R.R. Donnelley & Sons Company (NASDAQ:RRD)
Q2 2016 Earnings Conference Call
August 3, 2016 10:00 AM ET
David Gardella - Senior Vice President Finance
Thomas Quinlan - President and Chief Executive Officer
Daniel Leib - Chief Financial Officer
Charles Strauzer - CJS Securities, Inc.
Michael McCafferty - Shenkman Capital Management
Welcome to the R.R. Donnelley Second Quarter 2016 Results Conference Call. My name is Ellen and I will be your operator for today’s call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded.
I will now turn the call over to Dave Gardella. Mr. Gardella, you may begin.
Thank you, Ellen. Good morning, everyone. And thank you for joining R.R. Donnelley’s second quarter 2016 results conference call. This morning we released our earnings report, a copy of which can be found in the Investor section of our website at rrdonnelley.com. During this call, we will refer to forward-looking statements that are subject to uncertainty. For a complete discussion, please refer to the cautionary statement included in our earnings release and further detailed in our annual report on Form 10-K and other filings with the SEC.
Further, we will discuss non-GAAP and pro forma financial information. We believe the presentation of non-GAAP and pro forma results provides you with useful supplementary information concerning the company’s ongoing operations and is an appropriate way for you to evaluate the company’s performance. They are, however, provided for informational purposes only.
Please refer to the press release and related footnotes for GAAP information and a reconciliation of GAAP to non-GAAP information. We also posted to our website, in the Investor section, a description as well as reconciliations of non-GAAP measures to which we will refer on this call.
We’re joined this morning by Tom Quinlan, Dan Leib, Dan Knotts and Drew Coxhead. I’ll now turn the call over to Tom.
Thank you, Dave, and good morning, everyone. I will begin today’s call with a brief summary of our second quarter performance and provide an update on the tremendous progress we have made towards separating R.R. Donnelley into three independent public companies.
Following that, Dan Leib will discuss our financial performance in detail and then we’ll open up the lines for Q&A.
From a top-line perspective, the demand environment improved modestly, relative to what we experienced in the first quarter.
As we reported in this morning’s press release, compared to the second quarter of last year, organic revenue declined by 1.6%, though this represented an improvement of 150 basis points from the organic decline of 3.1% that we experienced in the first quarter of this year.
Importantly, the improving trends were seen in three of our four operating segments and the improvement occurred in a variety of our offerings across the segments. Also in this morning’s press release we provided full-year guidance updates which include an expectation for revenue to be at the lower end of our previous range and non-GAAP EBITDA margin to be at the high-end of our previous range. Our guidance on free cash flow remains unchanged in the range of $400 million to $500 million.
Almost a year ago to the day, we announced our intent to create three independent publicly-traded companies. The announcement was a culmination of a strategic evolution that occurred over the past decade. Since our R.R. Donnelley’s beginnings as a small Chicago printer evolving into a global full-line printing services provider and competing today as a leading provider of integrated communication services, we have built scale and a diversified portfolio, with the goal of successfully adapting to address changing customer buying behavior, changing market trends and a changing competitive landscape.
Through a combination of organic investment and acquisitions, we developed new products and services and invented fresh new ways to serve customers, attract critical talent, and build and even invent new technologies for our customers.
Industry dynamics have created different paths to success for LSC Communications, Donnelley Financial Solutions and R.R. Donnelley. Consequently, we saw significant opportunity to unlock value by allowing these three companies to pursue their own strategies and invest according to their unique dynamics of their respective industries.
Each of the new companies are leaders in their industries and are poised for tremendous success. Our transaction teams have been checking items off their list daily, at the same time making sure we continue to provide excellent service to our customers. As you can imagine, there are countless details in which hundreds of people have been working extremely hard to ensure flawless execution.
We have achieved many significant milestones throughout the process. We’ve filed the initial Forms 10 with the SEC in March and filed the first set of amendments in June. We obtained favorable ruling from the IRS, have intercompany commercial transition services agreements ready to go, and remain on target to complete the spinoffs of LSC Communications and Donnelley Financial Solutions in October.
Between today and the spin-day, we will host a series of road-shows with the investor community and raise capital at the spin-companies, ensuring that all the three companies; LSC, DFS and RR Donnelley; are in a position of financial strength.
As I noted on previous calls, we expect to see a variety of strategic and financial benefits in these transactions. From a strategic perspective, each company will have an enhanced focus on its distinct strategic priorities providing additional opportunities to create greater long-term value, increased flexibility to execute tailored business strategies and compete in evolving markets, and a more focused strategy to support its marketing plan.
And from a financial perspective, the benefits include: tailored capital structures reflective of each business’s financial growth profiles, better optimized investment policies, market recognition of standalone growth prospects and profitability, and market valuations reflective of each business’ unique operating and financial dynamics.
Before I turn the call over to Dan Leib, I’d like to summarize each of the three companies and their respective strategies.
LSC Communications is a leading provider of print and related products, services and technology solutions. With approximately 20,000 employees and 2015 revenue of $3.7 billion, LSC serves the needs of publishers, catalogers, merchandisers and retailers worldwide; with the portfolio products, services and technology solutions that include: office products, books, magazines, catalogs, retail inserts and directories.
With significant competitive advantages of scale, innovation, a diversified sales mix and deep customer relationships, LSC Communications is well-positioned to capitalize on opportunities in the industry. Financially stable with a strong balance sheet and equally strong free cash flow and a discipline cost reduction philosophy, we are confident that LSC will deliver value to all of its stakeholders.
LSC Communications’ global platform includes locations in North America and Europe, and offers customers leaner, more flexible supply-chain solutions and greater operational and organizational efficiencies. LSC’s strategies for growth stem from a three-pronged approach, including growing its core print and supply-chain services offering, continuing operating excellence and extreme discipline in its deployment of capital.
LSC has an experienced management team with a proven ability to execute operationally and financially in a dynamic market environment.
In October, I will become LSC Communications’ Chairman and Chief Executive Officer, and Judy Hamilton will be the Lead Director of the Board of Directors.
Donnelley Financial Solutions is a leading financial communication services and language solutions company with operations in North America, Asia, Europe, Latin America and Australia. With approximately 3,500 employees and 2015 revenue of $1.1 billion, Donnelley Financial Solutions serves capital markets and investment market clients by delivering products and services to help create, manage and deliver accurate and timely financial communications to investors and regulators.
Its brand and reputation as a customer-first industry leader, drives long-term client relationships. With Donnelley Financial Solutions’ 30-year heritage, the company is building on its position of strength for continued strong profitability and free cash flow generation.
Donnelley Financial Solutions serves capital markets and investment management clients internationally, providing one-stop content creation, collaboration, management and distribution capabilities. Its diverse resources include a range of proprietary and commercial data management and analytics services, virtual data rooms, translations, and language solutions.
Donnelley Financial Solutions’ strategy for growth includes selective product, service, and geographic expansion, while maintaining a disciplined approach to capital allocation. Dan Lieb will be the Chief Executive Officer of Donnelley Financial Solutions and Rick Crandall will be the Chairman of the Board of Directors.
With the spinoffs successfully prepared for launch, R.R. Donnelley remains a leading global provider of integrated multichannel communication services. R.R. Donnelley has the most comprehensive portfolio of products and services around the world to help customers create, manage, optimize and deliver their multichannel marketing and business communications.
With 2015 revenue of $7 billion, R.R. Donnelley operates in 28 countries with 377 production facilities and 42,000 employees. Because of a large and fragmented market and the rapid proliferation of big data and evolving consumer preferences, it’s harder than ever to grab the attention of busy consumers.
These challenges provide a unique opportunity for R.R. Donnelley to create, synchronize and deliver customers’ content across a maze of channels to create meaningful connections with their target audiences.
R.R. Donnelley’s core offering includes communication services, marketing, brand execution, customized business communication, supply-chain management and logistics solutions. These services tightly integrated, can take the form of digital and creative solutions, business process outsourcing, logistics services, packaging and related products, direct mail, personalized printed in online statements, labels, forms, commercial and digital print, and supply-chain management services.
R.R. Donnelley strategy is to drive growth in each of its core businesses, include extending its product and services to fuel organic growth through its existing customer base, expanding its print and digital technology platforms, pursuing strategic acquisition and business partnerships, and optimizing business performance through service, quality and operational excellence.
R.R. Donnelley will continue to execute on these initiatives, while also maintaining a disciplined approach to capital allocation. Dan Knotts will assume the role of Chief Executive Officer of R.R. Donnelley and Jack Pope will continue in his role as Chairman of the Board of Directors.
And now, Dan Leib will provide information on our financial performance. Dan?
Thank you, Tom. As with prior quarters, the focus of my comments will be on certain non-GAAP results and measures. Please refer to the support schedules of our earnings release for a reconciliation of GAAP to non-GAAP results for the second quarter.
Our second quarter results were in line with our expectations. Revenue of $2.7 billion represented a decline of 0.7% from the second quarter of 2015. Adjusting for an unfavorable impact of changes in foreign exchange rates as well as the impact of acquisitions, dispositions and pass-through paper sales, organic revenue declined 1.6%.
Volume increases in the Strategic Services and Publishing and Retail Services segment were more than offset by price pressure in all four operating segments, and volume declines in the Variable Print and International segment.
Second quarter gross margin was 22.2%, 37 basis points lower than the second quarter of last year, driven by price erosion and lower volume, partially offset by the positive impact from changes in foreign exchange rates and the impact of the Courier acquisition.
SG&A expense in the quarter was $318.2 million. As a percentage of revenue SG&A was 11.7% or 38 basis points higher than the second quarter of 2015, driven by negative operating leverage related to the decline in revenue and an increase in bad debt expense in the quarter, partially offset by higher pension income.
Our second quarter non-GAAP adjusted EBITDA was $286.7 million, compared to $309.2 million in the second quarter of 2015. Non-GAAP adjusted EBITDA margin in the quarter of 10.5% was 75 basis points lower than the second quarter of last year, driven by price erosion, lower volume and higher bad debt expense in the quarter, partially offset by the impact of the Courier acquisition and a positive impact from changes in foreign exchange rates.
Second quarter non-GAAP operating margin of 6.7% decreased 45 basis points from the second quarter of 2015; relative to the EBITDA margin change, lower depreciation and amortization as a percentage of revenue narrowed the decline in operating margin by 30 basis points, resulting from reduced levels of capital spending as our business continues to become less asset intensive.
Our non-GAAP effective tax rate in the quarter was 36.8% or 252 basis points higher than the second quarter of 2015, primarily driven by an unfavorable change in the mix of the income in the International segment.
Now, I’ll discuss revenue and non-GAAP adjusted EBITDA performance for each of the segments in more detail.
Revenue in our Strategic Services segment was $705.9 million in the second quarter of 2016, an increase of 1.2% from last year’s second quarter. And in organic basis, year-over-year revenue increased by 0.3%. In our logistics offering, the overall organic growth was 3.2%, driven primarily by new freight-forwarding and last-mile delivery volume. This increase was partially offset by a decline in fuel prices, the impact of which was approximately 360 basis points with the negative year-over-year impact reduced from the levels we experienced in 2015 and the first quarter of 2016.
Going forward, we expect the impact of fuel surcharges to continue to be less of a headwind, as we start to overlap quarters from last year, where the lower level of surcharges were reflected in our results.
Our financial offering reported an organic decline of 1.8% in the quarter, representing a notable improvement from last quarter’s organic decline of 10%, driven by improving, yet, still not robust conditions in the capital market.
Non-GAAP adjusted EBITDA margin of 13.7% for the Strategic Services segment decreased by 155 basis points from the second quarter of 2015, primarily due to unfavorable business mix, partially offset by our ongoing productivity initiatives.
Revenue in our Publishing and Retail Services segment was $621 million, an increase of 6.8% from the second quarter of last year. After adjusting for the impact of the Courier acquisition as well as an 80 basis point decline related to lower pass-through paper sales, organic revenue declined 1.5% year-over-year.
Higher supply chain management and fulfillment volume as well as higher one-color print volume only partially offset volume declines in magazines, catalogs and retail inserts, and price erosion across the segment.
Non-GAAP adjusted EBITDA margin for the segment was 11.3%, increased 137 basis points from the second quarter of 2015, primarily as a result of the impact of the Courier acquisition and incremental one-color print volume, which were partially offset by price erosion.
Second quarter revenue in our International segment was $519.4 million, a decline of 6.8% from the second quarter of 2015, largely a result of unfavorable changes in foreign exchange rates and the dispositions of two entities within our business process outsourcing reporting unit, as well as the disposition of our interest in our operations in Venezuela.
On an organic basis year-over-year revenue decreased by 2.1% driven by volume declines in Asia and Global Turnkey Solutions as well as price pressures in several reporting units, which were only partially offset by higher volume in Canada.
The non-GAAP adjusted EBITDA margin in the segment of 8.9%, improved 53 basis points from the second quarter of 2015, driven by the positive impact from changes in foreign exchange rates and favorable business mix in Latin America and Canada, which were partially offset by price erosion.
Revenue in our Variable Print segment was $883.4 million, a decrease of 3.1% from the second quarter of 2015. On an organic basis, year-over-year revenue declined 2.9% driven by lower volume and price erosion. Commercial and digital print showed continued improvement from trend as declines in transactional volume were partially offset by growth in retail and in-store marketing.
Forms and labels volume declined in line with the last few quarters, while the trend in direct mail improved substantially from last quarter on increased volume, reporting organic growth of 8% compared to last year’s second quarter. The segment’s non-GAAP adjusted EBITDA margin of 10.4% in the second quarter decreased 80 basis points from the second quarter 2016, primarily due to price pressure and volume decline.
Our second quarter 2016 non-GAAP unallocated corporate expenses were $17.8 million, an increase of $14.6 million from the second quarter of 2015, driven by $14 million in higher provisions for accounts receivable. Free cash flow in the quarter was $39.2 million or $113.5 million lower than the second quarter last year, primarily due to working capital, being a higher use of cash, approximately $21 million of spinoff related costs and higher cash tax payments.
Our controllable working capital rate, which we define as accounts receivables plus inventory less accounts payable, was 14.1% of revenue, an increase of 30 basis points on a like-for-like basis when adjusted for the impact of the Courier acquisition. The year-over-year increase in our controllable working capital rate is mainly due to the timing of supplier payments in the International segment, as well as an increase in office products inventory related to the transition of a warehouse facility and a shift in customer order patterns.
Second quarter capital expenditures were $53.3 million, relatively flat to the second quarter last year. On a full-year basis, we expect free cash flow in the range of $400 million to $500 million unchanged from our previous guidance.
As of June 30, 2016, our gross leverage was 3.1 times, flat to a year ago. We continue to target gross leverage in the range of 2.25 times to 2.75 times on a long-term sustainable basis. We ended the quarter with $1 billion of net available liquidity and $185 million drawn on our $1.5 billion revolving credit facility.
From 2016 to 2018, our annual average maturity is $240 million with our next maturity of $220 million due on August 15, which we will repay with a combination of cash on hand and revolver draw.
As Tom noted earlier, we are progressing well against our spinoff plans with no material changes to our expected cost or project timing. During the second quarter, we recorded $18.4 million of spinoff-related expenses. And as I noted earlier, we spent approximately $21 million of cash on spinoff-related activities.
Project to date, we have recorded $43.9 million of spinoff related expenses and expended approximately $48 million in cash and we remain on track to complete the spinoffs in October. With respect to our pension plan, I’d like to note that in the fourth quarter of 2015, we communicated to certain former employees the option to receive a lump-sum pension payment or annuity.
Payments were funded from existing pension plan assets and began in the second quarter of 2016. The reduction in the reported pension obligations for these participants was $354.8 million, compared to payout amounts of approximately $328.4 million.
Our pension assets and liabilities were re-measured as of the payout date. And in connection with this re-measurement, we recorded a non-cash settlement charge of $96.9 million in the second quarter of 2016 on the SG&A line of our GAAP income statement, but excluded this charge from our non-GAAP results.
Taking into account the impact of the settlement and changes in interest rates since the settlement date, we estimate that the net underfunded status of our pension and post retirement plans increased by $187 million to $867 million from December 31, 2015 to June 30, 2016.
Lastly, let me share more detail on the updated guidance that was highlighted in this morning’s press release. Our guidance represents full-year operations for the current R.R. Donnelley as one company. And excludes one-time costs related to the spinoff transactions. At the time of the spinoffs, we will classify the two companies as discontinued operations.
We expect revenue to be at the low-end of previous guidance of $11.3 billion to $11.5 billion, which implies an improvement in performance in the second-half of the year against weaker comparables. We expect our non-GAAP adjusted EBITDA margin to be at the high-end of previous guidance of 10.4% to 10.6%. Depreciation and amortization expense is expected to be in the range of $420 million to $430 million, $10 million lower than our previous guidance.
We continue to expect interest expense in the range of $260 million to $270 million. Our full-year non-GAAP tax rate is expected to be in the range of 34% to 35%. We project the full-year fully diluted weighted average share count to be approximately 211 million shares.
Regarding CapEx and free cash flow, we continue to expect capital expenditures in the range of $200 million to $225 million, and free cash flow in the range of $400 million to $500 million. And with that, I will turn it back to Tom.
Thank you, Dan. Before we open it up for questions, I like to take a minute to thank the employees across R.R. Donnelley who have worked so hard during this latest phase in the company’s evolution, but especially since the spinoff transactions were announced last August.
Because of you, we have successfully split, cloned, developed and supplemented our IT infrastructures, HR processes, finance systems, invoicing systems, legal entities and customer tools, all of which will enable the three companies to stand independently on day-one. This has been an incredible effort and is a tribute to the dedication, innovation, responsiveness and can-do attitude of the people at R.R. Donnelley.
And now operator, let’s open up the line for questions.
Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question is from Charles Strauzer with CJS Securities.
Hi, good morning.
Good morning, Charlie.
Good morning, Charlie.
Just to start-off here, let’s talk about the guidance real quick. If you can talk about the second-half of the year and kind of any seasonality between Q3 and Q4 we should be factoring in and how we should think about the various segments in terms of expectations on the top-line there?
Yes. Maybe what I’ll do is I’ll start-up and then hand it over to Dan. But which I would tell you, I think we’re feeling - I think the whole print industry is feeling a lot better these days than where we were sitting. I think if you look to see what’s taken place, the industry is in better shape. Companies in [this shape] [ph] are making the tough decisions to adjust their business models.
They’re matching across to revenues, which is something we’ve been doing for about 12 years. But retail inserts are starting to look stronger. Companies are starting to figure out that they cannot - not be in front of their customers, so that’s been - we’re seeing - I think we’re seeing a benefit from that in the back-half of the year.
When you think about package, print and e-commerce, labels, forms, the consumer continues to buy that way and that continues to be what I’ll say a good area. Books obviously is strong, as you can see our Publishing and Retail Services segment with what we’ve got going on with not only manufacturing but with the supply chain, and we’re taking customers’ infrastructure and changing those cost from fixed to variable. We were only down - I think, one of the smallest decreases in the quarter than anybody in the industry.
So I would say, look, it’s as bright as it could be given all the uncertainty that’s out there in the world today, probably more so than usual. But I think we feel pretty good as far as what the back-half is looking like to continue to recommend our guidance where it is.
Yes. The only thing I would add Charlie is a couple of items. We mentioned fuel surcharge. We have a couple of awarded pieces of business in our International segment. And then within commercial - print and digital, we’ve already started to see some improvement in trend and add-on to that the impact of election. And those are really the main drivers.
Excellent, thank you; and then, Tom, maybe we haven’t talked about this in a little bit. But give some - maybe give us an update on the postal system and what’s going on there, and then also on the textbook front, anything new on the textbook cycles that you could share with us as well.
And then lastly, if you could maybe just talk - we talked a lot about the service [ph] over the years about the substitution for digital versus printed materials. And maybe kind of give us a commentary on that as well. Thanks.
Sure, Charlie. It’s a lot for a Wednesday morning, but we will go through it. Look, when you look at the postal, the postal service did the mailing industry a tremendous favor by eliminating the exigent rate case. I think as they are starting to see, pricing does matter to people. The Postmaster General indicating that First-Class volumes were good and that there is stability in the advertising mail volume. That’s a great thing for all of us.
The USPS volume year-to-date was basically flat under the same period as last year. Think about it, when was that the last time that had happened.
As it talked about the exigent rate case being eliminated, it has a positive impact on volume therefore it has a positive impact on the USPS. Hopefully, the [powers will] [ph] be at not only the USPS, but Washington D.C. will recognize this and make sure that any legislation that’s coming out of Congress does not result in a step-back for us.
CPI was trending up from a projected 0.5% to 0.676%. Again, this is a price increase that the mailing industry expects to take place in January of 2017. Again, hopefully, there is the talk dies down of trying to have another increase from an exigent rate case standpoint.
As it relates to books, again, I think it is - we made a bet with Courier when we purchased them, that as you thought about long-run print that the book industry would be the place to go. And quite frankly, the Conways Family and the leaders up at Courier built a great business. Our platform is benefiting from that.
We’re able to - e-books, I would say, are leveling off. There is only so many hours in a day and I do think you’ve got people getting fatigued by electronic devices, which is I’ll come to in a second, because that’s going to be a good thing for all the print products.
But as you go through the book, we’re really comfortable as far as what I would say K-12 is doing from an education standpoint.
I think colleges are more further-ahead on electronic distribution of content. I think the bigger thing and this is my own personal opinion, it’s not an issue of, what I’ll say, access to higher education. The issue does come down to the K to 12 learnings that our people have and we talk at length here about you keep a - you want to keep a customer for as long as you possibly can.
In colleges right now the numbers are I think that 60% of students that start freshman year do not finish in four-year schools. I think it’s 70% that do not finish two-year schools that start. So I mean, the idea is when they get in there to keep them in, I think the K to 12 education is going to be critical to improving those numbers. And content is going to be critical and I think as you look at things, hopefully, the dollars that will be spent by the 16,000-plus different school districts will be towards curriculum and both electronic and physical as they go through it.
So books, good there; the publish - the one-color, obviously there is - Harry Potter is alive as of Sunday. So that’s always good for our industry. But I think the one color hasn’t really had a big runner that as we call it in the industry, but it’s gone really well.
So I think, again, we feel good about book. We feel good about how we can take people’s fixed cost make them variable within that supply-chain. We announced that with the big customer earlier this year and we’re going to look to replicate that across the platform. And, again, going back to - you look at disruption. So our industry has been disrupted, always is disrupted, will continue to be disrupted, but other industries now too.
But if you think about the television model that’s out there, that’s been changing for a while, but that pace of change is accelerating. We’re all starting to view content electronically with videos, whether it’s sports, news or entertainment. Every day that acceptance and flexibility to watch content is increasing at an increasing rate.
This is going to have a big impact on advertisers and how companies reach out to their customers. This will be a big benefit to print and to companies in our industries. Let’s say, each - when you think about Netflix, Amazon, Facebook, or other such distributors of content, probably has the data that indicates what you like. And we’ve always talked about that there.
Whether it’s a sporting team or sporting event, the drama or documentary, an artist; these distributors of continent are going to have all the pertinent data on the people that make up these communities. This will be advantage to companies that advertise. The old adage that 50% of my advertising-spend is a waste.
On this area, I think we believe that you’re going to have greater ability to reduce what’s being waste. And how does that fit into to print or physical contact, consumers are fatigued, as I said earlier, by looking at electronic devices for entertainment and news. And I’m not saying electronic advertising is going away or it’s going to be abandoned. But they’re going to look to get more physical contact into people’s hands. That’s going to be print-related products. That’s going to be direct mail. It’s going to be inserts. It’s going to be different types of commercial material that’s going to be out there.
So, again, I think as we look at what’s going on out there in the industry and how communication, the multichannel approach is going on, we think there are opportunities for all the products that we have under our roof to go have good day with.
Nice one, that’s helpful. Thank you, Tom.
Operator, we have time for one more question.
Okay. And we have Michael McCaffrey with Shenkman Capital Management. Please go ahead.
Thanks. Could you just help me understand the guidance of what is the EBITDA should be up low-single-digits in the back-half of year against softer revenue? I guess, I’m just curious, given that you had margin erosion in this quarter and in the first quarter, why - is there something specific that’s going to be flowing through in the back-half that is giving you confidence that you’re going to see margin expansion against a continued soft revenue stream?
Yes, yes, absolutely, so few of the items that we highlighted in terms of the driving the revenue and in the operating leverage that comes with that are - we talked about the sort of fuel impact, talked about the known project wins. And I didn’t mention, but certainly the ramp-up that we’re seeing in on some of the wins that we’ve had in the book offering on the warehousing, for fulfillment side.
So you’ve got that and then we highlighted both last quarter and this quarter a couple of rather large items running through the numbers. So we had a legal settlement last quarter and we had our bad debt impact this quarter. I think we talked about $14 million that impacted this quarter. So those are items that are in our numbers. We own them, but as we project forward and look at the revenue picture and the expected margin picture, that’s what drives it.
Okay. Thank you.
Thanks, Michael. Everybody thank you for joining us today. Appreciate all your support and look forward to talking to you down the road. Enjoy the day. Thank you.
Thank you, ladies and gentlemen. This concludes today’s conference. Thank you for participating. You may now disconnect.
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