Good day, everyone, and welcome to the Unified Natural Foods Third Quarter Fiscal Year 2018 Earnings Results Conference Call. [Operator Instructions] And please note that this event is being recorded. I would now like to turn the conference over to Faten Freiha, Director of Investor Relations and Corporate Strategy. Please go ahead.

Thank you, Will. Good evening, everyone. Thank you for joining us on UNFI’s third quarter fiscal 2018 earnings conference call. By now you should have received a copy of the earnings release issued this afternoon. This press release and the webcast of today's call are available under the investor section of the company's website at www.unfi.com. Joining me for today's call are Steve Spinner, our Chairman and Chief Executive Officer; Sean Griffin, our Chief Operating Officer; Mike Zechmeister, our Chief Financial Officer; and Chris Testa, President of the Atlantic Region. Steve and Mike will provide a business update and speak about our performance from the quarter and outlook for fiscal year. We'll take your question after management's prepared remarks conclude. Before we begin, I’d like to remind everyone that comments made by management during today's call may contain forward-looking statements. These forward-looking statements include plans, expectations, estimates, and projections that might involve significant risks and uncertainties. These risks are discussed in the company's earnings release and SEC filings. Actual results may differ materially from the results discussed in these forward-looking statements. And lastly, I'd like to point out that during today's call management will refer to certain non-GAAP financial measures. Reconciliations to the most comparable GAAP financial measures are included in the schedules on our press release and on the investor section of the company's website under events and presentations. I'll now turn the call over to Steve

Thank you, Faten. Good evening, everyone, and thank you for joining our call today. I'm excited to discuss our results for the third quarter, which were underscored by strong top-line and bottom-line growth while we continued to progress against our strategic growth objective to build out our product and service offerings through our buildout store initiatives. Before discussing our results, I would like to talk about recent changes in our management team, including the appointment of Jill Sutton as General Counsel, Corporate Secretary and Chief Compliance Officer and Sean Griffin's previously-announced retirement and succession plan. Joe Trafficanti has served as our General Counsel and Chief Compliance Officer for nine years and will be retiring. Joe was UNFI's first General Counsel. He built our internal legal department and organized it to serve all UNFI constituents in all legal matters. I'd like to thank Joe for his outstanding commitment and dedication to UNFI over the years and wish him well in his retirement. I'm pleased to welcome Jill Sutton to UNFI. Jill joined our team in mid-May as the General Counsel, Corporate Secretary and Chief Compliance Officer. She is a highly accomplished executive and her background, experience, and values match well with UNFI. Jill brings a valuable blend of expertise to UNFI, including her experience as an active member of the executive team and general counsel of a food and beverage company with significant distribution operations. I'm looking forward to partnering with Jill to continue to drive UNFI's mission and execute on our strategic plan. Sean Griffin and I have worked together for many years throughout our careers, and over the years Sean has demonstrated incredible leadership, accountability, integrity, and performance. Sean has been an important team member as our business has almost doubled in size over the last five years. He…

Thanks, Steve. It's great to be on the call this evening. I've been with UNFI for almost nine years in various capacities and currently serve as the President Atlantic Region, as Steve noted. Following Sean's retirement, I'll assume the role of President UNFI and oversee the company's broadline distribution business in the U.S., Select Nutrition in e-commerce, as well as the national enterprise sales and service teams. In addition, I'll continue to oversee the brand and communications group. I look forward to my new role as UNFI continues to adapt and grow with this dramatically-changing environment. I've had a chance to meet some of you, and over the next year you'll see me at conferences and investor meetings as I settle into the new position.

Thanks Chris. So, let's turn to our results for the third fiscal quarter. We achieved record sales of $2.6 million, which represents approximately 12% growth compared to the prior year. We continue to see strong top-line growth across all customer channels. These results demonstrate that demand for better-for-you products and for UNFI services continues to be strong. It's important to note that we are maintaining this growth, which does not include benefit from acquisitions, despite low inflationary environment. This quarter, our gross margin of 15.4% was positively impacted by a change in our estimate, which Mike will provide more details on during his remarks. The decline in our gross margin from the prior year was primarily driven by customer mix and an increase in inbound freight expense. We expect a headwind from inbound freight expense to continue throughout the next couple of quarters. From a total operating expenses standpoint, although we continue to have higher labor expenses, including increased overtime in several of our distribution centers due to high growth over the prior year, we weren't able to offset these increased costs by leveraging our fixed cost base. Year-to-date, on an adjusted basis, growth in our bottom line outpaced top-line growth. As we discussed in the past, higher demand is pressuring our supply chain as we continue to see degradation in supplier inbound fill rates. Supplier out-of-stocks in the third quarter of fiscal 2018 were approximately 150 basis points unfavorable versus the same quarter in the prior year. We continue to be dedicated to working with our suppliers and to enhance alignment on demand signals. We are focused on improving service level to our customers, which is why you're seeing the increased level of inventory in terms of volume. But we continue to be disciplined, maintaining and when possible lowering…

Thank you, Steve. Good evening, everyone, and thank you for joining our call this evening. I will speak to our third quarter performance, provide some year-to-date highlights, and then cover our updated outlook for fiscal 2018. As Steve noted, we had record net sales for the third quarter of $2.65 billion, reflecting growth of 11.8% or approximately $279 million year-over-year. In Q3, we continued to experience modest inflation of approximately 23 basis points, which was slightly lower than last quarter's inflation of 34 basis points. This marks the eighth consecutive quarter of either modest deflation or near zero inflation which continues to be a headwind to our net sales and EBITDA dollar growth compared to our 10-year average inflation of approximately 2.3%. Despite the lack of meaningful inflation, we continue to see strong demand for our products, which is translating into greater than expected net sales growth across our customer channels. Supernatural net sales in Q3 were up 24.3% over Q3 last year and represented 37.5% of total net sales compared to 33.7% in Q3 last year. Supernatural growth is driven by the growth of our supernatural customer, and the success of our build out the store strategy which is driving growth in new categories, most notably, health, beauty and supplements. Q3 marked the highest quarterly year-over-year net sales growth in the supernatural channel, since Q2 of fiscal 2011. Supermarket channel net sales increased 3.7% over the third quarter of last year, and represented 27.1% of total company net sales. Independent channel net sales grew 6.1% versus the third quarter last year, and landed at 25.1% of total net sales in the quarter. Our food service net sales increased 4.6% over Q3 last year, and our e-commerce net sales increased approximately 23% versus the third quarter last year. Let's turn…

[Operator Instructions] And our first question for today will be Chuck Cerankosky with Northcoast Research. Please go ahead.

Mike, I want to make sure I understand this inventory adjustment. That reflects something that took place over the first nine months of the year, but only hit the most recent quarter?

Yes, as I mentioned, Chuck, the change in estimate that we recorded in Q3 was substantially all related to purchase orders in the fiscal year.

But if you take the $20 million and remove it from the operating income you get a decrease in operating income. Is that the right way to look at it?

Well, Chuck, as I mentioned in my comments, this change in estimate is improvement in how we were estimating the liability for accrued inventory purchases. So, to adjust it would be to kind of ignore the accuracy or the improvement in the estimate of 20.9. Or in other words, to place value on a liability that doesn't exist.

And then, looking at the conventional supermarket channel, that was up 3.7%. If you look at conventional supermarket customers who do not - do their own distribution is the growth to those exit retailers stronger?

We typically wouldn't split that out. I think what you're asking is, is the growth to supermarkets that have captive distribution different than the growth of supermarkets that don't? Is that your question?

Yes.

Yes, we would typically not split that out.

And our next question today will be Eric Larson of Buckingham Research Group. Please go ahead

A couple of questions. First of all, when you - when I look at CapEx, could you help us - you have a few facilities that are running really tight on capacity, et cetera, and we're expecting that CapEx rate to go up. Is that a fiscal '19 event? Or are you expecting some of that incremental CapEx to start this year?

Well, we haven't provided guidance for 2019. And we’ve essentially given you guidance for the full year in the current year. So there's not a material change to our CapEx guidance for fiscal 2018. And as far as what CapEx is going to look like in 2019, I think we're just going have to wait a little while before we get into the specifics of that. But Mike, you want to add some more color?

Yes, Eric, if you look at our long-term CapEx guidance that we provided last fall, we said long-term you should think about us as 1.0% of net sales. When you look at our actual CapEx performance over the last three years, you see a number that looks like 0.6% of net sales. However, if you looked at our last five years, you're back right on 1.0% of net sales because four and five years ago as you recall, we were adding some capacity. So as I mentioned, we'll provide you our fiscal 2019 guidance in our next call. And we'll provide some update on long-term guidance. But I think you can think about us over the long-term in that range. And as we go into a period of CapEx investment, you can expect us to be a little higher than that 1.0 number that we provided.

And then just one more questions so that - I'll ask one more then hand it over. But obviously, you saw massive acceleration in your supernatural growth in the quarter. How is the best way for us to look at this going forward from a modeling perspective? And obviously, pricing as you did - there's very little inflation in the industry, so that's all real volume or real organic growth. So Steve, how is the best way to look at how we should sort of model and review the supernatural category for you?

I mean, that's a hard one for me to answer. I mean, obviously we stay very focused on this whole building out the store strategy and selling more categories of products to existing customers, whether it be supernatural or any other customer that we service. And I think it in this particular quarter we had some nice success there in supernatural that we've talked about over the last couple of quarters. But I don't think I would want to put ourselves in a position to give any specific color about any one customer other than to say we are just really focused on selling more categories of products to existing customers throughout the network.

And our next questioner today will be Andrew Wolf with Loop Capital Markets. Please go ahead

Just on the guidance in relation to the inventory change in the earnings impact. So for the fourth quarter I just want to confirm my math. Looks like at the midpoint of the implied EPS guidance bode high teens growth, about 18%. And about mid single digits EBITDA growth. So I just want to make sure that that comports with - that I did my math right as I just whizzed through it kind of on the road. And, also, the follow-on to that is, if it's right, I just want to know if this accounting change that impacted the third quarter materially, does that new ability to estimate the vendor partial payments or the partial billings, did that impact the fourth quarter materially such that those year-over-year numbers are also kind of changed - year-over-year for both numbers.

Yes, the change in estimate that we recorded in Q3 as I mentioned, was related - it was substantially all in the - related to POs in the fiscal year. But wouldn't be related to any POs that are yet to come. So none in Q4 or going forward. One of the ways to think about this in an unrelated industry would be an example of gift cards. And if you think about when gift cards first came out, companies had to record a liability and weren’t sure what percent would be redeemed or how long they should carry that liability before they relieved it. But over time, they gained experience about how quickly the gift cards got redeemed and how many got redeemed. And as a result, they changed their estimate and their liability for gift cards over time. And I think about our change in estimate on our accrual for inventory purchases very similarly. We used to wait a year to relieve that liability, and through data and analysis and really a benefit from bringing our shared-service operation centrally, we’re able to analyze and look at the information in a way that gives us more insight to the actual performance. And so, we’ve changed that methodology now, and when we get a throughway match, we know from our experience that there won’t be another - there won’t be a liability associated with that PO going forward, and so, we relieve it shortly after that throughway match. So, instead of waiting a year, we’re doing it more quickly. And that’s really the essence of it. So, again, going forward, if a PO were to qualify in that way, it would be treated the same way in the new estimation process that we have.

So, was this cumulative adjustment for the first nine months or the first three quarters? Kind of - if you just divided it by three, would you be able to get what the impact was per quarter if you wanted to or is it more lumpy than that?

What I mentioned there, Andy, was it’s substantially all related to purchase orders in the fiscal year. And we can use our guidance to indicate where we land.

That relates to the fiscal year? The entire fiscal year?

The guidance is for the fiscal year and, of course, you have our year-to-date results for the first nine months.

But I'm talking about the 20-plus million adjustment, that was for the first nine months. Right?

Yes, it substantially all to POs from this fiscal year.

Thank you. Was this change contemplated in the last updated guidance?

Our updated guidance reflects our best estimate of where we'll finish the year this year.

Now, when you issued the previous guidance a few months ago, did you think - was this part of that? Even though you may not have shared it with us, was that part of your guidance?

We just did the change in estimate here in Q3. So, the impact of it was in our Q3 results.

And lastly on the same topic, given it's a big number, did you decide to share any of that benefit, even if it's an accounting benefit to some extent, a large extent - did you decide to invest in of that or give any of that to your customers to grow market share or for any other reason?

The change in estimates related to the liability. So, an accrual for inventory purchases. So, the entry that was made to book it is a non-cash entry and really just recognition of a liability that - rather than a reduction.

So, it didn't - even though it flows through your income statement you didn't - you decide - it didn't change your business practices, so did I hear that right?

Right. No.

And our next question or two will be John Heinbockel with Guggenheim. Please go ahead

So where are we in the buildout of new capacity? I know you've added some, but there's more to go. And maybe in particular, where do we stand on automating more facilities to get greater labor efficiency?

We have several expansion projects that are underway pointed at - from a capacity perspective at distribution centers that have had some aggravation as it relates to outside storage and other capacity constraints. And, of course, that's in our guidance for 2018. We have not communicated 2019's plan as it relates to CapEx, although we're doing a lot of development today as it relates to where we're going to go and to what extent. As it relates to automation, along with the development approach to what we're taking for 2019 and beyond, automation is certainly part of that, particularly automation as it relates to our each pick velocity products.

And then maybe as a follow-up, the idea was we would sort of get past some of this inefficiency, right, in demand in the second half of the year. Where have you come out in the third quarter relative to where you thought you would be in terms of ameliorating some of that pressure? And it sounds and looks from your guidance that the fourth quarter would be better still versus the third quarter in that - with regard to that pressure. Is that right?

Well, just keep in mind, so UNFI's network is substantial. We have 33 distribution centers in the U.S. and Canada. So when we're talking about distribution centers that are capacity-challenged that are impacted by labor and then of course, through the P&L, we do not get the leverage that we'd anticipate, this is contained to a handful of distribution centers albeit they are the high volume DC. So we have not been able to get the leverage that typically we would get. But across the network, when we think about 33 DCs, we're talking about a handful of DCs that I would refer to as let's say suboptimal.

Yes John, also I think I mentioned in my prepared remarks, that we did get nice expense leverage in the quarter on a consolidated basis.

So you're talking about overhead primarily?

Yes.

All right. Then that will get better, do you think, as we - and I guess that's implied in your guidance, getting better into the fourth quarter.

Yes, I mean, I think as we think about the fourth quarter and into 2019 and 2020, I mean, we have to be more efficient. We've talked about that before.

And our next questioner today will be Rupesh Parikh with Oppenheimer. Please go ahead.

This is actually Erica Eiler on for Rupesh. Thanks for taking our questions. So I wanted to touch on cash flows here. So it looks like AR and inventory were both quite high. You touch on the inventory piece. Maybe you can talk a little about what's driving the higher AR. Has there been a change in terms or is there something else driving this? And then what are the opportunities to improve working capital from here?

Erika, thanks for the question. We have got some initiatives in place now on AR to improve performance there. We should see improved results going forward here in particular by the end of the fiscal year. And I would expect across our working capital that we'll see improvement in our results going forward. And it's primarily because we've had a lot of unexpected growth in our business this year. And as I mentioned, the centralization of our shared service operation is allowing us to change process, improve process and focus better going forward.

And then just on the inflation, deflation front, it seems still muted there. Maybe you can update us on your expectations for the balance of the year. And then additionally, are you starting to see more increases start to come through from your supplier community?

We've been talking about our hope for higher inflation for a long time now, and unfortunately, we haven't seen any material kind of inflection point. And we haven't seen the rate of inflation increase. And so our expectation, it's probably going to hover plus or minus somewhere where it is today.

And the next questioner today will be Chris Mandeville with Jefferies. Please go ahead

This is actually Aaron Eisenberg on for Chris. Thanks for taking my questions. So just starting with the guidance, so you raised EPS by around $0.10 at the midpoint. If I look at your benefit, my math is certainly more than $0.10. So just trying to square things on the guide there or am I missing something here?

I'm not sure what you're - how you're breaking it down. At the midpoint, our sales guidance is up in the neighborhood of 165 million to 170 million, and EPS is up as you said $0.10.5 at the midpoint. And so I'm not sure beyond that what your question is.

No, so if I strip out the 20.9 million benefit that you've got this quarter.

Yes, so to take out that is to assign value to a liability that no longer exists. We've improved our ability to estimate that accrual for inventory purchases in a way that are now system performance historical results supported.

And then I guess on the free cash flow front and more specifically on the working capital side of things, with the reorg creating now a new head of supply chain, is there any color you can provide there on what you're expecting from inefficiencies and a cost savings standpoint?

This is Sean. Just as it relates to - let me address this in the context of inventory. Because I think that's kind of what you're thinking about with respect to the supply chain role, et cetera. And either just consider that service to our customers is a primary objective for the company. And when we have inbound service level fill rates from suppliers, we feel like there are steps that we need to take by intent as it results to inventory levels in order to assure that we can service our customers. And so clearly, in Q3, we had a negative impact as it relates to this strategy. And we don't see in the quarter ahead of us necessarily, that inbound service will improve. Although it did not necessarily get worse versus Q2, we would expect more of the same.

And then lastly, you mentioned pressures from freight. Have you been able to begin passing on some of the recent freight pressures? And kind of how do you feel ending the year on this issue? And then separately, how are you handling your own drivers these day? I think on the last call maybe you referenced looking at wages, but did you? And do you feel the need to bump their pay at all or provide some additional incentives?

On the first part of the question as it relates to the inbound, think of it as a cycle in that as expense increases and the percentage of tons that UNFI manages and controls if you will, we do a review process of freight lanes by supplier. We have a commitment to our customers to provide notification of any increases related to this inbound freight expense. The products landed into our inventory and then we only recognize that benefit if you will when we sell through the inventory. So it's quite a lengthy cycle. We are underway. We expect some benefit in Q4, but really we're going to need to get into and through Q1 as Steve suggested it takes a couple of quarters in order to get, let's say, back to par.

And our next questioner today will be Karen Short with Barclays. Please go ahead

I just wanted to ask a little differently in terms of your guidance and in terms of this quarter. So I'm just trying to understand philosophically, this was a one-time benefit. And so to the extent that you are kind of slightly raising your guidance without this one-time benefit, you're meaningfully lowering your guidance. So I guess I'm trying to understand how you kind of get your head around including this as a part of ongoing results as opposed to calling it out separately? That's my first question.

Yes, there's a - so the change in estimate that we recorded in the third quarter is - there's a timing element related there. And what we've talked about is that we used to wait a year to clear these balances that we no longer believe we owed. And the change in estimate was to say we don't need to wait a year and that we can do that immediately. And we got there based on analysis of our performance and the history there. And we can look at the purchase orders that the change in estimate related to. And they're substantially all in this fiscal year. Certainly because we're talking about purchase orders that would have had a three-way match against them, they're not purchase orders that have occurred yet into the future. So, as we move forward and we have thousands of purchase orders at any given time, those ones that have - that are partially matched and have a remaining balance associated with them, in our experience we relieve those right away or shortly after the three-way match now. And so, that is a practice that we will continue to do as long as it continues to be supported by performance of our and history in our practice, and so that is something that will be applied to those instances going forward.

As we look at gross margins this quarter, excluding this one-time benefit, your gross margins were down 84 basis points. So, the question is as we look to the fourth quarter and we look into fiscal 2019, how are we supposed to think about the trajectory of your gross margins? Because it doesn’t seem like necessarily the pressures that you’re experiencing in this quarter are going go away in near term because we're - excluding the benefit.

As I mentioned, the change in estimate is related to purchase orders, or substantially all within the fiscal year, which gives you a sense for its impact throughout the year.

But, again, how are we supposed to think about gross margins going forward when we back out this? Even if we break it into a third, a third, a third, how are we supposed to think about the trajectory of gross margins going forward, given there was still meaningful degradation this quarter when we back out this benefit?

Yes, we still have a headwind on our gross margin related to the fact that our fastest growing customers are our largest customers. We still have some headwind on our gross margin related to inbound freight which, as we've talked about, will dissipate over the next couple of quarters and become part of our cost basis. And as a cost-plus provider, that's a benefit on an ongoing basis. And so, I think that's the way you kind of think about the results that we've had year-to-date and then as information about how we'll move forward. But the gross margin that you see reflected in our year-to-date number is the appropriate gross margin. That is our current run rate. So, it's not appropriate - we don't feel it's appropriate that you would back it out.

And then I just - one question I wanted to ask was in terms of the supernatural contract, has anything changed contractually with that, other than mix shift in terms of payment terms or anything along those lines?

No, absolutely not.

No, nothing has changed

And our next questioner today will be Ed Kelly of Wells Fargo. Please go ahead

So, I don't want to beat a dead horse here on the accrual, but I'm going to go back anyway. As we think about - I think what you're trying to say, right, is that basically you were underearning because of the accounting methodology around the liability. And I guess the adjustment probability relates to the inventory that you have on hand at this point. Is that all - that's fair, right? That's what you're trying to say here?

When we have pricing or quantity discrepancies on our purchase orders and we have a partial match, it leaves - what remains is a part of an - is a part of the balance which is then accrued. And what we have discovered is that part of the balance does not need to remain around for 12 months before it's relieved. We can actually relieve it immediately because it's actually not owed. And so, it's really a timing issue here. It's a better reflection of our liability. And so it's translation into our earnings is one that's we feel better about the essence, more accurate. And I would say - I would try to explain in a way that says - I wouldn't be comfortable saying we were underearning. We just didn't look at the estimate using the latest data and processes that we now have. And so, with the reflection of the estimate and the process change, our earnings now reflect the appropriate run rate, both in terms of EBITDA, gross margin, et cetera.

And just as it relates to that, you're not restating, right? So, as we think about -

Absolutely not.

So, as we think about Q4, do you continue to get some benefit from a gross-margin standpoint because of the comparison to last year in all this?

Perhaps.

And would that benefit, I guess, is it possible to quantify how big that benefit's going be over the next few quarters to like gross margin rate?

Well, again, we haven't given guidance for next year yet. We've revised our guidance for the current year. And like I said a minute ago, I think - you think about the current run rate in the nine months through the period ending third quarter, that's the appropriate way that you should look at our gross margin and our EBITDA.

And then I do just want to go back to what Karen was trying to ask. If we look at your guidance, your guidance went up by about $0.10.5. You did not previously contemplate what's about a $0.27 benefit from the accrual change, which basically suggests that guidance went down by about $0.17. And I'm just trying to figure out, as we all are, I think, what drives that? Is that - is that the shortfall in Q3? And is that related to the underlying gross margin? Just some color there I think would be helpful for us.

Right. So, I think what you suggested is $0.27 in Q3. Is that what you're asking?

Well, $20.9 million in incremental EBIT wasn't contemplated in the guidance when you gave it last quarter, right? That's about $0.27. You've raised $0.105, so it implies about a $0.17 shortfall. I'm just kind of curious as to what's driving that.

Yes, I'm not sure that we see it that way. We see it more of a - as a timing issue than it is anything else.

Well, I know that, but when you gave guidance last quarter of 306 to 314, $20.9 million wasn't in that guidance, right?

Well, yes. I'm not sure we look at it that way. And I think that the color that we provided in our script is the color. Again, we think about it in terms of the estimates that we've provided in our Q3 results are reflective of a number that you shouldn't think about in terms of our run rate in the nine months that have ended through the end of our third quarter. We think that that's a good rate in terms of how we look at our business going forward because that change in estimate reflects the appropriate gross margin and earnings that we've talked about.

And our last questioner for today will be Scott Mushkin with Wolfe Research. Please go ahead.

And before I get going, congratulations Sean, on retirement and, Chris congratulations to you on your new role.

Thank you, Scott.

Thanks, Scott.

So, I think we kind of get this accounting thing and wanted to actually ask something a little bit different. As we move forward, and we talked about capacity constraints, you’re obviously seeing substantial growth out of the supernatural channel. How should we think about your willingness to invest in your distribution? Obviously, there - you're going to need to make some substantial investments if the growth continues at this rate. So, how should we think about your willingness to do that? And how should we think about the cash flow implications of that as we think of next year and the year after?

Yes so, look, we - as a distributor, we need the capacity to satisfy the growth. And so fortunately, we have a very disciplined model that looks at return on invested capital, internal rate of return, and a variety of other factors that would move us towards making a capital investment or not. Now, we have - as we've talked about in the last couple quarters, a lot of customers that are growing really quickly. We've made reference to our customers 2 through 25 having double digit sales growth that still continues. And so there are certainly markets where we're going to need to add capacity to grow with the customers within those markets. And we'll apply that same level of discipline in the decision making process that we always have. And if we can't get over the hurdle as it relates to inventory or economic conditions or the macro environment or the customers that are growing the fastest or the slowest in that particular market, then we'll make those decisions when we need to. But I think the way that Mike articulated kind of our historic CapEx to free cash is a good way to look at it both in terms of the last three years and the last five years. And if you modeled it out using that data, you'd probably get to a pretty good point.

And so just a quick follow-up question. As we look at the largest part of your business, which is growing very, very rapidly, likely to eclipse 40% plus, we've seen you guys move to extend out the key contract in that bucket. Is that something you're going to need, given the amount of capital that likely will need to be deployed to keep that relationship at its optimal? Is that something you guys would like to do?

Yes, I don't know. We would never get into talking about any individual customer. We still have a long time to go on that contract. As you know, it goes out to 2025. So that's something that we'll start thinking about maybe five years before the end of the agreement itself. In the meantime we've got lots to do. Lots of growth, lots of good things happening within the company and those are the things that we’ll focus on.

I was going to say this will conclude our question-and-answer session. I would like to turn the conference back over to management for closing remarks.

Thanks everybody for joining us this evening and have a terrific summer.