RXO, Inc. (NYSE:RXO) Q3 2023 Earnings Call Transcript

RXO, Inc. (NYSE:RXO) Q3 2023 Earnings Call Transcript November 11, 2023

Operator: Welcome to the RXO Q3 2023 Earnings Conference Call and Webcast. My name is Synthu, and I will be your operator for today’s call. [Operator Instructions]. During this call, the company will make certain forward-looking statements within the meaning of federal securities laws, which by their nature, involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those in the forward-looking statements. A discussion of factors that could cause actual results to differ materially is contained in the company’s SEC filings as well as in its earnings release. You should refer to a copy of the company’s earnings release in the Investor Relations section on the company’s website for additional important information regarding forward-looking statements and disclosures and reconciliations of non-GAAP financial measures that the company uses when discussing its results.

I will now turn the call over to Drew Wilkerson. Mr. Wilkerson, you may begin.

Drew M. Wilkerson: Good morning, everyone. Thanks for joining today’s earnings call. With me today in Charlotte are Chief Financial Officer, Jamie Harris; and Chief Strategy Officer, Jared Weisfeld. I’m pleased with RXO’s performance in the third quarter and what was and continues to be a soft freight market. We’ve seen this part of the freight cycle before and know exactly what actions we need to take to fuel our continued growth and set us up for long-term success. In the third quarter, we accelerated our brokerage market share gains while maintaining strong brokerage gross margins. Brokerage volume grew by 18% year-over-year. For the first time, we’ve broken out brokerage volume performance between truckload and less than truckload for you.

Both grew significantly. Full truckload volume grew by 13% year-over-year and less than truckload volume grew by 55% year-over-year. We service our full truckload customers exceptionally well, and those customers continue to award us LTL freight, which is mostly contractual and highly automated. We expect continued growth in our LTL business. When LTL reaches full scale, it will add a meaningful source of earnings to our business and will be a platform for continued growth. In addition, total volume, quarterly loads per day and monthly loads per day during the month of September all set new records. All major brokerage verticals grew on a year-over-year basis and loads per day grew every month as the quarter progressed. The most important driver of that growth was contractual volume, which grew 30% year-over-year, faster than the 19% year-over-year growth we achieved last quarter.

This result speaks to the significant trust our customers have in us. Securing contractual volume positions us to win even more spot volume and project loads when the market inflects. We expect to grow brokerage volumes again in the fourth quarter on a year-over-year basis. Jared will walk you through our volume trends in more detail shortly. Our market share gains continue to be profitable. We leveraged our cutting-edge AI-enabled technology to improve our buy rates and our sell rates. The year-over-year decline in revenue per load in the third quarter eased when compared to the revenue per load decline we saw in the second quarter. Brokerage gross margin was strong at 15.1% in the quarter. We also saw momentum in our complementary services.

We achieved another quarter of synergy load growth in Managed Transportation and secured additional new business wins that will onboard in 2024. Within Last Mile, we continue to take action to improve our profitability and still expect Last Mile to grow EBITDA year-over-year for 2023. The strategic pricing actions that we took earlier this year helped contribute to 90 basis points of year-over-year margin expansion for complementary services. The investments we’ve made in our cutting-edge AI-enabled technology helped fuel our business results. In the third quarter, 97% of our loads were created or covered digitally, up from 81% in the third quarter of 2022. The team is executing very well and is growing our core truckload business, expanding and investing in additional services and capitalizing on powerful trends, including near story.

Let me give you some more details about how the quarter played out. Early in the third quarter, we experienced a squeeze on gross margin. This is typical for this part of the cycle. We believe July was the low point for brokerage gross profit per load for 2023 and that the third quarter marked the low point for adjusted EBITDA this year. The freight market and RXO performance improved each month as the third quarter progressed. Many of the industry metrics we look at also improved. The load-to-truck ratio increased from less than 2:1 earlier in the year to approximately 3:1 at the end of the third quarter. Industry-wide tender rejections also moved higher to approximately 4% and carrier exits continued, although at a slow pace. We also continue to hear from our retail and e-commerce customers that inventories are in a much better position heading into this year’s holiday season.

While I’m optimistic about the improvements we’re seeing, the industry still faces some challenges including uncertainty around consumer demand heading into the holidays and the rise in interest rates and increased fuel prices. That brings us to the month of October, where we did see some softening. Many bid activity increased and brokerage volume grew year-over-year, but the volume growth was at a slower rate in the third quarter. However, despite the softening in the market, our brokerage gross profit per load remained resilient in October and was roughly flat compared to the month of September with a strong gross margin of 16%. Even though the pace of the recovery is uncertain, we will continue to run the playbook we’ve talked with you about all year.

First, and most important, we’ll continue to stay close to our customers to ensure we can react quickly to the ever-changing market dynamics. We’ll remain focused on the long term and continue to make strategic investments. In the third quarter, we added new team members to fuel continued brokerage growth, introduced new technology to support our customers and our people and expanded the services we provide to customers. All of these investments increased the stickiness with our customers, and they are an important part of our strategy. So you’ll hear both Jamie and Jared talk more about them later in the call. Many of the largest shippers continue to increase their share of wallet with RXO because we have a team that has delivered results for their transportation and logistics departments.

Our exceptional service is supported by the best people, the best technology, a broad array of services and a strong financial position. Our strategy is to invest across all parts of the freight cycle, and that’s uncommon in our industry. While investing during the down cycle negatively impact short-term profitability, it delivers outsized returns when the market improves. This is not the first time we run this playbook. This was a winning strategy for us during COVID when we invested aggressively in our sales force. We see this down cycle as a similar opportunity to position us for robust growth over the long term. On the cost side, we’ll continue to be disciplined. Doing so will provide significant operating leverage for us when the market inflects.

Jamie will talk more about the actions we’re taking in a few minutes. We believe this playbook will enable us to achieve the long-term target we laid out for you a year ago at our Investor Day. We anticipate delivering between $475 million and $525 million in EBITDA by the end of 2027. We have a winning strategy, an experienced leadership team, proven technology and close customer relationships. RXO is in a great position to exit the soft freight cycle even stronger than we entered it. Now I’ll turn it over to Jamie, who will discuss our financial results in more detail. Jamie?

James E. Harris: Thank you, Drew, and good morning to everyone. In the third quarter, we generated $1 billion in revenue compared to $1.1 billion in the third quarter of 2022. Gross margin of 17.7% was down 190 basis points year-over-year, solid performance for this stage of the trade cycle. Our adjusted EBITDA was $26 million in the quarter compared to $66 million in the third quarter of 2022. And our adjusted EBITDA margin was 2.7%, down 310 basis points. The declines in these metrics were primarily due to lower freight rates and the moderation in brokerage gross profit per load. We continue to optimize our cost structure while investing for growth, position us well to drive substantial operating margin leverage when cycle influx.

I’ll touch on our year-to-date annualized cost savings shortly. Below the line, our interest expense for the quarter was $8 million. Our adjusted effective tax rate of 13% in the quarter was a function of an updated annual forecast of lower taxable income in addition to a small amount of discrete tax items. Our year-to-date adjusted effective tax rate is approximately 19%. Adjusted diluted earnings per share for the quarter was $0.05, which includes approximately $0.01 of discrete tax benefits. You can find a bridge to adjusted EPS on Slide 7 of the earnings presentation. Moving to our lines of business. We continue to outperform the brokerage industry. We grew brokerage volume by 18% year-over-year. Brokerage gross margin remained strong at 15.1%, down 390 basis points year-over-year, while only down 30 basis points sequentially.

Complementary services gross margin of 20%, improved by 90 basis points year-over-year. Our Last Mile pricing initiatives were the biggest driver. Please turn to Slide 8 as we discuss cash flow. Our adjusted free cash flow over the trailing 6 months was impacted by lower profitability levels, increased Quick Pay adoption by carriers and timing related to $15 million of certain cash tax outflows, including cash taxes related to prior periods. With respect to Quick Pay, this service allows our carrier partners to get faster access to their cash payments, increases carrier retention and generates a strong return on capital for RXO. We have an opportunity to drive increased carrier adoption of Quick Pay across our business, and we are investing accordingly.

While increased Quick Pay adoption will be a net use of working capital is a good strategic initiative with our carrier base with a good return on investment. Quick Pay is a win-win for our carriers and RXO. Normalizing for the increased adoption of Quick Pay and cash tax items, our adjusted free cash flow conversion over the trailing 6-month period was approximately 45%, which we are pleased with at this point in the freight cycle. We remain comfortable with an annual adjusted cash conversion rate between 40% and 60% of adjusted EBITDA over the long term across market cycles. As we mentioned last quarter, accelerated growth as the cycle turns will result in an ease of working capital. We continue to anticipate to use approximately 7% to 9% of each incremental revenue dollar.

This can impact short-term cash conversion depending on the pace of recovery. Let’s move on to our cash balance. We’ve also included a 6-month cash bridge on Slide 8. We ended the quarter with $104 million of cash on the balance sheet. The largest headwind to cash in the 6-month period was restructuring and spin-related cash outflows in the amount of $12 million. We continue to expect restructuring and spin-related charges to decline significantly in 2024. We also continue to settle RSU tax withholding obligations and cash to minimize solution, which was an outflow of $5 million in the period. Let’s now discuss cash on a 3-month view. As you’ll recall, in the second quarter, we collected approximately $15 million of receivables earlier than we expected.

When considering these earlier collections, the normalized starting cash balance for the third quarter was approximately $109 million. In addition to the use of working capital for Quick Pay, we used cash of approximately $3 million for restructuring and approximately $3 million for RSU tax withholdings. Turning to cost. We took out additional costs in the quarter and achieved annualized run rate savings of approximately $3 million. We’ve now achieved year-to-date annualized run rate savings of approximately $31 million with associated restructuring charges of $12 million, a strong return. While the savings have been masked by the current trade cycle dynamics and the reduction in brokerage gross profit per load, they will create significant operating leverage when the cycle turns.

We now expect lower restructuring and spin-related costs relative to our prior estimate. Specifically, we expect 2023 restructuring and spin-related costs of approximately $30 million to $32 million compared to $35 million previously. Additionally, we now anticipate cash outflows associated with these restructuring and spin-related actions of approximately $25 million, $5 million lower than our prior estimate. As you can see on Slide 9, our balance sheet remains healthy with net leverage at quarter end at approximately 2.1x trailing 12 months adjusted EBITDA. This is higher than the 1.6x last quarter due to our cycling of prior year EBITDA. While our leverage is above our long-term target of 1 to 2x, our liquidity position remained robust with $604 million of available liquidity at the end of the quarter.

We will again cycle through a tough comparison in the fourth quarter and expect net leverage to move higher at year-end. I’d also like to review our capital structure. In early November, we exercised the accordion feature under our existing revolving credit agreement that increased total revolver commitments from $500 million to $600 million. We simultaneously repaid all outstanding obligations under our term loan credit agreement. Pro forma, these actions will yield annual interest savings of more than $1 million. Gross debt will increase, and our net debt and liquidity positions remain unchanged. We’ve maintained the same liquidity with more flexibility at a lower cost. As you’d expect, at the end of the fourth quarter, you will initially see a lower cash balance as a result of the prepayment.

Our customers want to work with strong partners that can perform and invest across all market cycles, and these actions highlight our financial and balance sheet strength. You can find our updated 2023 modeling assumptions on Slide 15 of the deck. Capital expenditures are expected to be between $60 million and $65 million. This includes $10 million to $12 million of strategic investments in real estate to position us for additional growth in our brokerage business. This is down slightly from our prior estimate of $15 million due to some changes in project timing. Depreciation and amortization is expected to be approximately $70 million at the low end of our prior range. Stock-based compensation expense is expected to be between $20 million and $22 million.

Interest expense is expected to be between $32 million and $33 million, which is slightly lower than our prior estimate. This is pro forma for the capital structure optimization and includes the fourth quarter benefit associated with the net interest expense savings I mentioned earlier. We continue to expect a full year 2023 adjusted effective tax rate of approximately 25%. You should also model an average diluted share count of approximately 120 million shares. This does not include any impact associated with potential share repurchases. Overall, given the current state of the freight cycle, we’re pleased with our execution, we have a strong balance sheet, we’re operating well, investing strategically while remaining disciplined on cost and positioning RXO for the cycle in flexing.

Now I’d like to turn it over to Chief Strategy Officer, Jared Weisfeld, who will talk more about our outlook.

Jared Ian Weisfeld: Thanks, Jamie, and good morning, everyone. We continued to outperform the market in the third quarter, growing brokerage volume by 18% year-over-year with continued substantial profitable market share gains, enabled by our people and technology. Loads per day grew every month throughout the quarter. More specifically, we grew our core truckload volumes by 13% year-over-year and grew LTL volume by 55% year-over-year. Our full truckload customers continue to award us LTL loads because of our strong service and relationships. LTL now represents approximately 17% of brokerage volumes. From a vertical perspective, we saw growth in every major category. Specifically, retail and e-commerce volumes accelerated significantly with volumes growing by 21% year-over-year versus 3% in the second quarter.

Several existing customers awarded us new business in the quarter, but we also saw growth across the whole category. The Food and Beverage vertical also grew strongly. While Industrial and Manufacturing grew by low single digits year-over-year, the vertical decelerated from last quarter’s growth rate. From a profitability perspective, we again delivered strong brokerage gross margin of 15.1% in the quarter, down just 30 basis points sequentially, enabled by our technology. As Drew discussed earlier, July was a very difficult month for RXO. However, our performance improved as the quarter progressed. RXO brokerage key performance indicators improved every single month throughout the quarter, positioning us well into the fourth quarter. I’ll discuss this in more detail shortly.

In the third quarter, 97% of our loads were created or covered digitally versus 81% in the third quarter of 2022. Seven-day carrier retention was a strong 77% in the quarter compared to 75% in the third quarter of 2022. We launched several new features of RXO Connect in the quarter, including enhanced pricing algorithms. Additionally, we leveraged new natural language processing solutions for automated order creation. We also made specific generative AI investments in the quarter to improve employee productivity. In the third quarter, contractual volume represented 80% of our business, up 100 basis points sequentially and up 700 basis points when compared to the third quarter of 2022. Contract volume growth was up 30% year-over-year, accelerating from 19% in the prior quarter.

We have not yet seen the spot market emerge, but because of our contractual business and our deep customer relationships, when the market turns, RXO will react quickly and be a prime beneficiary of spot volume. Before discussing market trends, I want to emphasize the strategic investments that Drew and Jamie referenced earlier. RXO continues to invest in the business across our people, service offerings and our technology. We are building for the long term and are laying the foundation for the market inflection. Taken together, we estimate our 2023 strategic investments will total approximately $20 million to $25 million. While these investments impact near-term profitability, we’ve run this playbook before, and we are investing counter cyclically for the long term.

Last quarter, we communicated that we believed we were approaching the bottom of the cycle. We now have further conviction in that view. Specifically, we believe that July’s brokerage gross profit per load marked the low point for the year. I’d like to expand on our current view of the freight cycle, and I’ll refer you to Slide 11 through 13 of the presentation. Let’s start with revenue per load. To get a better view of our consolidated year-over-year price declines on a per loan basis, it’s important to consider the impacts of length of haul, mix and changes in fuel prices. When normalizing for those items, revenue per load was down approximately mid-teens percentage on a year-over-year basis, in line with market pricing. As you can see on the chart, we generate strong gross margin across all different parts in the freight cycle by leveraging our proprietary technology and pricing algorithms to procure capacity at better than market rates.

Moving to Slide 12. Let’s continue to walk down the P&L and discuss recent brokerage gross margin trends. RXO’s brokerage gross margin improved as the quarter progressed given improved freight market conditions and RXO-specific levers. The national load-to-truck ratio moved higher as the quarter progressed, tender rejection rates increased, and carrier exits continued, albeit at a slow pace. We expect carriers to exit the market at an accelerated pace over the next 3 to 6 months. We also took further buy-side actions, leveraging our technology, resulting in significant improvement in our gross profit per load every month of the quarter. Specifically, our gross profit per load in the month of September improved by greater than 20% when compared to July’s low.

Let’s go to Slide 13 and look at RXO’s brokerage gross profit per load on a quarterly basis. RXO’s Q3 2023 gross profit per load decline moderated with continued significant volume growth, positioning us well for the inflection. The underlying intra-quarter improvement of the business that we just discussed isn’t visible in this chart since July’s gross profit per load brought down the quarterly average. To put it in perspective, given the squeeze earlier in the quarter, July’s gross profit per load was our lowest since Q2 of 2017. I’d now like to review the relationship between Q3 volume growth and adjusted EBITDA. Early in the third quarter, we experienced a squeeze on gross margin. The headwinds from the freight cycle were severe in the month of July, the most difficult month of the year, and that significantly impacted near-term profitability despite improved volume growth.

This is typical at this point in the cycle, with gross margins compressing as cost of transportation increased without a corresponding increase in sell rates. When those headwinds reversed like they did as we exited July, our model delivers significant operating leverage. I’d now like to look forward and give you some more color on the puts and takes we’re expecting in the fourth quarter. We typically see a seasonal uptick in all our lines of business in the fourth quarter, which we expect this year. Based on what we’re hearing from our customers, we’re assuming a muted peak season. We are staffed for growth and can respond quickly if a stronger peak season develops. Our brokerage sales pipeline remains robust and is up 115% on a 2-year stack.

This gives us confidence that we will again grow brokerage volume on a year-over-year basis in the fourth quarter. While October brokerage volumes still increased on a year-over-year basis, we did see year-over-year volume growth moderate when compared to the third quarter. We are assuming fourth quarter year-over-year brokerage volumes will grow, but at a slower pace than the third quarter. It’s also important to note that we’re coming off a very strong September and Q4 had a tougher comp when compared to Q3. Brokerage revenue per load trends are encouraging, and we expect another moderation in year-over-year revenue per load declines in the fourth quarter. Moving to brokerage gross profit per load. While year-over-year volume growth moderated in October versus September, RXO’s gross profit per load was resilient, roughly flat with September levels with strong gross margin of 16%.

Putting it all together, we expect RXO company-wide adjusted EBITDA to grow sequentially into the fourth quarter. Over the last three years, on average, RXO adjusted EBITDA has grown by approximately 20% from the third quarter to the fourth quarter. We expect RXO company-wide adjusted EBITDA to grow roughly in line with that growth rate with strong company-wide contribution margins. As a reminder, historically, our adjusted EBITDA typically declines from the seasonally strong fourth quarter into the seasonally weak first quarter. We’re continuing to gain market share profitably with another quarter of strong brokerage gross margin. We’re optimizing our cost structure, while strategically investing in the business and have a playbook to deliver rapid earnings growth when the market inflects.

Our gross profit per load bottomed in July for calendar year 2023, and we’re entering the fourth quarter with improved momentum. We’re still operating in a soft part of the freight cycle and the pace of the recovery will be subject to the broader macro environment, but we are making the right strategic moves to position us well for the long term. With that, I’ll turn it over to the operator for Q&A.

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Q&A Session

Operator: Thank you. Ladies and gentleman, we will now begin the question-and-answer session. [Operator Instructions]. Our first question comes from Ken Hoexter from Bank of America.

Kenneth Scott Hoexter: Great. Good morning, Drew, Jared and Jamie. Maybe just talk about your outlook there, right? So you talked about slowing growth in October, some increased mini bids. Just what lends confidence that the third quarter is the EBITDA bottom? I guess you talked about confidence that — well, I’ll stop there. Just what gives you the confidence that we’re really seeing the bottom given that backdrop that October seems to be a bit more flattish?

Drew M. Wilkerson: Yes, Ken, this is Drew. Good morning. The first thing that I’d point out is the improvement that we’ve seen in gross profit per load. If you look from July, gross profit per load improved by more than 20% and it continued into October. So the biggest reason for optimism is what we’ve seen on the gross profit per load. The second thing is, as you look at what was impacting the second quarter outside of gross profit per load, we had 2 other factors. One Last Mile typically takes a step back seasonally from Q2 to Q3, but the cost to run the business doesn’t change a ton there. And then the third is, we’re the largest manager of ground expedite shipments in the country, and that was largely built off of automotive customers. So while that was a headwind for us as we came out of Q2, as the plants come back online, that will be more of a tailwind for us.

Kenneth Scott Hoexter: Great. And just if I can do a follow-up. I guess you talked about customer inventories being – you’re confident that they’re lower end and kind of set to face that rebound. Maybe talk about how you look at that given higher rates, the impact on consumer, just the economic backdrop. I don’t know maybe if loads are up maybe because of the bankruptcy of Convoy, any thoughts there if you’re seeing the benefit there or if this is really some sort of economic backdrop that you’re seeing that’s shifting?

Drew M. Wilkerson: Yes. So two separate points there. One on disruption in the market, one on peak season. The first point on peak season is we expect a muted peak season. But we do have some customers that are telling us that they will have a peak season. So we’re still staffed for growth and prepared to handle that if the inflection occurs for those customers. The second point on the disruption in the market, the competitor that went out of business was less than 1% of the overall brokerage market. So it wasn’t a huge play on capacity, but it did create some disruption and some noise in the market, and that’s a good thing for our business. Anytime that there’s disruption or noise, our customers are going to come to us to create solutions in times of chaos for their business. And we’ve got a lot of experience doing that and delivering for them. And we expect, as the market inflects, they’re going to come to us on spot loads, projects in many bids as well.

Kenneth Scott Hoexter: Great. I appreciate the time.

Drew M. Wilkerson: Thank you.

Operator: Thank you. Our next question comes from Christopher Kuhn from Benchmark Company. Please go ahead, you line is open.

Christopher Glen Kuhn: Yeah, hi. Thanks for taking my question, and good morning, guys. One of the issues that comes up is that the spot price kind of stays where it is. Can you continue to grow your gross margin from here if spot is flat from here or slightly just goes up a little bit?

Drew M. Wilkerson: We think that spot loads are at or near the bottom and have been floating around there for some time. And when you look at what we’re seeing from spot rates, we do not believe that carriers can continue at running below operating costs for much longer. We think that over the next 3 months to 9 months, you’ll see carrier rates actually accelerate, where if you do not see a demand inflection and that would cause an increase in the overall spot market. But if things stay floating along the bottom, our strategy has always been during this part of the cycle that we’ll grow and we’ll build our foundation. We’ll continue to hone in our relationships with our customers. We’ll make a fair margin, and we’ll prepare ourselves for the inflection and to show the power of the model and the earnings when the market inflects.

Christopher Glen Kuhn: Okay. Thanks, guys. Appreciate it.

Operator: The next question comes from Stephanie Moore from Jefferies. Please go ahead, you line is open.

Stephanie Lynn Benjamin Moore: Hi, Good morning. Thank you.

Drew M. Wilkerson: Good morning, Stephanie.

Stephanie Lynn Benjamin Moore: Good morning. I appreciate the color you’ve given so far, particularly related to October. But – I’m realizing this is a tough question to answer. But just given maybe what you’re hearing from your customers, how early bid cycle are trending so far? Maybe how this frames kind of your expectations for 2024 and just where we are in the cycle and the path to an inflection at some point? Maybe just your thoughts on when that might occur.

Drew M. Wilkerson: Yes. Thank you, Stephanie. We’re just starting a lot of those conversations with customers, and we expect those to pick up as they typically do over the next 5 months. And we’re hearing different things from different customers. Some of these customers were actually going to and we’re seeing slight increases on a year-over-year basis. Some of them are slightly down. It depends on when they were bid and when they were put into place and what was going on with the market at that point in time. The biggest thing for our business, though, as we head into 2024 is we’re going to hold the model, we’re going to continue to build the foundation, grow the base, have strong relationships with our customers. And as the market starts to inflect when spot loads come on, when projects start, we’re going to be the first place that customers go. We’ve got great service, we’ve created solutions for them and we’ve got the best technology in the industry.

Stephanie Lynn Benjamin Moore: Great, thank you so much.

Operator: Thank you. The next question comes from Scott Schneeberger from Oppenheimer. Please go ahead, you line is open.

Scott Andrew Schneeberger: Thanks very much. Good morning. Drew, the – you gave some color on load-to-truck ratio. Could you just talk – put it into a historical perspective where you see it right now, what you think it can be over the fourth quarter into next year? And what would be – more importantly, what would be triggers, what would be levels that would make you change behavior of the – versus the mode you’re in right now?

Drew M. Wilkerson: Yes. So right now, when you look at where load-to-truck ratio is sitting roughly around 2:1 overall. And I’ve been doing this for 17 years, Scott. And any time that it has gone below 2:1, it hasn’t stayed there for a sustained amount of time. You saw that whenever it went below 2:1 earlier this year, it quickly went to 3 – 3.5:1. So I do not expect that to hang down here for long because I do not think the carriers continue to operate below what it costs them to run their – especially a small trucking company. So for us, when you’re talking about will we continue, we’ve always invested in the business. That’s not something that we anticipate slowing down. We don’t look at this business quarter-to-quarter. We’re looking at it over the long term. And we’ve laid out targets of – in the EBITDA from $475 million to $525 million. And the investments that we’re making right now, we’re confident are going to help us achieve that.