TTEC Holdings, Inc. (NASDAQ:TTEC) Q1 2019 Earnings Conference Call May 8, 2019 8:30 AM ET
Paul Miller - SVP, Treasurer, and IR Officer
Ken Tuchman - Chairman and CEO
Regina Paolillo - Chief Financial and Administrative Officer
Conference Call Participants
George Sutton - Craig-Hallum
Bill Warmington - Wells Fargo
Welcome to TTEC's First Quarter 2019 Earnings Conference Call. [Operator instructions] This call is being recorded at the request of TTEC.
I would now like to turn the call over to Paul Miller, TTEC's Senior Vice President, Treasurer, and Investor Relations Officer. Thank you, sir. You may begin.
Good morning and thank you for joining us today. TTEC is hosting this call to discuss its first quarter financial results for the period ended March 31, 2019. Participating on today's call are Ken Tuchman, our Chairman and Chief Executive Officer; and Regina Paolillo, our Chief Financial and Administrative Officer. Yesterday, TTEC issued a press release announcing its financial results.
While this call will reflect items discussed within that document or complete information about our financial performance, we also encourage you to read our first quarter 2019 quarterly report on Form 10-Q. Before we begin, I want to remind you that matters discussed on today's call may include forward-looking statements related to our operating performance, financial goals and business outlook, which are based on management's current beliefs and assumptions.
Please note that these forward-looking statements reflect our opinions as of the date of this call, and we undertake no obligation to revise this information as a result of new developments that may occur. Forward-looking statements are subject to various risks, uncertainties and other factors that could cause our actual results to differ materially from those expected or described today. For a more detailed description of our risk factors, please review our 2018 annual report on Form 10-K. A replay of this conference call will be available on our Web site under the investor relations section.
I will now turn the call over to Ken Tuchman, TTEC's Chairman and Chief Executive Officer.
Thank you, Paul, and good morning everyone. We kicked off 2019 with solid results and exceeded our plan for the quarter. Our strong performance is a result of our steady focus on building and operating the leading customer experience technology and services platform for the world's most iconic brands.
Our first quarter 2019 year-over-year bookings grew 32% and revenue grew 5.1%, of which the vast majority was organic. Our non-GAAP operating income grew 28.4% and cash flow from operations grew 19%. The year-over-year improvement is even greater when you normalize for foreign exchange and last year's adoption of ASC 606, which Regina will address shortly. Our momentum is the result of our continued sales velocity, differentiated solutions portfolio and delivery of exceptional customer experience outcomes. We are well-positioned to deliver significant top line organic growth, bottom line margin expansion and improved operating cash flow.
Let me share why we are highly energized by the opportunities ahead. Customer expectations for simple, frictionless interactions across every channel and every device continue to skyrocket. Make it easy, make it fun and make it for me is the expectation. Brands that can't provide amazing experience are losing market share while brands that delight and deliver like our digital native clients are gaining share.
Companies in every industry are fast-tracking their efforts to modernize customer touch points and infrastructure. Our expertise in enabling digital transformation with award-winning cloud, AI, ML, RPA and omnichannel technologies, coupled with our customer experience services, make us the natural go-to partner for digitizing the customer engagement and delivering exceptional customer experiences. There are numerous macro forces accelerating our growth. Omnichannel cloud investment is expected to continue its exponential growth.
The market is growing near 25% a year, yet remains in its infancy with only 15% of companies using cloud-based solutions today. Our clients are embracing all cloud-based CX technology solutions in a similar way as they seek a cost-effective, scalable architecture, and rapid deployment model. Mega industries, which historically have not embraced CX as a top priority are now required to engage proven partners to improve outcomes across acquisition, growth, retention and service. Every company that is embracing CX transformation needs an insight-driven end-to-end solution that covers the full customer journey.
They need a platform that integrates advanced analytics, cloud AI, machine learning, robotic process automation and omnichannel to deliver a seamless differentiated experience. Equally important, they need highly skilled, empathetic front-line brand ambassadors who're equipped with the knowledge and tools to solve complex problems. With over 36 years of CX experience, a world-class client base, award-winning omnichannel platforms and an end-to-end suite of operational capabilities and a powerful go-to-market engine, TTEC is uniquely positioned to grow market share and transform its financial profile. This quarter's positive results demonstrate the benefits from our continued, steadfast focus on a clear and consistent strategy.
Through the culmination of years of thought leadership, innovation and significant investment in acquisitions, we have leveraged market trends to increase our market share with advanced digital technology offerings through our CTS business, which is estimated to grow revenue by over 40% this year and reach a run rate EBITDA margin near 20%. Expertise in highly complex industries, such as our healthcare vertical, which has an estimated annualized revenue run rate is now approaching $400 million. Technology-enabled fraud prevention and content moderation business, which is growing as companies strive to safeguard their customers' online interactions. And expanding in new geographies, including Europe, where we continue to double our bookings each year.
I want to now share some compelling client examples that demonstrate the strategic value and differentiation of our integrated end-to-end customer experience solutions. We recently added a new global financial services brand to our client portfolio. Their goal was to optimize their omnichannel capabilities to deliver a seamless end-to-end customer experience. Our solution brought both strategy and implementation to the challenge of integrating an existing CRM technology with broader new CX technology and services capabilities, including orchestrating omnichannel interactions to improve customer satisfaction, drive new customer growth and increase operating efficiencies.
An existing client in the automotive industry selected TTEC digital and TTEC engage to strengthen customer loyalty by designing and implementing the ultimate automobile experience for their flagship model. We delivered an end-to-end CX solution with our broad portfolio of offerings, including CX strategy, journey mapping, analytics, technology, process implementation and delivery solutions. This CX solution delivers a seamless, differentiated experience across the customers' entire journey with their vehicle yielding measurable benefits on loyalty, net promoter score and total cost to serve and acquire. A leading EMEA-abased telecom provider engaged TTEC digital to automate repeatable processes to deliver better customer experience with a lower overall cost to serve.
What began as a small robotic process automation project grew into a comprehensive digital transformation. The team digitized multiple end-to-end activities by designing and developing and implementing a network of intelligent virtual assistants across 200 unique processes, resulting in a material reduction in timing cost and improving the customer experience. TTEC is operating at the heart of the CX revolution and the addressable market for our platform continues to grow. We've built a set of agile solutions on a solid, extensible foundation that is strategically relevant to establish blue-chip companies, complex government entities as well as the fastest-growing digitally native brands.
Our client and employees net promoter scores lead the industry and our financial progress is testament to the market's reception of our strategy. We remain keenly focused on increasing shareholder value through organic investments, strategic acquisitions and capital distributions. We intend to invest in driving organic growth at an accelerated rate. This year, we increased our go-to-market spend to expedite new offer development, enhance demand generation and increase sales velocity across industries, geographies and solutions.
In line with our M&A history, we remain focused on using tuck-in acquisitions to advance our client base and offshore delivery footprint, as well as expanding our solution portfolio, especially in platform-based offerings. Last, we anticipate continuing to pay dividends to provide returns to our shareholders. Given our focus on driving shareholder value, it has become clear to us that our greatest opportunity to optimize and unlock the hidden value in our company is with a sum of the pieces strategy.
Let me explain. Our digital platform, which includes both CSS and CTS is thriving, with significant revenue growth and profit margin expansion, yet the differentiated multiple, at which similar digital businesses are valued, is not reflected in today's share price. To better enable our digital business from both an operational and financial perspective and to position ourselves to achieve a fair market-based valuation, we've made the decision to adjust how we report the performance of our segments. Starting with second quarter of this year, we will adjust our segment reporting to two segments from four. We began the transition to two segments in January of 2018 when we updated our branding and go-to-market approach to reflect two centers of excellence, TTEC digital and TTEC engage, which our clients and industry analysts embraced.
We believe by aligning our financial reporting with our go-to-market platform and internal management structure, we will make it easier for investors to understand the distinct nature, financial profile and value of each of these businesses. In closing, TTEC is in the right place at the right time and well-positioned for success. We're pleased with our continued progress, executing on our strategy and our ability to deliver increasing value to our clients and shareholders.
On behalf of our executive team and our employees across the globe, we thank you for your continued support, and I'll now turn the call over to Regina.
Thanks, Ken, and good morning, everyone. 2019 is off to a strong start with positive trends in our first quarter financial results on both top and bottom line. We closed $132 million in bookings with a mix in volume that reflects the relevancy of our comprehensive solution portfolio. CTS' bookings grew 83% and CMS grew 63%.
We signed three new brands, one in each of financial services, healthcare and education. We grew our share of wallet with several existing clients including 12 significant multi-segment deals. We closed a large government contract that was over $20 million in cloud, technology and services. We booked $27 million with six new and existing clients in the hyper growth category, which includes new economy business models, such as ride sharing, home sharing, e-banking, and media streaming services.
We are providing these brands the necessary CX technology and services to support their rapid growth.
Ahead of my comments on our GAAP and non-GAAP financial results, I want to provide some context on three specific items: first, last year's adoption of ASC 606 had a onetime positive impact on first quarter 2018 revenue and operating income in the amount of $13.9 million and $7.3 million, respectively; second, our first quarter 2019 results included negative FX impact of $4.4 million on revenue and positive FX impact of $1.2 million on operating income; and last, as previously discussed during last quarter's conference call, the deferred client minimum volume commitment was recognized in the first quarter of this year, adding $6.4 million to CMS' revenue and operating income. Regarding our GAAP results, we recorded revenue of $394.4 million, up 5.4% over the prior year consisting primarily of organic revenue growth. On a constant currency basis and excluding onetime ASC 606 adjustments in 2018, revenue increased 10.4%.
CTS' revenue grew 49% driven by our industry-leading SaaS-based cloud offerings, and CJS grew 20% reflecting the power of our digital B2B and B2C customer acquisition solutions focused on delivering profitable growth for our clients. Operating income was $32.1 million or 8.1% of revenue compared to 6.6% in the prior year. GAAP earnings per share was $0.41 in the first quarter versus $0.10 in the prior year. My non-GAAP comments primarily exclude restructuring and impairment expenses.
A full reconciliation of our GAAP to non-GAAP numbers is included in the table attached to our press release. Non-GAAP adjusted EBITDA was $55 million or 13.9% of revenue, an increase from 13.6% in the same period last year. Adjusted operating income was $34.6 million or 8.8% of revenue, an increase of 7.2% in the prior year quarter. Adjusted for ASC 606, and on a constant currency basis, operating income increased 73.4% over the prior year quarter.
Margins in the first quarter 2019 also benefited from lower expense-to-revenue ratios in SG&A, depreciation, amortization and healthcare, partially offset by the restoration of our variable incentive plan accruals, which were under-funded in 2018 due to the gaps in last year's performance. Our reported tax rate in the first quarter 2019 was 26.7% compared to 26.2% in the prior year period. The normalized tax rate was 24.7% versus 25.3%. Capacity utilization was 75% in the first quarter of 2019 compared to 77% in the prior year.
Capital expenditures were $13.2 million in the first quarter 2019, up from $7.5 million in the prior year due primarily to the expansion of our facilities, and technology platforms supporting increased revenue. Our first-uarter 2019 cash flow from operations was $80 million, up approximately 19% from $67.4 million in the prior year. First quarter 2019 DSO was 76 days, down from 84 days last year and 77 days sequentially. Regarding our semiannual dividend, the Board of Directors approved a $0.30 dividend per share in the first quarter or $13.9 million, which was paid on April 18, 2019, to shareholders of record on March 28, 2019.
The dividend represents an 11% increase over the April distribution in 2018. Turning to our first quarter 2019 segment results, which are presented on a non-GAAP basis. CSS' revenue was $13.4 million in the first quarter of 2019, down 9.6% over the prior year. Operating loss was $0.9 million negative -- or negative 6.6% of revenue compared to 3.7%.
CSS' first quarter results were slightly below plan. The timing of bookings, the de-prioritization of facilitated learning, lower volumes in CSS' Middle East business, and the redirection of certain consultants toward solutioning [ph] and selling transformational programs with new logos resulted in lower revenue and operating income in the first quarter. Our CSS segment is adding value and creating strategic client relationships and serving as a cross-selling platform for TTEC. Effective as of December 31, 2018, CSS' Middle East consulting operations, which was classified as an asset held for sale for the fourth quarter 2018, is now included in ongoing operations.
CTS' revenue increased 48.9% to $52.4 million in the first quarter 2019, and operating income increased 85% to $9 million or 17.1% of revenue, a 330 basis point improvement over the prior year. CTS is a global provider of subscription-based customer experience technology with a large and growing total addressable market, a diverse clientele, expanding solution portfolio, expanding geographic footprint and attractive financial profile with significant recurring and reoccurring revenue streams. In the first quarter of 2019, CTS' cloud services increased 180% over the prior year quarter and generated a gross margin of 46%. With its current scale, CTS is a solid benchmark to other customer experience cloud platforms that trade premium to TTEC's multiple. This business is vital to our focus on unlocking customer and shareholder value.
Moving onto our CGS segment, revenue increased 19.6% to $38.9 million in the first quarter 2019 over the prior year. Operating income more than doubled, increasing 110% to $4.3 million or 10.9% of revenue compared to 6.3%.
We are pleased with CGS' improved performance, which exceeded our first quarter revenue and operating plan. The over-performance is attributable to the timing of certain customer acquisition and growth volumes, which shifted from the second to first quarter of 2019, better onshore offshore mix, and improved program and staffing optimization. CMS' revenue decreased 1% to $289.6 million over the prior-year quarter. On a constant currency basis, and excluding onetime ASC 606 adjustments in 2018, revenue increased 5.2%.
CMS' operating income increased 13.9% to $22.2 million or 7.7% of revenue compared to 6.7% in the prior year period. Adjusted for ASC 606, on a constant currency basis, operating income increased 78.5% over the prior year quarter. In the first quarter, foreign exchange impacted revenue by a negative $3.5 million and operating income by a positive $1.2 million. Our CMS segment exceeded our first quarter plan on both the top and bottom line supported by higher bookings, the timing of volumes and the minimum volume commitment.
Lower expense-to-revenue ratios in SG&A, depreciation and amortization, and healthcare costs contributed to the improved performance. We are pleased with the momentum in the business. While some of the first quarter's over-performance is attributable to the timing of top line volumes and delays in investments in sales, marketing and new solutions, we have a high degree of confidence in delivering our previously provided guidance, including the revenue and operating split between the first and second-half of the year. We are executing on multiple fronts and realizing tangible results from our strategy, differentiated solutions and improved go-to-market platform.
The investments we have made over the past several years have transformed our company, are increasing our value proposition and changing the financial trajectory of the business. We are delivering at scale the essential expertise, and integrated technology and service capabilities that are advancing our clients' customer experience outcomes.
I'll now turn the call back to Paul.
Thanks, Regina. Operator, you may now open the line for questions.
Thank you [Operator instructions] Our first question -- we have two questions on queue, first question from the line of George Sutton of Craig-Hallum. George, your line is now open.
Thank you. Congrats on the results, and please put me on a list of supporters around your move to realign the segment reporting. I think that could be meaningful from a valuation perspective. And I wanted to be specific in looking at the CTS business and the run rate, which looks to be about $210 million of revenues, currently growing around 50% with $40 million of operating income. If I just look at that piece alone, depending on who I'm comping you against, that looks to be your valuation for the entire year of the company. Can you give us a sense of who are you competing with? In your view, who should you be compared with just in that specific segment?
Hi, George, nice to talk to you, I think it's safe to say that we primarily go up against Five9, inContact, Genesys, rarely Avaya now and then sometimes a few VARs here or there, but it's primarily the cloud providers that are focused on the marketplace, which would be Five9 and inContact at this point in time. With that said, those companies, which are good companies, are really much more focused on what I would call mid-market in SMB and are -- the lineage of TTEC digital has been that we've always focused on what I would say the F 500 and mega companies and governments. So we have a very different client complexion. Our contracts tend to be long term versus month-to-month, and we tend to have take-or-pay contracts, all of which is being delivered now in the cloud, which is very different than these other companies and where they're kind of -- what part of the market segment that they're focused on at this point in time.
Perfect. Let me ask on bookings. We've had greater than 30% bookings growth for four quarters in a row. I view that as a trend, beneficial trend. Can you give us a longer-term perspective on how sustainable you view these bookings type numbers to be? And you also mentioned that bookings doubled in Europe. I'm curious, given how we've always believed them to be a bit behind on digital transformation programs, how sustainable is that kind of opportunity in Europe?
So, starting with the latter part of your question, I think it's always safe to say that the majority of countries outside of the United States typically are a year to up to five years behind. And so the good news about that is, is that with the dramatic need for all companies to digitize, it's suffice to say that continental Europe is now becoming very focused not only on CX but on digitization. And so we see very significant opportunity there, which is why we did a small acquisition in Europe, why we doubled down on sales and management in Europe and we're currently in the market selling and doing quite well in the market in Europe.
And I think you'll see over time us expanding and putting more energy into other markets for our digital business as well because there is a global requirement for delivering cloud-based omnichannel solutions. So I think that for quite some time when you look at the fact that only 15% of the market in the U.S. has moved to the cloud on omnichannel contact center, you look at the fact that CRM cloud is already now at 60-plus percent. The two are hand and glove.
There's not a question in my mind that omnichannel contact center technology will easily catch up to the CRM, meaning the Salesforce, Microsoft Dynamics, Zendesk type marketplace as far as adoption. And I think that what happened was those guys did a great job of getting CIOs comfortable with their CRM being put in the cloud. And now they've -- they're questioning why do they have all this old VoIP equipment, etc., that is not omnichannel, that does not have the ability to interface with all the new AI and RPA, etc.. And therefore, they're turning it over to experts like us that have these technologies preintegrated, and that can turn clients on, on very, very short notice and take them global almost overnight because of our global network that we have. So I think you're going to see significant growth for many years to come in our digital space. Your first question though, I'm sorry?
Bookings, just the growth in bookings and how long -- how sustainable that is?
Yes. I mean, I've been doing this for really long time, George. I would love to give you a high level of confidence that we can maintain this level of bookings. But I think the reality is -- is that we're very comfortable with the level of bookings that we're doing right now and the organic growth that comes out of it. There is no question that the economy does help our bookings, but there's also no question that our clients are looking for significantly different solutions than what they've historically been acquiring. And they're not looking for just a labor-based solution, they're looking for a solution that, shall we say, kills multiple birds with one stone in that it's very clear to them now that if they don't drive a differentiated experience, that they run the risk of not making it across the river. They get that if their offering is not more frictionless, they also are at risk. And they also get that they have to come up with ways that are significantly more efficient than how they've historically done that, and that requires technology and that requires strategic consulting.
And so I -- consequently, I think that all these acquisitions that we've done over the last eight years and all the integration, all the pain that we have gone through and the hundreds and hundreds of millions of dollars of investments that we've made, now that they're all integrated and now that you have a go-to-market platform, I think that what we're seeing is, is really nice adoption. We feel good about the year. I think for me to predict beyond the year, doing this as long as I have would probably be somewhat irresponsible other than to say that this trend of hyperfocus on customer experience in this experience-based economy as I think this has got long legs, and I think that it's here for many years to come. And so I'm not trying to sculpt your question but hopefully, I'm giving you a level of confidence that we certainly feel comfortable that we're going to see more solid quarters of bookings in the quarters ahead.
The last thing that I would just say to that is the following: this -- the market that we're focused on has historically been chunky. And as much as we would like to deliver very consistent, every single quarter 30%, 35% bookings growth, I think that what we're going to ultimately see at some point in time is, we'll have some quarters where the bookings growth might be 10% and the next quarter we're at might be 40% because of the way these contracts come in. And as you can imagine, we have a very strict process of how we count the booking, and if we don't have full ink across all the SOWs across the contracts, etcetera, we will not count it as a booking. And so if it falls in couple of days or a week or two whatever later, then it gets counted into the next quarter. Sorry for the long-winded answer.
I'm a simple man. I'll always be more excited about the 40% than the 10%, I promise you that, but great results. Thanks a lot, guys.
Our next question comes from the line of Bill Warmington of Wells Fargo. Your line is now open.
Good morning, everyone. So I wanted to ask about the capacity utilization being down quarter over quarter and year over year. It looks like it's the lowest it's been since Q3 2016. What's going on there? And when do we start to see the higher bookings translate into better utilization?
Yes. So you know, as usual, we'll always be slightly down fourth quarter, first quarter. I'd also say that as we -- there are two things -- two dynamics that are going on. One is, we have become very successful in executing seasonal work. As we do that seasonal work, we price into our contracts the cost of that space and cost of keeping that space available. So while I think you can see in the operating income there's not an impact, the reality it is in our utilization calculation, those seats for some months are underutilized. So you have a seasonal impact on the utilization to be completely transparent, but you have, what I would say, superior margin as you go into the seasonal months in terms of that being priced into our revenue.
Second is, as you know, our bookings have been significantly increased, in particular, in CMS and it takes ramp to get those clients to their full ACV, and we're experiencing the implementation of that $200 million of bookings in Q4, and it will take us some time to fully utilize the space that's been allocated to these clients. So I think you're seeing -- again, as we talked about last year, there's a major step-up in our bookings. That means there's a major step-up in our ramps. The way it works is that those ramps can take three, six, nine, 12 months, depending on how -- the size of the ACV and the size of the training classes and you're seeing those two things come together in Q1 to impact the utilization. You will see more traditional utilization as we get into Q3 and Q4. Q2 is one of our hardest quarters. We begin to prepare for our seasonal work. And so you'll continue to see it around the level that you see it right now, but it'll uptick in Q3 and Q4. And the reality of it is that as stated in our guidance, you'll -- it's not an impact on the operating income. In fact, we're getting a better E to R on our overall real estate cost.
And at the risk of being redundant to what Regina just said, I want to just be very clear. With the bookings, once those bookings are signed, we have -- we absolutely have to put that capacity aside as we're ramping into it. When you have clients that have training programs that take four to sometimes nine weeks, unfortunately, that capacity sits idle until those classes graduate and people actually infill those seats. So again to reiterate, I'm not too concerned about the capacity utilization.
And the other thing is, this is a very fluid type of situation in that we have many regions or areas in the world where our capacity, if anything, is too tight and therefore, we're expanding capacity in other areas. And then lastly, every year, as just a normal course of our business, we rationalize capacity where we see fit. And there will be some amount of rationalization, not a large amount but actually pretty small, in the U.S. where we've been in -- where we have capacity that we feel is not profitable to continue to execute on. So, all in all, I think you'll see that the capacity will tighten up. It's all in our plan, but we've -- and we feel quite good about the capacity that we have available right now so that we can infill to all the bookings.
Okay. Okay. And then question on the change in reporting. This is the first time I've ever seen a company claim that providing fewer segments is going to help with the sum of the parts. I mean if anybody wants to do a sum of the parts on the business today, they can do it pretty easily given that you have revenue and operating income broken out in four parts. So the -- I guess the question is, are you thinking about actually selling off one of those divisions or splitting the company? Because if you are, then you can argue that the sum of the parts shows a path to unlocking the value. If you're not, then it's a bit of an academic exercise.
I want to answer this, but first, I just want to just technically remind -- just remind us that technically, there are a number of SEC factors that go into considerations in terms of your segments. And what I would say is that as we have been working on our new branding and executing our go-to-market with our two centers of excellence engage and digital, it has become apparent, right, and we continue to operate these in a very integrated way. We believe that that is going to unlock its own value by virtue of getting more efficient, reducing what I would say, G&A and just leveraging the platforms, the capabilities, the human talent, the technical talent, the facilities, right? These are going to be leveraged much, much better in an integrated fashion given the likeness of our CMS and CGS business and the importance of the CSS and CTS together. So first and foremost, this is the way we're going to operate. The way we're going to operate dictates our segments and that is first and foremost. That said, we do believe that we get some derivative value from -- derivative other value from that and I'll hand it over to Ken.
Yes. Well, I don't think I could have said it better than what Regina just said. Our segments are dictated by how we operate the business. And the way we operate the business is by these two segments. And so part of this is the SEC, part of this is our auditors and accountants as far as recommending how we report, etcetera. We're in no way trying to take away any transparency. And I think that it's safe to say that the main reason why we're doing this is, is because clients are either buying our digital capabilities or they're buying our engage capabilities. As it relates to how people will understand the value, I think it's pretty obvious.
I think that there is a set of analysts that cover contact centers and BPO, and there's another set of analysts that cover tech and SaaS and cloud. And we believe, based on the number of inquiries that we're now getting from tech analysts, they want to start covering the tech side of our business and they want us to go out of our way to create better understanding and transparency since they see us as a major competitor to the stocks that they are covering in the SaaS, cloud, tech sector. So this is not something that we just woke up one morning and thought about. This was -- has been thought through very clearly where the myriad of tech analysts have come to us and said, for God sakes, why don't you break this out because you are way undervalued in this area, and so that's what we're doing.
Okay. Well, thank you very much.
Thank you for your questions. That is all the time we have today. This concludes TTEC's first quarter 2019 earnings conference call. You may disconnect at this time.