before turning to guidance, I would like to highlight the impact of our adoption of the new revenue recognition standard, ASC 606. The impact to our financial results and guidance is as follows. Under ASC 606, 2017 revenue will show a reduction of approximately $500,000 and 2018 revenue will be reduced by approximately $400,000. Under ASC 340, the majority of commissions will now be expensed over 2 years, resulting in a reduction of commission expense of approximately $2 million in 2017 and approximately $1 million in 2018. As a result, adjusted EBITDA increases by approximately $1.5 million in 2017 and approximately $600,000 in 2018 versus the prior accounting standard. Our guidance reflects these changes, and you can see the impact of prior years on our financial data sheet on our website. There will also be more information provided in our 10-K filing. Now turning to guidance. For the first quarter of 2018, we expect revenue to be in the range of $57.4 million to $58.1 million. For the full year, we expect revenue to be in the range of $241 million to $244 million, representing 10% to 11% growth over 2017. For the first quarter of 2018, we expect adjusted EBITDA to be in the range of $9.5 million to $10 million. For the full year, we expect adjusted EBITDA to be in the range of $42 million to $43.5 million, representing 23% to 27% year-over-year growth. We'd like to note that without the impact of AOC 606, our adjusted EBITDA year-over-year growth would have been 27% to 31%. For Q1 2018, we expect fully diluted earnings per share to be $0.14 to $0.16 with fully diluted weighted average shares outstanding of approximately 17.4 million shares. We expect non-GAAP diluted earnings per share to be approximately $0.30 to $0.32 with stock-based compensation expense of approximately $2.9 million, depreciation expense of approximately $2.1 million and amortization expense of approximately $1.1 million. For the full year 2018, we expect fully diluted earnings per share to be in the range of $0.67 to $0.71. We expect fully diluted weighted average shares outstanding of approximately 17.5 million shares. We expect non-GAAP diluted earnings per share to be in the range of $1.32 to $1.36 with stock-based compensation expense of approximately $11.9 million. We expect depreciation expense of approximately $9.9 million, and we expect amortization expense for the year to be approximately $4.4 million. For the year, you should model approximately 30% effective tax rate calculated on GAAP pretax net earnings. We expect to pay nominal cash taxes in 2018 due to our NOLs. In addition to the 2018 guidance, we are introducing a 2020 goal and an updated long-term target model. Specific to the 2020 goal, factoring in current industry dynamics, we expect to reach adjusted EBITDA of at least $65 million and adjusted EBITDA margin percentage in the low 20s. We expect a revenue run rate comfortably in excess of $300 million exiting 2020. Beyond 2020, we expect to see continued margin expansion with a long-term target model for adjusted EBITDA margin of 35%. In summary, we delivered strong revenue and adjusted EBITDA growth in 2017 as we continue to invest for the future. We believe SPS is well positioned to expand its market leadership. And with that, I'd like to open the call to questions. Yes. I think when you look back from ---+ we haven't seen the full year '17 numbers yet, but '16 numbers were ---+ that overall brick-and-mortar grew about 3% and e-commerce grew more in the 17% range. And I think my guess is it's going to be slightly better than that but not significant for the full year. Retail continues to be overbuilt. I think we're going to continue to see store closings partly because of e-commerce but a big part just because it's been overbuilt for the last 25 years. So I think we're going to continue to see that. We did see additional transaction volume in Q4 that ---+ mostly from our drop-ship that created a little extra revenue in Q4, so that was strong. And then we did see some strength in our enablement campaign activity in Q4. But I don't think it's a huge overall change in the environment, and we're not counting on a complete turnaround. (inaudible) I think we're just going to continue to see some bankruptcies. I think we're going to continue to see store closings, and it continues to be an industry in transition. So if you take a step back, first off, from a product suite standpoint, we think analytics is an extremely important part of our portfolio. It fits very nicely with our mission and vision of perfecting (inaudible). And it does help in the overall sales for ---+ as we have an entire package for both retailers and suppliers. So we think it's an important part, and we do believe in the long-term TAM. I don't think the store closings and that matter. It's just a matter of where it's falling in people's priorities. I met with a supplier yesterday, and the suppliers are very much engaged and want to do more with the point-of-sale data and analytics. But they can only go so far if the retailers aren't going to share that data. So I still believe that there's an incredibly large long-term total addressable market. But I don't think we're going to see that move to the top of the party list for retailers over the next year or 2. Well, the customer growth count, as we stated in the past, is really around enablement activity. And channel sales will drive revenue. But for the most part, channel sales tend to be slightly larger deal. Typical deal size is 3 to 10 or larger than our average size. So it drives revenue but lower customer count. An enablement activity is what will be the stronger activity for customer count. We saw a relatively strong Q4, especially relative to most Q4s' enablement activity. I think, obviously, we believe in an incredibly large total addressable market. And I think for things to accelerate, we need to see a higher activity of enablement campaigns, so there's some normalization there. And we obviously need an acceleration and a prioritization of analytics. So those are the 2 things that we're going to watch. Sure. So when we look at 2017, EBITDA dollar growth was about 23%. When you look at our guidance for 2018, our EBITDA growth is 23% to 27%. So really, we demonstrate our ability to show some of that margin expansion in '17. And so really, in '18, you'd expect similar as it relates to the implied margin expansion. As it relates to where that comes from, over time, we believe we have opportunities for efficiencies really in most of the areas, with the exception of R&<UNK> We think that as a percent of revenue, and sort of that 10% to 12% makes sense for us. But over time, we think there's opportunities to show improvement in gross margin, sales and marketing as well as G&A. Specific to your question on the sales and marketing side, a couple things. We exited 2017 with about 295 quota-carrying sales headcount. We believe that puts us in a great position relative to what our expectations are for 2018. So the way you should think about that sales and marketing then in '18 is we'll continue to add here or there as we see opportunities to do so, but we're exiting in a really good sort of sales force optimization point so we don't need to be adding as many as we've had to add in prior years. Therefore, there's more efficiencies that you're going to see out of our model and more efficiencies that you'll see translated to the sales and marketing line itself in 2018. Well, I think there's a number of things that are driving the sales force. Obviously, we had a reorganization about a year ago, and I think the sales force ---+ I mean, I really believe we have extremely committed, strong sales organization. We have more seasoned sales reps. But more importantly, our customer success team has stepped up over the last year or 2 and is really driving customer behavior and assisting the sales force in selling to our existing customers. I think our sales operations team is doing a great job of taking burden off of the sales force, which allows them to be more efficient. So I think we've done a number of things that are proving out to allow the sales force to do what they do best and go after new prospects and work with our existing install base. Well, I think if ---+ when I look back 3 or 4 years ago, I think the e-commerce trend and omnichannel trend was more of an opportunity than a threat to people. We had a lot of tailwinds, retailers weren't as stuck, and there was ---+ they felt there was less disruption. I think over the last 3 or 4 years, the last 20 years of behavior from retailers of overbuilding is catching up with them. Obviously, the e-commerce, they need to get in the game, so there's more disruption there. And analytics is completely much more on the back burner as far as priorities. There's very large priorities. I think retailers actually are getting more engaged and into the game of truly building an omnichannel business. I think there's areas where we can continue to grow the sales force. I think there's areas where you need to be careful, I think, like analytics. I think they're ---+ it just ---+ it's not just a matter of more headcount will give you more sales. I think there's areas that we'll continue to add and we'll be selective, but it's not as straightforward that you just knew that if you added more, you'd sell more. But I think from a capacity standpoint, the things that Dan Juckniess and the entire sales organization has done and embraced over the last 12 months really set us up well for the long term. Sure. So from a customer churn, we're at 13%, that's an annual number, same as we were last quarter. And dollar churn is just about half of that, it's at about 7%. And that same is what we saw last quarter as well. Those are annual numbers, not just quarterly numbers, obviously. Sure, the last ---+ it's changed by about 1%. So if you went back, the customer churn used to be around 12% and the dollar churn used to be about 6%. So we've seen a slight uptick of about 1% on both of those metrics. Yes. I think it's fairly fresh in their minds. I haven't had a lot of feedback, but I think their plates are full. I think capital has been, in some cases, been the restraint. But I think a lot of the restraint for retailers is just how much can they do at a time. We still see that trend. Obviously, that's a retailer by retailer. They're not all going through the pipe at one time. But I think it's retailer by retailer. And I think there's going to be ---+ continue to be more and more large transformation as retailers are realizing that they either embrace an omnichannel strategy or they're not going to survive. So as it relates to 2018, we provided overall guidance for what our expectations are. However, we've also stated that we do expect that the analytics will continue to grow at a slower rate relative to the fulfillment growth. No, I think Mills Fleet Farm was a nice program. What we tried to do on the earnings call is highlight a customer or 2. So it was a nice program and it was one of a few that ---+ several that drove that. So it was deeper than just one program. Yes, and the ---+ in Q4, with the sequential adds being a bit higher and you also saw that in the customer growth rate, so it went up ---+ it's 4% versus the 3%. Those are highly correlated to the quantity of community enablement campaign. So one of the comments that <UNK> had made earlier is we did see a few more of the community enablement campaigns. They ended up coming in, in the latter part of the quarter, which was part of our reasons for our exceeding in the quarter. Sure. So we continue to see and expect to see the retail market. It's still undergoing significant transition. And as those retailers do that, there's opportunities for us to help them through community enablement campaigns, but the timing of when those campaigns happen really are more dictated on where the retailers are within their journey. So a lot of the commentary we said in '16, again, we still expect retailers are on this journey for ---+ into '18 and beyond. Yes. Our international business, in Australia, we've had nice traction there. That's an entire ecosystem obviously built into the whole global concept. But we've see nice traction in Australia. Our business in Asia is really more linked to the supply chain ---+ North America supply chain, and we continue to see that growing more at the pace of overall fulfillment on a growth standpoint. It's ---+ we actually support thousands of customers that may have a component in Asia through our Asian operations. And then Europe has been slower, but that's more linked to our analytics business, which, again, continues to be slower growth.

2018_SPSC

2017

KELYA

KELYA #Thank you, John. Thank you, and good morning. Welcome to Kelly Services 2017 Third Quarter Conference Call. With me on today's call is <UNK> <UNK>, our CFO. Let me remind you that any comments made during this call, including the Q&A, include forward-looking statements about our expectations for future performance. Actual results could differ materially from those suggested by our comments, and we have no obligation to update the statements made on the call. Please refer to our SEC filings for a description of the risk factors that could influence the company's actual future performance. Before we review Kelly's third quarter results, let me point out that our revenue growth was impacted by a weakening of the U.<UNK> dollar against several European currencies in the quarter. I'll present our year-over-year comparisons in nominal currency with the exception of our international performance, which will be represented in constant currency. Now turning to Kelly's results. The third quarter was eventful for us on several fronts. We acquired Teachers On Call, a leading educational staffing company, further strengthening our leadership position in the K-12 market. We announced our planned implementation of a digital talent platform, which will transform our front office. And I am pleased to report that even in the face of unprecedented weather events, we once again delivered good top line growth, healthy operating earnings and solid returns for our shareholders. Kelly's third quarter revenue was $1.3 billion, up 6.5% compared to last year. We achieved earnings from operations of $18.2 million compared to $18.8 million last year, reflecting the addition of sales and recruiting resources and increase in performance-based compensation and other factors that <UNK> will walk you through in a few minutes. And diluted earnings per share were $0.58 compared to the $2.06 per share last year, reflecting the impact of our APAC JV transaction. Excluding that impact, EPS increased more than 30% year-over-year in the third quarter. It was a solid quarter that continued to build on the momentum we saw in the first half of the year. And we are pleased with our performance, particularly our ability to deliver top line growth and make key investments in our future. Now before we look more closely at how specific elements of our business performed in the third quarter, let me remind you that effective January 2, we realigned our business into 3 operating segments. The Americas staffing segment includes our local branch-delivered staffing business in the United States, Puerto Rico, Canada, Mexico and Brazil. The international staffing segment includes the results of our EMEA staffing business. And the global talent solutions segment, which we call GTS, includes our global outsourcing and consulting business, OCG; and our centralized staffing operations in the United States, Canada and Puerto Rico. Now let's take a look at how these segments performed in the third quarter, starting with Americas staffing. Americas staffing is comprised of commercial staffing, Kelly Educational Staffing and professional and technical specialties. Americas staffing revenue increased 7% in the third quarter compared to the same period last year. Commercial staffing revenue increased 8% over prior year compared to the 6% year-over-year increase we reported in Q2 and the 1% increase in Q1. We continue to see demand for light industrial accelerate in the third quarter, building on the trend we saw in the first half of the year. And our office/clerical business returned to growth after several quarters of decline. Kelly Educational Staffing delivered revenue growth of 6% in the third quarter. This growth rate was impacted by 2 primary factors: the addition of revenue for the month of September from the newly acquired Teachers on Call, offset by the loss of revenue caused by the hurricanes experienced in the United States. Revenue in our professional and technical specialties was flat in the third quarter compared to prior year, down from the 3% increase in Q2. Total firm fees, which remain volatile in the Americas, were up 2% year-over-year. The third quarter gross profit rate in Americas staffing was 17.8%, down 50 basis points from a year ago due mainly to business mix. Expenses for the quarter were up in Americas staffing by 6% year-over-year, primarily the result of adding sales and resources in line with demand in commercial staffing and PT specialties as well as performance-based compensation. We expect to leverage from these investments to start to improve in the fourth quarter. All told, the Americas staffing segment achieved an operating profit of $13.3 million in the quarter compared to $14.3 million last year. Let's now turn to our international staffing operations outside of the Americas. Revenue in the international staffing increased 15% compared to prior year in nominal U.<UNK> dollars or 10% on a constant currency basis. This growth was driven by increased demand across Europe. For ease of reference, the remainder of my comments on international staffing will be in constant currency. Fee-based income for the quarter was up 8% year-over-year, largely due to Eastern Europe. The segment's reported GP rate for the third quarter was 14.3% compared to 14.7% for the same period a year earlier, down due to customer mix. An 8% increase in GP dollars is mainly attributable to higher revenue driven by hours volume and the temp staffing business. Expenses in international staffing were 2% higher than the prior year as we continued to add recruiters in our branch network, partially funded by redeploying headquarter expenses into targeted growth areas. Netting everything out, international staffing's operating profit in the third quarter was $7.2 million, up 57% over last year, and we are pleased with the solid performance in this segment. Now let's turn to the results of our global talent solutions reporting segment. This segment is a combination of our previously reported OCG segment plus our centrally delivered staffing operations. The GTS reporting segment reflects the 2 primary ways that clients in this segment are buying from us: talent fulfillment and outcome-based services. I'll discuss each business' result separately, but first, let's take a look at how GTS performed as a whole in the third quarter. GTS revenue was up 2% year-over-year while gross profit grew 8% for the quarter. Revenue was up year-over-year in our KellyConnect, Business Process Outsourcing and Contingent Workforce Outsourcing practices, offset by revenue declines in our centralized staffing and payroll practices. Now let's look at gross profit results in each of the 2 GTS businesses. Our talent fulfillment business is made up of our Contingent Workforce Outsourcing, Payroll Process Outsourcing, Recruitment Process Outsourcing and centrally delivered staffing practices. Gross profit in the talent fulfillment business was up 2% year-over-year, an improvement from the 1% decline reported last quarter. We continue to see nice double-digit GP increases in our CWO practice from new programs in Q3 as well as year-over-year GP growth in our RPO practice. These results were partially offset by year-over-year GP declines in our centrally delivered staffing and PPO practices. The outcome-based services business is comprised of our BPO, KellyConnect, Kelly legal managed services and advisory services practices. Gross profit for outcome-based services increased 33% year-over-year, driven primarily by continued momentum and strong results in both KellyConnect and BPO. The GP growth we've seen in KellyConnect during the last 3 quarters confirms the return on investment we made in this practice during the second half of last year. We also saw double-digit year-over-year GP increases in BPO in the third quarter as we continue to expand existing programs and win new business in this practice. Overall, the GTS segment gross profit rate was 18.5% for the quarter, up 110 basis points year-over-year, largely due to favorable practice and customer mix along with lower workers' comp and other employee benefit costs. Expenses in GTS were up 3% year-over-year in the third quarter due to headcount and salary costs related to the addition of new programs, coupled with increased performance-based incentive costs. These increases were somewhat offset by cost reductions from the actions we took in the first quarter to optimize our centralized delivery staffing business in line with demand. All told, GTS third quarter operating profit was $20.8 million, up 30% over a year ago, another solid quarter for this segment. Now I'll turn the call over to <UNK> who will cover our quarterly results for the entire company. Thank you, <UNK>. Revenue is at $1.3 billion, up 6.5% compared to the third quarter last year. As <UNK> described, our revenue growth benefited from the weakening of the U.<UNK> dollar against several of the European currencies in the quarter. On a constant currency basis, our total revenue increased 5.3% compared to the 3.5% in nominal currency growth, [so currency as reported] 220 basis points impact. In addition, our acquisition of Teachers On Call added about 30 basis points to our total revenue growth rate. Overall, our Q3 revenue performance reflects another quarter of improving trends driven primarily by solid growth in our locally delivered staffing business in the Americas and international. Staffing placement fees were up nearly 7% year-over-year, driven by good firm fee performance in international staffing. Excluding the impact of currency, fees were up 4%. Overall gross profit was up $16 million year-over-year or up 7.3%. Our gross profit rate was 17.4%, up 20 basis points when compared to the third quarter last year. Our overall GP rate reflects ongoing structural improvement as we shift to higher-margin solutions within our global talent solutions segment, partially offset by the impact of margin rate erosion in Americas and international staffing due to changes in business mix. SG&A expenses were up 8.3% year-over-year. About half of that increase comes from our corporate expenses, which reflect a return to normalized levels of performance-based compensation expenses after the 2016's unusually low level of performance-based compensation and litigation-related expenses. Within our operations, expense increases reflect good leverage on our third quarter GP growth even as we have made investments to capitalize on market opportunities within our locally delivered staffing business in the U.<UNK> and related international markets. We continue to focus on expense control efforts and generating return for investments in our service delivery infrastructure. Earnings from operations were $18.2 million in the third quarter compared with 2016 earned of $18.8 million. These results reflect the conversion rate on return on gross profits of 7.9% compared to 8.7% for Q3 2016. This relatively flat level of earnings reflect our solid GP growth, offset by additional expenses in the Americas staffing business to position us for future growth as well as higher performance-based compensation expenses. As a reminder, our third quarter 2016 results included the $87.2 million pretax gain on closing of the APAC JV transaction in July 2016. Income tax benefit for the third quarter was $4.1 million. Our Q3 2017 tax benefits include the impact of releasing additional tax valuation allowance, and our Q3 2016 tax expense includes the tax expense related to the gain on the APAC JV transaction. Adjusted for both items, our effective tax rate was 5.7% this quarter compared to our third quarter 2016 effective tax rate of 6.5%. And finally, diluted earnings per share for the third quarter of 2017 totaled $0.68 per share compared to $2.06 in 2016. 2016 Q3 EPS included $1.62 per share related to the after-tax impact of the gain on the APAC JV transaction. Excluding the impact of the APAC JV transaction, EPS increased more than 30% year-over-year. Now as we look ahead to the rest of the year. For the fourth quarter, we expect revenue to be up 8% to 9%, with about 200 basis points of the improvement coming from continued currency impact and about 120 basis points coming from our acquisition of Teachers On Call. We anticipate that there will be some continuing impact of reduced demand in hurricane-impacted Puerto Rico and believe it may put some modest downward pressure on our expected revenue growth. We expect the gross profit rate to be consistent with last year and SG&A expense to be up 4.5% to 5.5%. About half of the increase in SG&A is due to increased performance-based incentive compensation expense, as mentioned in my Q3 discussions, as well as the acquisition of Teachers On Call. Even with increase in performance-based compensation, we are on track to deliver good full year operating leverage. Our 2017 annual income tax rate is expected to be in the mid-single digits due to favorable trends in the first half of this year and due to a release of additional tax valuation allowance. Now moving to the balance sheet. Cash totaled $22.2 million compared to $29.6 million at year-end 2016. At quarter end, debt was $23.9 million compared to normal range at the end of 2016 and over $15.2 million from a year ago. These balances reflect that during the quarter, we paid $37.2 million net of cash received related to our acquisition of Teachers On Call. Accounts receivable totaled $1.3 billion and increased 12% compared to year-end 2016. Global DSO was 58 days, up 2 days from the same quarter last year and up 5 days since year-end 2016. DSO in the third quarter is higher due to seasonality, including the impact of the seasonal increase in Educational Staffing business in connection with the start of the school year. The remainder of the increase is due primarily to customer mix. In our cash flow year-to-date, we generated $18.2 million of free cash flow, down from the $20.4 million of free cash flow generated last year. The decline in free cash flow reflects higher capital spend in 2017 as a result of increased investment to begin our digital talent platform as well as the timing of spending on projects related to technology and infrastructure and compared to the prior year. For more information on our performance, please review the third quarter slide deck available on our website. I will now turn it back over to <UNK> for his concluding thoughts. Thank you, <UNK>. It's been a good year so far for Kelly, and we're pleased with the progress we're making. After building strong momentum in the first 2 quarters, our third quarter performance confirmed that we are continuing to drive top line growth even as we invest in talent, technology and solutions that will accelerate our progress in the future. Our Americas staffing segment continued its forward momentum, capturing strong revenue growth. Our local operating teams are more focused than ever. Our investments in targeted areas are yielding results. And the acquisition of Teachers On Call further strengthens Kelly's educational staffing leadership position in the K-12 market. We expect continued return on these investments as we move forward. Our international segment remains tightly focused on pursuing core specialties across Europe, closely managing expenses as they actively capture new opportunities. And our global talent solutions segment continues to deliver top and bottom line growth as we help companies navigate a more holistic approach to talent solutions. It was clearly a successful quarter. Our performance demonstrated our continued ability to grow the top line, operate with increased efficiency and deliver a solid return to our shareholders, all while continuing to invest in the future. Our acquisition of Teachers On Call and our decision to implement a digital talent platform confirm that we are not content to stop at short-term growth, and we are strategically positioning Kelly for the long term as the world of work evolves. Looking beyond our reporting segments. Our APAC joint venture has reached its 1-year anniversary and has fully met our expectations in terms of expanding our market presence and strengthening the Kelly-PERSOL relationship. Finally, we are pleased with our financial performance. Events in the third quarter also served as a reminder that Kelly has truly exceptional teams. I'm very proud of how our colleagues came together to support one another through the natural disasters we encountered, all while staying true to the character of Kelly in meeting the needs of our customers and candidates. <UNK> and I will now be happy to answer your questions. You mean the revenue growth that we saw in the third quarter. Yes. So as we look forward, not going any further than what we said with the fourth quarter, we see a continuing pace of growth going into the fourth quarter. And certainly, the fact that we have demonstrated that we're investing in sales and recruiting resources in our Americas segment predominantly but also in international demonstrates that we think that there's continuing demand as we look out in the future. Okay. Thank you, John, and thank you, everyone, for being on the call.

2017_KELYA

2017

XLNX

XLNX #Thank you, <UNK> Sales in the March quarter increased for the sixth consecutive quarter to $609 million, up 4% sequentially and up 7% on a year-over-year basis Growth was driven by our Advanced Products, which increased 9% sequentially to a new record Gross margin was 69.5%, at the high end of our guidance, due primarily to favorable end market mix Operating expense was $250 million This was $6 million higher than guided as we accelerated some 16-nanometer tape-out expenses to extend our technology leadership and add some increased litigation expense Operating income for the quarter increased 6% sequentially to $173 million or 28.5% Other income and expense was an expense of $2.2 million, better than guided due primarily to investment gains Tax rate was 10% for the quarter due to discrete item Our net income for Q4 was $153 million or $0.57 per share We are pleased to have delivered on our financial plan in fiscal 2017. We met our target of 6% revenue growth, driven by a 45% increase in Advanced Products, and operating margin was 30% for the year This profitability led to the generation of a record $934 million in operating cash flow Finally, our EPS was $2.32 for the year, a 13% increase over FY 2016. Now, some key points on the balance sheet and cash flows We ended the quarter with $3.4 billion in gross cash and $2 billion in net cash after our debt Accounts receivables decreased by nearly $100 million, as we collected last quarter's higher than normal receivables balance Inventory was $227 million, up $21 million from the prior quarter, with nearly all the increase coming from our Advanced Products Operating cash flow was $306 million for the quarter In the quarter, we paid $82 million in dividends, and we repurchased 1.8 million shares for $108 million, an average price of $58.45. We ended the quarter with diluted shares at 267 million, which included the impact of 15 million shares from the convertible and the warrant associated with it For a complete explanation of the impact of these instruments on share count, please refer to our convertible FAQ on our Investor Relations website As we have discussed, capital allocation remains a top priority for the company This year, we returned $855 million to shareholders through $333 million of dividends and $522 million of share repurchases This total capital return is $90 million more than we returned to shareholders in the prior year Our board recently authorized an increase to our dividend for the 12th consecutive year We continue to execute on our share repurchase program with the intention of exhausting our $1 billion authorization over the next several quarters We currently have $680 million left on that authorization Now to guidance In the June quarter, we are expecting sales to be between $600 million and $630 million Our backlog is up heading into the quarter, and we are expecting continued growth in our Advanced Products On end markets, we expect the communications category to be up, industrial and A&D categories is expected to be flat sequentially And, lastly, broadcast, consumer and automotive is expected to be slightly down Our gross margin will be approximately 68% to 70% We expect operating expense to decline to approximately $242 million, including $1 million of amortization Other income will be $1 million Finally, our tax rate is expected to be between 12% and 15% We will provide full year FY 2018 guidance at our upcoming Analyst Meeting in New York City on May 22. We look forward to seeing you all at that meeting Let me now turn the call over to <UNK> Yes <UNK> <UNK> <UNK> - Credit Suisse Securities (USA) LLC <UNK>? Yeah So two things So I might frustrate you by not being very precise But in the comms, we do show data center We do expect data center to grow meaningfully And again that's in the context of some of our older data center business not growing as much as we would like And in certain cases, our design wins that we've had were slowing down So we do think that, in summary, that the data center growth, which is part of the overall comms growth, all the end other markets in the comms area we expect to be growing as well, but the data center growth will be driven by hyperscale Then with regard to share count, so I haven't been providing detailed share count guidance for the past couple of quarters for a couple reasons One is I don't want to kind of signal exactly what we're doing on our buyback And the second part is, the complexity of the convert and its impact on our diluted share count is hard to describe briefly So I would though recommend you, CJ, go to our website We're going to update what we expect to be the impact on diluted share count from the redemption of the convert in this quarter Like I said, it's fairly complex, but we've tried to make it understandable And you will see that it will have a significant impact in this current fiscal quarter, and then because of the way the accounting is done for the share count, it will actually even translate to a further reduction in the next quarter So I mean, I will actually, I'm happy to take a follow-up if there's something specifically you were looking for, but I'm not going to give you a precise share count guide That was a very artfully phrased question, too Good for that It's generally been on an upward trend as design wins that we have, one in our 28-nanometer generation ramp in As you know, in defense, it's a very, very long-tailed business So at any point one time, we have multiple generations, multiple of our product generations being sold into the industry So given our competitive position and strength of design wins and our continued design wins in large opportunities like Joint Strike Fighter, we feel very good about the business So I think an element of your question, <UNK>, was maybe related to whether the applications on AWS are kind of nichy or small or whether there's some big entities using it And the launch partners range obviously from some smaller entities to some very large entities, and they're doing a range of applications that are fundamental to each of the companies in the core businesses So I do think the scaling opportunity is there and very well represented So the industrial A&D softness is due to program-specific things in defense primarily The rest of the business areas are relatively going to be flat relatively quarter on quarter In the automotive, consumer, broadcast space, as we've mentioned in this call already, we've set a record in automotive And if you go back a quarter, we talked about kind of a low based on some inventory things So we're going to see a little bit of dip in automotive And by the way, though we expect a longer-term trend upward based on the strength of our ADAS design wins, we won't be surprised by some quarterly fluctuations But underneath that, the ADAS business is very strong It's just kind of a quarterly correction and the rest of the end markets in that segment are flat We will probably talk a little bit more in May about longer-term trends in audio/video broadcast, but you're right, the industry is facing some headwinds, and we are feeling those as well Chris, we'll, like all the other questions that relate to longer-term views on the business, we'll talk about that more in our Analyst Meeting

2017_XLNX

2017

HCI

HCI #Thank you, and good afternoon. Welcome to HCI Group's First Quarter 2017 Earnings Call. With me today are <UNK> <UNK>, our Chairman and Chief Executive Officer; <UNK> <UNK>, our Chief Financial Officer; and <UNK> <UNK>, our Senior Vice President of Finance. Following <UNK>'s opening remarks, <UNK> will review our financial performance for the quarter and then turn the call back to <UNK> for an operational update and business outlook. And finally, we will answer questions. To access today's webcast, please visit the Investor Relations section of our corporate website at hcigroup.com. Before we begin, I'd like to take an opportunity to remind our listeners that today's presentation and responses to questions may contain forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995. Words such as anticipate, estimate, expect, intend, plan and project and other similar words and expressions are intended to signify forward-looking statements. Forward-looking statements are not guarantees of future results and conditions, but rather are subject to various risks and uncertainties. Some of these risks and uncertainties are identified in the company's filings with the Securities and Exchange Commission. Should any risks or uncertainties develop into actual events, these developments could have material adverse effects on the company's business, financial conditions and results of operations. HCI Group, Inc. disclaims all the obligations to update any forward-looking statements. With that, I would now like to turn the call over to <UNK> <UNK>, our Chairman and CEO. <UNK>. Thank you, <UNK>, and welcome, everyone. First, I'd like to provide a brief overview of our company. As most of you know, HCI Group is a holding company with subsidiaries engaging in diverse yet complementary business activities. Our principal operating subsidiary is Homeowners Choice Property & Casualty Insurance Company, which provides homeowners insurance in Florida. We also have TypTap Insurance Company, which currently focuses in providing flood insurance to Florida homeowners. TypTap features TypTap.com, our internally developed online platform for quoting and binding flood insurance policies. Accessible from any Internet-capable device, including your mobile phone, TypTap.com provides a quote in seconds and a policy in minutes. Additionally, we have a Bermuda-based reinsurance subsidiary called Claddaugh Casualty Insurance Company, which participates in our reinsurance programs. To support all of our insurance operations, we also have an information technology operation called Exzeo that develops insurance-related products and services. For example, it developed the technology that powers TypTap.com. It also developed Atlas Viewer, our map-based technology that allows us in real-time to identify, track and manage daily claims as well as claims associated with catastrophic events. In the future, we expect to find other means to leverage the new technologies, including the delivery of products and services to third parties. Finally, we have Greenleaf Capital, which owns and manages our growing portfolio of Florida real estate that currently includes 2 office buildings, 2 parcels of waterfront property and 2 grocery-anchored shopping centers. Turning to the quarter. The first quarter was a solid start of 2017. I am pleased to tell you that it was HCI's 38th consecutive quarter of profitability, and net income for the quarter nearly doubled from that of Q1 2016. Other highlights from the quarter were: We increased our quarterly dividend by $0.05 to $0.35 per share. We also completed the sale of $143.75 million of 4.25% senior convertible notes. We used a portion of these proceeds from the offering to repurchase common shares and also to retire all of our 8% senior notes. That redemption was finalized in April 3 after the end of the quarter. Now I would like to invite our CFO, <UNK> <UNK>, to walk us through our financial performance for the first quarter. <UNK>. Thank you, <UNK>, and good afternoon, everyone. For the first quarter of 2017, income available to common stockholders totaled $12 million compared to the same quarter of 2016 with net income of $6.1 million. Diluted earnings per share for the current quarter was $1.15 compared to $0.60 diluted earnings per share for the same quarter of 2016. Gross premiums earned was $91.6 million for the current quarter compared to $98.8 million for the comparable quarter a year ago. This decrease is attributable to normal policy attrition and the impact of the 5% rate reduction effective on new and renewal policies beginning in January of 2016. Ceded premiums were $28.6 million as compared to $40.4 million. For the first quarter of 2017, reinsurance costs were 31.2% of gross premiums earned as compared to 40.9% in the same quarter a year ago. This decrease is the result of the reduced reinsurance cost for the treaty year effective June 1, 2016. Through March of 2017 and for reinsurance treaty years beginning June of 2016, with the replacement of the multiyear reinsurance treaty as discussed in prior calls, benefits of $2.5 million and approximately $8.3 million were recognized, respectively. Net premiums earned for the first quarter of 2017 were $63 million compared to $58.4 million in the first quarter of 2016. Gross written premiums were $71.4 million for the first quarter of 2017 as compared to $75.6 million in the same period of 2016. For the same periods, net written premiums were $42.5 million compared to $35.2 million for their respective periods. Loss and loss adjustment expenses for the quarter totaled $25.8 million compared to the first quarter of 2016 of $27 million. As of March 31, 2017, we have strengthened reserves for incurred but unreported losses and for development on reported claims to the current carried level of $50.2 million compared to the carried IBNR and bulk reserve amount at March 31 of $30.5 million. In addition, we have continued to strengthen our reserves as seen in the minimal increase in our loss ratio. Our loss ratio applicable to the first quarter of 2017, which we define as loss and loss adjustment expenses related to gross premiums earned, was 27.9% compared with 27.4% in the first quarter of 2016. Loss and loss adjustment expenses for the first quarter of 2016 were impacted by tornadoes and hailstorms. Investment income and related investment items increased by approximately $2.6 million, primarily resulting from increases in net investment income of $1.3 million, realized gains of $800,000 and a reduction in net other than temporary investment losses of $500,000 as compared to the first quarter of 2016. Interest expenses increased by $713,000, primarily the result of interest on the recently completed bond issue in March of this quarter. The expense ratio applicable to the first quarter of 2017, which we define as underwriting expenses, interest and other operating expenses related to gross premiums earned, totaled 25.1% compared with 24.3% in the first quarter of 2016. Expressed as a total of all expenses related to net premiums earned, the combined loss and expense ratio for the first quarter of 2017 was 77.1% compared with 87.3% in the same quarter of 2016. These fluctuations in the ratios reflect the variances in gross premiums earned and reinsurance costs. We are constantly monitoring claim activities for development of trend and frequency, severity and litigation situation reaching all carriers in the state. Investments in fixed maturities, securities and equities increased to $230.2 million from $219.3 million at December 31, 2016, an increase of 4.9%. Cash and cash equivalents increased by $127.4 million during the quarter, primarily the result of the senior note debt offering which provided net proceeds of $109 million. On March 3, 2017, we closed our new convertible senior notes issue with total principal amount of $143.75 million. As part of this transaction, we repurchased 413,600 shares at $49.19 per share and entered a prepaid forward contract for a further repurchase of 191,100 shares at $49.19 per share, for a combined total of 604,700 shares at a total of $29.7 million. After paying transaction fees of approximately $5 million, the net cash from this offering was approximately $109 million. Subsequent to the end of the quarter, $48.8 million of these proceeds were used to redeem our 8% senior notes. The balance of approximately $68 million will be used for general corporate purposes. Coupon interest rate on the new convertible senior notes is 4.25%. However, the effective rate of interest is 7.6%. The carrying value of the new senior notes is $123.6 million. Total stockholders' equity at March 31 of $232.1 million reflects the decrease generated through the prepaid stock repurchase agreement discussed previously. Net book value per share has increased to $25.63 per share at the end of March 2017 from $25.23 at December 31, 2016. In the quarter, our basic earnings per share was $1.27. For purposes of calculating basic earnings per share, the weighted average share count for the quarter was 8,918,000 shares. The issuance of the convertible senior notes were dilutive in the quarter and our fully diluted earnings per share was $1.15 per share. For purposes of calculating the fully diluted earnings per share, the weighted average share count for the quarter was 11,140,200 shares and the interest expense add back was $1,499,000. The fully diluted share count as of March 31, 2017 is approximately 12,400,000 shares. We are pleased with our first quarter results led by strong fundamentals throughout our organization, and we remain committed to increasing shareholder value in future periods. Now I'd like to turn the call back over to <UNK>. <UNK>. Thank you, <UNK>. First, a few Hurricane <UNK> comments. Most of the <UNK> claims are now closed and we remain comfortable with our reserve levels. But keep in mind that claims can have a long tail, especially in the current litigation environment. Looking ahead, we expect Florida insurance regulators will approve an 8% average rate increase for our Homeowners Choice HO3 and HO6 books of business. We expect that rate increase to go into effect with new and renewal policies some time in Q3 of this year. 8% is a blended average. Many policyholders will receive a smaller increase or actually no increase at all. The increase will primarily impact policyholders in Southeastern Florida where litigation assignment benefit abuses have been most prevalent. We don't take these rate changes lightly. Homeowners Choice has not raised rates since 2013 and will be one of the last companies to raise rates this year. But unfortunately, at this point, we have to do out of prudence. Looking to reinsurance, we have substantially completed our 2017/2018 reinsurance program. We expect the cost to be similar to last year, but with much better coverage. Moving to TypTap, our recently formed flood insurance subsidiary. Since inception, TypTap has sold over 4,000 policies with gross written premiums over $4 million. We believe there is significant room for growth. Finally, our balance sheet is strong and obviously is stronger because of the recent transactions. And we have significant amounts of cash to invest in our businesses, enhance our technologies and pursue accretive opportunity that may arise. Finally, before I take questions, I have an announcement to make. For some time now, <UNK> <UNK> has indicated a desire to retire from the CFO role. We have not yet set a final date and we have some formality that need more work to do. However, on the call today is <UNK> <UNK>, our Senior Vice President of Finance who joined us last December and has been designated by the Board of Directors as <UNK>'s successor. <UNK> has considerable financial experience, and we are pleased to welcome him to the company. And I expect <UNK> will step into the role of CFO soon, probably before the next earnings call. <UNK> is not leaving us. He will remain with HCI and assume the title of Senior Vice President of Finance and provide ongoing strategic and financial guidance. I want to take a moment to thank <UNK> for his commitment and service to the company. <UNK> has been our CFO since the company's inception. He was there to file the original certificate of authority with the Office of Insurance Regulation. His expertise in the insurance industry has been extremely valuable during our initial public offering and subsequent growth. We are pleased that he will continue to work with us going forward. With that, we are ready to open the call for questions. Operator, please provide the proper instruction. Matt, there are 2 things, I think, that have been ---+ actually, 3 items that have been ---+ that have occurred in the industry for those who may not be aware. I think Prepared Insurance Company was sold. Elements Property Insurance Company was also acquired by somebody else. And I think the wind-down of Mount Beacon was greatly accelerated. I think some of these things may have occurred or been accelerated due to Demotech's actions. Beyond that, I think everybody else either put in more capital or did whatever they had to do to get their ratings reaffirmed. But I do know that Demotech is still concerned and watching everybody's balance sheets and income statements on a quarter-by-quarter basis. It's ---+ they're a regulator ---+ they're a ratings agency. That's what they're supposed to do. And I can tell you, that's what they're doing. Okay. So I'll take the question in 2 parts. Let's talk about the ---+ writing homeowners policies. TypTap has been ---+ has had its COA amended and has had rates and forms approved to do homeowners insurance in Florida. Having said all of that, we have made no announcements and have not done any marketing or anything else to actually write our first homeowners policy for TypTap in the State of Florida. So I think that is something that's coming. And the rate filing, et cetera, I think, are a matter of public record at this point. As far as expansion beyond Florida, I think given TypTap seasoning, Homeowners Choice and the state it finds itself in at this point, we may ---+ I think it's imminent that both companies will expand beyond Florida sometime in the near future, obviously, subject to all the regulatory approvals, both from Florida and from any state that they wish to apply to, yes. A bit of both in terms of that. I think the high cash balance and as the Fed has been raising interest rates, you can easily pick up 1% to 2% in anything that's liquid from ---+ immediately liquid to liquid over the next 2 years. So we will pick up some money from that. The big cash balance is really there to ---+ in case opportunities or needs arise for the business. So we're not necessarily committing to do anything just yet. Having said that, we did all of these transactions because we saw a window of opportunity whereby we could remove any concerns of debt being maturing and being due anytime in the next few years. And doing it in a way whereby actually our cash requirements to service the debt didn't actually go up and yet we netted about $70 million in cash. So it's a very good transaction. Great question. As we've told everybody, how this works is that we submit all of our data and information to the ---+ to actuaries who run up the numbers. Obviously, all of this stuff is a little bit backward-looking and delayed. So the data that's been used is probably a few months old. But anyway, based on that, they come up with what they think an actually sound rate should be charged. The OIR, our regulator, also get the ---+ do the same kind of things with their models and their actuaries. And they come up with an answer. And then everybody has a conversation as to what they think is a prudent number. And there's always a fair amount of discussion on the matter because unlike what people perceive these things to be, the OIR has a mandate to try and make sure that our rates are not so high as to be too high nor to be too low that we may be in a degree of insolvency or anything of that nature. In the course of this year's conversations, they felt it was ---+ given the logjam that AOB seems to be in the legislature, et cetera, they felt that out of abundance of caution, it might be worth taking a slightly higher rate just in case AOB and litigation spread beyond Tri-County to the rest of the state. So yes, it is higher than we had anticipated. It's higher than we thought we would do. But at some point, the regulators are extremely concerned, as is Demotech for that matter and as are we to some degree in case AOB spreads beyond the Tri-County area. My simple answer to that would be, I don't think so. Basically, it was renewal and slight reduction in the (inaudible). Well, actually, the one item that you would see why that gross written might not be going down as much is because the rate decrease went through starting January 1 of 2016. So when you are now renewing in Q1 of 2017, there's no rate decrease anymore. And remember that you have the impact of TypTap. Yes. It's not quite been finalized yet, but it will sometime be ---+ it'll either be August or September of this year, late Q3. We've been tracking lawsuit filings, et cetera, as you know, for several months. Not just our ---+ lawsuits filed against us, but against the top dozen or so carriers in the state, et cetera. And from everything we see, while our lawsuit count year-over-year has been flat, still way too high, but hasn't increased any. I cannot say that is the case across the industry. We have seen a couple of carriers with large increases in number of lawsuit in first quarter of 2017 versus what they had in first quarter of 2016. And I think the overall lawsuit filing in those Tri-County area has gone up. And I think there is some uptick in some other parts of the state. But I ---+ there, you're talking from a very small number. It could just be no, not supposed to be an actual trend. Current accident year was $23.2 million for about 25.3%. And for the entire quarter, it was 27.86%. Yes, 2.4 ---+ $2.49 million. Just a quick numbers question, what is interest expense roughly going forward. About $16.9 million. Annually. Yes, per year. Per year. Okay. And you just said, was it $2.49 million was the number for prior period development. Correct. Okay, $2.49 million. And you mentioned earlier that the reinsurance costs should stay the same just for the 2017/2018 year. Is that on an absolute dollar basis or a percentage basis. I think it's in dollar basis. Okay. And should we expect the percentage to stay consistent as well more or less, I guess. <UNK>, that depends on what you have as projections for revenue. That's true. Yes, that's a fair point. But I guess, just to ask differently. When we look forward ---+ I guess, when we look forward a little bit, do you expect that TypTap and maybe other initiatives that you might have could offset that. I know on past calls you mentioned that you thought TypTap could potentially prevent PIF from declining further. Do you still have that thought. Or sort of how do you kind of think about that. Yes, look, where this is going to get complicated ---+ and this is why you make the big bucks is, there is going to be some attrition, but ---+ and TypTap is growing so that offsets some of that. The other thing you will also have is this rate increase that we're talking about. It's going to have 2 opposite effects. It's a question of which one dominates. One obviously, and this is especially I'm talking about in the Tri-County and the Southeast Florida area. You're going to see a rate increase on the one hand, which would increase premiums, et cetera, but the size of the rate increase, may also cause retention rates to drop in those areas, which would tend to bring the premium down. So it's too early to tell which of those 2 forces will dominate and that may change the trajectory of revenue changes. Okay. And is it fair to think of the 8% ---+ is it partly due to the fact that when you took the 5% rate decrease, it's kind of before everything sort of blew up in Florida. So because of that, you're taking, I guess, a larger increase this year to almost undo the decrease last year, if that makes sense. Because like did you feel that the decrease last year in retrospect shouldn't have happened since AOB started to become even crazier by ---+ I think even when Heritage reported results in the first quarter, they had the development and you saw every quarter basically everybody in Florida taking development. So in retrospect, was that kind of where the 8% came from. <UNK>, I tell you what. Playing Monday morning quarterback on what you should have done 2 years ago, it's always right ---+ in hindsight, everything looks very clear at the time you make the decisions based on the best information you have. So the 5% rate decrease was ---+ in order for it to go into effect on January 1, 2016 was probably approved in late September, October 2015, right. And at that ---+ and they were, obviously, measuring the sort of data that was even older than that, right. So they were looking at it from what the results looked like in 2014 and maybe the early part of 2015. Based on those numbers, a 5% decrease was appropriate. This time around, obviously, looking at the data from the recent past and you come to a very different conclusion, right. But as with all of these things, it's ---+ it would be inappropriate to second-guess decisions made with new information ---+ second-guess decisions made with all information when new information comes to light, yes. So we tend not to look at it that way. And I know you said $4 million of TypTap premiums. What was the policy count there. I think it's about 4,000 in-force at the moment or 4,000 have been sold, yes. Okay. 4,000 have been sold. Perfect. On behalf of the entire management team, I'd like to express our appreciation and continued support we receive from our shareholders, employees, agents and most importantly, our policyholders. We look forward to updating you on our progress in the near future.

2017_HCI