Lionheart Holdings (CUB) Q3 2019 Earnings Report, Transcript and Summary

Greetings. Welcome to Cubic Corporation's Third Quarter Fiscal 2019 Earnings Conference Call. [Operator Instructions] I will now turn the conference over to your host, Kirsten Nielsen, Vice President of Investor Relations. Ms. Nielsen, you may begin.

Hello, everyone, and thank you for joining Cubic's webcast. I'm joined today by Brad Feldmann, Chairman, President and Chief Executive Officer and Anshooman Aga, Executive Vice President and Chief Financial Officer. Before we began, I'll remind everyone that our presentation contains forward-looking statements that are made pursuant to the safe harbor provisions of federal securities laws. Our most recent SEC filings include risk factors that could cause the Company's actual results to differ materially from our expectations. In addition, we have included non-GAAP financial measures in our discussion. Reconciliations to the most directly comparable GAAP financial measures can be found in today's press release and in the appendix to today's presentation. With that, I'd like to turn the call over to Brad.

Thank you, Kirsten. Thank you, everyone, for joining us today. On today's call, I will start by discussing our third quarter and year-to-date performance for fiscal year 2019, followed by an update on our strategic priorities, then I'll turn the call over to Anshooman, who will cover the financial results. Starting with Slide 3, sales for the third quarter were $382.7 million, a 29% increase compared to the third quarter of last fiscal year. Adjusted EBITDA for Q3 was $30.6 million, a 9 % increase compared to the third quarter of last year and Q3 adjusted earnings per share were $0.66, a 38% increase over the third quarter of fiscal 2018. Anshooman will discuss the quarterly financial results in more detail, including the narrowing of our financial guidance. We are very pleased with our year-to-date performance, with sales up 25%, adjusted EBITDA up 26% and adjusted earnings per share up more than 50%, reflecting project delivery on our major transportation contracts, strong demand across the Mission Solutions portfolio and the impact of our recent acquisitions. We expect continued growth based on our high backlog of $3.7 billion and robust pipeline. A key highlight for this quarter is that our Mission Solutions business acquired 20% of Pixia, a commercial technology company that provides high-performance platform solutions to manage massive amounts of imagery data for the United States intelligence agencies and other customers. We also have the option to purchase the remaining 80% by February 2020. Lastly, we're pleased to see that the White House and Congress reached a two-year budget deal, which sets defense budget levels at $738 billion and $740.5 billion and non-defense budget levels at $632 billion and $643.5 billion, respectively, for FY '20 and '21. We see this as a positive outcome as it avoids sequestration and it provides stable and comparatively robust defense and non-defense discretionary funding in FY '20 and '21. Turning to Slide 4, we continue to deliver on winning the customer priorities across the business. Cubic's strategic investment in Pixia enhances our Mission Solutions offering by extending our presence at the enterprise and the edge for defense in the United States intelligence agencies. This acquisition aligns with and enables our battlefield cloud strategy of processing and disseminating data rich actionable intelligence across the enterprise and at the edge of the battlefield in real time. Pixia also has a compelling financial profile, with margins consistent with software platforms. On May 31, our Transportation team successfully launched on time the first phase of our One Metro New York or OMNY fare payments system at 16 subway stations and on buses originating from Staten Island. Between Thanksgiving this year and October of 2020, we'll effectively install the rest of the entire system. We are very honored to partner with the New York MTA on this project and I am proud of the Cubic team for completing this phase on schedule just 18 months after the contract was awarded. As an update on Boston, we continue to be in positive negotiations with our customer to reset the program's milestones. The Cubic Global Defense Business recently received NSA certification for our Engage, air combat training system Miniature Encryptor for Air Combat Maneuvering Instrumentation, or ACMI and Live Virtual Constructive, or LVC, training systems globally. This innovation is a cost effective drop-in ready solution that enables secured transmission of classified data for existing global ACMI systems and for LVC systems in an operational domain. Turning to Slide 5, we're making great progress across growth initiatives for each of our businesses. The Transportation team is executing on our mid-market strategy by partnering with Delerrok to deliver a proposal for an opportunity to modernize British Columbia's transit's fare collection payment systems from magnetic stripe technology to an account-based back office that supports contactless payment cards and mobile device payment. We were recently shortlisted for and performed our oral presentation for this opportunity. As we've discussed on prior calls, we continue to pursue international expansion in transportation. Our recent mobile ticketing wins in Dublin establishes a footprint with the customer, which could lead to larger system upgrade and services contracts. During the quarter, we also turned in a good volume of proposals, including in Singapore, Hong Kong and the next generation NextBus system in San Francisco. In addition to several upgrade proposals to our installed base. We also recently achieved our first international sale of GRIDSMART with Vic Roads in the State of Victoria, Australia. We continue to be very pleased with the integration and performance of our recent acquisitions. Our Mission Solutions business continues to see strong performance and beat out competition on key strategic wins. We were recently selected as the video data link provider for the F-35 Lightning II program. Cubic's video data link capability for the F-35 will significantly increase the aircraft's combat capability and is essential to the overall F-35 follow on modernization program. CMS was also recently awarded a delivery order from the United States Air Force for the development and demonstration of a small form factor radio, multiple wave form prototype, including our protected wave form Boomslang for the Data Link Enterprise. The system is composed of one ground and one air component for improved communications capability, providing ground-to-air and air-to-ground real time communications. These awards follow the recent string of other secure communications contracts we've announced, including the MH-60 and MQ-25. We expect these contracts to lead to larger production contracts and deliver strong growth over time. We also delivered several Atlas Systems, which is our integrated offering, combining the GATR portable SATCOM antenna, our DTECH ruggedized network hardware and TeraLogics video streaming capability. Lastly, we shipped additional GATR systems which contributed to CMS's strong growth in the third quarter. And we also now have all orders in backlog to meet our expectations in this segment for the full year. During the quarter, our Cubic Global Defense business was awarded several contracts valued at approximately $150 million from various customers in the Indo-Pacific region to provide air combat maneuvering instrumentation, training, support for combat training centers and deliver upgrades and maintenance services for the region's live fire ranges. Another recent award for CGD, includes a $30 million booking for the P5 Combat Training System. This system for the Qatari Emiri Air Force's Eurofighter Typhoon positions CGD for expanding air training opportunities in the region and globally. Lastly, we achieved successful operational demonstrations and use of our new air combat maneuvering instrumentation planning, execution and after action debrief, digital platform known as SPEAR. During several United States Air Force Red Flag exercises, paving way for license acquisition and deployment. We expect our Defense Training business to return to growth driven by several opportunities and strategic actions. Recent wins with such programs, such as the Qatari Typhoon Award and the award in Southeast Asia to provide logistics operations and maintenance support services have combined to secure our incumbent position and added more than $90 million to backlog. Additionally, several international opportunities expected over the next two quarters will facilitate growth, led by two programs key program wins for our core product lines, which combined will add roughly $100 million in bookings. With the recent success of our LVC advanced technology demonstration with the United States Air Force, we have established a mature LVC position for the global air training market and we are well positioned for the recapitalization of this over $1 billion market. Lastly, we continue to develop innovative training technologies and will make available in fiscal 2020, two platform initiatives for human/machine performance assessment and gain-based training delivery for global defense, government and commercial markets. On Slide 6, we continue to drive our mission of living One Cubic or sharing strategy to enhance value. We've highlighted several examples here and I'll touch on a few. This year, we have been working toward our launch of our product lifecycle management or PLM system. The biggest benefit of PLM for Cubic is the ability to share technical information and data among our engineering teams and the overall Company using disciplined workflows. This is expected to result in increased quality and cost savings across the organization as we enable our engineers to access drawings and data in a single, easily accessible location and begin to standardize design practices and specifications across our products and engineering teams. Another One Cubic example is our new Tri-Reader Validator, which is the device at the forefront of our next generation fare collection systems. This innovation was developed through engineering collaboration across all three businesses. Our Defense and Transportation teams are also collaborating on a project with our network rail customer in the United Kingdom. The objective with this project is to derisk a large scale track and station renovations through real-time tracking and situational understanding of project assets location to improve overall project delivery of their track renovation. Next, I will ask Anshooman to describe our financial results in more detail.

Thank you, Brad. Please turn to Slide 7 to cover the financial highlights for the quarter. Sales in Q3 were $383 million, up 31% year-over-year on a constant currency basis, driven by organic growth from Transportation and Mission Solutions and the impact of our Trafficware in GRIDSMART acquisition. The impact from the new revenue recognition standard, ASC 606 had a favorable impact on quarterly sales of $15 million, including the Boston project. Excluding Boston ASC 606 impacted sales negatively by $5 million. Adjusted EBITDA for the quarter was $30.6 million, an increase up 11% on a constant currency basis. Adjusted EBITDA margins are down year-on -year, primarily as a result of investments in Mission Solutions to drive future growth and a tough comparable to strong CTS margins in Q3 last year. Adjusted EPS increased 38% to $0.66 per share. Free cash flow was $32.9 million in the third quarter and adjusted free cash flow, excluding the impact of the Boston consolidation, was $52.5 million. Free cash flow was supported by the milestone payments related to the New York contract, as well as $45 million in net proceeds from the sale of real estate in San Diego and Orlando. Including the real estate sale proceeds and free cash flow is consistent with the treatment of capital investments in our facilities in recent and future years, which also helped enable the real estate sales. We expect further improvement in the fourth quarter, driven by shipments in our Mission Solutions business and additional milestone, payments in Transportation. Turning to Slide 8, we continue to optimize our real estate. By 2021, we expect to reduce our real estate footprint by approximately 15%, cut our owned real estate by more than half while providing our employees with a modern cost effective environment. In June, we announced the sale of our San Diego, Kearny Mesa and Orlando campuses for $45 million to further rationalize our real estate footprint. Slide 9 provides a summary of the third quarter consolidated results, which are mostly covered already. I will point out that last year's Q3 bookings included $276 million from the Brisbane Transportation Systems Award. Beginning last quarter, we added adjusted earnings per share to improve our financial disclosures and guidance. Adjusted net income for the third quarter was $20.7 million or $0.66 per share compared to $13 million or $0.48 per share in Q3 of last year, mainly driven by higher adjusted EBITDA and lower taxes, which more than offset higher interest expense and a higher share count year-over-year. Moving to the Transportation segment results on slide 10, sales grew 32% on a constant currency basis, driven by the New York and Boston fare collection projects and the inclusion of Trafficware and GRIDSMART. Adjusted EBITDA margins improved sequentially from Q1 and Q2, but were down versus Q3 of last year, which was the strongest quarter for CTS in fiscal '18 and higher than the CTS's full year margins for fiscal 18. Adjusted EBITDA is expected to increase meaningfully in the fourth quarter, driven by continued ramp on the larger projects, including manufacturing, spend, and we expect full year margins to improve year-over-year. Moving to Slide 11, our Mission Solutions business reported another solid quarter with robust growth in bookings across the portfolio. Sales more than doubled compared to the third quarter of last year as growth increased across all product lines. Adjusted EBITDA margin reflects the accelerated recognition of costs for a new contract award in protected communications totaling $1.3 million and continued investment in new technologies. Including ISR systems assistance totaling $1.8 million. Excluding these investments, adjusted EBITDA margin would have increased year-on-year. Turning to slide 12, as we've discussed on prior calls, this fiscal year performance in Cubic Global Defense has been impacted by the delay of international orders. We expect improvement in both sales and EBITDA in the fourth quarter driven by recent order activity and additional Q4 orders. Turning to Slide 13, as we approach the fiscal year end, we are narrowing our full year guidance. We expect fiscal 2019 sales to be in the range of $1.44 billion to $1.48 billion. For adjusted EBITDA, we are narrowing the range to $145 million to $155 million, maintaining the same mid-point as our prior guidance, and the adjusted EPS range of $3 to $3.35 per share, reflects the narrowing of adjusted EBITDA. As we've said on prior calls, we expect a strong fourth quarter, driven by the project ramp up in CTS, shipments in Mission Solutions, and improvement in Defense Training business. Now I'll turn the call back over to Brad.

Turning to Slide 14, in summary, we delivered strong revenue, adjusted EBITDA, and adjusted EPS growth year-on-year, as well as improved free cash flow. Year-to-date Mission Solutions and Transportation delivered robust sales and we continue to expect Defense Training to return to growth with our recent wins as well as upcoming opportunities for our live virtual constructive solutions and expected near-term international orders. Our investment in Pixia brings technology-driven market leading solutions to manage massive quantities of data for the United States intelligence agencies and other customers. As we enter the final two months of fiscal 2019, we remain focused on meeting our commitments. We remain confident in our full year outlook, driven by our planned schedule on our major Transportation projects, improvement Defense Training, and our expected shipments in Mission Solutions, all of which is in backlog, giving us good visibility in CMS. Now, let's proceed to the Q&A session.

[Operator Instructions] Our first question comes from the line of Jon Raviv from Citigroup. Please proceed with your question.

Hey. Good afternoon, everyone. Brad and Anshooman, on the CMS performance, and clearly so, this question sort of refers to sales and margin. I know it can be a very lumpy business. Was there any timing benefit or pull forward on the sales line in 3Q, verse 4Q this year? And then also on the margin, can you just go through some of those adjustments, and sort of should we continue to expect to see those sorts of adjustments going forward in terms of bringing on new contracts or this was just a reflection of the maturity level of some of these projects and heading into 2020 and beyond things will smooth out their?

Yes. This is Brad. There was some sales we got done in the third quarter because as you know, we had regular order this year and we got the orders earlier, and so we were able ship earlier. Having said that, we will continue to see great growth in the fourth quarter and we would expect to have margin expansion in the Fourth quarter similar to last year.

Jon, on your point on the one-time investment, the investment for the contract that we took, that was more of a one-time expense there. Basically, as we book the contract, all of the cost to deliver the initial units were taken upfront. As we get incremental orders these will be high margin incremental orders in the future.

And Anshooman, following up on that point, can you just add some perspective as to why that's the economic model here, is it customer just saying, hey, you guys pay for it upfront, and we'll get you back later? Why did that expense all fall in one quarter?

So when you enter a program, you get the initial production orders, which are a few units. So you have to take the cost of development of these initial units and charge it to project which leads to a forward loss position. All the units you get for delivery after the initial delivery are at very high margins because the cost of the R&D is already been expensed to the initial production order. So, for example, you might get 10 units of delivery initially on a program that will have a few hundred after that. All the cost of the R&D went to the first few 10 units in this example.

Our next question comes from the line of Jim Ricchiuti from Needham & Company. Please proceed with your question.

Thank you. Good afternoon. Hello, Brad. Can you provide us with an update on the major Transportation contracts? Where do you stand with Boston, how is New York progressing and what's the pipeline look like for some of the other business that you're pursuing?

So as you know, Jim, we rolled out the first milestone in New York on time. And the next portions will go from Thanksgiving through the next couple of years after that. The project is proceeding well, the customer is very happy. In Boston, we're renegotiating some of the milestones. The customer wants different equipment sets, some related to their public policy with regard to their distribution networks. So, we're working with them in a positive manner. Brisbane is ramping up, as you would expect, and San Francisco as well, so we'll see great growth in that business. Based on our backlog, things are going well. In terms of getting new orders and new backlog, I mentioned in the call that, we put in some fairly sizable proposals in both Singapore and Hong Kong. We're working hard on our mid-market strategy, talked about some effort in Canada. We won a order in Dublin. In terms of big cities, Singapore is large, Hong Kong is large. We've talked about Toronto, that's also large. And we're very fortunate that we have this very large base of business and we're going, providing proposals to our customers for upgrades that are sizable as well. So we would expect, next year to book quite a bit of business.

That's helpful, and if I could just change gears for a second. Can you talk a little bit about the investment in Pixia and how this perhaps fits in with the broader CMS portfolio?

I'll talk about the fit and we'll let Anshooman deal with the economics. So, as you know, we made a bet in CMS on what I call the insatiable appetite for full motion video, pictures worth a thousand words, so that we can help our military have awareness of what's happening on the battlefield. As you know, we have distribution systems with Teralogics. We have satellite systems to move these things around. We have networking systems and so it all fits in moving full motion video around. We know that post 9/11, full motion video - we wanted to provide to Sergeant Jones, for instance, on the other side of the building in a counter-terrorism play. What Pixia provides is, they're doing the processing and storage and retrieval of very similar data called wide-area motion imagery. And so wide-area motion imagery is like taking a picture of a big swath of a city and then when you see something of interest, you take this soda straw, if you will, and you take full motion video of it. So, it's sort of like helping you understand what's going on in a big swath area and then using our full motion video. So, I don't want to call it ham and eggs, but they're very much related.

Got it. And --

Jim on the economics, as we mentioned earlier in the prepared remarks, we bought 20%. We have an option to get the remaining 80% of the business. The business has good platform, software platform like margins, business is grow, and the multiple on 2019 earnings is going to be very attractive.

And I might also add, it was probably noticeable, but Anshooman did a terrific job of rationalizing our real estate footprint and those proceeds that you could argue weren't earning that good of a return, have been parlayed into a business that will have software platform kinds of margins. So, great for shareholders.

Our next question comes line of Ken Herbert from Canaccord. Please proceed with your question.

Hi. Good afternoon. Yes. Hi, Brad. I just wanted to first ask, it sounds like you've got very good visibility on the full year 2019 expectations with tightening the guidance range, and like in prior years, about 50% of your EBITDA is going to come in the fourth quarter. Are there any areas you would specifically highlight as risk areas, as we think about the forth quarter or if timing of the budget in there is in fact a CR, or is there anything else in particular you'd point to that could be a risk or is the confidence level very high on the fourth quarter and thus the full year?

Confidence level is very high, all in backlog, teams working day and night to push it through.

Okay. That's great. And if I could, Anshooman, I just wanted to ask cash flows. I mean, it looks like this year with the projects and everything, there's a very significant investment in working capital and the business is really using a lot of cash, at least, through the first nine months of the year. How should we think about that maybe in the fourth quarter? And I know you don't typically give guidance on this, but then I guess more importantly, as we think about transitioning from 19 Into '20, where do you see - it sounds like working capital could be a big opportunity, but where do you see the opportunities to drive improvement here, specifically as we transition into '20?

Thanks, Ken. So going into '20, I as I mentioned first for fiscal '19 on the call, we expect cash flow to be positive in Q4 again. And then going into '20, we expect it'll be positive for the year also, given the fact that we'll have a lot of the milestone payments from our big Transportation contracts coming in. Brad talked a little bit about the schedule where we'll make good progress with production milestones that lead to cash. So, there were be positive cash flow from that. And also, the defense budget, what happens is, if we can get the orders early and we will start - be able to convert lot of inventory into receivables and into cash, which we also expect some cash to come in from August deliveries in September, for example, this year. So overall definitely a better year in 2020 from cash perspective as we reduce our working capital again.

Okay. That's great. And at the risk of maybe getting too far out ahead here, is there a way we should think about conversion, either on an adjusted EBITDA basis for free cash flow, as this business gets to a more normal level, any numbers Anshooman you'd be prepared to put out on a conversion basis?

So, given that we're a project business, there are a little bit of lumps on a year to year basis. So if you start thinking on two or three year horizon from a cash flow perspective, there is no reason why we shouldn't be converting our net income into cash, that given our amortization, that gives us some contingency for growth in the business as we continue to grow. We have aggressive growth targets. So, that's a good way to think of it in two or three year chunks.

Our next question comes from the line of Mark Strouse from JPMorgan. Please proceed with your question.

Yes. Hey, everybody. Thanks for taking our questions. Hey, Brad. How are you doing? So I wanted to follow up on Jim's question on Boston. I understand that things can change in a negotiation, but on a net-net basis, are these changes that could potentially add to the value of that contract? Or is this potentially something that would eat into you costs?

They will add to the value of the contract.

Okay. Good to hear. And then with Pixia, I understand you're not quite ready to give a lot of detail there on the financials, but Is there a material contribution to fiscal fourth quarter, to the remainder of fiscal year '19 guidance?

There is actually no contribution to the fourth quarter guidance because given we have only bought 20%, we will account under the equity method, and in our adjusted EBITDA, we don't count equity income as adjusted EBITDA. So, from adjusted EBITDA perspective, it won't be material. There will be some impact to out GAAP EPS. Obviously, positive impact to our GAAP EPS.

Got it.

But on a longer period of time, it will have very positive impact to Cubic as we buy the rest of the company?

Our next question comes from line of Louie DiPalma from William Blair. Please proceed with the question.

Hello. Good afternoon, everybody. Brad, should the future booking associated - can you hear me?

I can hear you fine.

Should the bookings associated with the live virtual constructive product line and the recent international win drive an inflection to positive Defense Training growth for the full fiscal 2020 year, next year?

Yes.

Great. And for ANshooman, you just mentioned in one of your answers that you expect positive free cash flow generation for next year. What are those specific Transportation milestones in Boston and New York City that we should be looking out for that you are expecting to receive?

So, a lot of them will be - so we did beneficial use one for New York. We'll have the next beneficial use and there'll be further deliveries and as we deliver, we're going to start getting cash on those. In Boston, there'll be production, which once we go to production on the hardware there will be milestones. And for the other projects also as we get into the milestones of production, as we get into the initial phased delivery of the projects. of those come with milestone payments that help with our cash flow and reducing our working capital.

And should San Francisco and Brisbane have any major cash impact for fiscal 2020?

Not material in a negative way.

Okay. And investors often ask what the future market opportunity available for Cubic is after you guys have already won large contracts for New York City, London, San Francisco, Chicago, Boston, et cetera. In the scripted remarks and in the Q&A, you referenced opportunities in Dublin, Singapore, Hong Kong and San Francisco and Metco at the recent New York Stock Exchange presentation also referenced that he expects Toronto to come up for bid next year. Collectively, what is the potential size of all of these new opportunities and do you think the size of these new opportunities is as big as your same-store sales from all of your existing customers?

It'll be very significant. Of course, we're in a competitive environment. We certainly believe that we have a strong edge given our patron share advantage, as you pointed out, but significant hundreds of millions of dollars on the aggregate, so it'll be very significant Louie.

Thanks.

And Louie, I think the other important pieces what Brad mentioned is our installed base upgrades which can add significant bookings and revenue also for us in the future.

Thanks, Anshooman.

Louie, we're going to continue to grow this business significantly.

Yes. And investors, they're looking at the future market opportunities and you listed a lot of them. I think you referenced Philadelphia and Toronto as two big ones and we've been getting a lot of questions on when those could be material for you guys and what's the opportunity for you to...

Sorry, Louie. Some will start next year for sure, and some the year after. But they will be great opportunity to grow and as you know we are working hard in the mid-market as well, that's a relatively new market for us.

Our next question comes from Jon Raviv from Citigroup Inc. Please proceed with your question.

Hey, thanks for taking the follow-up guys. So we can all appreciate the story behind offering up goal 2020. I was wondering if you could think about how that story might evolve as we do approach 2020? What are the parameters, the way you think about the business over a couple of more years and when you might think you might communicate, if at all, those sorts of multiyear goals?

Stay tuned for the next call in November. But what I would say is, as you know, we hired a Chief Digital Officer and we're working hard at trying to create digital platforms to accelerate the revenue growth of our existing businesses and we believe there is significant opportunity there to do that. So we'll talk about that in the November call.

Appreciate that, Brad. Oftentimes we saw it on display this quarter, but oftentimes when you make investments to accelerate growth sometimes it does come at the expense of profitability. With all the opportunities you see in the market, your Chief Digital Officer, is there a chance that just the profitability of the business could stay flatter for longer as you harvest some of those returns back into business or do you view this as an accelerating growth and accelerating profit type business as you roll out these new business models, so to speak?

We think the latter.

In a few words. Appreciate that, Brad. And then the last thing from me is just on the mid-market at CTS. I think we've been on the impression that that could be a good margins as there is kind of a lot of rinse and repeat, so to speak, not to minimize the complexity, but it's doing things over multiple. As you move into this strategy, what are you seeing in terms of potential returns in the mid-market, including how things are structured with Delerrok as you pursue that opportunity? Thank you.

Yes. So we believe that there's an opportunity to create platforms to provide fare and information services in middle market cities. Middle market cities generally don't have a lot of CapEx and we believe we will be able to scale within the cloud and take a piece of OpEx so we can provide these services. And of course, when the engineering is done or nearly done the cost to add another city aren't that significant. And so the revenue function should go up at a much higher clip than the cost function.

And the strategy in terms of dealing with Delerrok?

Yes, so Delerrok is one of the pieces. There are some other things that we're working on. As you know, we have this outfit called NextBus, and we have been doing some artificial intelligence, machine learning, algorithms to have a better guess about when the bus is going to show up. We've been working very hard on our mobile app offering, we've been working on our platform, we've been working on some things related to other adjacent revenue streams associated with that, and so we see it as a great opportunity

We should put this under the category some of the sales synergies from the acquisitions that you are doing?

I think that's right. But also, I think the business model is a little bit different in the sense that it would be by the fare based as opposed to put a system in and get paid for that. And so every time someone would take a ride, or take the journey, the revenue meter would click.

Understood. Thanks a lot for the extra time there Brad. End of Q&A

We have reached the end of the question and answer session and I will now turn the call over to Brad Feldman for closing remarks.

Thank you. We are pleased with our progress to-date, and we remain very focused on meeting our commitments in the fourth quarter. Thank you for joining us today on the call.

This concludes today's conference. And you may disconnect your line at this time. Thank you for your participation.