Sotera Health Company (SHC) Earnings Call Transcript & Summary

Thanks. Morning, everyone, and thanks for being with us on Sotera Health's Q3 2021 earnings call. I'm very happy to share that we've posted yet another quarter of double-digit growth in both revenue and adjusted EBITDA; this marks the fourth quarter we've reported since becoming a public company, and in each one since our November 2020 listing, we've delivered double-digit gains on both the top and bottom lines. As lots of you probably remember from things we've shared before, Sotera Health has posted revenue growth annually going back to 2005, which is when our tracking starts. That steadiness of results, paired with appealing opportunities for growth over the long haul, strikes us as a defining trait of this company and what sets it apart; it's been wonderful watching that steady growth path show up in every quarter we've reported as a public company, particularly measured against a pretty robust 2020 comparison, when we still managed growth each quarter even at the worst point of the pandemic. Scott will walk through more specifics shortly, but first, some third quarter highlights. We posted total revenue growth of 13% and adjusted EBITDA growth of 16% versus the third quarter of 2020, plus adjusted EPS of $0.21, which came in $0.12 higher than the third quarter of last year. Sterigenics had a solid quarter; last quarter we noted that Sterigenics ought to ramp up somewhat quicker than we'd initially thought, and they're still close to the peak pre-pandemic levels seen in the second quarter. Nordion, after a record-setting second quarter, put up another robust showing in the third quarter, with high double digit revenue growth fueled by demand for industrial-use cobalt. Nelson Labs had a tougher third quarter because of ongoing pandemic effects. We understood that shrinking PPE testing would create a headwind during 2021, yet demand there has come down nearer to pre-pandemic levels somewhat sooner than we'd anticipated. We've also discussed last quarter the slower ramp-up in medical device testing, which kept weighing on Nelson Labs in the third quarter too. Though near-term pressures exist, we view these Nelson Labs-specific headwinds as temporary in nature. We anticipate they'll settle in the coming few quarters before turning into tailwinds for our business. We're also heartened by patterns in particular testing categories, including extractable and leachables along with antimicrobial testing. As covered on earlier calls, our team accurately foresaw rising demand for E&L testing in Europe stemming from the introduction of the new EU Medical Device Regulations, or MDR, plus wider global dependence on this testing. Consequently, this testing category should experience robust demand for at least the coming several years. All in all, I couldn't be more proud of everyone across the Sotera Health team for putting up yet another solid quarter and for staying dedicated to serving our customers, the healthcare workers, and patients, all while keeping the workplace safe. What matters most is that the Sotera Health team keeps carrying out our mission — protecting global health — even as we work through this ever-changing landscape. Daily, we see proof that this mission of ours is greater than any single product or service. Take a recent case: a Sterigenics site of ours in the Southeast needed to sterilize an artificial heart on an urgent basis and get it to Spain, where it saved a patient's life. Over at Nelson Labs, teams are busy testing commercial hand sanitizers along with enhanced surface disinfectants to determine how effective they are against the Delta variant; these everyday business activities highlight the integrity, safety, and excellence of what we do and the dedication to our mission that sits at the core of so many healthcare experiences, day in and day out. Our strategic priorities remain our focus, and those take in driving operational excellence throughout our businesses, putting money into growth initiatives like adding capacity and upgrading infrastructure, strategic M&A, integrating acquisitions efficiently, and further deleveraging. Today, I'm eager to talk about one of our growth activities that touches multiple business units. For years now, both Sterigenics and Nelson Labs have played critical roles as expert advisors helping many customers reach their objectives, and more broadly they've acted as thought leaders when it comes to regulatory compliance. That role matters a great deal given how complex and shifting the regulatory environment is. These services have deepened and broadened ties with our customers and have strengthened our standing as thought leaders in the industry; so that customers can get more coordinated access and expertise, we recently set up the Sotera Health Expert Advisory Services Group, which brings together thought leaders from both our Sterigenics and Nelson Labs teams. This new group will broaden our capacity to serve the needs of our almost 6,000 customers around the world; alongside this initiative, I'm happy to share that we recently completed the acquisition of Regulatory Compliance Associates, or RCA. RCA ranks among the top providers of outsourced regulatory quality and compliance advisory services for the biopharma and medical device industries. Thanks to their deep bench of technical experts, RCA will be a great fit inside our new expert advisory services team, strengthening our ability to drive downstream testing and sterilization services for both Nelson Labs and Sterigenics. I'd like to extend a warm welcome to the RCA team. So far in 2021, we've taken a number of steps to invest in our growth priorities. We've acquired two small but strategic tuck-in acquisitions, and on top of that we purchased the outstanding minority stakes at our Fairfield lab and Shanghai sterilization operations; we've also finished two Sterigenics expansions and one Nelson Labs expansion in Europe. Just recently, we wrapped up installation of a new EBeam in Indiana, with product qualification happening during the fourth quarter. We're still pursuing growth investments, with 7 additional active capacity expansions at Sterigenics across a range of sizes. Those are anticipated to start coming online from later in this year and then carry on through 2022 and 2023. On top of that, we keep putting money into improvements at our Sterigenics facilities, and at the same time we're moving forward the 3 long term cobalt supply development projects at Nordion. Stepping away from our own results for a moment, I'll offer a short remark on conditions in the wider markets we serve. Overall, the recovery has unfolded in a way that's pretty much in line with what we assumed at the start of the year. That said, it's clear the Delta variant is still having an effect, and more recently macro difficulties tied indirectly to the pandemic have picked up speed — things like labor shortages, inflation and supply chain disruptions. We've run into each of those in one form or another, yet we've still managed them with just a limited direct hit to us. What we've experienced is more of an indirect effect on our customers, who keep facing a degree of uncertainty and volatility within their own supply chains. With those difficulties in mind, I'd describe the macro backdrop as unsettled, though we continue to be cautiously optimistic. As I said before, Nelson Labs has run into certain difficulties unique to that business, yet how our company performed overall shows how resilient Sotera Health's wider business model is. I'd like to say something about our 2021 outlook, since we've now finished 3 quarters of reporting, and from what we know as of today, we're narrowing the outlook range we gave you in August on the second quarter call, when we raised our guidance. Scott will get into the specifics, but at a high level, we anticipate 12% to 14% topline growth and 13% to 14% adjusted EBITDA growth for the full year of 2021. Before handing things to Scott to walk through the third quarter in greater detail and say more about our outlook, I want to pause once more and stress how proud I am of everyone on the Sotera Health team. I'll now hand the call over to Scott.

Thank you, Michael. To start, I'll go over the consolidated results for the third quarter, then share some perspective on each business segment, plus updates regarding capital deployment and leverage. I'll wrap up with additional specifics about our revised 2021 outlook. Looking at the consolidated total company figures for Q3, revenue rose 13% versus the same quarter a year ago, reaching $226 million. In constant currency terms, the increase was 12%. Adjusted EBITDA likewise climbed 16% from Q3 of 2020, hitting $117 million. Compared with last year's third quarter, adjusted EBITDA margins widened 140 basis points, primarily due to pricing as well as operating leverage at both Nordion and Sterigenics. Our solid operating results, together with a $37 million decrease in interest expense, produced adjusted EPS of $0.21 per share, which is $0.12 higher than Q3 of 2020. Let's now examine the segment results more closely. During Q3, Sterigenics posted 15% revenue growth and 19% segment income growth versus the prior year's third quarter. The drivers of Q3 revenue growth included organic volume and mix gains exceeding 8%, plus a pricing contribution of almost 4%. FX and contributions from Iotron made up the rest of the growth. Keep in mind that the Iotron acquisition closed in July of 2020, which means the inorganic contribution from that deal in this year's Q3 is far smaller than it was in recent quarters. In effect, we've now anniversaried the acquisition date, so Q4's year-over-year comparison will be clean. Relative to the third quarter of 2020, segment income margins during Q3 of 2021 widened 180 basis points, helped by stronger utilization and pricing. As Michael noted, Sterigenics volumes and utilization remain where they were in Q2, when they came close to their 2019 high watermark. We're continuing to invest significantly in Sterigenics capacity and anticipate revenue contributions from the expansions Michael mentioned starting in the first half of 2022. We're also still making headway on the facility enhancements at our North American EO facilities. Turning to Nordion, Q2 revenue increased 42% versus Q3 of 2020, reaching $29 million. Nordion segment income rose 59% to $16 million compared with the same period a year earlier. Nordion's top and bottom line gains came from a 31% volume and mix benefit, roughly 6% from pricing, and a 5% FX impact. Nordion's margins improved by about 620 basis points, mainly due to operating leverage on their higher sales and favorable pricing relative to Q3 of last year. Nordion's growth versus Q3 of last year does benefit from a relatively weak comparison, given the timing of shipments in the prior year, yet their overall 2021 performance remained strong and exceeded our overall expectations entering this year. Regarding Nelson Labs, revenue for the third quarter fell 2.6% versus the same period in 2020, landing at $52 million, while segment income dropped roughly 11%, coming in at $21 million. As Michael noted, Nelson Labs stands out as the single business unit facing clear headwinds tied to both direct and indirect consequences of the pandemic. The effect of phasing out the elevated PPE-related testing volumes proved larger in Q3 than what we witnessed during the prior quarter, amounting to a revenue headwind of nearly 9%. We anticipate a comparable headwind continuing through the first quarter of 2022, when we anniversary the stretches that enjoyed PPE testing tailwinds; this PPE testing drag was partially counterbalanced by a 5% tailwind stemming from buying Bioscience Labs. Pricing gains were mostly canceled out by volume decreases outside of PPE, which resulted from deferrals along with regulatory compliance-related testing and a slower than expected ramp-up in medical device product development and testing. Although it is frustrating to watch testing activity pushed into later quarters, it actually leaves us optimistic about our 2022 pipeline and suggests that whatever negative effects we face right now amount to a short term phenomenon. As Michael noted, we also take encouragement from positive momentum in certain testing categories, including E&L and antimicrobial. Nelson Labs margins in Q3 2021 shrank roughly 370 basis points relative to the same quarter a year earlier. Both the mix shift away from higher margin PPE testing and the layering in of the Bioscience Labs acquisition generated margin headwinds. We have said before that because of our strong margin profile, acquisitions tend to dilute margins, at least over the near term. Some of that effect is showing up now from Bioscience, and we will also start to see a degree of margin dilution from the newly announced RCA acquisition starting in Q4. We regard these as shorter term effects as we scale up the businesses. Now let me move to a few highlights concerning capital deployment and leverage. CapEx in Q3 came to $16 million, which brings our year-to-date figure to $61 million. Our spending remains aimed at growth initiatives, facility enhancements and Nordion cobalt supply projects. As of September 30, we held $115 million in cash and keep a strong liquidity position, even following the $100 million prepayment of our 2026 first lien notes made during Q3. Our net leverage has fallen to 3.6 times, a material decrease from the pre-IPO level of above seven times net leverage. The mix of our recent debt paydowns plus the January repricing of our term loan produced Q3 2021 interest expense of $18 million, versus interest expense of $55 million in Q3 of last year. Our latest debt paydown also lowers our new annual projected interest expense run rate to approximately $70 million, compared with interest expense of $215 million in 2020. As Michael noted, we are narrowing the range of our full year guidance, factoring in nine months of reported financials together with the most recent trends for each of our businesses. Keep in mind that back in August, we significantly raised the outlook range compared with the initial one from March. On the whole, we still feel at ease that the company's results are going to land inside those higher ranges we shared in August. We like how Sterigenics and Nordion are trending, yet we're trimming the upper end of the guidance range because of patterns we're genuinely observing in the Nelson Labs business. Like I said before, we're at ease that a lot of those headwinds are going to turn into tailwinds over the coming few quarters, though we don't anticipate normalization happening during the small portion of this year that's left. For the whole of 2021, we're looking at total revenues between $920 million and $930 million, which would be growth of 12% to 14% versus 2020. Adjusted EBITDA for the entire 2021 year should come in between $475 million and $480 million, which works out to growth of 13% to 14% versus 2020. And adjusted EPS should land between $0.87 and $0.88. When it comes to deploying capital, growth initiatives, debt repayment, and strategic acquisitions will stay our priorities. As Michael said, we've already completed the RCA deal, which is one more small but strategic tuck-in acquisition. Our refreshed guidance for 2021 CapEx now sits in a range of $90 million to $100 million. All in all, our approach to deploying capital hasn't shifted. Every other assumption behind the guidance we gave previously is unchanged. Before handing the call back to Michael for closing remarks, I wanted to reinforce what he said earlier about how proud we are of the whole team for producing yet another quarter of double digit growth on both the top and bottom lines. Michael, over to you.

Thanks, Scott. Before we finish and acknowledge how much the EO subject matters to our stakeholders, I'd like to let everyone know about some fresh EO-focused research that we've posted in the Investor Relations area of the Sotera Health website; the purpose of this material is to offer facts along with context, and I'd urge you to go to the site and look over what's there. Moving forward, we intend to make educational content about EO available, and any updates on EO topics that could be pertinent to investors will be placed there as well. With that said, operator, please go ahead and open the line for questions and answers.

Hello, and thank you. I appreciate you fielding my question, and congratulations on delivering yet another solid quarter. I'd like to dig into what you said regarding PPE and Nelson Labs during this period; it feels like everyone is still trying to grasp how COVID, or the various waves of it, have impacted these businesses. Would you be able to take us through what you anticipated for PPE and some of the testing trends in the back half of the year? And maybe what shifted once we got into the third quarter? Then I have a follow-up.

Sure. Good morning, Matt. This is Michael. Thank you for asking; regarding PPEs, like we've mentioned, PPE testing existed well before the COVID pandemic hit. Then throughout COVID, we witnessed those volumes rise dramatically in 2020 versus 2019. As we moved into 2021, we were attempting to predict precisely how things would unfold. Testing volumes kept going up, we observed. Keep in mind, a great deal of our work involves testing protective barriers — masks, gowns, drapes, that sort of item; we simply couldn't be certain how soon that expansion would begin to taper off, so to speak, so our internal projections assumed a slowdown that would bring things near 2019 levels. It remains higher than that, yet the decline arrived somewhat more rapidly than anticipated; meanwhile, certain other testing we thought would accelerate during 2021 has been somewhat slower to pick up. All the same, several genuinely encouraging things are happening. It's simply a matter of mix shifting; and like we've said previously, PPE, or protective barrier testing, carries fairly high margins, which meant margin rates felt an effect as well. All in all, Nelson's underlying fundamentals remained quite strong. The challenge was purely our capacity to predict, while sitting in the middle of this pandemic, how fast our other testing — our routine testing — would bounce back, and how fast PPE, or protective barriers, would decline; that piece proved somewhat difficult for us to project; so what occurred matched our expectations, except it unfolded at a somewhat quicker tempo in both directions.

Matt, let me jump in on that as well. If you consider the order in which the PPE situation has unfolded during this year, it's worth reminding everybody how big the swings between quarters have been. During Q1, we disclosed that PPE gave Nelson Labs a 10% sales tailwind. Then, once we got to the second quarter, that same 10% tailwind flipped into a 5% headwind. So obviously the gyrations are enormous, and then the move from a 5% headwind in Q2 to nearly a 9% headwind in Q3 was a somewhat quicker downtick than we had expected.

Absolutely. But the staff deserves recognition as well. A great deal of praise goes to Nelson Labs. They truly shifted direction to support clients with that PPE protective barrier, and now they are shifting back toward some of the other testing — Joe and the team did a really strong job doing everything possible to serve customers, since the situation kept changing. During this pandemic, Matt, events unfolded that nobody among us had anticipated.

Certainly. I’m grateful for that detail. Now, coming back to margins. I believe you addressed this somewhat during the call, and we probably ought to understand a little about how profitable each of your businesses is relative to the others. Still, would it be reasonable to state that the upside at Nordion likewise influenced mix in a comparable way?

At Nordion, what truly matters is the volume that dropped through into the P&L. That was something we observed. This business is doing extremely well; for the fourth quarter, we anticipate results matching what we expected. So on the whole, within that business, margins have come in strong this year, just as we anticipated.

Okay. Fair enough.

All right. Thanks Matt.

Hello, and thank you. Mike, I'd like you to continue from where you stopped regarding margins, keeping in mind the increased expenses for labor and the supply chain pressure from inflation. Could you perhaps share some thoughts on your approach to handling these matters given today's conditions?

Yes. Good morning, Tycho. The places where inflation is hitting us include certain materials, some utility expenses, and on the staffing front; we've managed to implement price rises, and we anticipate being able to essentially keep doing so as we move through the remainder of 2021 and into 2022. Those, however, are the spots where we're experiencing it. Mostly labor, utilities, and a small amount on the direct materials side, at Sterigenics.

All right. And there's nothing on the supply chain side worth calling out when it comes to sourcing, correct?

Correct. Tycho, like we mentioned during our prepared remarks, the way we look at the supply chain is that, just as with the Nelson team or the Sterigenics team, we depend on our customers to bring the supplies to us, right; so when it comes to testing at Nelson, we've run into delays where customers struggle to get samples to us, or at times the lows take a bit longer to be collected at Sterigenics because our customer is having trouble getting a truck or something along those lines. That's the type of supply chain challenge we're encountering. But on the whole, we feel fairly good about what we can see in these businesses, as we've said before. Nordion keeps working through the logistics it has to handle in order to serve customer needs; but those are those are the kinds of examples we're seeing.

Turning to how Nelson Labs is bouncing back. You mentioned a few quarters would be needed before things settle down. You noted that antimicrobials and E&L segments have improved somewhat; so when that business begins recovering, what's your view on pent-up demand?

Right. From our perspective, what this really comes down to is that PPE is going to keep unwinding, so to speak. That's the drag we called out. We remain quite confident about some of the — we offer 800 distinct tests. There are multiple sections. We divide things into roughly 18, 20 sections in total. A lot of those sections are performing quite well; the PPE reduction is simply the piece we're referring to. Yet we're seeing other segments picking up; we're adding teams. It isn't as though we're cutting a bunch of costs or doing anything like that. We keep growing our teams since we recognize the backlog is — we're beginning to see orders arriving. As I said during one of our earlier calls, Tycho, a few specific sections are linked to regulatory matters, and the FDA currently presents some uncertainty, especially regarding which test requirements they will mandate; as a result, we see customers beginning to accumulate some of that backlog with us, which runs a bit above typical levels, simply awaiting the final approval on protocols and what the FDA demands.

All right, and moving on to the final topic — those capacity expansion efforts. You mentioned, I believe, that 6 were scheduled to be operational before the year wrapped up, based on what you said last quarter. Sounds like all of them remain on schedule. Could you also give us an update on utilization? My recollection is that you cited roughly 80% for Sterigenics in the prior quarter.

That's right. We're still sitting at approximately 80%. Regarding the capacity initiatives, as we mentioned, a few of them went live during this year. There are multiple ones set to begin in the fourth quarter, and I think one actually shifted into the first quarter — early in the first quarter, from a timing standpoint. On the whole, though, we're in a solid position. We currently have 7 underway. Beyond those, we have a few additional ones that we'll coordinate on with the teams as well.

Okay. Thank you.

Thank you.

Hey everyone. Appreciate you taking our questions. Perhaps I can piggyback on what was asked about Tycho's margin. This may be directed at Scott. Regarding the wage inflation you mentioned, plus PPE creating a drag on margins as it phases out — could you walk us through the various factors affecting margins as we head into the fourth quarter and into 2022 as well? To what extent can you push those costs through to customers, and how much of that is baked into agreements? I'm simply attempting to gauge where margins land, considering once more the labor cost pressure and PPE working against you — perhaps address the positive factors too and how we ought to model that trajectory.

Certainly; and apologies, I'm uncertain whether your question targets Nelson Labs specifically or the whole company broadly. Speaking broadly though, our businesses have consistently done quite well at recovering rising costs through pricing charged to customers. And we definitely don't observe anything within the demand landscape overall or the market conditions that we believe would get in the way of that capability. Actually at present, while we work through our yearly budget process, we're in fact considering a few of those very exercises. So on the whole, we wouldn't anticipate significant margin strain tied to this. When examining the margin characteristics of every segment we just shared results for in Q3, we feel confident about sustaining those margin levels overall and further improving them across the longer horizon, consistent with what we've communicated previously. Earlier during my prepared remarks, I noted something along the lines that Nelson Labs' margin squeeze currently versus earlier periods stems mainly from that mix impact — the unfavorable mix impact tied to the decline in PPE testing. Additionally, as we've discussed before, because our businesses carry such elevated margin profiles, typically when we make acquisitions — bolt-on acquisitions — they tend to dilute margins at least somewhat in the short run, prior to us growing them and rolling out different OpEx programs; therefore you'll notice a certain degree of margin squeeze at Nelson Labs stemming from the Bioscience Labs acquisition completed earlier this year, and perhaps a bit more connected to the new acquisition we just announced too.

That said, Patrick, when it comes to Nelson Labs, we're still looking at EBITDA margins of 40%, correct. For a business in the lab space, the team has done a really strong job of delivering value to our customers.

Absolutely. Yes. Then you brought up M&A a bit; and you folks said you were sitting at 3.6 turns of leverage. Could you speak to the appetite? Clearly, a few bolt-ons have been completed. How should we frame the funnel over the three businesses? Any preferences, with one ranked above another? And then again the appetite regarding size. How big should we anticipate you going? Or does the emphasis remain on continuing to bring that leverage down? Thank you guys.

Yes, I mean, regarding our capital deployment, the initial item is to keep putting capital toward organic growth. That is our top priority. We will evaluate strategic M&A along with deleveraging opportunities. There's a strong pipeline list that our teams and we keep monitoring. I'd say it spans all three businesses, likely weighted more heavily toward the Nelson side, though not solely Nelson. On size, when it comes to the labs side, many of them are tucked in near the size of what we've completed here with Bioscience and RCA. And again for us, it's ensuring that strategically it matches what we're attempting to do, that culturally it lines up, and that we have plans for how we'll leverage and generate synergies throughout the company; that's genuinely what matters to us. So I'd say don't expect a call from us next quarter saying we're making a $2 billion acquisition; that's not how we think about it, right. But we're being quite deliberate in how we allocate capital toward M&A and organic growth as well.

I appreciate that information.

Hello everyone, good morning. Thomas Kelliher here, filling in for Sean. We appreciate you answering our questions. Perhaps we could turn our attention to Sterigenics — might you elaborate a bit further regarding the level of visibility you possess concerning sustained expansion in that area? Additionally, to what extent does softness in lab testing affect sterilization volume figures?

Sure. Thomas, this is Michael speaking. On the Sterigenics front, our visibility is quite solid. Our relationships with customers are governed by contracts that run for many years. At the moment, every one of our sites is running at very strong utilization levels. We have a good degree of confidence in where we stand in that business, and the same holds true for Nordion and for all of our sterilization solutions work across both of those operations. Now, Thomas, could you remind me what the second half of your question was? My apologies. Was it about the lab side? You're not seeing how that connects to the lab side?

Yeah, I need to ask this — could there be some sort of connection, say a softness on the lab testing side? Would that have any effect on the sterilization volumes you could receive?

No. What I'd say is certain new validations have come into the picture, and in those cases we're waiting on customers to assist with doing validations spanning both businesses. I'd also point out, on sterility assurance, keep in mind that roughly 40% of what Nelson Labs does involves taking product that frequently arrives from sterilizers and simply confirming those sterility plants function properly. So a link does exist there. It's over on the new product development side, where the pipeline could be somewhat slower as we ramp that up, which we mentioned to you, and that may be the cause. Beyond that, a few other areas not tied directly to terminal sterilization are experiencing some regulatory delays, and that's creating a bit of difficulty for Nelson, though it isn't directly hitting Sterigenics.

All right, that's useful. Thank you. Then could you share a bit more regarding the Expert Advisory Service Organization, I suppose, RCA included, plus what kind of opportunity that creates and how we ought to view any revenue contribution or growth?

Yeah. This is a thing we've had inside our company, and it was established within Sterigenics. Within Nelson, they had a group of individuals. For a good while, we understood we wanted to combine these organizations. In fact, we brought that together during the quarter — actually earlier in the quarter — beneath one of our leaders, and we've got, truly it assists us in providing end-to-end expert advice to our customers. They've requested this from us. So as we've performed survey work with our customers across the last several years, the feedback has been quite clear that there's high value in this work. It's entirely about our capacity to drive thought leadership. You'll see more from us in the coming months as we keep pushing on that in the marketplace and assist people with all the knowledge that we possess in this space in how they come to us. We're going to make it simpler for them to engage in this area. RCA is merely another component of that equation for us in that team and what they bring us on the services capability. And consulting there for quality and compliance and regulatory affairs is extremely valuable; they've got a heavy focus on biopharma and med device, which is very strategic to us long term. So we're optimistic about it.

Okay, that's everything on my end. Appreciate it, everyone.

Sounds good. Thank you, Thomas.

Hello, and thank you for letting me ask a few questions. Good morning to you. There are a couple of items I'd like to dig into, perhaps somewhat detailed in nature. The first concerns the RCA acquisition. From what I understand, that deal has now been completed. So I was curious about the extent to which it factors into the outlook for the remainder of the year.

The contribution is very slight. To begin with, this was a rather tiny purchase, with a price tag just north of $30 million, yet it clearly provides a chance for us to speed up our push in the area of expert advisory services. Thus, regarding that deal, I'd characterize it as being driven far less by what it adds right away and far more by what it will deliver over a longer horizon; consequently, I wouldn't view it as making any significant difference to our guidance—definitely not to the guidance covering the final couple months of this year.