Q3 2019 Earnings Call
Good afternoon, everyone and welcome to the Hudson grew 29, <unk> third quarter results conference call.
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At December like to try to come whatsoever to Deborah Belevan VP of Investor Relations Ma'am you may begin.
Thank you operator, and good afternoon, everyone. Thanks for joining us today after market close we released our third quarter results you can find a copy of our press release and the presentation on our website <unk> Investor Dodson group Dotcom, along with our interim report on today's call wheel hub, Roger for life, our CEO and Adrian parts, how our CFO .
Please note the management may make forward looking statements regarding their beliefs and expectations for the company's future business prospects and result.
Mr subject to risks and uncertainties that could cause actual results didn't differ materially from the state.
Although we believe these expectations reflected in such forward looking statements are reasonable we can give no assurance such expectations will be realized.
We urge everyone to review the Safe Harbor statements provided in our earnings release as was the risk factors contained in our 2018 annual report on form 20-F, which is available on yesterday's website.
During today's call will refer to both I ever us and non I ever us financial measures of the company's operating and financial result.
Information regarding our non I have for a financial measures and reconciliations to the most directly comparable <unk> first measures. Please refer to the earnings release.
And with that I'll turn the call over to Roger.
Thank you Debbie and good afternoon, everyone. Thanks for joining us on to review our third quarter results.
Third quarter was a challenging period as Mac, where no macroeconomic pressures continue to weigh on or duty free business with the ongoing weakening your Chinese passenger trends that have impacted our business over the last four quarters.
In addition, we face travel disruptions, that's often results in our duty paid business, including a prolonged effect from hurricane Dorian in September which interrupted an unusually large number of flights and the continued grounding of the Mac 737, which has reduced capacity and removed thousands of flights from the system.
Well these headwinds resulted in slight declines to organic and like for like net sales for the first time in a decade.
We continue to drive efficiencies in the business with yet another quarter of strong gross margin performance.
It's worth noting that these weather impacts and groundings are examples of short term disruptions that we can experience from time to time that temporary in nature.
We also will anniversary the weakening Chinese tourism trend next quarter, which should ease organic growth and like for like comparisons.
More importantly, our industry continues to exhibit extremely attractive long term growth fundamentals such as growing passenger traffic.
Stanphyl capital investment in expanding airports significant barriers to entry and attractive customer demographics.
We continue to make significant progress on our long term growth initiatives to best position ourselves to capitalize on these opportunities, including expanding into food and beverage and adding new and unique concepts all of which fuel our confidence in our long term business outlook.
To that point, we also completed two strategic acquisitions in the past month, but not only expand our presence, but also enhance our capabilities, which I'll discuss shortly.
But first turning to new business highlights for the third quarter.
We're excited to announce a new duty free when in Newark terminal B, which includes over 8000 square feet of duty free in specialty reshape retail shopping space.
We also extended our duty free contract in Seattle in August as well as expanded our footprint in that market with a new contract win for up to three additional stores.
Heading towards already sizable presence in that market.
As we discussed last quarter. This year has been lighter in terms of new retail RFP is being issued.
Last year, there were several large projects, including Boston, Logan Salt Lake City, Indianapolis and Philadelphia.
In fact 2019 has seen roughly half the square footage that was issued in 2018.
Again this is the nature of our industry and illustrates the ebbs and flows that come with airport RF piece.
Looking out to next year, we see a robust pipeline that is much more in line with 2018.
In addition, our two key acquisitions that we just announced will further strengthen our ability to compete for and win RF piece.
Subsequent to quarter end, we had a number of exciting new store openings in Vancouver, We just opened our first Joe when the Jews Hudson combo store as part of our New brand partnership announced earlier this year.
We are proud to partner with Joe when the juice to deliver their first store in Canada.
This adds another great brand to our portfolio food and beverage concepts and we will continue to look for similar brand partnerships to keep our portfolio fresh unresponsive to the evolving taste and preferences of our customers.
We also opened our first six stores at Indianapolis International Airport, including Apio Schwartz to me.
Hudson, our proprietary book concept Inc. by Hudson Vineyard vines and Pitstop by Hudson.
It's up they seemed travel convenience store is inspired by the Indianapolis Motor Speedway and features an auto racing theme complete with polished chrome finishes checkered pattern entry and a sleek racing strip displaying the store name.
It's just another example of Hudson's ability to localize it to travel convenience stores and give travel as a sensor place wherever their travels may take them.
Regarding M&A activity last week, we announced the acquisition of food and beverage operate Oh, H.M. concession group, which is a pivotal step in accelerating hudson's expansion beyond retail and into the food and beverage service.
Oh, it's Jim is a well respected operator with a long history of successfully developing an operating concepts and restaurants and some of the country's busiest airports.
Our portfolio of concepts includes a mix of quick serve takeout casual dining bars, cafes, and full service restaurants, including popular brands like Chick Fil, a Wolfgang puck Einstein bagels, jamba juice as well as several proprietary full service restaurants.
Well, Jim currently operates about 60 stores in 13 airports.
Some of which we already operate in and others, which are new markets for us.
With these new markets not only do we have the opportunity to expand our presence well. We can also demonstrate our operational excellence and potentially seek retail opportunities in the airports when they come up.
Hitting away Chemtura portfolio, which already includes roughly 50 quick serve in casual and coffee outlets enables us to broaden and strengthen our presence in the food and beverage arena. It also gives us the capabilities needed to participate in the robust pipeline of food and beverage opportunities that we see on the horizon, while increasing our likelihood of success in winning these.
Contracts.
Over the coming months, we will be integrating all H.M. into the Hudson family.
Well, we Chen CEO , Milan Patel will remain as our business partner he and his team bring valuable expertise in food and beverage operations and will be instrumental in integrating away Jens operations with Hudson.
We will we be acquiring a controlling stake for $50 million at a highly attractive mid single digit multiple.
We expect the deal to close in late fourth quarter or early first quarter 2020 subject to customary closing conditions and contribute 50 million up to 70 million to the topline sales next year, depending on timing.
Once everything is fully integrated we expect the wage M to Ed $80 million to $90 million in sales on a full year basis and 2021.
Early in October we also announced the deal to acquire the assets of 34 Brookstone store Lowe's stores located in airports.
And the right to be the exclusive airport retailer for this brand for total consideration of $7 million.
In addition to operating the current brookstone stores, we plan to add more locations as the opportunities arise through nor fees or existing contracts.
We also plan to sell brookstone products and all of our travel convenience stores part of a broader strategy to strengthen and grow this brand.
So it is a well known and trusted by travelers and were excited to include them in our already diverse portfolio of concepts.
Right now we are operating these stores under a temporary agreement as we're working through the closing conditions and we expect to fully consolidate the business by the beginning of next year.
We expect brookstone to add roughly $25 million to $30 million to top line sales on an annual basis for 2020 and anticipate productivity to be generally in line with our other specialty retail concepts.
Both of these acquisitions are consistent with our long term strategy, so not only broaden our market share in north American airports, but also to expand the portfolio of concepts, we offer making us the leading operator of choice for landlords that are looking to deliver their passengers a unique and dynamic shopping and dining experience along their journeys.
Our ultimate goal is to be able to serve all customers needs and desires throughout their travels well maintaining our reputation of operational excellence and best in class customer service as well as a track record of driving profitable growth.
We believe each of these acquisitions will help us to accomplish this mission, we look forward to updating you on the integration process in the coming quarters.
In summary, the third quarter challenges notwithstanding we believe we are well positioned to succeed long term.
The fundamentals of our business remains strong and I'm confident that once we work through these temporary disruptions and get back to a normalized business environment, we will be back on track to delivering results more in line with our long term goals.
I'll now turn it over the Adrian to review, our third quarter results in more detail.
Thank you Roger.
Before we discuss our financial results for the quarter I wanted to highlight two accounting items.
As a reminder.
As of January 1st doesn't 19, we have applied the new lease accounting standard I have for 16.
This new accounting standards relates the capitalization of leases, which impacts our income statement and bought on should.
Second we have also the time mind, the certain lease contract adjustments related to the adoption of the new lease accounting standard when necessary in the first and second quarter Oh This year.
Thank you Tony.
Payments recognizes lease expense one of the <expletive> they should be have been copytele.
As a result with hot to restate, our first half results to correct. The classification, which had a net positive impact on net profit attributable to the equity holders of the part of 200000, Incuron and 2.7 million in Q2.
We believe the adjustment another month through outdoor <unk> and have no impact when our key performance measure EBITDA.
You can see further did that in our interim airport that was finds the same time, that's how we released this afternoon.
Now turning to the results of the quota.
Our organic growth was down slightly driven primarily by continued pressure in our duty free business.
By softer topline, we continued to strengthen our gross margin during the third quarter, which I was just 'cause led though on the call.
Our turnover the cruise opened 7% to 523 million compared to third quarter of 2018.
Adjusted EBITDA decreased 1.1 million.
Seven to 5.1 million.
Adjusted net profit attributable to equity holders of the pollen decreased 4.2 million to putting the 2.7 million.
Adjusted EBITDA attributable to equity holder of the pilot was 26 cents down from third to sense in the third quarter of 2018.
Excluding the impact of the new lease accounting standard I first 16, our adjusted net profit directly the cause of the parent was 24.76 million or 26 cents per ship.
[noise] [noise] organic said, which is a contribution combination of like for like says and then your business was down 1% the under third quarter.
Compared to a difficult comparison of 6.5% growth in the third quarter of 2018.
Look in the two components of organic growth, we saw the trends over the last two quarters have become more pronounced down Q3 2019.
Like for like says on a GAAP constant basis declined 1.1% compared to an increase of 3.2 person in Q3 2018.
This was primarily driven by weaker due to criticize as a result was slowing Chinese passenger spend and currency pressure.
Resulting in good the free like for like decline of 8% at the constant currency basis.
This was offset slightly by 1.7% constant currency growth in duty paid.
Driven primarily by our food and beverage and then a tonics category.
There's a celleration did the but like for like growth during the quarter was larger due to cover disruption from how we can Dorian and the continued muck seven to seven grounding.
We remain a collaborative focus on growing our card to paid portion of our business with but good I'm for sizes of food and beverage, which our chairman acquisition we support.
Regarding the second component of organic growth net new business as Roger mentioned earlier the pipeline in 2019 was not as.
Robots as 2018.
As such that the other combination of net new business was flat in Q3, that's a that's compared to 3.2% in third quarter of 2018.
For the third quarter, although gross margin continued to improve.
Up approximately 80 basis 0.26 before going to 5% key drivers of this upside we're pricing improved vendor with them and continues so.
Mixed shift to higher margin category.
Specifically put them beverage would you grew 5% year over year.
[noise] lease expense, formerly called selling expense were 40.1 million in Q3 down from hundred 15.5 may not in the prior year due to adoption of my friends 16, requiring the capitalization of fix concession fees and other and payment.
Beginning January 1st doesn't 19 lease expenses are on the comprised of lease payments that a viable in nature.
Excluding the impact of I've heard a 16, Rick good night to leverage on the lease expense line.
Personnel expense rose, 3.6% 209.2 million.
For the third quarter over this year and this increase was primarily driven by wage increases.
Other expenses, which affirmative called generic offensive were 40.3 million in the third quarter opened 7% increase.
Compared to last year [noise].
Turning to our balance sheet.
You can see the line items that impacted by the adoption of I for 16.
Primary capitalizing the right the views and according to the lease obligation.
As of September Threerd 2019, our adjusted net debt position, excluding lease obligations was 260 million.
Resulting in adjusted net debt leverage opened nine times compared to one times.
In Q2, and 1.3 times a year end.
Cash flows from pricing activity for the nine month and that.
I'm, a third 2019 were 409 million compared to 197 million in the prior year period.
Sharp increase in disgust filling lines was mainly driven by the rectification lease payments moving from operating the financing cash flows if the results of the new lease accounting standard I have for Sixtyv.
Capital expenditure decreased to four to 6.1 million in the first nine months of the year from 52.4 million down in the same period last year, primarily due to the timing of new project.
[noise] given the trends they continue to impact I would just to frame business and the continued Mac 737 grounding downed upcoming busy holiday travel season, we are cautiously monitoring the rest of this year.
We also expect to close the previous discounts you only on starting in early November .
As such we now expect organic growth for the year to be flat, although slightly positive.
We will provide comments around 2020 on our Q4 core but as Roger mentioned, Rick texting a stronger pipeline out of peace next year as we should be able to compete more aggressively for food and beverage opportunities given the acquisition of all HM.
However, the timing between winning an RFP and one of the stores come online and begin to impact revenues is difficult to predict.
In addition, I would have the headwind from newly outdoor clauses for most of 2020 onto we'll lap them in early November next year.
While we continue to evaluate our cost structure to identify opportunities to enhance margins. We expect our gross margin to be slightly up an EBITDA margin to be slightly down for the.
Nevertheless, we are optimistic than once we move button. This headwinds we can return to normalized rate of organic net sales growth.
In summary, despite the continued softness in due to free business. We're generally pleased with the underlying strength of I would do to pay the operation.
This makes up the majority of our business and has an attractive revenue growth and margin profile.
We remain focused on driving growth in food and beverage both in our retail stores as well the food and beverage service confessions as we integrate or chime in dollar business.
Something that expansion into food and beverage concession on will not on the further diversify our business, but also position us to capture significant do I suppose opportunity.
Given that the growth opportunity at this coupled with the resilience of our business and distinct operating advantages and industry, leading position, we are well positioned to continue driving growth.
I'll now turn back over to the operator to open it up to that you at night.
Ladies and gentlemen at this time will begin the question answer session.
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Our first question today comes from Michael Lasser from U.S. Please go ahead with your question.
Good evening, Thanks for taking my question its first on the the duty paid Tom.
Or.
Like for like sales and the fact that it does continue to decelerate on a two year stack basis. So already on a one year and your comparisons are getting easier I know you attributed a lot of that too whether with Dorian and 737 back.
Is it possible that there are other factors going on.
Such as market share losses to other providers airport and how do you track that.
I'm not sure that it's it's.
Heavily related to market share obviously, you know we talked about.
Net new business being a component of our organic sales.
I think the big impact for this quarter really was related to the you know the 737, Max as we ran into our.
Peak summer travel months capacity.
We see tighten significantly as that we normally face.
Heavier travel during the July and August months, and given the fact that the 737 Max Groundings impacted specific airlines, we saw a a significant impact in those terminals during the month and while the reporting has been.
Sparse to date, we've seen a number of those terminals, where they've been impacted by the groundings you know as much as a 4% to 8% decline in passenger growth for those periods of periods of time.
So we do think that this is heavily weighted to the tightness goes capacity during those peak months and the fact that so many of these aircraft we've taken out in the passenger growth and additional capacity that normally happens during that period of time could occur.
In this is a follow up that is there a way for you to die is the impacted those two factors because it would seem like they're getting worse off from from quarter to quarter and that's quite the fact that industries had more time to adjust the 737 issues and in this most recent.
Period, there were some tough hurricane or issues in the year ago period, and enduring seem to be a little bit less disruptive and then what happened in the year ago.
Yeah, well two things I'll I'll, just the hurricane Dorian issue is really one of the unique nature of how slow it moved it set around.
Yes, I was for literally days, creating that's right along the Florida in the South East coast of the U.S.
And discourage people literally from flying into it not to mention the number of days of those airports you close the storm eventually did move up the east coast and you're absolutely right. Some of that is related to really the timing of when in fact that happened during happened to fall in September impacting our third quarter results.
And going back to the you know the 737, Max and you remember, though that the grounding started sometime around may.
And as the.
Period of time moves through into July and August that's when the capacities get tighter and tighter and then they start to ease as the year goes on until we hit the holiday periods traveling once again.
And again, we've seen the.
Airlines that has been significantly impacted by the 737, Max Groundings reporting.
Significant decline in their capacity during those periods.
Which somewhat confirms what we're seeing.
In the terminals that those airlines predominate.
And then my my my follow up question is on.
Yeah look for 2020, recognizing that you probably don't want to provide a lot of a detailed guidance. There is a unique amount of moving.
As we head into next year, you have about $100 million of sales contribution from.
New deals that you're close on your acquisition and yet it does seem like you're you're forecasting that so many softer organic trends continue for the near term <unk> as we frame our model for next year.
How should we think about.
Incorporating the puts and takes that you've outlined.
Particularly on the margin side.
As we look towards 2020.
So on that you're right on the acquisition, we certainly contribute to the topline growth and ER and took on the extent of the contribution will depend.
When we finally closed those and when we were supposed to come. This so it comes in Suncoke governmental approvals. So there. This is a this is the upside to as I mentioned my script. They some downside to closer than you already on the appears to to happen early November and next year, we will have to a comp against say so we thought was than yours.
Yeah. So those are the two biggest talk to us I mean, we don't want a good morning details about another 20 will provide more color and our next quarter.
Okay, Thanks, and good luck.
Our next question comes from Marisa Sullivan from Bank of America. Please go ahead with your question.
Good evening. Thanks for taking my question just wanted to pop a little bit on.
Kind of thinking about 2020, I know that you're gonna be cycling, the and I guess, given fourq, you're not going to be cycling that Chinese tourism.
No. This the onset of the weakening as we get into Threeq you, but.
It seems like the duty free like for like slowdown has has continued to intensify and I just wanted to get your thoughts on how we should think about you know the.
Pressures on the duty free businesses as you start to lap.
How many finish line.
Hi, Mark so.
Yeah, so as you've seen on our in our presentation there the softness and just if we started in Q4.
In 2018, so Q4 2019 will probably a benchmark how did you talk to my may evolve during the during next year. So now it's too early to a two.
To provide then they and especially the guidance, we don't know yet we will well serving the trends are in Q4 and to I think that when up of tens of Q4, we'll know more how a duty free may evolve during 2020.
Gotcha, and then in terms of just having to the acquisitions you've made.
Can you help us think.
I think through what the typical timeframe is for when when you win a contract.
When you start to realize the revenues.
And then also is there anything about the win rate and food and beverage that's different from any other differences in the bid process and can you get a little more color on that food and beverage pipeline as you see it in 2020.
Good afternoon Merus it so I think.
Two issues one is I think in regards to the food and beverage pipeline and as we look at a when rates and anticipations clearly you know were relatively new to the gaming with the always Jim acquisition experienced slows a kits. So what we do know that our success rate will well it'll take us number probably a few years sticking.
To get to the rate of where we are at the retail level, but we do anticipate with.
Both the OE Jim acquisition, the experience will levels kind of the brand portfolio as well as some of the key players involved in that organization.
That will significantly enhance where we are in comparison to where we are today I think from a point of view of timing. The timing is Adrian had mentioned earlier.
Earlier is always a subject to a contract by contract situation, it's difficult for us to determine from the point of view of even when an RFP comes out when it potentially can be awarded and of course, the timing of when the stores actually opened in a business.
Commences can vary.
You know we're anticipating for example, the latest newer be duty free win.
To be sometime late second quarter early third quarter start now that tends to be a relatively quick turnaround, sometimes like salt Lake City.
It was announced a I believe at the end of 2018 or early 2019 and won't actually open up the new terminal until mid year next year.
So the cycle in the timing really varies contract by contract fairly significantly.
Gotcha and then just one other follow can you help us just think about the.
And then margin structure and for these acquisitions.
On an EBITDA basis.
So brookstone the it the.
Slightly below our our EBITA margin.
And Oh, it would be slightly above.
Great. Thank you so much.
Our next question comes from Kimberly Greenberger from Morgan Stanley . Please go ahead with your question.
Okay, great. Thank you so much Roger I wanted to just start with the acquisition of L.H.M. I'm wondering are there are recipes that you will now be able to compete for that prior to the acquisition of a student beverage capability that you were not able to.
You can keep fourq or <unk> or does the acquisition simply make your current cheating process more compared to dance, but you you're able to bid for the same kinds of ads are you're able to participate in the same RFP is as previously.
So as we.
Continuously discuss they think it does put us in a very very different situation. We were primarily focusing on quick serve restaurants, cafes, and possibly a lounge or so prior.
Now with a broader capabilities landscape, we will be able to look at more casual sit down dining a much broader range of opportunities that we may not have looked at before.
So we are excited about the opportunity at looking at a much broader range of RSP is going into 2020.
Okay Wonderful and then if you look at the.
I think you and Adrian have talked about the timing lag between RFP to the awarding the contract to the eventual opening of the concessions.
And you said it varies greatly by contract is there any kind of a range that you might be able to give us is that you know not less than six months that you know typically not greater than 12 months or any sort of guidance or just helping us to understand the process that weren't all not quite as central Europe with as you are.
I would say an average probably around two one year slightly below one European beverage can be assured a six month I would guess as long as 18 months on the outside so I guess, if we went to look at an average of 12 months somewhere in that window.
Okay, great with maybe a range of six to 18 months.
Yeah.
Right.
Great. Okay, and then I wanted to just ask.
You know there there are a lot of sort of puts and takes that or a.
That are pressuring the topline growth and I'm wondering you.
You know when when do you think you get back to sort of a more normalized level of like for like sales growth [noise].
Is there a way to sort of help us understand what the what they.
Well I'd past might look like over the next one to two years.
It's difficult for <unk> to predicting exactly when when things are going to quote unquote normalize as as we stated on call earlier I think the that the timing that we see the 737 Max right now is Boeing as reported and I can only go by the public reports that that come out you know they are indicating that they're hopeful.
That does certification will be accomplished before the ended the year.
Most of the key airlines that have been impacted by the groundings, our reporting that they're adding these those planes back into their schedules in January quite a few of them in February .
So yeah, we're hoping that although split that timing that's being reported right now publicly.
In fact does occur because that's one one of the significant impacts that we're seeing impacting the duty paid right now and could help to bring that back on track.
The side of the duty free I mean, it's really really difficult to tell they there has been a lot of a lot of media reports about various things going on between the trade talks and other international issues, what's going on Hong Kong right now.
Obviously, the timeline on that it's difficult for us to perceive and then how quickly you know we get back into a normal course of business you know it's difficult to predict at this point.
Okay. Thank you so much.
Our next question comes from Seth Sigman from Credit Suisse. Please go ahead with your question.
Hi, This is collaboration money on for that segment. Thanks for taking my questions.
Firstly on store growth. So should we think about these acquisitions. So you know being incremental to organic store next to it and if I heard any capacity constraints that would limit the codell settle these acquisitions.
Yeah.
So I don't see any reason why there would be any limitations of growth outside of those acquisitions I mean, it's our goal that in fact that they helped to.
Expedite or enhance our opportunities on the brookstone a situation obviously, it's a great brands have enough portfolio, we see you know upside opportunity of potentially gaining.
You know some new real estate or are enhancing our RFP wins on the duty.
Page side of the business.
On the food side as we've been reporting you know it is our expectation with the full scale and capabilities of OEM to pursue.
Most of the RFP that are out they are enhancing our capabilities of.
In a winning on the food and beverage side.
Got it Oh, just pointing up a question on margins, though I mean can you tell us how to think about and I was just the synergies from these acquisitions and how do we think about.
Just a profitability on an existing 15 Fulton beverage store footprint in Washington, D.C. that having acquired.
I mean, there was a key is a key synergy we expect to to generate this acquisition is it's all blankson. It used to win new a new food and beverage artist piece and then go to top line on the cost side are there maybe some overlapping synergies between the I work with them beverage operations and acquisitions generally as I mentioned earlier.
The Oh, each acquisition EBITDA margins slightly higher than our Hudson margins on the on EBITDA should be accretive.
The BNS structure is slightly different a the gross profit margins to be higher.
Personal expenses also be higher but overall on the EBITDA margin perspective, since acquisition is slightly higher than to Hudson existing business.
Got it thank you.
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Our next question comes from Christopher Picor from Goldman Sachs. Please go ahead with your question.
Good evening guys. Thanks, so much for taking my questions.
I just had a follow up to the last one.
On the O. HM.
Deal.
So it looks like you paid $50 million, you said, a mid single digit multiple.
So if you apply six times to that you got about eight and change of EBITDA on 60 million of your one sales so like almost a 14% EBITDA margin I guess a is that the right way to think about it and then b.
In terms of the 2021 sales going up so call. It 85 million once fully integrated if you just hold that margin you got to like almost $12 million EBITDA or a fully synergized multiple for unchanged.
Hi, my way off or is that in the ballpark.
Yes, I mean, the right way to look at it just.
Good thing to say spoke to doesn't went through on each of the base for devaluation go safer generated with conflict or to secure a so this is the right base.
The 50 million on the controlling stake is actually a fight the person. So so you'll have to gross it up so there are hundreds within enterprise value is about 62.
And to do them up so you would probably come of some multiple based on 2020.
Who went to pro forma it'd be the it'd be though for five and hot die.
Perfect. That's excellent and then I understand the strategic rationale for M&A seems like a you know pretty reasonable multiple for the Iowa gem deal at least relative to where your stock is trading.
But maybe update us on your thoughts of of share buyback.
Given where your own shares are trading currently.
So no change in our guns are at the moment.
We as we've mentioned earlier, we want to focus on the growth organic growth and M&A growth and those two acquisitions a that for US I mean, the first and second step into the direction and we will we will before we consider buybacks or dividends, we want to explore and the other potential opportunity just to go out and hand to support the topline growth.
Yeah.
Got it and then on the New Orleans contract that will eventually go away in November it sounds like a any sense for what the headwind from those stores will be on that new store growth line.
Yeah.
That's kinda challenging right now to know as we're still working through a series of or fees that already been submitted another new business. So it's really difficult at this point kind of forecast, how that's going to impact our total net new business until we understand.
The win rates and other stuff that we win during during the latter part of this year going into next year. So we don't disclose performance by calling drug what are you only get the rough idea you probably could take their average revenue per store and then you. The number of stores. So we currently have in New Orleans, and prorated for two months to get an idea for the headwinds for this year.
Got it thanks, so much and good luck to rest of the here.
Thank you.
And ladies and gentlemen at this time and showing no additional questions I'd like to turn the conference call back over to Deborah Belevan for closing remarks.
Thanks, operator add thank you everyone for joining us. This evening I just a reminder, a de <unk>. The replay of the webcast will be available on our website. Thanks again bye.
Ladies and gentlemen that does conclude today's conference call with you. Thank you for attending you may now disconnect your lines.