Cimpress' (CMPR) CEO Robert Keane on Q2 2016 Results - Earnings Call Transcript

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Cimpress NV (NASDAQ:CMPR) Q2 2016 Earnings Conference Call January 28, 2016 7:30 AM ET

Executives

Sean Quinn - SVP & CFO

Robert Keane - President & CEO

Analysts

Youssef Squali - Cantor Fitzgerald

Matthew Thornton - SunTrust Robinson Humphrey

Paul Bieber - Bank of America Merrill Lynch

Brian Fitzgerald - Jefferies

Chris Merwin - Barclays Capital

Kevin Steinke - Barrington Research

Randy Heck - Goodnow Investment

Naved Khan - Cantor Fitzgerald

Operator

Welcome to the Cimpress FY '16 Second Quarter Q&A Earnings Conference Call. My name is Sheila and I will be your operator for today. This call is being hosted by Robert Keane, President and CEO and Sean Quinn, Senior Vice President and CFO. Before we take the first call as noted in the Safe Harbor statement at the beginning of the earnings presentation, comments may include forward-looking statements including statements regarding revenue and earnings guidance and actual results may differ materially. Risks that could impact those statements are described in the documents that are periodically filed with the Securities and Exchange Commission.

Question-and-Answer Session

Operator

[Operator Instructions]. And I will proceed with the first question which comes from the line of Youssef Squali of Cantor Fitzgerald. Please proceed.

Youssef Squali

Let me start with a question on growth and then on CapEx. The 8% growth in the Vistaprint business units, can you help us understand how that breaks down between North America and international? That 8% has been relatively flat for the last few quarters considering everything that you have been doing.

Maybe one would have expected it to maybe pick up a little bit. Maybe you can help us understand what will help it accelerate? And then on CapEx, I think in your prepared - in the slide deck, you talked about having spent less on - a little bit less on CapEx on major in diverse/other and I was just wondering if you guys are seeing anything that's given you pause to want to spend less at this juncture. Thank you.

Sean Quinn

It's Sean. I will take the first question on revenue and then CapEx second. On revenue within the Vistaprint business, so I think as you know we're no longer giving commentary on a regional basis, but let me try and break that apart for you a little bit so we can be helpful. On all the markets that we've rolled out our major pricing and marketing changes, revenue has grown year over year in constant currencies. In the U.S., we saw growth of 9%. Canada remains strong. We've shown some of those numbers in the past. In Europe, similar trends to what we've seen the last couple quarters. This is the fourth consecutive quarter of constant currency growth in Germany where we saw revenue declining for a few years. So, that's the breakout by country, some of the major trends there.

We're encouraged by the other metrics that we see as well. Stepping away for just from the geographic breakdown and if you think about net promoter score, we see a good strong trends there. Gross profit per customer continues to grow across our major markets, so a good quarter from that perspective. On the CapEx front, we did mention in our prepared materials that overall our organic investments that we broke out in detail back in August were moderately lower in our spending year to date and some of that is in CapEx. Youssef, there is no particular area that we've paused or changed our strategic direction. It's really just our ability to spend against that and we're just a little bit lighter than - in our plans there.

Youssef Squali

Will there be some catch-up in that spend in the second half?

Sean Quinn

So we haven't changed our overall outlook for the year. The strategic themes that we're investing against remain unchanged and we will continue to look for other opportunities to invest as well to the extent that we see good return profiles. We haven't changed our overall outlook but year to date it is favorable.

Operator

Your next question comes from the line of Matthew Thornton of SunTrust. Please proceed.

Matthew Thornton

A couple questions if I could. First, I guess on the German acquisition that is set to close here in early February, can you help us maybe think about sizing that or are there any other recent acquisitions that comps well against in terms of margin structure or growth profile? And then also just looking at some of your corporate solutions and partnerships, particularly Staples and Amazon. Wondering if you could give us an update on just the progress of the nascent Amazon relationship. And then also with Staples, it sounds like it's winding down a bit slower than previously expected. Is there a definitive end-of-life date or is that still kind of up in the air? Or any help you could give us there on just the linearity of that wind down.

Robert Keane

Okay, great, Robert speaking here. In terms of our acquisition of WIRmachenDRUCK, for competitive reasons, we don't publicly talk about the size and growth profile of that business. We're very excited about the German market, but it is clearly one of the most if not the most competitive markets in the world. So I can say that in terms of - if you step back and look at this from afar if you were to get up close, you'll see there are a lot of similarities in terms of the valuation we paid relative to what we've paid for other companies in Europe over the last few years.

We think that just from a pure what we call standalone discounted cash flow of the business, excluding anything we do in the future, we're very happy with the value we paid relative to those cash flow characteristics or otherwise. But we don't want to get into any more detail than that because of the number of people who comb through these calls understandably from a competitive perspective. In terms of the corporate solutions, we're quite optimistic about the long term opportunity [indiscernible] large of taking the capabilities we have as a company and exposing them to a large variety of third-party merchants.

Staples or Amazon are obviously on the very large end of the scale of third-party merchants and partners but we think there also can be many, many smaller, either micro or midsized partners we will move towards. So that team has recently broken out of being a part of the overall Vistaprint business and is focused on developing these opportunities. Amazon is very much in a small test phase right now. You can see that on the site.

It is not something that is doing anything material this year in revenues. We do think that the opportunity there is material, but we do not plan for that right now. The way Amazon works which is quite impressive, is a very rapid iteration of new ideas. It's very hard for us to say where that's going to go. On the other hand, Staples is something that we do expect to eventually come to an end. We have just seen that there has been a slower ramp down than we originally thought, but we don't see that as a materially different trend. It may be delayed by a few quarters and you can see that in some of the pressure in the growth rate of the business segment that we talk about.

Operator

Your next question comes from the line of Paul Bieber of Bank of America. Please proceed.

Paul Bieber

For the Vistaprint business unit, I think you highlighted that there is some focus categories that are growing faster than the overall segment revenues. What are those categories and how big are they relative to business cards? And then second, what is - I think you highlighted that you were going to make some incremental investments that improve the value proposition of the business unit - Vistaprint business unit's customers. What are some of those investments that you plan to make and how big are those investments relative to the investment cycle and improving the customer experience a few years ago?

Robert Keane

Robert here, some of these are discussed in more detail in the investment - or the investor day that we had last August where Trynka Shineman, our president of Vistaprint, gave examples of some investment areas and those remain consistent. So I will give you some highlights here but I would definitely refer you back to that overview that she gave in August. Some of the core investment areas that we're putting a focus on in terms of product are signage and apparel, promotional products and some of the value-added services that we've have talked about in terms of design re-creation and the like.

Each one those areas and a few others where we've put that focused attention we see growing materially above the overall rate of sales. We do see a corresponding compression in the growth rate of a long tail of small products that we us to traditionally cross-sell as opposed to make a core organic focus of the business. If we switch over to the forward-looking areas of investment, again they are going to be very consistent with what Trynka spoke about in August, but they are all around the areas that we believe will drive customer loyalty and that can be the transparency and ease-of-use of the website. It is the consistency of pricing across different channels. We've talked about those for many years; they have created headwinds.

We see ourselves starting to see tailwinds that are equal or starting to overcome those headwinds because of the loyalty effect of those. But another area that we see it materially in the area of investment which we spoke about in our prepared comment is in reductions to shipping prices where we feel that's an area that our customers still have the least amount of satisfaction and we've tested that quite a bit. We will expect to do more of that over the coming 3, 6, 12 months. But I don't think you will see a material change from anything we've talked about in the past when you step back and look at this from an aggregate perspective.

Paul Bieber

And one quick follow-up question. How should we think about the expansion of Pixartprinting into the U.S.? Will that be all organic or do you plan a similar acquisition strategy as you did in Europe?

Robert Keane

We plan to come into the U.S. with Pixartprinting organically and have a strong belief that there is an opportunity in this market because of the breadth and depth of the Pixartprinting offering, the quality and very importantly, the pricing relative to what we see on the U.S. market. We have spoken to many companies in the U.S. about M&A, but we believe at this juncture the best thing for us to do is make a very concerted investment organically into the market where we're quite confident in the capabilities of what we've seen with Pixartprinting in Europe extending into other countries. That being said, it's an organic startup in the North American market and on the relative scale of Cimpress, this year its revenues will not be material.

Operator

Your next question comes from the line of Brian Fitzgerald of Jefferies. Please proceed.

Brian Fitzgerald

Just a couple questions on the free cash flow, you continue to invest in strategic growth initiatives. CapEx is in there, too. Do you expect any trough there? And then as far as you continue to progress in unifying your backend platforms across your brands, any qualitative updates about how you feel that is going versus your expectations? Thanks.

Sean Quinn

So, Brian, it's Sean. I will take the first question on free cash flow. As far as whether or not we see any trough, we haven't given any guidance on what we expect for investment levels as we go out into FY '17. We're very much in the process now of planning for that and so that is sort of yet to be determined, the level of investment for next year which would dictate some of that trend.

One of the things that I will just call out in the trend for this quarter is the increased interest expense or interest paid from our high-yield notes that we issued last March and so that's about a $10 million increase year over year so you do see that pressure. But otherwise, it's yet to be determined what the profile will be as we get into next year.

Robert Keane

As it relates to the platform, let me step back and give the context of what we're hoping to do. We have through the Vistaprint traditional front and backend which was integrated and each of the acquisitions we have made which have been integrated, plus third parties, that is be it third-party suppliers we use or third-party merchants, be it someone like Staples or many other companies, we believe there's an opportunity to create this software platform in the middle of those to front ends and backend which will allow us to materially improve the competitiveness and the customer value we deliver.

And that's in terms of selection which is our term for the breadth and depth of delivery speed options, substrate choices, product formats, finishes and the like. Conformance to specification, do we do what we say we're going to do on time as specified and cost, so that is reducing the cost to giving any given customer a given product at a given geography.

That is, as we've said, a many year project but to your question, we do see some tangible examples of progress towards delivering on that vision that are starting to come out. In the software area, we have successfully separated some of the front-end merchant capabilities from the backend capabilities in multiple of our entities and modularizing then to give more ability for any given merchant to tap into the backend capabilities. In products, we're working towards and we have product now flowing where what we call the catalog of capabilities is being used in Europe across multiple different brands.

In supply chain, we're using a platform to work with outsourcers in both North America and Europe and we've had some quick wins in procurement for things like materials and equipment where we're able to now start consolidating our views of those procurements and we're starting to share some best practice in manufacturing. So that's a long list of examples. We do see this as something that will gain momentum over the coming years, but we're happy with the progress we have made so far.

Operator

Your next question comes from the line of Chris Merwin of Barclays. Please proceed.

Chris Merwin

I just had a couple questions. In terms of the numbers recasting for core Vistaprint, did that recasting in any way have an impact on the 8% constant currency growth that you reported? And then just a second question, if I look at your OpEx as a percentage of revenue in fiscal 2Q, it actually shrank meaningfully by about 400 basis points year on year but in the letter, you mentioned that investments were on track. So I am just trying to reconcile I guess how you're able to invest while also showing that leverage in OpEx. And is it fair to say then that we might see investments step up in the back half of the year? Thanks.

Sean Quinn

Yes, on your first question, the recast of segments did not have an impact. So there's nothing there that impacted the growth rate. On the OpEx question, there's a lot of puts and takes in here and so year to date, I think it's important to understand that we see good performance from the underlying business. So you really see the profitability of the underlying business underneath these results and then on top of that, we're investing deeper into the variety of categories that we outlined back in August. So we remain on plan there other than as we said, we're moderately under spend against that year to date. We don't expect that to change throughout the balance of the year as in spending more in the back half. So our outlook for the full year as far as the overall investments remains unchanged relative to what we described at our investor day.

Operator

Your next question comes from the line of Kevin Steinke of Barrington Research. Please proceed.

Kevin Steinke

So you just touched on it a little bit there. In terms of - you mentioned in the prepared comments about the underlying profitability of the business being strong and the fact that increased investments were more than offset by increased profits in the Vistaprint and upload and print businesses. So just a little more discussion of what's driving that underlying profitability and if you expect continued improvements in underlying profitability ex investments

Sean Quinn

Sure, Kevin. It's Sean. So, yes at the beginning of the year, we said we did expect profit growth in the underlying business; we see that. I would describe this quarter as a good quarter of execution. And it's an important quarter for us given the seasonality, particularly in our Vistaprint business, but also in businesses like album printer that are more consumer focused. So there were a few tailwinds that I will call out but other than that, for us, we were very much in line with our expectations.

Staples we've talked about as being a little bit favorable to our earlier expectations because the wind down has been slower there. We did have some proceeds from an insurance claim that we talked about last quarter of $2 million that flows through our notepad, so that's a little bit of a tailwind there.

And then also, when you look at notepad within taxes, we have some favorability from discrete items, particularly related to the extension of the R&D credit in the U.S.. So the profitability is strong and that's pretty much across the business. And then on top of that, we have the investments that we've talked about in detail. And we've said that we're just moderately under spent there against our plan but still have the same outlook for the full year.

No change to that overall commentary, Kevin. I think with regards to your specific question about do we expect the profit growth from the underlying business to continue, I think the answer to that would be yes. And we do you expect to continue to invest in the variety of strategic themes that we have talked about as well.

Robert Keane

And Kevin, I would add something. This is Robert. We mentioned in our prepared remarks that our capital allocation approach remains very much unchanged. We are constantly looking for value creating opportunities where that pays off over the long term from an intrinsic value perspective and to the extent we have the management bandwidth to make that investment, we will fund those investments. We specifically called out some areas which, if the tests continue to go well, we could see that doing more than we originally planned in the specific line item, but it is still consistent with the overall things we talked about in August.

In that specific example is that we have begun to test shipping prices within the Vistaprint business unit and we have been very pleased with the early results. Now those results definitely reduced near term revenues and near term profits, but when we look at the change in customer satisfaction and loyalty improvements driven by that, we have a strong hypothesis which we're continuing to test around that it pays off in a financial sense from a DCF perspective because of the future cash flows or the gross profits from those happier customers.

I bring that up because I want to reiterate that we certainly see levers like that that can be quite material if they continue to prove out that our - one of the reasons we changed how we're talking about the business publicly is to give us the flexibility to make those types of value creating investments.

Kevin Steinke

And if you could just touch on how the holiday season went overall for you and maybe qualitatively how things went in Europe because I know Europe is traditionally a holiday season is always a big driver of results in Europe.

Sean Quinn

Sure, Kevin. So I would just qualitatively, I would say that holiday was strong so we saw that across the more sort of consumer focused categories like cards and calendars as well as invitations and announcements. Geographically, we don't break out. Holiday is a more important quarter for Europe than North America but I would say the overall trends are consistent with what I outlined earlier from a geographical perspective. That is all related to the Vistaprint business. We also have an album printer business and photo producer which operates in Norway which have an important consumer focused holiday cycle and both of those businesses performed in line with our expectations as well.

Operator

Your next question comes from the line of Matthew Thornton of SunTrust. Please proceed.

Matthew Thornton

Just a quick housekeeping follow-ups if I could. The insurance recoveries, do you expect any more flow-through in the back half of the year or are we caught up there?

Sean Quinn

Sure, Matt. So I think we're materially through it. We're still working with our insurance provider and so there could be a little bit that trails through in Q3 but as far as anything material, we're certainly through it. We received another $3.5 million this quarter, $2 million of that flows through in our NOPAT results through COGS and then the rest of that is below the line, so I think we're largely through it but you could see a little bit of trickling in Q3.

Matthew Thornton

I think you may have alluded to this already but gross profit per customer, I know you said that the trend was positive. Do we interpret that as it was continuing to increase in the VBU unit?

Robert Keane

Correct. Yes.

Sean Quinn

That's correct.

Matthew Thornton

And then I guess, just stepping back for second, I know obviously in the upload and print business we will have the next cohort of acquisitions enter the comp base later this year and you alluded to this in the presentation. Is there any reason to think that cohort has changed much from the growth rates that were in place when you acquired those businesses? Has there anything that's changed materially from those growth rates?

Robert Keane

I would say that some of them have actually accelerated growth rates, some of them have decelerated growth rates, but overall there is not a major change. What I would reiterate is that there's very large differences in the growth rates between the companies we acquire that's always been reflected in the valuations we pay. In terms of if you look at - across that some are growing in the single digits and some are growing very high double digits.

So I think it's important to keep stressing that we've said many times. In terms of your specific question of have the growth profiles of the Company through acquired change changed materially since we've acquired those individual ones, I would say there are definitely shifts here and there but in the aggregate picture, the answer is no.

Sean Quinn

And Matt, maybe just a housekeeping item in addition to that which is some of these businesses before we acquired them did business with one another. So for example, Exagroup was a provider to Easyflyer and so obviously as we bring them into our consolidated group, those transactions between one another get eliminated. And so that has some impact. It's not overly material but it has some impact on the individual growth rates for any of these businesses. But it's not overly material.

And you will see those will largely come into the organic growth rates in Q4 this year and so we do expect that the growth in upload and print will moderate once they get folded in because the pro forma growth of the entire portfolio is lower than the 31% you see for organic this quarter.

Matthew Thornton

Sure and some of that intercompany I guess will now become intercompany revenue that goes away. That would be pressuring the current quarters, but once those acquisitions actually enter the comp - the organic growth comp base later this year, that should have already taken care of itself so organic growth rate wouldn't change.

Sean Quinn

That's right.

Matthew Thornton

Okay. And then just one final one, really quickly, on the all other segment, obviously we know that the MoW assets are growing nicely. The corporate solutions has some push and pull as you've discussed. The album printer business in isolation, any color you could offer there just in terms of the growth there. Is this a growing business? Is it single digits? Any color you could offer there.

Sean Quinn

Yes, so there are a couple things going on there. One is, in their B2B business, the revenue that they had with one of their partners is in the process of winding down. That's something we've mentioned in the past and we expect that to wind down completely in the balance of the year. So that's put some pressure on their growth. But in their B2C business, there is growth and so that will continue on. And you see that in this quarter which is an important quarter for them, this holiday season.

Robert Keane

And we don't give a quantitative number but it's healthy growth in the B2C business.

Operator

Your next question comes from the line of Randy Heck of Goodnow Investment. Please proceed.

Randy Heck

First, really terrific quarter. It's kind of a rare thing these days or it seems like it. How significant is it that new customers are growing again? I believe this is the first quarter in three or four or five quarters that's the case. Is it positive across geographies? Or is it still - are we still seeing a waterfall effect of the - based on the timing of changes made in the various geographies?

Sean Quinn

It's Sean. So it is a mix by geography. But this is the third quarter that we've seen growth there from new customers. Clearly it's important, it's an important trend. It had for a while been declining and the growth was really coming from the repeat base. So that trend is important and we need to continue to work to increase that trend over time, but it's encouraging that this is the third quarter where we've seen that but it is a mix by geography.

Randy Heck

Okay. And the progression of each geography, are they all running more or less consistent with, for example, if you go back to Canada being the first one with - the first geography with major changes, are the recovery and sales, is it more or less consistent across geographies whether it's France or Germany or the UK or the U.S. for that matter.

Robert Keane

We certainly see broad similarities, but there are significant differences. So Canada, we went in where we had very low penetration in the market and almost a greenfield relatively speaking in terms of customer expectations and so that continues to be a real success. We didn't have the headwinds that we have in places like Germany or UK where - or France. We had a large customer bases that were brought in in the old approach that was very focused on price primary customers.

And then there is geographic differences in terms of what the customers buy and the competitive environment and so on. So, we do see that consistent U-shaped curve where early on we have a pretty significant - it sharped down to the U and then a slow side of the right hand side of the U coming back out, but Sean may have some more specifics on country to country. We have not seen any countries to my recollection where that general overall shape hasn't taken place. It's just a question of months or quarters and the depth of the type of trends we're seeing.

Operator

Your next question comes from the line of Youssef Squali of Cantor. Please proceed.

Naved Khan

This is actually Naved Khan for Youssef. I had a follow-up question. Robert, I think you spoke about the test for reduced shipping and maybe even free shipping. Can you elaborate on that in terms of when do you expect to roll it out on a broader basis? And the net impact on the revenues, would it be - do you expect it to be neutral or a negative over the short term?

Robert Keane

Well it's definitely not free shipping. We occasionally will have a free shopping offer. The testing we're talking about is a more across-the-board reduction in shipping prices. If you look at the quarter we implement those, it definitely lowers revenues. Now, it doesn't lower revenues to the extent that we go from a growth company to a declining growth, but it's a material headwind.

And, it's a direct impact to the bottom line. We have not made decisions to roll this out yet because we still feel that we need to do more testing to understand that and it really varies country by country on how the customers react, what shipping norms are.

We highlighted more to say that it's an example of - an example of the types of investments we think that are very consistent with the continued shift of the value proposition and where we want to go and where we could deploy some material amounts of capital. I do want to step back again and say that when we look at the types of aggregate numbers we talked about in August for investment, we still see ourselves running light on those.

We could use things like this - make investments like this if it might bring it back towards the mean or the number we talked about in August, but again I don't want to say it's being rolled out yet. It's the type of thing where we're testing, so I think next quarter's call we will have some more information on this and certainly by June, we can talk about it in more detail.

Sean Quinn

Naved, I would say within the context of FY '16, I would think about this sort of within the range of what we talked about back in August as far as overall investments. This is just - we're highlighting this as the type thing that we look to on an ongoing basis as potential good investment because it's the right thing to do and it has good financial returns. But as far as overall impact on our financial results for FY '16, definitely think about that in the context of what we described back in August.

Unidentified Company Representative

One more thing that I would add is if you go back to our investor day presentation from this past August, you will actually see a chart in there where we show that revenue from shipping is coming down and has been coming down. This would be a continuation of that trend, although depending on whether we decide to go broader, the timing of that in different markets, you may see a bit more of a bigger drop. But if you look at that chart, you actually can see quite a long term trend of shipping coming down as a percentage of revenue.

Operator

Your next question comes from the line of Kevin Steinke of Barrington Research. Please proceed.

Kevin Steinke

Just quickly on the launch of Pixartprinting in North America. Just wondering a little bit more how that works practically in terms of marketing the brand and also production of the product.

Robert Keane

It works in a way which is very consistent with how we market the brand in Europe. The uploaded print brands, Pixartprinting included, spend a small fraction of revenues on advertising, certainly compared to the Vistaprint or Albumprinter business models. Early in the launch, it might be slightly higher than Europe but we see that as not something that is driven by heavy advertising, but is driven by just across-the-board low prices and very broad product line and very strong service.

So it will be very consistent with what you see in not just Pixartprinting but with a number of our upload and print companies in Europe, including the new acquisition in Germany. And price is an important component of that. It's just an everyday low cost approach. In terms of the supply chain, we very much intend to use our platform and 100% of the supply chain is coming through the software to platform. It's one area that's already been rolled out.

Some of that is being produced in our existing facility in Canada. Much of it is being produced at outsourcers and again, that's consistent with what we see in this model in Europe and we have talked about one of the reasons we bought or we're about to buy the company WIRmachenDRUCK in Germany and we bought Exaprint in France is that we see some great opportunity as we get to this breadth and depth of products that these companies have to not do that all internally but to find specialists suppliers. So, the supply chain we built up in North America will be analogous to what we see in Europe.

Operator

Your next question comes from the line of Paul Bieber of Bank of America. Please proceed.

Paul Bieber

I know you guys have a global business and it's difficult to parse out macroeconomic trends in the underlying business, but can you just comment on the overall cadence of the business throughout the quarter and whether there was any call out in terms of softening in the consumer business in December because of macro trends or is it too difficult to parse out?

Robert Keane

We do not see anything that we parse out. Some of our fastest-growing brands are in places like Italy and Spain. And in the consumer space, we had a strong quarter that certainly met our expectations. I could be talking about Albumprinter or the Scandinavian brands that we have for Albumprinter in the consumer space or the Vistaprint brand, so we certainly do not see any correlation to macro events.

Sean Quinn

And Paul, the only other macro thing that certainly has impacted us is currency. I would be happy to highlight that if that's useful.

Operator

And now I would like to turn the call over to Cimpress.

Unidentified Company Representative

So we did get a question over email from one of our shareholders and so I'm going to ask that question of Sean. Our shareholder was looking at our segment notes in our presentation and noted that the comparability of segments is not perfect right now because we have some corporate costs that are not allocated to the Vistaprint business unit that are in some of the acquisitions that we have made because they haven't been separated out yet. So he is wondering sort of what that might look like going forward. If we have plans to make that comparability better.

Sean Quinn

Sure. So there are no plans to change that certainly in the near term. It's possible that could change over the longer term because I think in some ways it would be more helpful. That said, I think the net operating profit by segment that we provide is an incredibly helpful metric even though you can't fully compare across, because now that we've provided some historical information, you can now see how this trends and I think really see where when we talk about the underlying profitability of the business where that's really coming through and how that's coming through. So there is some typicality in comparison across but I think in comparison within is particularly useful and should be used.

Robert Keane

And Robert speaking, I would add a couple more comments on why we think that's a logical response. One is that we don't want to create processes for external reporting that are not used for internal management other than those obvious places that are required by the SEC. And secondly, we don't make our decisions based on margin profile of the business. Any individual decision would be made on a cash flow DCF basis. So those two add to the reason why we think it is helpful, but it's not something we will go beyond in the near term.

So with that, I would like to say thank you very much for all your time and questions today. We continue to be very optimistic about the future of the business. We have a lot of good opportunities, excellent opportunities for investments across the business. As Sean mentioned and as we mentioned in our prepared remarks, we see some strong underlying numbers in our core business which are covered up by some of these investments but we believe the investments are clearly creating some long term value and when we look at the combination of that underlying strength with the potential for the future of these new areas, we remain very optimistic.

So thank you again for your time and we look forward to seeing you or speaking to you in three months.

Operator

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect and have a great day.

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