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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: I'll then hand the call over to our Head of Operations, Dave Striph, who will speak to the results of our Operating Asset segment.\nJay Cross will provide updates on our development activity in Ward Village.\nAnd finally, our CFO, Correne Loeffler, will conclude the call with a review of our financial results before we open the lines for Q&A.\nWith that, let me start out by saying our positive second quarter results marked a significant milestone for the Howard Hughes Corporation.\nDuring this time last year, COVID-19 emerged as a significant obstacle that we had to navigate for the better part of the year.\nDespite the enormous challenges of the past year, our team of dedicated employees, irreplaceable assets and highly sought after communities withstood the various hurdles presented by the pandemic.\nI am pleased to report that all of our business segments are demonstrating great strength and resiliency and now have either surpassed or are closely approaching pre-pandemic levels.\nOur Master Planned Communities continue to generate strong results with the acceleration of land sales driven by robust home buyer demand, demand that began to strengthen in the second half of last year and is carried into the first half of 2021.\nAn integral part of our strategy is our ability to sell residential land to homebuilders at higher prices over time, driven by the amenities created by our commercial developments that are integrated throughout our communities.\nDuring the quarter, our commercial assets delivered strong year-over-year and sequential NOI growth in our Operating Asset segment with notable improvements across retail, hospitality and the Las Vegas Ballpark.\nTurning to condo activity in Hawaii.\nWard Village has continued to experience elevated sales despite being limited to a mostly virtual condo tour experience.\nAll three towers currently under construction are now 86% presold and are all progressing on time and on budget.\nFinally, at the Seaport, we experienced improvement with the continuation of the greens, increased rooftop events and robust restaurant activity, all of which continue to drive increased foot traffic to the area.\nNow taking a deeper dive into the drivers of our MPC segment.\nOver the past several quarters, our communities located in the Las Vegas and Houston regions were able to capitalize on the demand from out-of-state migrations as homebuyers living in densely populated high-cost states set a better quality of life with a focus on expansive open spaces and best-in-class amenities.\nThis view was further solidified by the latest midyear report released in July by the Robert Charles Lesser Corporation, where our communities in Summerlin and Bridgeland ranked among the top-selling Master Planned Communities in the country.\nSummerlin was ranked as the third top-selling MPC in the U.S. and was the top-selling MPC in Nevada.\nBridgeland was ranked 13th on the national list.\nWhile some of the pandemic-driven migration trends that I just highlighted have moderated, regional builder inventories have been depleted and remain at or near all-time lows.\nAdditionally, homebuilders have recently shifted to a just-in-time home delivery strategy in order to combat supply chain constraints, which have also contributed to a reduced available supply.\nOverall, housing demand within our communities has remained strong, and new home permits have remained elevated, all of which point to increased homebuilder demand for land to replenish their depleted inventories.\nDuring the quarter, our MPCs delivered tremendous results as the strength in land sales, combined with earnings from our Summit joint venture in Summerlin, helped drive the segment's earnings higher.\nIn addition, new home sales, a leading indicator of future land sales, grew 23% year-over-year.\nSummerlin had an all-around great quarter, selling 49 acres of residential land, while also increasing its price per acre 14% compared to the same period last year.\nBuilders continue to purchase more of our land to keep up with demand, which is evidenced by the closing of three super pad sites during the quarter.\nAdditionally, Summerlin saw a 66% year-over-year increase in new home sales, demonstrating the demand from homebuyers in this region remains strong.\nAnother significant driver to Summerlin's success was derived from the earnings generated at The Summit, our joint venture with Discovery Land.\nThe Summit's increase in earnings was due to closing of 16 units during the quarter versus three units during the prior year period.\nIn Bridgeland, land sales softened in the quarter with 25 acres of residential land sold compared to 38 acres in the prior year period.\nBridgeland's new home sales slowed a bit during the quarter as well, as homebuilders paused the selling of lots and began listing homes on the market at a much later stage in the construction process.\nA change in sales strategy for homebuilders in Bridgeland that was driven by ongoing supply constraints that impacted material costs and delivery times.\nWe view both the decline in land sales as well as the decline in home sales this quarter as a temporary pause driven by this change in homebuilder sales strategy that meaningfully limited supply and was not the result of any change in underlying demand.\nAs builders now begin to release these partially constructed new homes to the market and return to the more traditional model of selling lots, we expect that sales will rebound in the coming quarters.\nThe Woodland Hills delivered positive results across the board with significant year-over-year increases in land sales, new home sales and growth in the price per acre of land sold.\nThe results produced by this MPC continue to impress and have maintained an accelerated pace over the past several quarters.\nTurning to the Seaport.\nWe continue to experience numerous areas of improvement with the reopening of the Manhattan economy.\nWe have begun hosting various rooftop events, such as high school and college graduations and, most notably, ESPN's Annual SB awards.\nWe continue to see strong demand for the future events at The Rooftop, which is a great sign coming out of the pandemic.\nWe've also made tremendous progress with our restaurant space.\nDuring the quarter, we increased the number of open restaurants from two to seven.\nOf these openings, two were related to concepts by acclaimed chef, Andrew Carmellini, restaurants Carne Mare and Mister Dips.\nBoth of these have displayed very strong initial results.\nLastly, we relaunched our Summer Concert Series on The Rooftop at Pier 17, which was canceled last year due to the pandemic.\nWe held our first concert in late July to a sold-out crowd.\nAnd have several more concerts lined up through October, several of which are already sold out.\nWith that, I'll hand the call over to Dave Striph.\nResults of the second quarter that David just highlighted clearly display the strength of our business as the economy continues to reopen.\nIn particular, our Operating Asset segment generated robust results that I would like to touch on in more detail.\nOur commercial properties delivered improved results during the quarter as the portfolio continues to inch closer to pre-pandemic levels.\nOur Operating Assets segment generated NOI of $57.9 million in the quarter, which was a material improvement year-over-year and sequentially.\nThe results delivered in the second quarter by our retail properties were one of the top highlights from our portfolio of high-quality assets.\nRetail NOI increased for the third consecutive period totaling $14.8 million in the quarter, increasing 72% year-over-year and 23% sequentially.\nWhile we generally experienced improvements throughout the majority of our retail assets, the largest drivers of this impressive performance were concentrated in Downtown Summerlin, Ward Village and the Outlet Collection at Riverwalk.\nSpecifically in Downtown Summerlin, we are beginning to see activity surpass pre-pandemic levels as sales per square foot in June totaled $668 compared to $636 in June of 2019.\nOur retail assets have continued to improve with consecutive increases in collection rates, which have been steadily improved to 80% from a low of 50% in the second quarter of last year.\nHospitality was another sector severely impacted by COVID, which caused our hotels to shutter for an extended period of time just over one year ago.\nOur hotels have experienced a meaningful recovery and during the quarter, generated $2.7 million of NOI compared to a slight loss in the prior quarter and a $1.8 million loss in the prior year period.\nThe improved occupancy at our hotels was largely driven by an increased volume of leisure travelers during May and June.\nThe Las Vegas Ballpark had a tremendous quarter, generating quarterly NOI of $3.1 million.\nThis was substantially higher than the $1.1 million loss reported during the prior year period due to the cancellation of the Minor League Baseball season in 2020.\nFor 2021, the season began in May, and our team, the Las Vegas Aviators has hosted several games at full capacity with additional games scheduled to continue through the majority of the third quarter.\nThe continuous lease-up of our latest multifamily assets helped drive quarterly NOI to $7.4 million, a 94% increase year-over-year and a 29% increase sequentially.\nJust as we have seen robust demand in single-family housing, interest remains high for available units at our multifamily properties.\nWith most of our assets leasing at or above pro forma projections, we have additional projects underway in Bridgeland, Summerlin and Downtown Columbia to further capitalize on this momentum.\nOffice NOI increased 2% sequentially to $26.3 million as strong leasing velocity more than offset the tenant expirations experienced during the prior quarter.\nI'm pleased to report that we experienced a rapid increase in office leasing momentum during the quarter, specifically in the Woodlands.\nYear-to-date, we have executed 216,000 square feet of new and renewal leases with 95% of that activity occurring in the second quarter.\nIn addition, we have nearly 300,000 square feet of leases in progress, predominantly concentrated in the Woodlands.\nThis provides a strong pipeline of opportunities that could potentially close in the second half of 2021.\nFurthermore, we have limited lease expirations that do not exceed 10% of our office portfolio during a given year until 2025.\nWith that, I will hand the call over to our President, Jay Cross.\nAs you can tell from the comments thus far, demand within our communities from both the residential and commercial perspective remains strong.\nAs such, we need to ensure that our communities are equipped with the right products that residents and tenants are seeking.\nLast quarter, I highlighted the commencement of two million square feet of construction across several asset types, including multifamily, office and a condo tower.\nWe've made great progress on the initial construction phase of these projects.\nAnd while we have encountered material shortages in some instances due to the supply constrained market, we do not expect any material impacts over the course of development.\nThis is due to our rigorous budgeting process and ongoing supply chain management.\nThere are a number of additional projects on the horizon as we continue to see an abundance of opportunities to diversify our product mix across the portfolio.\nFor instance, in Bridgeland, we continue to experience strong demand for housing and see a need to offer additional products into the market.\nAs I mentioned during our Investor Day and on last quarter's call, we plan to develop a single-family for rent community in Bridgeland that will encompass 263 homes distributed across three product types.\nThis is a first for Howard Hughes and will offer a complementary product between single-family for purchase and our multifamily offerings.\nThe thesis is to provide tenants the flexibility of renting while still having access to many of the offerings a traditional home can provide such as three- and four-bedroom configurations, private outdoor space and an attached garage.\nThe typical renter might be an executive looking for a temporary housing solution, a single parent or young couples for the family seeking a temporary home as they save to make a down payment for their first home.\nThe single-family for rent project is still in the preplanning stages, and we look forward to providing additional updates in the coming quarters.\nSeaport, we continue to make great strides on the development front.\nTin Building remains on track for completion by the end of 2021, and we look forward to having an official brand opening in the spring of '22.\nThe exterior of the building is largely complete, the interior is well along and the integration of omnichannel capabilities for enhanced mobile ordering and delivery will establish the Tin Building as a one-of-a-kind food home.\nAt 250 Water Street, we continue to advance our plans for this site following the New York City Landmark Preservation Commission's approval of our proposed design for a 28-story mixed-use building.\nThe proposal is now moving through the city's land use review process to obtain final approvals anticipated later this year.\nAdditionally, we have agreed with the city on an extension to our ground lease to 99 years, subject to a separate land use review process, which will also include our contribution to the Seaport Museum's revival, improvements to the Esplanade and the opening of an important drive way around the Tin Building.\nThis separate process is also on track for year-end completion.\nShifting our attention to Hawaii.\nAt Ward Village, condominium sales continued to progress at elevated levels.\nDuring the quarter, we contracted to sell 45 condos, which has further reduced our already limited supply of available units.\nThe pace of continued sales has been incredible, especially when one considers the impacts of Hawaii's COVID-related travel restrictions.\nLast quarter, we broke ground our latest tower, Victoria Place.\nAnd of its 349 units, only 23 condos remain, which speaks to the level of demand we are seeing in Ward Village.\nOur other two towers under construction, 'A'ali'i and Ko'ula are well sold at 87% and 81% and remain on time and on budget, with completion expected in the fourth quarter of 2021 and 2022, respectively.\nFinally, we sold out our third condo tower in Hawaii during the quarter with the closing of the final unit at Anaha for $12.9 million.\nDuring the second quarter, our operational teams were able to capitalize on improving market conditions and delivered improved financial performance across all of the company's business segments.\nFirst, our MPCs delivered strong results in the quarter with earnings before taxes, or EBT, of $69.8 million, which is a 10% increase compared to an EBT of $63.4 million in the prior quarter and a 66% increase compared to an EBT of $42.2 million in the prior year period.\nNext, our operating assets generated $57.9 million of quarterly NOI, which represented a 20% increase compared to an NOI of $48.4 million in the prior quarter, and a 42% increase compared to an NOI of $40.8 million in the prior year period.\nLastly, we sold 45 condo units in Hawaii, just one shy of the 46 units sold in the prior quarter and a 246% increase compared to the 13 units sold in the prior year period.\nAt the Seaport, we recorded a $4.4 million loss in NOI, which is only 1% lower compared to the prior quarter and 18% lower compared to an NOI loss of $3.7 million in the prior year period.\nDespite the loss in NOI, we experienced a meaningful improvement in visitor traffic.\nIt was driven by an increase in events and strong restaurant activity.\nEven with the impact of labor shortages, several of our restaurant concepts were still able to meet or exceed their stabilization targets based on recent sales per square foot.\nThis demonstrates the strength of the customer demand.\nWe are very pleased with our quarterly performance and look forward to continuing this momentum into the second half of the year.\nTaking a look at GAAP earnings.\nFor the second quarter, we reported a net income of $4.8 million or $0.09 per diluted share compared to a net loss of $34.1 million or $0.61 per diluted share during the prior year period.\nThe increase in net income from the prior year period was primarily driven by strong results generated by our MPC and Operating Assets segments.\nAided by our strong second quarter performance, I am pleased to report that we remain on track to meet all of our previously disclosed guidance targets established at the beginning of the year.\nTo reiterate our 2021 guidance, we expect MPC EBT to range between $210 million to $230 million and expect operating asset NOI to range between $195 million to $205 million.\nFor the first half of 2021, our G&A totaled $42.1 million, representing a 31% decrease compared to $61.3 million in the prior year period.\nBased on our current run rate, we expect G&A to be within our guidance range of $80 million to $85 million in 2021.\nBased on the presale volume at 'A'ali'i as well as our other sales at Ko'ula and Anaha, we remain confident we can generate between $100 million to $125 million of condo profits in 2021, which was our original guidance for the full year.\nOnce construction is complete at 'A'ali'i in the fourth quarter, we will close on the units currently under contract and begin to recognize the associated sales proceeds.\nNow turning our attention to noncore asset sales.\nIn May, we sold Monarch City, a 229-acre land parcel outside of Dallas, resulting in a book gain of $21.3 million before realizing a noncash tax expense of $4.6 million.\nThis sale generated net proceeds of $49.9 million, bringing our total net proceeds from noncore asset sales to $263.7 million since the fourth quarter of 2019.\nWe will continue to pursue the sale of our other noncore assets and remain focused on achieving maximum value for these dispositions.\nFinally, as we turn our attention to the balance sheet.\nWe continue to maintain a robust liquidity position and a strong balance sheet.\nWe ended the quarter with just over $1.2 billion of liquidity that comprised of $1.1 billion of cash and $185 million of undrawn revolving credit facility.\nOver half of our debt issuances don't mature until 2026 or later.\nAnd we have ample liquidity to address our near-term maturities as well as to fund our net equity requirements for our development projects.\nOur strong financial position provides us the flexibility to nimbly execute on future projects, targeting outsized risk-adjusted returns.\nBefore we open up the lines for Q&A, I'd just like to take a minute to reiterate a few key points.\nFirst, our business is designed to deliver perpetual cycle of value creation.\nAs we sell land to homebuilders, new residents move into our communities and create a need for commercial amenities.\nAs we build out these amenities by constructing commercial assets, it helps drive the overall value of our land hire.\nWe have nearly 10,000 acres of raw land across the country that enables us to repeat this process for decades to come.\nThis model remains true for our condo developments in Ward Village, but on a vertical level, where we have nearly five million square feet of entitlements remaining.\nSecond, our strong balance sheet leaves us well positioned to evaluate opportunities and react quickly based on current market conditions.\nAs Jay mentioned, we have already commenced two million square feet of development in the first half of 2021, and are in the early stages of planning for additional projects.\nThird, our management team is now fully established.\nWe come from unique backgrounds with diverse expertise in development, finance and operations that when mended together, position us to nimbly execute and deliver superior results.\nCombined with the support of our Board, we're all aligned and focused on creating meaningful value for all of our stakeholders.\nLastly, we finished the first half of 2021 with strong operational and financial performance across the board.\nWe believe our business is poised for continued growth, and we are well positioned heading into the second half of 2021 as we remain on target to achieve our full year guidance.\nWith that, I'd now like to begin the Q&A section of the call.\nWe'll answer the first few questions that have been generated by Say Technologies and will be read by John Saxon.\nJohn, can you read the first question?\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Before we begin I would like to direct you to our website www.\nTo start the call I'd like to provide a brief recap of our quarterly performance and cover the highlights of both our MPC segment and the Seaport.\nOur Head of Operations Dave Striph will cover the results of our operating assets segment; followed by our President Jay Cross who will provide details on our development activity and speak to the results at Ward Village.\nAnd finally our CFO Correne Loeffler will conclude the call with a review of our financial results before we open the lines for Q&A.\nBefore we dive into the results of the quarter I would first like to highlight the release of Howard Hughes 2020 annual ESG report which was published just a few days ago and can be found on the Sustainability portion of our website.\nThis report displays the impactful ESG results we have produced so far and reflects our commitment to environmental and social best practices which are integrated throughout our communities across the country.\nNow on to the highlights of the quarter.\nWe closed out the third quarter of 2021 with strong results across all segments as Howard Hughes continues to capitalize on the high levels of demand that exist throughout our various mixed-use communities.\nTo put our performance in perspective most of HHC's year-to-date results in 2021 have surpassed the year-to-date pre-COVID activity of 2019.\nMPC EBT is up 29%.\nOperating asset NOI is higher by 1% even with lingering impacts from the pandemic.\nAnd Ward Village condo sales were just shy of 2019 levels despite having limited available inventory.\nAnd this was all accomplished while reducing our G&A cost by 30%.\nDuring the third quarter we saw healthy land sales driven by superpad sales in Summerlin.\nOur operating asset NOI grew for the fourth consecutive quarter.\nCondo sales in Ward Village accelerated despite a shrinking supply of available units under construction and the Seaport saw steady improvements from the return of the concert series at Pier 17 and the growing popularity of our unique restaurants.\nWe expect these results to grow stronger especially with the recent addition of Douglas Ranch our latest MPC spanning 37000 acres in Phoenix West Valley.\nIn October we announced our $600 million all-cash acquisition of this fully entitled shovel-ready MPC which further adds to our depth of opportunities.\nBy strategically redeploying the net proceeds from our noncore asset dispositions we now have the ability to transform this blank canvas into a leading community focused on sustainability and technology a community that is entitled for 100000 homes 300000 residents and 55 million square feet of commercial development.\nFollowing this transaction we are still left with a healthy cash position to continue executing on our existing development pipeline to meet the growing demand within our MPCs.\nWhile we have already had approximately two million square feet of development underway we're pleased to announce new commercial projects in the medical office and single-family for rent sectors which Jay will touch on in a moment.\nBut we're not stopping there.\nWe've long believed that Howard Hughes trades at a steep discount relative to its net asset value.\nAs such we are pleased to announce our recent Board-approved share buyback program amounting to $250 million.\nWe believe there is great value that is yet to be reflected in our stock price and view this buyback initiative as an excellent use of capital that when coupled with our development projects will help deliver meaningful value.\nAll of these recent announcements put a significant amount of capital to work to unlock tremendous value for our dedicated shareholders.\nNow let's turn to the performance of our master planned communities.\nOur MPCs had another great quarter despite encountering headwinds including supply constraints the Delta variant and weather delays particularly in Houston.\nHousing supply still remains low throughout Houston and Las Vegas while demand continues to persist at elevated levels which leaves us well positioned to deliver residential land at appreciating prices.\nHomebuilders are currently sitting on record low inventory and they will need to replenish their depleted landholdings in order to meet its outsized demand.\nDuring the third quarter our MPCs recorded earnings before taxes of $54.1 million a 48% increase compared to last year largely driven by the robust superpad sales activity in Summerlin as well as the strong performance of our Summit joint venture.\nIn addition to these impressive results we continue to see a steady pace of new home sales.\nProving the strength of our communities remains clearly intact.\nSo far in 2021 there have been 2163 new homes sold in our MPCs a 6% increase over last year indicating further demand lies ahead.\nOverall we're seeing a lot of positive momentum when it comes to land sales.\nAnd looking ahead we expect our fourth quarter to be the strongest quarter yet.\nAs such we are raising our full year 2021 MPC EBT guidance by $60 million at the midpoint to a range of $275 million to $285 million primarily due to stronger-than-expected superpad sales in Summerlin.\nThis is our second time raising MPC guidance in 2021 as this segment continues to exceed our expectations.\nSpeaking of Summerlin this MPC drove a substantial portion of the positive results for the quarter selling 47 acres mostly made up of superpads.\nThis MPC generated $45.6 million in EBT a staggering 130% increase compared to the prior year period.\nAdditionally year-to-date new home sales have eclipsed over 1200 units and are 20% higher over the same period in 2020 which if you recall was one of the strongest years in Summerlin's history.\nAnother significant driver to Summerlin's results has been our joint venture at the Summit our exclusive 550-acre community in Summerlin.\nThe total earnings from our share of equity during the quarter totaled $8.3 million driving year-to-date earnings to $54.6 million versus only $4.4 million during the first nine months of 2020.\nThe activity at the Summit over the last year has been tremendous and these positive results have been primarily attributed to an influx of California buyers purchasing these custom lots and built product.\nTurning over to Houston.\nOur Bridgeland MPC experienced a decline in land sales as supply constraints continues to have an impact.\nAs we highlighted last quarter a majority of the homebuilders have extended their lead times for home deliveries due to ongoing supply disruptions that have resulted in higher material costs and delayed delivery times.\nWe've started to see some of these bottlenecks subside and expect a more normalized environment heading into next year.\nThis quarter's land sales were also impacted by inclement weather as significant rainfall in the Houston area delayed horizontal development resulting in slower lot deliveries to homebuilders.\nDespite these factors demand in the area remains incredibly strong.\nWe view the significant imbalance between undersupply and robust demand as a strong catalyst for elevated activity as we move into 2022.\nLastly in the Woodlands Hills despite lower quarterly land sales due to the similar impacts experienced in Bridgeland the residential price per acre grew 18% over the prior year period to $353000 while new home sales were up 15% which points to future growth ahead as we accelerate activity across this MPC.\nMoving over to the Seaport.\nWe saw heightened activity throughout the quarter as events and concerts at Pier 17 helped draw in spectators.\nDuring the quarter NOI improved 43% compared to the same period in 2020 indicating the return to normalcy is near.\nIn July we launched our 11-week summer concert series on the Pier 17 rooftop.\nOf the 30 concerts hosted 20 were fully sold out.\nThe turnout for these contracts proved to be very strong with approximately 74000 guests in attendance representing 90% of our available ticket inventory.\nIn addition to concerts we hosted several other major events including the SPs in July and the world tour for the Fujis who debuted at Pier 17 for their first show together in 15 years.\nIt's these type of special events that continue to set the Seaport apart from other destinations in Manhattan.\nAll of these events help drive substantial traffic to our restaurants.\nWe saw an uptick in activity as more and more locals and tourists experience our variety of cuisines from acclaimed New York City chefs.\nAs a result our restaurant saw their average monthly sales increased 65% versus last quarter.\nWhile labor constraints have marginally improved we continue to see improvements in this space quarter after quarter.\nMany of our restaurants are now closely approaching their stabilization targets as higher volume has contributed meaningfully to the growth of our bottom line.\nOverall we see the Seaport heading in the right direction and the upcoming completion of the Tin Building followed by its grand opening in the first half of 2022 will help bring the Seaport closer to stabilization.\nWith that I'm going to stop and hand the call over to Dave Striph.\nOur operating assets had a standout quarter as our portfolio delivered strong sequential and year-over-year NOI growth.\nFor the third quarter we reported $60.6 million of NOI.\nWhen you layer in the activity from our three hotels that were sold in September this segment generated $62.9 million.\nThis marks the fourth consecutive increase in quarterly NOI as our portfolio of income-producing assets continues to expand.\nAs the economy continues to reopen and activity within our regions improves we have seen a corresponding increase in our retail NOI.\nThese assets generated $16.1 million of NOI during the third quarter the highest level since the first quarter of 2019.\nThis is in large part due to a stronger tenant base coming out of the pandemic in addition to consistent increases in collections.\nFor the third quarter we collected 83% of our retail rents with Summerlin leading the charge for the highest collections in our portfolio.\nAs we have highlighted previously our retail at Ward Village has been materially impacted over the last several quarters due to sharp declines in tourism as a result of the pandemic.\nHowever as travel restrictions to Oahu have been recently eased we've seen a corresponding improvement in our retail performance.\nIn fact Ward was the largest contributor to the sequential increase in retail NOI partly as a result of a onetime payment of deferred rent of approximately $1.4 million.\nWe expect our retail portfolio to continue on this path of growth as collections work back to pre-pandemic levels coupled with the continuous lease-up of our remaining space to creditworthy tenants.\nAt the Las Vegas Ballpark we were able to host the remainder of the aviator season at 100% capacity.\nThis resulted in $5.4 million of NOI a 74% increase over the last quarter where the beginning of the season was limited to 50% capacity to comply with COVID-19 protocols.\nThis is a stark comparison to the same period in 2020 where the ballpark lost nearly $1 million as the season was canceled entirely due to the pandemic.\nOur multifamily assets produced $9.2 million of NOI during the third quarter a 24% sequential increase almost exclusively attributable to strong leasing momentum at our most recent developments.\nIn 2020 we completed construction on three multifamily projects between the Woodlands and Columbia.\nAnd during the third quarter these new developments made up 2/3 of the increase in sequential NOI growth.\nIn addition to this robust leasing velocity we've been able to push rents higher and are currently commanding some of the highest rents compared to our surrounding metro areas.\nIn addition to our existing product we have three more multifamily developments underway in Downtown Columbia Bridgeland and Summerlin to meet this ongoing demand which will drive our NOI even higher.\nOur office assets have experienced steady increases in NOI over the past few quarters despite a sluggish recovery in the return to office environment.\nFor the third quarter we generated $27.8 million in NOI a 6% increase sequentially and a 17% increase compared to the same period last year.\nThe bulk of this increase was driven by the roll-off of free rent at select assets including 6100 Merriweather our latest office building in Downtown Columbia.\nOverall we are seeing a noticeable increase in leasing activity and expect our pipeline of opportunities to accelerate into 2022 as tenants look for additional space and folks continue to return to an office setting.\nTo build on the momentum we are seeing within our operating asset portfolio we are pleased to announce some new product types in addition to our traditional mix.\nRecently we have expanded into the medical office space to continue to provide residents with the highest quality convenient medical care.\nWe have noticed a growing need for this type of asset as the volume of residents in our communities continues to grow.\nWith that we are pleased to announce the launch of two medical facilities spanning 106000 square feet throughout Downtown Columbia and the Woodlands.\nIn Downtown Columbia we will launch our first medical office building on the shoreline of Lake Kittamaqundi.\nThis new development will sit adjacent to our successful Whole Foods in the former Rouse headquarters building helping to establish Downtown Columbia as a prominent health and wellness destination.\nEncompassing approximately 86000 square feet we have already secured an anchor tenant for roughly 20% of the entire space.\nWe expect to break ground on this project during the first half of 2022 and this will kick start our major development pipeline in the Lakefront District.\nIn The Woodlands we will launch development on a 20000 square foot build-to-suit medical office building for Memorial Hermann.\nThis project will serve as a primary local facility to cater to the medical needs of nearby residents and is expected to break ground by the end of this year.\nLastly in Bridgeland we will be constructing our first single-family for rent community which will commence in the first half of 2022.\nThese 263 homes will span a combined 328000 square feet and offer a unique hybrid between single-family homes for sale and multifamily for rent adding yet another new product to our operating asset portfolio.\nGiven this is an extension of multifamily we plan to leverage the expertise of the property managers who oversee our existing portfolio in Houston to assist in managing this build-to-rent community.\nIn total these three projects represent over 430000 square feet and $114 million of development as we continue to put our capital to work and enhance our stream of recurring income.\nWe have already had a number of developments under construction in Summerlin Columbia and Bridgeland so the announcement of these additional developments demonstrates the immense demand we are seeing throughout all our regions.\nMoving to the Seaport.\nConstruction of the Tin Building is now in the final stages and will be substantially complete by the end of the year.\nThe launch of the Tin Building has been highly anticipated and our team has been working in close partnership with the Jean Georges team to prepare for the grand opening of this 53000 square foot food hall in the first half of 2022.\nLastly we continue to make great strides through New York City's ULURP process to obtain the necessary approvals for the development of a 26-story mixed-use building at 250 Water Street.\nIn October the City Planning Commission granted us approval for this project another hurdle passed through this rigorous land use process.\nWe are nearing the end of our review which we expect to conclude before the end of the year at the New York City Council.\nThe prospective development would replace the one acre parking lot with market rate and affordable residences commercial and community space further enhancing the character and vibrancy of this neighborhood.\nWe look forward to updating you on our continued progress as we continue to close in on the final stages of this process.\nAt Ward Village the pace of condo sales continues to exceed all expectations.\nDespite having less inventory under construction the number of condos contracted during the quarter has only grown.\nAcross our three recent towers 'A'ali'i Koula and Victoria Place we were 90% presold as of the end of the quarter with Koula and Victoria Place still under construction.\nThis robust velocity has led to the presales launch of our eighth tower The Park.\nPresales activity at The Park began in July.\nAnd as of the end of October we have already contracted 64% of the total units.\nThe sales activity across these four towers just in the third quarter translates to 316 contracted units secured by hard deposits during a period of time when travel to the island of Oahu was discouraged surrounding Delta variant concerns.\nThe pace of these sales is truly remarkable.\nWe've been able to establish a mark on this community where residents want to live and our historical sales pace has reflected increasingly faster sellouts with the launch of each new tower.\nSubsequent to the end of the quarter we completed construction on 'A'ali'i and began welcoming residents to their new homes in October.\nAs of November two we closed on 495 units totaling $332 million in net revenue revenue that will be recognized on our fourth quarter income statement and will contribute meaningly to our bottom line.\nWith that I'd like to now hand the call over to our CFO Correne Loeffler who will review our third quarter financial performance.\nThe results of the third quarter clearly demonstrates the strength of our business as we continue to benefit from the strong demand throughout our communities across the country.\nIn summary our MPCs produced $54.1 million of earnings before tax or EBT during the third quarter a 22% decrease compared to the last quarter and a 48% increase compared to the prior year period.\nIt's important to note that while EBT decreased from the last quarter it was largely attributed to nonrecurring costs such as the early extinguishment of debt upon the retirement of our Woodlands and Bridgeland credit facility.\nIn addition the top line only declined slightly due to the lack of commercial land sales in Summerlin compared to the last quarter.\nOur operating assets recorded a $62.9 million of NOI when including the contribution from the three Woodlands-based hotels which represented a 9% increase compared to the last quarter and a 65% increase compared to the prior year period.\nAs Dave touched on earlier the strong performance was due to a continued improvement across our retail portfolio a strong Minor League season at our ballpark robust lease-up activity at our multifamily assets and the roll-off of free rent at select office assets.\nAt Ward Village we contracted 316 condo units which were made up of 61 units from our three towers under construction and 255 units at the park which launched presales during the quarter.\nCombined sales at 'A'ali'i Koula and Victoria Place were up 36% compared to the prior quarter and increased 154% compared to the prior year period.\nFinally at the Seaport we recorded a $3.6 million loss in NOI resulting in a 19% improvement over the last quarter and a 43% improvement compared to the prior year period.\nTaking a look at GAAP earnings for the third quarter.\nWe reported net income of $4.1 million or $0.07 per diluted share compared to net income of $139.7 million or $2.51 per diluted share in the prior year period.\nThe decrease in net income from the prior year was attributed to a onetime noncash gain of $267.5 million for the third quarter of 2020 which was related to the deconsolidation of our 110 North Wacker office tower in Chicago.\nIf we remove this onetime gain our quarterly earnings were substantially higher than our prior year period due to strong activity to play throughout the entire business.\nWith only one quarter remaining to finish out the full year we remain on track to meet or exceed all previously disclosed guidance targets for 2021.\nAs David mentioned earlier our MPC segment has done particularly well which has led us to raise our EBT target for the second time this year.\nOur previous guidance range for 2021 was $210 million to $230 million.\nWe are now raising our guidance by $60 million at the midpoint thus revising our range to $275 million to $285 million as we are expecting a strong end to the year.\nGiven the recovery we are experiencing in our operating assets we are raising our full year NOI guidance by $5 million to a range of $200 million to $210 million.\nWe are raising this segment's guidance despite the fact that we will not receive any hospitality-related NOI during the fourth quarter as we just sold our Woodlands hotels in September for $252 million.\nThe sale of these assets generated $120 million of net proceeds and brings our total net proceeds from noncore asset sales to $376 million since the announcement of our strategic transformation plan in late 2019.\nWe are also revising our full year condo profit guidance at Ward Village by $7.5 million at the midpoint.\nOur previous guidance range for 2021 was $100 million to $125 million.\nWith elevated condo sales following the completion of 'A'ali'i in October we are expecting condo profits to range between $115 million to $125 million.\nPlease note that this target excludes the $20 million repair cost incurred at Waiea during the first quarter which we fully expect to be reimbursed for.\nLastly we remain on track to meet our previously disclosed G&A guidance of $80 million to $85 million for 2021.\nNow let's take a look at our balance sheet for the quarter.\nWe ended the third quarter with $1 billion of cash on hand leaving us plenty of runway to execute on the recent capital initiatives we discussed earlier.\nAdditionally we closed on several financings at attractive rates while at the same time extending our maturity profile.\nA couple of our recent financings include two construction loans for our latest project in Downtown Summerlin a $75 million loan for our 1700 Pavilion office development and a $59.5 million loan for our Tanager Echo multifamily development.\nIn addition we refinanced The Woodlands and Bridgeland credit facility into a new $275 million loan secured by Bridgeland notes receivables and land to support future horizontal development.\nLastly subsequent to quarter end we closed on a $250 million loan for 1201 Lake Robbins resulting in net proceeds of $248 million which helps elevate our overall cash position.\nAdditional activity following the close of the quarter include the repayment of 'A'ali'i construction loan upon the completion of the project.\nWe continue to push out our near-term maturities and remain focused on executing new financings to support our latest development projects as well as securing long-term funding for our stabilized assets.\nWe're going to open up the lines for Q&A.\nBut before we do I just want to hit on a few key points.\nFirst we remain committed to driving our net asset value higher on a per share basis and are laser-focused on closing the gap between our stock price and the true inherent value of Howard Hughes.\nAnd the actions taken over the last quarter to deploy capital into projects that we believe will achieve outsized risk-adjusted returns reflects that strategy.\nWe acquired a new fully entitled shovel-ready MPC.\nWe announced the launch of three new development projects and we announced the $250 million share buyback.\nAll of these initiatives will unlock tremendous value for our shareholders in the near medium and long term.\nSecond our balance sheet remains strong even after allocating capital to the various projects I just mentioned.\nOur disciplined capital allocation approach has allowed us to conserve capital and leaves us with sufficient excess liquidity to evaluate additional opportunities to further expedite growth.\nIn addition the cash flow generated by future land sales condo sales and recurring NOI combined with the proceeds from our remaining noncore asset sales will only drive our cash position higher.\nThird our financial results through 2021 represents the strength of our business as we are now exceeding pre-COVID levels and the guidance targets we have established for the full year points to an even stronger fourth quarter ahead.\nWith that we'd now like to begin the Q&A section of the call.\nWe will answer the first few questions that have been generated by Say Technology and will be read by John Saxon.\nJohn can you please read the first question?\n",
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"content": "compname reports q3 earnings per share $0.07.\nq3 earnings per share $0.07.\nqtrly earnings per share $0.07.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Actual results may differ.\nAlso in the remarks today, Mike, Chris and Tom will refer to certain non-GAAP measures.\nSales of $2.2 billion were up from $2.0 billion in the second quarter of 2020.\nDiluted earnings per share of $3.20 was up significantly from $1.30 in the second quarter of last year and pension adjusted earnings per share for the quarter was $3.05.\nNew contract awards during the quarter were approximately $1.2 billion, resulting in a backlog of approximately $48 billion, of which approximately $24 billion is funded.\nAnd Chris will provide some color on a few of the key awards for the quarter during his remarks.\nShifting to activities in Washington, we are pleased that the congressional markup process for fiscal year 2022 has begun in earnest, following the release of the President's budget request in May.\nOf note, the budget requests continued recapitalization of the nation's strategic ballistic missile submarine fleet and supported funding for CVN 80 and CVN 81 forward class aircraft carriers, two Virginia-class submarines, one DDG 51 Arleigh Burke-class destroyer and LHA 9.\nWe were also pleased that a second DDG 51 class destroyer was included as the number one priority on the Navy's unfunded requirements list for fiscal year 2022, and we look forward to working closely with the Congress during the FY '22 markup process to urge support for the second DDG and other critical priorities, including the efficient production of amphibious warships.\nIn closing, slide four provides some key takeaways from the recently announced agreement to acquire Alion Science and Technology.\nThe team is preparing for closing of the transaction, and we are very excited about the addition of Alion to the HII family.\nAlion is a perfect complement to our existing capabilities in the technology-driven defense and federal solutions space.\nThe solutions and products they provide are directly in line with the strategic focus that we have articulated for our Technical Solutions business and it enhances our technical capabilities and customer access in high-growth national security markets, including C5ISR, military training and simulation and next-generation technologies and solutions.\nWe firmly believe that Alion offers significant growth potential and represents an investment in capabilities that support the evolving DoD national security requirements, which, in turn, are expected to generate significant long-term sustainable value for our shareholders, our customers and our employees.\nThis was another solid operational quarter, and I'm very pleased with the consistent progress being achieved across our shipbuilding and technical solutions programs.\nWith that, let me share a few key contract awards and programmatic highlights from the business segments for the quarter.\nAt Ingalls, the team received a contract modification from the U.S. Navy for $107 million to provide additional long-lead time material and advanced procurement activities for amphibious assault ship LHA 9, which increases current funding on this ship to approximately $490 million.\nRegarding the potential bundled acquisition of LHA nine with LPD 32 and 33, discussions are ongoing with the customer.\nWe believe that a bundled acquisition continues to be the most cost-effective method, a procurement of these critically important ships.\nIn addition, Ingalls was awarded a contract with a potential total value of $724 million over seven years for planning yard services in support of a variety of in-service amphibious class ships, including the LPD 17 San Antonio class and LHA six America class.\nShifting to program status, LHA eight Bougainville is making steady progress through the structural erection and initial outfitting phases of construction with cost and schedule performance in line with our expectations.\nOn the DDG program, the team successfully launched the first Flight III Arleigh Burke class guided missile destroyer, DDG 125, Jack H Lucas in June.\nAnd DDG 121, Frankie Peterson Jr. is expected to conduct sea trials later this year.\nOn the LPD program, LPD 28 Fort Lauderdale is on track to conduct sea trials during the fourth quarter and LPD 29 Richard M. McCool Jr. continues to achieve production milestones in support of launch early next year.\nAt Newport News, there were no significant contract awards to highlight for the quarter, so I will go right on to program status.\nCVN-79 Kennedy is approximately 83% complete, and the team remains focused on compartment completion and key propulsion plant milestones.\nCVN 73 USS George Washington is approximately 90% complete, and the team remains focused on achieving key test program milestones to support redelivery to the Navy, which is planned for next year.\nOn the DCS program, the team completed shipment of the final module of SSN 797 Iowa during the quarter.\nIn addition, SSN 794 Montana remains on track for delivery to the Navy later this year, and SSN 796 New Jersey remains on track to achieve the float-off milestones as planned in the second half of this year.\nAnd finally, on the submarine fleet support program, SSN 725 Helena is on track for redelivery to the Navy later this year.\nAt Technical Solutions, contract awards of REMUS 300 unmanned underwater vehicles during the quarter to the U.S. Navy and Royal New Zealand Navy affirmed the flexibility and modularity of these units.\nTS was also recently awarded a $273 million cost plus fixed fee indefinite delivery, indefinite quantity contract to support maintenance and planning for the overhaul and repair of equipment and systems associated with the Navy aircraft carriers and West Coast Navy surface ships.\nIn addition, TS was awarded a contract with a 1-year base period and four 1-year options with a total potential value of $346 million to provide a variety of aircraft and operational support services for USAFRICOM, included planning, management, maintenance, logistics and airlift airdrop services and emergency medical care.\nExecution within Technical Solutions remains consistent with expectations except for delays in awards in our unmanned business for critical new programs, which we expect to be resolved by the end of the year.\nAs I close, note that we have included upcoming key program milestones on slide five.\nThere are no changes from what we have previously provided other than designated those milestones that have been completed with the checkmark.\nToday, I'll briefly review our second quarter results.\nThis was primarily due to the growth of Newport News and Ingalls and was partially offset by a decline at Technical Solutions due to the portfolio shaping actions we have taken.\nSegment operating income for the quarter of $169 million increased $174 million compared to the second quarter of 2020 and segment operating margin of 7.6% compared to a segment operating margin of negative 0.2% of the second quarter of 2020.\nThe prior year results were negatively impacted by the Virginia-class submarine program performance as well as impacts related to COVID-19.\nOperating income for the quarter of $128 million increased by $71 million from the second quarter of 2020 and operating margin of 5.7% increased 293 basis points.\nThese increases were primarily driven by the segments I just mentioned, partially offset by a less favorable operating FAS/CAS Adjustment.\nThe tax rate in the quarter was approximately 19.9% compared to 18.5% in the second quarter of 2020.\nThe increase in the tax rate was primarily due to adjustments related to research and development tax credits recorded in the second quarter of 2020.\nNet earnings in the quarter were $129 million compared to $53 million in the second quarter of 2020.\nDiluted earnings per share in the quarter were $3.20 compared to $1.30 in the second quarter of 2020.\nExcluding the impacts of pension, diluted earnings per share in the quarter were $3.05 compared to a loss of $0.49 per share in the second quarter of 2020.\nCash from operations was $96 million in the quarter, and net capital expenditures were $73 million or 3.3% of revenues resulting in free cash flow of $23 million.\nThis compares to cash from operations of $201 million and $75 million of net capital expenditures or free cash flow of $126 million in the second quarter of 2020.\nCash contributions to our pension and other postretirement benefit plans were $12 million in the quarter, principally related to postretirement benefits.\nDuring the second quarter, we paid dividends of $1.14 per share or $46 million and repurchased approximately 95,000 shares at a cost of $20 million.\nIngalls revenues in the quarter of $670 million increased $48 million or 7.7% from the same period last year, driven primarily by higher revenues on the DDG program and amphibious assault ships partially offset by lower revenues on the NSC program.\nIngalls operating income of $80 million and margin of 11.9% in the quarter were up from the second quarter of 2020, driven by the recognition of a capital investment related incentive for the DDG program that was recognized in DDG-125 as well as higher risk retirement from the LHA 8, LP 28 and LP 29 ships.\nNewport News revenues of $1.4 billion in the quarter increased $241 million or 21.5% from the same period last year due to higher revenues in both the submarine and aircraft carry construction.\nNewport News operating income of $76 million and margin of 5.6% in the quarter were up year-over-year, primarily due to the impacts related to the Virginia class performance and COVID in the prior year period.\nNow to Technical Solutions on slide 10.\nTechnical Solutions revenues of $237 million in the quarter decreased 25.9% from the same period last year mainly due to the divestiture of the oil and gas business and the contribution of the San Diego shipyard through a joint venture in the first quarter of this year as well as lower volumes in unmanned systems, partially offset by increases in volumes in the Defense and Federal Solutions.\nTechnical Solutions operating income of $13 million in the quarter compares to income of $9 million in the second quarter of 2020.\nThis increase was primarily driven by higher equity income related to our ship repair partnership with Titan as well as improved performance at Defense and Federal Solutions and Nuclear Environmental Services, partially offset by lower volumes in the unmanned systems.\nFinally, a perspective on the outlook of the shipbuilding for the remaining part of the year.\nWe continue to see limited opportunities for risk retirements in the third quarter with the remainder of the milestones weighted toward the end of the year.\nGiven the strong performance in the first half of the year, we now expect that the shipbuilding margin for the full year will be in the 7.5% to 8% range.\nWe continue to expect the Alion acquisition will close in the coming weeks and that we will incur approximately $25 million of onetime pre-tax transaction and financing-related expenses in 2021.\nWe completed the syndication of the term loan component of the acquisition funding earlier this week, and more details of the specifics are available in the 10-Q.\nWe will provide a more comprehensive update on our 2021 outlook for Technical Solutions on our third quarter call following the closing of the acquisition.\nAs a reminder to everyone on the call, please limit yourself to one initial question and one follow-up so we can get as many people through the queue as possible.\n",
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"content": "compname posts q2 adjusted earnings per share $3.05.\nq2 adjusted earnings per share $3.05.\nq2 earnings per share $3.20.\nq2 revenue $2.2 billion versus refinitiv ibes estimate of $2.17 billion.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Also, the release and supplemental include a reconciliation of these non-GAAP measures to the most directly comparable GAAP financial measures.\nThe extent to which the COVID-19 pandemic impacts us and our customers will depend on future developments, which are highly uncertain and cannot be predicted with confidence including the scope, severity and duration of the pandemic and the resulting economic recession and potential changes in customer behavior, among others.\nLet me start by saying I hope you are all well and your family are safe and healthy.\nAs mentioned on our last call, the Highwoods teams across our markets have safely returned to our offices, which is allowing us to reap the benefits of collaboration and our company's unique culture.\nAcross our 27 million square foot portfolio, we estimate utilization is approximately 25% on average, which has increased since the end of the summer, but is below our first COVID revised outlook we provided in April.\nWe don't expect a sizable increase in utilization until at least early 2021.\nIt remains difficult to predict the duration and severity of the current recession and when leasing activity will recover.\nWhile we're all hoping for a return to pre pandemic office fundamentals, we're still well positioned in the current environment given our lack of large customer expirations over the next few years, our ability to control opex and the built-in growth from our highly pre-leased development pipeline.\nPlus, we further strengthened our fortress balance sheet this quarter by raising $400 million of 10.5 year bonds at an attractive rate.\nWe have ample liquidity to fund the remaining spend on our development pipeline and still have plenty of dry powder to capitalize on future growth opportunities.\nIn addition to having a high-quality portfolio and strong balance sheet, our markets continue to benefit from positive demographic trends, both population and job growth.\nTo this end, the Urban Land Institute's recently published 2021 Emerging Trends in Real Estate report listed Raleigh as the number one market for overall real estate prospects.\nNashville came in at number three, Charlotte number five, Tampa number six and Atlanta number 11.\nThese five markets constitute more than 75% of our NOI.\nWe're seeing this national story of jobs migrating to our footprint verified in the inquiries we're receiving.\nWe've hosted numerous out of town prospects seeking space, ranging from large to small, and our partners at the various economic development agencies across our markets indicate the pipeline of out of town users seeking relocations continues to be robust.\nOn a related note, the big elephant in the room for office landlords is obviously the long-term impact of work-from-home policies.\nBrian will go into more detail about what we're seeing in our markets.\nAnd while it's still early, work-from-home has not yet had any meaningful impact on leasing decisions by existing customers or prospects.\nThus far, we've only experienced a few small customers who elected not to renew based on their plan to work from home.\nAnd some of these may be temporary solutions.\nIn the third quarter, we delivered FFO of $0.86 per share, which included a cumulative $0.05 impact from a debt extinguishment charge and noncash write-offs of straight-line rent due to the conversion of certain leases from fixed rent to percentage rent.\nAdjusting for these items, our FFO would have been $0.91 per share, a solid performance given the challenging economic environment.\nIn addition to healthy FFO, our portfolio metrics were strong.\nIn-place cash rents are up 5.2% compared to a year ago, which helped drive same-property cash NOI of 2.2%, excluding the impact of temporary rent relief deals, even with average occupancy down.\nThis performance was consistent with last quarter's 2.4%.\nAs expected, occupancy dipped sequentially to 90.2%, driven predominantly by T-Mobile's expiration in Tampa.\nWe expect occupancy to hold firm around 90% in the fourth quarter.\nWe leased 660,000 square feet of second-gen office space with GAAP rent growth of 12.5% and cash rent growth of 5% and this was done with limited leasing capex, which drove net effective rents 7.2% higher than our prior 5-quarter average.\nNew leasing volume rebounded to 190,000 square feet.\nAnd while still below our normal quarterly volume of 200,000 to 250,000 square feet, we're encouraged by the sequential uptick and improved level of prospect activity over the past month.\nSince the start of the pandemic, our monthly rent collections have been consistently strong.\nWe collected 99.7% of our rents in the third quarter and have collected 99.7% of October rents.\nTemporary rent deferrals equate to 1.2% of annual revenues, unchanged from last quarter, and repayments are occurring on schedule.\nTo date, we've received repayment of approximately 25% of total deferrals and remain on track to be largely repaid by the end of 2021.\nWe have made significant progress on Phase two of our market rotation plan to exit Greensboro and Memphis.\nThese sales will bring Phase two dispositions to $151 million for the year at prices that are in line with our pre pandemic expectations.\nAs reflected in our updated FFO outlook, these sales will be dilutive in the near term as we carry excess cash on our balance sheet, but we're confident we'll be able to replace this income as we redeploy the proceeds.\nOn the acquisition side.\nFor the few high-quality buildings that have come to market since the pandemic started, pricing has been very competitive, especially for buildings with high occupancy, limited near-term lease roll and creditworthy customers.\nWe're actively looking for opportunities to deploy capital, which is why we've kept our 2020 acquisition outlook range unchanged at $0 to $200 million.\nHowever, we'll stay true to our mantra of being disciplined allocators of capital and only seek opportunities where risk-adjusted returns make sense for our shareholders.\nOur 1.2 million square foot $503 million development pipeline remains on budget and on schedule.\nWe funded 73% to date and expect to fund most of the remaining $138 million by the end of next year.\nSince our last call, we've signed leases at both of our spec projects, one at Midtown West in Tampa and the other at Virginia Springs II in Nashville.\nThese deals bring our overall pre-leased rate to 79%.\nIn addition to the signed leases, we have seen increased prospect activity at both these projects in the past several weeks.\nThe three other projects in our development pipeline are fully pre-leased and on schedule to meet their delivery dates.\nUpon stabilization, our pipeline will provide more than $40 million of NOI, of which more than $32 million is already secured through signed leases.\nNew build-to-suit and anchor pre-lease conversations have slowed down compared to pre-pandemic levels.\nWe don't expect any new project announcements this year, and therefore, we took the possibility of new development announcements out of our updated 2020 outlook.\nHowever, we're still having conversations with prospects that could lead to build-to-suits or highly pre-leased development announcements in 2021.\nNow to our updated 2020 FFO outlook of $3.59 to $3.61 per share.\nAs I mentioned earlier, we incurred $0.05 of expenses this quarter due to debt extinguishment charges and noncash straight-line rent write-offs.\nIn addition, fourth quarter dispositions will be dilutive by $0.01 per share.\nThese items, which negatively impact our full year results by $0.06 in the aggregate were not in our prior outlook of $3.59 to $3.68.\nExcluding these items, the midpoint of our updated range is up $0.025 compared to the last quarter.\nAs a reminder, potential lost rents from customer defaults and noncash straight-line credit losses for the remainder of 2020 are too speculative to project.\nFinally, our performance the past few quarters demonstrates our ability to quickly adapt to changing macro conditions through reduced opex and meeting customers' needs with flexible and creative lease solutions.\nPlus, our limited lease expirations puts us in good position to mitigate the impact from the recession.\nWe also have built-in growth from our development pipeline and have a balance sheet with plenty of capacity to pursue additional growth opportunities.\nWe're cognizant of the near-term challenges facing us from the current environment, but we're confident we have the ingredients to drive sustainable growth over the long term.\nWhile leasing volume was lower in the third quarter than the second, we did see a sequential increase in activity levels.\nDuring the quarter, we signed 660,000 square feet of second-generation leases with GAAP rent spreads of a positive 12.5%, cash rent growth of 5% and net effective rents that were 7% above our prior 5-quarter average, just short of the record set in the fourth quarter of 2019.\nWith regard to new leasing, activity picked up in the third quarter with 190,000 square feet of new deals and 8,000 square feet of expansions.\nThe renewal of the Federal Aviation Administration in Atlanta during the quarter finalized our last remaining expiration over 100,000 square feet during the next 2-plus years.\nWith this renewal in hand, we now have only 18% of our portfolio expiring over the next nine quarters, which is down over 500 basis points compared to this point a year ago and our long-term historical average.\nAs Ted discussed, rent relief deals held steady at 1.2% of our annual revenues.\nWith inbound relief requests slowing to a trickle, we're focused on rent collections and creative solutions for customers with needs-based requests.\nTo that end and as a testament to the quality of our customers, our collections are strong with 99.7% of all rents collected in the third quarter and for the month of October.\nThese few leases were done for customers whose businesses have been severely impacted by social distancing measures, and we preserved the potential to receive full rent over the life of the lease.\nLet's now drill down and take a closer look at our markets where activity has picked up since Labor Day.\nAcross the board and specifically in Tampa, Raleigh, Nashville and Atlanta, tours are up.\nNew requests for proposals have come in, and we are seeing inbound interest from out of town prospects, looking to grow or relocate to our markets.\nTo this end, 25% of new deals in the quarter are new to market, coming from the West Coast, Midwest and the Northeast.\nWe've consistently touted our BBD location strategy, which contains a mix of highly amenitized urban and suburban locations across our footprint.\nWe've seen validation of this strategy in the superlatives provided in the recently released 2021 Emerging Trends in Real Estate report, published annually by ULI and PricewaterhouseCoopers.\nFour of our markets place in the top six including our hometown of Raleigh, where we own and operate close to five million square feet, coming in at number one.\nAs one might expect, and consistent with previous recessions, the availability of sublease space is increasing.\nHowever, in our portfolio, sublease space remains steady in Q3.\nPrice discovery on rents is limited due to the low volume and high proportion of short-term renewals.\nBut for the moment, face rates are holding steady, while we do expect downward pressure on net effective rents as concessions increase.\nVacancy increased 20 basis points across our markets for the quarter.\nAs Ted mentioned, we haven't seen work-from-home policies have a big impact on customer leasing decisions.\nSpecifically, in 2020, we've had seven customers ranging in size from 1,200 square feet to 4,300 square feet who did not renew leases in favor of working from home.\nAnd several of these indicated, this decision may be temporary.\nWe believe the characteristics that made our markets centers of growth prior to the pandemic are receiving increased attention as organizations and individuals reevaluate their geographic plans and preferences.\nAnecdotal evidence suggests the attractiveness of our markets could be an accelerant for inbound relocations for corporate users and individuals.\nTo Charlotte, where after five years straight of positive quarterly absorption, the market recorded its first negative quarter in Q3, with the footnote that rents are up 3% and major inbound announcements, such as Centene's one million square feet and 3,000 new job announcements are just now getting going.\nWhile construction on major new offices for Honeywell, Lending Tree, Duke Energy and the Lowes Global Technology Center are still finishing up.\nMarkedly different from the previous recession, Charlotte is now recognized as a growing and stable tech hub, exemplified by its number one ranking atop of Robert Charles Lesser & Co's and CapRidge's STEM Job Growth Index.\nIn good company on the same index at number five for growth, and with an already established global reputation as a tech hub, the Raleigh market posted positive net absorption in the third quarter.\nOur portfolio there held firm and we signed 167,000 square feet.\nLet's now go down to the home of the Stanley Cup winners, the World Series competitors at the very least, Super Bowl hosters in Tampa, where rents have increased 4% year-over-year, and the market saw over 200,000 square feet of inbound inquiries from out of market prospects this quarter.\nLabeled a boom market and a member of the Super Sun Belt by ULI's report, Tampa is highlighted as a metro area with less exposure to industries most affected by COVID-19, in addition to its low cost of living and business-friendly government.\nOur talented Tampa team was busy in the third quarter.\nThe team signed 80,000 square feet of leases and toured several prospects through Avion and Midtown Tampa, where the mixed-use development is racing toward delivery next year and where our new 150,000 square foot office building is rising directly above an REI, next door to Whole Foods and luxury apartments and down the block from Shake Shack and two new hotels.\nIn closing, we wouldn't be where we are today without the tireless dedication of our amazing team.\nFrom every maintenance tech, property manager and leasing agent, each Highwoods colleague adds their individual excellence in the pursuit of superlative results.\nBy developing, leasing, operating and maintaining our own portfolio, we do so as stewards entrusted with creating and sustaining the ideal environment for our customers to thrive in.\nDoing so in normal times is exceptional.\nDoing so throughout a pandemic is extraordinary.\nNow let me hand it over to Mark.\nIn the third quarter, we delivered net income of $40.3 million or $0.39 per share and FFO of $91.7 million or $0.86 per share.\nAs Ted mentioned, the quarter included a debt extinguishment charge and noncash straight-line credit losses, which reduced FFO by $0.05 per share.\nNeither of these items were included in our prior FFO outlook.\nExcluding these two items, our FFO would have been $0.91 per share which compares favorably to $0.88 per share in last year's third quarter, also after excluding onetime items associated with the market rotation plan from a year ago.\nTo put this in context, clean FFO is up about 3.5% year-over-year, with leverage essentially unchanged, while we've entered Charlotte with a trophy building, exited the majority of our Greensboro and Memphis properties and operated during a pandemic and severe recession.\nThis growth was due to higher rents, reduced operating expenses, keeping tight control on G&A and taking advantage of the debt markets to reduce interest expense.\nThe macro environment remains challenging but we've been pleased with our ability to adapt quickly and deliver strong financial results.\nOur balance sheet is in excellent shape.\nWe issued $400 million of 10.5 year bonds with an interest rate of 2.65%.\nWe used some of the proceeds to retire $150 million of our 2021 bonds early and repaid a $100 million term loan due in early 2022.\nAfter repaying the balance outstanding on our revolving line of credit and continuing to fund development, we ended the quarter with $119 million of cash on hand.\nOur net debt-to-adjusted EBITDAre ratio was steady at five times, and our leverage ratio including preferred stock is 36.6%.\nWe have $138 million left to spend to complete our development pipeline and no debt maturities until June 2021.\nThe combination of more than $700 million of current liquidity and projected fourth quarter disposition proceeds puts us in a strong position to fund our remaining capital obligations while leaving us ample room for future growth opportunities without the need to raise additional capital.\nTurning to our outlook.\nWe've updated our FFO range to $3.59 to $3.61 per share.\nThis includes $6.5 million or $0.06 per share of dilution from the following items that weren't in our prior outlook: $3.7 million debt extinguishment charge, a $1.5 million noncash straight-line rent credit losses mostly due to conversion of leases from fixed rent to percentage rent and $1.3 million net impact of lower FFO from fourth quarter dispositions.\nExcluding these items, our FFO outlook would have been up $0.025 at the midpoint.\nLast quarter, we detailed $0.01 of dilution from items that weren't in our original FFO outlook.\nWhen adjusting for these nonoperational or noncash items that were not in our original outlook, the midpoint of our revised range would be $0.01 per share above the midpoint of our original FFO outlook that we provided in early February.\nGiven the significant impact the pandemic and ensuing recession has had on the economy and our business, we believe our operating and financial results have been excellent.\nLast quarter, we provided a list of projected impacts from the COVID-19 induced economic slowdown with the primary takeaway that parking revenues were expected to be low for the remainder of the year but this reduction would largely be offset by lower operating expenses.\nWe also continue to expect cash flow to improve in the near term due to lower leasing capex.\nAs Ted mentioned, we expect to close $123 million in dispositions before year-end, which will bring 2020 dispositions to $151 million, excluding the $338 million of phase one market rotation dispositions we completed in the first quarter.\nWe have maintained our original acquisition outlook of $0 to $200 million as we're currently evaluating certain opportunities.\nWe don't expect any development announcements this year and thus have eliminated this potential from our outlook.\nHowever, here are a few noteworthy items to highlight as we get close to the new year: First, we're fortunate as we have ample liquidity and low leverage to deploy capital into potential growth opportunities.\nSecond, we're carrying more cash than normal on our balance sheet, following our debt issuance in the third quarter, which will be dilutive in the near term but should normalize as we pay off the remainder of the 2021 bonds in April and fund development expenditures.\nThird, we expect $40 million of NOI from our development pipeline upon completion and stabilization.\nMost of this is secured through signed leases.\nGlenLake Seven will deliver in early 2021, while the other projects in the pipeline are expected to contribute more substantially in 2022.\nLast, we've been able to quickly adapt to the current environment by reducing opex to offset lower parking revenues.\nAnd while we expect opex will rise as portfolio utilization increases, we believe we'll be able to hold on to some of those savings even as utilization levels recover.\nLooking forward, we continue to remain positive about the long-term outlook for Highwoods.\n",
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"content": "compname posts qtrly net income per share of $0.39.\nqtrly net income per share $0.39.\nupdates 2020 ffo outlook to $3.59 to $3.61 per share.\nqtrly earned ffo of $0.86 per share.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: I'm joined by our President and CEO, Joe Raver; and our Senior Vice President and CFO, Kristina Cerniglia.\nThese statements are not guarantees of future performance and our actual results could differ materially.\nI'd like to begin by acknowledging the continued dedication of Hillenbrand's employees in managing the business through the COVID-19 pandemic.\nWe remain vigilant in our commitment to ensure the health and well-being of our employees and their families, to meet the needs of our customers, and to execute strategic initiatives that we believe will position Hillenbrand well now and into the future.\nThis past quarter we marked the one-year anniversary for the close of Milacron acquisition.\nOver the past year, our teams have made rapid progress integrating the business and capturing synergies.\nWe also continue to adapt successfully to the challenges brought about by COVID-19.\nWe ended fiscal year 2020 in a strong position and in the first quarter of fiscal 2021, continued to build on that momentum, delivering strong results.\nEach segment exceeded our top line expectations in Batesville and the Molding Technology Solutions segment also achieved meaningful margin expansion by driving the benefit of higher volume to the bottom-line.\nIn addition to our solid operating performance in the quarter, we made significant progress against our previously announced plan to exit the Flow Control businesses, Red Valve and ABEL, and we remain on track with our plan to divest TerraSource Global.\nOverall, I'm pleased with our execution in the first quarter.\nAnd while uncertainty regarding the pandemic remains, we are focused on navigating the environment to drive profitable growth in our large platform businesses, capture the full benefits of the Milacron acquisition, and strategically deploy cash flow to drive long-term shareholder value.\nBefore I get into the highlights of the quarter, let me spend just a few minutes on the execution of our strategy as outlined on Slide 5.\nAs we've consistently communicated, we are focused on executing four key strategic pillars as we work to build Hillenbrand into a world-class global industrial company.\nThe first is to strengthen and build business platforms, both organically and through M&A.\nThe Milacron acquisition represented a major step in the execution of the strategic pillar.\nWith Milacron, we added industry-leading and complementary hot runner and injection molding product lines to the Hillenbrand portfolio, further strengthening our customer offering, increasing our global scale, and enhancing our capabilities across the entire plastics value chain from base resin production all the way through recycling.\nGiven that we have materially improved our balance sheet over the past year, we expect to continue to increase growth investments, both organically and inorganically with a focus on strengthening and building our large business platforms in APS and MTS.\nOur second strategic pillar is to manage Batesville for cash.\nBatesville has a long history of manufacturing excellence in burial caskets with solid and predictable cash flow that we can invest to grow our industrial platforms.\nBatesville's outstanding cash flow over the past several quarters, which we used to pay down debt, underscores the important role Batesville plays in our portfolio.\nThe third pillar of our strategy is to build a scalable foundation for growth using the Hillenbrand operating model.\nThe acquisition of Milacron is providing a unique opportunity for us to transform and scale many of our shares back-office functional business processes in areas such as IT, HR, health and welfare benefits and finance.\nWe believe that our efforts, to standardize processes and services and to leverage best practices across our operating companies globally, will drive meaningful efficiencies, improve effectiveness and quality and provide a scalable foundation for future growth.\nWe're also driving efficiencies and best practices in operations by leveraging our combined spend through the Global Supply Management Group and driving lean business practices, which really are the core of the Hillenbrand operating model to improve safety, quality, delivery, cost and working capital.\nOur fourth and final pillar is to effectively deploy strong free cash flow.\nWe have a track record of maintaining a flexible balance sheet, so we can grow through strategic acquisitions and a history of quickly reducing leverage following acquisitions.\nThis past quarter, we reduced our leverage ratio by approximately 0.5 turn to 2.2 times net debt-to-EBITDA.\nWe are confident in our ability to continue to generate robust free cash flow, maintain a strong balance sheet and grow our company, both organically and inorganically while returning capital to shareholders.\nToday, given our current leverage, we are lifting the temporary suspension of our share repurchase program and we will resume consideration of strategic bolt-on acquisitions.\nAs always, we will remain disciplined in our approach to deploying cash.\nNow, let me turn to some highlights for the quarter.\nTotal company performance exceeded our expectations led by higher burial casket demand at Batesville associated with the COVID-19 pandemic and strong hot runner systems growth in the MTS segment, driven by medical and packaging demand.\nAdditionally, we drove productivity and synergies across all of our segments.\nThe 30% growth at Batesville in the quarter was well above our expectations.\nWhile this significant increase in burial casket demand is both unfortunate and unprecedented, we were well positioned to handle this increase in volume at Batesville.\nAnd the results for the quarter reflect that.\nOver the past few years, the team has made significant progress in simplifying operations, reducing costs and improving the supply chain.\nAnd that was evident in the way Batesville responded to the spike in demand and drove the benefits of operating leverage to the bottom line.\nThe mental and physical challenges associated with the pandemic over the past year have been significant, and I continue to be proud of the Batesville team for their resilience and their ability to execute at a high level in such a demanding environment.\nThis is a company that is truly living its mission of helping families honor the lives of those they love.\nIn the Advanced Process Solutions segment, sales came in higher than we expected when we spoke to you last quarter.\nThis is despite lower year-over-year revenue due to continued delays on specific large polyolefin projects in our backlog.\nThe large project delays in the quarter were partly offset by faster delivery for smaller and mid-sized equipment.\nWe've had no cancellations of large projects from our backlog and demand for this type of project continues to be strong overall, particularly in China, which is offsetting lower North American demand for large polyolefin projects.\nThe strength we saw in the food and pharmaceutical end markets at the end of fiscal 2020, continued into the first quarter of this year.\nOther industrial end markets continue to remain challenged.\nIn Molding Technology Solutions, sales and margins were strong with hot runner system sales up in all regions and injection molding strength in India.\nWe saw an uptick in several end markets, including medical packaging, consumer goods and electronics.\nSales within automotive were up modestly sequentially, but continued to be soft compared to historical levels.\nParts and service revenues were lower compared to the prior year.\nOur MTS backlog increased 100% year-over-year on a pro forma basis, driven primarily by continued strength in orders for injection molding equipment.\nTotal company backlog increased over 32% year-over-year on a pro forma basis, to a new record of $1.4 billion a real sign of continued strong demand for our highly engineered solutions and applications expertise.\nWe continue to take the appropriate steps to convert our backlog to revenue, while following all necessary COVID-19 safety protocols and managing customer-induced schedule changes.\nOverall, I believe we executed well in the quarter and the businesses are well positioned for the future.\nAs some of you may have seen in our recently released annual report, sustainability is an important topic and one that we've been working on for a number of years at Hillenbrand.\nIn 2018, we took a big step forward in our efforts by forming a cross-functional sustainability steering committee, that's been effective in guiding our actions in a more coordinated way across the entire enterprise.\nIn 2019, we conducted a materiality assessment to identify the sustainability-related topics most important to our stakeholders, including employees, customers and investors.\nIn that same year, we also signed on to the United Nations Global Compact, because we believe that incorporating sustainability in our business activities will improve all aspects of our company, including the impact we have on society and the environment.\nAnd in the summer of 2020, we issued our first sustainability report, which shares some of the activities that we've undertaken.\nOne particularly impactful program is our global community engagement initiative that we call the One Campaign.\nIn the past years, the Hillenbrand One Campaign has focused on the UN Sustainable Development Goals, or SDGs, of quality education, reduced inequalities with a focus on diversity and inclusion and responsible consumption and production.\nLeveraging the results of our recent materiality assessment has been instrumental in identifying the SDGs most important to our stakeholders and focusing our efforts in areas that can have the greatest impact to our company and society.\nIn 2021, the One Campaign is focused on the SDG good health and well-being.\nIn fact, currently, a number of our employees are volunteering to support a vaccination clinic in our local Batesville community.\nGiven the impact of the COVID-19 pandemic in the communities in which we operate and across the nation and world, this is an initiative we feel strongly about lending our time and talents too.\nThroughout my section, I will be referencing pro forma results which exclude Red Valve in the APS segment and the Cimcool business which was divested on March 30, 2020, in the MTS segment.\nIt also assumes the Milacron acquisition closed on October 1, 2019.\nWe believe these pro forma results provide a better comparison of our ongoing operations and you will find a comparison of as-reported and pro forma results on Slide 19 of the earnings slide deck.\nTurning to the quarter, our teams sustained their strong momentum, with continued revenue growth, significant margin expansion and solid free cash flow.\nWe finished the quarter with results that were better than we anticipated, particularly given uncertainties caused by the pandemic.\nWe delivered total revenue of $693 million, an increase of 22%.\nExcluding the impact of foreign exchange, total revenue increased 19%.\nOn a pro forma basis revenue increased 6%, driven by strong burial casket demand at Batesville and hot runner systems sales in MTS.\nAdjusted EBITDA of $138 million increased 50% and adjusted EBITDA margin of 19.9%, increased 370 basis points.\nOn a pro forma basis adjusted EBITDA of $137 million, increased 51% and adjusted EBITDA margin was 20%.\nWith the benefit of additional volume along with the actions, we've taken to contain costs across all segments we expanded our adjusted EBITDA margin, 600 basis points over the prior year on a pro forma basis.\nWe reported GAAP net income of $76 million or $1.01 per share, an increase of $1.06 over prior year, primarily driven by a decrease in acquisition and integration costs related to Milacron, the gain on the sale of Red Valve and higher volume within Batesville.\nAdjusted net income of $72 million resulted in adjusted earnings per share of $0.96, an increase of 28%, mainly driven by strong Batesville and MTS performance.\nThe adjusted effective tax rate for the quarter was 28.5%, an increase of 650 basis points from the prior year.\nThe increase is primarily due to the prior year tax benefit recognized for the reduction in India's statutory tax rate.\nAnd, an increase in the deferred taxes associated with foreign un-remitted earnings this quarter.\nHillenbrand generated cash flow from operations of $66 million, an increase of $48 million compared to the prior year.\nThis increase was primarily due to lower acquisition and integration costs associated with Milacron and the strong cash generated by MTS from advanced payments on strong orders.\nCapital expenditures were approximately $6 million in the quarter, slightly lower than anticipated.\nWe also paid down $157 million of debt and returned $16 million to our shareholders, in the form of cash dividends.\nWe recognized $6 million of incremental synergies in the quarter.\nAnd we expect to deliver $20 million to $25 million of synergies this year.\nWe remain on track to achieve the three-year $75 million total run rate synergies, related to the Milacron acquisition.\nMoving to segment performance Batesville's revenue of $165 million, increased 30% year-over-year, driven by higher volume, as a result of increased deaths associated with COVID-19 and higher average selling price, partially offset by an estimated increase in the rate at which families opted for cremation.\nWith the commitment of our Batesville employees, our manufacturing capabilities and distribution footprint, we were able to respond to the elevated volume to meet our customers' needs.\nBatesville's first quarter execution was outstanding.\nAnd the benefits of the Hillenbrand operating model are evident in the results.\nStrong operating leverage and productivity initiatives, contributed to exceptional margin performance.\nAdjusted EBITDA margin of 31.7%, improved 1,360 basis points over the prior year and more than offset inflation in the quarter.\nTurning to Advanced Process Solutions, APS revenue of $291 million decreased 5%.\nOn a pro forma basis, revenue of $283 million also decreased 5%.\nExcluding the impact of currency, revenue decreased to 9%.\nThe revenue decline was primarily driven by a decrease in large polyolefin system sales, due to customer-driven delays on certain projects, and lower parts and service revenue driven by delays associated with the COVID-19 pandemic.\nWe continue to see field service and aftermarket softness exacerbated, by COVID-19 travel restrictions.\nBut the aftermarket business has begun to stabilize, and we've continued to innovate to provide service remotely.\nLonger term, we continue to see opportunity for growth in this area, as the installed base for our large systems, continues to grow.\nAdjusted EBITDA margin of 16.7% was down 10 basis points, and down 30 basis points on a pro forma basis.\nThe decrease was due to lower volume and adverse mix from a couple of lower margin strategically important plastics projects, partly offset by cost containment actions and productivity improvements.\nOrder backlog excluding Red Valve reached a new record high of $1.1 billion at the end of the first quarter, an increase of 21% year-over-year on a pro forma basis.\nExcluding the impact of foreign currency exchange, backlog increased to 12%.\nSequentially backlog increased to 10% on a pro forma basis from the previous record high.\nWe continue to see solid demand in the pipeline for new large plastics projects during the quarter primarily from Asia.\nThese projects are expected to contribute to revenue over the next several quarters including about 28% of the backlog expected to convert to revenue beyond the next 12 months.\nMTS revenue of $237 million increased 78% and 7% on a pro forma basis in comparison to the prior year.\nExcluding the impact of foreign exchange, revenue increased 5%.\nSales of hot runner systems increased double digits on continued solid demand in medical and packaging end markets and sales of injection molding and extrusion equipment were roughly flat year-over-year, but improved 20% on a sequential basis.\nIndia in particular continues to rebound on strong demand across all end markets particularly medical and consumer goods.\nAdjusted EBITDA of $48 million increased 84% and 47% on a pro forma basis with adjusted EBITDA margin of 20.4% increasing 560 basis points compared to the prior year on a pro forma basis.\nThe improvement was driven by higher volume, productivity initiatives including cost synergies and favorable mix of higher margin hot runner systems.\nWe're encouraged with these results and remain focused on leveraging the Hillenbrand operating model to drive sustainable operational improvements.\nOrder backlog of $292 million increased 100% compared to the prior year on a pro forma basis and 20% sequentially, primarily driven by an increase in injection molding equipment orders.\nActivity was strongest in the medical, consumer goods, packaging and electronics end markets.\nWe saw a slight uptick in automotive orders in the quarter and remain cautiously optimistic about future demand.\nTurning to the balance sheet; net debt at the end of the quarter was $1.1 billion and the net debt to adjusted EBITDA ratio fell by half a turn sequentially to 2.2 times.\nAs of the quarter end, we had liquidity of approximately $1.1 billion including $266 million in cash on hand and the remainder available under our revolver.\nIn the quarter, cash proceeds from the sale of Red Valve were $59 million.\nWe paid down $157 million of debt including prepayment of our term loan due in 2022 with cash on hand and revolver borrowings.\nWe have no near-term debt maturities and we'll continue to leverage the Hillenbrand operating model to drive greater efficiency across the business.\nWe continue to focus our efforts on improving working capital efficiencies particularly in the MTS segment.\nTurning to capital deployment, we are pleased with our aggressive deleveraging progress, which gives the company greater flexibility to grow both organically and inorganically.\nWhile our focus will still be to pay down debt, we are now more comfortably within our leverage guardrails.\nWe will continue to focus on reinvesting in the business with strategic investments and high-return opportunities.\nAnd as Joe mentioned earlier, we will reinstate our share repurchase program as well as begin to consider strategic bolt-on acquisitions.\nAmid continued uncertainty we are providing guidance only for the second quarter of fiscal 2021 under the assumption that we'll continue to see gradual stability in the global economy without any new broad-based COVID related disruptions.\nWe expect Hillenbrand's total second quarter revenue to increase year-over-year in a range of 12% to 16%.\nWe expect adjusted EBITDA in the range of $126 million to $137 million and adjusted earnings per share in the range of $0.85 to $0.95 for the second quarter, an increase of 29% on a year-over-year basis at the midpoint of the range.\nStarting with Batesville; in the second quarter, we expect revenue to increase 20% to 25% year-over-year based on a continued trend of elevated burial casket volumes due to the pandemic.\nWe expect strong margin performance in the second quarter, driven by operating leverage and continued efforts to drive productivity.\nHowever, we are experiencing higher commodity inflation and transportation cost, including premiums paid to expedite shipments.\nWe're targeting adjusted EBITDA margin of 29% to 30%, an increase of 590 to 690 basis points over the prior year.\nIn Advanced Process Solutions, which includes mid and long-cycle capital systems equipment and aftermarket parts and service, we expect second quarter revenue in a range of flat to down 4% year-over-year, primarily due to customer-driven delays with the timing of long-cycle, large polyolefin projects.\nPartly offsetting that is the demand momentum we have seen in a couple of areas for our mid-cycle capital equipment within plastics and food end markets and stabilization in parts and service.\nWe expect adjusted EBITDA margin of 17.5% to 18% to be modestly lower from a year-over-year perspective, down 60 to 110 basis points, as the headwind from lower volume, project mix and certain targeted investments is partially offset by our continued cost containment and productivity initiatives.\nTurning to Molding Technology Solutions, which includes mid-cycle injection molding equipment, short-cycle hot runner systems and aftermarket parts and service, we expect strong second quarter revenue growth in a range of 37% to 40% over prior year as demand continues to be strong in both hot runner and injection molding product lines.\nLast year, we had COVID-related shutdowns in China that we do not expect will repeat.\nWe are targeting adjusted EBITDA margin of 18.8% to 19.2%, an improvement of about 320 to 360 basis points, as the benefit of higher volume and continued productivity improvements flow to the bottom line.\nOn a sequential basis, margins will be lower than the first quarter due to a mix impact from higher injection molding sales, which typically carry a lower margin.\nHigher commodity inflation and transportation costs and targeted investments we are making to drive growth.\nNow turning to our expectations for the full year.\nIn terms of the outlook for the Batesville segment in the second half, we are not providing specific guidance, given the uncertainty that remains due to the pandemic.\nThe impact of the newly identified strains of the coronavirus and the speed and effectiveness of the vaccination rollout continue to make longer-term demand for Batesville hard to predict.\nIn the second half of the year, we expect Batesville's revenue and margins to be lower on a year-over-year basis, due primarily to the impact of lower volume from fewer COVID-related deaths, along with higher commodity inflation.\nIn the Advanced Process Solutions segment, we are expecting revenue to increase low single digits on a pro forma basis for the full year.\nWe expect increased revenue in large plastics projects and stabilization of the aftermarket business during the second half of the fiscal year.\nWe also expect EBITDA margins to be slightly down year-over-year on a pro forma basis, due to unfavorable project mix and investments in the business.\nTurning to the Molding Technologies segment.\nFor the year, we expect revenue to increase in the mid-teens year-over-year on a pro forma basis, driven by continued strength in end markets, such as medical, packaging and consumer goods and gradual improvement of automotive.\nWe expect moderate EBITDA margin improvement year-over-year on a full year basis, as additional volume leverage and productivity are partially offset by unfavorable mix and inflation.\nWe expect pressure on margins in the second half of the fiscal year versus prior year, due to unfavorable injection molding mix and additional investments in the business.\nOverall for the portfolio, we recognize that there is still a high degree of volatility and uncertainty around the world.\nHaving said that, our team has demonstrated the ability to execute through challenging circumstances, and I have confidence in our ability to achieve these results and continue our momentum.\nWe executed well and delivered strong performance across the board in the quarter.\nIn particular, we achieved robust growth at Batesville an exceptional EBITDA margin in Batesville and MTS.\nThe acquired Milacron businesses are beginning to accelerate their performance and we remain bullish on the deal's long-term strategic and financial benefits.\nWe're on track to deliver $20 million to $25 million in year two synergies, and we remain confident in achieving year three run rate synergies of $75 million.\nContinued strong free cash flow performance in the quarter has enabled us to delever at an accelerated pace despite the ongoing backdrop of the COVID-19 pandemic.\nWe further focused our portfolio by divesting Red Valve and signing an agreement to divest ABEL.\nAnd finally, we ended the quarter with a record backlog and a robust project pipeline.\nWe believe we will remain well positioned to overcome any near-term macro challenges and are confident in our strategy to drive profitable growth over the long-term.\n",
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"content": "compname reports q1 gaap earnings per share $1.01.\nq1 gaap earnings per share $1.01.\nsees q2 adjusted earnings per share $0.85 to $0.95.\nq1 adjusted earnings per share $0.96.\nq1 revenue rose 22 percent to $693 million.\nqtrly gaap earnings per share of $1.01.\nfiscal q2 2021 total quarterly revenue expected to increase 12% to 16% year over year on a pro forma basis\".\nbelieve we are well positioned for remainder of fiscal year 2021 with a solid balance sheet and healthy backlog\".\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: I'm joined by our President and CEO, Joe Raver; our Executive Vice President and incoming CEO, Kim Ryan; and our Senior Vice President and CFO, Kristina Cerniglia.\nThese statements are not guarantees of future performance, and our actual results could differ materially.\nBefore I start, I'd like to take a moment to introduce our new Investor Relations' Director, Sam Mynsberge who kicked off today's call.\nSam brings more than a decade of finance experience to the position and has been with Hillenbrand since 2014 serving in a variety of finance roles.\nGiven Sam's knowledge of our business and strong financial acumen, we're excited to have him lead our Investor Relations efforts.\nI'll now turn to an overview of the year.\nFiscal 2021 was marked by record performance for Hillenbrand, achieving new milestones for order intake, revenue, earnings and cash flow, driven by strong demand for our products and solutions and outstanding execution by our people.\nWe capped off this strong performance with a solid fourth quarter, as all three segments delivered margins and cash flow that exceeded our expectations coming into the quarter, which Kristina will discuss in more detail later in the call.\nAs we approach the second anniversary of the Milacron acquisition, the integration continues to progress well.\nWe accelerated our synergy realization and exceeded our goal for the year, achieving approximately $30 million of incremental cost savings, bringing our total synergy realization to date to nearly $60 million.\nWe remain confident in achieving our target of $75 million in run rate synergies by the end of year three.\nThe Milacron integration has served as a catalyst in establishing the foundation for accelerating value capture from future M&A and in driving many of the improved processes that have allowed us to effectively navigate this difficult operating environment.\nWe are a stronger company because of the Milacron acquisition, and I'm excited about the opportunities that lie ahead.\nWe also achieved significant strategic milestones, successfully streamlining our portfolio through the announced divestitures of Red Valve and ABEL during the fiscal year and just last month, TerraSource Global.\nWe made good progress on our sustainability journey this year, including the hiring of our first Chief Sustainability Officer and the issuance of our second sustainability report in September.\nThis year was not without its challenges however as global supply chains remain stressed, inflation in commodities and transportation has not abated, the impact of COVID-19 continues to persist, and labor shortages continue throughout the US.\nNevertheless, I'm proud of the dedication and resiliency displayed by our associates as they successfully executed our strategy and served our customers in the face of these external challenges.\nHillenbrand has a proven track record of execution, and I'm confident in our position as we enter fiscal 2022.\nOur experienced leadership team, healthy balance sheet, strong backlog and focused portfolio position us well for continued growth and success.\nAs I've mentioned before, Kim and I have worked together for a number of years at Hillenbrand, and we have a high degree of trust.\nTogether with our Board, we've been executing a detailed plan to ensure a smooth and effective transition.\nI'm confident that Kim and the rest of our executive team will do a great job leading Hillenbrand into the future.\nJoe has led the transformation of Hillenbrand into a global industrial company through the integration of Coperion and the acquisition of Milacron.\nHe also led the transformation of talent and capabilities of the company by bringing in excellent leaders with strong industrial background and deep operational expertise at all levels of the organization.\nI'm grateful for his mentorship and partnership over the years.\nAnd I'm confident that our leadership team will be able to build upon our strong foundation to drive profitable growth for years to come.\nNow, let me turn to our strategy.\nThe company achieved strong results in 2021 despite the escalating global challenges that we are all facing.\nDuring these times, it's critical that we remain focused on executing our strategy to drive long-term shareholder value.\nAnd I believe our performance demonstrated that throughout the year.\nAs you know, our strategy is comprised of four pillars.\nThe first strategic pillar is to strengthen and build business platforms, both organically and through M&A.\nOver the past 12 months, we completed the divestitures of three businesses from our APS segment.\nThis enables us to focus our capital allocation toward driving growth in our large industrial platform where we partner with our customers to develop highly engineered equipment and solutions that optimize quality, output and energy efficiency to achieve a lower total cost of ownership.\nThe strength of our customer relationships, our deep application expertise and our innovative product offerings enabled us to achieve record order intake in fiscal 2021, resulting in a strong backlog that positions us well for growth in fiscal 2022 and beyond.\nWe continue to see significant opportunity in several areas of strategic focus, such as food, including texturized proteins, recycling, biopolymers and batteries, which tend to be less cyclical than our other industrial end markets and have attractive long-term growth prospects.\nAs customer needs in these markets evolve toward higher output and more technically demanding applications, we are confident in our ability to win due to three key factors, our leading product offerings, our application engineering expertise, and finally, our global service network.\nAdditionally, the opportunities we see in these end markets aligned with our purpose of shaping a more sustainable future.\nWe are making organic investments to better position ourselves to win in these end markets, while also evaluating strategic acquisitions to accelerate our growth.\nIn recycling, for example, our investments have resulted in the introduction of several new products, the establishment of reference sites across all three recycling processes and key strategic partnerships that position us well for our future in this exciting area of opportunity.\nOur next strategic pillar is to manage Batesville for cash.\nAs we continue to grow our industrial product platforms, Batesville is becoming a smaller part of the portfolio, now comprising only about 20% of the company revenues.\nThroughout this unfortunate and unprecedented pandemic, the Batesville team has remained relentlessly focused on serving our customers and living up to their mission of helping families honor the lives of those they love.\nBatesville's strong execution over the last two years has delivered over $200 million of free cash flow paying -- playing a key role in the actions we took to aggressively pay down debt, accelerate growth investments in our industrial platforms and return cash to shareholders.\nOur third strategic pillar is to build scalable foundations for growth using the Hillenbrand Operating Model.\nThe Hillenbrand Operating Model is at the core of how we run and grow our businesses.\nDuring Joe's tenure, the Hillenbrand Operating Model evolved from a lean manufacturing system to a full operating model that enables continuous improvement across all aspects of the business, including operations, supply chain, global support functions and strategy.\nI've been fortunate to partner with the leadership team and the development of the operating model, while also experiencing firsthand the benefits of its deployment during my time as President of Coperion and through my involvement in the integration of Milacron.\nThe Hillenbrand Operating Model is a key enabler of the success we've seen so far in the Milacron integration, but the benefits will go far beyond the synergies realized from this particular acquisition.\nWe are confident that the capabilities we have developed and the organizational structures we have established will enable us to accelerate the integration and synergy realization of future acquisitions.\nAs we continue to utilize the tools and expand the capabilities of the HOM, we expect to drive further efficiencies throughout the enterprise, while also enhancing our growth tools, specifically around innovation, digitization and commercial excellence.\nOur fourth and final pillar is to effectively deploy strong free cash flow.\nWe generated record cash flow in fiscal 2021.\nThis allowed us to reinvest in the business for growth and productivity to strengthen our balance sheet and to return over $180 million in cash to shareholders through share repurchases and quarterly dividends.\nSince acquiring Milacron two years ago, we've reduced our leverage by nearly 2.5 turns.\nWe have a healthy and flexible balance sheet enabling us to further accelerate our growth through strategic investments in our industrial platforms, exploring potential inorganic opportunities that maximize long-term shareholder value and considering opportunistic share repurchases.\nAs always, we remain disciplined in our approach to deploying cash.\nWe issued our second sustainability report this past September.\nWe introduced a framework for how we prioritize our efforts based on the feedback of our stakeholders.\nWe also aligned our reporting framework to the United Nations Sustainable Development Goals and the Global Reporting Initiative.\nWe believe sustainability is a source of opportunity, innovation and competitive advantage for Hillenbrand, which will ultimately drive long-term profitable growth and shareholder value.\nThis is a priority of mine, and I'm excited to continue sharing our progress with you over the quarters and years to come.\nThroughout my section, I will be referencing year-over-year comparisons on a pro forma basis, which are adjusted for acquisitions and divestitures.\nWe believe these pro forma comparisons provide a better assessment of our ongoing operations.\nAnd you will find a reconciliation of reported and pro forma results in the appendix of the earnings slide deck.\nDuring the fiscal fourth quarter, we delivered total revenue in the quarter of $755 million, an increase of 12% on a pro forma basis or a 11% excluding the impact of foreign currency.\nWe saw year-over-year increases in all three segments, led by volume growth in the injection molding product line within MTS.\nAdjusted EBITDA of $140 million increased 2%, while adjusted EBITDA margin of 18.5% decreased 180 basis points, as cost inflation, unfavorable mix and an increase in strategic investments more than offset operating leverage from higher volume, favorable pricing and productivity improvements, including approximately $7 million of year-over-year synergies realized in the quarter.\nDespite the decline compared to prior year, adjusted EBITDA margins in the quarter exceeded our expectations for all three segments.\nAs communicated last quarter, we have been actively taking pricing actions to help mitigate the impact of rising inflation.\nWe had approximately 70% price/cost coverage in the quarter, which was more favorable than we had expected, primarily due to better pricing realization in some of our shorter cycle injection molding products and in Batesville.\nHowever, we expect to see continued price/cost pressure in the first half of fiscal '22, due -- in part due to the delivery of longer lead time injection molding equipment from the backlog that was priced at pre-inflationary levels.\nAdditionally, we expect our primary commodity costs of steel, electrical components, wood and fuel to remain elevated through at least the first half of fiscal 2022.\nWe will continue to monitor our pricing structures and take further action as appropriate.\nWe reported GAAP net income of $55 million, or $0.74 per share, which increased from a loss of $0.09 per share in the prior year.\nAdjusted net income was $74 million, or $1.00 per share, an increase of $0.08 or 9%.\nAnd the adjusted effective tax rate for the quarter was 29.2%.\nWe had cash flow from operations of $86 million in the quarter, which was better than our expectations coming into the quarter, but lower than last year, primarily due to timing of working capital requirements.\nCapital expenditures were approximately $18 million.\nWe repurchased approximately 1.8 million shares for $78 million in the quarter and returned $16 million to shareholders in the form of quarterly dividends.\nMoving to segment performance.\nAPS revenue of $340 million increased 9% on a pro forma basis, driven by higher volume of large plastics projects and separation equipment.\nAftermarket revenue was relatively flat year-over-year, but up 6% sequentially.\nAnd we had another solid quarter of aftermarket orders.\nWe expect continued growth in this highly profitable part of the business in fiscal year 2022.\nAdjusted EBITDA of $69 million increased 8% on a pro forma basis, while adjusted EBITDA margin of 20.3% was higher than expected, down only 30 basis points from the prior year.\nCost inflation was largely offset by price, but the impact of unfavorable mix from a higher proportion of large plastics projects and strategic investments for growth more than offset operating leverage from higher volume and productivity improvements.\nOrder backlog of $1.3 billion increased 41% year-over-year on a pro forma basis, primarily driven by large plastics projects.\nWhile backlog declined 2% sequentially, it remains at a high level, providing us a strong foundation for growth in fiscal '22 and beyond.\nThe pipeline for large plastics projects continues to be healthy, particularly in Asia.\nAnd as Kim mentioned, we have made solid advances in our product innovations and strategic partnerships in recycling as well as food, biopolymers and batteries.\nAlthough these areas are not significant portions of our revenue today, we are focused on building our capabilities to win in these end markets in the future through strategic partnerships and organic investments, while also evaluating inorganic opportunities.\nTurning to Molding Technology Solutions.\nWe saw year-over-year growth in all product lines, led by strong volume growth for injection molding equipment.\nBoth revenue and margins exceeded our expectations coming into the quarter.\nRevenue of $260 million increased 20% compared to the prior year.\nThe team executed well in the quarter and was able to largely mitigate the impact of a chip shortage that we communicated coming into the quarter.\nAdjusted EBITDA of $54 million increased 6%, while adjusted EBITDA margin of 20.6% decreased 270 basis points, as higher volume and productivity were more than offset by unfavorable mix due to an increased proportion of injection molding equipment, which comes at a lower margin compared to hot runners, cost inflation, not fully offset by price, and higher labor and manufacturing premiums, including outsourcing.\nWe continue to deploy the Hillenbrand Operating Model in the MTS segment, particularly in injection molding where we expect to achieve sustained margin improvement over the coming years.\nOrder backlog of $366 million increased 51% compared to the prior year and decreased 6% sequentially as order volumes normalized, in line with our expectations.\nBatesville performed above our expectations for both revenue and margin given the unfortunate circumstances with the Delta variant.\nRevenue of $155 million increased 5%, due to higher average selling price and an estimated increase in deaths associated with the pandemic.\nWhile we are closely monitoring the continued impact of COVID-19, we expect deaths to normalize as we progress through fiscal year 2022.\nAdjusted EBITDA margin of 21.6% declined 270 basis points compared to the prior year, primarily due to cost inflation and higher transportation and manufacturing cost premiums required to respond to the increased demand driven by the ongoing COVID-19 pandemic.\nAs we've discussed before, the Batesville team has been fully focused on meeting the elevated demand needs of their customers throughout the pandemic.\nWhen demand normalizes, the business plans to reallocate resources to drive productivity projects.\nNow, I'll briefly cover our full year results.\nConsolidated pro forma revenue of $2.8 billion increased 13% or 10%, excluding the impact of foreign currency exchange.\nPro forma revenue for APS of $1.2 billion increased 5% compared to the prior year, including a 4% contribution from the impact of foreign currency.\nMTS revenue of $996 million grew 25% on a pro forma basis or 22% excluding the impact of foreign currency.\nBatesville revenue of $623 million increased 13%.\nPro forma adjusted EBITDA of $534 million increased 20% compared to the prior year, while pro forma adjusted EBITDA margin of 18.8% improved 100 basis points, primarily driven by operating leverage from higher volume in Batesville and MTS and productivity improvements, including synergies.\nWe accelerated the timing of our synergy capture in the year, realizing approximately $30 million of incremental cost savings, which exceeded our target of $20 million to $25 million, and we remain on track to achieve our three-year run rate synergy target of $75 million.\nGAAP net income of $250 million resulted in GAAP earnings per share of $3.31.\nAdjusted net income of $286 million resulted in adjusted earnings per share of $3.79, an increase of $0.60, or 19% compared to the prior year.\nAnd our adjusted effective tax rate was 28.7% for the full year.\nWe generated record operating cash flow for the year of $528 million, up $174 million compared to the prior year, and our free cash conversion rate was 171% of adjusted net income for the year.\nWe continue to leverage the Hillenbrand Operating Model to drive greater efficiency across the business, including focused initiatives on improving working capital management, particularly within the MTS segment.\nCapital expenditures for the year were $40 million, which was lower than originally expected due to longer lead times from suppliers.\nWe remain focused on investing for growth as we head into fiscal '22.\nTurning to the balance sheet.\nNet debt at the end of the fourth quarter was $767 million, and the net debt to adjusted EBITDA ratio of 1.4 times was down from 2.7 times at the beginning of the fiscal year.\nAs of quarter end, we had liquidity of approximately $1.3 billion, including $446 million in cash on hand and the remainder available under our revolving credit facility.\nAs of September 30, we had no borrowing on our revolver and no near-term debt maturities due.\nMoving to capital deployment, we returned approximately $185 million to shareholders during the year through the repurchase of 2.8 million shares for approximately $121 million and $64 million through our quarterly dividend.\nSubsequent to the year end, we repurchased an additional 620,000 shares for $29 million, and we have $50 million remaining under our share repurchase authorization.\nOur top priorities for capital continues to be strategic investments to accelerate profitable growth and our large platforms in APS and MTS.\nAdditionally, we are evaluating acquisition targets that are a good strategic fit and that we expect will provide a high return to shareholders over the long term.\nWe will also continue to evaluate opportunistic share repurchases.\nOur guidance will be on a pro forma basis, which excludes the divested Red Valve and ABEL businesses from the prior year.\nOur guidance also excludes the divested TerraSource Global business from the prior year and the period of October 1 through October 22, 2021.\nAs the basis for our outlook, we expect supply chain disruptions, high transportation costs and labor market shortages to persist through the majority of the fiscal year.\nAnd as I mentioned earlier, we expect commodity costs to remain elevated through at least the first half of the fiscal year.\nAdditionally, we expect currency to be a headwind on a year-over-year basis.\nWe expect full-year revenue of $2.8 billion to $2.9 billion, an increase of 1% to 4%, driven by our strong backlog and solid underlying growth in our industrial end markets, partially offset by Batesville, the impact of supply chain disruptions and foreign currency translation.\nWe expect adjusted earnings per share in the range of $3.70 to $4.00 for the full year.\nTotal material and supply chain inflation for the year is expected to be approximately $95 million.\nWe anticipate offsetting the majority of this impact with price on a dollar-for-dollar basis, but this will have a dilutive impact to margins.\nWe expect inflation to be more of a headwind in the first half of the year with price/cost coverage of approximately 70% improving to approximately 100% in the second half.\nFor our fiscal first quarter, we expect adjusted earnings per share in the range of $0.87 to $0.94, down versus the prior year, primarily due to lower volume in Batesville, higher inflation and supply chain costs, and the impact of the divestitures.\nWe expect free cash flow as a percent of adjusted net income to be approximately 100% for the year.\nIncluding capex of approximately $75 million.\nNow to our segment outlook.\nTurning to Advanced Process Solutions, we expect full-year revenue to be up 8% to 12%, primarily due to continued strength in large plastics projects as well as solid growth in aftermarket revenue.\nThis growth includes an anticipated currency headwind of 3%.\nWe expect adjusted EBITDA margin of 21% to 21.5%, up 150 basis points to 200 basis points.\nWe anticipate supply chain challenges will more heavily impact the segment in the first half of the fiscal year, and we expect price to generally cover inflation for the year.\nFor the first quarter, we expect low-double-digit revenue growth year-over-year, but down high-single-digits sequentially, which is in line with historical seasonality trends.\nTurning to Molding Technology Solutions, we expect full-year revenue to be up 2% to 5% with modest growth in both hot runners and injection molding equipment.\nWe have a strong backlog, and underlying demand trends remain solid, but we anticipate supply chain disruption and labor shortages to be a headwind throughout the year.\nAdditionally, we expect sales for the hot runner equipment to be negatively impacted over the near term, primarily in the first quarter due to disruptions in China.\nWe expect adjusted EBITDA margin of 20% to 21% compared to 20.3% in fiscal '21.\nWe anticipate a higher degree of price/cost pressure in the first half of the year, due to injection molding equipment converting to revenue from the backlog, which was priced pre-inflation.\nWe expect price/cost coverage to improve in the second half.\nFor Q1, we expect revenue to be modestly higher than prior year, but down sequentially.\nAnd we anticipate modest year-over-year margin pressure, due to inflation and unfavorable mix from a higher proportion of injection molding equipment, which comes at a lower margin.\nFinally, with Batesville, we expect revenue to be down 11% to 13%, due to an anticipated decline in burial demand as just normalized during the year.\nWe expect COVID-related volumes to be significantly lower than the prior year, in line with external estimates.\nWhile we anticipate price/cost coverage will be better than it was in fiscal '21 due to the pricing actions we have taken, we expect adjusted EBITDA margin of 19% to 20% to be down 570 basis points to 670 basis points, primarily due to lower volume as well as supply chain premiums and inflation, not fully covered by price.\nWe expect price/cost coverage to be approximately 60% in the first half of the year, and we anticipate this will improve in the second half.\nFor Q1, we expect Batesville to be approximately flat on revenue with modestly higher margin on a sequential basis compared to Q4.\nWe expect the impact of the price increase to be largely offset by lower base deaths and continued pressure from inflation and other supply chain premiums.\nOverall, heading into fiscal year 2022, we have a strong backlog and our key industrial end markets remain healthy.\nWe continue to be focused on investing for growth and serving our customers, while continuing to leverage the Hillenbrand Operating Model to help us navigate through the difficult global operating environment.\nOur teams have demonstrated the ability to execute through challenging circumstances, and I'm confident that we will continue to drive sustainable improvement and achieve our targets for the coming year.\nFirst, underlying industrial end market demand remains solid, and we have a strong backlog as we head into 2022.\nThis provides visibility and gives us confidence as we operate in this uncertain macro environment.\nSecond, through the Milacron integration, we've significantly expanded our capabilities and improved our operating model.\nAnd this has enabled our strong execution during the past year, provides a scalable foundation for future growth.\nAnd last, we have a talented and experienced leadership team to drive Hillenbrand's profitable growth strategy into the future.\nFinally, it's been a great honor and privilege to serve at Hillenbrand over the last 28 years.\nI've been fortunate to lead the organization through a period of significant transformation, which could not have been possible without our dedicated employees, our talented leadership team and the support of our Board, shareholders, customers and other stakeholders.\nI'm excited about Hillenbrand's future, and I'm confident in its continued success under Kim's leadership.\n",
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"content": "compname reports q4 gaap earnings per share of $0.74.\nq4 gaap earnings per share $0.74.\nq4 adjusted earnings per share $1.00.\nsees q1 adjusted earnings per share $0.87 to $0.94.\nsees fy adjusted earnings per share $3.70 to $4.00.\nqtrly revenue of $755 million increased 9%.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: [Technical Issues] meaning of the federal securities laws.\nThese reconciliations, together with additional supplemental information, are available at the Investor Relations section of our website herbalife.com.\nAdditionally, when management makes reference to volumes during this conference call, they are referring to volume points.\nDuring the second quarter we delivered worldwide reported net sales of $1.6 billion, growth of 15% compared to the prior year.\nNet sales grew by double-digits for the fourth straight quarter.\nAll three of our core product categories grew double-digits, led by the Energy, Sports and Fitness category, which increased 45% compared to the prior year.\nAll of our regions, except China, experienced net sales growth in the quarter with four of our six regions increasing by more than 20%.\nWe will discuss China in detail toward the end of my remarks.\nThe underlying fundamentals of our business remain strong.\nFor the third quarter we are guiding reported net sales to be in the range of down 1% to up 5%.\nFor the full year, we expect net sales growth to be within a range of 8.5% to 12.5% compared to the prior year.\nIn addition to our net sales and earnings per share guidance, this quarter we have initiated guidance for adjusted EBITDA.\nFor the full-year 2021, we expect to generate between $875 million and $935 million of adjusted EBITDA, which highlights the ongoing profitability and underpins the cash flow generation of our business.\nAlex will provide detail on our new guidance and why we believe this incremental metric is valuable for investors as they analyze our business.\nNow let me get into our Q2 performance in more detail.\nThe North America region grew by 7% in the quarter, primarily driven by continued strong momentum in the US.\nIt is important to note that the single-digit growth is up against an extraordinarily high prior year comparison period.\nHowever, the two-year stack growth rate of 47% in the US accelerated compared to last quarter's two-year stack.\nWe have seen significant growth in our US Nutrition Club business as many parts of the country returned to more in-person activities.\nOver the first half of the year, we have had an increase of over 2,000 Nutrition Club locations in the US, with the total club count now exceeding 11,000.\nWhile we continue to monitor pandemic conditions, we are currently planning a return to some of our in-person training activities and sales events in the second half of the year, utilizing a hybrid format.\nThe Asia Pacific region had another quarter of powerful growth, up 38% compared to the prior year.\nThe region had notable strength in Vietnam, which grew 60%, Malaysia, which was up 45%, Taiwan, which increased 21% and South Korea, which returned to growth with a 19% increase.\nHerbalife Nutrition India has emerged as the number one direct selling company in that country based on a recent market research store report.\nOur Indian business grew 93% this quarter compared to Q2 of 2020.\nRecall that in Q2 2020, our business in India was disrupted by the severe public health-related restrictions imposed in response to the onset of COVID-19.\nOver the past year our business in India has adapted well to ongoing pandemic conditions, implementing several successful digital strategies, including a virtual nutrition club model.\nVirtual nutrition clubs incorporate many elements of traditional in-person nutrition clubs, but are conducted through virtual platforms such as Zoom or Facebook Live.\nVirtual clubs establish a sense of community and a personal sense of connection elements that proved incredibly important during the pandemic.\nThe virtual club strategy is now being shared as a model of success with other regions around the world.\nThe EMEA region set a second straight quarterly net sales record with year-over-year growth of 22%.\nStrong performances continued to be seen in markets such as Turkey, which was up 63%, Italy, which grew 38%, Belgium, which was up 25%, and Spain, which increased 21% in the quarter.\nThe United Kingdom delivered 24% growth, which was on top of a challenging comparison of 73% growth experienced in Q2 of 2020.\nAlthough combined new distributor and preferred customer numbers are lower than the peak of Q2 2020, we had significant growth of 56% compared to the more normalized 2019 comparison period.\nWe have also seen a 27% year-over-year increase in the number of active supervisors, which reflects the continued strength of the EMEA business over the past 18 months and helped drive the record performance.\nMexico grew 23% in the quarter, its first quarter of double-digit growth since 2013.\nNet sales growth was aided by a currency tailwind in the quarter.\nOur members in Mexico are beginning to adopt the preferred customer program, which was implemented in March.\nWe'll talk more about preferred customers in a moment.\nAdditionally, the South and Central American region grew 23% in the quarter.\nThe region was led by Chile, which grew over 200%, Bolivia, which was up 58%, Guatemala, which increased 57%, and Peru, which was up 20% compared to the prior year.\nThe region also benefited from the implementation of the preferred customer program, which is now live in eight of that region's markets.\nLet me go a little deeper on the preferred customer program, which is one of our key strategic elements.\nSegmentation, which for us means bifurcating our member base into two groups, distributors who intend to sell product and preferred customers or as they're known in the US, preferred members who are only product consumers.\nThe preferred customer program is now live in 25 markets around the world.\nThese markets represent approximately 70% of our total net sales.\nThe ability to identify and distinguish preferred customers from distributors provides us with a powerful dataset on each group.\nWe believe this primary customer data will be incredibly valuable.\nWe will talk more about our preferred customer program and segmentation in our upcoming Investor Day.\nWe're also seeing more interest in our business from young adults as approximately two-thirds of new distributors and preferred customers who joined Herbalife Nutrition during the second quarter were Millennials or Gen Z. The ability to run their business through digital platforms and to utilize social media to connect with consumers is appealing to this tech savvy demographic.\nAs we evaluate future product launches, we have Gen Z and their consumer preferences in mind.\nThis demographic is particularly interested in sports nutrition, clean label products, and offering such as our recently launched hemp cannabinoid products.\nNow returning to China, in China net sales declined 16% compared to the second quarter of 2020.\nThis year-over-year decline for the quarter was below our expectations.\nWe'd like to speak about China in more detail to give you a sense of what we're seeing and more importantly, what we're doing about it.\nChina represented approximately 11% of global net sales and just under 6% of global volume in the second quarter.\nWe're intensely focused on two key metrics that have decreased recently in China.\nOne, the number of new service providers joining the business and two, the activity levels of our sales representatives and service providers.\nWe are taking a number of actions in the market to adapt our business and to turn these two metrics around.\nFirst, we are continuing to invest in our digital platform.\nWe recognized in 2019 that our powerful digital platform was going to be a crucial component of our efforts for the China market.\nSince we began our digital transformation, we have formed partnerships with Tencent and Alibaba to help support our efforts.\nWe are just now beginning to see the initial results through the increased usage of our tools.\nThrough the first half of the year, approximately 50% of our business was transacted through our recently launched digital platforms.\nSecond, many of our service providers are shifting their focus to a newer Nutrition Club model, which includes a smaller scale, more rural location with an increase in daily customer interactions.\nThis type of Nutrition Club more closely resembles the very successful Nutrition Club businesses we have in many other parts of the world such as our US market.\nThird, with the goal of improving the activity and quality of our service providers in China, we elected to modify our qualification requirements.\nHistorically, in our business, we found that strategic changes to qualification methods often create short-term disruption, but eventually, lead to long-term positive results.\nFourth, beginning this month, we believe we've secured the ability to expedite the business licensing processes for our new service providers, where they can obtain their license significantly faster than getting their license on their own.\nWe anticipate this accelerated business licensing timeline will lead to incremental new entrants.\nOverall, we believe these initiatives will improve the number of new entrants joining the business and create a more active base of service providers in the long term.\nWhile below our expectations, China's volume has been more stable sequentially from month-to-month this year.\nThe China comparisons continue to be difficult for Q3, but they actually get much easier toward the end of 2021 and into early 2022.\nAnd we expect China to be additive to the total company growth within the next year.\nLastly, let me add that although at its current level China is a relatively small part of our overall business, we believe it offers significant growth opportunity long term and we remain firmly committed to the market.\nSo we've set a date for our Virtual Investor Day, which will take place on September 14th at 8:00 AM Pacific Time.\nWe look forward to sharing a deep dive on our company, on our strategy and on many of the initiatives that we have underway to drive continued growth.\nSecond quarter net sales of $1.6 billion represents an increase of 15% on a reported basis compared to the second quarter in 2020.\nThis was the largest quarterly net sales result in company history.\nThe growth was broad-based as over 50 of our markets grew by double-digits or more.\nWe had net sales growth in four of our five largest markets, consisting of the US, which grew 6%, China, which was down 16%, India, up 93%, Mexico, up 23% and Vietnam up 60%.\nCurrency was a tailwind to net sales in the quarter, representing a benefit of approximately 520 basis points, excluding Venezuela.\nReported gross margin for the second quarter of 79.2% decreased by approximately 60 basis points compared to the prior year period.\nThe decrease was largely driven by unfavorable country mix, primarily from China representing a smaller portion of our overall company sales.\nSecond quarter 2021 reported an adjusted SG&A as a percentage of net sales were 32.6% and 32.9%, respectively.\nExcluding China member payments, adjusted SG&A as a percentage of net sales was 26.6%, approximately 30 basis points unfavorable compared to the second quarter of 2020.\nThis was largely due to a return to more normal levels of advertising promotion and sales event spending, which was significantly disrupted during the second quarter 2020.\nFor the second quarter, we reported net income of approximately $144.2 million or $1.31 per diluted share.\nAdjusted earnings per share of $1.52 was a beat of $0.15 above the top end of our Q2 guidance.\nOur expected year-over-year currency benefit for the second quarter should have been approximately $0.10 lower than originally projected, which translates to our actual currency adjusted earnings per share exceeding the top end of our guidance range by $0.17.\nThis resulted in the largest quarterly adjusted EBITDA result in company history for the second quarter in a row, with adjusted EBITDA of approximately $262 million.\nCombined with the prior record in Q1, we have generated over $500 million of adjusted EBITDA during the first half of the year.\nWe are issuing guidance for the third quarter 2021, as well as updating our full-year 2021 guidance.\nFor the third quarter, we estimate net sales to be in the range of down 1% to up 5%, which includes an approximate 200 basis points currency tailwind.\nThe third quarter 2021 represents the most challenging comparison period of the year as we are comping 22% growth in Q3 of 2020.\nLooking back over the past four quarters, the two-year stack has range between approximately 19% and 28%.\nThis quarter's guidance implies a two-year stack of 21% to 27% growth.\nThird quarter adjusted diluted earnings per share is expected to be in a range of $1.05 to $1.25.\nAdjusted diluted earnings per share includes a projected currency benefit of $0.06 compared to the third quarter of 2020.\nJohn described earlier the strategic initiatives we have in place to return China to growth.\nWith that said, our expectations for China have come down in 2021.\nThis is reflected in our updated net sales guidance of 8.5% to 12.5% growth on a reported basis.\nDespite the reduction from China, the midpoint of our guidance still implies double-digit net sales growth for the year.\nCurrency remains a tailwind and we now project an approximate 220 basis point tailwind due to currency for the full year compared to the expected 200 basis points benefit from a quarter ago.\nWe are updating full-year 2021 guidance for adjusted earnings per share to a range of $4.70 to $5.10.\nDespite the reduction to the midpoint of our sales guidance, the midpoint of our adjusted earnings per share range is increasing by approximately $0.05.\nThis raise to the midpoint of our adjusted earnings per share guidance is primarily driven by the Q2 beat, partially offset by lower sales expectations in China for the remainder of the year.\nFor the full year, our guidance includes a projected currency tailwind of approximately $0.15 per diluted share, which is $0.03 higher than the currency benefit included in our prior guidance.\nIncrementally, we are initiating adjusted EBITDA guidance for the third quarter and full-year 2021 of $205 million to $235 million and $875 million to $935 million, respectively.\nWe believe this incremental metric will be helpful to investors as they analyze the profitability and cash flow generation potential of our business.\nNow we will turn to our cash position, capital structure and our share repurchase activity.\nThrough the first half of the year, we have generated $287 million of operating cash flow.\nThis was lower than our cash flow generation in the prior year period.\nHowever, for the full year we continue to anticipate cash flow will be stronger than the $629 million we generated in 2020.\nAt the end of the second quarter, we had $838 million of cash on hand.\nDuring the second quarter, we completed approximately $98 million in share repurchases.\nOur expectation is that we will complete approximately $200 million of share repurchases over the remainder of the year, resulting in over $900 million of share repurchases for the full-year 2021.\nDuring the quarter, we completed a $600 million offering of 2029 senior notes at a rate of 4.875%.\nWe used a portion of the net proceeds from the offering to redeem all outstanding $400 million 2026 senior notes that paid a coupon of 7.25%.\nGiven the favorable rate differential of approximately 240 basis points, we were able to raise nearly $200 million more debt at effectively the same interest payment.\nThis transaction resulted in a charge of approximately $25 million from the loss on the extinguishment of the 2026 notes.\nThis one-time charge was excluded from our adjusted results.\nAlso, just last Friday, we announced a repricing and upsizing of our term loan A and revolver credit facilities.\nThe borrowing margins of both facilities were reduced by at least 25 basis points in a new pricing grid to 2.25% or lower.\nThe revolver was increased by approximately $48 million to $330 million with the term loan A increasing by approximately $41 million to $286 million.\nThe amendment and incremental commitment from our bank group demonstrates their confidence in our current and future business outlook.\nWe also incorporated into the term loan A and revolver facilities a sustainability linked pricing grid relative to certain ESG KPIs.\nThese KPIs include our use of virgin plastic materials, reductions in greenhouse gas emissions and female diversity in our senior management ranks.\nHerbalife Nutrition is proud to demonstrate our commitment to an ESG strategy that is measurable through financial incentives.\n",
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"content": "compname reports q2 sales of $1.6 bln.\nq2 sales $1.6 billion versus refinitiv ibes estimate of $1.57 billion.\nq2 earnings per share $1.31.\nsees fy sales up 8.5 to 12.5 percent.\nq2 adjusted earnings per share $1.52.\nsees fy 2021 adjusted diluted earnings per share guidance range $4.70 - $5.10.\nsees q3 adjusted diluted earnings per share $1.05 to $1.25.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: These reconciliations, together with additional supplemental information, are available at the Investor Relations section of our website, herbalife.com.\nAdditionally, when management makes reference to volumes during this conference call, they are referring to volume points.\nOver the course of the global pandemic, we have delivered unprecedented business performance and growth.\nDespite challenging comparisons in the third and fourth quarter, we remain on track for another record sales year.\nThe fundamental tailwinds driving the global nutrition industry, along with demand for our science-based nutrition products, continue to benefit the company.\nIn Q3, we reported worldwide net sales of $1.4 billion, a decline of 6% compared to the prior year period.\nThese results were in line with the updated guidance that we issued in September.\nOn a two year stack basis, net sales grew 15% compared to the third quarter of 2019.\nFor the third quarter, we reported earnings per share of $1.09 per diluted share and net income of $117.4 million.\nAdjusted diluted earnings per share of $1.21 was above the top end of our revised Q3 guidance.\nAdjusted EBITDA of $222.4 million also exceeded the high end of our guidance range.\nUncertainty in global markets fueled by the ongoing pandemic and the Delta variant has presented challenges in predicting behavior in our channel.\nAs we discussed at our recent Investor Day, we observed lower-than-expected activity rates during the month of August, which led to our revised Q3 and full year 2021 guidance.\nThe decrease in activity rates was primarily driven by fewer new distributors and preferred customers entering our channel.\nThis lower level of contribution from new entrants remained relatively consistent in the month of September and is reflected in our guidance for the remainder of the year.\nFor the quarter, the number of new distributors and preferred customers joining the business was down 19% compared to record numbers of new entrants in Q3 2020, but it was still up 28% compared to Q3 of 2019, excluding China.\nDespite the slowdown in new entrants, we remain confident the foundation of our business is strong, and our long-term strategy is solid.\nIn Q3, the number of sales leaders actively selling in the channel was up 10% compared to the prior year period, excluding China.\nTurning to our regional performance.\nThe Asia Pacific region had another quarter of double-digit net sales growth, up 11% compared to the prior year.\nThe region was led by continued strength in India, which grew 46%.\nIndia set its fifth straight quarterly net sales record as well as a monthly net sales record in September.\nOver 220,000 new preferred customers joined the business in India, a record number, and a reflection of the momentum that we are seeing in that market.\nIn Vietnam, government COVID restrictions forced our Nutrition Clubs to close for the quarter, which contributed to growth of 13%, which was lower than the growth rates we had recently experienced in that market.\nAdditionally, a third wave of COVID-19 throughout Indonesia resulted in community restrictions in all provinces, and impacted our nutrition club utilization, resulting in a sales decline of 10%.\nLooking at North America.\nWe saw a decline in net sales of 11%.\nThis decline is up against an extraordinarily high prior year comparison period.\nThe two year stacked growth rate in the region increased 38% compared to Q3 of 2019.\nWe continue to see strength in our U.S. nutrition club business as many parts of the country returned to more in-person activities.\nWhile we continue to closely monitor pandemic conditions, we kicked off a series of in-person distributor events in October, and are encouraged by the initial attendance and the excitement in the channel as we begin to once again meet face to face.\nSimilar to the North America region, EMEA experienced a challenging year-over-year comparison, resulting in a 4% decline.\nHowever, in the region, we have seen a 16% year-over-year increase in the number of active supervisors, which reflects the continued strength and solid foundation of the EMEA business.\nLooking at the two year stack in the region, EMEA grew 33% compared to the third quarter of 2019.\nAlthough the combined new distributor and preferred customer numbers are lower than Q3 2020, we saw growth of 24% compared to the more normalized 2019 comparison period.\nIn China, net sales declined 30% compared to the third quarter of 2020.\nDuring the second quarter earnings call, we outlined the actions that we're taking in the market.\nOverall, we believe our strategic initiatives, which include a focus on our digital transformation and daily consumption at Nutrition Clubs, will improve the number of new entrants joining the business and create a more active base of service providers in the long term.\nAlthough the impact of these initiatives is yet to be seen in our top line results, we remain confident, and expect these strategies will benefit our sales performance over time.\nFor the full year 2021, we are reiterating the outlook that we provided in September for the top and bottom line.\nAlex will take you through our guidance in a bit more detail shortly.\nWe anticipate this to be our go-forward cadence, which will allow time for additional data to flow through our forecasting models.\nAlthough the unpredictable and unprecedented nature of the pandemic and its economic impacts have resulted in near-term variability in our business, we remain firmly confident in the long-term growth strategy that we outlined in detail at our Investor Day.\nOne of the initiatives that we outlined at Investor Day to accomplish this growth was new product innovation.\nAnd over the past several years, we have strategically built out our Herbalife24 sports nutrition brand through new products and global expansion.\nAnd this has contributed to impressive growth in the energy, sports and fitness category, which has increased at an 18% three year CAGR from 2017 through 2020 and growth of 31% year-to-date.\nWe anticipate new products will be a long-term growth driver in our business, and accelerating new product development will be critical.\nCurrently, products introduced in the prior three years represent only 14.5% of volume points in 2020.\nOur strategic objective is to increase sales attributable to new product development within the last three years to 25% over the next five years by localizing product development and improving speed to market.\nWe hope that you were able to attend our Investor Day where we outlined additional aspects of our growth strategy, and shared our vision on the future of the company.\nFor any of you that were unable to join, a full replay of the event is currently live on our Investor Relations website.\nThird quarter net sales of $1.4 billion represents a decrease of 6% on a reported basis compared to the third quarter in 2020.\nThis was in line with updated guidance we provided in September, and a 15% increase on a two year stack basis compared to Q3 2019.\nWe had year-over-year net sales growth in three of our five largest markets, consisting of the U.S., which decreased 11%.\nChina, which was down 30%.\nAnd Vietnam, up 13%.\nCurrency was a tailwind to net sales in the quarter, representing a benefit of approximately 165 basis points, excluding Venezuela.\nReported gross margin for the third quarter of 78.7% decreased by approximately 10 basis points compared to the prior year period.\nThe decrease was largely driven by unfavorable country mix, primarily from China, representing a smaller portion of our overall company sales.\nThe decreases were largely offset by the impact of routine price increases.\nThird quarter 2021 reported and adjusted SG&A as a percentage of net sales were 34% and 33.6%, respectively.\nExcluding China member payments, adjusted SG&A as a percentage of net sales was 27.6%, approximately 100 basis points unfavorable compared to the third quarter 2020.\nAlthough this level of SG&A spend is still below our historical levels, it was an increase compared to the prior year where costs were significantly disrupted by the global pandemic.\nFor the third quarter, we reported net income of approximately $117.4 million or $1.09 per diluted share.\nAdjusted earnings per share of $1.21 was above the high end of our Q3 guidance, and was an increase of approximately 5% compared to the prior year period.\nCurrency was a benefit of $0.04 in the quarter versus the prior year period.\nAdjusted EBITDA of $222 million also exceeded the high end of our guidance range.\nOver the first nine months of the year, the company has generated over $409 million of net income and $740 million of adjusted EBITDA.\nOur adjusted diluted earnings per share and EBITDA figures continue to exclude items we consider to be outside of normal company operations and provide measures we believe will be useful to investors when analyzing period-over-period comparisons of our results.\nThis quarter, you will notice we have a new exclusion item for onetime expenses related to transformation initiatives.\nManagement has begun efforts to design and build to reorganize both front and back office operations.\nWe continue to assess scope, and will update investors in February.\nWe are reiterating our fiscal year 2021 guidance for the top and bottom line.\nAcross the guidance ranges, this implies annual records for net sales, adjusted earnings per share and adjusted EBITDA.\nOur fiscal year 2021 capex guidance has been updated to a range of $145 million to $175 million.\nCurrency remains a tailwind, and we project an approximate 200 basis points tailwind due to currency for the full year compared to the expected 220 basis points benefit from a quarter ago.\nFor the full year, our guidance includes a projected currency tailwind of approximately $0.11 per diluted share, which is $0.04 lower than the currency benefit included in our prior guidance.\nAs John referenced, we are expecting to provide guidance for 2022 on next quarter's earnings call.\nWe will also be monitoring potential inflationary impacts on our business.\nLike many other companies, we have started to observe higher-than-usual cost increases in our supply chain with respect to raw materials, shipping costs and labor at our manufacturing facilities.\nNow we will turn to our cash position, capital structure and our share repurchase activity.\nThrough the first nine months of the year, we have generated approximately $375 million of operating cash flow.\nDuring the third quarter, our cash flow was negatively impacted by timing on several working capital accounts.\nGiven this unfavorable timing, we no longer anticipate operating cash flow to be higher in 2021 than 2020.\nHowever, we expect these items to net out in 2022, and results in a relatively more favorable cash flow environment next year.\nAt the end of the quarter, we had $678 million of cash on hand.\nDuring the third quarter, we completed approximately $162 million in share repurchases.\nGiven the level of our share price, we were able to opportunistically accelerate our repurchases ahead of our initial expectation of $100 million for the quarter.\nOur fully diluted share count as of the end of Q3 was approximately $105.3 million.\nWe expect to complete approximately $100 million of share repurchases during the fourth quarter, which will result in just under $1 billion of share repurchases for the full year 2021.\n",
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"content": "q3 sales fell 6 percent to $1.4 billion.\nq3 earnings per share $1.09.\nreiterating fy 2021 outlook for top and bottom line.\nq3 adjusted earnings per share $1.21.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: We undertake no obligation to publicly update or revise these statements.\nKevin Jacobs, our Chief Financial Officer and President, Global Development, will then review our first quarter results.\nIt has been a little over a year since the pandemic started.\nOver that time, we acted swiftly to address the challenges we face, so we could quickly turn our focus to best positioning ourselves toward recovery and beyond.\nI'm really proud of how we've set up the company for the future.\nAnd most importantly, I'm grateful to our team members who have continued to lead with hospitality and to all of our stakeholders for their ongoing support.\nIn the first quarter, systemwide RevPAR decreased 38% year-over-year and 53% versus 2019.\nRising COVID cases and tightening travel restrictions, particularly across Europe and Asia Pacific, weighed on demand through January and most of February.\nHowever, March marked a turning point.\nAs we lapped the start of the U.S. lockdowns, RevPAR turned positive up more than 23% year-over-year.\nSystemwide occupancy reached 55% by the end of the month driven by strong leisure demand.\nAs expected, recovery in group and corporate transient continued to lag, but both segments showed sequential improvement versus the fourth quarter.\nOverall, this positive momentum has continued into the second quarter.\nWhile recovery varies by region and country, we can see the light at the end of the tunnel.\nIn the U.S., more than 50% of adults have received at least one dose of a COVID-19 vaccine.\nAs a result, we're seeing a significant lift in forward bookings and occupancy, which is now around 60% as well as lengthening booking windows.\nThis mirrors trends in other countries around the world.\nFor instance, China is running in the low 70s occupancy.\nWe do expect this momentum to continue.\nVaccine distribution, coupled with relaxed travel restrictions and increasing consumer confidence should drive further RevPAR improvements in the coming months and quarters.\nIn fact, we are on pace to see record leisure demand in the U.S. over the summer months with April bookings for the summer exceeding 2019 peak levels by nearly 10%.\nWe also expect continued corporate office reopenings to drive a meaningful pickup in business transient demand toward the back half of the year.\nBased on what we've seen in China and pockets of the U.S., once restrictions are lifted and offices reopen, business travel returns.\nIn the first quarter, business transient revenue was roughly 75% of 2019 levels in states that were further along in their reopening process.\nAdditionally, recent forecast for nonresidential fixed investment are up more than three percentage points from prior projections to 7.8%, indicating even greater optimism around business spending.\nOn the group side, forward booking activity continues to improve month-over-month.\nGroup bookings made in the first quarter for the back half of the year were roughly flat with 2019 booking activity, suggesting customers are increasingly optimistic about safety measures and loosening pandemic restrictions.\nNear-term group bookings continue to be driven largely by social events and smaller group meetings, but we are seeing a slow shift back to a more normal mix of business with corporate group leads up more than 70% for future periods.\nAssociations and trade shows have also started opening up housing and registration sites for events later this year, further signs of moving forward with in-person group meetings.\nAs we look out to next year, our group position is roughly 85% of peak 2019 levels with rate increases versus 2019.\nGroup bookings were up in the mid-teens for 2023 versus 2019.\nIn fact, last week, I was in Mexico to chair the World Travel and Tourism Council's Global Summit where more than 800 participants from all over the world attended in person and thousands more attended virtually.\nThe conference demonstrated that it is possible to meet in a safe way and that hybrid events can be incredibly effective at expanding participation and enhancing collaboration.\nIt was great to be in the same room with other hospitality and government leaders talking about the bright future that lies ahead for our industry.\nThe event made me even more optimistic for our recovery and confident that we are beginning to see a new era of travel emerge.\nDuring the quarter, we added 105 hotels totaling more than 16,500 rooms to our system and achieved net unit growth of 5.8%.\nWe celebrated the openings of our 100th Curio and our 50th Tapestry hotel demonstrating the strength of our conversion-friendly brands.\nOverall conversions accounted for approximately 24% of additions in the quarter.\nWe also continued to enhance our resort footprint during the quarter with the openings of the 1,500-room Virgin Hotel Las Vegas, the Hilton Abu Dhabi Yas Island, the all-inclusive Yucatan Resort Playa del Carmen and six spectacular properties along the California Coast.\nCustomers have even more opportunities to stay with us as travel resumes.\nBuilding on our already impressive portfolio in the world's most desirable locations, during the quarter, we signed agreements to bring our Waldorf Astoria and Canopy brands to the Seychelles.\nThe properties are scheduled to open in 2023, joining the Mango House Seychelles, LXR Hotel and Resorts set to open later this summer.\nIn the quarter, we signed nearly 22,000 rooms modestly ahead of our expectations.\nThis included our first Signia hotel.\nAdditionally, through our strategic partnership with Country Garden to introduce the Home2 Suites brand to China, we added more than 5,000 rooms to our pipeline.\nWe're excited for the opportunities this partnership provides with one of our fastest-growing brands.\nHome2 recently celebrated its tenth anniversary, marking the milestone with nearly 1,000 rooms, hotels open and in the pipeline.\nOn Entrepreneur Magazine's Annual Franchise 500 List, which featured 11 of our 18 brands, Home2 was the number two hotel brand ranking only behind Hampton.\nOverall, we are very happy with our development progress and excited for additional growth opportunities with more than half of our 399,000-room pipeline under construction, We're confident in our ability to grow net units in the mid-single-digit range for the next several years and continue to expect growth in the 4.5% to 5% range in 2021.\nAnd in an environment where safety and cleanliness are top priorities for travelers, we continue to create more opportunities for our guests to enjoy a contactless experience from pre-arrival to post-checkout.\nOur digital key feature, which enables guests to bypass the front desk and go straight to the rooms is now available in the vast majority of our hotels worldwide.\nAdditionally, we've joined forces with Lyft to mobilize Honors members to contribute to the Lyft Vaccine Access Initiative, which funds rides for those in need of reliable transportation to their vaccine appointment.\nWe're excited to continue the momentum of our partnership with Lyft by supporting this important cause.\nDuring the quarter, we also launched two new co-branded credit cards in Japan, building on our 25-year partnership with American Express and marking the first time our co-branded cards have been made available to customers outside the United States.\nThese cards are designed with both frequent and occasional travelers in mind and offer customers the opportunity to earn Hilton Honors bonus points on everyday spending as well as at our properties worldwide.\nAs a result of our strong partnerships, industry-leading brands, and unmatched value proposition, our loyalty program continues attracting new members.\nWe ended the first quarter with more than 115 million Honors members, up roughly 8% year-over-year with membership increasing across every major region despite lower demand due to the pandemic.\nAs I reflect on the quarter and the past year, I'm very proud of the determination, creativity and hospitality that our Hilton team members have demonstrated.\nThis earned us recognition by Fortune and Great Place to Work as the number one Best Big Company to Work For and number three Best Company to Work For in the United States.\nOverall, I'm pleased with our first quarter results and feel very good about the momentum for the remainder of the year.\nI'm optimistic for the future of travel and for Hilton as we emerge stronger and better positioned continuing to drive value for our guests, our owners, our communities and, of course, our shareholders.\nDuring the quarter, systemwide RevPAR declined 38.4% versus the prior year on a comparable and currency-neutral basis as rising COVID cases and reinstated travel restrictions and lockdowns disrupted the demand environment, especially across Europe and Asia Pacific.\nHowever, occupancy improved sequentially throughout the quarter, increasing more than 20 points.\nAdjusted EBITDA was $198 million in the first quarter, down 45% year-over-year.\nResults reflected the continued impact of the pandemic on global travel demand, including temporary suspensions at some of our hotels during the quarter.\nManagement and franchise fees decreased 34%, less than RevPAR decrease as franchise fee declines were somewhat mitigated by better-than-expected license fees and development fees.\nAdditionally, results were helped by continued cost control at both the corporate and property levels.\nOur ownership portfolio posted a loss for the quarter due to the challenged demand environment.\nReinstated lockdowns and travel restrictions in Europe and Japan, coupled with temporary hotel closures and fixed operating costs, including fixed rent payments at some of our leased properties, weighed on our performance.\nContinued cost control mitigated segment losses.\nFor the quarter, diluted earnings per share adjusted for special items was $0.02.\nTurning to our regional performance.\nFirst quarter comparable U.S. RevPAR declined nearly 37% year-over-year and 50% versus 2019.\nDemand improved sequentially throughout the quarter with March occupancy 62% higher than January and ending at 55%, the highest level since the pandemic began.\nLeisure travel continued to lead the recovery, particularly on weekends with warm weather destinations benefiting the most.\nIn the Americas outside the U.S., first quarter RevPAR declined 55% year-over-year and 63% versus 2019.\nPerformance recovered in March, but lagged the broader system due to the region's greater dependence on international travel, which remain constrained by tightened travel restrictions.\nIn Europe, RevPAR fell 76% year-over-year and 82% versus 2019.\nDeclines were driven by increasing COVID cases and reinstated lockdowns across both the United Kingdom and Continental Europe.\nDelays in vaccination distribution also disrupted recovery.\nIn the Middle East and Africa region, RevPAR was down 32% year-over-year and 46% versus 2019.\nPerformance in the region benefited from strong domestic demand and easing restrictions.\nIn the Asia Pacific region, first quarter RevPAR fell 7% year-over-year and 49% versus 2019 as rising infections, lockdowns and border closures weighed on performance early in the quarter.\nRevPAR in China increased 64% year-over-year with occupancy levels increasing from roughly 35% to roughly 65% during the quarter.\nBoth leisure and business transient demand rebounded quickly as restrictions eased with March occupancy in China exceeding 2019 levels.\nAs Chris mentioned, in the first quarter, we grew net units 5.8% driven primarily by the Americas and Asia Pacific.\nTightening restrictions and lockdowns across Europe delayed openings in the region.\nHowever, we expect an uptick in development activity as countries continue to reopen.\nFor the full year, we continue to expect net unit growth of 4.5% to 5%.\nSignings in the quarter decreased year-over-year due to pre-pandemic comparisons, but exceeded our expectations due to greater-than-expected signings in China, particularly for our Home2 Suites brand.\nFor the year, we expect signings to increase mid-single digits versus 2020.\nTurning to the balance sheet.\nDuring the quarter, we took steps to further enhance our liquidity position and preserve financial flexibility.\nWe repaid $500 million of the outstanding balance under our $1.75 billion revolving credit facility and opportunistically executed a favorable debt refinancing transaction to extend our maturities at lower rates.\nAs we look ahead, we remain confident in our balance sheet and liquidity positions as we continue to focus on recovery.\nWe would now like to open the line for any questions you may have.\nChad, can we have our first question?\n",
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"content": "compname reports q1 adjusted earnings per share $0.02.\nq1 adjusted earnings per share $0.02.\nsystem-wide comparable revpar decreased 38.4 percent on a currency neutral basis for q1 from same period in 2020.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: This is Anvita Patil, Hecla's assistant treasurer.\nWith that, I will pass the call to Phil Baker.\nReferring to Slide 4, we had a very strong first quarter, very good operational and financial performance.\nWe recorded quarterly adjusted EBITDA that was a record for the company.\nIt was $12 million higher than our previous record.\nWe had the highest cash gross margin.\nAnd we had the second-highest revenues in our 130-year history.\nAnd all of this was driven primarily by the strong production results and cost performance at all of our operations.\nAt Greens Creek, we're lowering our cash cost and all in sustaining cash cost guidance for the year, and Lauren is going to speak more about that in a minute.\nThe fundamentals of our balance sheet reflect these successive quarters that we've had of improving performance by Hecla.\nSo our balance sheet is in very good shape.\nOne of the things I want to point out is that typically our first quarter is one of our smallest cash flow quarters.\nI went back and looked at the last 30 years, and about 20 of the 30 were the lowest.\nThere were about 10 where the first quarter wasn't the lowest cash flow for the year.\nAnd when it wasn't the lowest, it was always the second lowest.\nSo when we consider our operating plans and when we consider the reversal that we'll have of the working capital buildup, we're anticipating this significant free cash flow generation over the rest of the year.\nSo as good as the first quarter was, we think the rest of the year will be stronger.\nAnd as a result of that, the board has announced an increase to our dividend policy.\nOur silver-linked dividend payment that occurs at $25 will be increased by 50% to $0.03 per share annually, and Russell's going to speak more about that.\nWe're returning about 28% of our free cash flow in the first quarter to shareholders.\nAnd as silver prices increase, shareholders will have the ability to participate in incremental free cash flow generation that we'll have.\nWe also had a very strong operating performance.\nAnd despite the good performance, we were able to maintain our low all-in frequency rate about 1.71 for the first quarter.\nIn addition, our sustainability report, which we're going to release in May, with the annual meeting, highlights our ESG performance that we've had.\nThe report focuses -- in fact, the title of the report is something like Small Footprint, Big Benefit.\nBecause we have these underground mines that have an extraordinarily small footprint.\nAnd they're largely energized by alternative power, making our greenhouse gas emissions per ounce probably the lowest or among the lowest in the industry.\nAnd we've also focused on policies and activities that really make Hecla a uniquely positive ESG investment.\nSo we're going to focus a lot of attention on that at the annual meeting.\nAnd also at the annual meeting, we're going to update exploration.\nSo we're going to wait for now.\nWe'll wait till the annual meeting.\nBut, let me just say that we've had some of the best drilling results in the history of the company.\nAnd as you're going to see, in a few weeks, we're in the early days of some of these programs.\nBut, they have the potential to be extraordinarily accretive.\nI really look forward to the rest of the year.\nAnd with that, I'm going to pass the call to Russell.\nTurning to Slide 6.\nHecla continued to strengthen its balance sheet as we ended the first quarter with $140 million in cash aided by record margins from higher prices and strong operating performance.\nWith cash almost doubled since the second-quarter 2020 from consecutive quarters of strong free cash flow, we delivered a net debt to adjusted EBITDA ratio of 1.4 times, well below our target of two times, while providing the liquidity position at $390 million.\nLooking at Slide 7, our realized silver margins have continued to increase as costs stay low and silver prices increase with every dollar in margin, translating to free cash flow.\nIf you look at the gold portion of the bar, you see that our margin this quarter was about double the second and fourth quarter of last year, and about 50% more than the third quarter.\nAnd it gets only partially reflected in our free cash flow, because of working capital changes.\nFirst-quarter free cash flow was $16.5 million after negative working capital changes of $29.3 million using interest payments of $18.4 million and the timing of incentive compensation payments related to 2020 performance and higher accounts receivables from timing of concentration.\nBut maybe more important is the trailing 12 months free cash flow $121 million.\nWe see the future 12 months of having the same or better free cash flow the current prices.\nMoving to Slide 8 with the growth anticipating our free cash flow over the remainder of the year, the board has approved an increase to our silver-linked dividends of $0.01 per share.\nThis equates to a 50% increase in the dividend rate at the $25 per ounce threshold to $0.03 per year.\nThis increase to the silver-linked dividend reflects our confidence in Hecla's free cash flow generation.\nAt $25 per ounce realized price, the enhanced dividend policy has an implied yield of 7.4% to the silver price.\nThe return from this dividend policy, which is tied to the price of silver, distinguishes Hecla from investing in an ETF for that matter and is unique for the industry.\nContinued strong operational performance and higher silver pricing drive our 2021 free cash flow expectations, which should continue to grow from our first-quarter performance.\nI'll start on Slide 10.\nFirst and foremost is our focus on safety.\nOur teams continue their exemplary safety performance, and our all injury frequency rate in the first quarter was 1.71, which is a reduction of 72% since implementing a revised safety and health management system in 2012.\nOur operations teams have done an outstanding job of improving this aspect of the business.\nWhile we are a little higher than our 2020 full-year results, we are focused on reducing it further.\nOn slide 11, at the Green Creek mine, we produced 2.6 million ounces of silver and 13,200 ounces of gold at an all-in sustaining cost of $1.59 per ounce for the quarter.\nWe're lowering the cash cost and all-in sustaining costs guidance, due to the higher byproduct credits, more favorable smelter terms and lower treatment charges, and the reclassification of mine license tax to income tax.\nWhile smelter terms will be better for all of 2021, in the first quarter, we realized another benefit due to a customer meeting prior purchase obligations.\nThis benefit will not recur later in the year.\nWith these changes, updated cash cost guidance for Greens Creek is lowered to $1.50 to $2.25 per ounce and all-in sustaining cash costs are lowered to $6.50 to $7.25 per ounce.\nGreens Creek's consistent delivery and low cost combined with high silver prices generate very strong free cash flow.\nGoing to slide 12, the Lucky Friday achieved full production in the fourth quarter of 2020 and produced 0.9 million ounces of silver in the first quarter of 2021.\nProduction at the mine is expected to exceed 3.4 million ounces this year.\nWe anticipate the grades to improve as we mine deeper, increasing the projected production to around 5 million ounces annually by 2023.\nNo significant planned outlay of capital is required to achieve these goals.\nIn addition, we are testing and optimizing various mining method changes and other initiatives to improve safety while increasing the productivity of the mine.\nWe've made no change to our outlook at the Lucky Friday.\nUnlike Greens Creek, the Lucky Friday produces a relatively small amount of zinc.\nThe dramatic improvement in zinc concentrate treatment charges as compared to last year, therefore, has less impact.\nAt the Casa Berardi mine, shown on slide 13, we had a strong first quarter with production of 36,200 ounces of gold at an all-in sustaining cost of $1,272 per ounce.\nOur investments in the mill to improve reliability and recovery are yielding great results.\nAnd the mill has maintained greater than 90% availability since October of 2020.\nOur business improvement activities will continue in 2021 and are expected to reduce costs further and to increase cash flow generation from the mine.\nOur ongoing focus to improve productivity and to reduce costs are underpinned by multiple factors, and we're starting to see a downward trend in AISC.\nAll these efforts together with others in the pipeline are positioning Casa Berardi to deliver consistent production at lower costs.\nOur 2021 guidance for Casa Berardi remains unchanged and production is expected to exceed 125,000 ounces at all-in sustaining costs of $1,185 to $1,275 per ounce.\nMoving to Slide 14, at the Nevada Operations, we produced about 2,500 ounces of gold from a stockpiled bulk sample of refractory ore that was processed at a third-party roaster.\nFor the rest of the year, production is expected to be in the range of 17,000 to 19,000 ounces of gold, from the processing of oxide ore at the Midas mill and an additional 22,000 tons of refractory ore through third-party facilities.\nRoughly 12,000 tons will be sent to a roaster and about 10,000 times to an autoclave.\nWe expect the Fire Creek mine and the Midas mill will be placed on care and maintenance by the end of second quarter.\nWe remain very excited about our Nevada properties.\nAnd in addition to the exploration spend in Nevada, we'll be investing in other $5 million in pre-development activities this year at Hollister to access the Hatter Graben.\nLet's go to Slide 16.\nAnd this shows our consolidated production guidance for 2021 through 2023.\nAnd at this point, nothing has changed in that guidance.\nSo, let's focus on where the slide shows our cost outlook.\nAnd you can see there that we've significantly lowered our silver cost outlook, primarily because of the byproduct credits and the lower treatment charges at Greens Creek that Lauren talked about.\nNow this new guidance, if you look at this, it adds about $3 an ounce to our expected margin.\nSo at current prices, we think we have about $10 an ounce of free cash flow generation just from the silver operations.\nThe other thing to point out is that with the consistency that we have at Greens Creek and Lucky Friday at full production, and the increasing grade that we see at Lucky Friday that our U.S. silver production's expected to reach about 15 million ounces by 2023.\nAnd this is double what we had in 2018.\nAnd if you look at Slide 17, I want to do this because this time is really like no other for silver.\nIf you think about it, the photographic demand decline, which was a governor on total demand over the last 20 years is now long over.\nIndustrial demand has been growing at a 2% growth rate for the last decade.\nAnd it's continuing to grow, and we think will be fueled even more by the same factors that are fueling copper, this energy transformation.\nIndustrial demand has generally been strong for the last 20 years and looks to be even stronger with the current fiscal and monetary policies.\nAnd then, finally, miners are challenged to substantially reverse a five-year annual decline in mined silver production.\nWe actually mined 110 million ounces less than the high of 2016.\nSo, getting back to where we were is going to be hard.\nNow it's just industrial demand continues to grow at the same rate as the last decade so that 2% growth rate.\nAnd we think this is going to understate it, because of the energy demand we're going to have.\nThe world's going to need 70 million more ounces of silver per year.\nNow this doesn't sound like much, because it's only 7% of the current market, until you realize that to meet that demand, even if no mines are exhausted, you need seven new mines a year that are the size of Greens Creek, which is the United States largest silver mine or you needed to produce about 150% more or you need Codelco who has a substantial byproduct of silver production to produce three times as much silver.\nAnd so our view is it's not likely that even combining all the different companies that are in the industry that are trying to grow their silver production that we're going to be able to produce silver that is equivalent to seven Greens Creek mines.\nBut if we do, they're going to be in riskier jurisdictions.\nAnd we believe that over the next decade, we are in a market that's well-positioned for a silver squeeze to happen.\nNow this is not the sort of silver squeeze the Reddit investors were thinking about, but it's a squeeze nonetheless, because it's just that demand has already risen faster than supply, and it's positioned to continue to do so.\nThe result of this squeeze and -- prices will rise and the shortfall is going to be met by above-ground stocks.\nAnd I'm struck, if you look at what happened in 2020, when ETF and coin demand rose dramatically, prices rose 50% over the roughly average silver price of 2018 and 2019.\nSo what do we think the high end and low silver price will be over the coming decade?\nLet's first give you the lows.\nWe think we'll have higher lows.\nWe don't think we'll have lows for any significant period of time to be below $18 to $20 an ounce.\nAnd for the highs, there's no reason, silver highs will not do what gold and copper have done.\nThey both either exceeded or have just come in just below their all-time highs.\nSo to see a $50 plus silver price is not unreasonable.\nSo one final thought on how you should think about silver.\nWhat it has become is the precious copper or the industrial gold.\nAnd the reason I say that is there's really no metal quite like silver.\nIt's needed an application similar to copper, but unlike copper, it's an investable metal with lots of investment options.\nYou have the above-ground stocks, you have ETFs, you have coins.\nAnd silver is like gold, but unlike gold, only about 20% of the demand for silver is an investment.\nAnd for gold, only about 10% is industrial demand.\nSo think of silver as precious copper or industrial gold.\nAnd, of course, Hecla is in a unique position as the largest silver producer in the U.S.\nWe produce a third of all the silver produced in the United States, and that production is growing.\nWe're the oldest silver mining company.\nAnd we have a history of outperforming silver and every other mining company when the silver prices went up, which obviously we think that's what's going to happen over the course of the coming decade.\n",
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"content": "qtrly diluted earnings per share $0.03.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Copies of all three are available on the Investors page of our website.\nWith us for Q&A, we have Matt Sharpe on Business Development and Distribution; Mark Desrochers on P&C, Tyson Sanders on Supplemental, and Mike Weckenbrock on Life and Retirement, with Ryan Greenier available on investments.\nActual results may differ materially due to a variety of factors, which are described in our news release and SEC filings.\nReconciliations of these measures to the most comparable GAAP measures are available in our news release.\nLast night, we reported second quarter core earnings of $1.02, our highest second quarter result ever.\nWe benefited from particularly strong investment income in our alternatives portfolio and lower than guided catastrophe losses.\nAs previously announced, this led us to raise our full-year core earnings per share guidance to a range of $3.50 to $3.70 with an expected return on equity above 10%.\nWe saw strong earnings growth in each segment in the second quarter and solid sales momentum in the retirement line.\nAnnuity contract deposits increased by double digits over the prior year.\nBret will go over the quarterly results in more detail later in the call.\nI want to focus on our progress toward our long-term objectives of a sustainable double-digit ROE and significant expansion in the education market.\nOver the past year and a half, through unprecedented disruption in all aspects of our day-to-day life, Horace Mann has continued to be successful.\nI attribute this success to two factors.\nFirst, our unwavering dedication to the deserving education market.\nWe know our customers, we know them well and we respond to the issues they face.\nSecond, our multiline model, we have the premium and earnings risk diversification that enables us to remain focused on our long-term objectives throughout occurrences of weather volatility, market volatility and mortality and morbidity trend changes.\nWhile the COVID-19 pandemic added an extra year to the transformational stage of our growth journey, it also gave us time to analyze and improve the ways we can fulfill our value proposition for the education market.\nExamples of the outcomes of this focus include an accelerated integration of NTA agents, initiating key improvements and infrastructure, and expansion of our student loan solutions program nationwide.\nIt also set the stage for the entry into the employer paid benefits market with the planned acquisition of Madison National Life Insurance Company.\nThis acquisition brings together two educator-centric companies with complementary strength in product distribution and infrastructure.\nHorace Mann's most established channel for serving educators has always been individual products sold through our agency force of local, trusted advisors.\nIn recent years, we invested in upgrading our section 125 benefits administration program, which enable school districts to offer voluntary worksite plans, benefits including our individual supplemental products are provided or introduced through the school district, but paid for by individual educators.\nIn some cases, educators can fund these purchases with pre-tax dollars.\nMadison national represents a new third way for us to serve educators.\nIn line with emerging workplace trends, school districts are increasingly adding and enhancing employee benefits to attract and retain educators for hard-to-fill positions.\nMadison National's employer paid and sponsor group products will enable us to provide educators with solutions like short and long-term disability, while helping school districts improve recruiting and retention efforts.\nDistricts generally work with independent benefit brokers to purchase Madison National's group products and educator staff are automatically enrolled.\nWith this addition, Horace Mann will now have complementary distribution capabilities in each of the ways the country's $6.5 million public K-12 educators receive insurance solutions, dramatically increasing our addressable market.\nIn terms of scope, Horace Mann has at least one educator household located in 75% of the roughly 12,000 K-12 school districts in our market footprint.\nWhen we bought NTA, we added approximately 120,000 educator households.\nWith the acquisition of Madison National, we gain a solid base in this growth segment as they serve 1200 districts that provide employer paid and sponsored products to about 350,000 educators.\nThere's some overlap between Horace Mann's presence and those of NTA and Madison National, but each of the transactions has clearly added to our market share and with the Madison National transaction, our total addressable market expands to include a portion of the $160 billion that school districts spend annually on employer paid benefits, a market sector that has grown more than 30% over the past five years.\nAs we look at ways in which Maddison National aligns with our business strategy from a product perspective, Madison National bring 60 years of experience designing and underwriting a portfolio of group products.\nThese products can offer educators peace of mind that their families will be able to respond to unexpected events without depleting their savings.\nFrom a distribution perspective, independent brokers are key in the complex public sector benefit space, where districts, particularly large ones rely on their assistance to design plans and offerings that are typically offered to every employee in the district.\nWorking with independent brokers is completely complementary to our established distribution through local trusted advisors.\nWe have already signed a long-term distribution agreement with National Insurance Services, an employee benefit brokerage subsidiary of Assured Partners that has been a key distribution partner for Madison National for nearly 40 years.\nIt will take effect concurrently with the acquisition, giving us immediate access to the employer paid and sponsored portion of the market.\nAfter the transaction closes, we will be complementing Madison National's current group offerings, which includes supplemental products with enhanced offerings.\nOur product development team has been leveraging and NTA's 50 plus years of success in supplemental market to accelerate filings for group products customized for educators such as cancer and hospitalization.\nThese will allow us to work with Madison National and NIS to provide a comprehensive group product suite.\nIn terms of infrastructure, Madison National brings an exceptional experienced team focused on delivering great educator customer experiences supported by modern and scalable infrastructure.\nThey're ready to add scale and we're the right partner to help them do so.\nIn 2022, we expect Madison national to add 50 basis points of ROE with upside potential in future years.\nWe remain focused on three additional drivers of higher ROE across the entire business.\nFirst, driving higher net investment income by increasing the allocation to alternative investments.\nWhile our alternative portfolio returns can be volatile, recent performance clearly illustrates the value this asset class brings.\nWe continue to realize savings from actions such as the full integration of the supplemental segment in 2020, as well as benefits from continued infrastructure improvements.\nThird, market share expansion through cross-sell and new sales through each of our distribution channels.\nWe bring the ability to combine the new virtual marketing approaches we tested and refined over the past year and a half with our traditional in-person activities.\nWe look to build on the sales momentum we established in the first half of the year and are seeing a lot of optimism in the agency force around scheduling meetings and events in their schools this fall.\nThe 2021, 2022 school year will certainly be more normal than the previous one.\nHowever, there is concern about new COVID-19 variants.\nWe believe most schools will avoid a return to a hybrid or remote environment, notably, nearly 90% of educators are vaccinated against COVID-19, a far higher rate than the general population.\nFurther, educators have overwhelmingly made the case that the best educational environment for students is in-person.\nAt Horace Mann, this past year and a half has provided us an ever growing list of reasons and reminders of why we do what we do.\nIt is an honor to serve the educators who have gone above and beyond to reach every student through the COVID-19 pandemic.\nTheir dedication and selflessness to our country's children continues to inspire us to do more and this year we will.\nAnd with that, I'll ask Brett to take you through the results.\nSecond quarter core earnings per share was $1.02, up 52% over last year and our third consecutive record quarter.\nSix-month core earnings per share was $2.12, more than halfway to the increased full year earnings per share guidance of $3.50 to $3.70.\nAs we said last quarter, our outlook has always presumed a gradual recovery from the effects of the COVID-19 pandemic on results and that's largely what we've seen so far this year.\nIn that context, we're encouraged by the signs of momentum we are seeing with the vaccine rollout and continued strong performance across the business.\nAs a result, on July 1, we brought guidance to a level that aligned with the strong second quarter net investment income returns in the lower than historical average level of second quarter catastrophe losses.\nAs I talk through the segments, I will address the changes we've made to align full year segment outlooks with the updated guidance.\nI'll finish up with a recap of how we continue to think about allocating capital to maximize value for our shareholders.\nWhen we raised earnings per share guidance, we also raised our expectation for 2021 core return on equity to greater than 10% for the year.\nCore return on equity for the second quarter was 11.7% and it was 12.1% for the 12 months up from 9% for the prior 12 months.\nAlthough the pandemic and other unusual factors continue to contribute to the improvement, our strategic initiatives are equally as important and we remain on track to our long-term target of a sustainable double-digit ROE.\nAnd as we look ahead, the Madison National transaction will be a strategic use of capital to accelerate our shareholder value creation.\nIn addition to the strong fit of Madison National, this is another business with predictable and stable underwriting profitability, as well as strong capital generation that serves to further diversify our business profile.\nIn 2020, Madison National had net premiums of approximately $108 million and statutory income of approximately $14 million.\nMadison National's premium have grown in the mid-single digits over the past five years with the trailing five-year loss ratio below 50%.\nThe transaction is expected to be accretive by mid-single digits to Horace Mann's earnings from the level we would anticipate for 2022, taking into account a normal cat load.\nWe'll see that benefit even though amortization of intangibles related to purchase accounting means that GAAP earnings will be somewhat lower than statutory income.\nThe transaction also will deliver about 50 points of ROE improvement in the first 12 months after closing.\nWe expect that contribution to grow over time as we leverage the new opportunities that Madison National and it's independent distribution bring to Horace Mann.\nTurning to segment results for the quarter.\nIn Property Casualty, core earnings for the quarter were up about $8 million or 70.8% due to the strong contribution from net investment income, which was driven by the returns in the alternatives portfolio.\nDue to a higher underlying loss ratio, underwriting income was down by about $6 million despite significantly lower catastrophe losses and an improved expense ratio that reflected our continued focus on expense optimization.\nPremiums for the quarter were $156 million with new business volume remaining below historical levels as we work through the impact of the pandemic on sales.\nAuto average premiums were down slightly in the quarter, while property average premiums are starting to rise.\nIn line with our July 1 announcement, cat losses for the quarter were $17.5 million, contributing 11.3 points to the combined ratio, significantly below last year and below what we anticipated when the year started.\nThe 17 events designated as cat in the second quarter were generally less severe and not as widespread as the 20 declared cat events in last year's second quarter.\nOur revised full-year 2021 guidance reflects our assumption that second half cat losses will be between $20 million and $25 million, which is unchanged from what we guided to at the beginning of the year and is in line with the 10-year average for second half cat losses.\nTurning to the underlying loss ratios, our experience in the second quarter and the first half aligns with overall industry trends.\nDriving is returning to more normal patterns while inflationary trends in labor and materials are driving costs higher across all businesses.\nLet's look first at auto where the loss ratio has been one of the most pandemic-impacted metrics for the entire P&C industry.\nEven as miles driven ramps back up, through the first six months of 2021, our underwriting discipline is key to why we are reporting an underlying auto loss ratio below the 70.6% we reported for full year 2019, however, because of the inflationary component of the increase in loss costs over 2020.\nWe are initiating appropriate rate filings in selected geographies to help keep us at our targeted loss ratio.\nWe're confident and our agents will remain competitive on the business they quote even as these filings begin to take effect.\nFor Property, not only is inflation a concern, but similar to others, we are seeing increased frequency of fire and non-weather water losses in our case with several larger claims from those causes.\nTo address, we're now planning to file for property rate increases in the mid-single digits in many geographies in the second half of the year, a bit above our original rate plan for this year.\nWe're also making sure the insured values of covered properties remain in line with data on the rising value of homes across the country.\nFinally, we released $4.2 million dollars in prior period reserves during the second quarter with approximately $3 million from 2019 in prior auto liability.\nWith our six-month combined ratio at 92.7%, we are still on track to achieve a full-year combined ratio in line with our longer-term target of 95% to 96%.\nOur updated guidance for 2021 core earnings of $66 million to $70 million reflects the strong contribution of net investment income in the first half.\nTurning to Supplemental, the segment contributed $31.6 million in premiums and $12 million dollars to core earnings.\nSupplemental continues to experience favorable trends in reserves and is still seeing the benefit of changes in policyholder behavior due to the pandemic.\nNet investment income on the Supplemental portfolio reflects the solid progress we are making in improving the Supplemental investment yield.\nSupplemental sales were $1.2 million in the second quarter, up from both this year's first quarter and the year ago period.\nAs we've said, the individual Supplemental products that we currently offer have traditionally been sold through a consultative enrollment model that has been among the most impacted by the worksite access limitations of the past year and a half.\nAs we prepare for a more normal back-to-school season, Horace Mann agents continue to sell our individual Supplemental products with steady sales metrics in more open geographies.\nPremium persistency remains above 90%, a testament to the value educators place on these coverages with about 282,000 policies in force.\nOur revised outlook for Supplemental's 2021 core earnings of $41 to $43 million reflects a higher contribution from net investment income.\nWe are also seeing the return to historical policyholder claims behavior occur more slowly than we had anticipated in this business.\nWe now expect a full year 2021 pre-tax profit margin better than our longer-term target of mid 20%.\nIn the Life segment.\nJune was the highest month for Life sales since the pandemic began.\nAnnualized sales for the second quarter were ahead of first quarter with retention steady.\nWe also saw an increase in single premium Life sales.\nThese sales tend to be lumpy, but they are a reflection of improving access as these are more consultative sales, typically requiring multiple contacts with the customer.\nCore earnings more than doubled from last year to $5 million as mortality costs returned to within actuarial expectations, total benefits and expenses returned to targeted levels and net investment income rose 26.9% Nevertheless, because of the higher mortality costs in the first quarter, we've modestly lowered our outlook for full year 2021 Life segment core earnings to the range of $14 million to $16 million.\nFor the Retirement segment, second quarter core earnings ex-DAC unlocking were up 88.3% reflecting the strong net interest margin.\nDAC unlocking was favorable by about $200,000 compared with $3.7 million in last year's second quarter.\nThe net interest spread improved 79 basis points over last year's second quarter to 265 bps in part due to strong returns on the alternatives portfolio.\nThis is above our threshold to achieve a double-digit ROE in this business.\nOur solutions for augmenting retirement savings remain a core need for educators.\nAnnuity contract deposits were ahead of last year's second quarter by 15.6% with the June beating out March, the previous record as the highest month for deposit for several years.\nOur educator customers continue to see annuities as an important way to achieve their financial objectives and these products are complemented by our suite of fee-based products.\nBased on the strong results through the first half, we increased our full-year 2021 outlook for Retirement core earnings ex-DAC unlocking to the range of $43 to $45 million.\nTurning to investments, total net investment income on the managed portfolio was up almost 50% to $84.1 million with total net investment income up 35.8%.\nThe increase in NII, on the managed portfolio, was largely because our alternatives portfolio generated outsized returns in the second quarter.\nAs we've said, driving higher investment income through increasing our allocations to the alternative investments portfolio will be a strategic driver of a sustained double-digit return on equity.\nYear-to-date, private equity returns have been quite strong given the relative strength of the equity markets and the active IPO window.\nAs a result, second quarter alternative results were significantly above expectations.\nIn addition to the private equity returns, our other alternative strategies, such as private credit, infrastructure and commercial mortgage loan funds posted solid performance in the quarter.\nWe expect to reach our targeted 15% allocation to alternative investments within the next two years and expect this diversified portfolio to generate high single-digit annual returns on average over time.\nThe fixed income portfolio had a yield of 4.3% in the second quarter compared with 4.39% a year ago.\nSecond quarter purchase activity was largely opportunistic and focused on BBB corporate and high yield securities with attractive relative yields.\nThe core new money rate was 3.35% in the second quarter and based on current market conditions, we continue to anticipate a core new money rate of about 3% for the year.\nOur updated guidance reflects the higher assumption for total net investment income of $385 million to $405 million including approximately $100 million of accreted investment income on the deposit asset on reinsurance.\nThis expectation for investment income is captured in the segment by segment outlook I've summarized and in our core earnings per share guidance range of $3.50 to $3.70.\nIn closing, we are very pleased with our business progress through the first half of 2021 and excited about the potential of this year's back to school, as well as the progress we anticipate in 2022 and beyond.\nAs we stated last quarter, our top priority for the use of excess capital remains growing our business at returns that meet or exceed our ROE targets.\nThe acquisition of Madison National is an ideal use of capital to accelerate our path for sustained double-digit ROE.\nFurther, after the transaction, Horace Mann should generate more than $50 million in excess capital annually, assuming normalized property and casualty results.\nWe're committed to prudently using that capital to create additional value for shareholders.\nBeyond growth initiatives, our capital generation provides scope for repurchase, as well as maintaining our track record of annual increases in our cash dividend, which is currently generating yield slightly above 3%.\n",
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"content": "compname reports second-quarter 2021 net income of $1.11 per share and record core earnings* of $1.02 per share.\nreaffirming updated 2021 core earnings per share guidance of $3.50 to $3.70, with roe above 10%.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: My name is Matt McCall, I'm Vice President, Investor Relations and Corporate Development for HNI Corporation.\nActual results could differ materially.\nOur members delivered strong first quarter operating results, and we will come back to that in a moment.\nI want to start with an update on the ongoing COVID-19 pandemic.\nWhat we are experiencing, what we are assuming, and how we are currently responding.\nUpfront, the two most important points I would like to emphasize are; first, we will prioritize the health and well-being of all HNI members during this pandemic.\nAnd second, we will successfully navigate this pandemic.\nWith respect to my first point, the HNI culture again is rising to the occasion.\nOur members are coming together to support our communities and doing what is necessary to move the business forward.\nTo help protect our teams, we have aggressively implemented measures consistent with CDC guidelines across our organization.\nWe have reorganized our production facilities to provide appropriate social distancing.\nWe have increased the frequency and depth of facility cleaning.\nAll members able to work remotely are currently doing so.\nWith these measures in place, we are currently operating in our major facilities.\nAdditionally, we are utilizing our facilities in Iowa, New York and North Carolina to produce personal protective equipment.\nThese efforts include the manufacture of washable cloth face masks, face mask coverings and protective gowns for used by healthcare professionals and the public in general.\nWe are donating these critical supplies to our first responders, healthcare systems and hospitals in our communities.\nLet's talk about my second point, how we will successfully navigate this pandemic.\nWe have a strong balance sheet and have liquidity and cash flow to maintain our business and meet our obligations for a prolonged period.\nWith the sudden global economic shock -- while the sudden global economic shock has been felt across the majority of our businesses and geographies, we are responding accordingly and our teams are focused on three objectives.\nNumber one, we are adjusting to the current operating environment and staying vigilant in our short-term scenario planning.\nNumber two, we are maintaining our long-term strategic focus.\nAnd number three, we are focused on emerging from this period with our business poised to hit the ground running.\nLet me detail some of the actions we have taken to date to reduce cost and support our free cash flow.\nFirst, we temporarily reduced salaries across the board.\nBase salaries were reduced by 10% for all exempt salaried employees and by 15% for all executives.\nMy salary was reduced by 25%.\nWe plan to reevaluate these measures in six months.\nSecond, our board of directors elected to reduce by 25% both their cap retainers for the next six months and their annual equity award.\nThird, to better match staffing levels with demand activity, various groups and/or members have been furloughed.\nWe are supporting our furloughed members by covering all health and dental insurance premiums during the furloughed period, both the company and member portions.\nThese furloughs are being continuously reevaluated as conditions evolve.\nFourth, we suspended our share repurchase activity.\nAs a point of reference, in recent years, buybacks have averaged approximately $55 million annually.\nFinally, we reduced our capital expenditure budget for 2020 from approximately $65 million to $35 million.\nOur planned growth investment spending for 2020 is being maintained at a reduced level of approximately 50%.\nIn total, we currently anticipate $60 million to $65 million of cost improvement during 2020 as compared to 2019 with the full run rate expected by mid-Q2.\nIn addition, from a cash flow perspective, savings associated with our buyback suspension and our capex reductions will add to our liquidity buffer.\nAgain, these measures are part of our balanced approach to address the impact of the pandemic and are aimed at supporting our members and our free cash flow in 2020 as we navigate through these unchartered waters.\nI will now share some thoughts on the business and demand picture, what we are experiencing and currently assuming.\nWhile the extent of the pressure from the crisis is still uncertain, we believe several data points indicate we will see near-term slowdown in our businesses.\nThe first data point is our recent order activity.\nNot surprisingly, our orders over the last four weeks are trending down.\nDomestic office furniture orders are down 35% versus prior year period.\nThat rate does not include e-commerce, which continues to show strong growth.\nIn fact, our e-commerce orders are up 120% versus the prior year levels, in large part due to a huge spike in demand for home office products.\nOrders for our Hearth business during the same period are down 20%.\nThe second data point to consider is our experience in China.\nOur Furniture business in China faced pressure from the pandemic in Q1.\nAlthough China is a very different market compared to the U.S., our experience there may provide insight into the trend we could see domestically.\nDemand dropped quickly as measures to counteract the pandemic were implemented.\nApproximately eight weeks later, we started to see volume trends recover as businesses began to reopen.\nWhile we are still well below normal levels, the trend has improved.\nThe third data point to look at is what happened to our markets in previous recessions.\nWe are not saying the current downturn will play out the same way, as this one is certainly unique, but looking at history gives more data points to consider.\nIn each of the last two downturns, the commercial furniture industry volume declined a little over 30%.\nBuilding products and housing were hit hard in the last recession.\nWe are not expecting that level of severity this time.\nCompared to the great recession, construction levels are lower, inventories are tighter and there is not an overhang of homes held by speculative buyers and subprime borrowers.\nBased on these data points, we anticipate and we are seeing a significant near-term slowdown in our businesses.\nRight now, we do not have good visibility on the depth and duration of the decline.\nWe have run and are prepared for a variety of scenarios.\nDespite these near-term pressures, we see the potential for the post-crisis environment to positively impact our business segments in a couple of different ways.\nIn our Furniture segment, in addition to incremental demand tied to work from home trends, office floor plates will most likely see change to accommodate less dense configurations that better support social distancing.\nIn fact, in the last few weeks, we have already seen companies reconsider their plant layouts.\nIn addition, our architectural products platform is also well positioned for this trend.\nThe diverse product line-up can quickly create physical separation with minimal construction time, while maintaining natural light.\nIn our Hearth Products segment, we may see increasing benefit from a shift away from dense multifamily construction toward more single-family homes.\nThis will be a positive demand driver for our Hearth Products segment.\nIn addition, we believe the extended period of shelter in place could drive elevated remodel spending as consumers look to spend more money where they are spending more time.\nI will then come back and highlight the key elements of our long-term strategic framework.\nOur members delivered a strong first quarter.\nConsolidated non-GAAP net income per diluted share was $0.21, which represented a substantial increase versus the $0.02 reported in the first quarter of 2019.\nFirst quarter consolidated organic sales decreased 2.5% versus the prior year to $469 million.\nIncluding the benefit of acquisitions, sales were down 2.2%.\nIn the Office Furniture segment, first quarter sales decreased 4.3% year-over-year.\nWe again generated strong profit growth in Office Furniture with first quarter non-GAAP operating income improving $4 million.\nSales in our Hearth Product segment increased 2.6% year-over-year organically or 3.5% when including acquisitions.\nWithin the Hearth segment, new residential construction revenue grew 3.2% organically and sales of remodel and retrofit products increased 1.9% year-over-year.\nWe also showed strong profit improvement in the Hearth segment.\nHearth non-GAAP operating profit increased 17% versus the prior year quarter.\nFor HNI overall, first quarter gross profit margin expanded 220 basis points year-over-year to 37.6%.\nNon-GAAP operating profit grew 279% versus the prior year.\nAnd non-GAAP operating margin in the first quarter expanded 220 basis points to 3% of net sales.\nOur non-GAAP results exclude $37.7 million of charges related to intangible impairments and one-time items related to the COVID-19 crisis.\nSo overall, our first quarter results demonstrate the strength of our operating platform.\nOur annual productivity and cost saving efforts again drove improved profitability.\nLet's now talk about our liquidity and debt levels.\nAt the end of the first quarter, we had $230 million in total debt, representing a gross leverage ratio of 1.0.\nThis is well below the 3.5 times gross leverage covenant in our existing loan agreements.\nOur first debt maturity is not until 2023.\nLiquidity, as measured by the combination of cash and available capacity on our lending facilities, totaled more than $350 million at quarter end.\nThis is equal to approximately two years of recent free cash flow levels.\nLet's shift to covering some of the scenario analysis we've done.\nLet's start with emphasizing that we are not providing sales and earnings guidance.\nThat said, we have evaluated our earnings, cash flow and balance sheet under various scenarios.\nThe scenarios indicate the following.\nFirst, we would be able to manage to a 25% deleverage or decremental margin with our cost actions.\nSecond, we would generate free cash flow at or above our current dividend level.\nThird, year end debt levels would be similar or slightly above last year's ending balance.\nAnd finally, we would remain well within our debt covenants.\nThey also indicate we should expect a sizable earnings loss in the second quarter.\nIn our scenarios, we do remain solidly profitable on a non-GAAP basis for the year, and we'll manage cost accordingly.\nIn addition to these scenarios, we thought we'd share the results of our stress test where we model the limits of our current capital structure.\nWhat it showed is we can support nearly $270 million in debt with zero cash earnings.\nThis is due in part to the $77 million in annual depreciation and amortization we incur.\nPlease note, the stress test is not an outlook or scenario.\nWe are not providing color around what circumstances might drive us to this condition.\nIt has been solely to illustrate the financial flexibility of our business model.\nIn my letter to shareholders recently published in the HNI annual report, I introduced our three strategic priorities.\nWhile HNI's unique member-owner culture remains our foundation, our corporatewide focus and members efforts going forward are centered on the following three pillars.\nFirst, we will be laser-focused on the customer.\nCustomer journeys in our markets are changing and the impacts of the pandemic will create more change.\nTo capitalize on these changes and identify and take advantage of the new market dynamics, we are investing in new tools and capabilities in the areas of data analytics, digital assets, branding, e-commerce and expanded market coverage.\nSecond, we are simplifying the buying process.\nBuying Office Furniture and Hearth Products can be complicated and time consuming.\nThere are large numbers of options and configurations to sort through, complicated installations to coordinate and tight timelines to manage.\nAnd navigating the process can take multiple in-person interactions.\nCustomers today are less willing to go through that kind of process and they are upping their expectations.\nWe are focused on transforming the experience to reduce their effort.\nThird, we will leverage our lean heritage.\nHNI's long-standing and well established culture of rapid continuous improvement and our recent results demonstrate our capability to leverage that lean heritage.\nWe are doubling our efforts here in order to unlock our tool set in support of our first two pillars that I just referenced.\nAgain, while our near-term focus is on our members' health, safety and our overall cash flow, our strategic framework will help drive significant improvements over the long-term.\nLater this year, as the pandemic-driven economy, economic uncertainty moderates, we plan to rollout a more detailed version of our framework.\n",
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"content": "q1 non-gaap earnings per share $0.21.\nq1 sales fell 2.2 percent to $468.7 million.\ngaap operating profit was impacted by intangible impairments and one-time charges related to covid-19 crisis of $37.7 million in quarter.\nbase salaries for salaried exempt members were reduced by 10 percent; executive salaries were reduced by 15 percent.\nceo jeff lorenger's salary was reduced by 25 percent.\nmembers have been furloughed.\nreduced its capital expenditure budget for 2020 from approximately $65 million to $35 million.\nboard of directors reduced its cash and equity retainers by 25 percent.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: My name is Matt McCall.\nI'm Vice President, Investor Relations and Corporate Development, for HNI Corporation.\nActual results could differ materially.\nLet me start by saying our members did a great job of managing through challenging second quarter conditions.\nWe aggressively managed costs and drove productivity, offsetting much of the impact from lower volumes.\nWe kept our focus on our customers and also played offense, generating and seizing market opportunities where we could.\nMoreover, through this experience, we have developed new and better ways to operate our businesses that will benefit us in the future.\nWe delivered solid profitability in the second quarter.\nOur cost containment efforts, combined with the top line benefits from our diversified revenue streams, the breadth of our price points, our channel reach and our ability to quickly pivot, all contributed to the better-than-expected results.\nWhile we told you in the first quarter call that we expected a loss in the second quarter, the combination of these items helped us deliver a quarterly profit.\nMoreover, given our solid results in the second quarter, our year-to-date earnings per share is actually up slightly versus the first half of 2019.\nThis is a great accomplishment given the many headwinds we are facing and it demonstrates, again, what is unique about HNI.\nLast quarter, we told you we had two priorities when it comes to our pandemic response.\nFirst is the health and well-being of all HNI members.\nSecond is the success is to successfully navigate the pandemic in the short term by supporting cash flow and maintaining our strong balance sheet, while remaining focused on our long-term strategies.\nSo far, we have successfully navigated both priorities.\nWe quickly adjusted our facilities and were able to operate safely and effectively to serve our customers.\nIn addition, as we began returning to our offices, we implemented multiple safety measures to ensure a safe process for all members.\nOur members' safety remains paramount.\nWe also further strengthened our balance sheet.\nWe generated free cash flow in excess of prior year levels and significantly lowered our already modest debt level.\nWe have the financial strength and cost structure to successfully weather this crisis and any aftershocks for a prolonged period.\nOur financial strength and demonstrated ability to flex costs, we are making two changes.\nFirst, we are restoring salaries to their pre-pandemic levels, 60 to 90 days earlier than initially anticipated.\nIf you recall, we implemented temporary salary reductions as part of our balanced approach to the pandemic.\nOur members overdelivered on multiple fronts in the second quarter.\nI'm grateful for their efforts and happy that we are able to restore salary levels about a quarter earlier than originally anticipated.\nSecond, we are accelerating our investment levels.\nI would like to note that these actions are a direct result of our financial position and the efforts of our members.\nThat notwithstanding, we see opportunities and are using our strong financial position to invest.\nI will now share some thoughts on the demand picture across our businesses; what we experienced in Q2, what we are experiencing currently and how we view the future.\nFirst, our Q2 year-over-year order activity.\nHere is what we have been seeing recently.\nOrders in domestic Workplace Furnishings, excluding our e-commerce business, were down 36% in Q2.\nOver the past five weeks, they are down 33%.\nWe are generally seeing a seasonal uptick in orders, but our year-over-year declines have remained relatively constant and are in line with what we have experienced in previous recessions.\nE-commerce orders were up 114% in Q2 and up 87% over the past five weeks.\nWe are confident this business will still deliver strong growth both in the near and long term.\nResidential Building Products orders were up 2% in Q2, and we continue to see positive growth rates over the past five weeks.\nWe believe the secular trends discussed last quarter, which I will detail again in a moment, are providing consistent tailwinds.\nWe are keeping an eye on land and labor shortages for builders, which could slow down production.\nHowever, indications are encouraging thus far.\nAgain, [Technical Issues] revenue streams, price point breadth and channel reach are unique to HNI.\nAnd our recent growth rates reflect these benefits.\nNext, as we discussed last quarter, we are seeing several positive trends that should provide near-term and post-pandemic revenue support.\nIn our Workplace Furnishings segment, we see the potential for multiple supportive secular trends.\nFirst, increased office floor plate resets as organizations work to adjust to the new social distancing environment; second, increased demand for our architectural products platform, which can quickly create physical separation with minimal construction time while maintaining natural life; and third, more demand tied to work from home and from increased smaller satellite office locations.\nHNI is uniquely positioned to benefit from these trends given the value orientation of many of our brands.\nGenerally, these trends will take some time to gain momentum.\nMost of them will require a broader and more meaningful return to the office than we are currently seeing.\nCustomers are generally assessing their options right now and are still in a mode of figuring out next steps.\nThese trends won't be enough to offset near-term cyclical pressure, especially with the new growth in COVID cases nationally.\nHowever, HNI is particularly well positioned to take advantage of these secular opportunities as they develop.\nIn our Residential Building Products segment, the positive order trends reflect our strong competitive position in the market and specifically with large national builders.\nIn addition, trends tied to de-urbanization, elevated nesting and work-from-home trends, record low mortgage rates and low housing inventory, all support positive demand patterns and should provide cyclical and secular support going forward.\nWe are excited about the cyclical strength, secular opportunities and company-specific initiatives within our Residential Building Products segment.\nI will then come back and give some concluding thoughts.\nConsolidated non-GAAP net income per diluted share was $0.20.\nThat was down from the $0.38 we reported in the second quarter of 2019.\nSecond quarter consolidated organic sales decreased 21.2% versus the prior year.\nIncluding the benefit of acquisitions, sales were down 20.6%.\nConsolidated non-GAAP operating income declined $9.4 million versus prior year on a sales decline of $109 million, which means our deleverage rates or decremental margin was 8.6%.\nThat's well below our targeted range of 25%, which includes the benefits of cost actions.\nGiven the circumstances, our members did a great job of limiting the impact of declining volume.\nIn the Workplace Furnishings segment, first quarter sales decreased 24.8% year-over-year.\nDespite the top line pressure, we were able to generate $7.8 million of non-GAAP operating income in the segment.\nWhile that is down from the $19.7 million in the prior year quarter, the decremental margin was only 11%.\nSales in our Residential Building Products segment decreased 8.6% year-over-year organically and 6.1% when including acquisitions.\nWithin the segment, new residential construction revenue declined 5% organically, and sales of remodel and retrofit products were down 15% year-over-year.\nDespite the year-over-year sales pressure in Q2, we delivered higher operating profit and expanded operating margin versus the prior year.\nOperating profit totaled $14.4 million compared to $13.4 million in the prior year period, and operating margin was 13.1%, up from 11.5% in the second quarter of 2019.\nFor HNI, overall, second quarter gross profit margin was 36.1%.\nThis is down 50 basis points year-over-year, primarily due to volume.\nOur second quarter non-GAAP tax rate was 32.5%.\nThis was abnormally high, driven by changes to our full year earnings outlook.\nWe expect the tax rate to return to more normalized levels moving forward.\nI should note that the only difference between second quarter GAAP and non-GAAP earnings per share was tax.\nNon-GAAP earnings per share excludes the tax impact from onetime charges that we recorded in the first quarter of 2020.\nSo overall, our second quarter results again demonstrated the strength of our operating platform.\nLet's shift and now talk about our liquidity and debt levels.\nAt the end of the second quarter, we had $183 million in total debt, which was down $47 million from the first quarter and was $103 million lower than the prior year quarter.\nOur gross leverage or gross debt-to-EBITDA ratio was 0.8.\nThis remains well below the 3.5 times gross leverage covenant in our existing loan agreements.\nFrom a net debt perspective, our leverage ratio of 0.7 is down from 0.8 last quarter and 1.2 in Q2 of last year.\nOur teams have done a nice job of managing the balance sheet and generating cash flow.\nFree cash flow for the second quarter was $54 million, more than double the $23 million we generated in the second quarter of 2019.\nGiven our low leverage ratio, free cash flow levels and ability to quickly adapt our cost structure, we expect to maintain our strong financial flexibility in a variety of scenarios.\nThis means we will remain well within our debt covenants.\nWe expect to reduce year-end net debt below last year's level, and we project free cash flow will be significantly above our $52 million dividend.\nSo as we look forward to the rest of the year, the pandemic has limited our visibility and our ability to provide sales and earning guidance.\nHowever, we will share a few thoughts on what we expect.\nFirst, as I just covered, we do feel confident in our ability to generate strong free cash flow and maintain our strong balance sheet under a variety of scenarios.\nSecond, we expect third quarter sales and profit to track ahead of second quarter 2020 levels, primarily due to seasonality.\nThird, we continue to believe 25% is the appropriate deleverage or decremental margin estimate over time.\nThat's higher than what we just achieved in the second quarter.\nWe're expecting the impact of salary restorations, investment acceleration and less favorable business mix to pressure decrementals in the second half.\nAs a result, we expect decrementals to be in the range of 20% for the full year 2020.\nIn the quarters leading up to the pandemic, investments made in recent years were delivering returns.\nYou can see evidence in our recent revenue, margin and cash flow trends.\nThen this past quarter demonstrated more of what is great about HNI.\nNot only were we able to quickly adjust our cost structure to support cash flow on our balance sheet as our Q2 results indicate but we also took additional actions during the pandemic that will be additive to our pre-COVID strategic momentum and support our profitable growth strategic framework.\nOur members remain optimistic, nimble and thoughtful, and our pandemic-driven successes will help our businesses going forward.\n",
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"content": "q2 non-gaap earnings per share $0.20.\ncompensation for hni members & board are being restored to levels existing prior to reductions announced on april 22.\nseeing seasonal uptick in sales, expect q3 sales and profit to track ahead of q2 2020 levels.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: I'm Vice President, Investor Relations and Corporate Development for HNI Corporation.\nActual results could differ materially.\nOur members delivered another solid quarter in an environment that remains challenging.\nAnd again, our results demonstrate much of what is unique about HNI.\nAs we look ahead, we are prepared to confront the near-term macro challenges and we also see opportunity and signs that our strategies are gaining momentum.\nYou will notice some changes to our normal quarterly earnings report and call format.\nSpecifically, we have included more detail around our third quarter results and fourth quarter expectations in the release.\nThis allows us to focus our call commentary on the key highlights of the quarter, the key issues and opportunities going forward, and our strategic efforts aimed at pursuing long-term revenue growth, margin expansion, and free cash flow generation.\nNow, I will start with four key highlights from the third quarter.\nFirst, our Residential Building Products segment delivered strong year-over-year growth.\nWe generated 9% year-over-year revenue growth in the third quarter or 8% excluding the impact of acquisitions.\nThis is a substantial improvement from the second quarter 6% year-over-year revenue decline.\nOur third quarter order patterns indicate these positive volume trends should continue.\nOrders increased 13% year-over-year and consistent with most new home construction and remodeling indicators, order growth remains strong throughout the quarter.\nOur unique model in this business continues to provide a competitive advantage.\nOur focus on operational excellence, our vertically integrated structure, and our investment in regional distribution centers have allowed us to take advantage of accelerating demand.\nWe 're competing better than ever in this space and we continue to drive strong financial returns with third quarter operating margins expanding 270 basis points year-over-year to a third quarter record of 19.6%.\nThe second highlight of the third quarter was our Workplace Furnishings segment delivered solid profitability despite continued recessionary pressure.\nIn general, customers remain in a holding pattern and third quarter revenue was down 27% year-over-year.\nHowever, the segment still was able to generate a profit of nearly $17 million in the quarter.\nWe are seeing some signs that demand activity is becoming less bad in this segment.\nOrders in Workplace Furnishings excluding eCommerce declined 25% year-over-year in the third quarter.\nThis was an improvement from the 35% order decline in the second quarter.\nFurthermore, order declines moderated as the quarter progressed.\nThis trend is encouraging, but we are not expecting a dramatic improvement over the next couple of quarters.\nOrders in our Workplace Furnishings eCommerce business increased 35% year-over-year in the third quarter.\nThat is strong growth, but it is lower than the triple-digit order increase we generated last quarter.\nMuch of the moderation in order rates was expected as was the result -- and was a result of tougher comps and supply constraints.\nWe did see September orders reaccelerate and this improvement is a result of a continued strong demand environment combined with our improving inventory positions.\nOur third highlight for the quarter was we continued to smartly manage our costs and expenses.\nWe reported a decremental margin of 19% in the third quarter.\nThis is better than our previously communicated target of 25%.\nAlso recall, we were up against a strong prior-year comp in the third quarter as our productivity efforts and cost management drove a 50% incremental margin in the third quarter of 2019.\nWe continue to manage through the near-term recessionary environment in the Workplace Furnishings segment while remaining focused on our long-term strategies.\nFinally, our fourth quarter -- our fourth highlight of the quarter was continued strong free cash flow generation.\nOur balance sheet strength and cash flow outlook provide ample flexibility to navigate through the period of softness in Workplace Furnishings while maintaining our key growth investments in both segments.\nLet's turn to the outlook for our Workplace Furnishings first.\nIn the Workplace Furnishings segment, we expect fourth quarter year-over-year revenue declines to be in the mid-teens.\nThat's better than what we've seen over the last two quarters and is based on three factors.\nFirst as Jeff mentioned, we have seen year-over-year order declines trend less bad.\nSecond, we are expecting more growth from our eCommerce business given the continued demand strength along with our improving supply position.\nAnd third, our fiscal calendar has an extra week this year, which we expect will add 4 percentage points to 7 percentage points of growth to the quarter.\nI should note it also adds cost.\nSo this growth delivers lower incremental margins compared to true organic growth.\nShifting to our fourth quarter outlook for Residential Building Products.\nRecent order trends, housing construction activity, and the extra week support fourth quarter year-over-year growth rates in the mid-to-high-teens.\nMoving on to profitability, we would also like to emphasize what we are expecting for decremental margin.\nFor the full year, we expect decrementals to be less than 20%.\nThis implies meaningfully higher decremental margins in the fourth quarter, primarily driven by unfavorable business mix, accelerating investment levels, and the impact of the extra week.\nWe continue to target decremental margins of 25% over time.\nFinally, I'd like to make some comments on our cash flow and balance sheet.\nSince the early days of the pandemic, our teams have focused on driving free cash flow.\nAs a result, our free cash flow through the first three quarters is tracking 70% ahead of prior prior year levels despite lower profitability.\nWe ended the quarter with $109 million of cash in the balance sheet.\nThat balance has more than quadrupled the balance from the end of last quarter.\nWe've reduced our net debt by 65% or nearly $123 million and our gross leverage ratio is 0.9, well below our debt covenant of 3.5.\nSo we have substantial financial flexibility and a high-quality balance sheet and we're not expecting any meaningful capital structure stress.\nThe past six months have demonstrated how much of what is exceptional about HNI and I believe this experience has helped HNI become a stronger company in many respects, which will serve us well as we move forward.\nAs I look to 2021 and beyond, I would like to call out a few items.\nFirst, we remain excited about the prospects for our Residential Building Products segment.\nOur unique vertically integrated model with more than 20% of revenue coming from our owned [Phonetic] installing distributors along with our recent success in managing through the spike in demand surrounding the pandemic puts us in a strong position as we move into 2021.\nWe have ramped our investments in this business to better market directly to homebuyers and consumers in both the new construction and remodel retrofit markets.\nOur belief is that increased marketing in what has long been an under-marketed industry will provide revenue upside that may not be fully appreciated.\nThis will add to what is already a strong cyclical backdrop as indicated by low housing inventory and increased household formation and we will also benefit from encouraging secular trends such as urban flight, larger home sizes, and increases in home ownership.\nIn summary, we believe the revenue growth opportunity in this segment is strong and we will continue to invest aggressively to grow this addressable market and the categories in which we compete.\nSecond, while we remain cautious near-term, we expect Workplace Furnishings revenue to continue to recover as we move to a more supportive environment.\nLooking ahead to 2021, we expect a challenging first quarter as we lap pre-COVID conditions.\nHowever, moving through the year, we expect more companies to return to offices.\nWhile those return dynamics will likely take many forms, each will support improved demand.\nLonger-term, we see positive trends emerging that line up nicely with our competitive strengths.\nSpecifically, we are particularly well positioned to benefit from increasing work from home demand.\nOur unmatched price point breadth, our product depth and our distribution capabilities put us in a strong position to benefit from elevated work from home activity.\nA recent example of our efforts in the home office space is a win with a large enterprise client.\nTheir employees which number in the tens of thousands will be able to choose home office furniture from a preset selection of our products.\nThere are many more opportunities like this in the pipeline.\nWe are also uniquely positioned to benefit from trends tied to de-urbanization or urban flight.\nThis trend should lead to more satellite offices away from city centers and in smaller markets.\nThese are markets that play to the strength of our go-to-market models and where we have strong competitive positions.\nNext, we believe densification of office space, which was a headwind for this segment for years, will stabilize, if not reverse, in a post-COVID world.\nFinally, we believe office space layouts will change.\nWhile the exact layout of the office of tomorrow remains up for debate, it will not look like the office of yesterday.\nChange is good for our Workplace Furnishings businesses.\nThird, our cash flow outlook is encouraging and our balance sheet will remain strong.\nMarshall discussed our cash flow and balance sheet outlook.\nAs we look toward 2021, our targeted uses of cash continue to be ongoing dividend support.\nWe have not cut our dividend in over 65 years of paying it.\nInvestment in growth opportunities in M&A in both Workplace Furnishings and Residential Building Products and finally opportunistic share buyback.\nIn conclusion, I'm extremely proud of all of our HNIs members and of the company's collective focus and ability to adapt over the last six months.\n2020 has presented and continues to present challenges that were unforeseen just a few short months ago.\nHowever, as we emerge from this period, we will do so a stronger company well positioned to grow revenue, expand margins, and generate cash flow.\n",
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"content": "recent order trends suggest yoy workplace furnishing revenue declines will moderate slightly in q4.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Click the earnings materials box in the center of the page.\nJochen, let's get started.\nAs we look to 2021, it remains important to remember the unprecedented year that was 2020.\nI am however very pleased with the pace of recovery we've seen across our business and strong numbers reflecting the implementation of our new strategy as demonstrated by the positive financial results this quarter.\nWe continue to manage through the impacts of COVID-19 with the extraordinary efforts of our global team, keeping employee safety and community well-being at the forefront.\nWe've overcome global shipping and supply chain challenges, adeptly managing the effects of disruption, ensuring that we were able to continue building and delivering the world's most iconic motorcycles.\nAs you can see today, the actions we've taken to reshape the business through The Rewire leading into the early months of our Hardwire execution are already having a positive impact on our results in particular in the most important North American region.\nWe can see the initial signs of consumer excitement and optimism returning, even if parts of the world are still lagging due to continued COVID related lockdowns and delayed vaccination efforts.\nAs we start to execute our five-year strategic plan, The Hardwire, I'm confident Harley-Davidson in 2021 is a significantly leaner, faster and more efficient organization and will continue improving and delivering in line with our H-D Number One culture.\nI will talk more about stage one of The Hardwire later, but before I hand over to Gina, I'd like to address the announcement we made yesterday regarding the amended tariff ruling by the EU.\nThe decision taken by the EU is unprecedented, unfair and is a deliberate attempt to create a competitive disadvantage against our European competitors.\nWe are committed to fighting it and have launched an immediate legal challenge in Europe as we firmly believe that the original ruling on our BOI remains correct and should therefore be overturned.\nEvery big bike we sell in America comes straight from the hands of our hard working men and women of Wisconsin and Pennsylvania.\nIt bears repeating, if not for the tariffs, which are now threatening our recovering export potential, we could be investing in jobs at our American facilities, leading the world in electric innovation, research, engineering, design and advanced manufacturing.\nInstead, we are facing huge tariffs in trade war -- in a trade war not of our making.\nSo as you saw from the numbers, we delivered a very strong quarter and I'll hand it over to Gina for more details.\nAs Jochen mentioned, we had a good start to our fiscal year with first quarter results reflecting stronger demand and an improved economic outlook.\nOperating income of $346 million was well ahead of last year with growth coming from both our reported segments.\nThe Motorcycles and Related Products segment delivered $228 million which is $143 million better than last year, driven by units, a stronger product mix with growth in our Touring and Cruiser families and lower operating expense versus a year ago.\nThe Financial Services segment delivered $119 million of operating income, $96 million better than last year due to lower actual losses and a lower loss provision.\nWe delivered earnings per share of $1.68 with no significant restructuring charges taken within the quarter.\nInternationally, the impact of COVID was felt more deeply as many key countries remained under stay at home protocols and shipping networks were severely strained by COVID related challenges.\nThe TAM declines were driven by a 30% net reduction in the number of dealers and price increases taken across the portfolio as we work to restore profitability within those markets.\nAcross the dealer network, worldwide retail inventory of new motorcycles was down 48% versus a year ago behind our strategic shift on supply and inventory management.\nInventories were up 60% over Q4 as we work to build back inventory ahead of riding season.\nIt's important to remember that our strategic shift and inventory management will result in 2021 Q1 through Q3 inventories being lower than our historical averages.\nThis shift is continuing to improve profitability and strengthen pricing dynamics with Q1 motorcycle transaction pricing in the United States up materially across all families, most of which are at or near MSRP.\nLooking at revenue, total motorcycle segment revenue was up 12% in Q1, 3 points of this growth came from volume on motorcycle units and parts and accessories as we benefited from the retiming of the new model year launch and the lapping of the 2020 COVID shutdowns.\nOne point of growth came from pricing and incentives as we eliminated the corporate discounts and incentives as part of The Hardwire strategy to rebuild the desirability of our brand and products.\nAnd finally, we realized 6 points of growth from mix as the increased contribution from Touring more than offset the unit declines in our less profitable small cruiser models.\nAbsolute gross margin percent of 34.1% was up 5.1 points versus prior year driven by stronger volume, favorable mix and the lapping of heavier promotional periods in Q1 of last year.\nAs anticipated, while we did realize higher logistics spend in the quarter, we were able to offset with other savings across our supply chain.\nTotal operating margin of 18.5% was up significantly versus prior year due to the drivers already noted, lower operating expense.\nThe lower expense was the result of The Rewire actions executed last year as well as some timing shifts in our Hardwire related investments.\nWe do expect the favorability realized in the quarter tied to these Hardwire initiatives to be retimed and spent back in subsequent quarters.\nThe Financial Services segment operating income in Q1 was $119 million, up over $95 million compared to last year.\nNet interest income was down due to higher average outstanding debt as we proactively managed liquidity during the ongoing pandemic.\nThe total provision for credit losses decreased $102 million from Q1 2020 driven by an allowance decrease of $82 million and lower actual credit losses of $20 million.\nThe provision adjustment reflects an improved economic outlook and appropriately represents the estimated lifetime losses in our portfolio at the end of the quarter.\nActual retail credit losses continue to be down versus last year as a result of lower delinquencies as customers were supported by the recent federal stimulus packages and continued elevated levels of COVID related loan payment extensions granted to qualified customers.\nFocusing in on HDFS' base business, new retail originations in Q1 were up 25.8% versus last year behind higher new motorcycle sales as well as strong used motorcycle origination volume.\nMarket share for new U.S. retail financing remains strong at 63.5%.\nAt the end of Q1 2021, HDFS had approximately $1.7 billion in cash and cash equivalents on hand and approximately $1.6 billion in availability under its committed credit and conduit facilities for total available liquidity of $3.3 billion.\nCash and cash equivalents remained elevated, but were down approximately $800 million from Q4 2020 levels as we gradually pull cash back down to normalized levels.\nHDFS continues to manage its debt to equity ratio between 5 times and 7 times, and well within the debt covenants of no higher than 10 to 1.\nHDFS' retail 30-day plus delinquency rate was 2.14%, down 123 basis points compared to the first quarter of last year.\nThe retail credit loss ratio was also favorable at 1.4%, a 133 basis point improvement over last year.\nThe favorable delinquency performance is largely due to federal stimulus assistance and elevated levels of COVID related extensions.\nThe vast majority of the extended accounts have made at least one payment after the expiration of their extension period.\nWhile we do expect the delinquency rate to normalize over time, given the influx of stimulus funding and the improved economic condition, It's likely losses could remain low through most of the year.\nWrapping up with Harley-Davidson, Inc financial results, we delivered first quarter operating cash flow of $163 million, up $171 million over prior year.\nKey drivers of the improved cash flow were improved net income and lower inventory levels.\nCash and cash equivalents ended the quarter at $2.3 billion, which is $856 million higher than Q1 last year, but $937 million less than the end of Q4 2020 as we gradually worked down the higher cash balances that were held in the face of the pandemic.\nFinally, the Company's Q1 effective income tax rate was 24%, slightly lower than Q1 2020.\nLooking forward to the balance of the year, a number of factors occurred in the quarter that had given us confidence in taking our guidance up over the previous estimate.\nFirst, we have better clarity on the cost impact of the supply chain challenges and our ability to adapt, which we had built in as a significant headwind in our original plan.\nAlso, the economic outlook is much improved with filing unemployment numbers, a newly approved federal stimulus in the U.S. and continued progress on the global COVID vaccine rollout.\nFinally, we have also been able to get a much better read on profitable demand for our new model year '21 motorcycles, which is stronger than we had anticipated, particularly in our most profitable segments of Touring and large Cruiser.\nAs a result of these factors, we are raising our motorcycle segment revenue growth to be 30% to 35%, an increase from the previously communicated growth range of 20% to 25%.\nMoving on to Motorcycle segment operating income margins, assuming a successful outcome regarding the EU tariff situation, our updated guidance is a range of 7% to 9%, up from the previously communicated range of 5% to 7%.\nThis 200 basis point increase reflects an improved demand outlook and confidence in our ability to continue navigating through the global supply chain headwinds.\nHowever, if we are unable to reach resolution, negating the additional EU tariffs, the impact would bring us back to our original guidance of 5% to 7%.\nThe Financial Services segment operating income growth guidance is now 50% to 60%, an increase from the previously communicated range of 10% to 15% driven primarily by the loss provision adjustment.\nLastly, capital expenditures guidance remains flat to our original guidance of $190 million to $220 million.\nGiven that, we've added Slide 12 to help provide transparency on how our revenue and profit margin is split.\nWe expect approximately 60% of our revenue to come in the first half of the year as we ride the momentum of our model year launch through the riding season.\nAs we get into the back half, we'll start to see inventories come down from the peak in Q2, and in Q4, we will change over the factories to begin production on model year '22.\nFinally, remember that we will begin lapping the impact of cost savings actions we took in the face of the pandemic and our Rewire savings initiatives beginning in Q3.\nThe patterns on inventory and shipments will be similar to what we experienced in the back half of 2020.\nWe believe the substantial changes implemented with The Rewire have set us up to a win, and we will not rest here.\nWe will continue to explore additional opportunities as The Hardwire strategic plan is implemented and as we continue to deliver organizational speed, alignment and efficiency.\nAs we close this first quarter, we can see that we've been through a significant transformation over the course of the past year.\nThese changes are manifested in strong first quarter results and reinforce our decision to move the model year to coincide with the start of riding season for the first time in our modern history.\nThis new journey is powered by Harley-Davidson number one, a high performing winning organization based on our ten defined leadership principles and built on the powerful vision and mission of Harley-Davidson.\nThrough the pandemic and into this first quarter we have seen the willingness and growing capabilities of our team to win.\nOur future successes will only come from an effort by everybody in our team.\nAs you know, The Hardwire and its success is rooted in desirability in our ambition to enhance our position as the most desirable motorcycle brand in the world.\nDesirability is a motivating force driven by emotion.\nIt's in our DNA, it's embedded in our vision and it's at the heart of our mission and it's part of our 118 year legacy.\nDone right, Harley-Davidson's desirability preserves the value of our customers' purchases, builds our brand beyond our riders, ensures loyalty and drives engagement.\nOur strategic ambition for desirability is very simple: Design engineer and advance the most desirable motorcycles in the world reflected in quality, innovation and craftsmanship; build a lifestyle brand valued for the emotion reflected in every product and experience for riders and non-riders alike, and; focus on our customers, delivering adventure and freedom for the soul.\nDesirability provides the framework of our Hardwire strategic plan and the framework for our success measures.\nI will now address a few specific highlights for the quarter delivered against some of The Hardwire strategic priorities.\nI'm increasingly more confident of the market conditions and consumer appetite for our brand, our iconic motorcycles and our new products.\nThe pandemic has provided a reminder of the power of getting outside, reconnecting with our community and the significant freedom and adventure that our brand represents.\nWe've experienced significant demand in the market for our products and our brand, especially since March of this year.\nAnd the demand we are seeing is strongest in our most profitable segments.\nThis improved mix is resulting in stronger year-over-year motorcycle segment margins and can be attributed directly to our desirability and Rewire efforts.\nThis quarter has demonstrated the increasing strength of the market and the enduring power of our brand in both the USA and Canada as well as Asia.\nDespite the continued impacts of the pandemic especially in Europe, we also see post pandemic potential as part of our streamlined market strategy.\nWe maintain a long-term focus on sustained, profitable and desirable growth in line with The Hardwire strategy, and we are excited by the initial impacts.\nAs we begin to execute against our strategy of 70:20:10 skewed to our stronghold segments of Touring, large Cruiser and Trike, we will work hard to continue to solidify our position as leaders, acknowledging that these segments are the most attractive of the global market in terms of our profit focus.\nWith The Hardwire, we also made a commitment to introduce a series of models that align with our commitment to further increase desirability and to drive the legacy of Harley-Davidson in our core segments.\nIn this context, today, I'm pleased to introduce our new icons collection and this year's icon model, the Electra Glide Revival.\nLaunching April 26th, icons will be extraordinary adaptations of production motorcycles, which look to our storied past and bright future.\nProduced only once, each model will have a limited serialized production run of 1,500 bikes and deliver on what Harley-Davidson has always done so well; Iconic design and historic moments.\nA new icons collection model will be released within each model year with no more than two models being released in any given year.\nProduction will be enough to fill allocation of approximately one per dealer globally, making each icon a rare and highly coveted model for our riders, while increasing the overall desirability of our brand.\nWhen we announced The Hardwire, we also identified a focused expansion into new segments.\nThey are attractive and profitable segments that deliver a balanced combination of volume, margin and potential.\nAnd they're well aligned with our product and brand capabilities with a clear path to leadership.\nBy narrowing our focus on those opportunities that meet these criteria, we make our intention clear.\nWe are in them to win, supported by the right allocation of time and energy balanced with the right investments in product, brand and go to market capabilities.\nThis gets me to PR and marketing launch of the Pan America, our first Adventure Touring bike.\nWith the Pan America, we see the potential to build on our off-road heritage and to innovate into the high growth and attractive margin segment of adventure touring.\nWe are targeting a new customer, but a new customer that wants the craftsmanship, heritage and legacy of Harley-Davidson and wants to be part of our community.\nPan America was launched globally on February 22nd at a virtual launch viewed by over 350,000 participants across the world.\nWe partnered with movie star Jason Momoa to produce launch content that build desirability and excitement for Pan America around the launch.\nIf you haven't already watched Everything is a Road: The Path to Pan America, I'd encourage you to do so.\nTo date, the Pan America has received widespread global media acclaim with over 2 billion media impressions at a 97% positive media sentiment.\nWith the Pan America launch earning [Indecipherable] reports endorsement as I quote, The most important model released in memory signaling a shift in both philosophy and demographic.\nThe press riding reviews that have been going on for several weeks now around the world have also been exceptional with overwhelmingly positive feedback from around the world.\nThe launch delivered a full sellout of the pre-order allocation, which is currently in production and on schedule to be delivered to our dealers around the work from May onwards.\nAdventure touring is the largest segment in many European markets and is a largely untapped market in North America.\nWe believe this bike places us in a position to take market share in Europe and become market leader in the segment in North America.\nThere's also clear affinity for the bike in other high-potential global markets with the Pan America being awarded best bike of 2021 at the 42nd Bangkok International Motor Show.\nLooking forward, we have great plans to expand on Pan America with unrivaled innovation and design in new products that will reach new audiences, as we look to unlock new customers and opportunities.\nFollowing on from the Pan America launch, we continue to execute on our priority to selectively compete in attractive segments where we can profit and win.\nAnd we're excited for the upcoming launch of our next product from the RevMax platform, which will redefine the premium middleweight Cruises segment.\nWe intend to increase the profitability of our offerings overall in the small to mid sized Cruiser segment and change the competitive landscape.\nLeading in electric, combustion remains the core of our business, however we see great potential for long-term growth in electric vehicles.\nWith LiveWire widely regarded as the leading electric motorcycle in the world, we're excited about our future in this space.\nEarlier this year, we announced our intentions to work toward a dedicated EV division, and this work is now in full swing.\nThis division will allow for dedicated level of strategic focus required to deliver desirable growth in this segment.\nIn the quarter, we hired our Chief EV Officer to help guide this focus as we look to build on the success of LiveWire and win in Electric.\nBy investing in electric technology, it remains our intent to be at the forefront of innovation and development as we look to be the pioneers in EV.\nWe'll be telling you more about our dedicated EV plans in Q2.\nGrowth Beyond Bikes, we've always been about more than a machine and our related businesses are huge opportunities for long-term expansion of the brand.\nParts and accessories and general merchandise form part of the Harley-Davidson lifestyle and together with HDFS played an important role in inspiring existing and new customers to discover the adventure.\nEach business plays an important role in our overall vision and mission.\nWe see enormous potential to grow our customer base, both with riders and non-riders shaping our future success as a global lifestyle brand.\nIn parts and accessories with customization as part of our heritage, we continue working toward enhancing our position as the destination for high quality parts for all our riders both with new and used motorcycles.\nAs part of this new approach to our P&A business, the Pan America reveal included both P&A and general merchandise designed specifically for Harley-Davidson Adventure Touring motorcycles and riders.\nHarley-Davidson's heritage underpins our general merchandise business.\nIt is authentic to motorcycle culture and puts us in an unique position to reach beyond motorcycle riders and into the sport and lifestyle space.\nWith prominent brand collaborations in the works for general merchandise, we see long-term potential to leverage our brand value.\nWe'll be telling you more about this important strategic pillar for future growth in the second half of the year.\nAs evidenced by strong performance this quarter, HDFS is a strategic asset with a track record of delivering growth and profitability.\nIt is our goal to make HDFS the preferred choice for all Harley-Davidson riders by building digital capabilities and that rival the innovators of financial services.\nHDFS' is integral to Harley-Davidson's success and with expansion in Europe on the horizon, we are excited about its future.\nLed by HDFS earlier this month, as you know, we announced H-D Certified, the first certified pre-owned Harley-Davidson motorcycle program designed to lead our industry, satisfy our existing loyal riders and also reach new customers venture into Harley ownership for the first time.\nH-D Certified is a strategic effort to strengthen our competitive position and is part of our new approach to the used motorcycle marketplace, aligned to the strategic priorities of The Hardwire, targeting long-term profitable growth.\nIn partnership with our strong dealer network, we want to enhance the overall customer experience encouraging brand loyalty while supporting growth in parts and accessories, general merchandise and HDFS built around the used Harley-Davidson market.\nTo date, over 350 of our U.S. dealers have signed up to the program representing 63% of the U.S. dealer network on the day of launch.\nEach certified pre-owned motorcycle will be sold with a 12 month limited warranty on the engine and transmission and will include a 12 month complimentary membership in HOG, our Owners Group.\nIn addition, special financing rates will be available through H-D Invest [Phonetic] to support the program.\nWe believe H-D Certified will drive Harley-Davidson connectivity and engagement with our customers and enhance the overall customer experience, allowing more riders to have access to our motorcycles providing them with an added level of confidence in their purchase and an invitation into the Harley-Davidson community.\nFew words to summarize.\nThe strong Q1 financial performance despite the supply chain challenges of the quarter and an increase in demand, gives us the confidence to increase our guidance as Gina mentioned to deliver a strong performance for the full year.\nThat said, we expect the unprecedented pandemic related supply chain and logistics challenges to continue and recognize the potential associated risks well into the year.\nOur brand is powerful and it is one of the most recognized globally.\nWith 118 years of uninterrupted heritage, craftsmanship and iconic design, we are unique.\nNo other brand even comes close to Harley-Davidson.\nWe've been through significant change, but I believe this change has set us up to be stronger than ever before.\nWe will not rest until we are best-in-class in everything we do.\n",
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"content": "harley-davidson inc delivers q1 gaap diluted earnings per share of $1.68.\ndelivered q1 gaap diluted earnings per share of $1.68.\nqtrly motorcycles and related products (motorcycles) segment revenue up 12 percent.\nqtrly revenue $1,423 million, up 10%.\nharley-davidson - bottom-line results reflect q1 significant net income improvement with strong results in motorcycles and financial services segments.\nqtrly motorcycles & related products segment revenue up 12 percent amid strong retail demand for touring motorcycles.\nsees 2021 motorcycles segment revenue growth to be 30 to 35 percent.\nsees 2021 motorcycles segment operating income margin of 7 to 9 percent.\nsees fy 2021 capital expenditures of $190 million to $220 million.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Click the earnings materials box in the center of the page.\nJochen, let's get started.\nWe delivered a solid performance in the second quarter and first half of this year.\nI'm pleased with the pace of improvements we've seen with today's numbers reflecting the execution of our Hardwire strategy as demonstrated by the positive financial results despite significant supply chain challenges.\nAs a company, we continue to manage through the impacts of COVID-19 with the extraordinary efforts of our global team keeping employees' safety and community well-being a priority.\nThe supply chain and logistics challenges linked to the pandemic faced by our industry and many others continue to impact the sector with our teams managing the effects of disruption to ensure that we are able to continue building and delivering iconic Harley-Davidson products to the world.\nWe are seeing the initial proof points of our Hardwire execution and the positive impact of this strategy on our results, particularly in the strategically important North America region.\nWhile the pandemic and the related supply chain complications continue to impact our international business with certain regions at different stages of post-pandemic recovery, we can see the consumer excitement and optimism is returning, and we are encouraged by the signs of positivity in the market.\nI also want to note our continued fight against the proposed EU tariffs that we discussed at the last quarter.\nWe continue to pursue all remedies to the additional EU tariffs.\nWe believe these tariffs relate to a trade dispute not of our making and that it's unfair for our business to be targeted as part of this dispute.\nThe initial outcomes of the trade talks at the G7 meeting are encouraging, and we remain hopeful for resolution.\nBut first, I'll let Gina provide more details on the financial performance of the quarter and first half of the year.\nSecond quarter results reflected continued strong demand and improved operating margins as we manage through a volatile supply chain environment.\nTotal revenue of $1.5 billion was 77% ahead of last year as we lapped the impacts of the COVID shutdown.\nGiven the 2020 dynamic to help contextualize this year's performance, we've included comparisons back to 2019 for this quarter.\nRevenue was down 6% versus 2019, primarily driven by the actions taken as part of the Rewire to prune unprofitable motorcycles as well as exit unprofitable markets.\nTotal operating income of $280 million was significantly ahead of 2020 and 9% ahead of 2019 with growth across both of our reported segments.\nThe Motorcycles and Related Products segment delivered $186 million of operating income, which is $307 million better than 2020 and 3% better than 2019.\nEven though the quarter had 12,000 fewer units than 2019, we benefited from improved motorcycle unit mix, significantly lower sales incentives as we focused on building desirability, and a reduced cost structure behind our Rewire actions.\nThe Financial Services segment delivered $95 million of operating income, $90 million better than 2020 and 25% ahead of 2019.\nSecond quarter GAAP earnings per share of $1.33 was $1.93 ahead of Q2 2020.\nWhen adjusting to exclude the impact of EU tariffs and restructuring charges, our adjusted earnings per share was $1.41, up $1.79 over prior year.\nTurning to year-to-date results.\nTotal revenue of $3 billion was 37% ahead of 2020 and 2% behind year-to-date 2019.\nAgain, the decline versus 2019 was primarily driven by the actions taken as part of Rewire to prune the portfolio and partially offset by increased volume driven by the shift in model year launch timing and improved unit mix.\nTotal operating income of $627 million was $635 million ahead of 2020 and 48% ahead of 2019.\nThis strong growth versus 2019 was driven by the Rewire actions noted as part of our Q2 performance, including favorable mix, lower sales incentives, and reduced operating expense.\nThe shift in timing of the model year launch had a positive impact as well.\nGAAP year-to-date earnings per share was $3.01, up $3.16 from a year ago, while adjusted year-to-date earnings per share was $3.11, up $2.98 from last year.\nGlobal retail sales of new motorcycles were up 24% in the quarter behind strong demand for core Touring and large Cruiser products in the U.S. as well as a successful launch of our Pan America motorcycle into the Adventure Touring space.\nNorth America Q2 retail sales were up 43% versus 2020 and up about 5% over Q2 2019.\nGrowth over 2019 was driven primarily by improved sales in our core segments, Touring and large Cruisers.\nIn our international markets, COVID continued to have an impact, with many key countries in various states of lockdown and reopening throughout the quarter.\nWe also experienced a continuation of the logistics challenges noted in Q1, which resulted in longer ship times to key ports.\nEMEA sales recovered after much larger declines in Q1 as sales of Touring and Cruisers rebounded.\nThis improvement was offset by our decision to not sell Street and legacy Sportster bikes.\nThe TAM declines were driven primarily by Rewire actions to close certain dealers, exit countries, and take pricing actions across select models.\nWe believe these actions are working to restore profitability across the market in spite of the retail unit declines.\nIn Asia Pacific, in particular, in India and Australia, Q2 retail sales were negatively impacted by the discontinuation of Street motorcycles.\nThe region was also disproportionately impacted by global transportation headwinds.\nWorldwide retail inventory of new motorcycles at our dealers was down over last year and down versus the previous quarter.\nInventory levels were lower than originally planned, driven by stronger-than-anticipated demand, coupled with longer shipping times in our international markets.\nWhile we originally have planned for Q2.\nInventory levels to build coming out of Q1, we have seen that these lower levels have helped to foster increased desirability as evidenced by strong new and used motorcycle retail prices in the U.S. and continued improvement in dealer profitability in the quarter.\nInternational markets have seen a much larger impact in the global transportation challenges and it's likely some markets have seen retail sales impacted.\nLooking at revenue, total motorcycle segment revenue was up 99% in Q2 and up 45% on a year-to-date basis.\nFocusing on current quarter activity, 81 points of growth came from higher year-over-year volume and motorcycle units and parts and accessories as we lap last year's pandemic impact and work to meet the strong current year demand for our motorcycles, which includes the new Pan America; 13 points of growth from mix driven by a larger percentage of Touring bikes in the quarter along with favorable regional mix behind strong U.S. shipments; 5 points of growth from foreign exchange; and finally, one point of growth from pricing and incentives as we eliminated a majority of corporate discounts and incentives as part of the Hardwire strategy.\nAbsolute Q2 gross margin of 30.6% was up 14.5 points versus prior year driven by stronger volumes and favorable unit mix.\nHigher logistics and raw material inflation and incremental EU tariffs were more than offset by volume leverage and other savings across our supply chain.\nQ2 operating margin finished at 14% and was up significantly versus prior year due to the drivers already noted.\nThe gross margin gain was partially offset by higher operating expense as we lap the cost savings initiatives undertaken last year to preserve cash at the onset of the pandemic.\nThe supply chain remains very fragile, not only for our business but for every global manufacturer.\nOur team has continued to do a great job managing through the unprecedented challenges, and to date, we've had no sustained downtime in our factories.\nWe have continued to see inflation across all modes of freight as well as within raw materials, and we are forecasting this to continue throughout the fiscal year.\nTo help offset, we implemented an average 2% pricing surcharge on select models in the U.S. effective July 1st for the remainder of model year '21.\nFinancial Services segment, operating income in Q2 was $95 million, up $90 million compared to last year.\nNet interest income was favorable for the quarter driven by lower average outstanding debt and cost of funds as compared to the second quarter of last year.\nThe total provision for credit losses decreased $75 million year-over-year, primarily due to the reserve rate changes of $63 million as we lapped last year's increase, which was largely driven by the economic impacts of the pandemic.\nIn addition, actual credit losses were $12 million lower.\nThe favorability in credit losses was due in part to benefits provided to individuals under the recent federal stimulus packages.\nAdditionally, motorcycle values at auction remained elevated as the supply of used motorcycles was limited and demand remained strong.\nLooking at HDFS's base business, new retail originations in Q2 were up 29% versus last year behind higher new motorcycle sales and strong used motorcycle origination volume.\nAt the end of Q2, HDFS had approximately $820 million in cash and cash equivalents on hand and approximately $1.3 billion in availability under its committed credit and conduit facilities for a total available liquidity of $2.1 billion.\nCash and cash equivalents remained elevated but were down, approximately, $900 million from Q1 as we continued to pull cash back down to normalized levels.\nHDFS's retail 30-day plus delinquency rate was 2.21%, up 46 basis points compared to the second quarter of last year, which is the high point in issuance of pandemic-related extensions.\nThe delinquency rate continues to be favorable when compared to recent history.\nThe retail credit loss ratio remained historically low at 0.84%, a 103 basis point improvement over last year.\nWhile we do expect the delinquency rate to normalize over time, given the influx of stimulus funding and the improved economic conditions, we believe it's likely losses will continue to remain low through the remainder of the year.\nWrapping up with Harley-Davidson Inc. financial results.\nWe delivered year-to-date operating cash flow of $644 million, up $34 million over prior year.\nThe key driver of improved cash flow was higher net income, partially offset by an increase in wholesale finance receivable originations.\nAs we look to the balance of the year, we are maintaining our guidance on the Motorcycle segment revenue growth of 30% to 35%.\nFor the Motorcycle segment operating income margin, during the second quarter the European Union made a decision to implement a six-month stay on raising the incremental tariffs from 31% to 56%, while negotiations occur between the U.S. and the EU.\nThe step-up in tariffs was originally planned for June 1st and it will now be in effect in December if a resolution does not take place prior to then.\nLast quarter we provided two margin guidance ranges due to the uncertainty and how the tariff situation would evolve.\nWe had stated our official guidance to be 7% to 9%, which assumed complete mitigation of the incremental tariffs.\nWith the full impact of the incremental tariffs, our guidance was 5% to 7%.\nGiven the developments throughout the quarter, our tariff exposure in 2021 is more certain but less than what we originally communicated.\nBased on what we know today, our estimated tariff impact for this year is, approximately, $80 million versus the initial estimate of $135 million.\nThis improvement would result in our estimated GAAP operating income margin moving from 5% to 7% to our revised guidance of 6% to 8%.\nIf we are successful in materially mitigating the incremental EU tariffs for the remainder of 2021 and get back to the planned tariff rate of 6%, our operating margin range would remain 7% to 9%.\nWe are increasing the Financial Services segment operating income growth guidance to 75% to 85%, which is an increase from the previously communicated range of 50% to 60%.\nThe improved outlook takes into account the loss favorability we had seen year-to-date as well as the outlook for the rest of the year.\nLastly, capital expenditures remain flat to our original guidance of $190 million to $220 million.\nSlide 14 provides additional context on how our seasonality and strategy shift impact the back half of the year.\nThis chart is largely unchanged from the previous quarter with the one exception that it now includes the impact of the EU tariffs.\nAssuming the $80 million tariff impact, we expect the back half operating margin percent to be negative mid-single digits.\nThis back half guidance incorporates the impact in the shift in model year launch timing, logistics and raw material inflation rates in line with what we've seen throughout Q2, the approximately 2% pricing surcharge, and a step up in operating expense as we invest into the Hardwire and prepare for the launch of model year '22.\nAs the Hardwire strategic plan is implemented, we continue to enhance organizational speed, alignment, and efficiency, which we believe has set us up to win.\nThe changes implemented through Rewire in 2020 and the intentional Hardwire-related outcomes underscore the significant transformation of Harley-Davidson over the course of the past year.\nWe continue to be guided by H-D1 as a high-performing winning organization based on our 10 defined leadership principles, built on the powerful vision and mission of Harley-Davidson.\nAcross our company, we continue to see the desire and growing capabilities of our team to win.\nWe know our future successes will only come from an effort by everybody on our team.\nI know many of you are listening in today.\nTalking about winning, I'm excited that this month our Harley-Davidson Screamin' Eagles team rider Kyle Wyman won the inaugural MotoAmerica King of the Baggers championship series aboard his Harley-Davidson Road Glide special.\nEveryone at Harley-Davidson is immensely proud of our racing team and for the tireless commitment to securing this championship.\nKyle's incredible dedication and focus on winning was matched by the passion and energy of the team of Harley-Davidson engineers who developed these Baggers race bikes constantly working to improve the performance of these remarkable motorcycles.\nThis team and their success truly exemplifies the spirit of H-D1.\nNot to mention, Kyle won this race despite having his arm in a cast following an injury and surgery only a couple of weeks before the final race, a true Harley-Davidson hero.\nThis win is a strong statement for our ability to lead and innovate in our core Grand American Touring segment.\nAs I've said since we started this journey, the Hardwire strategic plan and success is underpinned by desirability and our ambition to enhance and grow our position as the most desirable motorcycle brand in the world.\nDesirability is our DNA.\nIt's embedded in our vision; it's at the heart of our mission; and it's part of our 118-year legacy.\nHarley-Davidson's desirability preserves the value of our customers' purchases, builds our brand beyond our riders, ensures loyalty, and drives engagement.\nBy designing engineering and advancing the most desirable motorcycles in the world reflected in quality, innovation, and craftsmanship we are building our legacy.\nIn building a lifestyle brand valued for the emotion reflected in every product and experience for riders and non-riders alike, desirability will continue to provide the framework for our Hardwire strategic plan and the framework for our success measures.\nI'd now like to address a few specific highlights delivered against some of the Hardwire strategic priorities.\nIt's been a busy few months at Harley-Davidson.\nAligned to our desirability and core product and category focus in Touring and Cruises, we continue to see an increase in consumer appetite and demand for our brand, our iconic motorcycles and our other products.\nThe pandemic has provided a reminder of the power of getting outside, reconnecting with the Harley-Davidson community and the unique freedom and adventure that our brand represents.\nWe continue to experience significant demand for our products and our brand with solid demand for our most profitable segments.\nThis improved product mix is resulting in stronger year-over-year motorcycle segment margins and can be attributed directly to our desirability and Rewire efforts.\nThis strong quarter underlines the increased strength of the market and of our brand, in particular in the U.S. and Canada.\nAnd while we've continued to see demand in Europe and Asia, these regions are also being affected by both, the enduring impacts of the pandemic and the wider global logistics challenges.\nIn line with the Hardwire and our streamlined market strategy, we continue to maintain a long-term focus on profitability, and we are pleased with the initial outcomes as we continue to execute against the strategy.\nAligned with our focus on our core segments, in April we launched our Icons Collection.\nProduced only once, these extraordinary adaptations of production motorcycles look to our storied past and bright future.\nWe've seen a fantastic customer response to the first model, the Electra Glide Revival with these limited serialized models selling out immediately.\nThe focus on selective expansion allows us to target segments that deliver a balanced combination of volume, margin, and potential, and that are aligned with our brand capabilities and identity.\nWe are in these segments to win, supported by the right allocation of time and energy, balanced with the right investments in product, brand, and go-to-market capabilities.\nAs highlighted at the last quarter, we've seen an exceptional response to our first adventure touring bike based on the Rev Max platform, the Pan America following its very successful launch earlier this year.\nDealers and riders have been taking delivery of Pan America motorcycles as part of the sellout pre-order allocation since May, and the response from riders on and off the road has been overwhelmingly positive, reinforcing our strategic launch within the adventure touring market.\nWe believe the opportunity within the Adventure Touring segment is significant, not just in Europe, the largest adventure touring market in the world, but in North America where the market remains a great opportunity, and we are now using our power to grow it.\nWe believe that with Pan America, we are well placed to take market share in Europe and to become the number one model in the segment in North America.\nWith Pan America, we've seen outstanding sell-through with the initial run selling out globally.\nLooking ahead, we see great potential to build on the success of Pan America and to target new riders in the Adventure Touring space.\nBy targeting new audiences, we will continue to look to further unlock a whole new dimension of customer and opportunity for the company as we continue to grow our global market share in the Adventure Touring segment.\nThe success of Pan America reflects our focus and is an integral part of our Hardwire strategy of selective expansion.\nWe saw the potential built on our off-road heritage and to compete and win in what we believe is the high growth and attractive margin segment of Adventure Touring.\nAligned to Hardwire, we will continue to strategically pick and compete in categories where we see high potential and where we have a clear path to winning.\nOn July 13th we launched the Sportster S at our Global Reveal event from Evolution to Revolution.\nSportster is not only one of the longest continuously produced motorcycles in history, but also one of the most iconic.\nThe Sportster S is the latest all-new motorcycle built on the Revolution Max platform setting a new performance standard for the Sportster line.\nThe launch of this next-generation Sportster defined by power, performance technology, and style reinforces our commitment to introduce motorcycles that align with our strategy to increase desirability and to drive the vision and legacy of Harley-Davidson.\nThe Sportster S is equipped with a host of technologies designed to enhance the riding experience, including three pre-programmed ride modes with which electronically control the performance characteristics of the motorcycle and the level of technology intervention.\nThe global reveal event generated over 127 million PR impressions with overwhelmingly positive sentiment, with many publications heralding the return of the iconic Sportster.\nWe also saw one of the highest social engagement rates on our H-D social channels.\nIt is clear that riders around the world are excited for Sportster S. As we approach a week since launch, we have seen exceptionally strong customer engagement for Sportster S with the highest leads generated for a new model in recent years.\nWe're excited about the potential of this bike and look forward to seeing it hit the streets this fall.\nAs we continue to increase our customer focus, we're also driving an updated product segmentation that better reflects our customers' needs and preferences and our unrivaled combination of product, heritage, and innovation.\nSportster S will be the first motorcycle in the all-new sport category.\nThis category showcases how Harley-Davidson's innovating and redefining core motorcycle segments with unmatched Harley-Davidson technology, performance, and style.\nThe touring category has been renamed Grand American Touring, denoting our legacy and stronghold position in a key market segment.\nAdventure Touring will represent our entry into critical global segment where we're competing to win.\nEach of these segments, along with other existing segments, such as Cruisers, will build their own personalities and products, further enhancing the customer appeal and relevance.\nAs part of the Hardwire strategy, we also made a commitment that Harley-Davidson will lead in electric.\nWhile we are clear that combustion remains the core for our Harley-Davidson business for the foreseeable future, we believe there is great potential for long-term growth in electric vehicles.\nEarlier this year, we announced our intentions to launch a dedicated EV division to allow the strategic focus to deliver desirable growth in this high-growth segment.\nWe recognize the pioneering spirit and brand value in LiveWire for our community and took the decision to evolve the original LiveWire motorcycle into a dedicated EV brand.\nOn July 8th, we presented the evolution of LiveWire as a stand-alone brand and the introduction of LiveWire ONE, the electric motorcycle built for the urban experience with the power and range to take you beyond.\nWith the MSRP at launch in the US for $21,999, pre any applicable tax credit, we believe LiveWire ONE will redefine the segment through innovative engineering and digital capabilities and bring a whole new generation of riders and non-riders into our company's fold.\nInnovating to win is core to our focus, and as the first OEM with a hybrid omni-channel model, LiveWire combines the best in digital and physical retail allowing the customer to interact with the brand on their own terms.\nBy launching online at LiveWire.com and at 12 LiveWire brand dealers in California, New York, and Texas, we placed geographic focus on EV customers and relevant charging infrastructure.\nAs this develops, we plan to increase the physical LiveWire footprint across the U.S. and the whole of North America.\nWe also plan to open our first LiveWire Experience Gallery designed to facilitate a fully immersive brand experience in fall-winter of this year in Malibu, California.\nOur focus on the digital experience is aligned to the EV customer.\nLiveWire.com, the new dedicated LiveWire app, and a new interactive bike build present a heightened ownership experience for the customer, including a digital path to purchase, a first for the LiveWire brand.\nWe've had a tremendous launch response to the new brand, and building on the U.S. launch, we intend to take LiveWire to international markets in '22.\nBy investing in electric technology, it remains our intent to be at the forefront of innovation and development as we look to lead the EV segment.\nWe've always been about more than a machine, and we believe our complementary businesses are huge opportunities for long-term global growth of the Harley-Davidson brand.\nParts and accessories and general merchandise form part of the Harley-Davidson lifestyle, and together with HDFS, play a valuable role in our overall vision and mission and inspiring existing and new customers to discover the adventure that is uniquely Harley-Davidson.\nWe believe there is great potential to grow our customer base, both with the riders and non-riders and to add to customer lifetime value shaping our future success as a global lifestyle brand.\nCustomization is a key part of our heritage, and this quarter in parts and accessories, we have seen a strong performance despite substantial supply chain challenges.\nWe continue to develop and evolve our product offering as we work toward enhancing our leadership position as a definitive destination for authentic parts and accessories for our riders of both new and used Harley-Davidson.\nFor many non-riders, general merchandise is the entry point to the brand.\nWe will be talking more about our H-D lifestyle in the fall, but we're excited by the long-term potential to leverage our brand value, to invest in our on and offline retail channels, and grow our general merchandise business globally.\nFor both, parts and accessories and general merchandise, aligned to our hardwire ambition, we continue to evaluate opportunities to redesign our supply chain and go to market capabilities to drive further efficiency and growth.\nWe also expect brand collaborations to be integral to our general merchandise strategy and allow us to leverage the unique and powerful brand that is Harley-Davidson.\nLast week, we launched our first product collaboration of the year with Jason Momoa and the Harley-Davidson Museum as a limited production American-made collection of 16 vintage inspired men's apparel and accessory styled sold exclusively on Harley-Davidson.com and in our museum store.\nJason's genuine passion for the brand reinforces how collaborations such as this one line with our hardware strategy to expand our complementary businesses with engaging products, services, and experiences.\nThe response from our community to this collection has been terrific, and we expect full sell-through of the collection in the coming days.\nLast but not least, building on the successful launch of H-D Certified last quarter, the first certified pre-owned Harley-Davidson motorcycle program ever, we're excited to launch H-D1 marketplace today on Harley-Davidson.com, the ultimate online destination for used Harley-Davidson motorcycles in North America.\nBy blending the best of a digital and in dealership experience, H-D1 marketplace is designed to facilitate the confident and seamless purchase journey for used Harley-Davidson motorcycles for the first time in our history, H-D1 marketplace will allow all Harley-Davidson pre-owned motorcycles, including H-D Certified bikes of every participating Harley-Davidson dealer to be online in one place making it easier for customers to find that unique pre-owned motorcycle that they had been searching for.\nAll, I repeat, all qualified dealers have signed up to participate.\nWith financing provided by HDFS, our goal is for H-D1 Marketplace to be the number one destination for anyone looking to buy used Harley-Davidson.\nAdditionally, customers will have the opportunity to sell their Harley-Davidsons directly through the H-D dealer network through the Sell My Bike feature.\nWe believe the H-D1 Marketplace will drive connectivity and engagement with our Harley-Davidson customers and dealers, acknowledging the important part that riders of pre-owned Harley-Davidsons play in our community.\nThe launch of H-D1 marketplace is also the first step in transforming H-D.com into the home of all things Harley-Davidson, from enhanced omni-channel purchase experiences to unique community engagement to exclusive content and learning on a global scale as we look to innovate online to lead the industry.\nBefore we head to questions, I'd like to summarize some of the highlights since we launched our new Hardwire strategy.\nFollowing the new 21 motorcycles introduction, we successfully launched Pan America, our first Adventure Touring bike.\nWe introduced H-D Certified, our first ever pre-owned program.\nWe launched our Icons Collection with Electra Glide Revival selling out instantly.\nWe created a new EV division and stood up LiveWire as an independent EV brand with LiveWire ONE as its first product.\nWe launched Sportster S, the evolution of the iconic Sportster as part of a reclassification of our overall market segmentation.\nAnd today, we introduced H-D1 Marketplace, the ultimate digital destination for pre-owned Harley-Davidson motorcycles in North America.\nWe delivered strong Q2 and first half financial performance despite the unprecedented pandemic-related supply and logistics challenges in the sector.\nWe expect these challenges to continue and recognize the potential associated risks to our business for the remainder of the year.\nHarley-Davidson is a brand with global recognition and appeal.\nWith 118 years of uninterrupted heritage, craftsmanship, and unrivaled iconic design, we are truly unique.\nWe believe there is tremendous potential for our brand and business globally, and we will not rest until we are the best-in-class in every market we compete in.\n",
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"content": "harley-davidson inc - delivered q2 gaap diluted earnings per share of $1.33.\ndelivered q2 gaap diluted earnings per share of $1.33.\nqtrly revenue $1,532 million, up 77%.\nqtrly adjusted earnings per share $1.41.\nfor fy 2021, continues to expect a.\nmotorcycles segment revenue growth to be 30 to 35 percent.\nfor fy 2021, continues to expect capital expenditures of $190 million to $225 million.\nfor fy 2021, expects financial services segment operating income growth of 75 to 85 percent.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: This is Shawn Collins.\nThe new Director of Investor Relations at Harley-Davidson.\nYou can access the slides supporting today's call on the Internet at investor.\nIn addition, Chief Commercial Officer, Edel O'Sullivan will join for the Q&A.\nWith that, Jochen why don't we get started?\nWe delivered a solid quarter, and are pleased with our year-to-date performance where you've seen many proof points that our Hardwire strategic initiatives are setting up a solid foundation for future growth at Harley-Davidson.\nAs part of the Hardwire strategy, we renewed our focus and profitably driving our core business.\nThrough 2021 we've been encouraged by the recovery of the Touring market.\nGrand American Touring sits at the core of our mission and our brand.\nWe are committed to defending and expanding our share in the segment and see potential for future growth.\nBy selectively targeting high potential categories such as Adventure Touring with Pan America and sports with Sportster S we are also maintaining our focus on long-term profitability and potential alinged to our brand and product capabilities.\nThe increased demand that we have seen across both our core and expanding categories underscores the momentum behind the Harley-Davidson Brand and all it stands in the pursuit of freedom and adventure.\nWe've also seen interest increasing across new riders with a marked increase in the participation in the Harley-Davidson Riding Academy.\nThrough September, we've seen Riding Academy participation and completion increased 20% over 2019.\nIn addition to our strategic changes as part of our streamline market strategy, macro headwinds, including a variety of challenges from supply chain shortages to congestion at ports and increased shipping times that have been impacting our production and our other suppliers in Q3, in particular in our international markets.\nThe supply chain challenges are likely to continue into 2022, our team remains committed to managing the effects of the disruption, leveraging the scale of our global network and infrastructure to mitigate the impact on our business.\nThat said, I'm very excited by the global potential of Harley-Davidson brand in the coming years.\nAnd, as we focus on more profitable motorcycle unit as part of our strategy, we continue our journey toward a more efficient use of inventory.\nWhile we are below our intended inventory strategy, we've seen our dealer community adapt, improve the profitability and therefore improve the overall health of our dealer network.\nI'll now hand over to Gina to provide more details on our financial performance for the quarter and year-to-date.\nThird quarter results reflect continued demand momentum as evidenced by our strong wholesale and unit growth and share performance across the market.\nAs Jochen said we did experience increased supplier volatility, which impacted our production and supply levels for the quarter.\nDespite this, our financial results demonstrate our agility in maximizing profitability, including the execution of a pricing surcharges in the US, optimizing production schedules to prioritize our most profitable models and markets and enacting tighter operating expense controls.\nIn the quarter, total revenue of $1.4 billion was 17% ahead of last year behind increased shipments and favorable motorcycle unit mix, primarily driven by the actions undertaken as part of the rewire.\nTotal operating income of $204 million was ahead of last year with growth across both of our reported segments.\nThe motorcycle segment, which includes our general merchandise and parts and Accessories products delivered $98 million of operating income, which is $51 million better than last year.\nAnd the Financial Services segment delivered $107 million of operating income, which is $15 million better than last year.\nThird quarter GAAP earnings per share of $1.5 is $0.78 better than last year or up 35% year-over-year.\nWhen adjusting to exclude the impact of EU tariffs and restructuring charges our adjusted earnings per share was $1.18 and up 12% year-over-year.\nTurning to Q3 year-to-date results, revenue of $4.3 billion is 30% ahead of 2020 and operating income of $831 million was $701 million ahead of last year.\nYear-to-date results reflect the strong unit growth over the pandemic impacted results of 2020 as well as the positive impact from last year's Rewire actions.\nGAAP year-to-date earnings per share was $4.06, up $3.42 from a year ago, while adjusted earnings per share was $4.29 up $0.03 from last year.\nGlobal retail sales of new motorcycles were down 6% in the quarter with growth in North America offset by declines in our international market.\nNorth America Q3 retail sales were up 2% versus last year driven primarily by 5% growth in Grand American Touring, our most profitable segment and the successful launches of Pan American and Sportster S. Pan America maintained its status as the number one selling adventure touring model in the US since its launch earlier this year, capturing a 16% market share in the third quarter in a rapidly growing adventure touring segment and after much anticipation beyond these Sportster S motorcycles began shipping to dealers late in Q3 and we have seen very strong sell-through today.\nIn our international markets the retail sales declines were primarily driven by the actions taken during Rewire to exit markets and prune unprofitable models.\nEMEA, and APAC sales were disproportionately impacted by the decision to exit the unprofitable Street and Legacy Sportster bikes, and in LATAM the declines in the model pruning and market exits were accompanied by pricing actions taken across select models.\nThrough these actions the LATAM region has improved their profitability, which we expect will set up a solid foundation for future growth.\nWorldwide retail inventory of new motorcycles was down 30% versus last year and relatively flat to the previous quarter.\nQ3 inventory has been impacted by stronger demand in the US as well as supplier challenges, which impacted our ability to produce to planned levels.\nwhile inventory levels are lower than our original plan We have seen improvement in desirability as measured by stronger pricing dynamics across both new and used motorcycles and strong dealer profitability.\ninternational markets continue to be impacted more profoundly by global transport challenges, which resulted in higher cost and longer ship times to key ports.\nLooking at revenue, total motorcycle segment revenue was up 20% in Q3, and up 36% on a year-to-date basis.\nFocusing on current quarter activity 9 points of growth came from higher year-over-year volume from motorcycle units, including the new Pan America and Sportster S motorcycle, 8 points of growth for mix driven by a larger percentage of touring bikes in the quarter and reductions across Legacy, Sportster and Street, 2 points of growth from pricing and incentives, and during the quarter we increased the pricing surcharges in the US from an average of 2% taken in Q2 to 3.5% to partially offset raw material inflation and finally, one point of growth from foreign exchange.\nQ3 gross margin percent of 26.7 was down 3% points versus prior year.\nOur margin benefit from stronger volume, profitable profitable mix and pricing was more than offset by the negative cost headwinds across the supply chain and higher EU tariffs.\nQ3 operating margin finished at 8.4% and was up 3.6% points over the prior year.\nThe positive margin benefit from volume, mix, pricing and reduced restructuring expense was able to offset the negative gross margin drivers already noted.\nYear-to-date operating margin is significantly ahead of last year given the COVID impact and it is also 4.6 points ahead of 2019.\nDespite absolute unit decline versus 2019 profit per unit has increased behind a stronger mix, pricing, lower incentives and an overall lower cost structure.\nThese results validate the efforts that we took during the rewire in a set up a more profitable foundation for future growth.\nAs mentioned previously, the global supply chain remains volatile, not only for our business, but across the global manufacturing sector.\nOur team has continued to do a great job navigating through the unprecedented challenges and demonstrating agility and managing production schedules to optimize output.\nWe have continued to see increasing inflation within raw materials in all modes of freights and we are forecasting this to continue at least through the balance of the year.\nTo help provide additional insight into the supply chain Slide 9 provides a detail on our cost of sales mix as well as the estimated inflation impact across the major components.\nAs you can see, logistics cost began to increase early in the year and peaked in Q2 at 2.5 times our prior year cost before settling down a bit in Q3 at two times prior year.\nQ3 was better than Q2 as we move past the cost incurred with our 3PL conversion in North America.\nMaterials and components cost inflation accelerated through the third quarter, where we experienced a 6% to 7% increase versus last year.\nThis includes the cost of raw materials and higher cost of purchase components.\nAnd finally, manufacturing inflation which includes labor cost has been relatively consistent throughout the year at 3%.\nWe're forecasting continued inflation pressure across all three buckets in the fourth quarter at similar levels to what we've seen in Q3.\nThe Financial Services Segment operating income in Q3 was $107 million, up $15 million compared to last year, primarily driven by $23 million of interest expense favorability.\nHDFS's retail credit loss ratio remained historically low at 0.8%, a 56 basis point improvement over last year.\nOverall retail delinquency rates have been favorably impacted by improved economic conditions and the benefits provided to individuals under the federal stimulus packages earlier this year.\nDelinquency rates have continued to run much lower than pre-pandemic historical levels and what we do expect delinquency rates to normalize over time we believe losses will continue to remain lower in the short term.\nLooking at HDFS's base business, retail originations in Q3 were up 13% versus last year behind strong new and used motorcycle origination volume.\nAs a result, ending retail finance receivables in Q3 were $6.7 billion, which is up 2.2% from last year.\nIn addition, the retail allowance for credit losses at the end of Q3 was 5.1%, which is flat sequentially and down from 5.9% at the end of Q3 last year.\nA year ago the US economy was restrained by the pandemic and this is reflected in higher allowance rate.\nWhile today's allowance rate has improved versus the peaks of 2020, it is still above pre-pandemic levels, given the continued uncertainties surrounding the pace of economic recovery.\nWrapping up with Harley-Davidson Inc financial results, we delivered year-to-ate, operating cash flow of $926 million, down $210 million from the year-over-year period.\nThe key driver of unfavorable cash flow was an increase in wholesale finance receivable originations.\nTotal cash and cash equivalents ended the quarter at $2.1 billion, which is $1.5 billion lower than Q3 last year as we worked down higher cash balances held as a result of the pandemic.\nAs we look to the balance of the year, we are maintaining our guidance on the Motorcycles segment revenue growth of 30% to 35%.\nWe are also maintaining our GAAP Motorcycles segment operating income margin guidance of 6% to 8%, which is inclusive of the full impact of the incremental EU tariff and the supply chain inflation laid out earlier.\nOur estimated EU tariff impact for 2021 has been adjusted to approximately $54 million in line with our unit forecast.\nWe are lowering our capital expenditures guidance to $135 million to $150 million from the previously communicated range of $190 million to $220 million.\nThe spending change is driven by tighter cash management across projects as well as changes in the cash flow phasing across key initiatives.\nAnd lastly, we are increasing the Financial Services segment operating income growth guidance to 95% to 105% which is an increase from the previously communicated range of 75% to 85%.\nThe improved outlook takes into account the year-to-date loss favorability, the reserve releases early in the year and our outlook for Q4.\nCash allocation priorities remain to first fund growth through the Hardwire initiatives then to pay dividends, and the company may also choose to execute discretionary share repurchases in 2021 and 2022.\nAs we look ahead to the fourth quarter, On slide 14 there are a few known and expected factors to consider regarding our revenue and profitability.\nFirst, as we've discussed, we will be shifting our motorcycle production in the middle of the quarter to begin producing the 2022 model year product.\nWhile we will continue to run the plant this dynamic will limit the amount of wholesale shipments and revenue during the fourth quarter as bikes builds will go into company-owned inventory ahead of the model year launch.\nWe expect the financial impact was very similar to the impact we saw last year in Q4.\nOther Q4 factors include higher expected expense and capital spending to support upcoming launches and marketing campaigns, and as we previously mentioned, we also expect to see supply chain inflation consistent with what we experienced in Q3.\nThis will be slightly offset by lower Q4 restructuring spending versus last year.\nRestructuring charges in Q4 2021 will not be material and we no longer plan to spend the $20 million full-year estimate mentioned in previous quarters.\nAs we pursue our Hardwire goals we continue to enhance our organization and processes, focusing on alignment and efficiency.\nUnderpinned by drive to win as a team, which is the basis for our culture, we will look to ensure that Harley-Davidson as a company and as a brand is getting stronger than ever and is positioned for long-term success.\nBy designing, engineering and bulding the most desirable motorcycles in the world reflected in quality innovation and craftsmanship we continue to further our legacy as the only American motorcycle brand with 118 years of uninterrupted heritage.\nAs you know desirability provides the framework for our Hardwire strategic plan, our 5-year roadmap to both enhance and grow our position as the most desirable motorcycle brand in the world.\nDesirability not only impacts those new to our sport and our brand, but also a dedicated community of riders and non-riders alike.\nAs we recognize the post pandemic conversations around the sport of motorcycling have changed, we also see a rider base that has a desire to escape, explore the outdoors and rediscover passion for riding, all of which fits squarely in the Harley-Davidson mission of delivering freedom for the soul in the pursuit of adventure.\nDesirability is also a motivating factor for getting people into the sport.\nWe know there are plenty of people who are interested in riding, but more importantly interested in riding Harley-Davidson.\nThe Harley-Davidson Riding Academy is an important way in which would build ridership and deepen our connection with our customers.\nAlready we are focused on North America we have plans to take the HD Riding Academy to high potential markets across the world including China, where we see a high potential to leverage our brand and introduce new riders to the sport.\nWe are also mindful of the need for riders to hone their riding skills at this part of their journey in pursuit of adventure.\nThe latest offering from the Harley-Davidson Riding Academy [Indecipherable] the adventure touring rider course specifically designed the offering to complement our Pan American motorcycle.\nThis course which we are planning to expand strategically over time is a perfect experience for new and existing adventure touring riders offering the skills and knowledge to get more out of the offroad experience by prioritizing rider safety.\nWith improved market conditions we've seen growing consumer appetite for our brand and our iconic motorcycles, including the new products we launched this year.\nSince launching Hardwire we've experienced strong demand for our products and our brand and the demand that we have seeing is in our strongest and most profitable segments.\nDespite the continued impact of the pandemic and related supply chain challenges we can see the potential of our streamlined market strategy as we maintain a long-term focus on profitable growth in line with our Hardwire ambitions.\nAs we continue to execute against our strategy of 70-20-10 SKUs two of our stronghold segments of Touring, Large Cruiser and Trike we remain guided by our commitment to two critical conditions, profitable segments, improving volume, margin and potential and segments aligned to our brand capabilities with a clear path to leadership.\n[Technical Issues] work hard to continue to solidify and grow our position as leaders, acknowledging that these segments are the most attractive of the global market in terms of our profit focus, another component of the Hardwire selective expansion.\nThe focus on selective expansion also allows us to target segments that deliver balanced combination of volume, margin and growth potential and that are aligned with our brand capabilities and identity.\nAgain, we run these segments supported by the right allocation of time and energy balanced with the right investments in product, brand and go-to market capabilities.\nIn February, this year we launched our first adventure touring motorcycle to Pan America.\nTaking inspiration from our heritage we wanted to create a motorcycle that redefine the category.\nThe Pan America squarely built in our mission to the deliver to adventure for our riders on and off the road.\nThe performance of the Pan America has recently been demonstrated by a group of riders who reached the summit of the Key La Pass in the Himalayas, the highest unpaved motorable road in the world at some 18,600ft, a feat at first for Harley-Davidson.\nThis quarter saw the Pan America [Indecipherable] to become the number one selling adventure model in the United States, an accolade that we are very proud of.\nWe believe we will continue to grow the category in North America and the potential of the Pan America across the world is significant.\nFor example, the North America the category accounts for 5% of the overall market and has grown 51% since 2017.\nWhen you look to Europe Adventure Touring currently represents 33% of the motorcycle market as a whole, growing 33% since 2018 and we believe it's continuing to grow.\nWe see great opportunity to build on the success of Pan America in the first 6 months in markets and look to win in Europe and further as we actively target new Harley-Davidson riders in the Adventure Touring space.\nIn July, we also launched the latest information of the iconic Sportster, the Sportster S at our Global Reveal event.\nImmediate response to the Sportster S has been exceptional with positive reviews including motorcycle.com praising the Revolution Max as their new favorite motorcycle engine, [Indecipherable] calling out the bike as a pillar [Indecipherable].\nAt launch we saw one of the largest engagement rates on our Harley-Davidson social channels.\nWe've been pleased to see this excitement translating into orders for the Sportster S allocation being sold out through our integrated pre-order system.\nWith our pre-order system, our dealers are able to effectively create an integrated reservation system.\nThis direct line of communication has allowed us to work through manufacturing allocations and improves the overall dealer visibility on orders.\nIn Q4 this year Harley-Davidson will officially launch the reservation process in the US and Canada to capture early demand on select 2022 models.\nThis process will provide a consistent experience both in Harley-Davidson.com and at the dealership network and will allow dealers to engage with customers on contributing and customizing the new motorcycle, keep them notified of when to expect delivery, and inform future enhancements that strengthen and support the Harley-Davidson community online and on the road.\nWith our ambition to put our customers at the forefront of everything we do aligned to our Hardwire goals.\nBy facilitating early engagement between dealers and customers, we are investing in strengthening this important relationship to move and integrated tools that we creating.\nFor dealers we believe this new reservation process will improve the sell-through rate and for Harley-Davidson, it will help ensure production better match customer demand.\nWe are excited to see the Sportster S make its way into the hands of our customers around the world and look forward to this new generation of Sportster hitting the streets in full force.\nAs evidenced by strong performance this quarter, HDFS's strategic asset with [Technical Issues] growth and profitability.\nWith HDFS Harley-Davidson is uniquely positioned to be able to offer our customers value the financing options for their motorcycles.\nWith over 65% of Harley-Davidson motorcycles financed by HDFS.\nGoing forward, it is our goal to make HDFS the preferred choice for all Harley-Davidson riders, but in the new capabilities that rival the innovators of financial services.\nHDFS is integral to the Harley-Davidson success and with the plant expansion in Europe in the near-to-medium term, I'm excited for the future.\nWith HD1 marketplace I think for HDFS it was our intention to change the face of the online market for pre-owned Harley-Davidson motorcycles blaming the best of digital and in dealer experiences aligned to our Hardwire priorities.\nSince launching in July H-D1 marketplace has become the go to online Harley-Davidson marketplace for dealer based listings, with the largest selection of dealer pre-owned Harley-Davidson motorcycles in the United States, including the largest selection of HD-certified motorcycles ensuring the ultimate choice in preowned.\nWe've seen the power of the HD certified program driving desirability and enhancing the overall consumer experience while providing customers with an extra level of confidence in their purchases.\nAs of this month, H-D1 marketplace features over 25,000 owned Harley-Davidson motorcycle listing,1200 Harley-Davidson certified motorcycles, over 500,000 units released since launch and over 550 participating Harley-Davidson dealers.\nBacked by the strength of our dealer network we want to continue to ensure that our riders have access to the largest selection of the best Harley-Davidson motorcycles.\nWe believe the H-D1 will drive connectivity and engagement with our Harley-Davidson customers and dealers, acknowledging the important part that riders of pre-owned Harley-Davidsons play in our community.\nWhile we have achieved this initial goal in the United States, it is our ambition that marketplace will continue to evolve and that it will become the the ultimate column for pre-owned Harley-Davidson motorcycles.\nFor over a decade, Harley-Davidsons has produced and published Annual Sustainability Report, ahead of many in our sector.\nOver that time we've made solid progress and that progress has reinforced the importance of inclusive stakeholder management as a key [Technical Issues] as we recognize that our future will be defined not only by our product and experiences, but how we deliver value for all our stakeholders.\nIn publishing our 2020 inclusive stakeholder management report, we made a commitment to create a high performing, engaged and diverse workforce, create an inclusive and more sustainable dealer network and supply base, create a path to net zero environmental impact by 2050 at the latest, deliver positive impact in our communities, and aling the rewards of inclusive shareholders.\nBy making inclusive stakeholder management a key part of our strategy, we are prioritizing long-term profitable growth and value for our stakeholders, our communities, our people and our planet.\nI will invite you all to read our report in full.\nThe initial proof points of our 5-year strategy.\nI believe there is tremendous potential for our brand and business globally and we will not rest until we have the best in class in every marketing segment in which we compete.\nIn closing, before we go to questions, I would also like to provide a brief update on EU tariff situation so far to the fact our company.\nAt the negotiations between EF and EU continue, we are quite optimistic that a resolution will be found.\nWe've been especially encouraged by the positive media reporting of the negotiations that we have seen over the past few weeks.\nWe've actively engaged with both the US administration and EU as we expect throughout, we believe that Harley-Davidson bear has place in this political dispute that is not of our making.\n",
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"content": "sees fy financial services segment operating income growth of 95 to 105 percent,.\nfull-year 2021 motorcycles segment guidance remains unchanged relative to prior guidance.\ncompname says fy 2021 capital expenditures of $135 million to $150 million, decrease from previously communicated range of $190 million to $225 million.\nsees fy 2021 motorcycles segment revenue growth to be 30 to 35 percent.\nqtrly motorcycle shipments, in thousands, of 47.9, up 12%.\nsees fy 2021 financial services segment operating income growth of 95% to 105%, increase from prior range of 75% to 85%.\nsees fy capital expenditures of $135 million to $150 million.\nharley-davidson - qtrly motorcycles segment operating margin was driven by unit mix, pricing & reduced restructuring expense.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: I'm Andy Simanek, head of investor relations for Hewlett Packard Enterprise.\nAlso, for financial information that has been expressed on a non-GAAP basis, we have provided reconciliations to the comparable GAAP information on our website.\nThroughout this conference call, all revenue growth rates, unless noted otherwise, are presented on a year-over-year basis and adjusted to exclude the impact of currency.\nIt is hard to comprehend everything that has transpired around the world over the last year.\nThe world we knew pre-pandemic has changed forever, and the need to use innovative technologies to advance the way people live and business operate has never been greater.\nImproving the health of our communities from educating our children to digitizing our economy and enable its recovery creates an enormous opportunity.\nI believe we are entering a new era, the age of insight, fueled by the amount of data around us.\nThe arrival of safe and effective COVID-19 vaccines is a marvel of innovation and good news for us all, bringing hope and optimism for what lies ahead.\nI am personally very excited about the future of innovation and impact it will have.\nI am very pleased with HPE's Q1 results.\nOur revenue exceeded our outlook and represents a stronger-than-normal sequential seasonality.\nWe significantly expanded our gross and operating margins, driving strong profitability across our businesses ahead of pre-pandemic levels.\nOur non-GAAP earnings per share exceeded the high end of our guidance, and free cash flow was a record Q1 performance.\nThese results give us confidence to raise our fiscal-year '21 earnings per share and free cash flow outlook, which we will address in more detail later on the call.\nThe global pandemic has brought a renewed focus on digital transformation as businesses are rethinking everything from remote work and collaboration to business continuity and data insights.\nAs the work recovers, our customers are looking for the agility and simplicity of the cloud-native world with the flexibility and control of a hybrid business model.\nThis is where we have a unique and differentiated value proposition.\nHPE acted intentionally and quickly last year to become a more agile organization and enable our ability to innovate faster.\nOur Q1 results demonstrate our progress in enhancing our position to accelerate what comes next for our customers.\nI am very grateful for our dedicated, passionate and resilient team members.\nThey have been laser-focused on delivering for our customers and executing our strategy to drive long-term sustainable profitable growth for our shareholders.\nWe are strengthening our core businesses, doubling down in key areas of growth and accelerating our as-a-service pivot to become the edge-to-cloud platform as-a-service choice for our customers and partners.\nOur total revenue of $6.8 billion was down 3% from the prior year.\nWhen normalized for the backlog from last quarter, this is better-than-expected sequential seasonality.\nWe saw solid order linearity intake across all of our businesses throughout the quarter.\nWe are executing on multiple growth opportunities, and we are particularly pleased with strong revenue growth in our Intelligent Edge business and growth in our as-a-service orders and revenue.\nGoing forward, we expect to see gradual improvement in customer spending as we progress through fiscal-year '21, giving us the confidence in our ability to deliver on our long-term revenue growth guidance.\nImportantly, our non-GAAP gross margin of 33.7% is up 30 basis points year over year and 300 basis points sequentially.\nOur non-GAAP operating profit of 11.3% is up 130 basis points year over year, and our non-GAAP earnings per share of $0.52 is up 4% year over year and significantly above the high end of our outlook.\nWe generated a record Q1 free cash flow of $563 million, the highest achieved in the first fiscal quarter in the history of Hewlett Packard Enterprise.\nThese are impressive results made possible through disciplined execution, strong expense management and critical investment prioritization.\nBased on the strong start to fiscal-year '21, we are raising our fiscal-year '21 non-GAAP earnings per share outlook to $1.70 to $1.88 and free cash flow to $1.1 billion to $1.4 billion.\nTarek will discuss the financial results and outlook in greater detail, but let me first give you some additional context around our business segment performance and innovation highlights for the quarter.\nTo emerge and recover from the global pandemic, enterprises require secure connectivity, data insight and a cloud experience to accelerate their digital transformation, all of which further reinforces the significance of HP's differentiated edge-to-cloud platform as-a-service vision.\nIn our prioritized areas of growth, our Intelligent Edge business had an outstanding quarter, with revenue of $806 million, up 11% year over year.\nWe again expect to take market share in both campus switching and wireless LAN segments of the market.\nWe are seeing continued traction from our investment at the edge, including rich software capabilities like our Aruba ClearPass security, our cloud-native Aruba Central and most recently, Aruba ESP, our edge services platform.\nOur Aruba SaaS revenue grew triple digits year over year.\nThe first full quarter following our Silver Peak acquisition reinforces that we are on track to grow high-margin recurring revenue with technology that accelerates our ability to capture the high-growth SD-WAN market opportunity.\nOur Silver Peak SaaS offering provide customers the ability to connect all their edges and all their clouds in a fully automated and autonomous way.\nWe launched new SD-WAN capabilities to centrally monitor, manage and automate connectivity from branch location to AWS, adding support for the AWS Transit Gateway Connect solution.\nAnd early today, you may have seen our announcement introducing new solutions from deeper integration between our Aruba ESP and Microsoft Azure, which will simplify IoT device connectivity and bring Aruba Central to Microsoft Azure.\nFinally, we introduced a new class of cloud-native and fully automated data center switching products specifically designed for the edge cloud data centers, which represents a $12 billion TAM expansion opportunity for Hewlett Packard Enterprise.\nThese new offerings also enable us to accelerate the delivery of workload optimized solutions for our HP GreenLake Cloud services offerings.\nAruba's innovations is why customers like Santander, SKECHERS USA and L3 Harris are choosing Aruba.\nWe have multi-growth drivers in our Intelligent Edge business, and we believe we are well-positioned to outgrow the market.\nHigh-performance compute and mission-critical solution is inherently a lumpy business due to the timing of deals and customer uncertainties because we can only recognize revenues once customer workloads are in production.\nIn Q1, revenue was down 9% from the prior year.\nWe remain very confident in this high-growth segment based on our backlog of our awarded business, which now exceeds well over $2 billion of exascale contracts and a robust pipeline of multimillion-dollar sized deals.\nWe are on track to deliver the 8% to 12% annual growth rate communicated at our Security Analyst Meeting last fall.\nWe have a market-leading and differentiated portfolio of technologies that will power the new age of insight.\nWe recently introduced HP GreenLake Cloud Services for HPC to accelerate enterprise Main Street adoption or high-performance computing, targeting a $3 billion to $4 billion TAM.\nEnterprises are running analytics on increasingly large data sets and are adopting new techniques such as artificial intelligence, deep learning and machine learning.\nAnd then now we have access to HPC technologies that were historically out of reach.\nIn Q1, we won two major HPC awards, one with the National Center of Atmospheric Research, a contract worth $35 million, to build a supercomputer for extreme weather research; and another that expands NASA's HP Akin Supercomputer.\nWe also completed the installation of the Dammam 7 supercomputer for Saudi Aramco, which immediately became one of the top 10 supercomputers in the world.\nFinally, on February 20, you may have seen that HPC Spaceborne Computer 2 was launched into orbit for use on the International Space Station.\nThis system is enabling real-time data processing with advanced commercial edge computing in space for the first time as NASA prepares for future missions.\nToday, I want to share the news that Pete Ungaro has decided to leave the company in April.\nPete joined HP with Cray -- with the Cray acquisition and ensured the successful integration of the two companies.\nHe has made significant contribution and has grown the business despite the complications and backlog brought by the global pandemic last year.\nPete will stay on with the company in a consulting capacity for six months.\nAnd I'm really grateful for him -- to him for his leadership.\nI am pleased to announce that Justin Hotard, a seasoned HP leader, will take over the leadership of the HPC MCS business and also Hewlett Packard Labs reporting to me.\nJustin has brought an extensive experience across the company that includes leading our HPE Compute business, where he transformed the x86 compute portfolio and delivered revenue growth, profitability and market share expansion.\nI'm excited about what Justin will bring to the business.\nIn the core businesses of Compute and Storage, our strategy to grow in profitable segments and pivot to more as-a-service solutions is paying off.\nWe drove strong profitability and cash flow in both businesses.\nIn Compute, our operating margins of 11.5% increased 80 basis points year over year and 490 basis points quarter over quarter.\nOur revenue declined 2% from the prior year but was up low single digits sequentially when normalized for the backlog in Q4.\nWe are encouraged by the sequential growth in new orders intake, taking into account our normal Q2 seasonality.\nJust last week, we launched our new HPE 5G open run solution stack for telecommunications companies to accelerate the commercial adoption of open run in 5G network deployments.\nThis is a transformative technology, featuring the industry's first server optimized for 5G open run workloads with our HP ProLiant servers.\nThis complements the HPE 5G core stack and build last year in March.\nOrange, one of the world's largest mobile network operators, is currently working with HPE to test a full 5G core stack in preparation for broader commercial deployment.\nIn Storage, revenue was down 6% from the prior year, with operating margins of 19.7%, which is above the target profitability range we discussed at SAM.\nWe continue to see strong revenue growth in our own IP software-defined portfolio, where we have been investing.\nOur HPE Primera business grew triple digits year over year and soon will be bigger than our 3PAR business.\nThis is the fastest revenue ramp ever achieved in our HP storage portfolio.\nOur overall HPE All Flash Array portfolio grew 5%, driven by both HPE Primera and HP Nimble storage.\nOur hyper-converged strategy continued to gain traction.\nOur HP Nimble dHCI next-generation technology, powered with artificial intelligence, give customers a cloud-native experience in their own data centers, where they also have the ability to control costs while maintaining data compliance and security.\nOur focus on our own IP software-defined portfolio also improves our ability to attach rich services to our product offerings.\nOur storage operational services attach intensity is up double digits year over year.\nWe're also integrating cloud-native software technologies to empower our field and accelerate sales velocity.\nJust last week, we completed the acquisition of CloudPhysics.\nThis deal provides us with a SaaS-based tool that analyzes IT environment to provide a quick return on investment recommendations for cloud migrations, application modernization and infrastructure.\nI am very excited about this new addition to our set of capabilities, which we will expand across our entire HP portfolio.\nOur pivot to as-a-service continues its strong momentum.\nOur annualized revenue run rate of $649 million was up 27% year over year.\nAnd we had our highest first quarter ever with HP GreenLake Cloud services.\nThe customer adoption continued to be very strong.\nIn Q1, we gained more than 70 new HP GreenLake cloud services logos.\nLineas, Europe's largest private rail freight operator, selected HP GreenLake Cloud services to support its transformation from a conventional freight company into a high-performing, efficient and sustainable transport system for the European logistics industry.\nWe remain very confident in our unique approach and differentiate the portfolio to capitalize on the rapidly growing on-premises as-a-service market.\nOur new HPE software portfolio and our HP GreenLake manage services offerings enable a true consumption-based experience.\nOur HP GreenLake Cloud services customer retention rates are above 95%, and the average customer usage of our cloud services currently running at 120% of original commitment, driven by customer expansion in their capacity utilization.\nWe are excited about this long-term opportunity, and I'm very confident in our 30% to 40% CAGR target by fiscal-year '22.\nHP continued to benefit from capabilities and services that enable growth in our core business segments.\nHP Pointnext operational services had a solid quarter.\nOrder trends are improving and revenue has stabilized to flat year over year with expanded operating profit margins.\nHP Financial Services provide significant value to our customers as they rebuild and rethink their IT transformation requirements.\nQ1 revenue stabilized with improved collections to deliver a return on equity of 16.5%.\nOverall, I'm pleased with how we started fiscal-year '21.\nBecause of our strong start, we are raising our outlook for both earnings per share and free cash flow.\nI talk to customers and partners almost every day.\nAnd while there continue to be some level of uncertainty, one thing is clear.\nCustomers are looking to accelerate their transformations and in a partner with the right technology, expertise and financial flexibility.\nOur distinctive and industry-leading portfolio of edge-to-cloud solutions and unique capabilities is resonating with customers.\nAnd I believe our team is one of the best in the industry.\nI'm impressed with our team members' commitment to make bold moves and ensuring we stay true to our service.\nFor the third year in a row, HP has been named one of the world's most ethical companies by the Ethisphere Institute.\nAnd just last week, HP received the terms of Reuters Foundation's Top Slavery Enterprise Award for our leadership in limiting the risk of slavery in our supply chain and operations.\nWith this unstoppable team and our portfolio leading solutions, we are well-positioned to capture the tremendous opportunity ahead in fiscal-year '21 and beyond.\nI'll start with a summary of our financial results for the first quarter of fiscal-year '21.\nAntonio discussed the key highlights for this quarter on Slide 1.\nAnd now let me discuss our financial performance and KPIs, starting with Slide 2.\nI am delighted to report that our Q1 results were marked by continued momentum in revenue, substantial gross and operating margin expansion and robust cash generation.\nWe delivered Q1 revenues of $6.8 billion, down 3% from the prior-year period, but better than our typical historical sequential seasonality when normalizing for Q4 backlog.\nI am particularly proud of the fact that our non-GAAP gross margin returned to above pre-pandemic levels and was up 30 basis points from the prior-year period and up 300 basis points sequentially.\nThis was driven by strong pricing discipline, the absence of backlog-related headwinds, cost takeouts and an ongoing favorable mix shift toward higher-margin software-rich offerings.\nOur non-GAAP operating margin was 11.3%, up 130 basis points from the prior year, which translates to an 11% year-over-year increase in operating profit.\nAs a result of our strong execution, we ended the quarter with non-GAAP earnings per share of $0.52, which was up 4% from the prior year and significantly above the higher end of our outlook range.\nQ1 cash flow from operations was close to $1 billion, driven by better profitability and strong operational discipline, as well as working capital timing benefits.\nQ1 free cash flow was $563 million, which was up approximately $750 million from the prior year and a record level for any first HPE first quarter.\nFinally, we paid $155 million of dividends in the quarter and are declaring a Q2 dividend today of $0.12 per share payable in April 2021.\nNow let's turn to our segment highlights on Slide 3.\nIn Intelligent Edge, we accelerated our momentum with rich software capabilities, delivering 11% year-over-year growth, our third consecutive quarter of sequential growth.\nSwitching was up 5% year over year with double-digit growth in North America.\nAnd wireless LAN was up 11% year over year with double-digit growth in both North America and APJ.\nAdditionally, the Aruba SaaS offering was up triple digits year over year and is now a significant contributor to HPE overall ARR.\nBased on our solid performance, we expect to take share again this quarter in both campus switching and wireless LAN.\nWe are also seeing the significant operating profit potential of this business with operating margins in Q1 of 18.9%, up 680 basis points year over year as we drove greater productivity from past investments and operational leverage benefits kick in.\nFinally, I am pleased to say we recognized our first full quarter of revenue from the acquisition of Silver Peak, the premium growth SD-WAN leader, which contributed approximately 500 basis points to the Intelligent Edge top-line growth.\nIn HPC and MCS, revenue declined 9% year over year, primarily due to the inherent lumpiness of the business, which is linked to the timing of deals and customer acceptance milestones.\nWe remain very confident in the near-term and longer-term outlook for this business and are reaffirming our full-year and three-year revenue growth CAGR target of 8% to 12%, respectively, as highlighted at SAM.\nWe have an extremely strong order book of over $2 billion worth of awarded exascale contracts with another $5-plus billion of market opportunity over the next three years.\nFinally, we announced the launch of our HPC as a Service offer, which we expect to gain traction later this year and become a further contributor to our overall growing ARR profile.\nIn Compute, revenue stabilized to a 2% year-over-year decline, but was up low single digits sequentially when normalizing for Q4 backlog, which attest of a strong order momentum in the quarter.\nGross and operating margins were up meaningfully quarter over quarter due to the absence of any backlog-related margin impact, improved supply chain execution and the rightsizing of the cost structure of this segment.\nWe ended the quarter with an operating profit margin of 11.5%, up 80 basis points from prior-year period and at the high end of our long-term margin guidance for this segment provided at SAM.\nWithin storage, revenue declined 6% year over year, driven by difficult prior-year compare, but with strong growth in software-defined offerings.\nWe are extremely well-positioned in Storage with Primera and Nimble dHCI.\nOur most software rich platforms, they are both growing triple digits year over year.\nThey are absolute winners in the market, and Primera is on track to surpass 3PAR sales as early as next quarter.\nWe also saw notable strength in overall Nimble, up 31% year over year, and total all-flash arrays were up 5% year over year.\nThe mix shift toward our more software-rich platforms helped drive storage operating profit margins to 19.7%, well above our long-term outlook for this segment presented at SAM last October.\nWith respect to Pointnext operational services, including Nimble services, revenue stabilized and was flat year over year, driven by the increased focus of our BU segments on selling products and services as bundles, improved services intensity and are growing as-a-service business, which I remind you, involves service attach rates of 100%.\nThis is very important to note because all of our services -- all of our OS revenue is recurring with three-year average contract length, and OS remains the highest operating margin contributor to our segments.\nWithin HPE Financial Services, revenue stabilized and was slightly down 1% year over year.\nAs expected, we are seeing sequential improvements in our bad debt loss ratios, ending this quarter at approximately 0.9%, which continues to be best-in-class within the industry.\nWe have also seen strong cash collections well above pre-COVID levels.\nAs a result, our non-GAAP operating margin was 9.8%, up 110 basis points on the prior year.\nAnd our return on equity is back to a pre-pandemic high teens level of 16.5%.\nSlide 4 highlights key metrics of our growing as-a-service business.\nSimilar to last quarter, we are making great strides in our as-a-service offering this quarter with over 70 new GreenLake logos added in Q1.\nI am very pleased to report that our Q1 21 ARR came in at $649 million, representing 27% year-over-year reported growth.\nTotal as-a-service orders were up 26% year over year, driven by very strong performance in Europe and Japan.\nOur HPE Aruba Central SaaS platform also contributed to grow revenues strong triple digits year over year.\nBased on strong customer demand and recent wins, I am very happy with how this business is executing and progressing toward achieving its ARR growth targets of 30% to 40% CAGR from fiscal-year '20 to fiscal-year '23, which I am reiterating today.\nSlide 5 highlights our revenue and earnings per share performance to date, where you can clearly see the strong rebound from our Q2 trough.\nRevenue returned back to near pre-pandemic levels last quarter.\nAnd with the operational execution of our cost optimization and resource allocation program, we have nearly doubled earnings per share from the trough and are now growing year over year.\nTurning to Slide 6.\nWe delivered a non-GAAP gross margin rate of Q1 -- in Q1 of 33.7% of revenues, which was up 300 basis points sequentially and 30 basis points from the prior-year period.\nThis was driven by strong pricing discipline, the absence of backlog-related headwinds we had in the second half of last year, operational services, margin expansion from cost takeout and automation and a positive mix shift toward high-margin software-rich businesses like the Intelligent Edge and Storage.\nMoving to Slide 7.\nYou can also see we have expanded non-GAAP operating profit margins, which is up 280 basis points sequentially and 130 basis points from the prior-year period.\nWe have done this by driving further productivity benefits while simultaneously maintaining our investment levels in R&D and field selling costs, which are critical to fuel our innovation engine and revenue growth targets.\nQ1 operating expenses also benefited from delayed hiring and a pushout of select investments that we will be making to drive further growth.\nTurning to Slide 8, we generated record levels of first-quarter cash flows.\nCash flow from operations was approximately $1 billion, and free cash flow was $563 million for the quarter, up approximately $750 million from the prior-year period.\nThis was primarily driven by the increased profitability, strong operational discipline and some working capital in year timing related benefits.\nNow moving on to Slide 9.\nLet me remind everyone about the strength of our diversified balance sheet, liquidity position, which are a competitive advantage in the current environment.\nAs of our January 31 quarter end, we had approximately $4.2 billion of cash on hand.\nTogether with an undrawn revolving credit facility of $4.75 billion at our disposal, we currently have approximately $9 billion of liquidity.\nFinally, I would like to reiterate that we remain committed to maintaining our investment-grade credit rating, which was recently reaffirmed by the rating agencies.\nBottom line, our improved free cash flow outlook and cash position ensures we have ample liquidity to run our operations, continue to invest in our business to drive growth and execute on our strategy.\nNow turning to outlook on Slide 10.\nToday, I'm pleased to announce that we are raising our fiscal-year guidance for fiscal-year '21 once again to reflect our strong operational performance to date and confidence in our outlook.\nWe now expect to grow our fiscal-year '21 non-GAAP operating profit by over 20% and expect to deliver fiscal-year '21 non-GAAP diluted net earnings per share between $1.70 to $1.88, which is a $0.10 per share improvement on the midpoint of our prior earnings per share guidance of $1.60 to $1.78.\nFrom a top-line perspective, we are pleased with the momentum we saw in Q1.\nAnd while we continue to see gradual improvement, we remain prudent as we and the rest of the world continue to navigate the pandemic and related macro uncertainties.\nMore specifically for Q2 '21, we expect revenue to be slightly better than in line with our normal sequential seasonality of down mid-single digits from Q1.\nThis still represents double-digit year-over-year growth from the $6 billion trough of Q2 of fiscal-year '20.\nNow with respect to supply chain, I would like to remind everyone that we exited Q4 of fiscal-year '20 with higher levels of inventory to protect against the risk of a short-term supply squeeze and address improved customer demand.\nWith these actions and other proactive steps that we've taken in Q1, we do not expect any meaningful impacts on our supply chain in the near term.\nWe are now turning our attention to working on strengthening our inventory supply for the second half of fiscal-year '21 as we see improved levels of demand, recognizing also that we have entered an inflationary environment for memory components.\nFor Q2 '21, we expect GAAP diluted net earnings per share of $0.02 to $0.08 and non-GAAP diluted net earnings per share of $0.38 to $0.44.\nAdditionally, given our record levels of cash flow this quarter and raised earnings outlook, I am very pleased to announce that we are also raising fiscal-year '21 free cash flow guidance from our SAM guidance of $900 million to $1.1 billion to a revised outlook of $1.1 billion to $1.4 billion, a $250 million increase at the midpoint.\nSo overall, Antonio and I are proud of these results.\nWe have navigated well through unprecedented challenges in the last fiscal year and have started the new fiscal year strong out of the gate.\nWe saw significant acceleration and customer demand in our Intelligent Edge business and the order pipeline, and our HPC MCS business remains robust.\nOur core business of Compute and Storage revenues are stabilizing with improved margins, and our as-a-service ARR continues to show strong momentum aligned to our outlook.\nAs a result of our cost optimization and resource allocation program, we are emerging from an unprecedented crisis as a different company, one that is much leaner, better-resourced and positioned to capitalize on the gradual economic recovery currently at play.\nWe are already seeing the benefits of our actions in our improved margin profile and free cash flow outlook.\n",
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"content": "q1 revenue $6.8 billion versus refinitiv ibes estimate of $6.71 billion.\nhewlett packard enterprise - raises fiscal 2021 gaap diluted net earnings per share outlook to $0.48 to $0.66 and non-gaap diluted net earnings per share outlook to $1.70 to $1.88.\nestimates q2 gaap diluted net earnings per share to be in range of $0.02 to $0.08.\nhewlett packard enterprise - raises fiscal 2021 free cash flow guidance to $1.1 to $1.4 billion.\nsees q2 non-gaap diluted net earnings per share to be in range of $0.38 to $0.44.\nqtrly compute revenue was $3.0 billion, down 1% year over year or down 2% when adjusted for currency.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: I'm Andy Simanek of investor relations for Hewlett Packard Enterprise.\nAlso, for financial information that has been expressed on a non-GAAP basis, we have provided reconciliations to the comparable GAAP information on our website.\nThroughout this conference call, all revenue growth rates, unless noted otherwise, are presented on a year-over-year basis and adjusted to exclude the impact of currency.\nWhile great progress is made in the fight against COVID, it's also clear that it's still a global challenge.\nWe will continue to do everything we can to support our team members, customers, and communities through this very challenging time.\nHewlett Packard Enterprise had a strong second quarter.\nI'm very pleased with our results and that they are marked by revenue growth, strong profitability, and free cash flow.\nThe overall demand environment is improving, and we are seeing traction across our portfolio.\nWe saw solid sequential improvement in total HPE orders growth that was up mid-single digits with double-digit growth in HPE GreenLake and HPC business segments.\nWe expect to continue to see improvement in customer IT spending throughout 2021.\nOur disciplined execution on our strategic priorities outlined at the Security Analyst Meeting last fall is positively impacting both top and bottom-line performance.\nWe are strengthening our core businesses, doubling down in key areas of growth, and accelerating our ultra service pivot while advancing our cloud-first innovation agenda to become the edge-to-cloud Platform-as-a-Service choice for our customers and partners.\nWe have also executed well throughout the industrywide tightening and cost inflationary trends with minimal impact to our first half.\nWe have taken proactive inventory buffering measures to position us well for the second half.\nWe will continue to take additional inventory actions as appropriate, in alignment to the market demand by leveraging great engineering capabilities and our long-term agreements with our suppliers.\nOur continued strong performance gives us the confidence to raise our fiscal year '21 earnings per share and free cash flow outlook for the third time since our Security Analyst Meeting.\nWe will provide more details about this new guidance later in the call.\nFirst, let me review some key Q2 highlights.\nRevenue of $6.7 billion was up 9% year over year, with better-than-normal sequential seasonality.\nI'm particularly pleased with the double-digit revenue growth in both our HPC and Intelligent Edge businesses that together now represents two -- 22% of our HPE total revenue.\nOur as-a-Service annual recurring revenue growth was an impressive 30% year over year, which underscores our momentum in enabling consumption-based IT.\nThis is an important long-term growth driver for our company.\nWe made significant improvements in both gross and operating margins.\nOur non-GAAP gross margin of 34.3% is at record level and up 210 basis points year over year.\nOur non-GAAP operating profit of 10.2% is up 300 basis points year over year.\nAnd our non-GAAP earnings per share of $0.46 is up 70% year over year and above the high end of our outlook range.\nThese results contribute to Q2 free cash flow of $368 million, which is up $770 million year over year, bringing our first half fiscal year '21 free cash flow to a record $931 million.\nTarek will discuss the financial results and outlook in greater detail.\nBefore he does that, I want to provide additional comments on our business segment performance and highlight some of the innovative solutions and experiences we introduced during the quarter.\nHPE has been a driving transformation in our businesses to deliver a modern secure cloud experience everywhere to help our customers with their digital transformations.\nOur Intelligent Edge business accelerated its momentum with an outstanding quarter across all metrics.\nRevenue of $799 million grew 17% year over year, and operating profit expanded 320 basis points year over year.\nThis is the third consecutive quarter of year-over-year revenue growth and sixth consecutive quarter of operating profit expansion.\nEdge-as-a-Service offerings were up triple digits year over year and now a meaningful contributor to HPE's overall ARR.\nExtended to the edge has never been more critical for enterprises.\nAt Aruba Atmosphere, our signature event for Aruba customers and partners, we announced an expansive set of cross-portfolio edge-to-cloud security integrations for our Aruba Edge Services Platform, or ESP, including SD-WAN technology from our recent Silver Peak acquisition.\nToday, our Aruba Edge Services platform already supports well over 100,000 customers with 150 new customers added every day, connecting over 1 billion active devices.\nAruba building identity network security is unique in the market and provides the ideal foundation for building a zero-trust and Secure Access Service Edge.\nOur comprehensive portfolio and AI-powered, cloud-driven platforms like Aruba ESP and Aruba Central will continue to accelerate WAN and security deployment, advanced cloud and IoT adoption, and fast-track digital transformation.\nCustomers like Walgreens Boots Alliance and Mercado Libre chose Aruba in Q2 for these reasons.\nI am tremendously pleased with Aruba's impressive performance, and it is against this successful backdrop that I want to share that Aruba founder, Keerti Melkote, has made the decision to retire from HPE.\nWe acquired Aruba in 2015 when we saw the edge as the next frontier.\nAruba and Keerti has been instrumental in accelerating this business to the $3 billion business it is today.\nI'm incredibly grateful for his leadership, and I have personally benefited from his counsel, knowledge, and friendship.\nKeerti will remain as an advisor to me for the remainder of 2021.\nI am pleased to announce that effective today, Phil Mottram will take over the leadership of our Aruba Intelligent Edge business.\nPhil is a result-driven leader with extensive experience implementing growth strategies and leading transformation initiatives.\nHe joined HPE in 2019 and most recently assumed the role as the General Manager of our Communications Technology Group, leading a team of more than 5,000 team members who drive $500 million in CPG-specific revenue and $3.5 billion in total revenue for HPE.\nIn our high-performance compute and mission critical solutions business, revenue of $685 million was up 11% year over year.\nWe are the undisputed market leader with an industry-leading portfolio in AI and people learning solutions for the new Age of Insight.\nWe continue to execute on over $2 billion in awarded contract, and we are pursuing a robust pipeline of another $5 billion in market opportunity over the next three years.\nIn Q2, we announced several new HPC systems deals and collaborations.\nThis includes building new supercomputer to advance scientific research for the Swiss National Supercomputing Centre, the United States Department of Energy Los Alamos National Laboratory, and the National Supercomputing Center in Singapore.\nAs we have noted on previous calls, this is an inherently lumpy business due to the lead times between ordinary revenue recognition, but we remain on track to deliver our target of 8% to 12% annual growth in this business this year.\nOur compute and storage businesses performed very well in the quarter.\nOur strategy to grow in profitable segments of the market and pivot to more as-a-Service solutions is paying off.\nIn Compute, revenue of $3 billion was up 10% year over year.\nWe drove strong operational performance, expanding operating margins by 550 basis points.\nWe expanded our portfolio with the latest AMD EPYC and Intel Xeon Scalable Processors, which include launching three new HPE ProLiant solutions targeting 5G deployments in telco, virtual desktop infrastructure, and storage optimized solutions for database workloads in enterprise.\nIn storage, revenue of $1.1 billion was up 3% year over year with a strong operating profit of 16.8%, up 110 basis points year over year.\nWe continue to see strength in key software-defined solutions, which drive our ability to attach rich services to our product offerings.\nHPE Primera and Nimble dHCI both grew triple digits.\nOur HPE's All-Flash Array portfolio grew 20%.\nOn May 4, we introduced a new portfolio of cloud-native data infrastructure called HPE Alletra.\nThis portfolio delivers workload-optimized systems and provides customers with architectural flexibility to run any application without compromise from edge to cloud with a cloud operational experience.\nThese innovations are propelling our storage business into our cloud-native software-defined data services business.\nOur pivot to as-a-Service continued its strong momentum.\nOur annualized revenue run rate of $678 million was up 30% year over year.\nWe saw strong total as-a-Service order growth of 41%.\nOver 900 go-to-market partners are now actively selling HPE GreenLake as a part of their own marketplace.\nAnd we average a 95% renewal rate with billings from those customers at 124% usage of the regional contract commitments.\nWe have an unmatched portfolio of hybrid cloud services that spans all aspects of networking, compute, storage, VMs, containers, ML Ops, HPC, and more.\nOn the innovation front, we announced a transformative new data storage services platform that brings a cloud operational model to whatever data it is by unifying data operations.\nThe platform will be available through HPE GreenLake Central and includes a new data services cloud console and a suite of software subscription services that simplifies and automates global infrastructure and scale.\nOur industry-leading HPE GreenLake Cloud Services experience enables us to gain more than 90 new customers during the quarter.\nCarestream is a great recent customer, for example.\nIn a three years multimillion-dollar deal, Carestream selected HPE GreenLake Cloud Services with HPE Ezmeral software HPE Pointnext services to power a transformative new healthcare initiative based on Artificial Intelligence-as-a-Service.\nWe will continue to invest aggressively in HPE GreenLake Cloud Services to provide a true cloud experience and operating model, whether at-the-edge, on-premise, or across multiple clouds.\nHPE's businesses that provide services and capability of our customers recently transformed also performed well in Q2.\nHPE Pointnext Operational Services had another solid quarter with revenue growing year over year as reported.\nWe expect to see growth for the full fiscal year, driven by our growing services intensity and other service momentum.\nHPE Financial Services continue to play an important role helping our customers as they rebuild and rethink their IT transformation requirements.\nCash collections continue to improve, and HPE FS delivered a return on equity of 18.3%, well above prepandemic levels.\nThis business continued to perform very well.\nOver the past year, our global communities have faced a catastrophic health crisis and significant business disruption.\nAt HPE, we accelerated our strategy to be the edge-to-cloud Platform-as-a-Service company to support our customers' rapidly changing needs, who have defined our 60,000 team members' demonstrated amazing agility and perseverance.\nAnd I'm tremendously proud of our team members' response during this unprecedented time.\nAs businesses emerge from the pandemic and move beyond the realities of COVID, digital transformation is at the forefront of their strategic initiatives.\nAt our Discover event on June 22, you will hear more about how HPE is at the center of this super-charged digital economy.\nOur edge-to-cloud architecture, software, and solutions all delivered as-a-Service will continue to help our customers transform their businesses, optimize their applications, and data clouds are increasingly distributing work and be future-ready today.\nI'm excited about our momentum, and I believe the HPE represents a strong investment opportunity for our shareholders.\nI'll start with a summary of our financial results for the second quarter of fiscal year '21.\nAntonio discussed the key highlights for this quarter on Slide 1, and now let me discuss our financial performance, starting with Slide 2.\nI am very pleased to report that our Q2 results reflect continued momentum in revenue, strong growth and operating margin expansion, and robust cash flow generation.\nWe delivered Q2 revenues of $6.7 billion, up 9% from the prior-year period, a level better than our normal sequential seasonality.\nI am particularly proud of the fact that our non-GAAP gross margin is at the record level of 34.3%, up 210 basis points from the prior-year period and up 60 basis points sequentially.\nThis was driven by strong pricing discipline, cost takeouts, and an ongoing favorable mix shift toward higher-margin, software-rich offering.\nOur non-GAAP operating expenses increased in the quarter, as we've previously indicated due to the planned hiring increases along with R&D and go-to-market investments, this offset by our continued progress delivering on the savings from our cost optimization plan, which is on track.\nEven with our investments, our non-GAAP operating margin was 10.2%.\nThat is up 300 basis points from our prior year, which translates to a 59% year-over-year increase in operating profit.\nWithin other income and expense, we benefited from one-time gains related to increased valuations in our Cohesity and IonQ investments within our Pathfinder venture portfolio.\nAs a result, we now expect other income and expense for the full year in fiscal year '21 to be an expense of approximately $50 million.\nWith strong execution across the business, we ended the quarter with non-GAAP earnings per share of $0.46, up 70% from the prior year and meaningfully above the higher end of our outlook range for Q2.\nQ2 cash flow from operations was $822 million and free cash flow was $368 million, up $770 million from the prior year, driven by better profitability and strong operational discipline, as well as working capital benefits.\nThis puts us at a record level of free cash flow for the first half at $931 million.\nFinally, we paid $156 million of dividends in the quarter and are declaring a Q3 dividend today of $0.12 per share payable in July.\nNow let's turn to our segment highlights on Slide 3.\nIn Intelligent Edge, we accelerated our momentum with rich software capabilities to meet robust customer demand, delivering 17% year-over-year revenue growth across the portfolio.\nSwitching was up 17% year over year, and wireless LAN was up 16%.\nAdditionally, the Edge-as-a-Service offerings were up triple digits year over year and now represent a meaningful contribution to HPE's overall ARR.\nWe also continue to see strong operating margins at 15.5% in Q2, up 320 basis points year over year, which is the sixth consecutive quarter of year-over-year operating margin expansion.\nSilver Peak continues to perform well, leveraging the high-growth SD-WAN market opportunity and contributed about five points to the Intelligent Edge top-line growth.\nIn HPC-MCS, revenue grew 11% year over year as we continue to achieve more customer acceptance milestones and deliver on our more than $2 billion of awarded contracts.\nWe remain on track to deliver on our full-year and three-year revenue growth CAGR target of 8% to 12%.\nIn compute, revenue grew 10% year over year and was down just 1% sequentially, reflecting much stronger-than-normal sequential seasonality.\nOperating margins were up meaningfully year over year due to disciplined pricing and the rightsizing of the cost structure in this segment.\nWe ended the quarter with an operating profit margin of 11.3%, up 550 basis points from the prior-year period and toward the upper range of our long-term margin guidance for these segments provided at SAM.\nWithin storage, revenue grew 3% year over year, driven by strong growth in software-defined offerings.\nNimble grew 17% with ongoing strong dHCI momentum growing triple digits.\nAll-Flash Arrays grew 20% year over year, led by Primera, that was up triple digits and is expected to surpass 3PAR sales next quarter.\nThe mix shift toward our more software-rich platforms and operational execution helped drive storage operating profit margin to 16.8%, up 110 basis points year over year.\nWith respect to Pointnext operational services, including Nimble services, revenue grew for the second consecutive quarter year over year as reported with further growth expected for the full year of fiscal year '21.\nThis has been driven by the increased focus of our BU segments on selling product and service bundles, improve service intensity, and our growing as-a-Service business, which I'll remind you, enrolls service attach rates of 100%.\nThis is very, very important to note because all of our OS revenue is recurring with three-year average contract length, and OS is the highest operating margin contributor to our segments.\nWithin HPE Financial Services, revenue was down 3% year over year as the pandemic did not materially impact this business until later in 2020.\nAs expected, we are seeing continued sequential improvements in our bad debt loss ratios ending this quarter at just 75 basis points, which continues to be best-in-class within the industry.\nWe have also seen improved cash collections well above pre-COVID levels.\nOur operating margin in this segment was 10.8%, up 160 basis points from the prior year and our return on equity at 18.3% is well above pre-pandemic levels and the 15%-plus target that we set at SAM.\nSlide 4 highlights key metrics of our growing as-a-Service business.\nSimilar to the past couple of quarters, we are making great strides in our as-a-Service offering with over 90 new enterprise GreenLake customers added.\nThat is in Q2, bringing the total to well over 1,000.\nI am pleased to report that our Q2 '21 ARR was $678 million, which was up 30% year over year as reported.\nTotal as-a-Service orders were up 41% year over year, driven by strong performance in North America and Central Europe.\nOur Edge-as-a-Service offerings also continued to grow revenue strong triple digits year over year.\nBased on strong customer demand and recent wins, I am very happy with how this business is executing and progressing toward achieving our ARR growth targets of 30% to 40%, a CAGR from FY '20 to FY '23.\nSlide 5 highlights our revenue and earnings per share performance to date where you can clearly see the strong rebound and momentum from our Q2 '20 trough.\nFor the past two quarters, revenue has exceeded our normal sequential seasonality, reflecting the improving demand environment.\nAnd with the operational execution of our cost optimization and resource allocation program, we have increased non-GAAP earnings per share in Q2 by 70% year over year.\nTurning to Slide 6.\nWe delivered a record non-GAAP gross margin rate in Q2 of 34.3% of revenues, which was up 60 basis points sequentially and up 210 basis points from the prior year.\nThis was driven by strong pricing discipline, operational services margin expansion from cost takeout and automation, and a positive mix shift toward high-margin, software-rich businesses like the Intelligent Edge and next-generation storage offering.\nWe have also benefited from the new segmentation we implemented beginning of fiscal year '20 that has given us much better visibility into each business unit and enabled better operational discipline.\nMoving to Slide 7.\nYou can also see we have expanded non-GAAP operating profit margin substantially from pandemic lows of -- to 10.2%, which is up 300 basis points from the prior-year period.\nWe have done this by driving further productivity benefits and delivering the expected savings from our cost optimization plan while simultaneously increasing our investment levels in R&D and field selling costs, which are critical to fuel our long-term innovation engine and revenue growth targets.\nQ2 operating expenses also included planned increased hiring and spending on select investments to drive further growth.\nTurning to Slide 8.\nWe generated a record first half levels of cash flow with $1.8 billion of cash flow from operations and $931 million of free cash flow, which is up $1.5 billion year over year.\nThis was primarily driven by the increased profitability, strong operational discipline, and some in near timing-related benefits.\nI would like to underscore that this year, our free cash flow profile seasonality will be different as a result of our back-end-loaded restructuring costs and investment in inventory for our supply chain to cater for rising demand and chip shortages as the economic recovery accelerate.\nNow moving on to Slide 9, let me remind everyone about the strength of our diversified balance sheet.\nAs of April 30 quarter end, we have improved the operating company to a net cash neutral position with our strong free cash flow.\nportfolio securitized by year end.\nThe refinancing of higher-cost unsecured debt with ABS financing allows us to boost access to financing markets at a cheaper cost of debt capital, as well as diversifying and segregating our balance sheet between our operating company and our financial services business.\nBottom line, our improved free cash flow outlook and cash position ensures we have ample liquidity available to run our operations, continue to invest in our business, drive growth and execute on our strategy.\nNow turning to our outlook on Slide 10.\nI am very pleased to announce that we are once again raising our full-year guidance to reflect the continued momentum in the demand environment and our strong operational performance to date.\nThis will be our third guidance increase in SAM in October 2020.\nWe now expect to grow non-GAAP operating profit by 25% to 35% and deliver fiscal year '21 non-GAAP diluted net earnings per share between $1.82 and $1.94.\nThis is a $0.09 per share improvement at the midpoint of our prior earnings per share guidance of $1.70 to $1.88 and a $0.22 per share improvement at the midpoint since SAM.\nWith respect to supply chain, we have executed well to date with minimal impact and continue to take proactive inventory measures where possible.\nWe do see further industrywide tightening and inflation persisting in the near term, which has been factored in our outlook from both a revenue and cost perspective.\nBut overall demand remains strong.\nFrom a top-line perspective, we are pleased with the momentum we saw in the first half.\nAnd while we continue to see further demand improvement, we remain prudent as certain geographies continue to navigate the pandemic, and we continue to observe uncertainties in the supply of commodity.\nMore specifically for Q3 '21, we expect revenue to be in line with our normal sequential seasonality of up low single digits from Q2.\nFor Q3 '21, we expect GAAP diluted net earnings per share of $0.04 to $0.10 and non-GAAP diluted net earnings per share of $0.38 to $0.44.\nAdditionally, given our record levels of cash flow in the first half and raised earnings outlook, I am very pleased to announce that we are also raising FY '21 free cash flow guidance to $1.2 billion to $1.5 billion.\nThat is a $350 million increase at the midpoint from our original SAM guidance.\nSo overall, Antonio and I are very proud of the progress we have made in the first half.\nWe have navigated well through the pandemic and are exiting the first half with improved revenue momentum, strong profitability, and robust cash flow.\nOur growth businesses in the Intelligent Edge and HPC-MCS have accelerated top-line performance.\nOur core business of Compute and Storage revenues are growing with improved margins, and our as-a-Service ARR is accelerating.\nWe also continue to execute well against our cost optimization and resource allocation program, which has made us leaner, better resourced, and positioned to capitalize on the economic recovery currently at play.\n",
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"content": "q2 revenue $6.7 billion versus refinitiv ibes estimate of $6.62 billion.\nq2 non-gaap earnings per share $0.46.\nhewlett packard enterprise - sees fiscal 2021 q3 gaap diluted net earnings per share to be in range of $0.04 to $0.10.\nsees fiscal 2021 q3 non-gaap diluted net earnings per share to be in range of $0.38 to $0.44.\nraises 2021 gaap diluted net earnings per share outlook to $0.60 to $0.72 , non-gaap diluted net earnings per share outlook to $1.82 to $1.94.\nraises 2021 free cash flow guidance to $1.2 to $1.5 billion.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Both are available on the Investors section of our website, hudsonpacificproperties.com.\nMoreover, this quarter, we've once again included certain disclosure prompted by COVID-19 business changes which we won't maintain once business operations normalize.\nThey will be joined by other senior management during the Q&A portion of the call.\nWe had a very strong second quarter in terms of our financial results.\nWe've also had a very busy start to our third quarter, executing on our growth strategy for Sunset Studios.\nAnd I'll talk a little bit about that more in a moment.\nThe big picture, the tech and media industries continue to flourish in our markets.\nVenture investment and fundraising are at record levels.\nThe IPO market is strong, tech employment and hiring have recovered to essentially pre-pandemic levels, and media companies are spending billions to produce a backlog of content.\nOver the last few months, we've seen a real momentum toward the return of office, and we're optimistic that's going to continue.\nGrowing vaccination rates, combined with statewide reopenings in California in mid-June in Washington at the end of June and forthcoming in Vancouver after Labor Day, led companies to begin implementing and formalizing plans.\nWe are still in a wait-and-see mode regarding any major adjustment space configurations or needs.\nBut even with variance, we're expecting heading into fall, most companies will move forward toward at least a partial reoccupancy of existing space, potentially coupled with vaccine mandates.\nWe're already seeing this from a few of our larger office tenants.\nEssentially, all of our major studio tenants, Netflix, HBO, CBS, Disney, ABC, Amazon, have resumed and are scheduled to imminently resume active production or on our lots with safety protocols in place.\nProduction is now an overdrive given content demand and pandemic-related shutdowns, particularly here in Los Angeles, where we are building a state-of-the-art global studio portfolio to meet that demand.\nTo that end, I'm sure many of you saw, we made two very exciting major announcements over the last week around our expansion of our Sunset Studio platform.\nThe first, Sunset Glenoaks, will be the largest purpose-built studio in the Los Angeles area in over 20 years.\nThe project is in Sun Valley, minutes from Burbank where Disney, NBC Universal and Warner Media are headquartered and many other production companies like Netflix are located.\nWe're going to build approximately 240,000 square feet, adding another seven stages to our portfolio for a total investment of approximately $170 million to $190 million.\nWe're finalizing plans and budgets that could start construction as early as fourth quarter of this year and complete the project in the third quarter of 2023.\nThis is a 50-50 joint venture with Blackstone and we're on point for development, leasing and property management.\nThe second transaction, which we announced on Monday, mark Sunset Studio's first expansion out of the U.S. into the U.K. Something I've often noted was on our agenda.\nThe U.K. has a long history of global production in a media center.\nIt is a deep pool of talent, crews and services to support productions, regional infrastructure and generous and long-standing tax credits.\nFurther, investment in the U.K. film and TV investment has grown dramatically over the last five to seven years, while supply and purpose-built studios remains limited.\nWe're in the entitlement and planning stages to build what will ultimately be one of the three largest purpose-built studios in the U.K. and one of the highest quality production facilities globally for TV and film.\nThe site comprises 91 acres on undeveloped land, about 17 miles north of London and Box Borne Harpeture, minutes from public transit and close to the Heathrow Airport as well as Central London.\nThis facility will provide great access to other major studios, production houses, crew and talent.\nWe purchased the site for GBP120 million through a 35-65 JV with Blackstone.\nAnd although it's early, we anticipate a total investment of around GBP700 million.\nWe'll be responsible for development, over site, leasing and property management and we're setting up a local office and a small team to manage the day-to-day reporting to our team here in Los Angeles.\nPart of what's so exciting about the Sunset Studio's newest L.A. and U.K. locations is we're reimagining how studio facilities can best support future productions, be it through architectural design, high-tech infrastructure or sustainable buildings and operations.\nWe're at the very positive preliminary marketing conversations with major production companies related to both projects, and we can either master lease or multi-tenant these facilities.\nIt's still early, and we have a lot of interest and flexibility so far.\nFinally, I want to congratulate the Hudson Pacific team on winning the NAIOP's 2021 Development of the Year Award.\nIt's one of the industry's most prestigious awards and NAIOP's highest honor It's also a reflection of our company's leadership and innovation across every aspect of our business.\nNAIOP's recognition is especially meaningful given it's based mostly on our exceptional performance throughout 2020 which, of course, was a very atypical and challenging year.\nSo again, very, very proud of the Hudson Pacific team.\nOur second quarter rent collections remained strong at 99% for our overall portfolio and 100% for office and studio properties.\nWe've collected 100% of our deferred rents due today.\nPhysical occupancy at our office buildings currently ranges from 5% to 55%, depending on the asset.\nAt the lower end, our properties largely occupied by tenants communicating an end of summer or early fall return.\nAs physical occupancy has improved, so has our parking revenue, which grew 12% in the second quarter compared to the quarter prior.\nOffice leasing activity continues to accelerate across our portfolio and markets, especially in terms of the inquiries and tours.\nThis activity translated into strengthening fundamentals more so in some markets like Silicon Valley, which in the second quarter had stable rents, declining vacancy and significant positive net absorption.\nIn line with these trends, our deal pipeline that is deals in leases, LOIs or proposals stand slightly above our long-term average at 1.4 million square feet.\nThat's up 75% compared to the second quarter last year and 35% year-to-date, despite our having completed over one million square feet of deals so far in 2021.\nTo that end, we signed 510,000 square feet of deals in the quarter, once again, in line with our long-term average with 19% GAAP and 12% cash rent spreads.\nOur weighted average trailing 12-month net effective rents are up close to 10% year-over-year.\nThere are two primary drivers of this increase: First, our effective rents are up slightly, about 8%; and second, our annual TIs per square foot are down 30% and mostly due to executing more renewal leases.\nSeparately, our trailing 12-month lease term and renewal deals also increased from 4.5 to about five years year-over-year and term has also extended from pandemic lows.\nOur deal activity this quarter was split relatively equally between the Bay Area with the preponderance along the Peninsula and in the Valley, and the Pacific Northwest, that is Seattle and Vancouver with a handful of deals in Los Angeles.\nWe maintained our stabilized lease percentage at 92.7%.\nOur in-service lease percentage dipped 30 basis points due to the inclusion this quarter of Harlow, which we delivered a company three in April.\nBut for Harlow, which is 54% leased.\nOur in-service lease percentage would have risen 40 basis points to 91.8%.\nWe have 4.4% of our ABR expiring over the rest of the year with about 55% coverage on that space.\nOur remaining 2021 expirations are about 12% below market.\nFor expirations, we addressed in the first half of the year, we renewed or backfilled close to 70%.\nTouching on our office developments, we're on track to deliver One Westside to Google in the first quarter of next year potentially sooner.\nWe're also set to close on the podium for Washington 1000 late in the fourth quarter at which point, we'll have a year to further evaluate tenant interest and broader market conditions and to finalize our time line to start construction.\nIn the second quarter, we generated FFO, excluding specified items, of $0.49 per diluted share compared to $0.50 per diluted share a year ago.\nSecond quarter specified items consisted of $1.1 million or $0.01 per diluted share of transaction-related expenses and $0.3 million or $0 per diluted share of onetime prior period supplemental tax expense related to Sunset Gower compared to $0.2 million or $0 per diluted share of transaction-related expenses a year ago.\nFFO beat our own expectations at the midpoint of our guidance by $0.02 per diluted share.\nThis was primarily due to the reversal of reserves against uncollected cash rents and straight-line rent receivables and savings on operating expenses, some of which we expect to incur in the second half of the year.\nSecond quarter NOI at our 44 consolidated same-store office properties decreased 2.1% on a GAAP basis, but increased 4.9% on a cash basis.\nFor our three same-store studio properties, NOI increased 17% on a GAAP basis and 29.3% on a cash basis.\nAdjusting for the onetime supplemental property tax expense at Sunset Gower, NOI for our same-store studio properties would have increased by 22.8% on a GAAP basis and 35.8% on a cash basis.\nAt the end of the second quarter, we had $0.9 billion in liquidity with no material maturities until 2023, but for the loan secured by our Hollywood Media portfolio.\nThis loan matures on Q3 2022 and has three 1-year extensions, our average loan term is 5.2 years.\nIn late July, in preparation of funding our U.K. Blackstone JV, we drew down $50 million on our revolver, resulting in $550 million of undrawn capacity, we funded our remaining pro rata acquisition costs with cash on hand.\nOur AFFO continued to grow in the second quarter, increasing by $11.4 million or nearly 24% compared to Q2 2020.\nThis occurred even while FFO declined by $3.6 million for the same period.\nAgain, this positive AFFO trend reflects the significant impact of normalizing leasing costs and cash rent commencements on major leases following the burn off of free rent.\nNow I'll turn to guidance.\nAs always, our guidance excludes the impact of unannounced or speculative acquisitions, dispositions, financings and capital market activity.\nIn addition, I'll remind everyone of the potential COVID-related impacts to our guidance, including variants like Delta and evolving government mandates.\nClearly, the uncertainty surrounding the pandemic makes projecting the remainder of the year difficult, and we assume our guidance will be treated with a high degree of caution.\nAs noted, many companies are still determining return to work requirements and the impact on space needs.\nBecause of this, for example, our guidance does not assume a material increase in parking and other related variable income.\nOverall, we assume full physical occupancy and related revenues will not return to pre-COVID levels in 2021.\nThat said, we're providing both full year and third quarter 2021 guidance in the range of $1.90 to $1.96 per diluted share excluding specified items and $0.47 to $0.49 per diluted share excluding specified items, respectively.\nSpecific items for the full year 2021 are the $1.1 million of transaction-related expenses and the $1.4 million of prior period supplemental property tax expense referenced in our second quarter SEC filings.\nThere are no specified items in conjunction with our third quarter guidance.\nWe appreciate your continued support.\nStay healthy and safe, and we look forward to updating you next quarter.\n",
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"content": "q2 ffo per share $0.49 excluding items.\nsees fy ffo per share $1.90 - $1.96.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: For financial information that has been expressed on a non-GAAP basis.\nWe've included reconciliations to the comparable GAAP information.\nAt our Securities Analyst Meeting last month, we shared our plans to continue building a stronger HP, one that deliver sustained revenue, operating profit, earnings per share and free cash flow growth.\nThis quarter's results reflect our continued momentum against this plan and they give us great confidence in our future.\nLet me talk through the details.\nIn Q4, revenue grew 9% to $16.7 billion.\nNon-GAAP earnings per share grew 52% to $0.94 and we generated more than $900 million of free cash flow, while returning $2 billion to shareholders through share repurchases and dividends.\nOur Q4 results are a great finish to an exceptional year.\nFor the full year, we grew revenue 12% to $63.5 billion and generated $1.7 billion of incremental non-GAAP operating profit.\nNon-GAAP earnings per share grew 66%.\nThis means that we exceeded our value creation plan target for non-GAAP operating profit and EPS, a full year ahead of plan.\nAnd we returned a record $7.2 billion to shareholders, while continuing to invest in strategic growth opportunities across the business.\nOur Q4 and full year performance shows our company on its front foot and hitting its stride.\nLong-term, secular trends such as hybrid play to our competitive strength.\nOur leadership across our market and the innovation agenda we are driving are enabling us to turn these trends into tailwinds.\nWe are making organic and inorganic investments to drive profitable growth.\nWe are accelerating our transformation, building new digital capabilities while also reducing structural cost and driving efficiencies.\nThe progress we are making against our priorities is creating a more growth-oriented portfolio.\nAt our Analyst Day, I shared that we expect our five key growth areas to grow double-digit and generate over $10 billion in revenue in fiscal '22.\nThese businesses collectively grew 12% this quarter.\nThis includes more than 30% growth for our Instant Ink business, as well as more than 20% growth for our industrial graphics portfolio.\nWe see our key growth areas becoming a bigger part of overall revenue and profit mix moving forward.\nWe are driving this growth, even as we continue to navigate a complex and dynamic operational environment that include robust demand and persistent supply constraints.\nThe actions we have been taking to mitigate industrywide headwinds are paying off.\nThere is no quick fix, but we are strengthening our operational execution and making continued progress quarter by quarter.\nAnd I just want to say how proud I am of the way our teams are stepping up.\nIt has not been easy, but the challenges we have faced have not deterred us from driving our business forward.\nAnd the fact that we delivered double-digit revenue and profit growth for the year gives us confidence as we enter 2022.\nLet me now talk about the strength we see across each of our business units.\nIn Personal Systems, there continues to be very strong demand.\nYear revenue and operating profit each grew double-digit in Q4.\nAnd our discipline execution and pricing strategy allowed us to effectively manage cost and component headwinds.\nA big part of our success is the improved mix we are driving given our leadership in the commercial PC market.\nAs more offices reopen, we led our shift toward Windows based commercial products where we saw the strongest demand and highest profitability.\nWe continue to see a significantly elevated order backlog.\nAs I shared last month, we expect component shortages, particularly in IC to persist into at least the first half of '22.\nThe operational actions we outline in our Q3 call are generating positive results.\nWe continue to increase our direct engagement with Tier 2 and Tier 3 suppliers.\nWe have expanded long-term agreements to secure capacity and our digital transformation initiatives are enabling greater real-time visibility to optimize our speed, agility and mix.\nThis work remains a daily priority and we expect our trajectory to continue to improve.\nWe're also creating important innovation that we design for all team's hybrid.\nThis includes a new lineup of Windows 11 devices that enable premium computing experiences for work and home.\nWe are also expanding into valuable adjacencies.\nLast quarter, we introduced HP Presence, the world's most advanced video conferencing system.\nThis is a large opportunity that will continue to grow as our digital and physical worlds converge.\nSeven out of 10 companies are already investing in technologies that improve hybrid work experience for their employees.\nHP presence combined our hardware, software, imaging and peripheral capabilities to create a more immersive experience, so that distributed teams can truly feel they are in the same room even if they are not.\nYou will see us continuing to innovate and expand our presence in the growing highly collaboration space.\nWe also delivered another quarter of double-digit device as a service revenue growth.\nThis included the launch of new digital services to help commercial customer simplify the complexity of hybrid IT environment.\nAnd following the close of our Teradici acquisition, we launched our lineup of new Z by HP, Teradici, and NVIDIA Omniverse subscription offers to enable high performance remote collaboration.\nTurning to Print, we grew revenue 1% in the quarter.\nThis was primarily driven by our disciplined pricing strategy, as well as our continued growth in services and subscriptions, which offset expected volume declines, driven by limited supply.\nLike others in the industry, we continue to operate in a supply constrained environment, driven by COVID-related disruption and other logistics issues.\nAgainst this backdrop, demand for our print hardware and supplies remained strong.\nThe fact is we had more hardware orders that we could fulfill in the quarter.\nAnd as we said last month, we expect this to impact Print growth in fiscal year '22.\nThis is not stopping us from advancing our strategic priorities.\nWe continue to grow our HP+ Plus portfolio globally, including a rollout to our Envy in 5000 -- 7000 series that is designed for families working, learning and creating new memories from home.\nImportantly, it is built with sustainability in mind and made from over 45% recycled plastic content.\nWe are also growing our digital services to enable hybrid office printing.\nOur great example is this quarter's launch of HP Managed Print Flex, our new cloud first MPS subscription plan for hybrid work environment.\nIn Q4, we drove double-digit growth of MPS revenue and total contract value and this supports our Workforce Solutions momentum.\nWe're increasingly integrating our offerings across Print and Personal Systems to meet new customer needs and unlock new growth opportunities.\nOur recently launched HP work from home service is a great example of how we are leveraging our diverse portfolio to win in the hybrid office.\nAs I mentioned earlier, we are also driving industrial graphics and 3D printing growth.\nIn industrial graphics, we drove double-digit revenue growth in the quarter and have built a healthy backlog of industrial presence.\nThis continues a positive recovery trend from prior-year quarter.\nWe also continue to see a mix shift toward more productive industrial process with significant growth in labels and packaging.\nAnd in 3D, our focus on high-value end-to-end applications is paving the way for entirely new growth businesses.\nOur molded fiber, footwear and orthotics initiatives are on track.\nOur progress against our strategic priorities is also driving strong cash flow and we continue to be disciplined toward of capital.\nWe have our robust returns based approach that we are applying to every aspect of our capital allocation.\nWe will continue to invest in areas where we see growth opportunities, while continuing to return capital to our shareholders.\nWe believe our share remains undervalued and we are committed to aggressive reported levels of at least $4 billion in fiscal year '22.\nWe also expect M&A will continue to play an important role.\nSpecifically, we plan to pursue deals that accelerate our strategies and drive profitable growth.\nAnd we are making ongoing progress against our sustainable impact agenda.\nESG is a driver of long-term value creation for all stakeholders.\nAnd we continue to pursue an ambitious agenda.\nThe latest example is our expanded partnership with World Wildlife Fund.\nWe are working to restore, protect and improve the management of nearly 1 million acres of forest landscape.\nThis supports our focus on making every page printed forest positive [Phonetic].\nTo sum up, our portfolio is innovative and resilient.\nOur strategy is driving sustained revenue, operating profit, earnings per share and free cash flow growth.\nWe are returning highly attractive levels of capital to shareholders and we are confident in the fiscal year '22 guidance that we shared at our Analyst Day.\nWe are entering the new year from a position of great strength and I look forward to continuing to share our progress.\nMarie, over to you.\nIt's good to be back together and it was great to connect with so many of you following our Analyst Day.\nI want to start by building on something Enrique said a moment ago.\nQ4 was a strong finish to a very strong year.\nIt builds on our proven track record of meeting or exceeding the goals we set and it underscores our confidence in our FY '22 and long-term financial outlook.\nLet me begin by providing some additional color on our results, starting with the full year.\nRevenue was $63.5 billion, up 12%.\nNon-GAAP operating profit was $5.8 billion, up 42%.\nWe grew non-GAAP earnings per share even faster, up 66% to $3.79.\nThis continues our trend of growing non-GAAP earnings per share every year since separation.\nOur $4.2 billion of free cash flow was consistent with our full year guidance and adjusting for the net Oracle litigation proceeds and we returned a record $7.2 billion to shareholders.\nThat's a 172% of free cash flow.\nWhat's especially important to note is how well balanced our performance is.\nWe are growing our top and bottom line.\nWe are returning capital to shareholders and investing in the business.\nWe are accelerating new growth businesses and driving efficiencies.\nThis reflects the company geared toward both short and long-term value creation as we enter a new period of growth for HP.\nThis is supported by our Q4 numbers.\nNet revenue was $16.7 billion in the quarter, up 9% nominally and 7% in constant currency.\nRegionally, in constant currency: Americas declined 4%, EMEA increased 15% and APJ increased 18%.\nAs Enrique mentioned, supply chain constraints continue to impact both Print and Personal Systems revenue and this was particularly impactful to our print hardware results this quarter.\nThat said, demand remain strong as hybrid work creates sustained tailwinds.\nGross margin was 19.6% in the quarter, up 2 points year-on-year.\nThe increase was primarily driven by continued favorable pricing including currency, partially offset by higher costs.\nNon-GAAP operating expenses were $1.9 billion or 11.5% of revenue.\nThe increase in operating expenses was primarily driven by increased investments in go-to-market and innovation.\nNon-GAAP operating profit was $1.3 billion, up 28% and non-GAAP net OI&E expense was $64 million for the quarter.\nNon-GAAP diluted net earnings per share increased $0.32, up 52% to $0.94 with a diluted share count of approximately 1.1 billion shares.\nNon-GAAP diluted net earnings per share excludes Oracle litigation gains, defined benefit plan settlement gains, non-operating retirement related credits, partially offset by restructuring and other charges, amortization of intangibles, acquisition-related charges, other tax adjustments.\nAs a result, Q4 GAAP diluted net earnings per share was $2.71.\nNow, let's turn to segment performance.\nIn Q4, Personal Systems revenue was $11.8 billion, up 13% year-on-year.\nTotal units were down 9% given the expected supply chain challenges and lower chrome mix.\nThe fact we still grew revenue double digits in this environment reflected the strength of demand and positive impact of our big shift toward mainstream and premium commercial.\nDrilling into the details, Consumer revenue was down 3% and commercial was up 25%.\nBy product category, revenue was up 13% for notebooks, 11% for desktops and 39% for workstations.\nWe also continue to drive double-digit growth across peripherals and services.\nPersonal Systems delivered $764 billion in operating profit with operating margins of 6.5%.\nOur margin improved 1.4 points, primarily due to continued favorable pricing, product mix and currency, partially offset by higher cost including commodity costs and investments in innovation and go-to-market.\nIn Print, our results reflected continued focus on execution and the strength of our portfolio as we navigated the supply chain environment.\nQ4 total print revenue with $4.9 billion, up 1%, driven by favorable pricing in hardware and growth in services, partially offset by a decline in supplies.\nTotal hardware units declined 26% due to consumer replenishment last year in Q4 and increased manufacturing and component constraints.\nWe expect these Print hardware constraints to extend at least into the first half of 2022.\nBy customer segment, consumer revenue was down 6%, with units down 28%.\nCommercial revenue grew 19%, with units down 12%.\nConsumer demand remain solid.\nHowever, revenue across both home and office was constrained by the current supply and factory environment.\nThe commercial recovery should further progress with a double-digit hardware revenue growth with triple-digit increases in Industrial printing hardware.\nWe expect to see a continued gradual and uneven recovery in commercial extending into FY '22.\nSupplies revenue was $3.1 billion, declining 2% year-on-year, driven primarily by prior year channel inventory replenishment.\nWe also saw steady normalization of ink and toner mix, partially offset by favorable pricing.\nWe saw continued momentum in our contractual business.\nAs we discussed at our Analyst Day, this is a key part of our broader services strategy.\nInstant ink delivered double-digit increases in both cumulative subscriber growth in revenue.\nWe also drove growth in managed print services revenue and total contract value with strength in both renewals and new TCV bookings.\nPrint operating profit increased $117 million to $830 million and operating margins were 17%.\nOperating margin grew 2.2 points, driven primarily by favorable pricing and improved performance in industrial including graphics 3D, partially offset by unfavorable mix at higher cost including commodity costs and investments in innovation and go-to-market.\nNow let me turn to our transformation efforts.\nAs we completed the second year of our cost savings program, we have now delivered more than 80% of our $1.2 billion gross run rate structural cost reduction plan and we continue to look at new cost savings opportunities.\nTransformation is not only about cost savings, but about also creating new capabilities and long-term value creation.\nI'd like to highlight is our ongoing digital transformation.\nBy leveraging our new digital platforms, we are enhancing our capabilities and transforming the way we operate to deliver new solutions to our customers.\nWith this capability, we recently launched Wolf Pro Security, a new subscription service that enables customers to digitally manage their software on an annual subscription basis.\nThe structural cost savings with our transformation efforts are enabling us to invest in these types of strategic growth drivers and we see many more opportunities like this to drive business enablement through additional software services and solutions offerings.\nLet me now move to cash flow and capital allocation.\nQ4 cash flow from operations was $2.8 billion and free cash flow was $0.9 billion after the additional adjustment for the net Oracle litigation proceeds of $1.8 billion.\nThe cash conversion cycle was minus 25 days in the quarter.\nThis deteriorated 4 days sequentially as lower days payable outstanding and higher days sales outstanding was only partially offset by the decrease in days of inventory.\nFor the quarter, we returned a total of $2 billion to shareholders, which represented 210% of free cash flow.\nThis included $1.75 billion in share repurchases and $219 million in cash dividends.\nFor FY '21, we returned a record $7.2 billion to shareholders or a 170% of free cash flow.\nLooking ahead to FY '22, we expect to continue aggressively buying back shares at elevated levels of at least $4 billion.\nOur share repurchase program, combined with our recently increased annual dividend of a $1 per share, has us on track to exceed our $16 billion return of capital target set in our value creation plan.\nLooking forward to Q1 and FY '22, we continue to navigate supply availability, logistics constraints, pricing dynamics and the pace of the economic recovery.\nIn particular, keep the following in mind related to our Q1 and overall fiscal 2022 financial outlook.\nFor Personal Systems, we continue to see strong demand for our PCs, particularly in commercial, as well as favorable pricing.\nWe expect solid PS revenue growth to continue into fiscal '22 with the shift to higher growth categories, including commercial, premium and peripherals.\nWe expect PS margins to be toward the high-end of our 5% to 7% long-term range.\nIn Print, we expect solid demand in consumer, a continued normalization in mix as commercial gradually improves through 2022 and disciplined cost management.\nWe expect Print margins to be toward the high end, about 16% to 18% long-term range.\nFor Personal Systems, we expect the component shortages, as well as manufacturing port and transit disruptions will continue to constrain revenue due to the ongoing pandemic in many parts of the world.\nIn Print, we expect similar, but more acute challenges, particularly with regard to factory disruptions and component shortages.\nWe expect these challenges across PS and Print to persist at least through the first half of 2022.\nFurthermore, normal sequential seasonality doesn't apply for FY '22 and we expect our revenue performance to be more linear by quarter, particularly driven by PS.\nIn addition, we expect a slight headwind year-on-year, approximately $20 million per quarter from corporate Investments and other.\nTaking these considerations into account, we are providing the following outlook: we expect growth quarter non-GAAP diluted net earnings per share to be in the range of $0.99 to $1.05 and first quarter GAAP diluted net earnings per share to be in the range of $0.92 to $0.98.\nWe expect full year non-GAAP diluted net earnings per share to be in the range of $4.07 to $4.27 and FY '22 GAAP diluted net earnings per share to be in the range of $3.86 to $4.06.\nFor FY '22, we expect free cash flow to be at least $4.5 billion.\nOverall, I feel very good about our performance and our outlook.\nSo let me hand it back to the operator.\n",
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"content": "q4 non-gaap earnings per share $0.94.\nq4 gaap earnings per share $2.71.\nq4 revenue rose 9.3 percent to $16.7 billion.\nsees q1 gaap earnings per share $0.92 to $0.98.\nsees q1 non-gaap earnings per share $0.99 to $1.05.\nsees fy 2022 non-gaap earnings per share $4.07 to $4.27.\nsees fy 2022 gaap earnings per share $3.86 to $4.06.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Such statements are based upon current information and management's expectations as of this date and they are not guarantees of future performance.\nAs such, our actual outcomes and results could differ materially.\nYou can learn more about these risks in our annual report on Form 10-K, our quarterly reports on Form 10-Q and our other SEC filings.\nRelieved that one of the most difficult years in the company's 100-year history is behind us and optimistic considering market share gains accomplished during the first fiscal quarter of 2021 and strengthening oil prices, which enhanced financial health of our customers.\nWe entered the new year, with 94 rigs running in U.S. land that's double the number we had in August, and the upward trend continues.\nAround this time last year VTI prices were trading in the low-50s there were approximately 800 rigs operating in the U.S. land market and H&P was operating in a 194 of those rigs.\nContrast that with today, where oil prices are up over 10%, up into the upper 50s and the industry rig count is approximately 415 rigs and H&P is running 103 FlexRigs.\nObviously, a lot of happened between these two data points, and it shouldn't surprise anyone that the short and medium term activity outlook from E&P companies is taking a while to take shape.\nHowever, if market expectations for U.S. production levels continue to drop that should have a positive impact on oil prices, which further supports consensus of expectations for approximately 500 active rigs in the U.S. at year-end.\nTaking this a step further, by our count, there are approximately 630 super-spec rigs available in the U.S. market.\nLooking forward, we believe the vast majority of all working rigs drilling horizontal wells will continue to trend toward the super-spec classification and if activity does reach 500 rigs, the industry rig count would begin to approach utilization levels that have historically provided pricing power.\nToday, we are hopeful and encouraged by the recent worldwide deployment of COVID-19 vaccines.\nWe are encouraged with an improving crude oil price picture and we're encouraged by the progress we continue to make on strategic efforts to deploy additional digital technology solutions and to advance new commercial models.\nEven with the early success of vaccines for COVID-19, there remains a significant level of uncertainty regarding the global economic recovery as well as the changing political environment, and that certainly tempers our short-term optimism.\nWhile it's encouraging to see oil prices higher than expectations, we are cognizant that even in a stable or improving environment, there remain several challenges ahead for the industry.\nWe are encouraged seeing the industry rig count begin to recover, the customers are still in the budgeting process to determine their capital allocation and those levels will set the tone for activity during the remainder of 2021.\nWe do expect public E&Ps to maintain financial discipline, related to their announced budgets.\nWe also expect private E&Ps to add rigs, however, we don't expect an outsized increase in fiscal '21 rig count, even if oil prices reach $60 per barrel.\nA return-driven capital allocation strategy is in the best long-term interest of our industry, and that's what we're aiming to support with our solutions based offering.\nH&P has a differentiated customer-centric approach of combining our people, rigs and leading-edge automation technology, which enables us to deliver the highest value wells for our customers.\nAnd underlying principle of our performance contracts is the creation of a sustainable win-win scenario based not only on efficiency, but also by employing the advantages of automation related to wellbore quality and placement.\nOur patented drilling automation software is a key driver in improving well economics for the customer by enabling the drilling of consistently higher quality and better placed wellbores throughout the drilling program.\nTo-date our autonomous AutoSlide technology is deployed on 25% to 30% of our FlexRig fleet and we currently have similar percentages for performance-based contracts.\nAutomation solutions improve the drilling efficiency of the well, but it also has a significant influence on the lifetime value of the asset by delivering a better wellbore to the completion phase, which will ultimately enhance production economics.\nWhen successful, the combination of the FlexRig and digital technology solutions leads to superior well economics by lowering risk and increasing returns, for our customers, as well as for H&P.\nWe can't control the macro challenges, but we can remain laser focused on our technology solution deployment, our performance-based contracts and our value accretion for customers.\nWe're encouraged that several customers have adopted these new solutions, but we recognize that more work is ahead, an additional efforts aimed at change management must occur within the industry.\nAccordingly, improvements in technology solutions and performance-based contract adoptions are not likely to be linear and may not always correlate with our rig count.\nThat said, we're seeing remarkable progress as being made today and we're steadfast and confident in our ability to lead and effect change in our industry.\nI'm very pleased with our people's service attitude and the ability to quickly respond to customer demand and improve activity by roughly 35% during the first fiscal quarter.\nOur market share today is back to pre-pandemic levels.\nWe are adding back more rigs in the competition due to our proven ability to reactivate rig safely, efficiently and cost effectively.\nWe believe there is an opportunity to grow our market share above 25%.\nIf you look at previous downturns we have faced since the 2008 Financial Crisis, we have emerged stronger with greater capability as we differentiated our offerings and grew market share in the premium part of the market.\nGoing forward, in a structurally smaller U.S. market, we believe super-spec rigs combined with digital technology solutions that provide improved value through wellbore quality will prevail.\nRelative to the 800 rig drilling a year ago, many idle SCR and less-capable AC rigs may be permanently sidelined.\nFurther, not all of our competitors with super-spec rigs have the ability to enable firm coordination[Phonetic] features that many customers are beginning to require.\nIn the super-spec classification segment, we have approximately 37% of the U.S. capacity with 234 super-spec FlexRigs that are unique with their digital technology capability across our uniform fleet.\nAnother aspect of our asset deployment strategy, we plan to execute, will occur over the medium to long-term in international markets.\nThat strategy is to opportunistically reduce our U.S. super-spec concentration over time by deploying rigs internationally for appropriately scaled contracts.\nOur international business development team is seeing some bidding activity in Argentina, Colombia, the Middle East as well as other markets.\nAt this time, these prospects are in early stages, but we are encouraged by the customer interest in H&P FlexRigs due to a combination of our expertise and unconventional drilling.\nOur strong historical performance in these areas and the need for, what we would consider an imminent legacy rig replacement, driven by an evolution toward digital technology for wellbore quality and placement.\nThese are great opportunities for H&P in addition to our initiatives to improve our cost structure, where Mark will provide more details in his remarks.\nOn the last call, we discussed having made investments in geothermal projects and you may have seen some recent announcements by our strategic partners.\nAlong with looking at admissions reducing opportunities like geothermal, H&P will continue to explore and invest in new and diversified technologies as well as expand our digital technology capabilities for the long-term sustainability of the company.\nBefore turning the call over to Mark, I want to underscore once more the focus and success our company has made on its strategic objectives, particularly given the economic and industry headwinds we are navigating.\nAs we've indicated previously, introducing disruptive technologies and new business models, is a long, arduous and sometimes, unpredictable process.\nI believe our dedicated teams are well equipped and our conservative financial stewardship will enable us to capitalize on the challenges and opportunities ahead.\nToday, I will review our fiscal first quarter 2021 operating results, provide guidance for the second quarter, update full fiscal year 2021 guidance as appropriate and comment on our financial position.\nLet me start with highlights for the recently completed first quarter ended December 31, 2020.\nThe company generated quarterly revenues of $246 million versus $208 million in the previous quarter.\nThe quarterly increase in revenue was due to higher rig count activity in North America Solutions as operators resumed some drilling activity.\nTotal direct operating costs incurred were $200 million for the first quarter versus $164 million for the previous quarter.\nThe sequential increase is attributable to the aforementioned additional rig count in the North America Solutions segment and the related rig recommissioning expenses.\nGeneral and administrative expenses totaled $39 million for the first quarter, higher than our previous quarter due to the resumption of short-term incentive accruals for fiscal 2021, but within our guidance for full fiscal year '21.\nDuring the first quarter, we closed on the sale of an offshore platform rig to its long-standing customer as per a provision in the original long-term contract.\nThe sale closed for consideration of $12 million paid out over two years.\nThe rig had an aggregate net book value of $2.8 million and the resulting gain of $9.2 million as reported as a part of the sale of assets on our consolidated statement of operations.\nIn connection with the sale, we entered into a long-term management contract for this rig in our Gulf of Mexico segment.\nOur Q1 effective tax rate was approximately 19%, which is on the lower end of our guided range due to a discrete tax expense.\nTo summarize this quarter's results, H&P incurred a loss of $0.66 per diluted share versus a loss of $0.55 in the previous quarter.\nAbsent these select items, adjusted diluted loss per share was $0.82 in the first fiscal quarter versus an adjusted $0.74 loss during the fourth fiscal quarter.\nCapital expenditures for the first quarter of fiscal '21 were $14 million below our previous implied guidance.\nThis is primarily due to the timing of spending, which has shifted to the remaining three quarters of the fiscal year.\nTurning to our three segments, beginning with the North America Solutions segment.\nWe averaged 81 contracted rigs during the first quarter, up from an average of 65 rigs in fiscal Q4.\nI will note here that at the end of fiscal Q1, all idle but contracted rigs, which I will refer to as IBC rigs thereafter have returned to work compared to an average of approximately 15 IBC rigs in the previous quarter.\nDuring the first quarter, we doubled our rig activity from the prior quarter low of 47 active rigs.\nWe exited the first fiscal quarter with 94 contracted rigs, which was slightly above our guidance expectations as demand for rigs continue to expand from the low, reached midway through the end of the previous quarter.\nRevenues were sequentially higher by $53 million due to the previously mentioned activity increase included in this quarter's revenues were roughly $4 million of unexpected early termination revenue from the cancellation of one rig contract.\nNorth America Solutions operating expenses increased $47 million sequentially in the first quarter, primarily due to adding 25 rigs, a 35% increase in North America activity as well as reactivating 10 idle but contracted rigs, both of which resulting in one-time reactivation expenses of approximately $10.6 million.\nLooking ahead to the second quarter of fiscal 2021 for North America Solutions.\nAs I mentioned earlier, we exited Q1 with slightly more rigs contracted and running than expected.\nThe activity level has continued to grow, albeit at a more moderate pace than the prior quarter as operators add rigs to maintain production levels with oil above $50 per barrel.\nAs of today's call, we have 103 rigs contracted with no IBC rigs remaining.\nWe expect to end the second fiscal quarter of '21 with between 105 and 110 contracted rigs.\nAs John discussed, our performance contracts are gaining customer acceptance and of the approximately 34 rigs that we have added to the active H&P rig count after September 30th through today, more than a quarter, are working under such performance contracts.\nIn the North America Solutions segment, we expect gross margins to range between $60 million to $70 million with new early termination revenue expected.\nAs we continue to add rigs, we will also incur related one-time reactivation expenses, such expenses are expected to be approximately $6 million in the second quarter.\nAs we have seen in previous cycles, there is a correlation between the reactivation cost per rig and the length of time a rig has been idle.\nAs a reminder, most of our rigs were stacked back in April of 2020, nine months ago.\nHistorical experience indicates that rig stacked for nine months or longer will incur cost of $400,000 to $500,000 to reactivate.\nReactivation costs are incurred in the quarter of start-up, so the absence of such costs in future quarters is margin accretive.\nOur current revenue backlog from our North America Solutions fleet is roughly $448 million for rigs under term contract, but importantly this figure does not include additional margin that H&P can earn is performance contract criteria are met.\nRegarding our International Solutions segment.\nInternational Solutions business activity declined from five active rigs at the end of the fourth fiscal quarter to four active rigs at December 31.\nThis decrease is the result of an expected rig release in Abu Dhabi, due in large part to the disruption created by the ongoing COVID-19 pandemic.\nAs we look toward the second quarter of fiscal '21 for International, our activity in Bahrain is holding steady with three rigs working.\nWe also have one rig under contract in Argentina.\nIn the second quarter, we expect to have a loss of between $1 million to $3 million, apart from any foreign exchange impacts, as the legacy structural cost in Argentina continue to hamper International margins.\nAlso we still have a pending rig deployment in Colombia that continues to be delayed, as our customer awaits on required regulatory approvals to begin work.\nTurning to our Offshore Gulf of Mexico segment.\nWe currently have four of our seven offshore platform rigs contracted and we have active management contracts on three customer owned rigs, one of which is on full active rig.\nOffshore generated a gross margin of $6 million during the quarter, which was at the lower end of our estimates.\nAs we look toward the second quarter of fiscal '21 for the Offshore segment.\nWe expect that Offshore will generate between $6 million to $9 million of operating gross margin.\nNow let me look forward to the second fiscal quarter and update full fiscal year 2021 guidance as appropriate.\nCapital expenditures for the full fiscal of '21 year are still expected to range between $85 million to 180 -- a 105 -- $85 million to $105 million, with remaining's been distributed over the last three fiscal quarters.\nOur expectations for general and administrative expenses for the full fiscal 2021 year, have not changed and remain at approximately $160 million.\nWe also remain comfortable with the 19% to 24% range for estimated annual effective tax rate and do not anticipate incurring any significant cash tax in fiscal 2021.\nThe difference in effective tax versus statutory rate, is related to permanent book-to-tax differences as well as state and foreign income taxes.\nNow looking at our financial position.\nHelmerich & Payne had cash and short-term investments of approximately $524 million at December 31, 2020 versus $577 million at September 30.\nIncluding our revolving credit facility availability, our liquidity was approximately $1.3 billion, not included in the previously mentioned the cash balance is approximately $35 million of income taxes receivable and related interest that we collected after the end of the first fiscal quarter.\nOur debt-to-capital at quarter end was about 13% and our net cash position exceeds our outstanding bond.\nH&P's debt metrics continue to be in best-in-class measurement among our peer group, but allows us to keep our focus on maximizing our long-term position.\nAs a reminder, we have no debt maturing until 2025 and our credit rating remains investment grade.\nNow a couple of notes on working capital.\nOur trade accounts receivable at fiscal year-end of $150 million grew by $38 million to approximately $188 million, due to the added rig activity, as previously mentioned.\nThe preponderance of our AR continues to be less than 60 days outstanding from billing day.\nAlso included in AR, there is another approximately $10 million of tax refund receivables.\nOur inventory balances have declined approximately $5 million sequentially from June -- from September 30th to $99 million and we continue to leverage consumables across the entirety of U.S. basins to use and reduce inventory on hand.\nThese efforts are resulting in better spending rationalizations, that are reducing our out-of-pocket expenditures.\nOur accounts payable terms optimization project, mentioned on the last earnings call will extend our payable terms with certain key vendors.\nAnd finally of note, our one, the majority of our annual ad valorem taxes accrued through the year are paid annually in the fourth calendar quarter.\nAnd two, the short-term incentive compensation accruing for fiscal year '21 will not be paid until the first quarter of fiscal year '22.\nAs I mentioned on the November call, we expected to use a modest amount of cash on hand, as we work toward a 100-plus rig count activity level.\nAs mentioned earlier in my comments we arrived at a 100 rig count level, during this second quarter.\nWe believe that this activity level, our point forward quarterly operating earnings, will fund our maintenance capital expenditures that service cost and dividends.\nBased on our updated forecast, we expect to end fiscal 2021 with cash and short-term investments at or above the $500 million.\nIn closing, we are continuously working to manage our costs, both operating and SG&A expenses, as well as capital expenditures.\nWe believe active cost management is crucial in the now structurally smaller United States upstream market.\nVarious initiatives are under way to identify and drive our costs where possible to enhance margins going forward.\nThat concludes our prepared comments for the first fiscal quarter.\n",
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"content": "q1 loss per share $0.66.\nqtrly adjusted loss per share $0.82.\nhelmerich and payne - expect north america solutions operating gross margins to be between $60-$70 million for q2.\nhelmerich and payne - sees fy 2021 gross capital expenditures are still expected to be approximately $85 to $105 million.\nfiscal year 2021 gross capital expenditures are still expected to be about $85 to $105 million.\nhelmerich and payne - ended quarter with $524 million in cash and short-term investments and no amounts drawn on its $750 million revolving credit facility.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Such statements are based on current information and management's expectations as of this date, and are not guarantees of future performance.\nAs such, our actual outcomes and results could differ materially.\nYou can learn more about these risks in our annual report on Form 10-K, our quarterly reports on Form 10-Q and our other SEC filings.\nWe will also be making certain references to non-GAAP financial measures, such as segment operating income and operating statistics.\nReflecting on where we were at this point last year, I'm encouraged by the recovery we are currently experiencing as well as how the company has navigated through a multitude of challenges in 2020.\nLast year, I said that two factors were crucial for us for continued success going forward.\nFirst, maintaining our financial strength and second, maintaining a long-term focus for future opportunities.\nI'm happy to report that the company continues to execute in both areas.\nToday's mid-$60 oil price is robust compared to what we experienced over the past year.\nBut going forward, we anticipate a degree of permanence in the change of historic industry behaviors and norms.\nEnergy markets are coming back into balance, global oil demand is reviving and oil inventories are falling back to their 5-year average.\nThe energy industry's capital discipline, which actually began prior to the global pandemic, also remains resolute.\nWhile this last point is uncomfortably limiting for the industry's near-term growth horizon, this is something we believe is imperative.\nFocused disciplined spending that generates returns under a variety of commodity price scenarios is what the industry needs to attract and retain investors.\nBack to the long-term focus and what we believe the future holds for H&P.\nA natural step in capital discipline is driving the most value per capital dollar spent, not just in a 1-year budget cycle, but over the life of an investment.\nThis corresponds to where we believe H&P as the leading drilling solutions provider contributes the most value to our customers and is the driver behind the development of our digital technology solutions, and our new commercial models that are structured around achieving value-added outcomes.\nAligned with our strategic objectives, H&P will continue to concentrate on delivering value to the customer by leveraging software, data and FlexRig technology.\nOur digitally enabled drilling operations provide automation solutions that deliver both efficiency gains and wellbore quality.\nNot only do our customers experience near-term financial benefits like lower well costs and the reduction of certain downhole risks, but also improvements in areas that were historically beyond our ability to influence, but have significant economic implications over the long-term life of the well.\nAn important ingredient to a successful technology strategy is the integration of new commercial models, which incorporate performance metrics and eventually, wellbore quality metrics.\nOne example is having a tortuosity index and tying them together with financial remuneration.\nNew commercial models are designed to generate win-win outcomes.\nThe customer has a well with improved economics, and H&P is compensated for helping to create a portion of that value.\nCurrently, approximately 30% and of our active U.S. fleet is under some type of performance contract.\nContrasting the successful adoption of these new commercial models compared to a year ago, where we only had about 10% of our fleet on performance contracts.\nOur digital technology is providing H&P and our customers another differentiating capability in delivering the best outcomes.\nLet me give you a few examples.\nH&P's automation technology deployed on our FlexRig is providing smoother wellbores and reduced tortuosity, which helps extend downhole tool life, deliver smoother casing runs, increase reliability and reduced well durations.\nIn addition, a less tortuous wellbore also saves the customer time and money during the completion phase of the well by lowering downtime events, reducing overall completion time and creating more certainty for the life of the well.\nWe are automating directional drilling with our AutoSlide solution, and this is driving repeatability and consistency in drilling the curve.\nThis enables landing the curve earlier in the zone, resulting in an additional frac stage and improved returns for the customer.\nWell cost consistency achieved through automation is providing more certainty and confidence to key stakeholders, affording a clear vision and more confidence in future expansion.\nI do believe that FlexRig solutions are unique in the industry and contributing to the demand for H&P as our current rig count in the U.S. is at 118 rigs, up 25% since the end of fiscal Q1.\nIn addition, we have approximately 35% of the public company E&P market share and about 14% of the private E&P market share.\nBoth are leading metrics in the U.S. We're making good progress in deploying digital technology solutions and introducing new commercial models to the industry.\nAll of that said, we also realize there's still a lot of work ahead.\nAs the demand for FlexRig solutions has increased, we find ourselves at a point where rig reactivations are becoming an increasing financial burden.\nWe believe the market is fast approaching an inflection point where this financial burden will have to be carried by our customers as well, either through lump sum payments or pricing over the life of the contract.\nWe estimate that industrywide, there are only a handful of idle super-spec rigs that have been active during the past nine to 12 months, particularly as longer idled rigs are put back to work, higher reactivation costs will play a larger role in contract economics going forward.\nWe already see a shortage of ready-to-work super-spec rigs in the market.\nSo there's momentum emerging in the near-term to improve FlexRig solutions' pricing and contract economics during the rest of 2021.\nIf commodity prices remain strong, many believe E&P budgets will likely respond positively in 2022, and that will increase the demand for incremental super-spec rigs.\nThose incremental rigs will be those that have not worked in well over a year, and it will be costly to bring those rigs back into service.\nAgain, contract pricing and economics must be supportive of that investment.\nI will not soon forget last summer's reorganization effort where we downsized corporate G&A and operational overhead in response to the pandemic.\nMark will give a more complete description of how these efforts are expanding this year.\nBut I wanted to underscore that our industry is structurally smaller today.\nAnd the prospects of that trend reversing, seem very slim, especially near term.\nWe must respond to the changing priorities, but it doesn't mean there are no longer opportunities for H&P to innovate, to grow and to thrive in this evolving environment.\nOil and gas is still critical to the global economy, and it will remain so for many years to come.\nGrowing internationally is another strategic priority for H&P.\nWhile international markets are lagging behind the U.S. recovery, we are participating in several bid opportunities in South America, the Middle East and elsewhere.\nWe are encouraged that several of these opportunities are unconventional resource-type plays, and we have industry-leading technology and expertise.\nThe process of obtaining international work has its set of challenges, and we are shifting our strategy to drive success.\nWe are committed to growing that part of our business and given our significant U.S. super-spec capacity, leading-edge technology offerings and financial ability, we are well positioned for many of these opportunities.\nH&P has long been committed to operating in a safe and environmentally responsible manner, and we continue to invest in advancing cleaner and more efficient energy through new technologies that minimize the environmental impact of our drilling operations.\nWe are pleased with our ongoing partnerships with our customers to reduce GHG emissions.\nOur operational and technological experience, combined with our rig design, help our customers minimize operational costs and risks and reduce the environmental impacts associated with producing oil and gas.\nWe are also investing in power management systems and alternative power sources.\nThe company recently launched our new website, and it's designed to provide greater insight into our solutions capabilities and outcomes-based results and other important disclosures.\nWe've included new disclosures around our CO2 emissions including rig and vehicle emission improvements we've realized over the past three years.\nIn the coming months, we plan to publish our HSE sustainability metrics, and other information as we continue to improve our ESG disclosures and culminating with publishing our sustainability report in 2021.\nAs we commented on our last call, we entered 2021 optimistically and so far, so good.\nOne of H&P's strengths is its ability to adapt to changing and often volatile market conditions.\nOur people, our rig assets and digital technology and our financial position are the drivers behind why H&P is considered a market leader and partner of choice within the energy industry.\nThe industry will continue to face challenges, but I'm confident that H&P and our people are up to the task and will be successful.\nToday, I will review our fiscal second quarter 2021 operating results, provide guidance for the third quarter, update remaining full fiscal year 2021 guidance as appropriate and comment on our financial position.\nLet me start with highlights for the recently completed second quarter ended March 31, 2021.\nThe company generated quarterly revenues of $296 million versus $246 million in the previous quarter.\nThe quarterly increase in revenue was due to a higher rig count activity in North America Solutions as expected.\nTotal direct operating costs incurred were $231 million for the second quarter versus $200 million for the previous quarter.\nThe sequential increase is again attributable to the aforementioned additional rig count in the North America Solutions segment.\nGeneral and administrative expenses totaled $39 million for the second quarter, consistent with our expectations and with the previous quarter.\nTowards the end of the second quarter, we continued our focus on operating super-spec rigs and phasing out the less capable portions of our fleet.\nAs a result, we developed and began executing a plan to sell 68 domestic non super-spec rigs, all within our North America Solutions segment, the majority of which were previously written down and decommissioned and/or used as capital-spared donors.\nWe expect most of these rigs to be sold for scrap value.\nThese assets were written down to their net realizable value of $13.1 million and were reclassified as held for sale on our balance sheet.\nAs a result, we recognized a noncash impairment charge of $54.3 million.\nAdditionally, during the second quarter, we downsized and moved our Houston FlexRig assembly facility as part of our ongoing cost management efforts.\nIn conjunction with this initiative, we incurred a loss on sale of assets of $18.5 million, primarily due to closing on the sale of scrap inventory and obsolete capital spares for an aggregate loss of $23 million.\nThis loss was offset by approximately $4.5 million in aggregate gains on asset sales, primarily related to customer reimbursement for the replacement value of drill pipe damaged or lost in drilling operations.\nOur Q2 effective income tax rate was approximately 23%, which is within our previously guided range.\nTo summarize this quarter's results, H&P incurred a loss of $1.13 per diluted share versus a loss of $0.66 in the previous quarter.\nAbsent these select items, adjusted diluted loss per share was $0.60 in the second quarter versus an adjusted $0.82 loss during the first fiscal quarter.\nCapital expenditures for the second quarter of fiscal 21 were $17 million below our previous implied guidance as the timing for that spending has shifted to the third and fourth quarters.\nH&P generated approximately $78 million in operating cash flow during the second quarter of fiscal 21.\nTurning to our three segments, beginning with the North America Solutions segment.\nWe have averaged 105 contracted rigs during the second quarter, up from an average of 81 rigs in fiscal Q1.\nWe exited the second fiscal quarter with 109 contracted rigs, which is at the high end of our guidance range as demand for rigs continue to expand from the low reached back in August of 2020.\nRevenues were sequentially higher by $48 million due to the activity increase.\nNorth America Solutions operating expenses increased $29 million sequentially in the second quarter, primarily due to the addition of 15 rigs.\nWe ended up reactivating 21 rigs during the quarter due to churn across basin geographies where some releases offset the total number of reactivations.\nMost of the rigs released during the quarter have returned to work or are expected to return during the third fiscal quarter.\nThis resulted in onetime reactivation expenses of approximately $9.7 million in fiscal Q2, including a portion of expenses for the April incremental fleet additions.\nLooking ahead to the third quarter of fiscal 21 for North America Solutions.\nAs I mentioned earlier, we exited Q2 at the high end of our expected range.\nThe activity level has continued to grow at a strong pace since March 31 but we expect that growth to be more moderate for the remainder of the quarter.\nAs of today's call, with the nine additions I discussed, we have 118 rigs contracted and turning to the right.\nWe expect to end the third fiscal quarter of 2021 with between 120 and 125 contracted rigs.\nAs of March 31, about 30% of our active rigs were working under some form of a performance contract.\nAs John mentioned, these new commercial solutions contracts reward H&P with incremental margin for delivering better and more consistent outcomes for the customer.\nIn the North America Solutions segment, we expect gross margins to range between $65 million to $75 million with no early termination revenue expected.\nWe will have quite a few rigs rolling off term contracts during the third quarter, with many front loaded in Q3.\nWe expect many of the operator programs from these rollovers to continue.\nHowever, the rigs will reprice in conjunction with the term expirations.\nAs we continue to add rigs, one-time reactivation expenses continue to pressure margins, as I mentioned a moment ago, with regards to Q2.\nWe expect those expenses to be approximately $6 million in the third quarter.\nAs John mentioned, there is a strong correlation between the length of time a rig has been idle and the cost required to reactivate.\nHistorical experience indicates the rig stacked for nine months or longer will incur costs in excess of $400,000 to reactivate, and that figure rises as more time passes.\nKeep in mind that most of our rigs were stacked back in April of 2020, some 12 months ago.\nReactivation costs are mostly incurred in the quarter of start up, so the absence of such cost of future quarters is margin accretive.\nOur current revenue backlog from our North American Solutions fleet is roughly $370 million for rigs under term contract.\nBut importantly, this figure does not include additional margin that H&P can earn if performance contract targets are achieved.\nRegarding our International Solutions segment.\nInternational Solutions business activity averaged approximately four active rigs quarter-on-quarter, but we did add a fifth rig in Argentina midway through the second fiscal quarter.\nMargin contribution was above expectations for the quarter, primarily due to the incremental rig commencing work in Argentina, coupled with revenue reimbursements for upgrades performed on a rig.\nAs we look toward the third quarter of fiscal 21 for International, our activity in Bahrain is holding steady with the three rigs working, and we have two rigs under contract in Argentina.\nAlso, we still have a pending rig deployment in Colombia that continues to be delayed as our customer waits unrequired regulatory approvals to begin work.\nIn the third quarter, we expect to have a loss of between $1 million to $3 million, apart from any foreign exchange impacts.\nTurning to our Offshore Gulf of Mexico segment.\nWe continue to have four of our seven offshore platform rigs contracted, and we have management contracts on three customer-owned rigs, one of which is on active rate.\nOffshore generated a gross margin of $6 million during the quarter, which was at the lower end of our estimates due to some unexpected downtime on one rig.\nAs we look toward the third quarter of fiscal 21 for Offshore segment, we expect that Offshore will generate between $6 million and $9 million of operating gross margin.\nNow let me turn to the third fiscal quarter and update full fiscal year 2021 guidance as appropriate.\nCapital expenditures for full fiscal 2021 year are still expected to range between $85 million to $105 million with the remaining spend distributed evenly over the last two fiscal quarters.\nOur expectations for general and administrative expenses for the full fiscal year 21 have not changed and remain approximately $160 million.\nWe also remain comfortable with the 19% to 24% range for our estimated annual effective tax rate and do not anticipate incurring any significant cash tax in FY 21.\nThe difference in effective rate versus statutory rate is related to permanent book to tax differences as well as state and foreign income taxes.\nNow looking at our financial position.\nWe had cash and short-term investments of approximately $562 million in March 31, 2021, versus $524 million at December 31, 2020.\nIncluding our revolving credit facility availability, our liquidity was approximately $1.3 billion.\nIn mid-April, lenders with $680 million of commitments under our $750 million in revolving credit facility, or RCF, extended the maturity of the RCF from November of 2024 to November 2025.\nNo other terms of the RCF were amended in conjunction with this extension.\nThe remaining $70 million of commitments under the 2018 credit facility will continue to expire in November of 2024.\nOur debt-to-capital at quarter end was about 14%, and our net cash position exceeds our outstanding bond.\nH&P's debt metrics continue to be best-in-class measurement among our peer group that allows us to keep our focus on maximizing our long-term position.\nAs a reminder, we have no debt maturing until 2025, and our credit rating remains investment grade.\nNow a couple of notes on working capital.\nAs discussed in our February earnings call, we received a $32 million tax refund, plus $3 million of interest in January.\nStill included in our accounts receivable is approximately $19 million related to further tax refunds that we expect to collect in the coming quarters.\nThe preponderance of our trade AR continues to be less than 60 days outstanding from billing date and increased a modest $8 million sequentially.\nOur inventory balance has declined for the third consecutive quarter even as our active rig count climbed.\nWe continue to focus our efforts on reducing out-of-pocket expenditures.\nGiven our current outlook for activity, we expect our cash balances at fiscal year-end to be relatively unchanged from March 31.\nOn one hand, rising activity drives our run rate cash generation higher, while on the other hand, in the short term, some of that higher cash generation potential was masked by reactivation expenses and working capital investments required to enable that higher activity.\nWe believe at these higher activity levels, our point forward quarterly operating earnings will fund our maintenance capital expenditures, debt service costs and dividends.\nAs John mentioned, cost control remains a high priority.\nSince we last spoke on the February earnings call, we have further advanced this initiative as we seek to adjust our cost structure to what we expect to be a smaller industry scale.\nThis effort is one of our current strategic objectives, and we have several work streams being carried out in parallel.\nOne such work stream was the reduction in size and relocation of our Houston FlexRig assembly facility, which lowers go forward overhead while simultaneously increasing capabilities at that facility.\nAs these work streams progress, we will update you on the expected magnitude and timing of these various cost savings opportunities.\nThat concludes our prepared comments for the second quarter.\n",
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"content": "compname reports q2 loss per share of $1.13.\nq2 loss per share $1.13.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Such statements are based upon current information and management's expectations as of this date and are not guarantees of future performance.\nAs such, our actual outcomes and results could differ materially.\nYou can learn more about these risks in our annual report on Form 10-K, our quarterly reports on Form 10-Q and our other SEC filings.\nWe'll also be making reference to certain non-GAAP financial measures such as segment operating income and operating statistics.\nThis past fourth fiscal quarter was one of the most challenging in the company's 100-year history.\nThe destruction of oil demand induced by COVID is well documented.\nAnd in terms of drilling activity, our rig count hit bottom in August.\nDespite the challenging quarter, our strong financial position has enabled us to remain focused on our long-term strategies.\nOur people are developing new commercial models and innovative drilling and digital technologies that will help to transform the customer experience and shape the future of this business.\nThese efforts have progressed despite this difficult environment and will serve as the foundation from which the company will build as the market continues to recover.\nOur customer-centric approach is one that prioritizes providing customized solutions by employing a combination of people, processes, rigs and automation technology to deliver more value and lower risk for our customers.\nThis approach is distinctive in the industry, resonates well across our customer base and with further developments on the horizon will be a major driver of growth as activity levels improve.\nExcluding our two idle but contracted rigs, our current US FlexRig activity has improved to 80 rigs and we expect our active rig count will exit the first quarter at approximately 90 rigs.\nThis is almost double the number of rigs turning to the right compared to the lowest level reached in August.\nThe Permian has led the industry rig count recovery and H&P has earned approximately two-thirds of the incremental work in that basin.\nAs we anticipated, our rig count growth has exceeded that of our peers coming off of the bottom, allowing us to recoup 4 to 5 points of market share.\nWe believe that the quality of our field leadership, rig crews, FlexRig fleet and digital technology solutions will continue to advance this trend.\nConcurrent with the increase in near-term activity, we are also experiencing increased customer utilization of our performance-based contracts in our rig automation software, AutoSlide.\nWe expect adoption of both to increase and become more prevalent in the industry.\nH&P's touch of a button autonomous drilling approach is designed to optimize drilling of the vertical, curve and the lateral.\nThese automated solutions include real-time automated geosteering, rotary and sliding execution and improved wellbore quality and placement.\nThe uniqueness of our automated solutions is backed by a patented economic-driven approach where the software not only makes optimal cost benefit decisions and also directs the rig to execute those decisions without the need of human intervention.\nThis improves reliability, enhances value and reduces risk for our customers.\nLet me give an example of the H&P value proposition autonomous directional drilling provides.\nWhen customers use AutoSlide on our FlexRig, directional drilling personnel are no longer required at the rig site.\nThis is possible because the directional drilling decisions are being calculated using an algorithm in our patented rig guidance system, which can accurately process through thousands of variables in seconds rather than relying on the manual calculations of the traditional directional driller.\nThe software-enabled FlexRig allows the curve to be landed more accurately and reliably and the lateral to be placed more precisely in the shale, which results in lower drilling costs, improved production, reduced long-term maintenance costs for our customers and lower environmental impact.\nCommercial models that reward performance coupled with rig automation software that enhances value are being adopted across the spectrum of the industry.\nMark will give additional details on performance contracts, but we have been successful in expanding our customer base with a wide range of E&Ps from super majors to small private companies.\nToday, H&P owns more than a third of the estimated 635 super-spec rigs in the US market.\nWith many rig count forecasts ranging from 450 to 550 rigs over the next couple of years, we see significant further super-spec FlexRig market share growth and opportunities for improved pricing.\nH&P continues to invest in new and diversified technologies for the long-term sustainability of the company.\nRecently, we have made investments in and are supporting the efforts of a few companies driving the evolution of the geothermal industry.\nThe core of this evolution is a transition from geographically concentrated and naturally occurring hydrothermal resources to enhanced geothermal systems and closed loop systems.\nJohn, could I ask you to pause for just a moment?\nI think I'm understanding from my team that we're having a difficulty with their web link not working.\nSo we're going to pause for just one moment.\nGet that online and continue.\nBear with us folks.\nIt is now my pleasure to turn today's program over to Mark Smith.\nAgain, our sincere apologies to all those on the phone -- on the telephone.\nSo, again, we do apologize.\nWe appreciate your patience and your interest in H&P.\nIn order to cure the problem, we will be posting the audio recording from this conference call within two hours from the conclusion.\nWe will be restarting from the top.\nWe will conduct a full one-hour conference call.\nWe hope you are available to stick with us and join us as we give you our fourth quarter fiscal '20 results and look ahead to fiscal 2021.\nSuch statements are based upon current information and management's expectations as of this date and are not guarantees of future performance.\nAs such, our outcomes and results could differ materially.\nYou can learn more about these risks in our annual report on Form 10-K, our quarterly reports on Form 10-Q and our other SEC filings.\nWe'll also be making reference to certain non-GAAP financial measures such as segment operating income and operating statistics.\nThis is yet another example that this fourth fiscal quarter is unprecedented in many ways and really challenging during the company's 100-year history.\nThe destruction of oil demand induced by COVID is well documented.\nAnd in terms of drilling activity, our rig count hit bottom in August.\nDespite the challenging quarter, our strong financial position has enabled us to remain focused on our long-term strategies.\nOur people are developing new commercial models and innovative drilling and digital technologies that we believe will help transform the customer experience and shape the future of this business.\nThese efforts have progressed despite this difficult environment and will serve as the foundation from which the company will build as the market continues to recover.\nOur customer-centric approach is one that prioritizes providing customized solutions by employing a combination of people, processes, rigs and automation technology to deliver more value and lower risk for our customers.\nThis approach is distinctive in the industry, it resonates well across our customer base and with further developments on the horizon will be a major driver of growth as activity levels improve.\nExcluding our two idle but contracted rigs, our current US FlexRig activity has improved to 80 rigs and we expect our active rig count will exit the first quarter at approximately 90 rigs.\nThis is almost double the number of rigs turning to the right compared to the lowest level reached in August.\nThe Permian has led the industry rig count recovery and H&P has earned approximately two-thirds of the incremental work in that basin.\nAs we anticipated, our rig count growth has exceeded that of our peers coming off of the bottom, allowing us to recoup 4 to 5 points of market share.\nWe believe that the quality of our field leadership, our rig crews, our FlexRig fleet and our digital solutions will continue to advance this trend.\nConcurrent with this increase in near-term activity, we are also experiencing increased customer utilization of our performance-based contracts in our rig automation software, AutoSlide.\nWe expect adoption of both to increase and become more prevalent in the industry.\nH&P's touch-of-a-button autonomous drilling approach is designed to optimize drilling in the vertical, the curve and the lateral.\nThese automated solutions include real-time automated geosteering, rotary and sliding execution and improved wellbore quality and placement.\nThe uniqueness of our automated solutions is backed by a patented economic-driven approach where the software not only makes optimal cost benefit decisions but also directs the rig to execute those decisions without the need of human intervention.\nThis improves reliability, enhances value and reduces risk for our customers.\nLet me give an example of the H&P value proposition autonomous directional drilling provides.\nWhen customers use AutoSlide on our FlexRig, directional drilling personnel are no longer required at the rig site.\nThis is possible because the directional drilling decisions are being calculated using an algorithm in our patented rig guidance system, which can accurately process through thousands of variables in seconds rather than relying on the manual calculations of the traditional directional driller.\nThe software-enabled FlexRig allows the curve to be landed more accurately and reliably and the lateral to be placed more precisely in the shale, which results in lower drilling costs, improved production, reduced long-term maintenance costs for our customers and lower environmental impact.\nCommercial models that reward performance coupled with rig automation software that enhances value are being adopted across the spectrum of the industry.\nMark will give additional details on performance contracts, but we have been successful in expanding our customer base with a wide range of E&Ps from super majors to small private companies.\nToday, H&P owns more than a third of the estimated 635 super-spec rigs in the US market.\nWith many rig count forecasts ranging from 450 to 550 rigs over the next couple of years, we see significant further super-spec FlexRig market share growth and opportunities for improved pricing.\nH&P continues to invest in new and diversified technologies for the long-term sustainability of the company.\nRecently, we have made investments in and are supporting the efforts of a few companies driving the evolution of the geothermal industry.\nThe core of this evolution is a transition from geographically concentrated and naturally occurring hydrothermal resources to enhance geothermal systems and closed loop systems.\nThe technologies and techniques these companies are exploring are expected to improve project economics, leading to the ultimate scalability of geothermal as a source of energy.\nThe growth potential of unconventional geothermal energy applications represents a new opportunity for H&P to increase the utilization of its installed FlexRig asset base along with our digital technology solutions.\nOur leadership position as a drilling solutions provider is a natural fit for the evolving geothermal market.\nThis is driven in part from our technology offerings that have already been utilized by some geothermal companies in Europe and are a proven success in unconventional oil and gas drilling in the US and internationally.\nModern geothermal drilling applications require the benefits that autonomous drilling and digital technology delivers for wellbore quality and placement.\nWe are encouraged by the successes, but we are also cognizant that a substantial amount of uncertainty remains in the market surrounding the impact of the pandemic.\nIt may take several quarters to understand what the new normal activity environment will look like.\nThat said, I continue to be impressed with our team's ability to manage through this difficult time and particularly the diligence they have demonstrated in keeping our employees and customers health and safety top of mind.\nToday, I will review our fiscal fourth quarter and full year 2020 operating results, provide guidance for the first quarter and full fiscal year 2021 as appropriate and comment on our financial position.\nLet me start with highlights for the recently completed fourth quarter and fiscal year ended September 30, 2020.\nThe company generated quarterly revenues of $208 million versus $317 million in the previous quarter.\nThe quarterly decrease in revenue is due to further declines in our rig count caused by the energy demand destruction associated with the COVID-19 pandemic as well as lower early termination revenues compared to the prior quarter.\nCorrespondingly, total direct operating costs incurred were $164 million for the fourth quarter versus $207 million for the previous quarter.\nGeneral and administrative expenses totaled $33 million for the fourth quarter, lower than our previous guidance.\nDuring the fourth quarter, we closed on the sale of a portion of our real estate investment portfolio comprised of six industrial developments in Tulsa, Oklahoma for $40.7 million, which had an aggregate net book value of $13.5 million.\nThe resulting gain of $27.2 million is reported as the sale of assets on our consolidated operations.\nOur Q4 effective tax rate was approximately 28% as we recognized an Oklahoma tax benefit related to the sale of our industrial properties in the state net operating losses.\nTo summarize this quarter's results, H&P incurred a loss of $0.55 per diluted share versus a loss to $0.43 in the previous quarter.\nAbsent these select items, adjusted diluted loss per share of $0.74 in the fourth fiscal quarter versus an adjusted $0.34 loss during the third fiscal quarter.\nFor fiscal 2020 as a whole, we incurred a loss of $4.60 per diluted share.\nThis was driven largely by the $563 million non-cash impairment announced in our second quarter as well as other select items, including restructuring charges and mark-to-market losses on our legacy securities portfolio.\nCollectively, these select items constituted a loss of $3.74 per diluted share.\nAnd absent these items, fiscal 2020 adjusted losses were $0.86 per diluted share.\nCapital expenditures for the full fiscal 2020 totaled $141 million, below our previous guidance due to the combination of ongoing capital efficiency efforts as well as the timing of a small amount of supply chain spending that crossed into fiscal 2021.\nThis annual total is a reduction of $145 million from our initial fiscal 2020 budget and a reduction of over $315 million from fiscal 2019 capex.\nH&P generated $539 million in operating cash flow during fiscal 2020, representing a decrease of approximately $317 million.\nI will note that our cash and short-term investments balance increased by $176 million sequentially year-over-year, which I will discuss more in detail later in my remarks.\nTurning now to our three segments, beginning with the North America Solutions segment.\nWe averaged 65 contracted rigs during the fourth quarter, approximately 15 of which were idle but contracted on some form of cold or warm stack rate.\nI will refer to idle but contracted rigs with the acronym IBC hereafter.\nThis contracted average was down from an average of 89 rigs in Q3.\nDuring the fourth quarter, we bottomed to 62 rigs contracted with about 16 IBC rigs resulting in 46 active rigs at the low activity point.\nWe exited the fourth quarter with 69 contracted rigs, of which 11 were IBC.\nThe exit count was slightly above our guidance expectations as demand for rigs found footing from the bottom late in the quarter.\nRevenues were sequentially lower by $105 million due to the aforementioned activity decline as well as the IBC count.\nIncluded in this quarter's revenues were $12 million of early termination revenue.\nNorth America Solutions operating expenses decreased $43 million sequentially in the fourth quarter, primarily due to reduced activity and to the proactive operating initiatives at the field level that I discussed during the third quarter call.\nThat said, the sustained decline in rig activity during the quarter did cause per day expenses to increase on a per revenue day basis.\nExpenses absorbed in the field include overhead for our field management and maintenance organizations, ongoing stacking costs, consumption of on-hand average cost inventory as we exhaust penny stock and limited reactivation costs for rigs returning to work.\nFurther, we had higher-than-expected self-insurance expenses, including numerous former employees on continued health and welfare benefits that will mostly expire toward the end of the first quarter fiscal 2021.\nOne comment to put these self-insurance expenses in context.\nOur prior period self-insurance claims were generated with higher average rig activity, but some of these incurred but not reported claims are just now being developed when current operations are much smaller.\nWhile we see both positive and negative volatility in our claims expenses as we true up the estimated liability each quarter, the percentage impact is more pronounced when our operations are smaller as they are today.\nNow looking ahead to the first quarter of fiscal 2021 for North America Solutions.\nAs I mentioned earlier, we exited Q4 fiscal 2020 with more rigs contracted and running than expected.\nThe activity level has continued to grow as operators add rigs with oil hovering around $40 per barrel.\nAs of today's call, we have 82 rigs contracted with only two IBC rigs remaining.\nThe market remains uncertain with macro COVID demand pressures, political uncertainties and forward crude supply balances.\nIn all but two situations, operators with idle but contracted rigs have put them back to work and we are winning select opportunities for incremental rigs.\nWe expect to end the first fiscal quarter of 2021 with between 88 and 93 contracted rigs and we also expect the remaining two IBC rigs to return to work in late December or early January.\nWhile the decrease in IBC rigs will not increase our contracted rig count, it will be accretive to activity and margins.\nAlmost all of these IBC rigs are on term contracts at rates entered into during the previous super-spec upgrade cycle.\nAs John discussed, our performance contracts are gaining customer acceptance.\nAnd of the approximately 21 rigs we have added or expecting to add to the active H&P rig count, after September 30 through December 31, just over 30% are working under performance contracts.\nAs we mentioned in the May and July calls, our focus on solution-based performance contracts has driven us to evolve the nomenclature we used to present our business with investors.\nWe began this transition as we shifted our segment guidance to focus on the segment margins driven by rig and technology solutions rather than individual rig rates.\nIn the North America Solutions segment, we expect gross margins to range between $40 million to $50 million with approximately $1 million of that coming from early termination revenue.\nThis margin guidance is greater than the prior quarter in total.\nAnd further, it is not impacted in any significant way by early termination revenues.\nHowever, Q1 margins will be temporarily adversely impacted by reactivation costs as we rapidly add rigs from the recent bottom and recommissioning costs for a couple of walking rig conversions.\nOur current revenue backlog from our North America Solutions fleet is roughly $554 million for rigs under term contract, but importantly is not inclusive of any potential performance bonuses.\nThis amount does not include the aforementioned $1 million of early terminations expected in Q1.\nRegarding our International Solutions segment, International Solutions business activity declined from 11 active rigs during the third fiscal quarter to five active rigs at fiscal year-end.\nThis decrease is the result of rig releases in Argentina and Abu Dhabi, due in large part to the ongoing COVID-19 pandemic.\nAs we look toward the first fiscal quarter of 2021 for international, our activity in Bahrain is holding steady with the three rigs working, while our two rigs in Abu Dhabi and our entire Argentina and Colombia fleets are now idle.\nIn Argentina, we continue to work within an arduous regulatory environment, which has prevented us from reducing labor costs to levels that are more in proportion with reactivity potential.\nThis will lead us to incur a legacy cost structure into at least the first quarter and will cause international margins to be negative.\nIn the first quarter, we expect to have a loss of between $5 million to $7 million, apart from any foreign exchange impacts.\nWe still have a pending rig deployment in Colombia, but it has been delayed as our customer is still waiting on all the required regulatory approvals to begin work.\nOn the marketing front, our international business development team is seeing some bidding tendering activity in Argentina, Colombia, the Middle East and certain other markets.\nAt this juncture, these prospects are early in the process and are not included in our forward outlook.\nFinally, turning to our Offshore Gulf of Mexico segment.\nWe have four of our eight offshore platform rigs contracted.\nOffshore generated a gross margin of $4.6 million during the quarter, below our estimates, in part due to unfavorable adjustments to self-insurance reserves related to a prior period claim.\nThe previously mentioned gross margin also includes approximately $1 million of contribution from management contract rigs.\nAs we look toward the first quarter of fiscal 2021 for the Offshore segment, we expect that offshore rigs will generate between $5 million to $7 million of operating gross margin with offshore management contracts contributing an additional $1 million to $2 million.\nNow, let me look forward to the first fiscal quarter and full fiscal year 2021 for certain consolidated and corporate items.\nAs we discussed in our May and July calls, we implemented numerous rightsizing efforts by reducing capital expenditures; reducing North America Solutions overhead; rightsizing selling, general and administrative overhead; and taking similar actions in the International segment where possible.\nAs mentioned, we are continuing to assess our international offices to appropriately calibrate for activity.\nIn all areas, we will continue to identify cost reduction opportunities and drive efficiency in our daily work activities.\nCapital expenditures for the full fiscal 2021 year are expected to range between $85 million to $105 million, which is a reduction of approximately 33% to fiscal 2020 capex.\nThis capital outlay is comprised of three approximately equal buckets: First, maintenance capex to support our active rig fleet.\nGiven current activity levels, we have sufficient capacity to minimize new maintenance capex expenditures for the foreseeable future.\nAs you may recall, in fiscal 2019, we had bulk purchases in capex to scale up rotating componentry [Indecipherable] 200 plus working super-spec FlexRig count.\nIn addition, we continue to harvest components from previously impaired and decommissioned rigs to conserve capital.\nAs such, we expect fiscal 2020 year maintenance capex will range between $250,000 to $400,000 per active rig in the North America Solutions segment, well below our prior year guidance of $750,000 to $1 million.\nSecond, skidding to walking capability conversions.\nFor the customer with a want or need for walking rigs, we will invest to convert certain rigs from skidding to walking pad capability in exchange for a term contract as opposed to competitors walking rig capacity is fully utilized.\nWe have select customers who prefer certain rig design elements and are willing to enter into a contract with at least a year of term to enable that investment.\nWe estimate walking conversions to approximately $6 million to $7 million per rig.\nThird, corporate capital investments.\nThe majority of this bucket is comprised of modernization for data center, data and analytics platforms and enterprise IT systems.\nOur on-site data center has elements at the life cycle renewal stage and we are seizing the opportunity to move to both co-located data centers and cloud computing configurations that will be less capital intensive prospectively.\nThe data and analytics modernization focuses on the cloud forward approach for increased capability and scalability.\nIn the enterprise IT systems arena, we were implementing a new Human Capital Management system to better accommodate how we manage our diversified and dispersed employee base, including all phases of the employment cycle and employee experience.\nFinally, a smaller amount of corporate capital is being allocated to office build outs as we reconfigure for new flex work arrangements with enhanced office capabilities that can facilitate smaller forward office footprints.\nDepreciation for fiscal 2021 is expected to be approximately $430 million.\nThis is approximately $50 million less in fiscal 2020, primarily due to the second quarter impairments of non-super-spec rigs and associated capital spares.\nOur general and administrative expenses for the full fiscal 2021 year are expected to be approximately $160 million.\nThe decrease sequentially is driven by our rightsizing efforts as discussed in the July conference call.\nWe believe our restructuring will enable us to achieve activity growth going forward without significant accretion of SG&A.\nWe are continuing our investment in research and development through the cycle as we push toward autonomous drilling.\nSuch innovation efforts will yield the next solution offering from our technology roadmap.\nWe expect R&D expenditures to be approximately $30 million in fiscal 2021.\nThe statutory US federal income tax rate for our fiscal 2021 year end is 21%.\nIn addition to the US statutory rate, we're expecting incremental state and foreign income taxes to impact our tax provision, resulting in an expected effective income tax rate range of 19% to 24%.\nBased upon an estimated fiscal 2021operating results and capex, we are projecting a decrease to our deferred tax liability with no resulting material cash tax.\nNow looking at our financial position.\nHelmerich & Payne had cash and short-term investments of approximately $577 million at September 30, 2020 versus $492 million at June 30, 2020.\nIncluding our revolving credit facility availability, our liquidity was in excess of $1.3 billion.\nOur debt to capital at quarter end was about 13% with a positive net cash position as our cash on hand exceeds our outstanding bond.\nOur debt metrics continue to be best-in-class measurement among our peer group.\nAs a reminder, we have no debt maturing until 2025 and our credit rating remains an investment grade.\nNow, a couple of notes on working capital.\nWe earned cash flow from operations in the fourth quarter of approximately $93 million versus $214 million in fiscal Q3.\nOur trade accounts receivable at fiscal year end was approximately $150 million with the preponderance being less than 60 days outstanding.\nOur inventory balance is reduced $9 million sequentially from June 30 to $104 million at September 30 as we have leveraged consumables across the entirety of US basins and have reduced our min/max carrying targets to reflect the new activity levels.\nAs mentioned in the previous call, we commenced a project to optimize our accounts payable terms and negotiate additional or early payment discounts from suppliers.\nThese efforts continued to bear fruit during the fourth quarter.\nWe expect further benefits, but the impact will be relatively modest in comparison to what we have realized to-date.\nThe macro environment in fiscal 2020 drove capital allocation decisions, cost management measures and the rightsizing of the company to new activity levels.\nThese collective efforts undertaken to-date are aimed at generating free cash flow of that, when combined with the modest uses of cash on hand, will cover our capital expenditure plan, debt severance [Phonetic] cost and dividends in fiscal 2021.\nBased on our budget for 2021 fiscal year, we expect to end fiscal 2021 with cash and short-term investments of approximately $450 million to $500 million.\nThe maintenance of our balance sheet strength and liquidity are foundational elements in our 100-year tradition of capital stewardship and they continue to be a significant differentiator in this volatile and cyclical industry.\n",
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"content": "compname posts q4 loss per share of $0.55.\nq4 loss per share $0.55.\nexpects its q1 of fiscal 2021 north america solutions rig count to exit at approximately 90 rigs up over 30% during quarter.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Such statements are based upon current information and management's expectations as of this date and are not guarantees of future performance.\nAs such, our outcomes and results could differ materially.\nYou can learn more about these risks in our annual report on Form 10-K, our quarterly reports on Form 10-Q and our other SEC filings.\nWe will also be making reference to certain non-GAAP financial measures such as segment operating income and other operating statistics.\nI'm excited to be in Abu Dhabi this week, having just participated in the ADIPEC Conference, which has provided a unique occasion to meet face-to-face with colleagues, customers and of course, our strong partner, ADNOC Drilling.\nAlso joining Mark and me today in Abu Dhabi is John Bell, Senior Vice President, International and Offshore Operations.\nAnd he will be available for International and ADNOC-specific questions.\nBefore getting into our traditional discussion topics, I wanted to first mention that ADIPEC, which is a global energy conference in Abu Dhabi, in this week there was over 150,000 attendees, 33 energy ministers and representatives from over 50 energy companies.\nI've been impressed with the focus on ESG and especially the discussions of the impacts on energy, security for the globe.\nIn addition to industry leaders sharing their focus on sustainability and ESG, there were also leaders of countries from around the globe that were present to give their perspectives on the energy transition and the importance of ongoing investments to ensure a smooth transition.\nDr. Sultan Al Jaber, the ADNOC Group CEO and UAE Minister of Industry and Advanced Technology gave a very compelling speech at ADIPEC's opening ceremony.\nHe started with a reminder that energy transitions take multiple decades, and I quote, Rewiring the energy system is a multi-trillion dollar business opportunity that is good for humanity and good for economic growth.\nHe also had a call to action stating, what the world really needs is to hold back emissions now progress.\nLet us together drive that progress.\nLet us always keep in mind our industry must play a pivotal role in the energy transition.\nWe have the knowledge, the skills and the people to make a difference in our world.\nNow that statement really resonates with me.\nWorking with our customers to reduce emissions and our collective environmental footprint is a major area of focus for us here at H&P.\nThe strategic alliance we signed with ADNOC is a great opportunity to deliver rig technology through the sale of eight high spec H&P FlexRigs as well as to make a significant $100 million investment in their initial public offering.\nADNOC has a 2030 oil production target of 5 million barrels per day and a goal to achieve natural gas independence.\nWe believe H&P can make significant contributions toward helping ADNOC achieve those goals through this new partnership, while also providing additional opportunities for us to expand in this pivotal and growing energy regions.\nLooking at the rest of our international activity, historically, we've experienced a lag compared to the US.\nSo we are expecting activity to improve in these markets in the coming quarters.\nA recent example is a couple of new agreements with YPF as we will put four rigs back to work under term contracts in Argentina during fiscal 2022.\nWe continue to pursue other international opportunities, and look forward to improving activity.\nShifting to North America Solutions, it is hard to believe that a year ago H&P had only 80 active rig drilling [Phonetic].\nToday we have 141 active FlexRigs.\nThe response of our people and their leadership through the pandemic has been nothing short of amazing.\nParticularly impressive is their service attitude in responding to customers as rig demand has been recovering.\nOur folks are resilient and deliver on safety, efficiency and reliability for our customers each and every day.\nWe expected that the rig activity increases would be more measured during our fourth fiscal quarter as we realized more rapid rig churn among customers who are sticking to their disciplined spending plans.\nGiven that, we were pleased with the 5% incremental rig count increase experienced during the quarter, and are even more optimistic as we look ahead to the fourth calendar quarter where we expect to see our rig count increase sequentially and at a higher pace as E&Ps reset their annual capital budgets.\nWe believe our customers will remain disciplined.\nAnd similar to 2021, the budgets for 2022 will be adhered to, but the new budgets will be reset at higher levels based on a higher commodity price environment, meaning more active rigs in 2022.\nAs evidenced by our rig count growth to date, we expect the rig count will have a significant increase in calendar Q4 of 2021 and Q1 of 2022.\nAs mentioned, our US land rig count stands at 141 rigs today, up from 127 at September 30, our fiscal year-end.\nAnd we expect to add roughly another 10 to 15 rigs by year end of calendar 2021.\nTo summarize North America Solutions, during calendar fourth quarter, we expect to add 25 to 30 rigs.\nTo put that in perspective, this is approximately the same number of rigs we added in the preceding nine months.\nFurther, we are also readying several more rigs during the first fiscal quarter that we expect to commence work in the first half of January.\nThis activity increase is exciting as our customers are investing in their calendar 2022 budgets.\nIt does however cause near-term margin compression due to the one-time expenses incurred to reactivation.\nMark will discuss the details more in a moment, and I'll add that we are pleased with the future cash generation these rigs will have, post reactivation as we return to greater scale operations driving both pricing higher and leveraging our fixed costs.\nGiven the well publicized challenges in what we hope is finally a post pandemic environment, it's not surprising to see rig reactivation and field labor cost increasing.\nAll of the super-spec rigs that are available to work today have been idle for well over a year, which equates to higher start-up costs.\nCompetition for quality people is also escalating, and we will be increasing field labor wages accordingly.\nAnd as a reminder, those cost increases are passed through to the customer.\nThe tightening supply of readily available rigs coupled with these cost increases have already begun to move contract pricing effort in the market.\nBased upon what we are experiencing today, we expect price increases will become even more pronounced in the coming months as rig demand picks up heading into 2022.\nMark will talk about our strong balance sheet in his remarks, but I wanted to mention one of our goals was to generate free cash flow, and we are encouraged that we believe that is achievable in the back half of 2022 with the rig count and revenue expectations we have.\nThese market conditions demonstrate further potential for H&P's new commercial models and digital technology solutions.\nOur digital technology solutions deliver value through improved efficiencies, reliability, lower cost and better overall outcomes.\nToday, approximately 35% of our FlexRigs are on performance contracts, and several customers are experiencing the powerful synergies, a combination of performance contracts and digital technology can deliver.\nAdoption continues to improve and is driving economic returns higher not only for our customers, but for ourselves as well.\nIn closing, we are encouraged heading into 2022 and fully expect that the demand for H&P's drilling solutions will continue.\nE&P capital discipline, rising commodity prices and a collective vision to play our crucial role and a smooth energy transition will strengthen the industry.\nThere are still many challenges, but I'm confident that our people and solutions have the Company well positioned to deliver value for customers and shareholders in this improving environment.\nToday, I will review our fiscal fourth quarter and full year 2021 operating results, provide guidance for the first quarter and full fiscal year 2022 as appropriate and comment on our financial position.\nLet me start with highlights for the recently completed fourth quarter and fiscal year ended September 30, 2021.\nThe Company generated quarterly revenues of $344 million versus $332 million in the previous quarter.\nThe increase in revenue corresponds to a modest increase in our rig count during the quarter.\nCorrespondingly, total direct operating costs incurred were $269 million for the fourth quarter versus $257 million for the previous quarter.\nDuring the fourth quarter, we closed on two transactions with ADNOC drilling.\nFirst, H&P sold eight FlexRig land rigs including two already in Abu Dhabi and six from the United States for delivery during 2022.\nConsideration received for this sale was $86.5 million and any gains above book values together with required investments to prepare and deliver the rigs will be recognized as each rig is delivered.\nSecond, H&P made a $100 million investment in ADNOC Drilling in conjunction with its initial public offering in early October.\nGeneral and administrative expenses totaled $52 million for the fourth quarter, higher than our previous guidance due primarily to professional services fees associated with the ADNOC transactions and our ongoing cost management efforts.\nAs well as increases to the short-term incentive bonus plan accruals to reflect full fiscal year operating results.\nOn September 27, we issued $550 million in unsecured senior note bonds to refinance our 487 million outstanding bonds that were due in May 2025.\nOur new issuance came at a coupon of 2.9% and a 10-year tenure maturing in September 2031.\nThe additional debt of about $63 million funded the make-whole provision and accrued interest for the call of the existing bonds as well as an associated transaction cost.\nThis made the transaction and subsequent debt extinguishment in October, liquidity neutral.\nAlso, note that the make-whole premium and accrued interest will be recognized in the first fiscal quarter 2022 concurrently with the October 27 redemption.\nOur Q4 effective tax rate was approximately 24%, in line with our previous guidance.\nTo summarize, fourth quarter's results, H&P incurred a loss of $0.74 per diluted share versus a loss of $0.52 in the previous quarter.\nAs of these select items, adjusted diluted loss per share was $0.62 in the fourth fiscal quarter compared with an adjusted $0.57 loss during the third fiscal quarter.\nFor fiscal 2021 as a whole, we incurred a loss of $3.04 per diluted share.\nAgain, this was driven largely by the non-cash impairments to fair value for decommissioned rigs and equipment, the majority of which were previously impaired and are held for sale.\nCollectively, these select items constituted a loss of $0.44 per diluted share.\nAbsent these items, fiscal 2021 adjusted losses were $2.60 per diluted share.\nCapital expenditures for fiscal 2021 totaled $82 million below our previous guidance due to the timing of supply chain spending that crossed in the fiscal 2022.\nRelative to our original guidance range of $85 million to $105 million, the variance was primarily driven by a delay in the start of planned IT infrastructure spending that we have previously discussed.\nMost of that planned IT spend will now be incurred in fiscal '22.\nH&P generated $136 million in operating cash flow during fiscal 2021.\nConsidering the pro forma impact of our recent debt refinancing, the collective cash and short-term investments balances decreased minimally by $7 million year-over-year due in part to working capital improvements achieved during fiscal 2021 as well as asset sales.\nTurning to our three segments beginning with the North America Solutions segment.\nWe averaged 124 contracted rigs during the fourth quarter, up from an average of 119 rigs in fiscal Q3.\nWe exited the fourth fiscal quarter with 127 contracted rigs.\nRevenues were sequentially higher by $12 million due to the aforementioned activity increase.\nNorth America Solutions operating expenses increased $18 million sequentially in the fourth quarter primarily due to the addition of six rigs as well as a higher material and supplies expense.\nThroughout fiscal 2021, we prudently managed our expenses and inventory levels using previously expensed consumable inventory harvested during stacking activities in calendar 2020 rather than utilizing fully costed inventory or purchasing new inventory.\nAs rig activity increased, our level of previously expensed inventory or what we have been referring to internally as quote-unquote, penny stock, has been exhausted resulting in the issuance of a higher cost inventory and the purchasing of additional inventory to replenish stock levels, replenishments go on the balance sheet.\nThrough fiscal 2021, we did not experience inflation in our costs.\nHowever, we are anticipating inflationary pressures moving forward, which I will touch on in a moment.\nAdditionally, as I will expand on later, we've put six rigs to work in the first half of October, the first fiscal quarter of 2022, but the reactivation costs are primarily incurred in fiscal 2021.\nThe onetime reactivation expenses associated with all of those rigs was $6.6 million in fiscal Q4.\nNow looking into the first quarter of fiscal 2022 for North America Solutions.\nAs expected, rig count growth was moderate during the fourth fiscal quarter.\nPublicly traded customers continued to operate within their calendar year budget plans, which are currently being reset for calendar 2022 in an oil and gas commodity environment that is significantly more robust than this time last year.\nAccordingly, we expect to see sizable spending increases, especially with our public company customers during the first fiscal quarter of 2022.\nAs of today's call, we have 141 rigs contracted, and we expect to end our first fiscal quarter with between 152 and 157 working rigs with current line of sight for a few additional rigs turning to the right in early January.\nIn the North America Solutions segment, we expect gross margins to range between $75 million to $85 million inclusive of the effect of about $15 million in reactivation costs.\nAs I mentioned in last quarter, there is positive correlation between the length of time a rig has been idle and the costs required to reactivate it.\nMost of the costs we are reactivating -- most of the rigs we are reactivating in the first quarter have been idle for 18-plus months.\nReactivation costs were mostly incurred in the quarter of start-up, so the absence of such costs in future quarters is margin accretive.\nAs John mentioned, we are expecting to achieve higher pricing in light of higher demand in tight, ready-to-work, super-spec supply.\nI will now pause to comment on inflationary considerations ahead for fiscal 2022.\nWe have seen increases in commodity pricing such as for steel.\nProducts reflecting upward pricing due to this pressure include capital items such as drill pipe.\nNote that our upcoming capital expenditure guidance is inclusive of such pricing increases.\nFor margin-related expenditures, I will touch on two items.\nFirst, maintenance and supplies pricing is increasing across some categories such as oil-based products like lubricants and steel-based products like fluid ends [Phonetic].\nSecond, as John discussed, we are increasing field labor rates to respond to market conditions and assist in talent retention and attraction.\nFurther, our contracts are structured to pass through labor price increases over a 5% threshold.\nTherefore, significant labor increases are margin neutral due to contractual protections.\nFair margin guidance was inclusive of our expectations for inflation in the first fiscal quarter.\nAs it relates to supply chain access to parts and materials to run our business, we are in constant communication with our suppliers and they've placed advance orders for certain IRS categories.\nOur proactive approach to inventory planning, coupled with our scale and healthy vendor partner relationships provide us reasonable assurance of supply chain issues as we see them today will not materially impact our business.\nWe will continue to engage our suppliers and partners to stay ready to adjust as developments unfold.\nSubsequent to September 30, 2021 we sold two peripheral service lines, which provided rig move trucking and casing running tools services to a portion of our North America segment customers.\nThese business lines were largely margin neutral to H&P having collected revenues in the fourth quarter and full fiscal year of 2021 of $10 million and $34 million respectively.\nTo conclude comments on the North America segment, our current revenue backlog from our North America Solutions fleet is roughly $430 million.\nRegarding our International Solutions segment, International business activity increased by one rig in Argentina to six active rigs during the fourth fiscal quarter.\nAs we look to the first fiscal quarter of 2022 for International, activity in Bahrain is holding steady with the three rigs working, and we expect to go from three to four rigs working in Argentina as well as get the contract of the Colombia rig turning to the right.\nNote that three of the YPF rigs John mentioned earlier will commence work in subsequent FY22 quarters in Argentina.\nTurning to our Offshore Gulf of Mexico segment, we continue to have four of our seven offshore platform rigs contracted.\nOffshore generated a gross margin of $8 million during this quarter, which was within our guided range.\nAs we look to the first quarter of fiscal 2022 for offshore, we expect that the segment will generate between $6 million to $8 million of operating gross margin.\nNow, let me look forward to the first fiscal quarter and full fiscal year 2022 for certain consolidated and corporate items.\nAs we increased our rig count, capital expenditures for the full fiscal 2022 year are expected to range between $250 million to $270 million.\nThis capital outlay is comprised of three buckets, similar to fiscal 2021.\nFirst, maintenance capex to support our active rig fleet will be approximately 50% of the total FY '22 capex.\nIn fiscal 2019, we had bulk purchases in capex to scale up rotating componentry for a then 200-plus working super-spec FlexRig count.\nIn addition, we harvested components from previously impaired and decommissioned rigs to conserve capital.\nAs such, we were able to utilize resources on hand and preserve capital in 2021.\nBut now we have reached the end of those inventories and we are needing to recommence a regular cadence of component equipment overhauls and drill pipe purchases.\nThis, coupled with a sharp activity increase we are experiencing is driving our fiscal 2022 maintenance capex back into our historical range of between $750,000 to $1 million per active rig per annum in the North America Solutions segment.\nSecond, skidding to walking capability conversions will approximate 35% of the fiscal 2022 capex.\nAlthough our peers have walking rigs available in the market, select customers prefer certain rig design elements and commit to a conversion.\nFor customers that need walking rigs, we will invest to convert certain rigs from skidding to walking pad capability and exchange for a term contract that will enable the new investment, which we currently estimate is $6.5 million to $7.5 million per conversion.\nThird, corporate capital investments will be about 15% of fiscal 2020 capex.\nOver half of this bucket is comprised of modernization for data center, data and analytics platforms and enterprise IT systems, most of which has moved from fiscal 2021 to fiscal 2022 and will improve our infrastructure and cyber security posture.\nPortions of the balance of this corporate capital investment are for Power Solutions capital associated with ESG research and development efforts, and for certain real estate matters.\nAs part of the ADNOC sale transaction mentioned earlier, we will deliver the eight rigs to ADNOC throughout the year of 2022 with sale proceeds of $86.5 million received in September 2021 and are included in accrued liabilities on our balance sheet.\nIn addition to the capital expenditures just described above, we will spend approximately $25 million in cash to prepare and deliver the rigs to ADNOC.\nWhen we incur these expenses, they together with the net book values which among other assets are classified in assets held for sale will collectively represent the accounting basis in the rigs for the purpose of determining gains to be recognized in the upcoming quarters upon each delivery.\nDepreciation for fiscal 2022 is expected to be approximately $405 million.\nOur general and administrative expenses for the full 2022-year expected to be approximately $170 million, which is roughly consistent with the year just completed.\nFiscal 2022 SG&A will be partly front loaded in the first fiscal quarter due to short-term incentive compensation payments for fiscal year 2021 results and the timing of certain professional services fees.\nSpecifically, we expect $45 million to $85 million in Q1 with the remainder spread proportionately over the final three quarters.\nOur investment in research and development is largely focused on autonomous drilling, wellbore quality and ESG initiatives.\nAnd we anticipate these innovation efforts to yield further enhancements and solutions offerings on our technology roadmap.\nWe anticipate R&D expenditures to be approximately $25 million in fiscal '22.\nWe are expecting an effective income tax rate range of 18% to 24% for fiscal 2022.\nIn addition to the US statutory rate of 21%, incremental state and foreign income taxes also impact our provision.\nBased upon estimated fiscal 2022 operating results and capex, we are forecasting another decrease to our deferred tax liability.\nAdditionally, we are expecting cash tax in the range of $5 million to $20 million.\nNow looking at our financial position.\nHelmerich & Payne had cash and short-term investments of approximately $1.1 billion at September 30, 2021.\nWhen considering the aforementioned 2025 bond repayment and make-whole premium that occurred in October, the pro forma cash and short-term equivalents of September 30, 2021 were $570 million, sequentially compared to $558 million at June 30, 2021.\nIncluding availability under our revolving credit facility, but excluding the $546 million, 2025 bond extinguishment amount, our liquidity was approximately $1.3 billion commensurate to the prior quarter.\nOur debt to capital at quarter-end was temporarily at 26% given the debt overlap at the September 30 balance sheet date, accounting for the repayment of the 25 bonds.\nHowever, pro forma debt to capital are just down to 16%.\nOur working capital stewardship since the March 2020 downturn resulted in cash accretion.\nAs we look forward toward the end of fiscal '22, we do expect to consume a modest amount of cash given the one-time recommissioning expenses together with net working capital increases as our rig activity climbs.\nFiscal Q1 will experience lower cash flow from operations in the following quarters due to the rig ramp up and the seasonal cash expenditures for incentive compensation, property taxes, etc.\nWe do expect to end the fiscal year with between $475 million to $525 million of cash on hand and $25 million to $75 million of net debt.\nIn summary, we are expecting to generate free cash flow that when combined with the modest uses of cash on hand early in the fiscal year will cover our capital expenditure plan, debt service cost and dividends in fiscal '22.\nThe growth in rig count early in the fiscal year provides a platform for cash generation in the second half of the year that pointing forward fully covers our cash uses including our dividend and sets the stage for further cash accretion.\nOur balance sheet strength, liquidity level and term contract backlog provide H&P the flexibility to adapt to market conditions, take advantage of attractive opportunities and maintain our long practice of returning capital to shareholders.\nThat concludes our prepared comments for the fourth fiscal quarter.\n",
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"content": "compname reports q4 loss per share of $0.74.\nq4 loss per share $0.74.\noperating revenues of $344 million for quarter ended september 30.\nexpect utilization of readily available rigs to remain very high.\nprojected increase in rig demand will be more than we can accommodate with our current active fleet.\nwill have to reactivate more long-idled rigs to satisfy demand.\nexperiencing increased rig activity with 141 rigs working in north america today.\nexpect to see activity improve in international markets in coming quarters as well.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: On the call today are Jeff Jones, our president and CEO; and Tony Bowen, our CFO.\nSome of the figures that we'll discuss today are presented on a non-GAAP basis.\nSuch statements are based on current information and management's expectations as of this date and are not guarantees of future performance.\nAs such, our actual outcomes and results could differ materially.\nYou can learn more about these risks in our Form 10-K for fiscal 2020 and our other SEC filings.\nWhen we last talked, we were in the middle of what was the most unique tax season in history.\nThe pandemic resulted in the first-ever extension of the filing deadline and changes to nearly every aspect of our operating model.\nThroughout the season, our teams demonstrated agility and resilience.\nWe adapted to an ever-changing environment, and we delivered to our clients when they needed us the most.\nThe result was a strong finish, growing revenue 300% in the quarter and serving more clients than last tax season.\nWe've also made progress in other areas of our business.\nOur results at Wave have steadily improved as they've returned to double-digit percentage revenue growth following the initial disruption caused by the pandemic.\nAfter the close of the quarter, we also successfully issued long-term debt and signed an important agreement with MetaBank to be the provider of our suite of financial products.\nThese developments have resulted in a great start to our fiscal year as we continue to build positive momentum in the business.\nFirst, I'll talk about the recently completed tax season, providing perspectives on both our performance and the overall industry.\nThen I'll give some thoughts on the progress we are making on our strategic road map.\nTony will then discuss our Q1 results and share high-level thoughts on the balance of fiscal '21.\nHe'll also provide an update on our capital structure, including details on our recently completed debt offering, and we'll talk about our agreement with Meta.\nI'd like to start with the tax season.\nThe majority of the season took place while the country was dealing with the pandemic.\nWe navigated the various state and local orders and took steps to promote the safety and well-being of our associates and clients.\nA significant number of our offices were closed, and those that weren't moved to a drop-off model with a limited in-person interaction with our clients.\nThe reality is that from mid-March through the end of the season, there has been no such thing as business as usual in any of our offices.\nThis was especially true during the May through July time frame with around half of our offices closed, and those that were open, subject to various local orders.\nAnd while this time has been challenging, we have looked at it as an opportunity to demonstrate our commitment to our clients and communities.\nAdditionally, we accelerated our efforts to transform our tax business as we innovate to deliver expertise to consumers in new and exciting ways.\nThe capabilities we've built to enable clients to digitally drop off their forms, interact with tax pros virtually, review their returns online and sign and pay remotely provide them with the expertise they wanted when they weren't comfortable with in-person service or when our offices were closed.\nAnd these innovations helped us engage with our DIY clients in new ways, bringing our expertise to life within our software offering.\nIn total, our digitally enabled returns grew over 150%.\nIt's clear that consumers are taking notice of how the expanded H&R Block platform is bringing digital capabilities to those who want assistance and on-demand human help to those who prefer to use software to file.\nTurning to category results.\nI'll start with our assisted business.\nWe had a strong start to the tax season as we were tracking to our goals of improving our client trajectory and holding market share.\nBecause of the impact of the pandemic and the changes we made to our operating model, we anticipated a decline in volume as well as the loss of market share.\nOur results, however, were strong as we finished with a small share loss.\nThis is attributable to the agility and resilience of our associates, tax pros and franchisees that I mentioned earlier as well as the digital efforts I just discussed.\nIn DIY, we also finished strong.\nOnline growth was 10.6%, which led the total DIY return growth of 8% as we held share in the category when excluding stimulus returns.\nOur product continues to evolve and win accolades from third parties.\nAnd our clients love the experience as well as Net Promoter Scores improved again, following a significant increase in the previous season.\nWe're also seeing this in our retention rates, which improved over two points.\nOur strategy in DIY is working.\nWe're pricing competitively, providing tremendous value and people are taking notice as we continue to drive awareness.\nTurning to the industry.\nIt's important to consider two key factors when reviewing the data.\nFirst, there were millions of people who filed tax returns solely for the purpose of receiving stimulus payments.\nWe believe there are between seven million to eight million returns with $1 of income and are being tracked as stimulus filers.\nHowever, there are likely more who filed solely for the purpose of receiving a stimulus payment but reported additional income, making the exact number of stimulus filers unknown.\nThe second factor to consider is paper filings, which fluctuated significantly during the last few weeks of the season, making that key piece of the puzzle unreliable.\nRegardless of these two variables, there were a couple of significant learnings from this season.\nThe first is that the industry itself is strong.\nThe tax refund, which is typically the largest financial transaction for most Americans each year, became even more important to people as they were adversely impacted by the pandemic.\nAnd second, the assisted category is resilient.\nGiven the various stay-at-home orders, mandates for business to close and the general fear of physical interaction caused by the virus, many expected a dramatic decline in assisted filings.\nInstead, we saw just a 40 basis point decline in assisted e-files and a moderate change in mix between assisted and DIY when excluding the estimated number of onetime stimulus filings.\nIn fact, during the pandemic from mid-March through mid-July, assisted filings actually increased 50 basis points, which is telling considering the circumstances.\nWith this tax season behind us, I'd like to look ahead and provide some thoughts on our strategy.\nAs I mentioned earlier, the work of digitally enabling our business was a key enabler of our success this year.\nIn other words, the investments we made allowed us to adjust our operating model while still providing the expertise and service our clients expect, and these capabilities will continue to benefit us in the future.\nLooking ahead, our strategy is evolving and will go beyond the digital efforts we've undertaken in our tax business.\nWe continue to evaluate and reprioritize our strategic imperatives and examine our cost structure as we remain focused on growing volume, revenue and earnings over time.\nWhen we speak in December, we'll have more to share in addition to providing our outlook for fiscal '21.\nWith the strong finish to the tax season, our fiscal year is off to a great start.\nToday, I'll share our results for the quarter; thoughts on the remainder of fiscal '21; an update on our capital structure; and finally, some color around our recent agreement with MetaBank.\nDue to our seasonality, we typically report lower revenues and a net loss during our first quarter.\nThis quarter's results, however, improved due to the significant tax return volume during the month of May, June and July.\nBefore jumping into the financials, I thought it would be helpful to provide some context on our volume and net average charge performance, which we reported in late July, as well as an update on Wave.\nfor the third consecutive year with a 3.3% increase in returns.\nThis was led by continued strength in our DIY business with a 10.6% increase in online filings.\nIn assisted, given that we had approximately half of our total network open and those offices were operating under a modified model, we expected a decline in return volume and a loss of market share.\nOur finish to the tax season was strong, however, resulting in a decline in returns of just 2.8% and a small share loss.\nRegarding pricing, our net average charge in DIY declined due to mix as well as our decision to keep our free state filing promotion through the end of the tax season.\nIn assisted, we targeted flat net average charge coming into the year.\nThose saw a slight decrease due to mix in our company offices, partially offset by improved pricing in our franchise network.\nDuring last quarter's call, we talked about the impact that the pandemic has had on small businesses and consequently Wave's growth trajectory.\nFollowing a couple of months of flat year-over-year revenue, I'm pleased to report that we've seen progressively better results in the subsequent months, resulting in year-over-year growth of nearly 20% during the quarter.\nConsidering the circumstances, this was a tremendous outcome and a positive sign that Wave's innovative platform continue to provide value to small business owners.\nThe increase in tax filing volume in Wave's contribution resulted in revenue of $601 million in the fiscal first quarter, an increase of $451 million or 300% compared to the prior year.\nThis improvement in revenue resulted in higher variable operating expenses, primarily in tax pro compensation and credit card transaction fees.\nWhile we anticipated this increase, it was lower than expected, as we managed labor more efficiently.\nIn addition to the variable expenses, we spent more in marketing due to the tax season extension.\nThese increases were partially offset by other expense reductions, resulting in an overall increase in operating expenses of just 30% to $448 million.\nInterest expense increased $11 million as a result of our line of credit being fully drawn, which I'll discuss later.\nThe net result of revenues increasing at a greater rate than expenses was pre-tax income from continuing operations of $124 million compared to last year's pre-tax loss of $207 million, which is typical for our fiscal first quarter.\nGAAP earnings per share improved to $0.48 compared to a prior year loss of $0.72, while non-GAAP earnings per share improved to $0.55 compared to a loss of $0.66.\nIn discontinued operations, there were no changes to accrued contingent liabilities related to Sand Canyon during the quarter.\nWith that recap of the quarter, let me provide some perspective on our expectations for fiscal '21.\nBefore doing so, please note that our expectations assume next tax season is completed by the normal filing deadline of mid-April.\nOverall, we expect to see a significant increase in revenue and cash flow this fiscal year, not just compared to fiscal '20, but also in comparison to a typical year.\nThis is due to both the carryover tax season '20 into our first quarter and our expectation for a normal tax season '21.\nIn addition to achieving these increases, we are also focused on driving cost efficiencies in order to fund our growth imperatives.\nThese reductions include a hiring freeze, the elimination of merit increases, examining vendor spend, renegotiating rent across our retail footprint and limiting capital expenditures.\nSo hopefully, that provides helpful context.\nWe will provide more details during our Q2 call in December.\nI'll now turn to capital allocation and the balance sheet.\nDespite the unique circumstances related to pandemic, our capital allocation priorities remain the same.\nAt the top of the list is maintaining adequate liquidity for operational needs.\nWe then look to make strategic investments back into the business to drive growth.\nFinally, we returned excess capital to shareholders through dividends and opportunistic share repurchases.\nGiven our priorities are unchanged, there are four specific areas I'd like to provide additional clarity on given recent events: our line of credit, the recent issuance of long-term debt, our dividend and future share repurchases.\nLet's start with our line of credit.\nAt the onset of the pandemic, we drew down the full balance of the line to maximize our liquidity given the uncertainty.\nThe draw had a six-month interest lock, which matures this month.\nGiven the strong finish to the tax season, we had a cash position of $2.6 billion at the end of the quarter, and as such, intend to pay down the full balance of the draw later this month.\nWe anticipate returning to our normal cycle of seasonal borrowings on our line of credit later this calendar year as we head into the upcoming tax season.\nIn addition, given the strength of our financial performance in the first quarter, we met our debt covenants and currently expect to be in compliance going forward.\nTurning to our recent debt offering.\nI'm pleased with our successful issuance of $650 million of 10-year notes at a coupon of 3.875%.\nWe intend to use the proceeds of these notes to retire existing debt that matures in October.\nThis was a positive result for us as we're replacing 5-year notes with 10-year notes at a lower interest rate.\nIt's also a sign that investors have confidence in our future.\nMoving on to our dividend.\nWe have continued our streak of paying quarterly dividends consecutively since going public nearly 60 years ago.\nAs we shared in the past, we evaluate our dividend after each fiscal year, which we did in June.\nThis review resulted in us maintaining the dividend at its current level.\nTo be abundantly clear, we have no plans to change our dividend payout level for the balance of this fiscal year.\nOur next evaluation of the dividend will be in June of next year.\nAnd while we cannot guarantee future dividend payments with the level of dividend would be at that time, we do have a goal of increasing the dividend over the long term as evidenced by the 30% increase over the past five years.\nFinally, turning to share repurchases.\nWe have decided to resume our practice of repurchasing shares to offset dilution from equity grants.\nConsistent with prior practice, we will not discuss potential additional share repurchases other than mentioning they would be done opportunistically.\nThe last thing I'd like to discuss today is the agreement we reach with MetaBank to be the provider of our financial products, including refund transfer, refund advance, Emerald Advance and Emerald Card.\nMetaBank is a leader in providing financial solutions to consumers and has significant experience in the tax preparation industry.\nWe worked with Meta in the past and know them to be an excellent partner.\nBoth of our teams are hard at work to make the transition as seamless as possible for our clients.\nFrom a financial perspective, we expect this agreement to result in savings of $25 million to $30 million on a run rate basis.\nThough that number will be approximately $10 million lower in fiscal '21 as we are transitioning midyear and will incur some onetime expenses.\nIn summary, we are off to a great start this fiscal year.\nWe recently had a successful debt issuance and are excited to be partnering with Meta for years to come.\nI'm looking forward to sharing more with you regarding our expectations for the fiscal year in December.\nThey truly make H&R Block a special place and are why we were able to accomplish so much during such a difficult time.\nWe're now focusing on the future, and I'm looking forward to sharing an update with you in December.\n",
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"content": "compname reports q1 adjusted earnings per share $0.55.\nq1 gaap earnings per share $0.48 from continuing operations.\nq1 revenue $601 million versus refinitiv ibes estimate of $617 million.\nq1 adjusted non-gaap earnings per share $0.55.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: On the call today are Jeff Jones, our president and CEO; and Tony Bowen, our CFO.\nSome of the figures that we discuss today are presented on a non-GAAP basis.\nSuch statements are based on current information and management's expectations as of this date and are not guarantees of future performance.\nYou can learn more about these risks in our Form 10-K for fiscal 2020 and our other SEC filings.\nI'm excited to provide an update today on the progress we're making on our Block Horizons strategy, as well as some perspective on the first half of the tax season.\nTony will follow with thoughts on our third-quarter results, outlook for fiscal '21, and additional detail on our strategic investments.\nSo let's jump right in.\nFollowing our investor day in December, we've connected with many of you and have enjoyed hearing your perspectives.\nBased on these conversations, I thought it would be helpful to start with an update on Block Horizons.\nOur long-term strategy focused on three imperatives: Small Business, Financial Products, and Block Experience.\nAs a reminder, Small Business and Financial Products are both categories with structural tailwinds, where we have a right to compete and advantages that will help us win.\nWhile these have been components of our business for years, historically, we haven't made a concerted effort to target either opportunity.\nBy leveraging our trusted brand, client relationships, and technology platform, we will accelerate growth in both areas.\nOver the next five years, they will become a more meaningful part of our business, helping to balance our current once-a-year purchase frequency.\nand given our existing assets in these areas, these will not require significant investment, as Tony will outline in more detail later.\nOur third imperative Block Experience encompasses a new approach to tax as we blend digital capabilities and data with human expertise and care.\nThrough this imperative, we will continue to modernize the consumer tax business, blurring the historical lines between Assisted and Do-It-Yourself.\nAnd by digitally enabling our human advantage, we'll increase the relevance of H&R Block.\nI'll now provide an update on each of these key areas, starting with small business.\nWe're making progress on all three elements of our small business strategy: first, expanding our reach to more small business owners to grow in tax, which includes cross-selling and fully integrating with Wave; second, growing our bookkeeping and payroll services in Block Advisors; and third, embedding Wave money at the center of the Wave experience.\nWe've certified over 25,000 professionals to serve the complex tax and financial needs of small business owners.\nThis is a great example of the power of our scale.\nWe've also seen thousands of Wave customers start to engage with the Block Advisors brand for their tax needs.\nWe're continuing to build new capabilities in bookkeeping and payroll.\nAnd in mid-February, we launched our Block Advisors marketing campaign to drive awareness of our ability to serve small business owners' unique needs and to reinforce our expertise as a trusted year-round partner.\nAt Wave, we continue to ship meaningful enhancements to our platform that are providing significant value to small business customers.\nThese include the beta launch of the new invoicing features to allow small business owners to better manage their accounts receivable, enabling remote deposit capture for Wave money, and creating new client interfaces to allow users to manage their bookkeeping faster and on more devices.\nThese efforts are paying off as we grew third-quarter revenue over 30% at Wave, continuing on the path toward pre-pandemic levels.\nIn financial products, our goal is to provide more value to our customers by transforming the Emerald Card into a fully featured consumer-friendly mobile banking alternative.\nWe are in the design phase and are excited about what we continue to learn with consumers.\nFor this season, we added a simple new digital feature to the Emerald Card, the ability for customers to automatically set up their mobile wallet on both Google Pay and Apple Pay directly from the MyBlock app.\nThis has resulted in a 10x increase in customers using their mobile wallets, which tells us that we're providing meaningful value.\nAnd in Block Experience, we're continuing to infuse human help into our DIY offerings and bring Tax Pro expertise to our customers however they want to be served.\nI'll provide more detail in a minute, but we're seeing positive momentum in several areas, including adoption of digital tools and Assisted, DIY filers engaging more with our tax experts, continued operational improvements in our offices, and enhancements to the DIY user experience.\nThe progress we're making in each of these three strategic imperatives in such a short time frame is a testament to the dedication and drive of our teams, and further evidence that we are building from a position of strength.\nBecause we have existing assets across Small Business, Financial Products, and Consumer Tax, it is important to emphasize that the investments we are making will be funded through cost savings, with future investments being success-based and tied to revenue growth.\nTony will provide additional color on this later in the call.\nWith that recap of Block Horizons, I'd now like to provide some perspective on the tax season.\nWe are executing on our playbook, digitally enabling our Assisted business in integrating human health into our DIY products to deliver a best-in-class experience however consumers want to file their taxes.\nIt's early in the season, but we're seeing hundreds of thousands of our Assisted clients choosing to interact with us digitally by uploading documents electronically through MyBlock, using video chat, or approving their completed return online.\nAnd our continued focus on operational excellence in our offices is translating to a consistent experience for our customers that provides tremendous value.\nAll of these efforts are resonating.\nAs we continue to see strong client satisfaction scores.\nWe've also improved the DIY user experience around document import, offered additional support to help users understand the pandemic's impact on their taxes, and provided real-time tax information updates for our mobile users.\nOur work to personalize the experience and to make it faster for our customers to complete their return continues to resonate.\nAnd finally, we're using data to offer human help in the moment clients need it most.\nResulting in online assist and Tax Pro review adoption significantly outpacing last year.\nAnd as I mentioned earlier, in small business tax, we have seamlessly integrated the Wave and block Advisors experience, leading to increased adoption of our tax services by Wave clients.\nWe're accomplishing all of this during another season in which the industry has experienced a delay in filings, which resulted primarily from the move of the IRS e-file open date from January to mid-February.\nWhile the slow start in the industry has obviously impacted our results, we've seen positive trends throughout the business.\nI'm encouraged by what we're seeing in our efforts to blend human help with digital capabilities.\nWe're seeing greater uptake of our digital tools by Assisted customers and the desire for more human help from our DIY customers as we continue to see the lines between these two categories blurring.\nAn example of this is the double-digit increase in online assist returns that I mentioned earlier, which is remarkable considering the overall decline in returns due to the delayed start.\nElsewhere, we're seeing a meaningful list in DIY net average charge as mix has been favorable, and we've been able to partially close the gap in pricing with our primary competitor.\nAnd our efforts to deliver exceptional service and Assisted are paying off with continued strong client satisfaction scores.\nWhile we're off to a good start, we recognize there's certainly a long way to go.\nWe're focused on executing our playbook in the second half of the season to build on our momentum.\nIn summary, we're executing on our Block Horizons strategy, seeing significant progress in key areas.\nWe're performing well in the tax season and, assuming an April 15 deadline, are on track to deliver our financial outlook for the year.\nWith that, I'll now hand the call over to Tony.\nToday, I'll provide an update on our third-quarter results, thoughts on our outlook for the fiscal year, and additional color on the investments we're making to support our strategic imperatives.\nStarting with the third quarter, our results were significantly impacted by the delayed start to the tax season, which resulted in an industrywide shift to returns from the first half into the second half.\nThis resulted in both lower return volume through January, as well as a deferral of revenue related to the e-file open date moving to February.\nAs a result, we reported revenue of $308 million for our third quarter, a decline of 41%.\nThis was primarily related to the delayed return volume, while approximately $69 million was due to the deferral of tax prep fees and the delayed recognition of refund transfer fees to Q4.\nPartially offsetting this decline was continued strong performance at Wave, where we posted an increase of over 30% for the second consecutive quarter.\nAdditionally, Emerald Card revenue improved due to additional loads from the second round of stimulus in January, and we saw improved performance in our international businesses.\nTotal operating expenses decreased 15% to $572 million.\nApproximately two-thirds of the decline was related to variable compensation and product expense, which was driven by lower return volume.\nAdditionally, marketing expenses were lower as we shifted spend to the fourth quarter.\nReductions in travel, legal and occupancy costs account for the remainder of the decrease.\nInterest expense declined $4 million, which reflects lower draws on our line of credit, as well as a lower interest rate on our debt issuance earlier in the fiscal year.\nThe changes in revenue and expenses resulted in pre-tax loss from continuing operations of $284 million.\nGAAP loss per share increased from $0.66 to $1.27, while adjusted loss per share increased from $0.59 to $1.17.\nThough the majority of this change was driven by the increase in pre-tax loss, it was also impacted by lower effective tax rate, as well as lower shares outstanding resulting from repurchases earlier in the year.\nAs we've discussed, while beneficial on a full-year basis, the lower tax rate and share count negatively impacts earnings per share in quarters in which we report a loss.\nIn discontinued operations, there were no changes to accrued contingent liabilities related to Sand Canyon during the quarter.\nTurning to our outlook for the fiscal year.\nWe expect industry volume to recover in the second half and then relatively flat for the tax season, assuming the deadline remains April 15.\nBased on these expectations and the positive trends Jeff mentioned earlier, we continue to expect revenue in the range of $3.5 billion to $3.6 billion and EBITDA of $950 million to $1 billion.\nWe have identified additional favorability in corporate taxes and, as such, now expect our effective tax rate to come in at the low end of our 18% to 20% outlook range.\nTurning to our strategic imperatives.\nI'd like to spend some time on the related investments and how we plan to fund them.\nAs Jeff mentioned, our established operations in Small Business, Financial Products, and Consumer Tax provide a strong base from which to build.\nIt's also important to note that we're implementing each strategic imperative in phases over the next several years.\nThis allows us to take a methodical approach, making modest initial investments with incremental investments being funded through revenue growth.\nIn small business, current investments are primarily in technology necessary to develop our capabilities, compensation as we build the team required to provide services, and marketing to acquire customers.\nIn financial products, the investment this year is limited and is primarily related to product design and experience.\nThis will continue into next year as we invest in technology to support the mobile banking platform.\nAnd in Block Experience, we continue to invest in technology and new operating models to deliver expertise and care to consumers however they want to do their taxes.\nAll in, these costs total approximately $20 million to $25 million in fiscal '21.\nWe've done an excellent job this year of finding efficiencies and eliminating unnecessary spend to fund these investments.\nTo summarize how we're thinking about this, our initial investments will be in the tens of millions of dollars, not hundreds of millions.\nWe'll fund them through cost reductions elsewhere in the business.\nAdditional investments will be funded by incremental revenue growth.\nAnd as a reminder, M&A is not a core part of our strategy.\nThough we'll remain open to opportunistically investing in external capabilities when we believe they will drive appropriate returns.\nOn a related note, following our investor day in December, we received several questions regarding our baseline earnings and expected run rate going forward.\nWe understand the importance of providing this perspective and plan to do so following the conclusion of this fiscal year.\nUltimately, our goal is to grow our top line at a rate in which we leverage our fixed cost, which translates to improved earnings and free cash flow.\nThis ability to generate a significant amount of cash, while our strategic imperatives provide a platform for accelerated growth, gives us confidence in our future and supports our capital allocation priorities, which remain consistent.\nAt the top of the list is maintaining adequate liquidity for our operational needs to account for our seasonality.\nNext, we will fund the investments I discussed earlier.\nFinally, we will deploy excess capital through quarterly dividends and share repurchases.\nWe're committed to continuing our dividend with the goal of increasing it over time.\nThe health of our business and our outlook for the future have allowed us to increase the dividend in four of the last five years, amounting to a total increase of 30% during that span.\nWe are also committed to repurchasing shares to offset dilution and we'll opportunistically repurchase shares beyond that.\nThis fiscal year, we have repurchased 5% of shares outstanding.\nAnd during my tenure as CFO, we have repurchased 19% of shares outstanding.\nIn summary, we're accomplishing great things in our tax business and are on track to deliver our financial objectives for the fiscal year.\nAnd our prudent, measured investments and our strategic imperatives are putting us on a path toward long-term growth in revenue, earnings, and cash flow.\nI couldn't be more excited about the future of H&R Block.\nThe dedication and resolve they've shown over the past 12 months are truly remarkable.\nI'm confident in where H&R Block is heading.\nWe're redefining the tax category, blending human expertise and care with technology and data, delivering more value for our customers, and we're making good progress in our small business and financial product strategic imperatives, which will be key growth drivers in the future.\nWe're not only poised to deliver on this year's outlook but are also well-positioned for an even stronger future.\nI look forward to sharing more with you when we report our full-year results in June.\n",
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"content": "q3 revenue $308 million.\nqtrly loss per share $1.27.\nqtrly adjusted loss per share $1.17.\nreiterates its revenue growth and earnings outlook for fiscal year.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: If you did not receive a copy of the release, you can find it on our website at hormelfoods.com under the Investors section.\nOn our call today is Jim Snee, Chairman of the Board, President and Chief Executive Officer; Jim Sheehan, Executive Vice President and Chief Financial Officer; and Jacinth Smiley, Group Vice President of Corporate Strategy.\nJacinth becomes, Executive Vice President and Chief Financial Officer on January 1.\nJim Snee will provide a review of the Company's current and future operating condition and a perspective on fiscal 2022, Jim Sheehan will provide detailed financial results and commentary in the fourth quarter and Jacinth Smiley will provide commentary on the Company's fiscal '22 outlook.\nAs a reminder, the fourth quarter of fiscal 2021 contained an extra week compared to fiscal 2020.\nAs a courtesy to the other analysts, please limit yourself to one question with one follow-up.\nIt will also be posted on our website and archived for one year.\nBefore we get started, I need to reference the Safe Harbor statement.\nIt can be accessed on our website.\nAdditionally, please note the Company uses non-GAAP results to provide investors with a better understanding of the Company's operating performance.\nThese non-GAAP measures include organic volume, organic sales and adjusted diluted earnings per share.\nJim will be retiring as CFO at the end of the calendar year, so this will be his last earnings call.\nJim has over four decades with our Company and under his tenure has built a world-class finance accounting and technology organization.\nJim was the guiding force behind Project Orion, an initiative that will benefit our Company for decades to come.\nFor over 43 years, with the last five years as CFO, Jim has been a trusted partner to me and many of my predecessors.\nJim helped complete over $5 billion in strategic acquisitions, including Justin's, Fontanini, [Indecipherable] Columbus, Sadler's, and our largest acquisition ever, Planters.\nEqually impressive with Jim's contribution to reshaping our portfolio, as he was was also a guiding force behind many of the divestitures we made to transform our Company.\nJim's oversight to our evolution puts us on a solid foundation for the future growth of our Company.\nAdditionally, Jim has overseen the distribution of over $2 billion in dividends to our shareholders.\nIn addition to his business accolades, Jim was the key voice behind our game-changing Inspired Pathways program, which provides free college education for children of our team members.\nJim will be missed, and we wish him well in retirement along with his wife, Jean.\nJacinth Smiley succeeds Jim, and brings a wealth of experience from outside Hormel Foods, she has deep and broad domestic and international experience in areas such as corporate finance, public accounting and compliance.\nMost recently, she served as the Group Vice President of Corporate Strategy.\nHormel Foods is fortunate to have Jacinth as CFO, and I'm looking forward to her leadership in her new role.\nMy sincere congratulations to both Jim and Jacinth.\nIn an incredibly difficult and rapidly changing operating environment, our team delivered outstanding top line results.\nWe achieved record sales in fiscal 2021, exceeding both $10 billion and $11 billion in sales for the first time.\nFor the full year, sales were $11.4 billion, representing 19% sales growth.\nOn an organic basis, sales increased 14%.\nOur top line growth was incredibly balanced as each of our go-to-market sales channels and business segments posted strong double-digit sales gains, underpinned by value added volume growth, pricing and a better mix.\nAdjusted diluted earnings per share for the full year increased 4% to $1.73, in spite of inflationary pressure and supply chain challenges.\nDiluted earnings per share was $1.66.\nWe had an excellent fourth quarter and posted numerous records, including a fourth consecutive quarter of record sales, record diluted earnings per share and record cash flow from operations.\nI want to commend our entire team for delivering this impressive performance and the numerous fourth quarter records.\nSales increased 43% and organic sales increased 32%.\nVolume increased 14% and organic volume increased 8%.\nWe grew sales in every segment and every channel for the quarter.\nCompared to pre-pandemic levels in 2019, all channels grew by over 25%, driven by strong demand and pricing action in almost every category.\nIt's all time record performance was led by further acceleration in our foodservice businesses.\nOur foodservice teams across the organization posted 72% sales growth for the quarter, 33% higher than pre-pandemic levels.\nThis followed second quarter growth of 28% and third quarter growth 45%.\nStrength was broad-based with significant contributions from Refrigerated Foods, Jennie-O Turkey Store and MegaMex.\nWe also saw a strong recovery in our noncommercial segments, including college and university and K through 12 institutions.\nOur foodservice portfolio remains perfectly positioned to meet the needs of today's foodservice operators with labor and time saving products.\nI believe our growth in foodservice is a function of our differentiated value proposition in the industry, as well as our dedication during the pandemic.\nWe have grown with our distributor and operator partners during the recovery, strengthening many of our partnerships and decades long relationships.\nThe top line performances from our other channels were equally impressive, retail, deli and international each delivered a second consecutive year of growth.\nRetail and international sales both increased 34% and deli sales increased 24%.\nOn an organic basis, each channel posted strong double-digit growth.\nGrowth came from numerous brands across all areas of our portfolio, including SPAM, Applegate, Columbus, Hormel Black Label, Wholly, Hormel Complete Gatherings and many more.\nWe continue to see very positive trends for consumer takeaway at retail.\nAccording to IRI, key metrics for our brands such as buy rate and trips per buyer remain favorable, which indicates elevated consumer spending on our products has remained.\nWe also continue to grow share in many important categories, including Hormel Gatherings, party trays, Hormel pepperoni, SPAM luncheon meat and Hormel Chili.\nOur One Supply Chain team has done an excellent job operating in and navigating constant supply chain disruptions.\nWe've also seen the positive impact of their strategic actions, namely, we're starting to see an increasing number of our open positions being filled, more automation being implemented in our facilities and a more simplified product portfolio.\nIn total, these actions are allowing us to maximize our throughput to meet the continued strong demand of our customers.\nFrom a bottom line perspective, fourth quarter earnings were a record $0.51 per share, a 19% increase compared to 2020, an acceleration in our top line results and the addition of the Planters business led to the earnings growth.\nAs we said in the third quarter, we expected margins to improve as pricing actions took effect.\nIndeed, margins improve sequentially in all four segments.\nPricing actions, improved promotional effectiveness and a more profitable mix, all contributed to the improvement.\nWe started to see relief in key raw materials in the fourth quarter compared to prior quarters.\nHowever, labor rates, freight, supplies and raw material costs remain above year-ago levels and in the case of freight, increased further.\nLooking at the segments, Grocery Products, Refrigerated Foods and International segments, each posted double digit segment profit growth.\nJennie-O Turkey Store profits declined due to higher feed costs.\nA few highlights from the quarter includes the following.\nRefrigerated Foods delivered strong volume sales and profit growth.\nThe team was able to leverage the numerous capacity expansion projects since the start of the pandemic for categories such as pizza toppings, bacon and dry sausage.\nWithin Grocery Products, our simple meals and Mexican portfolios generated excellent growth, in addition to contributions from the Planters snacks nuts business.\nNotably, the SPAM brands delivered its seventh consecutive year of record growth, and we recently announced plans for additional capacity to support future growth.\nOur international team achieved a seventh consecutive quarter of record earnings growth with strong results from all of their businesses.\nThe momentum this business has generated over the last two years supports our plans to aggressively expand internationally.\nLastly, Planters made a positive impact, especially in the fast growing snacking and entertaining space and within the convenience store channel.\nThis quarter's results were outstanding and we intend to build on this momentum going into 2022.\nOver the past decade, Hormel Foods has deliberately evolved from a meet centric commodity-driven company with a heavy focus on retail pork and turkey to a global branded food company with leading brands across numerous channels.\nOur Company today is more food forward than ever, with a sharp focus on the needs of our customers, consumers and operators.\nAs we begin fiscal 2022, we plan to continue our evolution.\nFirst, we will complete the full integration of the Planters business across all functions.\nThe first of three production facilities was successfully integrated in the fourth quarter and the remaining two facilities are scheduled to be fully integrated in our first quarter.\nSince acquiring Planters six months ago, our sales, marketing, innovation and R&D teams have been hard at work, developing new and innovative products and flavors, many of which will be rolled out this coming year.\nThey've also been working on refreshing the branding and packaging, which will also be launched in 2022.\nSeeing the great work of our teams has been even more confident about where we are able to take this brand in the future and further strengthen our conviction of the potential for Planters.\nFrom a financial standpoint, the Planters business is performing at the top end of our expectations and we expect that trend to continue in fiscal '22.\nSecond, we are also taking a series of actions at Jennie-O Turkey Store.\nOver time, we expect these actions to result in a more demand oriented and optimize turkey portfolio that is better aligned to the changing needs of our customers, consumers and operators that will result in long-term growth, improved profitability and lower earnings volatility.\nThe transformation starts with accelerating our efforts to shift from commodity to branded value-added products.\nThis is a similar to the successful strategy we have executed in Refrigerated Foods over the past 15 years.\nAs a result, we will close the Benson Avenue plant located in Willmar, Minnesota in the first half of fiscal 2022.\nThis plant is an older inefficient facility which produces numerous commodity items.\nValue-added products will be consolidated into multiple other facilities.\nTeam members will transition to our newer and larger facility also located in Willmar, which will supplement staffing levels.\nFinally, we will continue to integrate business functions into the Hormel Foods parent organization.\nOver the past two years, we have successfully integrated IT services, finance and accounting and HR into the Hormel organization through Project Orion, and we will continue these efforts for other functions.\nBy doing so, we will bring the Turkey expertise and competitive advantages of the Jennie-O team to the broader organization.\nI want to be very clear that Turkey will continue to play an important role in our Company for many brands, including Columbus, Applegate, Hormel Natural Choice, in addition to Jennie-O.\nTurkey is vital to our balanced business model, serves to diversify our portfolio and it's important to consumers who are looking for high protein, lean and versatile offering.\nWe will provide further update and details on the financial components and timing on our first quarter call.\nFinally, we made additional progress on optimizing our pork supply chain by signing a new five-year raw material supply agreement with our supplier in Fremont, Nebraska.\nThis new agreement more closely matches our pork supply with the needs of our value-added businesses, while simultaneously reducing the amount of commodity pork lease out.\nSimilar to the rationale for selling the Fremont plant in 2018, this new agreement further diversifies us away from commodity sales, increases our flexibility within our supply chain and decreases our earnings volatility.\nThis agreement should result in a reduction of approximately $350 million of commodity fresh pork sales at very low margin.\nThe impact is split between the Refrigerated Foods and International segment.\nThe contract will be effective at the start of calendar year 2022.\nThe success we are having with the Planters, the actions we are taking at Jennie-O Turkey Store and the continued progress we are making in our pork supply chain, all provide greater insights into how we are continuing to evolve Hormel Foods for next year and beyond.\nAnd not only have we evolved our portfolio, but we will continue to evolve how we operate as a company with initiatives such as One Supply Chain, Project Orion and our Digital Experience group.\nLooking at fiscal 2022, we expect net sales to be between $11.7 billion and $12.5 billion, and for diluted earnings per share to be between a $1.87 and $2.03 per share.\nWe expect growth in excess of our long-term goals due to organic growth across each of our segments and strengthen our Planters business.\nI have confidence in our ability to achieve our guidance with all four segments delivering growth.\nJacinth Smiley will provide more color regarding key drivers to our fiscal 2022 outlook.\nThe company achieved record fourth quarter and full year sales of $3.5 billion and $11.4 billion respectively.\nOrganic sales increased 32% for the quarter and 14% for the full year.\nPlanters contributed $411 million in sales for the full year.\nEarnings before taxes increased 26% for the fourth quarter, strong results in Refrigerated International and the inclusion of Planters led to the strong finish to the year despite ongoing inflationary pressures.\nEarnings before taxes increased 1% for the full year compared to fiscal 2020.\nDiluted earnings per share of $0.51 was a record.\nThis was a 19% increase over last year.\nAdjusted diluted earnings per share for the full year was $1.73, a 4% increase from last year.\nDiluted earnings per share was $1.66.\nSG&A as a percentage of sales was 7.5% compared to 7.9% last year.\nStrong sales growth and disciplined cost management contributed to the improvement.\nAdvertising investments increased 12% compared to last year.\nAs anticipated, operating margins in the fourth quarter increased compared to the third quarter as a result of effective pricing action.\nSegment margins expanded from last quarter by 136 basis points to 10.7% with increases in each segment.\nIn 2021, inflation, labor shortages in the Planters deal cost all negatively impacted margins.\nThe fourth quarter results, including the continued strong demand of our products are an indication of improved market conditions as we exit the year.\nNet unallocated expenses in 2021 increased primarily as a result of one-time acquisition costs for Planters and higher interest expense.\nThe effective tax rate for the year was 19.3% compared to 18.5% last year.\nOperating cash flow for the fourth quarter was a record, resulting from strong earnings and disciplined working capital management.\nOur balanced business model and consistent cash flow provided protection against the complex and challenging business dynamics we navigated during the year, allowing us to invest in numerous capital projects, acquired Planters and grow the dividend.\nWe paid our 373rd consecutive quarterly dividend effective November 15th at an annual rate of $0.98 per share.\nWe also announced a 6% increase for 2022, marking the 56th consecutive year of dividend increases.\nDuring 2021, the Company repurchased 500,000 shares for $20 million.\nCapital expenditures were $232 million.\nThe Company ended 2021 with $3.3 billion in debt or approximately 2.5 times EBITDA, although no mandatory debt repayments are required until 2024.\nBased on our strong cash flow, we expect to make incremental payments as soon as the second half of 2022.\nWe remain committed to maintaining our investment grade rating and deleveraging to 1.5 times to 2 times EBITDA by 2023.\nMarket conditions for pork input cost remained elevated during the fourth quarter.\nThe USDA composite cut out averaged 33% higher compared to last year, supported by strong demand for pork and historically low cold storage levels.\nHog prices averaged 62% higher than last year, but were down 27% compared to the third quarter.\nBelly, pork trim and beef trim markets were also significantly higher for the quarter compared to last year.\nThe latest estimates from the USDA indicate pork production for the year to decreased 2% compared to 2020, and remain relatively flat in 2022.\nLabor shortages may continue to be a significant factor affecting industry production.\nTurkey industry fundamentals were strong.\nThe Whole Turkey and thigh meat markets reached all time highs during the fourth quarter with breast meat prices above a year ago.\nSupporting these prices were historically low cold storage levels, lower poult placements and decline in egg sets.\nHigher feed cost and labor shortages continue to negatively impact Jennie-O.\nThe cost increased over 60% from last year in the fourth quarter.\nIn 2022, we anticipate pork, beef, turkey and feed prices to remain above historical levels.\nWe delivered strong results in the fourth quarter as the team overcame challenging operating conditions and volatile markets.\nThe performance is a testament to the strength of our brands, pricing power, balanced model and the team's ability to execute in a dynamic market environment.\nI appreciate the support of Jim Snee, the Board of Directors and my team over my tenure as CFO.\nI take great pride in the evolution and accomplishments of the Company during my career and leave with the greatest confidence in the future.\nI've enjoyed my interactions with the shareholders and analyst community and I wish you will.\nI know the Company is an excellent hands with Jacinth, and you will have an opportunity to get to know her better in the coming months.\nJacinth will provide an overview of the fiscal 2022 guidance and further context on our expectations for next year.\nFor analysts and the investment community on the call, I look forward to meeting you in the coming weeks and months.\nI'm excited to be stepping into the Chief Financial Officer role at Hormel Foods, a Company known for its financial strength, it's powerhouse brand and its commitment to employees and communities.\nIn the time I've been at the Company, I have found that the Hormel Foods is innovative and has a results driven focus for all stakeholders.\nAs Jim mentioned, allow me to share a bit more commentary regarding key drivers to our fiscal 2022 outlook.\nBuilding on the momentum we established during the second half of the year and the strategic investments we have made throughout the pandemic, we expect to generate sales and earnings growth in fiscal 2022 above the long-term goals we announced at our Investor update in October.\nWe anticipate growth from all four segments, driven by continued elevated demand for our products, the impact from our pricing actions, improve production throughput, new capacity for key categories such as pizza toppings and dry sausage, and the full-year contribution of the Planters business.\nWe also expect operating margins to show improvement throughout the year similar to the dynamic, we experienced in the fourth quarter.\nIt is important to note that rapid changes in raw material input costs can shift profitability between quarters.\nIn addition to generating strong sales and earnings growth, we will continue to invest in our leading brands through increases in strategic marketing and advertising, capacity expansions for, for high growth platforms and capabilities to drive industry leading innovation.\nThe Company's target for capital expenditures in 2022 is $310 million.\nWe are scheduled to open a pepperoni expansion to our newest facility in Omaha during the second quarter, which will provide the needed capacity to meet growing demand in our retail and foodservice businesses.\nWe are also beginning work on another expansion for the SPAM family of products, scheduled to be operational in 2023.\nIn addition to these larger projects, we are continuing to invest in cost savings, technology and automation projects to drive long-term savings and efficiency.\nPivoting to innovation, we achieved our 15% goal in 2021.\nWe have strong innovation platform for brands such as Planters, SKIPPY, Justin's, Herdez, and Hormel Black Label and Retail as well as the Jennie-O and Happy Little Plants brands in the foodservice channel.\nIn addition to our continuous process and product improvement initiatives give us the confidence going forward to consistently achieve our stated innovation goal.\nI want to speak for a moment about the complexities of our operating environment.\nThe operating environment is expected to remain complex in fiscal 2022 and our guidance accounts for the near-term impacts from labor shortages, higher costs and supply chain disruption.\nOur entire team has done an excellent job executing our business strategies in this dynamic environment.\nIn many ways, we have enhanced our competency for solving the day to day challenges inherent to our industry.\nWe have increased our efforts higher and maintain team members and have developed many strategies to mitigate the effect of labor shortages to meet elevated demand.\nThis includes maximizing our flexibility to produce the items that are most in demand and leveraging our manufacturing partnerships to increase throughput wherever possible.\nOur One Supply Chain team allows us to continue to actively manage our raw material procurement, logistics network and supply partnerships to minimize the impact of further inflation and supply chain disruption.\nWe will also benefit from our expanded logistics network which has added capacity for both the Refrigerated and Grocery Products business.\nAs a result of these actions, we expect improved fill rate and load factors in fiscal 2022.\nThe announcement of the Jennie-O Turkey Store transformation is another step in our evolution to become and stronger global branded food Company.\nConsistent with our long-term strategy, we are continuing our efforts to actively shift away from commodity businesses toward branded, value-added businesses.\nWe expect our strategic and intentional actions to create a better, more profitable and sustainable business model.\nTaking all of these factors into account, as Jim has mentioned, we are setting our full year sales guidance at $11.7 billion to $12.5 billion and our diluted earnings per share guidance at $1.87 to $2.03.\nAdditionally, this guidance reflects the Benson Avenue facility closure, our a new pork raw material supply agreements and and effective tax rate between 20.5% and 22.5%.\nFiscal 2022 will be 52 weeks.\nAs we move forward to execute against our strategic imperatives.\nIn 2022 and beyond, I'm pleased to be with a Company that continues to evolve as a global branded food Company.\nJim often says, we are uncommon.\nI have seen that first time in my time with the Company thus far.\nThis starts with our unwavering commitment to employee safety and remaining an employer of choice in the communities we live and work.\nWe're taking purposeful actions to transform our Company as we embark on our most ambitious corporate responsibility journey yet, our 20 by 30 challenge, which is certainly important from an ESG standpoint.\nOur experienced management team, the tireless work of our team members around the world and the progress made to implement the Project Orion and One Supply Chain initiative, gives us added confidence in our ability to deliver growth in fiscal 2022 and beyond.\nI am excited to be with Hormel Foods and be part of this -- its continued success.\n",
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"content": "qtrly net sales of $3.5 billion, up 43%.\nqtrly diluted earnings per share of $0.51.\nexpect all four segments to deliver sales and earnings growth in fy22.\nqtrly operating margin of 10.4% compared to 11.4% last year.\nexpects to close benson avenue facility, located in willmar, minn.\n, in first half of fiscal 2022.\nhave signed a new five-year raw material supply agreement with our supplier in fremont, neb.\nsees 2022 diluted earnings per share guidance $1.87 - $2.03.\nsees 2022 net sales guidance (in billions) $11.7 billion - $12.5 billion.\nhormel foods - new material supply agreement will result in a reduced supply of commodity fresh pork.\ncompany expects a $350 million sales reduction in fiscal 2022.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: I'm Dave Martin, VP of Investor Relations for Harsco.\nA few weeks ago, we announced the appointment of our new CFO Anshooman Aga.\nHe will join us later this month.\nand I could not be more pleased with the outcome of our search process.\nWe look forward to introducing Anshooman to you once he is settled into the role.\nAgain, I appreciate Pete's willingness to defer his retirement and remain with us through the transition over the next few months.\nI'm also very pleased with our Q2 results.\nWe delivered our highest quarterly revenue since 2013, and our adjusted EBITDA growth and margins were strong, both year-over-year and sequentially versus our first quarter.\nOur results reflect impressive execution by our team.\nAnd I'll highlight the ongoing integration of ESOL and Clean Earth, our high level of service to a booming steel industry and advances in operational excellence in the Rail business.\nThe Rail and Contaminated Materials segments had lagged the recovery of other sectors, and we are pleased with the way in which we've met the increased demand.\nIn short, the business momentum is now more broad based than it was in Q1, and we are maintaining a positive outlook for the balance of the year.\nI'll comment on each of the segments, beginning with Harsco Environmental.\nCapacity utilization of the steel mills that we support is approaching that of the first half of 2019 before the market began to turn down.\nAnd the outlook into next year includes further volume growth.\nWhen coupled with the shift toward an improved mix of environmental services and lower capital spending, AG's outlook for 2022 is as bright as ever.\nFrom a macro perspective, the steel industry's heightened focus on sustainability fits well with our focus on ESG and the portfolio of environmental solutions in our innovation pipeline.\nOur business has never been better positioned as a true strategic partner to the steel industry, and we look forward to continuing the work with our customers to advance and expand their green steel initiatives.\nOur Clean Earth segment continues to perform well.\nWe are delivering on our commitment to maximize the value from last year's ESOL acquisition while also taking advantage of the benefits of a market recovery.\nAfter realizing more than $10 million of synergies last year, we anticipate at least another $20 million this year.\nSo while the recovery in the each of Clean Earth's end markets is firmly rooted, the business is experiencing some pressure from tightness in the labor market and with end disposal assets.\nWe have factored these items into our outlook for the year and where possible, are taking action to mitigate the impact.\nAt the same time, we continue to recognize new growth opportunities in the hazardous waste industry supporting the initial steps we have taken to transform our portfolio of businesses.\nThe Rail segment recorded its highest quarterly profit in two years, and we expect EBITDA growth to exceed 60% for the full year.\nThe business has benefited from a recovery in domestic spending and also its global aftermarket platform.\nCOVID challenges remain, particularly in Asia and Latin America, but this has been accounted for in our outlook.\nThe team is also executing at a high level of managing our large contracts, dealing with COVID-related supply chain issues and as noted earlier, improving key operational metrics.\nFinally, in May, we released our most comprehensive ESG report to date, highlighting our ESG accomplishments and providing a detailed look at our ESG strategy as well as focus areas, the governance structure to align with our business strategy and commitment to ESG with shareholder value creation.\nHighlights of these are on page four of the slide deck.\nWe are particularly proud of our safety record last year and our contributions to the circular economy.\nLast year, Harsco recycled or repurposed over 75% of the material that we processed and we continue to see increases in our ESG ratings.\nWe are reinforcing our commitment to the environment and to social and governance matters by incorporating related goals into Harsco's annual incentive plan.\nSo let me start by turning to our results for the quarter and our unchanged outlook for the year.\nAs Nick mentioned, we are pleased with our Q2 results and our continued expectations for a strong year.\nHarsco's revenues totaled $570 million and adjusted EBITDA reached $78 million in the second quarter outperforming the prior year and sequential quarters.\nAlso, our Q2 EBITDA was at the top end of the guidance range we provided in May.\nImportantly, each of our segments performed well in the quarter.\nStrong performance and execution in Environmental as well as the mix and timing of some shipments in Rail drove results to the higher end of our guidance.\nClean Earth results were consistent with our expectations, and it was good to see the anticipated improvement in our Contaminated Materials business that we discussed on our May earnings call.\nBoth our Contaminated Materials business and Rail business which have been lagging as economic conditions strengthened over the past year are now experiencing positive momentum.\nAnd as Nick noted, these businesses are expected to further improve in the second half of the year.\nHarsco consolidated revenues increased 27% compared with the second quarter of 2020 and 8% compared with the first quarter of 2021.\nEach of our segments contributed to these increases.\nHarsco's adjusted earnings per share from continuing operations for the second quarter was $0.28, and this figure compares favorably to adjusted earnings per share of $0.13 in the prior year quarter and is above the guidance range of $0.21 to $0.27 we provided in May.\nLastly, our free cash flow for the quarter of $6 million was consistent with our expectations.\nThe change versus the comparable quarter in 2020 is principally driven by higher capital spending, much of which, as we've discussed before, had been deferred from the prior year.\nWe did see a sequential improvement in cash flow from Q1, as anticipated, and we expect our cash performance to improve meaningfully for the remaining quarters of the year.\nRevenues totaled $273 million and adjusted EBITDA was $58 million.\nThese results compare favorably to the prior year quarter when EBITDA totaled $40 million.\nOur quarterly margin improved to just over 21%.\nCompared with Q2 of 2020, the EBITDA improvement is primarily attributable to higher services and applied products demand globally.\nThese impacts also include the benefit of higher nickel prices in the quarter.\nThese positives were partially offset by higher SG&A, including incentive compensation as well as a modest impact from site exits.\nSteel production at our customer sites continued to improve.\nLiquid steel tonnage, or LST, increased roughly 25% versus the prior year, and we expect to benefit from increased production as the global economy continues to improve.\nOur customers operated at less than 80% of capacity in Q2, which leaves room for further improvement in service levels in the future.\nFor the quarter, revenues were $196 million, and adjusted EBITDA totaled $18 million.\nCompared to the second quarter of 2020, revenues increased 21% with both our contaminated and hazardous materials businesses contributing higher revenues.\nThe EBITDA increase year-on-year was mainly driven by higher hazardous waste volumes and our integration and value creation activities.\nIntegration benefits totaled roughly $5 million in the quarter versus the prior year period.\nAnd overall, our integration efforts are progressing well with us on track to realize $20 million of benefits this year.\nThese positive impacts were partially offset by incentive comp and SG&A investments, including some rebranding and IT costs, which won't repeat next year.\nLastly, on Clean Earth, I'd highlight that our year-to-date free cash flow now totals $24 million.\nThis total represents more than 70% of its EBITDA and reflects the positive results and financial characteristics of this business.\nRail revenues totaled $101 million, up 24% from the prior year quarter and the segment's adjusted EBITDA totaled $10 million in the second quarter.\nThe revenue increase versus the prior year quarter is attributable to higher equipment sales, including our work progress under a number of long-term contracts.\nMeanwhile, EBITDA was essentially unchanged year-on-year.\nHere, the benefit of higher equipment contributions was offset by a less favorable aftermarket mix, mainly in Asia, timing of certain contracting services and higher selling-related costs.\nWith this said, our Q2 results in Rail improved sequentially and were slightly better than anticipated.\nAgain, this reflects the positive market developments and improved outlook we discussed on our May earnings call.\nSo now turning to slide nine, which is our consolidated 2021 outlook.\nAs I mentioned earlier, our outlook details are unchanged from those communicated in May.\nAdjusted EBITDA is expected to be within a range of $295 million to $310 million.\nAdjusted earnings per share is expected to be within a range of $0.82 and $0.96 and we expect free cash flow of $35 million to $55 million for the year.\nOur Q2 results support this guidance.\nUnderlying market performance was consistent with expectations in recent months, and our outlook for the relevant end markets is unchanged.\nWith that said, our implied outlook range for the second half of the year also contemplates some modest potential headwinds largely comprising labor availability and inflation related to our trucking fleet at Clean Earth.\nAlso, the tightness and availability of end disposal options in the industry, including incineration capacity remains a potential headwind in the coming months.\nWe are, however, anticipating end disposal markets to loosen later in the year.\nLet me conclude on slide 10 with our third quarter guidance.\nQ3 adjusted EBITDA is expected to range from $75 million to $81 million.\nEach segment is expected to see improvement relative to the prior year quarter, given favorable market conditions as well as internal improvements and investments.\nSequentially, Q3 results are expected to be comparable with the second quarter at the midpoint of the range, reflecting some improvements in Clean Earth and Rail.\nIn Environmental, we expect that services mix will be slightly less favorable in Q3 versus the second quarter.\nI've met him I spoke with him.\nHe will be a fantastic addition to the leadership team of this company, a company that I've had the privilege to be part of for seven years.\nSince this will be my last earnings call, let me once again say that while my wife and I are very excited about starting the retirement phase of our lives, there is much I will miss about Harsco.\nMost importantly, the great people I've been proud to work with.\nNick, my colleagues on the executive leadership team and my global finance and IT teams, I will miss them greatly.\nHowever, rest assured, I will enjoy watching and sharing in the continued successes of Harsco on the sidelines as an investor for years to come.\n",
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"content": "q2 adjusted earnings per share $0.28 from continuing operations.\nq2 revenue $570 million versus refinitiv ibes estimate of $556.4 million.\nsees 2021 adjusted diluted earnings per share $0.82 - 0.96.\nsees q3 gaap earnings per share $0.15 - 0.21.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: I'm Dave Martin of Harsco.\nAs previously noted, we are very fortunate to have recruited Anshooman to Harsco and he has held significant financial and operational roles at Siemens, AECOM and Cubic, and he is already adding tremendous value to our company.\nTurning to our results, the third quarter was characterized by healthy underlying demand in our two core businesses, Harsco Environmental and Clean Earth.\nIt also reflected cost inflation and supply chain disruptions across all three business units.\nOverall, Harsco consolidated revenue was up 7% versus Q3 of 2020 while adjusted EBITDA was up 22% on the same basis.\nDemand in our Rail segment was dampened by continued weakness, in-transit ridership, a slowdown in domestic freight traffic and uncertainty as customers wait for the passage of the US infrastructure bill.\nAs we have indicated in the past Harsco Rail is not aligned with our long-term strategy to focus on and drive growth in businesses that provide environmental solutions to a broad mix than markets.\nHowever, Harsco Rail is a unique business with innovative solutions and a global reach with meaningful growth opportunities ahead.\nWe have received solicited expressions of interest from many parties over the past several months and expect a very competitive sale process.\nI'll comment on each of our segments beginning with Harsco Environmental.\nHarsco Environmental continued to perform in line with our expectations and we are pleased with its momentum.\nCapacity utilization of the steel mills we support remains lower than the levels of the first half of 2019 and analysts expect low-to-mid single digit LST growth through next year.\nCommodity prices along with the contributions from our so called echo products, previously referred to as applied products, remains strong.\nLooking ahead to 2022, against a continued positive outlook for the global steel industry and a decline to normalized levels of capital spending in our business we expect the Environmental business to deliver the highest EBITDA and free cash flow in many years.\nClean Earth experienced a moderate impact in the third quarter from cost inflation and an excess of backlog of material requiring incineration, which negatively affected volume.\nThe recovery and contaminated soil continues to be a bit slower than anticipated due to delays in certain infrastructure projects.\nNonetheless, Clean Earths EBITDA in Q3 was close to our expectations, and these pressures should abate throughout Q4 and become de minimis by Q1 of 2022.\nSimilar to Harsco Environmental we believe the Clean Earth has set up to deliver another strong year of growth in 2022.\nUnderlying market demand, new business, and you had higher benefits from the ESOL turnaround and integration will be the primary drivers.\nAs noted, our Rail business had a challenging quarter due to cost inflation and the timing of equipment orders and shipments.\nMany of our customers have been affected by their own supply chain issues, and as a result, maintenance programs are being put on hold.\nWhile we expect to see some continued impact from these inflationary and supply chain issues in Q4, we expect the situation to improve as we move through the first half of next year.\nThe passage of the US infrastructure bill and the introduction of new products aimed at improving the efficiency of rail maintenance activities should also support growth.\nThe other components of our business those being aftermarket technology and contracted services are performing in line with expectations and the outlook is encouraging.\nTherefore, we believe the timing of the divestiture of the rail business should coincide with improving market fundamentals and deliver the value we expect for our shareholders.\nLet me start by saying I am very excited to be here and a part of the Harsco team.\nI joined Harsco because I thought the promise of the Company's ongoing transformation to a single investment thesis environmental solutions company, and the value creation opportunities.\nI've enjoyed getting to know and working with the Harsco team over the past three months and my time with Harsco so far has strengthened my optimism.\nHarsco's strategy is well defined and our financial priorities are unchanged.\nStrengthening of free cash flow and reducing our leverage remain paramount to Harsco and the key priorities for me as CFO.\nThere is strong underlying momentum within our businesses and the opportunities to grow both organically and inorganically are significant.\nNow let me turn to our results for the quarter and our outlook for Q4.\nHarsco consolidated revenues in the third quarter increased 7% compared with the prior year quarter to $544 million and adjusted EBITDA increased 22% to $72 million.\nThe year-on-year improvement can be attributed to steady operational execution, strong performance in our Harsco Environmental segment as well as growth and improvements within the hazardous waste line of business of Clean Earth.\nHarsco's adjusted EBITDA margin as a result reached 13.2% in the third quarter versus 11.6% in the comparable quarter of 2020.\nDespite strong year-on-year improvement, our adjusted EBITDA was the lower guidance driven by new project delays from rail customers, cost inflation and supply chain constraints.\nTransit ridership remains weak, freight traffic has slowed and uncertainty related to the infrastructure bill has put pressure on customer capital and operating budgets.\nThe majority of the deferred sales for Rail in the third quarter and now expected to be realized in Q4 and early 2022.\nMaterial cost inflation and supply chain pressures had a mid single-digit EBITDA impact in the quarter relative to prior expectations.\nHarsco's adjusted earnings per share from continuing operations for the third quarter was $0.20.\nThis figure compares favorably to adjusted earnings per share of $0.08 in the prior year quarter.\nLastly, our free cash flow for the quarter was nominal.\nThis outcome was lower than anticipated for the quarter with Rail and related delayed projects as the primary driver.\nOur Environmental segment performed very well in the quarter.\nRevenues totaled $270 million and adjusted EBITDA was $56 million.\nRevenues were 21% higher than the prior year quarter and EBITDA increased 40% year-on-year.\nThese details illustrate the positive operating leverage in this business.\nCompared with Q3 of 2020 the EBITDA improvement is primarily attributable to increased demand for environmental services and applied products on a global basis.\nSteel market fundamentals remain strong.\nLiquid Steel Tonnage or LST increased roughly 20% versus the prior year.\nThe outlook for steel consumption remains positive.\nWe expect to see some modest disruptions in the fourth quarter due to normal seasonality, but the industry and market observers are predicting another year of growth in 2022.\nCompared to the second quarter of 2020 revenues increased 3% to $200 million with hazardous materials business driving this growth.\nWith hazardous materials retail and healthcare activity was strong while volumes from the industrial sector were modestly lower than the prior year quarter due to disposal market constraints.\nAlso activity within our soil dredged materials business was modestly lower year-on-year, however, we did see sequential improvement.\nWith that said, the improvement has been slow and recall that soil remediation is a late cycle business, that then trough until the fourth quarter of 2020.\nSegment EBITDA increased to $21 million and Q3 of this year supported by higher hazardous material volumes and ESOL integration benefits.\nThese positive impacts were offset by investments to support Clean Earth and inflation related to containers and transportation.\nWe have seen a significant increase in the cost of steel containers and transportation and have taken action already, which I will discuss in more details later.\nLastly on Clean Earth, I'd highlight that our year-to-date free cash flow now totals $39 million.\nThis total represents more than 70% of segment EBITDA.\nRail revenues totaled $74 million and its EBITDA totaled $3 million in the second quarter.\nThese figures are below those realized in Q3 of 2020.\nThe change in EBITDA can be attributed to lower equipment sales volume and higher costs.\nI have mentioned earlier most of the deferred sales are expected to be realized in the next few quarters.\nAlso higher material costs impacted results.\nWe incurred a negative LIFO adjustment in the quarter of approximately $2 million, which has not been anticipated.\nThese impacts were partially offset by higher contributions from aftermarket parts and contracted services both in US and Asia.\nTurning to slide 8, which is our consolidated 2021 outlook.\nOur adjusted EBITDA guidance is now $248 million to $256 million for the year while adjusted earnings per share is anticipated to be within a range of $0.51 to $0.54.\nThese figures consider $4 million of stranded corporate costs that were previously allocated to Rail.\nThis outlook also includes 100% of Harsco's interest costs and a pro forma estimated tax rate.\nA detailed segment outlook is included in the appendix of the slide deck.\nAnd, from a business segment point of view our adjusted EBITDA outlook for environmental is essentially unchanged.\nMeanwhile, our outlook for Clean Earth's adjusted EBITDA is lowered by $5 million at the midpoint.\nThis change reflects the impact of higher container and transportation costs as well as a volume impact from end disposal constraints.\nLast quarter we noted certain risk related to Clean Earth including the impacts related to incineration and inflation.\nThese impacts, however, are larger than what we previously anticipated for the second half of the year.\nLooking forward, we do expect these pressures to abate.\nThere are a number of disposal assets that have restarted or are increasing output.\nAlso we have been pushing through price increases to offset the inflation.\nPrice initiatives take time as you have aware driven by timing of contractual annual price increases in many cases, and we expect to fully offset the cost increases we've seen year-to-date during the first quarter of 2022.\nAlso, we remain very diligent on our cost structure, including corporate costs and the need for continuous improvement.\nIn this regard, we recently launched a cost improvement program which includes targeted reductions at both Clean Earth and Rail.\nThese efforts are anticipated to provide annual run rate benefits of $10 to $15 million when fully realized in the second half of 2022.\nAny non-recurring costs related to this program as well as our recently announced decision to move our corporate office to Philadelphia are excluded from this outlook.\nLet me conclude on slide 9 with our fourth quarter guidance.\nQ4 adjusted EBITDA is expected to range from $55 million to $62 million.\nAgain, this range excludes Rail.\nClean Earth is expected to see a nice improvement year-on-year as a result of integration benefits and higher volumes, including in the soil dredged materials business line.\nThese impacts are expected to be partially offset by inflation and investments.\nEnvironmental EBITDA is anticipated to be similar or slightly below the prior year quarter.\nThis guidance contemplates a negative FX impact, some contract exit costs and the less favorable services mix compared to Q4 of 2020.\nSequentially, we anticipate that some seasonality will reemerge across our businesses.\nAnd before opening the call to questions let me again reiterate our focus on reducing leverage and strengthening free cash flow.\nWe ended the quarter with a leverage ratio of 4.48 times.\nImportantly, we are targeting a leverage ratio of approximately 3 times at the end of 2022.\nThis outcome would be consistent with our long-term targets and reflects our optimism about our businesses and ability to sell Rail.\n",
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"content": "q3 revenue rose 7 percent to $544 million.\nintends to explore strategic alternatives for rail business, continuing co's transformation to pure-play environmental solutions provider.\ncompname says full year 2021 adjusted ebitda guidance updated to range of $248 million to $256 million for continuing operations.\nq3 adjusted earnings per share $0.20 from continuing operations.\nsees 2021 adjusted earnings per share $0.51 - $0.54.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: I'm Dave Martin of Harsco.\nFor a discussion of such risks and uncertainties to the Risk Factors section in our most recent 10-K and 10-Q.\nThe third quarter developed largely as we anticipated on a consolidated basis with our environmental businesses improving sequentially, while our rail business, which did not see a significant impact from COVID through Q2, was affected by weak demand and an unfavorable product mix.\nOverall, EBITDA was consistent with our expectations, while cash flow was better.\nRevenues in our environmental businesses, which represent more than 80% of total Harsco revenue, were up 15% versus the second quarter.\nVolumes were up in all waste categories, led by hazardous medical waste.\nRetail and industrial waste volumes were also up by double digits, while steel waste or LST, was up high single digits.\nRevenue was also up in the contaminated materials segment with strength in the dredge business, offsetting weakness in our high-margin soils business, which has been affected by softness in large nonresidential construction projects in the Mid-Atlantic and Northeast regions.\nOur key priorities have remained consistent for most of 2020: Keeping our people safe during the pandemic, preserving liquidity, capturing the value of the ESOL acquisition and executing our operational recovery plan in rail.\nI'm very pleased with the execution on each of these critical initiatives during the third quarter.\nThe number of COVID cases across our employee population has remained steady at modest levels for several months.\nAnd we have not experienced any significant disruption to our operations related to employee health.\nThe degree of employee compliance with our global COVID-related principles is quite high, and has served to counter the worrisome trends across the general populations of the more than 30 countries in which we operate.\nPete will comment on our liquidity position in a moment, but I would like to recognize Pete and his finance organization for their outstanding management of our cash flow and liquidity position over the last several months.\nCash flow continues to be strong and is well above the 2019 level despite the impact of COVID on cash earnings.\nThe integration and value capture of the ESOL acquisition continues at a brisk pace.\nThe vast majority of our value actions have been launched and the corresponding benefits for the year will be ahead of our original plan.\nThese actions range from logistics and disposal optimization to various SG&A and commercial initiatives.\nThis past week, David Stanton, the Clean Earth President and I visited a number of our sites across the U.S. was energizing to again see firsthand, the tremendous opportunities we have to grow the business and improve the efficiency of its operations.\nThe operational recovery program at Rail is on track to deliver against its objectives by the end of the year.\nThe backlog in Rail remains at record high levels, so the SCOR program is oriented toward ensuring we have the appropriate capacity, competency and governance principles in place, to deliver high-quality products to our customers on time.\nIn terms of next steps, we plan to establish and sustain the lean based operating model required for a best-in-class supply chain and fulfillment capability.\nLooking ahead, we expect our end markets to continue to improve throughout the quarter and into 2021, with recovery in our environmental businesses leading that of our Rail business.\nOur Q4 outlook reflects these positive trends in both Harsco Environmental and in Clean Earth.\nWe are not yet comfortable providing more specific guidance for next year given the current economic situation, and the potential impacts on our planning process.\nIn terms of management focus, we will continue to execute our current programs and strengthen our balance sheet.\nTogether with the expected improvements in our end markets, these actions should build on our foundation and enable us to take the meaningful next steps in our portfolio transformation.\nIn the third quarter, Harsco's revenues totaled $509 million, and adjusted EBITDA totaled $59 million.\nOur revenues increased 14% over the second quarter of this year with each of our businesses realizing a nice improvement in revenues from the second quarter when we believe the impacts of the pandemic peaked for most of our end markets.\nThe sequential improvement in revenue ranged from a 20% increase at Clean Earth, to a 9% increase at Harsco Environmental.\nOur third quarter adjusted EBITDA of $59 million is consistent with our expectations in August and is comparable to our adjusted EBITDA result in Q2, despite the unfavorable timing impact of certain expenditures we discussed on our earnings call last quarter.\nThese incremental items consisting largely of the timing of insurance and compensation related amounts, negatively affected the quarter-on-quarter comps by approximately $10 million.\nOtherwise, underlying performance improved compared with Q2 as a result of volume growth driven by the ongoing economic recovery, and strong underlying operating performance within our businesses.\nIncluding at ESOL, where margins improved considerably as our integration and operational improvement actions began to take hold.\nAnd as you may recall, Q3 was our first full quarter of owning ESOL after we acquired it in April.\nRelative to our expectations at the beginning of the quarter, our results were aided by better top line and margin performance in Harsco Environmental and lower corporate spending as a result of our ongoing focus on managing costs.\nOur EBITDA in the third quarter of 2019 totaled $87 million.\nThe change year-on-year clearly reflects the ongoing impact of the pandemic on end market demand as well as the fact that the prior year quarter was particularly strong due to a favorable mix in both Rail and Clean Earth.\nHarsco's adjusted earnings per share from continuing operations for the third quarter was $0.08.\nAnd lastly, our free cash flow totaled $18 million in Q3, a strong performance considering that this figure is net of approximately $14 million of tax-related outflows that we had deferred from the second quarter.\nThis figure compares with free cash flow of $5 million in the third quarter of 2019.\nAnd year-to-date, our free cash flow is now $10 million positive, significantly improved from 2019.\nCapital spending discipline and improved working capital performance have been the main drivers of the improvement this year and should continue to be so for the foreseeable future.\nGenerating positive free cash flow is clearly an important focus for us and we expect to generate positive free cash flow in Q4 as well.\nRevenues totaled $223 million and adjusted EBITDA was $40 million, translating to a margin of 18%.\nThis EBITDA figure compares to $60 million in the prior year with the change driven by pandemic effects on the demand for services and applied products as well as related impacts on new site ramp-ups.\nSteel output at our customer sites declined approximately 6% on a continuing site basis compared with the prior year quarter.\nRelative to the second quarter of this year, Harsco Environmental's revenues rose 9% on a similar improvement in steel volumes.\nAdjusted EBITDA was unchanged quarter-on-quarter.\nHowever, as I mentioned earlier, the comp to Q2 was negatively impacted by the timing of expenses, which totaled approximately $5 million for HE.\nSo I believe these results again illustrate strong performance by our Harsco Environmental team and their ongoing focus on operational excellence and financial discipline in controlling operating expenses.\nHarsco Environmental's free cash flow totaled $32 million in the quarter and now totaled $64 million for the year.\nThis year-to-date figure compares with free cash flow of $10 million in the prior year.\nThe improvement during 2020 has largely been driven by lower capital spending and cash generated from working capital, as I mentioned earlier.\nFor the quarter, revenues were $194 million, and adjusted EBITDA totaled $20 million.\nCompared to the third quarter of 2019, our dredged material processing business had a strong quarter.\nAnd the inclusion of ESOL offset the volume pressures linked to the pandemic in our legacy Clean Earth has waste business.\nOur soils business was impacted by less favorable mix and delays in nonresidential construction projects, again due to the pandemic.\nRelative to the second quarter of 2020, revenues increased roughly 20% with ESOL and legacy Clean Earth experiencing similar improvements.\nBy line of business, the sequential revenue growth was most significant in medical and dredge material processing, followed by industrial and retail hazardous waste.\nESOL contributed nearly $130 million of revenue in the quarter.\nAnd it's great to see the ESOL business bounce back from Q2 when many medical facilities and industrial plants as well as a good number of retail stores were closed.\nAnd I believe this illustrates the recurring and essential nature of its revenues and its resilience during atypical business cycles.\nFurther, ESOL's margin performance improvement was also very positive in the quarter.\nAdditional volume helped in the quarter, but I believe this result is more importantly, a direct positive reflection on the improvement initiatives that we've only begun to implement.\nESOL's run rate EBITDA as a result is now above pre-acquisition levels despite the pandemic.\nLast quarter, I mentioned that we expect to realize approximately $5 million of benefits in 2020 from our initiatives.\nToday, I'm confident we will exceed this target.\nAnd as a reminder, the major improvement levers we're pursuing are our disposal optimization, site productivity, inbound and outbound logistics, procurement and commercial initiatives.\nAlthough we still have some work to do in order to achieve our goal of doubling ESOL's EBITDA within three years, we're off to a great start.\nLastly, on the Clean Earth segment, free cash flow and cash conversion remains impressive.\nThe segment's free cash flow totaled $17 million in the quarter and year-to-date, it now stands at $38 million versus adjusted EBITDA of $42 million.\nRail revenues increased to $93 million, while the segment's adjusted EBITDA declined to $5 million in the third quarter.\nThe change in EBITDA relative to the prior year quarter can be principally attributed to a less favorable mix across all product categories and lower aftermarket and pro train volumes due to the pandemic headwinds affecting our customers, which became more pronounced during the quarter.\nThese impacts were partially offset by lower SG&A spending.\nWhile economic conditions related to the pandemic clearly hit the low point in Q2 for Clean Earth and Environmental, that wasn't the case for Rail, as the end markets continue to feel pressures from pandemic-related headwinds on freight and passenger rail demand.\nAs we started to see early this quarter, this has created some deferrals of our customers' capital spending versus their original plans.\nAnd accordingly, the demand for short-cycle products across all business lines in Rail was soft.\nWhile Rail traffic and ridership has started to improve, the outlook is still fairly volatile given the pandemic headwinds.\nFurthermore, our business generally lags leading indicators such as traffic and ridership by a few quarters.\nWe have some important customer discussions in the coming weeks about their forthcoming capital spending plans and are cautiously optimistic that we will see some further improvements late in the year and early 2021.\nNow bright spot continues to be business development in our backlog, where we continue to see opportunities to bid on larger, longer-term contracts despite softness in the short-cycle market, and we've had a number of notable sizable wins during the quarter.\nThese wins included a follow-on option contract with the New York City Transit Authority to supply them with additional vehicles and a new contract with the Chicago Transit Authority to supply them with snow removal vehicles.\nAs a result, Rail's backlog remains robust, totaling more than $450 million at the end of the quarter.\nSo before moving to our outlook on slide eight, let me comment on our balance sheet.\nOur financial flexibility remains strong.\nOur leverage, as expected stood at 4.5 times and our liquidity totaled $325 million at the end of the quarter.\nReducing our leverage is a top priority for us and our goal remains to reduce our leverage to below 2.5 times within a couple of years.\nNow let me turn to the outlook on slide eight With the exception of our Rail business, our visibility and confidence has continued to improve in recent months.\nAnd as a result, we believe we're in a position to provide some quantitative guidance for the fourth quarter.\nAs you all know, the current economic environment continues to be fluid, and recent COVID infection trends are not favorable.\nHowever, with this in mind and based on the current market environment, we see fourth quarter total Harsco adjusted EBITDA ranging from $58 million to $63 million.\nBusiness conditions are expected to improve modestly for Clean Earth and Harsco Environmental during Q4 relative to the third quarter.\nFor these two segments, Q4 margins are projected to be stable versus the third quarter.\nRail results in the fourth quarter are currently expected to be similar to the third quarter performance, and corporate costs are expected to be modestly above Q3 levels.\nAlso, we expect our free cash flow to be between $20 million and $25 million in the fourth quarter.\nAnd this outcome would place our free cash flow for the full year north of $30 million.\nNow as I mentioned earlier, this outlook does not contemplate any meaningful impact to our business from any new lockdowns or restrictions, which may be implemented by state or national governments as a result of negative COVID developments.\nNonetheless, despite the unusual conditions we've all experienced these past few months, I'm very pleased with the performance, discipline and focus on execution by each of our businesses and keeping our people safe while delivering our strong results to date.\nAnd I expect this to continue into the fourth quarter and into 2021.\n",
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"content": "compname says q3 adjusted earnings per share $0.08 from continuing operations.\nq3 adjusted earnings per share $0.08 from continuing operations.\nq3 revenue $509 million versus refinitiv ibes estimate of $474.1 million.\nexpects its q4 ebitda to be within a range of $58 million to $63 million.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Our fourth quarter results reflected the continued positive trends in our largest businesses.\nHarsco Environmental and the hazardous waste portion of our Clean Earth segment.\nOverall, Harsco delivered both sequential and year-over-year growth in Q4, and EBITDA was consistent with our expectations.\nWith that said, we are very happy to have 2020 in our wake.\nHarsco, like many other companies, faced challenges in 2020 that required us to shift our focus, essentially overnight to keeping our employees safe, our businesses resilient and our liquidity position strong.\nAt the same time, we closed the largest acquisition in Harsco's history in terms of revenue, ESOL.\nBeyond its scale, ESOL required a complicated carve-out from its parent company, was in need of basic process discipline and was underperforming its market.\nAdditionally, in 2020, we made a step change in our ESG journey as evidenced by significant ratings upgrades, external recognition and improved metrics in nearly all areas.\nIt is clear that ESG is closely aligned with our strategy and central to the shifting identity of Harsco.\nLooking back on what the Harsco team accomplished, I could not be more proud about the effort and the results.\nThere are many reasons to be optimistic about the direction of our company.\nMost notably, the continued improvement in our end markets and the value creation potential of our environmental services businesses that represent about 80% of our revenue.\nOur strategic focus is clear, and we look forward to executing the next major steps of our portfolio transformation as conditions warrant.\nWe have four principal objectives this year.\nApart from our primary objective of continuing to manage the impact of the pandemic on our people and on our businesses.\nThe first objective is to realize the targeted benefits of the Clean Earth and ESOL integration and prepare for accelerated growth in this new platform.\nSecond, enhancing the value proposition and the cash flow profile of Harsco Environmental by shifting the revenue mix further toward environmental solutions.\nThird, increasing the enterprise value of our rail business through further operational improvements and backlog growth; and fourth, reducing our financial leverage to a level much closer to our target of about 2.5 times.\nRegarding the Clean Earth platform, the benefits realized from the integration of ESOL were about twice what we expected in 2020.\nWe anticipate incremental benefits of about $20 million this year, also or about double those realized in 2020.\nWe still expect total benefits of $40 million to $50 million by the end of 2022 on a run rate basis.\nAlthough external integration costs are behind us, we will incur about $10 million of cost this year for branding and IT initiatives that will not repeat in 2022.\nOverall, while the negative impact of the pandemic on the business could not have been predicted, I'm pleased with our execution and the foundation we are building in this new platform.\nIn Harsco Environmental, it's terrific to have following seas after 18 months of medicine head seas.\nI'm excited to see the development of the business this year, particularly in the areas of Altek, applied product sales and innovation.\nAs previously discussed, a significant amount of maintenance capital was deferred from 2020 to this year, and capital spending on new contracts will also be higher than in future years.\nNonetheless, the growth and cash flow trends in the business are favorable, and we are targeting free cash flow generation of 8% to 9% of revenue in 2022 on a path to 10-plus percent in future years.\nOur Rail business was set up to have a very strong year in 2020, based on operational improvements and a record backlog.\nThe impact of COVID on capital spending in both the freight and transit sectors has been dramatic.\nAlthough the freight sector is recovering, spending on maintenance of way equipment will lag by a few quarters.\nAnd the transit sector remains particularly weak.\nAnother challenge for our business is overcoming the margin loss associated with a large Chinese aftermarket program that is winding down.\nFortunately, our backlog and the launch of new products and our global reach should enable us to outperform the market this year.\nWhile our project SCOR met its objectives in terms of capacity and data analytics, it uncovered more opportunity to improve manufacturing costs than we had realized.\nJust a few comments on our portfolio.\nAs noted previously, an aggressive slate of internal initiatives and our financial leverage will likely push the next major step in our portfolio transformation into next year.\nWe also continue to focus on the best avenue to create shareholder value with our Rail business.\nBut our strategic ambition remains clear, continuing our transformation to a pure-play environmental solutions company.\nNow over to Pete.\nHarsco's revenues totaled $508 million and adjusted EBITDA totaled $62 million in the fourth quarter.\nOur revenues increased 27% over the prior year quarter, with ESOL contributing most of the growth followed by revenue increases within both our Environmental and Rail segments.\nThe revenue increase for Harsco Environmental is noteworthy as Q4 was the first year-on-year increase in revenues for the business in a number of quarters.\nThis reflects both successful execution of our strategy and the positive trends in the underlying markets.\nRelative to the third quarter, revenues were a little changed as continued growth from the Q2 lows for environmental and hazardous waste processing were offset by increasing market pressures related to COVID within our Contaminated Materials and Rail businesses.\nOur fourth quarter adjusted EBITDA of $62 million was near the high end of our previously disclosed guidance range.\nEBITDA for Q4 improved both sequentially and year-over-year, reflecting the business reasons I mentioned earlier and the actions we undertook in response to the pandemic in 2020.\nHarsco's adjusted earnings per share from continuing operations for the fourth quarter was $0.12, this adjusted figure excluded costs for the ESOL integration and the severance costs related to additional restructuring actions in environmental.\nThe actions in HE supplement those taken in the first quarter of 2020 and illustrate our focus on continuous improvement and further strengthening the business results.\nThe ESOL integration process remains ongoing, but our related external costs are now essentially complete.\nFor 2021, we don't expect to incur any significant external integration costs.\nHowever, there will be other internal integration costs, which I'll outline later in my remarks.\nLastly, our free cash outflow was $8 million in the fourth quarter.\nThis outcome, while below our expectations, was largely the result of higher-than-anticipated capital spending and the timing of receivables collections.\nWith respect to receivables, some customers chose to manage payments at year-end, with this cash subsequently received by us in the first and second week of 2021.\nAnd these factors are considered in our cash flow guidance for the current year, which I'll discuss later.\nRevenues totaled $246 million and adjusted EBITDA was $52 million, representing a margin of 21%.\nThis EBITDA figure of $52 million compared to $51 million in the prior year quarter and $40 million in the third quarter of 2020.\nOverall, these were very strong results for HE with attractive incremental margins against comparable periods.\nWe're very pleased with these results as they demonstrate the increasing resilience of the segment despite the persistent impacts of the pandemic.\nCompared with the fourth quarter of 2019, the EBITDA change can be attributed to higher demand for Applied Products in North America and lower SG&A spending.\nAnd this lower administrative spending is the result of our actions linked to the pandemic deflects our costs as well as permanent reductions, some of which were taken in the fourth quarter, as I mentioned earlier.\nSteel consumption and production at our customer sites continues to improve.\nThe LST or steel production volume increase from the third quarter was strong, more than 10% sequentially.\nRelative to the prior year quarter, customer LST also improved incrementally.\nThis marked our first positive year-on-year comp for LST since early 2019.\nThe increase was, however, modest, and the benefit was largely offset by a less favorable mix of services, as shown in our bridge.\nIt is encouraging nonetheless to see the market recovery accelerate and financial performance strengthen within the steel industry in recent months.\nI would also emphasize that the industry continues to operate well below its normal utilization rates, which for our customers, averaged just over 75% in Q4.\nSo we look forward to further capitalizing on additional growth as the industry continues to recover.\nLastly, Harsco Environmental's free cash flow totaled $5 million in the quarter and totaled $69 million for the year.\nThis full year figure compares with free cash flow of $13 million in the prior year, with the improvement during 2020 driven by lower capex and cash generated from working capital.\nFor the quarter, revenues were $185 million, and adjusted EBITDA totaled $16 million.\nGrowth compared to the fourth quarter of 2019 reflects the inclusion of ESOL in our hazardous waste line of business.\nThis impact was offset by lower contributions from our contaminated materials business line, which continues to face pandemic-related impacts.\nThe change in our contaminated materials performance also reflects a challenging comp to the fourth quarter of 2019, which was a very strong period for the business from a mix point of view, both for soil and dredged material processing.\nAlso, as we've discussed before, our corporate cost allocation to Clean Earth also impacted the year-on-year EBITDA comparison.\nRelative to the third quarter of 2020, revenues were approximately 5% lower, and adjusted EBITDA declined to $16 million.\nThese changes reflect lower soil and dredge revenues in Q4 and again, a less favorable mix across all way streams relative to the sequential quarter.\nHazardous waste volumes were modestly higher quarter-on-quarter.\nNext, Clean Earth's free cash flow was again very strong for the quarter.\nThe segment's free cash flow totaled $17 million in the quarter and for the year, it totaled $55 million versus adjusted EBITDA of $58 million.\nWe are pleased with its results in the second half, and we remain ahead of our plan on integration.\nESOL contributed approximately $20 million of EBITDA in the second half of the year, which represents a meaningful improvement year-on-year.\nThe benefits realized from synergy or improvement initiatives now total approximately $10 million, with the largest improvements coming from disposal optimization and commercial levers.\nThis total was higher than our original goal for 2020.\nLooking forward, we still have more work ahead of us to complete the ESOL integration this year.\nAreas of focus and investment in the coming quarter will be IT integration, logistics, procurement, site productivity and additional commercial opportunities to name a few.\nWe remain confident that we will reach our improvement targets by year-end, and I'll discuss the anticipated 2021 benefits within our outlook in just a bit.\nRail revenues reached $77 million while the segment's adjusted EBITDA totaled approximately $2.5 million in the fourth quarter.\nThis EBITDA figure compares with a loss of $2 million in the prior year quarter.\nThe improvement relative to the prior year can be principally attributed to lower manufacturing costs and higher contracting contributions from new contracts in North America and Europe.\nThese positive factors were partially offset by lower short-cycle equipment and aftermarket results.\nRelative to the third quarter of 2020, the changes in our aftermarket business also led to the slight decrease in EBITDA sequentially.\nLastly, let me highlight that our rail backlog remains healthy at just over $440 million, representing a slight decrease from the prior quarter as we continued production under our long-term contracts.\nAs we mentioned with our third quarter results, economic or business conditions within the rail maintenance-of-way market remained challenging.\nMany customers continue to defer required maintenance spending and equipment replacement or upgrade expenditures.\nThis pandemic related trend continued throughout the entire fourth quarter.\nWith that said, rail industry metrics are improving, and we expect that Harsco Rail will begin to see the benefits from this positive trend in mid-2021.\nFor this reason, we are optimistic that business conditions will see improvement in 2020 as it progresses, putting our business in the right direction to achieve some of the financial goals we've discussed in the past.\nTurning to slide nine, which is a high-level summary of our full year 2020 results.\nFor the full year, revenues increased to $1.9 billion, and adjusted EBITDA totaled $238 million.\nAlso, our free cash flow was $2 million.\nLet me start by saying that given the extremely difficult environment we all saw in 2020, I am very proud of the extent and depth of the actions and processes we put in place as a result of the pandemic to protect our people, continue serving our customers and support our financial health.\nFrom a financial point of view, we trimmed the capital spending by roughly $65 million and pushed out project spending.\nWe took advantage of the CARES Act legislation and deferred other payments.\nWe also took actions to reduce our cost structure by more than $20 million with some of these being permanent savings, as I mentioned earlier.\nAnd secondly, the acquisition of ESOL accelerated our strategic transformation, and as I mentioned earlier, our integration work to date has exceeded our expectations.\nAlso related to ESOL, you will recall that we successfully raised capital to fund this acquisition during a period of extreme market volatility.\nWe ended the year with net debt of $1.2 billion, a leverage ratio of 4.6 times and liquidity of more than $300 million.\nWe are also now evaluating opportunities to take advantage of attractive credit markets to extend our debt maturities by another three years and provide even more financial flexibility.\nRegarding our segment outlook on slide 10.\nThere is no need to remind everyone of the continuing volatility in the end markets caused by the pandemic.\nHowever, we believe we have enough visibility in our businesses to provide outlook commentary for 2021.\nOf course, this assumes there are no significant negative pandemic-related market developments from what we see presently.\nWith that in mind, in summary, each business is expected to show improvement compared with 2020.\nStarting with Harsco Environmental, revenue is projected to increase 10% to 15%.\nAdjusted EBITDA is projected to increase approximately 20% at the guidance's midpoint.\nThe business drivers for HE in the year will be higher customer output and related services demand, increased Applied Products volumes, growth initiatives and new contracts.\nNext, for Clean Earth, we are guiding to adjusted EBITDA of $72 million to $78 million for the year on revenues of approximately $790 million.\nWe anticipate that CE's pro forma revenue growth will be within a range of 3% to 5%, while we expect double-digit pro forma EBITDA growth for the business.\nHigher revenues will support the EBITDA growth, but the primary earnings driver for CE in 2021 will be integration or operational improvement benefits.\nWe expect to realize an uplift of roughly $20 million from our actions taken to date and those contemplated in 2021.\nMost of these efficiencies will be operationally driven, including lower disposal and transportation costs.\nWe also anticipate some commercial benefits as well.\nAnd as I alluded to earlier, these benefits will be partially offset by additional support costs and investments.\nAnd it's important to note, a portion of these expenses, approximately $6 million to $8 million, comprising largely duplicative costs for IT integration and branding will not recur in 2022.\nWe've also allocated an additional $3 million of corporate costs to Clean Earth.\nThis allocation and the nonrecurring expenditures will total approximately $10 million for the year.\nLastly, for Rail, we project top line growth of 15% to 20% and adjusted EBITDA growth of 25% at the guidance's midpoint.\nFor the year, higher equipment, technology and contracting sales will offset the impact of a weaker parts mix, reduced Asian aftermarket demand and investments, including R&D.\nAnd lastly, corporate costs are anticipated to be within a range of $33 million to $34 million.\nTurning to our consolidated 2021 outlook on slide 11.\nOur adjusted EBITDA is expected to increase to within a range of $275 million to $295 million.\nThis guidance translates to adjusted earnings per share of $0.59 to $0.76.\nThe earnings per share range contemplates interest expense of $63 million to $66 million and an assumed effective tax rate of 36% to 38%.\nLastly, we are targeting free cash flow before growth capital spending of $100 million.\nAnd after considering all capex, our full year free cash flow should range from $30 million to $50 million.\nThis forecast anticipates net capital spending will be within a range of $155 million to $175 million.\nAnd this amount compares with net capex of $114 million in 2020, with most of the increase attributable to growth and renewal expenditures in environmental that were deferred in 2020.\nWhile capital spending will increase year-on-year, we will continue to employ strict spending discipline.\nAs in 2020, capex remains an important lever to support free cash flow.\nAlso at this point, I expect that our capital spending beyond 2020 will normalize to levels below our current year forecast.\nAlso note that our projected free cash flow ranges include cash payment deferrals from 2020, including those related to the CARES act of roughly $12 million to $15 million.\nBut looking past 2021, our cash flow generation will increase as capex normalizes and the cash payment deferrals from 2020 are behind us.\nWe expect to see consolidated run rate free cash flow generation in excess of 6% to 8% of revenue by the end of 2022.\nSo let me move to slide 12 with our first quarter guidance.\nQ1 adjusted EBITDA is expected to range from $52 million to $58 million.\nCompared with the first quarter of 2020, we expect HE results to improve due to lower administrative spending and a more favorable service mix.\nClean Earth results are projected to be modestly higher as ESOL contributions will offset the impact of lower contaminated soil and dredge volumes and the nonrecurring expenses I mentioned earlier.\nWe also assume that we'll be able to make up in March, some volume that was lost in January and February, due to weather conditions in the Northeast and in Texas.\nRail results are anticipated to be lower year-on-year as a result of lower aftermarket volumes and mix.\nAlso, corporate costs are expected to be modestly higher due to timing of expenditures and some normalization of costs.\nLastly, let me comment on this year's phasing.\nAs you'll likely conclude, we expect our results to strengthen as the year progresses.\nAnd the factors to consider regarding this phasing include the seasonality of HE and Clean Earth, the impact of growth investments in the maturing of new sites in environmental, the timing of synergies at Clean Earth and the conversion of our rail backlog and anticipated improvements in the rail maintenance-of-way market.\nWhile my wife and I are extremely excited about it and very much looking forward to my retirement and entering the next stage of our lives, it is hard not to have mixed emotions.\nI look back fondly and proudly at my time here at Harsco, and there is so much I will miss.\nAbove all, Nick's excellent leadership, counsel and friendship these past six years, which I value immensely, for which I'm extremely grateful.\nI will also greatly miss my colleagues on the executive leadership team who are far more than just colleagues.\nAnd finally, I will miss the world-class global finance and IT organizations I've had the privilege to lead and the countless members of the Harsco team I've met and worked with, each of whom clearly reflects the values and culture of this exceptional organization.\nYes, I will certainly miss much, but rest assured I'll be watching eagerly and optimistically as a shareholder as Harsco continues to achieve success.\n",
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"content": "q4 adjusted earnings per share $0.12 from continuing operations.\nq4 revenue $508 million versus refinitiv ibes estimate of $513.6 million.\n2021 adjusted ebitda expected to increase to between $275 million and $295 million.\n2021 free cash flow projected to increase to $30 million-$50 million.\nsees 2021 adjusted earnings per share $0.59 - $0.76.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Please note that the information presented is preliminary and based upon data available at this time.\nExcept to the extent required by law, we expressly disclaim any obligation to update earlier statements as a result of new information.\nFor the first quarter, Hilltop reported net income of $120 million or $1.46 per diluted share, representing an increase from the first quarter 2020 of $71 million or $0.91 per diluted share.\nReturn on average assets for the period was 2.9% and return on average equity was 20.6%.\nThese results do include a $5.1 million reversal of provision compared to the first quarter of last year when we had a provision expense of $34.5 million as we introduced CECL and the outlook for credit and the economy look to be deteriorating.\nMuch of the momentum around mortgages from 2020 continued into this first quarter.\nNotwithstanding higher long-term interest rates and refinance volumes slowing, the overall mortgage market remains strong, and our origination business was able to deliver $6.2 billion in volume, a 71% increase from Q1 2020.\nDriven by PPP loan balances, the bank's average loans for the first quarter increased 7% from prior year.\nAnd average deposits grew by $2.4 billion or 26% from prior year as well.\nWhile pre-tax margin at the broker-dealer was down slightly from Q1 2020, we did see growth in the structured finance business, which also benefited from a strong mortgage market.\nIn the public finance business, efforts to improve productivity and growth are showing positive returns as net revenue increased 8% from the first quarter 2020.\nDuring the period, Hilltop returned $50 million to shareholders through dividends and share repurchases.\nThe $5 million of shares repurchased are part of the $75 million share authorization the Board granted in January.\nLiquidity and capital remained very strong, with a Tier 1 leverage ratio of 13% and a common equity Tier 1 capital ratio of 19.6% at quarter end.\nWe continue to see improvement in economic trends.\nAnd during the quarter, we had payoffs and a return to contractual payments for a large portion of the modified loan portfolio.\nThis portfolio, which at the end of June 2020 was $968 million, is now down to $130 million as of March 31.\nNotably, all COVID-19 modified retail and restaurant loans are now off deferral program.\nOur allowance for credit losses as of March 31 totaled $144.5 million or 1.98% of the bank's loan portfolio.\nThis reflects a reduction in the reserve balance of $4.5 million from the fourth quarter, which was driven primarily by positive shifts in the economic outlook.\nWhile the general economic outlook for the Texas economy has improved, the bank remains cautious and in constant communication with borrowers and certain higher risk segments of our hotel and office portfolios.\nThese segments were more severely impacted by the pandemic and will take longer to recover.\nMoving to Slide 4.\nPlainsCapital Bank had a solid quarter with a pre-tax income of $65 million, which includes the aforementioned provision recapture of $5.1 million, also contributing to the increased pre-tax income from Q1 2020 was higher net interest income from lower deposit costs and PPP loan fees and interest income.\nOur bankers continue to work with small business customers on PPP program.\nand as of March 31, had funded approximately 1,100 loans totaling $178 million as part of the second round, bringing the total PPP loan balance to $492 million at period end.\nPrimeLending had another outstanding quarter and generated pre-tax income of $93 million, an increase of $53 million from Q1 2020.\nThat was driven by both a $2.6 billion increase in origination volume and a gain on sale margin of 388 basis points.\nWhile rates increased toward the end of the quarter and margins tightened, we remain encouraged by the demand for mortgages across the country and by the PrimeLending team that continues to perform exceptionally while actively recruiting quality loan originators.\nFor HilltopSecurities, they had a good quarter with pre-tax income of $18 million.\nThe structured finance business had a strong start to the quarter with favorable volumes and spreads, then the sudden rise in interest rates adversely impacted net revenue in March.\nNet revenue grew in public finance services compared to prior year from a modest increase in national insurance and recruiting efforts.\nThe fixed income services and wealth management businesses generated modestly lower net revenues than Q1 2020 levels.\nOverall, for Hilltop, this was an excellent quarter and a great start to the year.\nWe believe our balance sheet is strong and our credit quality is sound.\nWe are excited about the strategic direction and growth potential of our three businesses, and we are grateful for the talented leadership and dedicated teams we have across Hilltop.\nI'll start on Page 5.\nAs Jeremy discussed, for the first quarter of 2021, Hilltop reported consolidated income attributable to common stockholders of $120 million, equating to $1.46 per diluted share.\nDuring the first quarter, revenue related to purchase accounting was $4.9 million and expenses were $1.3 million, resulting in a net purchase accounting pre-tax impact of $3.6 million for the quarter.\nIn the current period, the purchase accounting expenses largely represent amortization of other intangible assets related to prior acquisitions.\nDuring the first quarter, provision for credit losses reflected a net reversal of $5.1 million and included approximately $600,000 of net recoveries of previously written off credits.\nThe improvement in the current macroeconomic environment as well as the outlook for continued improvement in key economic metrics positively impacted allowance for credit losses during the quarter.\nHilltop's quarter-end capital ratios remain strong with common equity Tier 1 of 19.63% and Tier 1 leverage ratio of 13.01%.\nI'm moving to Page 6.\nNet interest income in the first quarter equated to $106 million, including $7.5 million of previously deferred PPP origination fees and purchase accounting accretion.\nVersus the prior year quarter, net interest income decreased by $4.7 million or 4%.\nFurther, net interest margin declined versus the fourth quarter of 2020 by 2 basis points.\nIn the current period, net interest margin benefited from the recognition of deferred PPP origination fees, higher yields in stock loan and lower deposit cost.\nOffsetting these benefits were lower loan HFI and HFS yields, driven by market pricing and absolute yield levels in the mortgage market.\nFurther, PCB's excess cash levels held at the Federal Reserve increased by $365 million from the fourth quarter, putting an additional 5 basis points of pressure on net interest margin.\nDuring the quarter, new loan commitments including credit renewals, maintained an average book yield of 4%.\nThis was stable with the fourth quarter of 2020.\nTotal interest-bearing deposit costs declined by 8 basis points in the quarter as we continue to lower customer deposit rates and returned broker deposits during the first quarter.\nWe expect continued consumer CD maturities and additional broker deposit declines in the coming quarters, both of which support a continued steady decline in interest-bearing deposit costs.\nGiven the current market conditions, we expect net interest income and net interest margin will remain pressured as overall market rates remain low, putting pressure on held for sale and commercial loan yields and that competition could remain aggressive over the coming quarters as we expect new loan demand will remain below historical levels.\nTurning to Page 7.\nTotal noninterest income for the first quarter of 2021 equated to $418 million.\nFirst quarter mortgage-related incoming fees increased by $131 million versus the first quarter of 2020.\nDuring the first quarter of 2021, the environment in mortgage banking remained strong, and our business outperformed our expectations in terms of origination volumes, principally driven by lower mortgage rates which drove improved demand for both refinance and purchase mortgages.\nVersus the prior year quarter, purchase mortgage volumes increased by $561 million or 24% and refinance volumes improved substantially, increasing by $2 billion or 156%.\nWhile volumes during the first quarter were strong relative to traditional seasonal trends, gain on sale margins did decline versus the fourth quarter of 2020 as a combination of lower linked-quarter market volumes, principally purchased mortgage volumes, competitive pressures and product mix yielded a gain on sale margin of 388 basis points.\nWe expect pressures on margin to persist throughout 2021, and we continue to expect full year average margins to move within a range of 360 to 385 basis points contingent on market conditions.\nOther income increased by $12 million, driven primarily by improvements in the structured finance business as the prior year period included a $16 million negative unrealized mark-to-market on the credit pipeline.\nAs we've noted in the past, the structured finance and capital markets businesses can be volatile from period-to-period as they are impacted by interest rates, origination volume trends and overall market liquidity.\nTurning to Page 8.\nNoninterest expenses increased from the same period in the prior year by $85 million to $367 million.\nThe growth in expenses versus the prior year were driven by an increase in variable compensation of approximately $63 million at HilltopSecurities and PrimeLending.\nThis increase in variable compensation was linked to strong fee revenue growth in the quarter compared to the prior year period.\nThe balance of the increase in compensation and benefits expenses is related to higher payroll taxes, salaries and overtime expenses.\nLooking forward, we expect that our revenues will decline from the record levels of 2020, which will put pressure on our efficiency ratio.\nThat said, we remain focused on continuous improvement, leveraging the investments we've made over the last few years to aggressively manage fixed cost while we continue to further streamline our businesses and accelerate our digital transformation.\nI'm moving to Page 9.\nTotal average HFI loans grew by 5% versus the first quarter of 2020.\nGrowth versus the same period of the prior year was driven by growth in PPP loans and higher balances in the mortgage warehouse lending business.\nIn the period, banking loans, excluding PPP, and mortgage warehouse lending have declined modestly versus the prior year period as commercial loan demand has remained tepid throughout the pandemic.\nAs we've noted on prior calls, we are planning to retain between $30 million and $50 million per month of consumer mortgage loans originated at PrimeLending to help offset soft demand from our commercial clients.\nDuring the first quarter of 2021, PrimeLending locked approximately $146 million of loans to be retained by PlainsCapital over the coming months.\nThese loans had an average yield of 287 basis points and an average FICO and LTV of 779 and 61%, respectively.\nI'm moving to Page 10.\nFirst quarter credit trends continue to reflect a slow but steady recovery in the Texas economy as the reopening of businesses continues to provide improved customer cash flows and fewer borrowers on active deferral programs.\nAs of March 31, we have approximately $130 million of loans on active deferral programs, down from $240 million at December 31.\nFurther, the allowance for credit losses to end of period loan ratio for the active deferral loans equates to 13.4% at March 31.\nAs is shown in the graph at the bottom right of the page, the allowance for credit loss coverage, including both mortgage warehouse lending as well as PPP loans at the bank, ended the first quarter at 1.98%.\nWe continue to believe that both mortgage warehouse lending as well as our PPP loans will maintain lower loss content over time.\nExcluding mortgage warehouse and PPP loans, the banks' ACL to end-of-period loans held for investment ratio equated to 2.38%.\nTurning to Page 11.\nFirst quarter average total deposits were approximately $11.4 billion and have increased by $2.4 billion or 26% versus the first quarter of 2020.\nThroughout the pandemic, we continue to experience abnormally strong deposit flows from our customers, driven by government stimulus efforts and shifting client behaviors as customers remain cautious during these challenging times.\nGiven our strong liquidity position and balance sheet profile, we are expecting to continue to allow broker deposits to mature and run off.\nAt 3/31, Hilltop maintained $639 million of broker deposits that have a blended yield of 34 basis points.\nOf these broker deposits, $284 million will mature by 6/30 of 2021.\nThese maturing broker deposits maintain an average yield of 47 basis points.\nWhile deposits remain elevated, it should be noted that we remain focused on growing our client base and deepening wallet share through the sales of our commercial treasury products and services, and we remain focused on driving higher client acquisition efforts.\nI'm moving to Page 12.\nDuring the first quarter of 2021, PlainsCapital Bank generated solid profitability, producing $65 million of pre-tax income during the quarter.\nThe bank benefited from the reversal of credit losses of $5.2 million and the recognition of $7.5 million in previously deferred PPP origination fees.\nDuring the quarter, the bank's efficiency ratio dropped below 50% as the focus on managing expenses, improving fee income streams through our treasury management sales efforts and working diligently to protect net interest income is proving to be a successful combination.\nWhile we do not expect that the efficiency ratio will remain below 50%, we do expect that the bank's efficiency will operate within a range of 50% to 55% over time.\nMoving to Page 13.\nPrimeLending generated a pre-tax profit of $93 million for the first quarter of 2021, driven by strong origination volumes that increased from the prior year period by $2.6 billion or 71%.\nFurther, the purchase percentage of the origination volume was 47% in the first quarter.\nWhile refinance remained above our expectations during the first quarter, we expect that the market will begin to shift toward a more purchase focused marketplace during the last three quarters of 2021.\nAs noted earlier, gain on sales margins contracted during the first quarter, yet we continue to expect the full year average range of 360 to 385 basis points is appropriate given our outlook on production, product mix and competition.\nDuring the first quarter, PrimeLending closed on a bulk sale of $53 million of MSR value.\nSomewhat offsetting the impact of the bulk sale, the business continued to retain servicing at a rate of approximately 50%, which yielded a net MSR value at 3/31 of $142 million, roughly stable with 12/31 levels.\nWe expect to continue retaining servicing at a rate of 30% to 50% of newly created servicing assets during 2021, subject to market conditions.\nAnd we will be looking to potentially execute additional bulk sales throughout the year if market participation remains robust.\nMoving to Page 14.\nHilltopSecurities delivered a pre-tax profit and margin of $18 million and 16.2%, respectively in the first quarter of 2021, driven by structured finance and the public finance services businesses.\nWhile activity was strong in the quarter, we have continued to execute on our growth plan, investing in bankers and sales professionals across the business to support additional product delivery, enhance our product offerings and deliver a differentiated solution set to municipalities across the country.\nMoving to Page 15.\nIn 2021, we're focused on remaining nimble as the pandemic evolves to ensure the safety of our teammates and our clients.\nFurther, our financial priorities for 2021 remains centered on delivering great customer service to our clients, attracting new customers to our franchise, supporting the communities where we serve, maintaining a moderate risk profile and delivering long-term shareholder value.\nGiven the current uncertainties in the marketplace, we're not providing specific financial guidance but we are continuing to provide commentary as to our most current outlook for 2021 with the understanding that the business environment, including the impact of the pandemic, could remain volatile throughout the year.\nThat said, we will continue to provide updates during our future quarterly calls.\n",
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"content": "hilltop holdings q1 earnings per share $1.46 from continuing operations.\nq1 earnings per share $1.46 from continuing operations.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Our actual results, capital and financial condition may differ materially from these statements due to a variety of factors, including the precautionary statements referenced in our discussion today and those included in our most recent annual report and quarterly report filed with the SEC.\nExcept to the extent required by law, we expressly disclaim any obligation to update earlier statements as a result of new information.\nErik and I have worked together for a long time, and I know he will do a great job.\nFor the second quarter 2019, Hilltop reported net income of $57.8 million or $0.62 per diluted share, which represents a 77% increase compared with the $0.35 reported during the same quarter last year.\nAdditionally, Hilltop delivered a return on average assets of 1.74% and a return on average equity of 11.6%.\nThis quarter reflected the strength and diversification of our business model with the bank, mortgage business and broker-dealer all delivering significant year-over-year pre-tax income growth.\nAverage loans held for investment excluding broker-dealer loans grew by $740 million or 13% compared to the prior second quarter.\nThe large drivers were our Bank of River Oaks acquisition in Q3 2018 and our national warehouse lending business, which increases average balance by $225 million or 81% from second quarter 2018.\nWe continue to make paying a healthy pipeline of unfunded commitments and aim to prudently grow our loan portfolio by fostering our bank value relationships.\nThis was a strong quarter for PrimeLending as reflected by improvements versus Q2 2018 in both gain-on-sale margin and operating costs.\nAlso, the structured finance business at HilltopSecurities yielded a net revenue increase of $31 million compared to prior year from optimal market conditions and the strategic alignment with the capital market business.\nThrough the first six months of 2019, we have returned $40 million to our stockholders in dividends and share repurchases.\nUnder our Board-authorized share repurchase program, $25 million remains available through January 2020.\nCredit quality remains a high priority, and we continue to focus on maintaining our underwriting discipline.\nFor the second quarter, nonperforming assets were $53 million, down slightly linked quarter and down $32 million compared to the second quarter 2018.\nMoving to page four.\nThe bank had a healthy quarter with pre-tax income increasing by $13.5 million or 41% from prior year.\nThis increase was partially driven by a reduction in noninterest expense of $7.3 million attributed to a wire fraud and indemnification asset amortization in Q2 2018 as well as operational efficiency within the business.\nAdditionally, higher yields on higher loans balances delivered net interest income growth of $5.5 million despite lower accretion during the period.\nIn the second quarter, the bank closed two underperforming branches resulting in 62 full service branches.\nMortgage pre-tax income of $21.8 million for the quarter, an improvement of $8.4 million from Q2 2018, was the result of disciplined pricing and expense management despite a 4% decline in origination volume.\nMultiple initiatives implemented during the second half of 2018 resulted in $6 million lower fixed cost and $4.3 million higher origination and closing costs fees.\nGain-on-sale margins increased by 15 basis points from Q2 2018, though remained stable over the trailing 12 months.\nWith elevated refinancing volume, we expect margin compression to persist and remain focused on delivering profitable volumes through the second half of 2019.\nThe broker-dealer reported a very strong quarter with a pre-tax margin of 18.9% on increased net revenues of 35% versus prior year.\nThe increase was largely driven by structured finance, which experienced higher production levels and strong secondary market margin at 10-year rates decline.\nWe feel good about the path of our new CEO, Brad Winges, and his leadership team are on to build upon HilltopSecurities established business line.\nResults were relatively stable compared to prior year in our insurance business as we reported a pre-tax loss of $2.8 million for the quarter with a combined ratio of 113%.\nNotably, we have begun to realize written premium growth in Texas and other core states.\nIn January, we introduced our platform for growth and efficiency initiatives, which includes a broad set of projects to operate -- to lower operating cost and build a foundation for future growth.\nDuring the quarter, we benefited from the previously referenced mortgage efficiency and capital market strategic alignment initiatives as well as realized savings from our consolidated shared services and strategic sourcing.\nWhile we expect the benefits to largely materialize in 2021, we are encouraged by the profits being made.\nThis past quarter, I traveled with several of our business leaders to our major markets in Texas and nationwide and met with employees from across all lines of businesses.\nIt gave us the opportunity to have candid roundtable discussions and learn about what our people are seeing in the market.\nI came back inspired by our leadership and overwhelmed by the quality of our people in the field.\nThe strength of Hilltop is in our talented people and the impact they have on our customers and communities.\nI'm starting on page five.\nAs Jeremy discussed, for the second quarter of 2019, Hilltop reported $57.8 million of income attributable to common stockholders equating to $0.62 per diluted share.\nDuring the second quarter, Hilltop reported a $700,000 recovery and provision for loan losses.\nIn the quarter, the bank recaptured $6.2 million of allowance for loan loss, principally related to ongoing improvement in the oil and gas portfolio and a significant recovery from a previously classified oil and gas loan.\nThe second quarter provision includes approximately $3 million of net charge-offs or 18 basis points of average bank loans on an annualized basis.\nCredit quality during the quarter remains solid.\nBut even with the recent strong performance, we are monitoring our portfolio rigorously to evaluate areas that may be experiencing any weakness.\nCurrently, we do not see any industries or concentrated exposures that are experiencing material deterioration.\nDuring the second quarter, revenue-related purchase accounting accretion was $6.4 million and expenses were $2 million, resulting in a net purchase accounting pre-tax impact of $4.4 million for the quarter.\nIn the current period, the purchase accounting expenses largely represent amortization of deposits and other intangible assets related to prior acquisitions.\nRelated to the purchase loan accretion, as the purchase portfolio balances continued to decline, we expect scheduled interest income related to purchase loan accretion to average between $4 million and $6 million per quarter for the remainder of 2019.\nHilltop's capital position remains strong with a period in Common Equity Tier 1 ratio of 16.32% and a Tier 1 leverage ratio of 13%.\nI'm moving to page six.\nNet interest income in the second quarter equated to $108 million, including $6.4 million of purchased loan accretion.\nNet interest income increased $3 million or 3% versus the same quarter in the prior year.\nThe growth in net interest income was driven by asset growth, including the acquired loans in Houston and improvement in net interest margin, which expanded by three basis points versus the prior year period.\nNet interest margin equated to 3.49% in the second quarter and included 23 basis points of purchase accounting accretion.\nThe prepurchase accounting taxable equivalent net interest margin equated to 3.26%, which improved by eight basis points versus the same period in the prior year.\nOn a linked-quarter basis, taxable equivalent prepurchase accounting net interest margin declined by 12 basis points, resulting from lower yields on loans held for sale and the six basis point increase in the interest-bearing deposit costs.\nDuring the second quarter, long-term interest rates and more directly 10-year rates continued to decline that began earlier in the year.\nYear-to-date, the 10-year treasury yield has declined by approximately 65 basis points, which has a direct impact on Hilltop's loans held-for-sale yields, albeit on a lag basis.\nOverall, the average yield on loans held for sale during the second quarter dropped by 32 basis points to 460 basis points, putting pressure on net interest margin during the quarter.\nGiven the continued declines in the 10-year rates during the second quarter, we expect that yields on loans held for sale will continue to decline further during the third quarter.\nIn addition, bank loan yields have increased as compared to the same period prior year, but the competitive pressure continues to intensify on both new and renewed loans.\nAs expected, we've seen deposit betas continue to increase even as the Federal Reserve did not move short-term rates higher.\nHilltop's cumulative beta for interest-bearing deposits in December of 2015 has been approximately 46%, remaining below our through-the-cycle model ranges of 50% to 60%.\nWith the change in market sentiment and the market's indication that the Fed could reduce rates throughout the remainder of 2019, we expect the deposit cost will reach peak levels later this year.\nWith the combination of lower loan held-for-sale yields and somewhat higher deposit costs, we expect additional pressure on net interest margin for the remainder of the year.\nTherefore, we are maintaining our full year average prepurchase accounting net interest margin outlook of 3.25% plus or minus three basis points.\nWe will continue to revisit our assumptions based on the outcome of future Federal Reserve rate movements, yield curve shifts and asset liability flows across our portfolios.\nQuarterly average gross earning assets increased by $268 million versus the same period in the prior year.\nSecond quarter earning asset growth was driven by the BORO acquisition and growth in our national warehouse lending business, which provides warehouse financing to third-party mortgage companies.\nGrowth was impacted by lower average loans held for sale, which declined by $282 million versus the prior year period.\nI'm moving to page seven.\nTotal noninterest income for the second quarter of 2019 equated to $313 million.\nSecond quarter mortgage-related income and fees increased by $2.8 million versus the second quarter 2018.\nDuring the second quarter of 2019, the competitive environment in mortgage banking remained intense as Hilltop's mortgage origination volumes declined by $147 million or 4% versus the same period in the prior year.\nWhile mortgage volumes were challenged, gain-on-sale margins remained relatively stable during the second quarter at 333 basis points.\nWith the recent decline in the primary mortgage rate, the business experienced improvement in the refinance market as refinance volumes grew by 28% versus the prior year.\nGiven the improvements in the market related to lower long-term rates, we expect that full year origination volume in 2019 will be in line with full year 2018 production levels.\nRegarding mortgage gain-on-sale margins, given the current competitive dynamics, our projected mix of origination business and our expectations on market rate, we expect the gain-on-sale margins will trend lower throughout the balance of 2019.\nOther income increased by $35 million, driven primarily by improvements in sales and trading activities in both capital markets and structured finance services at HilltopSecurities.\nFavorable market conditions resulted in a 25% increase in structured finance mortgage-backed security volumes and improved secondary spreads.\nThese businesses continue to realize the benefits of the investments we've been making to improve our structuring and distribution capabilities since the third quarter of 2018.\nI'm moving to page eight.\nNoninterest expenses increased in the same period in the prior year by $5 million to $344 million.\nThe growth in expenses versus the prior year were driven by an increase in variable compensation of $18 million at HilltopSecurities and PrimeLending.\nThis increase in variable compensation was going to strong fee revenue growth in the quarter.\nOver the past five quarters, we've continued to make progress in aligning our businesses to the current market conditions and driving efficiencies across the franchise.\nThrough these efforts, headcount, nonvariable compensation, professional services costs and marketing and development expenses continue to trend lower as we make progress against our efficiency initiatives.\nDuring the second quarter, Hilltop incurred $2 million in costs related to the ongoing core system enhancements, and we do expect that these related expenses will increase for the remainder of 2019.\nMoving to page nine.\nTotal average HFI loans grew by 11% versus the second quarter of 2018.\nGrowth versus the same period in the prior year was driven by loans acquired in Houston during the third quarter of 2018 and growth in our mortgage warehouse lending business.\nBased on current production trends, seasonal and scheduled paydowns, the current competitive environment and our focus on high-quality conservative underwriting, we continue to expect the full year average HFI loans will grow between 4% and 6% in 2019.\nTurning to page 10.\nAs previously noted and as shown on this chart on the top right of the slide, Hilltop's businesses have maintained solid credit quality as nonperforming assets have declined $32.5 million from the same period in the prior year.\nThe allowance for loan loss to HFI loans ratio equates to 83 basis points at the end of the second quarter of 2019 and the decline from the first quarter of 2019 reflects the aforementioned allowance recapture.\nIt is important to note that we maintain approximately $90 million of remaining discounts across the purchase loan pools, and these discounts provide additional coverage against future losses.\nMoving to page 11.\nAverage total deposits are approximately $8.3 billion and have increased by $483 million versus the second quarter of 2018.\nInterest-bearing deposit costs have risen by six basis points from the first quarter of 2019 as competitive pressures remain and clients are actively seeking higher rates of return on their deposits by migrating monies from noninterest-bearing and savings products into higher-yielding money market, CD and investment products.\nWe continue to focus on growing deposits through the expansion of existing relationships and new client acquisition while managing overall deposit cost as aggressively as possible while remaining competitive.\nMoving to page 12.\nDuring the second quarter of 2019, PlainsCapital Bank continued to demonstrate solid improvement in profitability, generating approximately $47 million of pre-tax income during the quarter.\nThe quarter's results reflect the benefits of the growth in the Houston market, the affirmation allowance recaptured, which equated to $6.2 million and improvement in the efficiency ratio versus the prior year period of 10.6%.\nThe improvement in the efficiency ratio was driven by both revenue growth and lower expenses versus the prior year period.\nOf note, the second quarter of 2018 included $4 million of expense related to the previously reported wire fraud and $2 million loss share related expenses.\nThe focus at PlainsCapital remains consistent: provide great service to our clients, drive profitable growth while maintaining a moderate risk profile and delivering positive operating leverage by balancing revenue growth and expense efficiency.\nI'm turning to page 13.\nPrimeLending generated a pre-tax profit of $22 million in the second quarter of 2019 driven by the efficiency efforts that the leadership team at PrimeLending executed during the third and fourth quarters of 2018 and has continued in the 2019.\nWhile origination volumes declined by 4% versus the same period in the prior year, the combination of back-office efficiencies and branch performance management have yielded significant reduction in operating expenses, which declined by approximately $6 million versus the same period in the prior year.\nFurther supporting the improved results is our focus on pricing and fees.\nMortgage origination fees have increased from the same period in the prior year by 12 basis points, which yielded a small increase in fees versus the prior year even as origination volumes declined.\nThe focus for PrimeLending is to generate profitable mortgage volume, continue to focus on operational efficiencies and successfully launch our new mortgage loan operating system.\nTurning to page 14.\nHilltopSecurities delivered a pre-tax profit of $22 million for the second quarter of 2019, driven by solid execution in the structured finance and capital markets businesses, which have benefited from both our ongoing investments in structuring, sales and distribution and improved market conditions.\nWhile activity was strong in the quarter, results from both of these businesses can be volatile as market rates, spreads and volumes can change significantly from period to period.\nRelated to Public Finance, while revenues declined modestly versus the same period in the prior year, we are investing in our franchise to support long-term growth by strategically hiring bankers to support client expansion and acquisition.\nBased on current market activity, we expect results in this business to continue to improve throughout the remainder of 2019.\nThe focus for HilltopSecurities is to grow profitable revenue, optimize operating expenses, manage marketing liquidity risks within a moderate risk profile and finalize the deployment of the new core operating system.\nMoving to page 15.\nNational Lloyds recorded a $3 million pre-tax loss for the quarter, which reflects seasonal increases in storm activity and client-related losses.\nDuring the second quarter, the business delivered modest improvement in written premiums in our core states.\nGrowth in these core states remains the primary focus for 2019.\nI'm moving to page 16.\nFor 2019, we're maintaining the full year outlook for our key balance sheet items, loans and deposits.\nGiven the actual changes in market interest rates and our expectation for rates over the coming quarters, we are adjusting our full year net interest income range lower to reflect our asset-sensitive position at PlainsCapital, the impact of lower market rates on loan-held-for-sale yields and our expectation of increasing deposit costs.\nTo reflect the strength in our fee businesses, we are adjusting our noninterest income outlook higher to reflect the results during the first half of 2019 and the improvement in current market conditions.\nOur noninterest expense outlook range is slightly higher as variable expenses will continue to be correlated to our fee revenue businesses.\nLastly, as credit quality has remained solid and as a result of performance in the first half of 2019, we are adjusting our full year provision outlook range lower.\nThis outlook represents our current expectations with respect to the markets, rates and overall economic activity.\nThese, however, may change throughout the remainder of the year, and we will provide updates as necessary on our quarterly calls going forward.\n",
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"content": "hilltop holdings q2 earnings per share $0.62.\nq2 earnings per share $0.62.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Except to the extent required by law, we expressly disclaim any obligation to update earlier statements as a result of new information.\nDespite the ongoing pandemic and most of our team working from home, Hilltop had an unbelievable quarter, with record breaking mortgage earnings that more than offset a sizable and judicious reserve build at the Bank.\nBefore getting into the results of the quarter, I would like to start on Slide 3, and provide an update on our response to the COVID-19 pandemic.\nFrom an operation standpoint, we are very fortunate to have realized Hilltop over the past three years by building a robust holding company and integrating the functional departments of our operating companies.\nThis is enabled us to ensure business continuity while prioritizing the health and safety of our employees.\nWe continue to operate with the majority of our employees working remotely, so that essential staff can work safely from our offices.\nWe are tracking all COVID-19 cases to ensure the quarantine of affected employees and to ensure impacted offices are cleaned so that they can get back open as soon as possible.\nWe are also providing frequent and open communication so that everyone adheres to safety protocols and feel connected.\nWhile we did see an increase in employee cases this past quarter, the overall number remains low and has not had a material impact on our businesses.\nSince the start of the pandemic, we have been in constant contact with our clients to continue to serve their needs, and in particular provide relief and support where required.\nBy partnering with our borrowers that had been impacted by COVID-19, the Bank has provided deferrals on $1 billion of loans of which $619 million were principal only and $349 million for principal and interest for the more severely impacted borrowers.\nAs the initial 90-day deferrals are starting to come due, the Bank has already received requests for approximately $120 million of second-round modification.\nWe will be reviewing each of these requests on a case-by-case basis to ensure they are need-based and assess their viability.\nCertain industries including hotel and restaurants, have been more severely impacted.\nSo we anticipate a large portion of those credits will be requesting second deferral.\nAs well, the Bank booked over 2,800 PPP loans totaling $672 million.\nThis was a huge effort by our bankers, who were able to help many customers in need.\nAs the pandemic persists, we will continue to provide personal banking assistance including the waving of fees, increased daily spending limit and the suspension of residential foreclosure activity.\nMoving to Slide 4.\nFor the second quarter of 2020, Hilltop reported net income of $128.5 million or $1.42 per diluted share resulting in a 3.3% return on average assets and a 23% return on average equity.\nNet income from continuing operations was $97.7 million.\nAs noted at the bottom of the page, the results for National Lloyds this period and the gain on its sale are included in discontinued operations.\nThis quarter illustrates the strength of our businesses and the importance of diversification.\nWith the mortgage and broker-dealer businesses both delivering strong growth from fee income that alleviated the impact of the provision at the Bank.\nFavorable market conditions aided our results, but I'm most proud of our team for working closely together and executing on the opportunities that arose.\nOn June 30, the National Lloyds sales to Align Financial closed for total cash proceeds of $154 million, resulting in a net gain on sale of $32 million, which was non-taxable.\nThis was a great outcome for both parties.\nHilltop also had an important strategic accomplishment in the quarter.\nWith the successful issuance of $200 million of subordinated debt, which further bolsters our liquidity and capital to persevere the current recession and to enhance our position to take advantage of future opportunities.\nAs for managing risk.\nNet charge-offs for the period were $16.4 million, which included $12.5 million that was the oil and gas credit that was reserved for in Q1 2020.\nThe allowance for credit losses increased by $49.6 million this quarter as Hilltop built its loan reserve to reflect the deteriorated economic outlook from Q1 2020.\nWe also continue to enhance our liquidity position and ended the period with $6.6 billion of cash, security and secured borrowing capacity.\nMoving to Slide 5.\nPlainsCapital Bank recorded a pre-tax loss of $17.5 million largely due to our sizable CECL provision of $66 million that was partially offset by stable net interest income and lower operating expenses.\nThe Bank's pre-provision net revenue increased 5% from the second quarter 2019.\nNotably, Jerry and the Bank team did a great job growing PPNR while working tirelessly to process PPP loan and borrower deferral request.\nPrimeLending had an outstanding quarter and generated pre-tax income of $138 million, an increase of $116.5 million from Q2 2019.\nThat was driven by a 54% increase in origination volume and a 35 basis point increase in gain on sale margins.\nSteve Thompson and the entire PrimeLending team worked over time to process the overwhelming volumes and they took advantage of the industry's oversupply by raising prices and retaining servicing.\nHilltopSecurities, increased pre-tax by $6 million to $28 million, driven by profitable growth in the fixed income services and structured finance businesses.\nBrad Winges and the HilltopSecurities team are well under way in raising the caliber and profile of the firm to become the preeminent municipal focused investment bank.\nAdditionally, they completed the major system conversion for HilltopSecurities in the quarter.\nMoving to Slide 6.\nHilltop has a synergistic and durable business model, that is something we have been building toward -- throughout the life of our company.\nThrough acquisitions, we initially integrated our company for capital and funding purposes.\nOver the past three years, we have largely implemented our platform for growth and efficiency initiatives by integrating the shared services departments and executing on efficiency projects to build a scalable platform.\nAnd now with the sale of National Lloyds we have solidified our business model, which is a franchise anchored by PlainsCapital Bank and augmented with powerful fee income businesses in PrimeLending and HilltopSecurities.\nWe have made significant investments in talented professionals and system, and believe we are in a solid position to grow these core businesses.\nI'll start on Page 7.\nAs Jeremy discussed, for the second quarter of 2020, Hilltop reported consolidated net income attributable to common stockholders of $128.5 million, equating to $1.42 per diluted share.\nIncome from continuing operations attributable to common stockholders equated to $97.7 million or $1.08 per diluted share.\nHilltop's continuing operations generated $202 million of pre-provision net revenue or PPNR during the second quarter, which brings the first half of 2020 total PPNR to $302 million.\nPPNR increased by $125 million or 162% versus the prior year period.\nGrowth versus the prior-year period was driven by diversified revenue streams and led by strong mortgage originations.\nDuring the second quarter revenue related to purchase accounting was $3.3 million and expenses were $1.3 million resulting in a net purchase accounting pre-tax impact of $1.9 million for the quarter.\nIn the current period, the purchase accounting expenses largely represent amortization of deposit and other intangible assets related to prior acquisitions.\nWe expect that revenue from purchased loan accretion will continue to decline as the purchase loan portfolio continues to run off.\nFurther, we expect the revenue from purchased loan accretion will average between $3 million and $5 million per quarter for the remainder of 2020.\nGiven the significant growth in earnings, coupled with the successful sale of National Lloyds, and the subordinated debt raise completed during the second quarter Hilltop's capital position has been significantly strengthened as we both address the ongoing impacts of the pandemic and position the company to take advantage of opportunities that may be presented over time.\nHilltop's period end Common Equity Tier 1 ratio equated to 18.46% and the Tier 1 leverage ratio equated to 12.6%.\nI'm moving to Page 8.\nNet interest income from continuing operations for the second quarter equated to $104.6 million and declined by $2.7 million versus the second quarter of 2019.\nThe decline in net interest income was driven by lower purchase loan accretion of $3.2 million offset by interest income from higher loan held for sale and loans held for investment during the quarter.\nDuring Q2, Hilltop's consolidated average earning assets increased by $1.9 billion as the business experienced significant inflows of customer deposits across all product types.\nDeposit growth coupled with planned actions including Hilltop's $200 million subdebt raise, an increase in acquired brokered deposits of approximately $550 million and proceeds from the sale of National Lloyds all contributed to the increase in the ending period balance of cash on deposit at the Federal Reserve which grew by approximately $1.2 billion versus the prior quarter.\nIn addition, the Bank generated PPP loans of $672 million, net of approximately $21 million of deferred fees which will be recognized over the life of loans.\nLastly, the mortgage warehouse lending business generated growth of approximately $120 million versus the prior quarter, as mortgage volumes surged in the second quarter.\nThe second quarter Hilltop consolidated net interest margin equated to 280 basis points and declined by 61 basis points versus the prior quarter.\nThis decline was driven by the aforementioned growth in average earning assets, the build in liquidity as well as lower yields on loans, securities and deposits.\nWe expect that NIM will continue to be pressured in the third quarter, after which we expect that we will begin to see a modest rebound during the fourth quarter and into the first quarter of 2021.\nA significant driver of the improvement will be our efforts to reduce our cash and liquidity position over the second half of the year to between $5 billion and $6 billion.\nWe continue to monitor the capital markets, Hilltop's mortgage volumes and overall market functions related to liquidity and we will continue to balance our excess liquidity against the risk over time.\nTurning to Page 9.\nThe table on the bottom right of Page 9 highlights the liquidity that we maintain at the bank as of June 30.\nThe Bank ended the period with over $6.6 billion of liquidity, including both cash, securities and secured borrowing sources.\nFurther, at period end, the parent maintained $388 million of cash, which equates to approximately 4 times annual expenses, dividends and debt service.\nMoving to Page 10.\nNoninterest income for the second quarter equated to $468 million.\nDuring the period mortgage applications and locks were very robust as PrimeLending locked approximately $7.4 billion in new mortgages.\nThis is a record rate lock quarter for the business and reflected the impact of lower rates and better-than-expected demand for purchase mortgages across our markets.\nThe combination of strong lock-in origination volume and improving gain on sale spreads resulted in mortgage production and fee income increasing by $176 million versus the prior year period.\nDuring the second quarter, gain on sale margins in our mortgage business did expand by 43 basis points versus the first quarter of 2020.\nWe expect the gain on sale margins will move higher during the third quarter to between 430 and 450 basis points.\nFurther, we expect that spreads will remain elevated versus historical levels, but begin to moderate during the fourth quarter of 2020.\nDuring the second quarter, the securities business continued to show solid progress as fixed income capital markets delivered revenue growth of approximately $12 million and structured finance saw market conditions improve and revenue increased by $6.5 million versus the prior year.\nAt the period end, the mark on the structured finance loan pipeline stood at $15 million.\nIt remains important to note, that results from our fixed income and structured finance businesses can be volatile as market rates, spreads and volumes can change significantly from period to period.\nTurning to Page 11.\nNoninterest expenses increased from the same period in the prior year by $66 million to $370 million.\nThe growth in expenses versus the prior year were driven by the increase in variable compensation of approximately $56 million at both PrimeLending and HilltopSecurities.\nThis increase in variable compensation was directly linked to strong fee revenue growth in the quarter compared to the prior year period.\nNon-variable personnel expenses rose versus the prior year by $8 million driven by increases in over time hour at work, notably in our mortgage operations as well as deferred compensation and project labor spend in the period.\nOver the last nine quarters, we continue to make progress in aligning our businesses to the current market conditions and driving efficiencies across the franchise.\nThrough these efforts, headcount, professional service costs and marketing and development expenses continued to trend lower as we make progress against our efficiency and objectives.\nDuring the second quarter, Hilltop incurred $3.5 million in costs on $5.6 million of spend related to our ongoing core system improvement.\nDuring the second quarter, we continued to make progress and are moving into the final stages of implementation of our three core system installations.\nThe new core loan system has been installed throughout the mortgage business.\nThe securities team completed the Phase 1 implementation of the new operating platform HilltopSecurities.\nAnd we have now begun the final deployment of the new general ledger and ERP system across Hilltop.\nWe expect that all of these implementations will deliver significant value to our franchise and position Hilltop for profitable growth in the future.\nI'm turning to Page 12.\nTotal average held for investment loans grew by 9% versus the second quarter of 2019.\nGrowth versus the same period in the prior year was driven by $672 million of net PPP loan originations, coupled with growth in our mortgage warehouse lending business, which experienced growth of approximately $219 million versus the prior year period.\nOther business loans declined versus the first quarter of 2020, as customer demand has remained soft.\nLoan yields have declined over the prior four quarters and continue to decline in the second quarter.\nLower market rates, including the prime rate and LIBOR rates coupled with lower purchase loan accretion has contributed to the yield decline.\nWe do expect that loan yields will continue to be pressured in the coming quarters as market rates remain low and we've added $672 million in PPP loans that yield 100 basis points.\nLastly, our loan pipeline remains stable, but many clients are delaying pricing and funding on new loan commitments until they have greater clarity on the economic impact of the pandemic.\nMoving to Page 13.\nDuring the second quarter, Hilltop continued the process of building excess liquidity to prepare for the potential disruptions that may be caused by the pandemic and support outsized mortgage origination activity.\nSecond quarter average total deposits were approximately $11.2 billion and have increased by $2.2 billion or 25% versus the first quarter of 2020.\nDuring the quarter, the bank swept back to the securities business approximately $200 million in deposit as the securities business can achieve a better return of those funds then the bank can earn on excess cash.\nExcluding the growth from PPP deposits, the subdebt raise and the proceeds from the National Lloyds, customer deposits have continued to grow as customers retain cash until clarity emerges related to the economic activity.\nAs shown in the graph, the bank has been able to deliver growth in noninterest bearing deposits, which increased by approximately $600 million or 21% versus the first quarter of 2020 on an ending balance basis.\nTurning to Page 14.\nDuring this quarter, net charge-offs equated to $16.4 million or 92 basis points of total bank held for investment loans on an annualized basis.\nCharge-offs during the quarter largely represent the final disposition of a single energy credit and the writedown of the assets related to real estate properties that were all reserved for during the first quarter.\nWhile non-performing assets improved as is a percentage of criticized loans in the second quarter, it is important to note that the Bank approved $968 million in COVID-19-related loan modifications during the second quarter, and these deferrals are not reflected in the graph on this page.\nFurther, in the graph on the bottom right, Hilltop allowance for credit losses, the Bank's loans held for investment increased to 2.1% during the quarter.\nAs it relates to the allowance to credit loss to bank loans ratio, if we exclude PPP balances and our collateral maintenance loans, which we believe will have little loss content over time because of the collateral coverage of the loan types which include broker dealer margin and correspondent loans and mortgage warehouse lending loans, the coverage ratio at the end of the period equates to 2.6%.\nI'm turning to Page 15.\nDuring the second quarter, the macroeconomic outlook deteriorated materially from the outlook that we leveraged to evaluate allowance for credit losses during the first quarter.\nWe have presented a few key metrics for comparison in the table at the bottom of this page.\nThe outlook we use as our base case for CECL modeling as of June 30, reflects that GDP will fall significantly in Q2 with a material rebound during the third quarter of 2020 and then a slower, but steady improvement through the end of 2021.\nFurther, our base case assumes US unemployment remains elevated between 8% and 10% through at least Q4 2021.\nThe impact of these economic changes yielded a net allowance build of $60 million in the quarter, including the economic impacts, charge-off, and specific reserves, the allowance for credit losses increased by approximately $50 million in the second quarter.\nIn addition to the changes in economic factors, we incorporated model overlays to reflect ongoing reopening efforts, the potential impacts to the most at-risk portions of the portfolio included -- including the COVID-19 loan modification portfolio as well as the impact of government stimulus.\nAs it relates to future period, it remains very difficult to assess how the economy will react as the pandemic continues over the coming quarters.\nHowever, assuming the economic performance generally aligns with our current base case outlook, the primary factors affecting allowance will be credit portfolio migrations and new loan originations over time.\nAs we've noted in the past, we do expect that allowance for credit losses could be volatile in the future, given the potential for significant shifts in the economic outlook from one reporting period to another.\nTurning to Page 16.\nWe are updating our views of the COVID-19 impacted portfolio to represent those customer loans that requested and received a payment deferral during the period versus the broader portfolio views that we've discussed during the first quarter.\nWe believe that this group of loans represents the highest risk portfolio related to COVID-19 and that the relationship management credit teams are managing these relationships to monitor performance as these clients progress through these very challenging times.\nAs previously mentioned, the Bank approved deferrals for $968 million of loan portfolio representing approximately 13.5% of the total loan portfolio, excluding PPP loans.\nImportantly, $619 million were principal only deferrals and $349 million were principal and interest deferrals.\nIn the table, we provided detail on how the $968 million stratified across industry segments and also the amount of allowance for credit loss in dollars and percent terms prior to these loans as of June 30.\nNotably, the ACL loan coverage on this portfolio is 7.1% as of period end.\nAs of July 24, we have received requests for follow-on deferrals related to $122 million of loans and we'll be evaluating those requests during the third quarter.\nOf the follow-on request, 56% are restaurant and bars and 36% are hotels.\nWe do expect that many of our hotel clients will request additional deferrals as those businesses continue to show significant stress.\nAs well as the case in the first round of deferrals, our top priority is protecting the principle of the bank, while working to aid our clients in progressing through these unprecedented times.\nAny follow-on deferrals will be need-based and our target will be to extend for an additional 90-day period.\nMoving to Page 17.\nDuring the second quarter, the energy portfolio declined by $42 million.\nThe decline was driven by customer pay downs and the final resolution in charge-off of large energy credit we referenced during Q1 of 2020.\nIn total, the energy portfolio represents $104 million of outstanding balances and $59 million of unfunded commitments for a total exposure of $163 million.\nAs of June 30, our allowance for credit losses on the energy portfolio equates to $9 million or 8.7% of the outstanding balance.\nTurning to Page 18.\nDuring the second quarter of 2020, PlainsCapital Bank incurred a pre-tax loss of $17.5 million, driven by a $66 million provision expense, as previously reviewed.\nThe quarter's results reflect stable net and noninterest income and ongoing improvement in our operating expenses.\nThe efficiency ratio during the quarter equated to 54% and reflects the ongoing efforts to reduce deposit costs, lower operating costs and drive prudent revenue growth over time.\nDuring the first quarter, and in response to the pandemic and the unknown economic impacts, we suspended the retention of single-family mortgages by the Bank.\nAs we move forward and assuming markets continue to function in an orderly fashion and consumer credit remains stable, we expect to begin retaining PrimeLending originating mortgages during the second-half of 2020.\nTurning to Page 19.\nPrimeLending generated a pre-tax profit of $138 million during the second quarter of 2020, driven by strong origination volumes that increased from the prior year by $2.1 billion or 54%.\nAs noted earlier, gain on sale margins expanded during the second quarter versus the prior year, as market volumes and pricing actions provided for higher spreads.\nDuring the period, refinanced activity represented 47% of total origination.\nFurther, we expect that during the third quarter, the portion of originations that are refinanced transactions, will remain elevated from our historical level.\nDuring the second quarter, Hilltop retained approximately 89% of the mortgage servicing rights related to loans sold during the period.\nBeginning in March and carrying into the second quarter, the market for servicing deteriorated substantially as concerns regarding funding, servicer advances as well as margin requirements escalated as the pandemic accelerated.\nGiven Hilltop's strong liquidity and capital position, we were able to retain the mortgage servicing rights and the asset is now approximately $82 million.\nWe do expect that we will continue retaining a significant portion of the servicing rights for loans sold over the coming quarters and the asset could grow to between $150 million and $175 million by year end.\nThe results of our mortgage business during the quarter were very solid, and we're pleased with how our mortgage origination team is executed under some very challenging circumstances during the second quarter.\nTurning to Page 20.\nHilltopSecurities delivered a pre-tax profit of $28 million in the second quarter of 2020.\nIn the quarter, fixed income services generated solid revenue growth as their traders were able to happily negotiate challenging conditions, both in terms of pricing and liquidity.\nThe performance of the team demonstrates the progress we have and continue to make in this business.\nWe made substantial investments in the team and our broad set of capabilities, and those investments are returning dividends in 2020.\nThe structured finance business delivered growth versus the same period in the prior year of $6.5 million as the secondary markets for mortgage-related bonds improved from the market dislocation in March.\nIt remains important to note the results from our fixed income and structured finance businesses can be volatile as market rates, spreads and volumes can change significantly from period-to-period.\nAs noted earlier, the securities team made significant progress in launching their new operating system during the second quarter.\nWhile this is a significant milestone, the team will continue working over the coming quarters to enhance and optimize the system.\nTurning to Page 21.\nGiven the uncertainty surrounding the economy, specifically related to the pandemic, we're updating our 2020 commentaries, but we're not providing updated guidance or outlook.\nWhile it is not clear exactly how the economy will rebound, or the timeline of that rebound, which we believe will be directly linked to the success in managing the virus and subsequent outbreaks, we remain focused on delivering against those items that we can control.\nWe're committing to the -- we're committed to the ongoing safety of our associates and our clients as well as helping our clients work through these unprecedented challenges that the pandemic has presented us all.\nWe remain committed to executing our platform growth and efficiency initiatives and delivering against our 2021 commitments.\nLastly, and most important, we are focused on delivering prudent growth across all of our business lines, while maintaining a moderate risk profile and delivering long-term shareholder value.\n",
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"content": "q2 earnings per share $1.08 from continuing operations.\nq2 earnings per share $1.42 including items.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: These statements are based on management's current expectations concerning future events that by their nature are subject to risk and uncertainty.\nPlease note that the information presented is preliminary and based upon data available at this time.\nExcept to the extent required by law, we expressly disclaim any obligation to update earlier statements as a result of new information.\nFor the second quarter, Hilltop reported net income of $99 million or $1.21 per diluted share.\nReturn on average assets for the period was 2.29% and return on average equity was 16.4%.\nDespite certain headwinds in each business, our collective business model was able to generate strong earnings and grow capital, while at the same time returning capital to shareholders through dividends and share repurchases.\nPlainsCapital Bank generated pre-tax income of $87 million compared to a pre-tax loss of $17 million in Q2 2020.\nImprovements in the economic outlook and positive credit migration drove a $29 million reversal of provision, compared to a provision expense of $66 million in Q2 2020.\nOutside of a few pockets of weakness such as business focused hotels, our borrowers generally are seeing improved results with the economy reopening and robust activity.\nStrong deposit growth has continued with average interest-bearing deposits, excluding broker deposits and HilltopSecurities sweep deposits, increasing by 26% from Q2 2020.\nThis growth was partially offset by the planned run-off of approximately $858 million in broker deposits and the reduction in HilltopSecurities sweep deposits of approximately $690 million, as we optimize our liquidity sources and defend our net interest margin.\nWe attribute this core deposit growth primarily to increased liquidity in the market from government stimulus and the work our bankers have done to increase deposits from existing and new clients.\nTotal average bank loans declined modestly by 2% versus Q2 2020 as PPP loans have run off and commercial loan growth remains pressured.\nQuality loan demand has been muted as our borrowers are flushed with liquidity, leading to pay-downs and payoffs or the use of elevated liquidity to fund capital expenditures and other investments before seeking bank debt.\nHowever, the Texas markets we are in continue to experience significant activity from business and household migration, which should drive meaningful long-term opportunities for the bank, specifically in higher growth markets such as Austin and Dallas, with products like multifamily.\nImportantly, our business model has allowed us to selectively retain high quality mortgages from PrimeLending to support loan balances and provide improved yield opportunities for our elevated liquidity and capital.\nPrimeLending had another solid quarter, generating $49 million in pre-tax income.\nWhile the mortgage market has begun to normalize compared with the frenzied activity in 2020, volumes and profitability still remain elevated relative to the historical levels.\nPrimeLending originated $5.9 billion in volume with a gain on sale margin on loans sold to third parties of 364 basis points.\nAlthough, average mortgage interest rates declined year-over-year, refinance volumes decreased to 32% of total origination compared to 47% in Q2 2020.\nA decrease in mortgage interest rates typically leads to an increase in refinancing volume.\nHowever, significant refinancing activity during 2020 has limited the population of loans eligible for refinance.\nImportantly, our focus on home purchase mortgage origination should allow us to outperform the broader market.\nAs the third-party market for mortgage servicing has continued to improve, we have reduced our retained servicing to 25% of total mortgage loans sold during the quarter and executed an MSR sale of $32 million, reducing our MSR assets to $124 million.\nIn addition to rate, inventory and affordability are the main themes we are paying attention to in the mortgage industry.\nWith low inventory continuing to drive home prices higher, the properties that are available are increasingly getting out of reach for buyers.\nThis phenomenon affects both volume as well as gain on sale margins as certain products are more competitive in this environment.\nDespite the ever-shifting mortgage landscape, PrimeLending continues to execute well on its growth strategy, primarily centered on hiring purchase-oriented loan officers.\nIn the second quarter, PrimeLending had a net gain of 11 loan officers that we believe could add incremental annual volume of nearly $300 million.\nFor HilltopSecurities, they generated $6.9 million of pre-tax income on net revenues of $94 million for a pre-tax margin of 7.3%.\nThis was a challenging quarter for the mortgage-centric and fixed income businesses.\nAlthough these businesses have performed exceptionally over the past year, they are subject to volatility, which illustrates the importance of diversified revenue streams within HilltopSecurities.\nThe Structured Finance business was adversely impacted by mortgage market volatility in March and April and generated net revenue of $11.5 million, a decline of 75% from Q2 2020.\nOn a positive note, lock volumes remain relatively strong compared to pre-2020 historical level as we continue to add and maintain strong relationships with the existing clients.\nImportantly, our Public Finance and Wealth Management businesses generated revenue and income growth and we are pleased with their positive momentum.\nMoving to Page 4, Hilltop maintained strong capital with common equity tier 1 capital ratio of 20% at quarter end.\nDuring the quarter, Hilltop returned $55 million to shareholders through dividends and share repurchases.\nThe $45 million in shares repurchased are part of the $75 million share authorization the Board granted in January.\nThis week, the Hilltop Board authorized an increase to the stock purchase program to $150 million, an increase of $75 million.\nFactoring in shares repurchased made during the first half of 2021, Hilltop now has approximately $100 million of available capacity through the expiration of the program in January 2022.\nEven with sizable capital distributions to shareholders over the past two years, including the opportunistic tender offer executed in 2020, our tangible book value per share has grown at a compound annual rate of 21%, because of the profitability of our unique business model.\nWe plan to continue to prudently distribute capital to our shareholders through dividends and share repurchases.\nIn closing, Hilltop's performance in the quarter highlights the versatility of our franchise and the value of our diversified operating model.\nAlthough near term headwinds and volatility may occur, we believe each of our businesses are well positioned to take advantage of profitable growth opportunities and that we have the leadership, capital, and strategies in place to build on our franchise.\nI'll start on Page 5.\nAs Jeremy discussed, for the second quarter of 2021, Hilltop reported consolidated income attributable to common stockholders of $99 million, equating to $1.21 per diluted share.\nIncluded in the second quarter results was a net reversal of provision for credit losses of $28.7 million, which included approximately $500,000 of net charge-offs in the quarter.\nOn Page 6, we've detailed the significant drivers to the change in allowance for credit losses for the period.\nThe most significant drivers in the quarter were the positive migration of certain credits in the portfolio and the further improvement in the expected macroeconomic outlook.\nFirst, related to the macroeconomic outlook, we leveraged the Moody's S7 scenario for our second quarter analysis.\nThis scenario highlights improving real GDP and unemployment trends coupled with increasing risk of higher inflation in future periods versus the economic scenarios selected for our first quarter assessment.\nThe impact of the improving economic outlook resulted in the release of $11 million of ACL during the second quarter.\nThe second key driver was the ongoing improvement in credit quality across the portfolio.\nDuring the quarter, the restaurant portfolio experienced positive migration, resulting from improving financial performance and more resilient outlook for future periods.\nFurther, the business saw broader-based improvement across the served clients whereby their full-year 2020 results were not as severely impacted as was previously expected and their first half results were improving from prior risk rating assessment periods.\nThe result of the improvements at the client level equated with net release of ACL of $17 million during the second quarter.\nThe combination of improved client performance and the improving macroeconomic inbound [Phonetic] outlook which were only modestly offset by net charge-offs resulted in allowance for credit losses for the period ending June 30 of $115 million or 1.51% of total loans.\nFurther, the coverage ratio of ACL to total loans increases to 1.86%.\nThe loans that we believe have lower loss potential include PPP, broker dealer, and mortgage warehouse loans are excluded.\nTurning to Page 7, net interest income in the second quarter equated to $108 million, including $12.4 million of PPP-related interest and fee income as well as purchase accounting accretion.\nNet interest margin declined versus the first quarter of 2021 driven by lower PPP fee recognition, higher average cash balances, and continued pressure on loan held for investment yields.\nSomewhat offsetting these items were higher loans held for sale yields resulting from higher overall mortgage rates, coupled with lower interest bearing deposit costs, which should continue to trend lower as expected, finishing the quarter down 9 basis points at 32 basis points.\nWe continue to expect that interest-bearing deposit cost will move modestly lower over the coming quarters as the consumer CD portfolio continues to mature and reset the lower yields.\nAs it relates to asset yields, the current competitive environment for commercial loans is resulting in substantial pressure on new business loan yields as well as our ability to maintain current floor rates.\nFurther, with funded loan growth continuing to be slower than we expected, we are increasing the level of one-to-four family loans we are retaining on the balance sheet to approximately $50 million to $75 million per month from the prior outlook of $30 million to $50 million per month.\nAs we've alluded in the past calls, we are using the one-to-four family loan retention approach to offset the slower growth in commercial lending environment.\nWhile this does provide a high quality source of asset and net interest income, these loans generally carry a yield below that of our traditional commercial loans, and as a result, will put downward pressure on NIM.\nTo that end, we expect that NIM will maintain -- will remain pressured into the second half of 2021 moving lower toward 240 basis points and 250 basis points by year-end.\nTurning to Page 8, total non-interest income for the second quarter of 2021 equated to $340 million.\nSecond quarter mortgage-related income and fees decreased by $99 million versus the second quarter of 2020, driven by lower origination volumes, declining gain on sale margins and lower lock volumes.\nAs it relates to gain on sale margins, we note in our key driver tables on lower right of the page, the gain on sale margin on loans fell 22 basis points versus the prior quarter.\nFurther, we are providing the impact on gain on sale margin related to these loans that have been retained on the balance sheet.\nFor additional clarity, the reported gain on sale is the margin reported by our mortgage origination segment and replaced all loans distributed and retained on the balance sheet.\nGain on sale of loans sold to third parties provides the margin on those loans that were distributed outside of Hilltop Holdings or purchased at market value.\nDuring the second quarter of 2021, the environment in mortgage banking remained solid, and as expected, continued to shift to a more purchase mortgage-centric marketplace.\nFor the second quarter, purchase mortgage volumes increased by $1.1 billion or 38.5%, while refinance volumes declined 43% or $1.4 billion versus the first quarter origination level.\nWe expect this trend to continue toward a more purchase mortgage-centric market over the coming quarters, which should continue to pressure gain on sale margins into the future.\nWe continue to expect the gain on sale margins for third-party sales will fall within the full year average range of 360 basis points and 385 basis points.\nOther income declined by $37 million, driven primarily by declines in TBA lock volumes, volatility in market rates and volatile trading and fixed income capital markets.\nAs we noted in the past, the structured financing fixed income to capital market businesses can be volatile from period to period and they are impacted by interest rates, market volatility, origination volume trend and overall market liquidity.\nMoving to Page 9, non-interest expenses decreased from the same period in the prior year by $27 million to $343 million.\nThe decline in expenses versus the prior year was driven by decline in variable compensation of approximately $35 million at HilltopSecurities and PrimeLending.\nThis decline in variable compensation was linked to lower revenues in the quarter compared to the prior year period.\nLooking forward, we continue to expect that our revenues will decline from the record levels of 2020, which will put pressure on our efficiency ratio.\nThat said, we remain focused on continuous improvement, leveraging the investments we've made over the last few years to aggressively manage fixed cost, while we continue to further streamline our businesses and accelerate our digital transformation.\nMoving to Page 10, end of period HFI loan equated to $7.6 billion.\nAs we've noted on prior calls, we expected that loan growth will be challenging during the first half of 2021 and the results bear that out.\nWe've seen substantial increases in competition for quality loans across our Texas markets, which we expect will continue into 2022.\nFurther, the ongoing growth in available liquidity both on bank balance sheet and customer balance sheets could further delay a return to more normal commercial loan growth rates for at least a few quarters.\nWe continue to expect full year average total loan growth, excluding PPP loans, will be within a range of zero to 3%.\nAs noted earlier, we are increasing the level of retention of one-to-four family loans originated in PrimeLending to between $50 million and $75 million per month.\nDuring the second quarter of 2021, PrimeLending locked approximately $176 million loans to be retained by PlainsCapital over the coming months.\nThese loans had an average yield of 3.11% and an average FICO and LTV of 780% and 64%, respectively.\nTurning to Page 11, second quarter credit trends continue to reflect the slow but steady recovery in the Texas economy as the reopening of businesses continues to provide for improved customer cash flows and fewer borrowers on active deferral programs.\nAs of June 30, we have approximately $76 million of loan on active deferral programs, down from $130 million at March 31.\nFurther, the allowance for credit losses to end-of-period loan ratio for the active deferral loan equates to 16.8% at June 30.\nAs is shown in the graph at the bottom right of the page, the allowance for credit loss coverage ratio, including both mortgage warehouse lending as well as PPP loans at the bank ended the second quarter at 1.64%.\nWe continue to believe that both mortgage warehouse lending as well as our PPP loans will maintain lower loss content over time.\nExcluding mortgage warehouse and PPP loans, the bank's ACL to end-of-period loans HFI ratio equated to 1.86%.\nTurning to Page 12, second quarter end-of-period total deposits were approximately $11.7 billion and remained stable with the first quarter 2021 levels.\nWhile the overall balances were relatively unchanged, the mix of deposits continues to improve as brokered deposits declined approximately $300 million and non-interest-bearing deposits rose by approximately $200 million versus the first quarter 2021 levels.\nGiven our strong liquidity position and balance sheet profile, we are expecting to allow brokered deposits to mature and run-off.\nAt 6/30/21, Hilltop maintained $268 million of brokered deposits that have a blended yield of 31 basis points.\nWhile deposit levels remains elevated, it should be noted that we remain focused on growing our client base and deepening wallet share through the sales of our commercial treasury products and focused client acquisition efforts.\nTurning to Page 13, in 2021, we continue to remain nimble as the pandemic evolves to ensure the safety of our teammates and our clients.\nFurther, our financial priorities for 2021 remains centered on delivering great customer service to our clients, attracting new customers to our franchise, supporting new communities where we serve, maintaining a moderate risk profile, and delivering long-term shareholder value.\nGiven the current uncertainties in the marketplace, we are not providing specific financial guidance, but we are continuing to provide commentary as to our most current outlook for 2021 with the understanding that the business environment, including the impact of the pandemic, could remain volatile throughout the year.\nThat said, we will continue to provide updates during our future quarterly call.\n",
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"content": "hilltop holdings inc qtrly income from continuing operations of $1.21 per diluted share.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: These statements are based on management's current expectations concerning future events that by their nature are subject to risk and uncertainties.\nExcept to the extent required by law, we expressly disclaim any obligation to update earlier statements as a result of new information.\nFor the third quarter, Hilltop reported net income of $93 million or $1.15 per diluted share.\nReturn on average assets for the period was 2.1% and return on average equity was 15%.\nThese favorable operating results again demonstrate the strength of Hilltop's diversified model and our businesses and our people execute on their strategies and capabilities.\nPlainsCapital Bank had another strong quarter with pre-tax income of $63 million and a return on average assets of 1.4%.\nIncome during the period included $4.6 million of PPP loan-related origination fees and a $5.8 million reversal of provision.\nWe have seen continued improvement in our asset quality, which is a reflection of both the bank's sound lending practices and the healthier economic outlook.\nTotal average bank loans declined $252 million or 4% versus Q2 2021 as PPP balances ran off.\nExcluding PPP loans, average bank loans were stable in the quarter.\nAlthough the lending environment is extremely competitive and many of our clients remain flush with liquidity, we have seen growth in our loan pipeline, which is at its highest level since the pandemic.\nThe current pipeline is heavily commercial real estate, specifically in residential lot development, industrial and multifamily across the major Texas markets.\nPayoffs will remain a challenge though, as our quality real estate clients continue to find attractive opportunities for their projects in the permanent financing markets.\nTotal average deposits remain stable linked-quarter with average deposits excluding broker deposits increasing by $200 million or 2% from Q2 2021 and $1.9 billion or 16% from prior year.\nWe continue to see growth in both interest bearing and non-interest-bearing accounts since Q3 2020 we have run off almost $1 billion in broker deposits.\nThis was another strong quarter for PrimeLending generating $62 million in pre-tax income.\nAlthough a decline from the astonishing levels in 2020 volumes and pricing held on longer than anticipated and as a result we were able to deliver favorable returns during the period.\nPrimeLending originated $5.6 billion in volume in the quarter from its continued strength in home purchase volume.\nRefinancing volume as a percent of total volume decreased to 29% from 35% during the same period in 2020.\nIf current mortgage rates remain relatively unchanged through the end of the year, we believe this downward trend of refinancing volumes will continue.\nGain on sale margin of loans sold to third parties declined by 17 basis points linked-quarter to the 359 basis points.\nMargins remain pressured as we see competition reacting to the decline in refinancing volume.\nAnd as our product mix has shifted where the relatively higher margin government product is lagging.\nOur team at PrimeLending remains acutely focused on monitoring pricing and margins.\nPrimeLending continues to recruit productive loan officers and has hired 127 year to date bringing total loan officer headcount to 1,314.\nThis is a primary focus as we target purchase oriented loan officers to help offset the lower margins we expect in the coming quarters.\nWe believe our exceptional team purchase orientation, technology investments and focus on customer experience will continue to drive attractive returns from the mortgage business.\nDuring the quarter, HilltopSecurities generated $17.4 million of pre-tax income on net revenues of $127 million or a pre-tax margin of 13.8%.\nThis was a good quarter for the public finance business in particular with revenues up $12 million from prior year, predominantly from a few larger deals.\nWe are encouraged by the potential for growth in the municipal finance market with the healthy current pipeline and the anticipation of increased future infrastructure spending.\nRevenues within the structured finance business decreased by $26 million from last year as the overall mortgage market has declined from the astonishing levels in 2020.\nFrom a historical average perspective, volumes are still strong and revenues rebounded by $24 million linked quarter.\nWe continue to build on the structured finance business by solidifying existing relationships and adding new clients.\nWithin our fixed income business, customer demand weakened given expectations of higher interest rates on the horizon, a trend that has been seen across the industry.\nWhile all product areas were challenged in the quarter HilltopSecurities has made several key additions in the business, including leadership for our middle market sales effort, which has been a strategic priority for several years.\nTherefore, we remain focused on growing our market share and profitability in fixed income.\nOverall, HilltopSecurities is well-positioned as we have added key infrastructure producers and leadership to broaden our core capabilities and customer penetration as a leading municipal investment bank.\nMoving to page 4, as a result of strong and diversified earnings, we continue to grow our tangible book value while returning capital to shareholders.\nOur capital levels remain very strong with the common equity Tier 1 capital ratio of 21.3% at quarter end, and we have grown our tangible book value per share by 18% over the last quarter to $27.77.\nDuring the quarter, Hilltop returned $84 million to shareholders through dividends and share repurchases.\nThe $74 million in shares repurchased are part of the $150 million share authorization the board granted earlier this year.\nThis week, the Hilltop Board of Directors authorized an additional increase to the stock repurchase program of $50 million, bringing the total authorization to $200 million.\nAs a result of dividends and share repurchase efforts, Hilltop has returned $153 million in capital to shareholders year-to-date.\nAdditionally, we paid down $67 million in trust preferred securities during the quarter, which will reduce our annual interest expense by over $2 million going forward.\nIn conclusion, we are very pleased with the results for the quarter.\nAll businesses showed solid momentum going into the fourth quarter and are performing well against our strategic objectives.\nWe feel well-positioned with a team and capital in place to continue growing long-term shareholder value.\nI'll start on page 5.\nAs Jeremy discussed, for the third quarter of 2021, Hilltop recorded consolidated income attributable to common stockholders of $93 million, equating to $1.15 per diluted share.\nIncluded in the third quarter results was a net reversal of provision for credit losses of $5.8 million.\nDuring the third quarter, Hilltop recorded a modest net recovery of charge-offs.\nOn page 6, we have detailed the significant drivers to the change in allowance for credit losses for the period.\nThe most significant drivers in the quarter were the positive migration of certain credits in the portfolio and the further improvement in the expected macroeconomic outlook.\nThese were somewhat offset by the increase in specific reserves taken against a small number of credits that experienced deterioration during the quarter.\nFirst, related to the macroeconomic outlook, we leveraged the Moody's S7 scenario for our third quarter analysis, consistent with our second quarter outlook selection.\nThis scenario considered lower overall GDP rates, higher inflation and higher ongoing unemployment than other market consensus outlooks.\nAs said, the S7 scenario did improve from the prior period, and the impact of the improvement resulted in the release of $6 million of credit reserves during the third quarter.\nSecond key driver was the ongoing improvement in credit quality across the portfolio.\nDuring the quarter, the portfolio experienced positive migration across a number of industries and geographies resulting from improving financial performance and more resilient outlook for future periods.\nFurther, the portfolio of loans that are currently under active deferral plan build a $17 million from $76 million at the end of the second quarter of '21.\nThe result of the improvements at the client level equated to a net release of credit reserves of $5 million during the third quarter.\nThe net impact of these changes resulted in an allowance for credit losses for the period ending September 30 of $109.5 million or 1.45% of total loans.\nFurther, the coverage ratio of ACL to total loans increases from 1.74% from loans that we believe have lower loss potential, including PPP broker-dealer and mortgage warehouse loans are excluded.\nI'm moving to page 7.\nNet interest income in the third quarter equated to $105 million, including $8.3 million of PPP-related interest and fee income, as well as purchase accounting accretion.\nNet interest margin declined versus the second quarter of 2021 driven by lower PPP fee recognition, higher average cash balances, and continued pressure on loan HFI yields.\nSomewhat offsetting these items were higher loans held for sale yield, resulting from higher overall mortgage rates, coupled with lower interest-bearing deposit cost, which have continued to trend lower finishing the quarter down 4 basis points versus the second quarter of '21 at 28 basis points.\nWe continue to expect that interest-bearing deposit costs will move modestly lower over the coming quarters as the consumer CD portfolio continues to mature and reset to lower yields.\nAs it relates to asset yields, the current competitive environment for commercial loans is resulting in substantial pressure on loan yields for new originations, which were 3.8% during the third quarter and is also challenging our ability to maintain current loan flow rates.\nGiven overall market and competitive conditions, we expect that NIM will remain pressured into the fourth quarter of '21 moving lower to between 240 basis points and 250 basis points by year end.\nTurning to page 8, total non-interest income for the third quarter of '21 equated to $368 million.\nThird quarter mortgage-related income and fees decreased by $114 million versus the third quarter of 2020 driven by lower origination volumes, declining gain on sale margins, and lower locked volumes.\nAs it relates to gain on sale margins, we noted in our key driver table in the lower right of the page the gain on sale margins on loans fell 18 basis points versus the prior quarter.\nFurther, we are providing the impact of gain on sale margin related to those loans that have been retained on the balance sheet, which for the third quarter equated to 13 basis points.\nDuring the third quarter of 2021, the environment in mortgage banking remained resilient and is expected to continue to shift to a more purchase mortgage-centric marketplace with approximately 71% of our origination volumes serving as purchase mortgages.\nDuring the third quarter, purchase mortgage volumes declined modestly to 3.95 billion, while refinance volumes declined 12% or $235 million versus the second quarter origination levels.\nWe expect this trend to continue for the more purchase-centric mortgage market over the coming quarters, and we continue to expect the gain on sale margins for the third-party sales will fall within a full year average range of 360 basis points to 385 basis points.\nIn addition, other income declined by $36 million, driven primarily by declines in TBA locked volumes, coupled with lower volumes and market depth in the fixed-income capital markets.\nAs we've noted in the past, the structured finance and fixed income capital markets businesses can be volatile from period-to-period, as they are impacted by interest rates, market volatility, origination volume trends and overall market liquidity.\nLastly, our public finance and retail brokerage businesses at the broker-dealer drove solid revenue growth as highlighted in the securities-related fee growth of $15 million versus the prior-year period.\nThis growth highlights the impact of our ongoing investments in enhanced products and service capabilities across HilltopSecurities, which has provided our bankers with additional tools and capabilities to support their clients.\nTurning to page 9, non-interest expenses decreased from the same period in the prior year by $44 million to $355 million.\nThe decline in expenses versus the prior year was driven by decline in variable compensation of approximately $35 million at HilltopSecurities and PrimeLending.\nThis decline in variable compensation was linked to lower revenues in the quarter compared to the prior year period.\nThe bank continues to deliver improved efficiency, as highlighted in the sub-50% efficiency ratio.\nThis has been driven by lower overall headcount as well as benefits from strong mortgage production and the acceleration of PPP fees into current period income.\nAs we've noted in the past, we expect that over the longer term, the efficiency ratio at the bank will fall within a range of 50% to 55%.\nMoving to page 10, in the period, HFI loans equated to $7.6 billion, relatively stable with the second quarter levels.\nAs we've noted previously, we've seen substantial increases in competition for funded loans across the Texas markets, which we expect will continue into 2022.\nFurther, the ongoing growth in available liquidity both on bank balance sheets and consumer balance sheets could further delay a return to more normal commercial loan growth rates for at least a few quarters.\nWe continue to expect that full year 2021 average total loan growth excluding PPP loans will be within a range of zero to 3%.\nDuring the third quarter of '21, PrimeLending locked approximately $243 million of loans to be retained by PlainsCapital over the coming months.\nThese loans had an average yield of 2.95% and average FICO and LTV of 776% and 64%, respectively.\nMoving to page 11, third quarter credit trends continue to reflect the slow but steady recovery in the Texas economy, which is supporting improved customer cash flows and fewer borrowers on active deferral programs.\nAs of September 30, we have approximately $17 million of loans on active deferral programs down from $76 million at June 30.\nFurther, the allowance for credit losses to period end loan ratio for the active deferral loans equates to 22.8% at September 30.\nAs is show on the graph at the bottom right of the page, the allowance for credit loss coverage including both mortgage warehouse lending as well as PPP loans at the bank ended the third quarter at 1.58%.\nWe continue to believe that both mortgage warehouse lending as well as our PPP loans will maintain lower loss content over time.\nExcluding mortgage warehouse and PPP loans, the bank's ACL to end-of-period loans HFI ratio equated to 1.74%.\nTuning to page 12, third quarter end-of-period total deposits were approximately $12.1 billion, increasing by $398 million versus the second quarter of 2021.\nGiven our strong liquidity position and balance sheet profile, we are expecting to continue to allow broker deposits to mature and run-off.\nAt 09/30, Hilltop maintained $243 million of broker deposits that have a blended yield of 33 basis points.\nWhile deposit levels remain elevated, it should be noted that we remain focused on growing our client base and deepening wallet share through the sales of our commercial treasury products and services and focused client acquisition efforts.\nTurning to page 13, in 2021, we continue to remain nimble as the pandemic evolves to ensure the safety of our teammates and our clients.\nFurther, our financial priorities for 2021 remains centered on delivering great customer service to our clients, attracting new customers to our franchise, supporting the communities where we serve, maintaining a moderate risk profile, and delivering long-term shareholder value.\nGiven the current uncertainties in the marketplace, we're not providing specific financial guidance, but we are continuing to provide commentary.\nThis is the most current outlook for the remainder of 2021 with the understanding that the business environment, including the impacts of the pandemic could remain volatile.\nThat said, we will continue to provide updates during our future quarterly calls.\n",
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"content": "q3 earnings per share $1.15 from continuing operations.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Neil, you may begin.\nWe are pleased to kick off earnings season this quarter and glad that you could all join us.\nDuring last quarter's call in late April, all indicators were setting up for a summer of strong leisure travel, and it appears that expectations were appropriately set.\nWe significantly outperformed our internal forecast for the second quarter on both top line and profitability metrics.\nWe saw increased demand portfoliowide this quarter and are expecting this trend to incrementally build through the second half of the year.\nProperty level cash flow sequentially improved from $3.8 million in April to $7.7 million in June.\nIn June, our 33 hotels generated 59% occupancy at an average daily rate of $220 and comparable GOP margins for the month came in at above 45%.\nWe are encouraged to see both ADR and GOP profitability metrics begin to approach 2019 levels, well before recovery in business transient and group gets underway in our gateway markets.\nGateway market occupancy will push RevPAR higher from here.\nAchieving solid profitability and generating free cash flow a little over a year from the start of the worst crisis in this industry's history is testament to the quality of our hotels, the effectiveness of our cluster operating strategy and our mix of urban and resort markets.\nThese three advantages are our core pillars of growth for the early stages of this cycle.\nOur operating leverage positions us for outsized growth in a stabilizing environment.\nWe began the second quarter on strong footing as our portfolio RevPAR in April exceeded $100 and was 10% higher than March, which had been elevated due to spring break travel and stimulus spending.\nAbsolute RevPAR ticked sequentially higher during the balance of the second quarter, growing to $116 in May and exceeding $130 in June, resulting in second quarter RevPAR of $116, more than 50% higher than the first quarter 2021.\nRate integrity was a common concern this time last year.\nBut compared to prior demand shocks such as the Great Financial Crisis, revenue managers have not sacrificed rate to put heads in beds during this recovery.\nIn this environment, we've been able to strategically drive rates across our portfolio.\nLast quarter, our comparable portfolio ADR grew from $193 in April to $220 in June.\nThat's just 13% below June 2019 without the core business traveler in the marketplace.\nIn July, month-to-date, we are actualizing 2019 ADR levels.\nBased on pricing power at our resorts and the return of the price elastic business traveler in the fall to boost demand at our urban clusters midweek, we believe elevated ADR will prove sustainable on a portfoliowide basis through the recovery.\nLet's start to dig in with the two largest EBITDA-producing assets in our portfolio, the Cadillac Hotel and Beach Club on Miami Beach and Parrot Key Hotel & Villas in Key West.\nThey led the portfolio again this quarter on sustained demand to South Florida despite what is typically the start of reduced travel to the region.\nBack in 2018, we reinvested approximately $74 million in major upgrades of these resorts, and they are now firmly on target to achieve our expected post-renovation ROIs.\nAt prior peak in 2015, the Cadillac and Parrot Key generated $9.5 million and $7.8 million in EBITDA, respectively.\nThis past quarter, the Parrot Key and Cadillac generated $3.8 million and $3.2 million in EBITDA, respectively, for the quarter.\nAnd based on current projections, both hotels are expected to surpass prior peak and combine to exceed $20 million in EBITDA generation for the full year 2021.\nAs the lodging recovery continues to take shape across the next few years, we anticipate meaningful EBITDA contribution from these assets as they ramp toward stabilization.\nThe Parrot Key was our best-performing asset during the second quarter, generating 92% occupancy on a $454 average daily rate, resulting in a $416 RevPAR, which surpassed second quarter 2019's RevPAR by more than 80%.\nThe Keys have seen unprecedented demand year-to-date and the Parrot Key's performance has proven it is one of the most sought-after hotels in the marketplace.\nDespite inclement weather from tropical storm Elsa deflecting demand a few weeks ago, performance in July remains in line with our forecast at the beginning of the month.\nPerformance on Miami Beach was similarly encouraging as the Cadillac surpassed 80% occupancy for the quarter on a $235 ADR, which drove 39% RevPAR growth versus the second quarter of 2019.\nDemand trends for the third quarter remain robust at our three beach hotels as well as our more business-oriented Ritz-Carlton Coconut Grove, which is beginning to capture corporate business this summer across a variety of industries: financial services, defense, technology, healthcare and advertising, and broke through 2019 levels with 8.7% year-over-year RevPAR growth for the quarter.\nDespite August and September being traditionally slower in South Florida, our portfolio is forecasted to meaningfully outperform those periods in 2019 on the heels of continued price-elastic leisure demand and growth from both business transient and group.\nThere are a number of events, festivals and conventions returning to Miami in the near future.\nMiami Beach Pride in September, the South Beach Food & Wine Festival and Art Basel later in the fall and Formula One Grand Prix next year.\nBeyond tourism, there remains significant corporate relocations and transportation-related infrastructure growth in the region, leading to robust near-term and long-term demand fundamentals for Miami that will be captured through this recovery.\nOur drive-to resorts also continued their recent outperformance during the second quarter as the group generated weighted average occupancy of 72% and ADR growth of 23%, leading to weighted average RevPAR growth of 17% compared to the second quarter of 2019, further proving that the leisure traveler is not price sensitive for high-quality, well-located, differentiated hotels.\nThe Sanctuary Beach Resort continues to lead our resorts from a rate perspective as its $506 ADR and 82% occupancy resulted in 21% RevPAR growth versus the second quarter of 2019.\nOur Hotel Milo down in Santa Barbara reports 77% occupancy at a $333 ADR, and a very similar 21% RevPAR growth versus prior year.\nWe anticipate these resorts, in addition to our Ambrose in Santa Monica, will continue to garner robust occupancies and rates in the third quarter as travelers flock to the California coast.\nBack East, our Annapolis Waterfront Hotel occupies an irreplaceable position on the Chesapeake Bay.\nAnd after a significant renovation of the hotel, we are driving rates and occupancy.\nWe recorded a 77% occupancy and an average daily rate of $294 last quarter, which led to 7% RevPAR growth over the period.\nAnnapolis in the summer is primarily leisure transient, but social and sports groups provide a strong base of business to kick off the season.\nLooking further out toward the end of the third quarter, the hotel has several rebooked corporate and retreats that are helping to drive 15% ADR growth for Q3 versus 2019.\nOur Marriott in Mystic, Connecticut is also on pace to achieve peak summer leisure demand from weddings, leisure travelers and rebooked corporate and government groups during the third and fourth quarter at a better pace than was anticipated.\nAcross the quarter, we saw cities and states reopen their local economies and remove restrictions for gatherings and experiences, enabling the surge that we are seeing in domestic leisure travel today.\nThis fall, we expect to see the next inflection in demand growth as large employers return to the office and encourage travel, and our cities begin to host conventions and major citywide events.\nGateway urban markets have been more impacted by the pandemic than any other segment and offer the longest runway for growth as we look forward to the next several years of the cycle.\nWith summer travel underway, demand across the portfolio continues to be heavily weighted on weekends versus weekdays, but weekdays have shown a noticeable increase compared to just 90 days ago.\nMonth-to-date results in July for our portfolio versus March show average weekday occupancy growth of more than 1,200 basis points, leading to RevPAR growth of approximately 55%.\nRemoving our resort markets, our urban cluster saw weekday RevPARs grow more than 100% over that same period, indicating our gateway cities remain attractive to all segments of the traveler.\nWhen the higher-rated business traveler returns and replaces primarily leisure business, we would expect a meaningful increase in weekday ADRs.\nDuring the second quarter, we began to see traditional business travelers return to our hotels from one and two night stays to corporate groups.\nAt the Philadelphia Westin, we saw transient business from many pharmaceutical companies, in addition to Accenture and Deloitte employees.\nOur West tech-related businesses are beginning to return with corporate groups from both Google and Facebook booked at our Sunnyvale hotels during the third quarter.\nMcKinsey, JPMorgan, Goldman Sachs, IBM, General Dynamics and other traditional large accounts have become more active at several of our hotels in the portfolio.\nWhile we are seeing early stages of business travel returning in each of our urban centers and expect continued improvements throughout the summer, we anticipate the next big leg up in the recovery to be after Labor Day when schools reopen in-person and employees return to the office.\nDespite our hotels being primarily transient, we have seen an increase in group activity over the last few months across our portfolio.\nThe majority of the business has been through social groups and sports.\nBut as cities have reopened, larger events are occurring and being scheduled in our markets, resulting in increased group activity at our hotels.\nOur luxury hotels have benefited from not only strong leisure business and social group but also the first signs of corporate group, small meetings and retreats.\nThe Ritz-Carlton Georgetown finished the quarter with nearly 72% occupancy at a $456 ADR. The Rittenhouse Hotel in Philadelphia also turned cash flow positive this quarter as ADR reached $478 with occupancy growing by more than 2,500 basis points versus the first quarter.\nMany of our hotels are located near major universities and health systems, and these significant demand generators have mobilized and are leading to increased production and group bookings at many of our Boston, New York, Philadelphia and Washington, D.C. hotels in the third quarter.\nLarger events are taking place in the third and fourth quarters across many of our markets, highlighted by healthcare-related conventions in Washington, D.C., boston and Philadelphia.\nOtakon in August in Washington, D.C. and the Boston and New York City marathons in the fourth quarter.\nThe Javits Center in New York is slated to host a few larger citywides in August, including the New York Auto Show, but the major events in New York will return in September.\nThe U.S. Open for tennis, Fashion Week and the UN General Assembly.\nAnd for the first time, Salesforce's Dreamforce event will occur across multiple cities, including New York.\nOur New York City portfolio saw occupancies incrementally build throughout the balance of the quarter.\nVisitation remains primarily transient, and this leisure demand should continue as Broadway reopens this fall and more events occur.\nBut as noted in other markets, first signs of corporate travel have emerged across the past few months, and we are encouraged by the return of our more traditional large corporate accounts in the market.\nWe are very well positioned with our locations in several high-growth submarkets.\nWe supported teams during the mayoral election race early in the quarter at our Hilton Garden Inn Midtown East and have since transitioned to JPMorgan as our top account.\nOur Hyatt Union Square has seen a pickup in travelers from entertainment, media and technology: AT&T, Discovery and Apple.\nAnd downtown at the Hampton Seaport and the Hilton Garden Inn Tribeca, business travel has increased from major financial services companies and GE, Blackstone.\nPockets of corporate strength have taken shape across the city.\nAnd we believe they will continue to expand after Labor Day when schools fully return and more workers across all industries return to the office on a consistent schedule.\nConversations with our larger corporate accounts indicate that September is the month when the switch for business travel and in-person office work turns on.\nAnd with our first-mover advantage of remaining open throughout the pandemic, our clustered sales effort in the marketplace should yield additional revenue opportunities.\nMomentum is clearly building in New York, and our operating and data advantage can drive meaningful outperformance as supply remains significantly below pre-pandemic levels.\nThe lodging recovery is clearly underway.\nNear-term results have exceeded expectations, and there is a long runway of value creation ahead.\nDuring the first half of the year, we took swift action to rightsize our balance sheet and evenly reduced our exposure to our core markets by divesting of a lower-growth hotel in each market.\nWith few capital expenditures on the horizon over the next few years, we can focus on hotel operations to drive high absolute RevPAR on industry-leading margins, resulting in significant EBITDA and free cash flow growth in the coming years.\nResults this past quarter illustrate the merits of this strategy and the growth profile of our unique portfolio.\nWe are looking forward to a continued recovery in earnings in what we anticipate to be the start of a long up cycle in lodging.\nSo my comments will focus on the demand improvement across our portfolio throughout the second quarter and its impact on our margins and cash flow before closing with an update on our balance sheet and outlook for the current quarter.\nDemand fundamentals continue to improve from March over the balance of the second quarter and ultimately led to the company achieving corporate-level cash flow for the first time since the onset of the pandemic.\nIn what is typically our best quarter of the year with meaningful business travel, group and conference demand and the beginning of peak summer leisure travel boosting results, demand trends during the second quarter were still heavily weighted toward leisure.\nRevPAR and occupancy were up meaningfully from the first quarter, but RevPAR was still down approximately 45% from the second quarter of 2019.\nThe strong demand at our leisure-oriented properties and weekend demand at our urban hotels allowed us to maintain our average daily rates, less than 18% below 2019, all without any meaningful business travel or group demand in the marketplace.\nOn the weekends from March to June, we were able to achieve ADR growth at our resorts approximating 13%, while our urban portfolio captured 46% increase in rates with occupancies up 1,000 basis points.\nIncremental growth in occupancies, combined with our rate first strategy and expense savings initiatives, resulted in margin expansion and material cash flow generation at our hotels throughout the quarter.\nDuring the second quarter, 24 of our 33 hotels broke even on the EBITDA line, a 71% increase versus the first quarter.\nIn June, each of our 33 operational hotels broke even on the GOP line, with 24 achieving EBITDA break-even levels, representing 79% of open hotels breaking even on EBITDA versus 58% in March.\nWe originally forecasted levels needed to break even at the corporate level, approximately 60% of occupancy with a 40% RevPAR decline from 2019.\nResults from June cemented these projections as our comparable portfolio generated 59% occupancy with a 40% RevPAR decline.\nAnd combined with our $7.7 million in property level earnings, resulted in $334,000 of positive corporate cash flow.\nThe asset management initiatives we implemented in 2020, in conjunction with our flexible operating model, showed early signs that our margin improvement goal following the pandemic is beginning to take shape, as GOP margins of 44% during the second quarter were 830 basis points higher than the first quarter and just 260 basis points below our second quarter 2019 GOP margin.\nBased on current forecasts, we believe our third quarter GOP margins will actualize in line to slightly ahead of our third quarter 2019 GOP margins.\nAs RevPAR and out-of-room revenues increase in 2022 and beyond, our current operating model will yield much higher levels of GOP and allow us to amortize our fixed operating expenses as well as our property taxes and insurance expenses.\nThis provides us confidence in our ability to forecast post-pandemic EBITDA margin growth as our ability to drive ADR in tandem with applied expense savings initiatives should allow us to generate 150 to 250 basis points of sustainable long-term margin savings for the portfolio.\nFrom a profitability perspective, our South Florida cluster led the portfolio again this quarter with 41% EBITDA margins, highlighted by our Parrot Key and Cadillac assets.\nThe Parrot Key and Cadillac finished the quarter with 58% and 43% EBITDA margins, respectively, both exceeding second quarter 2019 EBITDA margins by more than 2,000 basis points.\nRobust results were also seen at our California and Washington, D.C. drive-to resorts as our Sanctuary Beach Resort and Hotel Milo generated a 49% and 38% EBITDA margin, respectively.\nWhile outside D.C., a strong start to the summer travel season from a rate and occupancy perspective, coupled with proprietary operational initiatives we have implemented since acquiring the hotel in 2018, led to a 59% EBITDA margin at the Annapolis Waterfront Hotel, 1,200 basis points higher than the second quarter of 2019.\nOur asset management strategy since the onset of the pandemic focused on driving margins through aggressive cost control.\nThis was done primarily through the reduction in labor, but we have also utilized various technology platforms at our hotels, such as mobile check-in and concierge services, guestroom energy management systems and water reuse systems to lower utility costs, and smartphone ordering systems at our food and beverage outlets.\nWe have been more nimble in this strategy at our independent hotels, which has resulted in significant margin savings versus our brand-oriented portfolio, as our independent and Autograph Collection hotels generated a weighted average 38% EBITDA margin for the second quarter.\nStrong performance at our properties this quarter was not limited to just increased occupancies and our ability to push rate as we also saw substantial growth in our restaurant and bars.\nAt our Parrot Key, revenue generated from our outlets during the second quarter was 58% higher than the second quarter of 2019.\nMeanwhile, up in Boston, our Envoy in the Seaport District saw meaningful revenue generation from its Lookout Rooftop and our newly installed taqueria pop-up Para Maria, both of which have been well received by guests and locals alike.\nThe Envoy boasts the premier rooftop in the city and its popularity helped the hotel achieve close to $2 million in revenues during -- in food and beverage revenues during the second quarter, $1 million of which was generated in June alone.\nWe expect our restaurant and bars and our outlets at The Envoy will remain popular during the peak summer months.\nBased on strong demand at our resorts and increased travel to urban markets from the leisure traveler, our ability to strategically and effectively drive rates and a return of more consistent business travel on the horizon, we believe we are past the inflection point of corporate level cash burn and expect month-over-month positive cash flow for the remainder of 2021.\nA few closing remarks on our balance sheet and outlook for the third quarter.\nWe ended the second quarter with $80.2 million in cash and cash equivalents and deposits.\nAs of July 1, we had approximately $46 million in capacity on our $250 million senior revolving line of credit, and $50 million of undrawn credit from the unsecured notes facility we placed with affiliates of Goldman Sachs Merchant Bank.\nAdditionally, we received approximately $1 million in business interruption proceeds in the second quarter from the impact of COVID-19 at several of our hotels.\nBased on discussions with our insurance providers, we do not anticipate receiving additional recoveries for business interruption related to the pandemic.\nDuring the second quarter, we successfully refinanced mortgage debt on four hotels: The Hilton Garden Inn Tribeca, Hyatt Union Square, Hilton Garden Inn 52nd Street and the Courtyard L.A. Westside.\nAs of June 30, 79% of our debt is fixed or swapped with our total debt weighted average interest rate of 4.48% and 3.1 years life to maturity.\nWe spent $2.6 million on capital projects last quarter, and we continue to limit our capex spend strictly to maintenance and life safety renovations.\nDuring the first half of 2021, we spent $5.3 million on capital projects, and we anticipate our full year capex load to be roughly 40% below our 2020 spend.\nWe project very little disruption or capital spend for our portfolio across the next few years, which is materially beneficial from a cash flow perspective as the sustained surge in construction costs, freight rates, oil prices, and the continued tightening of the supply chain remain elevated.\nMonth-to-date in July, we have seen continued growth in our portfolio occupancy and revenues, with the majority of our portfolio in line to slightly ahead of our internal forecast.\nThe largest outperformance month-to-date in July has been our New York portfolio, which is currently trending up approximately 20% from June on occupancy growth, both on weekdays and weekends.\nMonth-to-date in July, we are up over 1,000 basis points in occupancy in our Manhattan portfolio, and our New York City Metro, which includes the Boroughs, White Plains and Mystic, are running close to 80% occupancy.\nWith our sights set on the recovery, which has already commenced, we remain laser-focused on operational performance of the portfolio and accretive opportunities that become available throughout the cycle.\nSo this concludes my portion of the call.\nWe're happy to address any questions that you may have at this time.\n",
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"content": "not providing full-year 2021 guidance at this time.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Neil, you may begin.\nWe are fortunate to have some encouraging news in the macro environment that could provide a tailwind to our team's efforts across the last eight months.\nEmerging consensus around the split government removes an area of uncertainty for business and local governments.\nAnd Monday's announcement of a vaccine and other therapeutics, while not a panacea should ultimately be a catalyst for business and international travel.\nIt will take time to distribute and it will likely be several more months for large companies to encourage travel again, but there is more visibility today than there has been across the last few quarters.\nThis said, the hotel sector is still has plenty of wood to chop and the seasonally slower fourth and first quarter will make continued gains in RevPAR and reductions in cash burn more challenging.\nWe continue to plan for a sluggish recovery in 2021, gaining momentum in the back half, followed by a more robust growth in 2022 and 2023.\nWe are encouraged by the recent news, but remain razor focused on reducing cash burn and shoring up liquidity as we close out this challenging year.\nI'm going to touch on operations and capital allocation before turning it over to Ash for a deeper dive on cash burn and liquidity planning.\nLast March, we took immediate action to shore up our liquidity and mitigate expenses by temporarily closing hotels.\nOur primary goal in the second and third quarter was to minimize cash burn while reopening our hotels.\nWe achieved this goal as we now have 37 of our 39 wholly owned hotels open and operational with the two remaining closed hotels under contract for sale.\nThis sets up our portfolio to capture incremental demand through the end of the year and to continue to gain market share during the early stages of the recovery in 2021.\nOur ability to stay nimble and leverage our flexible operating model in close connection with our independent franchise operator allowed us to reopen our hotels in a timely and cost-efficient manner.\nThis relationship coupled with our cluster strategy to maximize revenues and generate marketing advantage and economies of scale has given us the opportunity to reduce our cash burn rates and breakeven levels and sets up our portfolio to generate cash flow earlier than our peers as we continue to navigate this recovery.\nIt has also yielded positive results over the prior few months.\nOf the 28 comparable hotels that were open throughout the third quarter, 21 of these hotels broke even on the GOP line with nine achieving EBITDA breakeven levels.\nLeisure travel remained strong post Labor Day.\nWeekends at many of our resorts outpaced pre-COVID performance and even provided a base during the week as many travelers have been able to take advantage of remote working and learning, lower gas prices and limited weekend sports engagements and other social activities.\nTSA data continues to improve sequentially week over week.\nDrive-to resorts have been our strongest performers since the inception of the pandemic and that continued through the typically robust summer months.\nOur Sanctuary Beach Resort was the best performing asset again during the third quarter, ending the period at 81% occupancy with a $570 ADR, which led to 16% RevPAR growth.\nSuccess continued in October, despite worries that leisure travel would subside after Labor Day as the resort grew RevPAR by 22% aided by 55% ADR growth and 70% occupancy.\nDown the California coast, the hotel Milo in Santa Barbara continued its momentum from the second quarter and finished the summer on a strong note with third quarter ADR in line with last year, aided by a very strong September, which saw 70% occupancy and 11% ADR growth.\nDown in Miami in South Florida, the case count escalation in June and July led to beach closures, restaurant and bar restrictions and curfews which stifled demand all summer.\nSince Labor Day, drive-to traffic began to return as Miami and Key West have opened beaches and have loosened restrictions on restaurants and bars.\nWe have been able to win market share and saw an occupancy bump of 1500 basis points versus August for our South Florida portfolio and that momentum continued into October, as our portfolio occupancy grew another 500 basis points for the month.\nBy the third quarter, we began to see Northeastern and Midwesterners flying to Key West and Miami despite COVID-19 concerns.\nThis pent-up demand has continued in the fourth quarter as we are seeing positive trends for our portfolio entering the peak travel season for South Florida.\nRates around the holiday week between Christmas and New Year's are already in line with last year and with a strong 30% occupancy already on the books across our South Florida portfolio, we believe demand will continue to pick up as we move through the holiday season.\nPre-COVID our resorts portfolio, all the drive-to from one of our gateway market clusters contributed 25% of our EBITDA.\nIn 2020, these hotels will be among our top cash flowing hotels.\n75% of our portfolio remains gateway urban markets.\nThese markets have lost not only business, international and group travel but have very few attractions for leisure travelers until cities open back up.\nOur teams have done an admirable job reducing cash burn and ramping to breakeven in this very low demand environment.\nAs we continue to reopen hotels across our markets, we saw a change in traveler walking through our doors.\nDuring the summer, we moved from first responder business to our new normal traveler, elective health-care workers and patients, design and construction teams outfitting offices to become COVID-compliant, professional sports teams quarantining during their abbreviated seasons and personnel related to content and entertainment production on-site around the country as studios remain shut and even the occasional micro wedding or corporate buyout.\nTraditional corporate travel didn't return with its usual force post Labor Day, however across our urban markets there were employees staying in our hotels to avoid mid-week commutes, smaller businesses utilizing hotel rooms for office day use and even corporate buyouts for smaller meeting space.\nSeptember and October have seen a continued increase in these unique travelers staying in our hotels.\nWe've been working with local universities, housing students at The Boxer in Boston allocating inventory at our Annapolis Waterfront Hotel approximate to the US Naval Academy and continuing to work with universities in many of our urban clusters for the upcoming spring semester by offering alternatives for the new housing protocols that are likely to persist through the end of the school year in 2021.\nIn New York we saw success around staycation packages in Brooklyn, production teams in Tribeca hosting virtual Fashion Week events, government census workers in White Plains and a pickup in higher rated corporate business from the leading financial services and consulting firms that stay at our Hyatt Union Square.\nIn California, our select service hotels in Sunnyvale housed relief business related to the wildfires while in Washington DC, our Capitol Hill Hotel has seen increased bookings from elevated Supreme Court and congressional activity.\nOn the West End in Washington, our St. Gregory successfully contracted with various media outlets for increased coverage leading up to the election last week.\nWe've expected that a lodging recovery is likely to be in lockstep with medical investments as it pertains to rapid testing, therapeutics and ultimately a widely distributed vaccination.\nRecent developments point to a recovery year in 2021 and we believe the recovery will be most pronounced in our core markets, highlighted by Washington DC, which is a historically strong market following an election year.\nNew administrations bring jobs, increase lobbying on the hill, the likely return of higher rated foreign delegations and an overall increase in corporate and leisure travel.\nThe Washington DC market has been an underperformer during the past few years, but we believe that a new administration will spark growth to the region aided by the aforementioned catalysts, reduced supply and the reopening of the city's unique demand generators.\nWe've seen from prior years that the first quarter, following the election and January specifically, proved to be a very strong period in this market, whether it's an incumbent or a de novo president.\nDuring President Obama's second inauguration in 2013, our portfolio generated 23% RevPAR growth during the quarter.\nIn the first quarter of 2017, following President Trump's inauguration, our portfolio RevPAR grew by 15% with 57% growth on the night of the inauguration.\nThe upcoming inauguration is leading to early reservations across our portfolio at rates we have not seen in Washington DC in many years.\nWe believe our unique portfolio in Washington spanning select service, independent and lifestyle and luxury is very well positioned to capture the increased demand to the market during the first quarter as well as throughout 2021.\nThe recovery in 2021 is not just predicated on favorable comps and increased travel but also on deteriorating supply.\nWe have already seen the headlines and consultant forecasts for New York City.\n20% of New York's total hotel room count, about 25,000 keys could permanently close and every week we seem to be seeing this forecast come to fruition with another permanent closure.\nNew York City is dominating the headlines but there are corners of every market filled with distressed assets that were troubled to produce margin growth even before the pandemic.\nThese assets were functionally obsolete prior to the pandemic and their closures will improve the long-term supply picture in many of our markets.\nThe other side of the supply picture is the development pipeline.\nRecent reports from Smith Travel have showed a large increase in the number of development projects that have moved from either the planning or final planning stages into either the deferred or abandoned buckets.\nIndustry experts believe this could equate to more than 13,000 rooms.\nYear-to-date through September, 211 projects in the US representing 56% decrease in the pipeline over the same period last year.\nThese are staggering figures that could continue to increase as our industry works through the recovery and even mirror the great financial crisis when the supply pipeline declined from a peak of 212,000 rooms at the end of 2007 to 50,000 rooms in early 2011.\nBefore Ash takes a deeper dive into expense savings and burn rate reductions I want to spend a few minutes on our capital allocation strategy and sources of additional liquidity.\nAs a quick reminder we have announced accretive binding sales agreements on four assets in our portfolio with total expected net proceeds of $70 million.\nWe remain optimistic that these transactions will close but we have provided extensions to the buyers through Q1.\nWith today's release we announced a fifth disposition, the Sheraton Wilmington, Delaware.\nWe began this process in the summer and are very pleased with a relatively quick execution in today's environment.\nNew Castle County of Delaware is acquiring the hotel for an additional $19.5 million in proceeds.\nThis is about a 2% cap on 2019.\nThese first five transactions are all smaller, non-core hotels and we are pleased with the pricing within 10% to 20% of pre-COVID values and at a combined 21 times EBITDA multiple on 2019.\nLast quarter we discussed exploring additional asset sales if we saw improvement in the transaction environment.\nAcross the last 90 days, even before the election or the vaccine, there has been a meaningful improvement in the availability of debt for higher quality, lower cash burn hotels.\nIn addition to private equity firms, there has been an increasing diversity of buyers, credible family offices, international capital and new domestic entrance to hospitality.\nWe assessed future sale candidates in our portfolio by triangulating buyer interest, capital requirements or age of hotel and expected growth rate.\nThe additional five hotels we launched for sale in September and October are emblematic of our portfolio and are highly sought after in this environment.\nThese simple hotels that have remained open throughout the pandemic are unencumbered of management and onerous labor contracts or are even unencumbered of brands and in some cases have assumable financing and are approaching break-even levels.\nThese characteristics do make these hotels more valuable as visibility increases.\nWe will see where values come out in the coming months and balance liquidity today with reversionary growth tomorrow.\nBut judging by early interest, we do expect to complete several more dispositions across the next couple of quarters.\nAt this time we view hotel sales as the lowest cost alternative for capital today as discounted hotel sales provide relatively quick liquidity and do not encumber our capital structure or permanently dilute our equity.\nAs you may know, the management and board of Hersha are among its leading shareholders and across this year we have continued to buy our common equity in the open market as we consider it a remarkable value for an exceptional portfolio.\nWe've constructed a portfolio with high absolute RevPAR, sector leading margins and minimal capex requirements for the foreseeable future, all in the most valuable markets in the United States with few if any encumbrances.\nOur portfolio is both attractive to a vast buyer pool and still offers incredible operational and financial leverage to this recovery.\nThis quarter's successful completion of our hotel reopening strategy that began during the second quarter and concluded with the opening of our two Ritz Carltons would not have been possible without the close working relationship we have with our third-party independent operator.\nDue to our focused service strategy we were able to comfortably restart our hotels with the confidence that we can attain GOP breakeven levels within 45 days of reopening.\nResults this quarter at our open hotels validated this confidence as the number of hotels that achieved GOP breakeven levels rose over the balance of the quarter.\nDuring July, 21 of our 28 open hotels broke even on the GOP line.\nThis increased to 22 hotels in August and 25 hotels in September.\nOur team's expense saving and revenue management strategies also yielded positive EBITDA results for a portion of our open hotels over the course of the period.\nOnce again during July, nine of our 28 open hotels achieved break-even EBITDA levels which increased to 11 hotels in August and 16 in September.\nOur operational strategy allows us to run our hotels on very lean labor models until demand reaches levels warranting additional staffing.\nWe're able to do this by applying various cost cutting strategies such as cross utilizing management personnel as well as outsourcing and job sharing within the hotel and across our clusters to lower our overall expense base.\nAs demand begins to pick back up and occupancy levels start to improve from these low levels, we will begin to phase back in staffing levels and other operating expenses in a very deliberate and calculated manner.\nOur model allows us the flexibility to continue to operate our hotels at current staffing levels at our break-even occupancies approximating 35% all the way up to 55% and even 60% at some of our hotels.\nWith our open portfolio generating 37% occupancy in the third quarter, we estimate that revenue from the next 20 percentage points of occupancy gains should drop down to the GOP line at 75% to 80% flow-through, generating outsized margin gains and highlighting the operating leverage inherent in our portfolio.\nWe would anticipate seeing these gains in the first half of 2021 as the recovery progresses and margins should continue to see momentum as we get deeper into the recovery in the back half of 2021 and 2022.\nWe also anticipate labor force headwinds to be much more favorable over the next few quarters with reduced F&B and smaller ancillary service departments such as salons and spas.\nThis development along with the various expense savings implemented by our asset management and sustainability teams such as grab and go breakfast options, reduced in-room amenities, housekeeping optimization and utility savings should bolster our margins through the recovery and post pandemic.\nWe estimate that many of these changes will lead to a 10% reduction in housekeeping labor and our preoccupied room cost for items such as breakfast and in-room amenities.\nWe also believe that there are significant opportunities to reduce our non-housekeeping labor expense.\nThrough zero-based budgeting we've found ways to operate more efficiently and are confident that these savings will exist even when occupancies return to more normalized levels.\nAs an example, we currently maintain an average FTE count at our hotels of 21 employees versus 60 FTEs in February of 2020.\nEmployee counts will increase as occupancies rise but changes in our operating model should allow for additional labor cost reductions in the 5% to 8% range leading to sustainable margin expansion of 150 basis points to 200 basis points post-pandemic.\nDuring the third quarter, steadily increasing occupancies and expense savings enacted during the prior quarter resulted in a reduction of our cash burn across the portfolio.\nOur property level cash burn ended the second quarter at $3.4 million and decreased sequentially over the balance of the third quarter with a $2.5 million cash loss on property in July and ending September with a $1.7 million property level cash loss.\nThis brought total property level cash burn for the third quarter to $5.7 million, 25% below our forecast at the beginning of the period.\nAt the beginning of the pandemic, our corporate level cash burn which includes all hotel operating expenses, corporate SG&A and debt service was originally projected to be $11 million per month.\nOur corporate level burn rate steadily declined over the six-month period ending in September reducing from $10.5 million for April to $6.6 million for July and ending the third quarter with a $5.9 million burn rate in September.\nOur corporate cash burn for the third quarter totaled $18.2 million, 32% below our second quarter burn rate and 27% below our initial downside scenario forecast.\nOur third quarter and October results which saw occupancies advance over the period despite precarious COVID-19 conditions and fear of a post Labor Day headwind for leisure travel resulted in breakeven levels that improved since our second quarter earnings call.\nBased on this quarter's results and our forecast for the fourth quarter, we are comfortable that on a property level basis our entire portfolio breaks-even with a 65% RevPAR decline with occupancies approaching 35% to 40% and a 25% to 30% ADR decrease.\nAt the corporate level, our RevPAR breakeven occurs at a 45% RevPAR decline factoring in 55% to 60% occupancies at a 20% ADR discount.\nTransitioning to an item that is cash flow positive.\nAfter more than two years we've settled our insurance claim related to hurricane Irma which significantly damaged our two largest South Florida hotels the Cadillac and the Parrot Key hotel.\nDuring the fourth quarter, we expect to collect insurance proceeds between $7 million and $8 million which will be recorded in our fourth quarter results.\nDuring the third quarter we spent $5.4 million on capital projects bringing our year-to-date spend to $21.8 million.\nWe anticipate a significantly reduced capex load for 2021, primarily focused on maintenance capex and life safety renovation, roughly 40% below our 2020 spend.\nSince 2017, we've allocated close to $200 million for product upgrades and ROI generating capital projects across more than 50% of our total room count.\nEntering 2020 we had substantial built-in growth projections for our portfolio based not only on market demand trends but on these recent capital improvements driving new and loyal customers to our hotels which was unfortunately upended by the pandemic.\nThe majority of our rooms oriented transient hotels have been renovated to the tastes and preferences of today's traveler and with very minimal capex moving forward, our portfolio will experience very little disruption at the onset and through the recovery.\nAs of November 1, we've drawn $126 million of our $250 million senior credit facility and ended the quarter with $20.2 million in cash and deposits.\nWe remain very encouraged by the resiliency of the capital markets throughout this pandemic.\nThe markets remain open and available at every tier of the capital stack and we've seen the first signs of traditional asset level financing from commercial and regional banks looking to deploy capital into the sector.\nWe believe there is a significant amount of capital forming both on the debt and equity front that will be seeking attractive opportunities in lodging over the next several years and we're still in the early stages of this capital formation.\nWe continue to have an active dialogue with our bank group and we plan to accelerate conversations over the next few months regarding the parameters surrounding our covenant waiver test on June 30, 2021.\nUntil then our lines of communication with our bank group remain open and constructive.\nWe remain in constant contact with suppliers of the four assets that we announced earlier this year and we recently granted the buyer of the Dwayne Street hotel an extension before in the first quarter of 2021 and this resulted in our receipt of an additional deposit of $500,000 for the transaction.\nAs none of the buyers need material financing we remain confident these transactions will close in a timely fashion next year.\nOver the past week we went under contract for sale for the Sheraton Wilmington in Delaware for $19.5 million and we've received a material hard deposit from the buyer.\nWe anticipate this sale will close before the end of 2020.\nThe proceeds from these five transactions will be utilized to pay down our debt and we plan to utilize any additional proceeds received from any of the five assets we currently have on the market for debt pay down and for additional working capital to bolster our liquidity.\nAs we enter the final months of this unprecedented year for our company and our industry, we look toward our pillars of strength to navigate our passport, our unique owner operator relationship which has yielded significant expense savings over the past nine months, our cluster strategy which maximizes revenues and economies of scale while capturing unique demand opportunities in our market and the more than 20 years of experience in the public markets as a team for Jay, Neil and I. All the while we continue to explore various opportunities to fortify our balance sheet, to give the portfolio extensive runway as we navigate toward stabilized demand over the next several years.\nThis concludes my portion of the call.\nWe can now proceed to Q&A, where we're happy to address any questions that you may have.\n",
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"content": "suspended its full-year 2020 guidance.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Neil, you may begin.\nAs always, I'm here with Jay H. Shah, our Chief Executive Officer; and Ashish Parikh, our Chief Financial Officer.\nWhen we last spoke in late July, demand for travel and hotels was the highest since March 2020, and projections were shaping up for a very strong second half of the year.\nThe delta variant made for a choppy seasonal shift in demand in late August and early September, but we were able to meet our internal forecast each month through a combination of aggressive revenue management and strict cost controls, allowing us to drive strong GOP margins even compared to the same period in 2019.\nDespite a slow start on the top line shortly after Labor Day, we were encouraged by the positive momentum we are seeing over the last few weeks, coinciding with the decline in COVID cases and notable green shoots indicating that travel is ramping up meaningfully.\nTSA data shows the beginning in mid-September, we have seen consecutive weeks of more than 12 million travelers.\nAnd if you zoom in on our markets, New York City, Boston, Philadelphia, San Jose and Washington, D.C., have all seen a rebound over the last few weeks of at least 7.5% in air travel.\nAdditionally, Uber recently reported a 15% increase in airport rides during the last two weeks of September.\nAnd U.S. car traffic in major cities like New York and Los Angeles was significantly higher in September versus August.\nIn New York, weekday ridership of trains and subways have each increased about 30% since the end of August.\nWhile Times Square foot traffic reached a record high since the start of the pandemic with 270,000 people visiting last Saturday, 80% higher than the same day in 2020.\nRobust leisure demand post-Labor Day is encouraging for the upcoming holiday season as well.\nAnd our booking pace for weekends in New York City and the holiday weeks in South Florida and California is noteworthy.\nAnd beginning next week, our borders will open to fully vaccinated international travelers.\nOne week after the announcement, airlines such as JetBlue and American, reported positive trends.\nJetBlue said it had seen a 5 times increase in bookings to the U.S. from the U.K., while American noted it expects international revenues to surpass 2019 levels in December and throughout 2022.\nOn the hotel booking front, many OTAs have noticed an uptick of almost 20% international bookings in the week since the announcement in major feeder markets like New York City.\nWith an expectation for 2022 bookings to materially increase across the next several weeks.\nThe international demand is diverse, but Canada, Mexico, the United Kingdom, Brazil and even several Asian countries are booking again.\nAsh and I will discuss in more detail our top line and bottom line results.\nBut first, a quick recap of third quarter performance for our portfolio.\nWe began the third quarter on strong footing as our portfolio RevPAR ended July near $150, approximately 15% higher than June as peak summer travel translated into robust results across the portfolio.\nThe first half of August was equally strong.\nBut due to the delta variant and typical seasonality with the resumption of the new school year, demand began to moderate during the second half of August, which stretched through the middle of September after the Jewish holidays.\nDespite the occupancy decline, our revenue managers continued their strategy of holding rates, resulting in our comparable portfolio ADR for the quarter coming in only 1% below third quarter 2019.\nRate integrity remains key to the lodging recovery and based on year-to-date performance from our resorts and our urban clusters, we believe strong ADRs will prove sustainable on a portfoliowide basis for years to come.\nOur resorts portfolio was strong again this quarter as the group generated weighted average occupancy of 68% and ADR growth of 30%, leading to weighted average RevPAR growth of 20% compared to the third quarter 2019.\nPerformance this quarter continued to stem from robust demand in South Florida, despite what is typically the slowest period for travel to this region.\nThe Parrot Key Hotel and Villas was our best-performing asset during the third quarter from a RevPAR growth perspective as 71% occupancy and a $409 average daily rate resulted in a $290 RevPAR, which surpassed third quarter 2019 RevPAR by 73%.\nThe Keys continue to garner unprecedented demand, and we expect the Parrot Key to continue its robust performance into year-end.\nPerformance on Miami Beach was also encouraging as the Cadillac and the Winter Haven on South Beach each exceeded their third quarter 2019 occupancy, ADR and RevPAR levels.\nEven in the more business-oriented submarket of Coconut Grove, we were able to drive 36% ADR growth during the quarter as we captured local business from a variety of industries, law, universities, financial services, consulting, technology, healthcare and advertising, which is leading to stronger weekday demand post-Labor Day.\nOut in California, the Sanctuary Beach Resort continues to lead our resorts from a rate perspective as a $669 ADR and 78% occupancy resulted in 30% RevPAR growth versus the third quarter of 2019.\nThe Our Hotel Milo in Santa Barbara reported 22% RevPAR growth this quarter, recording 75% occupancy at a $446 average daily rate.\nBoth of these hotels set record ADR levels under our ownership last quarter during the peak travel season on the California Coast, further proving that the leisure traveler is not price-sensitive for high-quality, well-located, differentiated hotels.\nBack East, our Annapolis Waterfront Hotel occupies an irreplaceable position on the Chesapeake Bay and was our strongest performing hotel from an occupancy perspective during the third quarter.\nWe recorded an 86% occupancy and an average daily rate of $332 last quarter, which led to a 24% RevPAR growth over the period.\nAnnapolis in the summer was primarily leisure transient but the hotel has seen significant demand continue post-Labor Day, highlighted by weddings, smaller conferences and corporate groups, collegiate sports and alumni reunions at the Naval Academy and the historic vote show that took place just a few weekends ago.\nOur regional resort destinations have provided robust results for the portfolio year-to-date and continue to show strong pace heading into year-end.\nBut our core urban portfolio, 75% of our rooms has also seen a steady demand increase over the last several months.\nWeekday ADRs in our urban portfolio exceeded $195 in July, surpassed $200 in August and ended September at approximately $225, 15% higher than July.\nFrom June to September, our urban portfolio saw a 7.5% CAGR in weekday RevPAR, supported by notable increases in both rate and occupancy.\nAnd weekday demand has continued to accelerate in the fourth quarter.\nAs the month-to-date ADRs in October are higher than the same time in September, with occupancy up approximately 650 basis points to 54%.\nThis performance has led to substantial weekday RevPAR growth over the last 30 days as RevPAR for our urban portfolio is up 15%, with increased demand across each of our major northeastern cities.\nDespite the third quarter being predominantly leisure-driven, and the business transient recovery clearly slowed by the delta variant, we have seen a steady return of corporate business across our markets.\nAirlines have reported that the larger corporate accounts are beginning to fly again and domestic business demand has rebounded to pre-delta levels or better.\nAnd we are seeing the shift in our hotels.\nAfter months of healthcare workers, sports teams, design and construction and other small- and medium-sized companies, we are now seeing the return of our more traditional corporate accounts midweek, Accenture, Deloitte, JPMorgan, Goldman Sachs, Bank of America, McKinsey, Boston Consulting Group and General Dynamics remain active across our portfolio.\nOur urban luxury hotels have enjoyed meaningful rate growth across the last several months, as the Rittenhouse Hotel in Philadelphia and the Ritz-Carlton in Georgetown, outperformed our third quarter 2019 ADRs by 17% and 7%, respectively.\nDemand at these assets was broad-based and supported by leisure and social groups such as weddings and entertainment over the last few months, the reopening of universities and parents weekends, and the blending of leisure and business travel in luxury.\nBut in September and October, we've seen an increase in corporate guests for stays and catering events, healthcare, consulting, financial services, media, software have all been gathering and traveling at our hotels.\nWeekday trends have been clearly accelerating, but the return to more stable business travel is closely correlated with employees going back to the office and resuming traditional travel to conferences and group meetings.\nAlthough many of the world's largest corporations have postponed their return to office plans, third-party data providers indicate that major cities like Boston and New York saw a 30% month-over-month increase in workers returning to the office in September.\nAnd conversations with our corporate accounts indicate that we should continue to see a resumption in companies opening their doors and encouraging travel through the end of the year.\nBut anticipate the first quarter as the next inflection point in demand growth from the business traveler.\nGateway urban markets have been more impacted by this pandemic than any other segment, and offers the longest runway for growth as we look forward to the next several years of this cycle.\nLast month, we saw the return of traditional major events in Manhattan, the U.S. Open, which benefited our assets in the JFK submarket.\nFashion Week, which led to the compression at our Hilton Garden Inn Tribeca.\nAnd the UN General Assembly, we saw increased demand at our Hilton Garden Inn Midtown East from foreign delegates and secret service personnel.\nDespite attendances below pre-pandemic levels, it was great to have these events back in person as they help drive hotel demand in Manhattan to its highest levels since the beginning of the pandemic.\nAnd New York has more citywides occurring in Q4.\nComic Con took place a few weekends ago, the NYU Lodging Conference and the New York City Marathon is resuming next month, and several trade shows and medical conferences remain on schedule.\nPockets of corporate strength remain across our assets in Manhattan from the traditional accounts I noted earlier, but we believe they will continue to expand as more corporations reopen their offices.\nWith the first mover advantage of remaining open throughout the pandemic, our clustered sales effort in the marketplace should yield additional revenue opportunities.\nNew York City has historically been the market leader in occupancy and we remain confident that it will revert back to prior levels over the next few years with our operating and data advantage driving meaningful outperformance throughout the recovery.\nDuring the last cycle, we had record demand for hotel rooms in New York, but year-over-year mid-single-digit supply growth resulted in a very challenging operating environment for owners.\nAlthough we have seen new hotels open again this year with more on pace to open over the next 12 months, it is important to note that many hotels have permanently closed.\nAnd although a few have recently reopened following the passage of the severance law in the city, the midterm supply picture looks very encouraging.\nBased on our internal projections as well as some recent third-party studies, it is estimated that 10,000 keys may be removed from inventory for the foreseeable future, if not permanently by way of demolition, resizing or alternate use conversions.\nWhen we factor in this in the analysis and the aforementioned new supply, net supply over the next few years will actually be negative 1% to 2%.\nAnd with the cost of construction financing remaining exorbitantly high and the recent approval by the New York City Planning Commission of the special permit for all new hotel construction, supply should remain in the low single-digit range for years to come.\nEarlier this year, we completed the sale of six noncore hotels that had substantial capital improvements on the horizon.\nAnd we also took necessary steps to infuse the portfolio with nondilutive equity through our notes placement with Goldman Sachs Merchant Bank.\nWe believe that our unique collection of hotels and our advantaged operating strategy allow us to manage cash burn in the worst of times and drive out performance early in the recovery.\nWe have and continue to actively monitor the capital markets for the best opportunity to increase our operating capital without diluting shareholder valuation.\nThe capital markets for almost every level of financing remains extremely competitive.\nAnd with improving fundamentals in each of our markets, we will remain opportunistic with both asset sales and financing opportunities across the next several quarters.\nAt current prices, we see no better value in the marketplace than our existing collection of hotels.\nSecond quick topic, sustainability, which has been at the core of our strategic operations since we launched our EarthView program in 2010.\nSince inception, we have saved over $20 million from energy efficiency initiatives that generate recurring savings year-over-year and help to alleviate expense growth and improve margins, vital over the past 18 months as we navigated the COVID crisis.\nWe have also had a very positive environmental impact.\nWe have reduced energy use per square foot by 15% and greenhouse gas emissions by 44% since 2010.\nAnd we announced our 2030 targets in our robust annual report on our website, disclosures that contributed to Hersha ranking #1 among our U.S. hotel peer set in the Global Real Estate Sustainability Benchmark public disclosure for the second year in a row.\nWe continue to be proud of the work of our teams in the field and in our headquarters, to ensure our hotels continue to operate not only efficiently, but are positioned for sustainable long-term growth.\nAs I mentioned earlier, the resumption of business travel is closely correlated with the return to office.\nAnd this will present a major inflection point for our hotels, with 75% of our rooms situated in major gateway cities.\nPerformance at our resorts has led to significant growth this year and allowed us to generate property level cash flow quicker than most of our peers.\nBut our growth runway remains long with the pending rebound of business travel demand to our urban gateway markets.\nWith few capital expenditures on the horizon over the next few years, we can focus on hotel operations to drive high absolute RevPAR on industry-leading margins, resulting in significant EBITDA and free cash flow growth in the coming years.\nAnd with the delta variant peaking, our borders reopening and businesses ramping up travel, we expect 2022 will be an inflection point for the lodging recovery.\nSo as Neil mentioned, my comments will focus on the continued growth in our margins and cash flow, and I'll close with an update on our balance sheet and outlook for the current quarter.\nTop line performance from July to September continue to provide a boost to bottom line results.\nDuring the third quarter, 31 of our 33 hotels were cash flow positive, a 21% increase versus the second quarter.\nResults last quarter highlight the efficiency of our portfolio in the merits of our operating model, leading to cash flow generation in an extremely volatile environment that is still reeling from the effects of the pandemic.\nThese factors allowed our portfolio to generate $25.4 million in property level earnings and $4.5 million of positive corporate cash flow after all corporate expenses, debt service and the payment of dividends on all tranches of our preferred equity.\nBased on month-to-date trends and forecast for the remainder of the year, we anticipate continuing to achieve positive corporate level cash flow for the fourth quarter.\nThe asset management initiatives we've implemented over the past 18 months, combined with our flexible operating model and continued top line improvement showed early signs that our margin expansion goal through the recovery is moving in the right direction.\nAs GOP margins of 45% during the third quarter were in line with the forecast we outlined on our July earnings call and approximately 100 basis points higher than our third quarter 2019 GOP margin.\nOn the EBITDA line, we witnessed sustained margin improvement as our comparable hotel EBITDA margin of 30% and was 360 basis points higher than the second quarter 2021 and just 230 basis points lower than third quarter of 2019.\nFrom a profitability perspective, our resort portfolio continued to deliver meaningful EBITDA margin performance as the group ended the third quarter with a weighted average EBITDA margin of 38%, 1400 basis points higher than the third quarter 2019.\nResults out west were highlighted by our Sanctuary Beach Resort in Hotel Milo as both finished the quarter with a 50% EBITDA margin.\nIn South Florida, the Parrot Key and Cadillac each surpassed their third quarter 2019 EBITDA margin by at least 1,800 basis points while the Annapolis Waterfront Hotel aided by a strong end to the summer, recorded a 55% EBITDA margin, the highest margin in our comparable portfolio last quarter.\nPrimary source of savings at our hotel has been the significant reduction in total labor.\nOver the past 18 months, we've been able to run our properties on a lean staffing model with occupancies between 35% and 60% at many of our hotels.\nAs demand started back in the spring, we began to expand our open positions across our portfolio.\nto rehire staff to support increasing occupancies.\nOver the past few months, our on property and corporate level management and HR teams have been very focused on our recruiting efforts.\nAnd over that period, we have seen a 44% rise in applicants for new posting with total hires in September, up 12% versus August following the expiration of additional unemployment benefits.\nOver the last two years, we have absorbed 10% to 15% wage growth in each of our markets.\nBut despite this increase, our total cost per occupied room remains approximately 15% below pre-pandemic levels, with total nonmanagement contracted labor 40% below the same time in 2019.\nWe are encouraged by recent trends, but the hiring market, especially for hourly employees remains challenging.\nFortunately, our cluster strategy and close relationship with our third-party management company allows us to run our properties with staffing levels capable of offering our guests a service expected at our hotels, all while continuing to drive GOP and EBITDA.\nAs RevPAR and out-of-room revenues increasing in 2022 and beyond.\nOur current operating model will yield much higher levels of absolute GOP dollars and allow us to amortize our fixed operating expenses as well as our property taxes and insurance expenses.\nThis provides us confidence in our ability to forecast post-pandemic EBITDA margin growth as our ability to drive ADR in tandem with applied expense savings initiatives, provides us continued confidence in our ability to generate 150 to 250 basis points of sustainable long-term margin savings for the portfolio.\nFor the second consecutive quarter, we saw substantial growth in food and beverage revenues at a few of our hotels.\nThis was led by the Envoy in Boston, which generated $3.6 million in food and beverage revenues, 80% higher than the second quarter.\nThe hotel's very popular Lookout Rooftop Bar was the primary driver of profit again this quarter, generating $2.4 million in revenues from beverage sales.\nMeanwhile, down in Key West, revenue generated from the food and beverage outlets at our Parrot Key Resort was 48% higher than the third quarter of 2019.\nWe expect our recently renovated outlets at the Parrot Key will remain popular as we enter the peak season of travel to the Keys.\nSo just a few closing remarks on our balance sheet and outlook for the fourth quarter.\nWe ended the third quarter with $83.7 million in cash and cash equivalents and deposits.\nIn September, we successfully refinanced the $23 million mortgage loan on the St. Gregory Hotel, eliminating all debt maturities until third quarter 2022.\nThe interest-only loan was completed at prime plus one and matures in October of '23.\nAs of September 30, 78% of our debt is fixed or swapped with our total debt weighted average interest rate of 4.41% and 2.9 years life-to-maturity.\nDuring the quarter, we spent $2.6 million on capital projects, and we continue to limit our capital expenditures strictly to maintenance and life safety renovation.\nYear-to-date, we have spent $7.9 million on capital projects, and we anticipate our full year Capex load to be more than 50% below our 2020 spend.\nWe project very little disruption or capital spend for our portfolio across the next few years, which is materially beneficial from a cash flow perspective as the supply chain continues to tighten in conjunction with elevated construction costs, labor and oil prices.\nMonth-to-date in October, we continue to see incremental growth across our portfolio, but especially in our urban markets, which are running close to 10% ahead of forecast.\nThe largest outperformance from an occupancy perspective has been our Boston portfolio, which is currently running at a 77% occupancy month-to-date up approximately 1,800 basis points from September.\nOur Manhattan portfolio occupancy is approaching 70%, 1,200 basis points higher than September.\nWhile our Philadelphia and Washington, D.C. clusters are above 60% occupancy month to date.\nFrom a revenue perspective, our Philadelphia and Manhattan hotels are surpassing initial forecast by 15% and 12%, respectively, while our Boston and D.C. portfolios are exceeding revenue forecast, by approximately 8% thus far in October.\nOur weekday improvement post Labor Day has shown that business travelers are hitting the road, and we expect this will continue to accelerate across the next several months as more companies reopen their offices, reinstate in-person meeting some staff that is widely dispersed across the globe, resume group attendance and encourage travel to reengage with customers in order to gain market share, which will provide a strong boost to our urban-centric portfolio.\nWith our balance sheet rightsized to allow for accretive opportunities through the recovery and our on-property operations set to capture continued demand at our hotels.\nWe look forward to continued robust leisure demand at our resort properties and an inflection point in the return of meaningful and sustained business travel to drive outperformance across our portfolio for the next several years.\nSo this concludes my portion of the call, and we will be happy to address any questions that you may have at this time.\n",
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"content": "will forego providing full-year 2021 guidance at this time.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: In a moment, Bruce Broussard, Humana's President and Chief Executive Officer; and Susan Diamond, Chief Financial Officer, will discuss our second quarter 2021 results and our updated financial outlook for 2021.\nJoe Ventura, our Chief Legal Officer, will also be joining Bruce and Susan for the Q&A session.\nBefore we begin our discussion, I need to advise call participants of our cautionary statement.\nActual results could differ materially.\nCall participants should note that today's discussion includes financial measures that are not in accordance with generally accepted accounting principles or GAAP.\nFinally, any references to earnings per share or earnings per share made during this conference call refer to diluted earnings per common share.\nToday we reported adjusted earnings per share of $6.89 for the second quarter of 2021, in line with our previous expectations.\nWe continue to focus on delivering strong operating results while navigating a dynamic environment due to the ongoing COVID-19 pandemic, all while staying true to our commitment to delivering the highest quality healthcare experience for members and patients.\nWell, we are maintaining our full year 2021 adjusted earnings per share guidance of approximately $21.25 to $21.75 at the midpoint, representing full year adjusted earnings per share growth of 16% above the 2020 baseline of $18.50 in excess of our long-term growth target, while acknowledging the continued uncertainty driven by COVID-19 hospitalization trends and the rate at which non-COVID cost normalized.\nAs Susan will describe in more detail, our full year adjusted earnings per share guidance now assumes a $600 million COVID-19-related headwinds that is expected to be largely offset by favorable operating items.\nIn addition, this guidance assumes no COVID costs will run -- non-COVID costs will run approximately 2.5% below baseline in the back half of the year, including an assumption of minimum COVID testing and treatment costs for the remaining of the year.\nI'd like to reiterate that our core fundamentals are performing well, and 2021 is a year of COVID-19 transition with various pandemic-related financial impacts, including reduced Medicare Advantage revenue resulting from the significant temporary deferral of utilization in 2020 as well as the lingering near-term uncertainties regarding the pace and level of the return of utilization for the balance of the year.\nWhile we continue to navigate this pandemic-related uncertainties in 2021, as Susan will lay out in detail, we expect 2022 to be a more normal year.\nThe healthcare system has been open for several months, and we have seen vaccination rates in the seniors reach approximately 80% nationally.\nAccordingly, our members continue to engage in more routine interactions with their providers, which we anticipate will result in more normalized Medicare Advantage revenue next year as providers are able to ensure that our members are receiving appropriate care and that their conditions are being fully documented.\nI would reiterate our remarks from the last quarter regarding our Medicare Advantage bids for 2022, which reflected the continued uncertainty associated with COVID-19 and our premium and claims assumption with a focus on maintaining benefit stability in 2023.\nWhile it is still too early to provide 2022 guidance, we believe our operating discipline in 2021 combined with the depth of our planning for 2022 Medicare Advantage AEP puts us in a strong position for financial growth in 2022.\nI will now turn to an operational and strategic update.\nImportantly, our underlying core businesses continue to deliver strong results on solid fundamentals with individual Medicare Advantage membership growth outpacing the industry.\nAs we highlighted at our recent Investor Day, this growth is balanced across various product lines, including HMO, PPO and Dual Special Need Plans or D-SNPs.\nOur Medicaid business continues to perform well in 2021 and our South Carolina plan is now operational.\nWe are diligently preparing for the Ohio contract go live date in early 2022 and are continuing to improve our operating model building off of our core Medicare Advantage capabilities.\nWe also experienced slightly better than expected results in our home and provider businesses and increased mail order rates in our pharmacy business.\nFinally, as announced last quarter, we've entered into an agreement to acquire the remaining 60% interest in Kindred at Home, and we expect the transaction to close mid-August, which we've included in our revised estimates for the year.\nOur strong operating performance this year is in part attributed to our strong partnerships with providers who are delivering high quality care to our members.\nWe are currently seeing 87% of our provider partners and value-based arrangements and surplus.\nOn the public policy front, as policymakers explore changes to Medicare, including adding dental, vision and hearing as part of the Medicare benefit, we stand ready to both innovate for the more than 12 million of our members who already have these benefits, including 7 million dental and vision policies in our MA group as well as offer ideas of public private collaboration to leverage our deep capabilities in Medicare and specialty markets so that beneficiaries could quickly see benefits go from a proposed law to a tangible benefit.\nBefore turning the call over to our new Chief Financial Officer, Susan Diamond, I'd like to take a moment to speak about Susan's experience at Humana over the last 15 years.\nShe has served in various leadership roles across the company during her tenure, spending eight years as part of the Medicare and leadership team with various financial and operational in line of business responsibilities.\nShe also spent two years on the finance team, leading enterprise planning and forecasting and overseeing the company's line of business, CFOs and controllers.\nMost recently, she led our home business, growing it to the largest offering of its kind.\nHer strong financial background and extensive knowledge of our business make her uniquely positioned to step into the CFO role.\nThe board and I have great confidence in our abilities and the contribution she will make in the next chapter for Humana as we execute on our strategic plan and deliver shareholder value.\nIn addition, during the strategic nature of the CFO role, Susan will continue to contribute in a meaningful way to our home health business.\nToday we reported adjusted earnings per share of $6.89 for the second quarter, in line with our previous expectations.\nOur underlying core business fundamentals remained strong, and we experienced a positive start to the year across our segments with the first quarter coming in modestly ahead of our previous expectations.\nOur results moderated back to expected levels in the second quarter, albeit with variation in the way specific underlying assumptions emerged, with COVID treatment costs coming in lower than expected, offset by non-inpatient utilization continuing to bounce back faster than originally anticipated.\nAs I will describe in further detail in a moment, uncertainty remains for the balance of the year due to the pandemic, specifically as it respects COVID hospitalizations and the rate at which non-COVID costs normalized inclusive of both volume and unit costs.\nRecognizing the majority of today's call will focus on our emerging experience and our 2021 guidance, I want to quickly touch on operating performance across our segments before diving into that detail.\nOur Medicare Advantage growth remains on track and consistent with our previous expectations with individual MA growing solidly above the market at an expected 11.4% at the midpoint.\nOur Medicaid business results are exceeding our initial expectations given membership increases largely attributable to the extension of the public health emergency as well as higher than expected favorable prior period development.\nIn our Group and Specialty segment, consistent with our commentary on our last earnings call, medical membership declines are lower than we expected coming into the year.\nOur Specialty business results are exceeding expectations as utilization, particularly for dental services, has been slower to bounce back than initially expected.\nFinally, within we set our healthcare services operations, pharmacy continues to see increased mail order penetration as a result of customer experience improvements and additional marketing initiatives.\nThe home business, CenterWell Senior Primary Care and Conviva are performing slightly ahead of expectations, and we remain on track to open 20 new clinics this year with Welsh Carson.\nIn addition, as Bruce indicated in his remarks, we now expect the Kindred at Home acquisition to close in mid-August subject to customary state and federal regulatory approvals.\nBefore I go into more detail on our 2021 guide, I want to reiterate that the uncertainty we are seeing in 2021 relates solely to the difficulty estimating the impact of the pandemic and is not expected to carry forward into 2022.\nWe remain comfortable with how we approach 2022 pricing, which I will expand on later in my remarks.\nTurning to full year 2021 guidance.\nI would remind you, our adjusted earnings per share guidance represents growth at or above the top end of our long-term target of 11% to 15%.\nOur philosophy regarding 2021 guidance has been to provide transparency into the uncertainty caused by COVID-19 and the ability to deliver our targeted earnings growth with solid underlying core business performance and largely offsetting COVID-19-related headwinds and tailwinds.\nWe have been consistent in and remain committed to this philosophy.\nThere is a reasonable path to achieving adjusted earnings per share within our initial guidance range.\nAnd accordingly, today we are maintaining our full year adjusted earnings per share guidance of $21.25 to $21.75, while acknowledging the continued uncertainty as it respects to COVID hospitalization trends as well as the pace at which non-COVID costs bounce back and at what level they ultimately normalize.\nAdditionally, we expect our third quarter adjusted earnings per share to reflect a low-20s percentage of our full year adjusted EPS.\nAs Bruce indicated, given our experience to date, together with our current estimates for the back half of 2021, we have effectively recognized a $600 million COVID-related headwind for Medicare Advantage in our full year guide, offset by favorable operating items.\nThese favorable items include, among others, higher than initially expected prior year development, the previously discussed better than expected specialty and Medicaid results and the expected contribution from Kindred at Home given the transaction is expected to close in the coming weeks.\nNow let me provide an update on the underlying changes since our initial detailed guide in February, articulate key assumptions regarding utilization in the back half of 2021 and expand on the continued pandemic-related uncertainties I described.\nI will begin with Medicare Advantage revenue.\nAs discussed last quarter, given our significant exposure to Medicare Advantage, we are disproportionately affected by COVID's impact on Medicare Risk Adjustment or MRA.\nRecall, our risk-adjusted revenue for 2021 is determined by 2020 dates of service, medical utilization and resulting documentation, which as previously discussed, was materially depressed in 2020.\nAs we have indicated since the beginning of the year, the MRA headwind we are facing in 2021 is significant, and we have closely monitored it over the course of the year.\nOur April guide recognized we had $300 million of additional pressure from MRA relative to our initial expectations for the full year, which was offset by the net benefit of the extension of sequester relief.\nIn July, we received the mid-year MRA payment, and it came in modestly lower than expected.\nWe are however taking operational steps now to be able to recover some of the MRA revenue in the final payment for 2021.\nAccordingly, our MA premium estimates, net of capitation, remained largely in line with our initial expectations when factoring in the net sequestration benefit.\nNow turning to benefit expense.\nAt the beginning of the year, we indicated that we expected non-COVID costs for our Medicare business to run 3.6% to 5.5% below baseline.\nWe define baseline and 2019 experience trended forward based on a normalized trend factor excluding the effects of COVID.\nHowever, that was offset by COVID utilization decelerating faster than expected.\nWe also recognized, however, visibility into non-inpatient claims were significantly less than inpatient.\nHowever, at that time, we could still tolerate overall utilization returning to baseline late in the year if the non-inpatient acceleration we were seeing was due to pent-up demand and leveled off in the second and third quarters.\nIn the first and second quarters, non-COVID costs run approximately 7% and 3% below baseline respectively with the bounce back outpacing expectations in the second quarter.\nNon-inpatient utilization did not level off and instead continue to increase in the second quarter and was offset by lower than expected COVID costs and other business outperformance.\nAs the healthcare system has been open for several months and a high rate of the senior population has been vaccinated, our current guidance now assumes that non-COVID costs level off and run approximately 2.5% below baseline levels in the back half of the year.\nConsistent with our original forecast, our current guidance assumes minimal COVID testing and treatment costs in the back half of the year.\nFinally, as it respects to our 2021 guide, for our commercial business, we expect all-in utilization for COVID and non-COVID to continue to run above baseline as anticipated.\nIn summary, I want to emphasize that 2021 is a COVID transition year.\nThere is a reasonable path to deliver against our guidance expectations.\nHowever, if non-COVID utilization or COVID treatment costs increase beyond our expectations in the back half of the year, it will present a headwind to our guide absent offsetting tailwind.\nI also want to reiterate that the $21.50 midpoint of our original guide continues to be the right jumping off point for 2022 adjusted earnings per share growth.\nOur members continue to engage in routine interactions with their providers, which we anticipate will result in more normalized Medicare Advantage revenue next year as providers are able to ensure that our members are receiving appropriate care and that their conditions are fully documented.\nDuring the first half of 2021, provider interactions and documentation of clinical diagnoses that will impact 2022 revenue outpace those experienced in the first half of 2020 and are approximately 80% complete in line with the estimated completion rate for the same time period in 2019.\nLastly, I would remind you that our Medicare Advantage bids for 2022 reflected the continued uncertainty associated with COVID-19 as it relates to our premium and baseline non-COVID claims trend assumptions with a focus on maintaining benefit stability into 2023.\nFirst, with the expected integration of Kindred at Home, our home business is growing significantly, and Amy has accepted the role of Vice President and CFO of Home Solutions.\nShe will be a key member of the Home Solutions leadership team, responsible for the financial oversight and planning and forecasting for the segment.\nLisa Stoner will succeed Amy, accepting the role of Vice President, Investor Relations.\nLisa has worked with Amy over the last four years and is well known and respected by our investors.\nWe are excited about the opportunity this affords both Amy and Lisa, and Lisa's continuity in Investor Relations will allow for a seamless transition.\nIn fairness to those waiting in the queue, we ask that you limit yourself to one question.\nOperator, please introduce the first caller.\n",
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"content": "sees fy adjusted earnings per share $21.25 to $21.75.\ncompname reports 2q21 earnings per diluted common share of $4.55 on a gaap basis, $6.89 on an adjusted basis.\nmaintains fy 2021 earnings per share guidance of $21.25 to $21.75 on adjusted basis.\ncompany’s fy adjusted earnings per share guidance assumes $600 million covid related headwind expected to be largely offset by favorable operating items.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: In a moment, Bruce Broussard, Humana's President and Chief Executive Officer; and Susan Diamond, Chief Financial Officer, will discuss our third quarter 2021 results and our updated financial outlook for 2021.\nJoe Ventura, our Chief Legal Officer will also be joining Bruce and Susan for the Q&A session.\nBefore we begin our discussion, I need to advise call participants of our cautionary statement.\nActual results could differ materially.\nCall participants should note that today's discussion includes financial measures that are not in accordance with Generally Accepted Accounting Principles or GAAP.\nFinally, any references to earnings per share or earnings per share made during this conference call refer to diluted earnings per common share.\nToday, we reported adjusted earnings per share of $4.83 for the third quarter of 2021, slightly above consensus estimates.\nOur year-to-date results reflect the strength of our core operations as we continue to see strong underlying fundamentals across all lines of business and have remained focused on ensuring our members receive the right care at the right time despite the continued disruption caused by the pandemic.\nWhile our underlying fundamentals are strong, 2021 financial results have been impacted by the ongoing pandemic, which has resulted in an adjustment to our full year adjusted earnings per share guidance.\nAs Susan will share in more detail, this reduction of approximately $1 in adjusted earnings per share is a direct result of COVID and corresponds to our current expectation of the total Medicare Advantage utilization inclusive of COVID costs will run 1% below baseline in the fourth quarter, which is a 150 basis points less than our previous assumption of 2.5% below baseline.\nThis update reflects a more conservative posture going into the final months of the year and notably $21.50 remains the baseline of which to grow for 2022.\nAs a reminder, prior to this guidance update we had not recognized a COVID headwind in our '21 guidance as many of our peers did.\nOur adjusted earnings per share guidance has been above our long-term growth target at the midpoint throughout the year at 16% growth.\nThis update results in an expected adjusted earnings per share growth at the lower end of our long-term range.\nAnd importantly, it is not reflective of any concerns with our core operations.\nI will now turn to our operational and strategic update.\nOur Medicare Advantage individual above market growth in 2021 of 11% can be in part contributed to our industry-leading quality and consumer satisfaction scores.\nWe are pleased to be recognized by CMS for having 97% of our members in 4-Star or higher rated contracts for 2022.\nWe also increased the number of contracts that received a 5-Star rating from one contract in 2021 to four contracts in 2022, the most in our history.\nExcuse me participants, this is the operator.\nYour conference will begin momentarily.\nPlease stay on hold until the conference begin.\nSorry for the technical glitch share.\nLet me just -- just maybe just go back to our guidance update here and reinsure that investors understand the guidance and in addition how it reflects in the -- as we look at the future here.\nFirst, the guidance reflects a much more conservative posture going into the final months of the year.\nAnd notably $21.50 remains the baseline of which to grow for 2022.\nAs a reminder, prior to the guidance update we had not recognized the COVID headwind in our 2021 guidance as many of our peers did.\nOur adjusted earnings per share guidance has been above our long-term growth target at the midpoint throughout the year at 16% growth.\nThis update results an expected adjusted earnings per share growth at the lower end of our long-term range and is importantly does not reflect any concern with our core operations.\nI will now turn to our operational and strategic update.\nOur Medicare Advantage individual above market growth in 2021 of 11% can be in part attributed to our industry-leading quality and consumer satisfaction scores.\nWe are pleased to be recognized by CMS for having 97% of our members in 4-Star or higher contract for 2022.\nWe also increased the number of contracts that received a 5-Star rating from one contract in 2021 to four contracts in 2022, the most in our history.\nAnd while CMS did make adjustments to the 2022 Star Ratings due to the possible impact of the COVID-19 pandemic, these adjustments had minimal impact on our ratings.\nThis further demonstrates our enterprisewide focus on quality, clinical outcomes and best-in-class customer service, which has been recognized from notable organizations such as Forrester, J.D. Power, and USAA.\nImportantly, the Star's bonus allows us to maintain a strong value proposition for our members and provided value for supplemental benefits that address social determinants of health and other barriers not addressed by fee-for-service Medicare.\nLooking ahead to 2022, we are pleased to be able to provide stable or enhanced benefits for the majority of our Medicare Advantage members.\nOperating plans that support members whole health needs while continuing to deliver the human care our members have come to expect from us.\nOur strong clinical and quality programs drive improved clinical outcomes and cost savings that allow our Medicare Advantage plans to continue to expand member benefits on those covered by fee-for-service Medicare.\nOur plans include highly valuable extra benefits including dental, vision, hearing and over-the-counter medication allowance, transportation support, business program memberships and home delivered meals following an inpatient hospital set.\nOver the last few years, we've made great progress in addressing social determinants of health and health equity by expanding our Medicare Advantage benefits.\nExamples of those impactful areas include respite care distributing 1.5 million meals during COVID, sending fans to seniors with COPD during a heat wave and providing support for financial need impacting a senior's health and well-being.\nGiven the increased demand for health equity across America, we have aggressively expanded our efforts to address it.\nWe continue to advance our consumer segmentation efforts developing plans that are tailored to the unique needs of specific member populations.\nThis has allowed us to provide benefits that enhance and complement an individual's existing coverage through programs like Medicaid or entities such as Veterans Affairs.\nThis approach leads to disproportionate growth.\nAs you've seen in our D-SNP plans designed for dual eligible members where we have grown our membership approximately 40% in both 2022 and 2021.\nWe've expanded our D-SNP offerings for 2022 to cover nearly 65% of the dual eligible population nationally.\nTo reduce food and security, 97% of our members enrolled in our D-SNP plans, and we'll have a healthy foods cart, which provides a monthly allowance to purchase approved food and beverages at various national chains.\nNew for 2022, many of our D-SNP members will have reduced Part D drug co-pays as a result of the D-SNP prescription drug savings benefit, which will help address the financial barriers some members face when assessing needed prescriptions leading to better medication adherence, an important driver of member's health -- overall health outcomes.\nAs previously shared, we took a more conservative approach to our 2022 bids recognizing the continued uncertainty associated with COVID-19 and potential impacts to premium and claims assumption allowing us to prioritize long-term benefit stability for our members.\nWhile it is early in the selling season we believe we struck the right balance and are competitively positioned for our continued growth in Medicare Advantage.\nOur brand promise to deliver human care resonates with seniors given our comprehensive set of offerings and focus on providing a patient-centric experience based on their specific needs.\nSusan will provide more detail and 2022 commentary in our remarks, including high level earnings per share and membership guidance.\nI now would like to highlight the continued progress of our strategy through the build out of our healthcare service platform starting with Primary Care business and then moving to our Growing Home Solutions offerings.\nWe have the largest senior-focused, value based primary care organization in the country, which by year end will include approximately 200 clinics serving 300,000 patients across 24 markets in nine states.\nWe are accelerating organic and inorganic growth nationally and plan to open a total of 30 de novo senior focused centers in 2022, up from 24 in 2021.\nThis will include launching in two new major metropolitan areas, Dallas and Phoenix next year.\nThis faster pace expansion comes as we continue to gain conviction in our de novo center model with panel growth in centers launched in 2021 exceeding plan and clinical performance in our more mature markets continuing to improve.\nAt our more mature centers hospitalizations and ER visits are down 12% year-to-date versus 2019 pre-COVID Stars performance tracking to 4.5 Stars and NPS score of 90.\nWe will also continue to expand through inorganic growth completing seven acquisitions through the third quarter of this year bringing 21 newly, wholly owned centers to our portfolio.\nWe plan to continue this pace of acquisitions, focused on the markets where we have established presence to provide more access and high quality care to our patients.\nTurning to the home, we completed the acquisition of Kindred at Home in the third quarter and now the largest home health and hospice organization in the nation.\nAs previously shared we will be migrating Kindred at Home to Humana's payor-agnostic healthcare service brand CenterWell.\nOur efforts to transform home health to a value-based model come at a pivotal time for the industry.\nAs seniors increasingly choose Medicare Advantage, there is a meaningful opportunity for home health organizations to engage differently with patients and Medicare Advantage payers to more holistically address patient needs and improved health outcomes reduce the total cost of care for health plans and share appropriately in this value creation.\nWe've made substantial progress toward our goal of scaling and maturing a risk-bearing value-based model that manages the provision of home health, durable medical equipment and home infusion services.\nWith the acquisition of onehome earlier in 2021, a delegated post-acute management services organization for the home, we have the capabilities to be a value-based convener providing risk-based contracting and referral management and continue to develop technology enabling us to coordinate with other adjacent services.\nThese services include gap in care, closure, primary or emergent care in the home as well as coordination of meals, transportation and other services to positively support social determinants of health.\nWe currently care for approximately 270,000 Humana members under value-based home care models in South Florida and Southeast Texas where we have seen improved outcomes including emergency room usage being 100 basis points better than Humana's national average.\nWe now are focused on expanding to select markets in North Carolina and Virginia, which we've chose based on multiple criteria including market density, opportunity to significantly reduce home care expense and a robust Kindred at Home footprint.\nWe expect to begin the rollout in the second quarter of 2022 with the goal of covering nearly 50% of Humana Medicare Advantage members under this value-based home health model within the next five years.\nWe are excited about the continued progress of our strategy in the home, but consistent with our home health peers we recognize that the national nursing labor shortage poses a significant risk to the industry and we are taking proactive steps to address it as part of our well-developed integration process with Kindred at Home.\nIn some markets the nursing shortages resulting in inadequate capacity to meet demand, negatively impacting our ability to grow the top line.\nWe believe that Humana's CenterWell brand supported by our patient-centric culture will bolster recruiting and retention efforts for nurses.\nWe've seen increased nurse satisfaction and engagement in pilot markets where we have deployed value-based concepts, with voluntary nursing turnover improving nearly 10% among home health nurses in 2021.\nIn addition to unlock sufficient capacity to meet our growth goals, we are implementing broader operational improvements and benefit enhancements, while also making targeted investments in capacity constrained areas to enhance nurse recruiting and retention.\nWith respect to hospice, our intent remains to ultimately divest the majority interest in this portion of the asset.\nAs our experience has demonstrated, we can deliver desired experiences and outcomes for patients transitioning from restorative care to hospice through partnership models.\nSince we closed the transaction in August we have continued to explore alternatives for the long-term ownership structure for the business and have initiated steps to reorganize the hospice business for stand-alone operations, while also ensuring business continuity and monitoring underlying trends.\nWe do not have a further update on the specific transaction structure or expected transaction timing, but we will provide additional updates as appropriate moving forward.\nGiven the continued expansion of an interest in our healthcare service platform we are committed to providing additional disclosure to give further transparency into the performance of these businesses beginning with our first quarter 2022 reporting.\nBefore closing, I want to touch on the current regulatory and legislative landscape.\nAs you know, last week, the White House and congressional leaders released their plan known as, Build Back Better, which includes several proposed changes to the Medicare program including establishing a hearing benefit starting in calendar year 2024, which will be included in the Medicare Advantage benchmark.\nGiven that today more than 40% of Medicare beneficiaries, over 27 million seniors and those with disabilities are enrolled in Medicare Advantage, we were encouraged to see that the package did not include any payment reductions to the program.\nAs this legislation continues to advance and likely be modified and as we look ahead to the annual CMS call letter and rate notice period, we will continue to work with policymakers and the Biden Administration to further improve Medicare Advantage building on the program's innovation and significant progress in areas like value-based care, social determinants of health, affordability and financial protection for beneficiaries, as well as reducing the total cost of care.\nThese attributes, along with a deep consumer popularity of Medicare Advantage are what have enabled it to have a strong bipartisan support with hundreds of members of Congress on record supporting the program.\nWith Medicare Advantage serving as a leading example of a successful private-public partnership, I am optimistic we can continue to lead on important healthcare issues facing both individuals and society, including addressing health and equities, improving health outcomes and expanding value-based care.\nToday we reported adjusted earnings per share of $4.83 for the third quarter and updated full year 2021 adjusted earnings per share guidance to approximately $20.50 to reflect a net unmitigated COVID headwind resulting from our current view of utilization levels for the balance of the year.\nI will now walk you through this detail starting with a reminder of our previous commentary.\nAs of our second quarter call, full year guidance assumed non-COVID Medicare Advantage utilization was around 2.5% below baseline in the second half of the year, with a further assumption of minimal COVID testing and treatment costs for the same period.\nIn September 2021 as a result of the surge in COVID cases due to the Delta variant, we updated our commentary on full year guidance to indicate we expected non-COVID Medicare Advantage utilization to be 5.5% below baseline in the back half of the year, while being partially offset by 3% of COVID costs, therefore, again assuming total utilization would be 2.5% below baseline in the back half of 2021.\nWhat we've seen develop for the third quarter is that total utilization is running 1% below baseline versus the previously anticipated 2.5%.\nCOVID costs have been higher than initially anticipated as the Delta Variant resulted in hospitalization levels on par with what we experienced in January of 2021 and were overwhelmingly driven by the 20% of our Medicare Advantage members believed to be unvaccinated.\nThese higher-than-expected COVID costs were fully offset by non-COVID utilization in the quarter.\nAs COVID hospitalizations increased or decreased we continue to see an approximate 1-to-1 offset in non-COVID hospitalization levels.\nWe also continue to see significantly reduced non-inpatient utilization when surges occur, offsetting the higher average cost of COVID admission.\nHowever, for the third quarter, in total we saw 1% incremental reduction in utilization beyond the level needed to offset COVID costs versus the 2.5% contemplated in our previous guide.\nAs a result, we have adjusted our full year guide to now reflect the fourth quarter running similarly with total Medicare Advantage utilization running 1% below baseline inclusive of estimated COVID costs, consistent with what we experienced in the third quarter.\nWe realized higher than expected positive current period claims development in Medicare Advantage in the third quarter as well as other operating outperformance largely mitigating the lower than anticipated depressed Medicare Advantage utilization allowing us to report results that were slightly favorable to The Street estimates.\nOur revised guidance does not assume that the higher levels of favorable current period development seen in the third quarter will continue.\nTaken together, our updated full year 2021 adjusted earnings per share guidance takes a more conservative posture going into the final months of 2021, and it's important to note as we've consistently shared throughout the year the midpoint of our original guidance range of $21.50 remains the correct baseline for 2022 given our approach to pricing.\nI will now briefly touch on operating results across our segments before sharing early thoughts on 2022 performance.\nOur Medicare Advantage growth remains on track and consistent with previous expectations.\nWe have refined our full year individual Medicare Advantage membership guidance to up approximately 450,000 members consistent with the midpoint of our previous guidance of up 425,000 to 475,000 members.\nThis outlook represents above market growth with an increase of 11.4% year-over-year.\nOur Medicaid results continue to exceed initial expectations due to higher than anticipated membership increases, largely attributable to the extension of the public health emergency.\nWe now expect to add 125,000 to 150,000 Medicaid members in 2021, up from our previous expectation of up 100,000 to 125,000 members.\nUtilization trends continue to be favorable to initial expectations and the Medicaid team is working diligently toward a successful implementation in Ohio with Go Live anticipated in July.\nIn our Group and Specialty segment, fully insured medical results were impacted by higher than expected COVID costs in the quarter, while our Specialty business results continued to exceed expectations as utilization, particularly for dental services remained lower than previously anticipated.\nRecall that our guidance as of second quarter did not contemplate significant COVID costs in the back half of the year and the Commercial business is not seeing the same level of utilization offset experienced in Medicare Advantage.\nFrom a membership perspective, we have increased our expected Group medical membership losses from 100,00 to 125,000 reflecting the expectation of additional losses in the fourth quarter as a result of rating actions taken to account for the expected impact of COVID in 2022.\nFinally, within our healthcare service of operations, the Pharmacy and Provider businesses continue to perform slightly better than expected with Pharmacy benefiting from increased mail order penetration as a result of customer experience improvements and marketing campaigns and the Provider business seeing continued operating improvement at our more mature centers, which are now aligned under the same leadership in our de novo centers.\nAs Bruce mentioned in his remarks, we are actively integrating the Kindred at Home operations and results post integration have largely been in line with expectations.\nSimilar to Home Health and Hospice peers, the business is being impacted by COVID and labor shortages.\nFor the third quarter, home health admissions grew low single digits year-over-year, while hospice experienced a low single-digit decline year-over-year.\nWe will continue to closely monitor trends as we made targeted investments to sustainably improve the recruitment and retention of nurses.\nNow, let me take a few moments to share an early outlook for 2022 starting with membership.\nAs you're aware, the overall PDP market continues to decline as more and more beneficiaries including dual eligibles choose Medicare Advantage.\nIn addition, as we've discussed previously, PDP plans have become a commodity with the low price leader capturing disproportionate growth.\nConsistent with 2021 the Walmart Value Plan will offer competitive benefits but will not be the low premium leader in 2022.\nAs a result, we expect a net decline in PDP membership of a few hundred thousand members in 2022.\nWe continue to focus on creating enterprise value for our PDP plans by driving increased mail order penetration and conversions to Medicare Advantage.\nWith respect to Group Medicare Advantage, we expect membership to be generally flat for 2022 as we do not anticipate any large accounts will be gained or lost as we continue to maintain pricing discipline in a highly competitive market.\nMoving to individual Medicare Advantage; as previously shared, we took a more conservative approach to our 2020 bids, reflecting the continued uncertainty associated with the pandemic.\nWe expect to grow our individual Medicare Advantage membership in a range of 325,000 to 375,000 members in 2022 or approximately 8% year-over-year reflective of our prudent approach we took to pricing for 2022 and the competitive nature of the market.\nIt is early in our AEP selling season and the outlook we are providing today could change depending on how sales and voluntary disenrollment ultimately commence.\nAnd consistent with prior years we have very little member disenrollment data at this point in the AEP cycle.\nI will now turn to our expected 2022 financial performance.\nAs previously mentioned, I want to reiterate that the $21.50 midpoint of our original 2021 guide continues to be the appropriate jumping-off point for 2022 adjusted earnings per share growth given our approach to pricing.\nIn addition, we feel comfortable that the risk adjusted assumptions and our 2022 pricing are appropriate as providers have been actively engaging with our members to ensure their conditions are fully documented and that care plans are established to address gaps in care.\nProvider interactions and documentation of clinical diagnoses that we anticipate will impact 2022 revenue are approximately 92% complete to-date, in line with both our expectations for 2021 as well as the estimated completion rate for the same time period in 2019.\nWe also assumed medical costs will return to baseline levels reflecting a pre-COVID historical trending.\nFrom an earnings perspective, we believe the conservative approach we took to 2020 pricing struck the appropriate balance between membership and earnings growth.\nGiven the ongoing uncertainty surrounding the COVID-19 pandemic we expect to enter the year with an appropriately conservative view of our initial 2022 financial outlook.\nAccordingly, we anticipate that our initial earnings per share guidance will target the low end of our long-term growth range of 11% to 15%.\nWe expect that COVID will be net neutral to the Medicare business in 2022 as we do not anticipate a risk adjustment headwind and expect COVID utilization to be offset by a reduction in non-COVID utilization.\nHowever, our initial guide will allow for an explicit COVID-related headwinds that we can tolerate, should it emerge similar to the approach some of our peers took in 2021.\nWe believe entering the year with this more conservative approach is prudent in the current environment and sets the company up for success in 2022.\nWe look forward to providing more specific guidance on our fourth quarter earnings call in early February.\nIn fairness to those waiting in the queue we ask that you limit yourself to one question.\nOperator, please introduce the first caller.\n",
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"content": "sees fy adjusted earnings per share about $20.50.\nq3 adjusted earnings per share $4.83.\nconfirming $21.50 as baseline for 2022 adjusted earnings per share growth.\nupdates fy 2021 expected individual medicare advantage membership growth to 450,000 members.\nduring 3q21 covid costs were higher than previously expected.\nupdating its fy 2021 earnings per share guidance to take a more conservative posture going into final months of 2021.\nanticipating total medicare advantage utilization, net of covid costs, will run approximately 1 percent below baseline in q4.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Actual results may differ materially from those made or implied in such statements, which speak only of date they are made and which we undertake no obligation to publicly update or revise.\nOur Chairman and CEO, Clarence Smith will now give you an update on our results.\nAnd then, our President, Steve Burdette will provide additional commentary about our business.\nWe're very pleased with the record results for the second quarter with sales of $250 million.\nWe've done a good job in our expense controls across the board, and combined with pricing disciplines from the merchandising teams and stores, we achieved solid gross margins and 11.7% pre-tax operating profits.\nOur ongoing objectives are to grow market share in our existing distribution footprint and maintain double-digit operating margins.\nWe believe that the increased importance of home that was jump-started with the impact of COVID last spring is a longer-term trend.\nWhile we don't expect the rush that impacted our industry to be at the elevated levels we experienced in recent quarters, we do believe that home is a priority and a sustainable trend for the near future.\nThe strong desire for homeownership, combined with Havertys strong positioning in Florida, Texas and the Southeast, puts us in an ideal position for today and for the future.\nOur supply merchandising and distribution teams are working with our factories and shippers to bring in product to fill orders and reduce our record backlog.\nThe shipping challenges that home-related industries are experiencing have caused major delays for furniture, which we believe will be problems until the spring of 2022.\nWe are working to increase our inventories as the production and product flow improves.\nWe're investing in our distribution capacity to support growth over $1 billion over our regions.\nWe just completed additional racking to our mothership, the Eastern Distribution Center in Braselton, Georgia, which adds 20% more storage capacity.\nWe will evaluate potential expansions to our network to better serve our planned growth.\nOur current focus is on building market share in our key markets with store positioning and target marketing to our core customer and new homeowners.\nExamples of this were the opening of Myrtle Beach earlier this year, the opening of a third store in Austin, in the fast-growing Pflugerville, Round Rock markets and a store opening tomorrow in the villages in Central Florida.\nWe're in a deep dive reviewing potential locations in our best markets, which will reach the fastest-growing areas and leverage our existing infrastructure.\nWe expect to announce several new fill-in locations for the 2022 openings.\nWe're very excited about the rollout of the WE FURNISH HAPPINESS marketing campaign, which we believe more clearly separates Havertys from our competitors and continues to raise the bar on service, quality, furniture and design.\nWe continue to be focused on our front door, havertys.com.\nWe've committed to significant investments in IT and state-of-the-art systems to better reach and appeal to our customers.\nWe've contracted with Adobe to bring on a collection of applications and services that will lay the foundation for unmatched customer experience.\nThe new foundation will improve functionality, help us create content easier and faster, provide better personalizations using AI-driven automation and enhance our analytics and reporting.\nOur goal is to have the best-in-class website experience.\nI'm very excited with our results for the second quarter.\nThis performance was due to the commitment, passion and determination of the store, distribution, home delivery, service and home office teams, whom I want to congratulate personally for their efforts.\nOur supply chain network has been able to increase the flow of products into our warehouses over the second quarter even with all the headwinds.\nContainer capacity continues to be under pressure with the continued increase in demand across all of retail.\nWe expect this to continue to be an issue for the remainder of the year, even if there is a softening in demand.\nAlso, container prices on the spot market continue to increase with prices varying between $12,000 and $22,000 a container.\nWe have been able to balance our shipping mix, so that no more than 20% to 30% is on the water at one-time at these increased rates.\nAs I stated last quarter, we finalized our contracts on May 1, which are significantly below the spot market rates.\nFoam continues to be an issue for some of our domestic vendors, however, their production has increased during the second quarter, but still not at 100%.\nOur import vendors are not having any foam issues.\nThe recent closures in Vietnam due to the increased spread of the Delta variant are not expected to have an impact on our customers, if the closures remain at the projected two weeks.\nThey are expected to open back up beginning the week of 8/2.\nHowever, if the closures are prolonged four to six weeks then there may be an impact to our customers, who already bought and future customer lead times.\nAlso, we are seeing port congestion in Vietnam and China, along with continued issues at the LA port and railyards.\nOur merchandising and supply chain teams are monitoring the situation very closely with our vendors.\nOur pool is now approximately 2 times larger than last year, with the average pool age stretching to approximately eight weeks from six weeks over the last 90 days.\nOur special order lead times have increased to 12 weeks to 20 weeks, depending on the vendor, causing some softening in our special order business.\nOur distribution, home delivery service network delivered a record quarter.\nOver 90% of our markets are delivering within a week to the customer's home once we have the product in our warehouses.\nStaffing continues to be our #1 concern in both distribution and home delivery.\nThe extra unemployment moneys that have stopped in most of the states we operate our warehouses, but there is still not enough people looking for work to fill the jobs available.\nHowever, we remain optimistic that we will see this improve during the third quarter.\nIn the second quarter of 2021, delivered sales were $250 million, a 127.3% increase over the prior year quarter.\nIf you recall, our retail operations were closed due to the pandemic in the month of April in 2020.\n103 stores reopened on May 1, 2020, and the remaining stores reopened by June 20th.\nTotal written sales for the second quarter of 2021 were up 67.5% over the prior year period.\nComparable store sales were up 46.9% over the prior year period.\nThis only include stores that were open for a full month in both periods.\nOur gross profit margin increased 240 basis points from 54.2% to 56.6% due to better merchandising, pricing and mix and less promotional activity during the quarter.\nThese improvements were partially offset by an increase in our LIFO reserve as we continue to see increased freight and product cost.\nSelling, general and administrative expenses increased $39.8 million or 54.7% to $112.4 million, primarily due to increased sales activity.\nHowever, as a percentage of sales, these costs declined over 2,000 basis points to 45% from 66.1%.\nAs demonstrated in the past three quarters, our financial model has substantial operating leverage at these sales levels.\nOther income in the second quarter of 2020 was $31.8 million, which included the gain on the sale-leaseback transaction of three distribution facilities in 2020.\nIf you recall, the gross proceeds from the sale was approximately $70 million.\nIncome before income taxes increased $10.5 million to $29.2 million.\nOur tax expense was $6.3 million during the second quarter of 2021, which resulted in an effective tax rate of 21.6%.\nThe primary difference in the effective rate and statutory rate is due to the state income taxes and the tax benefit from vested stock awards.\nNet income for the second quarter of 2021 was $22.9 million or $1.21 per diluted share on our common stock compared to net income of $13.6 million or $0.72 per share in the comparable period last year.\nExcluding the gain on the sale of our distribution assets in 2020, our adjusted earnings per share in the second quarter of last year was a $0.52 loss.\nNow, turning to our balance sheet.\nAt the end of the second quarter, our inventories were $115 million, which was up $25 million from the December 31, 2020 balance, and up $10.2 million versus the second quarter of 2020.\nAt the end of the second quarter, our customer deposits were $116.1 million, which was up $29.9 million from the December 31st balance and up $58.5 million versus Q2 of 2020.\nWe ended the quarter with $235.3 million of cash, cash equivalents.\nWe have no funded debt on our balance sheet at the end of the second quarter of 2021.\nLooking at some of our uses of cash flow, capital expenditures were $10.9 million for the first half of 2021, and we paid $8.6 million of regular dividends during the first half of 2021.\nDuring the second quarter, we did not purchase any common shares in our buyback program, and we have $16.8 million remaining under current authorization for this buyback program.\nWe expect our gross margins for 2021 to be 56.5% to 56.8%.\nWe anticipate gross profit margins will be impacted by our current estimates of product and freight cost and changes in our LIFO reserve.\nOur fixed and discretionary type SG&A expenses for 2021 are expected to be in the $275 million to $278 million range.\nThis is an increase over our previous estimate, primarily due to rising warehouse compensation and benefit cost.\nThe variable type costs within SG&A for 2021 are expected to be in the range of 17.3% to 17.5%, a slight decrease over our previous guidance.\nOur planned capex for 2021 has increased from $23 million to $37 million.\nAnticipated new or replacement stores, remodels and expansions account for $18.7 million.\nInvestments in our distribution network are expected to be $15.2 million, and investments in our information technology are expected to be approximately $3.1 million.\nThe largest increase in our planned capex for 2021 is in our distribution network.\nIn the third quarter of this year, we will be buying back our Virginia warehouse, which we sold and leased back last year.\nThis is a key distribution asset that may be expanded in the upcoming years.\nOwning this asset gives us more flexibility as we evaluate our future growth plans.\nOur anticipated effective tax rate in 2021 is expected to be 24%.\nThis projection excludes the impact from vesting of stock awards and any potential new tax legislation.\nThis completes our commentary on the second quarter financial results.\n",
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"content": "compname reports q2 earnings per share $1.21.\nq2 earnings per share $1.21.\nq2 same store sales rose 46.9 percent.\nq2 sales $250 million.\nqtrly diluted earnings per common share of $1.21.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Actual results may differ materially from those made or implied in such statements, which speak only of the date they are made and which we undertake no obligation to publicly update or revise.\nOur Chairman and CEO, Clarence Smith, will now give you an update on our results.\nAnd then, our President, Steve Burdette, will provide additional commentary about our business.\nWe're very pleased with another record quarter with sales of $260.4 million and net income of $24.2 million.\nOur team has done an outstanding job in producing this performance through the ongoing COVID concerns, significant product pricing increases, major hiring challenges, especially in warehouse and distribution, rising operating costs in unprecedented supply chain disruptions.\nI believe that we've outperformed the competition in being able to deliver to our customers.\nWe're very pleased with the efforts of our merchandising team and the pricing discipline at the store level.\nEven with the unusual and significant demurrage and LIFO charges, we increased our gross margins and reached record operating profits.\nOur available inventory is in the best shape we've had in over a year.\nWe're finally restarting new product development that was on hold due to COVID and the massive backlog of sold orders.\nClearly, our priority focus is bringing in sold merchandise to bring down our backlogs and to better serve our customers.\nHowever, we are a home furnishings retailer, and fashion and style are important drivers of sales.\nWe're always excited to see the latest design and styles hit our floors, which is an important differentiator for Haverty.\nIn the past several months, we've added over 500 online exclusive products, including outdoor products and specialty occasional items which have had good response.\nWe greatly appreciate our manufacturing partners in China and Vietnam who struggled with COVID shutdowns over the past several months, but are opening back up and increasing their production levels.\nBecause of the COVID-related shutdowns, we will have gaps in imported products, creating some out of stocks, especially in case goods.\nOur merchandising and supply chain teams have a strategy to soften this gap related to the Vietnam factory shutdowns.\nWe expect to end 2021 with 121 stores, one store over last year.\nIn 2022, we have plans to open five stores, netting three.\nWe're evaluating numerous opportunities for locations, which we can serve in our distribution footprint.\nWe've been pleased with our strategy of converting existing retail space to Haverty stores.\nRecently, we've had very good results with stores in the 30,000 to 35,000 square foot size, a building size with more availability.\nWith the importance of our website and special order tools, we can present a large selection set of merchandise without requiring a much larger store.\nWe're in the process of planning 2022 capex.\nWe expect we will be in the same range as we had last -- this year, approximately $35 million net.\nInvestments in stores and renovations are the largest block.\nOur single largest investment will be expansion of our Virginia Distribution Center, which we bought back earlier this year.\nWe're converting the facility from a regional home delivery center to a full distribution center to better serve our Atlantic Coast growth.\nThe expansion will allow us to receive direct shipments from the north port, reducing shipment cost and allow for quicker deliveries.\nOur IT and marketing teams made major investments in remaking and upgrading our website to be the best in class industry leader.\nWe're focused on ease of use and inspiring our customers throughout the process, utilizing the Adobe platform.\nIt will align with an upgraded 3D floor plan, significantly improved graphics, design and search.\nWe're expecting the rollout of the new site early in the second quarter next year.\nAs we just released, our fourth quarter written sales were down approximately 3.5% from the same period last year with delivered sales up 17.5% over last year.\nFor perspective, this year's Q4 written sales to date are up 20.9% and delivered are up 41.5% over 2019.\nWe're having record delivery weeks as we receive more incoming sold product and are having much better inventory compared to last year.\nAs all of retail is struggling with the late shipments for Christmas, we also have real challenges in supply chain, and I would like to ask Steve Burdette, President, to give us an update on our supply chain status.\nI am thrilled with our results for the third quarter.\nOur performance could not have happened without the dedication of our entire team in the stores, distribution centers, home delivery service and home office, whom I want to congratulate personally for their efforts.\nOur supply chain network has been able to increase the flow of products into our warehouses over the third quarter.\nOur warehouse inventory levels rose over 8% for the third quarter, and we are seeing our inventories continue to rise so far in October.\nWe will expect to see a slowdown in imports arriving in the November-December timeframe.\nThe headwinds during the quarter continued with the Vietnam shut down beginning in late July, rising container rates, container congestion at the ports along with container capacity, staffing issues with the continued spread of the Delta variant and trucking pressures moving products within our network.\nThere was a bright spot during the quarter with the foam supply as our vendors do not see this as an issue moving into the fourth quarter.\nVietnam began its shut down in late July and things accelerated in August where majority of our factories were closed for the months of August and September.\nWe are getting positive news from our vendors that they began opening at the beginning of October.\nHowever, it will be a slow process to get back to 100% production.\nMajority of the vendors feel like they will be able to get back to 50% to 75% of production by Chinese New Year with a return to 100% not happening until late first quarter next year.\nA few vendors did give a more upbeat outlook that they will be back to 100% production by the end of November because of the safety and medical protocols that they had in place.\nAlso, we continue to see shipments coming from Vietnam now.\nContainer capacity, container rates and port congestion continue to be areas of concern.\nWe expect these issues to continue well into 2022.\nOur container prices on the spot market continued to increase during the quarter.\nHowever, we are seeing a downward trend in October.\nWe continue to balance our shipping mix so that no more than 20% to 30% is on the water at one time at these spot market rates.\nDue to our focus on ensuring that we could provide our customers with a more consistent flow of product, we incurred higher freight costs during the quarter and a substantial amount of demurrage and detention expense that we expect will be reduced significantly during the fourth quarter.\nStaffing continues to be a concern as it is not only impacting our distribution, delivery and service areas, but it's impacting our manufacturers and trucking partners.\nWe continue to evaluate each of our areas of the business to ensure that we are competitive so that we are attracting the best talent.\nWe did start seeing some traction in the latter part of the quarter, but still have opportunities.\nWe consider our people our most valued asset as we know our service is what sets us apart from our competitors.\nWe have seen our average age of the undelivered pool continuing to increase to nine weeks from eight weeks over the quarter.\nOur special order lead times have stabilized due to the improvement in foam supplies, and we have started seeing higher production quantities from our domestic suppliers over the last four weeks.\nOur special order business is still suffering from these delays, but we feel confident that we will be able to see a bounce back due to a more confident sales team seeing the improvement in our lead times.\nWe remain optimistic for the fourth quarter.\nOur teams are doing a wonderful job communicating with our customers regarding any delays with their products.\nWhile there will be a slowdown in import receipts from Vietnam, we are expecting improved shipping times from our domestic suppliers and improvements in shipments from our bedding suppliers to help offset some of these delays.\nIn the third quarter of 2021, delivered sales were $260.4 million, a 19.7% increase over the prior year quarter.\nTotal written sales for the third quarter of 2021 were up 2% over the prior year period.\nComparable store sales were up 17.7% over the prior year period.\nOur gross profit margin increased 60 basis points from 56.2% to 56.8% due to better merchandise pricing and mix and less promotional activity during the quarter.\nThese improvements were partially offset by an increase in our LIFO reserve as we continue to see increased freight and product cost.\nSelling, general and administrative expenses increased $16.1 million or 16% to $116.2 million, primarily due to increased sales activity.\nHowever, as a percentage of sales, these costs declined 1,400 basis points to 44.6% from 46%.\nAs Steve mentioned earlier, during the third quarter of 2021, we did experience increased port congestion and we incurred significant demurrage costs of approximately $2.3 million, which negatively impacted our selling, general and administrative costs.\nHowever, as demonstrated in the past four quarters, our financial model has substantial operating leverage at these sales levels.\nOther income in the third quarter of 2020 was $2.4 million, which includes the gain on surplus property that was adjacent to our distribution center in Dallas, Texas.\nIncome before income taxes increased $7.4 million to $31.9 million.\nOur tax expense was $7.7 million during the third quarter of 2021, which resulted in an effective tax rate of 24%.\nThe primary difference in the effective rate and statutory rate is due to state income taxes and the tax benefit from vested stock awards.\nNet income for the third quarter of 2021 was $24.2 million or $1.31 per diluted share on our common stock compared to net income of $18.3 million or $0.97 per share in the comparable quarter of last year.\nNow looking at our balance sheet, at the end of the third quarter, our inventories were $119 million, which was actually up $29.1 million from the December 31, 2020 balance and up $28 million versus the Q3 2020 balance.\nAt the end of the third quarter, our customer deposits were $120.1 million, which was up $34 million from the December 31, 2020 balance and up $31.7 million versus the Q3 2020 balance.\nWe ended the quarter with $232.3 million of cash and cash equivalents.\nWe have no funded debt on our balance sheet at the end of Q3 2021.\nLooking at some of the uses of cash flow.\nCapital expenditures were $28.1 million for the first nine months of 2021 and we paid $13 million of regular dividends during the first nine months of 2021.\nDuring the third quarter, we purchased $19.5 million of common stock as 537,196 shares.\nAs previously reported, our board of directors authorized an additional $25 million of share repurchases.\nAt the end of the third quarter of 2021, we had $22.3 million remaining under current authorization in our buyback program.\nWe continue to expect our gross profit margins for 2021 to be between 56.5% to 56.8%.\nWe anticipate gross profit margins will be impacted by our current estimate of product and freight costs and changes in our LIFO reserve.\nOur fixed and discretionary type SG&A expenses for 2021 are expected to be in the $278 million to $281 million range, an increase over our previous estimate, primarily due to rising warehouse and demurrage costs.\nThe variable-type costs within SG&A for 2021 are expected to be in the range of 17% to 17.3%.\nOur planned capex for 2021 remains at $37 million, anticipated new replacement stores, remodels and expansions account for $18.7 million, investments in our distribution network are expected to be $15.2 million and investments in our information technology are expected to be approximately $3.1 million in 2021.\nOur anticipated effective tax rate for this year is expected to be 24%.\nThis projection excludes the impact from vesting of stock awards and any potential new tax legislation.\nThis completes my commentary on the third quarter financial results.\nWe are very pleased with the record performance here underway.\nWe're comparing well with the second half records of 2021 and against 2019.\nWe believe that the pneumatic return to home that COVID precipitated has changed the importance of home for years to come.\nWe agree with the recent editorial from Jerry Epperson, an industry veteran and analyst in furniture today this week.\nFollowing the boomers, the millennials and Gen Xers have moved to desiring homes because of life changes related to having children.\nWe're having another housing boom where people want to move to the suburbs.\nWe're getting back to the 67% of our households being homeowners.\nThe home will continue to grow in importance.\nYou can now shop, bank, see the doctor and go to church from home.\nThis is going to transform our nation in terms of level of productivity, innovation and new ideas.\nHaverty's 136-year history and strength is in serving the home furnishing needs in the 16 Southern Atlantic and Central states.\nThese areas are gaining the most transplants from the rest of the country.\nWe think that our locations, premium product merchandising, H Design services and dedicated distribution positions us to continue to grow from the all time record set in the past years.\nWe believe we have the experience, the deep resources and strong commitment to growing our sales and maintain strong double-digit operating profits in the years ahead.\n",
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"content": "q3 earnings per share $1.31.\nq3 same store sales rose 17.7 percent.\nq3 sales rose 19.7 percent to $260.4 million.\nqtrly comparable store sales increased 17.7%.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: I'm joined by John Plant, Executive Chairman and Co-Chief Executive Officer; Tolga Oal, Co-Chief Executive Officer; and Ken Giacobbe, Executive Vice President and Chief Financial Officer.\nAfter comments by John, Tolga and Ken, we will have a question-and-answer session.\nIn addition, we've included some non-GAAP financial measures in our discussion.\nI'll start with an overview of Howmet's second quarter performance then pass to Tolga, who'll talk more to our markets, and then Ken will provide further financial detail.\nI also plan to talk to ESG, and we'll do so in about once a year going forward and then provide guidance and talk to guidance for the third quarter and the full year 2021.\nSo let's move to slide number four.\nLet me start with some commentary on the second quarter, which was the first comparable quarter for Howmet post separation with no pro forma numbers.\nRevenue was $1.2 billion and in line with expectations, while EBITDA, EBITDA margin and earnings per share exceeded our expectations.\nAdjusted EBITDA was $272 million, and adjusted EBITDA margin was on par with Q1 2021 and Q4 2020 at 22.8% despite the addition of costs to prepare for the second half ramp-up in commercial aerospace production.\nEarnings per share, excluding special items, was $0.22 and ahead of our expectations.\nHistorically, the first half has been a cash outflow for the company.\nThe increased operating performance focus of Howmet has led to improved margins, enhanced working capital control and capital discipline, which generated $160 million of cash in the first half of the year.\nWe expect continued cash generation in the third and fourth quarters.\nYear-to-date, we have reduced debt by approximately $835 million by completing the early redemption of the 2021 notes in Q1 and the 2022 notes in Q2 with cash on hand.\nThese transactions reduced 2021 interest expense by approximately $28 million and approximately $47 million on an annual run rate basis.\nThis helps with increased 2022 free cash flow.\nIn the second quarter, we continue to return money to shareholders with the completion of a $200 million share buyback program.\nThe weighted average acquisition price was $34.02 per share for approximately 5.9 million shares.\nThe second quarter end cash balance was $716 million.\nLastly, we continue to focus on reducing legacy liabilities.\nYear-to-date, we have reduced our pension and OPEB liabilities by approximately $160 million.\nMoreover, full year pension and OpEx expense is expected to improve approximately 50% compared to last year.\nNow let's move to markets and performance on slide five.\nQ2 revenue was 5% less year-over-year and in line with our expectations.\nOn a year-over-year basis, commercial aerospace was 31% less, driven by lower aircraft builds, spares and the lingering effects of customer inventory corrections.\nCommercial aerospace continues to represent approximately 40% of total revenue compared to pre-COVID levels of 60%.\nThe commercial aerospace decline is partially offset by our continued strength in other markets.\nThe industrial gas turbine business continues to grow and was up 13% year-over-year, driven by new builds and spares.\nThe commercial transportation business was up 89% year-over-year as it rebounds from customer shutdowns in Q2 of 2020.\nTruck demand remains strong as our customers manage through their own supply chain issues with several components which are in short supply.\nAt the bottom of the slide, you can see the progress on price, cost reduction, margin expansion and cash management.\nPrice increases are up year-over-year and continue to be in line with expectations as they are tied to long-term agreements.\nStructural cost reductions are also in line with expectations with a $37 million year-over-year benefit which reflects the decisive actions we started in the second quarter of 2020 at the onset of the pandemic and continued through last year.\nYear-to-date structural cost reductions are $98 million, which have essentially achieved already our target of approximately $100 million.\nThe aerospace decremental operating margins continue to be very good at only 19%, while the Wheels segment had an incremental margin of 47%.\nEBITDA margin expanded by 310 basis points year-on-year, driven by price, variable cost flexing and fixed cost reductions.\nThe team delivered strong margin expansion despite a reduction in revenue.\nCapital expenditure was $36 million for the quarter and continues to be less than depreciation and amortization, resulting in a net source of cash.\nLastly, free cash flow was $164 million for the quarter, resulting in a record first half.\nNow let's move to slide six.\nAdjusted EBITDA margin for the quarter was 22.8% and consistent with the last couple of quarters on approximately $43 million of less revenue.\nThe margin results overcame both the effects of the low revenue and the cost of many additional employees to meet the increasing production demand coming in the third quarter.\nQ2 revenue at $1.2 billion was in line with expectations.\nYou can see the benefit of our actions since the start of the pandemic in Q2 with a solid 310 basis points EBITDA margin expansion, while revenue was approximately $58 million less in the same period.\nNow let me hand it over to Tolga to give an overview of the markets.\nPlease move to slide seven and some more details about our year-over-year revenue performance.\nSecond quarter revenue was 5% less, driven by commercial aerospace, which continues to represent approximately 40% of total revenue in the quarter.\nCommercial aerospace was 31% less year-over-year, in line with our projections as expected inventory corrections continued.\nDefense aerospace was essentially flat in the second quarter as we are on a diverse set of programs with the Joint Strike Fighter being approximately 40% of the total defense business.\nCommercial transportation, which impacts both the Forged Wheels and the Fastening Systems segments, was up 89% year-over-year as second quarter of last year was significantly impacted by customer shutdowns.\nFinally, the industrial and other markets, which is composed of IGT, oil and gas and general industrial, was up 13%.\nIGT, which makes up approximately 45% of this market, continues to be strong and was up a healthy 13% year-over-year.\nLet's move to slide eight for the segment results.\nAs expected, Engine Products year-over-year revenue was 7% less in the second quarter.\nCommercial aerospace was 17% less, driven by customer inventory corrections and reduced demand for spares.\nCommercial aerospace was partially offset by a year-over-year increase of 13% in IGT.\nThe IGT business continues to be strong as demand for cleaner energy continues.\nDecremental margins for engines were 12% for the quarter as we hired back approximately 300 workers to prepare for the anticipated growth in the second half of this year.\nNow let's move to Fastening Systems on slide nine.\nAlso was expected, Fastening Systems year-over-year revenue was 20% less in the second quarter.\nCommercial aerospace was 42% less.\nLike the Engine segment, we continue to experience inventory corrections in commercial aerospace.\nThe industrial and commercial transportation markets within the Fastening Systems segment were both up approximately 45% year-over-year.\nDecremental margins for Fastening Systems were 31% for the second quarter, and segment operating profit margin was approximately 19%.\nPlease move to slide 10 to review Engineered Structures.\nEngineered Structures year-over-year revenue was 30% less in the second quarter.\nCommercial aerospace was 45% less, driven by customer inventory corrections and production declines for the Boeing 787.\nDefense aerospace was relatively flat year-over-year.\nDecremental margins for Engineered Structures were 12% for the quarter.\nLastly, please move to slide 11 for Forged Wheels.\nForged Wheels revenue doubled year-over-year as last year's results were impacted by customer shutdowns.\nOn a sequential basis, volumes were down approximately 7% due to customer supply chain issues.\nReported revenue was essentially flat sequentially, driven by a 20% increase in aluminum prices.\nAlthough higher metal costs were passed through to customers to avoid a profit impact, you will see a reduction in EBITDA percent resulting from the pass-through.\nSegment operating profit margin was approximately 27%, and year-over-year incremental margin was 47%.\nImproved margin was driven by continued cost management and maximizing production in low-cost countries.\nPlease move to slide 12.\nWe continue to focus on improving our capital structure and liquidity.\nIn the first half of the year, we completed the early redemption of our 2021 and 2022 bonds with cash on hand.\nGross debt stands at approximately $4.2 billion.\nAll debt is unsecured, and the next maturity is in October of 2024.\nFinally, our $1 billion 5-year revolving credit facility remains undrawn.\nBefore turning it back to John to discuss ESG and 2021 guidance, I would like to point out that there's a slide in the appendix that covers special items in the quarter.\nSpecial items for the second quarter were a net charge of approximately $22 million, mainly driven by the costs associated with the early redemption of the 2022 bonds completed in early May.\nMoving to ESG, I'd I encourage you to read our sustainability report found at howmet.com in the Investors section.\nFor Howmet Aerospace, environmental, social and governance is about generating meaningful change for a more sustainable future, improving our diversity and inclusion inside our company and in the communities in which we operate.\nRegarding employee safety, we are maintaining attention on safety through and certain operational conditions presented by COVID-19.\nTotal recordable incidents continue to be significantly better than the aerospace and defense industry average.\nFor 2020, we had a 20% year-over-year improvement in rate to 0.71.\nAdditionally, 84% of our locations worldwide were without a lost workday incident.\nThis is a tremendous testament to the dedication and focus of our workforce.\nWe continue to underscore the importance and power of diversity, equity and inclusion in our company.\nWe value the rich diversity of expertise, backgrounds and viewpoints that fuel our innovation, and we are committed to improving diversity of employees at all levels.\nRecently, we were recognized by the 50/50 Women on Boards organization for our commitment to board diversity.\nIn addition to gender diversity, we also partnered with key external organizations, including the Human Rights Campaign, the National Hispanic Corporate Council and Diversity Best Practices, to review and continuously improve our initiatives.\nWith respect to sustainability, nowhere is this more evident than in the products that we provide to our customers.\nOur proprietary technologies help reduce fuel consumption and carbon emissions contributing to the aerospace industry's goal of a smaller carbon footprint.\nFive specific areas are at the bottom left of the slide.\nFor commercial aerospace, next-generation jet engine technology reduces fuel consumption by approximately 15%.\nMoreover, Howmet's increased content on composite aircraft of 2 times contributes to lightweighting solutions and reduces fuel use as composite aircraft are approximately 20% more fuel efficient than comparable metallic aircraft.\nFor Forged Wheels, Howmet's aluminum wheels are 5 times stronger than steel while being 47% lighter.\nCustomers can realize up to 1,400 pounds of weight savings from retrofitting an 18-wheeler Class eight truck of steel to aluminum wheels.\nFor IGT, Howmet's products continue to enable higher operating temperatures in the turbine and also pressures, which increase the load efficiency toward approximately 64% and reduce nitrogen oxide emissions by approximately 40%.\nLastly, for renewables, Howmet's Fastening Systems used with solar panels improve strength and clamping by 5 times to 10 times and reduce installation time by up to 80%.\nMoving to STEM education and inclusiveness.\nHowmet is dedicated to increasing STEM opportunities and education in the local community through the Howmet Aerospace Foundation with grants to institutions and schools.\nAlso, we renewed our commitment to support our six employee resource groups with strategic focus on community, culture and careers.\nLet me now move to slide 14 for our third quarter and annual guidance.\nThe leading indicators for air travel continue to show improvement, notably for domestic travel.\nThis includes online searches for air tickets, increases in flight schedules across most of the world and beginnings of some international travel.\nOrders for aircraft by airlines and assembly partners are increasing rapidly.\nThe expectation that Howmet will transition into revenue growth in the third quarter continues with growth of approximately 15% in commercial aerospace and total revenue growth of approximately 9%.\nWe look forward to managing and leading this exciting growth phase for Howmet after the devastation of the pandemic on the industry.\nGrowth is expected to continue into Q4 and into 2021 -- sorry, 2022 and beyond.\nThe sequence of our business is that we expect increases in the Engine business, notably starting in the third quarter, followed by Structures in the fourth quarter; and Fastener, starting in the first quarter of 2022.\nIn terms of specific numbers, we expect the following: for the third quarter, revenue of $1.3 billion, plus or minus $20 million; EBITDA of $295 million, plus or minus $10 million; EBITDA margin of 22.7%, plus or minus 40 basis points; and earnings per share of $0.25, plus or minus $0.02.\nAnd for the year, we expect revenue to be $5.1 billion, plus or minus $50 million; EBITDA baseline to increase to $1.17 billion, plus or minus -- plus $15 million, minus $25 million; EBITDA margin to increase to 22.9%, plus 10 basis points and minus 20 basis points; earnings per share increase to $0.99, plus or minus $0.03; cash flow baseline increase to $450 million, plus or minus $35 million.\nMoving to the right-hand side of the slide, we expect the following: second half revenue to be up approximately 12% versus the first half, driven by commercial aerospace, defense and IGT; second half year-over-year incremental margins of over 50% compared to the prior year.\nPrice increases will continue to be greater than 2020.\nThe cost reduction carryover of $100 million is already achieved with some potential modest upside.\nPension and OPEB contributions of approximately $120 million.\nWe are reducing cash pension contributions by approximately $40 million based upon the American Rescue Plan Act.\ncapex should be in the range of $200 million to $220 million compared to depreciation of approximately $270 million.\nAdjusted free cash flow conversion continues to be in excess of net income at approximately 100%.\nLastly, as announced last month, we have reinstated the quarterly dividend of $0.02 per common stock, starting in the third quarter.\nNow let's move to slide 15 for a summary.\nThe second quarter was solid, and it's described as a quarter to get through while we look for the volume lift in the third quarter.\nIt was better than expectations with improved margins and excellent cash flow.\nThe net recruitment of production operators in the second quarter was approximately 300 people, principally in our Engine business.\nAnd we, of course, will continue to manage costs very carefully during this recovery phase.\nIn the second half, we plan to recruit another net 500 people.\nLiquidity is strong, and we have healthy cash generation.\nThe third quarter outlook is for revenue to be approximately $100 million higher than the second quarter with margins somewhere between 22.3% and 23.1%.\nFor the second half, we expect extra costs.\nHowever, year-over-year incremental margins are expected to be over 50%.\nConsolidated EBITDA margins for the second half are expected to be 22.6% to 23.2%, setting a platform for a healthy 2022 And overcoming the drag of the increased labor costs from the recruitment I talked about and the cost of net -- the net effect of the metal recoveries.\n",
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"content": "howmet aerospace q2 revenue $1.2 billion versus refinitiv ibes estimate of $1.22 billion.\nq2 earnings per share $0.22 from continuing operations excluding items.\nq2 revenue $1.2 billion versus refinitiv ibes estimate of $1.22 billion.\nsees fy earnings per share excluding special items $0.95-$1.02, versus prior $0.91-$1.02, with an increased outlook of $0.99.\nsees q3 earnings per share excluding special items $0.23-$0.27 with an outlook of $0.25.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: I'm joined by John Plant, Executive Chairman and Chief Executive Officer; and Ken Giacobbe, Executive Vice President and Chief Financial Officer.\nAfter comments by John and Ken, we will have a question-and-answer session.\nIn addition, we've included some non-GAAP financial measures in our discussion.\nFirst, let's summarize the headline numbers, starting on slide number four.\nRevenue was $1.28 billion, adjusted EBITDA $292 million and EBITDA margin was 22.8%.\nEach number was within the guidance range provided.\nMore importantly, year-over-year revenues increased for the first time.\nThe revenue was led by Commercial Aerospace, up 15% year-over-year, and contributing to a total increase of 13%.\nOf note, the Howmet segment leading the increase was Engine Products as previously forecasted.\nThe company was also able to overcome the challenges once again of the Boeing 787 build rate declines and the supply chain issues limiting commercial truck production, the 787 affecting Fastening Systems and Engineering Structures in particular.\nAluminum prices continued the upward surge with aluminum and regional premiums increasing by over $400 per metric ton sequentially and impacting the margin rate by 20 basis points.\nAdjusted earnings per share, excluding special items, was $0.27, and cash generated in the quarter was $115 million.\nAR securitization was unchanged at $250 million.\nOn a sequential basis, Third quarter revenue and adjusted EBITDA were up 7% and adjusted earnings per share up 23%.\nMoving to the balance sheet and cash flow.\nAdjusted free cash flow for the quarter was strong at $115 million, which results in a Q3 year-to-date free cash flow at a record $275 million.\nKen will provide further details of our debt actions in the quarter, which included a bond tender refi finance to fundamentally lower interest costs and thereby improve future free cash flow yield.\nThe combination of debt actions in the third quarter, combined with our first half results and actions, will reduce annual interest expense by approximately $70 million.\nIn the quarter, we also repurchased approximately 770,000 shares of common stock for $25 million, which increases share repurchases year-to-date to approximately seven million shares for $225 million.\nThe net result of all these actions plus the reinstatement of the common stock dividend and the $115 million cash inflow resulted in a cash balance of $726 million, similar to that at the end of Q2.\nLastly, we continue to focus on legacy liabilities and have reduced pension and OPEB liabilities by approximately $180 million year-to-date.\nMoreover, year-to-date pension and OPEB expenses have reduced by approximately 50% compared to last year.\nPlease move to slide number five.\nRevenue for the quarter increased 13% year-over-year and 7% sequentially.\nAs expected, Commercial Aerospace was up 15% year-over-year and 16% sequentially, driven by the Engine Products segment and narrow-body aircraft production.\ncommercial transportation, namely Wheels, was up 38% year-over-year.\nVolume was impacted by supply chain constraints, limiting the Commercial Truck production.\nThe volume reduction in the Wheels business was offset by metal recovery dollars.\nThe industrial gas turbine business continues to grow and was up 26% year-over-year and 6% sequentially, driven by new builds and spares.\nDefense Aerospace was down 11% year-over-year, driven by reductions in the Joint Strike Fighter builds, but was up 3% sequentially from the second quarter.\nAt the bottom of the slide, you can see the progress on price, cost reduction and cash management.\nPrice increases are up year-over-year and continue to be in line with expectations.\nStructural cost reductions have exceeded our annual target of $100 million.\nQ3 structural cost reductions were $23 million year-over-year and $121 million year-to-date.\nEvery segment achieved a strong year-on-year margin expansion as revenue increased for the first time in the year in aggregate.\nIn the third quarter, Engine Products had an incremental operating margin of approximately 70%, and Forged Wheels had an incremental operating margin of approximately 45%.\nFastening Systems and Engineering Structures both had a higher EBITDA on lower revenue.\nFasteners had an operating margin expansion of some 630 basis points, while structures was up 210 basis points.\nAs a result, Howmet's adjusted EBITDA margin expanded a full 800 basis points year-on-year, driven by volume, price and structural cost reductions.\nAdjusted free cash flow for the quarter was $115 million and year-to-date, $275 million.\nAnd as I said previously, AR securitization is unchanged from the start of the year.\nLastly, we have lowered our annualized interest cost by $70 million through a combination of paying down debt and refinancing into low-cost debt.\nPlease move to slide number six.\nAdjusted EBITDA margin for the quarter was 22.8%, representing an 800 basis point improvement compared to the third quarter of 2020.\nThe margin for the third quarter was consistent with the last few quarters, despite the cost of adding employees to meet the increasing production demand and the effect on margins of the higher aluminum prices.\nIn the quarter, Engine Products added approximately 500 employees net, which now brings the total to 800 net additional employees hired for that segment during the second and third quarters.\nWe continue to review the headcount required in our other segments to adjust for future demand requirements.\nPlease move to markets on slide seven.\nThird quarter total revenue was up 13% year-over-year and 7% sequentially.\nCommercial Aerospace increased to 42% of total revenue, which is an improvement sequentially, but far short of pre-COVID levels of 60%.\nThe third quarter marked the start of the Commercial Aerospace recovery, with commercial aerospace revenue up 15% year-over-year and 16% sequentially.\nDefense Aerospace was down 11% year-over-year, driven by the Joint Strike Fighter and up 3% sequentially.\nCommercial Transportation, which impacts both the Forged Wheels and Fastening Systems segment was up 38% year-over-year, however, flat sequentially after we adjust for the increase in aluminum prices.\nFinally, the Industrial and Other Markets, which is composed of IGT, oil and gas and general industrial was up 14% year-over-year and down 2% sequentially.\nIGT, which makes up approximately 45% of this market continues to be strong and was up a healthy 26% year-over-year and 6% sequentially.\nLet's move to slide eight for the segment results.\nAs expected, Engine Products year-over-year revenue was 24% higher in the third quarter.\nCommercial Aerospace was 50% higher, driven by the narrow-body recovery.\nIGT was 26% higher as demand for cleaner energy continues.\nDefense Aerospace was down 8% year-over-year, but up 7% sequentially.\nIncremental margins for Engine Products were approximately 70% for the quarter despite hiring back approximately 500 workers to prepare for future growth.\nOperating margin improved 1,200 basis points year-over-year.\nPlease move to slide nine.\nAlso as expected, Fastening Systems year-over-year revenue was 6% lower in the third quarter.\nCommercial Aerospace was 25% lower as we saw continued production declines for the Boeing 787 and customer inventory corrections.\nThe commercial transportation and industrial markets within the Fastening Systems segments were approximately 55% and 19% year-over-year, respectively.\nYear-over-year Fastening Systems was able to generate $14 million more in operating profit, while revenue declined $17 million.\nAs a result, operating margin improved 630 basis points.\nPlease move to slide 10.\nEngineered Structures year-over-year revenue was 3% lower in the third quarter.\nCommercial Aerospace was 13% higher as the narrow-body recovery was partially offset by production declines for the Boeing 787.\nDefense Aerospace was down 21% year-over-year, but was flat sequentially.\nYear-over-year, Engineered Structures was able to generate $4 million more in operating profit on $7 million of lower revenue.\nAs a result, operating margin improved 210 basis points.\nFinally, please move to slide 11.\nForged Wheels year-over-year revenue was 34% higher in the third quarter.\nOn a sequential basis, revenue and operating profit were essentially flat.\nThe segment was able to overcome a 4% decrease in volume due to customer supply chain issues, limiting commercial truck production, and a 13% increase in aluminum prices to maintain a healthy operating margin of approximately 27%.\nYear-over-year incremental margins for Forged Wheels were approximately 45% for the quarter.\nImproved margins were driven by continued cost management and maximizing production in low-cost countries.\nNow let's move to slide 12.\nWe continue to focus on improving our capital structure and liquidity.\nI would highlight three actions.\nFirst, in the first half of the year, we paid down approximately $835 million of debt by completing the early redemption of our 2021 and 2022 bonds with cash on hand.\nThe annualized interest expense savings with this action is approximately $47 million.\nSecond, in the third quarter we tendered $600 million of our 6.875% notes due in 2025 and issued $700 million of 3% notes due in 2029.\nThe annualized interest expense savings with this action is approximately $20 million.\nThird, with cash on hand, we repurchased $100 million of our 2021 notes through an open market repurchase in Q3 and in October, which neutralized the gross debt impact of the tender and refinancing.\nThe annualized interest expense saving with this action is approximately $5 million.\nAs a result of these actions, we have lowered annualized interest costs by approximately $70 million and smoothed out our future debt maturities.\nAt the end of Q3, gross debt was approximately $4.2 billion, which is similar to Q2.\nNet debt to EBITDA improved from 3.5 times in Q2 to 3.2 times despite the deployment of cash for debt refinancing, share buybacks and dividends.\nAll debt is unsecured, and the next maturity is in October of 2024.\nFinally, our $1 billion revolving credit facility remains undrawn.\nBefore turning it back to John to discuss guidance, I would like to point out that there's a slide in the appendix that covers special items for the quarter.\nSpecial items for the third quarter were a net charge of approximately $93 million, mainly driven by the costs associated with the bond tender and refinancing completed in the quarter.\nThe leading indicators for air travel continue to show improvement, notably for domestic travel.\nBut also we note the sort of revised requirements or these restrictions being lifted for, certainly, transatlantic travel starting this month.\nAs expected, Howmet transitioned to revenue growth in the third quarter, and we expect year-over-year revenue growth will continue into the fourth quarter and to 2022, with a growth of approximately 12% in commercial aerospace and total revenue growth in the fourth quarter of approximately 6%.\nGrowth is expected to continue in 2022.\nAs expected, the Engine Products business began to grow notably in the third quarter.\nWe expect modest sequential growth in Q4 for Engineered Structures despite continued delays with the 787.\nFastening Systems is expected to show growth in the first half of 2022.\nIn terms of specific numbers, we expect the following: In terms of guidance for Q4, I'll just call out the midpoints, as you can read the slide: Revenue, $1.315 billion; EBITDA, $300 million; EBITDA margin, 22.8%; earnings per share of $0.29.\nAnd for the year, we expect revenue to be $5 billion, plus or minus; EBITDA at $1.135 billion; EBITDA margin at 22.7%; earnings per share increased to $1 per share; and cash flow of $450 million.\nMoving to the right-hand side of the slide, we expect the following: Second half revenue to be up approximately 8% versus the first half driven by Commercial Aerospace, Commercial Transportation and IGTT; Q4 sequential segment incremental operating margins, we expect to be in the order of 28%.\nPrice increases will continue to be greater than 2020, the cost-reduction carryover of $100 million, as already commented, is exceeded.\nPension and OPEB contributions of approximately $120 million and capex should be in the range of $180 million to $200 million compared to depreciation of approximately $270 million.\nAdjusted free cash flow compared to net income continues to be approximately 100%.\nI'd now like to preview some initial thoughts regarding 2022.\nAn early approximate total revenue guide would be for an increase in annual revenues of 12% to 15%, led by recovery in Commercial Aerospace.\nIn aggregate, our current view is that we see an acceleration during the course of the year, following a fairly flat first quarter compared to the fourth quarter this year, except for increased revenues due to metal recovery.\nWe'll refine this view and provide guidance at our earnings call in February 2022.\nNow let's move to slide 14 for the summary.\nWe delivered strong performance in the third quarter, which was in line with guidance.\nGrowth was very healthy, year-on-year and sequentially.\nIncrementals were truly exceptional, and the company's margin is in the top decile in aerospace.\nQ3 started -- or marked the start of the Commercial Aerospace recovery.\nMoreover, we delivered sequential improvements in both EBITDA and earnings per share.\nWe'll continue to manage costs very carefully during this recovery phase.\nLiquidity is strong, and we have very healthy cash generation.\nThe fourth quarter, for our -- revenue outlook is $30 million higher than the third quarter, with margins of approximately 23%, which sets a platform for a healthy 2022.\nAdjusted earnings per share guidance was increased, reflecting lower interest costs.\n",
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"content": "howmet aerospace delivers third quarter 2021 sequential revenue growth.\nhowmet aerospace delivers third quarter 2021 sequential revenue growth; raises adjusted earnings per share guidance1.\nq3 earnings per share $0.27 from continuing operations excluding items.\nq3 revenue rose 13 percent to $1.28 billion.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Before beginning, let me cover the formalities.\nSuch factors are detailed in the company's SEC filings and last night's news release.\nIt cannot be recorded or rebroadcast without our express permission.\n[Indecipherable] today are Nick Stanage, our Chairman, CEO and President; and Kurt Goddard, our Vice President of Investor Relations.\nThe purpose of the call is to review our fourth quarter and full-year 2020 results detailed in the news release issued yesterday.\nAfter reading our news release last night, I'm sure you'll agree that clearly we've had a seismic shift in the business, our demand, our volume, and our financial metrics.\nI also hope that we recognize how Hexcel has moved quickly and robustly in response to the market challenges arising from the pandemic.\nThe results we are sharing with you today reflect the strong and decisive actions that we took swiftly in response to the substantial impact of the pandemic on all those involved in the aerospace industry in 2020.\nThe actions which are ongoing include approximately a 35% reduction in global headcount; temporarily idling assets; cutting discretionary expenditures; prioritizing the most critical projects, including capital expenditures; and rightsizing working capital to generate strong cash flow.\nSo I'm glad that 2020 is behind us.\nAt the same time, it's amazing what you learn about yourself and your organization during such challenging times.\nI learned how extraordinarily strong, resilient, and action-oriented Hexcel employees are.\nThroughout the year, and despite the uncertainties and the difficult decisions we took, our team accepted and embraced the challenges we faced, quickly developing options and taking decisive actions.\nThey knew what needed to be done and they did it.\nAlthough 2020 is over, the pandemic headwinds will continue to test us into 2021.\nAs I mentioned in our news release last night, this first quarter of 2021, along with Q3 and Q4 of 2020 are anticipated to be our most challenging quarters during this pandemic.\nWe expect continued inventory destocking into the first part of 2021, which will continue to impact sales volumes and mix.\nGrowth for both our customers and for Hexcel is contingent on a healthy return to air travel following a successful vaccine rollout.\nWe are guardedly optimistic for a steady recovery in our business as 2021 progresses.\n2021 is going to be yet another unusual year as the world gradually emerges from the pandemic, and remaining disciplined will be vital for our success.\nWe will not drop the ball or our guard in relation to health and safety of our employees.\nWe will continue to work with our customers to provide innovative solutions to meet their needs, while at the same time maintaining our focus on delivering operational excellence and cost control, and not allowing waste and inefficiency in any areas of our business.\nWe will remain disciplined in relation to cash management and maintain an optimal level of working capital throughout our business and control inventory levels to match our customer demand requirements.\n2021 will be another challenging year, but I can assure you that Hexcel is ready.\nOur teams are focused, and we are optimistic that the actions we have taken and continue to take during the pandemic are laying the foundation for another period of robust growth in the years ahead.\nNow let me turn to our results.\nFirst, I'll cover the fourth quarter results and then full year 2020.\nFourth quarter sales of almost $296 million were in line with our forecast.\nAdjusted fourth quarter diluted earnings per share was a negative $0.18 compared to a positive $0.86 last year.\nOur focus on cash management has been unwavering throughout this pandemic, and in the fourth quarter we generated another $104 million, resulting in $214 million of free cash flow for the year.\nTurning to our three markets.\nFourth quarter aerospace sales were down 66% compared to Q4 2019.\nAll of our major programs were down substantially with the largest sales impact being related to the A350 widebody.\nBuild rate reductions driven by the pandemic combined with the 737 MAX grounding and significant supply chain inventory destocking led to the reduced sales levels.\nSales to other commercial aerospace, which includes regional and business aircraft, fell almost 60% year over year.\nAgain, the decline was from lower demand resulting from the pandemic.\nOn a positive note, space and defense sales increased almost 4% compared to Q4 2019.\nGrowth in this segment is broad-based across several defense and space programs, particularly US military rotorcraft.\nIndustrial sales declined approximately 29% when compared to Q4 2019.\nAs you know, wind energy sales are our largest industrial submarket, and those sales declined 42% in constant currency.\nDuring the year, we saw a decline in demand for wind energy materials in the United States by our largest wind energy customer Vestas.\nThat led us to close our prepreg production facility in Windsor, Colorado in November.\nThe decline is attributable in part to the commoditization and outsourcing of blades with a changing technology from prepreg to infusion wind energy remains a good business for Hexcel, and we are adjusting to the changing market dynamics and introducing new innovations to support our customers.\nVestas continues to be a great customer and manufacturing continues at our plants in Neumarkt, Austria; and Tianjin, China.\nNow let's turn to some specifics in our full-year 2020 results.\n2020 sales were $1.5 billion, down 36% year over year.\nAdjusted diluted earnings per share for the year was $0.25.\nOur full-year results were bolstered by the pre-pandemic Q1 2020 results, which were the strongest of the year.\nFree cash flow came in strong at $214 million compared to $287 million in 2019.\nOur liquidity position remains robust, and we have managed working capital tightly during this pandemic.\n2020 commercial aerospace sales were about $822 million compared to $1.6 billion in 2019, a decline of almost 50% [Indecipherable] an unprecedented decline in demand driven by lower build rates across all programs, including the 737 MAX, was compounded by inventory destocking across the supply chain.\nSales to other aerospace declined by one-third.\nSpace and defense sales for 2020 grew nominally to $448 million compared to $445 million in 2019.\nSelect programs have been impacted by pandemic-induced disruptions, although we feel these are temporary impacts that we -- that will be recovered over time.\nMoreover, space and defense is traditionally a strong and attractive market for Hexcel, now enhanced by our ARC Technologies acquisition where we continue to be pleased with the excellent performance and sales growth.\nFinally, turning to industrial, sales were $232 million in 2020, which was 26.5% lower year over year.\nWe have good wind energy demand continuing from the European and Asian markets as we enter 2021, and we are encouraged by growing demand for composites in automotive, marine, and sports applications where we have opportunities for growth.\nOur technical innovations in strength and light-weighting have led to increased composites penetration in these markets.\nThey were challenged in 2020 in ways we never could have imagined.\nDespite all the uncertainty, distractions, and sacrifices, they performed well for our customers and shareholders, and I couldn't be prouder.\nOur employees accepted the challenge of wearing face masks all day, constantly distancing themselves from one another, dealing with additional concerns about their own health and family's well-being in the midst of a pandemic, and they did this while continuing to deliver the high standards we set.\nIn this context, we achieved our best-ever safety rate performance in 2020.\nThat's just phenomenal and illustrates our deeply rooted safety culture.\nI also want to take a moment to reassure you that not even a pandemic, such as we are experiencing, has altered our commitment to continued innovation and customer intimacy.\nAll of our R&D sites are considered essential businesses, and these teams kept up their work in our labs throughout 2020.\nThey've continued to advance new technologies that will lead to new and optimized product offerings and improved manufacturing performance.\nOur advanced composites technology leads our industry, and we're proud that we have been able to continue to work for our customers during the pandemic.\nFinally, I want to mention that in Q4 we were pleased to expand our contract with Safran to include our HexTow IM7 Carbon Fiber for the GE9X engine that powers the 777X as well as positioning Hexcel for next-generation engines being developed by Safran.\nThis expansion also includes our advanced composites for Safran Cabin, Seats, and Aerosystems.\nOur relationship with Safran spans more than 35 years, and we are proud to partner with this key customer providing our high-performance materials that support the strength, efficiency, and reliability in their products.\nTo briefly summarize the quarterly results, our 2020 sales were negatively impacted by lower build rates and continued destocking as we expected and communicated last quarter.\nOur aggressive cost-reduction actions are starting to have an impact, which we've demonstrated by sequential margin improvement compared to the third quarter of 2020.\nFurther, we continue to generate free cash flow and deleverage with particularly strong and disciplined management of working capital.\nWe have increased our liquidity by $239 million at December 31st, 2020, compared to the end of the first quarter of 2020.\nAs a reminder, the year-over-year comparisons are in constant currency.\nThe majority of our sales are denominated in dollars.\nHowever, our cost base is a mix of dollars, euros, and British pounds as we have a significant manufacturing presence in Europe.\nAs a result, when the dollar strengthens against the euro and the pound, our sales translate lower, while our costs also translate lower leading to a net benefit to our margins.\nAccordingly, a weak dollar, as we are currently facing, is a headwind to our financial results.\nWe hedge this currency exposure over a 10-quarter horizon to protect our operating income.\nQuarterly sales totaled $295.8 million.\nThe sales decrease year over year reflects production rate decreases by our commercial aerospace customers in response to the pandemic combined with continued commercial aerospace supply chain destocking.\nTurning to our three markets, commercial aerospace represented approximately 43% of total fourth quarter sales.\nCommercial aerospace sales of $126.7 million decreased 67% compared to the fourth quarter of 2019 as destocking continued to impact our sales.\nWe expect continued destocking in the first quarter of 2021 at a similar level to what we witnessed in the third and fourth quarters of 2020.\nDestocking is then forecast to wind down during the second quarter of 2021.\nWe then expect to generally be at a steady-state entering the second half of 2021, with destocking largely behind us and realizing a substantial portion of the cost takeout benefits we have implemented and continued to work on.\nSpace and defense represented 40% of the fourth quarter sales and totaled $119.7 million, an increase of 2.5%, compared to the same period in 2019.\nU.S. military rotorcraft was strong in the fourth quarter.\nWe remain bullish for the outlook for our space and defense business globally.\nIndustrial comprised 17% of fourth quarter 2020 sales.\nIndustrial sales totaled $49.4 million, decreasing 31% compared to the fourth quarter of 2019 on weaker wind and recreation markets, partially offset by strengthening automotive.\nWe closed our Windsor, Colorado wind energy facility during the fourth quarter as previously disclosed.\nRecreation markets remained soft due to the pandemic, particularly for winter sports.\nIn contrast, the fourth quarter of 2020 generated the strongest automotive sales since mid-2019.\nOn a consolidated basis, gross margin for the fourth quarter was 10.3% compared to 26% in the fourth quarter of 2019.\nAs we discussed at our last earnings call, we continued to temporarily idle select carbon fiber capacity during the fourth quarter, and this is continuing in 2021 as we maintain alignment with customer demand.\nThe sales mix, particularly lower sales of carbon fiber products, continued to be an earnings headwind.\nOur view of forward demand continues to be consistent with what we communicated at our last earnings call in October, with Q3 and Q4 2020 along with Q1 2021 being the low point of the pandemic downturn.\nWe are staying close to our customers and maintaining our focus on operational excellence with process improvements and cost realignment actions across the business.\nFourth quarter selling, general, and administrative expenses decreased 29.2% in constant currency or $9.9 million year over year as a result of headcount reductions and continued tight controls on discretionary spending.\nResearch and technology expenses decreased 21.4% in constant currency.\nWe are an innovative material science company and continued research and technology funding is critical to our future growth.\nSo we have been very selective with our cost reduction actions in this area of the business.\nThe other expense category reflected severance costs, primarily in Europe.\nWe continue to target eliminating $150 million of annualized overhead costs, including indirect labor.\nWe expect that a significant portion of these cost-out actions will be completed as we enter the second half of 2021.\nAdjusted operating loss in the fourth quarter totaled $6.1 million, reflecting the lower sales volume and overhead headwinds combined with the negative sales mix.\nThe year-over-year impact of exchange rates was negative by approximately 40 basis points.\nNow turning to our two segments.\nThe composite material segment represented 76% of total sales and generated a negative 6.2% operating margin compared to 18.8% margin in the prior year period.\nThe engineered products segment, which is comprised of all structures and engineered core businesses, represented 24% of total sales and generated an 8.6% operating margin, compared to 16.9% in the fourth quarter of 2019.\nThe tax benefit for the fourth quarter and year-to-date periods of 2020 was $12 million and $61 million, respectively.\nThe tax benefit was primarily due to losses incurred in various jurisdictions due to the impacts of COVID-19.\nThe 2020 tax benefit was also impacted by discrete tax items of $55 million, primarily composed of a valuation allowance released in the third quarter of 2020.\nThe pandemic and consequent mix of results across the countries in which we operate is expected to continue to have an impact on the company's overall effective tax rate throughout 2021.\nNet cash provided by operating activities was $107.1 million for the fourth quarter and $264.3 million for 2020.\nWorking capital was a source of cash of $87.7 million in the last quarter of the year.\nCapital expenditures on an accrual basis was $3.2 million in the fourth quarter of 2020, compared to $30 million for the prior year period in 2019.\nAccrual basis capital expenditures were $42.5 million for the full 2020 year.\nWe continue to tightly manage capital expenditures and look for innovative ways to optimize the flexibility of our existing capacity to support new business opportunities in the future.\nFree cash flow for the fourth quarter of 2020 was $104.3 million and $213.7 million for the year.\nWe remain focused on generating and preserving cash as we deleverage.\nWe increased our liquidity by $108 million as of 31st -- December 31st, 2020, compared to September 30th, 2020, further strengthening our balance sheet.\nOur total liquidity at the end of the fourth quarter of 2020 was $875 million consisting of $103 million of cash and an undrawn revolver balance of $772 million.\nWe have no near-term debt maturities.\nOur revolver matures in 2024 and our two Senior Notes mature in 2025 and 2027, respectively.\nOur leverage as of December 31st, 2020, is measured on a net debt basis and was 3.6 times compared to 3.25 times at September 30, 2020, which at that time was measured on a gross debt basis.\nThe increase in the leverage ratio was due to the lower 12-month trailing EBITDA as net debt actually decreased $108 million at December 31, 2020, compared to September 30, 2020.\nWe remain within covenant conditions.\nOur revolver facility has leverage covenants based on a debt to trailing 12-month EBITDA.\nDuring the third quarter of 2020, we worked with our bank group to temporarily amend the covenant from a gross debt measurement to a net debt measurement and to increase the maximum allowable leverage for a period of four quarters.\nWhile we comfortably remained in compliance with the amended Covenant's December 31st, 2020, we recognized that the trailing 12-month EBITDA is decreasing more than we had forecast early in the third quarter of 2020.\nThis reflects our projections based on our latest customer demand requirements along with our belief that the aerospace supply chain destocking will now run through the second quarter of 2021 compared to our previous thinking that it would be largely completed by the end of 2020.\nWe are currently in discussions with our bank group regarding our revolver facility, and we are extremely confident that a mutually agreeable solution will be reached soon to ensure continued covenant compliance.\nOur share repurchase program remains suspended and is also restricted by the previously referenced revolver amendment.\nOur board will continue to regularly evaluate capital allocation priorities.\nTo summarize full-year 2020 results.\nTotal sales decreased 36%, adjusted operating income was $72 million, and adjusted diluted earnings per share was $0.25.\nWe delivered $214 million of free cash flow during the year, which we used to deleverage.\nAs our earning release states, we are not providing financial guidance at this time, but I would like to share the following.\nOur current market outlook, considering the strong pre-pandemic first quarter of 2020, is that we expect 2021 annual sales to be lower than 2020.\nWe expect the aerospace chain destocking to largely come to an end during the second quarter of 2021.\nConsistent with prior years, selling, general, and administrative expenses are forecast to be higher in the first quarter of 2021 compared to following quarters due to the timing of recording stock-based compensation expenses.\nSome additional restructuring costs are anticipated primarily in the first half of 2021 based on labor actions already initiated.\nCapital expenditures in 2021 will continue to be managed very tightly and are expected to be at a similar level to 2020.\nWe expect to generate free cash flow in 2021 and to further reduce debt levels.\nThe tax assumption is more complicated than normal, but we expect the rate to be approximately 24% to 25% in 2021.\nThis change from prior rates is due to a mix of the jurisdictions where we expect to generate income.\nOver time, we expect the tax rate to return to pre-pandemic levels.\nWhile it seems as though everything is changed, in reality, nothing has changed about who we are as a company.\nWe still have the broadest technology portfolio in our industry, with leading positions on the world's largest aerospace programs with our advanced composites materials.\nWe continue to generate cash and further strengthen our balance sheet.\nWe are taking this opportunity to strengthen our foundation, especially in the areas of cost control, realigning the business for lower demand for a period of time, and cash management, to name a few.\nThe great job our team has done puts us in a position to return to growth with strong leverage once this pandemic is behind us.\nClearly, there is still uncertainty.\nWhile air travel has increased from the 2020 lows, it remains weak.\nSo the next couple of quarters will be challenging.\nHowever, we can see a path forward toward a return to stability, and we view 2021 as a transition period that sits between the trough of the second half of 2020 and a return to growth in 2022.\nThis year, one of our primary objectives is to continue to stay close to, aligned with, and responsive to our customers' needs.\nGlobal demand for advanced composites technology for lighter weight will grow, and our technology and products remain unrivaled in our industry.\nThe potential for a significant upturn in 2022 and beyond continues to look promising.\nThe actions we have taken and will continue to take will ensure that Hexcel emerges from this pandemic stronger than ever, strategically positioned for growth to support the future of aerodynamics and sustainability in the markets we serve.\nWe continue to be disciplined and ready for the year ahead.\n",
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"content": "compname reports q4 adjusted loss per share $0.18.\nq4 adjusted loss per share $0.18.\nq4 sales $295.8 million versus refinitiv ibes estimate of $298.7 million.\ncontinues to withhold financial guidance due to market uncertainties.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Mr. Brett McGill, President and Chief Executive Officer; and Mr. Mike McLamb, Chief Financial Officer of the company.\nThese risks include, but are not limited to, the impact of seasonality and weather, general economic conditions and the level of consumer spending, the company's ability to capitalize on opportunities or grow its market share and numerous other factors identified in our Form 10-K and other filings with the Securities and Exchange Commission.\nOn the call, I will share highlights from our second quarter as well as provide an update on the continuing enthusiasm for boating.\nI will also touch on our positioning into the important June quarter and discuss the meaningful opportunities for MarineMax to create growth and long-term shareholder value in 2021 and beyond.\nFirst, I want to share how proud I am of our team's ability to successfully navigate through this pandemic and produce consistent record results quarter after quarter.\nFrom the onset of the pandemic, we effectively pivoted to capitalize on the ongoing changes in consumer behavior resulting in sustained record results.\nIt's important to note that we achieved these results while prioritizing the health and well-being of our team, their families and our customers as well as the welfare of our local economy.\nWe anticipated more than a year ago that boating would be one of the beneficiaries of a changed world.\nWe continue to see that development play out as evidenced by the 45% same-store sales growth and earnings per share increasing more than sevenfold in the March quarter.\nBoating continues to be a great way to escape the stresses of everyday life and strengthen the bonds between family and friends.\nThe recent demand for boating has created a foundational layer of new customers.\nThis is driving replacement and upgrade cycle that is supported by new technology and product upgrades, providing us with confidence that growth is going to be sustained well into the future.\nThese new customers are embracing the boating lifestyle and existing and new customers continue to upgrade to larger and newer boats while also taking advantage of our multiple product and service offerings.\nI'm honored to be able to lead such an outstanding, passionate and devoted team, and I'm excited about the long-term growth opportunities ahead of us.\nLet me underscore a few highlights from our March quarter.\nThe record sales and earnings growth we delivered were driven by robust 45% same-store sales growth, which is on top of 1% same-store sales growth a year ago.\nIt's important to note that our new unit growth was the primary driver, which provides the foundation for future sales.\nOur consolidated margins hit a March quarter record of 30% driven by increasing unit margins and the expansion of our higher-margin businesses, which I'll touch on shortly.\nOur significant geographic and product diversification and the effective utilization of our digital platform have enabled and driven our growth over the past several years.\nAdditionally, the marine industry continues to experience a significant acceleration in new customers.\nGiven our scale and global position, we continue to benefit from this resurgence and expect these new voters to support future growth in the coming years.\nTo this point, based on available industry data, we believe we gained market share.\nPart of our success is due to the strength of our relationships with our manufacturers and the great job they are doing to continue delivering product to us during these high demand period.\nFrom a six-month perspective, same-store sales growth was up 33% on top of 12% a year ago.\nWe had meaningful improvement across all brands, categories and geographic regions and continue to leverage our investments in technology, which is driving leads that are being converted into sales and enhanced profitability.\nProfitability-wise, the gross margin strength we produced last quarter continued into the March quarter, increasing 450 basis points to 30%.\nWe realized gains in new and used product margins as well as incremental gains in our higher-margin businesses.\nAdditionally, our last three acquisitions are all contributing to the margin expansion.\nFraser Northop & Johnson, our global superyacht services company, contributed to the growth of our brokerage revenue; while SkipperBud's, with its greater mix of service and storage revenue, helped to drive the overall margin expansion.\nAdditional incremental improvements in finance and insurance as well as service and parts also contributed.\nRegarding SkipperBud's, we remain very excited about the significant synergies associated with the acquisition, including the sharing of best practices, brands and resources to drive even greater growth in the years to come.\nIn the quarter, the margin expansion and generally good expense control led to operating leverage of 21% and the record earnings and earnings per share of $1.69.\nOur mission remains being laser-focused on creating an exceptional experience for our customers.\nWe continue to invest in technology, using our flexible model to service our customers in any way they prefer digitally or in our stores.\nOur model has created a seamless experience for our customers, which continues to drive market share gains.\nNow, let me touch on our positioning and share the attributes of the business model we believe will drive ongoing growth in and beyond the important June quarter.\nWe have kicked off this important boating season with strong visibility and are well positioned and prepared to serve our customers.\nThe sheer size of our backlog provides us with added confidence that we should outperform for the second half of 2021 and into fiscal 2022.\nWhile this can be impacted from a timing perspective and by our ability to deliver product, we do see demand remaining very strong across the industry.\nThere is also no question that our scale is a competitive advantage as we leverage our deep manufacturing relationships and nationwide shared inventory to support the growing demand.\nOur strategy to create long-term shareholder value remains focused on driving top line growth, operating leverage, disciplined capital management and building on our strong culture.\nWe continue to effectively execute on our multifaceted growth strategy, supported by our global market presence, premium brands, strategic location, exceptional customer service and ongoing investments in technology.\nWe remain committed to driving operating leverage in our model and generating significant cash flow growth.\nWe believe the combination of our approach, business model and strong visibility into the balance of the year and into fiscal 2022 will support sustained growth as we move ahead.\nAnd with that update, I'll ask Mike to provide more detailed comments on the quarter.\nFor the quarter, revenue grew 70% to over $523 million due largely to same-store sales growth of 45%.\nThis exceptional growth was driven by strong comparable new unit growth of 40% and a mix to larger boats.\nAdditionally, our recent acquisitions of Northrop & Johnson and SkipperBud's also performed well in the quarter.\nOur gross profit dollars increased over $78 million while our gross margin rose 450 basis points to 30%.\nOur record gross margin was due to a handful of factors.\nAmong these are improving margins on new and used boat sales due to increased demand; impressive service and storage performance at SkipperBud's, which has a long track record of performance in these categories; Growth in our higher-margin finance, insurance and brokerage businesses, including our global superyacht services organizations of Northrop & Johnson and Fraser Yachts.\nWe would note that the superyacht charter business has remained adversely impacted by travel bans around the globe.\nHopefully, with the vaccine rollouts, we will see improvements in the near future.\nNonetheless, we are pleased with the current contributions from these businesses.\nRegarding SG&A, the majority of the increase was once again due to rising sales and the related commissions combined with the two acquisitions we recently completed.\nInterest expense improved in the quarter due to lower interest rates and a reduction in short-term borrowings given the cash we have generated.\nOur operating leverage in the quarter was 21%, which drove very strong earnings growth, setting another quarterly record with pre-tax earnings of about $52 million.\nOur record March quarter saw both net income and earnings per share rise more than seven-fold, generating $1.69 in earnings per share versus $0.23 a year ago.\nFor the first six months of the year, our revenue exceeds $934 million.\nGross margins are 30%.\nOur operating leverage is around 20%.\nOur earnings per share is at $2.73 and our EBITDA is over $92 million, an impressive start to the year.\nMoving on to our balance sheet.\nWe continue to build cash with about $143 million at quarter end versus $64 million a year ago.\nAs discussed previously, given the attractive interest rate environment, we explored and did secure mortgages on a portion of our sizable real estate portfolio.\nBesides some slight rate arbitrage, it further positions us to capitalize on opportunities as they develop.\nOur inventory at quarter end was $303 million.\nExcluding SkipperBud's, our inventory is near historic levels on a relative basis.\nHowever, I believe it is important to reiterate again this quarter how well our team has pivoted to selling in a lean inventory environment as proven by the very strong unit-driven same-store sales growth this quarter despite historically low levels of inventory.\nIt also does speak to the success of our shared inventory strategy and the strength of our various manufacturing partners.\nLooking at our liabilities, short-term borrowings decreased sharply due to lower inventory and related financing as well as an increase in cash generation.\nCustomer deposits, while not the best predictor of near-term sales because they can be lumpy due to the size of deposits and whether a trade is involved or not, rose over 200% due to the demand we are seeing and a contribution from Skipper's.\nOur current ratio stands at 2.14, and our total liabilities to tangible net worth ratio is 1.05.\nBoth of these are very impressive balance sheet metrics.\nOur tangible net worth was $381 million.\nOur balance sheet has always been a formidable strategic advantage, and today more than ever, it can provide the capital for expansion as opportunities arise.\nThe March quarter exceeded expectations and industry trends remain strong.\nIndustry estimates for 2021 retail units are now expected to rise from the mid-single digits to the high single digits.\nSince we usually outperform the industry and grow our AUP on an annual basis, We now expect our annual same-store sales growth to be in the high teens.\nThis is up from the high single digits we guided to in the December quarter and up from the mid- to high single digits we guided to earlier in the year.\nGiven the strength in earnings in March, our guidance also assumes operating leverage improvement above our previous guidance.\nAccordingly, we are raising our earnings per share guidance to the range of $5.50 to $5.65 for 2021 from $4 to $4.20 that we guided to after the December quarter.\nIn summary, we are expecting our pre-tax earnings to rise in the second half of the year, which results in the earnings per share guidance range despite increases in both shares outstanding and our effective tax rate.\nOur guidance excludes the impact from any potential acquisitions that we may complete.\nAs we progress through the year, we will provide updates as needed to our guidance.\nOur guidance uses a share count of about 23 million shares versus a little over 22 million last year, and an effective tax rate of 25% versus 23.5% last year.\nLooking at the remainder of 2021, the March quarter was our easiest comparison with our toughest comparisons in the more meaningful summer quarters of June and September.\nTurning to current trends.\nApril will close with strong positive same-store sales growth and our backlog is at record levels, providing visibility into next fiscal year.\nAs we have said, industry trends remained strong, and we are generally outperforming these elevated levels.\nWe continue to feel good as we enter the important selling seasons with solid visibility.\nAs Brett discussed, the sheer size of our backlog provides us with added confidence that we should outperform for the back half of 2021 and into fiscal 2022.\nOur team's performance for the first six months of fiscal 2021 continues to show excellent execution, even on top of very impressive same-store sales a year ago.\nWe remain focused on creating exceptional customer experiences through our teams, services, products and technology.\nOur differentiated customer-centric approach continues to ensure MarineMax will meet the needs of the many new customers joining the boating lifestyle, and we will continue to see significant opportunity in our brand expansion and higher-margin businesses.\nWe are active with acquisition and investment opportunities that should strengthen our overall business while staying focused on our long-term strategy.\nLooking ahead, we remain focused on building our strong team culture, focusing on executing our growth strategy and creating long-term shareholder value.\n",
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"content": "raises fy earnings per share view to $5.50 to $5.65.\nrevenue increased 70%, or over $214 million, to $523.1 million for quarter ended march 31, 2021 from $308.5 million in comparable period last year.\nqtrly same-store sales grew over 45% on top of a 1% increase in comparable quarter last year.\nqtrly earnings per share $1.69.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: These risks include, but are not limited to, the impact of seasonality and weather, general economic conditions and the level of consumer spending, the company's ability to capitalize on opportunities or grow its market share and numerous other factors identified in our Form 10-K and other filings with the Securities and Exchange Commission.\nOur team continues to set records with their performance and our third quarter was no exception.\nThey produced record sales, record margins, record profit and on top of that record Net Promoter Scores.\nToday, I'd like to share the highlights from our very productive third quarter and then discuss the results of our strategic growth plan, which will continue to create shareholder value in 2021 and beyond.\nThen Mike will discuss our financial results in more detail and provide color on our updated 2021 financial outlook.\nLet me start by touching on our third quarter performance.\nI'm extremely excited about our results in the quarter, with both sales and earnings exceeding expectations, and I am especially proud of the MarineMax team for continuing a high level of execution on our key strategic initiatives which continue to gain traction and resonate with customers.\nWe have capitalized on a favorable consumer spending backdrop along with a continued demand and consumer seeking the boating lifestyle.\nThe record sales and earnings growth we delivered was driven by solid 6% same-store sales growth, which is on top of a robust 37% same-store sales growth a year ago.\nFrom a nine month perspective, same-store sales growth was up 21% on top of a 22% a year ago.\nOur significant geographic and product diversification along with the effective utilization of our digital platform is driving sustained growth.\nAdditionally, the marine industry continues to experience a significant acceleration in new customers.\nGiven our scale and global position, we are benefiting from our growing share of the market.\nAnd based on available industry data, we believe we continue to gain market share.\nWe had meaningful revenue growth across most brands and categories of products and continue to leverage our investments in technology, which is driving leads that are being converted into sales and enhanced profitability.\nWe built on our prior quarter's profitability and increased our operating margin to over 12%.\nThis performance is directly attributable to our ability to execute against our strategy, focusing on higher gross margin businesses, including finance and insurance, marina, storage, parts, services and brokerage.\nThe gross margin strength we produced in the first half of the year accelerated in the June quarter to 30.7%.\nAdditionally, our acquisitions have performed well and are aligned with our strategy of contributing to the margin expansion, and we expect our two most recent acquisitions, Cruisers Yachts and Nisswa Marine to further contribute to this growth.\nIn the quarter, gross margin expansion and good expense control led to outstanding operating leverage of over 20% and record earnings per share of $2.59.\nNow let me discuss the confidence we have that our strategy will continue to create sustained growth and long-term shareholder value in 2021 and beyond.\nWe are making significant progress on our vision of creating exceptional customer experiences through best services, products and technology.\nOur teams remain focused on these initiatives, resulting in strong sales and margins.\nWe are uniquely positioned to drive this growth for years to come.\nWe will accomplish this through our global market presence, premium brands, valuable real estate locations, exceptional customer service, technology investments, strategic acquisitions, industry-leading inventory management and finally, a continued commitment to build on our strong company culture.\nSupported by one of the strongest balance sheets in the industry, we will continue to make strategic, accretive acquisitions in a disciplined manner.\nThe combination of being well capitalized and having a broad global geographic presence has allowed and will allow us to grow in many ways by adding additional dealers, marinas, storage, service-related offerings, manufacturing and asset-light businesses, such as our superyacht services business.\nWe continue to have strong demand-driven visibility, and we are well positioned to serve our customers.\nThe sheer size of our backlog continues to provide us with added confidence that we should outperform for the remainder of 2021 and well into fiscal 2022.\nAlso, there is no question that our scale is a competitive advantage as we leverage our deep manufacturing relationships, our nationwide shared inventory and strong balance sheet to support the growing demand.\nAs we will discuss later on in the call, based on our third quarter results, we are again raising our full year 2021 guidance.\nThis reflects another great quarter and the confidence we have in the business as we build our backlog and look ahead to the new product that will start to flow in the future.\nWe believe the combination of driving operating leverage and generating significant cash flow, coupled with strong consumer demand will result in sustained growth well into fiscal 2022 and beyond.\nAnd with that update, I'll ask Mike to provide more detailed comments on the quarter.\nFor the quarter, revenue grew 34% to over $666 million due largely to same-store sales growth of 6%, which was on top of 37% a year ago, plus the strong results from the acquisitions we have completed, namely SkipperBud's, Northrop & Johnson and Cruisers Yachts.\nOverall, our growth has been demand-driven across generally all segments of products.\nAs expected, the supply chain challenges have resulted in low industry inventory, which led to reduced overall unit sales versus our record last year.\nHowever, with greatly increased backlog visibility, coupled with our broad product portfolio and production insight from our manufacturing partners, we were positioned to drive growth in many of our key categories.\nThis approach resulted in a double-digit expansion of our average unit selling price.\nWe also believe this strategy will continue to work well as we move ahead.\nOur gross profit dollars increased over $81 million, while our gross margin rose 590 basis points to 30.7%.\nOur initiatives to drive margin growth over the last several years is clearly working.\nMargins rose with contributions from multiple segments and businesses, including new and used boats, storage, our higher-margin finance, insurance and brokerage business as well as our global superyacht services businesses, Northrop & Johnson and Fraser Yachts.\nWe would note that the superyacht charter business is starting to see improvement with the reopening of Europe.\nAssuming the reopening continues, we would expect a much improved charter season compared to August and September last year.\nRegarding SG&A, the majority of the increase was again due to rising sales and related commissions, combined with the recent acquisitions.\nGenerally, expense trends are on track.\nOur operating leverage in the quarter was over 20%, which drove very strong earnings growth, setting another quarterly record with pre-tax earnings of over $80 million.\nOur record June quarter saw both net income and earnings per share rise more than 60%, generating $2.59 in earnings per share versus $1.58 a year ago.\nFor the first nine months of the year, I will make just a few comments.\nOur revenue exceeds $1.6 billion, driven by a 21% increase in comparable store sales.\nGross margins exceed 30%.\nOur operating leverage is around 20%.\nOur earnings per share is at $5.33 and our EBITDA is over $180 million, a very impressive nine months.\nMoving on to our balance sheet.\nWe continue to build cash with over $200 million at quarter end.\nOur inventory at quarter end was $209 million.\nExcluding SkipperBud's and Cruisers Yachts, our inventories neared historically low levels on a relative basis.\nHowever, it is important to reiterate that we have reasonable visibility from our manufacturing partners.\nThat, coupled with our backlog, allows us to direct our efforts to drive growth like we did this quarter.\nLooking at our liabilities, short-term borrowings decreased sharply due to lower inventory and related financing as well as the increase in cash generation.\nCustomer deposits almost tripled to over $86 million due to the demand we are seeing setting a new record.\nOur current ratio stands at 2.20, and our total liabilities to tangible net worth ratio is below one.\nBoth of these are very impressive balance sheet metrics.\nOur tangible net worth is $386 million.\nOur balance sheet has always been a formidable strategic advantage and now more than ever, it provides the capital for growth and expansion as opportunities arise.\nTurning to guidance for 2021.\nThe June quarter exceeded expectations and industry trends remained strong.\nIndustry estimates for 2021 retail unit growth is in the high single digits.\nWe expect our annual same-store sales growth to be in the high teens.\nThis is generally consistent with our comments last quarter.\nGiven the strength of earnings in the June quarter and the demand-driven visibility, we are raising our estimates for earnings per share guidance to the range of $6.40 to $6.55.\nIn summary, we do expect our pre-tax earnings to rise in the fourth quarter, which gets dampened a bit by a higher tax rate of around 25% this year as well as higher outstanding shares which results in the earnings per share guidance range.\nOur guidance excludes the impact from any potential acquisitions that we may complete.\nOur updated 2021 guidance implies an EBITDA level well in excess of $200 million.\nTurning to current trends.\nJuly will close with positive same-store sales growth and our backlog is at record levels.\nAs we have said, industry demand trends remain strong, and we are generally outperforming these elevated levels.\nWhile we would typically not share perspective beyond the current fiscal year, I'd like to provide some additional context as we look out to fiscal 2022.\nWith the demand side of our business remaining very strong, and with the visibility we have with our manufacturing partners and backlog, we do anticipate same-store sales growth in 2022.\nWe will provide more color around this on our fourth quarter call.\nAs evidenced in today's results, we are pleased to see our business continue to build momentum.\nOur team's performance in the first nine months of fiscal 2021 continues to show excellent execution, even on top of a record performance last year, which included very impressive same-store sales.\nMuch of our strategic work is still underway with the true benefit to be realized in the coming quarters and years.\nWe remain committed to creating exceptional customer experiences through our teams, services, products and technology.\nRecord high Net Promoter Scores show that our customer-centric approach is fully aligned to drive high levels of satisfaction and repeat business.\nWe will continue to uncover significant opportunities for brand expansions and higher-margin businesses that will strengthen our overall business, while staying focused on our strategy to create long-term shareholder value.\n",
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"content": "marinemax raises fy earnings per share view to $6.40 to $6.55.\nraises fy earnings per share view to $6.40 to $6.55.\nraises fiscal year 2021 guidance.\nq3 earnings per share $2.59.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Mr. Brett McGill President and Chief Executive Officer; and Mr. Mike McLamb, Chief Financial Officer of the company.\nThese risks include, but are not limited to, the impact of seasonality and weather, general economic conditions, and the level of consumer spending, the company's ability to capitalize on opportunities or grow its market share, and numerous other factors identified in our Form 10-K and other filings with the Securities and Exchange Commission.\nI'm very proud of the extraordinary achievements of our team in fiscal 2021; record revenue of more than $2 billion record gross margin of over 30%, record earnings per share, all while achieving record net promoter customer satisfaction scores.\nGiven the extremely lean inventory and well documented supply chain issues, this is a great achievement in 2021.\nToday, I'd like to share highlights from our fourth quarter and full year, followed by a discussion of the results of our strategic growth plan, which will continue to create shareholder value in 2022 and beyond.\nThen, Mike will discuss our financial results in more detail and provide color on our 2022 financial outlook.\nLet me start by touching on our fourth quarter and full year performance.\nFor the quarter, we generated 16% revenue growth, record gross margin of almost 38%, and record earnings per share of $1.45.\nI'm extremely pleased that our strategic acquisitions are exceeding expectations and diversifying our model resulting in robust margins and earnings growth.\nOur same-store sales for the quarter were down 7% versus 33% growth a year ago.\nAs supply chain challenges and lean inventory environment worsened and impacted us as we move through the later part of the quarter.\nHowever, demand remained strong and we see no softening as consumers are still actively seeking the boating lifestyle.\nThis strong demand environment is highlighted by our customer deposits, which jumped more than 3 times last year's level to over 100 million.\nLast year was elevated with increased demand, so this increase, this year, is a significant sign of strong and growing demand.\nFor the full-year, same-store sales growth was over 13%, on top of 25% a year ago.\nOur significant geographic and product diversification along with the effective utilization of our digital platform are driving profitability and growth.\nThe marine industry is continuing to experience an influx of new boaters.\nGiven our scale, and global presence, we are benefiting from our growing share of the market.\nAnd based on available industry data, we believe we continue to gain market share.\nFrom a cadence perspective, the supply chain headwinds deteriorated as we moved through the quarter.\nI want to emphasize that we are not seeing a demand issue, rather the timing of shipments is impacting our ability to fulfill some customer orders and therefore recognize revenue.\nSimply put, if we had the boats, they would be delivered and we'd have even higher revenue.\nWe are working closely with our manufacturing partners to satisfy the strong demand.\nBut as many experts in the industry are forecasting it, we'll likely not improve materially until later in fiscal 2022.\nIt's a unique environment and one that is challenging to predict, but our team will continue to perform.\nI also want to underscore our strategic growth plan, and how it is not only driving market share and revenue growth, but expanding company wide margins.\nThis quarter, we increased our operating margin by 130 basis points over last year's record to 9.5%.\nWe also finished the fiscal year with an operating margin increase of more than 300 basis points to over 10%.\nThis performance is directly attributable to our ability to execute our strategy, focusing on higher gross margin businesses, including charter, finance, insurance, marina, storage, parts, service and brokerage.\nThe gross margin strength we produced in the first nine months of the year accelerated in the September quarter.\nAdditionally, as we integrate our acquisitions, they continue to outperform and are aligned with our strategy of attributing to MarineMax's record margin expansion.\nSpecifically, each company we have acquired has outperformed their best year, or is on pace to outperform their best year.\nEarlier this month, we shared that we have entered into an agreement to buy Intrepid Powerboats.\nMany of you know that Intrepid is an iconic brand led by one of the best management teams in the industry.\nWe are very excited about having Ken Clinton and the Intrepid team join the MarineMax family.\nWe plan to support them with their innovative plans, provide them capital, and arm them with the tools to better serve the Intrepid nation.\nNow, let me discuss our confidence we have that our strategy will continue to create sustained growth and long-term shareholder value in 2022 and beyond.\nWe continue to make significant progress on our vision of creating exceptional customer experiences through best services, products, and technology.\nOur team remains focused on these initiatives, resulting in strong demand and margin.\nWe will accomplish this through our global market presence, premium brand, valuable real estate locations, exceptional customer service, technology investments, strategic acquisitions, industry-leading inventory management, and finally, a continued commitment to build on our strong company culture.\nSupported by one of the strongest balance sheets in the industry, we will continue to make strategic accretive acquisitions in a disciplined manner.\nThe combination of being well capitalized and having a broad global geographic presence, has allowed, and will allow us to grow in many ways by adding additional dealers, marinas, storage, service related offerings, manufacturing an asset-light business such as our superyacht services business.\nWe continue to have strong demand and are ready to keep serving our loyal customers.\nAs supply constraints are resolved by manufacturers, we expect to ramp sales in the future.\nOur scale continues to be a competitive advantage as we leverage our deep manufacturing relationships, our nationwide shared inventory, and our strong balance sheet to support the growing demand.\nWe believe the combination of driving operating leverage and generating significant cash flow, coupled with strong consumer demand, will result in sustained growth well into fiscal 2022 and beyond.\nAnd with that update, I will ask Mike to provide more detailed comments on the quarter.\nFor the quarter, revenue grew 16% to over $462 million, even with the lean inventory environment, as we benefited from the accretive acquisitions we completed during the year.\nOverall, our growth has been demand driven across generally all segments of products and across every global market.\nWe expected inventory to remain low through the quarter, but with the increased supply chain challenges, retail deliveries grew more challenging, which impacted revenue in excess of 50 million.\nThis led to decline in same-store sales growth.\nOur units declined in the quarter, double digits, while our average unit selling price continued to expand.\nHowever, with increasingly strong customer deposit visibility, coupled with our broad product portfolio and production insight from our manufacturing partners, we believe we are better positioned than most in our industry, resulting in market share gains in all our major segments.\nGross profit dollars increased over $58 million, while our gross margin rose 860 basis points to almost 38%.\nOur initiatives to drive margin growth over the last several years continue to generate solid results.\nMargins rose with contributions from multiple segments and businesses, including new and used boats, storage, parts and service, higher margin, finance, insurance, and brokerage businesses, as well as our global superyacht services businesses Northrop & Johnson and Fraser Yachts.\nAs expected, with Europe reopening, we did see improved sales and charter revenue in August and September this year.\nAbout half of our margin improvement came from the growth in our superyacht services businesses.\nRegarding SG&A, the majority of the increase was again due to rising sales and related commissions, combined with the recent acquisitions.\nSG&A rose as a percentage for a few reasons.\nWe did expect significantly more sales, which are not lost, but delayed.\nAdditionally, as our higher margin businesses grow, the compensation related to those businesses are higher.\nWe had elevated acquisition costs in a smaller quarter, not to mention some cost inflation.\nWe believe SG&A overall is generally on track on an annual basis, but we will watch the inflationary pressures carefully.\nOur operating leverage in the quarter was about 15%, which drove very strong earnings growth, setting another quarterly record with pre-tax earnings of over $43 million.\nOur record September quarter saw both net income and earnings per share rise over 21%, generating $1.45 in earnings per share versus an adjusted $1.19 a year ago.\nFor the full year, I will make a few comments.\nThe acquisitions we completed were all successfully integrated, resulting in record setting results for each.\nAdditionally, the acquisitions we completed over the last few years are all contributing greatly to our results.\nThe management teams of each acquired company also are contributing to our overall success.\nOur ability to acquire and integrate companies is greater today than at any point in our history.\nDuring the year, we added significantly to the strength of our balance sheet while continuing to make significant long-term investments in our real estate portfolio, our digital capabilities, and our team.\nLastly, for the full year, our earnings per share was close to double the midpoint of our initial guidance.\nAnd I would add that $6.78 is a pretty strong year.\nMoving on to our industry-leading balance sheet.\nWe continue to build cash with over $220 million.\nOur inventory at quarter end was $231 million, down 22%, excluding SkipperBuds and Cruiser Yachts, inventory declined about double that percentage.\nLooking at our liabilities, short-term borrowings decreased sharply due to lower inventory and related financing, as well as an increase in cash generation.\nDue to the demand we are seeing, customer deposits, as Brett said, more than tripled to over $100 million, setting another new record.\nOur current ratio is over 2, and our total liabilities to tangible net worth ratio is at 1; both of these are very impressive balance sheet metrics.\nOur tangible net worth is about 400 million.\nOur balance sheet has always been a formidable strategic advantage, and now more than ever, it provides the capital for growth and expansion as opportunities arise in good or bad times.\nTurning to our guidance for fiscal year 2022.\nFiscal 2021 and the September quarter generated significant operating leverage and demand remains strong.\nThe challenge with projecting 2022, are the assumptions around the supply chain.\nToday, given what we're being told from our various manufacturing partners, we do expect retail unit growth in 2022.\nHowever, until we see more stabilization in the supply chain, our guidance assumes basically flat units.\nThis, combined with increases in our average unit selling price, should provide annual same-store sales growth in the mid-single digits.\nIncluding the remainder of the Cruisers and Nisswa acquisitions, we expect total annual revenue growth in the high single digits to 10%.\nGiven the inflationary pressures in the marketplace, we do expect modest margin pressure.\nWe have levers to mitigate these pressures but believe it's prudent to include it in our expectations for now.\nOur guidance is also, before any other acquisitions that we may complete, including Intrepid, using the low end of our historical leverage range, plus a modest share increase and a tax rate of 20%, results in our earnings per share guidance range of $7.20 to $7.50.\nObviously, we expect to update you throughout the year as our visibility increases on the supply chain.\nTurning to current trends, October is forecasted to end with positive same-store sales growth and our backlog is at record levels.\nAs we have said, industry demand remains strong and we are generally outperforming these elevated levels.\n2021 generated landmark metrics for MarineMax and I am very proud of our team's ability to execute on our strategy and to successfully integrate our recent acquisitions, driving superior operating leverage.\nWe are pleased to see our business continue to build strength and are confident in our strategy for 2022 and beyond.\nOur operating margin ended the fiscal year at over 10%, almost double 2019.\nThis is the result of our team's commitment to capitalize on the strong industry demand.\nWhile we know we will face a few challenges related to the supply chain and inventory as we start fiscal 2022, beyond our organic growth, we will pursue additional brand expansions and higher margin businesses to support our strategy to create long-term shareholder value.\n",
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"content": "marinemax inc q4 same store sales fell 7 percent.\nq4 same store sales fell 7 percent.\nq4 earnings per share $1.45.\nfourth quarter revenue increases 16% to $462 million.\nq4 revenue increases 16% to $462 million.\ncompany currently expects earnings per diluted share to be in range of $7.20 to $7.50 for fiscal 2022.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: These statements are subject to numerous risks and uncertainties, as described in our Annual Report on Form 10-K, quarterly reports on Form 10-Q and other SEC filings.\nThese risks could cause our actual results to differ materially from those expressed in or implied by our comments.\nDuring our last call, we shared our optimism about the second quarter.\nAnd while we anticipated to see marked improvement, our adjusted EBITDA for the quarter significantly exceeded our expectations.\nThe swift pace of our recovery so far demonstrates the operating leverage within our business, as we translate an improving RevPAR environment into revenue growth and margin expansion.\nOperating cash flow was positive for the quarter and our owned and leased segment adjusted EBITDA improved over $40 million from the first quarter.\nWe do find ourselves experiencing very different demand profiles throughout the world.\nThe overall recovery thus far has been much quicker than we predicted and leisure demand is at a record high in certain markets, yet demand remains at historic lows in many parts of the world.\nCOVID remains present in both narratives, but it's clear in our second quarter results that when restrictions are eased and people are able to travel safely, the desire to get back to travel and back to hotels is stronger than it's ever been.\nThe labor environment has been challenging, putting significant pressure on our teams to deliver the high level of service our guests expects from our brands.\nWe're remaining agile in how we are addressing these labor challenges by examining all aspects at how we retain, attract and train new talent.\nWe're forming new recruiting relationships and sourcing more candidates from outside of our industry.\nWe're also increasing pool of nontraditional candidates through initiatives focused on diversity, equity and inclusion, such as our Rise High [Phonetic] program, which focuses on the employment of opportunity use.\nAs we remain focused on hiring, I'm proud to say that we recently published our EEI commitment as part of the launch of World of Care, our ESG platform.\nI look forward to continuing to update you on our progress to drive meaningful change within the hospitality industry and across the communities in which we operate.\nSo let's start with the latest trends we're seeing.\nAs I shared at the start, we anticipated the pace of recovery would accelerate in the second quarter in conjunction with wider vaccine availability, but the quarter finished well-ahead of our expectations.\nWe've seen growing leisure transient demand and I'll take a moment to review just how quickly it has accelerated this year, but I'll also share how the recovery has varied globally compared to our 2019 results.\nStarting with sequential growth.\nSystem wide RevPAR grew 58% in the second quarter compared to the first quarter.\nDemand has steadily improved since January with double-digit RevPAR growth in each successive month compared to the prior month.\nThe most pronounced period of RevPAR acceleration commenced with Memorial Day weekend in the United States and continued through July, driven by a wave of leisure transient demand.\nSystemwide RevPAR was trending approximately 50% of 2019 levels just prior to Memorial Day and it's grown to nearly 75% of 2019 levels for the month of July with RevPAR ending at approximately $100.\nThe RevPAR acceleration has come through higher demand but also bolstered by a significant increase in the rates, which are nearing fully recovered levels.\nOverall, swiftness of improvement in recovery is impressive considering major travel restrictions remain throughout the world, business chains and group have only partially recovered and international travel remains limited.\nRevPAR growth in the United States was the primary driver of the jump in systemwide RevPAR improving 75% in the second quarter over the first quarter and more than double a 30% aggregate growth rate for the remainder of the world.\nThe United States benefited from widespread vaccine availability and reduced travel restrictions, which unleashed significant pent-up leisure demand.\nFrom a global geographic market perspective, the rate of recovery continues to be highly uneven and heavily dependent on successful vaccination rollouts, leading to lower transmission rates COVID-19 and ultimately the easing of travel restrictions.\nTo give you a sense of the disparity as of mid-July, geographic areas such as Europe, Southeast Asia and the Middle East are trending at less than 50% of fully recovered RevPAR levels, while the United States, Mainland China and the Caribbean are over 80% recovered.\nThe surge in our resorts is unlike anything we've previously experienced.\nIn January, comparable US resort RevPAR was down 75% versus 2019.\nIn June, just five months later, RevPAR was 11% above 2019 with strong average rate growth in June of over 25% compared to 2019 levels.\nThe leisure transient surge has extended well-beyond our domestic resorts.\nHotels in Mexico and certain parts of the Caribbean are also at higher RevPAR levels in June relative to the same period in 2019.\nAdditionally, we've experienced a notable improvement in our urban and suburban markets in the United States.\nThis trend has only accelerated further in July with leisure transient nearly 20% ahead of 2019 levels in the United States and even stronger in Mainland China.\nThe outside contribution from these two markets are driving systemwide leisure transient revenue that is now slightly above 2019 levels across all comparable hotels.\nMoving on to business transient and group.\nThese segments are lightly in leisure, but the momentum is growing and we are encouraged by the steady improvement.\nOur system line business transient RevPAR in June has nearly doubled from the first quarter driven by strength in the United States and Mainland China.\nNotably, we RevPAR performance is now trending at 60% at 2019 levels at the end of June compared to just 40% two months prior.\nBusiness transient remains approximately 40% recovered globally and demand varies significantly by market.\nIn the United States, dense urban markets such as New York, Washington D.C., Chicago and San Francisco are still only 20% to 30% recovered, while the majority of other urban markets are trending at a 50% recovery level or higher.\nRegional businesses and some of our smaller corporate accounts are recovering the quickest, but we're also seeing acceleration in our comp accounts and continue to expect a more robust recovery in the fall.\nAs for group the trends are very encouraging.\nMore groups large and small have been returning to our hotels and ballrooms.\nImportantly, we're seeing room blocks actualize above expectations and the general size and mix of groups returning to more normalized levels.\nWe continue to expect demand to strengthen into the fall as evidenced by recent booking trends.\nGroup revenue booked in June for events that will occur in 2021 has reached approximately 90% of 2019 levels in our Americas full service managed properties with the rate of cancellation diminishing to only a fraction of the levels we experienced just a couple of months ago.\nAs we look to 2022, while group is down in the mid-teens compared to 2019, our leads are tracking 30% higher, which suggests that our pace deficit should improve.\nAdditionally, we're pleased to see group business booked in the second quarter for 2022 at an average rate that is 5% higher than the same period in 2019.\nIn summary, as we look across the world, growth remains uneven.\nThe geographic areas that have ease restrictions and are furthest along vaccination rates are seeing a surge of leisure demand.\nWe've opened 100 hotels over the trailing 12 months, a record level of organic expansion leading to net room growth of 7.1% in the second quarter.\nEven with our rapid rate of hotel openings, we've maintained our pipeline of signed deals in a challenging environment, closing the second quarter with a development pipeline of 100,000, 101,000 rooms representing over 40% of our existing lease base.\nAs we've highlighted in previous quarters conversion definite key ingredient to our growth.\nOur independent collection brands including the Unbound Collection by Hyatt, JDB by Hyatt and Destination by Hyatt accounted for all eight conversions in the quarter and in high barrier to entry markets such as Los Angeles, Toronto, Beijing, Sweden and Visa Spain.\nDemand for all of our brands remains strong among our development community, but I'm especially pleased with the integration and growth of the brands that we acquired through the acquisition of Two Roads Hospitality Alila, Thompson, JDV by Hyatt and Destination by Hyatt.\nBy way of reminder, we acquired Two Roads Hospitality in late 2018 and spent much of 2019 integrating the brands and back-end technology into the Hyatt ecosystem.\nWe clearly define the purpose and profile of each brand alongside our existing portfolio.\nWe continue to be focused on scaling these brands and our hard work is resonating with developers around the world.\nAs a result of the successful integration, 2021 is shaping up to be a banner year of openings for all four brands.\nAlready through the first half of the year, the number of hotels in these four brands have expanded by 20% and we expect to end the year with growth of 30% or more.\nIt's exciting to see how these brands have been so quickly adopted by our loyal guests with the World of Hyatt program driving over 40% of room nights.\nThis loyal member base has been a key catalyst of market share gains.\nRevPAR index for comparable former Two Roads hotels is up 13% versus 2019 through the first half of this year.\nThe successful integration of these former Two Roads brands has contributed to the broader evolution of the Hyatt portfolio as an industry leader in the luxury lifestyle space.\nIn the span of just three years, we tripled the number of lifestyle insofar properties from approximately 50 to 150, accounting for nearly 40% of total hotel openings over that time frame.\nFurther we significantly expanded our resort presence.\nSince 2017 we've grown our resort room count by 45% with well over 80% of that growth in the luxury segment.\nUltimately as we look at the Hyatt portfolio today and our signed pipeline, we're excited with the positioning of our portfolio to take full advantage of the demand coming back to our hotels.\nThis transition to a heavier leisure-driven portfolio has been very intentional and complemented with a variety of enhancements such as the launch of High Prive which is our luxury travel advisor program, the expansion of Benefits with the within the World of Hyatt programs such as the addition of small luxury hotels properties, the ability to use points for experiences such as Midland exhibitions and our strategic relationship with American Airlines.\nMost recently during the quarter we announced the launch of our relationship with Built Rewards a new rewards program with access to millions of urban renters who are now able to earn the global high points just by paying rent.\nOur portfolio of brands complemented with a best-in-class loyalty program and digital platform is clearly resonating.\nOur base of loyalty members is the largest, it's ever been and has grown 14% since the same point last year.\nOur co-brand credit card spend is trending well above 2019 levels and our enhancements to our digital platform are driving hi.com booked revenue more than 20% higher than 2019 levels which is outpacing OTA channels.\nOur portfolio and programs have us openly positioned to be the preferred brand for high-end leisure travelers now and well into the future.\nFinally, I want to provide a brief update on transactions before turning it over to Joan.\nDuring the quarter we announced the disposition of higher agency loss times for approximately $275 million a price that was above our pre-COVID-19 expectations.\nWe also acquired Ventana Big Sur, an Alila resort for $148 million securing our brand presence in a highly sought after resort destination.\nWith the completion of these asset transactions, we've realized net proceeds of approximately $1.1 billion since the time of our announcement in March of 2019.\nIn addition to these transactions, I'm pleased to note that we are in advanced stages for the disposition of two other assets in the aggregate amount of $500 million.\nShould we successfully close these two transactions, we will exceed our $1.5 billion asset sell-down commitment and do so well before our target date and at an aggregate multiple in the high teens.\nIn total, from the outset of our asset sell-down strategy announcement in November of 2017, and assuming the closing of the sale of the two properties in process, we will have sold over $3 billion of assets at an average EBITDA multiple of just under 17.5 times, demonstrating the valuations realized in our disposition efforts are materially in excess of the implied valuation, the market has placed on our owned and leased business.\nWe look forward to updating you on the progression of these sales and future plans, relative to our sell-down program during our next earnings call.\nAround the world things remain uncertain and we remain vigilant, as we maintain the health and safety of our colleagues and our guests.\nIt is clear and it's been validated repeatedly across markets and cultures that when people are able to travel and reconnect, the commitment to do so drives customer behavior.\nWhile we expect starts and stops, we remain confident we are on the path to full recovery.\nJoan, over to you.\nLate yesterday, we reported a second quarter net loss attributable to Hyatt up $9 million and a diluted loss per share of $0.08.\nAdjusted EBITDA was $55 million for the quarter, a sharp improvement from the adjusted EBITDA loss of $20 million in the first quarter of this year.\nAs Mark mentioned, the operating leverage in our business has enabled us to translate improving demand into a strong increase in earnings.\nSystemwide RevPAR was $72 in the second quarter, representing a 50% decline compared to the same period in 2019 on a reported basis and a 58% increase compared to the first quarter of 2021.\nBoth occupancy and rate contributed meaningfully to the sequential RevPAR growth with roughly 60% of the improvement coming through occupancy and 40% strip rate.\nLeisure transient was a key driver of our improved results for the quarter, leading to a material increase in our base, incentive and franchise fees, which totaled $77 million in the second quarter, a notable acceleration of $49 million in the first quarter.\nIn June, systemwide comparable occupancy eclipsed 50% and as of June 30, only 18 hotels or less than 2% of hotel inventory remained closed.\nTurning to our segment results.\nOur management and franchising business delivered a combined adjusted EBITDA of $63 million, improving over 90% to $33 million in the first quarter.\nThe Americas segment accounted for the vast majority of the growth led by our resort and select service portfolio but also increasingly for our business and convention hotels as more cities eased restrictions as the quarter progressed.\nThe Asia Pacific segment experienced improved performance, doubling its adjusted EBITDA in the first quarter, as hotels in Mainland China rebounded strongly after the easing of government restrictions.\nIt's important to highlight that Mainland China through a combination of RevPAR improvement, strong operating margins and net rooms growth generated more base incentive and franchise fees than any other previous quarter of record.\nAs for our Europe, Africa, Middle East and Southwest Asia segment, adjusted EBITDA was modestly lower than the first quarter as travel restrictions were prevalent throughout the region.\nHowever, the pace at which demand is currently improving, especially in Europe, as we progress through this summer, serves as another proof point that when restrictions are eased, people are ready and excited to travel.\nOur owned and leased hotel segment, which delivered $12 million of adjusted EBITDA for the quarter improved spend more than $40 million from the first quarter of 2021.\nThe swift path back to profitability highlights the strong operating leverage within our owned and leased portfolio.\nOwned and leased RevPAR was $87 for the second quarter, experiencing strong acceleration throughout the quarter with RevPAR improving from $73 in April to $107 in June, nearly doubling the rate of improvement of our systemwide portfolio.\nOur owned and leased resorts were a key driver surpassing adjusted EBITDA generated in the same period in 2019.\nFurther, the acceleration in group business throughout the quarter had a material positive impact.\nAnd this was most pronounced in June, our strongest month in the quarter, as group room nights accounted for 25% of the total room night mix, up from just 18% in May.\nAs we turn toward July, owned and leased RevPAR continued to strengthen further.\nPreliminary RevPAR for the owned and leased portfolio in July is approximately $135, up nearly 30% from June, and nearly 85% recovered versus the same month in 2019.\nImportantly, the average rate in July is above the same period in 2019.\nOur comparable owned and leased operating margins improved to 13.9% in June -- second quarter of June finishing above 19% a sharp improvement from the negative margins last quarter.\nWe continue to closely monitor the labor environment, and are working hard to get open positions filled.\nTo date, we've seen some pressure on wages and our general managers have made specific adjustments based on competitive factors, but it varies by market.\nAs we assess the potential impact of inflation on our business, we believe the increase in daily room rates will at least offset increases to wages or other costs.\nOur revenue management practices and teams reprice inventory on a continuous basis allowing us to quickly respond to changing market conditions.\nThis is evidenced by our ability to quickly realize stronger rates, which were up 20% at our owned and leased resorts compared to 2019 in the second quarter.\nI would also point out that valuations of hotel assets benefit from a inflationary environment, and this is a positive for us as we execute our owned and leased disposition strategy.\nI'd also like to provide a brief update on our liquidity and cash.\nOperating cash flow, including interest payments was positive for the quarter and exceeded our expectations.\nWe anticipate our operating cash flow will continue to improve from the second quarter levels as RevPAR strengthened.\nWe have and will continue to invest in the growth of our brand, including capital expenditures.\nOur cash investments in this area have remained in the same approximate range as the prior two quarters about $10 million to $15 million per month.\nWe expect monthly investment spend to trend higher consistent with our expected strong year of openings and signing activity.\nAs of June 30, our total liquidity inclusive of cash, cash equivalents and short-term investments and combined with borrowing capacity was approximately $3.2 billion with the only near-term debt maturity being $250 million senior notes maturing this month.\nWe received a $254 million US tax refund in July related to 2020 net operating losses carried back to prior years under the CARES Act.\nWe intend to use this tax refund to pay off our senior notes upon maturity later this month.\nI'd like to make a few additional comments regarding our 2021 outlook.\nConsistent with our communication in the first quarter, we continue to expect adjusted SG&A to be in the approximate range of $240 million excluding any bad debt expense.\nFurther, we continue to expect capital expenditures to be in the range of $110 million.\nGiven our confidence in the recovery, we are evaluating pulling forward selected renovation projects to take advantage of seasonality and lower displacement than we expect to have in the future.\nTo take this action, this may increase our capital expenditure estimate modestly and we'll update you further next quarter.\nTurning to net rooms growth, earlier this quarter in connection with the pending our agreement with Service Properties Trust, which extended our management of 17 high-place hotels that we previously forecasted to exit the system, we increased our net rooms growth projection to approximately 6%, up from greater than 5% as previously reported in the first quarter of 2021.\nWe're updating this expectation of net rooms growth to be greater than 6% for the year.\nWhile there is some degree of uncertainty related to supply chain issues, which could push certain openings into early 2022, we remain very confident in our ability to deliver another exceptionally strong year of net rooms growth.\nFinally, I'd like to briefly comment on earnings sensitivity.\nOur previously communicated earnings sensitivity levels illustrated that a 1% change in RevPAR level using 2019 RevPAR as a baseline resulted in an impact of approximately $10 million to $15 million in adjusted EBITDA.\nWe previously communicated that we expected that our earnings sensitivity would be at the high end of this range in the near-term due to the larger decline in owning leased RevPAR relative to our systemwide RevPAR as a result of COVID-19.\nAs the relationship between owned and leased systemwide RevPAR has formalized, the earnings sensitivity is now expected to improve toward the midpoint of the $10 million to $15 million range of adjusted EBITDA, reflecting our ability to mitigate the adjusted EBITDA downside impact relative to our 2019 results.\nAdjusted EBITDA and operating cash flow were positive for the quarter and we anticipate the momentum to continue into future quarters.\nOur management and franchise business reflects the quickly strengthening RevPAR environment and coupled with industry-leading net earnings growth is accelerating meaningfully.\nOur owned and leased hotels continue to exceed expectations as the segment generated positive adjusted EBITDA for the quarter.\nWe remain mindful that this recovery will be uneven, but have unwavering confidence we are on a path to full recovery.\n",
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"content": "q2 loss per share $0.08.\nsees 2021 adjusted selling, general, and administrative expenses to be about $240 million.\nsees 2021 capital expenditures to be approximately $110 million.\nqtrly total revenue were $663 million versus $250 million.\nhyatt - received a u.s. tax refund of $254 million in july of 2021 related to 2020 net operating losses carried back to prior years under cares act.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: I'm here with Arvind Krishna, IBM's chairman and chief executive officer; and Jim Kavanaugh, IBM's senior vice president and chief financial officer.\nI'll remind you the separation of our managed infrastructure services business, Kyndryl, was completed on November 3.\nAs a result, our income statement is presented on a continuing operations basis.\nOur results also reflect the incremental revenue from the new commercial relationship with Kyndryl.\nBecause this provides a one-time lift to our growth, we will provide the contribution to our revenue growth for the next year.\nFor example, all of our references to revenue and signings growth are at constant currency.\nThese statements involve factors that could cause our actual results to differ materially.\nAdditional information about these factors is included in the company's SEC filings.\nOur fourth-quarter results reinforce our confidence in our strategy and model.\nWith solid revenue growth, we are on track to the mid-single-digit trajectory we had laid out in our investor briefing last October.\nThe trend we see is clear.\nAcross industries, clients see technology has a major source of competitive advantage.\nThey realize that powerful technologies embedded at the heart of their business can lead to seismic shifts in the way they create value.\nThis reality of technology being about a lot more than cost will persist and explains why clients are eager to leverage hybrid cloud and artificial intelligence to move their business forward.\nOur fourth-quarter results illustrates the strong client demand we see in the marketplace for our technology and consulting.\nIBM Consulting again had double-digit revenue growth as our ecosystem play continues to gain momentum.\nSoftware revenue growth reflects strength in Red Hat and our automation offerings.\nInfrastructure had a good quarter, especially with regards to IBM Z and storage.\nOver the last year and a half, we have taken a series of actions to execute our hybrid cloud and AI strategy and improve our revenue profile, optimizing our portfolio, increasing investments, expanding our ecosystem, and simplifying our go-to market.\nAs we start to yield benefits from these actions, our constant-currency performance improved through 2021.\nOur most significant portfolio action was the separation of Kyndryl.\nYou will remember we had initially expected the spin by the end of the year, and we completed it in early November.\nAs we discuss our results, we'll focus on the new basis and structure that encompasses today's IBM.\nAs we look to 2022, we expect mid-single-digit revenue growth before Kyndryl and currency and $10 billion to $10.5 billion of free cash flow for the year.\nBoth of these are consistent with our medium-term model.\nLet me now spend a few minutes on what we are seeing in the market, how we address it, and the progress we are making.\nWe are seeing high demand for our capabilities in several areas.\nClients are eager to automate as many business class as possible, especially given the new employee demographics.\nThis dynamic is likely to play out over the long term.\nThey are also using AI and predictive capabilities to mitigate friction in their supply chains.\nCybersecurity remains a major area of concern as the cost of cybercrime, already in the billions of dollars, rises each year.\nAs clients deal with these challenges and opportunities, they are looking for a partner they can trust and who has a proven track record in bringing about strategic transformation projects.\nThis is why our strategy is focused on helping our clients leverage the power of hybrid cloud and AI.\nHybrid cloud is about providing a platform that can straddle multiple public clouds, private cloud, and as-a-service properties that our clients typically have.\nOur approach is platform-centric, and the platform we have built is open, secure, and flexible and it provides a solid base of the multiplier effect across software and services for IBM and our ecosystem partners.\nIt starts with Red Hat, which offers clients unique software capabilities based on open-source innovation.\nOur software, which has been optimized for that platform, helps our clients apply AI, automation, and security to transform and improve their business workflows.\nOur consultants deliver deep business expertise and they co-create with our clients to advance their digital transformation journeys.\nAnd our infrastructure allows clients to take full advantage of an extended hybrid cloud environment.\nThis strategy, along with the differentiated capabilities we bring to bear to our clients, have led to an increase in platform adoption and new business opportunities across the stack.\nWe now have more than 3,800 hybrid cloud platform clients, which is up 1,000 clients from this time last year.\nIBM Consulting continues to help drive platform adoption, with about 700 Red Hat engagements for the year.\nClients like Dun & Bradstreet, National Grid, AIB, and Volkswagen have all recently chosen IBM's broad hybrid cloud and AI capabilities to transform their processes and move their business forward.\nAs I look back on the year, we had good success in broadening our ecosystem to drive platform adoption and to better respond to client needs.\nDuring our investor briefing, we talked about strategic partnerships that will yield billion-dollar businesses within IBM Consulting.\nAs we move toward that, we had more than 50% revenue growth this year in partnerships with AWS, Azure, and Salesforce.\nThis adds to the strong strategic partnerships we have with others such as SAP, Oracle, and Adobe.\nWe're continuing to broaden our ecosystem reach.\nIn the fourth quarter, we announced an expansion of our strategic partnership with Salesforce to run MuleSoft integration software on Red Hat OpenShift.\nWe also created a host of new consulting services with SAP to help clients accelerate their journey to S/4HANA.\nTogether with Deloitte, we announced DAPPER, an AI-enabled, managed analytics solution.\nAnd we have expanded our partnership with EY to help organizations leverage hybrid cloud, AI, and automation capabilities to transform HR operations.\nWe have also recently announced a host of new strategic partnerships with Cisco, Palo Alto Networks, and TELUS, all focused on the deployment of 5G, edge, and network automation capabilities.\nDuring 2021, we have been making changes to increase our focus and agility and build a stronger client-centric culture.\nThis includes putting experiential selling, client engineering, and co-creation at the heart of our client engagement model.\nWe have completed thousands of IBM Garage engagements.\nAnd today, we have nearly 3,000 active engagements.\nWe've invested in hundreds of customer success managers to help clients capture more value from our solutions.\nAnd we have upgraded our skills with fewer generalists and more technical specialists.\nThis is resonating well with our clients, and it's starting to contribute to our performance.\nThe most important metric, of course, is revenue growth, but we are also pleased to see our client renewal rates increasing and our recurring revenue base growing.\nWe are starting to see signs of sales productivity improvements, with average productivity per technology seller increasing from the first to the second half.\nAt the same time, innovations that matter to our clients remain a constant focus, and our teams have worked hard to deliver a series of important innovations in the past quarter.\nStarting with AI, we added new natural language processing enhancements to Watson Discovery.\nWe're also combining and integrating products such as Turbonomic, Instana, and Watson AIOps to offer a complete set of AI-powered automation software to address the significant demand.\nThis quarter, Red Hat announced that the Ansible automation platform is now available on Microsoft Azure, bringing more flexibility to clients and how they adopt automation.\nIn partnership with Samsung Electronics, IBM announced a breakthrough that reorients how transistors are built upon the surface of a chip to enable tremendous increases in energy density.\nIn Quantum, we unveiled Eagle, 127-qubit quantum processor.\nThis is the first quantum chip that breaks the 100-cubic barrier and represents a key milestone on our path toward building a 1,000-cubit processor in 2023.\nWhile organic innovations are important, we continue to acquire companies that complement and strengthen our portfolio.\nWe made five acquisitions in the fourth quarter and a total of 15 acquisitions in 2021.\nTwo weeks ago, we announced the acquisition of Envizi.\nMany consumers are willing to pay more for products that are made by companies that are more environmentally sustainable.\nAs the world continues to move toward a more circular economy, our clients' need is the ability to manage and measure their progress.\nEnvizi's capabilities complement our own and help us respond to that client demand.\nSustainability is important across a number of stakeholder groups, including clients, employees, and investors.\nWe are continuing to make good progress and are particularly proud of our diversity and inclusion scores, and our ability to attract and retain talent.\nOur efforts were recently recognized by JUST Capital who named IBM as one of America's most just companies.\nLet me now close by emphasizing once again our fourth-quarter results strengthen the conviction that we have in our ability to deliver our model of mid-single-digit revenue growth.\nJim will take you through the fourth quarter and then provide more color on 2022.\nJim, over to you.\nLet me start out with a few of the headline numbers.\nWe delivered $16.7 billion in revenue, 58% operating gross margin, operating pre-tax income of $3.5 billion, and operating earnings per share of $3.35 for continuing operations.\nLast January, we said we expected performance to improve over the course of 2021 as we start to benefit from the actions we've taken.\nWe have seen progress in our constant-currency revenue growth rate every quarter and now again in the fourth.\nThis is the first view of IBM post-separation.\nWe had solid revenue performance, up nearly 9%.\nI'll remind you, this includes the incremental revenue from the new commercial relationship with Kyndryl, and we said we would be transparent on the contribution to our revenue growth for the first year.\nThis quarter, our revenue growth includes about 3.5 points from the new relationship.\nExcluding this, IBM's revenue was up 5%.\nWe have aligned our operating model and segment structure to our platform-centric approach.\nIn the fourth quarter, Software was up 10%, and Consulting was up 16%.\nThese are our two growth vectors and together represent over 70% of our annual revenue.\nInfrastructure, more of a value vector, tends to follow product cycles and was up 2%.\nThe Software and Infrastructure growth each include nearly 5 points from the new Kyndryl relationship while there is no contribution to Consulting's growth.\nOur platform-centric model has attractive economics.\nFor every dollar of hybrid platform revenue, IBM and our ecosystem partners can generate $3 to $5 of software, $6 to $8 of services, and $1 to $2 of infrastructure revenue.\nThis drives IBM's hybrid cloud revenue, which is up 19% for the year.\nPost-separation, revenue from our full-stack cloud capabilities from Infrastructure up through Consulting now represents $20 billion of revenue or 35% of our total.\nLooking at our P&L metrics.\nOur operating gross profit was up 3%, and the $3.5 billion of operating pre-tax profit was up over 100%.\nOperating net income and earnings per share also grew.\nLet me highlight a couple of items within our profit performance.\nFirst, the year-to-year pre-tax profit reflects $1.5 billion charge to SG&A last year for structural actions to simplify and optimize our operating model and improve our go-forward position.\nWe're continuing to invest to drive growth.\nThroughout the year, we have been aggressively hiring, with about 60% of our hires in Consulting.\nWe're scaling resources in Garages, sign engineering centers, and customer success managers, all to better serve our clients.\nWe're increasing investments in R&D to deliver innovation in AI, hybrid cloud, and emerging areas like Quantum.\nWe're ramping investment in our ecosystem, and we acquired 15 companies in 2021 to provide skills and technologies aligned to our strategy, including capabilities to help win client architecture decisions.\nRegarding tax, our fourth-quarter operating tax rate was 14%.\nThis was up significantly from last year but roughly 2 to 3 points lower than what we estimated in October due to a number of factors, including the actual product and geographic mix of our income in the quarter.\nLet me spend a minute on our free cash flow and balance sheet position.\nOur full-year consolidated cash from operations was $12.8 billion, and free cash flow was $6.5 billion.\nThese are all-in consolidated results and include 10 months of Kyndryl and the cash paid for the 2020 structural actions and spin charges.\nIBM's stand-alone or baseline free cash flow for the year was $7.9 billion, which is aligned to our go-forward business.\nThis excludes Kyndryl charges and pre-separation activity but includes the IBM portion of the structural actions.\nPayments for these IBM-related structural actions and deferred cash tax paid in 2021 contributed to the year-to-year decline in the stand-alone results.\nIn terms of uses of cash for the year, we invested over $3 billion in acquisitions.\nWe continue to delever, with debt down nearly $10 billion for the year and over $21 billion since closing the Red Hat acquisition.\nAnd we returned nearly $6 billion to shareholders in the form of dividends.\nThis results in a year-end cash position of $7.6 billion, including marketable securities and debt of just under $52 billion.\nOur balance sheet remains strong, and I'd say the same for our retirement-related plans.\nYou'll remember that over the last years, we've shifted our asset base to a lower risk profile.\nIn 2021, the combination of modest returns and higher discount rates improved the funded status of our plans.\nIn aggregate, our worldwide tax-qualified plans are funded at 107%, with the U.S. at 112%.\nNow, I'll turn to the details by segment, and I'll remind you we have put in place a simplified management system and segment structure aligned to our platform-centric model.\nAnd within the segments, we're now providing new revenue categories and metrics that will provide greater transparency into business trends and drivers.\nIBM Software delivered double-digit revenue growth in the quarter.\nThis was driven by good revenue performance in both hybrid platform and solutions and transaction processing, the latter benefiting significantly from the new Kyndryl content.\nSoftware is important to our hybrid cloud strategy and our financial model.\nOur hybrid cloud revenue in software is up 25% for the year to more than $8.5 billion.\nAnd subscription and support renewal rates continue to grow again this quarter, contributing to a $700 million increase in the software deferred income balance over the last year.\nHybrid platform and solutions revenue was up 9%.\nThis performance is an indication of the strength across the software growth areas focused on hybrid cloud and AI.\nIt's worth mentioning this includes only a point of help from the new Kyndryl commercial relationship.\nLet me highlight some of the trends by business area.\nRed Hat revenue, all in, was up 21%.\nBoth infrastructure and app dev and emerging tech grew double digits as RHEL and OpenShift address enterprise's critical hybrid cloud requirements.\nWith this performance, we're continuing to take share with our Red Hat offerings.\nAutomation delivered strong revenue growth, up 15%.\nAs Arvind mentioned, there is strong market demand for automation.\nWe had good performance in AIOps and management this quarter as we address resource management and observability.\nClients are realizing rapid time to value from Instana and Turbonomic, two of our automation acquisitions.\nAnd integration grew with continued traction in Cloud Pak for Integration.\nData and AI revenue grew 3%.\nWe have particular strength in data fabric, which enables clients to connect siloed data distributed across the hybrid cloud landscape without moving it.\nYou'll recall, we talked about the data fabric opportunity back in October.\nWe also had strong performance in business analytics and weather.\nWithin these solutions, clients are leveraging our AI to ensure AI models are governed to operate in a fair and transparent manner.\nSecurity revenue declined modestly in the quarter driven by lower performance in data security, while revenue grew 5% for the year.\nAs we called out in our recent investor briefing, security innovation is an integral part of our strategy.\nIn December, we launched a new data security solution, Guardium Insights, with further plans to modernize the broader portfolio throughout the year.\nThis quarter, we also completed the acquisition of ReaQta, which leverages AI and machine learning to automatically identify and block threats at the endpoint.\nPutting this all together, our annual recurring revenue, or ARR, is now over $13 billion, which is up 8% this quarter.\nThis demonstrates the momentum in our hybrid platform and AI strategy, including Red Hat and our suite of Cloud Paks.\nMoving to transaction processing.\nRevenue was up 14%.\nThis is above our model driven by a few underlying dynamics.\nFirst, all of the growth in transaction processing came from the new Kyndryl commercial relationship, which contributed more than 16 points of growth.\nSecond, I'll remind you that we're wrapping on a very weak performance in the fourth quarter of last year, which was down 26%.\nAnd lastly, we had some large perpetual license transactions given the good expansion in the IBM Z capacity we've seen this cycle.\nWhile the new capacity is important, what's just as important is the continued strong renewal rates this quarter.\nThese are both good proof points of our clients' commitment to our infrastructure platform and these high-value software offerings.\nLooking at software profit.\nWe expanded pre-tax margin by 12 points, including nearly 10 points of improvement from last year's structural actions.\nRevenue grew 16% with acceleration across all three revenue categories.\nComplementing this strong revenue performance, our book-to-bill was 1.2.\nClients are accelerating their business transformations powered by hybrid cloud and AI to drive innovation, increase agility and productivity, and capture new growth opportunities.\nEnterprises are turning to IBM Consulting as their trusted partner on this journey.\nThey are choosing us for our deep client, industry, and technical expertise, which drives adoption of our hybrid cloud platform and pulls through key technologies.\nConsulting's hybrid cloud revenue grew 34% in the quarter.\nFor the year, cloud revenue is up 32% to $8 billion.\nOfferings and application modernization, which are centered on Red Hat, contributed to this growth.\nThe Red Hat-related signings more than doubled this year and are now over $4 billion since inception.\nThis quarter, we added over 150 client engagements, bringing the total since inception to over 1,000.\nOur strategic partnerships also drove our performance.\nRevenue from these partnerships accelerated as the year progressed and was up solid double digits in the fourth quarter led by Salesforce, SAP, AWS, and Azure.\nTurning to our business areas.\nOur Consulting's growth was led by business transformation, which was up 20%.\nBusiness transformation brings together technology and strategic consulting to transform critical workflows at scale.\nTo enable this, we leverage skills and capabilities in IBM technologies and with strategic ecosystem partners such as SAP, Salesforce, and Adobe.\nOur practices are centered on areas such as finance and supply chain, talent, industry-specific solutions, and digital design.\nThis quarter, we had broad-based growth, reflecting strong demand for these solutions.\nIn technology consulting, revenue was up 19%.\nTechnology consulting architects and implements cloud platforms and strategies.\nWe leverage hybrid cloud with Red Hat OpenShift and work with providers, such as AWS and Azure, in addition to IBM Cloud.\nThis quarter, we continue to see good performance in application modernization offerings that build cloud-native applications and that modernize existing applications for the cloud.\nFinally, application operations revenue grew 8%.\nThis business line focuses on application and cloud platform services required to operationalize and run in both cloud and on-premise environments.\nRevenue growth was driven by offerings, which provide end-to-end management of custom applications in cloud environments.\nMoving to consulting profit.\nOur pre-tax income margin expanded about 8 points, including just over 9 points from last year's structural actions.\nWe're in a competitive labor market, and we continue to have increased pressure on labor costs due to higher acquisition, retention, and wages.\nWhile we still expect to capture this value in our engagements, it will take a few quarters to appear in our profit profile.\nSo, now, turning to the new Infrastructure segment.\nRevenue was up 2%.\nThe Kyndryl commercial relationship contributed about 5 points of growth, which is higher than we expected in October.\nIn this segment, we brought together hybrid infrastructure with infrastructure support, which was formerly technology support services.\nThis allows us to better manage the life cycle of our hardware platforms and to provide end-to-end value for our clients.\nHybrid infrastructure and infrastructure support revenue were up 2% and 1%, respectively, with pretty consistent contribution from the new Kyndryl relationship.\nHybrid infrastructure includes IBM Z and distributed infrastructure.\nIBM Z revenue performance, now inclusive of both hardware and operating system, is down 4% this quarter.\nThis is the 10th quarter of z15 availability and the combination of security, scalability, and reliability continues to resonate with clients.\nThis program continues to outpace the strong z14 program, and we ship more MIPS in the z15 program than any program in our history.\nOur clients are leveraging IBM Z as an essential part of their hybrid cloud infrastructure.\nAnd then in distributed infrastructure, revenue was up 7% driven by pervasive strength across our storage portfolio.\nLooking at infrastructure profit.\nThe pre-tax margin was up over 9 points but essentially flat, normalizing for last year's structural action.\nNow, I'll wrap up with a discussion of how our investments and actions position us for 2022 and the longer term.\nWe've been laser-focused on our hybrid cloud and AI strategy.\nOur portfolio, our capital allocation, and the moves we've been making are all designed to create value through focus for our clients, our partners, our employees, and our shareholders.\nWe took significant steps during 2021.\nThe most impactful portfolio action was, of course, the separation of Kyndryl.\nWe've also been allocating capital to higher-growth areas, investing in skills and innovation, and expanding our ecosystem.\nWe've aligned our business to a more platform-centric business model.\nAnd we're simplifying and redesigning our go-to-market to better meet client needs and execute on our growth agenda.\nBottom line, we're exiting 2021 a different company.\nWe have a higher-growth, higher-value business mix, with over 70% of our revenue in software and services and a significant recurring revenue base dominated by software.\nThis will result in improving revenue growth profile, higher operating margin, strong and growing free cash flow, and lower capital intensity, leading to a higher return on invested capital business.\nWe also continue to have attractive shareholder returns through dividends.\nIn October, we laid out a model for IBM's performance over the medium term defined as 2022 through 2024.\nThe model is focused on our two most important measures of success: revenue growth and free cash flow.\nAs we enter the new year, I'll talk about our expectations for 2022 performance along those dimensions.\nWe expect to grow revenue at mid-single-digit rate at constant currency.\nThat's consistent with the model.\nOn top of that, in 2022, the new commercial relationship with Kyndryl will contribute an additional 3 points of growth spread across the first three quarters.\nCurrency dynamics, unfortunately, will be a headwind.\nAt current spot rates, currency is roughly a 2-point headwind to reported revenue growth for the year and 3 points in the first quarter.\nFor free cash flow, we expect to generate $10 billion to $10.5 billion in 2022.\nTo be clear, this is an all-in free cash flow definition.\nThe adjusted free cash flow view we provided in 2021 was useful given the significant cash impact associated with the separation and structural actions.\nNow in 2022, despite the fact we still have nearly $0.5 billion of impact from the charges, we're focusing on a traditional free cash flow definition.\nThe $10 billion to $10.5 billion reflects a year-to-year improvement driven by lower payments for the structural actions, a modest tailwind from cash taxes, working capital improvements, and profit growth resulting from our higher growth and higher value business mix.\nWith this performance, we're on track to our model.\nSo, now, let me provide some color on our expectations for segment performance.\nBecause this is a new segment structure, I'm going to spend a little more time and provide perspective on constant-currency revenue growth and pre-tax margin in the context of our segment models.\nIn Software, as we benefit from the investments in innovation and our go-to-market changes, we're seeing progress in our Software growth rate.\nIn 2022, we expect growth at the low end of the mid-single-digit model and then another 5 to 6 points of revenue growth from our external sales to Kyndryl.\nWe expect Software pre-tax margin in the mid-20s range for the year.\nWe have solid momentum in IBM Consulting revenue and expect this to continue into 2022 as we help clients with their digital transformations.\nThis momentum and our book-to-bill ratio support revenue at the high end of our high single-digit model for the year, with double-digit growth in the first half.\nWe expect low double-digit pre-tax margin for the full year with improving performance through the year as we make progress on price realization.\nInfrastructure revenue performance will vary with product cycle.\nIn 2022, with a new IBM Z introduction late in the first half, we expect performance above the model and a slight contribution to IBM's overall growth.\nOn top of that, we're planning for about 2 to 3 points from the external sales to Kyndryl in 2022.\nThis supports a high-teens pre-tax margin rate for the full year.\nThese segment revenue and margin dynamics will yield about a 4-point year-to-year improvement in IBM's pre-tax operating margin for the full year and 2 to 3 points in the first quarter.\nIn terms of tax, we expect a mid- to high-teens tax rate, which is a headwind to our profit growth.\nBringing this all together, we expect mid-single-digit revenue growth before Kyndryl and currency and $10 billion to $10.5 billion of free cash flow for the year, both in line with our midterm model.\nPatricia, let's go to the Q&A.\nBefore we begin the Q&A, I'd like to mention a couple of items.\nIn addition to our regular materials, we've included a summary of our new segments for your reference and historical data on segment pre-tax income.\nAnd then, second, as always, I'd ask you to refrain from multi-part questions.\n",
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"content": "compname posts qtrly revenue of $16.7 billion, up 6.5%.\nibm - qtrly gaap earnings per share from continuing operations $2.72; qtrly operating (non-gaap) earnings per share $3.35.\nibm - qtrly revenue of $16.7 billion, up 6.5%, up 8.6% at constant currency (including about 3.5 points from incremental external sales to kyndryl).\nibm - q4 results give us confidence in ability to deliver objectives of sustained mid-single digit revenue growth & strong free cash flow in 2022.\nibm - qtrly operating (non-gaap) gross profit margin of 58% versus 60%.\nibm - unless otherwise specified, q4 results are on continuing operations basis.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: These items will be archived, and our call will be available for replay.\nIn our earnings supplement, we refer to certain non-GAAP measures.\nWe believe our non-GAAP measures are more reflective of our cash operations and core business performance.\nYou'll find a reconciliation to the equivalent GAAP terms in the earnings materials.\nPlease see the explanatory notes on the second page of the earnings supplement for additional details regarding the definition of certain items.\nWith us on the call today are Jeff Sprecher, Chairman and CEO; Warren Gardiner, Chief Financial Officer; Ben Jackson, President; and Lynn Martin, President of Fixed Income and Data Services.\nI'll begin on slide four with some of the key highlights from our third quarter results.\nAdjusted earnings per share totaled $1.30, up 34% year-over-year, marking the best third quarter in our company's history.\nNet revenues totaled a record $1.8 billion and, on a pro forma basis, increased 11% versus last year, with all three of our business segments contributing to the strong year-over-year growth.\nTotal transaction revenues grew 13%, while total recurring revenues, which accounted for nearly half of our business, increased by 10%.\nThird quarter adjusted operating expenses totaled $755 million, including $35 million related to Bakkt, which, after successfully completing its merger with Victory Park, recently began trading on the NYSE.\nAdjusting for Bakkt, third quarter operating expenses would have been $720 million, in the middle of our guidance range, while operating -- or while our adjusted operating margin would have been 60%, up over 100 basis points year-over-year.\nLooking to the fourth quarter, we expect adjusted operating expenses to be between $737 million to $747 million.\nRelative to the full year outlook provided on our second quarter call, the fourth quarter is now expected to include approximately $10 million related to the Bakkt stub period and $10 million to $15 million of performance-related compensation as we expect to reward our employees for their contribution to the strong results we are once again on track to achieve in 2021.\nRecord year-to-date free cash flow has totaled nearly $2 billion.\nThese strong cash flows, along with the divestment of our $1.2 billion stake in Coinbase, has enabled us to reduce leverage to under 3.25 times at the end of September, nearly a full year ahead of schedule.\nAs a result, we expect to resume share repurchases, including up to $250 million in this year's fourth quarter.\nWe anticipate updating you on our 2022 capital return plans early next year.\nIn addition, we announced in October that we have agreed to sell our stake in Euroclear for EUR709 million or approximately $820 million.\nWe expect to determine the use of Euroclear proceeds as we approach closing, which we expect will be -- will occur in 2022.\nNow let's move to slide five, where I'll provide an overview of the performance of our Exchange segment.\nThird quarter net revenues totaled $959 million, an increase of 16% year-over-year.\nThis strong performance was driven by a 30% increase in our interest rate business and a 38% increase in our energy revenues, including 34% increase in our oil complex, a 73% increase in European natural gas revenues and a 72% increase in revenues related to global environmental products.\nImportantly, total open interest, which we believe to be the best indicator of long-term growth, is up 18% versus the end of last year, including 11% growth in energy and 28% growth across our financial futures and options complex.\nRecurring revenues, which include our exchange data services and NYSE listings, increased 6% year-over-year, including 10% growth in our listings business.\nThis acceleration in growth was driven by an increasing number of operating company IPOs choosing the NYSE, particularly in the technology and consumer sectors.\nLooking to the fourth quarter, we expect recurring revenues in our Exchange segment to be between $330 million and $335 million.\nTurning now to slide six, I'll discuss our Fixed Income and Data Services segment.\nThird quarter revenues totaled $477 million, a 6% increase versus a year ago.\nRecurring revenue growth, which accounted for nearly 90% of segment revenues, also grew 6% in the quarter.\nWithin recurring revenues, our fixed income, data and analytics business increased by 5% year-over-year, including another double-digit growth in our index franchise, while other data and network services grew 9% driven by continued customer demand for additional network capacity.\nLooking to the fourth quarter, we expect that our recurring revenues will improve sequentially to a range of $415 million to $420 million and that full year revenue growth will be approximately 6%, at the high end of our guidance range.\nLet's go next to slide seven, where I will discuss our Mortgage Technology segment.\nPlease note that my comments on revenue growth are on a pro forma basis.\nDespite a double-digit decline in industry origination volumes, our Mortgage Technology business grew 7% year-over-year and achieved record revenues of $366 million.\nWhile third quarter transaction revenues declined slightly, they were more than offset by a 33% growth in our recurring revenues, which, at $143 million, once again exceeded the high end of our guidance range and accounted for nearly 40% of total segment revenues.\nOur outperformance relative to industry trends continues to be driven by increased customer adoption of digital tools across the workflow.\nWhile these secular growth trends have been a clear tailwind for our recurring revenues, there is also opportunity to drive accelerating adoption across our transaction-based businesses such as our closing solutions, where revenue increased by 30% in the third quarter.\nLooking to the fourth quarter guidance, we expect that recurring revenues will once again grow sequentially and be in a range of $147 million to $152 million.\nAt the midpoint, this represents growth of approximately 25% year-over-year, which is on top of 20% growth achieved in last year's third quarter.\nIn summary, we once again had strong contributions from each of our businesses and across the asset classes in which we operate.\nWe delivered double-digit growth in revenue, operating income and earnings per share.\nWe also generated strong cash flows, reduced leverage to under 3.25 times, announced the divestment of our stake in Euroclear and successfully took back public on the NYSE.\nAs we look to the end of the year into 2022, we remain focused on meeting the needs of our customers, continuing to drive growth and create value for our shareholders.\nOur strong third quarter results were driven in part by interest rate volatility, global energy supply shortages and the continued adoption of our mortgage technology even amid a decline in origination volumes.\nBut more importantly, underpinning that performance are long-term, secular tailwinds that will continue to drive growth across asset classes and macroeconomic environments.\nAnd with data and technology at our core, we have strategically positioned the business to benefit from these tailwinds across our platform.\nIn energy, the globalization of natural gas and the evolution to cleaner energy are trends that we began investing in over a decade ago.\nAnd today, cleaner energy sources, including global natural gas and environmentals, make up approximately 40% of our energy revenues and have grown 12% on average over the past five years.\nWith the rise of LNG, natural gas markets are becoming more global in nature.\nIn our European gas benchmark, TTF is emerging as the global gas benchmark.\nRevenues in our TTF markets have grown 38% on average over the last five years, including 84% growth in the third quarter.\nThe supply shortages and price volatility that we saw in the third quarter are a peek into the future of what the energy transition could look like.\nEnergy consumption is expected to double over the next 30 years, yet carbon emissions are expected to be reduced by half.\nThis imbalance in supply and demand will introduce additional complexity and volatility to energy markets, which will drive greater demand for our risk management.\nOur global environmental markets, alongside our global oil, gas and power markets, provide the critical price transparency across the energy spectrum that will enable participants to navigate this evolution.\nComplementary addition to the risk management that our technology provides is our growing suite of associated data products.\nLeveraging our leading environmental markets, we built a suite of carbon indices which allow global investors to access market-based carbon prices through a single investment instrument.\nAnd today, there are a growing number of ETFs benchmarking to our carbon indices and environmental markets.\nTurning now to fixed income.\nThe electronification of fixed income is a data-driven trend.\nWe recognized this in 2015 when we acquired IDC and continue to invest and innovate in data and technology to further enable this trend.\nOur leading evaluated prices provide critical price transparency for nearly three million securities daily.\nBy combining our proprietary pricing data with our comprehensive reference data, we've built innovative tools and analytics that will facilitate the continued electronification and automation of the fixed income markets.\nSolutions like our continuous evaluated pricing, best execution and liquidity indicators, for example, provide pre-trade transparency needed to determine fair value.\nWe also see the electronification of fixed income within the ETF ecosystem.\nOur quality pricing and reference data, combined with four years of history, serves as the foundation of our growing index business.\nWe not only offer benchmark indices but also calculation services, analytics and unique solutions like our custom indices.\nBy servicing the entire ETF ecosystem through data and technology, we've been able to grow our index business double digits for the past four years.\nAnd finally, turning to our mortgage business.\nIn the third quarter, we were once again able to grow our revenues even with industry volumes down double digits.\nThis continued outperformance is a result of executing against our strategy of leveraging our mission-critical technology and data expertise to accelerate the analog-to-digital conversion happening in the industry.\nPart of that strategy is intentionally shifting more business to recurring revenue, particularly within our origination technology and data and analytics business.\nWhile we only recently began this transition, we've already seen strong client adoption.\nAnother opportunity that we're executing on today is in our closing solutions.\nThe demand for automation in the closing of a real estate transaction is increasing.\nWe see this evidenced by the continued onboarding of new customers to our electronic closing room and hybrid solution that we launched in the second quarter.\nThis month, we further advanced the automation of our eClose solution, which can save lenders hundreds of dollars per loan by leveraging additional technology and automation by adding eNote and eVault.\nOur comprehensive offering and the efficiencies that it delivers positions us well to execute on what we believe to be a $1 billion opportunity.\nWithin data and analytics, our AIQ solution leverages AI, machine learning and proprietary data from our origination platform to automate the steps in the loan manufacturing process.\nThis automation could save lenders thousands of dollars per loan by reducing manufacturing time and complexity.\nToday, only a fraction of Mortgage Technology customers take our AIQ solution, and we continue to have strong sales success cross-selling to existing customers even if they're not on our loan origination system, including one of the largest depositories in the U.S. And while still an early opportunity at under $100 million in revenue today, the efficiencies that our data analytics provide position us well to continue executing against what we think is a $4 billion opportunity.\nFlywheel effect that our leading technology and data provides, combined with the cross-sell that our broad connectivity offers, generates an array of opportunities for us to grow a business that at $1.4 billion today is only a fraction of the $10 billion opportunity.\nThe third quarter extends our track record of growth.\nWe once again grew revenues, grew adjusted operating income and grew adjusted earnings per share with strong growth from all business segments, across asset classes and amid a dynamic macro environment.\nThese results are a testament to the strength of our business model, positioning the company at the center of some of the largest markets undergoing an analog-to-digital conversion and which together make ICE an all-weather name that generates growth on top of growth.\nThe diversity of our platform positions us to benefit not only from near-term cyclical events but also longer-term, secular growth trends.\nWe've expanded into new asset classes, grown our addressable markets and broadened our expertise, making our network significant and providing the opportunity to unlock additional growth by collaborating across businesses.\nWe recently announced another new product from the collaboration between ICE Data Services and ICE Mortgage Technology called the ICE rate lock indices.\nLeveraging anonymized and aggregated data from ICE Mortgage Technology's leading origination platform, this suite of indices provides a more comprehensive, accurate and timely reflection of residential mortgage rates.\nBuilding on this innovation, like we've done in other asset classes, these indices provide an opportunity to create additional products like rich analytics and better pricing tools for lenders.\nThe opportunity to turn raw, unstructured data into actionable insights abounds across our business.\nBy taking alternative datasets and marrying them with our proprietary data, we've built solutions that offer unique insights into the market.\nOur climate analytics, for example, leverage our strength in the fixed income market with third-party geospatial data to help market participants better manage climate risk as a part of their overall investing and risk management processes.\nAs ESG is increasingly becoming a component of investment portfolios, our technology and data expertise positions us well to deliver solutions that meet these evolving customer needs.\nWe have strategically assembled a portfolio to drive growth across asset classes and macro environments.\nAnd part of this strategy is capturing value by thoughtfully repositioning businesses.\nThis year alone, we harvested our gain in Coinbase, announced an agreement to do the same with our stake in Euroclear and unlocked Bakkt via our New York Stock Exchange listing.\nThese transactions expose billions of dollars in value creation and position us well to return capital to shareholders while continuing to invest for our future growth.\nIt's collaborative efforts, innovative solutions and strategic capital allocation like this that have driven our growth for the past 20 years and which lay the foundation for continued growth well into the future.\n",
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"content": "compname reports q3 revenue of $1.8 billion.\nq3 adjusted earnings per share $1.30.\nq3 revenue $1.8 billion.\nexpect to resume share repurchases in q4.\nq3 exchange net revenues were $959 million.\nexchanges q4 2021 total recurring revenues are expected to be in a range of $330 million to $335 million.\nfixed income & data services q4 2021 total recurring revenues are expected to be in a range of $415 million to $420 million.\nmortgage technology q4 2021 total recurring revenues are expected to be in a range of $147 million to $152 million.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: The slides that accompany today's call are also available on our website.\nWe'll refer to those slides by number throughout the call today.\nThis cautionary note is also included in more detail for your review in our filings with the Securities and Exchange Commission.\nWe also have other company representatives available for a Q&A session after Lisa and Steve provide updates.\nSlide four shows our quarterly financial results.\nIDACORP's 2021 first quarter earnings per diluted share were $0.89, an increase of $0.15 per share from last year's first quarter.\nToday, we also affirmed our full year 2021 IDACORP earnings guidance to be in the range of $4.60 to $4.80 per diluted share, with our expectation that Idaho Power will not need to utilize in 2021 any of the additional tax credits that are available to support earnings in Idaho under its regulatory settlement stipulation.\nThese are our estimates as of today, and those estimates assume normal weather conditions over the balance of the year and include customer usage returning closer to pre-COVID-19 levels as we progress through the year.\nHowever, as you would expect, it is difficult to predict the full impact of evolving economic conditions on Idaho Power's customers and suppliers and how that could affect the upper end of the earnings guidance range or the use of tax credits.\nWe have had a great start to 2021.\nAs our customers and employees move closer to a more normal work environment, we are looking forward to reconnecting with many of you in person over the next year when possible.\nOur company has begun to resume some normal work operations in a phased, carefully planned manner, and we are hopeful health trends will continue to allow our working conditions to normalize in the coming months.\nFor Idaho Power, as noted on Slide 5, the first quarter of this year saw a continuation of the strong customer growth.\nIn March alone, we saw an annualized customer growth rate of 3.5%.\nThis accelerated growth rate is challenging as we keep up with service connections, but our employees continue to prove that they are up for the task.\nLooking ahead, we expect robust growth to continue as Idaho's quality of life and business-friendly environment remain attractive.\nOther factors such as inquiries for large load projects suggests demand for our energy in our service area remains strong.\nOn Slide 6, you'll see highlighted a few publicly announced large load expansions and projects.\nThe economy within Idaho Power's overall service area continues to outperform national trends.\nUnemployment within Idaho Power's service area is now down to 3.7%, remaining well below the 6% rate reported at the national level, and total employment in our service area declined a modest 0.3% since March of last year.\nMoody's has strengthened its predictions for our service area, now projecting robust economic growth going forward even after our service area experienced a modest GDP decline in 2020 relative to the national average.\nThe Moody's forecast now calls for growth of 8% in 2021, 8.1% in 2022 and continued strong growth of 6.8% in 2023.\nWe expect that existing and sustained future customer growth will cause the need for Idaho Power to continue to enhance and expand its distribution and transmission system infrastructure, including the Boardman to Hemingway project.\nThat growth may also result in the need for Idaho Power to procure other new sources of energy and capacity to serve growing loads as well as to maintain system reliability.\nWe are in the process of analyzing options for the potential energy and capacity resource procurement while, at the same time, working on our 2021 integrated resource plan.\nWe are seeing early model results in our 2021 IRP planning process showing declining length in our system in the near term.\nIt's a little too early to tell us -- to tell what that will mean for the timing of early exit of Jim Bridger coal-fired plant unit, the timing of the exit for the second unit at North Valmy, high-voltage transmission line expansion project and for other general system upgrades.\nWhile there are many factors that can impact the ultimate results, there is a possibility that the capital expenditures that we shared in February could grow beyond the estimate to meet the required projected energy and capacity needs.\nYou'll see some of the items I mentioned highlighted on Slide 7.\nWe have many exciting challenges ahead as we work hard to ensure there is sufficient energy and capacity supply for our customers while balancing the critical need for reliability, resilience and affordability with our clean energy goals.\nLast quarter, we stated Idaho Power does not plan to file a general rate case in Idaho or Oregon in the next 12 months.\nThat remains true today as we look at the next 12 months.\nCustomer growth, constructive regulatory outcomes, major project completion dates such as the relicensing of Hells Canyon, the timing of resource acquisitions and effective cost management all play significant roles as we look at the need and timing of a future general rate case.\nAs part of our overall regulatory strategy, I'll briefly highlight an update that Idaho Power received in its case with the Idaho Public Utilities Commission.\nWe requested authorization to defer the Idaho portion of O&M expenses, including vegetation management, specified insurance costs and depreciation expense for certain capital investments expected to be necessary to implement its recently enhanced Wildfire Mitigation Plan or WMP.\nThe comments published earlier this month were generally supportive of our efforts to enhance and protect our infrastructure from some of the devastation that has been prevalent in other Western states in the past few years.\nAs a reminder, we expect to spend approximately $47 million in incremental O&M and $35 million in incremental capital expenses for wildfire-related infrastructure work over the next five years.\nThe case is still pending at the IPUC, and we are currently awaiting a commission order.\nAs you all know, weather is an important factor in wildfire risk as well as in other aspects of Idaho Power's overall operations.\nWe rely on a healthy snowpack to meet our customers' needs reliably and affordably.\nThis winter, our mountains accumulated below-average precipitation.\nHowever, we entered the upcoming spring and summer seasons with strong reservoir storage so we expect relatively healthy water conditions for irrigation customers, though it is likely that hydropower generation will be lower than our 30-year average.\nYou will see on Slide eight that the most recent projections from the National Oceanic and Atmospheric Administration suggest dry and hot conditions from May through July.\nPreparations for summer readiness, when our system is most stretched, are under way, and we expect to be able to balance the reliable system and to meet customer demands.\nAs a reminder, our power cost adjustment mechanisms in Idaho and Oregon significantly reduce earnings volatility related to changes in our resource mix and associated power supply costs that can fluctuate greatly due to weather.\nAnd with that, I will hand things over to Steve for an overview of the first quarter's financial performance.\nLet's now move to Slide 9, where you'll see our first quarter 2021 financial results as compared to the same period in 2020.\nOverall, we had a strong start to the year with accelerating customer growth and positive impacts from transmission revenues.\nAltogether, IDACORP's first quarter 2021 net income was higher by $7.3 million.\nOn the table of quarter-over-quarter changes, you'll see customer growth added $3.7 million to operating income.\nLower usage per commercial customer down 2%, partly due to COVID-19 impact, was largely offset by higher residential usage due to colder weather this year versus last.\nThe net result was a relatively modest $1.3 million decrease in overall usage per customer.\nThe next change on the table shows that transmission wheeling-related revenues increased $4.1 million.\nThis was partly due to a 20% increase in wheeling volumes as well as a 10% increase in Idaho Power's open access transmission tariff rate last October to reflect higher transmission costs.\nColder winter weather in the Southwest U.S. contributed to the increased wheeling volumes this quarter.\nNext on the table, other operating and maintenance expenses decreased by $4.2 million.\nThis was primarily due to the timing of cloud-seeding activities and cost-saving initiatives at our jointly owned coal plant.\nA portion of the savings also related to Idaho Power's exit from the Boardman plant in 2020 as both O&M costs and corresponding revenues were reduced due to the regulatory mechanism in place that's associated with its shutdown.\nWe continue to see decreases in employee travel and training costs related to COVID-19 while our allowance for bad debt remains above recent levels and will likely take longer to collect.\nOur net deferral impact, however, remained nominal.\nWe will continue to monitor the impacts by state to determine whether we ultimately seek recovery for any net increased cost.\nFinally, our higher pre-tax earnings led to an increase in income tax expense of $1.5 million this quarter.\nThe changes collectively resulted in an increase to Idaho Power's net income of $7.6 million.\nIDACORP and Idaho Power continue to maintain strong balance sheets, including investment-grade credit ratings and sound liquidity, which enables us to fund ongoing capital expenditures and distribute dividends to share owners.\nIDACORP's operating cash flows along with our liquidity positions as of the end of March are included on Slide 10.\nCash flows from operations were about $50 million higher than last year's first quarter.\nThe increase was mostly related to working capital fluctuations, the timing of pension contributions and the timing of net collections of regulatory assets and liabilities.\nThe liquidity available under IDACORP's and Idaho Power's credit facilities is shown on the middle of Slide 10.\nAt this time, we do not anticipate raising any equity capital in 2021.\nWhile cash flows have been minimally affected by the pandemic thus far, our combined liquidity, along with expected regulatory support from our annual adjustment mechanisms, is a substantial backstop to our expected capital and operating needs.\nSlide 11 shows our affirmed full year 2021 earnings guidance and our current year financial and operating metrics estimates.\nWe continue to expect IDACORP's 2021 earnings to be in the range of $4.60 to $4.80 per diluted share as we assume normal weather and operating conditions for the remaining nine months of the year.\nWe also assume pandemic impact continue to moderate as the year progresses.\nOur guidance still assumes Idaho Power will use no additional tax credits in 2021.\nOf course, our guidance could be negatively impacted if the economy or the pandemic worsens significantly or for other reason.\nOur expected full year O&M expense guidance remains in the range of the $345 million to $355 million, so we're off to a good start.\nIt's fair to say that this goal to keep O&M relatively flat for the ninth straight year is being challenged by the level of growth we are expecting.\nWe also affirm our capital expenditures forecast for this year, which we increased a bit in February to the range of $320 million to $330 million.\nOur expectation of hydro generation has softened somewhat given the conditions Lisa presented earlier and is now expected to be in the range of 5.5 million to 7.5 million megawatt hours.\n",
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"content": "sees fy earnings per share $4.60 to $4.80.\nq1 earnings per share $0.89.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: The slides that accompany today's call are also available on our website.\nWe'll refer to those slides by number throughout the call today.\nThis cautionary note is also included in more detail for your review in our filings with the Securities and Exchange Commission.\nWe also have other company representatives available for a Q&A session after Lisa and Steve provide updates.\nSlide four shows our quarterly financial results.\nIDACORP's 2021 third quarter earnings per diluted share were $1.93, a decrease of $0.09 per share from last year's third quarter.\nEarnings per diluted share over the first nine months of 2021 were $4.20, which were $0.25 above the same period last year.\nThe year-to-date earnings are the highest in the history of the company over the first 9 months of the year.\nToday, we also tightened our full year 2021 IDACORP earnings guidance estimate upward to be in the range of $4.80 to $4.90 per diluted share, with our expectation that Idaho Power will not need to utilize in 2021 any of the additional tax credits that are available to support earnings under its Idaho regulatory settlement stipulation.\nThese are our estimates as of today, and they assume normal weather conditions and a continued return to more normal economic conditions over the balance of 2021.\nI will begin by addressing the robust economic growth we continue to experience in Idaho Power service area.\nYou'll see on slide five that customer growth has increased 2.9% since September 2020.\nWe believe that quality of life, a business-friendly environment and reliable affordable energy from Idaho Power continue to attract a steady influx of business and residential customers, to the benefit of both our company and the local economy.\nAnd while the impacts of the COVID-19 pandemic linger, we continue to see a return to normal operations for most of our commercial and industrial customers.\nAs of the end of September, unemployment in our service area was 2.6% compared to the current rate of 4.8% nationally.\nTotal employment in our service area has increased 3.3% over the past 12 months.\nMoody's forecasted GDP now calls for economic growth of 6.1% in 2021 and 4.2% in 2022.\nWe are encouraged by this growth trend and forecast, especially considering the challenges we have all faced over the past 18 months.\nAt the local level, we are grateful to see businesses continue to bounce back from the various impacts of the pandemic.\nIdaho Power continues to experience a strong volume of potential customers interested in expanding in our service area.\nMany prospective projects are expressing a need for rapid speed to market and are seeking existing buildings versus greenfield construction.\nThis demand is fueling significant industrial spec development to construct shell buildings ranging from 50,000 to 250,000 square feet.\nWhile a number of local developers are building out industrial parks, several nationally recognized developers are making large investments in anticipation of ongoing growth in Idaho's industrial sector.\nAs you may know, Idaho Power serves a large dairy industry and the state of Idaho ranks as the third largest dairy producing state in the U.S. We've recently received a number of inquiries for dairy waste to energy projects that use electricity as part of the process to produce renewable natural gas that is placed into pipelines.\nOne such project announced this month by Shell Oil Products U.S. will construct a waste to energy natural gas facility at a large dairy operation in Southern Idaho.\nThe plan is for the gas to be shipped by pipeline from Idaho to California.\nYou'll recall that this summer brought extreme high temperatures to our region, which combined with customer growth led to record energy demand.\nIdaho Power hit a new all-time peak load of 3,751 megawatts on June 30, and exceeded the previous peak load more than 60 separate hours during June and July, as the weather remained hot and dry over most of the summer.\nThis led to strong sales across most customer classes.\nThe benefits of those sales were offset somewhat by Idaho Power's portion of the associated higher power supply costs, in part, because energy was at a premium across much of the West, due to the persistent hot dry conditions.\nIt was a challenging summer, and we learned some valuable lessons, and I am so pleased to see that both our people and our grid were up to the task.\nWe anticipate sustained growth in the demand for electricity, a challenge that is amplified by constraints in the transmission system impacting our ability to import energy into Idaho Power system, especially during peak load period.\nAs a result, we will need new resources to serve customers and maintain system reliability.\nLast quarter, I mentioned, Idaho Power had issued a request for proposal to add 80 megawatts of new resources by summer 2023 and expects to issue an additional RFP in late 2021 or early 2022 to meet anticipated needs beyond 2023.\nBased on our efforts to address the 2023 projected load deficits, you'll see on slide six that we now could potentially add approximately $100 million in additional capital expenditures related to the 80-megawatt project during the current 5-year forecast window.\nThese new resources will be in addition to the 120-megawatt solar project scheduled to come online at the end of next year, and the Boardman to Hemingway 500-KV transmission line that will enable an increased import of energy from across the Pacific Northwest as soon as 2026.\nOur 2021 integrated resource planning efforts are focused on ensuring we continue to deliver reliable affordable clean energy for our growing customer base from diverse resources.\nOn the regulatory front, I would like to provide an update on our recent request to accelerate depreciation for the Jim Bridger coal-fired power plant.\nLast quarter, I mentioned our filing with the Idaho Commission to increase rates $30.8 million in December of this year.\nIn September, PacifiCorp, our co-owner and operator of the Jim Bridger plant, submitted an IRP to the Idaho Commission that contemplates ceasing coal-fired generation in units 1 and 2 in 2023, and converting those units to natural gas generation by 2024.\nAt a public meeting this week, the Idaho Commission approved a joint motion to suspend the Idaho power's rate request, while the parties assess this option and environmental compliance requirements for the plant.\nWe expect to resolve the uncertainties in this case before the end of 2021.\nI'd also like to share a brief update on the Boardman to Hemingway transmission line project.\nIn July, Idaho Power awarded contracts for detailed design, geotechnical investigation, land surveying and right-of-way option acquisition for B2H.\nThat work commenced during the third quarter.\nGiven the status of ongoing permitting activities and the construction period, Idaho Power expects the in-service date for the transmission line will be no earlier than 2026.\nI have also mentioned on previous calls at Idaho Power and our co-participants are exploring several scenarios of ownership, asset and service arrangements aimed at maximizing the value of the project for each of the co-participants customers.\nAny changes regarding the ownership structure would be addressed through amended or new agreements for future phases of the project.\nWe hope to be able to share more detailed updates in the near-term.\nGiven the expected increase in capital spending along with the current growth projection and other factors, Idaho Power could file a general rate case in Idaho and Oregon within the next couple of years.\nSteady customer growth, constructive regulatory outcomes, effective cost management, and economic conditions, all play significant roles as we refine the need and timing of a future general rate case.\nSlide seven shows a recent outlook of precipitation and weather from the National Oceanic and Atmospheric Administration.\nCurrent weather projections for November through January show a 33% to 40% chance for both above normal precipitation and above normal temperatures in much of Idaho Power service area.\nIf these mild and wet conditions materialize, it could provide a needed boost to our regional snowpack, as well as our forecast for the clean low cost hydro generation that has traditionally been our single largest generation resource.\nWe will be praying for snow certainly.\nAnd with the storms of this week, we are off to a great start.\nLet's now move to slide eight, where you'll see our third quarter 2021 financial results as compared to the same period in 2020.\nWhile this year's third quarter was a bit lower than last year's related to the timing of irrigation sales in both years, IDACORP has achieved the highest first 9 months of earnings ever recorded.\nWe had a very good quarter, and with continued benefits from higher sales to new customers, and higher sale in most customer classes, as well as positive impacts from transmission revenues.\nWe also saw lower sales to irrigation customers after strong irrigation loads in the second quarter, and a return to more typical operating and maintenance expenses compared to the same period last year.\nOn the table of quarter-over-quarter changes, you'll see our continuing customer growth added $5.1 million to operating income.\nIncreased usage per customer drove operating income higher by $22.9 million.\nCooling degree days were 14% higher than last year's third quarter, and the hot and dry conditions lead to 3% higher residential per customer usage, while more normal operating conditions lead to a respective 3% and 1% higher usage per commercial and industrial customers.\nThe timing of precipitation, which was higher than last year's dry third quarter, and the early start of the irrigation season that was reflected in our second quarter's results, along with some limitations on water in the third quarter all led to a 4% decline in irrigation per customer usage.\nYou'll note on the table that the combined usage changes lead to a $0.2 million increase to operating income.\nA higher usage for residential and small general service customers was partially offset by $1.4 million of lower revenues from the FCA mechanism next on the table.\nFurther down, you'll see a decrease in operating income of $3 million that relates to the change in the per megawatt hour revenue, net of power supply costs, and power cost adjustment impacts quarter-to-quarter.\nThe primary driver of this decrease relates to the decrease in annual customer rates reflecting the full depreciation of all Boardman power plant investments after ceasing coal-fired operations at that plant last year.\nIn addition, the balance of the decrease relates to the amount of net power supply expenses that were not deferred to Idaho Power's power cost adjustment mechanisms.\nRecall that Idaho customers generally bear 95% of power supply cost fluctuations and those costs were higher as the summer heat wave impacted wholesale energy prices; at a time of increased energy usage by our customers.\nThe heat wave also affected transmission wheeling-related revenues, which increased operating income by $4.7 million.\nWheeling volumes increased as utilities work to serve high demand by moving energy across our system throughout the region during the quarter, combined with 2 new long-term wheeling agreements that also increased transmission within related revenues this quarter and run through March of 2024.\nWheeling customers also paid 10% more for Idaho Power's out-rate ph that increased in October of 2020 to reflect higher transmission costs.\nThat out-rate ph increased an additional 4% on October 1, 2021, to further reflect higher costs going forward.\nNext on the table, other operating and maintenance expenses increased by $4.9 million, primarily due to a return to more normal levels of purchase services and maintenance costs, compared with the previous year's third quarter, which was more negatively impacted by the COVID-19 pandemic.\nWhile some economic effects of the pandemic continue, much business activity has returned to more normal levels.\nYou'll note that we continue to expect our full year O&M to be within our previously guided range.\nFinally, income tax expense increased $3.4 million this quarter due mostly to plant related income tax return adjustments, which were positive last year and slightly negative in 2021.\nThese are generally recorded during the third quarter of each year upon completion of the prior year tax return.\nThe changes collectively resulted in a net decrease to IDACORP's net income of $4.1 million or $0.09 per share.\nEarnings per diluted share over the first 9 months of 2021 are well above the same period last year by $0.25.\nIDACORP and Idaho Power continue to maintain strong balance sheets including investment-grade credit ratings and sound liquidity, which enable us to fund ongoing capital expenditures and distribute dividends to shareholders.\nIDACORP's operating cash flows along with our liquidity positions as of the end of September 2021 are included on slide nine.\nCash flows from operations were about $19 million higher than the first 9 months of last year.\nThe increase was mostly related to the timing of net collections of regulatory assets and liabilities, and working capital fluctuations, partially offset by changes in deferred taxes and taxes accrued.\nThe liquidity available under IDACORP's and Idaho Power's credit facilities is shown on the middle of slide nine.\nAt this time, we still do not anticipate raising any equity capital in 2021 or 2022.\nOur combined liquidity along with expected regulatory support from our annual adjustment mechanisms is a substantial backstop to our expected capital and operating needs.\nSlide 10 shows this year's revised full year earnings guidance and our current key financial and operating metrics estimates.\nGiven the results year-to-date, we have listed the bottom end of our range and now expect IDACORP's 2021 earnings to be in the range of $4.80 to $4.90 per diluted share.\nThis guidance assumes normal weather and operating conditions for the balance of the year.\nOur guidance still assumes Idaho Power will use no additional tax credits in 2021.\nAnd while we do not currently expect to record sharing of excess revenues with Idaho customers this year, the upper end of our range is near that level.\nRecall that above a 10% return on equity in the Idaho jurisdiction, Idaho customers would receive 80% of any excess earnings.\nOur expected full-year O&M expense guidance remains in the range of $345 million to $355 million.\nIt's fair to say this goal to keep O&M relatively flat for the 9th straight year continues to be challenged by the level of customers and load growth we're experiencing.\nWe also reaffirm our capex forecast for this year in the range of $320 million to $330 million.\nOur expectation for hydro-generation was tightened within the range of 5.4 to 5.7 megawatt hours.\n",
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"content": "compname reports q3 earnings per share $1.93.\nsees fy earnings per share $4.80 to $4.90.\nq3 earnings per share $1.93.\nsees 2021 earnings per share $4.80 - $4.90.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: The slides that accompany today's call are also available on our website.\nWe'll refer to those slides by number throughout the call.\nThis cautionary note is also included in more detail for your review in our filings with the Securities and Exchange Commission.\nWe also have other company representatives available to help answer any questions you may have after Steve, Lisa and Darrel provide updates.\nOn Slide 4, we present our quarterly and annual financial results.\nIDACORP's 2019 fourth-quarter earnings per diluted share were $0.93, an increase of $0.41 per share over last year's fourth quarter.\nIDACORP's earnings per diluted share for the full-year 2019 were $4.61, an increase of $0.12 per share over 2018.\nThese full-year results represent the 12th straight year of earnings growth for IDACORP and are the highest achieved in its history.\nIDACORP's cumulative average growth rate in diluted earnings per share is 7.9% since 2007.\nToday, we also initiated our full-year 2020 IDACORP earnings guidance estimate to be in the range of $4.45 to $4.65 per diluted share with our expectation that Idaho Power will not need to utilize any of the tax credits in 2020 that are available to support earnings in Idaho under its settlement stipulation with the Idaho Public Utilities Commission.\nLast week, we announced that after 24 years with the company that I would retire effective June 1 of this year.\nIn connection with this decision, our board of directors selected Lisa Grow to succeed me as president and CEO of IDACORP and Idaho Power effective June 1 and also appointed her to the boards of directors of both companies effective last week.\nShe's an electrical engineer by training and she's got over 32 years of experience at Idaho Power.\nNot only does she have a long tenure at the company, she also has a long history with Idaho Power as her grandfather was a lineman with the company for 30 years prior to Lisa joining the company.\nShe has contributed significantly to the operational and financial success of Idaho Power since becoming an officer in 2005.\nShe has earned the opportunity to take over the reins as we move forward into 2020 and beyond.\nI look forward to continuing to serve as a member of the board of directors once I step away from my executive roles.\nWith that short introduction, I will now turn the time over to Lisa for some updates on the company, as well as ongoing economic activities.\nI am honored by the opportunity to succeed you, and I look forward to the exciting times ahead.\nIn addition to the financial success noted by Justin, Idaho Power set records across several of our important metrics: safety, customer satisfaction and reliability.\nOn Slide 5, we see details of the company's record employee safety results in 2019.\nWe are very excited and proud to see injuries at an all-time low as we continue to spend significant time on our safety culture and to emphasize the importance of safety at work and at home.\nOur record-setting results in residential and business customer satisfaction are shown on Slide 6.\nAs the population within our service area continues to grow, Idaho Power is working hard to meet our customers' evolving needs.\nMost Idaho Power customers experienced -- most Idaho customers experienced an overall price decrease for the second consecutive year in 2019 with business customers' rates going down by at least 5%.\nIdaho Power's efforts to keep prices affordable, provide personal service and improve the customer experience are paying off as overall customer satisfaction metrics continue to rank near the top of the list among our peer utilities.\nReliability is a key piece of the customer satisfaction puzzle and is also included on Slide 6, which shows another outstanding year.\nIdaho Power kept customers' lights on 99.975% of the time in 2019, and overall system reliability was among the best in company history, finishing very close to 2018's record results.\nAs noted on Slide 7, Idaho Power service area continues to experience substantial customer growth.\nFor the third year in a row, Idaho remains the fastest-growing state in the nation, and Idaho Power's customer base grew 2.5% in 2019, including a 2.7% growth rate for our residential customer segment.\nIdaho Power now has more than 570,000 customers, and we view the reliable, affordable, clean energy that our company provides as a key driver for continuing to attract new customers.\nThe economy is thriving within Idaho Power's service area, and Moody's GDP forecast calls for sustained economic growth.\nIn 2019, Idaho Power experienced sales growth in its commercial and industrial sectors through a balanced mix of new business and expansion projects across the food processing, manufacturing, distribution and technology sectors.\nMoody's current forecast of GDP in Idaho Power's service area predicts growth of 4.4% in 2020 and another 4.4% in 2021.\nMeanwhile, employment increased 3.2%, and the unemployment rate was 2.8% at the end of 2019, compared with 3.5% nationally.\nTurning to Slide 8.\nIdaho Power's most recent integrated resource plan calls for continued work toward a unit-by-unit early exit from the Jim Bridger plant located in Wyoming by 2030.\nIn 2019, the company ended its participation in Unit 1 of the North Valmy plant in Nevada, which was a significant milestone in our path away from coal.\nWe also have an agreement to exit Unit 2 by 2025.\nThe Boardman plant in Oregon is also scheduled to cease operations this year.\nIn both cases, Idaho Power has State Public Utility Commission's support for a cost recovery framework to be applied through the end of their useful life, which we believe could provide a blueprint for a similar approach for Bridger.\nWe are continuing to explore options with PacifiCorp, the co-owner of Bridger, as we plan the end-of-life for the entire Jim Bridger plant.\nPacifiCorp's IRP, as published last fall, showed early shutdown dates for two Bridger units as well.\nIdaho Power's overall coal-fired generation has decreased for six consecutive years.\nAs recently as 2013, coal was our largest energy source at 47% of our total energy mix.\nToday, that number is around 16%.\nOur path away from coal, which is driven by the economics of the plant, aligns with our Clean Today, Cleaner Tomorrow plan to provide 100% clean energy by 2045.\nAnother key project in our Cleaner Tomorrow plan is the Boardman to Hemingway transmission project or B2H, which made solid progress in 2019.\nThe Oregon Department of Energy recommended approval of the 300-mile line.\nThe department is expected to release a proposed order, which is the next step in the permitting process, authorizing the transmission line this year.\nIf the permitting process remains on track, we expect the Oregon Energy Facility Siting Council to issue a final order and site certificate in 2021.\nFollowing preconstruction activities, construction is expected to begin as early as 2023, with the line expected to be in service in 2026 or sometime thereafter.\nThe IRP we amended and filed at the end of last month also plans for us to include 120 megawatts of solar from the Jackpot Solar power purchase agreement.\nIdaho Power evaluated purchasing the project and elected not to pursue it.\nWe do not expect Idaho Power to file a general rate case in Idaho or Oregon in the next 12 months.\nThe influx of new customers, constructive regulatory outcomes and effective cost management all play significant roles in this decision.\nWith that, I will turn the time to Steve, who will go through the 2019 financial results.\nWe had excellent 2019 results.\nWeather challenges through the year were more than offset by a very good final quarter.\nI'll walk you through the drivers year over year on Slide 9.\nStrong net customer growth of 2.5% added $18.8 million to operating income in 2019.\nA decline in usage per customer, mostly related to lower irrigation sales, decreased operating income by $21.4 million.\nGreater precipitation and more moderate spring and summer temperatures led to 11% less use per customer for those in the agricultural irrigation class this year.\nFurther down the table, net retail revenues per megawatt hour decreased operating income by $2.8 million.\nAs anticipated, the settlement stipulations associated with income tax reform reduced revenues more significantly in 2019.\nIdaho Power's open access transmission tariff rates declined by 10% in October of 2018 and again by 13% in October 2019, lowering transmission wheeling-related revenues by $5.3 million.\nThese rates reset each year to align revenues with the cost of the transmission system.\nTo a lesser extent, lower transmission volumes also contributed to an overall reduced wheeling revenue this year.\nNext on the table, other operating and maintenance expenses decreased $8.7 million as our team's continued focus on cost management resulted in lower expenses across several areas.\nContributing to this decrease was lower bad debt expense of $1.1 million due to a strong economy and the nonrecurrence of a 2018 O&M expense of $4 million for a noncash amortization of regulatory deferrals related to tax reform.\nIdaho Power's 2019 return on year-end equity in Idaho landed between the 9.5% tax credit support level and the 10% customer sharing line under the Idaho regulatory settlement stipulation.\nSo we did not record any additional tax credit amortization or provision against revenues for sharing with Idaho customers this year.\nLast year, we recorded a $5 million provision against revenues for sharing, which did not recur.\nIdaho Power has the full $45 million of approved credits available to support earnings in future years.\nAs a reminder, the tax credit support line will be at 9.4% for 2020.\nThese items collectively resulted in a year-over-year increase to Idaho Power's operating income of $2.3 million.\nNonoperating income and expenses netted to a $9.9 million improvement to pre-tax earnings due to several items.\nA $4.2 million charge in 2018 related to Idaho Power's post-retirement plan did not recur.\nThis was anticipated and reflected in our prior earnings guidance ranges.\nNext, our allowance for equity funds used during construction increased $2.7 million as the average construction work in progress balance was higher throughout 2019.\nFinally, stronger asset returns this year led to $2.1 million of higher investment income from the Rabbi Trust associated with Idaho Power's nonqualified defined benefit pension plans.\nOn the next line, you will see income taxes were higher by $10.1 million.\nRemember that 2018 included $5.7 million of benefits from remeasurement of deferred taxes at Idaho Power due to income tax reform, as well as $1.3 million of tax-deductible bond redemption costs incurred last year.\nThere was no such remeasurement or bond redemption in 2019.\nAmortization of newly funded vintage investment tax credits helped lower tax expense in the current year, while higher pre-tax income primarily contributed to the remainder of the increases.\nFinally, at IDACORP Financial Services, distributions from the sale of low-income housing properties led to approximately $3 million higher net income at that subsidiary.\nWhile the nature, timing and amount of the underlying property sales at IFS are difficult to predict and are controlled by third parties, we do not expect them to be as significant in 2020.\nOverall, Idaho Power's and IDACORP's net income were $2.1 million and $6.1 million higher than last year, respectively.\nIDACORP and Idaho Power continue to maintain strong balance sheets, including investment-grade credit ratings and sound liquidity, which enable us to fund ongoing capital expenditures and dividend payments.\nRegarding dividends, you'll note that in addition to the latest dividend increase of 6.3% announced by the board of directors last September, the board also increased IDACORP's target dividend payout ratio to 60% to 70% of sustainable earnings.\nThis reflects several years of our steady upward trajectory of dividend increases.\nWe expect to recommend an annual dividend increase of 5% or more to the board of directors in the coming year.\nOn Slide 10, we show IDACORP's operating cash flows along with our liquidity positions as of the end of 2019.\nCash flows from operations were $125 million lower than 2018.\nThese were mostly related to changes in regulatory assets and liabilities like those resulting from the power cost adjustment mechanism and the timing of working capital receipts and payments.\nThe liquidity available under IDACORP's and Idaho Power's credit facilities is shown on the bottom of Slide 10.\nAt this time, we do not anticipate issuing additional equity in 2020 other than relatively nominal amounts under the compensation plans.\nSlide 11 shows our first look at full-year 2020 earnings guidance and our key financial and operating metrics estimates.\nWe are initiating IDACORP's 2020 earnings guidance in the range of $4.45 to $4.65 per diluted share, which is up roughly 4% over prior-year guidance range and assumes no use of additional tax credits under normal weather conditions.\nOur record 12 years of earnings growth is something that sets us apart from our peers.\nWe expect O&M expenses to be in the range of $350 million to $360 million, which would keep O&M relatively flat for the ninth straight year.\nWe expect capital expenditures will lift somewhat to the range of $300 million to $310 million.\nYou'll note that our updated five-year forecast of capital expenditures is also higher than our previous plan, now forecasted to range from $1.6 billion to $1.7 billion over that time.\nThis forecast still does not include the majority of costs to build the major infrastructure projects, such as Boardman to Hemingway or increased compliance costs associated with the new Hells Canyon license due to the uncertainty and the exact timing of that spend.\nFinally, our current reservoir storage and stream flow forecast suggests that hydropower generation should be in the range of 6.5 million to 8.5 million megawatt hours.\nWith that, I'll turn the time back to Darrel.\nThere is much to be proud of as we look back on the outstanding results of 2019.\nWhile the energy industry is rapidly evolving, IDACORP continues to meet challenges and opportunities while delivering unparalleled results for customers and investors alike.\nFrom meeting financial targets to striving for a cleaner energy future, we believe that our employees and our ongoing business strategy will help sustain our success into the future.\nI will close with a look at weather on Slide 12.\nThe latest projections from the National Oceanic and Atmospheric Administration suggests an equal chance of above or below normal precipitation levels and a 40% to 50% chance of above normal temperatures from March to May.\nWe have seen a lot of snow and rain in recent weeks.\nAs a reminder, our power cost adjustment mechanisms in Idaho and Oregon significantly reduced earnings volatility related to changes in our resource mix and associated power supply costs that can fluctuate greatly due to weather.\nWith that, Steve, Lisa and I and others here today will be happy to answer questions you may have.\n",
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"content": "compname announces q4 earnings per share $0.93.\nsees fy 2020 earnings per share $4.45 to $4.65.\nq4 earnings per share $0.93.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: The slides that accompany today's call are also available on our website.\nWe'll refer to those slides by number throughout the call today.\nThis cautionary note is also included in more detail for your review in our filings with the Securities and Exchange Commission.\nWe also have other Company representatives available for a Q&A session after Lisa and Steve provide updates.\nSlide 4 shows our quarterly and full-year financial results.\nIDACORP's 2020 fourth quarter earnings per diluted share were $0.74, a decrease of $0.19 per share over the last year's record fourth quarter.\nIDACORP's earnings per diluted share for the full year 2020 were $4.69, an increase of $0.08 per diluted share from 2019.\nToday, we also issued our full year 2021 IDACORP earnings guidance estimate to be in the range of $4.60 to $4.80 per diluted share with our expectation that Idaho Power will not need to utilize in 2021 any of the additional tax credits that are available to support earnings in Idaho under its regulatory settlement stipulation.\nThese, of course, are our estimates as of today, and those estimates assume normal weather conditions over the balance of the year and includes customer usage returning closer to pre-COVID-19 levels as we progress through the year.\nHowever, as you would expect, it is difficult to predict the full impact of evolving economic conditions on Idaho Power's customers and suppliers and how that could affect the upper end of the earnings guidance range or the use of tax credits.\nThe COVID-19 pandemic created unforeseen difficulties for our customers and our employees.\nEconomic uncertainty and interruptions to our daily lives became the norm.\nOur nearly 2,000 employees were challenged daily as we continued to carry out our mission as an essential service provider.\nAnd yet, through it all, IDACORP and Idaho Power continue to achieve tremendous results.\nAs noted on Slide 5, 2019 through 2020 were our two safest years in company's history.\nI am so grateful for the continued focus of our employees on safety despite all the distractions surrounding their daily routine.\nTurning to Slide 6.\nWe also saw some of our best third-party customer satisfaction rating being the top ranking utility among peers in the segments for overall customer satisfaction and fifth highest in the nation for business customer satisfaction.\nAnd our reliability numbers remained among the best in the industry as we capitalized on 99.96% of the time.\nThe success we achieved in the continuation of our operations without significant interruption over the past year serve as testament to our great people.\nWhether they were adapting to remote or hybrid work, finding innovative ways to serve our customers, meeting company goals or implementing additional measures to keep themselves, our customers and our community safe.\nOur dedicated employees rose to the occasion and powered through it together.\nIn addition to outstanding operating results, I am happy to report that IDACORP marked its 13th consecutive year of growth in earnings per share, as detailed on Slide 7.\nWe believe this achievement is unparalleled among investor-owned utilities in the U.S. in recent history and it is particularly noteworthy in a year filled with economic headwinds and uncertainties.\nWe're pleased to continue to share the successes of the company with our owners by increasing IDACORP's quarterly common stock dividend again in 2020 from $0.67 to $0.71 per share, marking our 9th consecutive year with an increase to the dividend.\nAs noted on Slide 8, Idaho Power's service area continues to experience substantial customer growth.\nAccording to U.S. News & World Report and the United States Census Bureau, Idaho was once again the fastest growing state in the country during 2020 and Idaho Power's customer base grew 2.7%.\nA national study by United Van Lines also ranked Boise as the number 3 metropolitan area for inbound moves during 2020.\nIdaho Power now serves more than 587,000 customers and we view the reliable, affordable, clean energy our company provides as an important factor in continuing to attract the business and residential customers to Southern Idaho and Eastern Oregon.\nIt does not seem that long ago that we crossed the 500,000 customer mark.\nLooking ahead at future loads, increase for large load project came in at a strong pace during 2020.\nOn Slide 9, you'll see the highlighted notable milestones, including the announcement of a 240,000 square foot True West Beef facility, the opening of Amazon's 2.5 million square foot fulfillment center and the announcement of a 90,050,000 square foot expansion to an existing Lamb Weston potato processing plant.\nAmidst the global pandemic, the economy within Idaho Power service areas continues to outperform national trend.\nMoody's predicts sustained economic growth going forward after experiencing a GDP decrease of 1.7% in 2020 with Moody's forecast calls for growth of 6.1% in 2021 and 6.8% in 2022.\nUnemployment within Idaho Power's service area is at 4.7%, an increase over recent years, but still well below the 6.7% reported at the national level.\nAs I mentioned earlier, IDACORP was pleased to announce a dividend increase of 6% this past fall.\nGoing forward, management expects to recommend the Board of Directors future annual increases in the dividend of 5% or more with the intent of keeping the company within our target payout ratio of between 60% and 70% of sustainable IDACORP earnings.\nAs outlined on Slide 10, IDACORP continues its strategy into 2021, starting toward our cornerstone goals of growing financial strength, improving the core business, enhancing Idaho Power's brand and keeping employees safe and engaged.\nAs we execute on these goals, we work to balance the interest of our owners, customers, employees and other stakeholders.\nWe are committed to working for sustainable financial results and strong credit ratings by continuing to provide safe, reliable, affordable service to customers from an already clean and increasingly cleaner reliable mix of generation resources.\nIdaho Power's goal to achieve a 100% clean energy by 2045 fits well into our overall strategy as we expected to meet the new investment in system improvements that will enhance the customer experience.\nYou'll see highlighted on Slide 11 that the Boardman to Hemingway project or B2H continues to advance.\nThis project is a key energy pathway that will allow us to buy transport and sell more clean energy across the North West.\nLast July, the Oregon Department of Energy issued a proposed order recommending authorization of the transmission line.\nIdaho Power anticipates finalizing B2H permitting in 2022 with the line planned to be in service in 2026 or later.\nDiscussions are ongoing about the ownership structure of the line with the Idaho Power -- with Idaho Power exploring with the partners, both its planned share of ownership as well as the potential additional investment opportunity.\nOur path toward a cleaner tomorrow continued in 2020 has been jointly on Boardman's coal-fired power plant in Oregon East operation in October.\nIdaho Power has previously ended its participation in 1 unit at the North Valmy coal-fired plants in Nevada at the end of 2019.\nAnd depending on further analysis on economics and system reliabilty, the remaining Valmy unit could follow with exit plan as early as next year, but no later than 2025.\nWe also continued to explore options with our partner for the appropriate end of life of the Jim Bridger coal-fired plant in Wyoming, which will be our final coal plant in the Idaho Power energy mix.\nOur most recent integrated resource plant calls for a full exit from coal-fired generation by 2030.\nReceiving a new long-term federal license for the three dam Hells Canyon Complex is another top priority to help ensure Idaho Power's clean energy future.\nSignificant steps in 2020 include filing a supplement to Idaho Power's final license application with the Federal Energy Regulatory Commission or FERC and preparing draft biological assessments in consultation with the U.S. Fish and Wildlife Service and the National Marine Fisheries Service that were also filed with the FERC.\nThe FERC can issue the license as early as 2022 but as of today, we believe issuance is more likely in 2023 or thereafter.\nThe FERC also recently formally initiated the relicensing proceeding for the American Falls hydropower facility, which is Idaho Power's largest hydropower facility outside of the Hells Canyon.\nIdaho Power currently expects the first to issue a new license for this facility prior to the 2025 expiration.\nLast quarter, we stated Idaho Power did not plan to file a general rate case in Idaho or Oregon in the next 12 months.\nThat remains true today as we look at 2021.\nCustomer growth, constructive regulatory outcomes, major project completion dates and effective cost management all play significant roles as we look at the need and timing of the future general rate case.\nAs part of our overall regulatory strategy, I'll highlight that Idaho Power filed an application last month with the Idaho Public Utilities Commission, requesting authorization to defer the Idaho portion of O&M expenses, including insurance cost and depreciation expense of certain capital investments expected to be necessary to implement its recently enhanced Wildfire Mitigation Plan or WMP.\nThis WMP outlines actions Idaho Power is taking or plans to implement in the future to reduce wildfire risk and to strengthen the resiliency of its transmission and distribution systems to wildfire.\nThese enhancements are in part the response to the degree of annual destruction from wildfires that the Western U.S. has experienced in recent years.\nWe expect to spend approximately $47 million in incremental WMP and wildfire-related O&M expenses and $35 million in incremental capital expenses over the next five years.\nThe case is now pending at the Idaho Public Utilities Commission.\nNext, I'd like to highlight our newest Board member, Dr. Mark Peters, who was appointed last week.\nDr. Peters is currently the Executive Vice President for the laboratory operations at Battelle Memorial Institute with responsibilities for governance and oversight of U.S. Department of Energy and U.S. Department of Homeland Security National Laboratory, for which Battelle has a significant lab management role.\nPreviously, he was the Director of the Idaho National Laboratory since 2015.\nMark is a highly respected leader in our Idaho community as well as an internationally recognized expert in his field, including energy and security.\nI will close with a look at weather on Slide 12.\nThe most current projections from the National Oceanic and Atmospheric Administration suggest normal conditions from March to May.\nOur mountain regions have received some good precipitation in recent weeks and we are hopeful the resulting snowpack should provide decent conditions for generating low-cost hydropower and to provide irrigation customers with enough water to operate in 2021.\nAs a reminder, our power cost adjustment mechanisms in Idaho and Oregon significantly reduce earnings volatility related to changes in our resource mix and associated power supply costs that can fluctuate greatly due to weather.\nWith that, I will hand things over to Steve for an overview of last year's financial performance.\nLet's now move to Slide 13 where you'll see our full year 2020 financial results as compared to the same period in 2019.\nOverall, we had solid results during a challenging year driven by customer growth in our service area and continued successful efforts to control costs.\nFirst up on the table is our strengthening customer growth of 2.7%, which added $14 million to operating income.\nHigher usage per residential and irrigation customer of 1% and 11% respectively more than offset the negative used impacts of the pandemic, which contributed to decreased commercial and industrial sales volumes by a respective 4% and 1% during the year.\nIrrigation sales volumes benefited from a return to more normal spring precipitation levels over 2019.\nResidential customer usage was partly impacted by weather variations but many customers also spent more time at home due to the public health crisis.\nThe net result was a relatively modest $0.9 million increase in overall usage per customer.\nAlso on the table you will see that the increase in residential sales was offset by a $1 million decrease in fixed cost adjustment revenues.\nNext, changes in net power supply expenses led to a $2.6 million decrease in retail revenues per megawatt hour largely due to fewer opportunities processed in sales than in the prior year.\nTransmission wheeling-related revenues also decreased $2.2 million primarily due to a 13% decline in Idaho Power's open access transmission tariff rate in October of 2019.\nThis decrease was partially offset by an increase in wheeling volumes this past summer related to warmer weather in the Southwest, U.S. and California as well as roughly 10% increase in tariff rate beginning October 1 of 2020.\nNext on the table, other operating and maintenance expenses decreased by $3.7 million.\nA portion of this decrease was expected due to Idaho Power's exit from either one of the North Valmy plant last year.\nBut much of the decrease resulted from lower costs related to discretionary maintenance projects at the jointly owned coal plant as well as lower performance-based variable compensation accruals.\nIn prior quarters, we mentioned a small deferral of expenses related to COVID-19.\nAs of year end, the current amount is nominal.\nHowever, Idaho Power plans to continue to monitor these -- those related ongoing costs.\nFinally, our higher pre-tax earnings led to an increase in income tax expense of $2.1 million this quarter.\nThe changes collectively resulted in an increase to Idaho Power's net income of $8.8 million.\nOther IDACORP net income changes were lower primarily because distributions from the sale of low income housing properties in 2018 did not recur in 2020.\nIDACORP's full year net income for 2020 was a net $4.5 million higher than 2019.\nIDACORP and Idaho Power continue to maintain strong balance sheets, including investment grade credit ratings and sound liquidity, which enable us to fund ongoing capital expenditures and distribute dividend to shareowners.\nIDACORP's operating cash flows along with our liquidity positions as of the end of 2020 are included on Slide 14.\nCash flows from operations were about $22 million higher than the prior year.\nThe increase was mostly related to working capital and deferred tax fluctuations offset partially by the timing of net collections of regulatory assets and liabilities.\nThe liquidity available under IDACORP's and Idaho Power's credit facilities is shown on the middle of Slide 14.\nAt this time, we do not anticipate issuing additional equity in 2000 -- or in 2021 other than nominal amounts under our compensation plans.\nWhile cash flows have been minimally affected by the pandemic thus far, our combined liquidity along with expected regulatory support from our annual adjustment mechanisms is a substantial backup -- backed up to our expected capital and operating needs.\nAs we did last year, Idaho Power contributed $40 million to its pension plan during 2021, which would be above its required contribution.\nSlide 15 shows our initiated full year 2021 earnings guidance and our key financial and operating metrics estimates.\nWe currently expect IDACORP's 2021 earnings to be in the range of $4.60 and $4.80 per diluted share.\nAt or above the midpoint of this guidance range, IDACORP would achieve its 14th consecutive year of growth in earnings per share, which approaches a 5% cumulative average growth over the past five years.\nOur guidance assumes Idaho Power would use no additional tax credits and assumes normal weather condition.\nOf course, our guidance could also be negatively impacted if the economy or the pandemic worsens significantly.\nAnd such scenarios could require us to use additional tax credits.\nOur strong, consistent financial results and sustained cost management efforts during the past decade have preserved the full $45 million of tax credits available to support our current Idaho jurisdictional return on equity support level of 9.4% under our regulatory stipulation and we plan to continue our efforts to preserve as many of those credits as we can going forward.\nOur full year O&M expense guidance is expected to be in the range of $345 million to $355 million.\nThis will be the ninth straight year of nearly flat O&M expense, which represents the sustained commendable effort of our entire team over those years.\nIt's fair to say this goal is being impacted by the level of growth we are experiencing and depending on how this year progresses, it could be challenging to meet.\nOur capex spending is expected to increase to the range of $320 million to $330 million, and our expectation of hydropower generation is expected to be in the range of 6 to 8 million megawatt hours, the upper end of which could be close to our normal annual generation over the past 30 years.\nOn the subject of capex, turning to Slide 16, you'll note that the current five-year capital plan reflects significant increases relative to our prior five-year plan.\nAs a portion of the construction cost for some of the larger projects Lisa discussed like B2H have been folded into the outlook along with other anticipated capital improvement.\nWe now expect our capital expenditures over the next five years to approach $2 billion and it shows roughly at 7% compound average growth over our previous five-year plan.\n",
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"content": "sees fy 2021 earnings per share $4.60 to $4.80.\nq4 earnings per share $0.74.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: I'm joined today on the call by Marcelo Fischer, IDT's chief financial officer.\nIDT continued to deliver strong results, reflecting the sustained execution of our strategic priorities and the robust operating performances of our businesses.\nAs a result, our top and bottom lines increased appreciably compared to the year-ago and prior quarters.\nEven though excluding the positive impacts of a reversal of income tax valuation allowances and gains on investments recorded this quarter, consolidated revenue increased $52 million year over year to $374 million with our fourth consecutive quarter of year-over-year revenue increases.\nWith solid performances across the board, including an exceptional increase in mobile top-up revenue among our traditional communications offerings, consolidated income from operations increased from $10.1 million to $13.9 million this quarter.\nOur adjusted EBITDA less capex, which is overall a good proxy for cash generation, jumped to $13.2 million and $5.7 million.\nSorry, my kids have just joined me, I apologize.\nI am sorry, it's the problem with not pre-recording.\nI am just going to go back and drop, I apologize.\nConsolidated income from operations increased $10.1 million to $13.9 million this quarter.\nWhile adjusted EBITDA less capex, which is overall a good proxy for cash generation jumped to $13.2 million from $5.7 million.\nAll three of our reporting segments, net2phone-UCaaS, fintech, and traditional communications met or exceeded our expectations.\nOur high growth, high margin businesses once again performed extremely well, net2phone delivered subscription revenue growth of 39% year-over-year.\nThe increase reflected in part for progress on the net2phone development roadmap, net2phone continues to add API third-party integrations and now offers integrations with Salesforce, Zoho, PurpleCloud, Slack, Zapier, and Microsoft Teams, among others.\nIts growing integration toolkit enhances access to new segments across its domestic and international markets.\nIn our fintech segment, NRS accelerated its impressive revenue growth increasing revenue by over 120% year over year, led by payment processing and digital advertising services.\nThis quarter, NRS announced the partnership enabling our independent retailers to ship and receive commerce packages.\nThis deal illustrates the real strength of the NRS ecosystem, namely, its ability to generate revenue from a variety of services in ways that add tremendous value to our retailers.\nAlso, within fintech, our BOSS Revolution money transfer business remained strong, generating 63% revenue growth year over year after excluding the significant positive impact of the transient FX opportunities we successfully pursued starting with the year-ago quarter, but which finally and completely ceased in the second quarter of this year.\nOur money transfer team has done a great job of enhancing the BOSS Revolution money app, user experience, and systematically cross-selling customers from our other BOSS offerings.\nIn the coming months, we will continue to grow our money transfer service to new corridors, enhance our distribution network, notably in Africa and expand it to new origination markets.\nThese initiatives offer abundant long-term growth potential.\nAnd finally, within our largest segment, traditional communications, mobile top-up revenue jumped by $36 million sequentially and by $47 million year over year, underscoring the vigor of these offerings and the potential to sustain long-term cash generation.\nThis significant revenue increase reflects our recent efforts to grow our share in the mobile top-up space.\nPowered by mobile top-up, adjusted EBITDA less capex for the traditional communication segment jumped to $20.8 million, an increase of $8.7 million from the year-ago quarter.\nFinishing up our strong third-quarter operational results enabled us to further strengthen our balance sheet with a significant improvement to available cash and current ratios this quarter.\nAnd I'm sure some of my kids would love to join, but hopefully, it will just be the two of us.\n",
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"content": "idt corp qtrly consolidated revenue increased 16% to $374 million.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: My discussions today focus on the fourth-quarter fiscal 2021 results.\nWe expect to file the 10-K with the SEC on or about October 14.\nWe continue to drive strong improvement in IDT's results during the fourth quarter, powered by growth at net2phone, NRS, and our Mobile Top-Up business.\nLet's focus first on net2phone.\nnet2phone subscription revenue growth accelerated in the fourth quarter increasing 46% year over year.\nGrowth in our Latin America and U.S. and Canadian market was again very strong.\nOur subscription revenue margin remained robust, increasing 10 basis points to 83.5%.\nnet2phone's strategic focus on midsized businesses, our multichannel go-to-market strategies, and deeply localized in-country offerings consistently generate gross margins and revenue growth metrics above UCaaS industry averages.\nBut really, the exceptional results at net2phone, are the collective efforts of the focused customer-centric group of people around the globe that is net2phone.\nCustomers in net2phone don't hear no very often.\nIf they want or need something to help them better communicate, we find a solution for them.\nnet2phone is becoming a big company, but we are not becoming the kind of big company that has different departments for large enterprises and a different department for small companies.\nAnd we don't have SLAs that differ depending on what you pay us.\nAt net2phone, no matter whether you're running a large global enterprise from Texas or a five-person start-up in Brazil, you are going to get a truly localized custom-tailored communication solution with outstanding service and reliability.\nOf course, we continue to work on the spinoff of net2phone.\nWe believe the financial and legal preparations will be substantially completed by calendar year end to enable a tax-free spin-off early in 2022 should our board authorize it.\nWithin our fintech segment, NRS revenue increased by 76% year over year, led by increased sales of merchant services and specifically NRS Pay payment processing.\nAdvertising and data sales at NRS were also robust in the fourth quarter.\nAt July 31, NRS had over 14,000 active terminals and over 5,600 payment processing accounts, more than double the number of accounts a year earlier.\nAverage revenue per terminal exclusive of terminal sales increased from $126 in the year-ago quarter to $169 in the fourth quarter of 2021.\nWe believe that ARPU will continue to climb with the addition of new NRS Pay accounts, increased utilization of our enormously powerful advertising network, and further utilization of data offerings by our consumer packaged goods partners just to name a few.\nAlso within our fintech segment, money transfer revenue decreased 49% compared to the year-ago quarter.\nAs we have discussed previously, a transitory foreign exchange market condition materially boosted revenue and gross profit in the fourth quarter of fiscal 2020 and persisted through the second quarter of fiscal 2021.\nAbsent that impact, fourth-quarter fiscal 2021 revenue would have increased by 36% compared to the year-ago quarter.\nSequentially, money transfer revenue increased by over 6%.\nAnd finally, turning to our largest segment, Traditional Communications continue to exceed our expectations.\nTraditional Communications revenue in the fourth quarter increased 10% year over year.\nWithin Traditional Communications, Mobile Top-Up revenue increased by 41%, powered by increases in sales in its B2B channel.\nWe expect that our efforts over the past year to expand our Mobile Top-Up business into the African market, led by the recent acquisition of a majority stake in a Mobile Top-Up operator with an extensive footprint in Africa, our increased focus in the B2B space, as well as the growing demand for data-heavy services worldwide, will continue to drive Mobile Top-Up revenue growth.\nFourth-quarter earnings per diluted share increased to $1.46 from $0.82 in the fourth quarter last year.\nThe increase reflects the positive impact of an income tax valuation allowance reversal in addition to the strong improvements in the underlying profitability of several of our business units.\nCash generation during the quarter helped to drive an increase in cash and current investments of $34 million during the quarter and $52 million during the fiscal year to $161 million as of July 31, and we have no debt.\nFollowing the quarter close, our NRS business sold a 2.5% stake to a private investment fund for $10 million, implying a $400 million valuation for that business.\nThat was based on approximately 19 times NRS' trailing 12-month revenue at the end of our third quarter.\nWe have not only endured COVID's multi-faceted challenges, but over the past several quarters, we have built like many other companies across the country and across the globe with supply chain issues that impacted our inventories of phones, POS terminals, and other hardware.\nThroughout, we have maintained our focus and succeeded in executing on our key objectives.\n",
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"content": "q4 earnings per share $1.46.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: This is Mike Yates, vice president and chief accounting officer for IDEX Corporation.\nThe format for our call today is as follows: we will begin with Eric providing an overview of the state of our business, an update on our M&A activity and an overview of our order performance and outlook for our end markets.\nBill will then discuss our first-quarter 2021 financial results and provide an update on our outlook for the second and -- quarter and full-year 2021.\nFinally, Eric will conclude with an update on our sustainability, diversity, equity and inclusion programs.\nBefore we begin, a brief reminder.\nWith that, I'll now the call over to our CEO, Eric Ashleman.\nOnce again, our teams across IDEX should be extremely proud of the results we've achieved together.\nI don't think any of us would have imagined being at this point when viewing the state of the world a year ago.\nOur diverse array of high-performing businesses continues to serve us well.\nWe're seeing most of our end markets either largely recovered or steadily improving at this point.\nWe continue to build on the momentum we experienced in the fourth quarter and expect 2021 to be stronger than our expectations 90 days ago.\nAlthough tremendous progress has been made in our recovery, there are still some areas we're keeping a close eye on.\nOur day rates have accelerated, but we have yet to see larger projects in our industrial sector moving forward.\nCustomers are more confident in their outlook but are now trying to balance the surge in demand with capacity to make larger investments.\nAs for COVID, the conditions vary widely around the world.\nIn the U.K. and the United States, the vaccination rate has been remarkable of late.\nIn China, much of life has been continuing as normal for many months now.\nThe situation in Europe and India, where lockdowns and virus variants are still a serious issue, reminds us that we are not fully past the societal and economic impact that the pandemic has had in our businesses.\nThe quarter was not without challenges from safety protocols and lockdowns to sporadic shortages of parts and materials to rapidly changing logistics hurdles in a variety of staffing challenges, this was far from smooth sailing.\nI'm proud that our team successfully navigated many tough hurdles to achieve these results.\nThe operational excellence of our teams continues to pay off.\nPivoting a moment to capital deployment.\nWith the closure of the ABEL Pumps transaction this quarter and the announcement of the Airtech acquisition last night, covered in more detail in a moment, we have started off 2021 on a strong note.\nAnd we'll build on this momentum as we further invest in M&A capabilities.\nWe recently allocated some of our most talented resources toward focused strategy and business development roles, and we engaged external expertise to expand our ability to identify, assess, win and successfully integrate new companies into IDEX.\nOur deal funnel is expanding as we look for more opportunities to acquire organizations that fit the IDEX style of competition.\nWe seek to both widen and deepen the moats around our best businesses as well as established positions within new market niches where the capabilities of our teams will drive the most value for customers and shareholders.\nWe are fortunate to have significant financial resources to deploy toward these efforts.\nMoving on to Slide 7.\nYesterday, we announced our intent to acquire Airtech Vacuum Group from EagleTree Capital for $470 million.\nAirtech engineers and manufactures high-performance regenerative blowers, pneumatic valves, air compressors and vacuum pumps.\nAirtech had revenue of $85 million with EBITDA margin in the mid-30s range in 2020.\nIt is a 16x trailing deal and a 15x deal including acquired tax benefits.\nWithin the IDEX family of businesses, they complement and expand upon the solutions provided by Gast Manufacturing, which produces fractional horsepower, air moving products and systems that include air compressors, vacuum pumps, air motors and tank systems.\nWhile there are some overlaps in the solutions they provide, much of Airtech's product lines will be complementary.\nThey will remain separate businesses within IDEX, but we anticipate collaboration and synergies from each company with shared expertise leading to further innovation.\nThis deal, which we expect to close in the second quarter, will then create a $200 million pneumatics platform within our Health & Science Technology segment.\nTurning to our commercial results on Slide 8.\nThe positive momentum in order trends continued in the first quarter, both compared to prior year and sequentially, allowing us to build $59 million of backlog in the quarter.\nMost of our business units are at or approaching pre-pandemic levels.\nI'll go into more details in a minute.\nOrganic orders in the quarter exceeded the first quarter of 2020 and were an all-time high for us.\nQ1 orders were also up 4% organically versus Q1 of 2019.\nAs we look across our segments, health and science technologies and fire and safety/diversified products delivered strong organic order growth, with fluid and metering technology slightly lagging.\nAs growth rates in HST and FSDP begin to naturally level off, we expect FMT will drive additional growth due to the return of project-based businesses in the energy and industrial markets in the second half of the year.\nThese commercial results and the strength of our rebound highlight the resilience of our businesses and the critical importance of the solutions we provide to our customers.\nOn Slide 9, we provide a deeper outlook for our primary end markets.\nTo level set, we entered the year cautiously bullish about the state of our underlying markets and the velocity of the pandemic recovery.\nOur day rate businesses began to accelerate coming into the year, and we continue to leverage our diversified portfolio to aggressively pursue opportunities to drive organic growth coming out of the pandemic.\nWe are now measuring our markets against their pre-pandemic levels.\nMany of our markets have fully recovered, and the majority of our markets are on track to have fully recovered by the end of the year.\nAs I mentioned earlier, we're not out of the woods yet, but even with pockets of concern around supply chain disruptions and COVID in certain geographies, we are optimistic about the outlook of our end markets.\nIn our fluid and metering technologies segment, industrial day rates continued to increase throughout the quarter.\nAs I've mentioned, we will not be at full recovery until we see large capex projects resume, but the underlying industrial markets are in a state of recovery trending back toward 2019 levels.\nAgriculture continues to drive outsized growth as crop prices and customer sentiment remains strong.\nOur water business is stable.\nWe continue to assess any subsequent impact from the pandemic on municipal funding as well as tailwinds that might come out of an infrastructure bill.\nEnergy markets continue to lag 2019 levels, primarily due to limited capital investment in this sector.\nMoving to the health and science technologies segment.\nWe experienced solid growth across almost all of our markets, semicon and food and pharma continued to outperform, driven by a strong market and winning share with our differentiated technology offerings.\nThe overall automotive market faces many challenges, but we have won several new platforms driving our performance.\nOur AI and life science markets are on the rebound as the impact of the pandemic in the United States has improved.\nDay rates are improving, but projects are lacking.\nOne last item for HST. We do see risk with the COVID opportunities we have been taking -- talking about in this segment, specifically around testing.\nThe end product application is yet to receive FDA approval which will impact volumes for this year.\nWe do believe that the strength in the rest of the segment will be able to offset most of that risk.\nFinally, in our fire and safety/diversified products segment, dispensing continues its rebound as large retailers free up capital and work through pent-up demand for equipment.\nMuch like our automotive exposures in HST, the auto recovery in FSD at BAND-IT is driven by new platform wins, coupled with an improved market.\nIn fire and rescue, we continue to assess municipal budget headwinds, especially in Europe and India as budgets have not been released, delaying tenders.\nThe U.S. market has been better, and we are optimistic about the impact of our businesses from increased infrastructure spending.\nThe other ligand category in FSD is primarily BAND-IT's energy and aerospace exposure along with some industrial applications in fire and rescue.\nWe continue to closely monitor market conditions and are focused on ensuring the stability of our supply chain.\nThis persistence in global supply chain issues threatened to create choppiness in the back half of the year.\nDespite these factors, we are confident enough in our outlook to raise our organic growth expectations for the year.\nI'll start with our consolidated financial results on Slide 11.\nQ1 orders of $711 million were up 10% overall and up 6% organically as we built $59 million of backlog in the quarter.\nOrganic orders grew sequentially and year over year in each of our segments, as highlighted by Eric on the prior slide.\nFirst-quarter sales of $652 million were up 10% overall and 6% organically.\nWe experienced growth across all our segments, with over 75% of our business units increasing year over year.\nStrength in semicon, food and pharma and dispensing were the notable highlights in the quarter.\nQ1 gross margin contracted 80 basis points to 44.9% but was up 110 basis points sequentially.\nThe year-over-year decrease was primarily driven by the dilutive impact of acquisitions, inventory step-up associated with ABEL, mix and onetime inventory reserves.\nThe inventory reserves were associated with our pandemic-related electrostatic sprayer businesses not materializing at the rate we expected.\nExcluding acquisitions and the inventory reserves, gross margin would have been flat to prior year.\nFirst-quarter operating margin was 23.9%, up 40 basis points compared to prior year.\nAdjusted operating margin was 24.3%, up 80 basis points compared to last year, driven by the increased volume and the impact of cost actions taken last year, offset by the gross margin pressure I just mentioned.\nI will discuss the drivers of operating income in more detail on the following slide.\nOur Q1 effective tax rate was 22.6%, which was higher than the prior-year ETR of 20% due to a decrease in the excess tax benefits from share-based compensation.\nThis drove a $0.05 headwind on earnings per share for the quarter.\nFirst-quarter adjusted net income was $115 million, resulting in adjusted earnings per share of $1.51, up $0.18 or 14% over prior year.\nExcluding the $0.05 tax headwind, adjusted earnings per share would have been up $0.23 or 17%.\nFinally, free cash flow for the quarter was $95 million, up 32% compared to prior year and was 82% of adjusted net income.\nThe strong performance was driven by higher earnings and the continued impact of our working capital initiatives.\nMoving on to Slide 12.\nAs Eric mentioned, we entered the quarter cautiously optimistic about the pace of growth coming into 2021.\nWe knew that we were structurally well positioned to take advantage of improving market conditions from the cost actions and discretionary controls we put in place last year.\nAdjusted operating income increased $18 million for the quarter compared to prior year.\nOur 6% organic growth contributed approximately $13 million flowing through at our prior-year gross margin rate.\nThe impact of previous discretionary cost controls contributed $5 million, and we were able to net $4 million from price productivity, partially offset by inflation.\nAfter accounting for $2 million of negative mix, our organic flow-through was extremely strong at 58%.\nFlow-through was then negatively impacted by the $3 million charge related to the inventory reserve I discussed on the last slide and the dilutive impact of acquisitions and FX, getting to a reported flow-through of 32%.\nAs we highlighted in prior calls, we expect to reinvest aggressively in the business to drive both organic and inorganic opportunities.\nWe have already started those investments and expect the associated costs from these initiatives will reduce our organic flow-through in subsequent quarters.\nWith that, I would like to provide an update on our outlook for the second quarter and full-year 2021.\nI'm on Slide 13.\nFor the second quarter, we are projecting earnings per share to range from $1.60 to $1.63, with organic revenue growth of 18% to 20%, and operating margins of approximately 24.5%.\nThe second quarter effective tax rate is expected to be about 23%, and we expect a 2% top-line benefit from the impact of FX.\nCorporate costs in the second quarter are expected to be around $21 million, with the increase primarily driven by the M&A investments we discussed earlier.\nTurning to the full-year outlook.\nWe are increasing our full-year earnings per share guidance from $5.65 to $5.95, up to $6.05 to $6.20.\nWe are also increasing our full-year organic revenue growth from 6% to 8%, up to 9% to 10%.\nWe expect operating margins of approximately 24 and a half percent.\nWe expect FX to provide a 1% benefit to top-line results.\nOur full-year effective tax rate is expected to be around 23%.\nCapital expenditures are anticipated to be around $55 million.\nFree cash flow is now expected to be 115% to 120% of net income.\nAnd corporate costs are expected to be approximately $74 million for the full year.\nFinally, our earnings guidance excludes any costs or earnings associated with future acquisitions or restructuring charges.\nABEL Pump is now included in these estimates, with the deal closed in the first quarter.\nAirtech is not included in these estimates.\nWe will update our guidance accordingly once the deal closes.\nWith that, I'll throw it back to Eric for some final thoughts.\nI'm on the final slide, Slide 14.\nWe recently published our second corporate social responsibility report.\nThis report is our first to adopt the sustainable Accounting Standards board's sector standards, also known as SASB.\nWe have increased our disclosures in key areas, including health and safety, diversity and environmental impact.\nDiversity, equity and inclusion continues to be a point of emphasis in our evolving company culture.\nSince we last met, an outside facilitator conducted anonymous focus groups with employees from around the world, from which we learned and were able to begin developing more targeted goals for the company.\nWe are currently planning training sessions for all leaders to help them understand and become comfortable fostering dialogue on these important issues.\nWe are addressing our talent management processes, including our assessment of existing talent and our consideration of new talent through recruiting to help ensure our processes are free from unconscious bias, and we are assessing our purchasing practice to expand our use of diverse suppliers.\nIDEX is a decentralized company with a diverse collection of businesses.\nOur superior economic model depends upon problem-solving and decision-making at the point of impact, closest to our customers.\nOur collective work within this important area, as outlined in this report, is an essential component of our next phase of business growth.\n",
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"content": "compname reports first quarter results; raises full year guidance; q1 orders and sales up 10 percent overall and 6 percent organically; q1 reported earnings per share was $1.48 with adjusted earnings per share of $1.51.\nq1 adjusted earnings per share $1.51.\nraises q2 adjusted earnings per share view to $1.60 to $1.63.\nsees fy adjusted earnings per share $6.05 to $6.20.\nqtrly sales of $652.0 million were up 10 percent compared with prior year period.\nqtrly orders of $710.7 million were up 10 percent compared with prior year period.\nincreasing full year organic revenue growth expectations to 9 to 10 percent with 18 to 20 percent growth in q2.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: This is Mike Yates, vice president and chief accounting officer for IDEX Corporation.\nThe format for our call today is as follows.\nWe will begin with Eric providing an overview of the state of IDEX's business and update on our growth investments and an overview of our order performance and outlook for our end markets.\nBill will then discuss our second-quarter 2021 financial results and provide an update on our outlook for the third quarter and full-year 2021.\nFinally, Eric will conclude with updates on our sustainability and diversity, equity and inclusion programs.\nBeginning with our overview on Slide 6.\nThe past year and a half have been one of the most dynamic and unpredictable ever experienced, but our IDEX team stepped up again in Q2 and delivered during an extremely challenging environment.\nOur commercial performance is very strong as we recorded record orders and backlog in the quarter.\nOrder trends continue to improve sequentially, and all three segments are materially above pre-pandemic level.\nOur day rates are very strong, and our OEM order patterns are robust.\nOnly large industrial projects, many of them in FMT, continue to lag a bit.\nWe're beginning to see the move into planning funnels, indicating support for continued phases of organic growth in the back half of 2021 and next year.\n1 operating challenge for the quarter was supply chain and logistics disruptions.\nIDEX is generally a short-cycle business with quick lead times.\nWe typically operate at the component level further down our customers' bill of materials.\nWe're also not very vertically integrated.\nWe depend on a tight network of supplier partners, often located close by our operating units to quick turn our solutions with a minimum of feasibility.\nFor these reasons, the challenging conditions of tight material supply and bottleneck logistics tend to lag other industrial companies.\nOur agile model does support a quick calibration to today's reality, and it helps us exit quicker than many on the backside of the supply side constraint.\nOverall, we believe these disruptions have hit a plateau.\nWe don't see things getting worse, and the challenges will continue to be highly variable.\nAt the same time, we don't anticipate these disruptions getting better soon, but most likely they will not subside until the end of this year or early next year.\nWe anticipated rising inflation as the global economy recovered, but like many did not imagine the sharp rate of increase.\nThis narrowed our spread between price capture and material costs, although we remain positive overall.\nOur teams leveraged the systematic investments we made a few years ago in pricing management and aggressively deployed two, sometimes three pricing adjustments with precision.\nWe are on track to expand our price cost spread to typical levels as we travel through the back half of the year.\nWhile we spend a lot of time talking about our business's ability to capture price, one area that I don't want to miss is our continued focus on operational productivity.\nOur teams continue to drive margin improvement through 80/20 simplification, lean effort and through sound capex deployment.\nOur robust project funnels continue to be another weapon to combat rising costs.\nThe one project that exemplifies the spirit deserves mention as we discuss Q2.\nOur energy market now starting to show some signs of recovery off the bottom are still lagging the overall group.\nOur teams are aggressively executing a facility rationalization project to consolidate our scale and focus our human resources in close working proximity.\nUltimately, this is a long-term value driver for that group.\nBut in the quarter, the project created headwinds for us as equipment was delayed and inventory positions were less than ideal to support production transfers.\nWe expect the project to be back on track and completed by the end of the third quarter.\nOverall, I am confident in our path through these choppy recovery as we continue to apply relentless focus from outstanding teams to deliver solutions that matter from high-quality businesses that are very well positioned within their application steps.\nMoving on to Slide 7.\nWe deployed just over $575 million in the first half of the year with our acquisitions of ABEL Pumps, Airtech and a small investment in a digitalization technology start-up within the fire and rescue space.\nWe continue to build out processes and capabilities to explore additional strategic investments we want to make across IDEX.\nOur funnel for potential acquisitions is stronger than it has been in the past, and we are more aggressive in pursuing opportunities that enhance our business solutions, fit well with our style of competition and drive IDEX-like returns.\nIt's early days in our integration of ABEL and Airtech, but we're happy to see that each business is performing well with excellent growth prospects in the near and long term.\nWhile we've stepped up our M&A game, we're also investing in our existing businesses with a 45% increase in capital spending through the first half of the year.\nWe're in the process of expanding IDEX facilities in China and India.\nWe project significant ongoing growth opportunities across Asia, and these investments are critical to support our local-for-local approach as we move to the next level of competitive advantage.\nWe're also focused on our digital strategy with our largest investments tied to our areas of higher integration and scale as we seek to drive higher impact for our customers.\nLastly, as I mentioned previously, we're focused on operational productivity as market dynamics are changing as well as investing in new technology to support growth.\nThis is on both the capex and opex side.\nSome of these investments are targeted at new applications in high-growth areas, like components to enable new global broadband satellite networks, building batteries for electric vehicles and providing key products to support the build-out of incremental capacity in semiconductor manufacturing.\nThese investments are combined with targeted spend in areas to support automation and efficiencies across the shop floor.\nThis strategic approach to both inorganic and organic investment is already paying off and sets us up for ongoing success for years to come.\nTurning to our commercial results on Slide 8.\nAs I mentioned, order strength continued in the second quarter both compared to prior year and sequentially, resulting in a backlog build of $65 million in the quarter.\nAs we look across our segments, all rebounded well from the pandemic and delivered strong organic order growth.\nSequentially, fluid and metering technologies and fire and safety diversified products saw increased orders compared to the first quarter.\nOur health and science technologies segment also saw increased sequential orders if we exclude the impact of a COVID testing application debooking that occurred in Q2.\nOrder intake across all segments was also above second-quarter 2019 levels.\nFMT lags HST and FSD due to lower levels of investment in the oil and gas market as well as concentration in the industrial market, which saw a pre-COVID pullback in the second half of 2019.\nThese commercial results give us confidence in our ability to deliver double-digit growth in the second half of the year and continue to highlight the resilience of our businesses and the criticality of our solutions to customers.\nOn Slide 9, we provide a deeper look into our primary end markets.\nOur focus is shifting from recovery to growth as most of our businesses are now performing above pre-pandemic levels.\nEven with pockets of concern around supply chain disruptions and COVID in certain geographies, we're optimistic about the outlook of our end markets and our ability to execute within them.\nIn our fluid and metering technology segment, industrial day rates were strong.\nSupply chain challenges remain.\nBut overall, the market trajectory was at or above 2019 levels with only large projects lagging, as I mentioned earlier.\nAgriculture continued to drive strong growth, driven by aging farm equipment and record crop prices.\nOur water business was stable.\nWe continue to monitor the impact of the federal infrastructure package on U.S. municipal spending.\nEnergy and chemical markets continue to trail 2019 levels, primarily due to limited capital investment in the sector as well as a longer project close cycle.\nOne item to highlight for FMT is the impact of our FMD acquisition last year.\nIt's now in our organic figures.\nAnd with its backlog burn last year and significant pullback in customers' capital investments, it impacted FMT's organic sales by 11%.\nIn other words, FMT's organic sales for the quarter would have been 19% instead of 8%.\nMoving to the health and science technologies segment.\nWe're seeing recovery and pivot to growth across all our end markets.\nSemiconductor, food and pharma continued to perform well, driven by strong market demand and winning share through our targeted growth initiatives.\nThe overall automotive market continued to face supply chain-driven challenges but we outperformed the market due to our product concentration in higher-end European vehicles.\nOur AI and life science markets continue to perform well as the pandemic impact eased and investments have increased.\nThe industrial business within the segment saw a similar result to FMT. Finally, in our fire and safety diversified products segment, dispensing rebounded as large retailers freed up capital and worked through pent-up demand for equipment.\nOur BAND-IT business was adversely affected by U.S. automotive production pullbacks due to microprocessor shortages in the second quarter.\nHowever, we continue to achieve new platform wins and believe we're well positioned to outperform the market as supply chain constraints ease.\nIn fire and rescue, we have yet to see larger tenders come back and emerging markets remain slow.\nWe continue to closely monitor market conditions and expect some choppiness in the second half of the year.\nThat said, we're confident in the future trajectory of our end markets as well as our ability to execute on our strong backlog and have raised our organic growth expectations for the year.\nI will start with our consolidated financial results on Slide 11.\nQ2 orders of $751 million were up 44% overall and 39% organically as we built $65 million of backlog in the quarter.\nOrganic orders grew sequentially and year over year in each of our segments, as highlighted by Eric on the prior slide.\nSecond-quarter sales of $686 million were up 22% overall and 17% organically.\nWhile we experienced a strong rebound from the pandemic across our portfolio, we were impacted by supply chain constraints and our energy site consolidation, which tempered our results.\nThe FMD pressure in fluid and metering Eric discussed also had an impact on overall organic sales.\nExcluding FMD, organic sales would have been up 22%.\nQ2 gross margin expanded by 280 basis points to 44.6%.\nThe year-over-year increase was primarily driven by increased volume and price capture, partly offset by inflation and supply chain impacts.\nExcluding the impact of $1.8 million pre-tax fair value inventory step-up charge related to the ABEL acquisition, adjusted gross margin was 44.9% and was approximately flat sequentially.\nSecond-quarter operating margin was 23.1%, up 340 basis points compared to prior year.\nAdjusted operating margin was 24.4%, up 330 basis points compared to prior year, largely driven by gross margin expansion and fixed cost leverage, offset by a rebound in discretionary spending and investment.\nI will discuss the drivers of operating income in more detail on the next slide.\nOur Q2 effective tax rate was 21.3%, which was lower than the prior-year ETR of 22.7% due to benefits from foreign sourced income in the second quarter of 2021.\nThis benefit also drove favorability to our guided rate for the quarter.\nQ2 adjusted net income was $123 million, resulting in adjusted earnings per share of $1.61, up $0.51 or 46% over prior-year adjusted EPS.\nFinally, free cash flow for the quarter was $120 million, down 25% compared to prior year and was 98% of adjusted net income.\nThis result was impacted by a volume-driven working capital build, higher capex and timing of tax payments, partially offset by higher earnings.\nOur working capital efficiency metrics remain strong, and the teams continue to do a good job managing the significant volume changes year over year.\nMoving on to Slide 12, which details the drivers of our adjusted operating income.\nAdjusted operating income increased $49 million for the quarter compared to prior year.\nOur 17% organic growth contributed approximately $41 million flowing through at our prior-year gross margin rate.\nWe maintained positive price material cost within the quarter and leveraged well on the volume increase.\nOur high contribution margins helped mitigate the profit headwinds we experienced from the supply chain disruptions.\nIn the second quarter of 2020, discretionary spending and investment were minimal, driven by a strict cost control environment during the pandemic.\nAs we return to a spend level, in line with our growth and continued strategic investments, we see year-over-year pressure of about $11 million, in line with the guidance we gave at the beginning of the year.\nEven with the incremental spend, supply chain and operational issues that tempered our performance, we still achieved a robust 45% organic flow-through.\nFlow-through is then negatively impacted by the dilutive impact of acquisitions and FX, getting us to our reported flow-through of 39%.\nAs we highlighted, we expect to reinvest aggressively in the business to drive both organic and inorganic opportunities.\nWe expect that our level of discretionary spending as well as associated costs from growth initiatives will similarly reduce organic flow-through in subsequent quarters.\nWith that, I would like to provide an update on our outlook for the third quarter and full year.\nMoving on to Slide 13.\nFor the third quarter, we are projecting earnings per share to range from $1.57 to $1.61.\nWe expect organic revenue growth of 14% to 16% and operating margins of approximately 24 and a half percent.\nThe third quarter effective tax rate is expected to be 23% and we expect a 1% top-line benefit from the impact of FX.\nAnd corporate costs in the third quarter are expected to be around $21 million.\nTurning to the full year.\nWe are increasing our full-year earnings per share guidance from our previous range of $6.05 to $6.20, up to $6.26 to $6.36.\nThis range includes Airtech, which will contribute $0.06 in the second half of 2021, roughly $0.03 a quarter.\nWe are also increasing our full-year organic revenue growth from 9% to 10% up to 11% to 12%.\nWe expect operating margins of approximately 24 and a half percent.\nWe expect FX to provide a 2% benefit to top-line results.\nThe full-year effective tax rate is expected to be around 23%.\nCapital expenditures are anticipated to be around $65 million, an increase of around $10 million versus our last call as we increase our investments in growth opportunities.\nFree cash flow is expected to be 110% to 115% of net income, lower versus our last guide, primarily due to the additional capital spending and higher working capital to support our increased volume.\nAnd corporate costs are expected to be approximately $77 million for the year.\nFinally, our earnings guidance excludes any costs, earnings associated with future acquisitions or restructuring charges.\nWith that, I'll throw it back to Eric for some final thoughts.\nI'm on the final slide, Slide 14.\nBefore we open the call up to questions, I'd like to share an update on our ESG journey and the evolution of our company culture.\nI pledged earlier this year that we would hire a new chief diversity, equity and inclusion officer.\nI'm pleased to announce that I now have Troy McIntosh in my senior leadership team.\nHe joined us just last week from U.S. Cellular, the fourth largest cellular communications carrier in the United States where he led significant improvements in their culture and levels of diversity in the workforce.\nAt IDEX, Troy will help build the global road map and success measures for DE&I.\nHe will help embed DE&I deeper in our culture and build inclusive leadership confidence and capabilities in all our people through training, education and coaching.\nHe will help us make sure our systems mitigate bias and create opportunities for everyone, no matter of their background to reach their full potential at IDEX.\nI look forward to great things happening with his leadership.\nI'd also like to share a nice step we're taking to improve our energy efficiencies.\nWork recently began on a solar array on the roof of our manufacturing facility in Germany.\nOnce completed next month, this collection of solar panels will be about one-third the size of the European soccer field and provide 30% of the electricity needs for the facility.\nNot only will it help reduce our carbon footprint there, we estimate it will save the business more than EUR 67,000 in just the first year alone.\nWe anticipate this project will serve as a pilot, leading the way for other solar installations on IDEX facilities around the world.\nLastly, I want to share that the catastrophic flooding that devastated portions of Western Europe earlier this month has impacted many IDEX employees.\nAbout a quarter of the employees at our German fire and safety business have either had their home severely damaged or destroyed.\nAll of our employees are safe, living with friends and family as recovery efforts are ongoing.\nAnd operations continued at our facility, which is not directly impacted by the flood.\nAmid all this destruction and loss, we once again saw the spirit of IDEX come through.\nColleagues from other IDEX businesses in Germany came to the area to assist.\nWith pumping equipment from our businesses, our people work tirelessly to help draw water from flooded homes to the long road of recovery again.\nThe IDEX Foundation also paid $100,000 to the German Red Cross, which has thousands of people in the region assisting those impact.\nWhile I shared this internally, I want to again express with our employees better that we stand by you through this terrible tragedy.\nYour outstanding examples of what makes this company so special.\n",
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"content": "idex raises full year guidance.\nq2 adjusted earnings per share $1.61.\nsees q3 adjusted earnings per share $1.57 to $1.61.\nsees fy adjusted earnings per share $6.26 to $6.36.\nnow projecting 11 to 12 percent organic sales growth for fy.\nnow projecting a 14 to 16 percent organic sales increase in q3.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: This is Allison Lausas, vice president and chief accounting officer for IDEX Corporation.\nThe format for today's call is as follows.\nWe will begin with Eric providing an overview of the state of IDEX's business and an overview of our end-market performance.\nBill will then discuss our third-quarter 2021 financial results and provide an update on our outlook for the fourth quarter and full-year 2021.\nFinally, Eric will conclude with an update on the IDEX Difference.\nBefore we begin, a brief reminder.\nIt's a pleasure to have you on the team.\nMike helped lead an evolution of our finance and accounting organization and his work has had a long-lasting impact on the business.\nOn behalf of the entire IDEX team, I wish Mike the best in his future endeavors.\nNow let's turn to our IDEX overview on Slide 6.\nWe continue to see supply chain challenges throughout the third quarter.\nOur localized sourcing, production, and selling model helps us a bit relative to others, but this prolonged environment of poor material, labor, and logistics availability challenges us just like any other business.\nDespite these obstacles, our IDEX teams around the globe have risen to the occasion.\nThey exhibited both resiliency and stamina as they overcame yet another quarter filled with day-to-day disruptions, all while providing a high level of support to our customers.\nAt this stage, we don't see any near-term signs of diminishing macroeconomic headwinds.\nRather, we expect they'll remain at a high level and persist into 2022.\nWe'll continue to leverage our 80/20 principles as we align around our best customers, our best prospects for growth, and our critical business priorities.\nI spoke last quarter about our ability to capture price due to the differentiated mission-critical nature of our products.\nOverall, the price actions that we took over the past six months were increasingly realized in the third quarter, and we saw our price/cost spread increase sequentially.\nWe will push price aggressively and appropriately as conditions continue to support our arguments.\nDespite the many challenges out there, our organic performance remains strong.\nwe set another record in the third quarter for orders, sales, and backlog.\nOur backlog is now $186 million higher than it was at the end of last year.\nSignals around the return of industrial projects have intensified and current energy prices, if sustained, have the potential to drive investments within IDEX application areas.\nOur Health Science and Technologies segment performed exceptionally well.\nOver the past five or so years, we have stepped up organic investments with our focus on the longer term.\nWithin our sealing business, we built a new facility with the goal of capturing share in the expanding semiconductor market.\nWe brought three optics facilities together, and our new Optics Center of Excellence to enable future wins in life sciences by integrating multiple IDEX components to create value for our customers.\nWe optimized the footprint and core technology of our material processing technology platform to enable long-term repeatable growth across a series of technologies.\nThese investments have generated tremendous returns, and we are well-positioned to capture share and capitalize on market growth going forward.\nOn the inorganic side, our recent acquisitions are doing extremely well.\nABEL Pumps is fully integrated and performing ahead of expectations.\nThe Airtech integration is ahead of schedule, and the team is making strong progress on their growth strategy.\nBoth are executing well in the challenging operating environment as they come up to speed on our 80/20 playbook.\nOur balance sheet remains strong, and we have ample capital available to support future acquisitions and investments in the business.\nOur M&A funnel is healthy.\nOur expanded team has identified a number of interesting opportunities as we look to deploy additional capital in the near and long term.\nIn the end, we are focused on delivering and growing within a very difficult near-term operating environment while spending a significant part of each day thinking about the best investments in teams, technologies, and business opportunities to thrive in the years to come.\nI'm very confident in our team's ability to outperform in both areas.\nWith that, I'll turn to our market outlook on Page 7.\nIn our Fluid & Metering technology segment, industrial day rates were favorable versus the second quarter.\nLarger industrial projects still lag, but quote activity and funnel strength have both improved.\nAgriculture remains robust, delivering on record volumes.\nOur water businesses continue to perform well.\nMunicipal spending is steady, and there is general optimism around future increased government funding.\nThe chemical and energy markets continue to lag primarily due to limited capital investment.\nHowever, on the chemical side, smaller, fast-starting projects performed well.\nWe are cautiously optimistic on energy as increased fuel prices and concerns over energy shortages have the potential to trigger investment.\nAs we noted last quarter, our Flow MD business has experienced a significant pullback in customers' capital investments.\nIt impacted FMT's organic sales by 8%.\nIn other words, excluding the impact of Flow MD, FMT organic sales would have grown 15% instead of 7% as reported.\nMoving to the Health & Science Technologies segment.\nWe continue to see strong demand across all our end markets.\nSemiconductor, food and pharma, analytical instrumentation, and life sciences all performed well.\nWe continue to win share through our targeted growth initiatives, and our intentionality around identifying opportunities that grow faster than the broader market is paying off.\nThe automotive market remains affected by supply chain-driven challenges, but we continue to see growth due to our concentration in higher-end European vehicles.\nThe industrial businesses within the segment saw a trend similar to FMT. Finally, our Fire & Safety Diversified Products segment is our most challenged segment right now.\nPrice capture and volume offsets faced stronger headwinds within the segment due to higher direct OEM exposure and higher levels of material intensity due to vertical integration.\nIn Fire & Safety, North America Fire OEM production continues to struggle due to supply chain challenges.\nLarger tender activity is slowly increasing within the global fire rescue markets, but we feel these market challenges will persist into 2022.\nautomotive production pullbacks due to microprocessor shortages have tempered the performance of our banded business.\nWe continue to achieve new platform wins and believe we're well-positioned to supply chain constraints eventually ease.\nBut in the third quarter, the impact of automotive shutdowns increased versus last quarter and moderated our performance.\nFinally, dispensing performed well as key customers deploy capital on strong DIY market demand, and our global product offerings capture share.\nWe continue to closely monitor market conditions and expect rolling supply chain disruptions to continue throughout the balance of the year and into 2022.\nThat said, our third-quarter organic orders were flat sequentially versus second quarter, and our backlog remains at a record level.\nOverall, the demand environment for IDEX products has not waned despite supply chain challenges, and we remain optimistic about the trajectory of our end markets.\nI'll start with our consolidated financial results on Slide 9.\nQ3 orders of 774 million were up 36% overall and up 28% organically.\nWe built 62 million of backlog in the quarter, and all three segments had strong organic performance versus last year as well as versus the third quarter of 2019.\nThird-quarter sales of 712 million were up 23% overall and up 15% organically.\nWe continue to experience a strong rebound from the pandemic across our portfolio, tempered by supply chain constraints.\nThe Flow MD pressure and Fluid & Metering Eric discussed also had an impact on overall organic sales.\nExcluding Flow MD, organic sales would have been up 18% overall.\nQ3 gross margin expanded 50 basis points to 43.8%.\nThe increase over the prior-year quarter was primarily driven by increased volume and price capture, partly offset by inflation and supply chain impacts.\nExcluding the impact of a $9.1 million pre-tax fair value inventory step-up charge related to the Airtech acquisition, adjusted gross margin was 45%, and improved sequentially.\nThird-quarter operating margin was 22.6%, flat compared to prior year.\nAdjusted operating margin was 24.3%, up 120 basis points compared to prior year, largely driven by our gross margin expansion and fixed cost leverage, offset with some pressure from targeted reinvestments and the dilutive impact of Airtech and ABEL acquisitions due to their intangible amortization costs.\nI will discuss the drivers of operating income in more detail on the next slide.\nOur Q3 effective tax rate was 23.4%, which was higher than the prior-year ETR of 14.4% due to the finalization of tax regulations enacted in the third quarter of 2020 as well as a decrease in the excess tax benefit related to share-based compensation in the current period.\nThird-quarter net income was $116 million, which resulted in an earnings per share of $1.51.\nAdjusted net income was $125 million, resulting in an adjusted earnings per share of $1.63, up $0.23 or 16% over prior-year adjusted EPS.\nThe tax rate movement I mentioned drives a $0.27 differential in earnings per share as compared to the prior-year quarter.\nSaid differently, our earnings per share would have expanded by $0.50 or 35% had 2021 been taxed at the 2020 rate.\nFinally, free cash flow for the quarter was 142 million, up 5% compared to prior year, and was 113% of adjusted net income.\nThe result was impacted by higher earnings, partly offset by volume-driven working capital build.\nOur working capital efficiency metrics remain strong, and the teams continue to do a good job managing significant year-over-year volume and supply chain challenges.\nMoving on to Slide 10, which details the drivers of our adjusted operating profit.\nAdjusted operating income increased 39 million for the quarter compared to the prior year.\nOur 15% organic growth contributed approximately 29 million, flowing through at our prior-year gross margin rate.\nWe achieved positive price cost within the quarter and saw our price/cost spread improve sequentially.\nOur teams continue to drive operational productivity as another lever to help mitigate the profit headwinds we experienced from supply chain costs and associated inefficiencies.\nThe positive mix is a primary result of the portfolio and business mix normalizing to pre-pandemic levels that had a negative impact on our results last year.\nAs Eric mentioned, we are actively investing in the resources we need to execute on future growth and productivity.\nThis reinvestment back into the business, higher variable compensation, and targeted increases in discretionary spending drive the year-over-year pressure of $15 million.\nDespite the incremental spend, inflation, and supply chain-driven operational efficiencies, we still achieved a solid 37% organic flow-through.\nFlow-through is then negatively impacted by the dilutive impact of acquisitions and FX, getting us to a reported flow-through of 30%.\nWith a significant amount of focus dedicated to navigating supply chain disruptions, we did not fully execute on the level of spend we expected in the quarter.\nWe intend to make these investments in the fourth quarter, and they will mitigate our flow-through a bit as we close out the year.\nWith that, I would like to provide an update on our outlook for the fourth quarter and full year.\nI'm on Slide 11.\nFor the fourth quarter, we are projecting adjusted earnings per share to range from $1.55 to $1.58.\nWe expect organic revenue growth of nine to 10% and adjusted operating margins between 23.5% and 24%.\nQ4 results are slightly lower than the third quarter, driven by organic and inorganic resource investments, seasonality, and the potential for year-end logistics challenges.\nThe Q4 effective tax rate is expected to be approximately 23%.\nWe expect about 0.5% of top-line benefit from FX, and corporate costs in Q4 are expected to be around 19 million.\nTurning to the full year.\nWe are narrowing our full-year earnings per share guidance from a range of $6.26 to $6.36 to $6.30 to $6.33.\nWe are also maintaining our full-year organic growth of 11 to 12%.\nWe expect operating margins of approximately 24%.\nWe expect FX to provide 1.5% benefit to top-line results.\nThe full-year effective tax rate is expected to be around 23%.\nCapital expenditures are anticipated to be around 65 million, in line with our previous guidance.\nFree cash flow is expected to be around 105% of net income, lower versus our last guide primarily due to working capital investments.\nAnd corporate costs are expected to be approximately $73 million for the year.\nOur earnings guidance excludes impacts from future acquisitions and any future restructuring charges.\nFinally, beginning in 2022, IDEX will provide earnings per share guidance and report actual results, excluding the impacts of after-tax acquisition-related intangible amortization.\nWe believe reporting adjusted earnings per share on this basis will provide more transparency to our core operating results as well as facilitate comparisons with our peer companies as we continue on our capital deployment journey.\nWith that, I'll throw it back to Eric for some final thoughts.\nI'm on the final slide, Slide 12.\nBefore we open the call up to questions, I'd like to share a few updates around our great teams.\nFirst off, I'd like to extend my public congratulations to our non-executive chairman, Bill Cook, on being named Public Company Director of the Year by the National Association of Corporate Directors.\nBill and I both joined IDEX around the same time in 2008, and I've learned a great deal from him over the years.\nHis insightful perspective and critical thinking skills have been tremendously helpful for the company, and I know I speak for everyone at IDEX when I say congratulations, Bill, on this well-deserved honor.\nTurning to the IDEX Foundation.\nLast month, the foundation entered a national partnership with the Boys & Girls Clubs of America.\nVarious U.S.-based business units have supported their local boys and girls clubs over the years, but this takes our joint work to the next level, offering a clear pathway for increased engagement.\nEvery one of our U.S. business units is close to at least one boys and girls club location.\nThis agreement aligns with the foundation's equity and opportunity charitable pillar added earlier this year, seeking to create opportunities for underserved disadvantaged people of color within our community.\nFinally, we attribute much of our success to our strong foundational culture.\nOur annual September engagement survey just came back.\nAnd even within this incredibly challenging environment, loaded with disruptions in unexpected turns, we held study and were scored in the top quartile of all manufacturing companies.\nOur teams around the world are beginning to develop tactical plans to address feedback provided by their local teams, part of the continuous improvement that supports everything we do at IDEX.\n",
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"content": "q3 adjusted earnings per share $1.63.\nq3 sales $712 million.\nsees fy adjusted earnings per share $6.30 to $6.33.\nsees q4 earnings per share $1.55 to $1.58.\nq3 earnings per share $1.51.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: This is Mike Yates, vice president and chief accounting officer for IDEX Corporation.\nThe format for our call today is as follows.\nWe will begin with Eric providing an overview of the state of IDEX's businesses, including a recap of our recent performance and how we are viewing 2021.\nEric will then provide an update on a few initiatives that we believe are key to IDEX's culture before moving into a review of our order performance and providing our 2021 outlook for our end markets.\nBill will then discuss our fourth-quarter and full-year 2020 financial results.\nAnd we'll conclude with an outlook for the first-quarter and full-year 2021.\nIt's been a year full of challenge and change with the numerous safety protocols and disruptions in the marketplace.\nIn that environment, our people continue to shine.\nBecause of the protocols we have in place, the disruptions in our operations have been limited.\nThe COVID trends across Europe, North America, and India have been troubling, and we continue to follow those developments closely and remain steadfast in providing a safe place for our employees to work.\nWe continue to deliver solutions for our customers during a challenging year, focusing on the critical innovation we need to support our long-term strategy, as well as producing new products to help the fight against the pandemic.\nBill will walk through the details shortly, with customer focus, strong execution and our ability to react quickly to unpredictable events helped us deliver a relatively strong performance in 2020, a true testament to our resiliency.\nLiquidity was a primary focus of our management strategy as the pandemic hit, and I'm happy to say that we were able to drive record free cash flow this year.\nAs we address the challenges in front of us, we see a path to bullishness for 2021.\nWe have seen a steady recovery in our end markets, which we will detail in a few slides.\nThe diversity and quality of our businesses continues to serve us well, ensuring that we can weather any storm and quickly capitalize when market conditions improve.\nWhile the pandemic still presents many challenges to solve, we are starting to see a focus pivot back to core commercial endeavors as we and our customers prepare for a world healed from the ravages of COVID-19.\nOur businesses remain focused on operating safely, and we are prepared to leverage our supply chains and react to increased demands.\nA year like 2020 truly test the culture of a company.\nAre you rooted in strong values that people really live and believe?\nIf so, you'll be better prepared to survive and even thrive.\nIDEX is that kind of company, and it served us well in a year none of us could have ever predicted.\nI'm proud of the culture we have built at IDEX.\nIt is admired by many, but we can strengthen it still.\nWe leverage our culture and mission to bind together a uniquely decentralized and diverse company, and our commitment to work even harder to support diversity, equity and inclusion is tied directly to this important aspect of IDEX differentiation.\nOur resiliency, agility, and fundamental ability to execute have IDEX exceptionally well-positioned to play off as aggressively as we move forward.\nWe are actively investing to support our best organic growth bets, and we have ramped up our capital spending to support very exciting initiatives.\nThe M&A markets are moving again, and we are expanding our capabilities to execute on strategic acquisitions.\nIn January, we announced an agreement to acquire Abel Pumps and expect that deal to close in the first quarter.\nWe actively seek to deploy additional capital to acquire IDEX-like businesses, as well as make some calculated bets in new technologies to bolster our growth potential to further strengthen our portfolio and enhance our return to shareholders.\nMoving to Slide 7.\nAs I just mentioned, the strength of IDEX comes from the IDEX difference, a teachable methodology where great teams working together in a superior culture, focused on the critical things that matter with a natural orientation toward the most important needs of their customers.\nOur culture is a significant focus and one of my key leadership priorities.\nTo that end, we are making ongoing improvements based on feedback we received from our employees every day.\nLast month, the IDEX Foundation, which was created to positively impact the communities in which we live and work, took a significant step forward as part of these efforts.\nIDEX committed $6 million to boost sponsored activities across the company.\nThe foundation formerly added equity and opportunity as a lasting and fully funded part of its mission, creating opportunities for underserved, disadvantaged people of color in our communities.\nThis donation allows the foundation to more than double its annual giving.\nIn addition to initiatives focused on equity and opportunity, we will continue the great work our people have been doing in our communities like building homes for the homeless, renovating community centers, and supporting schools and learning opportunities for young people.\nThis month, we will host more than a dozen facilitative employee focus groups around the world.\nThe feedback from our employees will help shape our path forward in diversity equity inclusion.\nDeveloping a formal framework and goals for our DE&I program is something we have all deployed at the senior leadership level making it a top priority.\nAs part of that commitment, I intend to have a Senior DE&I leader in place reporting directly to me later this year.\nWe will continue to grow and advance our culture as a key element of differentiation.\nYou have my commitment on that.\nTurning now to our commercial results on Slide 8.\nBroad rebound in order rates we discussed in the third quarter continued as our fourth-quarter organic orders were up 7% compared to the prior year.\nWe entered the quarter with optimism based on the strength of the third-quarter improvement, and that continued into the fourth quarter.\nExcluding timing on large OEM blanket orders year over year, our monthly order rates improved throughout the quarter.\nFMT organic orders for the fourth quarter were up 3%, driven by project orders in our water businesses, continued strength in agriculture, and recovery in industrial day rate businesses.\nHST organic orders were up 6% in the fourth quarter, driven by new product initiatives in life sciences and the recovery in auto and semicon continuing to boost our Sealing Solutions businesses.\nFinally, Fire & Safety/Diversified organic orders were up 15% in the quarter.\nDispensing saw significant improvement as retailers began to release pent-up demand for equipment refreshes BAND-IT after a strong bounce back in the third quarter, continued to improve based on auto market strength.\nAnd Fire & Safety saw growth in several product lines.\nA year ago, as we entered 2020, we talked about the general industrial slowdown that we were seeing and what a flat to down 2% to 5% world looked like for IDEX.\nWe have proactively taken strategic actions to address these factors.\nWe then faced the onset of the pandemic, and we responded to it with purpose.\nAs we close out 2020 and look forward, we are optimistic that our units and markets are quickly on a path to pre-COVID levels.\nThe actions that we took in 2019 and 2020 have left us well-positioned as we move into 2021.\nTurning to Slide 9.\nWe provide our current outlook for primary end markets.\nIn our Fluid & Metering Technology segment, industrial day rates continue to tick up in the fourth quarter, further solidifying the optimism that we discussed last quarter.\nWe see this increase driven largely by opex needs of our customers.\nWe continue to see large capital projects remain on hold.\nWe anticipate that broader signs of economic stability and higher degrees of certainty on COVID recovery timing is required before capital projects begin to move again.\nBut the investment discussions are happening.\nOur Water business has continued to show resiliency, and we are closely monitoring the toll that 2020 will take on municipal budgets in 2021 and beyond.\nThe strength in agriculture that we've called out for the previous two quarters has continued, and we expect it to grow in 2021.\nEnergy markets continue to remain challenged with markets still down compared to 2019 levels.\nStabilization of these businesses is largely dependent on increases in fuel prices, driving new capital investments in oil and gas.\nTurning to the Health and Science Technologies segment.\nWe were able to drive approximately $30 million of revenue in 2020 and expect to generate about the same amount in 2021 related to these initiatives.\nWhile some of this revenue is one-time in nature, we believe the technologies and applications we have developed here will generate recurring opportunities in 2022 and beyond.\nSo relative to our $25 million to $100 million of opportunities we highlighted, we'll achieve about $60 million.\nAI improved during the fourth quarter and looks to be on the rebound in 2021.\nIn life sciences, we saw an offset by continued weakness in IVD/BIO as lab capacity is still largely focused on COVID response, putting on hold other projects and initiatives.\nThe strength in semicon that we mentioned last quarter has continued.\nIn addition, our ceilings business has benefited from a rebound in automotive.\nWe see continued recovery in 2021 for the auto market, particularly driven by strength in European car sales in China and India.\nFood and pharma has also remained a bright spot as our businesses continue to benefit from growth in MPT projects and Microfluidics business.\nMoving to the Fire & Safety/Diversified segment.\nWe saw continued improvement in most of our markets.\nThe largest driver was the significant improvement in the dispensing market as large retailers increase demand for equipment refreshes, combined with order strength in the Asia dispensing markets.\nAs mentioned previously, the pace of the auto recovery continues to exceed expectations, springing on our BAND-IT business.\nFire & Rescue businesses continued to see strong order performance and we believe that we are seeing a recovery in the OEM businesses, driving through some of the delays in backlog concerns we referenced last quarter.\nAs with all our municipal businesses, we continue to closely monitor the impact on budgets to see if there are any lagging effects from COVID response spending.\nAs I highlighted in my previous remarks, we are optimistic about the market recovery we are seeing across most of our markets.\nAnd we need to be prepared for potential interruptions, particularly in the first half of 2021.\nOur teams have shown the ability to address these short-term shocks proactively.\nAnd the strategic actions we have taken across our businesses has us well-positioned to be able to ride the positive momentum we're seeing as we exit the issue of the pandemic.\nI'll start with our consolidated financial results on Slide 11.\nQ4 orders of $679 million were up 10% overall and up 7% organically.\nOrganic orders increased across each of our segments with drivers highlighted by Eric in his previous comments.\nFor the year, orders were down 3% overall and down 4% organically, with strong organic order recovery in the fourth quarter partially offsetting the 18% organic order decline we saw in the second quarter at the height of the pandemic.\nFourth-quarter sales of $615 million were up 2% overall, but down 1% organically.\nOur industrial and energy markets led the decline but did have positive organic growth of around 60% of our reporting units, led by strong performance in our ceilings, MPT, and dispensing businesses.\nFull-year sales of $2.4 billion were down 6% overall and down 9% organically, driven by the impact of COVID, industrial market softness, and challenges in oil and gas.\nQ4 gross margins contracted 20 basis points to 43.8%, driven by a decline in volume and unfavorable sales mix, partially offset by price capture.\nFor the full year, gross margins contracted 140 basis points.\nExcluding the impact of the FMD inventory step-up, adjusted gross margins contracted 130 basis points to 43.9%, driven by volume declines in sales mix, offset by our continued ability to capture price and drive operational productivity.\nFourth-quarter operating margin was 22.6%, up 50 basis points compared to prior year.\nFull-year operating margin was 22.1%, down 110 basis points compared to the prior year.\nAdjusted operating margin was 23.4% for the fourth quarter, up 10 basis points compared to prior year and 22.8% for the year, down 140 basis points compared to 2019.\nI'll discuss the drivers of operating income on the following slide.\nOur Q4 effective tax rate was 22.2%, which was higher than the prior-year ETR of 20.6% due to the revaluation of foreign deferred income tax balances driven by changes in foreign tax rates.\nFourth-quarter adjusted net income was $105 million, resulting in an earnings per share of $1.37, up $0.04 or 3% over prior-year adjusted EPS.\nFull-year adjusted net income was $397 million, resulting in adjusted earnings per share of $5.19, down $0.61 or 11% compared to prior year.\nFinally, free cash flow for the quarter was $149 million, up 9% compared to prior year and was 142% of adjusted net income.\nFor the year, free cash flow was $518 million, a record for IDEX, up 9% versus last year and 131% of adjusted net income, driven by strong working capital performance.\nMoving on to Slide 12.\nWe're going to review our full-year adjusted operating income.\nAs Eric mentioned, we faced unprecedented challenges in 2020, but the structural and discretionary actions we took were critical to lessen the volume impact on our income and margins.\nUsing a similar framework as we have for the previous two quarters, we wanted to walk through the components of our full-year adjusted operating income.\nAdjusted operating income declined $66 million for the year.\nWith organic sales down around $247 million, we would have expected a negative impact in operating income of $148 million at roughly 60% contribution margin rate.\nThe $148 million was offset by $58 million of executed operational actions, $23 million from the impact of restructuring actions combined with $35 million of discretionary cost control items, and $10 million of price, net productivity, and negative business mix.\nFinally, we had $7 million of reduced variable compensation for the year.\nThis yielded a better-than-expected flow-through of 34%.\nAgain, organic flow-through is based on taking reported sales and op income, less the impact of FX and acquisitions, which was roughly $77 million on the top line and $7 million of profit.\nOverall, our team's focused on quickly managing the crisis at hand and effectively managing costs to mitigate revenue declines and has IDEX well-positioned to leverage the recovery we expect in 2021.\nMoving on to guidance.\nI'm on Slide 13.\nBased on current order rates and expected market recoveries, we see an accelerating 2021 and expect organic revenue for the year to be up 6% to 8%.\nThis translates to an earnings per share impact of roughly $0.75 to $0.95, depending on our top-line results.\nWe expect our productivity initiatives to more than offset inflation, providing $0.04 of benefits.\nThe structural cost actions we have taken are expected to provide $0.12 of earnings per share benefit in the year.\nAs we move past the pandemic, we will aggressively invest in both organic and inorganic opportunities.\nAs business recovers, we will loosen discretionary cost controls as appropriate.\nAs mentioned previously, we expect approximately two-thirds of the discretionary cost to return over time.\nAdditionally, we will be making investments to enhance our ability to execute and integrate M&A opportunities as we view this as a critical time to enhance our capabilities, as well as continue to fund our targeted organic growth initiatives.\nThese discretionary add-backs and strategic investments will provide approximately $0.19 to $0.26 of pressure in our 2021 guidance.\nNext, we anticipate $0.08 to $0.11 headwind from variable compensation as we reset our incentive comp for the year.\nFinally, FMD has one-quarter of inorganic results, which we expect to provide $3 million of revenue but provide $0.03 of earnings per share pressure.\nThe structural actions we have made to improve FMD's profit profile based on the situation in the energy market will get FMD back to positive op profit in the second quarter.\nNow, let's take a look at a couple of nonoperational items.\nFirst, we expect an $0.18 headwind from tax, primarily related to discrete benefits we realized in 2020, associated with equity vesting and option exercising.\nSecond, we expect a 2% tailwind from FX, providing $0.13 of earnings per share benefit.\nSo in summary, we are projecting organic revenue growth of 6% to 8% for the year, and earnings per share expectations are in the range of $5.65 to $5.95, a 9% to 15% increase over 2020.\nMoving to Slide 14.\nLet me provide some additional details regarding our 2021 guidance for both the first quarter and full year.\nIn Q1, we are projecting earnings per share to range from $1.38 to $1.42 with organic revenue growth of 2% to 4% and operating margins of approximately 23.5%.\nThe Q1 effective tax rate is expected to be approximately 23%.\nWe expect a 3% top-line benefit from the impact of FX, and corporate costs in the first quarter are expected to be around $18 million.\nTurning to some additional details for the full-year guidance.\nAgain, we're projecting full-year earnings per share in the range of $5.65 to $5.95 with full-year organic revenue to be up 6% to 8%, with operating margins between 23.5% to 24.5%.\nWe expect FX to provide a 2% benefit to top-line results.\nThe full-year effective tax rate is expected to be around 23%.\nCapital expenditures are anticipated to be around $55 million.\nAnd free cash flow is expected to be between 115% to 120% of net income.\nCorporate costs are expected to be approximately $70 million for the year.\nFinally, our earnings guidance excludes any associated cost or earnings with future acquisitions or restructuring charges.\nAbel Pump is not included in these estimates, and we will revise guidance once that deal is closed.\nWith that, I'll throw it back to Eric for some final thoughts.\nWe have proven the resilience of our businesses and clearly demonstrated the impact of the IDEX difference in our operating model.\nWhile we are not completely out of the woods, this is a time for optimism.\nAnd I believe that our businesses are well-positioned to focus on the critical priorities that will accelerate our growth on the other side of the pandemic.\n",
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"content": "q4 adjusted earnings per share $1.37 excluding items.\nsees q1 earnings per share $1.38 to $1.42.\norders of $678.6 million were up 10 percent compared with prior year period.\nqtrly sales of $614.8 million were up 2 percent compared with prior year period.\nfull year 2021 earnings per share is projected to be $5.65 to $5.95.\nsees q1 earnings per share of $1.38 to $1.42.\nprojecting 6 to 8 percent organic sales growth for full year 2021.\nprojecting 2 to 4 percent organic sales increase in q1.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: This is Allison Lausas, vice president and chief accounting officer for IDEX Corporation.\nThe format for our call today is as follows: we will begin with Eric providing an overview of the state of IDEX' business, including a recap of our recent performance and our 2022 outlook.\nBill will then discuss our fourth quarter and full year 2021 financial results, and we'll conclude with our outlook for the first quarter and full year 2022.\nLastly, Eric will close with comments around our focus areas for 2022.\nBefore we begin, a brief reminder.\nI'm on Slide 6.\n2021 was another record year for IDEX.\nWe hit all-time highs on most of our key metrics.\nDemand for our differentiated technology remains strong.\nThis underlying momentum, combined with our targeted growth initiatives and ability to capture price, drove a strong rebound from 2020.\nAcross most of our portfolio, we saw an expansion beyond pre-pandemic revenue levels.\nIn the fourth quarter, we achieved a record for orders and sales, and our backlog position is very strong as we enter 2022.\nWe expanded our margins in a highly inflationary environment.\nWe levered well on the previous investments we made to optimize our cost position and executed on our productivity funnel.\nWe maintained positive price costs, albeit at a compressed level versus historic performance.\nWe remain diligent in controlling our discretionary spend and used our 80/20 principles to allocate resources to our most promising opportunities.\nOur strategic focus, purposeful resourcing, and strong operating cash flow enabled us to deploy record capital.\nWe acquired ABEL Pumps and Airtech and made a collaborative investment in a technology company driving advancements in connected products.\nWe also invested across the portfolio to support growth and productivity.\nWe optimized our cost position within our fluid and metering technology segment through a consolidation of our Italy facilities and our energy businesses and delivered on operational productivity projects across the segment.\nAll of this drove a record year in order sales, margins, earnings, and capital deployment.\nWe've said in the past that we built IDEX to outperform through a cycle, and we continue to find ourselves in a very challenging one, characterized by supply chain disruptions and labor scarcity exacerbated throughout the year by the emergence of new COVID-19 variants.\nOur view continues to be that we don't see gradients of bad.\nRather, the supply chain environment is very tough and numerous challenges persist.\nAs pockets of issues improve, they tend to be replaced by new obstacles.\nThe agility of our teams adjusting to new issues almost every day has been and continues to be outstanding.\nAs we look forward to 2022, we do not see any near-term signs of diminishing supply chain-related headwinds, and the impact of COVID-19 remains highly variable.\nIn the short term, these conditions have and will impact our ability to efficiently ramp production and have created significant pockets of disruption for our customers and suppliers as well.\nWe expect that these challenges will remain at a high level at least through the first half of 2022.\nRegardless of the near-term challenges, our overall IDEX strategy remains focused on the horizon.\nThe core of what makes IDEX strong, highly engineered specialized products used in mission-critical applications, remains a solid driver for long-term success.\nWe'll continue to deploy capital and invest in the resources necessary to drive organic growth in order to capitalize on a robust demand environment.\nOur balance sheet has ample capacity, and we will leverage its strength to continue to play offense in M&A.\nTo that end, we expect to close on the acquisition of Nexsight later this quarter.\nWith that, I'll turn to our outlook for our segments on Page 7.\nIn our fluid and metering technology segment, we anticipate growth in our industrial day-rate businesses in 2022 with a return of larger projects toward the latter half of the year.\nIn the short term, large projects continue to lag as our customers have limited capacity to execute larger upgrades or expansions.\nAgriculture is expected to perform well due to high crop prices, strong farmer sentiment, and limited availability of new equipment driving aftermarket demand.\nOur municipal water business is stable.\nWe see improved optimism in the market and project planning activities increasing.\nWe are expecting an uptick in the energy and chemical markets.\nThe North American mobile truck market is improving due to a strong construction market in home-heating oil prices, and North American pipelines are reporting modest increased capital budgets for 2022.\nWe see international oil and gas quote activity outpacing domestic demand, an opportunity we are well-positioned to capitalize on.\nFMT continues to be in a strong position to realize price, and we expect this to drive improved margins in 2022.\nLikewise, the projects we completed last year to optimize our cost position, as well as new operational productivity projects, will yield strong flow-through in 2022, tempered by a discretionary spending rebound and continued resource investment in this segment.\nMoving to the health and science technologies segment.\nWe expect the strongest growth in HST of all our three segments, and we plan to make the largest resource investments in HST to support that growth.\nWe anticipate margin improvement driven by volume leverage, partly offset by these resource additions.\nHST continues to have robust demand across all their major end markets.\nSemiconductor, food and pharma, analytical instrumentation, and life sciences are all expected to perform well.\nNext-gen sequencing instrument demand is growing with research and clinical applications outpacing COVID detection and surveillance.\nOur ability to execute in the current environment continues to distinguish us from our competition and improve our share position.\nOn the semiconductor side, we continue to capitalize on tailwinds generated from global broadband and satellite communication trends.\nIn auto, supply chain issues at our customers, especially around semiconductors, mute our growth.\nUnderlying market demand remains favorable, and we expect our results to improve as supply chain issues ease.\nThe industrial businesses within the segment faced similar trends to FMT. Finally, we expect that our fire and safety/diversified products segment will be our most challenged next year.\nIn fire and safety, North American OEMs are experiencing significant supply chain constraints around chassis and component availability, which limit their production.\nOn the rescue side, we anticipate that larger tenders will lag, compounded by China localization policies that are driving delays.\nWe do not anticipate near-term easing of these conditions and see the potential for recovery toward the latter part of 2022.\nIn our BAND-IT business, like in HST, we see auto supply chain issues dampening current demand.\nDespite this pressure, our business continues to outperform the broader market due to our content on key vehicle models.\nLastly, in the near term, we expect continued momentum within our dispensing business as customer capital investments are deployed in early 2022.\nHowever, for the year, we will see a non-repeat of North America projects as we reach the end of the replenishment cycle this year as composed to last year.\nWe anticipate that the unfavorable price cost position we experienced last year will rebound this year as annual contracts are renewed at current pricing.\nWe see this improvement tempered a bit by some mix pressure as dispensing volumes reduce and we make some targeted investments.\nwe see favorable conditions across the majority of our end markets.\nHowever, the degree to which our customers and our facilities will be impacted by rolling supply chain and COVID-related disruptions remains highly variable.\nWe'll continue to monitor conditions and be as prepared as we can be for potential interruptions.\nDespite these short-term headwinds, we are optimistic about our growth potential and the trajectory of our end markets.\nI'll start with our consolidated financial results on Slide 9.\nfourth quarter orders of $795 million were up 17% overall and up 13% organically.\nOrganic orders increased across each of our segments.\nFor the year, orders were up 26% overall and up 21% organically.\nWe experienced a strong rebound in demand for our products across all our segments and steadily built our backlog in each quarter of 2021 totaling $266 million for the year.\nRelative to full year 2019, organic orders were up 15%.\nQ4 sales of $715 million were up 16% overall and up 11% organically.\nWe experienced a strong demand rebound from 2020, but our results were tempered by supply chain and COVID production limitations.\nfull year sales of $2.8 billion were up 18% overall and up 12% organically.\nWe saw favorable results across all our segments and again, strong performance relative to full year 2019 with organic sales up 4%.\nfourth quarter gross margins expanded 20 basis points to 44%.\nFor the full year, gross margins expanded 60 basis points, and adjusted gross margins expanded 80 basis points to 44.7%, primarily driven by strong volume leverage.\nQ4 operating margin was 22.7%, up 10 basis points compared to prior year.\nAdjusted operating margin declined 60 basis points, driven by a rebound in discretionary spending, targeted resource investments, and the dilutive impact of acquisition-related intangible amortization, partially offset by volume leverage.\nfull year operating margin was 23%, up 90 basis points compared to the prior year.\nAdjusted operating margin was 23.9%, up 110 basis points compared to prior year.\nI'll discuss the drivers of adjusted operating income on the next slide.\nOur fourth quarter effective tax rate was 22.5%, relatively flat compared to the prior-year ETR of 22.2%.\nOur full year effective tax rate was 22.5% compared to 19.7% in the prior year due to lower tax benefits associated with executive compensation and the nonrepeat of benefits associated with the finalization of the global intangible low-income tax regulations in 2020.\nQ4 net income was $119 million, which resulted in earnings per share of $1.55.\nAdjusted net income was also $119 million with adjusted earnings per share of $1.55, which was up $0.18 or 13% over prior-year adjusted EPS.\nfull year net income was $449 million, which resulted in earnings per share of $5.88.\nAdjusted net income was $482 million, resulting in an adjusted earnings per share of $6.30, up $1.11 or 21% over prior-year adjusted EPS.\nThe tax rate movement I mentioned drives a $0.23 differential in earnings per share as compared to the prior year.\nSaid differently, our earnings per share would have expanded by $1.34 or 26%, had 2021 been taxed at the 2020 rate.\nFinally, free cash flow for the quarter was $136 million, 115% of adjusted net income.\nFor the year, free cash flow was $493 million, down 5% versus last year, and was 102% of adjusted net income.\nThis result was impacted by a volume-driven working capital build and higher capex, partially offset by our higher earnings.\nWe spent over $70 million on capital projects this year, an increase of over $20 million versus 2020.\nMoving on to Slide 10, which details the drivers of our adjusted operating income.\nAdjusted operating income increased $125 million for the year compared to 2020.\nOur 12% organic growth contributed approximately $106 million flowing through at our prior year gross margin rate.\nWe levered well in this volume increase, and our teams drove operational productivity to help mitigate the profit headwinds we experienced from increased supply chain costs and the associated inefficiencies.\nAlthough we have maintained positive price/cost for the year, inflation continues to ramp, and we saw compressed price/cost spread versus historic levels, which pressured our op margin rate and flow-through percentages.\nThe positive mix is primarily a result of the portfolio and business mix normalizing to pre-pandemic levels that had a negative impact on our results last year.\nWe reinvested $35 million back into the businesses, taking the form of a partial rebound in discretionary spending to pre-pandemic levels, higher variable compensation expenses, and targeted reinvestment and resources to drive growth.\nDespite this incremental spend and a challenging supply chain environment, we achieved a solid 38% organic flow-through for the year.\nFlow-through is then negatively impacted by the dilutive impact of acquisitions and FX, getting us to a reported flow-through of 30%.\nWith that, I'd like to provide an update on our outlook for the first quarter and full year 2022.\nI'm on Slide 11.\nAs a reminder, going forward, we will be adjusting earnings per share for acquisition-related intangible amortization in both our guidance and results.\nOur fourth quarter adjusted earnings per share under this definition would have been $1.71 per share, while our full year 2021 adjusted earnings per share would have been $6.87 per share.\nUnder this new definition, for the first quarter of 2022, we are projecting GAAP earnings per share of $1.57 to $1.60 and adjusted earnings per share to range from $1.73 to $1.76.\nWe expect organic revenue growth of 6% to 7% for the first quarter and operating margin of approximately 23%.\nQ1 expected results incorporate headwinds arising from COVID-driven apps and theism and supply chain production constraints.\nThe first quarter effective tax rate is expected to be approximately 22.5%.\nWe expect FX to be unfavorable to our topline by 1% and acquisitions to provide a 4% benefit.\nCorporate costs in the first quarter are expected to be around $19 million.\nTurning to the full year 2022.\nWe project GAAP earnings per share of $6.70 to $7 and adjusted earnings per share to range from $7.33 to $7.63.\nWe expect full year organic revenue growth of 5% to 8% and operating margins to be around 24%.\nWe expect FX to be unfavorable to our topline by 1% and acquisitions to provide a 2% benefit.\nThe full year effective tax rate is expected to be around 22.5%.\nCapital expenditures are anticipated to be around $90 million, an increase over 2021 as we continue to identify opportunities to reinvest in our core businesses.\nFree cash flow is expected to be approximately 105% of adjusted net income, and corporate costs are expected to be approximately $80 million for the year.\nOur earnings guidance excludes impacts from future acquisitions and any future restructuring charges.\nNexsight is excluded from the figures above as the transaction has yet to close.\nNext, I will provide some additional details regarding our 2022 guidance for the full year.\nI'm on Slide 12.\nOn an operational basis, we expect supply chain constraints to mitigate our output for the first half of the year, muting an otherwise strong demand environment.\nTherefore, we are projecting organic revenue for the year to be up 5% to 8%, which translates to an earnings per share impact of $0.60 to $0.95 depending on the topline results.\nThis range also assumes improving price/cost.\nWe continue to drive operational productivity across the portfolio and expect to see benefits from our 2021 restructuring actions.\nThis will drive $0.20 to $0.25 of favorability next year.\nWe also continue to invest in the resources required to grow in the current year end and beyond.\nThese investments will reduce earnings per share by $0.20 to $0.25 and are funded by the productivity gains I mentioned previously.\nOur discretionary spend partially recovered to pre-pandemic levels in 2021, and we expect this spending to be fully recovered by the end of 2022.\nThe unfavorability impacts earnings per share by $0.20 to $0.25.\nI'll note that we are ramping spend to pre-pandemic levels, but with 20% higher revenues.\nABEL has one partial quarter and Airtech has two-quarters inorganic results included in our guidance.\nWe expect the acquisitions to contribute $54 million of revenue and $0.08 of EPS.\nThe incremental amortization that we see in 2022 versus 2021 is largely related to these acquisitions and will provide an additional $0.05 of EPS.\nNow let's take a look at a couple of nonoperational items.\nFirst, our guide assumes no impact from tax as our guided rate is flat year over year.\nSecond, we expect a 1% headwind from FX, providing $0.07 of earnings per share pressure.\nSo in summary, we are projecting organic revenue growth of 5% to 8% for the year, adjusted earnings per share expectations in the range of $7.33 to $7.63, a 7% to 11% growth over 2021.\nImplied in our guidance is mid- to high 20s year-over-year flow-through on the low end and 30% on the high end.\nWith that, I'll throw it back to Eric for some final thoughts.\nI'm on the final slide, Slide 13.\nIn an environment characterized by uncertainty and disruption, it's important not to lose sight of who we are as a company.\nFirst and foremost, we are a portfolio of great businesses that leverage 80/20 with an obsessive focus to serve our customers.\nWe refer to that simple model as the IDEX difference.\nWe're committed to navigating the challenges of the short-term landscape, but remain focused on the longer term.\nWe must continue to utilize our 80/20 toolkit to create efficient, innovative, value-creating businesses.\nIn a world with this level of variability, the simpler you are, the more successful you'll be.\nWe remain committed to investing in the resources needed, so our businesses are poised to take advantage of the growth potential in front of us.\nWe're a company committed to its core values, and we'll continue to develop top-performing teams as part of an inspiring company culture.\nDiversity, equity, and inclusion continues to be an area of focus, creating environments where people feel they belong and are comfortable bringing their true selves to work every day.\nOur strong operating cash flow and balance sheet put us in a great position to continue to put capital to work, and we've already identified several high-return organic investment opportunities across the company that will push us past our 2021 capex record levels.\nWe have invested in new industrial automation that will improve efficiency and expand capacity for growth.\nWe're supporting focused digitalization efforts across our installed base to solidify our superior positions and expand share of wallet.\nOur facility expansions in China and India are well underway, effectively doubling future capacity to support growth across Asia.\nLastly, our M&A opportunity pipeline continues to be strong, and we look forward to deploying additional capital in 2022, welcoming new businesses to the IDEX family.\n",
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"content": "idex q4 sales up 16% to $714.8 mln.\nq4 sales rose 16 percent to $714.8 million.\nsees fy adjusted earnings per share $7.33 to $7.63.\nsees q1 adjusted earnings per share $1.73 to $1.76.\nsees fy gaap earnings per share $6.70 to $7.00.\nsees q1 gaap earnings per share $1.57 to $1.60.\nq4 adjusted non-gaap earnings per share $1.55.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: A copy of the release can be found on our IR website at ir.\nThese statements contain elements of uncertainty, which we have laid out on Slide 2 under the cautionary statement.\nA reconciliation of these non-GAAP financial measures to their respective GAAP measures is available on our website.\nPlease also note that we'll be using combined historical results for the first quarter as defined as three months of legacy IFF results, and two months, February and March, of N&B results, in both the 2020 and 2021 period, to allow for comparability in light of the merger completion on February 1, 2021.\nWith me on the call today is our Chairman and CEO, Andreas Fibig; and our Executive Vice President and CFO, Rustom Jilla.\nI will begin today's call by providing an overview of our first quarter results, including a review of our performance by region and segment.\nI would also like to share with you an update regarding our efforts to integrate DuPont, N&B business, which continues to progress well, following the completion of our transaction in February.\nRustom will then provide a more detailed financial review of the business, highlighting segment level business dynamics and performance and cover cash flow and leverage as well.\nIFF is off to a strong start in 2021, and I'm confident that the momentum we have built will continue for the remainder of the year and beyond.\nNow beginning with Slide 6, I would like to review our performance and notable developments in the first quarter.\nWe achieved 3% in combined sales growth, or 1% in currency-neutral basis, compared to the first quarter of 2020.\nAlso because of our change to a fiscal calendar rather than a traditional 4-4-5 calendar, we have had less -- two days less in first quarter.\nIf we were to normalize for that, our combined currency-neutral growth in the first quarter would also have been approximately 3%.\nAnd on a two-year average basis, to factor in our strong 7% year-ago comparison, growth would be strong at approximately 5%.\nOur adjusted operating EBITDA margin improved by 30 basis points, reflecting our team's diligent execution of our cost management strategy.\nIFF also continues to generate strong free cash flows, and we remain on track to meet our deleveraging target.\nFor the first quarter, our leverage ratio was 4.3 times.\nI'm also pleased to say we have reached an agreement to divest our fruit preparation business to Frulact, who specializes in fruit preparations for the food & beverage industry.\nThe divestiture is expected to close in the third quarter 2021, pending customary closing conditions, including regulatory approvals.\nThe fruit preparation business contributed approximately $70 million to IFF's Nourish segment pro forma sales in 2020.\nThis is our first step in terms of our portfolio optimization strategy.\nSo, I expect more news as we progress through 2021.\nAs you can see, we have established a solid foundation to carry us forward.\nAs we have said before, the opportunities in front of us and our mission is to execute on our plan to deliver industry-leading returns for our shareholders.\nAs we move into the second quarter, we remain squarely focused, leveraging our new capabilities to reach our business objectives, and further establish ourselves as an innovation leader in a global value chain for consumer goods and commercial products.\nNow on Slide 7, I would like to briefly discuss the regional sales dynamics that have influenced our first quarter financial results.\nAs you all know, there are notably significant differences in how different countries are managing the continued impacts of the pandemic.\nSo we want to talk to the dynamics we are seeing in our business across the world.\nWe are pleased to report that most of our operating regions saw sales growth in Q1.\nIn North America, we achieved solid performance across our portfolio with growth in nearly all of our segments.\nThis performance in North America reflects the impressive results in our Scent segment.\nWe continued to see healthy performance across our Asian markets, achieving a 6% increase in combined currency-neutral sales, primarily driven by double-digit growth in China and India.\nWhile we are pleased to see growth across many of these key markets, we must recognize that our growth in India could be challenged in the near term as the country is grappling with hardship related to the pandemic.\nWe wish everyone in India, our Indian colleagues and their loved ones the very best, and hope to see rapid improvement in conditions.\nIn Latin America, we saw an 11% increase in overall sales for the region with growth primarily driven by local currency sales.\nTwo highlights, that I would like to call out, in Brazil and South Cone, where both grew double-digits in Q1.\nCOVID-19 and related ongoing restrictions continue to heavily impact Western and Central Europe, which has resulted in challenges across the entire EMEA region and a 5% decline in overall sales.\nThat said, we remain optimistic about the region's recovery as global vaccination rates increase and related restrictions ease.\nAs we press ahead, we will continue to work diligently with our regional teams and communities, particularly those that remain on the most pandemic-related pressure to adapt our [Phonetic] supply chain ensure that our customers continue to receive the leading solutions they have come to expect.\nLet's move to Slide 8.\nI would now like to review our first quarter sales performance across IFF's key business segments, so you can get a more granular view.\nWe are pleased to report solid growth across our Nourish, Pharma Solutions and Scent divisions.\nOur largest group, Nourish, achieved combined currency-neutral sales growth of 1%, led by robust performance in Flavors.\nWe continue to see pandemic-driven headwinds in Food Design, which is driven primarily by continued declines in Food Service.\nThis channel, while improved from the fourth quarter trends, was down mid-single digits in the first quarter.\nScent continued its strong performance, achieving combined currency-neutral sales growth of 5%, the largest growth driver across our four divisions, led by continued strengths in Consumer Fragrances, double-digit growth in Cosmetic Actives, and a strong rebound in Fine Fragrance.\nFor our Pharma Solutions division, we achieved combined currency-neutral sales growth of 3%, with continued strong performance across the entire division and all sub-categories.\nFor Health & Bioscience division, combined currency-neutral sales decreased 3% against a strong double-digit year-ago comparison.\nIncreases in both health and home and personal care were offset by pressures in Microbial Control and Grain Processing.\nTogether, we have an in demand and diversified portfolio that is meeting that needs of our core end markets.\nI feel, we are very well-positioned to continue executing our ambitious growth initiatives and the complexity of the global marketplace.\nNow turning to Slide 9, I want to show a summary that highlights our business performance, particularly with regard to the segment-level adjusted operating EBITDA margin.\nAs you know, we are focused on driving overall group operating efficiencies as we execute on our integration plans.\nRustom will cover our first quarter segment performance in much more detail, but I wanted to present this slide as it will be included in our standard earnings package going forward, specifically focusing on year-to-year performance.\nSome highlights for Q1, that are worth mentioning; within our largest division, Nourish, I'm very pleased to see early progress on margin expansion.\nWe achieved strong results in our Scent division.\nThe team did a great job, driving higher volumes, benefiting from the rebound in Fine Fragrance, which drove favorable mix and continued, therefore, to capture productivity savings.\nIn H&B and Pharma Solutions, adjusted operating EBITDA margins were pressured by increased raw materials and logistics costs, which overshadowed the strong cost discipline the team has accomplished.\nNow on Slide 10, I would like to provide you with an update on our integration progress with N&B.\nSince completing our combination in February, we have achieved several financial organizational integration milestones, which reflect the incredible efforts of our global team.\nFrom an organizational perspective, we have established a comprehensive operating and leadership structure for our combined company, having identified and announced roles all the way from CEO, down to third level leaders.\nThese leaders are working closely with the integration management office to ensure that all employees are provided for the tools and resources they need to succeed.\nThey've also completed all IT migration from DuPont to IFF, and are on schedule regarding exiting many of our transition service agreements with DuPont.\nOn the revenue synergies front, we have a robust pipeline of projects, including both cross-selling and integrated solutions, that we expect will accelerate our ability to meet our $20 million synergy target this year.\nThis quarter, we achieved a significant cross-selling win within our Health & Bioscience divisions by detergents, and we've invoiced our first sales in April.\nWe are pleased with our project pipeline and with the efforts so far, and continued expressions of demand from customers.\nWe are confident in our ability to meet our three-year run rate synergy target of $400 million.\nFrom a cost synergy perspective, we are under way and already seeing modest P&L benefits, given we are in early days.\nWe expect these cost savings to increase over the course of the year, putting us well on track to meet our $45 million cost synergy target in the full year 2021, and our year three run rate cost synergy target of $300 million.\nI would now like to pass the call over to Rustom, who will provide a more detailed review of our financial performance in the first quarter.\nFirst, let me go a bit deeper into our consolidated financial results.\nIn the first quarter, IFF generated $2.5 billion in sales, a 3% combined year-over-year increase, including foreign exchange benefits, or up 1% on a currency-neutral basis, primarily led by strong performances in our Scent and Pharma Solutions divisions.\nAs you may recollect, from 2021 onwards we are applying prior-year average FX rate to our current year non-US dollar revenues to derive currency-neutral growth rates.\nThis is the more common practice and makes us more comparable to our competitors.\nOur gross margin was impacted in Q1 at Nourish, H&B and Pharma by higher raw material and logistics costs headwinds arising from input cost inflation and higher freight rates, tight inventories and weather-related plant disruptions.\nMeanwhile, our aggressive cost management program led by headcounts and other expense reductions, enabled us to improve RSA to sales by 120 basis points and deliver year-on-year adjusted operating EBITDA growth of 4%.\nAs an aside, Q1 2020 was our most difficult comp with 7% combined currency-neutral sales growth and strong adjusted operating EBITDA growth.\nIFF also delivered adjusted earnings per share, excluding amortization of $1.60 for the first quarter.\nNow on Slide 12.\nI'd like to discuss the first quarter performance of Nourish, which now includes the enhanced capabilities of N&B's pharma, food and beverages business.\nNourish sales totaled $1.3 billion for the quarter, representing 1% growth on a combined currency-neutral basis.\nAdjusted operating EBITDA grew 6%, with a 60 basis point margin expansion led by strong cost management.\nLooking at Nourish's performance by business, Flavors drove growth in nearly all our regions.\nWithin ingredients, which was flat year-over-year, Protein Solutions grew double-digits, but this was offset by softness in emulsifiers and sweeteners.\nContinued pandemic-related challenges impacted Food Design, particularly Food Service, which declined mid-single-digits year-over-year.\nAs the effects of the COVID-19 pandemic lessen, and retail and away-from-home channels continue to recover, returning to growth in this area, while maintaining our strong performance in Nourish's other segments will remain a top priority for the remainder of 2021.\nMoving to Health & Biosciences on Slide 13.\nAs Andreas noted, H&B had a combined currency-neutral sales decline of 3%, but this was against a robust 11% positive year-over-year comparison.\nIt should be noted that on the two-year average basis, currency neutral growth was solid at 4%.\nAdjusted operating EBITDA was also pressured and operating margin declined by 70 basis points, primarily driven by lower segment volumes and higher raw material and logistics costs.\nOur Home & Personal Care business grew strong double-digits this quarter, supported by evolving consumer buying trends related to the pandemic that has persisted through Q1.\nBut declines in Animal Nutrition this year, when compared to mid-teen growth in the prior-year period, offset that performance and impacted overall year-over-year growth.\nMicrobial Control & Grain Processing were also impacted by continued pre-COVID cycling, which impacted H&B's overall growth by approximately 5 percentage points.\nWe are pleased to say that over the course of the first quarter, these businesses showed improvement and were positive in April as we cycle the comparable.\nWe are encouraged by the tremendous performance of Home & Personal Care, which is a testament to evolving consumer trends that prioritize individual health more than ever before.\nTurning now to Slide 14 to discuss the results of our Scent division.\nOverall, we are very pleased with Scent's strong performance, which has been a significant contributor to our Companywide growth.\nOur Scent division generated $569 million in total sales, representing 5% combined currency-neutral growth against a strong 7% growth in the year-ago period as well.\nOn a two-year basis, growth is exceptional at approximately 6%.\nAdjusted operating EBITDA improved 8% with a 70 basis point margin expansion predominantly driven by volume growth across the entire segment, as well as favorable mix from Fine Fragrance recovery and continued productivity.\nAs we began to see last quarter, our Fine Fragrance business experienced a solid recovery as away-from-home restrictions continued to lift and consumer behavior returned to more traditional levels.\nCoupled with this rebound, continued strength in Consumer Fragrances and mid-teens growth in Cosmetic Actives, resulted in another quarter of strong performance for the entire division, driven by volume recovery and new business wins across the segment.\nOur new core wins also providing strong contributions with all three customers growing double-digits in the first quarter.\nNow on Slide 15, I would like to discuss the results of Pharma Solutions, our fourth division.\nAs previously mentioned, Pharma Solutions had an impressive quarter of broad-based growth and made a solid contribution to IFF's overall higher Q1 sales.\nPharma Solutions delivered $162 million in net sales, representing 3% in combined currency-neutral growth while adjusted operating EBITDA grew 2%.\nTaken in the context of the 11% growth in the prior-year period, growth is impressive on a two-year basis -- average basis at approximately 7%.\nLooking at Pharma Solutions performance by business, Core Pharma and Industrial Pharma led the division with volume growth for METHOCEL, seaweeds and coatings, providing -- proving instrumental to Core Pharma.\nAnd Global Specialty Solutions and Nitrocellulose supporting the success of Industrial Pharma.\nWhile we are very pleased with Pharma Solutions' sales performance in the first quarter, we saw adjusted EBITDA margin declined due to higher cost of goods related factors.\nMore specifically, gross margin was hurt by higher raw material and logistics costs related to supply chain challenges and force majeures due to the bad weather in the Midwest earlier this year.\nWe had two plants shutdown temporarily, which impacted raw material availability and caused higher distribution costs.\nNow turning to Slide 16, I'd like to review our cash flow dynamics and capital allocation, which remain a top priority.\nAs you will see, our operating cash flow was very strong at $358 million.\nWe are quite pleased with Q1 cash generation.\nFor legacy IFF, Q1 is usually the lowest cash flow quarter of the year.\nWe typically have net working capital headwinds, as we reset off Q4's loss and we make annual bonus payments in March.\nAnd this year, we also had large deal-related costs such as, cost to achieve investment banking fees, consulting expenses, etc.\nA large part of our Q1 success came from core working capital, where we generated $193 million, a great job by our global team and a great outcome.\nBut we don't expect this quarter after quarter, as we like to build inventory up in some of our legacy N&B business areas to support future growth.\nIn the first quarter, capex was approximately $93 million or 3.5% of sales, up from last Q1's combined comparative $76 million or 2.6% of sales.\nFree cash flow generation was, therefore, strong $265 million, and we distributed $82 million in dividends to our shareholders.\nOur leverage, which is net debt divided by credit adjusted EBITDA ended at 4.3 times, as Andreas noted back on Slide 6.\nThis is ahead of our expectation of 4.5 times first quarter post-merger leverage.\nNow to provide some full year context.\nLegacy IFF generated $520 million of free cash flow in 2020 and combined, we expect to generate $1 billion in 2021.\nIn 2021, we will invest more in legacy N&B production capacity to meet expected strong future demand, but will only be slightly above our original full-year capex projection of approximately 4.5% of sales.\nThe dividend payment this year will be -- this quarter will be $197 million reflecting our higher post-merger share count.\nAnd we remain on track to meet our long-term deleveraging target of 3 times net debt to credit adjusted EBITDA in 24 months to 36 months from deal close.\nTurning to Slide 17, I'd like to provide an update on our full-year 2021 consolidated financial outlook.\nBut before doing so, I want to remind everyone that in mid-April, we provided sales and adjusted EBITDA metrics for each of IFF's four segments on a 2020 pro forma and combined basis, and additional detail on a segment level via our Learning Labs series.\nOn a combined basis, IFF generated $10.6 billion of revenue for the full year 2020, with currency neutral growth of approximately 2%.\nAnd our combined adjusted operating EBITDA margin for 2020 was approximately 22%.\nPlease remember that combined includes 11 months of N&B and 12 months of IFF in 2020 and 2021.\nIn our fourth quarter conference call in February, we gave initial pro forma guidance, which assume the full 12 months of IFF and N&B, in order to be directly comparable to our previously provided S-4.\nMoving forward, to be more aligned with actual results and reporting, we are transitioning to guiding on 11 months of N&B, which excludes January and 12 months of IFF in the 2021 year, in light of the merger completing on Feb.\nAlso, please note that in January 2021, N&B's actual sales were approximately $507 million and adjusted operating EBITDA was $107 million.\nGiven our first quarter results, our April preliminary sales, our rest of year FX expectations incremental pricing to recover costs and the fact that Q1 was our toughest comparative period quarter, we are forecasting stronger sales growth through the rest of 2021.\nWe have, therefore, increased our sales expectation for 2021 to be approximately $11.25 billion in combined revenues, or plus 6% growth with an approximately 23% adjusted operating EBITDA margin.\nSince the beginning of the year, we have seen a rise in the cost of goods, driven by input cost, including raw materials and logistics.\nIn terms of raw material costs, we are seeing a large increase in selected commodities, soy, locust bean kernels, vegetable oil, turpentine and propylene glycol.\nIn addition, freight costs are higher as a result of greatly increased rates.\nFor example, the global freight index is up three times due to non-availability of containers at contracted rate.\nAnd we're also seeing an uplift in air freight volumes due to strong demand and supply chain challenges like force majeure earlier this year.\nThis has required us to go back to have additional pricing discussions to cover our exposure.\nWhile we are confident that over time we can fully pass along the increase, there is a time lag before pricing is fully realized, which can pressure gross margin in the short-term.\nUltimately, by the end of the year, we are confident that through pricing and our ongoing focus on cost reduction, we can achieve our full year adjusted operating EBITDA goal on a combined basis.\nWith regard to Q2, we are pleased that we've started the quarter strong, a nice growth acceleration versus where we ended the first quarter.\nWe are optimistic that for the full second quarter, revenue growth including currency benefit should be in the high-single-digits range, with an adjusted EBITDA margin also around 23%.\nTo assist with understanding and modeling the new IFF, we are also sharing our expectations with regard to depreciation, amortization, interest expenses, capex, our adjusted effective tax rate, excluding amortization and our weighted average share count on a combined basis.\nWhile, most of these metrics probably don't need to be elaborated upon, it's worth noting that we expect moderately higher capex in 2021, as we invest for growth and work to exit some of our IT-related transition services agreements with DuPont more quickly than planned.\nWe're also providing a 2021 adjusted effective tax rate, excluding amortization for the first time.\nAnd the 21.5% is broadly in line with our early expectations.\nThis is still preliminary and will change as we finalize purchase accounting and intangibles by jurisdiction.\nThe equivalent for heritage IFF on a similar basis for the full-year 2020 was approximately 18.5%.\nCollectively, these metrics and decisions reflect our confidence in IFF's ability to deliver solid results even in this volatile global environment.\nIt has truly been a busy quarter, and we all have much to be proud of, especially as this all was accomplished during a global pandemic.\nLooking beyond our solid Q1 financial results, I want to reemphasize the important first step that we took in tightening our business and optimizing our portfolio strategy, by agreeing to divest our fruit preparation business.\nBy divesting this non-core business, IFF will be more efficient organization with a greater capacity to focus on growth and innovation across our key businesses, ultimately generating greater value for our shareholders.\nAs we enter Q2 together, we are confident that we have the right team and the right structures in place to ensure that our newly combined company will meet our financial and operational goals.\nAs I mentioned, we are targeting strong year-over-year financial improvements with accelerated sales growth over the coming quarters, backed by our commitment to delivering industry-leading innovative products and services to our customers around the world.\nAnd as Rustom stated, we are pleased that we have started Q2 strong, and optimistic that our full second quarter sales growth should be in a high-single-digit range.\nI'm tremendously proud of all we have accomplished, and I firmly believe that the best is yet to come.\nWe're taking each and every learning from the N&B integration process to create a stronger, more agile and diversified company, that defines the future of our industry and showcase of what it means to be a leading ingredients and solutions partner.\n",
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"content": "q1 adjusted earnings per share $1.60.\nsees combined fy 2021 (excluding.\nn&b jan) sales about $11.25 billion.\nqtrly adjusted earnings per share excluding amortization $1.60.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: A copy of the release can be found on our IR website at ir.\nThese statements are based on how we see things today and contain elements of uncertainty.\nA reconciliation of these non-GAAP financial measures to their respective GAAP measures is available on our website.\nPlease note that we'll be using combined historical results for the second quarter defined as three months legacy IFF results and three months of legacy N&B results, and for the first half 2021 defined as six months of legacy IFF January to June, and five months of legacy N&B February to June in both the 2020 and '21 periods to allow comparability in light of the merger completion on February 1, 2021.\nWith me on the call today is our Chairman and CEO, Andreas Fibig and our Executive Vice President and CFO, Rustom Jilla.\nI will begin today's call by providing an overview of our performance during the first half of 2021 followed by an update on regarding our ongoing efforts to fully integrate the N&B business following the completion of the transaction in the first quarter of the year.\nRustom will then provide a detailed review of our second quarter financials highlighting segment level business performance and the market dynamics, we saw in the quarter.\nBefore we jump into the question-and-answer session Rustom will also conclude with an overview of our expectations for the remainder of 2021.\nNow, beginning with Slide 6, I would like to review our business highlights for the first half of the year.\nI'm pleased to report that IFF has delivered a strong performance in the second quarter, which is a robust acceleration viz our combined Q1 growth and through the first half of the year.\nAs I've said before, execution is everything and IFF has delivered strong financial results while advancing our ongoing integration efforts following the completion of the N&B merger in February.\nIn the first half of 2021, IFF achieved $5.6 billion in sales representing 8% growth or 5% on a currency neutral base.\nFor comparable purposes and to reflect the portfolio differences between our peers, I want also to highlight that both businesses performed well with legacy IFF achieving a very strong high-single digit growth rate with nearly 100 basis points of EBITDA margin expansion, and legacy N&B growing in mid-single digits.\nAt the same time, we continue to operate in a challenging global environment with significant headwinds in material cost and supply chain logistics.\nIn the first half combined EBITDA growth was a solid 6% and a combined EBITDA margin of 22.5%.\nImportantly, our strong free cash flow of $533 million enables IFF to maintain significant financial flexibility, including our efforts to delever.\nWe remain on track to achieve our deleveraging targets of under three times by year three post transaction close and we improved our net debt to credit adjusted EBITDA leverage on 4.3 times in the first quarter to 4.2 times in the second quarter.\nFinally, we are also well on track with integrating the N&B business and continue to realize synergies in line with our expectation of the transaction.\nAs we sharpen the IFF portfolio, we continue to progress on the divestiture of our Food Preparation business which we expect to be completed late in the third quarter or early fourth quarter.\nAs I mentioned last quarter, the divestiture of this non-core business will create a more efficient IFF with an enhanced ability to grow and innovate across the key business segments.\nWe are committed to ongoing active portfolio management and we'll continue to seek ways to increase value equation.\nStepping back to reflect on the first half of the year.\nI'm very pleased with what we have been able to accomplish.\nWe delivered strong sales growth, which is an acceleration versus historical performance for both legacy IFF and legacy N&B in the midst of a transformational integration as well as a global pandemic.\nThis is a validation of our strategy, motivates our team to continue defying industry expectations as we continue to see the benefits of our expanded product offering and capabilities.\nLong-term growth prospects of our business are strong and we are making investments in capacity, R&D, and Plant Technologies as well as increasing inventory levels and incurring higher logistic costs to maintain our growth momentum in the interim, specifically in the N&B business as we maximize our growth opportunities going forward.\nAs we look to the third quarter and second half of 2021 our objectives are clear, build on this momentum while executing on our integration plans allowing IFF to fully leverage our new capabilities and chief -- achieve our long-term expectations.\nTurning to slide 7, I would like to briefly discuss the regional sales dynamics that influence our results for the first half.\nDespite persisting global challenges and varied economic recoveries, we are pleased to report growth in each of our four key operating regions.\nIn North America, we achieved growth in all of our business segments, led by a single-digit growth in Scent, Nourish and H&B.\nSimilar to the first quarter, our Asian markets continue to perform well achieving a 5% increase in sales led by double-digit growth in India and a mid single-digit performance in China.\nWhile we had anticipated that growth would have been impacted in India due to COVID in the second quarter, the business was resilient and finished higher than we expected with strong double-digit growth in Q2.\nFrom a segment perspective and Asia's strong increases across our Nourish, Scent, and Pharma Solutions businesses all contributed to this sustained growth in this key region.\nLatin America, our strongest performing region, we achieved 12% sales growth driven by double-digit performance in nearly all of IFF's business segments and underpinned by favorable currency movements.\n[Indecipherable] Brazil, Mexico and South Cone, all achieved growth in the first half.\nWe are particularly pleased to report that our EMEA region has impressively rebounded in the second quarter up to high-single digits.\nWe achieved a 2% increase in sales in the first half as COVID 19 related restrictions eased.\nOur Scent and Nourish business performed particularly well in Q2, both achieving double-digit growth.\nBearing [Phonetic] any newly emerging COVID 19 challenges we expect this growth to continue through the remainder of the year as global vaccination rates increase and Western and Central Europe continue to recover.\nNow turning to Slide 8.\nI will provide a more detailed look at our sales performance across IFF's key business segments through the first half of 2021, particularly those that significantly contributed to our overall 8% sales growth, or 5% growth on a currency neutral basis that I mentioned earlier.\nWe are pleased to report solid growth across all of our four core divisions, Nourish, Health & Bioscience, Scent and Pharma Solutions.\nNourish achieved currency-neutral growth of 6% driven by a strong performance in flavors ingredients and Food design.\nSimilar to the first quarter, Scent remains our largest sales driver on a year-to-date basis, achieving 8% of currency-neutral growth led by a strong performance in Fine Fragrance and Consumer Fragrance.\nOur Health & Bioscience business has return to solid growth in the second quarter following a challenging first quarter where sales were affected by COVID 19 pressures in microbial control and grain processing, While microbial control continues to be challenged for the first half, we saw growth in grain processing, which showed a recovery in the second quarter as well as home and personal care cultures and food enzymes and animal nutrition.\nFinally, our Pharma Solutions business also delivered growth through the first half of 2021 against a strong year ago comparison.\nOn slide 9, I would like to discuss the underlying dynamics influencing each of our four segments in the first half.\nAs I mentioned, we saw broad-based growth in all Nourish categories led by robust performance in Flavors.\nDespite strong volume and continued cost discipline, higher raw material costs continue to affect margin when compared to the first half of 2020.\nHowever, on a year-over-year basis, EBITDA grew about 7%.\nOur Health and Biosciences businesses delivered growth in the first half led by strong performance in Home and Personal Care and grain processing.\nThis growth offsets COVID 19 related pressures in microbial control and a strong year ago comparable in Health.\nHigher logistic costs related to capacity and strong demand impacted our margin.\nNonetheless, we are encouraged by this performance and expect continued improvement as we move into Q3.\nOur leading growth and profit -- profitability driver Scent achieved an operating EBITDA margin increase of 170 basis points and absolute EBITDA grew nearly 20%.\nThis was driven by a strong rebound in Fine Fragrances as retail channels continue to recover, continued strength in Consumer Fragrances and double-digit growth in Cosmetic Actives.\nScent also delivered strong profitability led by higher volumes, favorable mix and higher productivity, which we expect to continue through the remainder of the year.\nLastly, in Pharma Solutions, the segment's 1% growth was driven primarily by improvements in industrials, so our margin was significantly challenged due to higher energy costs, lower manufacturing utilization and the result in the weather related raw material shortages.\nNow on slide 10 and 11, I would like to discuss our continued synergy progress in connection with our merger with N&B.\nFrom a revenue synergy perspective, we remain on track to meet our $20 million revenue synergy target this year.\nCoupled with continued demand and positive feedback from our customers, we are also confident in our ability to meet our 2024 run rate revenue synergy target of approximately $400 million.\nI would like to spend a moment highlighting how we realize this significant opportunity and share additional context on some of our recent wins.\nIn only six months since completing the merger, we are already seeing strong affirmation in the opportunity before us.\nOur Home Care segment is a perfect example of how our expanded portfolio and combined capabilities with N&B delivers creative solutions for our customers and creates new opportunities for our business.\nRecently, our Health and Bioscience division saw an opportunity to collaborate with our Scent division.\nA global Scent customer expressed the need for enzyme technology and IFF's capabilities across divisions allowed us to deliver an integrated solution and ultimately create a superior dishwashing detergent.\nTogether with IFF's leading fragrance capabilities, our enzyme technology ensures fit for purpose delivery and performance, which creates a differentiated product for our customers.\nThis opportunity represents more than $5 million in annual sales potential.\nAt the same time, we are actively working with other customers across IFF network to develop solutions that require capabilities across our four divisions.\nIn the Food and beverage category, we continue to see demand for plant based meat alternatives that showcase the best of our expanded portfolio.\nFor low sugar, low fat yogurt, we are introducing new flavor technologies with improved texture and speed to market, which are key advantages for our customers.\nLastly, in our Health category we're developing an integrated solution for fiber gummy that leverages our unmatched scientific and technical expertise combined with our best-in-class flavor offering.\nThese are just a few examples of the cross-selling opportunities that we are seeing customers increasingly demand and differentiator for our business over the long term.\nWe made significant strides in the second quarter from an integration perspective, ramping up our cost synergies from a few million dollars in the first quarter to a total of approximately $15 million on the first-half basis.\nThis was largely a result of the comprehensive savings program we have implemented in the second quarter which allowed us to leverage our increased scale to reduce our indirect spend, benefit from various office consolidations and renegotiations, and right-size our organization.\nAdditionally, because of our operational strengths and commitment to the integration process early on, we were all [Phonetic] able to accelerate exiting our various transition service agreements with DuPont.\nI'm very encouraged by the continued progress on this front and we are on track to deliver at least $45 million cost synergies for the full year, and ultimately our three-year run rate cost synergy target of $300 million.\nAnd now, I will hand it over to Rustom.\nI will begin with an overview of our consolidated second quarter results on Slide 12.\nIn Q2, IFF generated approximately $3.1 billion in sales, representing a 13% year-over-year increase or 9% on a combined currency-neutral basis, primarily driven by double-digit growth in our Nourish and Scent divisions and a strong Health & Biosciences performance.\nThough our gross margin was pressured by higher input cost, raw materials and logistics inflation and higher air freight volumes, this was partly offset by our disciplined cost management practices, administrative expense reductions and cost synergies.\nThis enabled us to deliver adjusted operating EBITDA growth of 7%.\nWe also achieved strong adjusted earnings per share, excluding amortization of $1.50 for the second quarter.\nI want to provide a perspective on sales performance in Q2 versus pre-COVID.\nThere is no doubt that 2020 was an extraordinary year due to COVID 19, so it makes more sense to also evaluate our performance relative to 2019's levels.\nAnd as you can see, all four divisions in the second quarter delivered strong sales growth as compared to the space period.\nTotal company sales were up 8% on a two-year basis with double-digit growth in Nourish and Pharma Solutions, a high single-digit increase in Scent, and mid single-digit growth in H&B.\nWith the exception of a handful, all of our sub categories have grown relative to their pre-COVID levels.\nMost notably, we are pleased to report that those categories most impacted by COVID 19 are ahead of their respective Q2 2019 levels including Cosmetic Actives, which is up double digits, Fine Fragrance, which is up high-single digits, and grain processing which is up low-single digits.\nFoodservice in microbial control while we had strong growth in the second quarter of 2021 remained below Q2 2019's levels, but we expect it will continue to improve as we move forward.\nThis performance underscores the strength and diversity of our portfolio as well as our position as an essential partner to our customers.\nNow on the next few slides, I will dive deeper into the second quarter financials of each of our four divisions.\nBeginning with Nourish on Slide 14.\nSales for the division increased by 15% year-over-year or 11% on a currency neutral basis, driven by robust double-digit growth in flavors with Frutarom contributing to growth, and a strong ingredients performance particularly from our protein solutions, cellulosic, locust bean gum, and Food Protection categories.\nNourish also saw a strong rebound in Food design including a very strong 24% growth in foodservice as pandemic related restrictions continue to ease and consumer behavior and away from home channels continue to normalize.\nAs I mentioned in the previous slide, higher raw material costs put relatively modest pressure on the margins of most of our individual segments.\nAlthough we are pleased to have delivered adjusted operating EBITDA growth of 7%.\nPricing continued to accelerate in Q2 and contributed over a percent of growth in the second quarter.\nAs we will discuss later, we expect this will increase significantly in the third and fourth quarter as more of our pricing actions take hold.\nTurning to slide 15.\nOur Health & Biosciences division saw year-over-year growth of 9%, or 5% on a currency neutral basis, led by double-digit growth in Home and Personal Care.\nAs Andreas mentioned earlier, we are particularly encouraged by Health & Biosciences returned to growth this quarter, led by our microbial control and grain processing categories strong recoveries from the industrial and supply chain challenges related to COVID 19.\nPerformance in our Health category was challenged based on the particularly strong double-digit probiotics year-over-year comparison, although this did not offset the rest of the segment's growth and we remain confident in the Health category's trajectory moving forward.\nHealth & Biosciences also delivered adjusted operating EBITDA growth of 5%.\nWhile you see that the division's margin was down this quarter, this was due to higher logistics costs in order to balance robust customer demand and available capacity.\nWe have increased capacity investments in this business to support long-term growth and invested R&D and plant technology to increase output later this year.\nWe are incurring significantly higher air freight costs to maintain our growth momentum in the interim, and this is impacting our EBITDA margin.\nNow turning to slide 16 to discuss the results of our Scent division, which continued to be a standout growth contributor this quarter.\nOur Scent division generated $550 million in total sales representing year-over-year growth of 16%, or 13% on a currency neutral basis.\nScent also achieved adjusted operating EBITDA growth of 34% with margin expansion of 300 basis points, driven by robust volume mix and productivity, which did offset some inflationary pressures.\nWhile Consumer Fragrances was down slightly this quarter against a very strong double-digit year ago comparison, a significant rebound in Fine Fragrances which grew by approximately 85% led by new wins and improved volumes more than offset Consumer Fragrance's more modest performance due to last year's double-digit growth.\nOur Ingredients category also contributed the division's strong performance growing double-digits led by strong performance in Cosmetic Actives and Fragrance ingredients.\nOverall, we are extremely pleased with Scent's continued strong performance.\nLastly, turning to Slide 17 to discuss Pharma Solutions.\nCurrency-neutral sales were flat against a strong year ago comparison with Industrial Pharma the most significant performance driver for this division, led by Global Specialty Solutions.\nCore Pharma's performance was challenged against a very strong year ago comparison.\nOn a two-year basis, growth was solid at about 3.5%.\nAdjusted operating EBITDA was pressured this quarter with the margin decline due to higher energy costs and lower manufacturing utilization due to a couple of plant shutdowns as a result of weather related raw material shortages.\nSpecifically we had raw material availability issues related to the Midwest storm in the US earlier this year, which meant we were not able to run production and absorb our fixed costs.\nGoing forward, the supply chain is improving, which we expect will lead to stronger margins in Pharma Solutions for the balance of the year.\nNow turning to Slide 18.\nI'd like to review our cash flow position leverage dynamics for the first half of 2021, which remain a top priority as we continue to navigate a recovery in global markets.\nAs you will see in the first half IFF generated $533 million in free cash flow, with free cash flow from operations totaling $698 million, driven by an improvement in core working capital.\nCapEx for the first half totaled $165 million or approximately 3% of sales as we continue to invest in growth accretive areas that we believe will ultimately prove rewarding over the long term as well as in integration-related activities.\nIn the first half, we also delivered $274 million in dividends to our shareholders.\nAs we look ahead, we are confident that our cash generation will remain robust, and have announced that we are raising our quarterly dividend marking the 12th consecutive year of dividend increases.\nFrom a leverage perspective, our cash and cash equivalents finished at $935 million with gross debt holding steady at $12 billion.\nOur trailing 12 month credit adjusted EBITDA totaled $2.61 billion, and our net debt to credit adjusted EBITDA was 4.2 times.\nWe are slightly better than we expect to be at this point in time and we are still expecting to delever to below three times net debt to EBITDA in the first three years post transaction close.\nNow moving to Slide 19, I'd like to provide an update on our financial outlook for the full year 2021.\nIFF has built a solid foundation in the first half of the year and delivered particularly strong second quarter performance, and we expect strong growth will continue through the rest of the year.\nFor the full year 2021, we are once again increasing our forecast for total revenues with an expectation to achieve 2021 total revenues of approximately $11.4 billion, which equates to about 7% growth.\nThis is up from our previous $11.25 billion or 6% growth as we have confidence in our sales momentum continuing into Q3 and through the rest of the year.\nBreaking down the contributors of growth, we expect currency-neutral sales to be about 5% and FX benefits to be approximately 2%.\nWhile pandemic related uncertainties persist, we are encouraged by the strong performance and important recoveries we are seeing across the business, which we believe position us well to capture continued strong sales growth in Q3 and Q4.\nAt the same time, we now see full-year 2021 adjusted EBITDA margin at about 22.5% versus approximately 23% previously.\nA part of this reduction is related to our margin performance in Q2 for all the reasons I explained earlier.\nWe also continue to see inflationary pressures across the supply chain.\nFrom a raw material perspective, we have seen raw material costs continue to increase over the course of the year.\nIn the first half we were successful in raising our prices to recover a portion of the cost increases, and continue to expect close to full cost recovery in the second half.\nIt should be noted that we are also seeing more broad based non-raw material inflation such as higher energy costs that we're managing through.\nOur expectations for air freights has also increased significantly as rates are higher, but mostly higher volumes to balance robust customer demand and available capacity.\nWe are absorbing higher logistics costs to grow the business in the short term and expect this is only temporary until our capacity expansion projects are complete.\nThe combination of unfavorable price to raw material costs and higher logistics costs are negatively impacting operating margin in 2021 by more than 100 basis points.\nHowever, through higher sales, strong cost discipline, and our focus on unlocking additional cost synergies, we believe we will end up only about 50 basis points lower than our previous expectations with higher revenues and a roughly similar dollar EBITDA level.\nFor modeling purposes, please note the depreciation and amortization, interest expense, CapEx as a percentage of sales, adjusted effective tax rate excluding amortization, and weighted average diluted share count all remain the same as what we shared in Q1.\nOverall, we are confident that we are well placed to continue capturing additional growth over the next two quarters and beyond, while maintaining our focus on execution, continued financial discipline and leveraging our significantly bolstered resources and expertise as a stronger, more diversified company.\nBefore I wrap up today's call I would like to first recognize our thousands of employees around the world who continue to display their unwavering commitment to serve our customers, unify our teams together with N&B and deliver for our communities.\nDespite the uncertain environment that we have continued to navigate, IFF's first half and Q2 results showcase the strengths of our combined portfolio and our ability to execute our ambitious business objectives.\nAnd I'm incredibly proud to lead such a talented and passionate group of IFFs.\nWe have much to be proud of this quarter as we move ahead, I'm confident that we have built the financial operational structures needed for our combined company to reach even greater heights.\nAs Rustom and I have mentioned, we are targeting a strong full year performance indicative of our post-pandemic aspirations, and I know we are exceptionally positioned to achieve this, and we are seeing this strong top line momentum will continue in the early days of the third quarter.\nTogether, we will further our mission to be an innovative force for good and redefine what it means to be a leader in the global value chain for consumer goods and commercial products.\n",
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"content": "iff q2 adjusted earnings per share $1.50.\nq2 adjusted earnings per share $1.50.\nsees fy sales up about 7 percent.\nraises full year 2021 sales outlook.\nboard of directors authorized a 3%, or $0.02 increase, in quarterly dividend to $0.79 per share.\nsees fy sales about $11.4 billion.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: A copy of the release can be found on our IR website at ir.\nThese statements are based on how we see things today and contain elements of uncertainty.\nA reconciliation of these non-GAAP financial measures to their respective GAAP measures is available on our website.\nPlease also note that we will be using combined historical results for the third quarter, defined as three months of legacy IFF results and three months of N&B results and for nine months year-to-date defined as nine months of legacy IFF January to September and eight months of N&B February to September, in both the 2020 and 2021 period to allow for comparability in light of the merger completion on February 1, 2021.\nWith me on the call today is our Chairman and CEO, Andreas Fibig; and our recently appointed Executive Vice President and CFO, Glenn Richter.\nAs you know, Glenn joined us a little over a month ago as our new Executive Vice President and Chief Financial Officer.\nI'm sure you will all find that his experience aligns perfectly with our strategic goals, making him an incredible asset to our team.\nRustom played an important role in our combination with DuPont N&B.\nAnd for that, we are immensely grateful.\nHe has been important in putting IFF in the strong position it is today.\nBefore we conclude today's call with a question-and-answer session, Glenn will also speak to our outlook for the remainder of the year.\nNow as I mentioned, I'd like to kick us off on Slide six by discussing our financial highlights for the first nine months of 2021.\nThroughout the third quarter, we remained laser focused on extending the momentum IFF established in the first half of 2021.\nIn the first nine months of 2021, IFF achieved $8.6 billion in sales, representing 10% growth or 7% on a currency-neutral basis, a strong reflection of the strength of our market-leading platform and the compelling position we have established with our customers as a combined company.\nWe delivered a 22% adjusted operating EBITDA margin and a combined EBITDA growth of 5%.\nAs we will discuss in more detail, we continue to confront meaningful inflationary pressure due to higher raw material, logistics and energy costs.\nWe have maintained our robust cost discipline efforts and are entering the fourth quarter with continued financial strength, having achieved $884 million free cash flow or approximately 10% of our trailing nine months sales, driven by strong cash generation.\nThis cash generation has enabled us to stay on track to meeting our deleveraging target.\nFinally, as I've mentioned in previous quarters, continued refinement and optimization of our portfolio is a critical component of our ongoing integration efforts.\nI'm pleased to share that we have completed the divestiture of our food preparation business and are on track to complete the divestiture of our microbial control business in the second quarter of 2022.\nTogether, these two important divestitures will create a more focused IFF, allowing us to hone in on the constraints of our core business segments and it creates a stronger, more focused business.\nWe will continue to evaluate and optimize our portfolio as we move forward with our integration, looking for opportunities to rapidly divesting other noncore businesses.\nWe started this year with a simple commitment to focus on execution and deliver on the potential of the new IFF.\nI'm pleased to say that even in a very challenging global environment, our team has met our integration objectives, while delivering strong results with continued sales momentum and profit growth.\nNow turning to Slide 7.\nI'd like to walk you through some of the regional sales dynamics underpinning our results for the last nine months.\nFirst, I'm excited to share that we continue to experience strong growth in all four of our key operating regions despite ongoing and unique market uncertainties that have persisted across each geography.\nIn North America, we achieved 7% growth across all four of IFF's business divisions, led by high single-digit growth in Nourish and Scent.\nThese two divisions have continued to perform exceptionally well, quarter after quarter.\nIn Asia, we experienced a 7% increase in sales led by continued double-digit growth in India as well as a low single-digit growth in China, even amid particularly strong recent market complexities in the region.\nFrom a business unit perspective, Nourish, Scent and Pharma Solutions continued to carry the region's growth throughout the year-to-date.\nLatin America continues to be our strongest performing region and sales growth leader, having achieved 12% growth, largely fueled by double-digit growth in our Nourish and Scent divisions and continued local currency strength.\nPerhaps, most impressive is a 7% sales growth that our EMEA region achieved to date, which includes a robust double-digit increase in the third quarter, impressive performance on our Scent and Nourish divisions growth, this encouraging rebound with Scent delivering double-digit growth led by our Fine Fragrance business and Nourish delivering high single-digit growth led by our Food Service business.\nWe expect this momentum to continue through the remainder of the year, and we will stay diligent to ensure our business remains nimble, positioned to perform against any new supply chain challenges that may arise.\nMoving now to Slide 8, I'd like to take a closer look at our nine months year-to-date sales performance across IFF's key business segments.\nOur largest division, Nourish, has been a strong performer throughout the year, achieving currency-neutral sales growth of 9% with broad-based strength from our Flavors, Ingredients and Food Design businesses.\nScent has had a similar strong year delivering 8% in currency-neutral growth to date, led by impressive double-digit growth in Fine Fragrance as well as strong growth in Consumer Fragrance and Ingredients.\nHealth & Bioscience has seen strong demand in key focus areas including Home & Personal Care, Animal Nutrition and Cultures & Food Enzymes.\nAs you know, we are in the process of selling our Microbial Control unit, which has continued to experience headwinds through this year but has rebounded from COVID-impacted lows with growth in both Q2 and Q3.\nThis divestiture should further enhance the performance of this important division.\nPharma Solutions, despite significant challenges, is flat so far for the year.\nSupply chain challenges have had an outsized impact on this division throughout the year.\nWhile we have seen encouraging growth in our Industrial business, the division still struggles to meet customer demand due to raw material availability challenges and logistics issues.\nNow on Slide 9, you will see that we have outlined some of the factors influencing the growth and profitability of each of our four divisions so far this year.\nAs I previously mentioned, Nourish has had a strong year with Flavors and Ingredients experiencing double-digit growth.\nWe have been working hard in our execution to manage volume and cost to limit margin impact from higher raw material costs, which continued to be a headwind on our profitability.\nWhile we have seen some margin impact of about 20 basis points in the year, we are proud of how our execution has mitigated much of the negative headwinds, while delivering meaningful growth.\nOur team has did an exceptional job increasing prices to combat inflationary pressures, something that will continue to be critical as we move forward.\nIn Health & Bioscience, we mentioned broad-based growth across the markets, but here, we are seeing significant margin impacts from higher logistic costs.\nAs shared on our second quarter call, part of this that freight rates have increased significantly, but also we are having higher logistic costs to balance robust customer demand and available capacity.\nWe have increased capacity investments in this business to support long-term growth, investing in R&D and plant technology to increase output later this year and into 2022.\nThe Scent division has certainly realized the strongest, all-around bounce back as consumer demand rises across end markets.\nNotably, Fine Fragrances alone has realized 36% growth year-to-date with double-digit growth in Cosmetic Active and continued solid performance in Consumer Fragrances.\nAt the time, sales profitability expansion of 110 basis points has been led by higher volume, favorable mix and higher productivity.\nAs I mentioned, Pharma Solutions was the only division in which we did not experience sales growth due to continued global supply chain challenges that have impacted our ability to meet strong customer demand.\nThese challenges, including supply and logistic constraints and ongoing inflation have, in turn, significantly pressured our margin compared to the first nine months of 2020.\nMoving to the fourth quarter and entering 2022, we will be closely tracking supply chain dynamics, and we'll continue to prioritize returning our Pharma Solutions business to the profitability we know is achievable.\nAnd in the fourth quarter, we're expecting year-over-year top and bottom line performance to improve.\nAs we have been talking about today, IFF is realizing very strong sales momentum across our business.\nThis is a reflection of the powerful new position we have created through our combination with the N&B business and a compelling value proposition we can offer to our customers.\nWhile we are pleased to put many of the gross headwinds related to the pandemic behind us, it is important to understand that our growth this year is, in fact, meaningful above pre-pandemic results.\nIf you look at the total business, you will see that on a comparable 9-month pro forma basis, the new IFF has realized 9% sales growth over 2019 results.\nThis strength is broad-based too.\nEach segment is realizing strong growth above pre-pandemic levels.\nNourish is a business that was particularly hard hit through the pandemic, is now strongly growing with sales growth of 9% compared to pro forma 2019 9-month period.\nAnd important, especially given that much of the integration work is coming from within this division, these results showcase how our position in the market has been fundamentally strengthened through the merger and how our teams are delivering the full potential of IFF to our customers.\nMoving to Slide 11, I would like to discuss the strong progress we have made in terms of synergy realization.\nFor just nine months, since completing our merger with N&B, our synergy progress reaffirms the tremendous opportunity we have in front of us as a combined company.\nHaving received significant and highly encouraging positive feedback from our customers, along with persistent robust customer demand, we are confident in our ability to meet our revenue target.\nTo date, revenue synergies have started to contribute to our top line performance, and we are pleased that our project pipeline is strong and growing.\nIn the first nine months of 2021, we've achieved approximately $40 million in cost synergies, representing nearly 90% of our 2021 cost synergy target with one quarter to go.\nThis was largely a result of the comprehensive savings programs we have implemented, where we are leveraging our increased scale and optimizing our organization.\nI'm confident that we will more than exceed our $45 million year one synergy target.\nAnd I'm encouraged by the continued progress we are making toward achieving our 3-year run rate of cost synergy target of $300 million.\nHis background is perfect, but there are two areas I think really stand out.\nFirst, he brings tremendous depth with private and public companies and leading finance teams to enhance discipline and build processes that drive toward a goal of shareholder value creation.\nHe has time and time again shown an ability to help businesses accelerate top line growth while driving margin expansion.\nIn this way, he consistently implements productivity initiatives with lasting impact.\nSecond, he has been through several large-scale M&A integrations with a track record of strong success.\nAs we continue to execute on our multiyear transformational integration, this experience is invaluable.\nSince joining IFF in late September, I've had the opportunity to briefly meet many in our investor community.\nAnd the most common questions I've been asked is why did I join IFF and what are my near-term priorities.\nConsequently, before I review our financial results, I thought it would be helpful to briefly provide these perspectives as an introduction.\nThere were three very compelling reasons for me to join IFF.\nFirst, and perhaps most importantly, IFF is a company that is truly making a difference in helping solve some of the world's biggest challenges.\nWe are delivering reliable, innovative and sustainable solutions that are directly helping address issues such as improved nutrition and wellness, reducing greenhouse gas emissions and creating a more sustainable environment.\nSecond, the industry has very attractive organic growth characteristics, benefiting from continued strong consumer tailwinds from increased consumer focus on wellness and natural and sustainable products, increased demand in emerging markets and new consumer needs presented by aging demographics in developed markets.\nI also believe that scale will become an important basis of competitive advantage as customers demand leading ESG platforms, increased innovation and speed to market, global supply chain resiliency and help in navigating increasingly complex regulations.\nThird, I firmly believe that the combination of IFF with DuPont's legacy N&B business has uniquely created an industry-leading platform.\nAnd since joining IFF, I've tried to immerse myself in the business completely, visiting sites, meeting with our business and operations teams and spending time at our R&D and creative centers.\nI've also prioritized hearing from you, our investors and analysts.\nAnd frankly, today, I'm even more bullish on the strength of IFF's global capabilities and the tremendous long-term potential we have to drive strong top and bottom line growth.\nRelative to my near-term priorities, I have four primary areas of focus.\nBy far, our most pressing priority is to tackle the challenges from the global inflationary environment and to successfully execute broad-based pricing actions across all of our businesses.\nSecond, I'm also focused on enhancing our core financial processes and metrics, including better forecasting, improved business-level return metrics and tighter disciplines for our investment decisions, so that we're maximizing our growth potential and return on invested capital.\nA third area of focus is ensuring we fully deliver on our merger synergies, while also accelerating our focus on sustainable productivity.\nAnd finally, while we have made very good progress to date on our portfolio optimization, there is significant opportunity remaining.\nIn the days and months ahead, I look forward to learning even more about this organization and engaging with all of you.\nWith that, I'd now like to provide an overview of our consolidated third quarter results.\nIn Q3, IFF generated approximately $3.1 billion in sales, representing a 12% year-over-year increase, primarily driven by the continued double-digit growth in our Nourish division and strong increases in both Scent and Health & Biosciences.\nIn terms of contribution, volume performance was the primary driver of our growth as pricing represented approximately two percentage points in the quarter.\nThough our gross margin continued to be challenged by inflationary pressures, it was somewhat offset by our strong cost management focus, which resulted in adjusted operating EBITDA growth of 4%.\nAnd while we had solid year-over-year EBITDA growth, our gross margin was down by 210 basis points as our pricing actions recovered only about 65% of our raw material increases or approximately 50% in the third quarter when we include raw material, logistics and energy increases.\nAs we move forward, we are squarely focused on improving this recovery rate relative to the total inflationary basis but expect that in the short term, specifically the fourth quarter, we will see a similar pressure given the time lag of price realization.\nLet me finish on this slide by saying that we achieved strong earnings per share, excluding amortization of $1.47.\nOn the next few slides, I will dive deeper into the third quarter financial results for each of our four divisions.\nTurning to Slide 13, I'll start with our Nourish division, which had an exceptional quarter.\nIn Q3, Nourish achieved 17% year-over-year sales growth or 15% on a currency-neutral basis, driven by robust double-digit growth in Flavors for the second consecutive quarter.\nIngredients also grew double digits with all subcategories, protein solutions, pectin and seaweed extracts, emulsifiers and sweeteners and cellulosics, LPG and food protection, increasing double digits.\nFood Design also grew double digits, led by Food Service, where pandemic-related restrictions continue to be lifted with away-from-home consumer behaviors returning to more typical levels.\nAs a result of strong volume growth, price increases and our focus on cost management, Nourish achieved an adjusted operating EBITDA increase of 19% and margin expansion of 30 basis points.\nOn Slide 14, you'll see that our Health & Biosciences division saw year-over-year sales growth of 7% or 5% on a currency-neutral basis, led by double-digit growth in Home & Personal Care and high single-digit growth in Cultures & Food Enzymes.\nOur Health category was soft this quarter due to a particularly strong double-digit year-ago comparison, so we are pleased with the results when we look at it on a 2-year basis.\nAs Andreas mentioned earlier, inflationary pressures and higher logistics and energy costs to keep up with the robust customer demand has challenged our margins across our business, with H&B particularly impacted, which drove an operating EBITDA decrease of 12%.\nUnpacking this a bit deeper, the bulk or 70% of our year-over-year EBITDA decline came from higher air freight volumes, where we have increased intercompany shipments to manage available capacity.\nAs we shared last quarter, we have increased capacity investments in this business to support long-term growth and have also invested in R&D and plant technology to increase output.\nUntil then, we will be incurring higher costs to support our customer demand, and this will impact our EBITDA margin.\nTurning now to Slide 15.\nOur Scent division continues to perform extremely well and experienced strong growth, achieving 10% year-over-year growth or 9% growth on a currency-neutral basis.\nThis performance was driven by Fine Fragrances' continued rebound, which grew approximately 36%, led by new customer wins and improved volumes.\nOur Ingredients category also continues to perform well and contributed to Scent's overall success, seeing double-digit growth for the second consecutive quarter led by strong performance in both Cosmetic Actives and Fragrance Ingredients.\nWhile our Consumer Fragrances business saw modest low single-digit growth against a strong double-digit year ago comparison, this is a marked improvement from Q2, and we expect further growth as we move forward.\nOn a 2-year average basis, Consumer Fragrance remained strong at 9% in the third quarter.\nScent also experienced adjusted operating EBITDA growth of 10%, driven by strong volume growth and favorable mix.\nMargin was down modestly due to higher raw materials and logistics costs, a trend we see continuing.\nI will provide more context shortly.\nLastly, in our Pharma Solutions business, we saw a currency-neutral sales decrease of 2% due to continued supply chain challenges related to raw material availability and logistics disruptions, which have made it challenging to meet persistent and growing customer demand.\nWhile Industrials has continued to recover from COVID-19 lows, our core Pharma business saw soft performance against its solid year-ago comparison.\nThe division's adjusted operating EBITDA and margin also continue to be impacted by higher sourcing, logistics and manufacturing costs.\nWe also continue to see the impact of force majeures and raw material shortages with suppliers and shutdowns due to Hurricane Ida, resulting in unplanned outages in some of our product lines.\nWhile we expect the current market environment and macro supply chain problems to continue challenging the segment, we remain optimistic and as Andreas mentioned earlier, we remain focused on returning the division to profitability as these industry conditions stabilize.\nNow on Slide 17, I would like to review our cash flow position and leverage dynamics for the first nine months of 2021, both of which remain a top priority for us.\nSo far this year, IFF has generated $884 million in free cash flow, with cash flow from operations totaling approximately $1.1 billion.\nAs the team has mentioned in previous quarters, we are investing in our growth accretive businesses as well as integration activities.\nYear-to-date, we have spent $242 million or approximately 2.8% of sales on capex and expect a significant ramp-up in fourth quarter as our annual spend is traditionally more back half weighted.\nFrom a leverage perspective, we are continuing to make substantial progress toward achieving our deleveraging target, with our cash and cash equivalents finishing at $794 million, including $122 million restricted cash, with gross debt reduced by $446 million versus the second quarter to $11.5 billion due to our debt maturity schedule as part of our deleverage plan.\nOur trailing 12-month credit-adjusted EBITDA totaled approximately $2.7 billion, with a 4.1 times net debt to credit-adjusted EBITDA.\nWith our continued strong cash flow generation, including proceeds from divested noncore businesses, we remain confident that IFF is on track to achieve our deleveraging target of less than three times net debt to EBITDA within 20 to 36 months, post-transaction close.\nTurning to Slide 18.\nI'd like to take a moment to discuss the cost inflation trends that have impacted our business this year.\nAs I mentioned earlier, IFF and the industry at large have seen significant year-over-year inflation increases, which have been accelerating in the recent quarter.\nThe inflationary pressures we are seeing today are significant.\nJust as examples, vegetable oil prices hit a record high after rising by almost 10% in October.\nThe price of wheat is up almost 40% in the last 12 months through October.\nBrent crude prices have more than doubled over the past 12 months to the highest level since October 2018.\nIn the U.S., natural gas prices are up 100% from a year ago and in the U.K. grew up about 500%.\nAnd transportation rates have increased significantly given the high demand and limited capacity to ship.\nAcross the raw materials, logistics and energy markets, like many industries around the world, we have seen costs accelerate each quarter, which has led to our margins being adversely impacted.\nFor example, in the first half of 2021, gross margin was down about 150 basis points, while in the third quarter, we were down about 210 basis points.\nAs we look ahead, we are being prudent in our planning as we expect these inflationary pressures will continue throughout the fourth quarter and over the course of 2022.\nConsequently, this will require us to successfully implement significant pricing actions across each of our businesses as well as improve our sourcing efficiencies, accelerate operational improvements and capture targeted integration synergies to drive profit growth.\nNow moving to Slide 19.\nI would like to share what this means for our consolidated financial outlook.\nFor the full year 2021, we are maintaining the increased total revenue forecast we announced in September to account for the strong demand.\nFor the full year 2021, we are targeting $11.55 billion in total revenue or approximately 8.5% growth, up from the forecast of $11.4 billion or 7% growth that we disclosed in the second quarter.\nWe also expect our sales growth to continue in the fourth quarter as our Q4 quarter-to-date sales trend is solid.\nAs mentioned, unprecedented macro supply chain challenges and inflationary pressures continue to impact our industry, and we do expect this to continue in the foreseeable future.\nWhile we are intently focused on offsetting these inflationary pressures through pricing actions, these are lagging the inflationary pressures.\nAnd as a result, we have further revised our adjusted EBITDA margin to be modestly below 21%, down from approximately 21.5% that was forecasted in September.\nAbout half of this reduction is due to lower gross margin in the third quarter and the other half stemming from higher cost trends we see in the fourth quarter.\nFor the full year, we are targeting low single-digit EBITDA growth, a solid improvement in light of the external challenges.\nWe also adjusted our capex spend outlook down as we have been very thoughtful in balancing near-term operating priorities with the need to add capacity to support accretive growth across our businesses.\nOverall, we are pleased of the progress we've made to date, strong top line growth and a commitment to meet near-term macro cost pressures, and we're confident that IFF is on the right path and poised for continued success across our core business.\nBefore I wrap it up, I'd like to reiterate how proud I am of IFF and our thousands of employees around the world who have showcased a remarkable resilience toward an evolving and continuously uncertain industry environment.\nWe have continued to deliver strong year-over-year sales and profit growth, and I'm confident that with our top-notch financial and operational structure supported by Glenn's financial leadership, we will be able to maintain and bolster our strong financial profile, while continuing to deliver for both our shareholders and our customers.\nQ4 is off to a solid start, and I know that our momentum will propel us to achieve strong sales growth for the full year and bring us another step closer to achieving our synergy targets.\nIn sum, it is clear to me that IFF is in an incredible strong position.\nWe knew entering this year that the new IFF was poised to change our industry.\nBut to do so, we had to execute.\nAs we look at industry-leading sales growth for the full year, I'm just so proud of how everyone here stepped up and executed on our vision and delivered against our potential.\nIFF is once again the clear leader of this field, creating another iconic chapter in this company's 132-year legacy.\nThis core strength of the business is why I felt now was the perfect time to start the transition to find IFF's next CEO.\nI have every confidence that now is the right time to let the next chapter of IFF legacy begin.\nAs we announced, the search has begun for my successor, and we expect that person to be in place by early 2022.\nI'm fully committed to a seamless transition and look forward to talking to you all about this more in the near future.\n",
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"content": "qtrly adjusted earnings per share except amortization $1.47.\nachieves strong double-digit sales growth in quarter; on-track to grow 8.5% for full year 2021.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: A copy of the release can be found on our IR website at ir.\nThese statements are based on how we see things today and contain elements of uncertainty.\nA reconciliation of these non-GAAP financial measures to their respective GAAP measures is available on our website.\nWith me on the call today is our Chairman and CEO, Andreas Fibig, and our Executive Vice President and CFO, Rustom Jilla.\nWe will begin by sharing a detailed look into our fourth quarter and the full year 2020 results, and then Rustom and I will highlight the go-forward outlook and opportunity for the new IFF.\nI'm really excited and proud to say that as of February 1, we have officially completed our merger with DuPont N&B.\nOur teams have hit the ground running establishing our new company as an innovation leader in the global value chain for consumer goods and commercial products.\nWith the close of the N&B transaction, we also unveiled a new brand identity and purpose intended to unify our organization and best position our divisions for success.\nAs a purpose-driven enterprise, we share a mission to build from strength and transform our industry.\nWe are now squarely focused on execution, building on recent performance to leverage the exciting capabilities and broader customer base of our new company.\nI'm confident that the direction that we are moving and the opportunity ahead of us will lead to accelerated growth and improve profitability as we generate strong value creation and total shareholder return.\nBeginning with Slide 6, I would like to recap what was truly a remarkable 2020.\nAmid an unprecedented pandemic that challenged our global organization, we delivered solid financial results while embarking on a transformational journey to create a new industry leader together with DuPont N&B.\nI'm pleased to report that we completed 2020 with positive momentum on a comparable basis, and we have seen this trend continue in January 2021 as a combined company.\nIn 2020, our portfolio remained resilient to an evolving and incredible challenging global environment due to the ongoing COVID-19 pandemic.\nIFF generated USD5.1 billion in sales for the full year 2020, about a 1% increase on a currency-neutral basis from last year when excluding the 53rd week of 2019.\nThis sales growth was primarily driven by strong performance in our Scent division, which we believe is even better positioned to capture further market share in 2021.\nWe achieved an adjusted operating margin, excluding amortization, of 18.1%, driven by our synergy efforts with Frutarom and pursuing additional productivity initiatives across the business.\nAs we reflect on the integration of Frutarom, we are pleased with what we have achieved as it relates to cost synergies from procurement, manufacturing and administrative expenses.\nAcknowledging the revenue challenges at Frutarom over the past two years, we have restructured the business and, going forward, it will be an integral part of our larger new segment, including Taste, Food and Beverage segments now we have the combined combination with N&B.\nWe really emphasized free cash flow management throughout the year.\nThis led to meaningful increases year-over-year as we continued to focus on managing our balance sheet through the pandemic.\nWe finished the year with an adjusted earnings per share, excluding amortization, of $5.70.\nWith the completion of our combination with DuPont N&B, we have also achieved the important milestone of completing the integration planning phase related to the merger.\nWe are now focused on execution going forward as we are committed to realizing the meaningful synergies presented by the transaction.\nFor capital synergy opportunity, we are encouraging collaboration across divisions and closely aligning with the markets and regions we serve to showcase the full breadth of IFF's new portfolio.\nI will provide further details regarding our integration initiatives a bit later.\nOn Slide 7, let's take a second look at the sales dynamic that we have seen across the business.\nReflecting on 2020, we were off to a very strong start, growing 6% in Q1 2020, until the pandemic had a profound impact on society and, ultimately, our business.\nGiven the disruption of the year, we want to offer a bit more perspective on the trends we have seen within our business as we cover from the peak of the regulatory restrictions of the pandemic in the second quarter of 2020.\nOur growth rates continued to improve in the fourth quarter, up 2% excluding the 53rd week, versus the 1% year-on-year growth seen in the third quarter.\nA large part of this improvement came from Fine Fragrance, which returned to growth in the fourth quarter.\nAs we have noted before, roughly 15% of our business was negatively impacted by COVID-19 and decreased by 16% in 2020, excluding the impact of the 53rd week.\nThe vast majority of our portfolio, which includes food, beverage, hygiene and disinfection type products, is defensive in nature or benefited from the pandemic.\nThis was roughly 85% of our pre-pandemic sales and these grew approximately 4% for the full year, excluding the impact of the 53rd week.\nOur performance was strong with multinational customers, especially those who benefited from the pandemic.\nHowever, our exposure to local and regional players adversely impacted sales.\nI think it's important to remember that while these smaller and regional customers were disproportionately impacted by COVID-19, they have historically been an important source of growth across our industry and we expect them to be important contributors in our recovery.\nOn the whole, we are proud of the results achieved and resilience of our business in 2020.\nSome of our end markets have seen prolonged and significant negative impact that led to inevitable headwinds for certain segments.\nHowever, when you look at the whole of our portfolio, we see strong results with meaningful momentum that affirm our central role in the consumer product good value chain.\nThat gives me great confidence as we begin to execute as a new IFF with the N&B business in 2021.\nAs we begin 2021, I'm very pleased to say we, on a combined company basis, had a strong performance in January, with approximately 3% currency-neutral growth against a strong year-ago comparison.\nScent trends continued to be very strong, Taste improved and N&B continued to be pressured by COVID.\nIt is good to see that the business has had steady improvement since the pandemic lows.\nI would now like to pass the call over to Rustom, who will provide a more detailed review of our financial performance in the fourth quarter.\nI will cover the P&L high points on this slide and get into additional detail as we go through the following several slides.\nIn the fourth quarter, IFF generated $1.3 billion in sales, down 2% year-over-year on a currency-neutral basis.\nWhen excluding the roughly $50 million impact of 2019's 53rd week, our comparable currency-neutral growth was plus 2%, and as I'll explain on the next slide, up approximately 4%, counting foreign exchange-related price changes as our peers in many CPGs disclosed.\nWhile Taste performed at levels similar to Q3 2020, we did see a significant acceleration in Scent.\nIn the fourth quarter, our adjusted operating profit, excluding amortization, decreased by 10% on a currency-neutral basis, or by 9% including a one percentage point benefit of FX, with solid operating performance -- operational performance offset by a challenging year-ago comparable and COVID costs.\nWe delivered adjusted earnings per share, excluding amortization, of $1.32, mostly as a result of lower operating profit in the quarter.\nThis was down 11% on a currency-neutral basis, or 10% including the one percentage point benefit of FX.\nIt was good to finally see foreign currency having a positive impact on sales, operating profit and earnings per share in the quarter.\nNow moving to Slide 9.\nI would like to focus on the emerging markets and currency impacts on our results, both in the fourth quarter and the full year, to provide better clarity regarding our currency-neutral sales growth.\nFor the fourth quarter and for the full year, the impact of FX-related pricing was approximately two percentage points.\nTo be clear, if we simply looked at our revenue in the current period by local currency and applied the average FX rates from the prior period to the current period, our currency-neutral growth of 2% in the fourth quarter would have been up approximately 4%, and our full year currency-neutral growth of 1% would go to approximately 3%, all excluding the impact of the 53rd week.\nAt the segment level, Scent would have grown 10% in Q4 2020 and 7% in the full financial year, while Taste would have been up 1% in both Q4 and the full year 2020.\nAgain, all excluding the impact of the 53rd week.\nResponding to feedback from our investors and after further review of what our competitors and other CPG companies are doing, starting in Q1 2021, we will align our reporting with our peers' methodology.\nFor 2021, our plan is to provide this on a consolidated basis and divisional level.\nAnd before our next earnings call, we'll provide a historical restatement of growth by division for 2020.\nMoving now to Slide 10.\nLet me break down the key factors impacting our Q4 profitability.\nI do want to go into more detail on this as the overall results hide some meaningful operational improvements that support our optimism and momentum heading into 2021.\nA close look at our operating profit bridge shows that we were able to drive operational improvements, about 8%, largely attained through Frutarom synergy realization, productivity initiatives and reformulation activities, mostly in Scent; higher volumes ex the 53rd week and disciplined cost management.\nAs expected and communicated earlier this year, there was a negative impact from our annual incentive compensation, or our AIP program reset, which was a direct result of weak Q4 2019 results.\nFurther negative offsets came from a challenging year-to-year comparable, which included the 53rd week and the Brazilian indirect tax RSA benefit that both occurred in 2019, and in 2020, incremental COVID-19 costs, which we expect will only reduce in the second half of 2021.\nUnfortunately, these combined items represent an 18 percentage point year-over-year headwind and were the primary driver of our 10% currency-neutral decline in operating profit.\nNow on Slide 11, I'd like to discuss our Scent division results in more detail.\nAnother strong overall performance from Scent.\nSales totaling $504 million were up 3%, or 7% when excluding the 53rd week comparison.\nWe've continued to see strong growth from our Consumer Fragrance business with a high single digit increase, driven by strong performances in our Home Care and Personal Wash categories.\nAlso, the new color is, where we recently gained access in Consumer Fragrance, core to our 2021 strategy, grew more than 60% in the fourth quarter and represented more than 1/3 of our Consumer Fragrance growth.\nI'm also happy to share that we returned to growth in our Fine Fragrance business with a mid-single-digit increase as a result of several new wins in North America and Europe.\nWhile this was a nice development in Q4 2020, we're cautious and are not extrapolating the trend for the first quarter of 2021.\nIn Fragrance Ingredients, we experienced a high single-digit growth, driven by double-digit growth in Cosmetic Actives.\nSo overall, the Scent division achieved a 15.9% profit margin on the $504 million of sales in the quarter.\nOur recent performance across the Scent portfolio is encouraging and will remain a core piece of our growth story moving forward, bolstered over time by expanded sales opportunities from working together with N&B.\nThe team has done a tremendous job delivering market-leading growth, adjusted for the reporting differences over the past three years, while improving Scent's margin profile.\nTurning now to Slide 12.\nI'd like to highlight the fourth quarter performance of our Taste division.\nOur Taste division, with the exception of our Food Services business, has remained resilient throughout the pandemic.\nTaste sales totaling $766 million declined 5%, or 1% when excluding the 53rd week comparison.\nFood Service was down roughly 17% on a similar basis.\nThe Taste division achieved approximately 11.8% profit margin, with $90 million in segment profit.\nThese numbers also include approximately $42 million in amortization of intangible assets.\nIf you exclude that amortization, our Q4 margin would be 17.2%.\nFrutarom continued to be pressured in the quarter, declining mid-single digits on a currency-neutral basis as COVID-19 has disproportionately impacted Food Service and the end market performance of local and regional customers, both of which represent a large portion of Frutarom's annual sales.\nLooking at our performance by region.\nOur North American business remains particularly strong, outperforming other markets with mid- single-digit growth.\nWe have experienced challenges -- experienced challenges in our Flavors segment in Latin America and Greater Asia due to the ongoing pandemic, while our EAME performance was challenged by weakness in Savory Solutions, specifically driven by the Food Services market.\nSo returning to profitable growth in our Taste division will remain a top priority in 2021.\nAnd we fully expect to deliver improved results and enhanced profitability as we emerge from the pandemic.\nNow turning to Slide 13.\nI'd like to spend some time on our cash flow.\nIFF has always been a strong generator of cash, but given our 2020 starting leverage and the fact that N&B was coming along in early 2021 bringing additional debt, it was even more critical that we focus our people on the importance of cash generation across the company.\nSo capex and working capital targets were both included in our annual incentives, we launched specific initiatives and we tracked progress throughout the year.\nAs you will see, operating cash flow for the full year was up from $699 million in 2019 to $714 million this year, an increase of 2%.\nNet income was lower as a function of operating profit but also higher year-over-year transaction and integration-related costs.\nHowever, this headwind was more than offset by lower incentive compensation payments in 2020 as a result of our 2019 performance as well as by the timing of payments on some integration-related costs.\nCore working capital was a modest use of cash, driven primarily by timing related to accounts receivable, where Q4 2019 was favorably impacted by the 53rd week.\nCollections in that extra week ending in January helped 2019's cash flow, and this was always going to be very hard to fully offset this Q4.\nOverall, we're satisfied with the 2020 trajectory of our 5-quarter average cash conversion cycle, which improved six days year-over-year.\nAnd this was despite holding additional inventory to avoid any customer disruption due to COVID-19-related supply chain issues.\nWe also reduced our capex to 3.8% of sales versus 4.6% of sales in the prior year period as we prioritized spending more than ever to manage and preserve cash through the pandemic.\nAnd travel and on-site work restrictions also helped lower 2020 capex.\nAll this led to a significant 13% increase in free cash flow compared to 2020's $522 million.\nAnd we will be equally focused in 2021 in cash generation and on reducing our overall level of net debt.\nMoving to Slide 14.\nI would like to address the key assumptions behind our full year 2021 expectations.\nWhile we were certainly encouraged by our business trends in the fourth quarter and in January 2021, we expect COVID-19 to have a similar impact in 2021's first half, as we've seen in 2022's second half.\nWhile we expect improvements in Fine Fragrance, Food Services and our biorefinery business on a full year basis, 2021 sales will likely remain below our 2019 levels.\nAssumed in our full year guidance is a euro to U.S. dollar exchange rate of $1.18, which represents approximately 25% of our combined sales.\nWe expect approximately $50 million of merger-related cost synergies with DuPont N&B, mostly back-end loaded this year, with $45 million coming from cost synergies and an additional $5 million from the EBITDA contribution of revenue synergies.\nNow we also provided some additional inputs that should help you model the business moving into 2021.\nWe expect total annual depreciation and amortization to be $1.165 billion, which includes amortization of approximately $715 million.\nAnnual interest expense is expected to be around $315 million.\nFor our annual effective tax rate, we are still working through the details, given that we just completed the acquisition on February 1.\nWhile we do have an estimate, it's still being validated by the team, so my preference is to complete additional work before we communicate.\nLastly, we expect diluted shares outstanding for the pro forma company, for earnings per share calculation purposes, to be approximately 255 million shares, and that's including the approximately 141 million shares from the transaction.\nFor Q1 2021, please do remember that it's two months of actuals for N&B and three months for IFF when modeling.\nAnd also, please note that we'll continue to dig into these numbers post close, but we did want to share our thinking at this point in time.\nSo we will update you accordingly should anything change.\nNow turning to Slide 15.\nI'd like to detail our pro forma full year 2021 financial guidance.\nIn line with the projections included in our December 22 S-4 filing, plus the synergy realization plan communicated January 11, we expect to generate approximately $11.5 billion in sales at an approximately 23.2% adjusted EBITDA margin.\nPlease note that this is a 12-month combined company pro forma estimate and includes approximately $507 million of N&B sales that occurred in January 2021.\nThese metrics reflect our confidence in the combined company's ability to generate strong results in the complex global market as several of our businesses are expected to see improvement throughout the year.\nOn a pro forma basis, sales are expected to grow nearly 4% and EBITDA margin to expand by approximately 100 basis points.\nWe should note that we are moving toward reporting and guiding on an adjusted EBITDA basis as part of our broader effort for easier comparability with our peers, which includes our reported sales growth as well.\nWe are redoubling our efforts to be more transparent and investor-focused as a combined company, and we think EBITDA is a key contributor to that in our sector.\nWith an even stronger portfolio and enhanced capabilities, the new IFF is starting the year with a strong financial foundation from which to deliver strong results.\nOur 2021 guidance reflects the strength of our enhanced platform, our expectation that the impact of the pandemic will have meaningfully subsided in the second half and our rigorous focus on execution.\nAs such, we expect to deliver 2021 results that are meaningfully better than 2020's.\nI'd also like to comment on some of the underlying dynamics that we expect will continue into the first quarter of 2021.\nAs we face a strong first quarter comparison from both IFF at 6% and N&B at 3%, we will also continue -- we also continue to manage through pandemic-related headwinds.\nWhile the majority of our portfolio delivers essential products and solutions, we expect that Food Service, biorefinery and microbial sales will continue to remain under pressure in the near term or until we lap the COVID-related challenges.\nWe are closely monitoring trend improvements in our Fine Fragrances business and are cautious not to extrapolate our Q4 -- our Q4 trends in the first quarter as we believe some of the performance was due to a strong holiday period.\nBuilding on what Andreas said earlier, I'm pleased to say that we had solid pro forma results in January, with approximately 3% currency-neutral growth on our new disclosure basis.\nIn January 2021, N&B finished with approximately $507 million in sales.\nGiven that N&B became part of IFF's business just -- of IFF just eight business days ago, we are not providing quarterly guidance.\nJust one reminder for anyone extrapolating out our January results for the quarter.\nWhile this has no impact on our full year expected sales, please remember that we moved away from our previous 4, 4, five reporting cycle to calendar month reporting from January.\nSo in Q1 2021, we will have two less working days for legacy IFF.\nTherefore, perhaps a better metric for tracking progress is average daily sales.\nWhile we do not know where the pandemic will take us, we're happy with our start to 2021.\nWe will continue to thoughtfully manage resources, operating expenses and capital to ensure that our business is well positioned to deliver in an uncertain market.\nWe also want to note that since we closed the deal on February 1, we have been working on getting the investment community pro forma segmentation for our combined company.\nNow moving to Slide 16, and before passing it back to Andreas, let me end by summarizing our go-forward reporting and disclosure updates, all aimed at being more investor-friendly and more comparable to our peers.\nStarting in Q1 2021, we will align our currency-neutral sales reporting to the more common methodology.\nWe will calculate currency-neutral sales growth by taking our revenue in the current period in local currency and applying average FX rates for the prior period to the current period.\nWe've shifted from our previous financial reporting calendar of 4, 4, five weeks to the more commonly used calendar month end to eliminate comparable issues related to the 53rd week.\nWe're also moving toward reporting and guiding on an adjusted EBITDA basis for easier comparability with our peers.\nThis includes both at the consolidated level as well at the segment level.\nAnd we will be eliminating our corporate expense line in our segment profit table by allocating corporate expenses accordingly to each division.\nTurning to Slide 17.\nLet's focus on 2021 and the new IFF with the N&B business.\nOur teams executed well on the tremendous integration planning for the transformational combination despite working remotely due to COVID-19.\nThis integration planning effort, more than one year long, has provided an opportunity to create the right team and operating model needed to secure our global leadership position.\nIt has been driven by the lessons we have learned in past integrations across both organizations, rounding our plans and practical experience that will enable near-term execution.\nWe set out an aggressive time line in 2019 to close and complete integration planning in 2020.\nThe global pandemic only challenged us even further.\nBut I'm very pleased to say that our teams worked extraordinarily well together to complete every aspect of our integration planning.\nI'm confident that the new IFF is ideally positioned to succeed.\nWith this planning complete, we can entirely focus on execution, delivering our commitments and realizing significant revenue cost synergies, resulting in significant value creation for shareholders for the years to come.\nLet's move to Slide 18 and take a second and we focus on the value proposition of the new IFF.\nOur new company is poised to realize significant value for all of our stakeholders.\nAnd these two highly complementary companies form a true innovation partner for all customers.\nThe new IFF will be a force in shaping the future of our industry.\nOur R&D investment will be 1.5 times greater than our nearest peer.\nWe will have #1 or #2 positions in core categories in nutrition, cultures, enzymes, probiotics, soy proteins, flavors and fragrances.\nThis is coupled with the broadest and most diverse customer base in our industry, more than 45,000 in total, and about 48% of our annual sales from small medium and private label customers.\nWe are well positioned to drive profitable growth for our shareholders.\nThis allows us to enhance the value we can deliver to our customers in a very powerful way.\nWe can deliver value to customers in every interaction, from leading product offerings to significant benefits of speed to market and supply chain simplification as we deliver market-leading integrated solutions.\nI think it is important to remember that while the N&B transaction is a culminating and transformational move, it is completely consistent how we have been evolving the portfolio over the past five years.\nOur strategy focused on positioning the company for where the industry is going, not where it has been.\nThat has required more naturals, more regional supply chains, reaching smaller customers and increasing technology and science-led innovation.\nActions like Frutarom, Lucas Meyer, Ottens Flavors and others were important foundational steps as we executed the strategy.\nAs we look ahead, we are pleased we have the most complete portfolio in the business.\nWhile our portfolio may change around the edges, it is complete and gives us the right base to grow and the right assets to drive the financial results you see from our long-term targets.\nPut simply, the new IFF will be the strongest partner to customers worldwide to corporate essential solutions for on-trend innovation.\nNow to Slide 19.\nI would like to emphasize the long-term value creation potential we have seen for IFF.\nOur new company has substantial synergy opportunities that will drive growth and expand margins.\nThrough our integration planning, we confirmed the run rate revenue synergy expectation at approximately USD400 million by 2024, with a contribution of at least USD145 million of EBITDA by that time.\nIn addition, we expect to achieve meaningful cost savings, including a run rate cost synergy expectation of USD300 million by the end of 2023.\nWe expect that execution on our plan will unlock about $50 million in EBITDA contribution in 2021.\nI think it's important to say that any combination is not just about synergies, but also to strong and leading-based businesses.\nOur leaders across legacy IFF and legacy N&B businesses are committed to running every part of this business, both base business and combined, to yield superior results.\nThis requires a mindset of continuous improvement and operational excellence that we are embracing across the organization.\nIt is critical to underscore that we have a comprehensive structure in place to track more progress against the identified objectives.\nAt the center of our discussion will be synergy realization, where we will track diligently, including the onetime costs in both expense and capital.\nOur hope is to highlight, on a continuous basis, all value creation levers to provide you with a critical how component of our value creation story.\nAnd in the end, while we are focused on synergy realization, success will not be defined just as that.\nIt will be the cumulative results where synergies are additive to base business performance for a stronger total P&L.\nOn Slide 20, I want to highlight the actions that we are immediately taking to begin execution.\nOne of the most questions we get from investors is, not what will you deliver, but instead, how will you actually do it?\nAs you can imagine, synergy capture is all about the how.\nAnd we -- and as we mentioned on January 11th, there are 85 separate initiatives behind the $300 million cost savings that are in our plan on the cost side and another several initiatives on the revenue side.\nWe try to give you a flavor for the type of actions that are part of these initiatives.\nIn terms of revenue synergies, we have engaged with our top global and regional customers to introduce joint portfolio and capabilities, accelerate co-development partnership with global customers, activate cross-divisional innovation and collaboration in R&D and launch combined commercial excellence and integrated solution teams.\nAt a high level, I would characterize the cost actions as follow.\nFirst, where there's duplication, we eliminate the duplication.\nYou can imagine across two global companies, there's a lot of duplication in back-office and admin functions.\nSecond, we look to align our cost structure with best-in-class peers where it is comparable.\nWe have undertaken benchmarking across functions like G&A, which gives us a tangible target for improvement.\nNo two organizations are identical.\nSo we use this as a goal rather than a prescription.\nThird, where there is efficiency, we spread the benefits of dollar spend across a larger base.\nLet me give you an example.\nBoth organizations invest in R&D.\nWe can now leverage across double the categories and customers.\nThis powerful -- and this is powerful and shows you the benefit of global scale for supporting cutting-edge science investments.\nFourth, I will point out the power of centralized services.\nWe have empowered regional business leaders who drive their P&LS, but they have access to the best-in-class global-shared service centers in areas like HR, finance and procurement where there's a tangible benefit to scale and combine resources.\nAnd finally, we have set all of our incentive compensation metrics to reflect and align with our base business and integration objectives.\nI really hope this gives you some flavor for the how.\nWe now know the targets we want to deliver and we have told you our long-term goals.\nSo over the coming quarters, focus will be very much on these actions.\nThe new IFF is set to deliver a best-in-class financial profile and maximize value for our shareholders.\nThis slide summarizes our long-term outlook, which we introduced to investors at the beginning of this year.\nFrom a revenue perspective, we expect currency-neutral organic sales growth of approximately 4% to 5% over the next few years, led by our unrivaled product and solutions portfolio, which is set to benefit from our industry-leading R&D programs.\nWe also expect to see meaningful operating margin improvements for IFF, including an estimated adjusted EBITDA margin of approximately 26% in 2023, up around 400 basis points from our 2020 pro forma.\nThe new IFF will continue to generate strong free cash flows, and we expect a significant increase to approximately $2 billion in 2023.\nAs we pursue further growth toward capital management and delevering, we remain -- we will remain at core priority.\nWe are targeting almost 3 times net debt-to-EBITDA ratio, 24 to 36 months post close and reaffirm our commitment to maintaining our investment-grade rating.\nFinishing on Slide 22.\nAcross the world, our teams have worked tirelessly throughout a difficult year to ensure IFF continued to serve our customers and deliver strong business results.\nOur full year financial results showcase the strength of our portfolio and, most importantly, our people.\nThrough this challenging environment, we made tremendous progress on our transformational journey.\nThe formation of the new IFF, together with N&B, has made us an even stronger company, better positioned to deliver value for our stakeholders.\nWith the pre-integration process completed, it's now time to execute.\nWe have the team and structures in place to ensure that our newly combined company will meet our financial and operating goals in order to shape the future of our industry and improve our world.\nWhile global volatility is expected to persist, our foundational commitment to our people, customers, communities and planet will remain unchanged as we look to strengthen and redefine our role as the industry-leading ingredients and solutions partner.\nI'm really thrilled for IFF's exciting new chapter, and hope that you will join us on our pursuit to revolutionize the industry and deliver for our customers, teams and shareholders.\nSo before opening to questions, please note that our plan for Q&A today is to focus on our results and outlook and not to address questions about market rumors.\n",
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"content": "sees 2021 pro-forma (giving effect to n&b transaction) sales to be approximately $11.5 billion.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: We are again presenting results from multiple locations, so please bear with us if we encounter any technical difficulties.\nAs you have seen from today's announcement, we had an outstanding quarter.\nStronger player demand drove improved momentum across all our main activities in Q1.\nThis translated into 25% revenue growth from the prior-year period and a 6% increase from Q1 '19.\nLottery reached the record levels with the same-store sales up over 30%, including double-digit gains across games and regions.\nGrowth accelerated for our digital and betting activities where revenues nearly doubled in Q1.\nWe continue to monitor costs as the top line recovers and we are making excellent progress on structural cost reductions with the OPtiMa program, which Max will discuss later.\nYou can see these in the over 70% increase in EBITDA and 44% EBITDA margin for the first quarter.\nIt was an outstanding performance and among the highest levels ever achieved.\nWith such strong Q1 results and an expectation of progressive recovery for land-based gaming as we move through the year, we believe we can return to pre-pandemic revenue, profit, and leverage levels this year.\nThis swift recovery from the impact of the pandemic is due to the unique and resilient nature of our business model across products and regions.\nI'd like to spend some time on Q1's lottery performance.\nThe 32% same-store sales increase was fueled by 52% growth in Italy and 28% in North America and the rest of the world.\nEven without the benefit of stronger multi-jurisdiction jackpot activity, same-store sales for North America and the rest of the world were up over 20%.\nCompared to 2019, global same-store sales were up 24%.\nThe sustained strength in lottery same-store sales for the last three quarters confirms a complete recovery from the pandemic.\nThis is supported by the highest segment revenue and profit levels we have ever achieved.\nAnd the momentum continues.\nGlobal same-store sales are trending up over 20% for the Q2-to-date period compared to the second quarter of 2019.\nIn the U.S., higher disposable income, which includes the benefit of government stimulus, is another factor.\nBut lottery has always maintained a steady growth profile.\nThis is because it is a content-driven business.\nThe games have high entertainment value with broad player appeal.\nA consistent stream of new games offers fresh opportunities for player engagement.\nThroughout the pandemic, the lottery has become a valued and routine activity in the new normal.\nWe expected that to continue.\nAccording to our research, many intend to play lottery at higher levels than they did before COVID.\nThis is an encouraging sign.\nInnovation is another important contributor.\nIn the draw-based arena, add-on and progressive jackpot games are fueling double-digit growth in the U.S., while the 10eLotto Extra is an important driver in Italy.\nInstant ticket sales are benefiting from higher average ticket prices, as well as player interest in the second chance and the free ticket games.\nIt is reasonable to expect sales to moderate from current levels as other entertainment options become more widely available, especially in Italy.\nWe believe we will see a return to more normal steady increases after we cycle through the pandemic-related peaks and valley over the next several quarters.\nOur expectation is that when the restriction of the pandemic will be largely over to see some stickiness to the recent increased play levels, particularly in North America, and the market will resume a more normal growth rate, mid-single digits in the U.S., but starting from a higher individual consumption.\nThe recovery for our global gaming segment is progressing well in the U.S., which accounts for about 70% of the segment revenue.\nU.S. casinos are open for business as the pace of vaccination is driving confidence among players and operators This has led to a substantial improvement in slot GGR since January, not only in the regional U.S. markets where most of our business is conducted but also in Las Vegas.\nCore players ever returned and new players, mostly younger, are entering the market as other entertainment options are limited.\nThis is translating into a swift recovery in our business.\nEven as more units are powered up is on active U.S. units were up high single digits sequentially.\nNew multilevel progressive such as Dragon Lights, Gong Xi Fa Cai, along with the Wheel of Fortune franchise, are driving these stronger results.\nWe also had good unit sales in the quarter, fueled by a 40% increase in the U.S. and Canada units, including double-digit growth in replacement, which were not far from Q1 '19 levels.\nThe resilience speaks to the diversity in our customer mix across regional, tribal, and commercial casinos, as well as the VLTs.\nRegal Riches and the Lion Dance were among the top-selling core video titles, while Wild Life Extreme and the Big City 5s were the best realty titles.\nWe expect continued progressive improvement throughout the year across all aspects of our global gaming segment.\nIt is clear from our meetings over the last few months that the digital and betting is of great interest to you.\nIt is for us, too, as IGT plays an important role in the iGaming, sports betting, and iLottery ecosystems.\nDuring Q1, GGR across the portfolio was two to three times the prior-year levels.\nMost of that growth came from an expanding player base in existing markets.\nThere are no signs of the digital trend cannibalization in the land-based business.\nDigital and betting revenue nearly doubled in Q1, posting the strongest quarterly increase in the last year.\nWe expect the business to maintain a strong double-digit growth profile for the next several years through a combination of organic growth including the contribution from new jurisdictions.\nWe are investing to support this growth and maintain leadership positions in all three verticals.\nIn iGaming, we are expanding our content portfolio through a combination of internally developed games and those developed with third-party studios.\nThere is an additional opportunity for IGT to act as a distributor of third-party content.\nAnd this is an emerging area of opportunity for us.\nAll these should result in IGT having 20%, 30% share of the North American iGaming market.\nOutside North America, there is also an opportunity to penetrate emerging international markets such as Germany, Greece, and the Netherlands.\nWe intend to maintain a leading role in the iLottery industry, leveraging the longest standing relationship we have with the world's leading lottery today into our commitment to investing in three main objectives: first, expand the portfolio of games; second, to enhance our platform capabilities; and third, by increasing the marketing and other activities to support players acquisition and retention for our customers.\nAs we look out over the next three to five years, we see the potential for the number of U.S. jurisdictions authorizing the iLottery to double from current levels.\nToday, our presence in the U.S. sports betting markets powers 16 states representing over 40 sportsbooks.\nIGT's land-based sports betting platform is the most widely used in the country.\nWe see the greatest opportunity for us in offering turnkey sports betting solutions to commercial and tribal casino operators.\nSince the launch of our in-house trading team last summer, we have made good progress assigning customers including Maverick Gaming, Snoqualmie, and Emerald Queen, among others.\nWe have many more deals in the pipeline.\nThere are 17 states where legislation is spending this year and four more where legislation has been passed but sports betting is not yet operational.\nWe are proactively securing a partnership in jurisdictions where regulatory approval is spending, ensuring our customer is with the launch as markets go live.\nOur first-quarter results marked a strong start to the year and illustrate the compelling foundation IGT can build on over the next several years.\nThis is especially true for our global lotteries segment where record sales and profits confirm the high entertainment value and broader player appeal of the games, bolstering our favorable long-term growth outlook.\nThe faster recovery in our land-based U.S. gaming activities is accentuated by accelerating the momentum for the right growth of digital and betting businesses.\nStronger revenue trends are further enhanced by significant structural cost reductions that improve our outlook for profit margins and cash flows.\nWith the proceeds of the recent sale of certain Italy B2C gaming businesses that will be used for debt reduction, our leverage profile should be significantly improved by yearend.\nThe financial performance exhibited in the first quarter of 2021 displays the strength of the IGT portfolio with our lottery business running at a fast pace both on a core basis and supported by exceptional jackpot activity in the early part of the period.\nOur gaming unit is on an accelerated path to recovery with a strong contribution from our OPtiMa program as well as sustained robust growth in our digital platform verticals.\nThese trends brought a performance of over $1 billion in revenue and $450 million in adjusted EBITDA.\nOur profitability showcases the dynamic margin leverage of our lottery business as well as disciplined cost-saving actions throughout the company.\nWe achieved roughly one-third of this year's over 200 million OPtiMa savings target during Q1, mainly through product simplification and margin improvement efforts.\nAs giving volume gradually improved throughout the year, we expect to see an increase in benefit from our operational excellence initiatives.\nCompared to the prior year, we saw the expected reoccurrence of certain normal running expenses in the first quarter, primarily employee-related costs.\nContinued healthy cash conversion and capex discipline drove over 200 million in free cash flow, which is high for a first-quarter performance.\nInteresting to note, we return to profitability and net income level this quarter, generating $0.38 per share.\nTurning to our lottery segment on Slide 13.\nRevenue increase over 40% to 749 million.\nGlobal same-store sales rose over 30% on broad-based growth across instant tickets, drawer-based games, multi-state jackpots, and iLottery.\nSame-store sales grew double-digit in January and February where there were no prior real impacts from the pandemic, highlighting the strong underlying play of demand.\nIn fact, the comparison to Q1 2019 in terms of the top line is showing an astounding 20 percent-plus growth.\nPart of the same-store sales growth includes roughly 20 million in revenue from higher multi-state jackpot activity and outside of same-store sales, lottery service revenue includes approximately 60 million in performance-driven incentive accruals from our U.S. lottery management agreements.\nThere's 80 million in total in Q1, benefits flow through almost entirely to profit.\nProduct sales, which are naturally lumpy and represent about 5% of annual lottery revenue, were down 10 million on large software license sales in the prior year, partly offset by an increase in instant ticket printing revenue.\nThe margin leverage from lotteries largely fixed cost structure is particularly evident this quarter as our revenue growth translated into incremental margins of over 80%.\nAnd we also had the benefit of the 80 million in Q1 revenue items indicated before.\nOperating income more than doubled from the prior-year period to 337 million with adjusted EBITDA growing 74% to 447 million.\nSo all in all, an excellent performance by a vibrant and pandemic-resilient lottery business.\nTurning to global gaming, the revenue of 266 million was down 14% over the prior year.\nWe continue to see sequential improvement in this business with higher revenue and adjusted EBITDA and lower operating loss.\nCompared to the fourth quarter, KPIs are improving and the contribution from digital and betting continues to accelerate with revenue growing over 80% from the prior year.\nSequentially, the global installed base was stable.\nOver 75% of our U.S. casino installed base was active and service revenues close to prior levels due to higher productivity on the active machines.\nIn North America, yields on active units increased double-digit compared to the previous-year period.\nWe sold just over 4,400 units globally in the quarter, up 20% over the prior year, and up 2% sequentially.\nUnit shipments were driven by VLT replacement sales in the U.S. and Canada and the casino opening of Resorts World Las Vegas and Hard Rock Indiana.\nOverall, product sales are down due to a multi-year strategic agreement booked in Q1 last year and AWP upgrades in the prior year as well.\nOperating loss and adjusted EBITDA reflect a lower base of revenue, partially offset by the benefit of cost savings actions.\nMargin leverage improved in the quarter as expenses have come down.\nOn Slide 15, you can see that the recovery of top-line trends and diligent cost-savings initiatives are driving strong cash flow in the quarter.\nCash from operations was 251 million despite the concentration of interest payments in the first quarter.\nFree cash flow was 204 million, and you can see the direct impact on net debt and leverage, which was down at full-term versus yearend 2020.\nWe now expect leverage to return to pre-COVID levels by the end of this year, highlighting the unique resilience of the IGT business.\nOn the next slide, we can see our debt maturities.\nIn the last year, we have made significant improvements to our capital structure as we pay down debt, extending maturities, and reduce interest costs.\nEach of our most recent debt transactions in euros and dollars was at the lowest coupon rate in company history.\nSince our last earnings call, there have been two additional improvements.\nFirst, in late March, we successfully refinance approximately 1 billion notes due in 2022 with a combination of new notes and bank debt and extended maturity date to 2026.\nSecond, the 630-plus-million euro in net proceeds from the sale of the Italy gaming business will contribute to the full redemption of our euro-denominated 2023 note through the exercise of the make-whole call.\nAs you can see, these two changes meaningfully reduce our net near-term debt maturities and will allow us to save, going forward, about 60 million in annual interest cost with the full run rate of savings starting to materialize in Q3 this year.\nIn summary, our strong first-quarter performance was driven by a combination of global lottery growth, progressive recovery in U.S. gaming, and OPtiMa cost-savings initiatives.\nWe are on track to structurally reduce our cost structure by more than 200 million this year with each segment contributing according to plan.\nWe continue to convert adjusted EBITDA to cash flow at a healthy rate and the free cash flow we generate is used primarily to reduce debt, allowing us to reach pandemic levels of leverage by the end of the year.\nNow I'd like to share our perspectives on the second quarter on Slide 18.\nQuarter to date, global lottery same-store sales growth is over 20%, so our second-quarter revenue should be higher on a year-over-year basis, though we do not expect the $80 million in Q1 lottery revenue benefits related to jackpot activity and LMA contract incentive to recur.\nWe expect continuous sequential improvement in the gaming business in line with what we have seen in the last few quarters.\nWhile second-quarter profitability will be lower sequentially, we expect second-quarter operating income and adjusted EBITDA will be higher than prior year, even without the benefit of the drastic temporary reductions in cost savings during the second quarter of 2020.\nDepreciation and amortization should be relatively stable, and for the full year, let me reiterate that we expect all relevant key financial metrics to return in line with 2019 trends.\nThe meaningful progress on vaccination campaigns in our core markets and overall has convinced us that it is time to update the market on our long-term targets in line with sentiments echoed by several market participants we have interacted with recently.\nI'm excited to announce we will be hosting an Investor Day later in the year where we can elaborate and update you on our strategic priorities, long-term financial targets, and capital allocation plans.\nWe will have many opportunities to connect before that including second-quarter earnings in early August, G2E in early October, and our normal conference and roadshow participation.\nThen on November 9, we will report our third-quarter earnings, as well as hosted our Investor Day.\nHopefully, it will be in person in New York City.\nSo, please mark your calendars.\n",
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"content": "compname reports q1 earnings per share of $0.38.\nq1 earnings per share $0.38.\nqtrly consolidated revenue of $1,015 million, up 25% from prior year.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: It's hosted by Marco Sala, executive chair; Vince Sadusky, chief executive officer; and Max Chiara, our chief financial officer.\nWe are presenting from multiple locations, so please bear with us if we encounter some technical difficulties.\nWe met and, in many instances, exceeded the financial targets we set for the year.\nWe also made important progress on several strategic objectives and reinitiated returning capital to shareholders.\nAs we enter 2022, the company is in a very strong place, with a solid financial condition and the strong foundation to build on.\nWe recently made some leadership changes that best position the company to realize its long-term growth initiatives and create significant shareholder value.\nI have moved into a new role as executive chair of IGT, and Vince Sadusky was named the company's new CEO.\nIn June, I will be proposed as the next CEO of De Agostini, IGT's majority shareholder.\nAs you can imagine, I have been in parallel discussions regarding the leadership evolution at IGT and De Agostini for some time.\nThis was happening while we were managing through the pandemic and making important progress of sharpening IGT's strategic focus and growth objectives.\nWe outlined a new long-range plan at our investor day and the time is right for a strong leader to deliver on it.\nWe are very fortunate to have Vince, a seasoned C-Suite executive and longtime IGT board member, to be IGT's CEO.\nI have enjoyed working with him over the last seven years and has every confidence he is the right person at the right time to lead the company in an exciting era of growth.\nHe has an impressive track record of creating shareholder value.\nObviously, I'm not leaving IGT.\nI will remain engaged as executive chair, working with Vince on IGT's strategic direction, serving as a resource on customers and regulatory methods and focusing on corporate governance.\nVince will be responsible for establishing the company's priorities, managing day-to-day operations and delivering on strategic and financial goals.\nWe also enjoyed -- we always enjoyed a constructive dialogue, and I have valued your support of the company.\nAnd now to Vince.\nI am really excited to be here leading IGT in the next chapter of its evolution.\nI've been a keen observer and advocate of the company's progress for more than a decade in my role as a board member, including as chair of the audit committee.\nI've admired the way Marco and team have led the company, especially over the last few years, navigating a highly disruptive pandemic, while making important strategic decisions to position the company for the future.\nThere are many parallels between IGT and the media companies I've run in the past.\nBoth operate in regulated markets with high barriers to entry, expertise in content and technology, a culture of innovation and distribution power are critical to success, and each generate strong cash flows and have faced both disruption and opportunity with the emergence of digital.\nGiven these similarities, I see opportunity to create great value for all IGT stakeholders.\nI'm excited to build on the strong foundation I am inheriting.\nThe company laid out some long-term financial and strategic goals at the November investor day, and I intend to deliver on them.\nI signed off on them as a board member, and I'm doubling down as CEO.\nOur mission is to strengthen IGT's global leadership position in the regulated gaming industry by offering innovative content, services and solutions.\nThat is the foundation of our strategy to grow top line and margins across all segments, while increasing operational efficiency and optimizing capital allocation.\nAnd we're in a great position to do so.\nOur core activities are in markets with secular tailwinds and accelerating digital growth.\nWe have set aggressive, but achievable financial goals that include impressive cash flow generation over the next several years, and we have a disciplined strategy to allocate that cash flow to maximize value for all stakeholders.\nWe have a powerful, diverse portfolio that not only offers compelling growth prospects, but also provides significant resilience.\nThis was clearly on display during the pandemic where strong lottery and digital and betting growth helped mitigate the impact of wide-scale casino and gaming hall closures.\nThe collection of assets also provides unique and sustainable competitive advantages, including a best-in-class management team with extensive global industry experience.\nFrom an industrial perspective, the content, technology and management of our operations are highly complementary and are leverageable across slots, lottery, sports betting, and iGaming.\nIn the quest to sharpen our focus on core operations, we recently announced the sale of our Italy commercial services and payments business at a very attractive multiple, over 15 times 2021 EBITDA.\nNet proceeds will primarily be used to reduce debt and potentially for strategic M&A if we see compelling opportunity.\nI'd like to highlight some of the progress we're making in our goals.\nBeginning with global lottery segment, where same-store sales were up over 20% compared to both 2020 and 2019 levels.\nIGT's unique insights on game innovation, portfolio optimization and sales and distribution strategies are helping to drive record level wagers for our customers.\nThe broad appeal and high entertainment value of lottery games is clear.\nIn the last two years, we have established a much higher baseline to grow from, and it is important to highlight the tremendous operating leverage in the business as operating income increased at more than double the top-line growth rate in 2021.\niLottery and instant ticket services are two areas of incremental opportunity for us.\nWe are making good progress on both evidenced by strong KPIs for the year.\nIn the markets served by IGT's iLottery platform, our lottery same-store sales increased over 60% in 2021, including nearly doubling in the U.S., where iLottery penetration reached 12% in the fourth quarter.\nOur innovative new eInstant games are consistently delivering higher average revenue per user for our iLottery customers.\nInstant ticket Services had a record year, fueled by a more than 35% increase in standard units produced.\nThe multiyear outlook for our lottery business is compelling.\nWe expect innovation, higher average player consumption, increased iLottery adoption and market share gains in instant ticket services to fuel sales growth.\nWe have a favorable contract renewal cycle ahead of us, and our investments here have attractive returns.\nFocused product strategies and the global market recovery are driving a strong rebound in sales and profits for the global gaming segment, which continues to see sequential improvement in sales and profits.\nThe expansion of our multilevel progressive game portfolio on the new Peak cabinets is strengthening our leased game portfolio and generating some of the strongest sales funnels ever.\nOur award-winning Resort Wallet cashless gaming technology recently received regulatory approval in Nevada.\nWith this achievement, IGT's entire cashless gaming solution, which includes the option for one-step external funding via IGT pay on personal mobile devices is approved for deployment throughout the state.\nIt is an important milestone for this emerging technology as Nevada is widely viewed as a future forward gaming jurisdiction.\nContinued execution on well-defined product strategies is expected to drive market share gains in key categories for us over the next several years.\nThe digital and betting segment continues to grow at a fast clip, propelled by our strong leadership positions and new iGaming and sports betting regulations in the U.S.\nWe are investing in R&D and talent to build a solid foundation to support the high revenue and profit growth trajectory we expect over the next several years.\nNew leadership for both the iGaming and sports betting verticals are already making an impact.\nThis year, we expect to significantly increase the number of new iGaming titles, and we will also begin distributing our first third-party games.\nOur PlaySports solution powers over 60 venues in more than 20 states and was recently recognized as the Platform Provider of the Year at the SBC Awards North America.\nThe turnkey sports betting solution is gaining traction, including new partnerships with Meruelo Gaming and Cliff Castle Casino.\nWe also have a robust pipeline of new turnkey customers teed up for 2022.\nWe are making progress on creating a strategic optionality for the digital and betting segment.\nThe separate legal entity and organizational realignment is underway along multiple work streams.\nIt's an exercise that will likely last until year end.\nLike many others, we are facing some incremental near-term challenges in four main areas: the impact of the Omicron variant in certain markets, labor shortages, increased supply chain pressure and cost inflation.\nOmicron has impacted Italy lottery sales, especially venue-based draw games, like Lotto, since late December.\nIt has also led to incremental casino restrictions, mostly outside the U.S.\nWe have found that negative COVID-related impacts on lottery sales proved to be short-lived.\nIn addition, casino GGR trends and our sales funnel remains strong in North America, which represents about 70% of our global gaming segment.\nLow unemployment and higher attrition are impacting our ability to fill open positions as quickly as we'd like.\nWe are investing in our people and have made talent acquisition and retention a top priority.\nIGT's culture of innovation and commitment to diversity and inclusion have proved to be important advantages in attracting and retaining talent.\nWe are also experiencing increased pressure on product deliveries due to longer lead times and availability of certain components.\nWe are mitigating this by prioritizing key product and customer deliveries.\nA sustained focus on cost discipline and avoidance is also helping to mitigate inflationary pressure on things like components, freight and wages.\nIt is hard to know if we will experience any impact from the conflict between Russia and Ukraine.\nWe have minimal direct exposure to those countries, but the repercussions throughout Europe and the rest of the world are difficult to assess at this time.\nNet-net, based on what we know today, we expect to offset the impact of the incremental headwinds and maintain the 2022 outlook provided in November.\nSix weeks in, I get more and more excited about what we can achieve in the next few years.\nThe team is extremely motivated to deliver on the plan to take IGT to the next level, and I have tremendous confidence that we will do just that.\nAnd now over to Max for some insight into our financial results.\nThe figures we reported today demonstrate the highly resilient nature of our business as we not only deliver meaningful revenue and profit growth year over year but also exceeded pre-pandemic levels on all key financial metrics.\nA high-level summary of our fourth quarter financial results with comparisons to both the prior year and 2019 is shown here on Slide 14.\nIn the quarter, we generated over $1 billion in revenue, up 19% year over year on solid global same-store sales growth in lottery, higher replacement unit shipments and ASP in gaming and 25% growth in digital and betting, propelled by continued market expansion and customer demand for our products and technology.\nStrong profit flow-through and operating leverage drove adjusted EBITDA to $387 million and the associated margin to 37%, up 31% and 400 basis points, respectively.\nIt is important to mention that this substantial increase in profit already incorporates higher cost related to the reestablishment of incentive comp programs and favorable supply chain impact and work associated with establishing digital and betting as a separate legal entity.\nThe solid financial performance and our rigorous approach to invested capital led to record level cash flow generation with cash from operations of nearly $400 million and free cash flow totaling $326 million, inclusive of favorable working capital performance, part of which is timing with Q1.\nI would now like to shift the focus to full year results to provide perspective relative to the multiyear outlook we provided during our investor day in November.\nIn 2021, we delivered over $4 billion in revenue with significant growth across segments versus the prior year.\nStrong operating leverage, bolstered by structural cost savings, drove significant increases in profit with over $900 million in operating income and nearly $1.7 billion in adjusted EBITDA, exceeding both prior year and 2019 results.\nAs we continue to recover from the extreme measures taken during the pandemic, our cost structure is benefiting from the execution of our OPtiMa program, where we overachieved our $200 million cost savings target.\nAs a reminder, about 3/4 were achieved in our P&L, while 1/4 of that was achieved with structural efficiency in our capital expenditure.\nThe overachievement piece to our cost savings target primarily comes from temporary actions that are an important mitigant to the increased supply chain costs, primarily in logistics that have impacted our '21 performance and will continue into 2022.\nMore on that later when we speak about our outlook for '22.\nCash flow generation exceeded our expectations with cash from ops of over $1 billion and free cash flow more than doubling to over $770 million, both record levels.\nNow let's review the results of our three business segments.\nGlobal lottery achieved record financial results during the year.\nRevenue increased 30% to $2.8 billion as strong customers' demand drove global same-store sales up over 20% year on year and versus 2019.\nAs a reminder, extremely high play levels in the first half of '21 were bolstered by certain discrete items, including gaming hall closures in Italy, elevated multi-stage productivity and LMA performance in the U.S. These items contributed about $165 million in revenue and around $140 million of profit.\nThe high flow-through of same-store sales growth and a positive geographic mix also led to record profit levels with operating income rising nearly 70% to $1.1 billion.\nAdjusted EBITDA increasing over 40% to $1.5 billion and operating income and adjusted EBITDA margins of 39% and 55%, respectively.\nGlobal gaming returned to profitability during the year with significant increases in revenue and profit compared to the prior year.\nRevenue rose 33% to $1.1 billion, driven by solid increases in active units, yields, number of machine units sold and ASPs.\nThe installed base in North America reflects changes in the WLA markets of Delaware, New York and Rhode Island.\nUnit reductions in this market of about 840 units year over year and 650 units sequentially were partly offset by increases in the balance of the portfolio.\nIn the rest of the world, the installed base rose over 380 units year on year and 180 units sequentially, primarily driven by increases in Latin America and plus two units in South Africa.\nGlobal unit shipments increased 62% year on year as operators began increasing capital budgets in the midst of the market recovery.\nShipments totaled 57% of pre-pandemic levels during 2021, indicating there is still some runway to a full recovery in this area, which we don't expect to happen completely until 2023, although we expect North America unit shipments will get close to 2019 levels in 2022.\nIGT sold over 23,800 units globally during 2021 compared to about 14,700 units in the prior year and at higher average selling prices.\n2021 ASP of over $14,000 exceeded both prior year and 2019 levels on an improved mix of products and new cabinets.\nStrong operating leverage, which was accentuated by savings realized from the OPtiMa program, drove a substantial recovery in operating income and adjusted EBITDA with contributions of over $40 million and $170 million, respectively.\nOperating income margins in the fourth quarter reached 11%, nearly matching the 12% pre-pandemic level achieved in the fourth quarter of 2019 and are expected to continue to improve in 2022.\nThe digital and betting segment continues to grow at a fast pace, generating revenue of $165 million in 2021 with double-digit growth achieved in both iGaming and sports betting.\nThis growth is propelled by new market adoption, new customers and organic growth.\nWe completed the successful launch of iGaming in both Michigan and Connecticut, and so our sports betting footprint expand to over 60 sports books.\nOperating income grew to $33 million, and the operating margin reached 20%, a solid profit contribution from an emerging business and a nice profit flow-through even with increased investments in talent and resources to fund future growth.\nAdjusted EBITDA increased to $48 million, more than double the prior-year level.\nAs I mentioned earlier, exceptional operational performance and disciplined capital management led to a record level of cash generation which, in addition to approximately $900 million in net proceeds from the strategic sale of our Italy gaming business, allowed us to reduce net debt by $1.4 billion.\nLeverage is down to 3.5 times, the lowest leverage in company history, and reaching the 2022 year-end leverage target 12 months early.\nWith the improved risk profile, we now have a more balanced capital allocation framework that once again includes shareholder returns.\nIn Q4, we reinstated a quarterly dividend and implemented a $300 million share repurchase program, the first in company history.\nWe delivered over $80 million to shareholders during the quarter, including about $40 million in the purchase of 1.5 million shares at an average price of just about $27 per share.\nBased on recent SEC filings, you can see we continued repurchasing shares in Q1 with another 570,000 shares repurchased through February 9.\nProactive management of our capital structure continued during the year, as evidenced by the redemption of nearly $1 billion of euro notes.\nThe refinancing of another $1 billion in U.S. dollar notes at a lower interest rate and the successful amendment and extension of our term loan facility.\nThe reduced debt, increased liquidity and extended maturities have greatly improved our credit profile and lower interest expense by about $60 million during the year.\nWe also recently accomplished the goal of raising our credit ratings, restoring our pre-pandemic levels.\nLast month, S&P and Moody's upgraded our corporate credit rating to BB+ and BA2, respectively, citing the strong performance, improved leverage, EBITDA margin improvement and the use of asset sale proceeds to reduce debt.\nThese latest actions position us very well in the fixed income market going forward and strengthen our conviction in pursuing our long-term leverage objective.\nOur debt portfolio is favorably structured in the current market environment with a heavily weighted mix of fixed to floating rates and no large near-term maturities.\nIn conclusion, let me summarize by saying 2021 was a very successful year, with compelling progress made on many growth initiatives and the successful achievement of our financial goals, with all key financial metrics exceeding 2019 levels.\nWe reduced debt and leverage to record levels and increased capital returns to shareholders.\nMore broadly, over the past couple of years, we have built a solid foundation for profitable growth in the future as we drove an accelerated recovery from the pandemic, readied our company to capture potential portfolio opportunities and realign our portfolio to high growth opportunities.\nBased on the strong performance of 2021 and despite the recent headwinds, we are reaffirming the 2022 full year guidance we provided at the recent investor day.\nWe currently expect to deliver revenue of approximately $4.1 billion to $4.3 billion, operating income margins of 20% to 22%, cash from operations of between $850 million and $1 billion and capital expenditures ranging from $400 million to $450 million.\nLeverage is expected to remain around 3.5 times x in '22 with some variability quarter to quarter.\nThe leverage outlook excludes any positive impact from the recent -- from the receipt of proceeds from the recently announced sale of our commercial service and payment operations in Italy.\nOn a pro forma basis, we see a further improvement in our leverage ratio to the tune of 1/4 of a turn.\nThat transaction is expected to close in the third quarter of 2022.\nAs Vince mentioned earlier, we are managing through some headwinds caused by near-term market dynamics.\nWe're confident we can mitigate the impact of these items with incremental product sales, financial rigor on cost and lower depreciation and amortization related to the capex efficiency as well as timings of spending.\nIt is fair to mention that our outlook does not factor at this point any material consequence from the recent conflict in Ukraine given our limited direct exposure to the affected region, although we continue to monitor events very closely and we'll adjust our posture accordingly as events unfold.\nIn order to provide some indications with respect to the first quarter of 2022, we expect to achieve revenue of $1 billion to $1.1 billion and operating income margins of 20% to 22% in the quarter.\nThis outlook implies a sequential improvement in profit from Q4 '21.\n",
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"content": "reaffirming full-year 2022 guidance provided at recent investor day.\nsees q1 revenue of about $1.0 billion - $1.1 billion.\nsees q1 operating income margin of 20% - 22%.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: I am joined today by Summit Hotel Properties' Chairman, President and Chief Executive Officer, Dan Hansen and Executive Vice President and Chief Financial Officer Jon Stanner.\nThe third quarter was, again, challenging for our industry, as leisure travel continued to serve as the primary demand source.\nHowever, we were encouraged by the continued sequential demand improvements, which led to operating results that were considerably better than the second quarter.\nRevPAR improved each month of the quarter across our portfolio.\nAnd importantly, this trend continued into October, which provided us with some level of reassurance of the sustainability of demand in the weeks following Labor Day, a period of significant uncertainty heading into the quarter.\nOccupancy increased each month of the quarter peaking at 47% in September, which led to third quarter RevPAR of $47, a 63.5% decline year-over-year, but that was a significant improvement from the second quarter RevPAR of $23.\nMarket share gains were substantial, once again, in the third quarter as we finished with 151% RevPAR index, an increase of approximately 39 percentage points compared to the third quarter of last year and an 8 percentage point increase relative to last quarter.\nThese gains reflected tremendous work done by our in-house asset and revenue management teams, along with the tireless efforts of our management company partners to capture the limited demand that currently exist in the market.\nWe have clearly been successful capturing our fair share of very short term leisure demand, but our results have been further aided by capitalizing on certain unique piece of the business and small groups that booked during the quarter, some of which were related to the damaging wildfires on the West Coast and the storms in the Gulf of Mexico.\nPreliminary October results reflect a modest continuation of the improvements we experienced throughout the third quarter as October RevPAR is expected to finish at $50, with the highest ADR of any month since the onset of the crisis, running nearly $10 higher than the rates achieved in the second quarter.\nOccupancy in October was over 47% across the total portfolio, more than 24 percentage points higher than the second quarter occupancy and flat to September, despite the strong Labor Day weekend results.\nExcluding the five hotels that were either closed or consolidated into adjacent operations at various times during the quarter, occupancy was more than 50% in October.\nThe trend of weekend occupancy and RevPAR outperformance continued in the third quarter as leisure travel, particularly in drive-to and non-CBD markets continued to provide the vast majority of demand across the industry.\nWeekend occupancy was 56% during the third quarter as the relative outperformance compared to week day results accelerated each month during the quarter.\nThis led to weekend RevPAR that was 40% higher than our weekday RevPAR, primarily driven by occupancies that ran nearly 20 percentage points higher by the end of the quarter.\nDespite lagging weekends on a nominal basis, weekday rate demand in the quarter increased commensurately with weekends on a percentage increase basis, as occupancy and RevPAR nearly doubled from the second quarter.\nWeekend occupancy at our hotels located in markets we consider as drive-to was nearly 64% in the third quarter.\nOur extended stay hotels which comprise nearly 25% of our total guest rooms were also relative outperformers again during the third quarter, finishing with occupancy of more than 63% and exceeded 60% in each month of the quarter while achieving a 51% RevPAR premium to our overall portfolio.\nThis trend continued as our preliminary October results indicate our extended stay hotels achieved 65% occupancy for the month.\nOur suburban and airport hotels, which comprise more than a third of our portfolio guest rooms were also outperformance during the quarter, posting occupancies of 58% and 56% respectively, both increases of more than 20 percentage points from the second quarter results.\nThese hotels achieved RevPAR premiums of 27% and 29% respectively to the total portfolio in the quarter.\nUrban hotels have continued to lag the industry recovery though occupancy increases for our portfolio during the quarter were in line with all other location types, finishing the quarter 20 percentage points higher than in the second quarter.\nRevPAR growth at our urban hotels led the portfolio on a percentage increase basis relative to the second quarter, posting a nominal RevPAR 2.5 times higher than our urban portfolio's second quarter RevPAR.\nOur hotels continue to operate with extremely lean staffing models with labor resources being added back on an asset-by-asset basis strictly based on improved hotel demand.\nWe are currently averaging less than 14 FTEs per hotel compared to approximately 30 FTEs per hotel prior to the pandemic.\nDespite this lean staffing model, our team continues to demonstrate a steadfast commitment to prioritizing the health and safety of our guests.\nEver changing health and safety protocols and local ordinances provide unique challenges to our business and we are grateful to our brand and management partners for their constant awareness of and compliance with these dynamic policies.\nOptimizing the guest experience has always been a central tenet of our business model and that has never been more important than it is today.\nFinally, to preserve liquidity, we have continued to delay most nonessential capital expenditures for the remainder of 2020, along with common dividend distributions, which combined, preserved approximately $30 million in the third quarter and will preserve $30 million of cash for the balance of the year.\nI'll let John speak to the specifics of our balance sheet.\nBut with approximately $255 million of current liquidity and a manageable monthly cash burn rate that has been further reduced as our portfolio operating metrics have improved, we are well positioned to navigate the recovery.\nWe've been pleased with the continued efforts of our operations team to diligently manage operating costs at our properties in an effort to maximize hotel level profitability and minimize corporate cash burn rates.\nIn the third quarter, our hotel EBITDA retention across the portfolio was more than 47%, which resulted in hotel level profitability in each month of the quarter, positive adjusted EBITDA for the quarter, and a reduction of our corporate cash burn rate to an average of just over $5 million per month.\nCommensurate with increases in RevPAR, our cash burn rate improved sequentially in each month of the third quarter and finished September at just $4.5 million, the lowest of any month since the onset of the pandemic.\nThis represents a significant improvement from the second quarter when our cash burn averaged $11 million on a monthly basis.\nRevPAR and cash burn rates in October generally tracked in line with September, a level at which, if sustained, provides a liquidity runway of nearly five years.\nWe currently have $225 million available on our revolving credit facility and approximately $30 million of unrestricted cash on hand which combined gives us $255 million of total liquidity.\nToday, our weighted average interest rate is approximately 3.5% and weighted average term to maturity is approximately 3.3 years, with no maturities until November of 2022.\nWhile we've been pleased with the gradual improvements in our results, and particularly October metrics, that on a preliminary basis, finished ahead of our pre-Labor Day expectations, our near-term outlook for the business at January remains uncertain.\nWe continue to operate in a very challenging and limited demand environment and the prospects for a more robust industry recovery are likely linked to fewer governmental and corporate travel restrictions and significant health advancements or the passage of time to mitigate the effects of the pandemic.\nThough we remain confident that headwinds of our industry will ultimately abate, the timeline has continued to be pushed out.\nAnd we now expect a more meaningful increase in corporate and group demand to occur in 2021.\nHistorically, November and December are slower travel months and we would expect modest declines in absolute RevPAR levels from what we achieved in September and October, though year-over-year declines will likely remain fairly stable given the seasonality of last year's results.\nAs we said last quarter, despite the many near-term challenges we face as an industry, we remain bullish on the long-term prospects for travel related demand.\nThe uniqueness of this pandemic has forced us all to challenge the pre-crisis status quo in nearly every facet of life and travel, particularly work related travel, in a time of unmatched at home technology is at the precipice of that discussion.\nWhile it's not unreasonable to conclude that the events of the last seven months will ultimately lead to a systemic decline in travel, history would suggest otherwise, emphasizing that this is one of the most resilient industries in our economy and that people's desire to gather in person and travel is innate.\nPrior to the crisis, we were witnessing, and fortunately benefiting from, society's undeniable shift in preference away from the collection of material items in favor of experiences and services.\nAnd while the pandemic has created an impediment to this progress, we believe those long-term trends that were significantly driven by a younger demographic will again reemerge as meaningful themes in the new post-COVID normal that has been so heavily speculated about.\nHere at Summit, we are blessed with a terrific portfolio that has been recently renovated, continues to capture significant market share despite the difficult environment and is poised to lead through the recovery.\nWe have an experienced team and a strong balance sheet with considerable liquidity to manage through the crisis, all of which gives us optimism and positions us well for the brighter days ahead.\n",
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"content": "anticipates investing a total of approximately $23 million to $25 million in capital improvements on a consolidated basis across its portfolio during 2020.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: I am joined today by Summit Hotel Properties President and Chief Executive Officer, Jon Stanner; and Executive Vice President and Chief Financial Officer, Trey Conkling.\nOverall, we are extremely pleased with the continued acceleration of our improving operating trends in the third quarter, which exceeded our initial expectations and resulted in more than a 25% increase in RevPAR from the second quarter.\nOccupancy average daily rate and overall profitability all reached new highs since the onset of the pandemic, and we more than tripled our positive corporate cash flow compared to last quarter.\nDemand growth accelerated broadly during the quarter as we sold nearly 7% more room nights in the third quarter than we did in the second quarter, peaking during a historically strong summer travel season in July when occupancy in the portfolio was above 72%.\nAlthough August demand pulled back modestly as expected, we saw a reacceleration in the back half of September when occupancy averaged nearly 70% during the last two weeks of the quarter.\nWhile leisure demand continues to be the primary driver of our operating results, we remain encouraged by improving corporate transient demand trends.\nNegotiated room revenue increased approximately 28% in the third quarter over the second quarter.\nAnd while that is admittedly off of a very small base, we're also encouraged by some of the anecdotal signs suggesting a more robust return of corporate travel is forthcoming.\nWe reported third quarter pro forma RevPAR of $98, which was more than double our RevPAR in the third quarter of last year and was 24% lower than what was achieved in the third quarter of 2019, a significant improvement from the first half of the year when RevPAR was nearly 43% lower in the second quarter and 59% lower in the first quarter than the comparable 2019 periods.\nImportantly, the recovery of average rates accelerated meaningfully during the quarter.\nAs ADR across our portfolio increased 19% compared to the second quarter, and weekday ADR growth outpaced weekend growth by nearly 200 basis points.\nAverage rates in our urban portfolio increased 24% from the second quarter, and weekday urban ADR grew 27% from the second quarter, which encouragingly reflects some level of rate accretive remixing of our business with corporate travel.\nWeekend occupancy was an impressive 80% during the third quarter and averaged 82% in July and September as the recovery continues to clearly be led by exceptionally strong leisure demand.\nHowever, mid-week occupancy also continues to steadily improve, climbing to 64% during the first quarter, a full five percentage points higher than the second quarter and the gap between weekday and weekend occupancy continues to narrow.\nTrey will provide some additional color on our operating results later in the call.\nDuring the third quarter, we completed the previously announced acquisition of the newly built 110 guestroom residence in Steamboat Springs for $33 million.\nThe extended-stay hotel is the newest hotel in Steamboat, one of only six other hotels that have opened in the market since the year 2000, and the first Marriott-branded extended stay product in the market.\nSince acquisition, the hotel has performed exceptionally well, generating occupancy and RevPAR of nearly 87% and $161, respectively, and hotel EBITDA margin of 49% for the third quarter.\nOn an annualized basis, this equates to a 9% net operating income yield and less than three months of ownership, despite the hotel having been open for less than one year.\nDuring the third quarter, we invested approximately $4.2 million in our portfolio on items primarily related to planned maintenance capital.\nAs we previously mentioned, given our conviction around the long-term improvement in demand trends, we plan to commence several renovations in the fourth quarter of this year and early next year to minimize disruption from these projects.\nWe expect to spend between $15 million and $20 million in capital expenditures for the year on a consolidated basis.\nAnd between $14 million and $19 million on a pro rata basis.\nDuring the third quarter, our resort and other nonurban hotels continued to show robust sequential improvement with RevPAR growth of 12% relative to the second quarter of this year, and a nominal RevPAR value exceeding $100.\nThis subset of the portfolio illustrates Summit's diversification and broad exposure to the overall lodging recovery as ADR increased 13% to $135 relative to the second quarter on stable occupancy of 74%.\nTransitioning to our urban hotels, we were encouraged by the progress in this subset of the portfolio, which, for the first time since the onset of the pandemic experienced meaningful outsized growth relative to our other location types.\nRevPAR at our urban hotels increased 43% from second quarter 2021 to approximately $94, primarily on the strength of rate, which increased 24%.\nAs an additional point of reference, in third quarter 2020, our urban portfolio posted a RevPAR of $37, further evidence of the strong rebound experienced year-over-year.\nKey factors driving growth in the urban portfolio include increased business activity, professional and college sports attendance and group demand.\nAs a final point on our urban portfolio, we believe business travel is now in the early stages of its recovery as urban midweek occupancy increased 10 percentage points from the second quarter to 57%, and ADR increased more than $30 to $144 or a 27% increase for the quarter.\nThis translates to a RevPAR growth rate of 54% versus second quarter for the urban portfolio.\nTo provide a little more insight into the company's overall third quarter portfolio segmentation, growth in demand was driven primarily by the increases in group business and negotiated business segment, as previously mentioned.\nFull week group RevPAR for the company's total portfolio increased by 76% relative to second quarter 2021, while weekday group RevPAR increased by 100% during the same time frame.\nSimilarly, full week negotiated RevPAR increased by 28% relative to second quarter, while weekday negotiated RevPAR increased by 32%.\nIncreases in negotiated RevPAR were driven primarily by travel from small and medium-sized business transient accounts.\nAlthough booking windows remain short-term in nature and forecasting continues to be a challenge, we've experienced a decline in the percentage of room nights booked near to or on the night of stay.\nFor example, transient room nights booked within 24 hours this day, declined from 23% of total bookings in the second quarter to 21% of bookings in the third quarter.\nBut importantly, nights booked more than 30 days out, increased by 19% during that same period.\nWhile the overall booking window remains shortened relative to prepandemic standards, its expansion represents a definitive trend that started earlier in the year and has strengthened throughout the third quarter.\nFrom a cash flow perspective, continued growth in demand, combined with thoughtful expense management, enabled Summit to generate positive corporate cash flow of $18.5 million in Q3, which was more than triple the corporate cash flow of Q2 2021.\nPro forma hotel EBITDA was $38.8 million in the third quarter, exceeding the previous two quarters combined by approximately $5 million.\nOperating costs per occupied room declined nearly 10% compared to 2019, which drove third quarter gross operating profit margin and hotel EBITDA margin to an impressive 47% and 35%, respectively.\nWe continue to operate our hotels utilizing a very lean staffing model, which consists of approximately '19 FTEs on average or slightly more than 55% of free pandemic staffing levels.\nRehiring hourly staff, particularly in the housing housekeeping department has been an ongoing issue across the industry.\nDespite these challenges and increasing occupancy levels, our asset management team has done a great job controlling operating expenses, leading to hotel EBITDA retention of 54% when compared to the third quarter of 2019.\nFinally, turning to the balance sheet.\nOur overall liquidity position continued to strengthen during the quarter as the business made substantial progress generating positive cash flow.\nAdditionally, we accessed the capital markets in August, taking advantage of a favorable preferred equity market with the issuance of $100 million of five and seven, eight Series A perpetual preferred paper.\nProceeds from this opportunistic offering were used to accretively refinance our $75 million, 6.45% Series B preferred stock and to reduce the outstanding balance on our November 2022 term loan to its current balance of $62 million.\nThis sub term loan remains the company's only 2022 maturity, and we continue to maintain ample liquidity to repay all maturing debt through 2024 when considering available extension options.\nWe're thrilled to announce the acquisition of a 27 hotel portfolio from NewcrestImage, which is comprised of approximately 3,700 guest rooms located across 10 high-growth Sunbelt markets in Texas, Oklahoma City and New Orleans.\nThese hotels are highly complementary to our existing portfolio with premium brand affiliations, excellent locations in strong markets and comprise a relatively new portfolio with approximately 70% of the guest rooms opening since 2015 and more than 1/3 of the guestrooms built in the last three years.\nThe hotel portfolio's allocated value of $776.5 million equates to approximately $209,000 per key, which reflects a significant discount to replacement costs and results in a stabilized NOI yield of 8% to 8.5%, including underwritten capital expenditures.\nOur increased exposure to Sunbelt markets, which will be approximately 60% of our pro forma room count, positions the combined hotel portfolio to benefit from the favorable migration patterns, labor dynamics, corporate relocation activity, return to office trends and general pro business climates in these markets.\nIn addition to the hotel portfolio, we will be acquiring two parking structures, totaling approximately 1,000 parking spaces that serve two triplex hotel clusters, one in Downtown Dallas and the other in the emerging mixed-use development of Frisco Station, a thriving North Dallas suburb.\nThe transaction also includes an allocation to several financial incentives that will be assumed upon closing of the transaction.\nOur joint venture with GIC will acquire the assets for a total consideration of $822 million, and we will finance the investment with a new $410 million credit facility.\nWe expect the transaction to be immediately accretive to our earnings and leverage-neutral to our balance sheet.\nGIC's 49% equity interest will be a cash contribution totaling approximately $208 million, and our 51% controlling interest will come from a combination of common and preferred op units.\nWe will issue 15.9 million shares of common op units valued at $160 million.\nBased on our common stock's 10-day [Indecipherable] as of Tuesday's closing price equal to $10.09 per share.\nNewcrestImage ownership will be approximately 13% of our total shares outstanding.\nThe preferred op units totaling $50 million will be issued at a standard $25 par value and pay an annual coupon equal to 5.25%.\nAs part of the transaction, NewcrestImage will have the right to appoint one representative to the company's Board of Directors.\nThe transaction would increase our combined room count by over 30% and our total enterprise value by approximately 20%.\nActing as a general partner, on behalf of the joint venture, we will continue to earn fees for our asset management services and expect our stabilized fee stream earned through the joint venture will cover approximately 17% of our in-place cash corporate G&A.\nThe utilization of common and preferred op units for our 51% equity interest will preserve nearly all of our liquidity of $450 million, leaving us ample runway to pursue additional growth opportunities.\nWhile closing remains subject to customary closing conditions and a formal due diligence period, we anticipate closing to occur later this quarter or early in the first quarter of 2022.\nWe are incredibly excited about the future of our business and believe this transaction, combined with the continued recovery of lodging fundamentals, positions us particularly well to create long-term value for our shareholders.\n",
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"content": "entered into a definitive contribution agreement with newcrestimage to acquire a 27-hotel portfolio.\nagreement through its existing jv with gic for total consideration of $822 million.\nexpects to fund 51% equity contribution through issuance of 15.865 million common operating partnership units.\njoint venture has secured a $410 million financing commitment from bank of america and wells fargo bank.\ngic's estimated equity contribution of $208 million will be funded in cash.\nsummit hotel properties - deal structured to preserve nearly all of $450 million of existing liquidity, expected to be immediately accretive to earnings.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: With us on the call today are Michael Kasbar, Chairman and Chief Executive Officer; and Ira Birns, Executive Vice President and Chief Financial Officer.\nIf not, you can access the release on our website.\nBefore we get started, I would like to review World Fuel's safe harbor statement.\nA description of the risk factors that could cause results to materially differ from these projections can be found in World Fuel's most recent Form 10-K and other reports filed with the Securities and Exchange Commission.\nAs with prior conference calls, we ask that members of the media and individual private investors on the line participate in listen-only mode.\nI hope you're all well, and I hope you are as optimistic as I am about the medium and long-term future market opportunities.\nWe opened the year with a strong first quarter, once again demonstrating the resiliency of a well-diversified portfolio.\nAnd considering current market conditions, all of our businesses performed well.\nOur balance sheet and cash flow has never been stronger.\nWe believe we had a significant medium- and long-term opportunity to deploy capital in our North American C&I, meaning commercial and industrial, liquid fuel business and globally in fuel, gas, power, carbon and renewables to serve our aviation, marine and land customers and drive the energy transition.\nAs I mentioned last quarter, the work we have done over the last few years in talent, culture and leadership is having a positive impact.\nWe are converging our organization and business solutions in line with the transitioning marketplace.\nCombining functions and the business itself is creating greater efficiencies and effectiveness as well as greater mobility and career opportunities for our global teams.\nConsolidating our global origination, fulfillment and support with our digital and sustainability competencies gives us a forward-ready business as the world emerges from this global health and economic crisis.\nWe are already a globally diverse group, and the inclusiveness that convergence drives is accelerating value creation as our customers see comprehensive solutions and pathways to lower carbon footprints and supply chains.\nWe are maintaining the cost discipline achieved so far on operations as markets reopen.\nWe have grown market share in our global land business with higher quality, ratable business activity.\nWe see a long runway of growth opportunities in this space.\nAnd now, as we experience the world's growing commitment to sustainability, we view this as an incredible opportunity to tap into our ability to create innovative solutions.\nI am personally more excited and enthusiastic about our future prospects as a global team than I have been in years.\nWe have been through our most challenging stress test ever, and our global teams performed flawlessly.\nWe have never been tighter or more coordinated.\nBuilding a global, diverse and increasingly digital energy and logistics solutions business is not easy.\nSo that is exactly what we have done.\nAnd we are highly motivated to continue to build and leverage our platform.\nIt's not easy to have global share of anything, but we have achieved that in two businesses, and we are well on our way to do that in our World Connect global land business, simultaneously creating lower carbon synergies for our global marine and aviation businesses.\nWe are not only becoming more sustainable ourselves, but driving sustainability for the marketplace.\nWe are truly helping to build the better tomorrow by accelerating the green and digital agenda within and for our partners around the world.\nIt is hard to find an energy-related subject or a problem anywhere in the world that we cannot address in one way or the other.\nWorld Connect is the emerging brand for comprehensive energy solutions.\nAnd finally, more of our teams are getting fully vaccinated.\nAnd this is both raising optimism and providing opportunities for greater engagement with each other and the market.\nI hope you are all doing well and finding ways to return to some sense of normalcy.\nAlthough the pandemic continues to present significant challenges across businesses globally, there has certainly been some encouraging developments, which has many of us a bit more optimistic about the prospects of increased levels of business activity.\nI am extremely proud of how well our team has performed in the face of a multitude of ongoing challenges.\nAnd our results this quarter are a testament to the value of our diversified business model, our expertise in the markets we serve and the dedication of our global team.\nThe nonoperational items for the quarter principally related to acquisition, divestiture and restructuring-related adjustments and expenses.\nNow let's begin with some of the first quarter highlights.\nAdjusted first quarter net income and earnings per share were $21 million and $0.33 per share respectively.\nAdjusted EBITDA for the first quarter was $62 million.\nWe generated another $103 million of operating cash flow during the first quarter and increased our net cash position to more than $210 million.\nConsolidated revenue for the first quarter was $6 billion, an increase of $1.3 billion or 27% sequentially, but still well behind the pre-COVID revenue levels, which is principally driven by the year-over-year decline in volume in our aviation and marine segments when compared to 2020.\nOur aviation segment volume was 1.1 billion gallons in the first quarter, essentially flat sequentially, but still well below pre-COVID activity levels.\nWhile cargo operations and business aviation activity remains strong, overall aviation volume remains significantly below prior-year levels, driven by continued softness in global commercial passenger aviation activity, principally given slower vaccine rollouts abroad.\nIn the U.S., we have been experiencing increased activity with TSA daily throughput back to nearly 65% of prepandemic levels.\nBut despite some modest improvements in parts of Europe in the first quarter, continuing restrictions in most of Europe and Asia will likely prolong the broader recovery until vaccination rates accelerate in these regions.\nVolume in our marine segment for the first quarter was 4.2 million metric tons, flat sequentially and down 13% from the strong prior year results we generated where the new IMO 2020 regulations were implemented last January.\nOur land segment volume was 1.3 billion gallons or gallon equivalents during the first quarter, that's down 6% year-over-year, but up 2% sequentially, principally driven by increases in our World Connect natural gas operations as well as some seasonal improvement in the U.K. Land volumes have now rebounded to 97% of first quarter 2019 prepandemic levels.\nConsolidated volume in the first quarter was 3.6 billion gallons, up slightly on a sequential basis, but down year-over-year, again, related to the items already mentioned.\nConsolidated gross profit for the first quarter was $192 million.\nThat's a decrease of 18% compared to the first quarter of 2020 with an increase of $26 million or 16% sequentially.\nOur aviation segment contributed $77 million of gross profit in the first quarter, down 15% year-over-year, but up 9% sequentially.\nYear-over-year, in addition to the COVID-related profit declines from depressed commercial passenger aviation activity, the decrease was also related to the decline in government-related activity associated with the continued drawdown of troops in Afghanistan.\nThese declines were partially offset by higher average margins from a more profitable core business mix.\nAs we look ahead to the second quarter, aviation gross profit should increase sequentially, principally driven by the continuing recovery in domestic commercial passenger activity, partially offset by a further decline in our government business in Afghanistan.\nAs I am sure you are aware, earlier this month the U.S. and NATO announced its final withdrawal from Afghanistan by September, and therefore we expect further declines in this business activity over the balance of the year.\nThe marine segment generated first quarter gross profit of $25 million, that's down 57% year-over-year, but up 12% sequentially.\nIn addition to the pandemic-related impact, the year-over-year declines were principally driven by the strong results we saw in the first quarter of 2020, again related to the IMO transition to very low sulfur fuel oil.\nBut as we forecasted on last quarter's call, marine gross profit increased sequentially relating to strong results from our physical operations.\nAs we look ahead to the second quarter for Marine, based on what we've experienced through the first few weeks of April, we expect Marine gross profit to increase sequentially, driven by improvement in our core resale business activity.\nAnd as we look to the latter part of the year, there's an increasing likelihood that cruise lines will begin sailing again, providing opportunities for additional improvement in the fourth quarter and into 2022.\nOur land segment delivered gross profit of $89 million in the first quarter, up 5% year-over-year when excluding the profitability related to the multi-service business from last year's results and actually up 24% sequentially.\nAs we anticipated, we experienced solid sequential improvement in our U.K. heating oil business, driven in part by lockdowns for most of the quarter, but we also generated additional profitability during the quarter related to improved performance in our U.S. natural gas supply activities that was principally driven by the extremely cold weather in parts of the U.S. in February.\nLooking ahead to the second quarter, we expect the traditional seasonal decline in land gross profit, which will be further impacted by the strong natural gas product contribution in the first quarter.\nWe believe the land segment has many opportunities ahead, from global sustainability initiatives to potential infrastructure bill spending, which would all benefit our commercial and industrial fuels business as well as our natural gas power and sustainability activities.\nWe continue to manage our operating expenses prudently.\nCore operating expenses, which excludes bad debt expense, were $146 million in the first quarter, down $29 million or 17% from the first quarter of last year.\nLooking ahead to the second quarter, operating expenses, excluding bad debt expense, should be generally in line with the first quarter in the range of $144 million to $148 million.\nWe had debt expenses in the first quarter with $3.6 million, down both sequentially and year-over-year and down materially from the elevated levels in the second and third quarter of 2020.\nThis is further evidence of the solid team effort in managing our receivables portfolio through this stage of the pandemic.\nAdjusted income from operations for the first quarter was $42 million, down 38% from last year but up 68% sequentially related to the segment activity that I mentioned previously.\nAdjusted EBITDA was $62 million in the first quarter, down 29% from 2020 and up 39% sequentially.\nAgain, the year-over-year decline in income from operations and adjusted EBITDA was principally driven by the impact of the pandemic as well as benefits from supply imbalances and price volatility arising from the IMO 2020 implementation in the first quarter of 2020 for our marine business.\nFirst quarter interest expense was $8.7 million, which is down 44% year-over-year and approximately 20% sequentially.\nTotal interest expense continues to benefit from lower average borrowings and interest rates.\nAt the end of the first quarter, we again had no borrowings outstanding under our revolver and ended the quarter in a net cash position in excess of $200 million.\nWe expect interest expense in the second quarter to be approximately $9 million to $10 million.\nOur adjusted tax rate for the first quarter was 35.8% compared to 30.6% in the first quarter of 2020.\nAt this time, we expect our effective tax rate to remain elevated in the near term, primarily due to the current mix of U.S. and foreign earnings as well as the continuing effects of guilty and valuation allowances on certain of our foreign entities.\nOur total accounts receivable balance increased significantly on a sequential basis to approximately $1.7 billion at quarter end, principally related to the 37% rise in average fuel prices from the fourth quarter.\nWe remain focused on managing working capital requirements, which resulted in operating cash flow generation of $103 million during the first quarter despite a significant sequential increase in accounts receivable.\nIn closing, despite continued weakness in the commercial passenger aviation market, we delivered a solid quarter, driven principally by very strong results in our land segment.\nAnd we again delivered strong operating cash flow.\nWith vaccination rates up significantly in the United States, we are encouraged by the recent trends we are seeing in domestic commercial passenger activity and are hopeful that other parts of the world will begin to catch up over the next several months.\nWhile we are appropriately inwardly focused over the first 12 months of the pandemic, during which time our team performed at a level of excellence for which they should all be very proud, we can now more clearly see the light at the end of the tunnel.\nAnd we are coming out of the pandemic with a strong balance sheet, actually a stronger balance sheet than where we started prepandemic.\nThis strong balance sheet, including $735 million of cash, provides us with capital to further grow our core business organically as well as the ability to capitalize on strategic investment opportunities which should drive scale and efficiencies, most specifically in our land and World Connect business activities.\nOur balance sheet liquidity and solid operating cash flow also provide us with capital to repurchase shares and fund dividends to further enhance shareholder value.\nIn demonstration of our commitment to enhancing shareholder value, over the past two years we've repurchased $134 million of our shares, and we increased our cash dividend twice, most recently, a 20% increase during the first quarter.\n",
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"content": "compname reports q1 adjusted earnings per share of $0.33.\nq1 adjusted earnings per share $0.33.\nqtrly revenue $5,957.9 million versus $8,015.2 million.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: With us on the call today are Michael Kasbar, Chairman and Chief Executive Officer; and Ira Birns, Executive Vice President and Chief Financial Officer.\nIf not, you can access the release on our website.\nBefore we get started, I would like to review World Fuel's safe harbor statement.\nA description of the risk factors that could cause results to materially differ from these projections can be found in World Fuel's most recent Form 10-K and other reports filed with the Securities and Exchange Commission.\nWe are speaking to you today for our second quarterly earnings call during the COVID-19 pandemic.\nFirst, I want to say how proud I am and how well our global team has continued to operate our day-to-day business activities with nearly all of our employees working from home or on the frontline delivering fuel.\nIt is a testament to their professionalism and passion for the business.\nAs I've said previously, we took swift action at the beginning of the pandemic to activate our safety procedures and protocols.\nAnd fortunately, we have had very few cases of COVID-19 among our employees.\nDespite all of the continuing complexities in the world around us, we delivered a very respectable result in the second quarter.\nWhile our aviation volumes were naturally lowered in the current environment, we delivered better-than-expected results, driven by increased cargo activity, unscheduled aircraft activity as well as historic oil price volatility during the quarter.\nGlobal airline passenger volume, while recovering at varying cases in different parts of the world, is still far from pre-pandemic levels.\nBefore COVID-19 hit, the aviation industry was on a strong upswing with good passenger mile growth, consistent with a very long growth trend.\nIt's clear the world wants to travel by air.\nThat is not likely to change.\nI'm optimistic that science will ultimately prevail and the airlines focus work on safety and cleanliness will bring back this industry, which is so vital to local, national and global economies and modern living.\nWorld Fuel is fortunate to have a geographically and segment diverse portfolio of energy clients that rely on our solutions.\nOur core marine activity held up as well.\nWhile the cruise market continues to work its reentry plan with some limited cruising occurring in Asia and Europe.\nWe continue to be selective on marine risk as we have been over the last five years, which should position us well in today's market.\nOur global land business delivered good results, boosted by seasonal strength in the U.K., which carried into April and a rebound in our North American gasoline and diesel business as many taking not taking to the skies began taking to the road.\nAs Ira will explain further, we have used the considerable learnings of the past four months to rethink our global work routines.\nWhen the world does return to some steady state, we will have a more flexible and efficient hybrid workforce and workplace, with some returning to the office and some continuing to work remotely, driving both greater cost and business efficiencies and giving us the ability to access wider talent pools.\nOur global team also continued to do a great job of managing cash, risk and operating expenses, with expenses down sequentially and strong operating cash flow, supporting our very healthy liquidity position.\nUnderwriting has always been a core competency and one of our core values to the marketplace.\nInsulating buyers and sellers from a multitude of counter-party risks has been the essence of our existence for the last 35 years, and it still is.\nProtecting the balance sheet and cash flow is what we have always focused on every day.\nSpeaking of liquidity, as announced earlier today, we have signed an agreement to sell our multi-service payment solutions business to Corsair Capital, a New York-based private equity firm.\nWell, I love this business and its people, and it was certainly additive to World Fuel, focus is truly the key to success.\nThe sale will provide us with even more capital with which we can reinvest in our core business, enhancing our ability to drive growth, greater operating leverage and higher returns.\nIra will shortly provide you with all the related financial information timing.\nSo while the pandemic continues to challenge the world, we have been staying healthy and safe while serving our customers and suppliers with the same level of commitment and old-fashioned customer service excellence and operational support we always have.\nAdversity often drives efficiency and productivity.\nMany of the companies that come out on the other side of extraordinary events will be smarter, stronger, more efficient and poised for growth.\nI am confident that we will be one of them.\nThe resilience of our company and commitment to best-in-class service has differentiated us as a solid counter-party with a sustainable business model for decades, and this has only been further accentuated over the past few months.\nWhile the timing of returning to any sense of normalcy remains unclear, we remain focused on our long-term strategy, which encompasses strategic growth in our core businesses and a continual focus on cost and balance sheet management to deliver greater value for our shareholders and other stakeholders, while, of course, looking after the health and safety of all of our employees worldwide.\nAnd now I will provide you with our financial update.\nThe nonoperational expenses in the second quarter principally consisted of an $18.6 million asset impairment relating to our decision to rationalize our global office footprint in light of the new world we are living in.\nSome of our office locations will simply transition to a more permanent remote work environment and some will be relocated to smaller, more flexible and cost-effective locations.\nNonoperational expenses also included costs related to certain other organizational changes as well as acquisition and divestiture-related expenses.\nSo now let me get into some second quarter highlights.\nAdjusted second quarter net income and earnings per share were $8 million and $0.13 per share.\nAdjusted EBITDA for the second quarter was $57 million.\nAnd lastly, we generated $236 million of cash flow from operations, which enabled us to continue to maintain more than $1 billion in total available liquidity, a critically important metric during this time period.\nConsolidated revenue for the second quarter was $3.2 billion.\nThe significant year-over-year decline was driven principally by the dramatic impact of the COVID-19 pandemic on our segment volumes as well as significantly lower average fuel prices during the quarter due to the unprecedented impact of the pandemic on global demand.\nOur aviation segment volume was 690 million gallons in the second quarter, representing a sequential decline slightly less than the 65% decline forecasted on last quarter's call.\nAlthough we experienced relatively strong volumes related to cargo activity in certain business and general aviation customers, commercial passenger activity remained at levels below 25% of normal activity, and that was the principal driver of the volume decline in the second quarter.\nVolume in our marine segment for the second quarter was four million metric tons, down approximately 18% sequentially, driven principally by the negative impact of the pandemic, our core reselling activity, including sales to cruise lines, experienced most of the volume decline.\nWe are hopeful that second quarter volumes were the low point as we are beginning to see some increased activity in certain segments of the marine market.\nOur land segment volume was 1.2 billion gallons or and gallon equivalents during the second quarter.\nThat's a 50% decrease sequentially.\nWhile volume declines in our land segment were not as significant as the aviation and marine segments, we did experience volume declines in our retail, commercial and industrial and connect businesses.\nConsolidated gross profit for the second quarter was $214 million.\nThat's a decrease of 20% compared to the second quarter of 2019.\nOur aviation segment contributed $92 million of gross profit in the second quarter.\nThat's down 35% year-over-year and basically flat sequentially, but significantly above the expectation shared on last quarter's call.\nDespite the significant decline in traditional passenger activity during the quarter as well as a decline in government-related activity as a result of the ongoing drawdown of troops in Afghanistan, we did benefit from some situation-specific, nontraditional activity arising from the pandemic, such as repatriation flights and the repositioning of aircraft.\nWe also benefited from historic inventory volatility experienced during the quarter, whereas many of you know, crude oil prices started out at $20, then technically dropped to negative 40 and ultimately ended the quarter at just under $40.\nThe resulting return to a contango market following the somewhat prolonged backwardated market environment, served to contribute positively to our second quarter aviation results as well.\nWhile we are slowly beginning to see an increase in volume during the early part of the third quarter in many parts of the world, we expect aviation gross profit in the third quarter to be generally flat sequentially due to reduced price volatility as compared to the second quarter as well as an expected further decline in activity in Afghanistan.\nObviously, with the ongoing effects of the COVID-19 pandemic globally, performance in the latter part of the year remains difficult to forecast at this stage.\nThe marine segment generated second quarter gross profit of $37 million, representing a slight increase year-over-year and generally in line with the guidance we provided on last quarter's call.\nAs we look ahead to the third quarter, we expect a modest sequential increase in marine gross profit, driven principally by seasonality and the modest volume growth in our core business mentioned earlier.\nOur land segment delivered gross profit of $85 million in the second quarter, down 8% year-over-year.\nLand results were actually better-than-expected at the start of the quarter as gas and diesel activity began rebounding midway through the quarter and the strength of our U.K. operations in the first quarter of this year actually continued into the early part of the second quarter.\nHowever, many customer segments, such as the busing sector, for example, continue to be constrained until related markets reopen.\nOur core operating expenses, which exclude our bad debt expense, were $154 million in the second quarter, down more than $20 million sequentially and just below the guidance provided on last quarter's call.\nAs mentioned last quarter, we made immediate cost-related decisions as the pandemic began impacting our business activity.\nThese measures included a global hiring freeze and other organizational changes, the postponement or elimination of all nonessential projects and a reduction in discretionary spending.\nWith the broader learnings stemming from our ability to effectively operate many functions within our business with a remote workforce, we explored the opportunity to rationalize our global office footprint, as mentioned earlier, which we expect will result in additional annualized cost reductions of close to $10 million, while ensuring a healthy and agile work environment for our employees as we look toward 2021 and beyond.\nBased on the actions taken to date and our continued efforts to identify additional cost-saving opportunities, we expect core operating expenses to be in the range of $149 million to $154 million in the third quarter, representing another sequential decline in operating expenses.\nLast quarter, we mentioned the likelihood that bad debt expense would increase over the balance of the year, considering the strain COVID-19 has placed on the global transportation industry and many of our customers around the world.\nAs a result, our bad debt expense increased to $25 million in the second quarter, principally due to the establishment of reserves related to a few notable bankruptcies in the commercial aviation market.\nWhile our consolidated receivables portfolio was down from $2.9 billion at year-end to $1.4 billion in June and aviation's receivable portfolio is down from $1 billion to just over $400 million over the same time period, risk levels clearly remain elevated.\nHowever, our underwriting team has done a fantastic job managing through this crisis and the challenging market conditions we've experienced since March.\nDespite the historic market conditions experienced in the second quarter, we still delivered $35 million of adjusted income from operations.\nI think that's another testament to the work of our team and they're laser-focused on supporting our customers through these unprecedented times while also carefully managing costs throughout the quarter.\nIn the second quarter, nonoperating expenses, which is principally interest expense, was $14.9 million, which is down 15% year-over-year, primarily driven by a decrease in borrowing rates.\nWhile we have been making progress in reducing our tax rate over the past several quarters, due to the pandemic's negative impact on our profitability, most notably in the United States, as well as discrete tax items recorded during the quarter, we had an unusually high tax rate this quarter.\nAt this point, considering the current environment, it is difficult to forecast our effective tax rate for the second half of the year, but it is now more likely that our rate will be over 30% over the next two quarters.\nOur team did a fantastic job managing working capital during the second quarter, resulting in $236 million of operating cash flow.\nWhile prices were extremely volatile during the quarter, lower prices, combined with significant volume declines contributed to a reduction in working capital that resulted in substantial cash flow generation.\nOur net debt position declined by more than $200 million sequentially to $450 million in the second quarter, again, due to our strong operating cash flow.\nThis resulted in a further decline in our net debt-to-EBITDA ratio to 1.2 times, and our total available liquidity remained at more than $1 billion consistent with or actually somewhat above our liquidity position at the beginning of the second quarter.\nObviously, looking forward, our available liquidity is dependent in great part upon our future performance and cash flows.\nThe strength of our balance sheet is a result of a phenomenal remote team effort involving our commercial business, our underwriting and collection teams and many other members of our organization.\nFinally, today's announcement of the sale of our multi-service payment solutions business represents a significant step in our strategy to sharpen our portfolio of businesses.\nExiting this line of business will enable us to continue to simplify our business and focus our attention on driving growth and greater digitization in our core businesses, accelerating our ability to drive greater operating efficiencies and returns.\nWhile the proceeds from the sale, which is expected to close within 90 days, will initially be utilized to repay outstanding debt, it also will provide us with additional capital to strategically invest in our core businesses.\nIn closing, like most businesses worldwide, our business has clearly been impacted by the global pandemic.\nOur employees, our customers, our suppliers and even our shareholders have all been impacted.\nDespite the continuing need to run our business remotely, our global team pulled together to deliver reasonably good second quarter results, given current circumstances.\nWhile we have no direct control over the timing of a return to any sense of normalcy, we remain focused on our core priorities of keeping our employees safe, serving our customers with excellence, driving growth in our core businesses and continuing to improve our operating efficiencies, all of which should contribute positively to shareholder returns.\n",
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"content": "world fuel services q2 adjusted earnings per share $0.13.\nq2 adjusted earnings per share $0.13.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: With us on the call today are Michael Kasbar, Chairman and Chief Executive Officer; and Ira Birns, Executive Vice President and Chief Financial Officer.\nIf not, you can access the release on our website.\nBefore I get started, I'd like to review World Fuel's safe harbor statement.\nA description of the risk factors that could cause results to materially differ from these projections, can be found in World Fuel's most recent Form 10-K and other reports filed with the Securities and Exchange Commission.\nAs with prior conference calls, we ask that members of the media and individual private investors on the line participate in listen-only mode.\nAs I mentioned last quarter, our organization continues to evolve within a fundamentally changed marketplace.\nWe've made progress within the digital and energy transition and performed well within a constrained supply chain.\nThe choppy start-stop reopening of markets and borders has added challenges.\nThere is no historical analog for the dynamics we were experiencing.\nDespite this, we have done an extraordinarily good job of managing risk and supporting our customers, suppliers and partners from cyber to driver shortage to credit risk and lockdowns, our team has done an exceptionally good job of supporting a very different market.\nAnd while conditions in many parts of the world remain fragile, our team again performed with both commercial and operational excellence in the second quarter, delivering solid results.\nThe aviation market continues to recover, with North American commercial passenger activity now back to 80% of pre-pandemic levels, while international activity still has a longer way to a full recovery.\nI recently returned from Europe, but it's clear that airports are getting busier and activity is picking up.\nSo the prognosis for commercial passenger activity is clearly improving each quarter.\nAt most of our 80 operated locations outside of the U.S., activity was substantially ahead of where we were a year ago.\nLastly, as were publicized in media, our government bases in Afghanistan is generally coming to an end, as most bases have now been closed.\nWe expect some activity to continue, but this is expected to be modest.\nMany sectors within the marine industry are performing well.\nThe container segment is especially buoyant, dry bulk is strong, with tankers looking more positive over time and the cruise market slowly entering restart mode.\nWhile our marine business continues to perform well, we've been impacted by the lack of volatility and a corollary reduction in demand for our risk management offerings.\nOur highly experienced marine team continues to build its logistics capabilities, and add complementary services, which includes sustainability offerings, leveraging our deep expertise within our World Connect business.\nOur land business continues to evolve with the growing emphasis on natural gas, power and sustainability-related services.\nThe pandemic's impact on our land business is less pronounced, with volumes getting back to pre-COVID levels.\nStrong seasonal first quarter results in Europe continued into the first month of the second quarter, and our commercial and industrial and retail businesses all performed well during the quarter.\nWe continue to gain traction in supporting our long-term fuel customers, with our natural gas and power and growing suite of sustainability offerings.\nOn the technology front, our team continues to develop a broader suite of offerings to complement our core business activities, and while it has been a long haul, we are getting closer to completing the integration of our North America land operating platforms, with one step in this process successfully completed in the second quarter.\nThis integration will drive efficiencies and will facilitate more synergistic integrations in the future.\nI'm proud of the team's efforts in these areas, which are critical to our long-term success.\nFinally, our balance sheet and liquidity profile remains strong.\nWe remain poised to invest in organic growth, as markets continue to recover and we will be supplementing organic growth with strategic investments, which should accelerate our growth in our core businesses and drive increasing shareholder returns.\nI hope that you're all enjoying the summer, while continuing to stay safe and healthy.\nOur business continues to perform well, in what remains a challenging operating environment, and I am proud of our people and all the great work we have done, supporting our customers and managing our business through this extraordinary period in our lives.\nWe remain extremely engaged with our customers and suppliers, and are proactively [Indecipherable] support.\nAnd we are pleased to see that many of the markets we serve are showing increasing signs of improvement, others, including our aviation business in parts of Europe and Asia, have been slower to recover.\nMeanwhile, we remain focused on enhancing our value proposition in all the markets we serve, and we're excited about the long-term prospects and opportunities that exist across our business.\nThe non-operational items principally relate to acquisition and divestiture, asset impairment and restructuring-related adjustments and expenses.\nNow let's begin with some of the second quarter highlights.\nAdjusted second quarter net income and earnings per share were $25 million and $0.39 per share, respectively.\nAdjusted EBITDA for the second quarter was $60 million.\nVolume improved significantly, as markets continue to recover, with second quarter consolidated volume up 9% sequentially and 33% year-over-year.\nAnd lastly, generating $37 million of cash flow from operations during the second quarter and $500 million over the past 12 months, increasing our net cash position to more than $200 million, further strengthening our balance sheet.\nAnd now I'll review our financial results in greater detail.\nConsolidated revenue for the second quarter was $7.1 billion, an increase of $1.1 billion or 19% sequentially and an increase of $3.9 billion or 126%, compared to the second quarter of last year.\nThe year-over-year increase is driven by the significant increase in volume across all of our operating segments, as well as our 130% increase in average fuel prices compared to the second quarter of 2020.\nOur aviation segment volume was 1.8 billion [Phonetic] gallons in the second quarter, an increase of 230 million gallons or 20% sequentially, and double the volume generated in the second quarter of last year.\nThe volume increases both sequentially and year-over-year, spanned our commercial passenger and business in general aviation businesses.\nAlthough we've continued to experience increased activity with overall segment volume at more than 60% of pre-pandemic levels, at this time, we remain optimistic about the second half of the year and beyond.\nHowever, uncertainty remains in many parts of the world, where travel restrictions remain in place and delta variant cases have been increasing.\nRegardless, we remain in close contact with our customers and suppliers, and are ready to meet their needs across our global footprint.\nVolume in our marine segment for the second quarter was 4.6 million metric tons, an increase of 360,000 metric tons or 8% sequentially and an increase of nearly 600,000 metric tons or 15% year-over-year.\nOur land segment volume was 1.3 billion gallons or gallon equivalents during the second quarter, flat sequentially, but an increase of 120 million gallons or gallon equivalents of 10% year-over-year.\nThe year-over-year volume increases in the land segment came from improvements in our retail, commercial and industrial and wholesale businesses in North America, as well as continued growth in our Connect natural gas, power and brokerage businesses.\nConsolidated volume for the second quarter was 3.9 billion gallons, an increase of 310 million gallons or 9% sequentially, and an increase of 960 million gallons or 43% compared to the second quarter of 2020.\nConsolidated gross profit for the second quarter was $185 million, that's down 4% sequentially and 6% year-over-year.\nOur aviation segment contributed $88 million of gross profit in the second quarter, an increase of 15% [Phonetic] sequentially or a decline of 3% year-over-year.\nThe year-over-year decline was driven by a reduction in our government-related activity in Afghanistan, as a result of the ongoing military withdrawal, which should be substantially completed by the end of next month, as well as declining margins principally related to a more normalized business mix, as well as lower physical inventory profitability in our core aviation business, when compared to the second quarter of last year.\nAs we look ahead to the third quarter, we expect aviation gross profit to increase sequentially, driven principally by the continuing recovery in North America and international commercial passenger activity.\nThe land segment generated second quarter gross profit of $23 million, that's a decline of 11% sequentially and 39% year-over-year.\nThe year-over-year decline is principally a result of lower profitability compared to the second quarter of last year, which benefited from volatility arising from the implementation of the IMO 2020 regulations, as well as the impact of competitive market conditions during this past quarter, where price volatility was also limited.\nAs we look ahead to the third quarter, we expect marine gross profit to increase modestly on a sequential basis, based upon some quarter-to-date improvement in our core resale business activity.\nAs we look toward the -- as we look toward the latter part of the year and beyond, we expect cruise line activity to accelerate and should contribute incrementally to our financial results.\nOur land segment delivered gross profit of $74 million in the second quarter, a decline of 18% sequentially, but an increase of 8% year-over-year when excluding the profitability related to the multi-service business from last year's results.\nSequentially, we experienced the traditional seasonal decline in our U.K. business as well as a decline in gross profit related to our business in Afghanistan.\nYear-over-year gross profit in our North American retail and commercial and industrial businesses, as well as our Connect business, all showed increases when compared to the second quarter of last year, demonstrating continued progress in growing our core land business activities.\nConnect's growth is reflective of our increasing focus on natural gas, power and a growing suite of sustainability solutions, and it now represents nearly a third of land's overall gross profit.\nLooking ahead to the third quarter, we anticipate land gross profit will be relatively flat on a year-over-year basis, when excluding the results of multi-service.\nWe continue to believe that our land segment has many opportunities for growth, both organically and through strategic investments, principally in our commercial and industrial and Connect businesses.\nCore operating expenses, which exclude bad debt expense, were $147 million in the second quarter, which was in line with our guidance for the quarter, as we continue to manage our controllable costs well.\nLooking ahead to the third quarter, operating expenses, excluding bad debt expense, should remain in the range of $146 million to $150 million.\nAs previously discussed, our team has continued to do an excellent job, managing our receivables portfolio throughout the pandemic, with more than 90% of our portfolio now current.\nOur team's efforts have been paying off, with no leasing losses of any significance, compounded by successfully collecting certain high-risk receivables, which had been previously reserved for, this resulted in a credit to bad debt expense this quarter of approximately $1 million.\nAdjusted income from operations for the second quarter was $39 million, that's down 7% sequentially, but up 17% year-over-year, related to the segment activity that I mentioned earlier.\nAdjusted EBITDA for the second quarter was $60 million, down 3% sequentially, but up 11% compared to last year.\nSecond quarter interest expense was $10 million, that's flat year-over-year, as total interest expense continues to benefit from low average borrowings, as well as low rates, and we get into the quarter with no borrowings on our revolving credit facility, and in a net cash position, again, in excess of $200 million.\nWe expect interest expense for the third quarter to be approximately $9 million to $11 million.\nOur adjusted effective tax rate for the quarter was 10.3%, which is significantly lower than our tax rate in the second quarter of 2020, and the rate we had previously forecast for this year's second quarter.\nAs a result of certain business initiatives, we recently updated our forecasted global jurisdictional income mix, which significantly reduced our second quarter tax rate.\nFurthermore, we also had a discrete tax benefit relating to a change in U.K. statutory tax rate, that was announced during the second quarter.\nIn a nutshell, our second quarter tax rate was much lower than forecast for the reasons just explained, but the forecast of changes in income mix will also contribute to a lower tax rate, compared to where we started the year, with our tax rate for the second half of the year now expected to be in the range of 29% to 33%.\nOur total accounts receivable balance increased to approximately $1.8 billion at quarter end, principally related to the increase in volume in our aviation and marine segments, as well as the sequential rise in average fuel prices.\nWe remain focused on managing our working capital requirements, which resulted in operating cash flow generation of $37 million during the second quarter, again, despite a 14% sequential increase in prices and a 9% increase in volume.\nThis further strengthened our balance sheet.\nIn closing, in the face of continued travel restrictions in many parts of the world, our business continues to recover, delivering solid results this past quarter.\nAnd despite rising prices and increasing volumes, we again generated healthy operating cash flow, which now aggregates to nearly $750 million over the past six quarters.\nAs noted many times in the past, this cash flow supports our balance sheet with significant liquidity to grow our business organically, as the recovery continues, and inorganically as strategic opportunities arise.\nYes, our business has been meaningfully impacted by the pandemic, through its effects on the needs of many of our customers we serve throughout the world.\nBut our results have also shown our resiliency, evidenced by our ability to manage expenses prudently, manage our balance sheet extraordinarily well, and maintaining and growing relationships with our customers during this unprecedented time period.\nWe believe these relationships in our global platform, which combines our liquid fuel offerings with natural gas and power with a broad portfolio of services, and a growing suite of sustainability solutions, will serve us very well as the recovery in global markets accelerates.\n",
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"content": "q2 adjusted earnings per share $0.39.\nqtrly revenue $7,085.5 million versus $3,158.3 million.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: With us on the call today are Michael Kasbar, Chairman and Chief Executive Officer; and Ira Birns, Executive Vice President and Chief Financial Officer.\nIf not, you can access the release on our website.\nBefore we get started, I would like to review World Fuel's Safe Harbor statement.\nA description of the risk factors that could cause results to materially differ from these projections can be found in World Fuel's most recent Form 10-K and other reports filed with the Securities and Exchange Commission.\nAs with prior conference calls, we ask that members of the media and individual private investors on the line participate in listen-only mode.\nI hope that you're all doing well, while continuing to stay safe and healthy.\nWe obviously have some very exciting news to talk about this evening regarding the definitive agreement to acquire the Flyers Energy Group that we just announced, which Ira and I will cover after Ira's financial review.\nFlyers is an ideal addition to our US land business and will significantly contribute to the scale and density of our commercial and industrial platform in the US, more about this exciting news later.\nOverall, our business performed well in the third quarter as we witnessed some encouraging trends, primarily in our aviation segment where commercial passenger activity continue to increase both domestically with activity climbing to more than 80% of its pre-pandemic levels and internationally where easing travel restrictions have led to increased activity in Europe and Asia.\nWe continue to make strides in expanding our aviation service network and comprehensive offering.\nIn marine, market conditions remain challenging in the third quarter compounded by the fact that we did not have the benefit from certain seasonal business we have generated in prior years.\nHowever, we have begun seeing improvement in certain markets such as the cruise sector where activity continues to recover with more ships sailing monthly.\nWe also recently concluded a term LNG bunker supply agreement on the US West Coast demonstrating our ability to provide a broader range of energy solutions and cleaner marine fuels.\nAnd lastly, we are continuing to build a stronger foundation in our land segment by remaining laser focused on enhancing our core product and service offerings and meeting the evolving demands of our customers throughout the world including recently developing a multiyear carbon offset program for a large cruise operator facilitated by World Connect, our gas power and sustainability business.\nIn addition to continuing to invest in the commercial and industrial ground fuels market in North America, our inorganic focus will also include World Connect activities tailed [Phonetic] by our growing global base, customer base effectively navigate the energy transition.\nBefore I walk through our third quarter results, please note that the following figures exclude the impact of non-operational items netting only $1 million this quarter, which principally related to acquisition divestiture and restructuring related adjustments in expenses.\nNow let's continue with third quarter financial highlights.\nAdjusted third quarter net income and earnings per share were $23 million and $0.36 per share, respectively.\nAdjusted EBITDA for the third quarter was $63 million.\nAnd volume continue to improve across all of our business segments as markets continue to recover.\nWith third quarter consolidated volume up 9% sequentially and 23% year-over-year.\nWe generated positive cash flow from operations of $83 million during the third quarter contributing to our net cash position of $282 million.\nThis was our 14th consecutive quarter of positive operating cash flow totaling approximately $1.4 billion over such period.\nAnd now I'm going to get into our financial results in greater detail.\nSo, let's jump back to the volume.\nAviation segment volume was 1.7 billion gallons in the third quarter, an increase of 21% sequentially, consistent with the growth forecast provided on our second quarter call and an increase of 63% compared to the third quarter of 2020.\nWe experienced volume increases both sequentially and year-over-year in our commercial passenger and business in general aviation operations.\nThe year-over-year volume increases resulted from the continuing recovery in air travel and the sequential increase was driven by both the general economic recovery and traditional summer seasonality.\nVolume in our marine segment for the third quarter was 4.8 million metric tons, an increase of 4% sequentially and 9% year-over-year.\nWe experienced increases in core resale activity during the third quarter in marine.\nAnd although we may see some disruption from the supply chain bottlenecks at certain ports, marine activity should benefit from the ongoing economic recovery possibly higher fuel prices as well as we head into 2022.\nOur land segment volume was 1.3 billion gallons or gallon equivalents during the third quarter.\nThat's practically flat sequentially, but an increase of 4% year-over-year.\nThe year-over-year volume increased spend across much of our North American retail and commercial industrial operations and our Connect business continues to post solid year-over-year growth driven by an increasing demand for our energy management and sustainability offerings.\nConsolidated volume for the third quarter was 4.2 billion gallons or gallon equivalents, an increase of 9% sequentially and 23% year-over-year driven by the significant rebound in aviation activity.\nConsolidated gross profit for the third quarter was $197 million, an increase of 7% sequentially and 3% year-over-year.\nOur aviation segment contributed $113 million of gross profit in the third quarter.\nThat's up 28% sequentially and 19% year-over-year.\nAs previously noted, the year-over-year increase in gross profit generally related to the continued rebound in core activity, partially offset by the reduction in government-related activity in Afghanistan, where as you already know, all activities ceased a part of the final troop withdrawal during the third quarter.\nOur team in Afghanistan did an amazing job over the past 10 years.\nAll of our employees made it out of the region safely and we will be forever grateful for their dedication and valuable contribution to our business.\nMost particularly, Derek McRobbie and his team who stuck it out [Phonetic] until the very end supporting the evacuation missions on the ground at Kabul Airport.\nAs we look ahead to the fourth quarter, we expect aviation gross profit to decrease sequentially, principally driven by the traditional seasonal decline in activity and the conclusion of activity in Afghanistan.\nHowever, we expect continued increases in both volume and gross profit on a year-over-year basis.\nThe marine segment generated third quarter gross profit of $22 million down 4% sequentially and 31% year-over-year.\nDespite the year-over-year increase in volume and marine.\nGross profit declined as a result of lower margins in our core business driven by continued competitive market pressure and the loss of some seasonal business we had benefited from in the past.\nAs we look ahead to the fourth quarter, we expect Marine gross profit to modestly increase both sequentially and year-over-year driven by some signs of improving marketing conditions in our core business.\nOur land segment delivered gross profit of $63 million in the third quarter, a seasonal decline of 15% sequentially and a decline of 4% year-over-year when excluding MultiService from last year's results.\nWe experienced a year-over-year decline in gross profit from our Core Commercial and Industrial business activity in North America driven principally by current supply chain disruptions which had temporarily eroded margins due to increased transportation costs.\nWe also experienced a year-over-year decline from government-related activity, again as a result of the conclusion of activity in Afghanistan.\nThese declines were offset by increases in the North American retail business and power activity in Europe where related markets have been strengthening.\nLooking ahead to the fourth quarter, we anticipate land gross profit will increase principally related to seasonal activity in the UK.\nCore operating expenses which exclude bad debt expense were $153 million in the third quarter.\nLooking ahead to the fourth quarter, we expect core operating expenses excluding bad debt expense to be in the range of $156 million to $160 million.\nAfter experiencing elevated losses during the front end of the pandemic, we continue to manage our broad portfolio of receivables exceptionally well with bad debt expense near zero in the third quarter.\nAgain, adjusted EBITDA was $63 million in the third quarter, that's up 6% sequentially but down slightly compared to last year's third quarter.\nInterest expense in the third quarter was $10 million, which is effectively flat year-over-year and fourth quarter interest expense should be about the same in the range of $10 million to $11 million.\nAnd our adjusted effective tax rate for the third quarter was just under 31% and we expect the fourth quarter effective tax rate to be about the same.\nDespite rising prices and volume, we generated $83 million of operating cash flow during the third quarter, our 14th consecutive quarter of positive operating cash flow.\nThis further strengthen our balance sheet resulting in a net cash position of $282 million at quarter end at a total cash position of nearly $800 million.\nWe also repurchased 750,000 shares of our common stock during the quarter, demonstrating our continued commitment to drive additional shareholder value through both buybacks and dividends.\nBefore we move on to discussion of the Flyers Energy acquisition, let's sum up the quarter.\nAviation's continuing recovery contributed to a strong quarter and we see continued growth opportunities across all three of our business segments as the economic recovery continues.\nWe generated strong operating cash flow in a sharply rising price environment contributing to an ending cash position of nearly $800 million setting us up well for the Flyers acquisition, but also for the additional growth opportunities ahead.\nThe world around us is changing rapidly and we're excited about organic and inorganic growth opportunities that will support our customers' evolving needs throughout the world.\nAs we've been repeating for some time now, we've been sharpening our portfolio of business activity strategically shedding non-core activities and we indicated that we were focused on investing in and growing our core commercial and industrial land business in North America as well as our increasingly relevant natural gas, power and sustainability platform.\nWith today's announcement of the signing of a definitive agreement to acquire Flyers Energy, we are taking a very significant step in this direction.\nThis acquisition will add significant scale and density to our North American land platform.\nWe are very excited about it and we think that it's a watershed turning point for the Company that will position us for growth for many years to come.\nIra will now review the transaction in greater detail.\nThe remaining $100 million we paid in two equal $50 million instalments upon the first and second anniversaries of closing.\nThe cash portion of the upfront purchase price will principally be paid with cash on hand.\nAgain, we had $796 million of cash at end of September, with the remainder to be drawn under our revolving credit facility.\nThe transaction is expected to be significantly accretive to margins, earnings per share and cash flow and is expected to close within 60 to 90 days subject to customary closing conditions, including regulatory approval.\nFlyers which has been very successfully operated by the Dwelle family for decades is based in Auburn, California and distributes diesel, renewable fuels, lubricants and gasoline to more than 12,000 small to medium sized commercial and industrial and retail customers spanning 20 states.\nEstimated volume for 2021 is $850 million gallons with forecasted 2021 revenue and gross profit of $2.4 billion and $135 million respectively.\nWe really look forward to welcoming the talented and experienced Flyers team to World Fuel.\nThey are a great bunch of people.\nFlyers are the national fleet fueling network consisting of approximately 200 card lock sites which are operated by Flyers and an additional 200 third-party sites, which are part of their national network.\nCard locks are effectively unmanned fuel sites serving commercial trucking fleets providing 24 hour access 365 days per year.\nFlyers operates a stable and ratable low cost business model with a loyal and growing commercial customer base.\nWhile their card lock operation is clearly their largest segment, Flyers also operates a small retail distribution business which will expand the World Fuel network to more than 2,000 retail locations nationwide and they also operate a wholesale diesel and lubricants business.\nAs we have stated repeatedly over time, we have been strategically focused on sharpening our portfolio of activities in our land segment.\nJust two years ago, before the pandemic began, our land segment was fragmented without significant upscale in our core activities that being our North American commercial, industrial and retail activity and our growing gas power and sustainability activities.\nThese combined business activities represented less than 50% of total land gross profit back in 2019 before the start of the pandemic.\nIf you fast forward to our new run rate upon closing this transaction, these core activities will represent more than 80% of land gross profit and the overall land business will represent a greater percentage of our global franchise driving greater scale synergies and operating leverage.\nThe transaction will also expand our North American platform to more than 30,000 commercial and industrial customers, customers to whom we can support with options to purchase lower carbon renewable fuels.\nFlyers already distributes renewable diesel at several card lock locations and we will look to continue growing renewable fuels distribution across our combined networks.\nSpeaking of our combined networks, this transaction will provide our North American land business with a national platform, which significantly improves scale.\nWe will be significantly expanding our card lock network, which is a low cost operating model driving above average returns accretive to our overall returns in our land business.\nThe transaction will provide regional density in California, Arizona and Nevada and will strengthen our density in the Rockies and Midwest.\nThe transaction also brings us a truly best-in-class management team poised to join with us to drive further growth and significantly enhance our land segments' shareholder value contribution.\nAgain Flyers is a stable, ratable and growing business with a low risk portfolio of customers at a seasoned management team with significant industry experience, which will strengthen and expand our North American land platform.\nThe transaction will also heighten our opportunity to participate in the growing low carbon renewables market.\nWe also believe that there remains a strong pipeline of additional investment opportunities, which can drive even further growth and operating efficiencies down the road.\nFlyers will also improve the overall tax efficiency of our Company by adding substantial US profitability to our consolidated results.\nAnd this strategic transaction will also drive a step change in the ratability of our global business, making our results easier to understand and forecast.\nThis is especially true in our land business, which we know hasn't always been the easiest to understand.\nThat will be fewer moving parts, more ratability and improving margins, contributing significantly to earnings per share and cash flow, a very exciting and important step forward in our longer term growth journey.\nWhile this will indeed be the largest acquisition in the history of our Company, the substantial cash flow we have generated over the past three to four years combined with the cash generated from the sale of MultiService last year allows us to complete this transaction largely with cash on hand, leaving us with a strong and liquid balance sheet post-acquisition to support organic growth as well as further investments in core business activities principally on North American land and global gas power and sustainability business providing a more exciting experience for our global team of nearly 5,000 professionals and driving greater value to our shareholders.\n",
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"content": "q3 adjusted earnings per share $0.36.\nqtrly revenue $8,350.9 million versus $4,482.7 million.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: We will also refer to certain non-GAAP measures.\nWe believe that these measures provide useful supplemental data that, while not a substitute for GAAP measures, allow for greater transparency in the review of our financial and operational performance.\nAt this point, it is my pleasure to turn things over to Philippe Krakowsky.\nI hope everyone is keeping well.\nAs usual, I'll start with a high level view of our performance in the quarter.\nEllen will then provide additional details.\nI'll conclude with updates on key developments at our agencies, and then we'll follow that with Q&A.\nThey are the principal reason we can report such strong results again this quarter.\nOur people are delivering insight and execution required for the complex integration of creativity, technology and data at scale as marketers across industry sectors need in order to accelerate their business transformation journeys.\nThis kind of work is helping set a standard for our industry and further build on IPG's record of industry outperformance and margin expansion.\nAs we've moved through September and now into October, it's also been rewarding to begin welcoming our people back to office settings and to see many of our teams together again in the places where creativity, collaboration and culture are ultimately rooted and regularly renewed.\nTurning to our results in the quarter, our net organic revenue growth in the third quarter was 15%.\nThat's against the third quarter of 2020 when, as you will all recall, our organic change was negative 3.7% due to the impact of the pandemic.\nIt's also important to note that our 2-year organic increase was 10.7% relative to the third quarter of 2019, which is a strong result.\nCompared to 2020, our growth in the quarter was again broad based by region of the world, discipline as well as client sector.\nOrganic growth was 14.7% in the U.S. and it ranged between 11% and 20% in international regions.\nBoth of our operating segments also grew at double-digit rates.\nOur IAN segment increased 14.4% organically with all major agencies contributing high single to double-digit percentage increases.\nWe were led by media, data and technology, R/GA and Huge as well as by MullenLowe, McCann and FCB highlighted by notable contributions from their Healthcare and Advertising disciplines.\nAt our DXTRA segment, organic growth was 18.6% reflecting double-digit increases across each of our DXTRA agencies and furthering the rebound from the sharp impact of the pandemic last year on our sports and entertainment as well as experiential businesses.\nLooking at client sectors, the picture is also one of balanced growth with nearly every one of our major client sectors increasing at a double-digit percentage rate, led by the auto sector and other sector with government and industrials and the tech and telecom retail and healthcare sectors.\nTurning to profitability and expenses.\nOur results again demonstrate outstanding focus and execution by our operating teams even as we continue to invest to support areas of accelerating growth and to enhance our offerings.\nThird quarter net income was $239.9 million as reported.\nOur adjusted EBITDA was $369.5 million and our margin of adjusted EBITDA before restructuring was 16.3%, compared with 16.2% a year ago and 14.7% in the third quarter of 2019.\nThere were several factors worth noting within those comparisons.\nWe have a solid operating leverage on our expenses for base payroll as we continue to see the structural benefits of the strategic cost actions taken last year.\nThose are reflected in our base payroll as well as our occupancy expense.\nTo-date, our very strong top-line growth is also outpacing the associated hiring and therefore our expense for temporary labor increased from a year ago.\nOur travel and related expenses continue to track at low levels but still were somewhat higher than last year.\nAs we look ahead, T&E expense will pick up over the remainder of the year.\nOur expense accrual for employee performance based incentive compensation however increased as a percentage of net revenue which is a direct result of our strong operating performance.\nThird quarter diluted earnings per share was $0.60 as reported and was $0.63 as adjusted for the after-tax expense for the amortization of acquired intangibles and other items.\nIn sum, our quarter as well as our year-to-date speak to strong financial performance across the key metrics of growth, EBITA and earnings per share.\nOur growth reflects the cyclical economic recovery as well as the important structural current that favor the kinds of higher order expertise with which we're well resourced.\nThe work we're doing solves for the increasingly complex world faced by our clients in marketing and media environment that's defined by a very rapid rate of change.\nThis is a validation of our long-term strategic focus on building offerings that help clients integrate brand experience across all consumer touchpoints, improve their capacity to apply data in the way their business goes to market and capitalize on the benefits of technology and digital channels.\nGoing back a number of years, we've anticipated transformational opportunities of this type of environment.\nOther important drivers of our continued success, our ability to deliver fully integrated solutions through our open architecture model and our emphasis on strong agency brands and best industry talent so as to deliver breakthrough creative ideas and content.\nWe've also fostered a culture that respects the individual, is transparent with respect to clients and is accountable when it comes to data privacy and media responsibility.\nTurning to our outlook, with our seasonally important fourth quarter still ahead, we're pleased to increase our financial performance objectives.\nWe now expect that we can deliver organic growth for the year of approximately 11% which is ahead of the 9% to 10% range we had previously indicated.\nWith growth at that higher level and given our strong results through the 9-months, we would therefore expect to achieve adjusted EBITA margin of approximately 16.8% which is an increase of 80 basis points over the level that we had previously shared with you.\nOur outlook is based on expectations of a reasonably steady course of public health and global economic recovery.\nWe begin the fourth quarter well positioned and the strong operating momentum and the tone of the business remains solid, as we had into the year and into holiday season.\nAs such, we see 2021 as another year of strong value creation for all of our stakeholders.\nAnd on that note, I'll now hand over the call to Ellen for a more in-depth view of our results.\nI hope that everyone is safe and healthy.\nAdjusted EBITDA before a small restructuring adjustment was $369.5 million and margin was 16.3%.\nDiluted earnings per share was $0.60 as reported and $0.63 as adjusted for the after-tax impact of the amortization of acquired intangibles, a small restructuring adjustment and the net gain from the disposition of non-strategic businesses.\nOn October 1st, following the conclusion of the third quarter, we repaid our $500 million 3.75% senior notes from cash-on-hand further deleveraging our balance sheet.\nTurning to Slide 3, you'll see our P&L for the quarter.\nI'll cover revenue and operating expenses in detail in the slides that follow.\nTurning to the third quarter revenue on Slide 4.\nOur net revenue in the quarter was $2.26 billion, an increase of $307.1 million from a year ago.\nCompared to Q3 2020, the impact of the change of exchange rates was positive 1.1% with the U.S. dollar weaker than a year ago in all world regions, with the exception of LatAm.\nNet divestitures were negative 40 basis points.\nOur net organic revenue increase was 15% which brings us to 12% organic growth for the nine months.\nAt the bottom of this slide, we break out segment revenue in the quarter.\nOur IAN segment grew 14.4% organically.\nWe had notably strong growth across our offerings in media, data and tech, R/GA, Huge, McCann Worldgroup, FCB driven by health and the MullenLowe Group.\nAt IPG DXTRA, organic growth was 18.6%, which reflects double-digit growth across public relations, experiential, sports and entertainment and branding disciplines.\nMoving on to Slide 5, which is a look at our organic revenue change by region.\nIn the U.S., which was 65% of our net revenue in the quarter, organic growth was 14.7%.\nThe organic revenue decreased a year ago was 2.4%.\nYear-on-year performance was notably strong across both our IAN and DXTRA segments and at almost all of our agencies, led by media, data and tech, FCB, MullenLowe, McCann, Weber and Jack Morton.\nInternational markets were 35% of our net revenue in the quarter and increased 15.4% organically.\nYou'll recall that the same markets decreased 6% a year ago.\nThe U.K. increased 13.3% organically, led by our offerings in media, data and tech, DXTRA, McCann and R/GA.\nContinental Europe grew 11.8%.\nAmong our largest national markets, we had notably strong growth in Germany, Spain, Italy and France.\nThere were a number of operating highlights in the region led by media, data and tech, DXTRA, and R/GA.\nAsia-Pac increased 17.4% organically, led by growth across most national markets notably, Australia, Singapore, India, the Philippines, China and Japan.\nOur organic growth in LatAm was 20.3% with exceptional results in Brazil, Argentina, Colombia and Chile.\nOur Other Markets group, which consists of Canada, the Middle East and Africa grew 17.1% organically, led by notably strong performance in Canada.\nMoving on to Slide 6 and operating expenses in the quarter.\nOur fully adjusted EBITDA margin was 16.3% compared with 16.2% a year ago and 14.7% in the third quarter of 2019.\nWe continue to see efficiencies in a number of different expense categories as we had in this year's first half and these were both structural and variable.\nIn the structural category, we are seeing the benefit of the strategic restructuring actions, which we initiated in the second quarter last year and continue to execute over the back half of 2020.\nAs we've called up previously, we also had a sharp decrease in certain variable operating expenses from pre-COVID levels.\nI would call out specifically travel and related expenses, which while increased from the third quarter of a year ago were still well below their level in 2019.\nAs you can see on this slide, our ratio of total salaries and related expense as a percentage of net revenue was 66.8% compared with 65% in last year's third quarter.\nThe increase was due to higher expenses in two categories.\nOur approval for performance-based incentive compensation was 5.8% of net revenue and our expense for temporary labor, which was 5% of net revenue in the quarter.\nWe had strong leverage on our expense for base payroll, benefits and tax, which was 53.9% of third quarter net revenue, which reflects the benefit of our restructuring actions and the fact of the pace of hiring lagged our strong revenue growth, which has been the case in past economic expansions.\nAt quarter-end, total worldwide head count was approximately 54,600, an 8% increase from a year ago.\nWe have added net 4500 people year-to-date to support our growth.\nAlso, on this slide, our office and other direct expense decreased as a percent of net revenue by 250 basis points to 13.3%.\nThat reflects lower occupancy expense mainly due to the restructuring of our real estate.\nThe ratio was 5% of net revenue.\nWe also reduced all other office and other direct expense by 120 basis points compared to last year, which reflects lower expense for bad debt and leverage as a result of our growth.\nOur SG&A expense was 1.4% of net revenue with the increase from a year ago due to higher unallocated performance-based incentive expense and increased employee insurance, which was at a very low level last year.\nOn Slide 7, we present detail on adjustments to our reported third quarter results in order to provide greater clarity and a picture of comparable performance.\nThis begins on the left hand side of the page with our reported results and steps through to adjusted EBITDA and our adjusted diluted EPS.\nOur expense for the amortization of acquired intangibles in the second column was $21.5 million.\nThe restructuring refinement in the quarter was a benefit of $3.5 million dollars.\nTo be clear, this is an adjustment to estimates of the 2020 restructuring program.\nBelow operating expenses in column 4, we had a gain due to the disposition of certain non-strategic businesses, which was $1.7 million in the quarter.\nAt the front portion of the slide, you can see the after-tax impact per diluted share of these adjustments, was $0.03 per share, which bridges our diluted earnings per share as reported at $0.60 to adjusted earnings of $0.63 per diluted share.\nOn Slide 8, we turn to cash flow in the quarter.\nCash from operations was $390.2 million compared to $689.3 million a year ago.\nWe generated $79.6 million from working capital compared to $376.8 million last year, which was unusually strong seasonal result.\nInvesting activities is $72 million in the quarter, mainly for capex $61.3 million.\nFinancing activities used $153.3 million mainly for our dividend.\nOur net increase in cash for the quarter was a $152.5 million.\nSlide 9 is the current portion of our balance sheet.\nWe ended the quarter with $2.5 billion of cash and equivalents.\nUnder current liabilities, the current portion of long-term debt refers to our $500 million, 3.75% senior notes, which have matured since the balance sheet date and we repaid with cash on hand.\nSlide 10 depicts the maturities of our outstanding debt.\nAgain, this includes the October 1st maturity.\nOur next maturity is $250 million to April 2024 and following that, there is nothing until 2028.\nIn summary, on Slide 11.\nOur teams continue to execute at a high level in an unprecedented environment.\nI would like to reiterate our pride in and gratitude for the efforts of our people.\nThe strength of our balance sheet and liquidity means that we remain well positioned, both financially and commercially.\nThe combination of our exceptionally talented people and a balanced portfolio of offerings and capabilities continues to set the standard for growth in our industry.\nThe strategic steps we've taken over the long-term have positioned IPG as a high value business partner to our clients.\nWe're able to combine the power of creativity and narrative storytelling with the benefits of data and technology in order to deliver growth for marketers across a broad range of sectors.\nThese strategic steps are evident in our strong results and position us well going forward.\nBy helping clients to better understand audiences and to engage with them with greater precision and accountability, we can help company succeed the digital economy.\nToday, marketers are responsible for increasing business innovation, building new content platforms and e-commerce platforms as well as adopting emerging tech and leveraging data all while complying with an evolving data privacy landscape.\nOur clients are also at the forefront for addressing societal issues and corporate purpose on behalf of their companies and brands.\nAs a partner, we're helping them solve all of these challenges.\nWith our ability to deliver complex integrations focused on business results and outcomes, our ability to help marketers proactively address these issues is further assisted by our intentional focus on ESG priorities as core business imperatives.\nThat's why we've been focused in working on ESG for many years at IPG.\nWe continue to build on a strong industry record in DEI initiatives which are integral to nurturing the highest quality and most representative perspectives, insights and creative voices across our company.\nMore recently, we've launched our first formal human rights policy and our work with clients around social issues includes campaigns focused on LGBTQ+ rights, mental health awareness, ways in which we can remove implicit bias from core datasets and also use data to increase the health of our planet as well as sustainable consumption models.\nWith respect to climate, we're now measuring our total greenhouse gas emissions around the world.\nWe're committed to setting a Science-based target and to reaching net zero carbon across our business by 2040.\nWe've also agreed to source a 100% renewable electricity by 2030 for our entire portfolio.\nNow turning to the highlights of performance from across that portfolio during the quarter, a key sector that continue to show strength for us is healthcare.\nAs you know, IPG has significant operations in healthcare marketing totaling approximately a quarter of our total revenue.\nThis includes specialized global healthcare networks as well as significant healthcare activity and client relationships at our media and public relations operations and within some of our U.S. independents.\nAs health and wellness continue to be a top concern for people companies and governments around the world, we've seen an increased need for sound healthcare information to be delivered at speed in ways that are highly personal, culturally relevant as well as respectful of privacy regulations.\nWithin the healthcare sector as well as across other client sectors, our ability to deliver open architecture solutions will continue to drive success for our company.\nWe have deep experience providing customized, integrated client service models to many of our largest client partners and we continue to perform well and winning new business on this sort of work especially in pitches that leverage the IPG data stack as a key part of the strategy.\nThis past quarter for example, Morgan Stanley and E*Trade named Mediahub as media agency of record following a highly competitive review.\nData strategy was a key component of the brief.\nFor this reason our customer intelligence company, Acxiom was placed front and center in our winning proposal.\nThe Mediahub team is leading media strategy, planning and activation in the U.S. leveraging Acxiom's consumer data and expertise to fuel tightly targeted and effective communication solutions.\nIn media brands, we continue to see a high degree of engagement with many of the world's most sophisticated marketers across our two largest brands, UM and Initiative.\nDuring the quarter, Initiative U.S. won Adweek's prestigious Media Agency Of the Year honor for 2021.\nLast year at this time within media brands, we launched Reprise commerce, the global specialty e-commerce offering and since then, e-commerce revenue within that unit has increased significantly as we've held clients build out holistic approaches to e-commerce including e-retail, supply chain and warehousing, marketplaces and direct-to-consumer programs.\nThere's never been a more important time to connect the e-commerce opportunity with the full power of clients media and marketing investments.\nIn addition, we can create and deploy consistent cross channel experiences that dynamically adapt to consumer needs and goals in real-time.\nWith the expertise as a key part of the news last week that the owner of Werther's Original candy business, Storck USA had selected UM as it's media agency of record.\nUM takes on all strategy, planning, buying and analytics duties, including the implementation of Storck's Shopper commerce activity.\nOur data and technology offerings continue to be key drivers of performance for us as well, featuring an all major open architecture and new business activity of significant scale.\nThis month marks the third anniversary of Acxiom becoming part of IPG.\nDuring the third quarter, Acxiom continued to post strong performance and to win in the marketplace bringing in major new clients from the media, retail and financial services sector.\nMost recently, a top-10 financial services company engaged Acxiom to build their unified enterprise data layer which again shows the strength and depth of Acxiom's technology expertise.\nDuring Q3, Kinesso launched -- we are calling the Kinesso Intelligence Identity product also called as Kii and this is a new identity solution that works across the open web as well as the walled gardens and is already live with clients across a broad range of verticals.\nAlong with IPG Mediabrands, the Trade Desk is among the first media partners using Kii and the launch comes at a particularly important moment as brands and agencies work to create and bolster privacy first identity solutions that can assure addressability as third-party cookies and mobile ad ideas begin to be phased out.\nKii can match our brands first party CRM data and map it to key identifiers significantly increasing match rates and reducing the need for third-party onboarders.\nWhen it comes to the strength of our brands in the creative advertising space, McCann, FCB and MullenLowe continued to distinguish themselves this quarter.\nMcCann Worldgroup was named Global Network of the Year at the 2021 Gerety awards which recognizes the best creative communications from the female perspective.\nAlso notable McCann Worldgroup named a new President and Global Chief Creative Officer who joins us from Nike where he served in senior brand marketing and creative leadership roles for more than 20 years, most recently leading Nike's men's brands globally.\nDuring his tenure at Nike, he was responsible for many of the world's best known and most iconic campaigns across a range of marketing disciplines and channels.\nAt FCB, the agency at Chicago office was ranked as the top creative agency in North America in the Lion's Creativity Report.\nIn that same report, FCB was ranked among the top networks in the world and FCB was also named North American Agency of the Year at the 2021 New York Festival Awards.\nMullenLowe was named the second most effective agency at the recent U.S. Effie Awards.\nAnd MullenLowe Group was named the number 2 most effective network globally, in both cases punching well above its weight against larger competitors.\nDuring the quarter, the agency won the TJ Maxx creative account and just this week Mediahub won 3 Adweek Media Plan of the Year's awards as well as seeing it's U.K. office when global media duties [Phonetic] for Farfetch which is a luxury fashion e-commerce brand.\nR/GA launched what they're calling a direct to avatar capability and that's going to create virtual stories for brands within metaverse platforms and that really stakes out new territory in direct to consumer sales.\nOn the growth front, R/GA added projects for digital forward partners like Tonal, Slack, CBS and Roku.\nHuge also launched a new commerce offering which we call the experienced stack of the future, and that's a tool that consolidates various elements of SaaS into an integrated growth solutions for brands.\nI think we're also going to see the agency's newly appointed CEO to further his plans to infuse data into Huge's core offerings.\nIPG's DXTRA growth in the quarter was broad based and it benefited from the return of live events.\nJack Morton won new client assignments with Amazon and Twitch and along with Octagon Sports and Entertainment was listed among event marketers ranking of the top 100 event agencies of 2021.\nAudio social media app Clubhouse added Golin as its global agency, lead agency.\nWeber was named the Supplier of the Year by GM and security software company McAfee also named Weber Shandwick its global agency of record to help redefine the firm as a consumer brand.\nLastly, Weber launched a media security center in partnership with Blackbird AI to address emerging information bridge and this is an offering that's built to offer solutions to what business leaders say is a really leading reputational issue, which is the spread of misinformation and disinformation.\nDuring the quarter, we also saw continued positive momentum at our U.S. independent agencies.\nThe Martin Agency won Hasbro's Nerf brand of products.\nCarmichael Lynch was named Strategy and Creative Lead for H&R Block where he will take on responsibility for strategy, creative and social media as well as public relations and Deutsch LA added energy drinks brand, A SHOC to its roster.\nAll in, we are in a positive position from a net new business standpoint for the year and our new business pipeline continues to be active.\nAs it's typical at this time, we don't have full visibility and project work as we head into the fourth quarter which will include the crucial holiday shopping season.\nNow in line with the growth we're seeing across much of the portfolio, our companies are adding staff with the requisite contemporary skillsets as well as expertise.\nSo hiring is yet to fully keep pace with a very strong growth we've seen to date this year.\nWe began seeing travel restrictions lifted in certain key markets as infection rates decline and we fully continue to use technology and practices developed during the pandemic to reduce travel and other carbon intensive parts of our business where and as appropriate but we believe that some of what we can call standard cost of doing business will return in Q4 and in larger measure in 2022.\nEarlier on the call, we shared with you our perspective on the full year and our updated expectation that we will deliver approximately 11% organic growth and adjusted EBITDA margin of approximately 16.8% for the full year 2021.\nThat view is predicated as we indicated on the assumption that will continue to be a reasonably steady course of macro recovery and we're very proud to have delivered a very strong 9-months thus far this year, on top of the most challenging comps in the industry.\nCurrent performance, combined with the continued execution of our long-term strategy should continue to be significant drivers for sustained value creation for all of our stakeholders.\nWe're committed to sound financial fundamentals as well as continuing to grow our dividend as we've consistently done, including through the pandemic and returning to our share repurchase program also remains a priority.\nAs we turn our focus on planning for the upcoming year, we will of course, keep you updated on our progress on that front.\nWe're confident as well that the investments in talent and capabilities we continue to make, position IPG well for the future.\nAs Ellen said, this is an unprecedented time, but we have a highly relevant and differentiated set of offerings underpinned by a sound financial foundation and a strong balance sheet.\n",
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"content": "compname posts q3 adjusted earnings per share $0.63.\nq3 adjusted earnings per share $0.63.\nq3 net revenue was $2.26 billion, an increase of 15.7% from a year ago.\nq3 diluted earnings per share was $0.60.\ninterpublic group of companies - upgrades expectation for fy 2021 organic growth of approx 11.0% and adjusted ebita margin of approximately 16.8%.\nexpect that we can deliver fy organic growth for the year of approximately 11%.\nexpect to achieve fy adjusted ebita margin of approximately 16.8%.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: We will also present certain non-U.S. GAAP financial information.\nA reconciliation of those figures to U.S. GAAP financial measures is available on our website.\nRelative to the Ilim joint venture and Graphic Packaging investment, Slide two provides context around the financial information and measures presented on those entities.\nWe will begin our discussion on Slide three.\nInternational Paper delivered solid earnings and strong cash generation in the first quarter.\nOur mill and converting system performed well to mitigate the significant impact of the winter storm and support a strong customer demand across all of our packaging channels.\nWe see momentum building, continuing to build across our three businesses with very strong demand for corrugated packaging and containerboard and solid demand for absorbent pulp.\nAnd in papers, we're seeing an improved supply demand backdrop in all of our key geographies.\nOur capital allocation in the first quarter, we repaid $108 million of debt and we returned $331 million to shareholders, including $129 million of share repurchases.\nOur performance again demonstrates the agility and resilience of International Paper to perform well across many different circumstances.\nWe're passing the 1-year mark of the global pandemic, and I could not be any prouder of the commitment of our employees to take care of each other and take care of our customers.\nThe vast majority of our 48,000 team members work in our mills and conversion plants each and every day, and their health and safety remains our most important responsibility.\nWe also made solid progress on the spin-off of our Printing Papers business, which we expect to complete late in the third quarter this year.\nOur team is also making strong progress to develop and deliver multiple streams of earnings initiatives to achieve the $350 million to $400 million in incremental earnings and accelerated growth by the end of 2023.\nAs we work to build a better IP, we remain laser-focused on delivering superior solutions to our customers, executing well and meeting our commitments to our shareowners and our other stakeholders.\nTurning now to Slide four, which shows our first quarter results.\nWe delivered EBITDA of $730 million and free cash flow of $423 million despite the $80 million pre-tax earnings impact from the winter storm in the Southern U.S. Revenue increased by more than $100 million sequentially, primarily driven by price realization in our Packaging and Global Cellulose Fibers businesses.\nAnd again, free cash flow is strong with a continued focus on running our businesses well, controlling our cost and actively managing our working capital.\nI'll start with the quarter-over-quarter earnings bridge on Slide five.\nFirst quarter operating earnings were $0.76.\nThe winter storm impacted pre-tax earnings by $80 million or a $0.15 impact to operating EPS.\nWe're still in the very early stages of the insurance process and do not have a recovery estimate at this time.\nLooking at the bridge, price/mix was strong driven by prior period price flow-through and packaging and cellulose fibers.\nVolume was essentially flat with continued strong demand for corrugated packaging and absorbent pulp.\nOverall papers volume continues to recover even though we saw the expected seasonal decline for papers in Brazil in the first quarter.\nOperations and costs were favorable.\nMill and box system performance was solid and helped mitigate the impact of the winter storm, which was a cost headwind of $55 million to operations.\nMaintenance costs increased sequentially, and we expect to complete about 65% of our maintenance outages in the first half of the year.\nInput costs were unfavorable, which included a $20 million cost impact from the storm, mostly for energy and raw materials such as starch and adhesives.\nOverall, we're seeing higher costs for recovered fiber, energy, chemicals and distribution, which we expect to continue in the second quarter.\nTransportation conditions are challenging, and we're experiencing significant rail, truck and ocean transportation congestion.\nHigher corporate expenses were driven by a noncash foreign exchange loss on intercompany loans, and lower equity earnings are partly attributed to the reduced ownership position in GPK.\nTurning to the segments, and starting with Industrial Packaging on Slide six.\nWe continue to see strong demand across all of our channels, including box, sheets and containerboard.\nFor the quarter, volume was essentially flat.\nWe lost 145,000 tons of containerboard production due to the winter storm.\nAlthough our mills and box plants in the region recovered quickly, the storm did impact sales in the quarter.\nWe had nearly 30 box plants in Texas, Louisiana and Mississippi affected by the storm, which impacted our box shipments in the quarter.\nPrice and mix was strong.\nOur November increase is essentially implemented fully with the $131 million first quarter realization.\nAnd I would add, this is one of the fastest implementations that we've seen.\nOperations and cost includes about $55 million impact from the winter storm, about half of which is due to unabsorbed fixed costs and the balance is related to repairs and higher distribution costs.\nOverall, mill and box plant performance was solid, and we leveraged our system to support strong customer demand across all of our channels.\nMaintenance outage costs increased sequentially.\nWe did defer about $30 million of maintenance outages from the first to the second quarter due to the significant production loss resulting from the winter storm.\nWe expect to complete about 75% of our planned maintenance outages for packaging in the first half of the year.\nInput costs were a significant headwind in the quarter, including about $20 million related to the winter storm due to higher energy, distribution and raw materials in our mill system and box plants.\nHigher recovered fiber costs were another significant headwind in the quarter.\nWe expect continued cost pressure for recovered fiber, energy distribution in the second quarter, and we're still seeing the lingering effects in certain chemicals produced in Texas and Louisiana as suppliers recover from the winter storm.\nTurning to Slide eight.\nAs we enter the second quarter, we're seeing continued strong demand across all of our channels.\nU.S. and export containerboard demand is strong with low inventories in all regions.\nOur first quarter shipments were impacted by the significant production loss resulting from the storm.\nWe're working with our customers to recover from extensive backlogs.\nIn our U.S. box system demand remains robust as more states start lifting restrictions.\nE-commerce, again grew at a strong double-digit pace in the first quarter, and we believe the majority of the accelerated consumer adoption in this channel is permanent.\nWith states starting to reopen, we're also seeing improved demand in segments with greater exposure to restaurant and foodservice channels, such as produce and protein, although we're still not back to pre-COVID levels.\nNondurables, excluding food and beverage, represents about 30% of U.S. box demand across a wide range of consumer and industrial products.\nThis segment is benefiting from strong consumer demand in the broad manufacturing sector recovery.\nAnd lastly, demand for durable goods, which had the immediate pullback due to COVID is benefiting from a healthy housing market.\nWe're well positioned and have the scale and footprint to serve just about every corrugated segment in a meaningful way, and our packaging team continues to focus on delivering superior packaging solutions to help our customers succeed.\nTurning to Slide eight.\nI'll provide an update on the progress we're making in our EMEA packaging business.\nOur objective is to bring this business back to sustainable mid-teen margins and generate returns above our cost of capital.\nWe're well on our way to achieving our goal.\nIn the first quarter, we improved adjusted EBITDA by nearly $20 million compared with last year.\nThe Madrid mill is fully ramped, and we have more integration and cost opportunities available.\nWe're integrating our world-class lightweight recycled containerboard with our box network in Southern Europe to provide customers with a broader array of packaging solutions.\nWe've improved our footprint in the Iberian Peninsula through selective acquisitions, including two box plants in Spain acquired at the end of the first quarter.\nThese acquisitions provide additional integration opportunities with the Madrid mill.\nAnd more importantly, they enhance our commercial capabilities in the region.\nWe continue to make progress with our box system performance and have more opportunity ahead.\nAll our plants have clear commercial and operational plans, and we're leveraging the skills and resources from across the company to deliver on our commitments.\nThe map on the slide shows our packaging footprint in Europe after the sale of our Turkey packaging business, which we expect to close in the second quarter.\nAfter the sale, the EMEA packaging business will have two recycled containerboard mills, 21 box plants and two sheet plants.\nAnd again, our commitment is to bring this business to sustainable returns above our cost of capital.\nMoving to Global Cellulose Fibers on Slide nine.\nPrice and mix was favorable with price realization accelerating across all pulp segments in the first quarter.\nVolume was moderately lower due to the shipping delays related to port congestion.\nDemand for fluff is solid and we have healthy backlogs.\nOperations and costs improved sequentially, driven by the nonrepeat of the $20 million write-off in the fourth quarter as well as solid operations and good cost management.\nThese improvements were partially offset by about $10 million of higher seasonal energy consumption and an FX loss at our mill in Canada.\nMaintenance outage costs decreased as expected, and input costs increased due to higher wood costs in the Mid-Atlantic region as well as higher energy costs.\nDemand improved as we entered the year and the end-use demand signals for absorbent hygiene products is healthy.\nTurning to Printing Papers on Slide 10.\nOur business -- our papers business has demonstrated outstanding resilience throughout the past year.\nOur performance reflects the talent and commitment of our team, the scale and capabilities of our global footprint and the strength of our highly valued brands.\nWe continue to see steady recovery in demand across all regions, which we expect will accelerate with broader return to office and return-to-school activity.\nI'd also add that we've seen significant improvement in supply demand dynamics both within the U.S. and outside the U.S. Looking at our first quarter performance, price and mix was stable across the segment.\nVolume decreased sequentially due to the lower seasonal demand in Brazil and Russia as expected.\nIt also meant that the export supply chains are stretched in most regions.\nOperations and costs improved on solid operations and good cost management, as well as a favorable FX in Brazil of about $10 million.\nFixed cost absorption improved with economic downtime decreasing by 40,000 tons sequentially across the system.\nMaintenance outages increased modestly, as expected, and input costs increased primarily due to higher wood and energy costs in North America.\nLooking at Ilim on Slide 11.\nThe joint venture delivered $49 million in equity earnings in the first quarter with an EBITDA margin of nearly 35%, driven by higher average pricing.\nVolume decreased sequentially, primarily due to fewer shipping days because of the Chinese New Year, as well as the impact of tight shipping capacity in China.\nUnderlying demand remained strong as we enter the second quarter.\nAnd lastly, in April, we saved a $144 million dividend payment from Ilim, which is $44 million higher than the estimate we provided last quarter.\nNow we can turn to the outlook on Slide 12, and starting with Industrial Packaging.\nWe expect price and mix to improve by $75 million on realization of our March 2021 price increase.\nVolume is expected to decrease by $10 million on lower seasonal demand in Spain and Morocco as the citrus season winds down.\nOperations and costs are expected to improve by $15 million, with the full recovery of the winter storm impact partially offset by higher incentive compensation accruals related to a stronger outlook.\nStaying with Industrial Packaging, maintenance outage expense is expected to increase by $77 million.\nAnd input costs are expected to increase by $20 million due to higher OCC, energy, raw materials and distribution costs.\nIn Global Cellulose Fibers, we expect price and mix to increase by $100 million on realization of prior price movements.\nVolume is expected to increase by $5 million.\nOperations and costs are expected to decrease earnings by $10 million.\nMaintenance outage expense is expected to decrease by $10 million, and input costs are expected to be stable.\nTurning to Printing Papers.\nWe expect price and mix to increase by $25 million.\nVolume is expected to increase by $5 million.\nOperations and costs are expected to decrease earnings by $10 million due to the nonrepeat of foreign currency gain in Brazil during the first quarter.\nMaintenance outage expense is expected to increase by $22 million, and input costs are expected to increase by $5 million.\nAnd under equity earnings, you'll see the outlook for our Ilim joint venture.\nTurning to Slide 13.\nI want to take a moment to update you on our capital allocation actions in the first quarter.\nWe're committed to maintaining a strong balance sheet.\nWe have no significant near-term maturities.\nAnd in the first quarter, we reduced debt by $108 million.\nWe also returned $331 million to shareholders, including $129 million of share repurchases, which represented about 2.6 million shares at an average price of $50.28.\nWe acquired two box plants in Spain at the end of the first quarter.\nYou can expect M&A to continue to focus primarily on bolt-on opportunities in North America and Europe.\nAnd lastly, in the first quarter, we monetized about $400 million of our stake in Graphic Packaging.\nAfter that transaction, we now hold about 7.4% ownership in the partnership.\nTurning to Slide 14.\nAs we enter the second quarter, I'm mindful that we're still in the midst of a global pandemic, and there is still significant uncertainty in the geographies and markets that we operate.\nHaving said that, we see momentum building in our three businesses.\nWe continue to see very strong demand for corrugated packaging and containerboard in North America and Europe.\nWe're also seeing solid demand for absorbent pulp with more favorable supply and demand dynamics as paper-grade pulp demand recovers.\nIn Printing Papers, we're seeing a steady recovery in demand.\nAnd in areas where schools and offices have reopened, we're seeing a step change improvement.\nOverall, we're seeing a much better supply/demand backdrop.\nWe expect price flow-through from prior price increases across our three businesses.\nWe expect margins to improve, even as we manage through the impact of higher input costs for recovered fiber, energy and transportation.\nIn addition, we expect productivity and other cost initiatives to offset general inflation.\nAll of this contributes to a more favorable outlook for 2021.\nI just want to take a moment to reflect on what has now been a full year of living and working in a global pandemic environment.\nWhen we shared our first quarter performance last year, we talked about all the protocols we quickly put in place to keep our employees and contractors safe so that we could continue taking care of our customers.\nWe stayed diligent about adhering to those protocols, and we will remain steadfast for as long as it takes to get fully and safely past the pandemic.\nWe continue to operate in this environment with a view toward the short-term and long-term success and sustainability of International Paper for all of our stakeholders, with an unwavering commitment to the health and safety of our employees and contractors, to understanding and taking care of our customers' needs as they also adapt to rapid change, to supporting the critical needs in our communities and to building a better IP for all of our stakeholders.\nSince the pandemic began, not a day goes by that I don't think about the commitment of our employees, and especially our frontline teams for their ability to adapt well and perform at a high level across circumstances and geographies.\n",
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"content": "q1 adjusted non-gaap operating earnings per share $0.76.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: We will also present certain non-U.S. GAAP financial information.\nA reconciliation of those figures to U.S. GAAP financial measures is available on our website.\nLastly, relative to the Ilim joint venture, slide two provides context around the joint venture's financial information and statistical measures.\nWe will begin our discussion on slide three.\nIn the third quarter, International Paper grew revenue, earnings and margins, and we continued to generate strong cash from operations.\nWe continue to see strong demand for corrugated packaging and solid demand for absorbent pulp.\nWe're making strong progress on price realization from our prior increases.\nHaving said that, the supply chain and input cost environment remains very challenging and it impacted our results much more than we anticipated.\nThe widespread supply chain constraints limited our ability to capture the full opportunity that comes with the strong level of demand that we're seeing.\nOur mills performed well.\nHowever, stretched supply chains impacted volume in our Industrial Packaging and Global Cellulose Fibers businesses.\nContainerboard inventories in our packaging network improved in the latter part of the third quarter, and we are in a much better position as we enter the seasonally strong fourth quarter.\nInput costs in the third quarter rose by about $230 million or $0.46 per share, which was more than 2 times what we had anticipated, with cost pressure in just about every category.\nOur Ilim joint venture delivered another strong performance, with equity earnings of $95 million.\nOn capital allocation, we continue to make significant progress strengthening our balance sheet.\nIn the third quarter, we reduced debt by $235 million.\nI would also highlight that our pension plan is fully funded.\nThis is a significant milestone that further strengthens the company.\nIn the third quarter, we also returned $411 million to our shareholders, including $212 million of share repurchases.\nOn October 1, we completed the spin-off of the Printing Papers business.\nIP received a $1.4 billion payment from Sylvamo, and we retained a 19.9% interest in the new company, which we intend to monetize within one year.\nThe teams did an outstanding job executing the transaction in a very challenging environment.\nWe are laser-focused on strengthening the company and building a better IP for all of our stakeholders.\nTim and I will share more about the progress we're making during today's discussion.\nTurning now to slide four.\nWe delivered EBITDA of $938 million and free cash flow of $519 million in the third quarter, which brings our free cash flow nearly $1.6 billion year-to-date.\nRevenue increased by nearly $600 million or 12% when compared to last year.\nAnd if we exclude the Printing Papers business, third quarter revenue grew by 14% as compared to last year.\nWe also expanded our margins in the third quarter with realization of our prior price increases.\nWe expect continued margin expansion in the fourth quarter.\nMoving to the quarter-over-quarter earnings bridge on slide five, third quarter operating earnings per share were $1.35 as compared to $1.06 in the second quarter.\nPrice and mix improved by $0.43 per share, with strong price realization across the three businesses.\nSupply chain constraints limited our ability to capture the full benefit of a strong demand backdrop.\nWe replenished our containerboard inventories in the latter part of the third quarter, which positions us well entering the seasonally strong fourth quarter.\nIn our cellulose fibers business, demand for absorbent pulp is solid.\nOur pulp shipments were constrained due to significant port congestion and our backlogs remain stretched.\nOur mills performed well.\nOperating costs benefited by about $35 million of onetime items, including the sale of nitrogen credits and insurance recovery related to the winter storm earlier this year.\nSupply chains are stretched, and transportation costs are elevated for both inbound materials and outbound shipments.\nEvery mode of transportation is tight, and we expect the transportation environment to remain tight for the foreseeable future.\nMaintenance costs decreased as expected.\nInput costs rose by $0.46 per share or about $230 million, which is more than double what we had anticipated for the quarter.\nHigher fiber and energy cost accounted for about 80% of this increase.\nCorporate expenses were essentially flat.\nTax expense was lower by $0.04 per share in the third quarter, with an effective tax rate of 18% as compared to 21% in the second quarter.\nMost of this was related to adjustments to our federal tax provision after finalizing our 2020 tax return in the third quarter.\nEquity earnings were lower sequentially following the final monetization of our stake in GPK in the second quarter.\nTurning to the segments, I'll start with Industrial Packaging on slide six.\nWe are seeing strong demand across all channels, including boxes, sheets and containerboard.\nThird quarter shipment across our U.S. channels improved by 1.3% year-over-year.\nHowever, box shipments were hampered by low containerboard inventories and stretched supply chains.\nWe successfully replenished inventories across our box system in the latter part of the third quarter, which puts us in a much better inventory position as we enter the seasonally strong fourth quarter.\nWe expect supply chains to remain stretched for the foreseeable future, which requires us to carry more inventory given the slower velocity across our network.\nTo put the velocity into context, our mill-to-box plant containerboard supply chain is currently running three to four days longer than our normalized flow, and in some lanes, even longer.\nTaking a look at third quarter performance.\nPrice and mix was strong.\nOur March increase is essentially fully implemented, with $128 million of price realization in the third quarter.\nVolume was lower by $45 million.\nBox shipments in North America were impacted by low containerboard inventory, especially in the first half of the quarter.\nVolume in EMEA was seasonally slower, as expected, representing about $10 million of the sequential decrease.\nOperations and costs were essentially flat sequentially.\nOur mill system performed at 100% and provided much needed inventory relief to our box system.\nIn the third quarter, we also received insurance proceeds of about $15 million related to the winter storm.\nThese benefits were largely offset by unplanned maintenance costs.\nWe are not seeing any relief on supply chain costs and are managing risk associated with transportation capacity and congestion across the rail and truck networks.\nInput costs increased by nearly $190 million in the quarter.\nOCC and wood fiber accounted for $120 million of that total.\nEnergy accounted for another $45 million, primarily in our recycled containerboard mills and our box plants.\nTaking a closer look at fiber, our North American packaging fiber mix is around 65% virgin wood and 35% OCC.\nWood fiber costs rose sharply in the third quarter due to continued wet conditions across the Southern and Eastern regions as well as inbound transportation constraints.\nWood inventories are below our control limits, and we expect difficult operating conditions again in the fourth quarter.\nWe expect demand for OCC to remain strong, with no cost relief even as generation gradually improves.\nAs a reminder, we consume about 4.5 million tons annually in the U.S. and nearly 0.5 million tons in EMEA.\nMoving to Global Cellulose Fibers on slide seven.\nThe business delivered earnings of $96 million.\nThird quarter segment earnings included $13 million from the Sylvamo subsidiary and the Kwidzyn mill, which are no longer part of our operations in the fourth quarter.\nLooking at our sequential earnings, price and mix improved by $59 million.\nVolume improved by $11 million sequentially.\nDemand for fluff pulp, which represents about 75 of our -- 75% of our mix remained solid.\nOur shipments continue to be negatively impacted by unprecedented port congestion and vessel delays.\nKeep in mind that we export about 90% of our volume in this business.\nThe majority of this is fluff pulp that ships in containers which is where port congestion is especially challenging.\nWe have systems in place to manage through this environment.\nHowever, vessel delays and higher supply chain costs are expected to continue for the foreseeable future.\nOur mills performed well.\nWe also benefited from about $20 million of onetime items related to the sale of nitrogen credits and lower corporate costs in the quarter.\nThese benefits were largely offset by $50 million of higher supply chain costs for export operations.\nMaintenance outage costs decreased sequentially, while input costs were a significant headwind in the third quarter, driven primarily by higher wood and chemical costs.\nTurning to Printing Papers on slide eight.\nThe business delivered earnings of $106 million in the third quarter, with strong momentum ahead of the spinoff.\nThird quarter results includes the Kwidzyn mill until the sale on August 6.\nPerformance in the third quarter was strong with continued demand recovery globally and price realization outpacing rising input costs.\nNow that the spin-off is complete, the historical results of the business will be treated as a discontinued operation with a full recast of previous periods.\nAnd going forward, activity pertaining to the Printing Papers offtake agreement for Riverdale and Georgetown will be included in our Packaging and Global Cellulose Fiber segment earnings.\nLooking to the Ilim results on slide nine.\nThe joint venture delivered another quarter of strong performance with equity earnings of $95 million and an EBITDA margin of 44%.\nSolid price realization for pulp and container board were partially offset by lower volume due to high planned maintenance outages in the quarter as expected.\nVolume in the fourth quarter is expected to improve.\nHowever, shipping capacity remains tight and supply chains to China are stretched.\nSo now we'll turn to the fourth quarter outlook on slide 10.\nIn Industrial Packaging, we expect price and mix to improve by $70 million, mostly on the realization of our August 2021 price increase.\nThat includes a negative mix impact as we start to recover some export backlogs.\nVolume is expected to improve by $65 million sequentially on strong seasonal demand even as we cut down free shipping days.\nOperations and costs are expected to improve by $5 million, with the North American system benefiting from improved containerboard inventory levels, partly offset by onetime benefits in the third quarter.\nStaying with Industrial Packaging, maintenance outage expense is expected to increase by $3 million.\nInput costs are expected to increase by $50 million, mostly on the flow-through of higher third quarter input costs for fiber and energy.\nIn Global Cellulose Fibers, we expect price and mix to be stable.\nVolume is expected to decrease by $5 million.\nOperations and costs are expected to decrease earnings by $25 million due to the non-repeat of onetime benefits in the third quarter.\nMaintenance outage expense is expected to increase by $37 million.\nAnd input costs are expected to increase by $15 million on higher wood and energy costs.\nOn our outlook slide, we include the sequential earnings adjustment associated with the Printing Papers' spin and Kwidzyn sale for a total of $134 million across the three segments.\nWith regard to cash flow, I would note that our cash from operations in the second half 2021 includes cash taxes of about $450 million associated with the various monetization transactions from earlier this year.\nRemember that the proceeds for these transactions are not captured in our free cash flow.\nHowever, the resulting cash taxes are included in free cash flow and the majority will be paid in the fourth quarter.\nTurning to slide 11, I'll take a moment to update you on our capital allocation actions in the third quarter and what you can expect from International Paper following the recent paper spin.\nWe will maintain a strong balance sheet.\nAs we previously said, we're comfortable taking our leverage below the stated target of 2.5 times to 2.8 times debt-to-EBITDA on a Moody's basis.\nIn the third quarter, we reduced debt by $235 million, which brings our year-to-date debt reduction to $1.1 billion.\nWe will also complete an additional $800 million of debt repayment by the end of this month.\nTaking a look at pension, we are very pleased with the performance of our plan this year.\nOur qualified pension plan is fully funded, and we feel really good about the actions we've taken to improve performance and derisk the plan.\nReturning cash to share owners is a meaningful part of our capital allocation framework.\nIn the third quarter, we returned $411 million to share owners through dividends and share repurchases.\nShare repurchases were $212 million, which represented about 3.6 million shares at an average price of $59.13.\nAlso earlier this month, the Board of Directors approved an additional $2 billion share repurchase program, which raises our total available authorizations to $3.3 billion.\nWe will continue to execute on that authorization in a manner that maximizes value for share owners over time.\nWith regard to the dividend, our policy does not change.\nWe are committed to a competitive and sustainable dividend, with a payout of 40% to 50% of free cash flow, which we will continue to review annually as earnings and cash flow grow.\nEarlier this month, we decreased our dividend by 9.8% to $1.85 per share annually, following the spin-off of the papers business.\nThis adjustment is well below the 15% to 20% proportion of cash previously generated by the papers business as we outlined when we announced the spin last year.\nInvestment excellence is essential to growing earnings and cash generation.\nWe expect Capex in 2021 to be around $600 million, which is less than our original plan, primarily due to the timing of equipment delivery and a more challenging contract labor environment.\nWe will continue to proactively manage Capex and have the ability to increase or pull back if circumstances warrant.\nYou can expect strategic capital to be deployed mostly to our packaging business to build up capability and capacity needs to drive profitable growth.\nWe will continue to assess disciplined and selective M&A opportunities to supplement our goal of accelerating profitable growth.\nYou can expect M&A to focus primarily on bolt-on opportunities in our packaging business in North America and Europe.\nAny potential opportunity we pursue must be compelling value for our shareholders.\nI'm on slide 12 now.\nLet's talk about the future and how we're going to accelerate value creation for IP and our shareholders.\nWe are building a better IP.\nWith the recent spin-off of the papers business, IP is really a corrugated packaging-focused company.\nWe are significantly less complex with a much narrower geographic footprint.\nIn addition, we have strengthened the company's financial footing, as Tim has described, significantly over the past few years.\nOur focused profile and financial strength will further enable us to make sustainable, profitable growth and accelerate value creation.\nAs I said earlier in the process, we've been actively working on multiple streams of earnings initiatives over the past year.\nWe established a dedicated team that's been working closely with our businesses and external partners over the past year to identify, develop and pilot a wide range of highly attractive opportunities which are now moving to scaled implementation.\nWe will deliver $200 million to $225 million of gross incremental earnings in 2022.\nThat represents more than 2 times the dis-synergies resulting from the spin-off.\nOur value drivers ramp up in '23 and 2024, with net incremental earnings of $350 million to $400 million in 2024.\nThese include around $300 million in cost reduction initiatives and at least $50 million through commercial and investment initiatives.\nOur earnings catalysts are front-loaded, with significant benefits coming in 2022 from streamlining and simplifying the company and scaling a wide range of process optimization initiatives.\nStreamlining and simplifying is all about agility and effectiveness.\nThe organization is being designed to support a packaging-focused company with a more focused footprint.\nWe are aligning our talent to accelerate performance.\nWe've also examined our processes to increase efficiency and reduce costs.\nWe are implementing and scaling new approaches for areas such as sourcing, supply chain and operations by leveraging technology and data analytics.\nLet me give you a few examples of these value drivers for 2022.\nWe redesigned our sourcing process for our 200 converting facilities.\nWe're using data analytics and third-party partners to deploy an automated catalog of sourcing options for operating and repair materials in our box plants.\nThis program will deliver meaningful value in 2022.\nWe're also using data analytics to unlock capacity in our converting facilities by improving our planning and order execution process.\nThis includes, for example, how we aggregate and plan smaller orders and how we can optimize our manufacturing mix in each plant and each network of plants.\nWe've also developed a new application to further optimize containerboard replenishment to our box plants.\nThe system anticipates potential roll inventory stock-ups, which have been a big issue for us this year, and recommends the lowest-cost replenishment option to reduce premium freight.\nThere are many initiatives that contribute to our value drivers and the savings.\nWe have really good line of sight on the expected benefits in 2022 and the ramp-up as we move forward.\nOur 2022 value drivers not only deliver meaningful benefits in the near term, they are also setting the foundation for IP going forward to accelerate commercial and investment excellence to drive profitable growth.\n",
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"content": "q3 adjusted non-gaap operating earnings per share $1.35.\nqtrly printing papers operating profits profits were $106 million versus $63 million.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: And as a result of this performance and an improved outlook for the rest of the year, we have once again raised our guidance.\nThe 2021 guidance that we provided you last quarter was already within reach of our original pre-COVID plans for 2021.\nOur revised guidance today significantly exceeds those original plans.\nIn many ways 2020 was a reset year for our company and also for the industry.\nWe've been saying for a long time that the traditional timelines for the development of new drugs are too long.\nThe speed at which COVID vaccines were developed in 2020 has obviously raised the bar in terms of what expectation should be.\nThe crisis accelerated the adoption of new technologies and we believe it will force a lasting change in how innovative medicines are developed and commercialized.\nAll of these has made IQVIA even more relevant to our clients and has highlighted the power of our differentiated offerings.\nThe deep client engagements that we had during the pandemic demonstrated how uniquely positioned we are to bring new insights and expertise that can improve drug development and commercial timelines.\nWhat is also becoming clear is that there is a lot of pent-up demand due to one, the many trials that were slowed down or temporarily pushed to the right.\nAnd two the trials that did not get started as they were crowded out by the COVID resolution efforts on which everyone was focused.\nThis pent-up demand across therapy areas combined with record levels of biotech funding provide a very strong backdrop for our industry.\nAs a result of these favorable conditions we started the process of revisiting our vision 2022 goals.\nWe plan to update you later this year on our vision '22 progress and lay the groundwork for the next phase of our journey.\nWe may do this at an investor conference later this year, especially if we are able to hold one in person, so stay tuned for more information.\nSo now, let's review the quarter.\nRevenue for the first quarter grew 24% on a reported basis and 21% at constant currency was $209 million above the high end of our guidance range, but about half of this beat came from strong operational performance and half was from higher pass-throughs.\nFirst quarter adjusted EBITDA grew 32%, reflecting our revenue growth and productivity measures.\nThe $69 million beat above the high end of our guidance range was entirely due to the stronger organic revenue performance.\nFirst quarter adjusted diluted earnings per share of $2.18 grew 45%.\nThe beat here entirely reflect the adjusted EBITDA drop-through.\nA little bit more color on the business.\nOur commercial technology presence continues to grow as we launch new offerings in the market.\nDuring the quarter, a top 10 pharma client deployed our next best action solution in 14 countries.\nThis tool is a SaaS-based technology platform that optimizes our client's sales force effectiveness.\nIt increases the success of their marketing activities by providing automated sales call recommendations to the field based on advanced artificial intelligence and machine learning algorithms.\nOur base OCM -- CRM win rates remain strong.\nWe added another 10 new clients this quarter and now have 150 clients deploying about 70,000 users.\nOur eCOA technology platform or Electronic Clinical Outcomes Assessment tool, which is used by our real world as well as R&DS team is also experiencing strong demand.\nThis cloud-based platform utilizes a user-friendly interface to collect clinical data directly from patients.\nWe launched this solution during 2019 and the team is seeing strong user acceptance.\nTo-date, we've been awarded over 125 studies with over 300,000 patients enrolled and over 4 million surveys completed.\nMoving now to R&DS.\nWe continue to build on our strong bookings momentum in our R&DS business.\nIn the first quarter, we achieved a contracted net book-to-bill ratio of 1.41, including pass-throughs and 1.41 excluding pass-throughs.\nAt March 31st, our LTM contracted book-to-bill ratio was 1.52 including pass-throughs and 1.45 excluding pass-throughs.\nThese numbers are although more impressive, obviously, given our strong revenue growth.\nOur contracted backlog in R&DS including pass-throughs grew 18.3% year-over-year to $23.2 billion at March 31, 2021.\nAs a result, our next 12 months revenue from backlog increased by over $600 million sequentially to $6.5 billion, that's up 31.1% year-over-year.\nThe R&D team is building on the success we experienced in 2020 with our hybrid virtual trial offering or the term what is now decentralized trials.\nIn the first quarter we won decentralized trials in new therapeutic areas, including cardiovascular and metabolic disorders.\nWe are working with 5 of the top 10 pharma client and to-date we've recruited almost 170,000 patients using our advanced decentralized trial solutions.\nFinally, you saw that on April 1, we completed the acquisition of the remaining interest in Q Squared Solutions from Quest Diagnostics.\nAs you know Q Squared is an industry-leading laboratory service provider for clinical trials with global capabilities across safety, bioanalytical, vaccine, genomics, and bioanalytical testing along with best-in-class technology in bio specimen and consent lifecycle management.\nThis transaction streamline strategic decision making for us and gives us the flexibility to build out greater bioanalytical, genomic and biomarker capability, as we see increased attractive growth opportunities in this expanding market.\nAs already mentioned, this was a very strong quarter.\nWe'd start first by giving you some more detail on revenue.\nFirst quarter revenue of $3,409 million grew 23.8% on a reported basis.\nAnalytics Solutions revenue for the first quarter was $1,348 million, which was up 20.7% reported and 17.1% at constant currency.\nR&D Solutions first quarter revenue of $1,868 million improved 29.6% at actual FX rates, and 28.1% at constant currency.\nPass-through revenues were a tailwind of 770 basis points to the R&DS revenue growth rate in the quarter.\nCSMS revenue of $193 million was down 1.5% reported and 4.1% on a constant currency basis.\nMoving down to P&L, adjusted EBITDA was $744 million for the quarter.\nMargins expanded 140 basis points despite significant headwinds from higher pass-through revenue and lower margin COVID work.\nGAAP net income was $212 million and GAAP diluted earnings per share were $1.09.\nAdjusted net income was $425 million for the first quarter and adjusted diluted earnings per share grew 45.3% between [Technical Issues] $2.18.\nR&D Solutions delivered another exceptional quarter of net new business.\nBacklog was up 18.3% year-over-year to $23.2 billion at March 31.\nNext 12 months revenue as Ari mentioned from backlog grew significantly and currently stands at $6.5 billion, up 31.1% year-over-year.\nAnd of course this metric now includes the first quarter of 2022, which is a further indication that we see the momentum of the business continuing beyond this year.\nNow let's review the balance sheet.\nAt March 31, cash and cash equivalents totaled $2.3 billion and debt was $12.2 billion, resulting in net debt of $9.9 billion.\nOur net leverage ratio at March 31 improved to 3.9 times trailing 12 month adjusted EBITDA, marking the first time since just following the merger that this ratio was below 4 times.\nAnd this is particularly noteworthy, you may recall that in 2019, when we gave you our three year guidance, we committed to delever to 4 turns or below exiting 2022.\nWe're pleased to have achieved this target entering 2021.\nFirst quarter cash flow, free cash flow in particular was very strong.\nCash flow from operations was $867 million, capex was $149 million, resulting in free cash flow of $718 million.\nWe repurchased $50 million of our shares in the quarter, which leaves us with $867 million of share repurchase authorization remaining under the program.\nNow let's turn to guidance.\nYou'll recall that back on April 1, when we announced the acquisition of Quest 40% interest in our Q Squared joint venture, we raised our 2021 earnings per share guidance by $0.12 to reflect the elimination of Quest minority interest in the joint venture's earnings.\nWe wrapped revenue and adjusted EBITDA guidance unchanged, of course because we already consolidated the -- or consolidated the financial of the joint venture prior to the transaction.\nWell, today we're revising our guidance upward again as follows.\nWe're raising our full-year 2021 revenue guidance, both at the low and high end of that range, resulting in an increase of $625 million at the midpoint of the range.\nThe new revenue guidance is $13,200 million to $13,500 million, which represents year-over-year growth of 16.2% to 18.8%.\nThis increased guidance range reflects the first quarter strength and the continued operational momentum that we see in the business.\nAnd also absorbed an FX headwind versus our previous guidance.\nNow compared to the prior year, FX is expected to be a tailwind of about 150 basis point to full-year revenue growth.\nFrom segment perspective, we now expect full year Technology & Analytics Solutions revenue to grow at a low to mid-teens percentage rate and R&D Solutions to grow in the low to mid-20s.\nOur previous expectation that revenue in the CSMS business would be slightly down, remains unchanged.\nWe're also raising our full-year profit guidance as a result of stronger revenue outlook, we've increased it, increased adjusted EBITDA guidance at both the low and high end of the range, resulting in an increase of $133 million at the midpoint.\nOur new full-year guidance is $2,900 million to $2,965 million, which represents year-over-year growth at 21.6% to 24.4%.\nMoving to EPS, I mentioned Q Squared transaction on April 1, as a result of that, we raised our adjusted diluted earnings per share guidance by $0.12 to a new range of $7.89 to $8.20.\nWe're now raising both the low and the high end of that guidance range, resulting in a new adjusted diluted earnings per share guidance of $8.50 to $8.75 or year-over-year growth of 32.4% to 36.3%.\nMoving to detail on P&L, interest expense is expected to be approximately $400 million for the year, operational depreciation and amortization is still expected to be somewhat over $400 million and we're continuing to assume an effective tax rate of approximately 20% for the full year.\nThis guidance assumes that current foreign currency exchange rates remain in effect for the rest of the year.\nNow let's turn to the second quarter guidance, assuming FX rates remain constant through the end of the quarter, second quarter revenue is expected to be between $3,225 million and $3,300 million, which represents reported growth of 27.9% to 30.9%.\nAdjusted EBITDA is expected to be between $690 million and $715 million, which represents reported growth of 42.9% to 48%.\nAnd finally, adjusted diluted earnings per share is expected to be between $2 and $2.10, up 69.5% to 78%.\nSo to summarize, we delivered very strong first quarter results, once again reporting double-digit growth in all key financial metrics.\nThis included revenue growth of over 20% in both our TAS and R&DS segment.\nR&DS backlog improved to $23.2 billion, up 18% year-over-year.\nNext 12 months revenue from that backlog increased to $6.5 billion, up 31% year-over-year.\nFree cash flow was strong again this quarter.\nNet leverage improved to 3.9 times trailing 12 month adjusted EBITDA.\nAnd finally, given the strong momentum we see in the business, we are once again raising our full year guidance for revenue, adjusted EBITDA and adjusted diluted EPS.\nBefore we open up the call up for Q&A, I'd like to make you aware of a couple of leadership changes within IQVIA finance organization.\nAndrew Markwick, who has led Investor Relations function for the past four years very capably, I think you'll agree, is moving on to become, CFO of the R&DS unit.\nNick Childs, who currently runs our Corporate FP&A function will take-over as SVP of Investor Relations and Corporate Communications.\nNick has been in his role for over three years and has a very deep knowledge of the company and our financials.\nHe will be succeeded by Mike Fedock who has served as CFO of the R&DS unit for the past few years.\nFinally those of you on the fixed income side know that Andrew who has also served as our Treasurer for the past couple of years and Manny Korakis who is our Corporate Controller will also assume leadership of the Treasury function going forward.\nAnd with that, let me hand it back over to Casey, who will open the call for Q&A.\n",
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"content": "q1 adjusted earnings per share $2.18.\nq1 gaap earnings per share $1.09.\nq1 revenue rose 23.8 percent to $3.409 billion.\nsees 2021 revenue $13,200 million - $13,500 million.\nsees 2021 adjusted diluted earnings per share $8.50 - $8.75.\nsees q2 revenue $3,225 million - $3,300 million.\nsees q2 adjusted diluted earnings per share $2.00 - $2.10.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Our strong momentum from earlier in the year has continued despite the resurgence of COVID-19 due to the delta variant.\nThis has not had an impact on our operations as we have learned to manage through these disruptions.\nOur outlook for the longer-term remains unchanged.\nThe backdrop for the life science industry continues to be very strong.\nBiotech funding continues to run at record levels.\nAccording to the National Venture Capital Association, funding totaled $35.8 billion through September 2021, already exceeding the full year of 2020.\nThe pipeline of late-stage molecules continues to expand and is at an all time high with almost 3,000 molecules in active Phase II or Phase III development.\nClinical trial starts are trending well ahead of recent years with year-to-date starts up 23% over 2020 and 13% over 2019.\nAnd finally, new drug approvals by the FDA are keeping pace with the historically high levels of 2020 with 40 new drugs approved year-to-date, which sets the stage for a strong volume of upcoming commercial launches.\nThe bottom line is the dynamics in the industry are strong and we remain bullish on our outlook for our end markets and for IQVIA in particular.\nAs we think about our longer term plans, I want to remind you of our upcoming Analyst and Investor Conference on November 16th in New York City.\nAt that meeting, we will provide financial guidance for 2022 ahead of our usual timeline, which is normally coinciding with the end of year results in early February and we will share as well, our mid-term outlook and plans for the next phase of IQVIA's growth.\nWe look forward to seeing everyone and hope you can join us then.\nWith that let's review the third quarter.\nRevenue for the third quarter grew 21.7% on a reported basis and 21.1% at constant currency and was $64 million above the midpoint of our guidance range.\nThe beat was driven primarily by higher pass-throughs, which as you know dilutes our margin somewhat, as well as by a stronger organic revenue growth.\nThird quarter adjusted EBITDA grew 20.5% reflecting our revenue growth, as well as productivity measures.\nThe $8 million [Phonetic] beat above the mid-point of our guidance range was entirely due to the stronger operational performance.\nThird quarter adjusted diluted earnings per share of $2.17 grew 33.1% that was $0.07 above the midpoint of our guidance with the beat coming from the adjusted EBITDA drop through, as well as favorability in below the line items.\nLet me now provide an update on the business.\nOur real-world evidence business continues to take a leading role in informing healthcare.\nIn late September, the FDA released their drug guidance on how electronic health records and medical claims data can support regulatory decision making and it cited several IQVIA publications.\nWith the growth of rare disease therapies and personalized medicine driven trials, the number of single-arm clinical trials increases every year and external comparators provide important context for these studies for both regulators and payers.\nOur clients recognized our leading expertise in this area.\nFor example, we had a recent major win to deliver an external comparator in a cardiovascular study for top 20 pharma clients.\nIn another example, we were awarded a 15-year follow up study to demonstrate the long-term effectiveness and safety of a newly launched gene therapy.\nRegulatory guidance requires extended follow-up for patients exposed to cell and gene therapy and IQVIA's innovative real-world capabilities combining direct to patient solutions, as well as IQVIA's technology platforms to capture secondary data was pivotal in this award.\nOn the technology front, our suite of offerings continue to be adopted in the marketplace.\nYou're familiar with our OCE platform and other commercial technology applications and we have, of course, continued to expand our footprint here.\nWe had 10 new client wins in the quarter, bringing the total number of OCE wins to-date to 169 customers.\nBut we are also very excited to see increased adoption of our orchestrated clinical trial suite OCT.\nThis quarter, for example, a leading biotechnology company in Asia selected our site portal module within OCT to power site engagement across all of their trials.\nWe now have 165 customers that have bought the site portal module, representing 155,000 sites and 1,716 active studies that are using our site portal module.\nSimilarly, our award winning eCOA platform continues to experience strong demand.\nWe have successfully deployed over 150 projects across 35 different therapeutic areas.\nTo date, we have over 70 customers using this platform, including eight of the top 10 pharma clients.\nThe platform has processed over 10 million unique patient responses in 65 countries and across 28 languages.\nNow I want to say a few words about a fast growing part of our industry.\nYou are familiar with decentralized trials or DCT.\nThe IQVIA's decentralized trial offering combined several tech modules within our OCT suite including e-COA, eConsent, telemedicine and connected devices, as well as other service capabilities, including home nurses and phlebotomy, along with our decentralized trial patient counselors and study coordinators, all organized around our decentralized trial platform.\nImportantly, we've developed innovative clinical patient engagement offerings including direct-to-patient services to accelerate recruitment and improve patient diversity and inclusion in clinical trials.\nWhen we step back and look at the growing importance of DCT in our own portfolio, we find that up to 30% of our active full service trials utilize one or more components of our DCT Offering.\nIncidentally, when our competitors speak about their own DCT offering.\nThis is often what they report as their DCT business.\nWhen we look at trials that actually fully utilize our DCT capabilities, meaning they are fully run on our decentralized trial platform.\nWe've been awarded 89 trials to-date, totaling over $1 billion.\nThese awards are with 34 unique sponsors of which 10 have multiple decentralized trials ongoing with us.\nThese trials spent 12 different therapeutic areas, 32 unique indications and have recruited over 200,000 patients in 40 countries, our ability to combine advanced clinical technology with an extensive network of investigators and care professionals differentiates us in this space and makes us the partner of choice for decentralized trials that utilize the full capabilities.\nOur overall R&DS business continues to build on its strong momentum.\nWe had approximately $2.6 billion of net new bookings in the quarter, bringing our LTM net new bookings for the first time to over $10 billion including pass-throughs.\nThis resulted in a contracted net book-to-bill ratio of 1.39 including pass-throughs and 1.28 excluding pass-throughs.\nAt September 30, our LTM contracted book-to-bill ratio was 1.38 including pass-throughs and 1.37 excluding pass-throughs.\nOur contracted backlog in R&DS including pass-throughs grew 12.7% year-over-year to $24.4 billion at September 30, 2021.\nAs a result, our next 12 months revenue from backlog increased to $6.9 billion, up $300 million sequentially versus the second quarter.\nAs we have signaled several times in the past, we've ramped up investments in our lab capabilities.\nWe recently announced the opening of our new 160,000 square foot Innovation laboratories in North Carolina.\nThis facility provides customers with access to cutting edge bioanalytical, vaccine and genomics capabilities, along with an expansion into exploratory human biomarker discovery services.\nThese new services will enable us to partner closely with sponsors in the development of essential biomarkers to support new molecules moving into clinical development and throughout their life cycle.\nAnd this expansion of course comes on top of the investment we announced last quarter in our 130,000 square foot facility in Scotland.\nLet's start by reviewing revenue.\nThird quarter revenue of $3,391 million grew 21.7% on a reported basis and 21.1% at constant currency.\nYear-to-date revenue was $10,238 million, growing at 27% reported and 25% at constant currency.\nTechnology & Analytics Solutions revenue for the third quarter was $1,337 million, which was up 10.8% reported and 9.9% at constant currency.\nYear-to-date, Technology & Analytics Solutions revenue was $4,038 million, which was up 17.6% reported and 14.9% at constant currency.\nIn the third quarter, R&D Solutions had revenue of $1,853 million, up 32.4% at actual FX rates and 31.9% at constant currency.\nExcluding the impact of pass-throughs, third quarter R&DS revenue grew 24.7% year-over-year.\nYear-to-date revenue in R&D Solutions was $5,612 million, up 37.7% reported and 36.2% at constant currency.\nFinally Contract Sales & Medical Solutions or CSMS revenue of $201 million was up 12.3% reported and 12.8% at constant currency.\nYear-to-date CSMS revenue was $588 million, growing 6.5% reported and 5.1% at constant currency.\nAnd let's move down the P&L to adjusted EBITDA, which was $728 million in the third quarter, up 20.5%, year-to-date adjusted EBITDA was $2,194 million, growing 33.1% year-over-year.\nThird quarter GAAP net income was $261 million and GAAP diluted earnings per share with $1.34.\nYear-to-date, we had GAAP net income of $648 million or $3.32 of earnings per diluted share.\nAdjusted net income was $423 million for the third quarter and adjusted diluted earnings per share grew 33.1% to $2.17.\nYear-to-date adjusted net income was $1,264 million or $6.48 per share.\nTurning now to the R&D Solutions backlog.\nAs already reviewed R&D Solutions delivered another outstanding quarter of net new business.\nBacklog now stands at $24.4 billion.\nIn last 12 months, net new bookings including pass-throughs rose to over $10 billion.\nTurning to balance sheet.\nAt September 30th, cash and cash equivalents totaled $1.5 billion and debt was $12.2 billion.\nThis resulted in net debt of $10.7 billion.\nOur net leverage ratio at September 30th came in at 3.65 times trailing 12 month adjusted EBITDA.\nCash flow was again quite strong in the third quarter.\nCash flow from operations was $844 million and with capex of $162 million, this resulted in free cash flow of $682 million.\nThis third quarter performance brought our free cash flow year-to-date, that is through the first three quarters to almost $128 billion, which continues the strong improvement trend we've had over the past three years.\nIn the quarter, we repurchased $125 million of our shares, which leaves us with $697 million of share repurchase authorization remaining under our latest program.\nLets turn to guidance.\nAs you saw, we're raising our full-year 2021 revenue guidance by $188 million at the midpoint, this reflecting the third quarter strength and the continued operational momentum in our business.\nOur new revenue guidance is $13,775 million to $13,850 million, representing year-over-year growth of 21.3% to 21.9%.\nOf note that included in this guidance is a $30 million headwind from FX versus our previous guidance.\nNow looking at the comparison to the prior year, FX is a tailwind of about 120 basis points to full-year revenue growth.\nWe're also raising our profit guidance as a result of a stronger revenue outlook.\nWe've increased our full-year adjusted EBITDA guidance by $20 million at the midpoint.\nOur new full-year guidance is $2,980 million to $3,010 million, which represents year-over-year growth of 25% to 26%.\nMoving down to EPS, we're increasing our adjusted earnings per share guidance by $0.10 at the midpoint.\nThe new guidance range is now $8.85 to $8.95, which represents year-over-year growth of 37.9% to 39.4%.\nNow, our full-year 2021 guidance assumes that September 30th foreign currency rates remain in effect for the balance of the year.\nThe full year guidance implies our fourth quarter guidance, which we show here and before getting into the numbers, I'll say for context, you'll probably recall that last year's fourth quarter was unusual due to a snap back in the general business as we rebounded from the effects of COVID-19, picked up incremental demand from mega vaccine studies in R&DS and government-related COVID work within TAS.\nFourth quarter revenue is expected to be between $3,537 million and $3,612 million, representing growth of 7.2% to 9.5%.\nFX in the quarter is a headwind to growth of about 100 basis points.\nWe expect fourth quarter TAS revenue growth to be mid single digits, reflecting the expected year-over-year decline in government COVID related work and the FX drag.\nI'll note though that underlying constant currency organic growth for TAS will be in the high single digits, which is a level that TAS has recently accelerated.\nR&DS revenue growth would be in the low teens with services growth in the mid teens despite last year's difficult comparison due to the COVID vaccine work.\nCSMS will be slightly down.\nAdjusted EBITDA in the fourth quarter is expected to be between $786 million and $816 million, up 6.9% to 11% and adjusted diluted earnings per share is expected to be between $2.37 and $247, growing 12.3% to 17.1%.\nSo, in summary, we delivered a very strong third quarter with strong results results on both the top and bottom line.\nR&DS backlog improved to $24.4 billion, that's up 12.7% year-over-year, next 12 months revenue from backlog increased to $6.9 billion, up $300 million sequentially versus the second quarter.\nWe reported another strong quarter of free cash flow, which at $1.8 million through the first three quarters of the year is a market improvement over prior year.\nAnd finally, we are once again raising our full year guidance for revenue, adjusted EBITDA and adjusted diluted EPS.\n",
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"content": "compname posts q3 adjusted earnings per share $2.17.\nq3 adjusted earnings per share $2.17.\nq3 gaap earnings per share $1.34.\nq3 revenue rose 21.7 percent to $3.391 billion.\nsees q4 revenue $3,537 million - $3,612 million.\nsees q4 adjusted earnings per share $2.37 - $2.47.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: We are joined here today by Bill Meaney, president and CEO; and Barry Hytinen, our EVP and CFO.\nToday, we plan to share a number of key messages to help you better understand our performance, including our Q2 outperformance, the increased momentum in the business, our updated outlook for 2021 financial guidance, the continued growth in our data center business, and the strong performance in our growth areas.\nIn addition, we use several non-GAAP measures when presenting our financial results.\nWe have included the reconciliations to these measures in our supplemental financial information.\nI hope you and your families are safe and well.\nThis strong performance in both Q2 and the first half of the year reflects the breadth and depth of our products and solutions and the strength of our deep customer relationships.\nOur second-quarter results especially reflect increased demand for our services across our key markets and is based upon these strong results and the increased momentum in the business that has caused us to increase the midpoint of our financial guidance, as well has increased the expected bookings in our data center business.\nAs we celebrate and honor Iron Mountain's 70th anniversary this month, I am extremely proud of what our team has accomplished in growing our relationships with our large and diverse customer base in spite of the continued challenges due to COVID.\nOur Mountaineers across the globe have conquered every obstacle with tenacity in an innovative mindset, all with a focus on accelerating growth in services to assist our customers.\nBefore we dive into our record results and the positive momentum in our business, I want to take a moment to reflect on the current situation with the pandemic and new variants still wreaking havoc in many parts of the world.\nIn addition to operational complexities, we're also dealing with the realities of the workplace and a world changed forever by the COVID-19 pandemic.\nIn Iron Mountain, we're thinking how we can move forward instead of getting back to normal, all while remaining diligent to ensure the physical and mental health, as well as the overall safety of our teams, their families and our customers.\nAs I mentioned earlier, this year, we celebrate 70 years of Iron Mountain.\nIt's a legacy with a rich inspired past, which continues inspiring the future.\nSince that day on 24 August 1951, we have built, evolved and expanded our trusted relationship with our customers to include not just the leading storage platform of physical assets but now includes a rapidly increasing range of business services.\nThese new services are centered around data center colocation, information security, data insights, IT asset disposition and business process management.\nAnd today, with this broadened portfolio of services and storage capabilities, we have become an innovative and global leader in our field with more than 225,000 customers, including more than 95% of the Fortune 1000, a global footprint of more than 1,450 facilities with a presence in 58 countries and 24,000 dedicated Mountaineers across the globe.\nAnd doing all this with -- in an energy sustainable way with 100% of our data centers powered by renewable energy.\nMany of the things about us have changed in 70 years.\nWhat hasn't changed is our core values and commitment to building and delivering on the trust our customers have come to count on.\nOver the last two quarters, we shared with you that we now have an expanded total addressable market, or TAM, of more than $80 billion.\nAnd against that expanded TAM, we've identified the building blocks for growth that will enable future growth and success.\nAnd in fact, you can already see evidence of this expansion through our year-on-year digital service revenue growth, together with secure IT asset disposition or ITAD.\nIn this quarter versus a year ago, these business lines have grown over 37%, resulting in $25 million of incremental growth.\nI want to highlight a few examples which illustrate our progress in helping our customers through utilizing new technologically enabled approaches and products to not only protect, but unlock value from what matters most to them.\nThe first win I want to highlight is in Singapore with a multinational banking and financial services corporation.\nWe won a $750,000 annual recurring revenue digital mailroom contract over their current service provider.\nAt first, the bank didn't believe that Iron Mountain could solve this need for them as they had only known us to support their storage and scanning requirements.\nHowever, the account team pursued the opportunity and highlighted Iron Mountain's strength utilizing a new technologically based approach, which allows us to assist in managing the very start of much of the information entering the bank while securely facilitating a hybrid office and home working model.\nAs we are already this customer's partner for business process outsourcing and processing much of the bank's critical information, the mailroom is a key additional service, which will yield further security and simplicity for the bank.\nTurning to another area representing part of our expanded TAM, I want to touch briefly on Secure ITAD.\nThink of this as an area where we apply our highly secure chain of custody with a service that allows our customers to dispose securely in an environmentally responsible way their IT assets, which are at end of life.\nWe have continued to see good momentum in our Secure ITAD solution following a number of big wins last quarter.\nWe won a deal with one of the world's largest banks to recycle corporate laptops, monitors, and outdated IT equipment across over 400 corporate offices, 4,000 conference rooms and 5,000 retail offices, which we expect to generate annual run-rate revenues greater than $5 million.\nThis is a valuable offering given our expertise in chain of custody and compliance, helping customers securely dispose of their IT equipment.\nTurning to our data center business.\nWe want to share not only our continued growth in top and bottom line, but some recent exciting developments in the last month which has led us to increase our guidance for expected 2021 leasing from 25 to 30 megawatts to over 30 megawatts, not including additional leasing expected from the recent acquisitions in Frankfurt and India.\nOur increased guidance around leasing activity is based upon the momentum we have seen in the business in the first half of the year, as well as the pipeline.\nToday, we announced not only the 3.6 megawatts of new leases we signed in the second quarter, but also a six-megawatt lease with a new logo to our platform that was signed post Q2 in Northern Virginia.\nTaken together, along with our strong results in Q1, we have recorded a total of 19 megawatts of new and expansion leases in the first seven months of the year.\nThis is a great launching off point for the remainder of the year, and we feel confident we will achieve leasing activity above the top end of our original guidance.\nTurning back to Q2, it should be noted, of the 3.6 megawatts we leased in the quarter, the majority was in the retail and enterprise segments.\nThis resulted in attractive pricing for the quarter which increased 14% sequentially.\nOur strongest markets in terms of new and expansion leasing were Phoenix, Singapore and Northern Virginia.\nWe have a new 27-megawatt greenfield build in London, adjacent to our existing London-1 facility, as well as the pending acquisition of a multi-tenant colocation data center in Frankfurt.\nTaken together, this will increase our total potential capacity in Europe to more than 88 megawatts and will provide access to important interconnection markets for new and existing customers looking for a reliable, flexible and secure data center location.\nAs always, sustainability continues to be a top priority.\nAnd as part of our commitments, we will power our new buildings in London and Frankfurt with 100% renewable energy.\nBefore I hand the call over, I also wish to touch upon some new product areas which are leading to more growth in our traditional storage areas.\nOne of these newer product offerings is Clean Start, which is a service that helps customers navigate today's changing workplace requirements from reconfiguring the office for social distancing to office closures or moving to a more digital way of working.\nSince its inception, the Clean Start product has generated over $19 million in revenue and has uncovered 1.1 million net new cube over a three-year period.\nIn 2020, we decided to expand Clean Start globally with all regions engaged in growing the program.\nSince taking the business globally, we have seen an acceleration in bookings.\nSpecifically, in the first half of 2021, Clean Start has delivered $5 million of new revenue or some 25% of the total revenue from this program since its inception three years ago.\nA specific customer example in this quarter includes a $1.8 million deal with a leading global hotel chain over the next five years.\nDue to challenges from the pandemic, the customer needed solutions to help with compliance and storage of materials.\nThis customer has been with Iron Mountain for years at an individual hotel level and its corporate team saw the value in our scale, breadth of offerings, compliance expertise in risk reduction solutions.\nThis prompted their decision to deploy our services across 103 hotels, plus an additional 15 one-off sites as required.\nWe were able to manage much more than just their record storage, also meeting the destruction needs and providing image-on-demand services, all of this being done companywide at a scale unmatched by any other provider.\nAnother example which showcases our innovative new products which drive record volume and services growth is Smart Sort.\nOur customers want to reduce cost and risk by defensively destroying records as they meet retention requirements, which is difficult to do if records are not stored by the destruction eligibility date.\nFor example, many healthcare accounts store records by patient number or last date of visit and not by retention requirement.\nWith Smart Sort, we organize the records by destruction date so the customer knows what they can destroy and when.\nOur team understood a pervasive customer problem, took a customer-centric approach and proactively came up with a solution to solve it with Smart Sort.\nJust in the last year, we've had 10 healthcare vertical wins for Smart Sort with our most recent win with Johns Hopkins Medical Center.\nThe agreement is a five-year term which includes a $1.2 million Smart Sort move project, bringing an additional 160,000 cubic feet of inventory, representing over 4 million individual patient records.\nReflecting some of these successes, total global volume grew to a record 733 million cubic feet this quarter.\nIn spite of organic volume being down 10 basis points in the second quarter versus the first quarter, total global organic volume was up 1.6 million cubic feet in the first half of the year, and we continue to expect organic volume to be flat to slightly up for the full year.\nThis expected organic volume, together with continued strong price increases, sets us up well for continued strength in organic storage revenue growth from our physical business areas.\nI'm extremely proud of their relentless dedication to each other and our customers.\nWith a resilient business model, ongoing market share growth and strategic investments to transform the company, we are excited about the significant opportunities ahead of us, which continue to exceed even our ambitious targets.\nThe second quarter exceeded our expectations across each of our key financial metrics.\nContinuing the trend we have seen over the last few quarters, revenue continued to strengthen with a strong recovery in service revenue and activity levels.\nOur core physical storage business performed well, and we are seeing great progress in our growth areas.\nReflecting that progress and the outperformance in the first half, we increased the midpoint of our financial guidance.\nTurning to our results for the quarter.\nOn a reported basis, revenue of $1.1 billion grew 14%.\nTotal organic revenue increased 10%.\nOrganic service revenue increased $81 million or 26%, and was ahead of our expectations.\nOur team drove strong growth in both our Global Digital Solutions business and Secure IT Asset Disposition.\nTotal organic storage rental revenue grew 2.5% with continued benefit from pricing, together with positive trends in volume.\nAdjusted EBITDA was $406 million.\nWe exceeded the projections we shared on our last call as the team delivered better-than-expected Project Summit savings, together with the revenue beat.\nAFFO was $246 million or $0.85 on a per-share basis.\nIf you recall, last year's AFFO benefited from a $23 million tax refund.\nAdjusting for this, AFFO would have increased 8% year over year.\nAs we mentioned on our prior earnings call, AFFO also reflects an increase in recurring capex as we catch up on some projects that were deferred during the pandemic.\nOur full-year recurring capex guidance is unchanged.\nTurning to segment performance.\nIn the second quarter, our Global RIM business delivered revenue of $993 million, an increase of $116 million from last year.\nOn an organic basis, revenue increased 9.1%.\nThe team performed well with constant-currency storage rental revenue growth of 1.9% or 1.6% on an organic basis.\nGrowth was driven primarily by pricing and volume.\nWe added about 4.5 million cubic feet from our acquisition in Indonesia, which closed during the quarter.\nOur traditional services business continued to recover from the pandemic with revenue growing 24% year over year and 4% from the first quarter.\nOur Global Digital Solutions business continued to display strong momentum, growing 24% year over year.\nGlobal RIM adjusted EBITDA was $430 million, an increase of $47 million year on year.\nAdjusted EBITDA margin declined 50 basis points year over year as a result of mix given the strong service revenue growth.\nSequentially, EBITDA margin increased 110 basis points due to Project Summit benefits and the contribution from pricing.\nTurning to our global data center business, where the team continues to perform exceptionally well.\nWe booked 3.6 megawatts in the quarter, and through the first half, we have booked 12.6 megawatts.\nSubsequent to the end of the quarter, we signed a six-megawatt lease in Northern Virginia.\nBased on the year-to-date performance and the strength of our pipeline, we increased our full-year leasing target to more than 30 megawatts, which would represent a 23% increase in bookings.\nIn terms of revenue, as we projected, growth accelerated sharply to 15% year over year.\nWe continue to plan for full-year revenue growth in the range of low double digits to approaching mid teens.\nThe combination of our strong prior-year bookings and the team's leasing performance year to date provides high visibility.\nAdjusted EBITDA margin of 43.4% increased 60 basis points from the first quarter and was ahead of our expectations.\nAs compared to our prior outlook, the improvement was driven primarily by timing related to the Frankfurt build-out we discussed last quarter, which has been modestly delayed.\nAs a result, we now expect more of the work associated with that project to occur in the second half, which will result in a temporary impact on segment margins on the order of three points relative to the second-quarter level.\nTurning to Project Summit, this quarter, the team delivered $42 million of incremental year-on-year adjusted EBITDA benefit.\nWith the strength of the team's performance year to date, we now expect year-on-year benefits from Summit to approach $160 million, with another $50 million of year-on-year benefit in 2022.\nTotal capital expenditures were $136 million, of which $100 million was growth and $36 million was recurring.\nTurning to capital recycling.\nAs we have said before, we view the market for industrial assets as highly attractive as a means to supplement our growth capital.\nWith that backdrop, in the second quarter, we upsized our recycling program and generated approximately $203 million of proceeds.\nYear to date, we have generated $215 million in proceeds, compared to our previous guidance of $125 million.\nWith our strong data center development pipeline, we are now expecting to generate full-year proceeds of approximately $250 million.\nTurning to the balance sheet.\nAt quarter end, we had approximately $2.1 billion of liquidity.\nWe ended the quarter with net lease-adjusted leverage of 5.3 times, slightly better than our projection and down from both last year and last quarter.\nThis marks our lowest leverage level since year-end 2017.\nAs we have said before, we are committed to our long-term leverage range of four and a half to five and a half times.\nFor 2021, we expect to end the year within our target range and estimate we will exit the year at levels similar to the second quarter.\nWith our strong financial position, our board of directors declared our quarterly dividend of $0.62 per share to be paid in early October.\nTurning to our outlook.\nToday, we are pleased to increase the midpoint of our 2021 financial guidance.\nThere are three factors driving the improved projections.\nFirst, operational performance in the second quarter was better than expected, and we have good momentum in our key growth areas.\nSecond, we have identified additional benefits from Project Summit, primarily related to opportunities that our commercial team has been able to uncover.\nAnd third, we have acquired a small records management business in Morocco that will add about $5 million in revenue.\nConversely, as compared to our prior guidance, there are two headwinds I would call out.\nFirst, we divested our Intellectual Property Management business in early June.\nCompared to our prior guidance, this represents a reduction of approximately $20 million of revenue and $15 million of EBITDA.\ndollar is more of a headwind by nearly $20 million for revenue and $7 million for EBITDA.\nFor the full-year 2021, we now expect revenue of $4.415 billion to $4.515 billion.\nWe now expect adjusted EBITDA to be in a range of $1.6 billion to $1.635 billion.\nAt the midpoint, this guidance represents growth of 8% and EBITDA growth of 10%.\nWe now expect AFFO to be in the range of $970 million to $1.005 billion.\nAnd AFFO per share of $3.33 to $3.45.\nAt the midpoint, this represents 11% and 10% growth, respectively.\nOur guidance assumes global organic physical volume will be flat to slightly positive versus last year.\nAnd with continued benefit from pricing, we anticipate low single-digit growth in total organic storage revenue.\nFor services, we expect to maintain positive revenue growth through the remainder of the year.\nWith the ongoing pandemic, we believe it is helpful to share our short-term expectations.\nFor the third quarter, we expect revenue and EBITDA to both increase approximately $10 million sequentially from the second-quarter levels.\nWe expect AFFO to be slightly in excess of $250 million in the third quarter.\nIn summary, our team is executing well.\nWe have seen positive trends in the macro environment, and our pipeline continues to build.\nThe momentum we had entering the year has strengthened, our addressable market continues to expand, and we feel confident in our ability to drive growth.\nWe feel well-positioned and look forward to updating you on our progress during -- following the third quarter.\nAnd with that, operator, please open the line for Q&A.\n",
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"content": "q2 revenue rose 14 percent to $1.12 billion.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: We have provided the user-controlled slides on our investor relations website.\nWe are joined here today by Bill Meaney, president and CEO, and Barry Hytinen, our EVP and CFO.\nToday, we plan to share a number of key messages to help you better understand our performance, including how we are continuing to respond and adapt to the COVID-19 pandemic; continuing to demonstrate top line resilience in our physical storage business, continuing to see strength in our data center business, progressing on our transformation program with Project Summit, and how we are remaining committed to funding innovation and new product development.\nWe have noted the impact from COVID-19 on our expectations of how that may impact our operations and financial performance in 2020.\nWe have also noted our expectations for Project Summit as well as certain other comments on our expectations for the remainder of the year.\nIn addition, we use several non-GAAP measures when presenting our financial results.\nWe have included the reconciliations to these measures as required by Reg G in our supplemental financial information.\nWith that, Bill, would you please begin?\nLet me start by saying, I hope you and your families are safe and well.\nThe third quarter provided us with a great opportunity to demonstrate the significance of the measures we have taken over the last few months in response to the pandemic and set a marker for outperformance through top line resilience in our physical storage and growing data center businesses, adjusted EBITDA margin expansion and by maintaining our strong cash generation track record all while continuing our investment in innovation and new product development.\nDespite lingering uncertainty related to the global COVID-19 pandemic, we have seen improvements, albeit gradual in key U.S. and international markets as it relates to our service activity levels, while showing continued strong performance in both our physical storage business and our global data center business.\nI continue to be inspired by the tireless efforts of our teams as they support and care for our customers, each other in our communities, while accelerating progress on our strategic priorities.\nFrom the start, we set out our priorities to deal with the situation clearly and take care of the health and safety of our people and work hard to honor the commitments we have made to our customers.\nIn April, we had up to one-third of our workforce out on furlough or other temporary leaves.\nI'm happy to report that we have brought a significant number of these mountaineers back to work to serve our customers, and we now have over 90% of our employees working regularly.\nWhilst this has been a very difficult time, we have proven to be very resilient.\nWe are financially healthy with strong and reliable cash flow, driven in part by our brand and customer loyalty.\nThis is evident in how we've managed the heightened uncertainty of the past eight months.\nWe quickly aligned on the right mix of priorities to maintain strong near-term momentum while continuing our investments in innovation and new products as we execute our plan for long-term value creation.\nThis, combined with the benefits from Project Summit has allowed us to continue to invest in transforming and modernizing our company.\nAs demonstrated by our year-on-year constant currency year-to-date adjusted EBITDA and storage revenue growth, we can already see the evidence supporting our belief that we will emerge from this pandemic as a stronger company on all dimensions.\nClearly, there are still many uncertainties around COVID in terms of the development of the pandemic and how the government's worldwide will continue to respond with varying degrees of restrictions as infections rise.\nHowever, in the third quarter, we saw signs of improvement in customer trends, and as a result, the decline of our service revenue moderated.\nIn addition, there is clear evidence that as and when the restrictions lift customers do come back to us with needs from both a physical and digital document storage perspective.\nAnd while some elements of our business may have changed forever, our positioning with the communities we serve remain strong.\nThroughout the pandemic, we have continued to adapt and transform our business model and solutions to changing customer needs due to challenges created by COVID-19.\nOur customers are evaluating their real estate needs, business processes and ways to increase digitization in a remote workplace setting.\nWe have been focused on helping them navigate these challenges and have tasked ourselves with accelerating our response to our customers' needs.\nOne thing is certain, the pandemic has created opportunities for us to help our customers in new and innovative ways.\nThe fact is we're a different company than the one most people know.\nThe strategic journey we have been on has driven this change.\nAnd to remind folks, our focus remains on three pillars.\nFirst, continued growth in physical storage revenue through pricing as well as new volume growth achieved from record growth in emerging markets and are in consumer storage in developed markets.\nSecond, utilizing our global scale as well as 70 years of customer trust to deliver a differentiated data center offering.\nAnd third, new products and services that allow our customers to achieve reliable and secure information management in a more complex regulatory environment and one in which hybrid, physical and digital solutions are the norm.\nFurther expanding on the product and services pillar, most know us for protecting highly regulated records.\nBut over the years, our relationships have evolved to help customers manage a broader set of assets and to help them solve a broader range of problems.\nAs customers' needs evolve, their expectations of us evolve.\nFor this reason it is important we continue to invest in creating solutions that unlock value for our customers.\nA great example of this is a solution we just provided for a U.S. credit union who needed a faster, more efficient method for processing new members' mortgage loans after closing.\nTheir old process was too manual and it could no longer support the volume of work, much less scale to meet the credit Union's 30% year-over-year growth projection.\nAnd it didn't satisfy increased regulations, the organization must now meet when selling their loans.\nWe rebuilt the customer's workflow to better integrate their mix of paper and digital loan materials.\nThis included mailroom services, document scanning and private vault with bio-resistant safeguards in defensible, secure disposition.\nWe also applied machine learning to automate how the credit union access data, verified its accuracy and resolve missing or incorrect items.\nWith these changes, the credit union can now process post-close mortgage loans much faster, more than doubling their capacity while reducing their costs by 25%.\nThis example speaks to what we see as our differentiation and why customers ultimately call us when they need help.\nFor some time, we have talked about our opportunity to enable our customers' digital transformation journeys.\nInitially, much of this work was going on behind the scenes, especially as Project Summit got under way, putting in place the systems and structures to support this transformation.\nThe benefits of this work are now becoming more evident with notable improvements to our customer experience at a time when demand for our solutions has never been greater.\nThis materialized in the third quarter and high-single-digit growth in our digital solutions business.\nIf you look at our physical storage business, this remains a key foundation for Iron Mountain.\nCustomers have long trusted us to secure their information and their assets that matter most to them.\nThey needed us to service their lock, if you will.\nBut over time, while their needs expanded beyond security and compliance, their jobs grew more complex as they now had to store, use and extract value from growing amounts of information that was in both physical and digital form.\nThe hybrid nature of their data was preventing them from achieving speed, compliance, efficiency and ultimately growth.\nA lock was no longer enough.\nThey now needed a key to solve for this hybrid environment.\nUniquely, Iron Mountain offers both the lock and the key that organizations need in order to realize competitive advantage from their paper and digital information.\nPlenty of companies offer a secure home for valued assets, when they offer technology services so customers can better use those assets, but this over specialization falls short of the needs of most customers.\nWe hear from our customers that they want partners who can help them build singular solutions capable of solving for multiple demands of speed, cost savings, revenue opportunities and security.\nThis is Iron Mountain's distinctive position.\nWe serve as the lock and the key.\nNow, let's take a closer look at business trends during the third quarter.\nAt a high level, we are pleased with the stabilization and early recovery we're beginning to see across our service business.\nService activity levels have shown a gradual improvement from the second quarter.\nHowever, similar to what we discussed last quarter, the shape of the recovery will be dependent on macro factors.\nThe recent increases in COVID-19 cases in many parts of the world has focused states and countries to implement new restrictions to mitigate the spread of COVID-19.\nWhilst these factors will make the recovery uneven, our experienced management team is prepared to confidently manage the volatility.\nTurning now to our physical storage business.\nTotal organic storage rental revenue growth accelerated modestly from last quarter, up 2.5%.\nThis once again was driven by strong revenue management results as well as growth in our emerging markets in consumer.\nWe continue to be very encouraged with the levels of organic storage revenue growth, underscoring the durability of the physical storage business and supporting strong cash generation.\nTotal global organic volume increased 2 million cubic feet sequentially.\nContributing to this was 3 million cubic foot increase in consumer and other and fine art storage, partly offset by a decrease in records management volume.\nLooking more specifically at records management organic volume, this was down 1.1 million cubic feet compared to the second quarter.\nWhile still a decline, this is a significant improvement from the 3.9 million cubic foot decline last quarter, again, reflecting the early signs of recovery.\nWe continue to expect the full-year organic volume to be down 1 to 1.5% and up 2.5% in terms of organic revenue based on current visibility.\nTurning now to our global data center segment.\nWe are very encouraged by another strong quarter of bookings.\nIn Q3, we leased 12.3 megawatts, bringing the year-to-date total to just over 51 megawatts.\nThe strong leasing this year, particularly among smaller deployments, has resulted in increase in our utilization by more than seven points to nearly 92%.\nGiven the need for additional capacity, we have increased our development pipeline to approximately 50 megawatts, consisting of both greenfield development and further build out of existing facilities.\nMoreover, in excess of 50% of our development is pre-leased, resulting in a strong backlog.\nLet me now provide a brief update on Project Summit.\nOur transformation program is progressing well, and we are on track to realize our permanent structural cost savings of $375 million per year exiting next year.\nMost notably, these ongoing initiatives should not only significantly reduce our cost base, but also make it easier for our mountaineers to get work done, enabling them to focus on a more customer centric approach.\nSome examples include: driving global standardization in IT, replacing cumbersome manual processes with reliable automation and improving the user experience while reducing process cycle time.\nWe are as excited about the systems and process improvements that our Project Summit as we are about the bottom line improvement and believe the end result will be an enhanced value proposition for our customers and communities.\nAs we shared with you last quarter, we are strongly committed to all of our stakeholders.\nWe are focused on our culture, especially our purpose to inspire and build better lives and communities.\nI would also point out that we are committed at the executive level to continue on our path and accelerate improving our diversity and inclusion.\nIn order to be a sustainable and successful company, we need to attract the best talent to drive maximum creativity through diverse and innovative thinking.\nI am proud to say we achieved a perfect score of 100 on the Human Rights Campaign Foundation's 2020 Corporate Equality Index.\nThis recognition reinforces the important work we are doing and supports our goal of building and promoting an inclusive culture that encourages our employees to bring their whole authentic cells into the workplace.\nAs we look at our business going forward, we see opportunities as well as risks and we are making every effort to ensure we are well placed to maximize the opportunities.\nWe are cautious about our expectation of the pace of market recovery as we progress through 2021.\nIn our own business, as we've shared with you in previous calls, we expect a gradual recovery in our service business to continue as economic activity recovers, leading 2021 to look similar to 2020, just in reverse in terms of quarterly progression.\nThe work we are doing and have done to address the challenges posed by COVID-19, gives us confidence that we will come out of this position to consistently deliver long-term sustainable growth.\nIn summary, we are leveraging the opportunity in this rapidly changing environment to reaffirm our commitment to our strategy of growth through increased product offerings in the physical storage area as well as continued rapid growth in our data center and digitization areas.\nAt the same time, we continue to exercise prudent cost control and drive further efficiency across the organization through our transformation activities.\nWe are proud of the progress we have made toward our transformative shift during this crisis.\nWe are now even more enthusiastic about the speed of our future transformation given the lessons we have learned during the pandemic.\nI hope you all remain well.\nWe are pleased with our third quarter and year-to-date performance.\nIn a challenging macro environment, our team delivered solid performance across each of our key financial metrics.\nRevenue of $1.04 billion declined 2.4% on a reported basis year on year, which includes a 30 basis point impact from foreign exchange.\nTotal organic revenue declined 3.4%.\nOrganic service revenue declined 13.5%, reflecting the continued COVID impact on our activity levels.\nWhile the pace of recovery continues to be dependent on many factors, overall, we continue to see service declines moderate, reflecting an improving trajectory since the April, May time frame.\nFor the full quarter, service trends were generally consistent with the July levels we discussed on our last call.\nDespite the macro headwinds, total organic storage rental revenue grew 2.5%, driven by three points of revenue management and data center growth partially offset by a 30-basis-point decline in global organic volume on a trailing 12-month basis.\nThis is 30-basis-point improvement as compared to the second quarter on a trailing 12-month basis.\nAdjusted EBITDA was $370 million.\nAdjusted EBITDA margin expanded 30 basis points year on year to 35.7%.\nThe improvement reflects progress on our Summit transformation, revenue management and favorable mix while partially offset by fixed cost deleverage on lower service revenue and higher bonus compensation accrual.\nIn addition, in the third quarter, we incurred incremental cost to keep our teams safe, for example, specialized cleaning of our facilities as well as purchases of personal protective equipment.\nWe included these expenses in our adjusted EBITDA.\nAdjusted earnings per share was $0.31, down $0.01 from last year.\nAFFO declined 5.4% to $213 million.\nAs compared to adjusted EBITDA, the decline in AFFO was primarily driven by timing of cash taxes consistent with our outlook.\nTurning to segment performance and starting with the global RIM organization.\nIn the third quarter, our global RIM business experienced declines in service revenue, albeit at moderating levels compared to earlier in the year.\nThis was partially offset by storage volume growth in our faster-growing markets and revenue management, which led to a total organic revenue decline of 3.9%.\nBack, together with better than planned project Summit benefits resulted in adjusted EBITDA margin expansion of 110 basis points.\nIn the service business, we experienced year-on-year declines of approximately 31% for new boxes inbounded and 39% for retrievals and refiles.\nWe also continue to see a slowdown on the outgoing side as permanent withdrawals declined to 28% and destructions were down 22%.\nIn our thread business, activity declined approximately 17%.\nFor the third quarter, our average realized paper price was 20% higher than the prior year, which was more than offset by a decline in paper tonnage, leading to a net $3 million reduction in adjusted EBITDA.\nAs we projected on our last call, after the temporary spike in recycled paper prices in April and May, prices have taken a step down.\nAnd by October, paper prices have now returned to the low levels experienced at the end of 2019.\nOur consumer storage business has maintained momentum and continues to be a more meaningful contributor to our overall physical storage volume growth.\nIn the third quarter, we continued cost reduction actions, including furloughs and reduced work hours, albeit at much lower levels than earlier in the year.\nAs service revenue expectations improve, we want to ensure we are staffed to the appropriate level so we can fully support our customers.\nAs we have discussed before, this does tend to cause incremental cost deleverage as we bring back employees ahead of demand.\nWe think this is the right investment to service our customers.\nTurning to global data center.\nThe business delivered organic revenue growth of 12.1%, driven by prior period leasing and strong service revenue growth.\nThis was partially offset by a moderate churn of 160 basis points, in line with our target of 1 to 2% per quarter.\nIn the fourth quarter, we are expecting slightly elevated levels of churn compared to our normal target range.\nIn the quarter, we booked a nonrecurring revenue adjustment of $1.8 million.\nAdjusted EBITDA margin of 45.8% was consistent with our first half trend.\nAs Bill noted, our data center team continued to deliver strong bookings momentum, signing over 12 megawatts of new and expansion leases, bringing year-to-date bookings of 51 megawatts.\nThis commercial success resulted in us exceeding our previous full-year target through the first nine months.\nFor the full year, we expect to deliver more than 55 megawatts of new and expansion leasing, representing bookings growth of 45%.\nOf course, that includes the significant hyperscale lease in Frankfurt.\nAnd excluding that, we would expect bookings growth of about 23%.\nThis compares to our original guidance of 15 to 20 megawatts or mid-teens bookings growth.\nWe believe we are growing considerably faster than the broader market.\nGoing into next year, we feel good about the state of our pipeline, both from a hyperscale perspective as well as our core retail co-location business supporting rich ecosystems across our platform.\nWe believe we can lease in excess of 20 megawatts next year, which would result in mid-teens annual bookings growth.\nIn October, we announced the formation of our joint venture with AGC Equity partners, a greater than EUR 300 million partnership for our fully pre-leased data center in Frankfurt.\nThis venture represents an important strategic step toward our goal of identifying alternative sources of capital to fund accelerating growth as we expect proceeds will be redeployed into higher return development opportunities.\nAs we have previously disclosed, the venture will be reflected as an unconsolidated joint venture and therefore, will not flow through to revenue and EBITDA.\nTurning to Project Summit.\nIn the third quarter, we recognized $48 million of restructuring charges as well as an adjusted EBITDA benefit of $48 million.\nThrough the first nine months, we have delivered $113 million of benefit.\nThis is ahead of our prior expectations as we accelerated certain initiatives in 2020 with a particular focus on the highest return activities in response to COVID 19.\nAs Bill referred to, we now expect the program to deliver adjusted EBITDA benefits of $165 million in 2020, approximately $150 million more in 2021 with the full program generating $375 million exiting 2021.\nIn terms of costs related to Project Summit, we now expect to spend closer to $200 million in 2020.\nWe continue to expect the cost to implement the full program to be approximately $450 million.\nTurning to cash flow and the balance sheet.\nWe are operating from a position of significant balance sheet strength.\nIn the third quarter, our team did a nice job delivering further cash cycle improvement, with solid performance in both payables days and days sales outstanding.\nOn a sequential basis, cash cycle improved by a full day as a result of continued DSO improvement.\nIn August, the team executed another successful bond refinancing, issuing $1.1 billion to redeem our most restrictive outstanding debt and pay down a portion of the outstanding balance under our revolving credit facility.\nThe continued strong support received from the fixed income community provided us the opportunity to upsize our transaction while printing the lowest coupon for 10-year notes in the company's history.\nTaken together with our bond offerings in CIN, we issued $3.5 billion of new debt on a leverage-neutral basis, increased our weighted average maturity by over two years to nearly eight years, while only modestly increasing our weighted average cost of debt.\nAdditionally, these new bonds are more in line with our REIT peers as they include a fixed charge coverage ratio as opposed to a debt-to-EBITDA covenant.\nAlso, I think it is worth noting that we have eliminated all of our six and a half times leverage covenant bonds, meaning our most restricted bond covenant is now seven times debt-to-EBITDA.\nAt quarter end, we had $1.7 billion of liquidity.\nAs a reminder, at the end of the second quarter, we had elevated levels of cash on our balance sheet due to the timing of the payoff of one of our notes from the June bond offering.\nWe paid off the notes in early July, leaving us with a cash balance at September 30 $152 million.\nWe ended the quarter with net lease-adjusted leverage of 5.3 times, which takes into account adjustments as described in our credit facility.\nLooking ahead, we expect to end the year with leverage of approximately 5.3 times, which would represent an improvement year on year as we made progress toward our long-term leverage range.\nWith our strong financial position, our board of directors declared our quarterly dividend of $0.62 per share to be paid in early January Turning to capital expenditures.\nOur full-year expectation is now approximately $450 million, or a decrease of $75 million, reflecting development capital for our FIFO data center that will now be a part of our venture with AGC.\nNow, let me share a few thoughts as to our capital allocation strategy.\nFirst, we are committed to our dividend at this sustainable level.\nAnd over time, we expect to glide into our targeted AFFO payout ratio of mid-60s percent.\nSecond, we are committed to our target long-term leverage range of four and a half to five and a half times on a net lease-adjusted basis.\nThis year, the team has made good progress toward our target.\nAs investors know, we have been allocating significant capital to our data center business for several years.\nAnd as our pipeline continues to build with high-return investment opportunities, our strategic intent is to increase the amount of capital we dedicate to the business.\nWith that, we have considered options to generate incremental funds for investment.\nWe view capital recycling as a good means to monetize certain assets, particularly industrial real estate to increasingly invest in our development pipeline.\nIndustrial cap rates are at historically low levels, and we have the opportunity to structure long-term leases on favorable terms that effectively allow us to have control of the facilities, whether we lease or own.\nWith that, in the third quarter, our team accessed the market and monetized two facilities for proceeds of approximately $110 million.\nThis brings our year-to-date proceeds to nearly $120 million, ahead of our full-year target of $100 million.\nWith the highly favorable market backdrop, together with our development pipeline, we are planning to recycle relatively more going forward, albeit what will amount to a small portion of our total industrial assets.\nSimilarly, we view selling stabilized data center assets into a joint venture as analogous to monetizing industrial real estate assets.\nIt represents another source of capital to redeploy into development projects.\nOf the joint venture we just announced in Frankfurt is a good example of this strategy.\nThe JV provides us with an opportunity to boost returns on stabilized assets and provides incremental capital to allocate to projects in the development phase.\nTurning to our outlook for the remainder of the year.\nWhile we are not issuing official guidance today, I would like to provide an update as to our expectations, excluding any material and unforeseen changes.\nWith the continued impact of COVID, we are planning for the fourth quarter to be generally in line with the third quarter for revenue and adjusted EBITDA on a dollar basis.\nTherefore, for the full-year 2020, this would lead to a low single-digit revenue decline and flat to slightly positive adjusted EBITDA growth as compared to last year.\nThis outlook includes a full-year headwind from foreign exchange rates approaching $60 million for revenue and $20 million for adjusted EBITDA.\nThis outlook reflects our solid year-to-date performance, benefits from revenue management, accelerated project Summit savings and incorporates a cautious view for the fourth quarter.\nGiven our favorable results, we now expect AFFO growth to be up low single digits for the full year.\nOur full-year expectations for tax rate and shares outstanding remain unchanged from our prior commentary.\nWhen we look ahead to 2021, as you expect, until we get COVID-19 behind us, naturally, it is difficult to provide guidance.\nBut we are committed to providing the investment community with additional commentary on our trajectory and underlying business trends, just as what we've been doing throughout this year.\nWhile the challenges for our service business persist, we remain confident in its resiliency and the continued durability of our storage business.\nI'm proud of how the team has responded to these challenges and the strong results we've delivered.\nWe look forward to sharing further progress with you on our 0earnings call.\nAnd with that, operator, please open the line for Q&A.\n",
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"content": "compname says q3 revenue fell 2.4% to $1.04 billion.\nq3 revenue fell 2.4 percent to $1.04 billion.\nadjusted earnings per share for q3 was $0.31.\nexpects project summit will generate $165 million in adjusted ebitda benefits in 2020.\nno change to overall scope and size of total summit program.\ncontinues to expect project summit to generate $375 million of adjusted ebitda benefits exiting.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: We are joined here today by Bill Meaney, president and chief executive officer; and Barry Hytinen, our executive vice president and chief financial officer.\nIn addition, we use several non-GAAP measures when presenting our financial results.\nWe have included the reconciliations to these measures in our supplemental financial information.\nWe are pleased to have delivered record performance for both the fourth quarter and the full year.\nThese record results are reflective of our broad offerings, deep customer relationships, resilient business model and our dedicated teams.\nDespite the challenges associated with the pandemic and most recently with the Omicron variant, our Mountaineers around the world have continued each and every day to put our customers first now with renewed and invigorated focus on growth.\nAnd our historically high revenue and profitability are a testament to our Mountaineers' commitment.\nSpeaking about our Mountaineers, I wish to begin my remarks by stating that we are all saddened by the overnight events in the Ukraine.\nOur thoughts and prayers are with our customers there and our fellow 60 Mountaineers and their families living and working in the Ukraine.\nI am sure for all of us, given the current events in Europe, it deals in many ways inappropriate discussing our financial results with this backdrop.\nYet at the same time, it is in keeping with our Mountaineer spirit.\nWith that, let me begin our discussion of our remarkable and record year.\nIn the fourth quarter, we achieved our highest ever quarterly revenue of $1.16 billion, yielding eight and a half percent of total organic revenue growth and record EBITDA of $431 million.\nFor the full year, we achieved record revenue of nearly $4.5 billion and EBITDA of $1.6 billion.\nThese results were fueled by increased demand for our services across key markets.\nFor the full year, we delivered organic storage rental revenue growth of 2.6%, reflecting continued benefit of pricing combined with positive volume trends.\nWe drove double-digit growth in digital offerings, including data center inside our digital transformation services and secure IT disposition, now referred to as ALM, or asset life cycle management.\nOur digital services and ALM businesses continue to build momentum, growing over 20% in the fourth quarter and capping off an excellent year of growth.\nFurther to our recent success in the ALM area, we are also pleased to report that the acquisition of ITRenew, announced in December, closed in January.\nThis acquisition will accelerate our growth trajectory in this $30 billion market, which is growing over 10% per year.\nOur newly created ALM division will absorb our historical secure ITAD business line.\nThis enlarged division not only helps us provide chain of custody for our customers' IT assets, but our ALM activities also assure our customers that their IT assets are wiped of any data at the end of their life and destroyed and recycled in a responsible way.\nOn this last point, in terms of recycling, our expanded offerings in this space around a circular economy are important for both IRM's and our customers' ESG goals leading to carbon neutrality.\nThis expanded ALM division also strongly complements our fast-growing data center business, bringing capabilities to serve some of the largest and most innovative companies in the world in a more cradle-to-grave way, consistent with the best security and ESG practices.\nThis expanded ALM platform will directly benefit from Iron Mountain's 225,000 loyal customer base, which includes 95% of the Fortune 1000.\nThis global customer base is supported by 25,000 Mountaineers across 1,450 facilities in 63 countries.\nOur recent expansions in data center, machine learning-driven data analytics and insights and now ALM are just some of the examples of how we continue to invest in growth to capitalize on our many opportunities ahead, serving a customer base which has been loyal to Iron Mountain for decades.\nI have shared with you previously how in the last five years, these investments have taken the total addressable market, or TAM, of our products and services from $10 billion to some $80 billion.\nI am happy to report our continued build-out of new products and services in the last year as well as growth in these underlying markets has now taken our TAM to over $120 billion.\nOur continued drive in building an ever-expanding set of synergistic and customer-centric solutions, together with global reach and scale, is the fuel behind much of the acceleration in our growth.\nLet me share a few examples of how we've been empowering our customers' success in growth through our diverse solution offerings and unmatched customer service.\nOur recent customer win with a large aerospace company, where we won a backfile digitization deal of over $20 million, is a superb example of collaboration among our entertainment services, technology organization and our global records organization, or GRO.\nIn order to achieve its goal of being a 100% model engineering company and to most effectively use designs and data from historical archives to refine new designs, this aerospace company sought help with the digitization and auto classification of over 50 million digital engineering assets.\nWe were tasked to store, classify and utilize machine learning to identify relevant information while maintaining compliance with International Traffic in Arms Regulations known as ITAR.\nTo this end, we developed and implemented an ITAR-compliant solution using our InSight machine learning platform operating in the AWS government cloud environment.\nIron Mountain is uniquely positioned to assist our partner with this initiative with our storage capabilities, our understanding of ITAR compliance complexities, our machine learning-trained analytic engines and our technological support to ensure efficiency and success.\nMoreover, this project enables us to deliver critical insight into engineering data, not just to this company but also to other manufacturing and engineering customers across the globe.\nWe concluded a Phase 1 contract and have also been awarded a Phase 2 contract for this branch.\nThe agency originally planned to select three vendors for the first contract due to the high volume of microfilm reels needing to be processed, but our solution surpassed the customer's expectations, and Iron Mountain was awarded the exclusive contract to process all 177,000 of microfilm reels or over 2 billion records needing analysis.\nThis win was based on our unique splitting technique, proprietary machine learning, automated QA process and processing scalability that helped us to differentiate our offer from the competition.\nThese technology innovations for the customer have enabled future use cases, which rely on advanced pattern recognition at scale, including OCR microfilm processing projects, applying machine learning extraction techniques for digital mailroom, invoice processing and extracting information from claims documents, to name a few.\nAnother example how Iron Mountain is working with customers to support their digital transformation is our recent partnership with a production and development company operating in the U.K.'s North Sea.\nWe've undertaken a significant back scan of their legacy archive records to meet their regulatory obligations to the U.K. oil and gas authority in order to relinquish their license to operate on 230 wells they wish to abandon.\nThey're required to digitally upload all information assets to the National Data Repository.\nUsing the InSight platform, we were able to solve the problem of having enormous amounts of data to sift while consolidating physical and digital data in disconnected information silos and resulting in millions of dollars of annual savings.\nMoving back above ground, recently in our Crozier Fine Arts division, we won a contract to provide comprehensive storage solutions and logistical support for the museum operations of the Academy Museum of Motion Pictures.\nWe were excited and proud that based upon a foundation of long-term partnership and trust built up through many years of support from Iron Mountain's entertainment services division, they came to us to meet their evolving needs where Crozier services were an ideal match.\nNow, turning to wins in our data center business.\nRecall that our bookings target for the year was 30 megawatts.\nWe are pleased to have finished the year with nearly 49 megawatts of leases signed with over 27 megawatts of leases in the fourth quarter alone.\nThis includes the new 20-megawatt lease in our Manassas, Virginia data center announced in December.\nThis lease is expected to commence in phases from mid-2022 through mid-2023.\nWe continue to see strong demand for comprehensive data center solutions from our existing customer base.\nThis lease is indicative of our ability to meet that demand and reflects our commitment to strategically partnering with our customers to meet their individual requirements.\nBased on current design plans, we now expect that the VA2 facility to support 36 megawatts, up from 30 megawatts previously.\nWith these changes and other additions to our portfolio, our total capacity is now in excess of 600 megawatts.\nFinally, we continue to be recognized for our leadership around ESG.\nThis has been an important focus for us for many years, having produced annual sustainability reports outlining our commitments and progress since 2013.\nSome of our past recognitions have included 100% of our data center power is generated by renewables.\nWe were the launch provider of Green Power Pass, which allows our customers to report reductions in their carbon footprint when using our data centers.\nWe were a co-signer with Google to expand our commitment to green-powered data centers to 24/7 carbon-free electricity, and we were one of the original signatories of the UN Global Compact on Sustainability back in 2016.\nMore recently, we announced, in addition to their RE100 program, we have joined the Climate Group's EV100 initiative and reached a key milestone in electrifying our global vehicle fleet in line to reach our climate pledge commitment to achieve net zero carbon emissions by 2040.\nWe have made real progress toward our carbon reduction goals.\nSince establishing our first science-based targets, we have reduced absolute greenhouse gas emissions by over 60% from our 2016 baseline while growing the business.\nWe believe that our commercial growth and ESG initiatives make us stand out, and we suspect they were a major factor of our being ranked among the top 100 on Newsweek's list of America's most responsible companies.\nIn summary, our future ahead is bright.\nWe are building on our growth momentum as we expand our portfolio to meet our customers' evolving needs.\nAnd with our strong footprint, powerful portfolio and deep customer relationships, we are confident that we can continue this momentum as we ascend our mountain range and provide another set of performance records this year and the years ahead.\nIn the fourth quarter, our team delivered strong performance, exceeding the expectations we provided on our last call.\nOn a reported basis, revenue of $1.16 billion grew 9.4% year on year with total organic revenue up eight and a half percent.\nRevenue was $10 million ahead of the high end of the expectations we shared previously despite the U.S. dollar strengthening and being more of a headwind in the quarter.\nAs an example of the momentum we are building, on a two-year basis, our total organic revenue growth continued to accelerate in the quarter.\nOrganic storage revenue grew 3.6% in the quarter, reflecting our strong pricing and data center commencements.\nOrganic service revenue increased $65 million or 17.6% driven by continued strong growth in digital solutions and asset life cycle management.\nAs revenue associated with our traditional transportation services were still down nearly 10% from pre-pandemic levels, we are even more pleased with this performance.\nAdjusted EBITDA was $431 million, an increase of $56 million from last year.\nAs a result of strong flow-through driven by pricing and productivity, fourth quarter EBITDA exceeded the high end of our expectations by $6 million despite additional FX headwind.\nAFFO was $267 million or $0.92 on a per share basis, up $76 million and $0.26, respectively, from the fourth quarter of last year.\nIn both cases, we significantly exceeded the high end of our expectations.\nNow, let me briefly summarize the full year.\nRevenue of $4.5 billion increased 8% on a reported basis and over 6% on an organic constant currency basis.\nAdjusted EBITDA increased 11% year on year to $1.635 billion, an increase of $159 million year on year.\nWe achieved the high end of our full year guidance.\nAFFO increased 14% to $1.01 billion or $3.48 on a per share basis, in both cases, exceeding our full year guidance ranges.\nNow, let's turn to segment performance.\nIn the fourth quarter, our Global RIM business delivered revenue of $1.02 billion, an increase of $76 million from last year or 8% on a reported basis from last year.\nOn an organic basis, revenue increased 7%.\nConstant currency storage rental revenue growth of 4.2% or two and a half percent on an organic basis reflects our focus on revenue management and solid volume trends.\nWith positive volume trends and growth in our adjacent and consumer businesses, total physical volume was in line with our expectations for the quarter and the year.\nGlobal RIM adjusted EBITDA was $453 million, an increase of $49 million year on year.\nAdjusted EBITDA margin was up 160 basis points year on year, reflecting continued pricing strength and productivity.\nTurning to our global data center business.\nOur team booked 27 megawatts in the quarter.\nFor the full year, bookings came in at 49 megawatts, significantly exceeding our full year guidance of 30 megawatts.\nWe are very pleased with the team's leasing performance.\nTo give some historical context, we leased 10 megawatts in 2018, 17 megawatts in 2019 and excluding our joint venture in Frankfurt, 31 megawatts in 2020.\nIn terms of revenue, as we projected, fourth quarter growth accelerated to 25% year over year.\nStorage revenue grew 18% year on year, and service revenue was up sharply and in line with our projections.\nAs a reminder, service revenue in the second half includes fit-out services we are providing to our Frankfurt joint venture.\nWe expect that activity will be completed early in 2022.\nEven with the large service component, EBITDA margin increased sequentially with strong commencements.\nWe are pleased with our data center performance, and our pipeline has continued to strengthen, both in terms of hyperscale and retail colocation.\nIn 2022, we expect to lease 50 megawatts, which would represent 28% annual bookings growth.\nWe project full year data center revenue growth in a range of high teens percent year on year with even higher growth rates on storage.\nWith our strong prior-year bookings and recent commencements, we have very good visibility to revenue.\nWith pricing and improved mix, we expect data center margin for the full year to be up modestly compared to 2021.\nTurning to Project Summit.\nThis quarter, the team delivered $30 million of incremental year-on-year adjusted EBITDA benefit.\nFor the full year, as compared to 2020, Summit delivered $160 million of benefits.\nWe continue to expect another $50 million of year-on-year benefit in 2022.\nTotal capital expenditures were $219 million, of which $173 million was growth and $46 million was recurring.\nFor the full year, total capital expenditures were $606 million, of which $309 million was growth capital related to data center development.\nIn 2022, we expect total capital expenditures to be approximately $850 million.\nWe are projecting approximately $700 million of growth capex, with data center development representing about three-quarters of that.\nWe expect recurring capex to approach $155 million.\nTurning to capital recycling.\nAs we have said before, we view the market for industrial assets as highly attractive as a means to supplement our growth capital.\nWith that backdrop, in the fourth quarter, we upsized our recycling program and generated approximately $63 million of proceeds, bringing the full year to $278 million.\nTurning to the balance sheet.\nWe ended the quarter with net lease adjusted leverage of 5.3 times, in line with our projection and modestly improved compared to last quarter.\nAs we have said before, we are committed to our long-term leverage range of four and a half to five and a half times.\nFor 2022, with the closing of the ITRenew transaction, we expect leverage to tick up modestly in the first quarter.\nWe expect to exit the year at levels within our target range.\nFrom a cash perspective, I would like to recognize our team for driving strong collections, improving our days sales outstanding and resulting in year-on-year improvement in our cash cycle.\nThe collective performance has resulted in a five-day improvement from pre-pandemic levels.\nWith our strong financial position, our board of directors declared our quarterly dividend of $0.62 per share to be paid in early April.\nAlso, as you may have seen, we are pleased to announce an important strategic milestone related to our unconsolidated joint venture focused on the fast-growing valet consumer storage market.\nMakeSpace recently completed a merger with Clutter, a similarly sized business also focused on valet storage.\nWe expect the combination will result in considerable benefits, including a focus on a single brand, Clutter, broader reach and natural synergies.\nIron Mountain will continue to provide storage services to the business, and our ownership interest will be nearly 25% of the combined entity.\nWe are excited about the opportunities that lie ahead and expect continued benefit to our total physical volume.\nNow, turning to our outlook.\nFor the full year 2022, we currently expect revenue of $5.125 billion to $5.275 billion.\nWe expect adjusted EBITDA to be in a range of $1.8 billion to $1.85 billion.\nAt the midpoint, our guidance represents revenue growth of 16% and EBITDA growth of 12%.\nWe expect AFFO to be in the range of $1.085 billion to $1.12 billion, which represents 9% year-on-year growth at the midpoint point.\nWe expect AFFO per share to be in a range of $3.70 to $3.82.\nOur guidance assumes organic global physical volume will be consistent to slightly positive year on year.\nWe expect revenue management will be a significant benefit, and I will note that the majority of those actions have already been taken as we speak to you today.\nAnd nearly all of them will be in place by the end of the quarter.\nAs Bill mentioned, we are planning for a continuation in the strong trends we are seeing in digital solutions and our organic ALM business, combined with a slight recovery in our service activity across the year.\nOur guidance also assumes the contribution from our acquisition of ITRenew.\nAs we closed the deal at the end of January, we are including 11 months of the results in our guidance.\nOur guidance includes approximately $450 million of revenue from ITRenew.\nWe estimate the stronger U.S. dollar will result in foreign exchange headwinds to revenue of approximately $60 million year on year with the vast majority of that in the first half.\nIn terms of EBITDA, our expectations include the benefit from revenue management and top-line growth, the contribution from ITRenew as well as Project Summit benefits.\ndollar and the divestiture of the software escrow business, which we sold in late second quarter.\nWith the ongoing volatilities in the market associated with the pandemic as well as the closing of the ITRenew transaction during the quarter, we felt it would be helpful to share our expectations for the first quarter.\nWe expect total revenue to be in excess of $1.2 billion.\nWe expect EBITDA to be approximately $425 million.\nWe expect AFFO to be in excess of $250 million.\nIn summary, our team is executing well.\nOur pipeline continues to expand, and momentum continues to build across our business.\nOur addressable market has grown significantly over the last several years, and we expect this to continue to expand.\nWe feel confident in our ability to deliver higher levels of growth.\nAnd with that, operator, please open the line for Q&A.\n",
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"content": "q4 revenue rose 9.4 percent to $1.16 billion.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: This is Emmanuel Caprais.\nOur adjusted non-GAAP results exclude certain nonoperating and nonrecurring items, including, but not limited to, asbestos, restructuring, asset impairment, acquisition-related items, and certain tax items.\nAll adjustments in the quarter are detailed in the reconciliations.\nBefore we begin, I'd like to provide a brief overview of our Q2 GAAP results compared to prior year.\nQ2 total revenue decreased 29% to $515 million.\nSegment operating income decreased 65% to $37 million and earnings per share of $0.53 decreased 29%.\nFree cash flow increased 205% to $169 million.\nPlease note that our remaining discussion will primarily focus on non-GAAP or adjusted measures unless otherwise indicated.\nActual results may vary materially.\nAll such statements should be evaluated together with the safe harbor disclosures and the other risks and uncertainties that affect our business, including those disclosed in our SEC filings.\nI truly hope that everyone stays safe as we continue to adjust to the widespread repercussions of the COVID-19 pandemic.\nI'm also very grateful to our shareholders for their support.\nOn our Q1 call, we highlighted our 2020 focus to strengthen ITT's resilience and to drive aggressive cost actions while playing offense for the future.\nAnd this is exactly what we did in Q2.\nWe delivered a 25% segment decremental margin.\nWe accelerated and increased our cost and spend reduction actions to $160 million.\nWe generated record free cash flow of $169 million.\nWe bolstered our liquidity to $1.4 billion, and we signed an LOI to acquire a niche European rail company.\nBuilding on this strong foundation, we will continue to drive operational execution that further reduces decremental margins while fueling future growth opportunities.\nWe can only truly demonstrate our resilience through actions and results.\nToday, we will also give our understanding of the markets that we serve and our expectations for the balance of 2020.\nBefore going into Q2 highlights, a word on safety.\nSafety is my top priority.\nAnd when I talk weekly with our facilities across the world, I'm energized by the accomplishments of our teams who diligently and effectively execute our health protocol.\nThis enabled us to contain the global number of infections to fewer than 70.\nNow let's turn to our Q2 results.\nWe focus on what we control and produce better results than expected.\nDuring the second quarter, ITT's resilience, the resolve of our teams and our pivot to play offense were on full display.\nFrom a financial perspective, we delivered solid earnings per share of $0.57, exceptional segment decremental margin of 25%, record free cash flow of $169 million representing a significant growth of 205% or $114 million.\nAnd segment working capital reduction of 210 basis points compared to prior year and 100 basis points compared to the first quarter.\nOperational excellence is a fundamental pillar of ITT's long-term success.\nAnd during the month of June, I was able to experience it first-hand over and over again when visiting our Seneca Falls plant and seven facilities in Europe.\nSFO operational improvement enabled industrial process to deliver a 13.7% adjusted operating margin.\nThis is 120 basis point expansion versus prior year despite a revenue decline of 17%.\nThe 13.7% margin also represents an improvement of 240 basis points over Q1.\nWe moved quickly to take out costs and we are progressing nicely toward our long-term 15% plus margin target.\nIP continues to impress with strong operational execution, and as an example, the NC line at Seneca Falls achieved above 90% on-time delivery for the tenth consecutive month.\nWhilst in Europe, I was also pleased to see all the Kaizen projects we have under way to improve our operations.\nBeing an assembly line efficiency workshop in KONI Oud-Beijerland or boosting output in Axtone, Stalowa Wola in Poland.\nLast but not least, in Barge, our Friction teams continue to improve our manufacturing processes by repurposing and driving the utilization of existing equipment.\nAll across ITT, we drove high levels of operating efficiency at our manufacturing plants in Asia, Europe, Middle East and the Americas.\nAnd lastly, this operational excellence combined with our speed in execution enabled us to accelerate and boost our cost reduction plan, adding $25 million of new actions that increase our target to $160 million.\nAll of the operational excellence was possible because all our leaders get our people safe through the adoption of rigorous health protocols.\nOn customer centricity, our teams passionately serve our customers, and we're creative in satisfying increasingly demanding requirements, showing in actions, once again, that our customers are our priority.\nMomentum in Friction OEM share gain continued.\nIn the first half of 2020, we outperformed the global market and each of our main regions.\nAnd based on platforms ramping in the second half, we continue to expect to outperform global markets by 700 to 1,000 basis points this year.\nOur end ordering unit grew new business awards by 94% in the quarter.\nThe improvement that Logan and his team executed have put this business back on a growth trajectory.\nIP grew organic pump project orders by 22%.\nProject orders were consistent with the level reached in the first quarter.\nAs a result, our backlog at the end of Q2 was up 3%, excluding foreign exchange compared to the beginning of 2020.\nThe the project order performance is an emerging sign of customers' recognition of IP's operational improvement and the innovation in our products.\nIP customers were also delighted by Seneca Falls' 95% plus baseline pumps delivery performance during Q2.\nThis outstanding delivery performance pairs nicely with the rest of our U.S. facilities and our Korean and Saudi plants.\nThis level of execution mirrors the Motion Technologies' playbook where our friction business maintained 99% on-time delivery performance despite operating in areas hit hard by COVID-19.\nLastly, on capital deployment.\nOur effective capital deployment strategies consolidated and protected our outstanding liquidity position.\nThis will enable us to continue to invest in future growth opportunities as we pivot to play more often.\nToday, we have $1.4 billion of available liquidity, and we have ample capital to fund all our operational needs and investments and position us to take advantage of other strategic opportunities.\nAnd we continue to protect our cash position through daily and weekly cash reviews, and we added a record $169 million cash flow year-to-date.\nWhile we play offense for the future, we will continue to strictly control our capital expenditures.\nIn Q2, we reduced capex by 25% compared to prior year, and our tracking to our $35 million reduction target for the full year.\nOur strong liquidity position enabled us to weather the present storm while we sow the seeds of future growth.\nWe will continue to invest in smart and energy-efficient applications that will drive revenue growth in the long term.\nIn 2020, the ITT Smart Pad is making new inroads in both aftermarket and OE customers.\nAnd at IP, we are currently testing a revolutionary energy-efficient power source for our pumps.\nLastly, on capital deployment, we signed an LOI for a new niche rail acquisition as we continue to build out this long-term growth platform.\nAll of these actions executed with speed, helped us deliver the Q2 results provided on slide four.\nSegment operating income margin of 12.6% despite the revenue decline.\nWe delivered this margin through strong operational execution and fast and decisive trust actions that produce segment decremental margin of 25% and an EBIT decremental margin of 20%.\nWe achieved 52% corporate spend reduction versus prior year.\nEPS of $0.57 per share was ahead of our expectations and declined 35%, excluding unfavorable FX of $0.03.\nAnd lastly, we generated $169 million of free cash flow year-to-date, representing a 205% improvement over the prior year.\nIn summary, we delivered a solid second quarter in a difficult environment by executing decisive action early and with speed.\nLet's start on slide five with Motion Technologies.\nMT organic revenue declined 35% due to wide-ranging auto production shutdowns impacting our Friction and Wolverine businesses.\nIn the quarter, Friction declined 42%.\nHowever, for the first half of 2020, Friction outperformed each of our major OEM auto markets.\nIn North America, we outperformed by 1,000 basis points.\nIn Europe, we outperformed by 400 basis points.\nAnd in China, we outperformed by 1,600 basis points.\nAs discussed during our Q1 call, we expected Q2 top line results to be impacted by unfavorable customer order phasing.\nNonetheless, we continue to project 700 to 1,000 basis points of global OE outperformance for the full year as new platform awards enter the production phase in the second half.\nWolverine declined 38% in the quarter, but was able to deliver 800 basis points of outperformance for the first half.\nAnd finally, KONI and Axtone revenue decreased 9% as solid Europe OE rail growth, partially offset lower aftermarket revenue in North America and Asia.\nMT's adjusted segment operating income declined 57% to $24 million due to volume declines and unfavorable FX of $2 million.\nHowever, MT successfully contained decrement margins to 27% due to increased manufacturing efficiency, proactive plant shutdowns, restructuring benefits and aggressive discretionary cost actions.\nThe 27% decremental margin improved sequentially and is also much lower than the decremental margins during the 2008, 2009 recession, reflecting the true resilience of today's MT. MT delivered solid Q2 margin of 12.2%, mainly reflecting the volume decrease.\nAxtone continued to expand margins both compared to the prior year and to the first quarter, and Friction China almost returned to pre-COVID-19 margin levels.\nContinuing restructuring actions in the second half will further bolster MT's structural competitive advantages, which are the foundation for our continued market outperformance.\nAnd these reductions will also help to improve decremental margins in the second half.\nIt is also worthy to note that MT improved working capital by 120 basis points and produced record operating cash flow.\nAnd lastly, from an award perspective, both Friction and Wolverine continued to gain share with key conquer wins and new platform wins, both on conventional and electric vehicles.\nThese awards continue the share gain momentum that will power MT's significant outperformance in the global markets we serve well into the future.\nLet's now turn to industrial process on slide six.\nIP delivered outstanding results considering the challenging environment.\nOrganic revenue was down 17%.\nHowever, margins expanded 120 basis points compared to the prior year and 240 basis points sequentially.\nThe IP revenue decline was driven by lower project revenue due to large project shipments in the prior year.\nShort-cycle revenue was up 4%, mostly driven by lower industrial valve activity, more than offset relatively flat aftermarket and baseline activity.\nOrganic orders for the quarter declined 9% as 22% growth driven by general Industrial market share gains was partially offset by reduced capital investments across major markets due to COVID-19.\nIP's backlog at the end of Q2 was up 3% excluding foreign exchange versus the beginning of 2020, providing solid visibility into the second half of 2020.\nOperating income declined 9% to $26 million, as George and the IP team confined decremental margins to a near 6%.\nThis was a major accomplishment driven by proactive measures taken in late Q3 of last year and rapid restructuring actions implemented in 2020.\nAnd as a result, IP segment operating margin grew 120 basis points to 13.7%.\nThis operating margin performance was driven by mix, restructuring and sourcing benefits, continued strong project execution, price and government incentives, more than offsetting the impacts of volume declines and increased customer payment risks.\nWorking capital improved 760 basis points as the IP and shared services teams were hard at work securing payments from customers and deleveraging the balance sheet.\nIP's resilience reflects the Motion Technologies business approach as global on-time performance and product portfolio redesign accentuate differentiation with customers.\nIP will continue to reduce costs in the second half as we implement new restructuring actions and execute on footprint optimization projects.\nNow let's turn to CCT on slide seven.\nCCT organic revenue declined 29% and weakness across all major end markets.\nThe steep reduction in air traffic lowered commercial aero demand and caused a major slowdown in OE build rates that was further compounded by the specific challenges related to the 737 MAX requalification.\nOur Industrial Process business experienced a 7% decline and distribution inventory adjusted to lower levels of activity and medical connector surge in demand to accommodate COVID-19 patient care.\nOperating income declined 55% on the volume drop and margins declined to 11.1%.\nThe primary drivers of the declines were volume impacts in COVID-19 and OE production weakness.\nThese impacts were partially offset by strong productivity, restructuring actions, government incentives and lower materials inflation.\nWe expect volatile market conditions to persist for the balance of the year affecting OE build rates at airframes.\nCCT's decremental margins of 35% improved sequentially from Q1 and reflected aggressive restructuring actions executed by the business.\nCCT executed a footprint move in Q2 and will continue to drive product line transfers to lower cost regions and additional restructuring for the balance of 2020 as a part of the comprehensive operational reset designed to better align with current demand expectations.\nSo now I'll turn it to Emmanuel, our future ITT CFO.\nFor an update of our cost actions, liquidity and balance of the year expectations, starting on slide eight.\nAs you can see here, in 2020, we are laser-focused on what we can control.\nAnd we implemented aggressive and large restructural cost actions in all of our businesses as well as our corporate at the onset of the pandemic to protect margins and to produce strong free cash flow performance.\nIn Q2, as a result of this focus, we increased our savings target of $260 million, exceeding the original guidance that we communicated during Q1.\nWe have already executed a large portion of our restructuring plan, and the remaining actions will mostly take place in international regions in the second half.\nWe are also detailing incremental actions across ITT as part of our increased cost target of $160 million.\nSpecifically, we added annualized savings coming from our global industrial footprint optimization, mainly dealing with IP production facility.\nWe already announced one closure and the relocation into a larger production site is scheduled for Q4 this year.\nWe continue to prepare plans for additional consolidations.\nAnd our discretionary spending cuts were very impactful in Q2, and we will exceed our original target for the year.\nFinally, we reduced capex by 25% in Q2 and continue to track to our overall target of $35 million reduction.\nWe remain flexible on our capex strategy and continue to focus the reduced capital allocation toward productivity and targeted growth projects.\nOverall, as a result of the great progress made to date and the decisive incremental actions we took, our 25% decremental margin in Q2 has significantly improved from Q1, and we now expect total segment decremental margin in 2020 to range between 22% and 28%.\nNow on slide nine.\nWe ended the quarter with liquidity of $1.4 billion, which was significantly strengthened compared to Q1.\nOur balance sheet and liquidity position are key strength of ITT, and this provides us the ability to effectively deploy capital when opportunity materialize and value creation targets are achievable.\nFrom a cash flow perspective, we continue our strict routines to monitor collections and other working capital improvements on a daily basis.\nWe scored some good wins with customers and our collections in Q2 helped generate a record $169 million of free cash flow year-to-date.\nThis represents an increase of 205% versus the prior year.\nWe also collected significant past due receivables early in July with key customers to continue our successful receivable harvesting actions.\nWe optimized segment working capital by 210 basis points year-over-year, and we have more opportunities to further improve in the second half, especially regarding inventory at MT and CCT.\nHowever, we also expect demand to increase sequentially at MT and IP which will start to weigh on our second half receivables.\nBased on this, we are now targeting a free cash flow margin of more than 11% on for the full year, which is 160 basis points better than prior year.\nThe next few quarters will continue to be unpredictable, even though the visibility has improved compared to 90 days ago.\nAs a result, we will continue to suspend formal guidance until demand certainty improves.\nBut let me provide some perspectives on how we see the year playing out for the balance of 2020.\nWe expect gradual sequential improvement in the second half, but still expect high-teen revenue year-over-year declines, mainly driven by CCT.\nDespite improving passenger air traffic in Q3, we do not see commercial aero production rates materially improving sequentially.\nHowever, we expect defense revenue to pick up compared to the first half on the back of improved project order intake.\nWe expect auto production rates to improve sequentially, reflecting a market decline of approximately 25% for the full year.\nWe also reaffirm that our Friction OE business will outperform this global market decline by 700 to 1,000 basis points for the full year.\nSequentially, in Q3, we expect MT revenue to improve more than 20% versus Q2 with further improvement expected in Q4.\nThis MT revenue growth, combined with our aggressive cost actions will fuel solid sequential margin expansion in Q3 and Q4.\nWe expect IP revenue to be consistent with Q2 levels in Q3 and show modest sequential growth in Q4.\nFinally, we expect corporate expenses in Q3 and Q4 to be similar to Q1.\nOverall, we have not integrated in our forecast another global lockdown like we experienced in Q2.\nEven though we have seen improvements in June and July from certain end markets, we expect the sequential recovery to be erratic because of COVID-19.\nWe expect Q3 earnings per share to show mid-teens sequential improvement.\nThe gradual improvement will come from cost actions combined with gradual market recoveries.\nWe are now targeting segment decremental margins of 22% to 28% for the full year.\nAnd finally, from a free cash flow standpoint, we're targeting more than 11% of free cash flow margin.\nQ2 has been a very demanding quarter.\nAnd I'm very proud of ITTiers' achievement when it comes to our customers.\nWe serve them even better than before by assisting them in navigating this crisis and delivering our products safely and on time, day after day.\nFor our ITTiers, we kept our people safe by rigorous respecting health protocols.\nFor our communities, the civil right movements have been an inspiration to us all.\nAt ITT, we reject racism.\nRacism has no place at ITT, full stop.\nWe at ITT, are upstanders and live by the principles of diversity, equity and inclusion.\nAnd we're taking concrete actions to make ITT a better workplace.\nAnd for our shareholders, we delivered record free cash flow and aggressively reduced costs to limit the impact of lower demand.\nWe're already playing offense and using our strong competitive position to our advantage.\nWe will continue to focus on what we control and drive of operational excellence, customer centricity and effective capital deployment.\nThese are our value-creation drivers.\nAs you are aware, Tom will be stepping down as ITT's Chief Financial Officer as of October.\nAt this time, he and Emmanuel Caprais, who will be succeeding him as ITT's next CFO, are working closely on the transition.\nYou should know that it was Tom and I who recruited Emmanuel in 2012.\nThis is when our partnership started.\nI want to express my deepest appreciation to Tom for all he's done for ITT, for our customers, our ITTiers, and of course, our investors.\nTom has been with ITT since 2006 and was named CFO in 2011 as we navigated the spin-off.\nSince that time, under Tom's leadership, among many others accomplishments, ITT's market value tripled.\nI'm sure that many of you have gotten to know Tom professionally during his time with ITT.\nHe has spent a lot of time with many of you in all of his roles here.\nBy my calculations, Tom has made more than 50 quarterly earnings calls.\nAlso between conferences and other meetings, he has been part of more than 1,700 investor and analyst meetings during his tenure as CFO.\nThat number is even higher when you consider all the interactions he had with many of you up until he became CFO.\nBut for those of you lucky enough to have gotten to know Tom personally, you also know that he is not only a special finance leader, but a truly special person who cares about people and who always bring a fresh perspective.\nAnd he does it with a great sense of humor.\nI found his counsel and partnership during our time working together to be invaluable.\nWhen I was getting ready to start into my new role as CEO, ITT provided some provided me some coaching on the IR side.\nStill, I can tell you today that the best coaching was in working day in and day out with Tom.\nAnd listening to his perspective and absorb from his experience.\n",
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"content": "compname reports q2 adjusted earnings per share $0.57 from continuing operations.\nq2 adjusted earnings per share $0.57 from continuing operations.\nq2 earnings per share $0.53 from continuing operations.\nq2 revenue fell 37 percent to $199 million.\nqtrly earnings per share $0.53.\nqtrly organic revenue decreased 28% mainly as a result of negative global impact of covid-19.\nstrong available liquidity of $1.4 billion as of june 30, 2020.\ntargeting full-year 2020 adjusted decremental margins in range of 22% to 28%.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: This is Alex Sherk.\nOur adjusted non-GAAP results exclude certain nonoperating and nonrecurring items, including, but not limited to, asbestos, restructuring, asset impairment, acquisition-related items and certain tax items.\nAll adjustments in the quarter are detailed in the reconciliations.\nBefore we begin, I'd like to provide a brief overview of our Q3 GAAP results compared to prior year.\nQ3 total revenue decreased 17% to $591 million.\nSegment operating income decreased 22% to $84 million.\nRegarding EPS, we took our net asbestos liability to a full-horizon estimate, resulting in a noncash expense equivalent to $1.20, the main driver of the $0.55 earnings per share loss.\nFree cash flow increased 77% to $271 million.\nPlease note that our remaining discussion will primarily focus on non-GAAP or adjusted measures, unless otherwise indicated.\nActual results may vary materially.\nAll such statements should be evaluated together with the safe harbor disclosures and other risks and uncertainties that affect our business, including those disclosed in our SEC filings.\nI truly hope that everyone stays safe.\nAnd to make sure we continue to operate safely, we're implementing our ready, safe, go program across ITT based on the successful containment strategy first developed by our Asia Pacific team.\nToday, we will present the results of ITT'ers' relentless efforts to drive our performance and fortify our resilience.\nDuring the last few years, we at ITT have elevated the strategic standing of execution.\nQ3's outstanding results are the proof of this and also a testament to our strengthening momentum toward full recovery.\nLast quarter, we highlighted our focus on protecting our employees and supporting our communities while providing superior service to our customers with flawless execution.\nWe also committed to delight our shareholders with record cash flow generation and timely cost actions while playing offense for the future.\nThis is exactly what we continue to do in Q3.\nWe delivered record ITT operating income margin of 15.4%.\nWe grew 92% sequentially in Friction OE sales.\nWe delivered 19% segment decremental margin and 40% segment incremental margins sequential to Q2.\nLastly, we generated record free cash flow of $271 million.\nWe are firmly on the road to recovery.\nITT's execution capabilities and our unprecedented granularity delivered higher volume than expected, increased top line sequentially, and through strict fixed cost controls, produced an ITT record quarterly margin performance.\nWe achieved our highest-ever quarterly operating income margin and our highest-ever year-to-date free cash flow.\nThis is even more remarkable given the current macro environment.\nWe will also provide our perspective on the markets we serve.\nBefore going into Q3 performance, I'd like to highlight our safety record.\nSafety is, without a doubt, my top priority.\nWe have made tremendous progress in all our businesses.\nYear-to-date, we reduced the number of incidents by 30%.\nOur injury frequency rate is 0.8%, and 50% of our sites have been incident-free for more than a year.\nI'm grateful to our teams for their accomplishments and for keeping our people safe.\nNow let's turn to our Q3 results.\nOn the road to recovery, we focus on what we control and broke some records along the way.\nWe delivered solid earnings per share of $0.82, up 44% sequentially, strong segment operating income margin of 16.2%, up 360 basis points sequentially; record operating income margin of 15.4%; and record free cash flow of $271 million, representing a growth of 77% or $118 million versus prior year.\nFrom an operational excellence standpoint, we continued our journey of betterment.\nOur productivity and cost actions helped to offset the impact of materially lower volumes.\nIn the third quarter, I was very fortunate, I was able to visit many of our sites in Europe and the U.S. Let me tell you, we have many opportunities, and we will go after them.\nI also experienced the progress made firsthand, progress that helped us to deliver 14.1% operating margin at IP.\nThis is the highest Industrial Process Q3 margin ever, and we continue to confidently progress toward our long-term 15% plus margin target.\nThe breadth of the operational improvements delivered by George and his team is impressive, not only because of the quality of execution, but also because of the care they put into structurally resetting IP for the long term.\nWe are actively shaping our manufacturing footprint and redesigning our product portfolio to establish a lasting competitive mode and superior margin performance for IP in the years to come.\nThis 14.1% margin performance represented 120 basis point expansion versus prior year, and 40 basis points higher than Q2 this year.\nOur progress was also evident when I was with the MT team in Barge.\nMotion Technologies delivered a strong operating margin at 18.5%, up 630 basis points versus Q2 and only 30 basis points below prior year.\nWe continue to drive productivities through our factories, and China and Mexico, in particular, keep on impressing with margins near all-time highs.\nAt CCT, I was encouraged by the many Kaizen events running in our Valencia site.\nAnd all across ITT, we drove high levels of productivity that produce significant segment margin expansion compared to Q2.\nThese operational excellence, combined with our speed and execution, enabled us to accelerate working capital reduction and post a year-over-year 180 basis points improvement.\nOn the customer front, our teams continue to focus on serving our customers with utmost dedication, showing through their actions that our customer-centric approach is a way of life at today's ITT.\nOur Friction OE sales grew 92% sequentially, and the momentum in shared gains continued with each one of our main regions outperforming global production year-to-date, including over 1,000 basis points of outperformance in North America and China.\nWhile we still experience inventory adjustment issues in Europe with certain customers in the first half of Q3, we saw encouraging signs in auto OE production, particularly in September and October.\nWe now expect Friction OE outperformance for the full year at the lower end of our expectations based on the timing of new platform ramps in the fourth quarter.\nIP grew organic short-cycle pump orders by 14% sequentially on the back of strong part, which improved gradually during the quarter and showed year-over-year growth in September.\nIP delivered a book-to-bill of 1.\nAnd as a result, our backlog at the end of Q3 was up 6%, excluding foreign exchange compared to the beginning of 2020.\nIP continues to lead in on-time delivery performance.\nToday, our customers know they can rely on us to deliver top-quality Goulds Pumps on time at a competitive price and consistently.\nThis is a key differentiator.\nWe've been talking a lot about Seneca Falls' 95% plus baseline pumps delivery performance for the last 12 months.\nAnd I want you to know that today, the rest of our facilities have been performing at an industry-leading level as well.\nFinally, at CCT, we have been busy playing offense and finding new ways to partner with our customers.\nOur elastomeric rotorcraft business has been nominated on the next U.S. military reconnaissance helicopter code named FARA.\nThis is a major recognition for our rotorcraft business, which we created organically just a few years ago.\nAnd our composites business is finalizing a strategic partnership with a large aircraft engine manufacturer that we propel our Matrix business to new top line heights.\nThe team at CCT has been working hard to adjust our cost structure to the new aero market conditions, and at the same time, looking for growth opportunities by showcasing our engineering prowess.\nI was at our Valencia facility last week, and I was impressed by our new state-of-the-art sound chamber capabilities as well as our new product pipeline.\nLastly, on capital deployment.\nWe continue to drive cash generation through working capital efficiency and strict capital expenditure focus, further strengthening our liquidity.\nAs a result, we are raising our free cash flow margin target to a range of 13% to 15% for the full year.\nToday, we have $1.5 billion of available liquidity, and we have ample capital to fund all of our operational needs and investment, and position us to take advantage of other strategic opportunities.\nOur strong liquidity position prepares us well for what's ahead, whether it is facing headwind or surfing tailwinds.\nFinally, in October, we successfully terminated and transferred our U.S. pension plan.\nThis will not only provide our pension eligible employees great service but also reduce ITT's administrative costs and eliminate any future funding requirements.\nLet's now look at our Q3 financial results provided on slide four.\nWe produced 16.2% segment operating income margin.\nWe delivered these margins through productivity and aggressive cost actions that produced segment incremental margin of 19%.\nWe continued to drive down corporate costs and delivered an approximately 20% structural run rate reduction versus prior year.\nEPS of $0.82 per share declined 15% and was ahead of our expectations.\nAnd on cash, we generated $271 million of free cash flow year-to-date, up 77% versus prior year.\nOur trailing 12-month free cash flow margin now stands at a record 15.4%, a sequential improvement of 80 basis points.\nITT'ers delivered strong Q3 results versus 2019, and these results are even stronger when we look sequentially.\nSwitching to our sequential performance on slide five.\nOur segment operating income jumped 48%, an impressive growth compared to an organic revenue increase of 12%.\nThis is the result of our business stepping up efficiency and cost actions as we continue to focus on what we control and benefit from operational leverage from a permanently lower fixed cost base.\nOur revenue growth was driven by a 92% increase in friction sales OE, mainly coming from outperformance in China and North America.\nSimilarly, earnings per share grew 44% sequentially despite a onetime environmental benefit realized last quarter.\nWhilst recovery remains uneven across market, whichever way you choose to look at our financials, ITT's businesses delivered outstanding third quarter results.\nLet's start with Motion Technologies on slide six.\nOrganic revenue declined 13% on lower order production rates and slower activity in the rail segment due to reduced passenger traffic.\nIn the quarter, Friction OE sales were nearly flat to the prior year.\nThis is a strong showing with China and North America growing 11% and 14%, respectively, which was offset by Europe, where we experienced destocking with some Tier one customers.\nSequentially, Friction OE sales skyrocketed 92%, gradually accelerating during the quarter to show mid-single-digit year-over-year growth in September.\nSegment operating income declined 12% to $50 million.\nMT successfully improved decremental margins to 21%.\nAnd sequentially, operating income increased 107% with 36% incremental margin performance.\nWe drove operating income recovery through productivity and restructuring actions.\nMotion Technologies delivered outstanding Q3 margins of 18.5%, 30 basis points lower than the prior year, but increased 630 basis points sequentially.\nThese results were fueled by strong performance in Friction China, which produced its highest margin since Q1 2018, and Friction Mexico is now approaching pre-pandemic margin levels.\nThe MT team delivered above our expectations given the revenue decline versus prior year.\nIn Q4, we expect to deliver margin expansion versus prior year on the back of continuing restructuring actions and productivity as well as low single-digit organic revenue declines.\nThese structural cost actions add to MT's many competitive advantages, material science leadership, best-in-class quality and fastest lead times, all of these together form the foundation for continued outperformance.\nAnd lastly, from an award perspective, both Friction and Wolverine continued to gain share with Conquer wins and new platform wins like the 15 new electric vehicle platform awards in the quarter.\nMoving on to Industrial Process on slide seven.\nIP clearly demonstrated the resilience of its business model considering the challenging environment.\nWith 14.1% operating margin, IP expanded 120 basis points compared to the prior year despite an organic revenue decline of 19%.\nSequentially, the growth was 40 basis points on flat revenue.\nThe IP year-over-year revenue decline was driven by short-cycle bookings during the height of the pandemic last quarter.\nLower project revenue is mainly due to large prior year chemical shipments related to the expansion of plastic production capacity in North America.\nOrganic orders for the quarter declined 17% coming from 33% lower project bookings and 12% short-cycle decline versus prior year.\nParts orders recovered gradually during the quarter and posted year-over-year growth in September.\nIP's book-to-bill of one in Q3 and year-to-date backlog growth of 6%, excluding foreign exchange, provides solid revenue visibility into next quarter.\nOperating income declined only 12% to $27 million despite significant revenue declines.\nOur proactive cost actions, shop floor and sourcing productivity resulted in best-in-class decremental margin of 8%.\nIP will continue to benefit from our footprint optimization strategy.\nAnd in October, we completed step one of our European footprint project and announced a new facility closure.\nIndustrial Process segment operating margin of 14.1% was driven by productivity and cost control, sourcing and restructuring actions amid a decline in revenue.\nIP continued to fund innovation such as the new diagnostic capabilities added to our i-Alert remote monitoring platform and our product portfolio redesign projects.\nLet me expand on our BB2 pump redesign project as it demonstrates our strategy of playing offense.\nAs you know, we have been hard at work improving our large chemical pump design to reduce materials content, improve manufacturability and source components from best cost regions while improving hydraulic performance.\nThis design has generated so much interest from our customers that we booked 43% higher orders year-to-date than for the entire 2019.\nTo date, we generated large sourcing savings, and the team has established a long-term supplier strategy that will put IP on a path to supply chain excellence for years to come.\nFinally, IP improved working capital by 800 basis points as we reduced AR past dues by more than 20% and inventory by 14%.\nWe continue to see more opportunities to further reduce inventory as we consolidate footprint and optimize materials management -- materials planning management.\nIP finished the quarter with 19% working capital as a percent of sales.\nIP's outstanding performance reflects the multiyear strategy that we outlined back in 2017 and that we are faithfully executing as we advance toward our long-term margin target of 15% plus.\nWe expect to produce a similar margin in Q4 as sequential volume increase is driven by large project shipments.\nLet's complete the overview of our segments with CCT on slide eight.\nCCT organic revenue declined 26% on weakness across our major end markets.\nThe steep reduction in passenger traffic lowered commercial aero demand and continues to cause a major slowdown in OE build rates.\nWe are also impacted by the specific challenges related to the 737 MAX requalification process.\nOur CCT industrial business experienced only a 2% decline as our distribution partners reduced excess inventory and adjust to lower levels of activity.\nOur BIW, oil and gas connector business, was impacted by reduced North American shale production and lingering difficulties with customer site access and service deliveries in the Middle East.\nHowever, we were able to gain share in that region on the back of better quality and delivery performance, and our year-to-date orders are up 30% year-over-year.\nOperating income declined 40% on the volume drop, and margin of 14% showed an improvement of 300 basis points over Q2.\nThe primary driver of the decline versus prior year was volume impacts from aero weakness.\nThese impacts were partially offset by shop floor productivity, especially out of the Nogales and Valencia sites, restructuring actions and benefits from product line transfers.\nIn Q3, we continue to see aero debookings, albeit at slightly reduced levels compared to Q2, and significant disruptions coming from customers' ordering and receiving patterns.\nWe expect weak OE build rates to persist.\nAdditionally, lower aircraft utilization and weakened airline profitability result in a slow aftermarket recovery as less maintenance is required or gets deferred.\nCCT decremental margins of 28% improved sequentially from Q2 and reflect the aggressive restructuring actions executed by the business.\nFinally, in October, Ryan Flynn was appointed CCT President.\nRyan had previously served as the President of our Asia Pacific region, where he drove critical growth initiatives.\nDavide Barbon, who is head of our KONI Axtone business, will now lead the Asia Pacific region, one of ITT's growth platforms.\nDavide returns to China, where he previously led the expansion of MT in Wuxi.\nAs you know, last quarter, we raised our cost action target to $160 million.\nLet me now give you an update on our plan on slide nine.\nOur capex reduction plan is progressing well.\nWe are hard at work on the remaining $125 million of cost reduction, a large portion of which is structural.\nTo date, we have completed more than 90% of the full year headcount reduction plan.\nOn the spending front, we are exceeding our saving expectations driven by strong cost controls and sourcing performance.\nWe are driving footprint optimization at both IP and CCT with several new actions progressing through granular planning and internal approval stages.\nOverall, we expect these actions will generate more than $90 million savings of benefits -- $90 million of benefits in 2020 and additional carryover benefits in 2021, partially offset by temporary compensation actions that have been rolled back in Q1 -- in Q4.\nAs a result, we are improving our decremental margin target, and we now expect total segment decremental margin for 2020 to range from 21% to 24%.\nNow I'd like to discuss the results on our net annual asbestos remeasurement on slide 10, which is excluded from our Q3 adjusted results.\nThese events, coupled with stability in our underlying claim data, enabled us to extend the period for which we provide an estimate through 2052 from our previous rolling 10-year estimate.\nSince then, excluding the full horizon transition, our net liability declined 44%, and when accounting for these quarters, noncash $136 million full horizon impact, the net liability dropped 25%.\nThis reflects our effective claims management and one firm defense strategy as well as aggressive insurance recovery actions that have improved the value of our insurance portfolio.\nImportantly, we now expect that our projected annual average net after-tax defense and indemnity outflows for the next 10 years will decrease to $20 million to $30 million, a reduction of 24% from the midpoint.\nBefore Luca provides his closing remarks, let me share some perspective on how we see Q4 playing out.\nWe expect continued sequential improvement in Q4 but still anticipate year-over-year revenue declines to range between high single digits and the low teens.\nWe expect MT to deliver on low single-digits revenue decline as Friction revenue growth will more than offset -- will be more than offset by lower Wolverine and KONI Axtone volumes.\nWe expect auto production rates to improve sequentially, reflecting a market decline of approximately 20% for the full year.\nFriction OE outperformance is now expected to be at the lower end of our range.\nWe also expect IP revenue to show sequential growth in Q4 and year-over-year declines to a low double-digit range.\nMost of our expected Q4 revenue is already in backlog at the end of Q3.\nDespite slowly improving passenger air traffic in Q3, we do not see commercial aero production rates materially improving sequentially.\nAs a result, we expect flattish CCT revenue from Q3 to Q4.\nFrom a segment margin standpoint, we expect to produce strong Q4 margins, well over the 15.4% generated last year driven by benefits from productivity and cost actions.\nWith outstanding margin performance to date, we expect IP to deliver healthy full year margin expansion compared to 2019.\nConsequently, IP's Q4 margin will be similar to Q3 and prior year, while CCT may show a sequential reduction driven by unfavorable connector mix.\nWe expect corporate expenses for the full year to be down approximately 40%.\nWe also expect Q4 earnings per share to show low double-digit sequential improvement, and we are now targeting segment decremental margins of 21% to 24% for the full year.\nOn free cash flow, we are raising our margin target to 13% to 15% for the full year as we rebuild some working capital to support our business and customers.\nITT's performance is the outcome of a sound and actionable strategy, one with clear priorities and a strong focus on execution driven by unprecedented level of granularity.\nAs a result, we generated strong levels of profitability and record free cash flow.\nWe are managing through the storm, and ITT will emerge stronger and bolder than ever before.\nI look forward to continuing to share the progress we will make in our journey.\n",
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"content": "itt q3 loss per share $0.55 from continuing operations.\nq3 revenue fell 17 percent to $591.2 million .\nq3 adjusted earnings per share $0.82 from continuing operations.\nq3 loss per share $0.55 from continuing operations.\nsequentially, organic revenue increased 12 percent from q2 of 2020.\ncompname reports q3 adjusted earnings per share $0.82 from continuing operations.\nq3 revenue fell 11 percent to $272 million.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Today's call will cover ITT's financial results for the three-month period ending October 2, which were announced yesterday evening.\nThese statements are not a guarantee of future performance or events and are based on management's current expectations.\nActual results may vary materially due to, among other items, the factors described in our 2020 annual report on Form 10-K and other recent SEC filings.\nThese adjusted results exclude certain nonoperating and nonrecurring items, including, but not limited to, asbestos-related charges, restructuring, asset impairment, acquisition-related items and certain tax items.\nI am very pleased with the results ITT delivered in the third quarter.\nOnce again, the resilience of our businesses and our teams has allowed ITT to execute for our customers in a tough macroeconomic environment.\nAs a result of the revenue growth, continued margin expansion and the effective deployment of the balance sheet, ITT delivered adjusted earnings per share of $0.99, growing 21% over the prior year.\nDuring the quarter, it was paramount that we stay focused on execution while cultivating the significant growth opportunities ahead of us, and this is exactly what we did.\nIn the third quarter, I continued to work our shop floors around the world to ensure we are taking full advantage of our opportunities.\nI'm encouraged by what I saw firsthand as we are not even close to being done improving our operational and business excellence.\nI saw the engineering expertise and prowess on display at the Friction plant and innovation center in Barge, Italy.\nThe productivity and automation opportunities at our KONI plant in Oud-Beijerland, The Netherlands and the energized high-performing goods pumps team I reconnected with in Dammam, Saudi Arabia.\nI was also fortunate to visit our industrial process team in Tizayuca, Mexico, where we have a good low-cost manufacturing setup poised for future growth.\nAnd lastly, our Friction plant in Silao, Mexico is continuing to add new production lines to support the wins in EVs and share gains on conventional vehicle platforms.\nThere is a lot to be excited about at ITT.\nLet's talk about some of the key highlights from ITT's third quarter.\nWe drove broad-based sales growth across all three segments and implemented strategic commercial actions to minimize the impact of rising inflation.\nWe drove incremental productivity in the quarter, roughly 280 basis points through a combination of shop floor and sourcing actions, and we continue to apply strict controls over our fixed costs as growth resumes.\nWe thought to overcome a year-over-year $0.23 or 370 basis point raw material headwind.\nOur ITTers delivered 60 basis points of adjusted segment operating margin expansion, an exceptional result, considering the supply chain dynamics we see.\nWe generated organic orders growth of 27% with strong demand in Friction aftermarket, rail, connectors and industrial controls.\nWe also continued to grow nicely in IP short-cycle and projects.\nFinally, we put our capital to work, repurchasing an additional $50 million of ITT shares to bring our year-to-date repurchases above $100 million, exceeding our repurchase commitment for the full year.\nThese accomplishments and the dedication of our ITTers drove adjusted earnings-per-share growth of over 20% compared to prior year and 2% above 2019 pre-pandemic levels.\nLooking at the businesses.\nDespite the supply chain disruption, the restricted auto production volumes, Friction OE continued to outperform, while also driving strong aftermarket growth.\nWe continue to win on both conventional OE vehicles and on new electric vehicle platforms, which will power future outperformance as they transition to hybrid and ultimately to full electric accelerate.\nThis quarter, we won content on six new electric vehicle platforms in China, the world's largest automotive market.\nThis year, we have been awarded content on 25 new EV platforms and our win rate is significantly above our current global OE share of over 25%.\nElectrification will be MT's next springboard for long-term growth given our strategic focus on EV platforms.\nIn Connect & Control Technologies, we drove 17% organic sales growth with strong demand in North America distribution, especially in the industrial market.\nThis, coupled with progress on CCT's operations, generated 17% adjusted segment margin for the quarter, putting the business closer to pre-pandemic levels.\nLastly, we generated 8% organic revenue growth in industrial process, driven by short-cycle demand across parts, valves and service.\nThis is remarkable, given the supply chain difficulties we are experiencing.\nWe see positive signs in our weekly order rate.\nAnd as you will hear shortly, continue to see sequential improvement and market share gains in the long-cycle project business, which is an encouraging sign for 2022 and beyond.\nOne of the most telling metrics for ITT this quarter was the 27% organic orders growth.\nOur order levels again surpassed 2019, even with many of our key end markets still early in their recovery, like commercial aerospace.\nIn Industrial Process, we generated double-digit growth versus 2020 in short-cycle across baseline pumps, part and service.\nQ3 was also the third consecutive quarter of sequential orders growth in projects with 36% organic order growth.\nAs a result, IP's backlog was up $28 million in the quarter.\nIn Connect & Control, orders grew over 40% organically, including an encouraging 70% orders growth in aerospace and the strong performance in North America distribution.\nFinally, in Motion Technologies, we generated strong demand in the Friction aftermarket and in KONI/Axtone, which more than offset a slight decline in friction OE due to the chip shortage impact on our OEM customers.\nEven with these challenges, MT grew over 20% organically versus 2020 and 4% above 2019.\nAnd for the year, we now expect MT to deliver over $1.3 billion in revenue, comfortably above 2019.\nAs we head into the fourth quarter, we are not anticipating any improvement in the global supply chain or with raw material pricing.\nWith our teams executing relentlessly against these challenges, we are narrowing and raising our full year adjusted earnings per share outlook for 2021 at the midpoint to reflect the strong performance to date and our ability to execute.\nWe now expect adjusted earnings per share in the range of $4.01 to $4.06 at the high end, which equates to 25% to 27% growth versus prior year.\nThis is a $0.06 improvement at the midpoint after a $0.37 increase through the first half of the year.\nThis puts ITT on pace to comfortably surpass 2019 adjusted EPS.\nIn September, ITT released the second supplement to our 2019 sustainability report, demonstrating the company's progress on our environmental, social and governance practices.\nWe are continuing to integrate ESG in our business strategy and the day-to-day operations of over 10,000 ITTers.\nSome highlights from the report to note: we drove a 25% reduction in greenhouse gas emissions, and a 23% reduction in waste sand to landfills, with 25% fewer workplace safety incidents.\nWe are expanding investments in guarantee of origin certificates throughout our European locations to increase ITT's share of electricity from renewable sources.\nWe are investing in more sustainable product technologies, especially in our pump business, building on the success we have achieved in MT's copper-free brake pads.\nAs we conduct our operating plan reviews for 2022, ESG continues to be a key element of the leadership team's mandate and there is much more for us to do.\nThus far, we have deployed capital in an amount nearly three times our year-to-date free cash flow across all our capital deployment priorities.\nOur capex for the year is approximately 3% of revenue through the third quarter.\nWe've invested in capacity in our Friction plant to support the share gains achieved with new and existing customers as it relates to the accelerated transition to electric vehicles.\nWe also continue to execute value analysis, value engineering to reinvigorate our product offerings in Industrial Process and Connect & Control.\nFrom the inception of this initiative in 2018, we have commercialized more than 100 different pump models, representing 23% of our total product portfolio.\nIn addition, we completed redesign for more than 30 additional pumps ahead of their commercial release.\nWe have only begun to scratch the surface with more than 70% of the product offerings still to be addressed.\nAs an example of this effort, following the success of our BB2 pumps, our year-to-date order growth for our recently redesigned magnetic drive pump is 40%.\nThe VA/VE announcements resulted in increased performance, better reliability and shorter lead times.\nRegarding our other capital deployment priorities, we increased our dividend rate by 30% after 15% the year before.\nThis represents an annual dividend yield of approximately 1%.\nOur share repurchases this quarter will drive a 1% reduction in our weighted average share count for the full year.\nWe will continue to drive repurchase activity in the future and our existing $500 million authorization.\nAnd lastly, as we discussed last quarter, we divested our legacy asbestos liability to a portfolio company of Warburg Pincus.\nThis has reduced ITT's risk profile and allows us additional capital flexibility.\nTo accelerate our M&A activity, we're investing in our capabilities.\nBartek leads strategy development and will drive all merger and acquisition activities, including ITT's newly launched corporate venture vehicle.\nOn this front, we made one initial venture investment in Q3 for Connectors-related assets.\nAnd we have a growing pipeline of leading technologies to enhance our existing product portfolio.\nWe have stepped up our M&A pipeline and cultivation activities and are looking forward to bringing great companies into ITT in the near future.\nEmmanuel, over to you.\nAs you heard, Motion Technologies again delivered a solid performance, driven by strength in the Friction aftermarket.\nIn our OE business, Friction's market outperformance was over 1,000 basis points this quarter, significantly above our historical average despite large declines in global auto production levels.\nFor all of ITT, we estimate that the supply chain disruptions deducted approximately 350 basis points from our sales growth this quarter.\nHowever, we expect to recover a majority of the pushed-out sales in the next few quarters.\nWe also saw double-digit organic sales growth in IP short-cycle and continued strong demand for industrial connectors.\nAnd similar to what we saw in Q2, demand in commercial aerospace is increasing as exhibited by the 70% growth in aerospace orders.\nOn segment margin, CCT grew margin by 300 basis points and IP by 150 basis points, while MT declined 110 basis points, mainly due to raw material inflation.\nWe overcame a 470 basis point inflation headwind to drive 60 basis points of adjusted segment margin expansion.\nOn adjusted EPS, despite the challenges Luca highlighted in his introduction, we drove a $0.42 operational improvement year-over-year through a combination of higher sales volumes, strategic pricing actions and productivity across the enterprise.\nWe continue to realize benefits from prior restructuring, including our 2020 cost action plan, and we're carefully managing the unwinding of temporary cost actions taken in 2020 to ensure these costs align with the pace of ITT's recovery.\nWe achieved an adjusted trailing 12-month free cash flow margin of more than 11% this quarter, due to higher segment operating income.\nOn a year-to-date basis, excluding the asbestos payment in Q2, adjusted free cash flow declined by -- driven by strategic investments in working capital.\nAs I mentioned earlier, our performance this quarter was largely operationally driven.\nOur year-over-year growth was significantly impacted by $0.23 headwind related to raw material inflation and a $0.09 headwind from prior year environmental settlements and temporary cost actions.\nPartially offsetting these items was a roughly $0.04 benefit from foreign currency.\nWe also realized a slightly lower effective tax rate versus the prior year, which drove over a $0.02 benefit.\nThis was due to effective tax planning strategies related to our patent portfolio abroad.\nWe now expect our full year effective tax rate to be approximately 20.75%.\nMotion Technologies Q3 organic revenue growth of 20% was primarily driven by strength in the aftermarket as the Friction OE business declined slightly given the supply chain headwinds affecting OEMs. This and the raw material inflation also impacted operating margin as we had signaled last year -- last quarter.\nThe Friction team is working diligently with our customers to drive equitable price recovery action, given the significant inflation we are seeing today.\nWe were able to pass price increases on to our customers this quarter and manage the impact of contractual price concessions.\nHowever, there is much more to be done to compensate for the inflation we are experiencing.\nOur Motion Technologies team will continue to methodically execute incremental pricing actions in Q4 and 2022.\nWe also experienced significant production inefficiencies resulting from large variations in customer orders patterns.\nHowever, as with last quarter, our Friction OE business executed very well with over 99% on-time performance across all Friction plants.\nIn challenging economic conditions, Friction continues to be widely recognized as the quality -- as the highest quality and most reliable supplier in the market.\nAnd in KONI, we continue to improve our quality performance and remain deeply focused on serving our customers amid supply chain disruptions.\nFinally, we also continue to evaluate strategic footprint actions and announced one additional plant closure in Europe this quarter, which will drive further cost competitiveness within our rail business.\nFor Industrial Process, revenue was up 8% organically.\nThis was driven primarily by short-cycle demand across parts, valves and service.\nServing our customers this quarter require tremendous focus, coordination and effort by the IP team to overcome supply chain disruptions.\nOur all-hands-on-deck approach made this happen.\nAs we signaled last quarter, we see the project funnel continuing to grow and IP was able to capture a significant share as evidenced by the 36% organic order growth in project this quarter.\nWe see this constructive momentum continuing and expect to deliver similar year-over-year growth in Q4.\nIP margin expanded 150 basis points to 15.6% with an incremental margin of 33%, this was driven by higher sales volume, favorable mix, given the higher proportion of short-cycle sales, productivity and price, partially offset by labor and material inflation as well as higher freight charges given shipping delays.\nSimilar to MT, we're making progress on footprint optimization and have executed one plant closure during the quarter with another plant in Brazil in Q4.\nIn Connect & Control Technologies, we continued to drive a recovery from both the sales and margin perspective.\nWith incremental margin of 35%, CCT generated segment margin above 17%.\nThis is a 300 basis point improvement over prior year.\nThe margin expansion was the result of continued volume leverage and strong productivity, including restructuring savings, despite inflationary headwinds.\nThis margin profile is approaching pre-pandemic levels, but with approximately $20 million less in revenue.\nWhile there is much work to be done to further solidify this performance, we are very encouraged by the work the team has done thus far and it gives us confidence in the future prospects at CCT.\nAs you can see, our teams have done a good job capturing the demand, leading to solid order growth in Q2 and Q3.\nA few highlights to note.\nIt is important to note that our ability to win a majority of the EV competitions that we bid on is key to creating the long-term growth platform that Luca talked about.\nSecond, in Industrial Process, the strength we anticipated in short cycle is materializing.\nBut even more encouraging is the order growth and continuing recovery in long cycle pump projects.\nBoth the number and the size of orders in the funnel is increasing, and we have seen a steady sequential order increase throughout 2021.\nThis is the result of our relentless focus on customer centricity and operational excellence, which is increasingly recognized by our OE customers.\nThird, CCT orders were up 40% organically in -- on the strength of our connector portfolio, particularly in North America.\nThe commercial connector performance, especially with our distribution partners is encouraging, and we're working to replicate the strong momentum across all our customers.\nWe also continue to see a gradual recovery in commercial aerospace, which will further bolster the sales growth in CCT over the next several years.\nCCT backlog is up 17% organically or $40 million since year-end with a book-to-bill of 1.06.\nThis is a notable improvement for CCT since this time last quarter.\nThrough two quarters we had raised our organic sales outlook by 600 basis points and adjusted earnings per share by $0.37 versus the midpoint of our original guidance.\nGiven our strong performance, today, we are again raising the midpoint of our adjusted earnings per share range by an additional $0.06 to reflect the stronger-than-anticipated results and lower tax rate.\nWe're not anticipating any improvement in the market headwinds in the near term.\nNevertheless, in 2021, we expect to comfortably exceed pre-pandemic adjusted earnings per share levels.\nIP will grow revenue in the low single-digit range, while CCT will drive mid-teen percent revenue growth.\nFacing a tough comparison after a strong Q4 last year and the continued impact from constrained OEM demand, MT revenue will decline by mid-single digits in Q4.\nHowever, we expect to largely outperform the global auto market.\nIn total, this will drive approximately flat to slightly up organic revenue growth in Q4.\nFrom a segment margin standpoint, we expect all businesses to expand sequentially with CCT growing triple digits and IP building on its strong Q3 performance.\nYear-over-year we expect segment margin to grow approximately 50 to 75 basis points.\nBecause of an exceptionally strong Q4 last year, Q4 adjusted earnings per share will grow in the low single-digit range year-over-year, and this will drive full year adjusted earnings per share above 2019.\nWith that, let me pass it back to Luca.\nLet me wrap it up.\nFirst, ITT has performed extremely well in a challenging climate.\nWe fought through adversity, and we're winning in the market.\nSecond, we have a resilient set of businesses that have demonstrated over and over again the ability to effectively manage multiple external factors while investing in long-term growth.\nWe delivered strong growth in revenue and margin, while not all of our markets have fully recovered yet.\nThird, while we are continuing to invest for long-term growth and sustainability, our funnel of opportunities is increasing, and the growth in orders throughout 2021 will pave the way for continued outperformance.\nLastly, we have deployed over 2.8 times our year-to-date adjusted free cash flow through our asbestos divestiture, dividends and share repurchases.\nAnd we are increasing our focus on M&A, we are in a favorable position to execute acquisitions given our balance sheet strength, and we are growing our pipeline and expanding our target cultivation activity.\nAs I said earlier, there is a lot to be excited about at ITT.\n",
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"content": "q3 adjusted earnings per share $0.99.\nsees fy revenue up 11 to 13 percent.\nraised its full-year 2021 guidance.\nexpect full-year 2021 adjusted earnings per share of $4.01 to $4.06 per share.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Actual results may vary materially from the assumptions presented today.\nAll such statements should be evaluated together with the Safe Harbor disclosures and the other risks and uncertainties that affects our business, including those discussed in our Form 10-K and other SEC filings.\nThese results exclude certain non-operating and non-recurring items including, but not limited to, asbestos-related charges, restructuring, asset impairment, acquisition-related items and certain tax items.\nAll adjustments in the quarter and for the full year 2020 are detailed in the reconciliations in the appendix.\nBefore we begin, I'd like to provide a brief overview of our fourth quarter GAAP results compared to prior year.\nQ4 revenue decreased 1.5% to $709 million.\nSegment operating income increased 11.6% to $120 million.\nAnd reported earnings per share was a net loss of $0.16.\nThis is principally driven by a $137 million charge related to the successful termination of our U.S. pension plan and other items, including tax charges totaling $17 million, partially offset by $52 million asbestos insurance settlement benefit.\nI truly hope that everyone is healthy and safe.\nI'm humbled by the way this team continues to respond to the crisis and want to express my sincere gratitude for all you have done.\nYour efforts to serve our customers and drive exceptional performance in a safe, fast and productive manner are a testament to the commitment, perseverance and your hard work.\nMark joined ITT in January of this year after a successful 13-year career at Honeywell and has hit the ground running.\nI'm happy and excited to have Mark on the ITT team to drive our global investor Relations strategy.\nAs a result of our focus on the health of our people and our efforts, we delivered another strong performance in the fourth quarter.\nEarly last year, we took some difficult and swift actions to respond to the pandemic.\nThese actions ensured that ITT continued to outperform in 2020 and will emerge stronger in 2021 as the economic environment recovers.\nLet me now highlight some key financial achievements for the quarter.\nWe generated adjusted segment operating income growth of 8% with margin expansion of 150 basis points on a 4% organic sales decline.\nAnd we improved our decremental margin every quarter in 2020.\nFor the full year, our decremental margin was 22% at the low end of our range.\nAs a result, we delivered adjusted earnings per share of $1.01, a sequential and as well as a year-over-year increase.\nWe generated free cash flow of $102 million for Q4 and $372 million for full year.\nThroughout the year, we drove cash collections and optimized inventory, while applying strict control over capital investments.\nThese drove a free cash flow margin of 15% at the high end of our guidance that we increased just last quarter.\nOn capital deployment, in 2020, we increased our dividend by 15%.\nWe repurchased ITT shares totaling 73 million and we increased our majority stake in our Wolverine China joint venture as we continued to expand our market share in Asia.\nDespite the restrictions posed by COVID, I was fortunate to safely visit many of our facilities around the globe, including in China, Europe, the Middle East and across the U.S. As you know, I consider this fundamental to identifying and executing the many operational and commercial opportunities we at ITT have around the globe.\nIn 2020, we reduced the number of recordable incidents by 25% and implemented safer workplace protocols globally.\nThis is an important element in ensuring the health of our people.\nAnd it also contributed to a significant reduction in workers' compensation expense in the U.S. Safety is foundational for our operational excellence and all of us should expect a continued reduction in incidents in the future.\nFrom a commercial perspective, sales in Friction outpaced global auto production rates by more than 600 basis points for the full year.\nWe increased market share by almost 400 basis points in North America, more than 200 basis points in China and almost 100 basis points in Europe.\nAnd when it comes to EVs, we secured position on 42 new electric vehicle platforms during the year.\nIn Industrial Process, we continue to execute on our footprint rationalization projects.\nWe finalized our first consolidation in Europe this quarter and are progressing according to plan on our second project; this one in North America.\nWe are making progress in sourcing efficiencies through aggressive negotiations and supplier rationalization.\nAs I noted before, I believe there are still many opportunities to improve our purchasing performance, as well as further lean out our operations.\nIndustrial Process delivered 15.1% adjusted segment operating margins this quarter.\nThis is a milestone still in IP.\nAt the end of last year, I visited our industrial valve site in Amory, Mississippi.\nI was impressed with the order management process implemented by Angie and her team that has resulted in best-in-class on-time delivery performance and unparalleled service for our customers.\nThis is also true from a project management performance standpoint where IP continue to drive near-perfect execution and on-time delivery, while driving margin expansion for many of our large projects.\nWhile CCT's end markets remain challenged, we are deploying the same operational excellence playbook that we successfully executed in MT and IP.\nWe expect to reach pre-COVID margin levels at CCT in the next two to three years.\nToday, I'm also pleased to provide our outlook for 2021 that reflects all that we have done to strengthen our operations, our people and our potential.\nWe anticipate full year organic sales growth of 2% to 4% driven by continued share gains in Motion Technologies, as well as the broader auto market recovery.\nWe expect the rest of our markets to be flat to slightly down.\nWe plan to expand adjusted segment margins by 130 to 180 basis points.\nThe increased sales volume and the carryover impact of our 2020 cost actions, coupled with the strong productivity from 2021 initiatives, we'll generate adjusted earnings per share in the range of $3.45 to $3.75%, which equates to 8% to 17% growth versus prior year.\nBecause of our strong free cash flow performance in 2020, we're well-positioned to deploy capital in 2021.\nFirst, we would invest in our businesses with approximately $100 million of capital expenditures, up over 55% versus 2020.\nSecond, we will aggressively and diligently pursue acquisitions in our core markets to effectively put our cash to work and build on our strong businesses.\nThis is our ninth consecutive dividend increase.\nAnd finally, we are planning to repurchase ITT shares totaling $50 million to $100 million reducing the full year weighted average share count by approximately 1%.\nFrom a top-line perspective, Motion Technologies delivered a strong performance, growing over 10% organically, driven by continued share gains and double-digit growth in auto in North America and China.\nThis was offset by lower short-cycle demand in Industrial Process as we anticipated and the impact of commercial aerospace dynamics in CCT.\nOur focus on operational excellence is producing strong results.\nMotion Technologies expanded margins over 400 basis points to 19.5%.\nIndustrial Process grew margin 90 basis points to 15.1% despite a 10% organic sales decline.\nThe MT and IP performances more than offset Connect and Control Technologies' margin decline.\nFor the full year, I'd like to point out a few highlights in addition to those that we have already discussed.\nFirst, working capital as a percentage of sales continues to decline and we saw 70 basis points of improvement in 2020, excluding the impact of FX.\nSecond, free cash flow increased 40% versus prior year despite the challenges posed by the global pandemic.\nWe hit the high end of our full year target for free cash flow margin, while also investing in the business through growth capex of more than $35 million for the year.\nThird, we continue to effectively manage our legacy liability profile.\nAs I mentioned in our last earnings call, early in Q4, we successfully transferred our U.S. pension liability to a third party.\nThis will reduce our administrative costs and end all future funding requirements for the plan.\nWe also continue to successfully negotiate asbestos-related insurance settlements with our carriers.\nAnd we drove an increase in our insurance assets of $52 million in the fourth quarter and $100 million for the full year.\nAs a result, our net asbestos liability that we have recently brought to a full-horizon valuation is now $487 million.\nYears back, our Friction team developed a strategy to penetrate the growing EV segment, while continuing to gain share on conventional vehicle platforms.\nWe focused our technical expertise in addressing tighter noise and vibration requirements, while continuing to deliver a frictionless customer experience.\nIn China, our EV Brake-Pad Development Center continues to effectively partner with our customers in the largest EV market in the world.\nAnd in 2020, we continued to see the results of our strategy by winning content on new electric vehicle platforms, including several platforms wins with The EV manufacturer.\nWe also won both the front and rear axle for a new U.S. performance crossover vehicle.\nThe strength of our Friction technology continues to be on display as we assist automakers in significantly reducing braking distance of heavier vehicles.\nAll of these is a testament to the innovation and the engineering prowess behind our brake-pad technology.\nIn Industrial Process, our redesigned between-bearing API pump has seen new orders increase over 50% this year.\nOur customers are benefiting from improved hydraulic efficiency and performance with reduced lead times at a competitive price point.\nIn Q3, we further expanded and improved our hydraulic pump offering and have an active funnel of potential orders already.\nOur new i-Alert remote monitoring offers diagnostic capabilities and tailored solution that predict customer equipment failure and improve asset up-time.\nFinally, in Connect and Control Technologies our Enidine business is teaming with Bell Textron to produce passive vibration control technology for the 360 Invictus.\nThe Invictus is Bell's competitive prototype to the U.S. Future Attack Reconnaissance Aircraft or the FARA program.\nTogether with Bell, the Enidine team is developing technology for use in a mission-critical defense application suitable for the FARA program.\nAs we embarked on 2021, we remain laser focused on operational excellence and customer centricity.\nThese has been the ITT playbook for the last four years.\nWe continue to make significant progress and we, again, saw the benefits of this commitment in the results we delivered in Q4.\nWe will continue to be good stewards of ITT, driving performance for our customers, while searching for organic and inorganic opportunities to deploy capital and grow the business.\nOur effective and comprehensive capital deployment strategy with clear priorities on organic investments, first and foremost, followed by close-to-core acquisitions and then return to shareholders will ensure that our cash is efficiently put to work.\nLet me begin with Motion Technologies.\nOur Q4 organic growth of 10% was primarily driven by strong performance in our Friction OE business.\nWe delivered 640 basis points of outperformance in 2020 on a global basis; further evidence that the MT machine continues to win in the marketplace.\nFor the quarter, Friction sales in North America were up 43% and sales in China, up 19%, while growth in our Wolverine business was over 12% with strength in Europe and Asia-Pacific as we gained market share in both brake shims and sealings.\nSegment margins were incredibly strong again expanding 410 basis points on incremental margins of 46%.\nThis was mainly driven by higher volume and productivity that allowed us to continue to fund growth investments.\nWe are very pleased with the pace and the strength of the recovery in MT as we head into 2021.\nFor Industrial Process, sales were down, as we anticipated, with declines in short-cycle due to pandemic-related impacts that affected our previous two quarters' bookings.\nOur project business, which encompasses most of our oil and gas exposure in IP, saw declines in pump bookings as large projects continued to shift to the right.\nHowever, our short-cycle orders in the quarter were up 1%, driven by aftermarket demand.\nIP margins expanded 90 basis points on 7% decremental margins.\nThe impact of the sales decline was almost entirely offset by productivity benefits, restructuring savings and price.\nFurthermore, IP's working capital as a percent of sales improved 590 basis points versus prior year and we still see further opportunities to optimize inventory as we consolidate footprint and enhance materials planning.\nIP finished the quarter with less than 20% working capital as a percent of sales.\nLastly, in Connect and Control Technologies, we continued to see weak demand across all major end markets.\nSales in aerospace and defense were down over 30%, driven by lower passenger traffic and lower build rates from airframers.\nThe de-bookings we saw in aerospace in the second and third quarters declined sequentially in the fourth quarter to minimal levels.\nWe expect that the sales weakness we saw this quarter in commercial aerospace will likely persist into the first half of 2021.\nConnected sales were down over 10%, mainly due to North America aerospace and defense.\nOn a positive note, we are encouraged by the recovery in orders in defense and industrial connectors.\nThese contributed to a book-to-bill of more than 1 in Q4.\nCCT margins were impacted mostly by lower volumes, partially offset by an aggressive cost reduction plan.\nWhile this year was challenging for CCT, we are encouraged by the productivity, which was over 400 basis points this quarter and the full year.\nI am now on Slide 7 to present a deeper look at the margin performance this quarter.\nI want to highlight two main points.\nFirst, we generated productivity of 230 basis points.\nFor the full year, that number was over 300 basis points.\nThis is the result of a multi-year approach to reduce ITT's cost structure by driving operational excellence across the enterprise and moving toward a leaner ITT in all three segments and at corporate.\nWe have successfully executed this playbook at Motion Technologies and we are in the early stages of the journey with Industrial Process.\nAt CCT, we're still laying the foundation and over time we expect results similar to what we experienced in Motion Technologies.\nThe second key takeaway is on strategic investments.\nWhile we made necessary cuts to discretionary expense this year to manage through the pandemic, these did not come at the expense of growth investments.\nWe continued to selectively fund the most promising growth initiatives in key markets, including in EVs globally, to ensure we continue to win in the marketplace as we did with our successful launch of copper-free brake pads several years back.\nFor the full year, we achieved cost reduction savings in excess of $100 million, including $40 million in the fourth quarter.\nThis came from a combination of headcount reductions, reduced Executive and Board compensation and discretionary cost actions.\nWe delivered approximately $65 million of structural reduction in fixed costs for the full year, with the remainder comprising temporary savings, which will partially reverse in 2021.\nWe are continuing to drive footprint optimization at both IP and CCT, while remaining diligent with strong cost control and accelerated sourcing performance.\nWe expect that the carryover impact of actions in 2020 will generate approximately $10 million to $15 million of additional savings in 2021.\nWe also expect to fund and execute new footprint rationalization and cost reduction plans in addition to the normal productivity we will generate.\nAs a result of these measures, our decremental margins improved every quarter since Q2 and we finished the year at 22% at the lower end of our target, given the strong performance in Q4.\nIn 2021, we expect incremental margins north of 35% as volumes recover and we leverage our optimized cost structure.\nKeep in mind, this will vary from quarter to quarter based on our quarterly performance in 2020 and the mix among our businesses.\nOur end markets are showing signs of recovery.\nStill, the full year economic outlook remains somewhat uncertain at this time.\nWe intend to remain flexible and manage our costs to coincide with the expected gradual recovery.\nDespite the ongoing disruption from the COVID pandemic, we see general economic conditions continuing to improve throughout 2021, particularly in the second half of the year.\nWe expect total revenue will be up 5% to 7% versus 2020 and up 2% to 4% on an organic basis.\nThe strong organic growth we see in Friction, stemming from continued share gains and the resurgence in auto, will likely be offset by declines in industrial pumps as customer opex continues to be constrained and project activity remains weak.\nNotably, we expect sales in Motion Technologies in 2021 to get back to 2019 levels.\nIn commercial aerospace, activity will slowly recover, starting in the second half of 2021 as inventory levels normalize and passenger air traffic begins to recover.\nDefense should be relatively stable as the large order we won in the fourth quarter of last year will convert into revenue toward the end of 2021.\nFinally, in oil and gas, we expect modest growth from downstream activity improvement.\nHowever, the growth rate will be impacted by lower project bookings in 2020 as a result of the market downturn.\nWe expect to see stronger growth in the Middle East and Asia-Pacific in particular.\nWe expect adjusted segment margins to expand by a 150 basis points at the midpoint, driven by higher volumes, continued productivity and the incremental benefits from structural reductions to our cost structure in 2020.\nAll segments should deliver triple-digit margin expansion.\nWe're guiding to adjusted earnings-per-share growth of 8% to 17%.\nThis assumes an approximate 1% reduction in our full year weighted average share count from repurchases and an effective tax rate of 21.5%.\nFree cash flow will be in a range of $270 million to $300 million and we expect free cash flow margin to be 10% to 12%.\nThis is lower than the 15% delivered in 2020 as we expect to increase capex spending, including $5 million to $10 million of investments into green projects and increase working capital dollars to support top-line growth.\nHowever, we expect working capital to continuously decline as a percent of sales over the long term.\nAt these levels, adjusted free cash flow conversion will approximately be a 100% aided in part by working capital optimization.\nOn Slide 10 we show the walk to our 2021 adjusted earnings per share guidance.\nThe majority of our earnings growth will be generated by stronger volume and net productivity, partially offset by the reversal of temporary cost savings and the incremental investments for growth.\nThe reversal of temporary cost savings is due to a combination of higher compensation costs, travel expense and CARES Act benefits that will become a headwind to earnings in 2021.\nForeign exchange is expected to contribute positively to earnings and tax rate is expected to be slightly higher than 2020 at 21% -- 21.5% with a variance of 20 basis points around the mean, depending on the jurisdictional mix of our income.\nOur planning rate currently implies a $0.02 earnings per share headwind.\nLastly, as Luca highlighted, we expect to repurchase $50 million to a $100 million in ITT shares, which will generate a $0.01 to $0.03 tailwind.\nBefore we wrap up, I also want to share some additional details on what we are seeing thus far in 2021 and what we expect in the first quarter.\nYear-to-date, we are on track.\nOur first quarter outlook assumes continued double-digit organic sales growth in Motion Technologies, offset by mid-to-high-teens declines in both Industrial Process and Connect and Control.\nIn Industrial Process, soft 2020 bookings will continue to weigh on revenue near-term, particularly in the chemical and oil and gas segments.\nOur short-cycle business will decline due to customers maintaining tight operating expense controls and lower ending backlog.\nHowever, we expect that IP short-cycle will improve sequentially in the second quarter and then grow in the second half of 2021.\nIn CCT, the declines will be driven by weak commercial aero demand.\nThis will be partially offset by growth in connectors, given the strong beginning backlog after over 30% sequential order growth in Q4.\nThe margin expansion will be driven by MT and IP, given the higher order volumes and the cost actions executed in 2020.\nDespite progress, CCT's margin will be lower than last Q1, which was still largely unaffected by the pandemic.\nWhile there remains a fair amount of uncertainty in some of our end markets, we're confident in ITT's ability to continue to execute and outperform the competition, which will likely generate Q1 adjusted earnings-per-share growth of mid-to-high-single-digits versus prior year.\nLet me pass it back to Luca for closing remarks.\nI'm proud of the results we delivered in 2020.\nWe focused on what we could control, acted quickly and continued to invest in our businesses.\nOur Motion Technologies business is our springboard for growth.\nFriction continues to win in the marketplace with a focus on capturing share in the fast growing EV segment.\nWe are progressing in our transformation at both Industrial Process and Connect and Control technologies with a lot of runway.\nAnd finally, our financial health is strong entering 2021 with ample capacity to deploy capital.\nWe intend to fund high-return growth initiatives, aggressively and diligently pursue strategic acquisitions, pay a competitive dividend and systematically reduce our share count, while continuing to wind out our legacy liability exposure.\nWe have clear priorities, we are aligned and purposely committed and accountable and we are seeing the benefits of our rigor in our results.\nWith that, Maria, could you please open the line for Q&A?\n",
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"content": "itt q4 loss per share $0.16.\nq4 adjusted earnings per share $1.01 excluding items.\nq4 loss per share $0.16.\ncompname announces a 30% increase in quarterly dividend to $0.22 per share.\ninitiates 2021 earnings per share guidance of $3.12 to $3.48, adjusted earnings per share guidance of $3.45 to $3.75.\nqtrly organic revenue decreased 4%.\nqtrly revenue $708.6 million, down 1.5%.\nexpect revenue growth of 5% to 7%, or up 2% to 4% on an organic basis in 2021.\nsees free cash flow of $270 million to $300 million in 2021.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: I'm joined by our; Chairman and CEO, Scott Santi; Vice Chairman, Chris O'Herlihy; and Senior Vice President and CFO, Michael Larsen.\nDuring today's call, we will discuss ITW's first quarter 2020 financial results as well as the impact of the global pandemic on our business and our strategy for managing through it.\nStating the obvious, a lot has changed relative to the environment we operated in for most of the first quarter.\nI will provide some brief commentary on our Q1 performance, and then we will transition to our pandemic strategy.\nWe talk often about the fact that our decentralized entrepreneurial culture is a key element of ITW's secret sauce.\nIt is core to who we are as a company, and it is never more valuable than during times of significant and in this case, rapid change.\nThe proactive teamwork, ingenuity and selflessness of our people and quickly adapting to rapidly changing conditions and tackling new challenges that seemingly arise daily at the moment is ITW at its finest.\nThe fact that the ITW team has responded exactly as we expected they would doesn't make it any less extraordinary.\nNow on to first quarter results, total revenue declined 9% year on year with organic revenue down 6.6%, currency at 1.5% headwind, a negative 1% impact from divestitures and 40 basis points of PLS.\nThe majority of the organic revenue decline occurred in the last two weeks of March where we saw organic revenue down more than 20%.\nBy geography, North America was down 5% and Europe was down 7%, China was down 24% for the quarter, but appears to have bottomed in February and was flat year on year in April.\nIn the face of a challenging demand environment, we continue to execute well on the elements within our control.\nDespite a 9% decline in revenues, operating margin was flat at 23.6%, five of our seven segments expanded margins in the quarter due largely to benefits from enterprise initiatives which contributed 120 basis points to operating margin at the enterprise level.\nAfter tax return on invested capital is 27% and free cash flow was $554 million with a conversion rate of 98% of net income.\nNow let's shift gears and talk about how we will manage ITW through the global pandemic.\nDespite the unusual and in some cases unprecedented challenges of the moment, we continue to execute at a high level and with our usual degree of focus and discipline across the company.\nAs a result of all the work we have done over the last seven years in executing our enterprise strategy and the progress we have made on the path to our full potential performance, ITW is today in a position of significant strength in dealing with the effects of the global pandemic.\nToday's ITW is centered on our powerful and proprietary business model and our people are better trained and more skilled at executing it than ever before in the history of our company.\nITW is 80/20 front to back methodology and the laser light focus that drives on the relative handful of critical performance, difference makers, and every one of our businesses has served the company extremely well in times of both opportunity and challenge for a long time now.\nI have no doubt that this unique ITW skill will be a significant asset to us as we work our way through the COVID-19 pandemic and its aftermath.\nIn addition, as I mentioned earlier, we are very fortunate to have a decentralized operating structure and an entrepreneurial culture that has been developed, nurtured, and protected over many years.\nOur people think and act like owners.\nThey are accountable and they deliver.\nThey are deeply trained in our business model, our strategy and our values and I assure you that even in an unprecedented times such as these, none of them are waiting around to be told what to do.\nIn addition, in today's ITW, we have worked hard in shaping our portfolio and driving consistent high quality execution across every business in it, both to position the company to deliver consistent upper tier long term earnings growth, when global conditions are favorable and to build in a margin cushion and level of diversification, that makes us highly resilient during most periods when they are not.\nAnd it follows from there that the robust free cash flow we generate through our strong margin profile, and the unique attributes of our business model, combined with our very, disciplined capital allocation strategy, gives us an extremely strong balance sheet and Tier 1 credit ratings.\nSo with these elements is our foundation, our strategy for managing through the pandemic and its aftermath is to focus, on the following four priorities.\nFirst, to protect the health and support the well being of our ITW colleagues, second, to continue to serve our customers with excellence, third, to maintain financial strength, liquidity and strategic optionality and fourth, to leverage ITW strengths to position the company to fully participate, in the recovery.\nChris will give you some additional color on priorities one and two.\nMichael will cover priority three and I will come back and cover priority four.\nThis is a challenging time for all of us, as the world continues to grapple with the effects of a global pandemic.\nAt this point, I'm sure that every one of us has been impacted by this situation, in ways that were unimaginable just a few months ago.\nAnd ITW as a company and the community is certainly being affected.\nHaving said that, and Scott reference, or divisional leaders think and act like owners, are able to react quickly and take the necessary actions to protect our people and serve our customers, which is a particular advantage of the company, in times of significant challenge.\nLet's move to slide six.\nThe actions were taken to protect the health and support, the well being of our colleagues.\nWe developed and deployed a number of practices to minimize exposure.\nAnd prevent the spread of COVID-19 and keep our colleagues safe.\nWe have followed CDC, WHO, and local government guidelines in doing so.\nOut ITW colleagues have redesigned production processes to ensure proper social distancing practices, adjusted shift schedules and assignments that have colleagues who have child care needs, due to school closings and implemented aggressive new water and sanitation practices, to minimize infection risk.\nWe're also providing full compensation to employees, who have been quarantined.\nIn addition, our strategic sourcing team is heavily engaged in helping our businesses, by coordinating the procurement of personal protective equipment, to ensure all our employees receive the protection they need.\nI'm pleased to say, that as a result of our containment efforts, to this point we've largely been able to restrict infections to single cases, in a minority of our locations, which is a testament to the actions our colleagues have taken to implement sound sanitation practices and social distancing and to protect one another, to the best of their abilities.\nTurning to slide seven, let's shipped to another important stakeholder group and how we continue to serve our customers with excellence.\nTo support our customers, our teams have worked diligently to keep our factories open and operating safely.\nIn areas around the world where governments have issued shelter in place orders, the vast majority of ITW businesses have been designated as critical or essential businesses.\nAnd as such, they're needed to really an open and operational.\nIn some cases, it's because our products directly impact, the COVID-19 response effort.\nFor example, our welding equipment is used to manufacture hospital beds or structural products are utilized to build temporary medical facilities, or test and measurement products test medical and laboratory equipment.\nOur Polymers & Fluids products sanitize workplaces.\nAnd our food service equipment is used to feed people in hospitals.\nIn other cases, our businesses are designated as critical, because they play a vital role in serving and supporting industries.\nThey're essential to the physical and economic health of our communities.\nAlthough, some facilities are subject to mandatory shutdowns, roughly 95% of our global manufacturing capacity is currently available to be deployed to serve our customers.\nThe same is true for our service networks, particularly in food equipment and test and measurement, which we continue to keep fully available in order to ensure that we can help keep essential businesses and healthcare facilities in operation.\nIn both cases, across all segments, we continue to maintain best-in-class performance for product and service quality and the availability.\nFinally, we're rigorously managing our supplier base to both mitigate near-term supply risk for critical raw materials and components and ensure that we are positioned to win in a wide range recovery scenarios going forward.\nWell, that's the primary objective of our enterprise strategy, an important byproduct, if you will, a lot of work done over the last seven years is that ITW is in a position of considerable financial strength to deal with highly disruptive events, such as this global pandemic.\nIn many ways, ITW was built for times like this.\nAnd through the pandemic, we will manage the company to maintain our financial strength, liquidity and strategic optionality so that we can leverage our strong financial foundation and resilient profitability profile to position the company for maximum participation in the recovery.\nITW has more than enough financial strength and resilient -- resilience to withstand this kind of shock to the system, that the global economy is under experience over the next several months.\nWe are prepared for it.\nWe'll get through it.\nAnd we'll come out the other side strongly positioned for the recovery.\nAs we sit here today, one month into the quarter, we're estimating the Q2 revenues will be down 30% to 40% on a year-over-year basis.\nObviously, there's a fair amount of uncertainty around how May and June actually play out but that is our current view.\nAs you would expect, given that most of our automotive OEM customers in North America and Western Europe have been essentially shut down since mid-March, and are only beginning to restart production in early to mid-May.\nOur automotive OEM business will be the hardest hit with revenues potentially down 60% to 70% year-over-year.\nAnd abrupt decline of this magnitude in the quarter is pretty unprecedented.\nAs difficult as it may look, if it plays out this way, we expect that ITW will still make operating profit in the $200 million to $400 million range, generate free cash flow of more than $500 million and end the Q2 with cash on hand of about $1.5 billion.\nKnowing that we have the financial strength to withstand whatever comes our way over the next few months, our number one priority becomes positioning to play offense in the recovery.\nAnd this is an area where our strong margin profile really helps us.\nWhether the pace of recovery is fast or slow, V shaped or U shaped, over the next few quarters, it doesn't really impact us that much.\nUnder very fast paced recovery, we end up down 15% for the full year, and margins are 19% to 21%.\nThey're much slower recovery, revenues are down 25%.\nYet, our margins are still a very strong 17% to 19%.\nThis is against a backdrop, where most of the companies that our divisions compete with came into the pandemic, with margins at half of ours or less.\nAs a result, a number of them may have to retrench in a major way in order to get through the epidemic, potentially creating some significant share gain opportunities for us in the recovery.\nWith our margin cushion, we are concerned with how quickly demand is going to recover in Q3 or Q4.\nWe can be fairly certain that it will be incrementally better than Q2.\nBut beyond that, it really doesn't affect us a whole lot, which allows us to think long-term and positioned for maximum participation in the recovery, making sure that we are in a strong position to fully support our customers, as their businesses begin to re accelerate, and that we are in an equally strong position to take share from competitors, who can't, is the central imperative of our pandemic response planning for every one of our divisions.\nWe will, of course, need to manage our businesses smartly across our portfolio and make some meaningful capacity and cost structure adjustments in businesses, where we expect prolonged recovery periods, or maybe even permanent demand impacts from the pandemic.\nBut as we always do, we will leave those decisions in the hands of our divisional leaders as they are in the best position to assess the pace and slope of the cut of the recovery in each of their respective businesses.\nTurning to slide 11.\nThe financial benefits of our enterprise strategy, combined with the work done to optimize our capital efficiency, capital structure and capital allocation over the years, has put ITW in a very strong position going into this crisis.\nAt quarter end, we have more than $1.4 billion of cash and cash equivalents on hand.\nAt the end of Q1 and it's still the case.\nAs of today, we have essentially no short-term debt.\nAnd we have not issued any commercial paper.\nWhy you might ask?\nSimply put, because we don't need to cash.\nWe have a $2.5 billion undrawn credit facility available to us, if needed in the future bring our total liquidity to about $4 billion as we sit here today.\nOur net leverage is only 1.7 times and our next maturity is pretty small, $350 million and not until September 2021.\nHigh quality of earnings and strong free cash flow are hallmarks of ITW.\nAs you know, we consistently generate significantly more cash than we need for internal purposes.\nAnd our annual conversion rate from net income is consistently above 100%.\nWe expect that to continue to be the case, as we manage our way through the pandemic.\nAs evidenced by Tier 1 credit ratings that are the highest in our peer group, we continue to have excellent access to credit markets in the event that we needed.\nDuring this time of market volatility, it's also worth mentioning that our pension plans, have remained in great shape.\nOver the years, we have consistently funded and de risked our plans.\nAnd as we sit here today, our largest U.S. plan is funded at 104%.\nTurning to slide 12.\nSo how do we think about and adjust our capital allocation approach during the pandemic?\nFirst, with regard to the dividend.\nWe recognize the importance of ITW's dividend to our long term shareholders.\nWe have a long history, with more than 56 years of growing the dividend.\nAnd we are part of a small group of so-called dividend aristocrats, and one of about 18 companies that has increased its dividend for more than 50 years.\nAnd we view the dividend as a critical component of ITW's total shareholder return model.\nSince 2012, we have increased the annualized dividend from $1.52 per share to currently $4.28 per share, a cumulative annual growth rate of 16%.\nSimply put, we remain strongly committed to our dividend and as we sit here today, we do not see a scenario where we would have to reduce the dividend.\nIn terms of strategic optionality, we are clearly in a position of strength, with ample balance sheet capacity.\nAnd we're certainly open to the possibility that opportunities might emerge as a result of the pandemic.\nIt could be in the form of more reasonable valuation opportunities for assets that we were already interested in, as well as some unique opportunities with quality companies that may not have the financial strength to weather the pandemic.\nGiven our financial strength and ample capacity, we will be in a strong position to react to any high quality strategic opportunities that may emerge.\nWe will continue to fully fund all internal investment and capex projects that meet our criteria, like we always have, but the number will likely come down in terms of aggregate spend in the near term, simply due to the fact that we don't need any capacity expansion projects for the next several quarters.\nFinally, I think, it comes as no surprise to anyone that we have suspended share repurchases until end markets stabilize and the recovery path becomes clearer.\nAnd as a priority four, which is all about leveraging our strengths to make sure that every one of our businesses are strongly positioned to fully participate in the recovery.\nIn short, we are going to be there to serve every bit of our customers' needs as their businesses begin to reaccelerate and be well prepared to capture any share gain opportunities that may come our way.\nFood equipment had a good quarter with organic growth up 2% year-over-year despite a tough comp of 5% organic growth last year.\nThe service business was solid up 4% in the quarter.\nEquipment growth of 1% reflects double-digit growth in retail and modest decline in institutional and restaurants against tough year-over-year comps for both of those.\nOperating margin expanded 90 basis points to 27.5% with enterprise initiatives, the main contributor.\nTest and measurement in electronics had a very strong quarter with test and measurement up 6% with 13% growth in our Instron business.\nThe segment also experienced a meaningful pickup in demand from semiconductor customers.\nElectronics was up 2%.\nMargin was the highlight as the team expanded operating margins 330 basis points to a record, 28.1% the highest in the company this quarter with strong contributions from enterprise initiatives and volume leverage.\nAlso in the quarter, we divested in electronics business with 2019 revenues of approximately $60 million.\nIn the face of an unprecedented demand contraction in Q2, as Michael commented earlier, we will still generate operating income in the hundreds of million dollars and generate over $500 million in free cash flow.\nWe will manage discretionary expenses prudently, but we don't need to start cutting muscle immediately.\nAnd we certainly want to avoid doing so, before we have some level of indication as to the shape and slope of the recovery in each of our businesses.\nWith this principle in mind, to this point, we are providing full compensation and benefits support to all ITW colleagues around the world.\nAnd we're going to do our best to sustain that level of support for all of our people through at least the end of Q2.\nWe are doing it because we are in a position to support our people at a time of great personal and family stress and uncertainty.\nAnd we think that it's the right thing to do.\nBut we're also doing it to protect the significant investment we have made in training and developing great ITW people and great ITW leaders over the past seven years.\nAs Michael mentioned, it is likely that we will need to make some staffing adjustments to align with prolonged or permanently lower demand in some of our businesses as a result of the pandemic.\nSo we are committed to being there for all of our people during the worst of this, and we will take the time to make whatever longer-term adjustments need to be made thoughtfully.\nThe second principle is that we're going to lean into the upside by remaining invested in structure to capture incremental demand.\nGiven the profitability of our core businesses in the strength of our financial position, what's the bigger risk for ITW, carrying more cost and it turns out we need for a few months or cutting too much and not being able to fully serve the needs of our customers and take share from our competitors as the recovery accelerates.\nObviously, we believe short sheet and the upside potential of the recovery would be the far bigger mistake for ITW.\nAnd we're going to plan and execute our recovery strategies accordingly.\nThe third principle is that we're going to leverage the strength of ITW to protect investment in areas of strategic importance to the execution of our long-term strategy.\nWe're early in our planning around all these areas.\nBut as one example, prior to the pandemic, we invested two plus years in our strategic sales excellence initiative that included significant investments in new sales and sales leadership talent.\nWe have the financial capacity to protect these types of long-term strategic investments.\nAnd doing so is worth a lot more over the long-term to the company, there are a few extra detrimental margin points in the short-term.\nThat being said, decremental margins should likely be in our normal 35% to 40% range in Q4.\nBetween now and then, we're going to focus on making sure ITW is in a strong position to fully participate in the recovery.\nTurning to slide 14, this is just a reminder that our long-term strategic priorities remain unchanged that we are committed to achieving and sustaining ITW potential performance, and continuing on our quest to firmly establish ITW as one of the world's best performing, highest quality, and most respected industrial companies.\nNow let's move on to slide 15 to wrap things up.\nAs of right now, there's no way to know how severe this crisis will be, how long it will last, or how quickly our customers and then markets will recover.\nWhat I do know is that the strength and resilience of ITW's business model and our people put us in about a stronger position as an industrial manufacturing company can be in, to deal with that whatever will unfold over the coming weeks and months.\nI have every confidence that ITW will rise to the challenges we always have over the course of our 108-year history.\nOur strong financial position and margin profile give us the ability to make strategic moves now to position the company to fully participate across a range of recovery scenarios, and to come out the other side ready to continue on our path to ITW full potential performance.\nAs a reminder, please see the appendix in today's slide deck for the usual segment detail for the first quarter.\n",
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"content": "illinois tool works inc - suspending previously announced annual guidance for 2020.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: I'm joined by our Chairman and CEO, Scott Santi; and Senior Vice President and CFO, Michael Larsen.\nDuring today's call, we will discuss ITW's first quarter financial results and update our guidance for full year 2021.\nIn Q1, we saw continued improvement in both the breadth and pace of the recovery, with six of our seven segments delivering strong growth in the quarter, with revenue increases at the segment level ranging from 6% to 13%, and that's with one less shipping day in Q1 of this year versus last year.\nAt the enterprise level, organic growth was plus 6% in Q1 or plus 8% on an equal days basis, and that was despite the fact that our Food Equipment segment was still down 10% in the quarter.\nThe fundamental strength of our 80/20 front-to-back business system and the skill and dedication of our people around the world, combined with the Win the Recovery actions that we initiated over the course of the past year allowed us to meet our customers' increasing needs while at the same time delivering strong profitability leverage, as evidenced by our 19% earnings growth, 45% incremental margins, and 120 basis points of margin benefits from our enterprise initiatives in the quarter.\nDespite rising raw material costs and a tight supply chain environment, we maintained our world-class service levels to our customers while also establishing several all-time Q1 performance records for the company, including earnings per share of $2.11, operating income of $905 million, and an operating margin of 25.5%.\nBased on our first quarter results and our normal practice of projecting current demand rates through the balance of the year, we are adjusting our 2021 guidance.\nFor the full year, we now expect organic growth of 10% to 12%, operating margin in the range of 25% to 26%, and earnings per share of $8.20 to $8.60 per share, which at the $8.40 midpoint represents 27% earnings growth versus last year.\nAt the midpoint of our revised guidance, 2021 full year revenues would be up 1% versus 2019 and earnings per share would be up 9%.\nNow, stating the obvious, there's still a lot of ground to cover between now and the end of the year, and the near-term environment is certainly not without its challenges.\nThat being said, I have no doubt that we are well positioned to respond to whatever comes our way as we move through the remainder of the year and to continue to deliver differentiated performance in 2021 and beyond.\nSolid demand momentum we had coming out of the fourth quarter continued to gain strength across a broad cross-section of our business portfolio in Q1.\nOur operating teams around the world responded to our customers' increasing needs, as they always do, and delivered revenue growth of 10%.\nOrganic growth of 6% was the highest organic growth rate for ITW in almost 10 years.\nAnd as Scott mentioned, Q1 had one less day this year.\nAnd on an equal days basis, organic revenue grew 8%.\nOrganic growth was positive across all major geographies, with China leading the way with 62%, North America was up 4% and Europe grew 1%.\nRelative to Q4, a new trend that emerged in Q1 was a meaningful pickup in demand in our capex-driven equipment businesses, Test & Measurement and Electronics which grew 11%; and Welding, which grew 6%.\nGAAP earnings per share of $2.11 was up 19% and an all-time earnings per share record for continuing operations.\nOperating leverage was a real highlight this quarter with incremental margins of 45% as operating income grew 19% year-over-year.\nOperating margins improved to 25.5% in the quarter, an increase of almost 200 basis points as a result of volume leverage and a continued strong contribution of 120 basis points from our enterprise initiatives, partially offset by the margin impact of price cost.\nExcluding the third quarter of 2017, which had the benefit of a one-time legal settlement, operating margin of 25.5% was our highest quarterly margin performance ever.\nAs you know, supply chains around the world are under significant pressure, and ITW's operating teams certainly had to deal with their fair share of supply challenges and disruptions in the quarter.\nBy leveraging our produce where we sell supply chain strategy, our proprietary 80/20 front-to-back business system and supported by the fact that we were fully staffed for this uptick in demand due to our Win the Recovery initiative, we were able to maintain our normal service levels to our customers.\nAnd once again, our ability to deal with the impact of some pretty meaningful supply chain challenges and disruptions and still take care of our customers, with strong levels of profitability, speaks to the quality of the execution at ITW.\nIn the quarter, we experienced raw material cost increases, particularly in categories such as steel, resins and chemicals.\nAnd across the company, our operating teams have already initiated pricing plans and actions that will offset all incurred as well as known but not yet incurred raw material cost increases on a dollar per dollar basis, as per our usual process.\nAs a result, price cost is expected to be EPS-neutral for the year.\nAs you know, given our high-margin profile, offsetting cost increases with price on a dollar per dollar basis causes some modest dilution of our operating margin percentage and our incremental margin percentage in the near term.\nIn Q1, for example, our operating margin was impacted 60 basis points due to price costs.\nAnd our incremental margin would actually have been 52%, not 45% if it wasn't for this impact from price costs.\nFor the balance of the year and embedded in our guidance are all known raw material increases and the corresponding pricing actions that have either already been implemented or will be, again, EPS-neutral for the full year.\nAt this early stage in the recovery, our 25.5% operating margins are already exceeding our pre-COVID operating margins.\nFour of the seven segments delivered operating margin of around 28% or better in Q1, with one segment, Welding, above 30% in a quarter for the first time ever.\nI think it says a lot of our operating teams, that when faced with the challenges of the global pandemic, they stayed focused on our long-term enterprise strategy and continue to make progress toward our long-term margin performance goal of 28% plus.\nAfter-tax return on capital was a record 32.1%, and free cash flow was solid at $541 million with a conversion of 81% of net income, in line with typical seasonality for Q1.\nWe continue to expect a 100% plus conversion for the full year.\nAs planned, we repurchased 250 million of our shares this quarter, and the effective tax rate was 22.4%, slightly below prior year.\nSo in summary, the first quarter was solid for ITW with broad-based organic growth of 6%, strong profitability leverage, 19% earnings growth, 45% incremental profitability and record operating margin and earnings per share performance.\nAnd the information on the left side of the page summarizes the organic revenue growth rate versus prior year by segment for Q1 this year compared to Q4 last year.\nAnd it illustrates the broad-based demand recovery that we're seeing in our businesses.\nAnd obviously, there's a positive impact as the easier comparisons begin on a year-over-year basis.\nWith the exception of Automotive OEM, every segment had a higher organic growth rate in Q1 than they did in Q4, and six of our seven segments delivered strong organic growth in the quarter, with double-digit growth in Construction Products, and Test & Measurement and Electronics, which were also the most improved segments in this sequential view, going down -- going from down 3% in Q4 to up 11% in Q1.\nWelding improved eight percentage points, growing 6% in Q1, providing further evidence that the industrial capex recovery is beginning to take hold as visibility and confidence is coming back.\nAt the enterprise level, ITW's organic growth rate went from down 1% in Q4 to up 6%.\nAnd I would just highlight that this is 6% organic growth with one of our segments, Food Equipment, while on its way to recovery is still down 10% year-over-year.\nAs we go through the segment slides, you'll see that this robust organic growth, combined with strong enterprise initiative impact contributed to some pretty strong operating margin performance in our segments.\nSo let's go into a little more detail for each segment, starting with Automotive OEM.\nAnd the demand recovery in the fourth quarter continued this quarter with organic growth of 8% and total revenue growth of 13%.\nNorth America revenue was down 2% as customers continue to adjust their production schedules in response to the well-publicized shortage of certain components, including semiconductor chips.\nWe estimate this impacted our Q1 sales by about $25 million, and it is likely to continue to impact our revenues to the tune of about $50 million in Q2 and another $50 million in the second half of the year.\nAs you can appreciate, the situation is obviously pretty fluid, but as we sit here today, that is our best estimate, and that is also what we embedded in our updated guidance.\nLooking past the near-term supply chain issues affecting the auto industry, we're pretty optimistic about the medium-term growth prospects as consumer demand remains strong and dealer inventories are very low by historical standards.\nBy region, North America being down in Q1 was more than offset by Europe, which was up 4%, and China up 58%.\nAnd finally, the team delivered solid operating margin performance of 24.1%, an improvement of 320 basis points.\nSo, revenue was down 7%, with organic revenue down 10%, but like I said, much improved versus Q4.\nAnd there are solid signs that demand is beginning to recover, as evidenced by orders picking up and a backlog that is up significantly versus prior year.\nOverall, North America was down 6%, with equipment down only 1% as compared to a 22% decline in Q4.\nInstitutional, which represents about 35% of our North American equipment business was down 7%, with healthcare about flat and education still down about 10%.\nRestaurants, which represents 25% of our equipment business was down in the mid-teens, with full-service restaurants down about 30%, but fast casual up low single-digits.\nRetail, which is now 25% of the business, was up more than 20% as a result of strong demand and new product rollouts.\nInternational was down 15% and is really a tale of two regions.\nAs you would expect, Europe was down 22% due to COVID-19-related lockdowns.\nAnd on the other hand, Asia-Pacific was up 44%, with China up 99%.\nOverall, equipment sales were down 4% and service down 19%.\nTest & Measurement and Electronics delivered revenue growth of 14% with 11% organic growth.\nTest & Measurement was up 7% with continued strength in semiconductors and healthcare end markets now supplemented by strengthening demand in the capital equipment businesses as evidenced by the Instron business growing 12%.\nThe Electronics business grew 16%, with strong demand for clean room technology products, automotive applications, and consumer electronics.\nOperating margin of 28.4% was up 330 basis points.\nMoving to slide 6, as I mentioned earlier, we saw a strong sequential improvement in Welding as the segment delivered organic growth of 6%, the highest growth rate in almost three years.\nThe commercial business, which serves smaller businesses and individual users, usually leads the way in a recovery, and Q1 was their third quarter in a row with double-digit growth, up 17% this quarter.\nThe industrial business continued its sequential improvement trend and was down only 1% with customer capex spend picking up and backlogs building.\nOverall, equipment sales were up 10% and consumables were flat versus prior year.\nNorth America was up 7% and international growth of 4% was primarily driven by recovery in China and some early signs of demand picking up in oil and gas.\nSolid volume leverage and enterprise initiatives contributed to a record margin performance of 30.3%, which, as I said, marked the first time an ITW segment delivered operating margins above 30%.\nPolymers & Fluids delivered organic growth of 9%, with Polymers up 16%, driven by strength in MRO applications, particularly for heavy industries.\nThe automotive aftermarket business continued to benefit from strong retail sales with organic growth of 9%, while fluids, which has a larger presence in Europe was down 1%.\nOperating margin benefited from solid volume leverage and enterprise initiatives to deliver margins of 25.7%.\nMoving to slide 7, construction was the fastest-growing segment this quarter with organic growth of 13%.\nNorth America was up 12%, with continued strong demand in residential renovation and in the home center channel.\nCommercial construction, which is only about 15% of our U.S. sales was up 3%.\nEuropean sales grew 19% with double-digit growth in the UK and Continental Europe.\nAustralia and New Zealand grew 7% with strength in both residential and commercial markets.\nOperating margin of 27.6% was an improvement of 420 basis points.\nSpecialty revenues were up 10%, with organic revenue of 7% and positive growth in all regions.\nNorth America was up 6%; Europe, up 5%; and Asia Pacific was up 24%.\nDemand for consumer packaging remained solid at 6%.\nAnd per our usual process, and with the caveat that we're only one quarter into the New Year and a significant number of uncertainties and challenges are still in front of us, we are raising our guidance on all key performance metrics, including organic growth, operating margin and EPS.\nIn doing so, we've obviously factored in our solid Q1 results.\nAnd per our usual process, we are projecting current levels of demand exit in Q1, into the future and addressing them for typical seasonality.\nAnd as discussed, we've made an allowance for the estimated impact of semiconductor chip shortages on our Auto OEM customers.\nThe outcome of that exercise is an organic growth forecast of 10% to 12% at the enterprise level.\nThis compares to a prior organic growth guidance of 7% to 10%.\nForeign currency at today's exchange rates adds 2 percentage points to revenue for total revenue growth forecast of 12% to 14%.\nAs you saw, we're off to a strong start on operating leverage and enterprise initiatives, and we are raising our operating margin guidance by 100 basis points to a new range of 25% to 26%, which incorporates all known raw material cost increases and the corresponding pricing actions.\nRelative to 2020, our 2021 operating margins of 25% to 26% are 250 basis points higher at the midpoint and they are almost 150 basis points higher than our pre-COVID 2019 operating margins of 24.1%.\nAs we continue to make progress toward our long-term performance goal of 28% plus, as I mentioned earlier.\nOur incremental margins for the full year are expected to be above our typical 35% to 40% range.\nFinally, we are raising our GAAP earnings per share guidance by $0.60 and or 8% to a new range of $8.20 to $8.60.\nThe new midpoint of $8.40 represents an earnings growth rate of 27% versus prior year and a 9% increase relative to pre-COVID 2019 earnings per share of $7.74.\nA few final housekeeping items to wrap it up, with no changes to: one, the forecast for free cash flow; two, our plan to repurchase approximately $1 billion of our own shares; and three, our expected tax rate of 23% to 24%.\nAs per usual process, our guidance is for the core business only and excludes the previously announced acquisition of the MTS Test & Simulation business.\nThe process to close the acquisition by midyear remains on track.\nAnd once the acquisition closes, we'll provide an update.\nAs we've said before, we do not expect a material financial impact to earnings in 2021.\nSo in summary, a quarter of quality execution in a challenging environment, and as a result, we're off to a solid start to the year.\n",
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"content": "compname reports q1 earnings per share of $2.11.\nq1 gaap earnings per share $2.11.\nq1 revenue rose 10 percent to $3.5 billion.\nsees fy gaap earnings per share $8.20 to $8.60.\nplans to repurchase approximately $1 billion of its shares in 2021 and expects an effective tax rate of 23 to 24 percent.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: I'm joined by our Chairman and CEO, Scott Santi; and Senior Vice President and CFO, Michael Larsen.\nDuring today's call, we will discuss ITW's third quarter financial results and update our guidance for full year 2021.\nIn the third quarter, we saw continued strong growth momentum in six of our seven segments and delivered excellent operational execution and financial results.\nRevenue grew 8% with organic growth of 6% and earnings per share of $2.02 was up 10%.\nAt the segment level, organic growth was led by welding at plus 22%; food equipment at plus 19%; Test & Measurement and Electronics at plus 12% and specialty products at plus 8%.\nOur automotive OE segment continued to be impacted in the near term by auto production cutbacks associated with the well-publicized supply chain challenges affecting our auto customers.\nIn Q3, auto production cutbacks ended up being significantly larger than what was projected heading into the quarter.\nAnd as a result, our auto OEM segment revenues were down 11% in Q3 versus the minus 2% we were expecting as of the end of June.\nIn a very challenging environment, our teams around the world continue to do an exceptional job of executing for our customers and for the company.\nIn Q3, our people leveraged the combination of ITW's robust and highly flexible 80/20 front-to-back operating system.\nThe company is close to the customer manufacturing and supply chain capabilities and systems and our decision to stay fully staffed and invested through the pandemic to sustain world-class service levels for our customers.\nThey also executed appropriate and timely price adjustments in response to rapidly rising raw material costs.\nAnd as a result, we were able to fully offset input cost increases on a dollar-for-dollar basis in Q3, resulting in 0 earnings per share impact from price cost in the quarter.\nAnd, by the way, our teams also managed to continue to drive progress on our long-term strategy, execute on our Win the Recovery positioning initiative and deliver another 100 basis points of margin improvement benefit from enterprise initiatives.\nMoving forward, we remain very focused on sustaining our growth momentum and on fully leveraging the competitive strength of the ITW business model and the investments we have made and continue to make in support of the execution of our enterprise strategy.\nMichael, over to you.\nAs Scott said, demand remained strong in Q3 with total revenue of $3.6 billion an increase of 8% with organic growth of 6%.\nGrowth was positive in six or seven segments, ranging from 3% to 22% and in all geographic regions, led by North America, up 9%; Europe, up 1% and; Asia, up 5%.\nChina was up 2% versus prior year and up 6% sequentially.\nGAAP earnings per share of $2.02 was up 10% and included a onetime tax benefit of $0.06.\nOperating income increased 7% and operating margin was flat at 23.8% despite significant price cost headwinds.\nEnterprise Initiatives were real positive again this quarter at 100 basis points, as was volume leverage, which contributed more than 100 basis points.\nThroughout 2021, our businesses have quickly and decisively responded to raw material and logistics cost inflation with pricing actions in alignment with our policy to fully offset these cost increases with price on a dollar-for-dollar basis.\nAnd we've talked about this before, but given the current environment, I'll remind you that we don't hedge.\nSo current cost inflation is always moving through our businesses in real time.\nAfter-tax return on invested capital was 28.5% and free cash flow was $548 million.\nFree cash flow conversion was 86% as our businesses have been very intentional about adding inventory to both support our growth and to mitigate supply chain risk and sustained world-class service levels for our customers.\nOverall, for the quarter, then strong growth in six of seven segments and excellent operational and financial execution across the board.\nLet's go to slide four for segment results.\nAnd before we get to the segment detail, the data on the left side of the slide illustrates our strong Q3 results with and without automotive OEM.\nI wanted to highlight two key points.\nThe first is the benefit we derive from our high-quality diversified business portfolio in terms of the strength, resilience and consistency of ITW's financial performance.\nwhich is enabling us, in this case, to power through significant near-term headwinds in our largest segment and still deliver top-tier overall performance.\nThe second is the accelerating growth momentum with strong core earnings leverage we're generating across the company.\nExcluding our auto OEM segment, given the issues affecting that market right now, the rest of the company collectively delivered organic growth of 11%.\nOperating income growth of 14% and an operating margin of 25% plus in Q3.\nAs you can see on this slide, if you eliminate the price/cost impact, our core incrementals were a very strong 52% in the third quarter, which points to the quality of growth and profitability leverage that define the core focus of our business model and strategy.\nNow let's take a closer look at our segment performance in Q3, beginning with automotive OEM on the right side of this page.\nOrganic revenue was down 11%, with North America down 12%, Europe, down 18%; and China, up 2%.\nAnd as Scott mentioned, supply chain-related production cutbacks were much larger in Q3 than what we and most, if not all, external auto industry forecasters were expecting heading into the quarter.\nWhile conditions in the auto market are obviously very challenging in the near term, but really good news from our standpoint is that the eventual and inevitable recovery of the auto market will be a major source of growth for ITW over an extended period of time once the current supply chain issues begin to improve and ultimately get resolved.\nBetween now and whenever that is, we will remain fully invested and strongly positioned to support our customers and seize incremental share gain opportunities as production accelerates coming out the other side of this situation.\nTurning to slide five for Food Equipment, and organic revenue growth was very strong at 19% and the Food Equipment recovery that began in Q2 continues to gain strength.\nNorth America was up 18% with equipment up 20% and service up 14%.\nInstitutional revenue, which is about 1/3 of our revenue, increased more than 20%, with strength in education, up over 40% and healthcare and lodging growth of around 20%.\nRestaurants were up almost 50% with strength across the board.\nStrong demand is evident internationally as well with Europe up 20% and Asia Pacific, up 23%.\nEquipment sales led the way up 26% with service growth of 8%.\nIn our view, this segment is in the early stages of recovery as evidenced by revenues that are still below pre-COVID levels.\nTest & Measurement and Electronics organic revenue was strong with growth of 12%.\nTest & Measurement was up 15%, driven by continued strength in customer capex spend and in our businesses that serve the semiconductor space.\nElectronics grew 8% and operating margin was 26.8%.\nSo moving to slide six.\nWelding demand continued to be very strong with organic revenue growth of 22%.\nEquipment revenue was up 25% and consumables grew 18%.\nOur industrial businesses increased 32% in the commercial business, which sells to small businesses and individual users grew 18%.\nNorth America was up 24% and international growth was 12% with continued recovery in oil and gas, which was up 9%.\nWelding had an operating margin of 30% in the quarter.\nPolymers & Fluids organic growth was 3%, with demand holding steady at the elevated levels that began in Q3 of last year.\nAnd as such, had a tough comp of plus 6% a year ago.\nIn Q3, growth was led by the Polymers business, up 8% with continued strength in MRO and heavy industry applications.\nAutomotive aftermarket grew 4% with sustained strength in the retail channel.\nAnd Fluids was down 5% due mostly to a decline in pandemic-related hygiene products versus prior year.\nMargins were 24.2% with more than 250 basis points of negative margin impact from price cost driven by significantly higher costs for resins and silicone.\nMoving to slide seven.\nAnd a similar situation with construction, where organic growth was also up 3% and also on top of a strong year-ago growth rate of plus 8%.\nAll three regions delivered growth with North America up 2%, with residential renovation up 1%, on top of a plus 14% comp a year ago and commercial was up 10%.\nEurope was up 8% and Australia and New Zealand was up 2%.\nSpecialty organic revenue was up 8%, driven by continued recovery in North America, which was up 15%, and international was down 4%.\nEquipment sales were up 10% with consumables up almost 8%.\nLet's move on to slide eight for an update on our full year 2021 guidance.\nWe now expect the Automotive OEM segment revenue to be down about 15% in the second half, including being down 20% in Q4 versus the forecast of roughly flat second half auto OEM revenues that was embedded in our previous guidance.\nAll other segments remain on track or better versus our previous guidance.\nOur $8.40 midpoint equates to earnings growth of 27% for the full year.\nWe now expect full year revenue to be in the range of $14.2 billion to $14.3 billion, which is up 13% at the midpoint, with organic growth in the range of 11% to 12%.\nOf that organic growth rate of 11% to 12% volume growth, including share gains are 8% with price of 3% to 4%.\nFor the full year, we expect operating margin of approximately 24%, which is up 100 basis points versus last year.\nAnd the fact that we're expanding margins at all in this environment is pretty strong performance, considering that we now expect raw material costs to be up 9% or more than $400 million year-over-year, which is more than four times our expectation coming into this year.\nOur businesses are on track to offset raw material cost increases with pricing actions on a dollar-per-dollar basis, which, as you know, is earnings per share neutral but margin dilutive.\nAs raw material costs and consequently, price have gone up more than what we predicted in our previous guidance, we now estimate margin dilution percentage impact from price cost for the full year at about 150 basis points versus our previous expectation of 100 basis points.\nThese margin headwinds though, will be offset by strong volume leverage of about 250 basis points and another solid contribution from enterprise initiatives of more than 100 basis points.\nFree cash flow is expected to be approximately 90% of net income as we continue to prioritize sustaining our world-class service levels for our customers in this challenging environment, and as such, we will continue to invest in additional working capital to support our growth and mitigate supply chain risks.\nAnd as per usual process, our guidance excludes any impact from the previously announced acquisition of the MTS Test and Simulation business.\nWe are awaiting one final regulatory approval and expect to receive that and close the transaction in Q4.\nSo in summary, this will be a record year for ITW with double-digit organic growth, margin expansion, strong cash flow and earnings per share growth of 25% plus.\nWe expect this strong demand momentum to continue in Q4 and well into next year with an additional boost from automotive OEM likely at some point in 2022 as the supply chain issues there begin to improve.\nITW remains very well positioned to continue to deliver differentiated best-in-class performance as we leverage our diversified high-quality business portfolio, the competitive strength of ITW's proprietary business model and our team's proven ability to execute at a very high level in any environment.\n",
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"content": "q3 gaap earnings per share $2.02.\nq3 revenue rose 8 percent to $3.6 billion.\nsees fy2021 total revenue growth of 13% to 14% and organic growth in range of 11% to 12%.\nfy2021 guidance excludes any impact from acquisition of mts test & simulation business.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: I am joined with our Chairman and CEO, Scott Santi and Senior Vice President and CFO, Michael Larsen.\nDuring today's call, we will discuss fourth quarter and full year 2019 financial results and provide guidance for full year 2020.\nFinally, I'd like to remind folks, we have our Investor Day coming up six weeks from today on March 13 in Fort Worth, Texas.\nThe ITW team delivered another quarter of solid operational execution and strong financial performance in Q4.\nDespite some broad-based macro challenges, we delivered GAAP earnings per share growth of 9%, operating margin of 23.7% and after-tax return on invested capital of 28.9% in the quarter.\nFor the full year, against the backdrop of an industrial demand environment that went from decelerating in the first half of the year to contracting in the second half of the year, we're continuing to execute well on the things within our control.\nAs a result, despite revenues that were down $700 million or 4.5% year-on-year, we delivered record GAAP earnings per share of $7.74, expanded operating margin to 24.4% excluding higher restructuring expenses and group free cash flow by 9%.\nIn addition, we were able to raise our dividend by 7% and returned $2.8 billion to shareholders in the form of dividends and share repurchases.\nEqually important, in 2019, we continued to make solid progress on our path to ITW's full potential performance through the execution of our enterprise strategy.\nLast year, we invested more than $600 million to support the execution of our strategy and further enhanced the growth and profitability performance of our core businesses.\nIn addition, each of our divisions continued to make progress in executing well-defined and focused plans to achieve full potential performance in their respective businesses.\nWe look forward to providing a full progress update on our enterprise strategy and our progress toward ITW's full potential performance at our Investor Day in March.\nLooking ahead, ITW's powerful and proprietary business model, diversified high quality business portfolio and dedicated team of highly skilled ITW colleagues around the world position us well to continue to deliver differentiated performance across a range of economic scenarios in 2020 and beyond.\nIn the fourth quarter, organic revenue declined 1.6% year-over-year in what remains a pretty challenging demand environment.\nThe strike at GM reduced our enterprise organic growth rate by approximately 50 basis points and Product Line Simplification was 60 basis points in the quarter.\nBy geography, North America was down 2% and international was down 1%.\nEurope declined 1%, while Asia Pacific was flat.\nOrganic growth in China was broad-based across our portfolio and up 7% year-over-year.\nAs expected, our execution on the elements within our control remained strong in the fourth quarter.\nOperating margin was 23.7%, including 40 basis points of unfavorable margin impact from higher restructuring expenses year-over-year.\nExcluding those higher expenses, operating margin was up 10 basis points to 24.1%.\nEnterprise initiatives contributed 130 basis points and price/cost was positive 30 basis points.\nGAAP earnings per share was up 9% to $1.99 and included an $0.11 gain from three divestitures and $0.06 headwind from higher restructuring expenses year-over-year and foreign currency translation impact.\nThe effective tax rate in the quarter was 22.8%.\nFree cash flow was 114% of net income.\nAnd as planned, we repurchased $375 million of our own shares during the quarter.\nOverall, Q4 was another quarter characterized by strong operational execution and resilient financial performance in a pretty challenging demand environment.\nLet's move to Slide 4 and operating margin.\nOverall, operating margin of 23.7% was down 30 basis points year-over-year, primarily due to higher restructuring expense.\nExcluding those higher restructuring expenses, margin improved 10 basis points despite a 3% decline in revenues.\nEnterprise initiatives were once again the highlight and key driver of our margin performance, contributing 130 basis points, the highest levels since the fourth quarter of 2017.\nThe enterprise initiative impact continues to be broad-based across all seven segments, ranging from 80 basis points to 200 basis points.\nAnd the benefits of the restructuring activities that we initiated earlier in the year are being realized.\nThe majority of these restructuring projects are supporting enterprise initiative implementation, specifically our 80-20 front-to-back execution.\nPrice remained solid with price well ahead of raw material costs and price/cost contributed 30 basis points in the quarter.\nVolume leverage was negative 30 basis points.\nIn Q4, as we always do, we updated our inventory standards to reflect current raw material costs.\nAs raw material cost in the aggregate have declined over the course of the year, the annual mark-to-market adjustments to the value of our inventory that we do every fourth quarter, this year had an unfavorable impact of 30 basis points versus last year.\nWe also had a favorable item last year that didn't repeat this year for 40 basis points.\nAnd finally, the other category, which includes typical wage and salary inflation was 50 basis points.\nSo overall, solid margin performance again for the quarter and the year.\nTurning to Slide 5 for details on segment performance.\nAs you know, 2019 was challenging from an industrial demand standpoint.\nAnd you can see that the organic growth rate in every one of our segments -- seven segments was lower in 2019 than in 2018.\nAt the enterprise level, the organic growth rate swung from positive 2% in 2018 to down 2% in 2019 with the biggest year-on-year swings in our capex-related equipment offerings and automotive.\nSpeaking of automotive, let's move to the individual segment results starting with Automotive OEM.\nOrganic revenue was down 5% as the GM strike reduced revenues by approximately two percentage points.\nTaking a closer look at regional performance, North America was in line with D3 builds, down 13%, Europe was essentially flat versus builds that were down 6% and China organic growth was 11% compared to builds, up one.\nMoving on to Slide 6, Food Equipment had a good quarter with organic growth up 2% year-over-year despite a tough comp of 5% organic growth last year.\nThe service business was solid, up 4% in the quarter.\nEquipment growth of 1% reflects double-digit growth in retail and modest decline in institutional and restaurants, against tough year-over-year comps for both of those.\nOperating margin expanded 90 basis points to 27.5% with enterprise initiatives the main contributor.\nTest & Measurement and Electronics had a very strong quarter with Test & Measurement up 6% with 13% growth in our Instron business.\nThis segment also experienced a meaningful pickup in demand from semiconductor customers.\nElectronics was up 2%.\nMargin was the highlight as the team expanded operating margin 330 basis points to a record 28.1%, the highest in the company this quarter with strong contributions from enterprise initiatives and volume leverage.\nAlso in the quarter, we divested Electronics business with 2019 revenues of approximately $60 million.\nTurning to Slide 7.\nWelding organic revenue declined 4% against a tough comparison of 8% growth last year.\nNorth America equipment was down 3% against a tough comparison of up 7% last year.\nThe lower demand is primarily in the industrial business, while commercial, which includes smaller business and personal users was pretty stable.\nOil and gas was down 2%.\nOperating margin was 25.4%, down 150 basis points, primarily due to higher restructuring expenses.\nIn the quarter, we divested an installation business with 2019 revenues of approximately $60 million, which reduced Welding's organic -- which overall growth rate by 150 basis points in the quarter.\nPolymers & Fluids' organic growth was down 2% versus a tough comp of plus 4% last year.\nPolymers was flat, Automotive aftermarket was down 1%, Fluids was down 6%.\nOperating margin was strong, up 150 basis points, driven primarily by enterprise initiatives.\nMoving to Slide 8.\nConstruction organic revenue was down 1% with continued softness in Australia/New Zealand, which was down 4%.\nEurope was down 3% with the U.K. down 14%.\nNorth America was up 2% with residential remodel up 2% and commercial up 5%.\nOperating margin was 22.2% down due to the inventory mark-to-market adjustments and higher restructuring expenses.\nIn Specialty, organic revenue was down 3%, which on a positive note, is an improvement from the past couple of quarters.\nAs in prior quarters, the main drivers are significant PLS and the relative performance of the businesses we have identified as potential divestitures.\nExcluding these potential divestitures, core organic growth was down 1.7%.\nBy geography, North America was down 4% and international 3%.\nWe also divested a business in this segment with 2019 revenues of approximately $15 million.\nAnd these divestitures reduced Specialty's growth rate by almost eight percentage points.\nNow let's quickly review full year 2019 on Slide 9.\nIn a challenging industrial demand environment, organic revenue was down 1.9% with total revenues down 4.5% as foreign currency translation impact reduced revenues by 2.3% and divestitures by 30 basis points.\nGAAP earnings per share was $7.74 and included $0.09 of divestiture gains, as well as $0.32 of headwinds from foreign currency and higher restructuring expenses year-over-year.\nOperating margin was 24.1% -- 24.4% excluding higher year-on-year restructuring expense as enterprise initiatives contributed 120 basis points.\nAfter-tax return on invested capital improved 50 basis points to 28.7%.\nOur cash performance was very strong with free cash flow up 9% and a conversion rate of 106% of net income.\nWe made significant internal investments to grow and support our highly profitable businesses, increased our annual dividend by 7% and utilized our share repurchase program to return surplus capital to our shareholders.\nA quick update on our various divestiture processes that overall remained on track.\nAs a reminder, we're looking to potentially divest certain businesses with revenues totaling up to $1 billion and are targeted to complete the effort by year-end 2020.\nThe strategic objective with this phase of our portfolio management effort is to improve our overall organic growth rate by 50 basis points and improve margins by approximately 100 basis points.\nNot counting potential gains on sales, the plan is to offset any earnings per share dilution with incremental share repurchases.\nIn the fourth quarter, we completed the sale of three businesses with combined 2019 revenues of approximately $135 million, generating a pre-tax gain on sale of $50 million or $0.11 a share.\nIn 2019, these businesses were a 20 basis points drag to our organic growth rate and 10 basis points to our margin rate.\nOn Slide 10, we wanted to give you a quick update on the progress that we're making on our organic growth initiatives.\nWe estimated the aggregate market growth rate or decline for each one of our segments and compared it to the segments actual organic growth rate in 2019.\nWe also included Product Line Simplification by segment.\nAs you know, full potential steady state PLS is expected to be about 30 basis points.\nAs you can see overall, we've made some good progress, as our segments are all outgrowing their underlying markets, except for Specialty Products.\nAt the enterprise level, we estimate that we outpaced our aggregate blended market growth rates by approximately one percentage point.\nSo overall good progress on our organic growth initiatives.\nAnd by completing our Finish the Job agenda over the next several years, we expect to generate one to two percentage points of additional improvement in ITW's organic growth rate.\nAs Scott mentioned, we look forward to providing a full progress update at our Investor Day in March.\nNow let's talk -- let's turn the page and talk about 2020, starting with Slide 11.\nFirst, we expect GAAP earnings per share in the range of $7.65 to $8.05 for 2020.\nUsing current levels of demand adjusted for seasonality, organic growth at the enterprise level is forecast to be in the range of 0% to 2% for the year.\nAt current exchange rates, foreign currency translation impact and the revenue associated with our 2019 divestitures are each of -- one percentage point headwind to revenue.\nPLS impact is expected to be approximately 50 basis points.\nWe expect to expand operating margin from 24.1% in 2019 to a range of 24.5% to 25% in 2020 with enterprise initiatives contributing approximately 100 basis points.\nAfter-tax ROIC should improve to a range of 29% to 30%.\nAnd as usual, we expect strong free cash flow with conversion greater than net income.\nWe have allocated $2 billion to share repurchases with core share repurchases of $1.5 billion, an additional $500 million to offset the earnings per share dilution from the three completed divestitures.\nAdditional items include an expected tax rate in the range of 23.5% to 24.5%, which represents a 10% -- $0.10 earnings per share headwind and foreign currency at today's rates is also unfavorable $0.10 of EPS.\nJust a quick word as it relates to the Coronavirus situation in China and we're obviously in the same position as everyone else.\nAt this point, we've baked into our guidance a last week of production, assuming that we all return to work in China on February 10.\nBut obviously it's too early to tell and we'll continue to monitor the situation closely.\nOverall, ITW is well positioned for differentiated financial performance across a wide range of scenarios as we continue to execute on the things within our control and make meaningful progress on our path to full potential performance through the implementation of our Finish the Job enterprise strategy agenda.\nFinally, we're providing an organic growth outlook by segment for full year 2020 on Slide 12.\nAnd as always, these are based on current run rates adjusted for seasonality and are obviously influenced by year-over-year comparisons as we go through the year.\nIt's important to note that there is no expectation of demand acceleration embedded in our guidance.\nYou can see that every segment is forecast to improve the organic growth rate in 2020 relative to 2019.\nThe same is true for margins, as every segment expects to improve the margin performance in 2020.\nJulianne, we're ready to open up the lines for Q&A.\n",
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"content": "q4 gaap earnings per share $1.99.\nsees fy earnings per share $7.65 to $8.05.\nillinois tool works inc - plans to repurchase approximately $2 billion of its shares in 2020.\nillinois tool works inc qtrly organic revenue down 1.6%.\nillinois tool works inc - at current levels of demand, sees 2020 organic growth to be in range of 0% to 2%.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: We appreciate you're joining us today for Gartner's first quarter 2021 earnings call, and hope you are well.\nWith me on the call today are Gene Hall, Chief Executive Officer; and Craig Safian, Chief Financial Officer.\nAll growth rates in Gene's comments are FX-neutral unless stated otherwise.\nReconciliations for all non-GAAP numbers we use are available in the Investor Relations section of the gartner.com website.\nFinally, all contract values and associated growth rates we discuss are based on 2021 foreign exchange rates unless stated otherwise.\nI encourage all of you to review the risk factors listed in these documents.\nGartner performance accelerated in the first quarter of 2021.\nWe delivered strong results across contract value, revenue, EBITDA and free cash flow.\nTotal revenues were up 6%, with each of our business segments, research, conferences, and consulting, exceeding our expectations.\nResearch is our largest and most profitable segment.\nOur Research segment serves executives and their teams across all major enterprise functions in every industry around the world.\nResearch has a vast market opportunity across all sectors, sizes and geographies.\nGlobal Technology Sales, or GTS, source leaders and their teams within IT.\nFor Q1, GTS contract value grew 5%.\nFirst quarter new business was up 21% as a result of new logos and upsell with existing clients.\nClient engagement continue to be strong, with content and analyst interaction volumes up to 26% compared to Q 2020.\nWe saw strong performances across several regions and industries, including tech and midsized enterprises.\nWe expect GTS contract value growth to continue to accelerate in 2021 and return to double-digit growth in the future.\nGlobal Business Sales, or GBS, serves leaders and their teams beyond IT.\nThis includes HR, supply chain, finance, marketing, sales, legal and more.\nGBS achieved contract value growth of 12%, its first quarter of double-digit growth.\nNew business growth was a very strong 87% in the quarter.\nAll practices, with the exception of marketing, ended Q1 with double-digit contract value growth rates, and all practices delivered positive quarterly NCVI.\nAcross our entire research business, we practiced relentless execution of proven practices, and we're seeing the results of our efforts.\nOur Research business is well positioned to return to sustained double-digit growth over the medium term.\nTurning to Conferences, as many of you know, during 2020, our Conferences business pivoted from in-person destination conferences to virtual.\nOur value proposition for virtual conferences remains the same as for in-person conferences.\nWe deliver extraordinarily valuable insights to an engaged and qualified audience.\nWhile Q1 is a small quarter for conferences, the business exceeded our expectations.\nBeyond virtual conferences, we continue to prepare to return to in-person conferences in the second half of 2021.\nGartner Consulting is an extension of Gartner Research, and helps clients execute their most strategic initiatives through deeper extended project-based work.\nOur Consulting segment also exceeded our expectations, with bookings up 26% during Q1.\nOur Consulting business will continue to serve as an important complement to our IT Research business.\nOne of our objectives is to generate strong cash flow.\nFree cash flow for the quarter was $145 million, up significantly versus the prior year.\nIn addition, we used that cash flow plus cash balances to purchase more than $600 million in stock through April of this year.\nWith these repurchases, our Board increased our share repurchase authorization by another $500 million.\nWe recently launched our 2020 Corporate Responsibility Report.\nThe report details the progress we made in accelerating positive social change and contributing to a more sustainable world.\nWe want our associates, communities and clients to continue to thrive today and in the future.\nThe report can be found on gartner.com, and I encourage you to take a look.\nSummarizing, Q1 was a strong quarter with all three business segments exceeding our expectations.\nLooking ahead, we are well positioned for sustained success.\nWe have a vast addressable market which will allow us to achieve double-digit contract value and revenue growth over the next five years and beyond.\nWe expect to deliver modest EBITDA margin expansion going forward from a normalized 2021.\nWe generate significant free cash flow in excess of net income, which we'll continue to deploy through share repurchases and strategic tuck-in acquisitions.\nAnd with that, I'll hand the call over to Craig.\nI hope everyone remains safe and well.\nFirst quarter results were outstanding with very good momentum across the business.\nRevenue was well above our expectations.\nDespite the lower-than-planned expenses, we are well positioned to take advantage of the strong demand environment.\nWe will continue to restore spending to support and drive long-term sustained double-digit growth.\nWith stronger-than-expected results in contract value, nonsubscription research and consulting, we are increasing our revenue growth and normalized margin outlook, which results in a meaningful increase to our 2021 guidance.\nThe improved outlook reflects the increased visibility we have following the stronger-than-expected first quarter.\nFirst quarter revenue was $1.1 billion, up 8% year-over-year as reported and 6% FX-neutral.\nIn addition, total contribution margin was 70%, up more than 320 basis points versus the prior year.\nEBITDA was $320 million, up 50% year-over-year and up 44% FX-neutral.\nAdjusted earnings per share was $2, and free cash flow in the quarter was $145 million.\nResearch revenue in the first quarter grew 8% year-over-year as reported and 6% on an FX-neutral basis, and we saw strong retention and new business throughout the quarter.\nFirst quarter research contribution margin was 74%, up about 200 basis points versus 2020.\nHigher contribution margins reflect both improved operational effectiveness and the avoidance of travel expenses.\nSome of the margin improvement compared to historical levels is temporary and will reverse as the world reopens, and we increase spending to support growth.\nWe are seeing a benefit from increased scale and a mix shift to higher-margin products, including from the discontinuation of certain lower-margin marketing products.\nTotal contract value grew 6% FX-neutral to $3.7 billion at March 31.\nQuarterly net contract value increase, or NCVI, was $59 million, significantly better than the pandemic affected first quarter last year.\nQuarterly NCVI is a helpful way to measure contract value performance in the quarter, even though there is notable seasonality in this metric.\nGlobal Technology Sales contract value at the end of the first quarter was $3 billion, up 5% versus the prior year.\nGTS CV increased $34 million from the fourth quarter.\nThe selling environment continued to improve in the first quarter but while retention isn't yet fully back to normal.\nMoving forward, we expect win backs and a return to more expansion with existing clients to contribute to growth in 2021, consistent with our experience coming out of the last downturn.\nBy industry, CV growth was led by technology, healthcare and services, while retention for GTS was 98% for the quarter, down about 560 basis points year-over-year.\nSequentially, a majority of our industry groups saw retention improve from the fourth quarter.\nGTS new business was up 21% versus last year with strength in new logos and an improvement in upsell with existing clients.\nOur regular full set of metrics can be found in our earnings supplement.\nGlobal Business Sales contract value was $731 million at the end of the first quarter, up 12% year-over-year.\nGBS CV increased $25 million from the fourth quarter.\nThis was the strongest first quarter performance we've seen from GBS.\nCV growth was led by the healthcare and technology industries.\nAll practices recorded double-digit CV growth with the exception of marketing, which was impacted by discontinued products.\nHowever, our marketing practice saw improving retention rates and a return to year-over-year new business growth in the quarter.\nAll of our practices, including marketing, showed sequential increases in CV from the fourth quarter.\nWhile retention for GBS was 104% for the quarter, up more than 330 basis points year-over-year, GBS new business was up 87% over last year, led by very strong growth across the full portfolio.\nAs with GTS, our regular full set of GBS metrics can be found in our earnings supplement.\nConferences revenue for the quarter was $25 million.\nWe had about $10 million of onetime revenue in the quarter.\nThis reflected contract entitlements, which we extended beyond the end of 2020 as a result of the pandemic.\nContribution margin in the quarter was 56%.\nWe held five virtual conferences in the quarter.\nWe also held a number of virtual Avanta meetings.\nFirst quarter consulting revenues increased by 4% year-over-year to $100 million.\nOn an FX-neutral basis, revenues were flat.\nConsulting contribution margin was 39% in the first quarter, up 860 basis points versus the prior year quarter.\nLabor-based revenues were $84 million, up 4% versus Q1 of last year and down 1% on an FX-neutral basis.\nLabor-based billable headcount of 744 was down 8% due to headcount actions taken in Q2 and Q3 of last year.\nUtilization was 68%, up about 550 basis points year-over-year.\nBacklog at March 31 was $116 million, up 3% year-over-year on an FX-neutral basis after a strong bookings quarter.\nOur backlog provides us with about four months of forward revenue coverage.\nOur Contract Optimization business was up 6% on a reported basis versus the prior year quarter and 3% FX-neutral.\nAs we have detailed in the past, this part of the consulting segment is highly variable.\nConsolidated cost of services decreased 2% year-over-year and 4% FX-neutral in the first quarter.\nCost of services declined due to lower travel and entertainment costs during the quarter, as well as the continuation of various cost avoidance initiatives.\nSG&A decreased 2% year-over-year and 4% FX-neutral in the first quarter as well.\nSG&A declined due to lower facilities, travel, entertainment, and conference-related expenses, as well as the continuation of various cost avoidance initiatives.\nAs CV rebounds this year, our traditional sales productivity metrics will also improve.\nFor 2021, we have ample sales capacity to drive increasing CV growth, a more tenured-than-usual sales force, several consecutive quarters of strong client engagement which should drive improving retention, and the insights to help our clients address their most critical priorities.\nGoing forward, in addition to the initiatives to improve sales force productivity and cost effectiveness we've been discussing the past few years, this year, we are investing to upgrade many of our sales technology tools.\nWe will be ramping up our sales force hiring later in the year to ensure we have the team in place to drive strong CV growth next year.\nWe still anticipate high single-digit growth in both GTS and GBS headcount by the end of 2021.\nEBITDA for the first quarter was $320 million, up 50% year-over-year on a reported basis and up 44% FX-neutral.\nFirst quarter EBITDA reflected revenue above the high end and costs toward the low end of our expectations for the first quarter.\nDepreciation in the quarter was up about $3 million versus 2020, including real estate and software, which went into service since the first quarter of last year.\nNet interest expense, excluding deferred financing costs in the quarter, was $25 million, flat versus the first quarter of 2020.\nThe Q1 adjusted tax rate, which we used for the calculation of adjusted net income, was 23.5% for the quarter.\nThe tax rate for the items used to adjust net income was 22.4% in the quarter.\nAdjusted earnings per share in Q1 was $2.\nRecall that about $6 million of equity compensation expense, which we normally would have incurred in the fourth quarter of 2020, shifted into the first quarter of 2021.\nThe weighted average fully diluted share count for the first quarter was 89.1 million shares.\nThe ending fully diluted share count at March 31st was 87.7 million shares.\nOperating cash flow for the quarter was $157 million compared to $56 million last year.\nThe increase in operating cash flow was primarily driven by EBITDA growth, improved collections and cost avoidance initiatives.\ncapex for the quarter was $13 million, down 49% year-over-year.\nLower capex is largely a function of lower real estate investments.\nFree cash flow for the quarter was $145 million, which was up about 360% versus the prior year.\nFree cash flow growth continues to be an important part of our business model, with modest capital expenditure needs and upfront client payments.\nFree cash flow as a percent of revenue or free cash flow margin was 22% on a rolling 4-quarter basis, continuing the improvement we've been making over the past few years.\nFree cash flow is well in excess of both GAAP and adjusted net income.\nAt the end of the first quarter, we had $446 million of cash.\nOur March 31st debt balance was $2 billion.\nAt the end of the first quarter, we had about $1 billion of revolver capacity.\nOur reported gross debt to trailing 12-month EBITDA was about 2.2 times.\nWe remain very comfortable with our current gross debt level and the corresponding lower leverage multiple.\nThe multiple has reduced predominantly from increased EBITDA.\nOur expected free cash flow generation and excess cash remaining on the balance sheet provide ample liquidity and cash to deliver on our capital allocation strategy of share repurchases and strategic tuck-in M&A.\nDuring the first quarter, we repurchased $398 million in stock at an average price of about $180 per share.\nIn the month of April, we repurchased more than $200 million of our stock.\nAt the end of April, the Board increased our share repurchase authorization for the second time this year, adding another $500 million.\nAs of April 30, we have around $790 million available for open market repurchases.\nWe expect the Board will continue to refresh the repurchased authorization as needed going forward.\nAs we continue to repurchase shares, we expect our capital base to shrink going forward.\nThis is accretive to earnings per share and combined with growing profits, also delivers increasing returns on invested capital over time as well.\nWe are updating our full year guidance to reflect Q1 performance and an improved and increased outlook for the remainder of the year.\nFor Research, the strong start to the year in CV performance and improvements to nonsubscription revenue are contributing to higher-than-previously expected research revenue.\nFor Conferences, our guidance is still based on being virtual for the full year.\nOperationally, we are planning to relaunch in-person Avanta meetings in the third quarter and in-person destination conferences starting in September.\nOur guidance includes fixed costs, primarily people and marketing related to both a full year of virtual and a partial year of in-person conferences.\nWe've excluded the variable costs, primarily venue-related associated with in-person conferences from our guidance.\nIf we are able to run in-person conferences, we expect incremental upside to both our revenue and profitability for 2021.\nFor Consulting revenues, demand started the year better than we expected and the backlog improved during the first quarter.\nFor expenses, we have reinstated benefits, which were either canceled or deferred in 2020.\nThis includes our annual merit increase, which took effect April 1.\nWe also plan to increase quota-bearing head count in the high single digits for both GTS and GBS by the end of 2021.\nAdditionally, we continue to invest in several other programs.\nThe impact of most of these expense restorations or investments impact our P&L starting in the second quarter.\nAs you know, travel expenses were close to 0 from April 2020 through March 2021.\nOur current plans continue to assume a modest ramp-up in travel-related expenses over the course of 2021.\nMost of this ramp is built into the second half of the year.\nIf travel restrictions remain in place for longer than we've assumed, we'd see expense savings.\nFor our revenue guidance, we now expect Research revenue of at least $3.935 billion, which is growth of at least 9.2%.\nWe expect Conferences revenue of at least $170 million which is growth of at least 42%.\nWe now expect consulting revenue of at least $400 million, which is growth of at least 6.4%.\nThe result is an outlook for consolidated revenue of at least $4.5 billion, which is growth of 9.9%.\nBased on current foreign exchange rates and business mix, the consolidated growth includes an FX benefit of about 200 basis points.\nThe year-over-year FX benefit is more pronounced in the first half of the year.\nWith the ongoing business momentum we are seeing, we are planning to restore growth spending as we move through the year.\nWe now expect full year adjusted EBITDA of at least $1 billion, which is an increase of about 22.3% versus 2020 and reported margins of at least 22%.\nThis is based on conferences running virtual only.\nThe 18% to 19% expected margins in the back half of the year should provide a reasonable run rate for thinking about the margins going forward as we will have more fully restored costs and resumed growth hiring.\nWe expect our full year 2021 adjusted net interest expense to be $102 million.\nWe expect an adjusted tax rate of around 22% for 2021.\nWe now expect 2021 adjusted earnings per share of at least $6.25.\nFor 2021, we now expect free cash flow of at least $850 million.\nThis is before any insurance proceeds related to 2020 conference cancellations.\nAll the details of our full year guidance are included on our Investor Relations site.\nFinally, we expect to deliver at least $270 million of EBITDA in Q2 of 2021.\nWe expect the second quarter tax rate in the high 20s.\nLooking out over the medium term, our financial model and expectations are unchanged.\nWith 12% to 16% research CV growth, we will deliver double-digit revenue growth.\nWith gross margin expansion, sales cost growing in line with CV growth over time and G&A leverage, we can modestly expand margins from a normalized 2021 level of around 18% to 19%.\nWe can grow free cash flow at least as fast as EBITDA because of our modest capex needs and the benefits of our clients paying us upfront.\nWe will repurchase shares over time, which will lower the share count as well.\nWe had a strong start to the year with momentum across the business.\nWe have meaningfully updated our outlook for 2021 to reflect the stronger demand environment and our enhanced visibility.\nWe are restoring certain expenses and investing to ensure we are well positioned to rebound as the economy recovers.\nWe repurchased more than $600 million worth of stock this year through the end of April and remain committed to returning excess capital to our shareholders.\n",
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"content": "q1 revenue rose 8.4 percent to $1.1 billion.\nboard of directors increased share repurchase authorization by $500 million in april 2021.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: We appreciate you joining us today for Gartner's second quarter 2021 earnings call and hope you are well.\nWith me on the call today are Gene Hall, Chief Executive Officer; and Craig Safian, Chief Financial Officer.\nAll growth rates in Gene's comments are FX-neutral unless stated otherwise.\nReconciliations for all non-GAAP numbers we use are available in the Investor Relations section of the gartner.com website.\nFinally, all contract values and associated growth rates we discuss are based on 2021 foreign exchange rates unless stated otherwise.\nI encourage all of you to review the risk factors listed in these documents.\nGartner's positive momentum continued in the second quarter of 2021.\nWe again delivered strong results across contract value, revenue, EBITDA and free cash flow.\nWe significantly increased the pace of our buybacks.\nTotal company revenues were up 16% with strength in all three business segments and research exceeding our expectations.\nWe continue to see growth opportunities across industries, geographies, and every size enterprise.\nResearch is our largest and most profitable segment.\nOur research segment serves executives and their teams across all major enterprise functions in every industry around the world.\nOur market opportunity is fast across all sectors, sizes and geographies.\nTotal contract value growth increased to 11% with both GTS and GBS accelerating in the quarter.\nThis was driven by strength in both retention and new business.\nGlobal Technology Sales or GTS, serves leaders and their teams within IT.\nFor Q2, GTS contract value growth accelerated to 9% and we have CD growth in all of our top 10 countries.\nGTS drove strong growth across virtually all industries, including manufacturing, services, and tech and telecom.\nAnd we expect GTS contract value growth to continue accelerating, returning to double-digit growth in the future.\nGlobal business sales or GPS serves leaders and their teams beyond IT.\nThis includes HR, supply chain, finance, marketing, sales, legal and more.\nGBS again accelerated, delivering outstanding contract value growth of 18%.\nBoth practices contributed to our growth.\nAnd our HR, finance, sales and supply chain practices each exceeded 20% contract value growth.\nSo across our entire research business, we're seeing the results of a sustained focus, a consistent execution of proven practices.\nWe continued to have a vast market opportunity.\nAnd our research business is well-positioned as we continue to deliver long-term sustained double-digit growth.\nTurning to conferences; for the second quarter of 2021, conferences revenues were $58 million, again exceeding our expectations.\nAs many of you know, during 2020 we were unable to hold in-person conferences.\nTo address this situation we created virtual conferences to deliver extraordinarily valuable insights to our audiences.\nWe continue to operationally prepare for some in-person conferences in the second half of the year if conditions allow.\nGartner Consulting is an extension of Gartner Research and helps clients execute their most strategic initiatives through deeper extended project based work.\nConsulting revenues were up 4% in Q2.\nWe had strength in our labor-based business.\nWith labor-based revenue up 20% over this time last year.\nContract optimization revenue was down from a record high last year.\nOverall, Consulting continues to be an important complement to our IT research business.\nTo ensure we keep pace with our accelerating growth rates, we're rapidly growing our recruiting capacity.\nOur hiring is accelerating.\nEven in today's tough labor market, candidates see Gartner as a great place for a long-term career.\nThey know we have an incredible impact on our clients, that we're a sales-driven growth company and our growth provides among the best promotion and professional development opportunities for all our associates.\nWith strong revenues and continued disciplined cost management, EBITDA exceeded expectations.\nStrong EBITDA combined with effective cash management resulted in strong free cash flow.\nOur priorities for cash flow continue to be strategic, tuck-in acquisitions, like the small one we did this quarter and share repurchases.\nSummarizing, Q2 was another strong quarter with strength in all three business segments, and research exceeding our expectations.\nWe delivered strong results across contract value, revenue, EBITDA and free cash flow.\nLooking ahead, we're well-positioned for long-term sustained double-digit growth.\nWe have a vast addressable market.\nWe have an attractive recurring revenue business model with strong contribution margins.\nWe expect to deliver modest EBITDA margin expansion going forward from a normalized 2021.\nWe generate significant free cash flow in excess of net income, which will continue to deploy through share repurchases and strategic tuck-in acquisitions.\nWith that, I'll hand the call over to Craig.\nSecond quarter results were excellent with strength in contract value growth, revenue, EBITDA and free cash flow.\nWe are increasing our 2021 guidance to reflect our strong Q2 performance.\nSecond quarter revenue was $1.2 billion, up 20% year-over-year as reported and 16% FX neutral.\nIn addition, total contribution margin was 70%, up more than 300 basis points versus the prior year.\nEBITDA was $355 million, up 85% year-over-year and up 75% FX neutral.\nAdjusted earnings per share was $2.24.\nFree cash flow on the quarter was $563 million.\nFree cash flow includes $150 million from insurance proceeds related to cancelled 2020 conferences.\nResearch revenue in the second quarter grew 15% year-over-year as reported and 11% on an FX neutral basis.\nWe saw strong retention and new business in the quarter.\nSecond quarter research contribution margin was 74%, up about 170 basis points versus 2020.\nContribution margins reflect both improved operational effectiveness, continued avoidance of travel expenses and lower than planned headcount.\nHowever, some of the margin improvement compared to historical levels is temporary and will reverse as we resume normal travel and increased spending to support growth.\nTotal contract value grew 11% FX neutral year-over-year to $3.8 billion at June 30.\nQuarterly net contract value increased or NCVI was $114 million, significantly better than the pandemic lows in the second quarter of last year and a new record high for second quarter NCVI.\nQuarterly NCVI is a helpful way to measure contract value performance in the quarter, even though there is notable seasonality in this metric.\nGlobal technology sales contract value at the end of the second quarter was $3 billion, up 9% versus the prior year.\nGTS CV increased $75 million from the first quarter.\nThe selling environment continued to improve in the second quarter.\nBy industry, CV growth was led by technology, manufacturing and services.\nWhile retention for GTS was 101% for the quarter, up about 110 basis points year-over-year.\nWhile retention isn't yet fully back to normal because it's a rolling four quarter measure.\nGTS new business was up 38% versus last year with strength in new logos and continued improvement in upsell with existing clients.\nOur regular full set of metrics can be found in our earnings supplement.\nGlobal Business Sales Contract Value was $770 million at the end of the second quarter, up 18% year-over-year, which is above the high-end of our medium term outlook of 12% to 16%.\nGBS CV increased $39 million from the first quarter.\nBroad-based CV growth was led by the healthcare and technology industries.\nAll of our practices including marketing delivered year-over-year and sequential CV growth.\nHR, finance, sales and supply chain each grew 20% or more year-over-year.\nWhile retention for GBS was 110% for the quarter, up more than 950 basis points year-over-year.\nGBS new business was up 76% over last year, led by very strong growth across the full portfolio.\nAs with GTS our regular full set of GBS metrics can be found in our earnings supplement.\nConferences revenue for the second quarter was $58 million compared to no revenue in the year-ago quarter.\nContribution margin in the quarter was 73% driven by strong top line performance.\nWe held 13 virtual conferences in the quarter.\nWe also held a number of virtual Avanta meetings.\nSecond quarter consulting revenues increased by 9% year-over-year to $106 million.\nOn an FX neutral basis, revenues were up 4%.\nConsulting contribution margin was 40% in the second quarter, up almost 600 basis points versus the prior year quarter.\nLabor-based revenues were $86 million, up 25% versus Q2 of last year and up 20% on an FX neutral basis.\nLabor-based billable headcount of 740 was down 7%.\nUtilization was 70%, up more than 1,100 basis points year-over-year.\nBacklog at June 30 was $108 million, up 7% year-over-year on an FX neutral basis after another strong bookings quarter.\nOur Contract Optimization business was down 31% on a reported basis versus the prior year quarter and down 33% FX neutral.\nThe prior year period was the highest ever revenue quarter for Contract Optimization and as we have detailed in the past, this part of the consulting segment is highly variable.\nConsolidated cost of service has increased 9% year-over-year and 6% FX neutral in the second quarter.\nCost of services increased due to the reinstatement of annual merit increases and to support growth in the business.\nSG&A decreased 1% year-over-year and 4% FX neutral in the second quarter.\nCompared with the prior year period, SG&A declined due to lower severance and conference related expenses partially offset by higher personnel costs.\nE&E remains close to zero.\nOperating expenses were lower than planned in part because net headcount growth was below our targets.\nWhile our rate of hiring continues to ramp up, turnover remains modestly above normal levels due to tighter labor market conditions.\nAs Gene said, we're rapidly growing our recruiting capacity to keep pace with our accelerating growth rates.\nEBITDA for the second quarter was $355 million, up 85% year-over-year on a reported basis and up 75% FX neutral.\nSecond quarter EBITDA again reflected revenue above the high-end and cost toward the low-end of our expectations.\nDepreciation in the quarter was up about $3 million versus 2020, reflecting real estate and software which went into service since the second quarter of last year.\nNet interest expense excluding deferred financing costs in the quarter was $26 million, roughly flat versus the second quarter of 2020.\nThe Q2 adjusted tax rate which we use for the calculation of adjusted net income was 29.9% for the quarter.\nThe tax rate for the items used to adjust net income was 24.6% in the quarter.\nAdjusted earnings per share in Q2 was $2.24.\nThe weighted average fully diluted share count for the second quarter was 86.6 million shares.\nWe exited the second quarter with 85.1 million fully diluted shares.\nOperating cash flow for the quarter was $575 million, up 68% compared to last year.\nQ2 operating cash flow includes $150 million of proceeds from insurance related to 2020 conference cancellations.\nExcluding the insurance proceeds, operating cash flow improved by 24% versus the prior year quarter.\nCash flow strength continues to be driven by EBITDA growth and improved collections.\nCapex for the quarter was $12 million, down 44% year-over-year.\nLower capex is largely a function of lower real estate investments.\nFree cash flow for the quarter was $563 million, which was up about 75% versus the prior year.\nExcluding the insurance proceeds, free cash flow improved by 28% versus the prior year quarter.\nFree cash flow growth continues to be an important part of our business model with modest capital expenditure needs and upfront client payments.\nFree cash flow as a percent of revenue or free cash flow margin was 27% on a rolling four quarter basis.\nExcluding the insurance proceeds, free cash flow was 23% of revenue, continuing the improvement we've been making over the past few years.\nFree cash flow was well in excess of both GAAP and adjusted net income.\nAt the end of the second quarter, we had $796 million of cash.\nDuring the quarter, we issued $600 million of new 8-year senior unsecured notes with a 3.625% coupon.\nWe used the proceeds from this new issuance to repay $100 million of the existing term loan A. The balance is available for general corporate purposes including share repurchases.\nOur June 30 debt balance was $2.5 billion.\nAt the end of the second quarter, we had about $1 billion of revolver capacity.\nOur reported gross debt to trailing 12-month EBITDA was about 2.3x.\nOur expected free cash flow generation and excess cash remaining on the balance sheet provide ample liquidity and cash to deliver on our capital allocation strategy of share repurchases and strategic tuck-in M&A.\nDuring the quarter, we made a small acquisition with net cash paid at closing of $23 million.\nYear-to-date, we've repurchased more than $1 billion in stock, including $685 million during the second quarter.\nIn July, the Board increased our share repurchase authorization for the third time this year, adding another $800 million.\nAs of August 1, we have more than $1 billion available for share repurchases.\nWe expect the Board will continue to refresh the repurchase authorization as needed.\nAs we continue to repurchase shares, we expect our capital base will shrink.\nThis is accretive to earnings per share, and combined with growing profits also delivers increasing returns on invested capital over time.\nWe are updating our full year guidance to reflect Q2 performance and an improved and increased outlook for the remainder of the year.\nFor Research, the strong start to the year in CV performance and improvement to non-subscription revenue are contributing to higher than previously expected research revenue.\nFor Conferences, our guidance is still based on being virtual for the full year.\nWith the uptick in COVID and shifting government directives, there is much more uncertainty around our ability to run in-person conferences during the balance of the year.\nWe continue to operationally plan for some in-person conferences.\nOur updated guidance reflects some additional cancellation related costs for conferences where we have been planning to run in-person, but may need to cancel.\nIf we are able to run in-person conferences, we expect incremental upside to both our revenue and profitability for 2021.\nFor expenses, we have reinstated benefits which were either cancelled or deferred in 2020.\nThis includes our annual merit increase, which took effect April 1.\nWe are investing in expanding our recruiting capacity, drive additional hiring across the business.\nThe additional hiring will continue into 2022 and beyond to support current and future growth.\nOur current plan is to increase quota-bearing headcount in the mid-single digits for GTS and low double digits for GBS by the end of 2021.\nAdditionally, we continue to invest in a number of programs with a focus on improving sales productivity.\nAs you know, travel expenses were close to zero from April 2020 through June 2021.\nOur current plans continue to assume a ramp up in travel related expenses.\nOver the course of the rest of this year, we add more to the fourth quarter.\nIf travel restrictions remain in place for longer than we've assumed, we'd see expense savings.\nFor our revenue guidance, we now expect research revenue of at least $4 billion, which is growth of 11%.\nWe still expect Conferences revenue of at least $170 million, which is growth of 41%.\nWe still expect Consulting revenue of at least $400 million, which is growth of 6%.\nThe result is an outlook for consolidated revenue of at least $4.57 billion, which is growth of 11%.\nBased on current foreign exchange rates and business mix, the consolidated growth includes an FX benefit of about 200 basis points.\nThe year-over-year FX benefit was more pronounced in the first half of the year.\nWith the ongoing business momentum, we are seeing we will continue to restore growth spending as we move through the year.\nWe now expect full year adjusted EBITDA of at least $1.16 billion, which is an increase of about 42% versus 2020 and reflects reported margins of 25.4%.\nWe expect a reasonable baseline for thinking about the margins going forward is around 18% to 19% consistent with our comments last quarter.\nWe expect our full year 2021 adjusted net interest expense to be $113 million.\nLooking out to 2022, as the balance sheet stands today, we expect interest expense to be around $115 million.\nWe expect an adjusted tax rate of around 22% for 2021.\nWe now expect 2021 adjusted earnings per share of at least $7.60.\nFor 2021, we now expect free cash flow of at least $1.13 billion.\nThis includes the $150 million of insurance proceeds received in the second quarter this year.\nAll the details of our full year guidance are included on our Investor Relations site.\nTurning to the second half of the year.\nFor Research, we have more visibility into revenue the farther we get into the year.\nThis is because NCVI earlier in the year has more of an effect on the full year revenue.\nSeasonally, Conferences and Consulting are also both typically later in Q3.\nFinally, at the start of 2021, there was a lot of uncertainty in the world and we began with a prudently conservative plan.\nMore than halfway through the year and with less macro uncertainty, there's a lower likelihood of the kind of upside we've seen in the past few quarters.\nAs a result, we expect reported numbers to be closer to our guidance than earlier in the year.\nAny upside is more likely to come from lower costs than higher revenue.\nFor Q3, we expect to deliver at least $250 million of EBITDA.\nWe also expect the tax rate for the quarter in the high 20s.\nLooking out over the medium term, our financial model and expectations are unchanged.\nWith 12% to 16% Research CV growth, we will deliver double-digit revenue growth.\nWith gross margin expansion, sales cost growing in line with CV growth over time, and G&A leverage, we can modestly expand margins from a normalized 2021 level of around 18% to 19%.\nWe can grow free cash flow at least as fast as EBITDA because of our modest capex needs and the benefits of our clients paying us up front.\nWe will repurchase shares over time, which will lower the share count.\nWith a strong first half, with momentum across the business, we have meaningfully updated our outlook for 2021 to reflect the stronger demand environment and our enhanced visibility.\nWe are restoring certain expenses and investing to ensure we are well-positioned to continue our momentum.\nWe repurchased more than $1 billion worth of stock this year, and remain committed to returning excess capital to our shareholders.\n",
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"content": "compname posts q2 adjusted earnings per share $2.24.\nq2 revenue $1.2 billion versus refinitiv ibes estimate of $1.12 billion.\nq2 adjusted earnings per share $2.24.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: We appreciate you joining us today for Gartner's third quarter 2020 earnings call, and hope you're well.\nWith me on the call today are Gene Hall, Chief Executive Officer; and Craig Safian, Chief Financial Officer.\nAll growth rates in Gene's comments are FX neutral unless stated otherwise.\nReconciliations for all non-GAAP numbers we use are available in the Investor Relations section of the gartner.com website.\nFinally, all contract values and associated growth rates we discuss are based on 2020 foreign exchange rates unless stated otherwise.\nI encourage all of you to review the risk factors listed in these documents.\nBusiness leaders need help in all times, but during highly uncertain times like today they need help more than ever.\nThose that know Gartner, know, we are the best source for how to survive and thrive in these difficult times.\nBeginning in Q1, we made significant changes in response to the pandemic and economic downturn.\nOur strategy is to ensure our research content addresses the most critical priorities of our clients at any point in time.\nWhen the pandemic hit, the rate of change in the world increased radically.\nWe responded with agility, we accelerated the creation of new, highly relevant content for our clients across every function.\nTopics included adapting to COVID-19, shifting to remote work, accelerating the transition to digital business, strengthening diversity, equity and inclusion across the enterprise and more.\nClients have highly valued this content addressing their mission critical priorities.\nClient engagement with our experts rose significantly, during Q3 client interactions increased more than 20% year-over-year to over 120,000 interaction.\nGartner Conferences delivered the same unparalleled insight and advice to those who want an immersive experience.\nSeat holders who attend our conferences received great value, which results in higher retention.\nNon-seat holders equally received great value and are a great source of highly qualified leads for our research sales force.\nOnce the pandemic hit, we pivoted to virtual conferences to replace our traditional in-person destination conferences.\nSo far we've delivered seven virtual conferences through October and the performance of these conferences has exceeded our expectations.\nIT Symposium/Xpo is our flagship conference series for senior IT executives.\nWe recently held our IT Symposium Americas virtually.\nIt was a resounding success.\nMore than 15,000 executives attended and that's about double the number that attended Orlando Symposium in-person last year.\nAttendees were highly engaged and participated in an average of 11 live sessions.\nMore than 80% of IT Symposium Americas attendees rated the conference as meeting or exceeding their expectations.\nAttendee scores for the keynotes were on par with the in-person conferences from last year.\nExhibitors are also an important element of our conferences.\nWe've been working with them to create a great experience for both attendees and themselves.\nWhile exhibitor revenues were lower when compared to our in-person conferences from last year, they exceeded our expectations.\nEarly on, there was great uncertainty as to whether virtual conferences would be viable.\nThe results of the seven virtual conferences, we've held-to-date demonstrate we can achieve attendance, while delivering high value to both attendees and exhibitors.\nWe're early in the virtual conference journey and each one we've held has been better than the last.\nWe are a learning organization, we'll continue to get even better by taking the experience from each conference and improving on the next.\nWe have eight more virtual conferences planned for 2020 and have -- already have more than 21,000 attendees registered.\nSo we were extremely agile in serving the needs of our clients, by adapting our content and pivoting to virtual conferences.\nWe were just as agile in adapting our operations for the new environment.\nWe went from an in-office to completely remote and we now have achieved the same level of operational effectiveness as we had in the office.\nWe acted early and decisively at the beginning of the pandemic to optimize our costs and prepare for a wide range of scenarios.\nWe've achieved strong cost savings by working smarter, not just by getting by with less.\nFor example, we've established specialized teams to handle some tasks such as background research.\nPreviously, this was done individually by all our experts rather than specialized teams.\nThe specialized teams do this research in fewer hours and often with higher quality because of the specialization.\nIn addition, we have automated some of this work through technologies such as web mining, which further lowers the cost and increases the overall quality.\nThough these changes didn't begin during the pandemic, but because of the pandemic we accelerated the pace.\nIn addition to cost savings and operational efficiencies, we also took several steps to preserve liquidity and maintain financial strength.\nWe now have a capital structure with less maturity risk and more flexibility.\nSo we accelerate the creation of new, highly relevant content for our clients across every function.\nWe successfully pivoted to virtual conferences, which were well attended and delivered high value to our clients.\nOur clients are more engaged than ever.\nBeyond client engagement we adapted our operations to work remotely just as effectively as we do from our offices, and we combine this with early and decisive actions to optimize our cost structure and our balance sheet.\nThe combination of these factors has resulted in improvements across most of our operational metrics compared to Q2.\nThe improvement in our operational metrics in turn has resulted in improvement in our Q3 financial metrics and guidance compared to Q2.\nRevenue and EBITDA are performing better than we expected and free cash flow generation is very strong.\nI hope everyone remains safe and well.\nThird quarter results were ahead of our expectations and we raised our full year guidance to reflect the modestly better demand environment and strong cost management.\nWe had another successful bond offering during the quarter and amended and extended our credit facility through 2025.\nAs of September 30th, we have a stronger balance sheet than we did at the start of the year.\nWe have significant liquidity, which gives us financial flexibility.\nWe reduced our maturity risk and our annual interest expense will be lower starting in 2021.\nAs we have gotten more clarity on the economy and gauged our business performance over the past several months, we've resumed targeted spending.\nWhile we continue to manage our cost carefully, we remain focused on positioning ourselves to rebound strongly as the economy recovers.\nThird quarter revenue was $995 million, down 1% both as reported and FX neutral.\nExcluding conferences, our revenues were up 5% year-over-year FX neutral.\nIn addition, contribution margin was 67%, up more than 300 basis points versus the prior year.\nEBITDA was $168 million, up 20% year-over-year and up 19% FX neutral.\nAdjusted earnings per share was $0.91 and free cash flow in the quarter was a very strong $229 million.\nResearch revenue in the third quarter grew 6% year-over-year on a reported and FX neutral basis.\nThird quarter research contribution margin was 72%, benefiting in part from the temporary cost avoidance initiatives we put in place starting in the first quarter.\nAs we have seen improvements in the macro environment, we have resumed growth spending and started to restore some of the compensation and benefit programs, which we've had put on hold when the pandemic first hit.\nTotal contract value was $3.4 billion at September 30th, representing FX neutral growth of 5% versus the prior year.\nGlobal Technology Sales contract value at the end of the third quarter was $2.8 billion, up 5% versus the prior year.\nThe more challenging selling environment that began in March continued through the third quarter and had an impact on most of our reported metrics.\nClient retention for GTS was 80%, down about 160 basis points year-over-year, but up modestly from last quarter.\nWallet retention for GTS was 99% for the quarter, down about 600 basis points year-over-year.\nGTS new business declined 7% versus last year.\nWe ended the third quarter with enterprises down about 3% from last year.\nThe average contract value per enterprise continues to grow.\nIt now stands at $227,000 per enterprise in GTS, up 9% year-over-year.\nGrowth in CV per enterprise reflects the combination of up-sell, increased number of subscriptions and price.\nIn addition, we continue to see higher churn among lower spending client.\nAt the end of the third quarter, the number of quota-bearing associates in GTS was down about 8% year-over-year.\nWe expect to end 2020 with more than 3,100 quota-bearing associates, a slight decline from the end of 2019.\nWe entered this year with a large bench, which we have now fully deployed.\nFor GTS, the year-over-year net contract value increase, or NCVI, divided by the beginning period quota-bearing headcount was $41,000 per salesperson, down about 60% versus the third quarter of last year.\nDespite the challenging macro environment, GTS CV grew in nearly all of our 10 largest countries similar to last quarter was up double digits in Brazil, Japan, France and the Netherlands.\nCV grew across all sectors except for transportation and media.\nAcross our entire GTS sales team, we sold significant amounts of new business in the quarter to both existing and new clients.\nNew logo has continued to be a significant contributor to our CV growth.\nFinally, despite some net churn in clients, we continue to see increased spending by retained clients on average, although not quite enough to offset dollar attrition.\nThis speaks to the compelling client value proposition we offer in both strong and challenging economic environments.\nOverall GTS retention and new business improved in the third quarter as compared to the second quarter.\nGlobal Business Sales contract value of $656 million at the end of the third quarter.\nThat's about 20% of our total contract value.\nCV growth was 6% year-over-year as reported and 5% on an organic basis.\nCV growth in the quarter was led by our supply chain and human resources teams.\nAll practices positively contributed to the 6% CV growth rate for GBS with the exception of marketing.\nGBS new business was strong, up 14% over last year.\nAs we've discussed the last three quarters, in the marketing practice, we are transitioning away from some lower margin products.\nThis has created short-term headwinds, but is expected to improve profitability in a normal environment.\nGxL is now more than 50% of GBS total contract value, an important milestone in the path to long-term sustained double-digit growth in GBS.\nClient retention for GBS was 82%, up 117 basis points year-over-year.\nWallet retention for GBS was 99% for the quarter, up 220 basis points year-over-year.\nWe ended the third quarter with GBS enterprises down about 9% from last year as we continue to see churn of legacy clients.\nThe average contract value per enterprise continues to grow, it now stands at $140,000 per enterprise in GBS, up 16% year-over-year.\nGrowth in CV per enterprise reflects upsell, an increased number of subscriptions, penetration of new functional areas and price.\nDespite the pandemic, our retain clients are continuing to spend more with us every year, although not quite enough to offset dollar attrition.\nAt the end of the third quarter, the number of quota-bearing associates in GBS was down 7% year-over-year.\nWe expect to end 2020 with roughly flat headcount at the end of 2019 in GBS.\nFor GBS, the year-over-year net contract value increase, or NCVI, divided by the beginning period quota-bearing headcount was $38,000 per salesperson, up from last year.\nOverall, GBS had a good third quarter, driven by a strong double-digit year-over-year improvement in new business.\nAs you know, the Conferences segment has been materially impacted by the global pandemic.\nWe cancelled all in-person destination conferences for the remainder of 2020.\nWe pivoted to producing virtual conferences with a focus on maximizing the value we deliver for our clients.\nWe held two virtual conferences in the third quarter after producing pilots in the second quarter.\nWe have also held a number of virtual Evanta meetings, shifting these one-day local conferences online due to the pandemic.\nConferences revenue for the quarter was $30 million, a combination of the two virtual conferences and a number of virtual Evanta meetings.\nWe are still in the early stages of all forms of virtual conferences and will continue to leverage customer feedback as we develop, refine and grow our virtual conference offerings.\nThe revenue mix of our virtual conferences is different from the mix from in-person conferences.\nFirst, in Q3, our revenues were split between virtual conferences and virtual Evanta meetings with a higher mix from Evanta meetings than last year.\nAttendee revenue with virtual conferences is from two sources, tickets that are purchased as a stand-alone item, either online or through our sales teams, or an entitlement associated with a broader research contract.\nAs we've detailed in the past, a small portion of many research contracts gets attributed to the Conferences segment.\nThe vast majority of the Q3 and expected Q4 attendee revenue is from subscription contract entitlements.\nThese are entitlements which would have been applied to in-person conferences in 2020 or in some cases in 2021.\nWe continue to refine our exhibitor offerings for virtual conferences.\nWe expect Q4 exhibitor revenue to be a much smaller part of overall conferences revenue than in the past.\nWe continue to incur costs, both in cost of services and SG&A to support virtual conferences and to be in a position to resume in-person conferences when it is safe and permitted.\nLastly, the timing of receiving conference cancellation insurance claims remains uncertain.\nSo we will not record any recoveries and expenses incurred until the receipt of the insurance proceeds.\nThird quarter consulting revenues decreased by 4% year-over-year to $89 million, on an FX neutral basis revenues declined 6%.\nConsulting contribution margin was 32% in the third quarter, up over 300 basis points versus the prior-year quarter.\nMargins were up, primarily due to cost reduction actions.\nLabor-based revenues were $74 million, down 5% versus Q3 of last year or 6% on an FX neutral basis.\nLabor-based billable headcount of 737 was down 9%.\nUtilization was 60%, up about 300 basis points year-over-year.\nBacklog at September 30th was $96 million, down 12% year-over-year on an FX neutral basis.\nOur backlog provides us with about four months of forward revenue coverage.\nAs we discussed last quarter, we had a small workforce action in the consulting business to align our billable headcount with our revenue outlook for the balance of the year.\nOur contract optimization business was down 3% on a reported basis versus the prior year quarter.\nThis compares to a 74% growth rate in the third quarter last year.\nAs we have detailed in the past, this part of the Consulting segment is highly variable.\nSG&A increased 2% year-over-year in the third quarter and 1% on an FX neutral basis.\nSG&A as a percentage of revenue increased in the quarter as we restored certain compensation and benefits costs.\nEBITDA for the third quarter was $168 million, up 20% year-over-year on a reported basis and up 19% FX neutral.\nAs I mentioned earlier, we had stronger than expected top-line performance and continue our disciplined focus on expenses.\nWe also continue to see a meaningful benefit from significantly lower than normal travel costs.\nDepreciation in the quarter was up approximately $2 million from last year, although, flat with the second quarter as a result of additional office space that had gone into service before the pandemic hit.\nAmortization was about flat sequentially.\nNet interest expense, excluding deferred financing costs in the quarter, was $29 million, up from $22 million in the third quarter of 2019.\nNet interest expense is up because our interest rate swaps had higher fixed rates from the warrants, which expired last year.\nThe Q3 adjusted tax rate which we use for the calculation of adjusted net income was 20% for the quarter.\nThe tax rate for the items used to adjusted net income was 26.4% in the quarter.\nAdjusted earnings per share in Q3 was $0.91.\nOperating cash flow for the quarter was $244 million compared to $220 million last year.\nThe increase in operating cash flow was primarily driven by cost of avoidance initiatives, partially offset by an earlier interest payment due to the refinancing.\nCapex for the quarter was $15 million, down 59% year over year.\nLower capex is largely a function of lower real estate expansion needs due to the pandemic.\nWe define free cash flow as cash provided by operating activities less capital expenditures.\nFree cash flow for the quarter was $229 million, which is up 25% versus the prior year.\nThis includes outflows of about $10 million of acquisition, integration and other non-recurring items.\nFree cash flow as a percent of revenue, or free cash flow margin was 15% on a rolling four-quarter basis, continuing the improvement we've been making over the past few years.\nFree cash flow as a percent of GAAP net income was about 285%.\nFree cash flow benefited from continued strong collections combined with reductions in outflows from our cost avoidance initiatives, lower capital expenditures and lower cash taxes and deferrals of certain tax payments.\nWhile we've seen timing benefits to our free cash flow margin from significantly lower capex and our ability to defer certain tax payments, even excluding these, LTM free cash flow margin is still up about 200 basis points versus the prior year.\nDuring the quarter, we took advantage of historically attractive high yield bond pricing and issued $800 million of new 10-year senior unsecured notes with a 3.75% coupon.\nWe use the proceeds from this new issuance to extinguish our 2025 bonds, which carry a 0.625% coupon.\nWe also amended and extended our credit facility to September 2025 with attractive financial terms, increased flexibility and fewer less restrictive covenants.\nThe overall impact of the financing activities resulted in a 50 basis point reduction to total cost of borrowing.\nThe combination of the capital market activities in the past six months has extended our debt maturity profile to nearly eight years versus less than three years pre-pandemic.\nOur September 30th debt balance was $2 billion.\nOur reported gross debt to trailing 12 month EBITDA is about 2.5 times.\nOur total modified net debt covenant leverage ratio was 2.3 times at the end of the third quarter, well within the 5 times covenant limit.\nAt the end of the third quarter, we had $554 million of cash.\nAfter pausing share repurchases at the start of the pandemic, we are in a position to resume our normal capital allocation programs.\nGoing forward, we will deploy excess cash for share repurchases and strategic tuck-in acquisitions.\nAt the end of the quarter, we had about $1 billion of revolver capacity and have around $680 million remaining on our share repurchase authorization.\nWe are updating our full-year outlook to reflect Q3 performance, a modestly better demand environment including the successful launch of virtual conferences and cost restoration plans.\nLast quarter, when updating guidance, we were cautious because we had only been through one full quarter of the pandemic and we had two quarters remaining in the year.\nWith more experience, better performance and more visibility, we have updated our guidance accordingly.\nWe now forecast research revenue of at least $3.57 billion for the full year.\nThis is growth of almost 6% versus 2019 and reflects a continuation of third quarter new business and retention trends.\nFor the Conferences segment, we are generating revenue from our virtual conferences.\nWe now expect revenue of $110 million for the full year.\nThis reflects our initial success in launching virtual conferences and virtual Evanta meetings.\nThe majority of the incremental revenue, we expect in conferences is from entitlements, included in some of our subscription contracts, as we've discussed earlier.\nWe now forecast consulting revenue of at least $370 million for the full year or a decline of about 6%.\nThe consulting outlook continues to contemplate a slowdown in labor-based demand.\nThe timing of revenue in the contract optimization business can be highly variable as you know.\nOverall, we expect consolidated revenue of at least $4.05 billion, that's a reported decline of about 5% versus 2019.\nExcluding conferences, we expect revenue growth of at least 4.5% versus 2019 on a reported basis.\nThe cost avoidance programs we put in place in March have allowed us to protect profitability and conserve cash.\nWe started to resume certain spending late in the second quarter as the operating environment appears to have at least stabilized, we want to ensure we are well-positioned for an economic normalization.\nWe expect full year adjusted EBITDA of at least $740 million, that's full year margins of about 18.3%, up from the 16.1% margins we had in 2019.\nWe expect our full year 2020 net interest expense to be $106 million.\nWe continue to expect an adjusted tax rate of around 22% for 2020.\nThis does imply a higher fourth quarter rate than we've seen throughout 2020, consistent with our experience in recent years.\nWe expect 2020 adjusted earnings per share of at least $4.07.\nFor 2020, we expect free cash flow of at least $625 million.\nOur free cash flow guidance reflects both the P&L outlook we just discussed, strong capex management and better than previously forecasted collections.\nAll the details of our full year guidance are included on our Investor Relations site.\nIn summary, despite a very uncertain economic environment we delivered better-than-planned financial results in the third quarter, which has allowed us to update our full year outlook favorably.\nMost of our key operating metrics improved in the quarter and we were able to successfully launch and monetize virtual conferences and virtual Evanta meetings.\nCash flow was outstanding and we have taken a number of measures to increase our financial flexibility, reduce maturity risk and ensure we have ample liquidity.\nWe will continue to balance cost avoidance programs with targeted investments and restoration of certain expenses, to ensure we are well positioned to rebound when the economy recovers.\n",
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"content": "q3 revenue $995 million versus refinitiv ibes estimate of $928.1 million.\nq3 adjusted earnings per share $0.91.\nraised guidance for full year as demand is tracking above our prior expectations.\nsees fy adjusted earnings per share at least $4.07.\nsees fy adjusted fcf at least $625 million.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: We appreciate your joining us today for Gartner's fourth quarter 2020 earnings call and hope you are well.\nWith me on the call today are Gene Hall, Chief Executive Officer; and Craig Safian, Chief Financial Officer.\nAll growth rates in Gene's comments are FX-neutral, unless stated otherwise.\nReconciliations for all non-GAAP numbers we use are available on the Investor Relations section of the gartner.com website.\nFinally, all contract values and associated growth rates we discuss are based on 2020 foreign exchange rates, unless stated otherwise.\nI encourage all of you to review the risk factors listed in these documents.\n2020 was an extraordinary year.\nThe COVID-19 pandemic, global macroeconomic conditions, social unrest and geopolitical changes, all pose significant challenges to enterprises around the world.\nIn this context, Gartner delivered a strong performance across contract value, revenue, EBITDA and free cash flow.\nAs many of you know, we entered 2020 with a financial plan to align cost with revenues.\nBy executing this plan and taking swift cost actions when the pandemic first began, we quickly stabilized our financial position.\nWe maintained discipline cost management throughout the year over strong investments to support future growth.\nWe've successfully pivoted our global workforce to operate effectively in a remote environment.\nWe grew our capability and key functions across our business.\nWe drove strong operational execution and we were extremely agile in serving our clients.\nPivoting our content to address critical contemporary issues such as the pandemic, remote work environments, cost optimization and business continuity.\nWe are well positioned to spring back quickly as the macroeconomic environment improves.\nOur performance improved in Q4 compared to earlier in 2020.\nWe delivered strong performances in GBS contract value, research revenues, EBITDA and free cash flow.\nResearch is our largest and most profitable segment.\nThis is a vast market opportunity across all sectors, sizes and geographies.\nOur research segment serves executives and their teams across all major enterprise functions in every industry around the world.\nWe are uniquely positioned to support leaders enterprisewide on hundreds of critically important topics.\nTopics with the highest interest during Q4 included data and analytics, cost optimization and talent management.\nGlobal Technology Sales or GTS, serves leaders and their teams within IT.\nFor the full year 2020, GTS contract value grew 4%.\nOur key underlying metrics have improved each quarter since Q2.\nFourth quarter 2020 contract value from new logos was up from a year ago, while cancels were about the same.\nOur existing clients continued to increase their spend, however it was a slower pace than in 2019.\nThis was the biggest factor impacting our growth in the quarter.\nClient engagement continue to be strong with both content and analyst interactions up 30% versus 2019.\nWe saw strong performances across several regions and industries, including tech, retail and services.\nSome of the topics with the highest interest included digital transformation, application development, cloud management and the digital workplace.\nWe expect GTS contract value growth to accelerate in 2021 and return to double-digit growth in the future.\nGlobal Business Sales or GBS, serves leaders and their teams beyond IT.\nThis includes HR, supply chain, finance, marketing, sales, legal and more.\nGBS contract value continued to perform well throughout the year with contract value growth of 7%.\nNew business growth was a very strong 26% in the quarter, driven by our GxL product line.\nThe sales, finance and HR practices all ended Q4 with double-digit growth rates.\nAnd all practices, with the exception of marketing, contributed to GBS's growth.\nAcross our entire research business, we've practiced relentless execution of proven practices, and we're seeing the results of our efforts.\nOur research business is well positioned to return to sustained double-digit growth over the medium term.\nAs many of you know, our conferences segment had great momentum coming out of 2019, but was hard hit in 2020 by the global pandemic.\nTo replace our traditional in-person destination conferences, which were no longer possible in 2020, we pivoted to virtual conferences.\nThe performance of these conferences exceeded our expectations in 2020.\nAnd now with several months experience under our belt, we've got a set of best practices that will continue to refine.\nOur value proposition for virtual conferences remains the same as for in-person conferences.\nWe deliver extraordinarily valuable insights to an engaged and qualified audience.\nBeyond personal conferences, operationally, we are preparing to return to in-person conferences in the second half of 2021.\nGartner Consulting is an extension of Gartner Research and helps clients execute their most strategic initiatives through deeper extended project-based work.\nOur consulting segment was also impacted by the pandemic with revenues down 12% in Q4 and 5% for the full year 2020.\nOver the past several years, we've made great progress in our consulting business, and it will continue to serve as an important complement to our IT research business.\nCompanywide, we continued to strengthen our stance against racism and discrimination.\nWe appointed a new leader of diversity, equity inclusion.\nWe established a Center of Excellence dedicated to improvement in this area.\nAnd we strengthened our employee resource groups, which help remove barriers for diverse populations and support associate engagements.\nSustainability is an important factor in how we manage our business.\nFor example, we've signed contracts for our Stamford headquarters and our U.K. hub to be powered by 100% renewable energy.\nWe'll be eliminating single-use plastics across our offices.\nAnd finally, we're benchmarking our environmental footprint and development programs to minimize it over time.\nSummarizing, we've performed well in the context of a pandemic.\nLooking ahead, we are well positioned for sustained growth.\nWe expect to return to revenue growth in 2021 and are on track to return to double-digit CV and revenue growth thereafter.\nWe expect to deliver 2021 EBITDA margins, up 2019 and to further expand margins over time.\nWe've generated significant free cash flow in excess of net income, which will deploy to return capital to our shareholders through share repurchases and make strategic tuck-in acquisitions.\nWith that, I'll hand the call over to Craig.\nI hope everyone remain safe and well.\nFourth quarter results were ahead of our expectations, headlined by a strong performance in GBS, better than planned cost management and outstanding free cash flow generation.\nAs our 2021 guidance highlights, we expect total revenue to increase versus 2020, while also positioning Gartner for a return to strong growth.\nLooking out over the medium term, we continue to expect double-digit CV and revenue growth, modest margin expansion and strong free cash flow generation.\nBecause we can fund growth investments, we have ample capital to return to shareholders and to deploy to strategic tuck-in acquisitions when we find the right opportunities.\nOur board authorized an additional $300 million for repurchases, bringing the total available to around $860 million.\nReviewing our year-over-year financial performance, for the full year 2020, total contract value increased 4%, total FX-neutral revenue was down 3%, FX-neutral adjusted EBITDA increased 20%, diluted adjusted earnings per share was a strong $4.89 and free cash flow was $819 million, up almost 100% from 2019.\nWe did see some timing benefits, which I will discuss a bit later.\nFourth quarter revenue was $1.1 billion, down 8% as reported and 9% FX-neutral.\nExcluding conferences, our revenues were up 2% year-over-year FX-neutral.\nIn addition, total contribution margin was 68%, up more than 580 basis points versus the prior year.\nEBITDA was $245 million, up 13% year-over-year and up 10% FX-neutral.\nAdjusted earnings per share was $1.59, and free cash flow in the quarter was a robust $237 million.\nResearch revenue in the fourth quarter grew 5% year-over-year as reported and 4% on an FX-neutral basis.\nFourth quarter research contribution margin was 72%, benefiting in part from the temporary cost avoidance initiatives we put in place starting in the first quarter of 2020.\nTotal contract value grew 4% FX-neutral to $3.6 billion at December 31.\nThis was the highest contract value in Gartner history, a notable achievement in a challenging year.\nFor the full year 2020, research revenues increased by 7%, both on a reported and FX-neutral basis.\nThe gross contribution margin was 72%, up about 240 basis points from the prior year.\nGlobal Technology Sales contract value at the end of the fourth quarter was $2.9 billion, up almost 4% versus the prior year.\nThe selling environment continued to improve in the fourth quarter, but we are still seeing less upsell with existing clients than normal.\nOur clients are staying with us, but not adding as much incremental CV as we've historically seen given the challenging economic environment.\nMoving forward, we expect win backs and a return to more expansion with existing clients to contribute to growth in 2021 consistent with our experience coming out of the last downturn.\nBy industry, CV growth was led by technology, retail and services.\nWhile retention for GTS was 98% for the quarter, down about 600 basis points year-over-year, a majority of our industry groups saw retention improve from the third quarter.\nGTS new business declined 5% versus last year, an improvement from both the second and third quarters.\nOur regular full set of metrics can be found in our earnings supplement.\nGlobal Business Sales contract value was $696 million at the end of the fourth quarter.\nThat's about 20% of our total contract value.\nCV increased 7% year-over-year.\nCV growth was led by the healthcare and technology industries.\nThe sales, finance and human resources practices, all recorded double-digit CV growth for the year.\nAll practices contributed to the 7% CV growth rate for GBS with the exception of marketing, which was impacted by discontinued products.\nThat said, our marketing business saw improving retention rates and a return to year-over-year new business growth in the fourth quarter.\nWallet retention for GBS was 101% for the quarter, down 43 basis points year-over-year.\nGBS new business was up 26% over last year, led by very strong growth in HR, finance and legal.\nAs with GTS, our regular full set of GBS metrics can be found in our earnings supplement.\nOverall, GBS continue to demonstrate its resilience and strength as we exited 2020.\nThe conferences segment was materially impacted by the global pandemic, as you know.\nDuring the year, we pivoted to producing virtual conferences with the focus on maximizing the value we deliver for our clients.\nWe held 13 virtual conferences in the fourth quarter.\nWe also held a number of virtual Evanta meetings, shifting these one day local conferences online due to the pandemic.\nConferences revenue for the quarter was $93 million.\nContribution margin in the quarter was 78%.\nOur fast transition to virtual conferences has been positive for the overall business.\nAs we discussed last quarter, virtual conferences offer significant value to our research clients and prospects.\nAnd while we've shown that we can run virtual conferences profitably, it is important to recognize the different economics associated with virtual versus in-person conferences.\nSimilar to last quarter, I'd highlight two primary differences.\nFirst, our mix of revenue from attendees and exhibitors has essentially flipped, with the in-person format approximately two-thirds of revenue comes from exhibitors and one-third from attendees.\nIn the virtual format, we've seen about two-thirds of revenue come from attendees.\nSecond, the vast majority of our attendee revenue has continued to come from research contract entitlements as opposed to incremental tickets.\nI'd also highlight that our fourth quarter destination conferences have historically been our largest most profitable conferences.\nIn 2020, we held our biggest most highly anticipated conferences of the year in the fourth quarter in a virtual format.\nFor the full year 2020, revenue decreased by 75%, both on a reported and FX-neutral basis.\nGross contribution margin was 48%, down about 290 basis points from 2019 as we maintained some of our cost of service as well as SG&A despite the lower revenue.\nWe did this to ensure we were in a position to execute our new virtual conferences and to resume in-person conferences when it is safe and permitted.\nLastly, the timing of receiving conference cancellation insurance claims remains uncertain, so we will not record any recoveries in excess of expenses incurred until the receipt of the insurance proceeds.\nFourth quarter consulting revenues decreased by 10% year-over-year to $94 million.\nOn an FX-neutral basis, revenues declined 12%.\nConsulting contribution margin was 26% in the fourth quarter, down about 160 basis points versus the prior year quarter due to lower contract optimization revenue, which usually flows through at high margins.\nLabor-based revenues were $73 million, down 10% versus Q4 of last year or 12% on an FX-neutral basis.\nLabor-based billable headcount of 730 was down 10%.\nUtilization was 63%, up about 300 basis points year-over-year.\nBacklog at December 31 was $100 million, down 14% year-over-year on an FX-neutral basis.\nOur backlog provides us with about four months of forward revenue coverage.\nOur contract optimization business was down 9% on a reported basis versus the prior year quarter.\nAs we have detailed in the past, this part of the consulting segment is highly variable.\nFull year consulting revenue was down 4% on a reported basis and 5% on an FX-neutral basis and its gross contribution margin of 31% was up 68 basis points from 2019.\nSG&A decreased 6% year-over-year in the fourth quarter.\nSG&A as a percentage of revenue was up year-over-year as we restored certain compensation and benefit costs and had significantly less revenue from conferences.\nFor the full year, SG&A decreased 3% on a reported and FX-neutral basis.\nEBITDA for the fourth quarter was $245 million, up 13% year-over-year on a reported basis and up 10% FX-neutral.\nAs we have seen improvements in the macro environment, we have resumed growth spending and started to restore some of the compensation and benefit programs, which we'd put on hold when the pandemic first hit.\nFourth quarter EBITDA benefited from several factors.\nFirst, we've continued to maintain very strong cost discipline across the company.\nSecond, we had better than planned revenue performance in research and conferences, which flowed through with very strong incremental margins.\nThird, we had planned for an increase in certain costs, such as travel, which didn't materialize due to pandemic-related shutdowns.\nAnd finally, we have been conservative in our implied fourth quarter guidance given the geopolitical uncertainty due in part to the U.S. election, rising COVID counts and a still recovering global economy.\nDepreciation in the quarter was up approximately $4.5 million from last year, including expense acceleration from facilities-related charges.\nAmortization was down about $800,000 sequentially.\nNet interest expense, excluding deferred financing costs in the quarter was $26 million, flat versus the fourth quarter of 2019.\nThe Q4 adjusted tax rate, which we use for the calculation of adjusted net income, was 25% for the quarter.\nThe tax rate for the items used to adjusted net income was 28.4% in the quarter.\nThe adjusted tax rate for the full year was 21%.\nAdjusted earnings per share in Q4 was $1.59.\nFor the full year, adjusted earnings per share was $4.89.\nEPS growth for the year was 25%.\nNote that about $7 million of equity compensation expense, which we normally would have incurred in the fourth quarter, has shifted into the first quarter of 2021.\nThat was a benefit to fourth quarter adjusted earnings per share of about $0.07.\nOperating cash flow for the quarter was $260 million compared to $83 million last year.\nThe increase in operating cash flow was primarily driven by cost avoidance initiatives, improved collections and timing of tax payments.\nCapex for the quarter was $23 million, down 57% year-over-year.\nLower capex is largely a function of lower real estate expansion needs due to the pandemic.\nWe define free cash flow as cash provided by operating activities less capital expenditures.\nFree cash flow for the quarter was $237 million, which is up about 700% versus prior year.\nFree cash flow as a percent of revenue or free cash flow margin was 20% on a rolling four quarter basis, continuing the improvement we have been making over the past few years.\nFree cash flow was well in excess of GAAP and adjusted net income.\nAdjusted for timing and one-time benefits, 2020 normalized free cash flow margin is around 13%.\nWe had a fantastic year for free cash flow, driven by the resiliency of the business, continued strong collections, disciplined cost and cash management and lower cash taxes and deferrals of certain tax payments.\nWe took a number of actions in 2020 to further strengthen our balance sheet.\nWe had two successful bond offerings and amended and extended our credit facility.\nWe reduced our maturity risk and our annual interest expense will be lower starting in 2021.\nOur December 31 debt balance was $2 billion.\nAt the end of the fourth quarter, we had about $1 billion of revolver capacity.\nOur reported gross debt to trailing 12 month EBITDA is about 2.5 times.\nAt the end of the fourth quarter, we had $713 million of cash.\nWe resumed our share repurchases after pausing earlier in the year, buying back $100 million in stock at an average price of $156 per share.\nThe board recently increased our share repurchase authorization by $300 million because we have significant capacity for buybacks from cash on hand and expected free cash flow.\nAs of February 8, we have around $860 million available for open-market repurchases.\nWe expect the board will refresh the repurchase authorization as needed going forward.\nWe will deploy excess cash for share repurchases and strategic tuck-in acquisitions.\nBefore providing the 2021 guidance details, I want to discuss our base level assumptions and planning philosophy for 2021.\nFor research, most of our 2021 revenue is determined by our year end 2020 contract value.\nAs we move through the year, we will revisit the research revenue outlook.\nOperationally, we are planning to relaunch in-person one day events in the third quarter and in-person destination conferences starting in September.\nOur guidance includes fixed costs, primarily people and marketing, related to both the full year of virtual and in-person conferences.\nWe've excluded the variable costs, primarily venue-related, associated with the in-person conferences from our guidance.\nWe've been able to run profitable virtual conferences in 2020, and that is reflected in our 2021 guidance.\nIf we are able to run in-person conferences, we expect incremental upside to both our revenue and profitability for 2021.\nThe economics in 2021, even in a partial in-person year, won't be fully back to normal.\nAs we get closer to the go-no-go decision point, we'll provide additional insight to sizing the incremental revenue and profits.\nFor consulting revenues, the compares get easier as we move through the year.\nWe have more visibility into the first half based on the composition of our backlog and pipeline as usual.\nFor expenses, we have planned for the full reinstatement of benefits that were either canceled or deferred in 2020.\nThis includes our annual merit increase and certain other benefits.\nWe are also returning to growing our sales forces, with planned quota-bearing headcount growth in the high-single-digits for both GTS and GBS.\nWe have also planned for several additional programs, including technology investments.\nThe impact of most of these expense restorations or investments impact our P&L, starting in the second quarter.\nAs you know, travel expense was close to zero from April through December.\nOur current plans assume a modest ramp up in travel-related expenses over the course of 2021.\nMost of this ramp is built into the second half of the year.\nIf travel restrictions remain in place for longer than we've assumed, we'd see expense savings.\nOur guidance for 2021 is as follows.\nWe expect research revenue of at least $3.815 billion, which is growth of at least 5.9%.\nWe expect conferences revenue of at least $160 million, which is growth of at least 33%.\nWe expect consulting revenue of at least $390 million, which is growth of at least 3.6%.\nThe result is an outlook for consolidated revenue of at least $4.365 billion, which is growth of 6.5%.\nBased on current foreign exchange rates and business mix, the consolidated growth includes an FX benefit of about 200 basis points.\nWe expect full year adjusted EBITDA of at least $760 million, which is a decline of about 7% and reported margins of at least 17.4%.\nThis is based on conferences running virtual only.\nWe expect our full year 2021 adjusted net interest expense to be $102 million.\nWe expect an adjusted tax rate of around 22% for 2021.\nWe expect 2021 adjusted earnings per share of at least $4.10.\nFor 2021, we expect free cash flow of at least $630 million.\nThis is before any insurance proceeds related to 2020 conference cancellations.\nIt is also important to note that we have revalued our contract value at current year FX rates, which had a modest overall impact.\nOur 2020 ending contract value at 2021 FX rates is $2.9 billion for GTS and $706 million for GBS.\nDetails are included in the appendix of the earnings supplement.\nAll the details of our full year guidance are included on our Investor Relations site.\nFinally, we expect to deliver at least $200 million of EBITDA in Q1 of 2021.\nIn summary, despite an unfavorable economic environment, we delivered better than planned financial results in 2020.\nWe had outstanding free cash flow and strong EBITDA.\nWe strengthened our balance sheet and moved quickly to implement cost avoidance initiatives, while still investing for future growth.\nWhile there is still uncertainty in the macro outlook, our contract value held up better than in the last downturn.\nWe were able to launch and monetize virtual conferences and virtual Evanta meetings.\nWe will continue with targeted investments and restoration of certain expenses to ensure we are well positioned to rebound when the economy recovers.\nAs I mentioned at the start of my remarks, looking out over the medium term, we continue to expect double-digit CV and revenue growth, modest margin expansion and strong free cash flow generation.\nBecause we could fund growth investments, we have ample capital to return to shareholders through our buyback programs and to deploy to strategic tuck-in acquisitions when we find the right opportunities.\n",
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"content": "compname posts q4 adjusted earnings per share $1.59.\nq4 revenue $1.1 billion versus refinitiv ibes estimate of $1.07 billion.\nq4 adjusted earnings per share $1.59.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Today we will be reviewing our third quarter 2020 financial result, and providing investors with an update on our transformation and our response to the COVID-19 pandemic.\nFurther information can be found in our SEC filing.\nThrough their persistence and hard work, we successfully balanced lower sales by making durable changes to minimize cost.\nWe found innovative ways to engage with our customers and we kept our transformation plans on schedule.\nWe also overcame unprecedented global supply chain constraints, which was also challenging and improved tremendously since the early stages of the pandemic.\nIn addition, our pipeline of new products continues unabated with products that deliver innovative clinical solutions that are expected to drive incremental sales growth.\nTaken all together, these actions should result in long-term improvements to our business since a public company forward it depend on its result.\nWe're pleased with our performance in the third quarter, achieving our 12th consecutive quarter of year-over-year improvement in adjusted EBITDA.\nAs guided, we delivered higher consolidated sequential net sales, driven by a double-digit increase in Europe as a result of the initial easing of public healthcare restrictions, primarily in France and Germany, with the U.K. still remaining fairly closed.\nWe continue to monitor our key markets and the potential impact on our business and believe we're prepared for the pandemic to sporadically recur during the winter months.\nIn North America, we saw a continued strength in respiratory products, offsetting diluted sales in mobility and seating products due to its longer quote order cycle, which we'll cover in more detail on later slides.\nOn the balance sheet, we retired a significant majority of the 2021 convertible notes, leaving just over $1 million maturing in February of next year.\nFinally, our strong performance in the third quarter and our visibility into trends during the fourth quarter give us the confidence to raise our full year guidance for net sales and adjusted EBITDA.\nTurning to Slide four.\nIn the third quarter, we delivered stronger operating income, both year-over-year and sequentially, continuing our track record of enhancing profitability.\nAdditionally, adjusted EBITDA improved year-over-year and grew nearly 50% sequentially, driven by higher net sales and lower SG&A expenses.\nI'm pleased with our strong performance in this challenging environment, which demonstrates that our prior transformation initiatives are successfully driving improved results in line with expectations.\nTurning to Slide five.\nThis is a chart we found helpful to depict the impact of the pandemic on our product lines over the past few quarters.\nAs expected, we continue to see above normal demand for our respiratory products, specifically stationary oxygen concentrators, which are used as an essential part of COVID-19 care.\nWith 95% of our sales in Northern Hemisphere, we anticipate continued elevated demand as winter weather forces more people indoors with pandemic blues occurring as a result.\nIn our lifestyle category, we returned to more normal sales levels, having passed peak surge demand for bed and related products for pandemic care.\nProduct mix shifted toward at-home care away from normally higher levels of institutional sales that have been lower due to limited access to long-term care facilities and lower admissions of new residents.\nIn mobility and seating, we saw a general recovery in demand more immediately in Europe, which went from very strict measures to more normal healthcare access.\nAs a result, reported net sales in Europe improved over 38% sequentially, although still lower than third quarter 2019.\nWe saw a similar type of recovery in North America in the form of higher quote volumes in the third quarter, which we anticipate will lead to increase sales through the end of the year.\nGlobally, we continue to launch an exciting full line of new products in all categories that will continue to drive customer interest and sales regrowth overall.\nWe'll be ready to react to regional pandemic outbreak and related public healthcare measures, which we expect to sporadically affect sales, although not to the same extent as we experienced earlier this year.\nWe're pleased with the sequential improvement in consolidated net sales and believe this may be an early indicator that markets are beginning to recover.\nTurning to Slide six.\nOur solid third quarter results reflect the hard work the team has put into transforming the company.\nWe delivered year-over-year and sequential improvement in operating results, and we expect this trend to continue as sales accelerate.\nAs we close 2020, we remain on track with our key business initiatives.\nIn North America, our IT modernization program is expected to launch in the first phase of go live during the fourth quarter.\nAs the new and improved system rolls out across the region, these advanced systems should help us better engage with our customers with tools to improve the efficiency of our associates and optimize working capital.\nCustomers would be able to use a more typical set of e-commerce tools we've all come to expect in our personal life.\nThis more intuitive platform will advance our growth, and I'm excited about the many benefits the program we will provide both internally and externally.\nIn addition, our German plant consolidation remains on track for completion in 2020.\nThis consolidates operations across Germany and is expected to generate approximately $5 million in annual cost savings beginning in 2021.\nUnderscoring the strength of our innovation culture, we were honored to have received awards in many categories for product excellence from a broad North American industry publication, including for our standing power wheelchair system and our SMOOV power add-on product.\nIn addition, we were recognized by an expert rehabilitation organization for our contribution to the advancement in assistive technology rehabilitation engineering.\nThese awards speak volumes about our associates who are developing great solutions for complex healthcare needs.\nIn summary, we overcame multiple challenges during the quarter to drive sequential improvements in operating results and took actions to reduce total outstanding debt.\nAt the same time, we made good progress in our key transformation initiatives to optimize the business and we launched several new products.\nWe look forward to an equally successful fourth quarter to close out the year.\nTurning to Slide eight.\nReported net sales declined 10.1%, primarily due to lower sales of mobility and seating and lifestyle products, partially offset by growth in respiratory products.\nGross profit was lower by 40 basis points to 28.3% due to unfavorable manufacturing variances as a result of the lower sales volume.\nTo offset this, we were able to drive constant currency SG&A down 12.5% or $7.8 million through reduced employment cost, lower commercial expenses and favorable foreign exchange.\nAs a result, operating income improved by 21.2% or $500,000 and adjusted EBITDA was $9.8 million, up 2.5%, including the benefit of reduced SG&A expenses.\nFree cash flow usage was $1.8 million, unfavorable to the third quarter 2019 by $14.1 million due to working capital needed to support operating activities.\nTurning to Slide nine.\nSequentially, reported net sales increased 8% and constant currency net sales increased 4.3%, driven by higher sales of mobility and seating products, including a 30% increase in Europe.\nGross profit was lower by 60 basis points to 28.3% due to unfavorable manufacturing variances as a result of lower sales volume and the expected mix of lower acuity products as elective care resumed.\nConstant currency SG&A decreased 6% or $3.4 million, driven by lower stock compensation expense, which is typically higher in the second and fourth quarters of the year.\nOperating income improved by $5.2 million, and adjusted EBITDA improved 48.7% or $3.2 million, driven by higher net sales and lower SG&A expenses.\nFree cash flow usage was comparable to the second quarter due to the benefit of higher profitability and lower inventory.\nAs a result of lower net sales and higher working capital as compared to the third quarter 2019, we did not experience the same pattern of seasonality in free cash flow as we have historically.\nTurning to Slide 10.\nWe experienced stronger sales of mobility and seating products, particularly in Europe.\nLifestyle products continue to be impacted by limited access to long-term care facilities, while demand for respiratory products remained high.\nI will discuss the product lines in more detail within each segment.\nTurning to Slide 11.\nAs a result of the initial easing of public healthcare restrictions, constant currency sequential net sales increased by 8%, driven by a 30.4% increase in sales of mobility and seating products, reflecting an early rebound in demand, particularly in France.\nWe are beginning to see positive momentum in sales in our key countries of France and Germany, although the U.K. remains under relatively significant restrictions, as Matt mentioned earlier.\nGross profit was 230 basis points lower due to the reduced net sales and unfavorable manufacturing variances, both impacted by the pandemic, which affected sales volume and product mix.\nOperating income was lower by $3.8 million due to reduced gross profit from lower net sales, partially offset by actions reducing SG&A expenses, such as furloughs and reduced work hours.\nMoving to Slide 12.\nNorth America remained resilient, demonstrated by both year-over-year and sequential improvement in net sales.\nConstant currency net sales increased 1.2%, with growth in respiratory products partially offset by lower sales of mobility and seating and lifestyle products.\nAs a result of the longer quote to order cycle for mobility and seating products in the U.S., lower sales in the third quarter were a direct result of lower quote activity in the preceding quarter when access to healthcare professionals and clinicians was limited.\nSequentially, constant currency net sales of mobility and seating products increased 0.2%.\nWe believe that demand for mobility and seating products are largely nonperishable, as evidenced by significant higher quotes in the third quarter, which are expected to convert into stronger sales for the remainder of the year.\nGross profit increased 170 basis points or $2.6 million, driven by higher net sales and lower material and freight costs from prior transformation initiatives, partially offset by unfavorable variances and higher warranty expense.\nOperating income was $3 million, an improvement of $4.7 million, driven primarily by actions which lowered SG&A expense.\nTurning to Slide 13, all other, which includes the sales of the Asia-Pacific region, decreased by 3.1% on a constant currency basis, driven by lower sales of mobility and seating products, partially offset by higher sale of lifestyle products.\nOperating loss increased by $500,000 due to lower operating profit as a result of the dynamic control divestiture in the first quarter 2020 and improved $1.6 million sequentially, primarily driven by lower stock compensation expense.\nMoving to Slide 14.\nAs of September 30, 2020, the company had total debt of $273 million, excluding operating and finance lease obligations.\nAs of September 30, 2020, the company had $87 million of cash on its balance sheet, which was sequentially lower, primarily as a result of proactively repurchasing $24.5 million of convertible notes in the third quarter.\nWe are pleased to have retired the significant majority of these notes, which increased our financial flexibility, reduced ongoing interest expense and leave a balance of less than $1.3 million maturing in February of 2021.\nWe remain confident that our balance sheet will support us through the transformation.\nAnd as always, we continue to assess opportunities to further optimize our capital structure.\nTurning to Slide 15.\nAs a result of the sequential improvement in business performance achieved in the third quarter and our visibility into the fourth quarter, we are updating our full year guidance for 2020.\nThe company anticipates consolidated net sales to improve sequentially in the fourth quarter 2020, but remain lower than the fourth quarter last year based on continuing access to healthcare facilities without new public health restrictions and from the adoption of new products.\nWhile the markets are expected to continue to remain open, pandemic-related closures may vary in regions over the winter months.\nFor the full year 2020, the company now expects reported net sales of at least $840 million, up from the previous range of $810 million to $840 million, driven by the expected recovery of sales based on the recent trends we've seen in the early part of the fourth quarter.\nAdjusted EBITDA in the range of $28 million to $32 million, up from the previous range of $27 million to $30 million due to the benefit of prior transformation actions and our continued ability to optimize cost.\nAnd free cash flow usage in the range of $8 million to $12 million, changed from the previous range of 7% to 10%, given the timing of the recognition of sales during the fourth quarter delaying the collection of cash into the first quarter of 2021.\nSo far, 2020 has been a year like no other.\nIt's impossible to overuse the word unprecedented as the pandemic has impacted almost every aspect of our daily lives, yet while we were still able to achieve year-over-year improvement in our operating results despite those continuing challenges.\nOver the company's recent history, we faced adversity and we've always been up to the task.\nOur transformation initiatives will drive our return to profitability and create a stronger, more agile organization, which will unlock further shareholder value.\nWe're already seeing the results of the diligent work.\nWe know there's plenty more progress to be made ahead of these challenges.\nI believe it's even stronger, and I'm confident in our continued progress.\nWe'll now take questions.\n",
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"content": "increases full year 2020 guidance for net sales and adjusted ebitda.\nsees fy 2020 reported net sales of at least $840 million, up from previous range of $810 to $840 million.\nsees fy 2020 adjusted ebitda in the range of $28 to $32 million, up from previous range of $27 to $30 million.\nsees fy 2020 free cash flow usage in the range of $8 to $12 million, changed from previous range of $7 to $10 million.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Today we will be reviewing our third quarter 2021 financial results and providing investors with an update on our full-year outlook.\nFurther information can be found on our SEC filings.\nActual future results may differ materially from those expressed in our statements today due to various uncertainties.\nStarting on slide three, I'm pleased to announce that we achieved constant currency net sales growth of 2.9% with increases in all key product categories despite continuing global supply chain challenges.\nRevenue growth was led by solid performance in Europe and Asia-Pacific and North America realized growth in mobility & seating and respiratory products appeared with strong new order intake, we continue to experience higher than typical backlog levels across all product categories compared to pre-pandemic levels, which is expected to drive sequential sales growth in the fourth quarter.\nAs always, we're working diligently to maximize our throughput and improve our service levels to better support our customers' needs.\nTurning to gross profit, we've benefited from sales growth and favorable sales mix with higher gross profit on lower percentage of sales.\nGross margin was impacted by previously disclosed changes to input costs ahead of offsetting price adjustments.\nWe view these challenges as transitory and during the quarter we undertook actions to address them which I'll discuss more in detail in the next slide.\nTo support existing levels of demand and expected sales growth, free cash flow usage increased as a result of greater investment in working capital, specifically inventory, which Kathy will discuss later.\nOverall, our third quarter sales results were in line with expectations with solid revenue growth year-over-year in all major product categories.\nTurning to slide four, we expect to finish the year on a strong note, while we anticipate global supply chain challenges to persist in the near-term, the disruptions are generally more predictable, and the actions we've taken should mitigate some of the remaining uncertainty.\nIn addition, our customers continue to demonstrate strong demand for our products even though access to healthcare has not fully rebounded from pre-pandemic levels.\nAs mentioned previously, we're taking action to mitigate the supply chain challenges which impacted sales and gross margins.\nFor example, we expanded our network of freight providers for more timely shipments, we found ways to improve staffing levels to increase throughput, and we have further increased inventory to mitigate supply chain uncertainties.\nIn addition, we continue to adjust price and freight charges were applicable to offset the substantially higher material and logistics costs we continue to experience.\nWell still early in the fourth quarter, we're seeing positive signs that our actions should be effective.\nAs we work through these near-term challenges, we're also marching forward with the next phase of our IT modernization Initiative in North America.\nI'm pleased to share that the program took a big step forward following the launch of our new e-commerce platform, which has features to enhance the customers experience and to improve the ease of doing business with Invacare.\nIn 2022, we expect to launch the next phase in North America, which will focus on driving operational efficiencies, lowering costs and improving working capital management.\nTurning to sales, demand remains strong and we continue to see solid order rates in all regions and product categories.\nAs we grow revenue, our order backlog has also continued to increase.\nIn the third quarter, product availability in our targeted inventory strategy were key factors in driving strong sales growth in both Europe and Asia-Pacific.\nSpecific material shortages, limited some of lifestyle product availability in North America balancing overall results.\nAll things taken together, we expect fourth quarter will improve in all key metrics with sequential constant currency net sales growth, driving substantially higher profitability and free cash flow.\nWe believe the progress we have made sets us up for a strong finish to the year and continued improvement in 2022.\nTurning to slide six, reported net sales increased 5.8% and constant currency net sales increased 2.9% in line with our quarterly guidance, and driven by growth in all key product categories, sales growth was the result of continued strong order intake, and the conversion of a portion of the excess backlog from the second quarter of 2021.\nGross profit increased $300,000 and benefited from net sales growth and favorable sales mix.\nHowever, gross profit as a percentage of sales declined 140 basis points.\nAs previously discussed, gross margin continued to be impacted by global supply chain related challenges and labor shortages resulting in elevated manufacturing costs for the quarter.\nWe expect many actions we have undertaken to mitigate these higher costs to become effective and benefit margins in the fourth quarter of '21.\nConstant currency SG&A expense decreased primarily related to lower employee related costs, including stock compensation expense.\nTo drive profitability, we continue to align commercial expenses with net sales growth and monitor all discretionary spending.\nOperating loss excluding the goodwill impairment charge was $3.8 million, an improvement of $900,000 from the third quarter of 2020.\nThis improvement was driven by sales growth and lower restructuring costs.\nIn the third quarter of '21, the company recorded a one-time non-cash charge related to an impairment for Goodwill of $28.6 million.\nThe company's reporting units for Goodwill assessment North America HMV, and the Institutional Products Group merged into one reporting unit as a result of changes to the operating structure of the North America business and the implementation of a new enterprise resource planning system at the end of the quarter.\nThis change was considered a triggering event and required the company to perform an interim goodwill impairment test.\nAdjusted EBITDA was $18.1 million, an increase of $8.3 million primarily attributable to $10.1 million of CARES Act benefit, and net sales growth partially offset by higher supply chain costs.\nExcluding the CARES Act benefits, adjusted EBITDA for the third quarter was $8 million.\nNote that the CARES Act benefit was and is not considered in the company's full-year 2021 guidance for adjusted EBITDA.\nFree cash flow usage for the quarter reflects an investment in working capital, including $10.1 million of additional inventory as compared to the second quarter of '21.\nAs previously disclosed, the company increased inventory levels to mitigate supply chain disruptions and to prepare for expected sequential sales growth in the fourth quarter.\nWe anticipate that inventory levels and accounts receivable will remain elevated at year-end and convert to cash over the next few quarters.\nTurning to slide seven, reported net sales in all key product lines improved despite supply chain challenges, which continued to limit the conversion of orders to revenue.\nWe continue to see strong demand in all product categories and in all regions, which resulted in excess order backlog that was higher than typical compared to pre-pandemic levels and similar to the end of the second quarter.\nWe're working diligently to reduce the excess backlog and return our service levels back to more normal lead times.\nOn a consolidated basis, constant currency net sales of Lifestyle products grew 5.2% driven by exceptionally strong sales of manual wheelchairs and hygiene products in Europe.\nMobility & seating products also achieved constant currency net sales growth in North America and Asia Pacific.\nIn addition, we continue to see elevated demand for respiratory products globally related to the pandemic.\nTurning to slide eight, Europe constant currency net sales increased 4.5% driven by more than 17% growth in lifestyle products as a result of heightened demand for products that were readily available, demonstrating the importance of our targeted inventory strategy.\nWhile respiratory demand remained strong, fulfilling that demand has been hindered by the availability of components to complete orders.\nGross profit increased $3.2 million, and gross margin increased 20 basis points driven by net sales growth and favorable product mix partially offset by higher freight costs and supply chain disruptions.\nAs Matt mentioned, we have taken actions to mitigate the impact of these additional costs and expect to see benefits starting in the fourth quarter.\nOperating income benefited from SG&A leverage and increased by $2 million, driven by higher gross profit from revenue growth.\nTurning to slide nine, North America constant currency net sales decreased slightly, a 7% increase in mobility & seating and an over 6% increase in respiratory products was more than offset by lower sales of lifestyle products.\nHigher sales of mobility & seating products was driven by power wheelchairs and power add-on products.\nThe lifestyle product category was impacted by supply chain issues limiting the availability of materials and components in particular for bed.\nIn addition, access to institutional and government customers' remains limited compared to pre-pandemic level.\nThat said, overall, we continue to see increased customer interest in all products and strong order intake.\nGross profits declined by $2.8 million and gross margin declined 80 basis points due to unfavorable operating variances as a result of supply chain challenges, partially offset by favorable product mix.\nOperating loss of $1.5 million was impacted by reduced gross profit and higher SG&A expense, the latter of which came primarily as a result of spending supporting revenue growth.\nAs noted the goodwill impairment charge previously discussed is not included in the operating results for North America.\nTurning to slide 10, constant currency net sales in the Asia Pacific region increased 17%, driven by significantly higher sales of respiratory products, and an over 15% increase in mobility & seating products.\nSales rebounded in the Asia Pacific region as a result of receiving products delayed from the second quarter, which had been impacted by global shipping issues.\nOperating loss improved by $2.2 million, driven primarily by lower corporate SG&A expense, including reduced stock compensation expense.\nThis was partially offset by lower profitability in the Asia Pacific region impacted by higher material and freight costs as well as higher SG&A expense.\nMoving to slide 11, as of September 30, 2021, the company had total debt of $318 million, excluding financing and operating lease obligations, and $74 million of cash on the balance sheet.\nLower cash balances are primarily related to higher levels of working capital, which we anticipate will remain elevated through the end of the year.\nAs part of the company's strategy to mitigate supply chain challenges and to prepare for expected sales growth, the company added $10.1 million of incremental inventory in the quarter, which is expected to convert to cash over the next few quarters.\nIn the third quarter of 2021, the company received forgiveness of its CARES Act that obligation of $10.1 million of principal and accrued interest.\nTurning to slide 12, we are reaffirming our full-year guidance for 2021 consisting of constant currency net sales growth in the range of minus 1% to positive 2%.\nAdjusted EBITDA in the range of $30 million to $37 million, and free cash flow usage in the range of $10 million to $20 million.\nAs previously mentioned, full-year adjusted EBITDA guidance does not include the CARES Act benefit recognized in the third quarter.\nFor the fourth quarter, the company anticipates sequential improvement and constant currency net sales growth driven by continued strong order intake and the conversion of a portion of its elevated backlog into revenues.\nWe expect the actions we have taken to support sales growth and manage near-term supply chain challenges will drive sales growth, favorable sales mix and expand gross margin.\nAs a result, adjusted EBITDA and free cash flow are expected to improve materially.\nTurning to slide 13.\nWe're pleased that our third quarter results reflect constant currency net sales growth.\nWe anticipate the actions we have taken will enable us to finish the year on a strong note and instill confidence that we will achieve our full-year guidance.\nLooking further ahead, I'm confident that the durable benefits from our recent actions and our capable team will allow us to drive sustainable profitable growth in 2022 and beyond.\nWe'll now take questions.\n",
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"content": "full year 2021 financial guidance reaffirmed.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: Today we will be reviewing our fourth quarter and full year 2020 financial results and providing investors with an update on our transformation.\nFurther information can be found in our SEC filings.\nLet's begin on Slide 3.\nWe started 2020 enthusiastic for a strong year of commercial execution, launching new products and continuing to simplify our business.\nI'm pleased that despite the unforeseen pandemic challenges, we still managed to do all of those things and achieved remarkable results.\nFor the full year, we delivered higher profitability at lower net sales, while expanding gross margins and reducing SG&A expense.\nWe also achieve breakeven cash flow by prudently managing working capital with a special emphasis on reducing inventory.\nAt the same time, we strengthened our financial flexibility by retiring debt and extending the maturity of a significant portion of convertible notes.\nIt was another great year of new products.\nOur innovation team added great new products expected to drive incremental sales and improved profitability.\nWe also manage through challenging global supply chain disruptions and took steps to optimize our manufacturing network.\nWe did this while quickly adapting to a new work environment to safety measures for our associates and creative ways to engage our customers.\nOur ability to conduct virtual training and support our customer's non-contact clinical assessment and the unique ability of many of our products to perform remote programing and diagnostics really put us ahead.\nFor the best of best of these to widen our competitive advantage in the future.\n2020 has made our business stronger.\nInvacare participates in durable, healthy markets and serves a persistent need for its products with a tremendous opportunity to grow by commercializing new products and servicing pent-up demand for purchases.\nWe continue to simplify the business, so we can better serve our customers and make transactions easier.\nAt the same time, we have a great team of people, working to drive efficiency and financial performance.\nAfter strong results in a challenging 2020, I have even more confidence about the bright future ahead of us.\nOn Slide 4, you'll see the fourth quarter, we delivered stronger operating income with a substantial increase in free cash flow.\nThis was the result of overall good sales performance, cost containment measures and less restructuring in the period.\nAs guided, in the fourth quarter, we achieved improvement in sequential consolidated net sales of 5.7%, in constant currency sequential net sales increased by 4.2%, driven by continued strength in respiratory products, increased sales of lifestyle products and growth in North America mobility and seating.\nThese results were consistent with our expectations about the lessening of pandemic restrictions in the periods.\nCompared to prior year, operating income increased by $5 million and free cash flow increased by nearly $12 million.\nI'm pleased with the continued progress in the business and the improved financial results achieved during the quarter.\nTurning to Slide 5, with fourth quarter, adding to the strong results from the three prior quarters, full-year operating income increased by $21.7 million and adjusted EBITDA grew by over 11% to nearly $32 million.\nDuring the year we launched new products, improved gross profit margin and effectively managed SG&A expense to achieve these results.\nImportantly, after years of improvements, North America returned to profitability with more than $17 million increase in operating income and modest growth in constant currency net sales.\nAs mentioned previously, we generated breakeven free cash flow as a result of prudent working capital management.\nI'm pleased with the significant improvement in our key metrics.\nThis demonstrates our strategic initiatives are working and that we have built a strong business foundation.\nAs demonstrated on Slide 6, having a full pipeline of compelling new products with meaningful innovation is at the core of our growth strategy.\nIn 2020, our innovation and commercial efforts continued unabated.\nWe launched new power wheelchair products in adults and smaller sizes, active manual, passive manual and Bariatric wheelchairs, folding compact power wheelchairs, power add-on beds, lifts and hygiene products.\nIt was really a great year, adding to our portfolio, which will help us find more ways to engage with clinicians, and help them engage with end users looking for the latest solutions for independence and great healthcare aids.\nIn 2020, we also introduced the Pico Green product line, the first shower chair made using renewable materials from sustainable products and which eliminates 99% of surface bacteria, particularly maintaining a safer patient environment.\nThese products come in many varieties and will help us engage with customers to provide better solutions for 24 hours of care.\nThis is the kind of pipeline we expect to continue in the future.\nAlso in 2020, we completed the previously announced structural business improvements.\nWe outsourced all of our IT infrastructure and began deploying our modernized IT system in the first stage in Canada and New Zealand.\nWe're pleased with the system's new functionality and look forward to using these new systems to improve our customers' experience transacting with us, and to providing our associates with modern tools to simplify their work and improved results.\nAdditionally, in December, we successfully completed the German plant consolidation, which is anticipated to generate approximately $5 million in annual cost savings, starting in 2021.\nIn 2021 we'll turn our attention to further optimizing operations and our manufacturing facilities, into working with our logistics partners, which should further improve results.\nIn summary, 2020 was a good year in both results and from fundamental improvements that will help us grow and improve in the future.\nOn Slide 7, I'd like to take a brief moment to address how our ESG initiatives support our mission and enhance shareholder value.\nAt our core, Invacare is a company focused on our mission of inclusion.\nAfter all our products are designed to maximize the person's independence and to help people achieve the best lifestyle and outcome in any setting they choose.\nOur business results are what we do every quarter and ESG guides us on how we achieve -- as an employer and community number, it's important for us to align our mission-driven purpose that yields great healthcare solutions for people and to do that in a way that engages all of us that work with us.\nThree years ago we began a concerted effort to ensure Invacare is a responsible environmental steward, with employment practices and community outreach that engage with us.\nYou can see the areas we're focused on to leverage our efforts to reduce waste, consume energy responsibly and engage with social purpose.\nTurning to Slide 9, during the fourth quarter, while constant currency net sales decreased compared to the prior year, revenues increased sequentially as healthcare restrictions began to loosen.\nDuring the early days of the pandemic, there was no playbook and now every day we learn how to be more effective in this new environment.\nWe achieved a higher gross profit margin, both year-over-year and sequentially, despite continued supply chain challenges with the benefit of previous initiatives and product mix.\nTo offset lower sales, we took actions to reduce SG&A expense and improved operating income by $5 million.\nAs we will discuss later, some of the reduction in SG&A expense was a result of lower sales and related business activities.\nHowever, of the available actions we implemented, many of them are durable.\nThat said, as revenue grows back, we expect that selling expenses like commissions will return, but this is a good thing and will allow us to scale against our SG&A expense.\nAt the end of the year, free cash flow was helped by the increase in third quarter sales that were collected in the fourth quarter.\nIn addition, our colleagues around the globe were diligent in managing down inventory, which peaked in the second quarter as sales declined faster than fulfillment levels could be reasonably adjusted.\nI am pleased with how quickly we were able to adapt.\nTurning to Slide 10, while the pandemic had little to no impact on sales in the first quarter, by late March to early April the whole world had gone into a simultaneous and hermetic shutdown, which lasted throughout mid-summer.\nAccess to healthcare was oftentimes limited to only pandemic related or urgent care, with elective care suspended or delayed.\nAs a result, consolidated net sales declined significantly in the second quarter and have continued to improve throughout the year, but have not yet returned to pre-pandemic level.\nEach of the product lines was impacted differently, which I'll address in more detail on the next slide.\nDespite lower revenues, gross profit as a percentage of sales improved by 60 basis points, due to favorable sales mix and prior actions taken to expand margins.\nAs mentioned previously, we executed both temporary and durable actions to reduce SG&A expense to match the lower sales level.\nAs a result in 2020, we managed to grow operating income, reversing course from an operating loss in 2019, a significant turnaround in results.\nIn addition, adjusted EBITDA improved over 11% from 2019 and free cash flow exceeded our expectations.\nTurning to Slide 11, as Matt discussed in the previous two quarters, the pandemic had a different impact on each one of our product lines.\nMobility and Seating product sales began to see early signs of recovery as consolidated sequential net sales improved modestly.\nNorth America's sequential sales growth of 3.3%, was more than offset by weakness in Europe as more stringent public health restrictions imposed during the fourth quarter continued to limit access to our customers and end users.\nAs our products mainly serve chronic conditions, we believe these sales are generally non-perishable and these delayed sales will be fulfilled in 2021.\nOur new Mobility and Seating products are beginning to contribute as well, and we expect their contributions in 2021 to help lift the category even higher.\nLifestyle Products grew sequentially, driven by Europe, with strong demand in all product categories, primarily bed and bed related products.\nRespiratory, which continue to experience elevated demand globally, increased by over 75% compared to the prior year, and also grew sequentially, driven by sales of stationery oxygen concentrators used for the COVID-19 response.\nGlobal supply chain issues that were almost insurmountable during the second quarter have improved considerably, but still impact our ability to meet the outsized demand.\nWe continue to experience global demand in excess of our ability to supply, currently impacted by transportation and logistics delays.\nTurning to Slide 12, Europe constant currency net sales during the fourth quarter decreased compared to the prior year, as growth in respiratory was more than offset by lower sales of Mobility and Seating and Lifestyle products.\nSequentially, reported net sales increased 10.8%, driven by increases in Lifestyle and Respiratory products.\nEurope continues to be impacted by more recent pandemic related measures, which may limit our end users ability or willingness to obtain healthcare, although our customers generally remain open.\nAs a result of the lower sales both gross profit and operating income declined, and we incurred unfavorable manufacturing variances from the lower volume.\nFor the full year, although we saw sequential improvement in net sales in both the third and fourth quarter, overall sales were limited by the pandemic.\nHistorically, the second half of the year is seasonally stronger due to higher sales of Mobility and Seating products, primarily scooters in Europe, which are popular during the warmer months.\nStrict health restrictions in many of our key markets dampened sales as our end users had limited opportunity to enjoy being outside or travel freely.\nAs a result, we saw the same impact on gross profit and operating income for the full year as we did in the fourth quarter.\nTurning to Slide 13.\nIn North America we achieved higher constant currency net sales in both the fourth quarter and the full-year, driven by two primary factors.\nFirst, we saw a tremendous growth in sale of respiratory products primarily stationary oxygen concentrators.\nNot only did we see higher unit volumes, we also realized a favorable mix shift toward higher acuity products.\nAlthough, sales increased significantly, fulfilling these orders was not easy.\nWe had to battle multiple global supply chain challenges early on when our suppliers were closed due to not being deemed essential businesses, had difficulties assembling our workforce and inefficiencies driven by the scarcity of transportation and logistics.\nWhile most of these issues have resolved themselves, we feel an impact today.\nThe second factor is that the individual states in the U.S. never fully shutdown cohesively as the countries in Europe.\nAs long-term care facilities closed their doors to new residents, we saw a shift toward home healthcare, an area where we have a strong presence.\nWith improved sales, we were able to expand gross profit, which improved 510 basis points for the quarter and 260 basis points for the full year.\nThis was largely driven by favorable sales mix and lower freight and material costs.\nImportantly, operating income improved by $4 million for the quarter and by $17 million for the year, as we realize the benefit of transformation initiatives, which return the segment to profitability.\nI'd like to commend the team on all their hard work, which led to such great results.\nTurning to Slide 14, we made great progress in Asia-Pacific, as constant currency net sales improved year-over-year and sequentially.\nIn the fourth quarter, constant currency net sales increased 16.2%, driven by all product categories with a nearly 36% improvement in mobility and seating sales.\nSequentially, reported net sales increased 11.5%, driven by mobility and seating sales.\nOperating loss for all other improved, driven by higher operating profit in the Asia-Pacific business and decreased SG&A expense related to corporate stock compensation expense.\nMoving to Slide 15.\nAs of December 31, 2020, the company had approximately $273 million of total debt and approximately $105 million of cash on its balance sheet.\nIn 2020, we took proactive steps to improve our financial flexibility by retiring approximately $25 million of convertible notes in 2021.\nIn addition, we extended the debt maturities to November of 2024 of a significant portion of our convertible notes, which were due in 2021 and 2022.\nAs a result of these actions, the remaining balance of $1.3 million of the 2021 notes will be settled in cash this month.\nAs always, we will continue to assess opportunities to further optimize our capital structure.\nLet's shift from talking about strong results in 2020 and talk about the future as we provide our outlook for the company's expected performance in 2021.\nWe now know so much more about operating in a pandemic and we anticipate it's going to have a heavy influence in 2021, both in restricting access to healthcare and affecting supply chain and logistics, much like it did in 2020.\nWe also have a view on improvements we're going to make in 2021 to make another great year.\nOn Slide 16, we show guidance with expected operating results for the full year 2021 to consist of the following.\nConstant currency net sales growth in the range of 4% to 7%, we're giving a range of revenue, reflecting good growth over 2020 with the range providing for variations in sales by product line and in key markets depending on how the pandemic unfolds.\nGiven these assumptions, this is expected to result in a 41% improvement in adjusted EBITDA, taking us to $45 million, and free cash flow generation of $5 million.\nBased on the healthcare restrictions currently in place, especially severely in Europe, consolidated reported net sales in the first quarter maybe down slightly to mid-single-digit, compared to prior year, which was not impacted by the pandemic.\nWe're bullish for the full year, expecting a strong uplift in the second half with public health restrictions are lifted.\nWhile, it's impossible to project the exact path of the pandemic in 2021, we remain confident that as weather gets warmer in the Northern Hemisphere, where we do most of our sale, and as people desire to get outside and as vaccines become more widely available, we'll see strong sales growth, driven by new products and pent-up demand from 2020.\nAs I mentioned earlier, we expect some increase in SG&A expense, primarily to support increased sales, although it should remain below 2019 spending.\nNot yet factored into guidance is the anticipated benefit related to improved customer experience and efficiencies from the IT modernization initiative as it's rolled out in North America.\nFinally, free cash flow is expected to be lumpy in the quarters, especially in the first half, if we fund seasonal inventory early in the year and payments for 2020 programs like severance from the German plant consolidation and deferred taxes.\nOur guidance demonstrates the continued confidence we have in our strategic plan and our ability to drive future growth.\nWhile we could not have predicted the pandemic, the test of the result of our customers, suppliers, associates and the people who rely on our products every day, I am incredibly proud of all we accomplished.\nThis would not have been possible without the inspired and tireless support of our associates who battled through global supply challenges, found creative ways to engage with our customers and end-users and adapted quickly to a new working environment, all while ensuring the health and safety of our colleagues.\nLooking ahead, we have clear objectives with the focus on delivering sales growth and generating gains in our key markets, which we expect will result in significant improvement in profitability and free cash flow.\nWe're confident the long-term economic potential for Invacare remains strong.\nLater this year, we'll provide an update on the timing of our longer-term targets, which we believe will achieve according to our prior and ongoing strategic initiatives as they continue to gain traction and as consequences of the pandemic sub-side.\nWe will now take questions.\n",
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"content": "sees 2021 constant currency net sales growth in range of 4% to 7%.\nsees 2021 adjusted ebitda improvement of 41%, to $45 million.\n",
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"content": "You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. \nText: They involve risks, uncertainties and assumptions and there can be no assurance that actual results will not differ materially from our expectations.\nFor a discussion of these risks and uncertainties, please see the risks described in our most recent Annual Report on Form 10-K and subsequent filings with the SEC.\nI'll give some brief comments before turning the call over to our Chief Investment Officer, Brian Norris to discuss the current portfolio in more detail.\nAfter a tumultuous start to the year brought on by the impact of the COVID-19 pandemic, the financial markets continue to recover during the third quarter.\nAt IVR, we have made tremendous progress in implementing our Agency MBS focused strategy and opportunistically reducing our exposure to credit assets.\nFor the quarter core earnings came in at $0.06 share, exceeding our recently increased dividend of $0.05.\nBook value is $3.47 at quarter end, which represents an increase of about 9.5% for the quarter.\nThe combination of the increased dividend and our book value appreciation produced an economic return of 11% for the quarter.\nThe improvement in book value has continued since quarter-end, as we estimate that book value is up approximately 6% since quarter-end through last Friday.\nDuring the quarter, we purchased $5.6 billion in specified pool agencies and invested an additional $900 million in Agency TBAs.\nThis brought our allocation to agency mortgages up to 93% of assets and 60% of equity.\nWe also reduced our credit exposure significantly selling $1.1 billion of credit assets, while repaying the remaining balance of our secured loans that were collateralized by credit.\nThis leaves us with a notably smaller credit portfolio that is completely unencumbered.\nAs you look out over the next several quarters, our outlook is quite constructive.\nWe have continued to make progress in reallocating the portfolio during October, as additional credit sales combined with agency investments will continue to improve our earnings power.\nWe remain positive on agency mortgages, as we expect demand from the Federal Reserve and commercial banks to remain strong.\nWhile the economic outlook remains uncertain, we expect to Fed to remain supportive by continuing large-scale asset purchases and by keeping short-term interest rates low for the foreseeable future.\nPost-election, we expect interest rate volatility to remain subdued, which is also supportive of agency mortgage assets.\nIncreased levels of prepayments remain a potential headwind, but our focus on purchasing specified pool collateral helps to mitigate that risk.\nI'll stop here, and let Brian go through the portfolio.\nI'll begin on Slide 4, which summarizes our Agency RMBS assets and trading activity during the third quarter.\nConsistent with the strategic transition we've communicated since June, we purchased $5.6 billion of Agency RMBS specified pools during the quarter.\nStrong demand for our credit assets provided opportunities for dispositions at attractive prices, freeing up capital for allocation to the agency-focused strategy.\nAs detailed on the chart on the top left, we were able to source attractively priced new issue collateral stories, including loan balance, low FICO, high LTV and geo pools, which consists exclusively of borrowers in slower paying states such as New York, Florida and Texas.\nWe also focus a significant portion of our purchases on new production pools originated and serviced exclusively by banks in order to mitigate our exposure to pay-up premiums, while benefiting from improved prepayment protection relative to non-bank originators and servicers.\nWhile pay-ups on our specified pool holdings range from less than a 0.25 point up to 4 points, the weighted average pay-up on our portfolio was approximately 1.25 points, representing approximately $70 million of market value at quarter end.\nWe believe low mortgage rates and historically fast prepayment speeds should continue to keep pay-up premiums near current levels, as strong demand for prepayment protection support valuations.\nAll purchases in the quarter consisted of 30-year collateral with coupons ranging from 1.5% to 3%, with the majority in 2s and 2.5s, as indicated in the chart on the bottom left.\nGiven our expectation for continued pressure on prepayment speeds at mortgage rates fell to all time lows, we focused our purchases on lower coupon pools, which typically experienced experienced slower prepayments due to lower mortgage rates on the underlying loans and benefit from lower purchase prices which reduces the negative impact of prepayments.\nIn addition, these coupons have been targeted by the Federal Reserve as a part of their bond purchase program, the valuations also benefit from positive supply and demand technicals.\nOur specified pools paid only 1.8% CPR during the quarter, reflective of the focus in newly issued lower coupon pools, given mortgage loans tend to pay slowly in the months immediately after after closing, before prepayments typically begin to ramp higher around month six.\nThis dynamic benefited the performance of our Agency RMBS pools during the quarter as the weighted average yield was an impressive 1.91%.\nThe prepayment protection in our specified pools and active management should lessen the impact of faster prepayment speeds due to further seasoning of our holdings in the months ahead.\nIn addition, we added $900 million notional in agency TBA contracts, given the attractive implied financing rates and hedged carry available in the forward market for Agency RMBS, due to the significant demand from the Federal Reserve and commercial banks for lower coupon pools.\nGiven the current attractiveness of certain TBA contracts due to this favorable technical environment, we expect our investments in Agency TBA to grow commensurate with the growth in our overall assets, as we continue to implement our agency-focused strategy.\nTurning to Slide 5, and as John mentioned, we made significant progress in reducing our credit exposure during the quarter.\nDemand for our credit assets was robust, and the notable improvement in valuation drove the majority of our gain in book value.\nIn particular, higher quality CMBS was the beneficiary of the June launch of the TALF program, as spreads tightened dramatically in the AAA and AA rated assets we financed at the Federal Home Loan Bank through our captive insurance subsidiary.\nSubstantial credit dispositions at attractive valuations allowed us to pay off our secured loan at the FHLB in August, and redeploy capital into Agency RMBS investments, which further improved the earnings power of the portfolio, allowing us to increase our third quarter dividend to $0.05.\nSlide 5 details the seasoning and senior capital structure positioning of our remaining credit investments as of September 30.\nAs shown in the chart on the left, our credit assets consist of predominantly seasoned investments with over 80% of our holdings issued prior to 2015.\nIn addition to the benefits of seasoning, given the improvement in property valuations over the past five years, our CMBS credit holdings also benefit from substantial credit enhancement, as detailed in the chart on the right, with over 82% of our holdings maintaining at least 10% of credit support.\nIn addition 69% of our remaining credit investments are rated A or higher.\nWe've been encouraged by the renewed investment demand for CMBS, which has led to spread tightening and contributed to book value appreciation.\nThe pace of spread tightening slowed over recent weeks however, as increasing concerns related to the COVID-19 pandemic combined with heavy focus on the U.S. election dampened investor demand.\nWe believe yesterday's positive announcements regarding the timing and efficacy of the vaccine should prove beneficial for our credit holdings, as the global economy continues to navigate the pandemic.\nRegardless of near-term headlines, we believe our bonds are well positioned for long-term incremental spread tightening given the notable subordination detailed on Slide 5 and favorable supply and demand dynamics.\nSlide 6 details the growth of our funding and hedge book during the third quarter as shown in the chart on the upper left.\nAfter paying off our secured loans at the FHLB in August, all of our remaining credit holdings were held on an unlevered basis, eliminating the mark-to-market funding risk on that portion of our book.\nRepurchase agreements collateralized by Agency RMBS grew to $5.2 billion as of September 30 and hedges associated with those borrowings also grew during the quarter to $4.6 billion notional of fixed-to-floating interest rate swaps.\nInterest rates on our borrowings drifted lower during the quarter and that settled in near 0.2%, and we took advantage of historically low interest rates further out the yield curve to lock-in low funding cost to be a longer maturity interest rate swaps, given the potential for a steepening yield curve as the Federal Reserve keeps short-term rates anchored for the foreseeable future.\nOur economic leverage, when including TBA exposure increased to 5.1 times debt-to-equity as of September 30, indicating significant progress toward the transition to the agency-focused strategy.\nGiven notable changes in the portfolio since quarter-end, Slide 7 summarizes the progress we made in continuing to transition the portfolio through the end of October.\nDemand for our credit assets continued during the month, as we were successful in disposing of $112 million of credit exposure at attractive valuations.\nThese sales provided further opportunities to continue the ramp in Agency RMBS, as we purchased $1 billion of specified pools and an additional $300 million notional in Agency TBA contracts, bringing our total to $6.5 billion of pools and $1.2 billion of TBA.\nOur borrowings and hedging grew commensurate with these purchases, with repurchase agreements of $6.2 billion hedged with $5.2 billion notional of interest rate swaps at month end.\nAs noted on Slide 7, our liquidity position remains substantial, with $351 million of unlevered credit investments in addition to $340 million of unrestricted cash, combining to represent approximately 8.5% of our investment portfolio.\nThe Agency RMBS market continues to be well supported by the Federal Reserve purchase program as well as significant commercial bank demand.\nAnd our credit assets continue to recover from the impact of the COVID-19 pandemic and March's liquidity crisis.\nWhile the prepayment environment in Agency RMBS remains challenging, we believe our careful selection of prepayment protection and active management will mitigate the negative impact of what has become a highly efficient process for mortgage loan refinancings.\nLastly, monetary policy remains very supportive.\nWe expect that to continue well into 2021 as the Federal Reserve communicates a desire to maintain an accommodative stance over the medium term.\nAnd now, we will open the line for Q&A.\n",
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"content": "q3 core earnings per share $0.06.\n",
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] |
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