Carrols Restaurant Group, Inc. (NASDAQ:TAST) Q3 2019 Earnings Conference Call November 7, 2019 8:30 AM ET
Tim LaLonde - Interim Chief Financial Officer
Dan Accordino - Chairman & Chief Executive Officer
Conference Call Participants
Jake Bartlett - SunTrust
Will Slabaugh - Stephens Inc.
Brian Vaccaro - Raymond James
Welcome to the Carrols Restaurant Group Third Quarter 2019 Earnings Conference Call. At this time all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session and the instructions will be given at that time. I would now like to remind everyone that this conference is being recorded today, Thursday, November 7, 2019, at 8:30 a.m. Eastern Time, and will be available for replay.
I will now turn the conference over to Mr. Tim LaLonde, Interim Chief Financial Officer. Please go ahead, sir.
Good morning, everyone. By now, you should have access to our earnings announcement released earlier this morning, which is available on our website at www.carrols.com under the Investor Relations section. Before we begin our remarks, I would like to remind everyone that our discussion will include forward-looking statements, which may consist of comments regarding our strategies, intentions, guidance or plans. These statements are not guarantees of future performance and therefore, undue reliance should not be placed on them.
We also refer you to our filings with the SEC for more details, especially the risks, that could impact our business and results. During today's call, we will discuss certain non-GAAP measures that we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with generally accepted accounting principles. A reconciliation to comparable Generally Accepted Accounting Principle measures is available with our earnings release.
With that, I will now turn the call over to Chairman and CEO of Carrols Restaurant Group, Dan Accordino.
Thanks, Tim, and good morning, everyone. Let me begin by expressing our deep sadness over the September passing of Paul Flanders who served as our CFO for over two decades. He was a dear friend and colleague and is sorely, sorely missed by the entire Carrols' team. We extend our deepest sympathies to his family during this difficult time.
We have commenced a search for a new permanent CFO but in the meantime are thankful to Tim LaLonde who's been able to step in on an interim basis until a permanent replacement can be identified and appointed. Tim is a seasoned professional, a little over four decades of finance and accounting experience and served as our own controller for 20 years. In the past two months, we have experienced a seamless transition as he temporarily rejoined the company. With that let's discuss the quarter.
Total restaurant sales grew by more than 34% compared to the year ago period to $402 million mainly because of the Cambridge merger and was completed in the second quarter, which contributed nearly $72 million of restaurant sales to our top line as well as other smaller acquisitions completed over the past year.
We also generated a robust 4.5% increase in comparable restaurant sales due to the effectiveness of Burger King's marketing strategy during the third quarter with a gain consisting of both mix and traffic increases. On a two-year basis comparable restaurant sales grew 6.1%. We are further encouraged that the sales momentum we experienced in the third quarter has continued through October as well.
However restaurant-level EBITDA rose only modestly to $43 million from $41.6 million and restaurant-level EBITDA margin decreased 330 basis points due to 10.7% or -- to 10.7%. Adjusted EBITDA decreased $800,000 to $25.6 million and adjusted EBITDA margin declined 250 basis points to 6.4%. Finally our adjusted net loss was $0.09 per diluted share compared to adjusted net income of $0.09 per diluted share in the prior quarter.
As referenced in the press release, our results were negatively impacted by combining sales discounts with respect to separate Whopper value meal promotions between June 30 and August 26, which resulted in significant additional sales discounts at our restaurants relative to those experienced in the Burger King franchise system and reduced restaurant sales by approximately $8.3 million and reduced adjusted EBITDA by $7.3 million.
Adjusting for the excess sales discounts our comparable same-store sales would have increased approximately 7.4% and our adjusted EBITDA would have been approximately $32.9 million in the third quarter. This issue also negatively impacted our restaurant sales in June and on a year-to-date basis reduced our restaurant sales by approximately $12.4 million and adjusted EBITDA by approximately $10.9 million.
I will give more detail on the stack promotion later in my remarks but we'll first comment on the most significant factors affecting our core top line performance in the third quarter.
Beginning with comparable restaurant sales the Impossible Whopper launch in August was undoubtedly the biggest product news of the third quarter. The Impossible Whopper was not only additive to average check but also appears to have attracted new guests into our restaurants across all demographics and ages.
From our observation these guests included many millennials and Gen Z customers who appreciate its messaging around sustainability and lapsed users including older customers who have not visited us in a while but came back because of the Impossible Whopper.
We are also encouraged by the product's healthy rates of repurchase and are therefore optimistic that over time, Burger King can meaningfully build on the success that this plant-based platform has shown so far in 2019, and we expect will continue to show through the remainder of this year and beyond.
Importantly, the Impossible Whopper wasn't the only driver of Burger King's successful promotional messaging during the third quarter the two for $6 Mix & Match sandwich platform delivered a consistent performance during the quarter as did other limited-time offers such as the $4, $5, $6 Whopper meal deal. In the value segment, the full margin dollar crispy taco offer helped address a perceived gap in the value menu noted in the second quarter.
I now want to provide more detail around the non-recurring promotional area that impacted our financial results. Had it not been for this issue our results would have been much more in line with our expectations. They also would have been much more in line with what we expected to achieve in the fourth quarter and beyond given the strong momentum we've seen carry us over from September into October.
We discovered the issue in late August 2019 when comparing our significantly higher level of promotional discounts relative to the rest of the Burger King, franchise system and our lagging same-store sales performance relative to other franchisees during the preceding 12 weeks.
For those of you who follow Carrols closely you will know that we typically outperformed the Burger King system which is why our underperformance raised a red flag, when we received the comparative information for review. We eliminated these excess sales discounts on August 27, which resulted in an immediate improvement sales from an immediate decline in promotional discounts. This led to improved sales and margin trends sequentially during the remainder of the third quarter, which you can see from the encouraging and unaffected September results that we disclosed in our press release.
Note that these positive trends continue through October, so that in both September and October, we are once again back to outperforming the broader U.S. Burger King system from a same-store sales perspective.
Now a brief comment on Popeyes. Although this brand currently represents less than 5% of our sales, same-store sales compared to pre-acquisition Cambridge sales increased 8.2% in the third quarter, driven by the successful launch of the new chicken sandwich, which was only featured for about two weeks in mid-August before being sold out.
The sandwich just returned in early November as a permanent menu item, chain-wide and the initial results are extremely favorable. We are excited to grow our Popeyes business through both acquisitions and new restaurant development.
Turning to other factors that affected profitability. We were challenged by higher beef costs, which rose nearly 11% year-over-year and by labor cost pressures as our average rate increased approximately 5.5%.
Although Cambridge did not contribute materially to our overall profitability in the third quarter the integration of the Cambridge restaurants is progressing very well and is proceeding on schedule. We've applied the same Carrols integration playbook that we developed and honed over the last decade.
We are adding labor and training, which leads to improved guest satisfaction and accelerated same-store sales and we are installing our point-of-sale and back office -- back of house systems at the Cambridge Burger King restaurants, which should improve cost of sales due to the reduced theft and food waste. We will be finished with a rollout by mid-November.
The current performance at the Cambridge restaurants is not a reflection of any shift in our business model fundamentals and is simply a reflection of the investments required to drive long-term results. We realized that it will take some time to see the full benefit of the acquisition flow through to our financial results and we do not expect that that will be evident until next year.
However, we are confident based on our experience and our prior track record that we can improve the sales and overall financial performance of these restaurants so that they contribute meaningfully to our overall growth and profitability. By realizing these improvements, we believe we can drive meaningful value creation from the Cambridge restaurants as we have with so many acquisitions in the past.
On the M&A front, we continue to pursue a capital allocation strategy to drive long-term shareholder value and have a compelling pipeline of acquisition targets at both Burger King and Popeyes that we expect to close in the coming months. As a reminder, we have a $25 million share repurchase authorization in place reflecting the Board's continued confidence in our strategy and value creation potential.
During the third quarter, we repurchased $2 million of our common stock in open market transactions. Although, we believe that the Carrols stock price does not reflect the fair value of our business, we have many competing high-return options for capital allocation and are disciplined in balancing all of them while also maintaining sufficient liquidity and a prudent level of leverage.
At an approximately 4 times net debt-to-EBITDA with a covenant-light term loan, we believe we are well capitalized to pursue our growth goals and will continue to evaluate all capital allocation decisions rigorously to compound shareholder value at attractive rates of return.
With that, let me turn the call over to Tim to review our financials in further detail and update our annual guidance.
Thanks, Dan. Restaurant sales for the third quarter increased 34.2% over the prior year period to $398.4 million, including $71.6 million in restaurant sales from the Cambridge acquisition. Comparable restaurant sales for our core Burger King restaurants, which excludes Cambridge and other restaurants acquired in the past 12 months increased 5% consisting of a 2.3% increase in average check and a 2.2% increase in customer traffic.
Our average check increase reflected menu price increases of 1.2% in the quarter. Note that the excess discounts relative to our Whopper value meals that Dan mentioned, negatively impacted our same-store sales by approximately 290 basis points during the third quarter.
And adjusting for the impact of that issue our comparable restaurant sales would have increased 7.4% in the third quarter and would have outperformed the broader Burger King North America system, which had a 5% comp sales increase by approximately 240 basis points.
Adjusted EBITDA declined $800,000 in the quarter to $25.6 million from $25.6 million in the third quarter last year. As Dan mentioned, the excess sales discounts on our whopper value meals reduced adjusted EBITDA by approximately $7.3 million in the third quarter and reduced adjusted EBITDA margin by approximately 180 basis points in the third quarter.
We have made investments in training labor, as Dan mentioned, for the Cambridge Burger King restaurants as part of the integration to our restaurant systems, which we believe will enhance restaurant level margins in the future.
Restaurant-level EBITDA increased $1.4 million to $43 million in the quarter from $41.6 million in the third quarter last year. Restaurant-level EBITDA margin was 10.7% of restaurant sales and decreased 330 basis points. The impact for the excess sales discounts also reduced restaurant-level EBITDA margin by 180 basis points in the third quarter.
Turning to other cost line items. Cost of sales, excluding the Cambridge six convenience stores increased 190 basis points as a percentage of restaurant sales compared to the prior year period, which primarily reflected higher commodity costs including a 10.7% increase in beef costs.
Ground beef averaged $2.20 a pound in the third quarter compared to a $1.97 per pound in the third quarter last year. Restaurant labor expense increased in the third quarter 77 basis points, as a percentage of restaurant sales, compared to the prior year quarter due primarily to a 5% increase in our average hourly rate in our Burger King restaurants.
Rent expense increased 46 basis points in the third quarter as a percentage of total revenues compared to the prior year period due to the high rents as a percentage of sales acquired in 2019 and the elimination of deferred gain amortization on sale-leaseback transactions this year as a result of the new lease accounting standard. Other operating expenses increased 42 basis points in the third quarter as a percentage of total revenues compared to the prior year due to higher repair and maintenance expenses.
General and administrative expenses were $21.4 million in the third quarter of 2019, including $2.2 million in Cambridge acquisition costs and the integration costs compared to $17.6 million in the prior year period, which included $800,000 in acquisition costs and integration costs. Excluding these costs in both periods, general and administrative expenses declined 102 basis points to 4.6% as a percentage of total revenues.
Our net loss was $6.8 million in the third quarter or $0.15 per diluted share compared to net income of $3.6 million or $0.08 per diluted share in the prior period. The net loss for the third quarter of 2019, included $0.5 million of impairment charges and other lease charges and $2.8 million of acquisition and integration costs. Net income for the period included -- for the prior year quarter included $200,000 of impairment costs and charges and $800,000 of acquisition expenses.
Excluding these charges, adjusted net loss in the third quarter was $3.9 million or $0.09 per diluted share compared to adjusted net income of $4.2 million or $0.09 per diluted share. As a reminder, a summary of these adjustments in arriving at adjusted net loss are detailed in the tables accompanying this morning's release.
Total capital expenditures reflect $54.3 million in the third quarter of 2019 compared to $97.4 million in the first nine months. At the end of the third quarter, our cash balances were $2.6 million and total long-term debt and finance lease liabilities were $486.5 million.
With regard to liquidity, we ended the third quarter with $2.6 million in cash. And at the end of the third quarter, we had available under our revolving credit facility $53.9 million. Our net leverage ratio was approximately 4 times consolidated EBITDA as defined in our senior credit facility.
Lastly, as we've announced during our last call, our Board authorized a $25 million stock repurchase program, which we can use at our discretion, to provide a tangible return of capital and support to long-term enhancement of value to shareholders. To that end, we repurchased in open market transactions a little over 283,000 shares of our stock for approximately $2 million during the third quarter which was at an average purchase price of $7.10 per share.
Turning now to our 2019 guidance, we are revising certain items while maintaining others. These estimates exclude any other potential acquisitions that we may complete in 2019. Total restaurant sales are still expected to be $1.44 billion to $1.47 billion, including approximately $200 million of total revenues for Cambridge for approximately eight months of results in 2019.
Comparable restaurant sales are still expected to increase 2% to 3% for the year. Commodity costs are still expected to increase 3% to 4% with beef costs increasing 7% to 9% for the year. General and administrative expenses are still expected to be $68 million to $72 million, which excludes stock compensation expense and acquisition and integration costs.
We also fully -- we expect to fully integrate, the Cambridge corporate functions by the end of the year. Our previous guidance of adjusted EBITDA of $100 million to $105 million remains unchanged other than for the negative impact on adjusted EBITDA of $10.9 million in the second and third quarters due to the excess sales discounts discussed earlier.
We are building more restaurants in Q4 than we previously guided. And as a result, capital expenditures are now expected to be $145 million to $155 million, which was previously $120 million to $130 million, which -- this includes $55 million to $65 million for the construction of 22 to 24 new Burger King restaurants and nine to 11 new Popeyes restaurants.
We also plan in 2019 to remodel a total of 90 -- approximately 92 Burger King restaurants and four Popeyes restaurants. Our CapEx guidance for 2019 is gross of an $8 million landlord contribution related to certain 2019 remodels to be received in 2020. Proceeds from sale leasebacks are now expected to be approximately $44 million to $48 million previously $15 million to $25 million.
Finally, we expect to close up to 15 Burger King restaurants, including two restaurants that were relocated in their respective trade areas, and of which 13 have already closed through the end of the third quarter.
That concludes our prepared remarks. So with that, operator, let's go ahead and open up the lines for questions.
Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Your first question comes from Jake Bartlett with SunTrust. Please go ahead.
Thanks. I'd first just like to express my condolences for Paul's passing. I think the rest of the investment community I think, we really appreciate the work he did with us. And he was a great guy.
And so, Dan, my first question is just really on this excess discounting. And if you can just kind of really kind of clearly explain what it was? And my understanding is that it related to the $4, $5, $6, Whopper promotion. And that came with small drink inside.
And you're offering any size for those, but you didn't see a related boost in traffic. If you could just clarify that that understanding is right or wrong, then that would be helpful?
Yeah. That's pretty close, Jake. The -- what we typically do when we run a two for $4 promotion or a $2 for $6 promotion, which doesn't include any ancillary items, is we induce people to attempt to trade up to a higher quantity, medium or large.
This promotion was intended for only a value meal -- I mean a value fry, and a value drink, to be purchased for a Whopper Junior at $4 or Whopper at $5, and a double Whopper at $6. What we did was attempt to induce people to a trade up.
And what therefore happened was you end up with a double discount, because we typically don't do this, with a value meal. Our value meals are already discounted. And by the way, we handled this. You essentially ended up with a further discount on a value meal that was already discounted.
So, if you had $1.50 discount off a value meal, we gave you an additional discount, on top of that. So it was not a successful strategy. It was not an accounting issue. It was not a systems issue. It was a mistake.
We screwed up. And it cost us a fair amount of money. And when I saw the margins, and I contacted Burger King after Q2 and said, "What in the world happened here, because we always outperformed the system?"
We did some research with them, some analysis with them, and looked at our incidence of $4, $5 and $6 compared to the rest of the system. And essentially we were giving a discount to everybody. And we shouldn't have and we didn't get a corresponding increase in traffic, nor sales.
And you feel confident that, it didn't boost your traffic? Or you feel confident of how you're able to kind of tease out the impact?
Yeah. We looked down -- we did -- we analyzed in three different ways here. And I have Burger King analyze it separately. And our incidence of $4, $5 and $6 was exactly the same as the balance of the system.
So in terms of people who actually took advantage of the promotion as it was intended, which was to buy it with a value fry and a value drink, we were giving discounts to people who otherwise didn't expect those discounts. And we didn't get any additional traffic from that at all.
Got it and then, I think...
I think, the issue Jake is, we spent a lot of time dealing with this convoluted mistake. The fact of the matter is it was a mistake. We screwed up. The underlying business is stronger than what our numbers reflect. And that's what we should be focused on is the fact that it was a onetime error. And the underlying business is very good.
Got it, I appreciate that. And I think, maybe to that end it would be helpful if you could quantify your performance in October because obviously you already stated the strong results in September.
I think that was also lapping Hurricane Florence if I'm correct but I think, it would be helpful just to hear how the trends in October has been which are, maybe a little more clean?
October is also trending very strong compared to -- it's consistent with what we had expected and was higher than the balance of the system.
Okay. Would it be stronger than September number that you've disclosed?
No. Not in terms of same-store sales, but in terms of -- relative to the balance of the system there's still an adequate delta.
No when you look at -- I think, where you're going Jake, if you look at the Q4 sales comps it's embedded in the annual guidance of 2% to 3%.
Got it, okay.
Yeah. That's really helpful. And then, just lastly, just trying to...
You do understand the press release Jake, because I'm not sure, I did?
No. I think, I'm finally -- I think, I'm getting it. I think I'm starting to get it now. So I appreciate it. It's very helpful. Lastly for me, I wanted to just see if I can better understand the drag on margins from the Cambridge stores.
If you could quantify that it would be really helpful if there's kind of a number you could provide as to what maybe their margins were versus yours? Or we could do the math to see what kind of a drag it was.
But I wanted to see if I could get that answer. And then also just to understand how quickly you expect the margins at those stores to improve in the coming quarters?
Tim, can give you what the margins were. And then, I'll tell you what our expectation is in terms of the improvement.
Yeah. The Cambridge stores from a same-store sales standpoint are not performing nearly as well as our legacy restaurants and that impacted the margins quite significantly.
We still have -- we have a lot of opportunity in food costs. And we are -- we will be beginning those -- recognizing those benefits once we complete our POS installations which will be done here in the next couple of weeks. And then, as mentioned, in the release we also added some labor for training...
But what was the margin included in the three, that's what he asked?
He's looking up that answer.
The -- as far as the improvement right now Jake, there's about a 350 to 400 basis point delta in cost of sales between the Cambridge restaurants and our legacy stores. Now that we have our own POS systems in we've been able to quantify that.
Our expectation is that half of that will be corrected by mid-2020. And we will be on target with the legacy restaurant cost of sales improvements by the end of the year of 2020. Labor we're already making the modifications that need to be make and those things will be on target by the end of Q1.
What we're really focused on is the sales increase because right now the delta between the Cambridge sales and the legacy sales in terms of comp store sales is not where it needs to be and that's primarily an operating issue which is why we're adding labor currently to improve the restaurants.
We've added management staffing. And we've added team member staffing. And we would expect again by the mid-2020 that those restaurants will be in a competitive shape.
Yeah. Jake, our restaurant EBITDA contribution for Burger King and the Popeyes was about $3.2 million, and at a margin between, 4%, to 5% if it was de minimis, Jake.
Got it, thank you very much I appreciate it.
Well thank you.
Thank you. Your next question comes from Will Slabaugh from Stephens Inc. Please go ahead.
Yeah. Thanks guys. I know there's a lot of noise in the quarter. But I was wondering how you would describe the underlying momentum of the business as you work throughout the quarter?
And I know you mentioned on the last call, I think, you were up 1.5% or so in July but I'm assuming there was -- that's not an adjusted number. So just curious, how you would describe sort of the cadence of the quarter as we work throughout the three months?
We got stronger as the quarter went on Jake each month – while part of it is because the numbers that we were lapping last year got a little bit easier. But our sales trend is as we had expected and forecasted on our Q2 call. And we ended Q3 on a much stronger note. And we expect that Q4 will also be consistent with our expectations.
September benefited from the launch of the Impossible Whopper which did what we thought it was going to do. And looking at the rest of our menu item sales it appeared to be almost 100% incremental.
Great and I had a Cambridge follow-up as well. How are you thinking about the earnings power of that business for 2020 and beyond today versus when the acquisition was announced? I'm just curious if any thoughts have changed there?
No, no. No, I'm still very optimistic about Cambridge. One of the things that we were impressed by was the fact that the -- we had real favorable opportunities in wage rates which we can leverage. And we knew that the operating metrics were not strong and that we had real opportunity to improve the operations. And when you improve the operations the sales also will be strong.
The one thing I think that we have learned is that it's a very value-sensitive market. And consequently, we'll be focused in that area as well in terms of things that we can do to continue value offerings in those -- well there's two things. It's a value-oriented market and it's not responding to the Impossible Whopper to the extent that other places are probably not surprising.
Makes sense, and then one more question if I could on the acquisition pipeline and plan for both Burger King and Popeyes. You mentioned you had a few stores -- or a few deals rather you're hoping to close by year-end. I'm curious if those are all Burger Kings or you have some Popeyes in there? And just if you could talk about the pipelines in general for both brands?
We will have a few Burger Kings closed in this year in 2019 and we have a significant Popeyes acquisition that we are in negotiation with. We're as a matter of fact dealing with the contract issues as we speak and we will close on that deal in the first quarter of 2020.
So the acquisition pipeline in both brands is still quite strong. And our expectation is that we'll be at 130, 140, Popeyes by Q2 of 2020 and we will continue to be acquisitive in that -- with that brand as well as continue the new-build opportunities.
Great, thank you.
Thank you. [Operator Instructions] Your next question comes from Brian Vaccaro with Raymond James. Please go ahead.
Thanks and good morning. I just wanted to circle back on the Impossible Whopper. Obviously a very strong product launch. Could you provide a little more color on how demand for the product or unit sales trended through the quarter and perhaps into October?
The Impossible Whopper trend is pretty stable. We've been running at 30 to 35 units per day over the past several weeks and that continues to be the trend. And as Tim indicated it appears to be 100% incremental because it is not negatively impacted our SKUs on Whopper sales at all.
If you look to as Dan mentioned the -- per store per day counts very greatly within our system depending on the demographic but we're averaging in the 30s.
Okay. And the discounting issue, and the promotion issue that obviously identified did that impact both Cambridge units and the legacy units?
No just the legacy restaurants.
Just legacy, okay. And then Dan I wanted to ask about the updated guidance excluding the discounting piece. I guess just can you talk about the Cambridge assumption that's embedded in your $100 million to $105 million of adjusted EBITDA. Did that change at all versus last quarter?
I think the way to think of that would be, as I mentioned before on the margins a slight improvement in the restaurant EBITDA.
So versus your prior guide you expect a little higher margins on those units?
No sequentially from the third quarter it was what I was referencing.
No it's consistent with what we guided to previously Brian.
Okay. All right. And then on the sale leaseback the change there? Dan can you elaborate a little bit on that sort of build it up buying some incremental land it sounds like for future organic growth? And what was the year-to-date proceed so far?
Let me answer the first part of that. Yes the Cambridge restaurants there were some Burger King opportunities and Popeyes opportunities that were already in the pipeline when we did the deal and it was owned real estate. So we were able to build those things in a more rapid pace in Q4 and that's part of the sale leaseback issue. Right now currently on -- in terms of sale-leaseback dollars, what have we got in the bank right now? We're expecting to close in the fourth quarter here about $39 million of sale leasebacks in about four or five different transactions some transactions with multiple restaurants included.
Okay. And then I guess last one Dan, you talked about the Popeyes acquisition in the early part of next year. I noticed you're -- just thinking about the balance sheet a little bit, I noticed the debt I think it was close to $490 million. I guess how are you balancing the organic unit growth opportunity versus acquisitions? And is there an expected sort of amendments or additional capacity you might pursue into next year to provide that funding?
Yes. I think that your question is how am I going to pay for this? And yes, we're in the process currently of looking at financing alternatives and we're in pretty good shape in terms of locking those up and our leverage will be south of 4 times. And consequently we're confident that we'll be able to get the financing that we need at very favorable terms.
Okay. And any color on the multiple on the Popeyes units even a range?
It will be between $6 million and $7 million.
Store level EBITDA?
We have reached the end of the question-and-answer session. And I will now turn the call over to the management team for closing remarks.
Yes. So this is Dan...
Apologies we do have a follow-up question from Jake Bartlett of SunTrust.
I just snuck it in there. It was ending sooner I thought.
Well you just made it Jake.
I know. So again I just want to maybe pin you down on this a little bit more. As I look at the fourth quarter -- and the guidance range is just pretty wide when you kind of look at the implied guidance, I think it's about 1% to 5% for the fourth quarter. So any more color on where you think you're going to fall in that range as, I look to last quarter...
At the high end Jake.
Okay. Great. Thanks so much.
Yes. As a final comment this is Dan, what I would like to say is again I apologize for the confusion around this discounting issue. It was -- it's difficult to explain. And that I just want to make sure everybody understands. It's not an accounting issue. It's not an add-back issue. It's not a restatement issue. It was a mistake and the underlying business is very strong. And I think that's what we focus on. And I think that's what our investors focus on.
So thank you and we'll talk to you in February.