Good morning, ladies and gentlemen, and welcome to the Arcosa Inc. Second Quarter 2019 Earnings Conference Call. My name is Bree, and I'll be your conference coordinator today. As a reminder, today's call is being recorded. I would now like to turn the call over to your host, Gail Peck, SVP Finance and Treasurer for Arcosa. Please go ahead.

Good morning, everyone. Thank you for joining our Second Quarter 2019 Earnings Call. With me today are Antonio Carrillo, President and CEO; and Scott Beasley, CFO. A question-and-answer session will follow their prepared remarks. A copy of the yesterday's press release and a slide presentation for this morning's call are posted at our website, www.arcosa.com. You can access the presentation by going to the Events tab under the Investors section of the website. A replay of today's call will be available for the next 2 weeks. Instructions for accessing the replay number are included in the press release. A replay of the webcast will be available for one year on our website. Today's comments and presentation slides contain financial measures that have not been prepared in accordance with generally accepted accounting principles. Reconciliations of non-GAAP financial measures to the closest GAAP measure are included in the appendix of the slide presentation. Let me also remind you that today's conference call contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. Please refer to the company's SEC filings including its Form 10-K for more information on these risks and uncertainties. I would now like to turn the call over to Antonio.

Thank you, Gail. Good morning, and thank you for joining today's call to discuss Arcosa's second quarter results and our business outlook. We are pleased to report our strong second quarter and first half results, which exceeded our initial financial forecasts and have positioned us to raise our guidance for full year 2019. The overall business climate has remained positive for our 3 business segments, which serve diversified end markets within the infrastructure sector. Our business model provides us with significant growth opportunities as well as a resiliency associated with our broad portfolio of products and solutions. Please turn to Slide 4. We had a number of successes in the second quarter advancing on both our Stage 1 priorities and other key operational initiatives. First and foremost, we posted 38% adjusted EBITDA growth on a 23% revenue increase. With all 3 business segments contributing to this strong performance. While there were some core specific factors, such as wet weather on the negative side and increased throughput allowing for additional orders to be produced in Energy Equipment on the positive side, on balance our results reflected organic growth, the benefit of our December 2018 acquisition of ACG Materials and operating margin improvements in several key areas of the business. Based on first half results and our current visibility, as outlined in the press release, we are raising our 2019 adjusted EBITDA guidance 7% at the midpoint. In the second quarter, we completed 2 bolt-on acquisitions that are aligned with our stated objectives. One in the aggregate business and one in the marine components business. Both transactions are good examples of what we're looking for. The acquisitions fit well into the existing portfolio. They bring immediate synergies, while broadening our geographic footprint. They add complimentary product lines. They reduce the overall cyclicality…

Thank you, Antonio, and good morning, everyone. Starting on Page 6, I'll walk through the second quarter results for each segment, and then give additional color on our increased guidance. Construction Products performed well, despite challenging weather conditions in Texas, Oklahoma and California. Revenues increased 38% to $115.6 million. Segment EBITDA of $26.5 million was $3.8 million higher than last year. This segment EBITDA margin of 23% reflects the strong geographic and competitive advantages of our Construction Products businesses. As expected, our second quarter margin was lower than last year. Two main factors contributed to the decline. First, as we have discussed on the last several calls, while ACG margins are accretive to our overall business, they are lower than our legacy segment margins. Additionally, ACG's operations in Oklahoma were negatively impacted by heavy rainfall, which lowered their margins from historical levels. Second, volumes in our legacy aggregates business were lower as the Dallas-Fort Worth market lost a higher number of days to weather than normal. When weather has been clear, customers have been purchasing at more normalized levels. So we're confident that the fundamentals of the market remained strong. Pricing was modestly lower, but volume was the bigger driver. In our other two businesses, specialty lightweight aggregates and Construction Site Support, EBITDA improved slightly in each business, demonstrating the strength of our broad-based exposure to infrastructure end markets. Overall, we continue to be pleased with our performance at Construction Products and are actively looking for additional ways to grow the business organically and through disciplined acquisitions. Please turn to Slide 7. Energy Equipment had another very strong quarter of performance, where our team drove organic revenue growth and operating margin improvements. Revenue increased 15% to $204.3 million from a combination of factors. First, unit volumes were higher in our…

Thank you, Scott. Now I will share with you our outlook on the business conditions in our key markets. Starting with Construction Products, please turn to Slide 11. We continue to see strong underlying factors driving growth for the Construction Products segment, as the private and public sector spending trends are favorable in our markets. While wet weather constrained our first half results, assuming normal weather conditions prevailed, we expect a stronger second half of the year for the construction segment. Weather conditions through the end of the second quarter have normalized, and we have seen an increase in volume when weather has been dry, which suggests continuing strong fundamentals. Pricing is another sign of market strength. During the second quarter, even our volumes dropped due to bad weather, pricing remained at healthy levels. As we discussed at the time of the ACG acquisition, in addition to creeping nicely, the business brought along a pipeline of small acquisition candidates that could be bolted on at attractive pricing. We completed one aggregate acquisition during the quarter of mid-single-digit EBITDA multiple, and we continued to advance a pipeline of attractively priced deals. So we remain optimistic that we can expand our construction segment to a healthy combination of organic and inorganic growth, while maintaining price discipline. Please turn to Slide 12. Moving to Energy Equipment, we continue to make good progress on lean manufacturing initiatives, which have significantly increased our throughput in utility structures business. Bidding activity for utility structures remains healthy and we have seen an increase in grid hardening and reliability spending across the country. This improvement in activity should provide our business with increased visibility on projects and allow it to continue building momentum in the implementation of the lean programs. In addition to organic growth in our traditional…

[Operator Instructions]. We'll take our first question from Bascome Majors from Susquehanna.

Congratulations on the results here. Can you guys, first of all, kind of directionally breakdown the EBITDA increase to 2019 between how much the acquisitions may have added? And what's more organic, based on the performance you've had this year?

Sure, Bascome. This is Scott. So the acquisitions really won't have a big impact in 2019. We've talked about $23 million purchase price mid-single-digit, so you're talking about annualized maybe $4 billion to $5 billion of EBITDA contribution, make that a 0.5 year and you're kind of at $2 billion, but in the first year we've got integration costs and some ramp-up costs. So really not much from the acquisitions this year. The primary increase was both our outperformance in the second quarter and some continued confidence in the second half from where we were a quarter ago.

That's great news. On the share repurchase plan, you weren't particularly active in the second quarter. Can you talk a little bit about that as a use of capital as you look out versus the big M&A opportunities that you talked about earlier?

Sure. Sure. So we've talked about our balanced capital allocation strategy across organic opportunities, acquisitions and return of capital to shareholders. And so if you look in the first half of the year, we spent about $40 million on CapEx, the $23 million on acquisitions and then for return of capital to shareholders paid $5 million in dividends and then repurchased about $11 million since the authorization of the program in December. So I think we'll continue to try to be balanced. We're really excited this quarter to have been able to deploy capital into the growth acquisitions. But we still have $39 million in the share repurchase program and we'll deploy that when it makes sense.

Okay. And as we look forward, I mean you gave a lot of comments from the second half, you talked a little bit about the barge backlog and sequential improvement and the profitability of that business as the ramp completes and better pricing rolls through. Any high-level thoughts you can give us on the business as you get out of this year and into next year? You mentioned some potential headwinds in rail related to what's the declining backlog in the industry there for railcars. But anything else that we should think about kind of puts or takes directionally as we think about your business transitioning into next year?

Sure. This is Antonio, Bascom. So let me give you some thoughts. I mentioned that about half of the backlog we have in barges will be delivered in 2020, and we had a slower order this quarter in barges than the first quarter. The first quarter was incredibly high but -- and this quarter was very complicated for customers. The river system was flooded, and they were basically trying to keep their business going with all those variables moving around them. Since the end of the quarter, I mentioned we continued to see good inquiries for barges, both on the liquid and the dry side, more on the liquid side. So we are -- and if you look at the barge replacement cycle, both on the dry side and the liquid side, there is -- on the liquid side about 25% of the barges in the fleet are over 20 years old, and we've seen a trend in barges being built -- being, let's say, replaced with shorter periods. So some of the larger companies are replacing their barges at 20 years, rather than 30 years. So you see the fleet, there is, I think, a very, very good indication that the demand for tank barges is going to be good over the next few years. On the dry cargo side, of course, we know the decline in coal, but also the fleet size and the fleet replacement cycle seems to be a good indicator that there is going to be -- we should expect some additional demand in the future. Also steel prices, I mentioned, should help that demand come through as steel prices peaked a few months ago, close to $1,000, now they're close to $700. So there's, I think, good economic factors that should also help drive the demand for barges. On the rail component side, our -- let me just continue on the barge, also the dynamics in the fundamentals of the shipping industry in the barge, rates have become better. The river system is becoming more efficient as the water recedes. So things are looking better. On the component side, I mentioned the battles for the rail OEMs have continued to go down. So as those volumes come down, we'll know more in the next few months. Volumes could be -- for our components could be lower. I think the pricing we already -- are having some impact this year and we'll see depending on how those volumes look, how pricing look for the following years. But overall, we're happy with the way the ramp up is going on our barge -- in our barge group. We've been able to get the people, we launched our first barge. We are really optimistic of how things are going.

And could you give us some high-level thoughts on energy? I mean you had a very good margin outcome in the first half of the year, but we're pretty transparent that, that won't be sustainable as you make some changeovers and get into tougher price backlog in the second half. Any high-level thoughts on the trend in the energy business overall as we get into 2020?

Sure. In my first quarter conference call, I mentioned that the lean implementation have increased our throughput significantly. And one of the reasons we thought we were going to have a lower margin in the second quarter was -- the increased throughput had created some holes in our production schedules in second quarter. So we went out into the bid market. As I mentioned, also there is -- there has been a very good bidding activity in the transmission business, so we were able to fill those holes with good margin orders, and our team has done an incredible job in working through the throughput and those orders. So we were very happy with what's going on in our transmission business. The headwind comes really on the wind tower side. In the second half of the year, we have some lower pricing coming through our business, and we also sold some additional orders, which are good orders, relatively good margins, but lower margins than the average we have. As I mentioned, we believe that's going to be the market of the future in terms of smaller orders and we have to become good at it. So the second half is going to be kind of our entry into the this new market. And it's counterintuitive because we are going into 2020 and -- a strong 2019 to strong 2020 in terms of orders, the wind industry is going install a record amount in 2020. And I'm lowering my forecast for margins. And that's the reason we launched our antidumping case a few weeks ago against several countries, Canada, Vietnam, Korea, because we believe in fair trade, but we believe in fair competition and that's why, I think, a lot of the margins in the future will depend on not only the demand factor, which seems to be better, if you look at all the forecast in the wind industry they are getting better. But we also need to have a fair competition from the supplier side. So that's one of the things that we are going to be watching how the ITC and the Commerce Department response to our antidumping case.

Okay. Last one, is the revenue split between wind towers and utility still fairly even? Or has that started to break in one way or the other?

Sure. This is Scott. Yes. It's still roughly even, yes. Depends a bit on the quarter, but still about the same size.

And our next question will come from Ian Zaffino with Oppenheimer.

Great quarter. A question would be on the barge side the pricing, what's the actual real pricing that you're seeing over material costs?

Sure. This is Scott. So we're -- we don't disclose direct gross margin. I'd say if you look at the history of the barge business, peak cycle EBITDA margins were roughly in the 20% range if you look at the bottom of the cycle, the past few years, they were kind of high single-digits, 5% to 7%. So we would expect to see in the third, fourth quarter and then into next year, EBITDA margins come off of that bottom, back up towards higher margins, still not at a peak yet. Peak margins occurred when the business was doing probably $650 million of revenue, with all the plants very full. We're not even back close to a peak-type level. So you're talking about coming off the lower margins headed towards a higher one but still not there.

Okay. And then on the dry side, is there a particular price level for steel where the customers will kind of hit the bid? And also maybe give us an idea of what the sensitivity is of every $100 per ton change. What is that change kind of the selling price of the barge? I'm trying to understand what the impact would be to the customer as they decide whether or not to purchase a new barge?

Ian, this is Antonio. I think it's a combination of 2 things. Like every customer is -- it makes -- their numbers and the combination is both the rates and the cost of the barge and make a decent return on their investment. If you look at the rates, they have been very, very low, and they've been coming up. So it's a combination of the cost of the barge and the rates. And that's why I said, I think the fundamentals are moving in the right direction, both of them. And it will depend also on type of commodity they are moving. I will tell you that the steel price, where it is right now, it's -- I would consider a good-level steel pricing, if you look at the history for plate. So -- and we've seen inquiries pick up in the dry side. If you look at the amount of barges that need to be replaced. There are very high number of barges. If you just make the numbers on our production for -- just our closest production for the last 20 years, we produced probably an average 400 barges a year. Over the last 3 years, we haven't produced a 100. So also, it's -- this year we're producing very few barges. So I think there is a good case for both sides. On one, fundamentally embedded, on the other side, at some point, someone is to replace their barges.

Okay. And then one final question. Scott, how much should ACG add in the quarter?

So we combine that with our legacy businesses, I'd say. We said, ACG performed roughly in line with our expectations minus a delta for weather. So if you look kind of historical $32 million of EBITDA that they did when we bought them, roughly in line with that by quarter minus some weather.

Our next question will come from Brent Thielman with D.A. Davidson.

Great quarter. On the energy business, I want to ask about the pickup and kind of grid hardening, fire restoration activity, I guess. And whether or not that's driving a pickup in pricing in that business. Are you seeing more appealing bid margins, I guess. Are you factoring in some offset to the, obviously, the issues in the wind business from that?

Yes. Brent, this is Antonio. And as I said in the second half, where the headwinds we see are really on the wind tower side. If you look at the numbers and the results for transmission business, they're doing really well. As Scott mentioned in his remarks, they're exceeding our expectation for margin improvement that we had last year. Last year, this was a business that was severely underperforming our competitors, and now it's doing much better. We are seeing some increase in the grid, both from our traditional customers, but also from the bid market, which is where we have not been playing. So if you look at one of the issues we had in the past, we were basically concentrated on our traditional customers, we were not playing in the market and we were kind of full. As we've increased our throughput, we become more active in -- with new customers, we become more active in the bid market and we see opportunities, as I mentioned, to expand our product line. So I think it's a combination of a good market and the dynamics of the lean implementation we're doing. And the team that we put together, that's doing a great job.

Okay. And then on the construction business. We often hear from the other public participants about sort of the traditional aggregates market. I'd love to get your views in terms of varying demand pieces on the specialty business, what you're seeing there? And I guess if you can comment on just pricing in general within the business.

Yes. So overall I think we share the view of the other participants that the residential market building continues to be strong, the nonresidential continues to be particularly strong. We have a disadvantage that we are more concentrated in certain markets, and were probably the hardest hit in terms of weather because we have so much of our assets here in Texas and Oklahoma. But at the same time, we're also fortunate that we are in a strong market, this Texas market continues to see strength. We -- both in terms of public and private spending, but also we have a great position here. And we -- I said in my remarks, as soon as the dry weather came back, we continue to see strong volumes. On the specialty side, we're really happy to -- what we're seeing in ACG. Scott mentioned, we had weather impacts, yes, that was from our traditional aggregates business. But also there is some -- on the specialty products, we have some plasters and some specialty things coming from our gypsum plants that have done extremely well. We're expanding capacity in ACG, we're doing quite -- CapEx going on into ACG going forward both in our Western facilities and also in Oklahoma to expand because we are running at capacity some of our plants. Probably the only side that we've seen some volatility in the energy sector, we have some exposure to the Permian and to the Oklahoma basin in terms of energy, that's a little more volatile. But for the rest, we see strength in all of our markets.

It sounds fairly balanced. It's good. I guess my last question. Obviously, you've done a couple of transactions this year, maybe if you could just talk little more broadly about the M&A pipeline? Is it still your expectation focused on maybe sort of smaller bolt-on transactions or anything potentially larger in that pipeline?

Yes. So yes, we have quite a bit of smaller transactions coming in through our pipeline, and we are disciplined about how we approach them. We are looking at it, some of them fit better than others, and as I've said before, M&A has its own, once you started with it, it takes a life of its own, each one of the transactions, it's unique. But we are also looking at some larger transactions. We've looked at some in the last few quarters. We've been disciplined of our pricing. We're not going to be paying absurd multiples. If you remember, one of our long-term strategy is to increase our return in invested capital. So it's a balance of what's available and what we can buy. We do believe that because of our size still, we can still access some of the smaller acquisitions that move our needle. But there is some potential larger acquisitions, more specifically, in the Specialty Materials side. Yes. And just to finish up. I also mentioned opportunities on the energy side on expanding our product line, so that's another area we're looking. Those are the 2 big focus areas, construction and the transmission expanding our product line.

Our next question will come from Stefanos Crist with CJS Securities.

Congrats on the quarter. I want to focus on the third barge plant opening up last week. Do you have a timeline, an expectation for when that should be margin accretive to the segment?

Yes. So we launched the first barge last Thursday. There's 2 barges behind it. We expect it to start becoming accretive probably in the fourth quarter.

Okay, great. And how does this affect capacity? You have a ballpark range down to third client?

Sure. So capacity for barge fabrication. As you know, one of the big competitor shut down last year. So that's why it was important to have this capacity available to be able to show the customers. Capacity for building barges is driven by 2 things, of course, the facilities, but also labor. And I think our capacity at the moment, even though we're open, we have the third facility open. We still have capacity and we've been able to hire people. Labor has not been a big issue for us. We've been able to hire the amount of people we need. So we have, I would say, as Scott mentioned, we are focusing right now, mainly on tank barges, that's what we're building, a few hopper barges. But there is still significant amount of capacity that we could increase if needed. What's nice about our position at the moment based on the mix we have is that each one of the 3 facilities we have is being set up to fabricate the barges that they are very good at making. So we won't be able to -- we won't have to be making different types of barges in each facility. So the setup is nice and the capacity can be expanded relatively easy.

All right. And just one more quick one. Can you talk about cash flow in the second half. It was very strong in the first half. Maybe quarter-by-quarter?

Sure. Stefanos, this is Scott. So we generated about $75 million of working capital in the first quarter, and then used a portion of that, about $50 million in the second quarter. Particularly in the barge businesses, we ramp up and build inventory in the third plant. So we've said, we'd expect to use a portion of that working capital and end up kind of roughly working capital neutral for the year. So you take kind of working capital neutral, and our EBITDA, we've talked about our CapEx and our cash taxes. We should have very healthy free cash flow for the full year and that includes the second half.

Our next question will come from Blake Hirschman with Stephens.

I'm not sure some of these might have already been asked, so I'll go ahead and apologize ahead of time. But on the Barges piece, I think the previous expectation was that the revenue there would kind of ramp sequentially throughout the year with a more impactful move kind of from 2Q to 3Q versus what was expected at least at the time from 1Q to 2Q. Is that still a fair way to count your outlook?

Correctly. The revenue ramp most significantly from 2 to 3 because now we have the third plant opening, should ramp a bit from 3 to 4, but the bigger step will be 2 to 3. Margin though, as we said, the third plant will still be kind of EBITDA neutral and Q3 won't be as accretive until Q4. So you may see a bigger margin bump in Q4.

Got it. And I know a lot of these point in time, backlog book-to-bill, that kind of things can move around a lot quarter-to-quarter, but it looks like backlog and barges slid a little bit quarter-over-quarter for the first time. And over a year, book-to-bill was a little choppy and new awards were a little bit slow. So kind of with all that put together, I mean, is this mainly due to weather? Is it timing-related stuff? Distractions with the new capacity adds? Just trying to kind of connect the dots with the early cycle outlook? And kind of what these metrics are saying, at least as of right now?

Yes. If you look historically, the way the orders are, they're normally choppy. So it's -- and we had an incredibly high number of orders in the first quarter. And these things, these barges, especially, the tank barges are a complicated piece of equipment. So there are negotiations, and there's design issues. And so it takes time. Every order takes time to be processed through. I also mentioned that river system will have been very complex during these last few quarters, in terms of flooding, et cetera, so customers were focused on just running the business. I mentioned since the close of the second quarter, we have seen activity, let's say, pick up in terms of bidding. When you sit down with our sales team, I think they are pretty confident with what they are seeing in the market in terms of orders out there and the inquiry. So I would say it's a normal market. And we still have $160 million in place for a backlog for 2020. So about half of our backlog is to be delivered in 2020.

Got it. Makes sense. And lastly for me, just a quick clarification on the back half margin headwind commentary. I think you said it was 200 to 300 bps or so. Part A being, is that year-over-year? Or is that a headwind first half versus second half? And Part B being, was that across the whole energy segment? Or was that specific to like wind towers or one of the pieces within?

Sure. This is Scott, Blake. The 200 to 300 basis points is really of the normalized first half. So we had the bad debt recovery in the first half that made it a little higher than it would have been otherwise. And we said, it's kind of 200 to 300 of the normalization. That's still a good improvement from last year's full year average. If you remember, last year's EBITDA margin in this segment was about 10%. And so even with the headwind of lower pricing and inefficiencies in the second half, we still expect the second half to be better than last year's average. Your second question about where is that headwind coming from? It is primarily the wind towers. The other businesses seem strong. The markets are strong. Our operational improvement initiatives are going well. So the primary headwind should be in wind towers, although I'll still say it's a good improvement from last year.

Our next question will come from Justin Bergner with G. Research.

A couple of questions here. First off, for the energy margins, I guess, coming out of the first quarter, you said that you expected them to be modestly better than the 10% from last year in the second quarter to the fourth quarter. Obviously, you did something in the order of 15% in the second quarter and are guiding something in the 12% to 13% range for the second half. So I was wondering if all of the strength was being driven by this bid activity? I guess, it seems like kind of more of a spot market for you? Or if there are other factors as well that are contributing to that step up?

I think it is a -- sometimes these calls and everything is -- they're sure to talk about things we're doing, but it's a combination, I would say, of 4 things. So let me start with wind towers. Wind towers, even though the market environment is uncertain and we have inputs, et cetera, all those things I already mentioned. The team is doing an incredible job and they have a very mature lean system, but they've been just simply outstanding in the way they have been performing. Every one of our plant is doing an incredible job in throughput, in cost reductions, in running their business and that's why I'm very certain that in normal conditions, we can go head-to-head with any company in the world and be the best-in-class in wind towers. So very happy with what's going on there. On the transmission side, I mentioned already the throughput is increasing and that's allowing us to penetrate markets we were not playing at. So it's a combination of volume and new markets. And then we have 2 businesses we don't talk much about, which is the power business, both in the U.S. and Mexico. I think part of the margins are coming from almost turnaround type businesses as our Mexico business was losing money last year. It's making money this year and every quarter is looking better. They are doing a great job. They are cutting costs. They are increasing their production. They are focusing on their market. And the tank business in the U.S. is also healthy and they're doing a very nice job. So I would say the 4 businesses that we have in this segment are doing really well. The margin headwind we see in the second half is really coming from the wind towers, as I mentioned, because of pricing and some of the learning curve we're going to go through as we build towers for 3 customers.

That's very helpful. Shifting to the barge business, two quick ones there. Why are barges beginning to be replaced sooner? And was the pricing on the orders, did that step up occur in the second quarter? Or did you enjoy that as well in the first quarter when you had the large amount of orders?

We've been -- with the gradually rising prices, we have seen demand going up. So we started since early in the year and we've been little by little gaining momentum on that. On the tank barges that I mentioned, they're being replaced shorter times. These are some of the larger companies we have been dealing with, barges are very different than rail or some other pro tanks, let's say, where you keep oil. When you have oil being -- oil or other chemicals being moved through the river, if there's a spill or something, there's a bigger environmental impact. And we are seeing from some of our customers a significant focus on safety and improvements being made on the barge design to increase safety, increase the amount of safety features to avoid leakage, et cetera. And I think that's one of the drivers that's happening in the tank barge. When you see the river system like you saw it in the first half with all the flooding and you see some of the videos of the barge sometimes getting lose, et cetera, you need a very, very robust safety -- safe barge to handle liquids. So I think that's one of the biggest things happening.

Okay. That's helpful. So I assume they need to make the safety upgrades. They replace the barge rather than try and refurbish it for the most part.

Yes. Those are the, let's say, anecdotally, the comments we're getting from our customers.

Okay. Lastly, I just want to clarify 1 or 2 numbers. You mentioned the start-up costs in the barge facility in the second quarter. I think that came at me a bit fast. And then the line change for the wind towers, is there sort of a dollar amount that that's going to be a headwind for the second half?

Sure. This is Scott. So the second quarter ramp-up costs in Madisonville we said were $1.3 million. Those have kind of lessened over time, even though we're producing revenue there by shipping barges. There's still lower margin as we're ramping up the learning curve. So that's the barge facility. On the wind tower margin headwind, we didn't break out the combination of the pricing, any inefficiencies, but said total would be about 200 to 300 basis points of the margin headwind.

Okay. Great. And then the bad debt recovery of $3 million that's in your $230 million to $240 million now, the one -- the bad debt in the first quarter.

Correct.

And there are no further questions at this time, so I'll turn it back to Gail Peck for closing remarks.

Thank you, Bree. Thank you everyone for joining us today. We look forward to speaking with you again next quarter.

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