Stericycle Inc (SRCL) 2015 Q4 法說會逐字稿

Good afternoon. My name is Skinner and I will be your conference operator today. At this time, I would like to welcome everyone to the Stericycle fourth-quarter earnings call.

All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions). Thank you.

I would now like to turn the call over to our host, Sean McMillan, Vice President of Corporate Finance.

I will now read the safe harbor statement. This conference call may contain forward-looking statements that involve risks and uncertainties, some which are beyond our control, for example general economic and market conditions. Our actual results could differ significantly from the results described in the forward-looking statements. Factors that could cause such differences include changes in governmental regulation of the collection, transportation, treatment and disposal of regulated waste or the proper handling and protection of personal and confidential information; increases in transportation and other operating costs; the level of governmental enforcement of regulations governing regulated waste collection and treatment or the proper handling and protection of personal and confidential information; our obligations to service our substantial indebtedness and to comply with the covenants and restrictions contained in our private placement notes, term loan credit facility and revolving credit facility; our ability to execute our acquisition strategy and to integrate acquired businesses; competition demand for services in the regulated waste and secure information destruction industries; political, economic and currency risks related our foreign operations; impairments of goodwill or other indefinite lived intangibles; variability in the demand for services we provide on a project or nonrecurring basis; exposure to environmental liabilities; fluctuations in the price we receive for the sale of paper; destructions in or attacks on our information technology systems; compliance with existing and future legal and regulatory requirements; as well as other factors described in our filings with the US Securities and Exchange commission, including our most recently filed annual report on Form 10-K. As a result, past financial performance should not be considered a reliable indicator of future performance. Investors should not use historical trends to anticipate future results or trends. We make no commitments to disclose any subsequent revisions to forward-looking statements.

I will now turn it over to Charlie Alutto, CEO.

Thanks Sean. We are pleased to report our fourth-quarter results. Overall, our business performed very well in the quarter and remains on track despite foreign-exchange headwinds and lower hazardous waste volume from our industrial customers.

In the quarter, we made good progress on the Shred-It integration and our team numbers are working together to help realize the many synergies from this acquisition.

Joining me on today's call will be Dan Ginnetti, CFO, and Brent Arnold, COO. I will now turn it over to Dan.

Thank you Charlie. The results for the fourth quarter are as follows. Revenues were $888.3 million, up 31.2% from $676.9 million in Q4 2014, and internal growth, excluding returns and recall revenues, was up 5.2%. Domestic revenues were $651.1 million, of which $626.8 million was domestic regulated waste and compliance services and $24.3 million was recalls and returns.

Fourth-quarter domestic internal growth, excluding returns and recalls revenues, was up 4%, consisting of SQ up 6% and LQ up 2%. As anticipated, growth rates were impacted by lower fuel surcharges and lower hazardous waste volumes from our industrial customers.

International revenues were $237.2 million, and internal growth adjusted for unfavorable foreign exchange impact of $26.9 million was up 8.1%. This growth rate was also impacted by lower hazardous waste volume.

Acquisitions contributed $200 million to growth in the quarter. Gross profit was $380.4 million, or 42.8% of revenues. SG&A expense, including amortization, was $203.6 million, or 22.9% of revenues. Net interest expense was $24.9 million. Net income attributable to Stericycle was $78.9 million, or $0.80 per share on an as reported basis, and $1.11 when adjusted for acquisition related expenses and other adjustments.

Now for the balance sheet. Our covenant debt to EBITDA ratio was 3.45 at the end of the quarter. The unused portion of the revolver at the end of the quarter was approximately $686 million.

In the quarter, we repurchased 240,468 shares of common stock on the open market in an amount of $28.646 million. At the end of the quarter, we had authorization to purchase 3.7 million shares.

Our CapEx was $42.2 million, which included accelerated spending to support 2016 integration associated with Shred-It.

Our DSO was 64 days.

Year-to-date as reported cash from operations was $390 million. When adjusted for recall reimbursement and other items, cash from operation was $501 million.

I will now turn it over to Brent.

Thanks Dan. Worldwide, we continue to use our strong free cash flow to drive our growth through acquisitions. In the quarter, we closed 10 acquisitions, six domestic and four international, including Shred-It. The international acquisitions were one in Canada, one in the Netherlands, one in Mexico, and one in Spain. Revenues for the 10 acquisitions were $176.4 million in the quarter, and annualized are approximately $728 million. Our worldwide acquisition pool remains robust with well over $100 million in annualized revenues in multiple geographies and lines of business.

In the fourth quarter, we continued to see strong growth in our pharmaceutical waste compliance program. Both our SQ and LQ adoption rates continued to increase as customers look for a compliant solution for this waste stream. This program not only helps our customers manage their pharmaceutical waste, but it often paves the way for Stericycle to manage all of their hazardous waste.

Our Shred-It integration efforts remain a priority across the organization. The Cintas Shred-It synergies are on track focusing on routing efficiencies and on-site to off-site conversions. The Stericycle Shred-It integration is gaining momentum and the team has kicked off a number of exciting cross-selling pilots.

As a reminder, less than 20% of our existing Stericycle customers use Shred-It for secure information destruction. This represents a tremendous growth opportunity for Stericycle.

To assist with the integration, we are working with a consulting firm to help us optimize our long-term organizational structure. The goal is to maximize our growth opportunities and to better serve our customers. We are anticipating implementation to start later this year.

Looking ahead, we continue to see expanding growth opportunities as Stericycle provides multiple services to help our customers improve their operations and achieve their goals. As we execute on this strategy, we can more than triple our customer revenues.

In closing, I want to thank each member of our worldwide team for their strong performance and continued commitment to our customers, our shareholders, and to our core values.

I will now turn it over to Charlie.

Thanks Brent. I would now like to provide insight on our current guidance for 2016. Please keep in mind that these are forward-looking statements and our guidance does not include future acquisitions, divestitures, integration, acquisition related and other adjusted items. As a reminder, our 2016 EPS guidance is adjusted for amortization expense.

For 2016, we believe analyst EPS estimates will be in the range of $5.26 to $5.33, reflecting the unfavorable impact of foreign exchange and a share count of approximately 92 million, which we are comfortable with. We believe analyst revenue estimates for 2016 will be in the range of $3.6 billion to $3.67 billion, depending on assumptions for growth and the unfavorable impact from foreign exchange rates. We anticipate 2016 internal growth rates to be SQ 7% to 9%, LQ 4% to 7%, international 6% to 9%, and recall and return revenues between $95 million to $120 million.

We believe analysts love estimates for free cash flow in 2016 between $460 million to $480 million. 2016 CapEx is anticipated to be between $125 million to $135 million. We expect the 2016 full year as-reported tax rate to be in the range of 36% to 36.5%.

In closing, we are very pleased with our fourth-quarter results and remain excited about our multiple growth opportunities for 2016 and beyond.

Thank you for your time today. We will now answer any questions. As a reminder, please limit yourself to one question and one follow-up question as necessary. Skinner, you can now open the question queue.

Absolutely. (Operator Instructions). Ryan Daniels, William Blair.

Thanks for taking the question, guys. Dan, maybe I'll start with one for you. Just trying to get a better feel for the cadence of EPS progression through the year, given paper prices, the Shred-It integration and synergies in industrial waste work. I guess I'm trying to figure out might this be more of a back-end loaded year? Should we think of it being relatively consistent to years past?

Yes. I think we've done a lot of looking at that. And if you were to look at where we finished the year at $1.11, when you factor in also the amortization that is going to be excluded out next year, that jump off point really equates to $1.24.

We had $0.03 of nonreocurring EPS that won't repeat itself, so that really brings the jump off point to about $1.01. We have -- I'm sorry, $1.21. And then we have about $0.03 of normal seasonality we would expect in Q1, an additional $0.01 of headwind to tax. So I think you're best to jump off the year at about $1.17, and then ramp up throughout the course of the year, probably evenly dispersing it from there on.

Okay, that's very helpful. And then the recent weakness in recycled paper pricing, has that impacted your kind of thoughts on how you're guiding for that going forward, or are you still assuming an uptick in the back half of the year using more of a blended estimate?

So, if you remember, much like foreign exchange, we only give guidance based off the current rates. And the current rates that we had at the time was $126 per ton. That equated to about an $0.08 impact in 2016. But from some work in operational efficiencies and some favorability in depreciation, we were able to exactly offset that. So there's been no guidance change for that going forward from an EPS perspective. And so throughout the course of the year, we really don't anticipate any change and that just assumes that's $126.

Okay. So in effect, your fundamental earnings performance is a little bit higher, but that's being offset just by the paper pricing and some FX headwinds. That's a good way to think about it?

Yes. Why don't I just take you through the EPS bridge for the $5.26 (multiple speakers) $5.33 that we gave you. So you remember the jump off point was $5.28 to $5.35. We saw $0.08 of headwinds from the paper directly offset by depreciation. The foreign exchange, the $48 million due to the current rates, is about a $0.05 to $0.06 headwind, offset by $0.02 to $0.03 of interest, favorability, and about $0.01 on the acquisitions. So really if you look at the impact of the paper and the foreign exchange, we really only changed the guidance about $0.02.

Gary Bisbee, RBC Capital Markets.

Good afternoon. The first question, so can you give us an update on the second derivative energy exposed revenue that you talked about last quarter, and maybe, more broadly, that base of manufacturing and industrial project-based work. Any change in the other part from the $70 million that you focused on last quarter?

If we think about what we talked about last quarter and the reality of Q4, it was right on where we expected. We thought the full-quarter impact was going to be about $18 million. That's about roughly 80% domestic, 20% international. That came in as expected and then obviously had an impact on growth rates.

The other part of the business I think you're talking to is that other part of the project in industrial waste work that's not affected by commodity, and that performed as expected in the quarter. We didn't see any pullback in that part of the business. I think Brent talked about it in his comments, Rx waste specifically, which that is hazardous waste, a good portion of that is hazardous waste upon disposal. The team had a really good quarter in Q4. And again, to remind everybody, our focus in hazardous waste is on healthcare hazardous waste, it's on retail haz waste and SQ hazardous waste. And those parts of the business are doing well.

Okay, great. And then taking a step back from what's been going on with Shred-It and haz waste, I guess your international business has had margins well below the US for I guess ever since you got into it. I know there's structurally probably some reason you'll never have to scale. But what are you doing? What's on the game plan, thinking about the next couple of years, to try to close that gap or improve the international profitability? And is that something that you think can happen, or are we much more focused on Shred-It getting haz waste fixed and growing in terms of the near-term opportunity? Thank you.

It's Brent. The answer would be all of the above. We want to improve it across the globe. But I think it's good to take a step back and really just remember that usually when we enter a new country, it's with LQ, and we usually will go there to establish a base. Over time, we look to improve the mix via tuck-in acquisitions and new services. A good example of that would be dosimetry. So that's usually the way we'll try to work it.

We will also try to continue to sell things like clinical services to continue to improve those margins. So the team is very focused on that. We are making some good progress in other areas, but I think you also have to take into account that these markets have been difficult markets over the last several years and the team has I think done a really good job to make sure that we continue to stay focused on improving our margins.

David Manthey, Robert W. Baird.

Hi guys. First of all, on the returns and recall business, I think you indicated that that was $24.3 million. On the press release, the adjustment you make is $20.4 million I believe. Am I missing something there?

I think there might be the acquisition effect on that. That's why being lower in the third quarter (inaudible) at $24.3 million, that is correct. And the difference is the acquisition that happened I believe it was fourth quarter of last year.

I see, okay. And then the $0.08 of paper impact offset by depreciation, Dan, could you tell me what that means? I'm not sure exactly what the mechanism you're referring to there.

Yes. So we saw about a $14 change in paper prices. Actually, if you looked at the quarter, about $1.33 is what the average was, but we are looking at $1.26 going forward. Our guidance was at $1.40. That equates to about an $0.08 impact. But as part of our normal process of purchase accounting and booking an opening balance sheet, after the closing, we did a fair market study of Shred-It's fixed assets and that actually reduced the revenue expectation -- or I'm sorry, the depreciation expectation we had for the year, and it happened to directly offset the decline in paper prices. So right now, there's no EPS impact to the Shred-It business assuming paper prices continue at $126 per ton.

I see. So that's kind of a one-time thing, but it cancels it out for the current year. Then the last question I had for you, Dan, in terms of the other income expense line, you've been reporting an other expense of about $800,000 for the past two or three years on average, and this quarter was other income of $4.5 million. What was that?

Yes, we had the opportunity to renegotiate a seller note. In doing that, we also were able to negotiate it into an alternative currency and that generated some -- about $0.03 along with some favorability in the interest. So, that combined generated about $0.03. The interest will repeat, but the note was obviously a one-time effect that will not repeat going forward.

Al Kaschalk, Wedbush Securities.

Good afternoon guys. I want to focus on the commentary about the good progress on the synergies related to Cintas. Can you give us a little more color on that?

Absolutely. This is Brent. I have had an opportunity to visit a lot of Shred-It locations over the last several months, and I'm really pleased so far with the integration, and overall everything is on track. To date, we've completed over 50% of our reroutes, which is terrific. The team continues to improve that process and refine that as we go forward, as well as the on-site to off-site conversions are also on track. So overall, we are very pleased with the efforts. The team members are I think fitting in great with our company and we are really excited about where this is headed.

Can you put a little more quantification around the progress on -- I think you said the first 12 months, you were focused on capturing the Cintas synergies. And the commentary was you've also started to make some progress on the Stericycle synergies. So, I'm just trying to gather how much of that -- I don't know if was $52 million or $57 million you captured this quarter, and how we are on track for the next nine months.

Yes. When we last spoke, I think it was about 30% of the way with regard to the Cintas Shred-It synergies. And to date, we are just shy of 50% of the way with regard to those synergies. So the team continues to make great progress.

I think, on the Stericycle Shred-It synergies integration, we told you that was going to be more the back end of 2016, Al, and moving forward into 2017.

Scott Schneeberger, Oppenheimer.

Thanks. Good afternoon. Guys, just circling back on the RMS question, it looks like you were right on the year. I'm just curious -- but you maintained a 2016 outlook. Did something not come through in the fourth quarter? And how is the momentum entering the year to maintain the guidance? Thanks.

Yes, as you know, that's a lumpy business for us. It's really uneven. It's hard to predict, so it's hard to say coming into the first part of the year if we are going to take guidance down. If you look back, the last three quarters for recall and returns, our RMS part of our business, has been really well. The team has done solid. We think that will continue into next year. So there was no reason at this point to change the guidance.

It all comes down to blockbuster events. If we can get larger recall events in 2016, we will be on the higher end of the range, and if we don't see those come in, we are confident on the low end of the range. So, again, the range is around $95 million to $120 million, and that's unchanged. That obviously is within -- the year finished at $102.8 million, so we were in the range and we feel confident about the 2016 guidance there.

Okay. I know automotive was helpful this past year. Is that going to be a driving force next year, or will there may be other sources in pharma or you just don't have that visibility yet?

That's a good call. There are certainly -- we did that acquisition last year to get an entry into the auto recall space. There's obviously a lot of heightened sensitivity to auto recalls. We can offer a turnkey solution to manufacturers. That helps them assist their customers with both notification and increasing their response rate. So still early stages with respect to our automotive recall capabilities. We are doing a great job. The team continues to win some deals in that space, and we feel really good about that acquisition and about the outlook for 2016.

Thanks. Could you guys just hit on real quick your ability to surcharge on used paper price? How much has that been rolled out, and how is that influencing the guidance update? Thanks so much.

Yes, we already have that backed into the guidance update. Our plan, though, is over time to mitigate the sort of office paper revenue fluctuations through contracts, terms, and conditions. This is going to take time. It is going to be addressed on a customer-by-customer basis. Certainly at Shred-It, the average contract is between two and four years, so this will take us several years to get through all the customers. But we think we will make progress as we get further into the integration.

Scott Levine, Imperial Capital.

Good afternoon guys. I don't know if you gave the gross margin bridge, Dan, but I was hoping you might be able to go over that. The margins rebounded nicely on the gross line -- and then also quantify the impact of fuel and how much of a positive that was in the quarter.

Yes, let me take you through the gross margin. And I want to remind you that as we went -- as we spoke last time and we were going to integrate Shred-It into the business, we fully expected that we were going to see some puts and takes. You would see favorability on the gross margin line and then you'd also see a little bit higher of an SG&A as a result. And there was going to be a lot of moving parts on that.

So I think it's probably more appropriate if I take you through the EBIT bridge, and that will take a little bit of the noise out. But certainly we did see favorability on the gross margin line that was nice.

But from an EBIT perspective, Q3 EBIT was $22.6 million. Shred-It impacted the EBIT by about 245 basis points, which is actually better than we had anticipated. And an improvement in the overall business really offset the lower revenue, slightly lower revenues that we saw, and some of the challenging economic conditions in Latin America. So those offset each other. And I would say better performance. We are very pleased with the results of the EBIT and the gross margin for that matter.

With regard to the impact of fuel with regard to our profitability, as you recall, we are on the fuel surcharge for a great portion of our business. So what we typically will see is, as fuel comes down, so will the surcharges for that. And that's an offsetting effect with regard to the lower cost. So really it's a net push with regard to the benefit to the business.

Washes out at the EBIT line.

What you will see on the gross margin and the SG&A line is those puts and takes have ironed out a little bit and those are pretty good jump off points for building the bridge into -- going forward on that.

Got it, thank you. As then a follow-up, given the comments you made about the reduction in D&A associated with the change in accounting, can you give us a sense of what we should be assuming in our models on a go-forward basis as the add-back to arrive at cash EPS on a quarterly basis in 2016?

I think, for depreciation, about $44 million, and for amortization about $36 million.

Got you. Thank you.

Barbara Noverini.

Good afternoon everybody. So, you've guided organic growth rates, organic revenue growth rates, in 2016 that are pretty similar to business as usual. So what gives you the confidence that the weakness in the industrial hazardous waste volumes won't accelerate through the year? How good is your visibility into those project pipelines?

I think when we give -- it's important. When we give guidance, it's an annual guidance for our growth rates. So, if you think about where we are today with growth rates last quarter of [62%], had we normalized that for fuel surcharges and reduction in hazardous waste volume, we would have been at, SQ at about 8%, LQ at about 7%.

When we look forward to next year, we know that we will have a tough comparable in Q1 and Q2, and part of Q3, but then we won't have that in the back end of the year.

So as far as confidence, we think obviously we will be at the lower end of the range for growth rates in the first half of the year, and then we will have improvement in the latter part of the year. But overall, when you look at the annual growth rates, we think we will be between that SQ of 7% to 9% the and LQ of 4% to 7%.

Got it. Thanks. And then can you remind us what the business mix is in hazardous waste, what percentage of sales is associated with industrial versus retail versus healthcare hazardous waste?

Yes. When you think about our business, hazardous waste worldwide, it's roughly $650 million, and we've called out that we have project work in large industrial waste customers of anywhere between $125 million to $200 million. So that's that portion of the business. We don't really breakout the other portions of the business, but retail hazardous waste certainly is a major contributor, as is our healthcare haz waste and our SQ business as well.

All right. Thanks very much.

Isaac Ro, Goldman Sachs.

It's actually Joel in for Isaac. How should we be thinking about the incremental opportunities for M&A in the paper shredding business? Is it too soon to be thinking about how you guys are going to be -- are you guys doing any major deals here? And then what types of assets in terms of size or capability or geographic footprint would you be looking for?

Yes, I think one thing that we did this quarter is, besides the Shred-It acquisition, we made four acquisitions of other secure information destruction companies. So we certainly -- as part of our game plan, Shred-It obviously had a pipeline and we were able to complete those deals in Q4.

From a geography line, certainly any country where we currently have operations, those have the best returns and that's where the focus will be. And then we will also look at countries that Stericycle is currently in on the waste side of the business and see if there are opportunities to enter into those secure information destruction markets as well.

Great. Thanks. And then I think it's been about six months since you guys went live with the Title V compliant incinerators. Any change to the plans to push those incremental operating costs to your customer base as contracts roll over? And if so, to what extent do you think this would be somewhat of a competitive disadvantage as these contracts expire?

With regard to competitive disadvantage, I don't really see that happening, because this is -- our incineration and the fact that we are vertically integrated there really helps us provide the best possible value for our customers to manage their pharmaceutical waste.

So with regard to overall cost, as we've talked about before, as those contracts renew, we are able to accelerate those. And if there are regulatory changes, we are also able to oftentimes go back and renegotiate those with our customers.

Great. Thanks.

(Operator Instructions). Sean Dodge, Jefferies.

Thanks. Charlie, on the core hazardous waste business, if we strip away the $125 million to $200 million of project-based and industrial exposure there that you had mentioned, can you give us an idea of how organic growth rates in that core part of the hazardous waste business have trended over the last few quarters?

Yes. Sean, we didn't strip out the whole $125 million to $200 million. We were roughly though -- I think we are fairly accurate -- that about 50% between the $125 million to $200 million, so about $80 million of that was project or industrial waste related.

I will tell you there are parts of those business like retail haz waste that have growth rates that are actually higher than our current growth rates, our organic growth rates. So it varies by business line, but the business itself, if you take out the project in the industrial waste parts of the business, is growing at or about our Company average.

Okay, thank you. And then Rich had mentioned in the prepared remarks that acquisitions had contributed about $176.4 million of revenue to the quarter. How much of that was Shred-It?

There was only about $1.6 million outside of credit. So the acquisitions that we did outside of that were more towards the end of the month.

Got it. Thank you very much.

Larry Keusch, Raymond James.

Good afternoon. Wondering if you -- I know it's been a relatively brief period that you have had the Shred-It business in-house, but would you mind talking about anything perhaps surprising versus your expectations going in?

Overall, I would tell you that we haven't had any major surprises. I think the things that -- the common themes that we've seen is, one, the service is very complementary to our existing compliance services. So, that works well for us.

Two, I continue to be very impressed with the people and how similar their culture is to ours. So, so far, it's been great to work with them.

Where I continue to get most excited is the cross-sell opportunities. We've got multiple opportunities everywhere you look to cross-sell their services into our customers.

I was just at the national sales meeting last week, and our LQ team, who's had a great deal of success selling additional services into hospitals, like our SMS or our Rx waste or hazardous waste, all of them now are trained and ready to go with regard to selling that service into hospitals. Again, I am very confident we will be successful there.

We also have another several pilots going on with regard to their sales executives and selling into our existing Stericycle medical waste customers. What they typically do is they go in and give them a compliance review, looking at how they manage all of their secure information. Oftentimes, when they do that audit, we can find compliance breaches, and that's a great way for them to switch to an outsourced service, and therefore we are selling multiple services.

So overall I would tell you that we continue to be very encouraged, and the things that we thought going into this are turning out true. And again, we think this will be a great long-term acquisition for us.

Okay, terrific. And then just one other one. I just want to make sure I've got my math right. I'm pretty sure, on the third-quarter call, you indicated in the 2016 guidance that you are assuming $760 million in revenues for Shred-It. So, A, I wanted to make sure that was accurate. And B, is that still the case as you think about 2016?

Yes, that was accurate for the guidance that we gave last time. We discussed the paper impact, which will be about $12 million. We also have about 25% of their business, which is international, so they saw about an $8 million foreign-exchange impact. And also on the lower fuel prices, it moves a little bit. I think you're better to look at about $738 million now next year. But the great thing is with some of that benefit we saw in appreciation, from an EBITDA view that we gave you last time at about $20.7 million, the new guidance is about $21.1 million. So really only about $1 million different from the EBITDA line.

Michael Kaufman, Stifel.

Thank you guys for taking my question. If I can follow up on that last one, so the other number you gave in the third quarter was that you actually focused on EBIT, 17.6% -- or 16.7% margins for EBIT in document destruction. I wanted to verify that was still the right number. And then I just wanted to make sure I caught the paper number you're saying is in the $740 million now, or $738 million. Is that still about $120 million of paper is in that number?

The first question on the EBIT line, we're looking at about 16.2%. So that came down very modestly from the 16.7%, largely due to the decline in paper. And right now, we said the change in the paper revenue was about $12 million based off the latest known rate, which is $126 per ton.

Okay. And then my follow-up on the hazardous waste business, the $650 million is the as-reported 2015, so what was the exit rate of revenues, and what percentage of that is in industrial overall and what percentage of that is projects?

I don't have a breakout for that, Michael, on what is industrial. What was your second part of that? Industrial and --?

So, you said $650 million, but I'm assuming that's reported 2015. You're exiting at a slower rate of -- because it's down in the second half versus up the first half, right? So, am I entering the year really a run rate that's more like $620 million and then I've got $150 million is industrial, so I'm really talking $470 million is retail and medical waste and pharmacy? That's the way to think about it?

You've got some background noise, sorry about that, Michael. When you are ending the year, first of all, it's approximately $650 million. And if you take the reduction in Q3, which was about $8 million, and the reduction in this quarter, which was about $18 million, that is really where you take off entering into 2016, and then we will see two more quarters of about $18 million each, so another $36 million. But if you want to do it annually, I would take $18 million x 4. That's probably another way you can look at it for 2016.

At this time, we have no more questions in queue.

Thank you, everybody, again for participating on our call. Depending on analyst models, revenues, adjusted EBIT and EBITDA will all show growth in excess of 20%. It's going to be an exciting 2016. Have a great evening. We'll see everybody on the road in the next couple of months. Thanks for joining, everybody. Take care.

This does conclude today's call. You may now disconnect. Thank you for your participation.