Amazon adds antenna service for satellite data; courts space industry

FILE PHOTO: The logo of Amazon is seen at the company logistics centre in Boves, France, August 8, 2018. REUTERS/Pascal Rossignol/File photo

LAS VEGAS (Reuters) – Inc on Tuesday said it was starting a new antenna service for uploading and downloading data from satellites, in a bid to lure more space industry customers to the cloud.

The world’s No. 1 cloud computing company said it was aiming to make data transfers to and from satellites cheaper and easier through ground stations associated with its data centers across the globe. It listed Lockheed Martin Corp as one of the customers or partners already previewing the service.

“It’s not so simple dealing with satellites if you actually want to be able to upload and download data,” Andy Jassy, Amazon Web Services’ chief executive, said in Las Vegas announcing the service, which he called a “total game changer for how people can interact with satellites.”

Reporting By Jeffrey Dastin in San Francisco; Editing by David Gregorio

Cyber Monday 2018: 40 Extended Deals You Can Still Buy

If you slept in yesterday, or were lucky enough to spend a day away from screens, you missed a bunch of sales. Cyber Monday is the epic conclusion to what has become an extended weekend of deals beginning with Black Friday (or Thanksgiving for some retailers and shoppers).

No big deal. We combed through our many Cyber Monday guides and found more than three dozen deals that are still active as of noon on Tuesday. These are all items we like here at WIRED. These deals tend to be volatile so we don’t know how long they will last, but have a gander if you’re still bargain hunting for the holidays.

TV and Home Theater Deals

43-Inch TCL 4K Roku TV

$350 ($50 off) from Amazon

TCL’s 5 Series 4K TV with Roku has all the basics of a good 4K HDR TV, with great picture quality and a better interface than some $1,000-plus sets, thanks to Roku.

LG OLED C8 55-Inch 4K TV for $1,697 ($400 off)

Amazon, Walmart

Once you spend a day with LG’s OLED screen tech, you won’t go back. Visually, nothing compares to it. Read our C8 review to learn more.

49-Inch Sony X900F for $898 ($202 off)

Amazon, Walmart, B&H

The Sony X900F is one of the best-looking TVs money can buy, with deep blacks and high contrast and works well for absolutely anything, including gaming. Sony also chose Google’s Android TV for its interface, which means you may not need to buy a Roku.

Roku Streaming Stick Plus for $48 ($22 off)


This is the Best Overall TV streaming device and our favorite Roku.

Home and Kitchen Deals

Instant Pot Duo 6-Quart for $70 ($30 off)

Amazon, Target

The Instant Pot is a multi-purpose cooking device that cooks food faster than competitors like a Crock Pot, and can do more.

iRobot Roomba 690 for $249 ($126 off)

Amazon, Target, Lowe’s, Best Buy

This is one of our favorite mid-range vacuums. It’s Wi-Fi-enabled and has the same impressive floor navigating tech as iRobot’s other, pricier models.

Dyson V8 for $345 ($254 off)

Amazon, Target

Dyson cordless stick vacuums are our favorite stick vacuums. The V8 has a very decent 40 minutes of run time and hassle-free HEPA filtration. It might be more efficient than a Roomba if you have a smaller house.

Wemo Mini Smart Plug for $25 ($10 off)


The Wemi Mini is compact enough to stack two in the same outlet. It’s also compatible with Amazon Alexa, Google Assistant, and Apple HomeKit.

ChefSteps Joule Sous Vide for $159 ($40 off)

Amazon, ChefSteps, Sur la Table

This smart sous vide immersion wand takes a lot of stress out of cooking.

Primula Cold Brew Coffee Maker for $20 ($10 off)


This Primula holds 51oz and is sized small enough to fit on most shelves. It also doesn’t have quality issues some makers suffer from, like glass cracking or poor filtering.

KitchenAid Classic Stand Mixer for $190 ($132 off)


This is the stand mixer. It’s a classic and sticks around because it works well.

Uuni 3 Pizza Oven Bundle for $268 ($67 off)


We’ve tried the Uuni Pro. The only difference with the Uuni 3 is that it’s smaller. It cooks 12-inch pizzas instead of 16-inch ones. This bundle includes a skillet pan.

Bose Audio

Bose QuietComfort 35 II (Wireless) for $299 ($50 off)

Amazon, Jet, Dell

These are Bose’s killer travel headphones. Almost nothing can match the noise canceling abilities of these cans.

Bose SoundSport Free for $169 ($80 off)

Amazon, Walmart, B&H

The Bose SoundSport Free are some of the best-sounding and most comfortable wireless workout buds.

Bose SoundLink Revolve for $179 ($20 off)

Amazon, Walmart, B&H

The SoundLink Revolve is one of the Best Bluetooth Speakers available. It shoots sound out all directions, has a 12-hour battery life, and sounds incredible.

Bose SoundLink Micro for $69 ($31 off)

Amazon, Walmart, Target, Nordstrom

The SoundLink Micro sounds extraordinary when compared to other tiny speakers. It’s small enough to clip onto a bike’s handlebars thanks to its stretchy silicone strap.

Other Audio Deals

New Amazon Echo Dot for $30 ($20 off)


The new Echo Dot has improved sound and a classier look to it. It has Alexa to answer questions, and can connect to all manner of smart home devices.

Sennheiser HD 4.5 Wireless Noise Canceling for $138 ($62 off)

Amazon, Walmart ($150)

These Sennheisers are an upgrade of the BT4.4 we reviewed earlier this year. They sound great, and the noise canceling in this model is a bonus.

Jaybird Run for $129 ($51 off)

Amazon, Best Buy

We loved the Run’s rich, detailed sound. You can also use just one earbud, which is useful if you like to run outside and keep track of incoming cars.

Jabra Elite Active 65t for $160 ($30 off)


These workout headphones are waterproof (and sweatproof). You’ll get five hours of play time between trips to the charging case—15 hours of total listening time.

Gaming Deals

Two Nintendo Labo Kits for $99 ($40 off)

Best Buy

The Nintendo Labo is like Legos meets videogames meets cardboard, and we love it. The Vehicle Kit is our favorite, but the Variety Kit is also a lot of fun.

Nintendo 2DS + Super Mario Maker for $80 (New Bundle)

Walmart, Best Buy

The 2DS can do everything the 3DS can except 3D, and you don’t really need that feature to enjoy most (or all) games. Super Mario Maker lets you construct your own Super Mario Bros. levels and play levels made by others.

Nintendo 2DS XL for $130 ($20 off)


If you like the clamshell design and crave larger screens, the 2DS XL is just about the best version of the 3DS you can get.

Turtle Beach Stealth 300 Headset for $45 ($35 off)


This Stealth 300 headset will work on Xbox, PS4, Switch, PC, etc. It’s a lot like our top-recommended Stealth 600 sets except it’s wired.

Laptops, Phones, Watches

Fossil Sport Smartwatch for $179 ($76 off)

Fossil (use code ‘BF30’), Amazon

Confession: Our tester model is still en route, but word on the street is that this sport smartwatch is an excellent value for the money, and we’re very excited about checking it out.

Garmin Fenix 5 Plus Sapphire for $650 ($150 off)

Amazon, B&H Photo, Dell, REI

If you do any kind of outdoor activity, the Garmin Fenix 5 Plus is the best GPS-enabled fitness watch you can get for this kind of money. The sapphire glass version is stronger, but both are worthwhile.

Samsung 11-Inch Chromebook 3 $129 ($70 off)


This is a petite, lightweight Chromebook for lightweight tasks. It’s good for email, browsing, and other basics.

Dell Inspiron 11 2-in-1 Chromebook for $250 ($50 off)


This is one of the better low-end Chromebooks on the market. It weighs just three pounds and has an 11-inch screen that bends back into a tablet-like configuration.

Lenovo Ideapad 720S Laptop with 4K Display for $997 ($500 off)

Lenovo, Newegg ($1,030)

With an Intel Core i7 (8th Gen), 8GB RAM, a fingerprint reader, and a 512-gigabyte SSD for storage, this Ideapad should be able to handle most work tasks with ease.

Mophie Wireless Charging Pad for $23 ($37 off)


This Mophie charging pad will charge any phone or device with Qi charging, and it’s especially optimized for iPhones.

Motorola Moto Z3 Play for $370 ($80 off)


The Moto Z3 Play doesn’t lag much for a mid-range phone and we really like the Moto Mod that comes in the box. It’s a magnetic battery pack you can snap on the back, and it’s thin enough that I just kinda left it on for days at a time. It works on all major wireless networks.

Motorola Moto X4 for $180 ($70 off)


The Moto X4 is a dependable budget phone that won’t drive you nuts. It works on any U.S. wireless carrier.

Toys for Kids (and Parenting Gear)

Anki Cozmo for $140 ($40 off)

Amazon, Walmart ($150), Target ($150)

Cozmo is so fun, and cute, that you might be excused for forgetting that he’s actually teaching your child (and possibly you) to code.

Thule Chariot Lite 2 Convertible Stroller for $680 ($170 off)

REI, Nordstrom

This is the Thule trailer that Gear writer Adrienne So uses to tote around her two children. Once you get to your destination, just unhook it from your bike, pop the rugged wheels on, and be on your way down the trail.

Radio Flyer Kids Balance Bike for $35 ($64 off)


This is an unbelievable price on a classic balance bike, which is better for learning how to bike than a tricycle.

LittleBits Avengers Hero Inventor Kit for $100 ($50 off)

LittleBits, Amazon

Why build superheroes when you can become one? Kids who are eight years and older can use the included light sensor, accelerometer, and LEDs to built their very own superhero gauntlet.

Other Great Tech

AncestryDNA Kit for $59 ($40 off)

Amazon, Ancestry

We here at WIRED have mixed feelings about sending out your DNA to be tested. But if you’re going to buy Mom or Dad a DNA testing kit, AncestryDNA has the biggest user database, which means better Family Tree matches.

Furbo Dog Camera for $169 ($80 off)

Amazon, Furbo

Furbo is one of our favorite devices for pet parents who have to work out of the home.

Otterbox Venture 25 Cooler for $210 ($60 off)


Otterbox is currently holding a sitewide 25 percent off sale, if you’ve been looking for a cooler that will last forever or a case that will protect your phone when you drop it off a cliff.

Vivobarefoot Primus Swimrun for $120 ($40 off)


We thought these were the perfect outdoor traveling and running shoe when we reviewed them last summer.

All of WIRED’s Cyber Monday Deals Roundups

*The deals in these roundups are expiring quickly, but you’re welcome to peruse to get a feel for some items we like.

When you buy something using the retail links in our stories, we may earn a small affiliate commission. Read more about how this works.

Cyber Monday on track for U.S. online shopping record

(Reuters) – Cyber Monday was on track to bring in a record $7.8 billion in U.S. online sales, as millions of shoppers scoured for steep discounts on everything from Lego sets to big-screen TVs.

The marketing event was expected to pick up steam this evening as West Coast shoppers nab deals after work and those on the U.S. East Coast make purchases before bed, according to Adobe Analytics, which measures transactions from 80 of the top 100 U.S. retailers.

“Many shoppers have waited on certain purchases, with three hours tonight expected to bring in as much revenue as an average full day,” said Taylor Schreiner, director of Adobe Digital Insights.

Target Corp and Inc were pulling out all the stops by offering free delivery with no minimum order requirement and bombarding shoppers with promotional emails. Companies had logged $531 million as of 10 a.m. ET, Adobe Analytics found.

Shares of Amazon were up 5 percent in afternoon trade. Macy’s Inc, Kohls Corp and Target shares rose as well.

In a different estimate Mastercard SpendingPulse forecast a 25 percent jump in e-commerce sales volume to at least $3 billion. That figure was based on sales via the Mastercard payments network and estimates for other payment forms such as cash and check.

These U.S. forecasts still paled in comparison to Alibaba Group Holding Ltd’s “Singles Day” earlier this month, which raked in $30.7 billion in sales.

The promotional efforts ahead of the U.S. shopping frenzy drew the ire of some who complained they woke up to even more Cyber Monday emails than in years past.

“Yes retailers, I’m aware it’s Cyber Monday even without the 150 emails,” tweeted Keina (@RealMamaEagle), a user from Delaware.

Packaged merchandise on a conveyer belt after being labeled for shipping is seen at the Amazon fulfillment center in Robbinsville, New Jersey, U.S., November 26, 2018. REUTERS/Shannon Stapleton


Drawing an estimated 75 million shoppers, the day was a test of retailers’ online platforms and delivery operations.

If not backed with the right IT infrastructure, the heavy traffic could have caused hours of glitches like those during Amazon’s Prime Day marketing event in July.

But as of 2:30 p.m. ET on Monday, no big U.S. chain had technical difficulties, according to outage tracker On Black Friday some websites including apparel retailer J.Crew and home improvement chain Lowe’s Cos Inc had temporary outages.

Consumers are increasingly buying holiday gifts online, diluting the importance of Black Friday, when shoppers had traditionally flocked to brick-and-mortar stores for the best deals.

“I find Cyber Monday to be more convenient than Black Friday,” said Jeissy Casilla, 23, a retail worker in Puerto Rico, adding that it allowed her to browse multiple stores and offers and avoid long lines.

“I think that Cyber Monday is better in terms of how much you can get done while doing so little – basically a better chance at the best deals,” she said.

Toys were expected to have the biggest discounts, Adobe Analytics said, as retailers rush to fill the void left by the bankruptcy of top U.S. toy retailer Toys ‘R’ Us.

Target offered 30 percent off on select toys, while Kohl’s discounted Lego sets between 30 percent and 40 percent.

Slideshow (4 Images)

Social media conversation tracker Brandwatch said out of 13,000 social media mentions of #Cybermonday, the Apple Watch and the Red Dead Redemption 2 video game were two products that were highly discussed.

The National Retail Federation forecast U.S. holiday retail sales, including online, in November and December will increase between 4.3 percent and 4.8 percent over 2017, for a total of $717.45 billion to $720.89 billion.

Additional reporting by Uday Sampath Kumar and Soundarya J in Bengaluru, Melissa Fares in New York and Jeffrey Dastin in Los Angeles; Editing by Bernard Orr and Meredith Mazzilli

NASA's InSight Spacecraft Lands on Mars and Snaps a Photo

After a six-month journey across hundreds of millions of miles of deep space, NASA’s InSight spacecraft—a mission nearly ten years and close to $1 billion in the making—landed successfully on the surface of Mars on Monday, touching down on the planet’s surface just a few minutes before 12:00 pm PT.

In the final moments of the spacecraft’s descent, the mission control room at NASA’s Jet Propulsion Laboratory was silent as updates on InSight’s status blared over the PA system: “Altitude 300 meters… 200 meters… 80 meters… 60 meters … 50 meters, constant velocity 37 meters… 30 meters … 20 meters… 17 meters… standing by for touchdown… Touchdown confirmed! InSight is on the surface of Mars!” Immediately, the engineers in mission control burst into applause.

News of the successful touchdown was delivered to Earth via two briefcase-sized communication satellites named Mars Cube One-A and Mars Cube One-B, which accompanied InSight on its journey to Mars and monitored the spacecraft from high above the planet. The two “CubeSats” are the first of their kind to make the trip to deep space. On past missions to Mars, updates on a mission’s status have been relayed to Earth by spacecraft stationed in Martian orbit, such as the Mars Reconnaissance Orbiter. InSight, however, did not have an orbiter in position to forward information on its entry into Mars’s atmosphere, descent to the surface, and ultimate landing. Instead, InSight brought its own, mission-specific communications relay, in the form of MarCO-A and B. The tiny satellites’ performance today hints at how spacecraft going forward could phone home in near real-time from faraway planets, even in the absence of a permanent orbital outpost like MRO.

According to the MarCO telemetry, InSight deployed its parachute, activated its radar, detached from its backshell, activated its 12 descent engines and landed on the planet — all, it seems, according to plan. “Flawless… flawless,” said Rob Manning, chief engineer at NASA’s Jet Propulsion Laboratory, over the cheers of his colleagues. “This is what we really hoped and imagined in our mind’s eye. Sometimes things work out in your favor.” He added that InSight’s engineers will spend the next hours and days reviewing the landing data, to see just how well it went. But as of right now, he said, InSight’s landing was as close to perfect as his team could have expected.

Within minutes, the CubeSats had also relayed InSight’s first photograph of its surroundings on Mars. Conditions looked… dusty, with flecks of Elysium Planitia (InSight’s landing site and home for the duration of its mission) obscuring a view of the Martian horizon:


But InSight’s mission planners were anticipating dust. Now, the lander must wait for that dust to settle—literally—before unfurling its solar arrays, which it will use to power its mission on Mars.

MRO and the MarCO satellites will be out of range by the time those solar arrays are fully deployed, which means we’ll have to wait another four or five hours for updates on their status. For now, though, all appears to be well with InSight. “The lander is not unhappy, it’s not complaining, it’s in a normal mode, so it’s going to chug along for the rest of the afternoon and finish its activities,” Manning said.

[embedded content]

Learn More About the InSight Mission

Insiders Just Bought A 15% Yield At Below Book Value: USA Compression Partners LP

Looking for a dependable high-yield vehicle? The management at USA Compression Partners LP (USAC) have maintained the company’s $.52 quarterly through previous boom and bust cycles:

(Source: USAC site)

If you’ve ever researched how natural gas gets pulled out of the ground, you’ve already discovered that compression is an increasingly important part of the operation. Compression also is a vital element in shale fracking production, which requires more compression than traditional techniques.

Although you wouldn’t know it from its current low price, which is near its 52-week low, USAC is in a good place now – demand for its large horsepower units is robust, and the major acquisition it made of the assets of CDM in early 2018 put it into a dominant position in its industry.

Management referenced this on the recent Q3 ’18 earnings call:

“The overall market for compression services remains very strong, driven by solid natural gas fundamentals and the continually midstream infrastructure buildup, which does not just combine to one region, but rather it’s taking place across the country in areas which we operate. We continue to take advantage of the strong market to push through rate increases while prudently investing capital in the business. Our utilization metrics demonstrate the current strength of the market and we expect continued strength throughout 2019, based on the current visibility for compression services demand.”

Natural gas has multiple drivers – increasing utilization as a replacement for coal at power plants, LNG exports, exports to Mexico, and demand as a feedstock for petrochemical companies, which continue to ramp up their presence in the US, in order to take advantage of larger natural gas supplies:

(Source: USAC site)

Many have posed the age-old question, “Does size matter?” with advocates on both sides of the argument.

However, when it comes to the scintillating world of compression, size does matter, and here’s where USAC has a distinct advantage over its competitors. The trend is toward outsourcing, particularly for large equipment, which tends to be “sticky” – it’s expensive for a customer to demobilize this type of equipment, ($60K – $200K plus), which promotes longer contracts and increasing prices for USAC.

“The market for large horsepower equipment has remained very tight as we’ve experienced throughout the entire year. Demand continues to be especially strong for the very largest horsepower categories in which USA Compression specializes.”

“Compression – the way forward continuing to outsource actually is trending to accelerate. So, I think you’re actually in a very unique time right now that you’ve got limitations on access to capital, you’ve got limitations on access to people and you have limitations on access to new equipment. So, all of those three things together can provide for a perfect storm which we think plays well to our strength of large horsepower infrastructure equipment and will allow us to re-price our book upward over time.”

“We’re in the equivalent of a seller’s market right now where there is a lot of demand and not a lot of supply.” (Source: Q3 call)

(Source: USAC site)

Looking forward, USAC should be able to capitalize on a better pricing environment: “When we look at the spot pricing on the new units we’re deploying, 120,000 some odd horsepower for next year, these are extremely attractive new unit economics, effectively five-year or less cash on cash type of payouts, low 20s, IRR on an levered type of basis.” (Source: Q3 ’18 call)


USAC’s next distribution should have an ex-dividend date sometime in early February. It pays in the usual Feb/May/Aug/Nov LP cycle for LPs, and issues a K-1 at tax time. At a $13.50 price/unit, USAC yields 15.56%, with trailing coverage of 1.02X.

DCF coverage was just 1.01X in Q3 ’18. However, moving forward, management sees additional cost savings synergies from the CDM deal kicking in for 2019, as it finalizes the transition. The entire 900 employees of the company are now using the same customer, contract and asset data systems. This should improve coverage going forward, in addition to forward price increases.

No More IDR’s:

USAC closed on the CDM deal on 4/2/18. CDM was the compression services arm of Energy Transfer Partners LP, and Energy Transfer Equities, which merged into Energy Transfer LP (ET). CMD was valued at ~ $1.8B.

This deal included the following:1. The contribution of ETP’s subsidiaries, CDM Resource Management LLC and CDM Environmental & Technical Services LLC, to USAC.2. The cancellation of the incentive distribution rights in USAC.3. The conversion of the general partner interest in USAC into a non-economic general partner interest. As part of the transaction, ETE acquired the ownership interests in the general partner of USAC, and approximately 12.5 million USAC common units from USA Compression Holdings.

(Source: USAC site)


This table illustrates the impact that the CDM deal has had on USAC’s operations. It was transformative, ramping up revenue and EBITDA by well over 100% and DCF by over 54% in Q3 ’18, while Q2 ’18 saw even larger increases.

USAC had a larger than normal number of legacy CDM field technicians after the CDM deal closed, and also used outside parties to perform routine maintenance on some compression units, which was much more expensive than using internal personnel. It took a while to find the right caliber of technicians, due to a strong marketplace environment, but they’ve fixed the situation, and upgraded their staff talent level.

USAC’s coverage has improved dramatically over the past four quarters, rising from a sub-par .87x (when the GP was relinquishing IDR rights to support the payouts, up to 1.09X in Q2 ’18, and averaging 1.02x over the past four quarters).

Looking forward to 2019, if we use an average of the post-CDM deal Q2 and Q3 2018 DCF figures of $47.5M and $51.4M, respectively, that gives us an average DCF of ~$49.45M/quarter.

We compared and extrapolated that $49.45M DCF average to the Q3 ’18 total cash distributions of $47.02M, which were higher than the Q2 ’18 total of $43.5M.

If USAC’s DCF and total distributions stay flat, we should see 1.05X coverage in 2019. This is without the benefit any cost savings, or additional revenues from price hikes.

Fleet Utilization:

Fleet horsepower was over 3.6M, as of 9/30/18, an increase of more than 53,000 horsepower vs. Q2 ’18. Active horsepower increased 61,000 to over 3.2M, up ~2% over Q2 2018.

Another positive is that management has been able to redeploy ~353,000 horsepower of idle horsepower from the combined fleets at nominal additional capex costs. (CDM’s fleet had a lower utilization rate.) Most of its idle equipment is in the small horsepower category – long before the CDM deal, management had been shifting USAC’s emphasis toward large horsepower equipment.

USAC has had a very stable fleet utilization rate of ~93% for more than a decade:

(Source: USAC site)

Guidance vs. Performance:

Management narrowed its full-year 2018 adjusted EBITDA guidance range to $310 – $320M, and its 2018 DCF guidance range to $170m – $180M.

We pro-rated this 2018 guidance to three quarters to get an idea of USAC’s actual Q1 ‘3 ’18 results compare to the guidance. So far, EBITDA looks roughly in line with the low end of 2018 guidance, while DCF is ~4% above it.


Natural Gas downturn – If there’s another protracted downturn in the energy patch, this could lead to a cutback in rigs, and potential demand for compression services, even the large units, which are in tight demand now.

Unlike crude oil, which has had a rough go of it in 2018, natural gas futures are up 34% over the past month, and 46% year to date in 2018. However, producers need compression to get their product out of the ground, which gives USAC a cushion in energy cycles, as its fleet utilization has had a strong, long term record of 93% utilization.

IRA Holders – Holding an LP in an IRA may result in tax complications for IRA holders due to UBTI. You’ll also get more tax deferral advantages from investing in USAC in a taxable account. You should consult your accountant about these aspects of investing in LPs.


At $13.50, USAC is less than 5% above its 52-week lows – its price hasn’t been this low since April 2016. It’s also selling at .85x of book value, and its price/DCF is one of the lower valuations we’ve seen recently.

Analyst’s Price Targets:

That $13.50 price puts it nearly 26% below analysts’ lowest price target of $17.00, almost 44% below the $19.43 average price target.

Insiders Are Buying:

Management just upped its skin in the game last week – they bought 45,000 units at a price range of $13.40 to $13.90.

(Source: finviz)


Due to negative net income, which includes heavy non-cash depreciation and amortization charges, USAC has negative ROA and ROE valuations.

The interest coverage factor of just .69X looks poor, when compared to the 1.45X average, but, again that includes a great deal of non-cash depreciation and amortization charges.

USAC’s EBITDA/Interest coverage factor for Q1-3 ’18 was 4.49X.

Debt and Liquidity:

“As of September 30, 2018, the Partnership had outstanding borrowings under the revolving credit facility of $1 billion, $578.2 million of borrowing base availability and, subject to compliance with the applicable financial covenants, available borrowing capacity of $309.7 million. As of September 30, 2018, the outstanding aggregate principal amount of the Partnership’s 6.875% senior notes was $725 million.”

(Source: USAC site)

USAC’s Credit Agreement has an aggregate commitment of $1.6B, with a further potential increase of $400M, and has a maturity date of April 2, 2023.

Its 6.875% senior notes Senior Notes mature on April 1, 2026.


We have options picks for USAC in our Double Dividend Stocks service, which we can’t divulge here, but you can see trade details for over 25 other option-selling trades in our Covered Calls Table and Cash Secured Puts Table.


We rate USAC a long-term buy. Demand for its natural gas compression services isn’t going away any time soon, just the opposite. USAC has a strong position in its niche industry, and is well-positioned to benefit from increasing demand for large-scale horsepower compression.

All tables furnished by, unless otherwise noted.

Disclaimer: This article was written for informational purposes only, and is not intended as personal investment advice. Please practice due diligence before investing in any investment vehicle mentioned in this article.

CLARIFICATION: We have two investing services. Our legacy service,, has focused on selling options on dividend stocks since 2009.

Disclosure: I am/we are long USAC.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Black Friday deals lure U.S. shoppers, biggest sales gains online

NEW YORK (Reuters) – Shoppers across the United States snapped up deep discounts on toys, clothing and electronics both online and at stores on Black Friday, giving retailers a strong start to their make-or-break holiday season.

A healthy economy and rising wages gave people the confidence to splash out on retailers’ annual raft of bargains.

“The prices today are very good,” said Jose Manuel Cruz Hernandez, 59, who hit the Del Amo Fashion Center in Torrance, California, with his sister Paulina Cruz, 66, who comes every year from Mexico City to shop.

The pair spent $120 on princess dolls and other toys at the Walt Disney Co store, where items were 20 percent off. They spent a similar amount at Gap Inc, where items were discounted by about 55 percent.

Cruz Hernandez, a foreman at an aerospace firm, said he was comfortable with the U.S. economy and his own finances and plans to spend another $1,000 on holiday gifts – about the same as last year.

A similar story played out online, where shoppers spent $643 million by 10 a.m. ET, up 28 percent from a year ago, according to Adobe Analytics, which tracks transactions at most of the top U.S. online retailers. Smartphone sales in particular contributed to gains.

Foot traffic looked healthy at stores offering discounts, although detailed numbers on brick-and-mortar holiday sales will not be available for several days.

“Overall, Black Friday doesn’t have the sense of urgency as in the past and feels more like a busy regular weekend day in many of the stores,” said Dana Telsey at Telsey Advisory Group.

“Many of the promotions were available for the past couple of weeks,” Telsey said. “We haven’t noticed desperation from any retailer.”

Shares of Macy’s Inc, Kohl’s Corp, and Target Corp all closed down on Friday and weighed on the broader S&P 500 retailing index, which closed down 0.56 percent.

Investors are concerned retail sales growth may have peaked in the second quarter and business will slow down as comparisons get tougher, said Brian Yarbrough, retail analyst with Edward Jones.

Victoria’s Secret owner L Brands, Walmart Inc and American Eagle Outfitters rose. J.C. Penney Co Inc ended flat and Inc closed slightly lower.

The overall stock market finished a shortened session with losses.


Early numbers showed overall retail sales, both in stores and online, were in line with expectations, according to Mastercard Inc’s SpendingPulse retail report. The firm expects overall Black Friday sales to top $23 billion this year, up from $21 billion last year.

Mastercard combines sales activity in its payments network with estimates of cash and other payment forms. It said cold weather in the eastern United States and wet weather in the west may be pushing more consumers online. 

Online spending is on track to hit $6.4 billion on Friday, Adobe said. Online sales on Thanksgiving Day were up 28 percent at $3.7 billion.

The National Retail Federation forecast U.S. holiday retail sales in November and December will increase between 4.3 and 4.8 percent over 2017 for a total of $717.45 billion to $720.89 billion. That compares with an average annual increase of 3.9 percent over the past five years.

About 38 percent of American consumers plan to shop on Black Friday, a Reuters/Ipsos poll showed last week.

People shop during the Black Friday sales shopping event at Roosevelt Field Mall in Garden City, New York, U.S., November 23, 2018. REUTERS/Shannon Stapleton

Very cold weather in the U.S. Northeast may have kept some shoppers at home, although industry analysts also reported added demand for coats and other warm clothing. An Athleta clothing store in Tysons, Virginia, provided hot chocolate with marshmallows to women in line for the dressing room.


Shoppers picked up big-ticket items such as TVs, Apple Inc iPads and Watches at Target, while phones, toys, gaming consoles and cookware were top sellers at Walmart Inc.

Many shoppers sought out air fryers, which do not use oil to deep fry food and Instant Pots. Kohl’s Chief Executive Michelle Gass told CNBC the company was selling 60 Instant Pots per minute online on Thanksgiving Day.

While most retailers have not changed their deals and discounts year-over-year, many have moved their start dates earlier and offered more teasers, according to deal site RetailMeNot.

The deepest discounts in apparel and accessories were offered by Michael Kors, which ran a 60 percent discount sale; Gap, which offered 50 percent off site-wide; and Nordstrom, which gave away up to 60 percent on merchandise.

Other deals included:

* An H&M store in Manhattan offered 30 percent off everything in-store and online.

* Macy’s in Herald Square, Manhattan, sold a Coach designer wallet, originally $225, for $53. Coach bags there, originally $259, were half off.

* Midtown Comics was taking 25 percent off everything at its three Manhattan locations until noon.

* An Eddie Bauer in Chicago offered 50 percent off all items.

* At a Chicago-area Pandora, which sells popular charm bracelets that can cost up to $1,000, jewelry was 35 percent off before 10 a.m. and 25 percent off for the remainder of the day.

* J Crew clothing was 50 percent off. Its site experienced some technical difficulties.

* Walmart was selling a Google Home mini for $99.


Many retailers, reacting to the bankruptcy of the Toys ‘R’ Us chain, are catering to parents.

Target said in October it planned to dedicate nearly a quarter of a million square feet of new space to its toy business across 500 of its stores.

“Toys ‘R’ Us had better quality for toys,” said Ashley Drew, 29, shopping for her 5-year-old daughter at a Los Angeles-area Walmart, next door to the empty shell of a Toys ‘R’ Us store.

Department store JC Penney, known for its mid-priced apparel, has also made a push into toys.

Slideshow (13 Images)

Carolyn Pertette from Wilkinsburg, Pennsylvania, shopped in the early morning at the Waterfront Mall in Pittsburgh.

“I’m concerned about where I’m going to get toys,” she said.

Additional reporting by Shannon Stapleton in Long Island; Lewis Krauskopf, Melissa Fares, Jennifer Ablan and Anna Irrera in New York; Lisa Baertlein in Los Angeles; Richa Naidu in Chicago; Margaret Rice in Tysons, Virginia; and Siddharth Cavale in Bengaluru; Writing by Nick Zieminski; editing by Patrick Graham, Saumyadeb Chakrabarty and Bill Rigby

I Just Doubled Down On Brookfield Property Partners – 40% Discount To Fair Value With 7% Dividend Yield

This research report was jointly produced with Samuel Smith, co-author of High Yield Landlord.

Brookfield Property Partners (BPY) offers investors a unique opportunity to own world-class properties at a steep 40% discount to NAV alongside an attractive 7% dividend yield. Furthermore, its access to plentiful, low-cost capital and global markets – thanks to the vested interest of its parent Brookfield Asset Management (BAM) – gives it an attractive long-term growth profile. As a result, we are adding BPY to our core portfolio, giving our portfolio the added benefit of exposure to high quality office real estate.

Business Model

BPY was formed in 2013 as one of BAM’s limited partnerships. While this means it issues a K-1 (as a Bermuda-based LP) – a deal-breaker for some investors – there are two reasons that Brookfield Property appeals to those that typically reject such investments. First, BPY’s assets are also structured as limited partnerships. Therefore, it does not generate UBTI, making the units suitable for inclusion in a retirement account. Second, Brookfield recently started offering a REIT alternative, known as Brookfield Property REIT (BPR) to eliminate the K-1 if desired. They are both set to be economically equivalent and offer identical distributions/dividends both in terms of quantity and schedule.


One of the biggest competitive advantages that BPY/BPR enjoys is that BAM owns 52% of BPY’s units and therefore, indirectly over 30% of BPR’s shares. With such a huge vested interest, BAM – as one of the world’s oldest, largest, and most successful real asset managers – provides BPY/BPR with access to a never-ending supply of lucrative deals through its enormous global network of business and government connections, strong management, and the security and cost of capital advantage that its enormous liquidity and A-rated balance sheet brings.

Alongside investments from its parent, BPY finances its investments by raising funds through selling debt and units in the public markets. It then uses these funds to buy equity stakes in various investment funds as well as individual assets fed to it through its Brookfield network. The vast majority of its focus is on high-quality office and retail (Class A malls and shopping centers) real estate, while it also invests in opportunistic diversification opportunities as they present themselves including multifamily, student housing, hospitality, self-storage, and industrial properties. Through acquiring quality assets at what it believes to be significant discounts in combination with its operational and value-add expertise, BPY aims to generate long-term returns of 12-15% while growing its distribution at a robust 5-8% annual rate. Management also enhances returns by routinely selling assets at rich valuations and recycling the capital at higher cap rates, which it can then apply its value-add/operational expertise too to unlock further value.

Another way in which management expects to drive superior returns over the long term is through its geographic and asset class diversification. By maintaining numerous options, BPY gives itself the ability to deploy capital at the greatest value, regardless of the market conditions in any one of its markets. It also tends to level overall operating results, similar to how a diversified stock portfolio experiences less volatility over time. Furthermore, management leverages its Brookfield connections in order to give it informational, operational, and bargaining advantages, enabling it to get superior values on its acquisitions and dispositions while also enhancing its value-add and deal flow operations.


BPY’s recent portfolio holdings include office, retail, multifamily, logistics, hospitality, self-storage, and student housing properties.


BPY owns, develops, and manages 288 office properties totaling approximately 138 million square feet in premier cities in the major economic powerhouses of the world, including the U.S., Europe, Canada, Australia, Brazil, India, and South Korea. This global network works alongside the Brookfield connection to give them strong pricing power as a major landlord partner for some of the very safest investment grade tenants, including major international corporations and government agencies of top Western economies (i.e., U.S., Canada, U.K., and Germany). As a result, their office properties enjoy consistently strong occupancy and NOI growth (driven in part by ~10% long-term leasing spreads) and are, therefore, considered to be very safe relative to most other office REITs.

Some of their assets include:

Brookfield Place New York, U.S.

This state-of-the-art multipurpose property boasts a diverse tenant base including restaurant, retail, and office space. It experiences ongoing strong demand from businesses and customers alike as a premier live-work-play destination in Lower Manhattan.


Canary Wharf, U.K.

BPY owns premier office and retail assets on the Canary Wharf estate in London through a joint venture, including ~7 million square feet of office space, over 800,000 square feet of retail space, and an office and residential development pipeline of over 3,000,000 square feet.


Potsdamer Platz, Germany

As an iconic mixed-use complex in the center of historic Berlin, management is investing €100 million to unlock its full potential by renovating and repositioning the 3 million square feet estate as an attractive location for office, retail and residential tenants.


IFC Seoul, South Korea

A 5.4-million-square-foot premier, mixed-use complex in Seoul, South Korea, consisting of three office buildings, a 400,000-square-foot mall, and a five-star Conrad hotel, this property gives Brookfield a strong presence in the heart of Seoul and the ability to attract and retain strong tenants.


China Xintiandi, China

This property is a 4 million square feet, mixed-use complex in Shanghai’s central business district and Hongqiao transportation hub. The property’s owner partnered with Brookfield to leverage their expertise in completing some of the development and leasing the buildings. The partnership has already sold two towers at prices that outperformed initial projections.


India Office Parks, India

A 10-million-square-foot, Class A office portfolio within India’s Special Economic Zones (“SEZ”) alongside a partially constructed, 6 million square feet development portfolio, Brookfield views this initial foray as laying the groundwork for significant expansion in the country’s marketplace.


Canadian Office Fund, Canada

After acquiring two of Olympia & York’s publicly traded entities, Brookfield improved its presence in key markets by renovating in adding value to core properties in the 11 million square feet office portfolio. The non-core properties have since been sold off.

Manhattan West, U.S.

A 7 million square feet, mixed-use development at the gateway of the Hudson Yards District, it is one of New York’s largest and most state-of-the-art development projects. When completed, it will include three office towers, 844 apartments and 200,000 square feet of retail space, with strong appeal to the nearby business district as a premier work-live-play development.


Trizec Properties, U.S.

This portfolio reflects a 2006 privatization of Trizec Properties, an office REIT with a presence in numerous major U.S. cities. Through the acquisition, Brookfield was able to unlock value in the portfolio by selling off non-core properties and leveraging their superior operating expertise and tenant network to grow NOI in the core properties.


As one of the largest owners and managers of residential apartment properties in the United States (over 25,000 multifamily units), Brookfield focuses on high growth markets and then leverages a fully integrated national multifamily services platform providing development, construction, renovation, asset and property management, and acquisition and disposition services. Brookfield also adds value through development work, with over 3 million square feet of property under various stages of construction in the U.S. and the U.K.

Associated Estates Realty Corporation, U.S.

After acquiring the company, Brookfield used its capital and expertise to grow the portfolio by ~13,000 units across 10 states while also renovating existing properties to add value.

Manhattan Multifamily, U.S.

A 4,000-unit portfolio in New York City, the property enjoys its prime location near Columbia University’s Manhattanville campus, the Second Avenue subway expansion, and Cornell University’s tech campus in Roosevelt Island. Brookfield has invested significantly in extensive renovations, technology upgrades, and a modernization of the energy systems, which have combined to yield a very attractive return on investment through rental growth and reduced costs.



Brookfield has built a high-quality retail portfolio in the U.S., Europe, Brazil, and Asia. Some of their world-class assets include the famous Ala Moana Center (Honolulu), Fashion Show (Las Vegas), Tysons Galleria (Washington D.C.), Glendale Galleria (Los Angeles) and Water Tower Place (Chicago) as well as urban mixed-use retail districts in New York, Shanghai, London, and Berlin. With 100 of the top 500 malls in the U.S., these properties are far from dead and dying as they are landmarks, city centers, and tourist attractions, drawing from among the best tenants with strong pricing power ( high-teens leasing spreads over the past year, leading other industry peers). Furthermore, no single tenant accounts for even 4% of total rent and the average remaining lease term is ~6.5 years, giving them significant diversification and cash flow visibility.

GGP Inc., U.S.

The GGP acquisition gives Brookfield access to a large portfolio of solid retail real estate across the United States. BPY believes it can unlock considerable value by leveraging its business network, operational expertise, superior access to low-cost capital, and development acumen by repositioning and repurposing several of the properties with the long-term in view. It was willing to buy GGP shares at a premium because it believed it could drive long-term value from the properties in a way that GGP could not.



Brookfield owns ~34 million square feet of high-quality distribution facilities and continues to grow its portfolio as one of the nation’s largest logistics developers. The company uses its large network of warehouses and global tenant base to secure attractive long-term leases and high occupancy on its properties.

IDI Logistics, U.S.

Brookfield built this firm to serve as an owner, developer, and operator of warehouses and distribution facilities, selling its European business for a highly impressive IRR of 47% while continuing to own the U.S. business.



Brookfield also owns and manages full-service hotels and leisure-style hospitality assets in high-barrier-to-entry markets across North America, the U.K., and Australia. The company pursues a strict value-add approach to these properties.

Center Parcs, U.K.

An operator of five short-break holiday destinations in the U.K. that generates stable, predictable cash flows. It enjoys a strong moat due to geographical and capital scale barriers to entry. Brookfield has capitalized on these strengths by investing heavily in growing the business.

The Diplomat Beach Resort, U.S.

As one of the few beachfront hotels with extensive conference facilities located between Miami and Fort Lauderdale, Brookfield has invested in renovating the resort and exploiting its unique positioning in the local market to carve out a niche moat.


Atlantis Paradise Island, Bahamas

A 3,000-room beachfront resort with a convention center, casino, golf course, waterpark, and 65 acres of developable land, Brookfield has added value by renovating the casino, guestrooms, and improving its food and beverage offerings.


Sheraton Centre Toronto Hotel, Canada

This asset possesses numerous competitive advantages that give it significant pricing power and strong demand: it is located directly across from City Hall, it is one of the largest institutional-quality, full-service convention hotels in downtown Toronto, and it is in a market with positive growth fundamentals and high barriers to entry. The hotel itself is highly impressive: 1,372 rooms, approximately 121K SF of newly renovated meeting space, with a direct connection to Toronto’s PATH network via 44,000 square feet of retail space on the concourse level of the PATH system and along Queen Street. Management envisions making the property even more elite by executing a comprehensive renovation plan, improving amenities, enhancing the arrival experience, and repositioning the retail space.



Additional assets in their portfolio include U.K. student housing portfolio (45 properties with over 16,000 beds), 136 manufactured housing communities in the U.S., over 300 triple-net lease auto dealership properties in North America; and numerous self-storage properties in the U.S. (some of which it recently sold for a 46% IRR).


BPY appears undervalued based on numerous metrics. First, BPY’s current NAV (IFRS accounting) per unit valuation is ~$30, meaning that unit-holders have the opportunity to purchase equity in its high-quality and well-diversified portfolio at a 40% discount. Management reaffirmed its conviction in its steep discount during its most recent earnings call by discussing the possibility of beginning to buy back a massive amount of units in the coming quarters.

Second, it offers a substantially higher yield relative to other publicly-traded premier office and mall operators including Simon (SPG), Taubman (TCO), Regency (REG), and Boston (BXP):


BPY Dividend Yield (TTM) data by YCharts

Furthermore, on top of its forward yield of ~7%, its plentiful access to low-cost capital and lucrative global deals through its sponsor combined with its value-add, operational, and pricing power competitive advantages give it a strong growth outlook. 2019 FFO projections put its current forward P/FFO multiple at a mere 9x. Its five-year average is over 10x and peers such as Simon trade at a P/FFO multiple of ~15x. Management forecasts that between organic, property-level NOI growth through value-add improvements and leasing spreads, development projects, profitable investment dispositions, and accretive acquisitions/unit buybacks, they should be able to grow FFO/unit (as well as distributions/unit) at a 5%-8% rate over the long term. However, given BPY’s recent large accretive investment in GGP, with a significant amount of additional projected accretive investment to be made in the GGP portfolio, management sees the upper end of that growth rate range being more accurate.

Even allowing for a significant margin of safety and assuming growth at the low-end of that guidance (5%-6% annual FFO/unit growth), BPY is still poised to deliver very healthy annualized returns of 11%-12% (according to the Gordon Growth valuation model). When considering the high-quality of the asset base and the deep resources of BPY’s parent, these returns are extremely attractive in a risk-adjusted context.


Given that the investment looks extremely attractive, why are units so cheap? First of all, many retail investors do not want to have to deal with the K-1 come tax time and BPR was just recently issued, so it may take a while for it to catch on with investors. Furthermore, the existence of the much larger publicly traded parent’s shares as well as numerous opportunistic investment funds within the Brookfield family provides significant competition for institutional dollars. Finally, as an LP, BPY units are not included in most real estate/REIT ETFs, mutual funds, and CEFs due to their focus on REITs. These factors combine to keep demand down for units, helping them to remain at a discount.

An additional factor tempering demand for units was the recent GGP acquisition. Due to the numerous uncertainties surrounding the details of the deal and the market’s general wariness of U.S. retail real estate, many investors preferred to steer clear. However, we believe that with the deal in the rear view mirror and the dust settling, investors will begin to overcome their initial reservations as they see the tremendous value proposition in these units. Already in just the past several weeks since the deal was completed, BPY’s units have been outperforming retail REIT peers.

The most significant risks in our mind stem from BPY’s high leverage as well as its exposure to international currency and geopolitical risks. Debt-to-EBITDA is ~13x, clearly a very elevated leverage level. However, there are five significant caveats that keep us highly optimistic about the safety of this investment.

  1. First, as previously mentioned A-rated parent BAM has an enormous amount of skin in the game here, and currently enjoys a record amount of liquidity. As a result, they will likely do everything in their power to ensure that BPY sustains its investment-grade credit rating (currently BBB) and enjoys the liquidity necessary to continue generating strong shareholder returns.
  2. Second, BPY’s portfolio is very high quality. Given its premier office and retail portfolios and diversification across geographies, tenants, and property sectors, cash-flows should remain quite steady over time, making servicing their debt very feasible. Should a recession occur, some of its portfolio (in particular some of the lower quality Class-A malls from the GGP portfolio) will likely experience declining occupancy and pricing power? However, management is planning to sell some of the non-core GGP properties and redevelop/significantly upgrade the others, thereby mitigating some of this risk.
  3. Third, BPY structures its debt in a highly conservative manner. 76% of its debt is non-recourse asset-level debt, meaning that its corporate-level debt is extremely low. It also means that if any of its properties underperform to the point of failing to service their share of the debt, they can simply give them to the lender and remove the burden from the rest of their portfolio.
  4. Fourth, management is dedicated to deleveraging, with an emphasis on paying down its already minor corporate debt. It forecasts bringing leverage down to 11x within the next year and a half primarily through debt pay-down and then further deleveraging over the long-term as development projects come online

Finally, geopolitical/macroeconomic risk is mitigated by the fact that most of the economies in which Brookfield operates continue to be strong/strengthening, liquidity remains plentiful (giving them ample time to deleverage), interest rates remain low (reducing the cost of carrying/refinancing a lot of debt) and the flattening yield curve portends low upside for further rate increases, leasing contracts typically have inflation increases built in to them, only 26% of assets are generating rent in foreign currencies, and BPY employs currency hedges to further reduce this exposure.

In summary, BPY – like all investments – is certainly not risk-free and we certainly would prefer to see them reduce their leverage by a considerable amount. However, we view that enough risk mitigation measures are being implemented to prevent this from being a deal breaker, especially when considering the significant value embedded in the units.

Bottom Line

BPY has one of the most enviable property portfolios in the world, with the financial, operational, and networking backing of the Brookfield family giving it plenty of options to continue growing and improving its portfolio. Despite these obvious advantages, units remain cheap due to competing investment alternatives and concerns about over-exposure to U.S. retail real estate and overleveraging as interest rates rise. However, given the risk mitigation techniques in place and the high-quality, diversified assets underpinning the partnership, we believe that BPY remains a fairly safe investment with very strong total return potential. Finally, its 7% distribution combined with its mid-to-high single digit annual growth potential make it a nice complement to our yield-focused portfolio.

If you enjoyed this article, scroll up and click on the “Follow” button next to my name and choose “email alerts” to not miss my future articles on other REIT opportunities.

High Yield Landlord is one of the largest and fastest-growing communities of real estate investors on Seeking Alpha. This holiday season, we want to show our appreciation to our loyal readers. To say thank you, we are offering you a special discount. Subscribe now and SAVE $100. It is our best offer yet. Only valid for first 20 members.

Our high yielding real estate portfolio is just one click away. Take advantage of our Black Friday Sale with a two-week free trial. For more information click HERE.

Disclosure: I am/we are long BPY (INDIRECTLY THROUGH BPR).

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Do These 3 Things Every Morning to Boost Your Productivity and Happiness

You don’t have to change your entire morning or suddenly start training for a marathon when you wake up to create a morning that will nourish the rest of your day. These three simple morning habits are a great place to start if you want to create a morning routine that will enhance your productivity.

1. Get an early start to the day.

As we all know, the early bird gets the worm. Getting an early start to your day allows you to begin your day with the freedom (and time) to own your morning. Instead of hitting the snooze button and running out the door to avoid being late, try waking up 30 or 40 minutes before you normally do. 

Lauren Vanderkam’s book What the Most Successful People Do Before Breakfast shows that almost 50 percent of self-made millionaires start their mornings three hours before their day needs to begin and that 90 percent of all executives prefer to be early rises and wake up before 6A.M. on workdays. 

Waking up early gives you time to get what you want to be done before heading into work. Take this time to make a healthy breakfast, read, meditate, or to do the remaining productive boosting habits on this list. 

2. Say your goals for the day out loud.

No matter how big or small your goal is for the day, week, or year it’s important to keep it at the front of your mind every single day. Creating a pathway to progress on your goals starts with acknowledging them. 

Being an entrepreneur means having to put out a million little fires a day, while still building a company and pushing a product or service. Being in charge of clients, employees, marketing materials X, Y and Z can start to give you whiplash. This is why it’s especially important to state your goal and objective every morning. Staying grounded in this will help you on even your busiest of days. 

Add a massive amount of productivity to your day by reciting your goals at the start of your day. Do so in a positive and affirmative way. Instead of saying “I want my company to earn X amount of revenue by X”, say “My company has a brilliant product, and we will earn X amount of revenue by X day.”. You should also do this with smaller, personal goals. 

Visualize what you want your day to be like, and what aspects of your day will attribute to you getting closers to your goal. Give yourself reassuring affirmations that will stay with you throughout the day–no matter how hectic it gets. 

3. Write a detailed to-do list.

Writing a to-do list every morning is a fantastic way of taking inventory of what you didn’t get accomplished the day before, and what you plan to get done today. Starting your day off by doing this every morning helps you set the tone for the day. 

Use this list in conjunction with your schedule to keep you prepared for what needs to get done that day. Staying aware of what your day should consist of is the easiest way to stay on track. This will boost productivity by allowing you to prepare for your day within the hour you wake up.

SpaceX's crew rocket set for January test flight

ORLANDO, Fla. (Reuters) – The first flight of a SpaceX rocket tailored to fly astronauts to the International Space Station is set for liftoff from Kennedy Space Center in Florida on Jan. 7, NASA said on Wednesday.

FILE PHOTO: The top of a replica Crew Dragon spacecraft is show at SpaceX headquarters in Hawthorne, California, U.S. August 13, 2018. REUTERS/Mike Blake/File Photo

The launch test is a crucial milestone in the space agency’s Commercial Crew Program, which aims to launch humans to space from U.S. soil for the first time in nearly a decade.

The U.S. National Aeronautics and Space Administration said SpaceX’s Crew Dragon spacecraft – which will shuttle three astronauts to space from the same launch pad that sent Apollo 11’s three-man crew to the moon in 1969 – will make its debut flight atop SpaceX’s Falcon 9 rocket on Jan. 7.

While NASA did not detail the flight path, it said the test would provide data on the performance of the Falcon 9, Crew Dragon capsule, and ground systems, as well as on-orbit, docking and landing operations.

SpaceX and Boeing Co (BA.N) are the two main contractors selected under NASA’s Commercial Crew Program to send astronauts to space as soon as 2019, using their Crew Dragon and CST-100 Starliner spacecraft respectively.

Since the U.S. space shuttle program was shut down in 2011, NASA has had to rely on Russia to fly astronauts to the space station, a $100 billion orbital research laboratory that flies about 250 miles (402 km) above Earth.

The Demo-1 launch is the latest test in a rigorous certification timeline imposed under NASA’s Commercial Crew Program. While SpaceX is targeting early January, NASA spokeswoman Marie Lewis said the demo mission could be pushed back because “flying safely has always taken precedence over schedule.”

Founded by Tesla Inc (TSLA.O) Chief Executive Elon Musk, SpaceX said if the Jan. 7 test is successful, it plans to launch its first crewed mission in June 2019, but the timeline may shift.

Boeing plans a similar test launch of the Starliner spacecraft atop its Atlas 5 rocket as soon as March, with a crewed mission following in August.

The Jan. 7 launch date announcement comes a day after NASA said it would conduct a “cultural assessment study” of the companies, “including the adherence to a drug-free environment,” prior to crew test flights. [nL4N1XW01J]

Reporting by Joey Roulette in Orlando, Florida; Editing by Eric M. Johnson and Lisa Shumaker

Inside AlienCon, the Annual Gathering of 'Ancient Aliens' Fans

Secret underground pyramids. Extraterrestrial visitations. Government cover-ups. These and other conspiracy theories are the stock-in-trade of Ancient Aliens, one of the longest-running and most popular programs on History, the cable network formerly known as the History Channel. As part of History’s prime-time lineup, the show has developed a rabid fan following and even inspired a convention, AlienCon, which recently attracted over 15,000 enthusiasts to Baltimore for three days of lectures, celebrity appearances, and vendor showcases.

Brooklyn-based photographer Kellyann Petry, a self-professed agnostic on the alien question, attended the first day of this fall’s convention to learn more about the show’s followers. She had seen Ancient Aliens a few times, and even though it has been described as “some of the most noxious sludge in television’s bottomless chum bucket,” she tried to approach the event with an open mind. “I wasn’t there to make any decisions about my personal beliefs,” Petry explains. “I wanted to be fair to everyone. These people take it very seriously, and I didn’t want to make a mockery of it.”

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At the convention, Petry photographed both presenters, such as the show’s host, Giorgio Tsoukalos (“he’s like a god—they love him”) and ordinary attendees, who had traveled from all over the country to mingle with the like-minded. Although people differed on which particular theories they favored, no one doubted that aliens had visited the earth at some point. “I did not meet a single skeptic,” Petry says.

Most of the conference attendees, Petry noticed, were middle-aged or older—perhaps not surprising given the demographics of basic cable viewers and the fact that conference tickets ranged from $61 for a day pass to $700 for a “Gold Pass” that included a private event with stars of the show. “The fact that I was only going for one day was lunacy to them,” Petry says. “This is their Super Bowl.”

Petry met several convention-goers who had taken vacations to sites with supposed extraterrestrial connections: “One couple had just got back from Mexico to visit the pyramids, which are believed to be landmarks created by aliens. They were also going to Peru, which is apparently another hotspot for alien tourists.” The photographer also attended a panel discussion for people who claimed alien encounters, including one couple who only discovered after they got married that they had independently received such a visit.

Although most of the people she met were friendly, Petry said she received some strange looks when she was taking pictures. “People seemed to be able to sense if you were there to gawk or if you were there because you wanted to be,” she says. “As much as they believe in this world [of ancient aliens], they’re definitely skeptical of their fellow humans.”

More Great WIRED Stories

Lime Manufacturer Hits Back Over Claims It’s Responsible for Recalled Scooters

Electric scooter startup Lime last week recalled scooters that broke in half and blamed a manufacturer—but now that manufacturer is fighting back, saying it’s not to blame for Lime’s faulty scooters.

The Chinese manufacturer, Okai, rejected Lime’s claims that scooters from its factory were the ones that easily broke apart when customers used them.

“We feel it necessary to make cautions to the public on the credibility of such statements made by Lime,” Okai said in a statement, according to CNN Business. “Obviously, Lime has other suppliers whose scooters broke.”

Lime recalled all the scooters made by Okai in its fleet worldwide. The manufacturer has sold 32,000 scooters to Lime, according to CNN Business.

“We are actively looking into reports that scooters manufactured by Okai may break and are working cooperatively with the U.S. Consumer Product Safety Commission and the relevant agencies internationally to get to the bottom of this,” Lime told Fortune last week. “Safety is Lime’s highest priority and as a precaution we are immediately decommissioning all Okai scooters in the global fleet. The vast majority of Lime’s fleet is manufactured by other companies and decommissioned Okai scooters are being replaced with newer, more advanced scooters considered best in class for safety.”

Lime didn’t immediately respond to request for comment from Fortune about Okai’s comments.

Along with questioning Lime’s placement of blame for its recalled scooters, Okai is pushing the company to take responsibility for the deterioration of heavily used scooters in its fleet.

“It is the operator’s responsibility to ensure proper and prompt management and maintenance of the scooters it puts into the co-sharing market,” Okai told CNN Business.

Lime’s scooter recall was its second in recent months, following a recall over Segway Ninebot scooters whose batteries caught fire.

Instagram Bug Leaves Some User Passwords Exposed

Instagram users have been asking for a way to view all the data the company has on them, but this may be more than they were hoping for. The new Download Your Data tool that allows users to receive that information may have left some users’ passwords exposed.

When using the new feature, some Instagram users’ passwords were displayed in the URL, which was then also stored on Facebook’s servers—a bigger issue for those using a shared computer or compromised network, according to The Information. Facebook already notified users who were affected.

The tool has since been updated and the problem should no longer occur. Those Instagram users affected are encouraged to change their passwords and clear their browser history.

But it’s still a troubling update, as Instagram and parent company Facebook fight back against a seemingly unending stream of scandal and security breaches.

Fortune reached out to Instagram for comment, but did not receive an immediate reply.

During Chicago Toy And Game Week, Products Get Licensed

Last week, I had the pleasure of interviewing a remarkable toy inventor named Mary Couzin. In 2003, Couzin founded Chicago Toy and Game Week — affectionately known as ChiTAG — to bring toy inventors, toy companies, and toy lovers together. Now in its 16th year, the annual celebration of play and innovation has become the event for toy inventors of all ages and degrees of experience. Currently taking place right now, this event is unlike any other I’m aware of for inventors in the best way possible.

It’s beloved by the industry, for starters. Event sponsors include industry titans like Mattel, Hasbro, Spin Master, LEGO, and Goliath Games. And get this: Product acquisitionists from more than 90 companies, representing 26 countries, will be there. Wow. That’s a lot of decision-makers in one place. Every year, new inventors, professionals, and even young inventors license their toy and game ideas as a result. That makes ChiTAG a uniquely successful event for inventors.

Unlike typical trade shows — such as Toy Fair in New York City — the focus at ChiTAG is squarely on invention, not retail. There are several distinct components. This weekend, more 30,000 attendees (half of whom are children) will peruse and interact with toys and games exhibited at the fair. Retailers including Target also make a point of attending the fair, because they can observe how customers interact with the toys and games on display.

Before the fair gets underway, there’s a two-day conference for new inventors focused on education, including how to pitch. Professional toy inventors — who set their own meetings with companies looking for ideas — are provided with meeting space. Young inventors are encouraged to compete in a challenge by submitting videos of their invention ideas, and receive feedback and mentorship in return. And finally, there’s an awards gala. (This year, my former bosses David Small and Paul Rago from the startup Worlds of Wonder are being recognized for their decades of innovative toys with a Lifetime Achievement award.)

In the 1990s while she was in real estate, Couzin pursued her love of inventing as a side-hustle. After achieving some success, she began advising and representing other toy inventors.

“Coming together can only help the industry,” she explained in a phone interview. “We really make a point of this feeling like a community. People who don’t carry that out are not invited to return.” Industry leaders make themselves available because they view this as their time to give back, she added. Opportunities to network are a core part of the experience. “You could sit down to breakfast with the head of Hasbro,” she said.

I personally know of inventors who have licensed their ideas because of ChiTAG. When novice inventor Eduardo Matos had an idea for a new toy that he thought was a hit, he considered his options. Sharing his royalties with a toy broker didn’t appeal to him. What he heard about ChiTAG on LinkedIn sounded too good to be true. But after an executive convinced him it was the real deal, he took the risk and paid to participate in the conference for new inventors, included the opportunity to pitch.

It paid off. He received a lot of interest, and eventually secured a licensing deal with a leading toy company. His invention is scheduled to debut next fall.

“ChiTAG a must,” he said. “The information shared was hugely valuable. For example, I learned that when a company asks to option your product, the typical fee paid is $5,000 a month. When my invention was optioned later that same day, I knew to ask for that.”

His recommendations? Take as many notes as you can, attend the entire conference, make your prototypes look as professional as possible, and have a hit on your hands.

When you have an idea for a new product that you want to commercialize, determining how to spend your resources is incredibly important, because they’re always limited. This is true for startups that raise millions of dollars as well as independent inventors. What’s worth it? What’s not? When? These questions are especially relevant when considering industry events like trade shows, as costs quickly add up.

At the end of the day, being able to access the people in your industry who are decision-makers is remarkable. I wish more trade events provided access like this. (If you’re looking to license your product idea, I don’t recommend buying a booth and waiting for someone to walk up. Read more of what I believe inventors need to know about trade shows.)

Missed out this year? There’s a wealth of information on the ChiTAG website, including a regularly updated blog and white papers.

Mary Couzin’s Tips For Inventors

1. Do your research first. Does your product idea already exist? Use Google to find out. You could also visit a local retailer or toyshop. Ask, has this been done? Will it sell?

“It’s so easy to check. It’s not like the old days when you had to visit every show and store. Otherwise, you’re just spinning your wheels.”

2. Don’t give up too soon. “Persistence is the number one quality you must have to become successful at toy inventing,” Couzin said. “Believing in what you have will carry you for the most part.”

Remember, no one has all the answers all the time. So take the opinion of others with a grain of salt. Couzin says she abstains from passing judgment on any toy or game for this reason.

3. Tell your story in the media. She emphasized the importance of storytelling, and referenced the success of the startup GoldieBlox. “Their marketing was brilliant. Before the product was as good as it is today, it had sold the public.” (Interestingly, GoldieBlox describes itself as a disruptive media company on its website.)

Toys are part of the entertainment industry, she pointed out, which means they compete for attention with movies, music, books, and television. “We’re the only ones not telling our story!”

If you want to succeed in the toy industry, you absolutely must attend this show.

How California Needs to Adapt to Survive Future Fires

Editor’s note: This is a developing story about California’s Camp Fire. We will update it as more information becomes available.

On November 8, an almost unimaginable firestorm broke out in Northern California. Fed by dry vegetation, and fanned by northeasterly winds pouring off the Sierra Nevada Mountains, it rapidly descended on the community of Paradise, home to nearly 30,000 people.

Scott McLean, deputy chief of Cal Fire, was among the rescuers, driving through town and frantically trying to get people out. “I just left the hospital, heading up into the mess again,” he told WIRED Friday evening. “And out of the smoke comes this little old lady with a little puppy in a wheelchair just scooting down the road. These people didn’t have ways to get out. So I picked her up, put her in my truck, and took her back to the hospital.”

Virtually nothing is left of Paradise—the current tally is 10,300 structures destroyed. That makes the Camp Fire by far the most destructive wildfire in California history. It is also by far the state’s deadliest, with a death toll of 56 and at least 100 still missing.

Something’s gone wrong in California. Fires aren’t supposed to destroy entire cities—at least, not since San Francisco burned in 1906. Fire codes, better fireproof materials, fire engines, and water-spewing aircraft have made it easier to put out flames. Yet in the last year, California has seen seven of its 20 most destructive wildfires ever. The Camp Fire comes just a year after the second most destructive blaze, the Tubbs Fire, struck the city of Santa Rosa to the south of Paradise, leveling 5,500 structures and killing 22.

“How could this happen?” says Stephen Pyne, a fire researcher at Arizona State University. “How did this come back? I mean, this is what we saw in the 19th century.”

You can find much of the “how” in the collision of two long-term trends, climate change and explosive population growth. The fires aren’t going away, but likely neither are the people. So how do you keep 40 million people from suffering the same fate as the residents of Paradise? And how do you protect $2.6 trillion in property?

“At some point, you don’t know what to say,” Pyne adds. “It’s like mass shootings, we’re just sort of numbed by it and we don’t seem to be able to respond.”

But respond California must.

How We Got Here

David Crane/Los Angeles Daily News/Getty Images

Climate change didn’t invent California wildfires, but the data says it’s making them worse. This is largely a problem of timing. Normally by this time of the year, the state has at least a little bit of rain on the books, which helps rehydrate parched vegetation. With climate change, though, California is seeing a severe drying trend in the autumn, as you can see in the graphic below.

The fast, hot winds that blow in from the east this time of year are further desiccating the vegetation, providing ample fuel for what became the Camp Fire, as well as the Woolsey Fire in Southern California. These conflagrations are spewing embers that travel miles ahead, creating a multitude of new fires, which firefighters simply can’t handle.

The fires are encroaching on sprawling development in California—or, more accurately, the development is encroaching on the fires. “I think of fire as a driverless car,” says Pyne. “It’s just barrelling down the road integrating everything around it. It’s a reaction, it takes its character from its context.”

Controlling fire, then, means changing its character—by tweaking our cities. Fire codes emerged as a reaction to the need to control urban development. Plain wooden shingle roofs are a no-no, for instance. Properties are subject to rules about creating defensible spaces—for example, clearing out dead plants and grass. In 2005, a new California law bumped the required clearance from 30 to 100 feet.

But fire codes only go so far. “One of the weaknesses is that it’s really difficult to actually enforce that,” says Crystal Kolden, a fire scientist at the University of Idaho. “The enforcement falls on the local municipal agencies and fire departments, and oftentimes they simply don’t have the resources.”

Then there are California’s struggles with fire suppression. Not letting trees burn can actually lead to bigger blazes. “There’s really good scientific evidence that the tree density in the Sierra Nevada right now is much higher than it was in the pre-European settlement period,” says Kolden. “That’s very much a product of 100 years of fire suppression.”

Forests packed with more fuel than is natural also creates more conflagrations, across millions of acres of wildlands where crews should be reducing fuel loads. “You don’t have a lot of resources to do that because so much of your funding now goes to simply fighting fires year round,” says Kolden. “That fuel simply remains there, and will remain there until it finally burns.”

One solution is prescribed burning, a measure that California hasn’t quite embraced. So far this year the state has done around 55,000 acres of prescribed burning. The southeastern United States churned through 5.5 million acres last year—100 times more. And the southeast as a region is only about five times bigger than California.

“When you look at the southeastern US, it’s not a place where we think of as having a lot of wildfires, and they really don’t,” says Kolden. “That’s because the southeastern US does an enormous amount of prescribed fire because their vegetation grows back so quickly.”

California’s densely packed wilderness has another thing going against it: power lines. Indeed, the prime suspect of the Camp Fire is the local utility, PG&E, which reported an electrical incident at the conflagration’s origin just before crews spotted the blaze. The utility may be to blame for last year’s Tubbs Fire as well. The question then becomes: Why on Earth are we not burying power lines?

The reason is lots of metamorphic rock: very dense stuff that forms in high pressure and high heat conditions. It’s not easy to drill through. “It becomes prohibitively expensive to bury lines and still be able to provide access to those lines,” Kolden says. Utilities can bury them where there’s dirt, sure, but it’s still going to be very expensive.

Fire Is a People Problem

Randy Vazquez/The Mercury News/Getty Images

Yes, California needs to get better about fuel management. But at its core, wildfires are a people problem. Traditionally, fires in the state have raged either in the wilderness, or in cities. Which is why we have wildland firefighters, who are lightly outfitted, and urban firefighters, who wear much heavier protections to enter burning buildings.

They’re also trained in radically different ways. “Structural city firefighters are really focused on saving people, and they understand a lot of the chemistry and physics of burning buildings,” says Kolden. Wildland firefighters, on the other hand, know how fire behaves in forests.

But now that wildfires are moving into California cities, both groups are being marshaled to fight fires where they’re not accustomed to fight. The question now is whether to train firefighters to handle both scenarios, or better assign resources to make sure each group fights where they’re most comfortable. Kolden believes that the latter is the safer option.

Then there’s the matter of training everyone else living in California—building with better materials, clearing out defensible spaces. Take it from the city of Montecito in Southern California, a model for how to bolster a community against wildfire.

A few years back, Kolden helped put together a worst-case scenario model that projected a fire driven by 60-mile-per-hour winds could destroy 400 to 500 homes in Montecito, a super-wealthy community on the Southern California coast. Last year, that conflagration came in the form of the Thomas Fire. But Montecito had been readying itself for decades.

“They really focused on defensible space around homes, particularly the homes that were closest up against the wildland areas,” says Kolden. “They focused a lot on doing brush removal along their road system.” And they made a mountain of information available to firefighters who might come from out of town to help battle a blaze. Basically: This is how we’ve prepared.

When the Thomas Fire hit, they lost seven homes, not 500. They couldn’t even rely on aircraft to drop water. “To me it was a model,” says Kolden. “This community has figured out what works for them. And the homeowners are 100 percent bought into it, and they’re all working together to make the community resilient to fire.” To be clear, what works for a coastal town like Montecito might not work for a forest town like Paradise—each community is unique, and will need its own unique solution.

Sadly, a month after it broke out, the fire Thomas Fire took its true toll on Montecito: Heavy rains triggered mudslides on burned-out land, killing 21 people in the area.

Still, Montecito had an excellent fire evacuation plan in place, in stark contrast to what just happened in Paradise. The Mercury News reports that the evacuation was absolute chaos. Many residents are saying they received no warning at all from authorities, and only made it out because they either spotted the flames or a neighbor came for them. Fleeing at the last minute, residents crammed the few escape routes. Some abandoned their cars to escape on foot. Not everyone could. Paradise is a retirement community—the elderly need time and sometimes special arrangements to clear out of their homes, let alone out of town.

“It’s what I feared,” says Thomas Cova, who studies wildfire evacuations at the University of Utah. “It looks like we’re repeating history again from the Tubbs Fire last year.” During that disaster, authorities opted not to send an alert, fearing they’d cause alarm and hamper emergency efforts. The fire claimed 22 lives.

McLean, of Cal Fire, says that his organization immediately notified the Butte County Sheriff’s Department when they spotted the blaze. The sheriff is then in charge of sending out an alert. But something—what, exactly, isn’t yet clear—went awry. “We have a warning failure of really epic proportions,” says Cova.

A particularly powerful tool is the Amber alert system, but Paradise residents say they didn’t receive warning through it. Either the sheriff’s office didn’t send it, or it somehow failed. (The mayor of Paradise says the town did have an evacuation plan that they practiced in 2016.)

As Montecito proved last year, it doesn’t have to be this way. “We know enough to stop this,” says Pyne. “We knew enough decades ago.”

Fueled by climate change and fierce winds and desiccated vegetation, fires will keep licking at cities like Paradise. The future of cities will depend on how serious they get about fuel management and building codes and in case that fails, evacuation procedures. To that end, in September, California Governor Jerry Brown signed legislation that bolsters wildfire prevention efforts.

California will have to spend billions upon billions to fix this problem, but that’s a tiny investment compared to what it stands to lose.

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Boom Supersonic Moves to Take off With a Demonstrator Plane

The airplane that could herald a new generation of supersonic passenger flight looks an awful lot like a fighter jet. It’s long and sleek, with a narrow wingspan, two tandem seats, and three engines blasting full afterburners to propel it to twice the speed of sound.

Look the part, be the part. “This thing will handle very much like a fighter jet,” Boom Supersonic test pilot Bill “Doc” Shoemaker says with a grin. “We have to actually limit its capabilities a bit so passengers stay comfortable.” The F/A-18s this former US Navy pilot used to fly would lose a top speed contest to Boom’s new airliner by a healthy 1,451 mph.

Shoemaker is actually talking about two aircraft: a 1/3-scale demonstrator the company is building now to prove out its supersonic technology, and the full-scale airliner that, come 2025, will carry 55 passengers to Mach 2.2 at 60,000 feet altitude. To avoid sonic boom-related speed restrictions, Boom will mimic the Concorde in sticking to transoceanic routes.

For that to happen, the company has to raise about $6 billion in funding, clear all the safety and reliability hurdles required of new commercial aircraft, and be economical enough for airlines to even want the thing. Despite the appeal of going supersonic, no airline will forget the famed Concorde’s famously monstrous financial record.

“To make this whole effort successful, you need to have technology that works, customer demand, the cooperation of great suppliers in the industry, and you need to have an approach that will ensure certification and regulatory approvals,” Boom CEO Blake Scholl says from his new headquarters outside Denver. “We’re now spiraling up through all those challenges, and one of the strategies for that is to build the XB-1, which we can do with the money we already have.”

The XB-1 is that demonstrator plane, 60 feet long and dubbed the “Baby Boom.” Developed with some of the $85 million the company has raised so far, it will go just as fast as the proposed airliner, and allow engineers to assess the aerodynamic performance of their design and the structural qualities of the carbon fiber airframe, as well as the general engine setup.

The scaled-down flier will use a trio of General Electric turbojets; the airliner will use new engines that are more efficient and powerful, and thus don’t require afterburners, but don’t quite exist yet. Boom is soliciting proposals from the major engine manufacturers. In the meantime, Boom’s engineers are using wind tunnels and test facilities to develop their propulsion strategies—what works for the demonstrator will, for the most part, also work for the bigger airliner.

The scaled-down flier will use a trio of General Electric turbojets; the airliner will use new engines that are more efficient and powerful, and thus don’t require afterburners, but don’t quite exist yet.

Boom Aerospace

Propulsion engineer Ben Murphy is leading much of that work, including using test facilities at the US Air Force Academy in Colorado Springs. “Our ultimate goal is safe and efficient engine operation from idle through Mach 2.2,” he says.

That mean designing inlets that can take air moving twice as fast as sound and slow it to the subsonic speeds at which its engines can operate. Boom will use an adjustable inlet that adjusts airflow based on the phase of flight—more open during takeoff and landing, more constricted during high-speed cruise. Murphy says that in one year of work, his team has exceeded the Concorde’s inlet performance, and at higher speeds than that airplane could fly. “Efficient inlets mean lower fuel consumption, and this lesson we’ve learned on XB-1 will help improve the operating economics of Boom’s airliner,” he adds.

Boom is also using the XB-1 to hone its carbon fiber manufacturing techniques, ensuring that the pieces that will make up its plane have the not just the right durability, strength, precision, and lightness, but thermal performance at high speeds. Structural elements expand when heated. “At Mach 2.2, the nose and leading edges of the wings will be 307 degrees Fahrenheit,” Scholl says. “That’s toasty.”

“You want thermal expansion to be matched, so that everything grows at the same rate,” explains Scholl, a private pilot who began his career in the technology world, in digital marketing with Amazon. The pieces being made in California are sent to Denver, where they’re tested for strength and rigidity. Eventually all will be assembled into the XB-1, which the CEO estimates will fly by the end of 2019.

Boom Supersonic isn’t without competition in this quest. Boston-based Spike Aerospace and Aerion Supersonic in San Francisco are building supersonic airplanes along similar timelines. Those two companies, though, are targeting the business jet market with smaller craft and and lower speeds of Mach 1 to 1.4.

Boom’s speedier flying will undoubtedly give it extra appeal to the airlines considering it, and so far it has drawn preorders and investments from Japan Airlines and Virgin Group. (No surprise on the latter—Richard Branson once tried to buy the Concorde fleet British Airways was retiring.) If the XB-1 proves out Scholl’s vision, it will presumably draw still more money from airliners and investors. And if for some reason it kills the argument for the 55-passenger airliner, Scholl says he could just start selling the demonstrator to wealthy aviators looking to rocket between meetings.

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DARPA's Hail Mary Plan to Restart a Hacked US Electric Grid

In his years-long career developing software for power grids, Stan McHann had never before heard the ominous noise that rang out last Wednesday. Standing in the middle of a utility command center, he flinched as a cyberattack tripped the breakers in all seven of the grid’s low voltage substations, plunging the system into darkness. “I heard all the substations trip off and it was just like bam bam bam bam bam bam bam bam,” McHann says. “The power’s out. All you can do is say, OK, we have to start from scratch bringing the power back up. You just take a deep breath and dig in.”

Thankfully, what McHann experienced wasn’t the first-ever blackout caused by a cyberattack in the United States. Instead, it was part of a live, week-long federal research exercise in which more than 100 grid and cybersecurity experts worked to restore power to an isolated, custom-built test grid.

In doing so they faced not just blackout conditions and rough weather, but also a group of fellow researchers throwing a steady barrage of cyberattacks their way, hoping to stymie their progress just as a real enemy might.

Power Play

Funded by the Defense Advanced Research Projects Agency, the exercise, which ran the first week of November, served as a testing scenario for seven DARPA-developed grid recovery tools.

But while the situation was manufactured, the conditions of the exercise were all too real. Researchers built their test grid off of the already isolated power grid on Plum Island, a Department of Homeland Security animal disease research facility at the tip of Long Island’s North Fork. Roughly the size of Manhattan’s Central Park, Plum Island sits about three miles offshore in the Long Island Sound, and is accessible only by ferry. In addition to DHS’s livestock research facility, Plum Island is also home to ruins from armaments and fortresses built during World War I and II, pristine beaches, a lighthouse built in 1898, and even packs of gregarious harbor seals in the winter.

The result: A surreal combination of utilitarian federal operations, breathtaking natural habitat, untapped Hamptons real estate, and a nagging sense of foreboding. (Despite persistent conspiracy theories, DHS representatives patiently but firmly deny that there is anything creepy about the island.)

“When we first started the program, we were working in university labs and simulating everything,” says Walter Weiss, the DARPA program manager who oversees the agency’s research into restoring power to a dead grid—what utilities call “black start.”

During one early RADICS meeting, Weiss convinced the host university to cut power to the floor the team was on, forcing researchers to consider how the tools they were researching would remain effective during a blackout. “We said, ‘Imagine you’re going to an island,'” Weiss says, laughing.

Assume Breach

Over the past few years, the threat of grid hacking has morphed from a distant possibility to a stark reality. The most chilling incidents to date are two cyberattack-induced blackouts in Ukraine—one in December 2015 and the next a year later in December 2016—that caused power outages for hundreds of thousands of residents in Kiev for a few hours each time. Both attacks are thought to have been perpetrated by Russian state-sponsored hackers. And though a similar incident hasn’t played out in the US so far, there is increasing evidence that various hacker groups have infiltrated US grid defenses. The Department of Homeland Security warned repeatedly this year that it has detected extensive Russian probing of the US grid.

But awareness can only get you so far. For actual resilience, the industry needs what cybersecurity practitioners call an “assume breach” mentality: thinking not just about how to keep attackers out, but knowing how to respond if and when they do break in.

Since the end of 2015, DARPA’s Rapid Attack Detection, Isolation and Characterization Systems program, which Weiss oversees, has taken up that mantel for power grids. RADICS seeks to develop tools that aid in three phases of black start after a cyberattack. The first involves creating sensors that can give accurate readings and situational awareness even after a hack has potentially skewed or degraded the reliability of existing monitoring equipment. The second looks at developing specialized equipment for rapidly setting up a secure backup network in a pinch, since whatever malware caused the blackout may still infect some systems. And the third focuses on tools that can quickly scan for threats to help understand how an attack happened, and how to lock down any remaining hacker footholds as power comes back online.

Those tools are all necessary pieces in the critical puzzle of jumpstarting a dead grid. “The real weakness is just how do you get that power back from nothing after 30 days when you don’t even know what’s up,” says Gary Seifert, a federal electrical engineering contractor who conceived much of the RADICS test grid on Plum Island.

RADICS conducted a relatively small black start pilot exercise on Plum Island in June; the grid at that time was designed to be managed by a single utility running a diesel generator, known as Utility A, and a small cluster of substations. A grid is essentially made up of a utility’s generators—which power a system—substations that transform electricity from low to high voltage to be transmitted across power lines over long distances, substations that transform electricity back down to lower voltage for local distribution, and customers who receive electricity. For this month’s followup, which DARPA hosted in conjunction with the Department of Energy, RADICS expanded the test grid to include a second utility and generator, known as Utility B, and a number of additional substations.

In the scenario laid out for the exercise, a massive cyberattack knocks some portion of the grid offline for weeks—long enough that residual power and substation batteries would all be depleted. Utility B’s goal is to black start as quickly as possible, to deliver power to a customer that has been designated a critical asset. After failures plague Utility B, Utility A then needs to step in, restarting to offer redundant power to that same critical customer.

In order to interact and safely share electricity, utilities also need to get their electromagnetic frequencies in tune at around 60 hertz, so part of the exercise involved not just getting Utility A and B running, but syncing them.

“We had 18 substations, two utilities, two command centers, and we had two generation sources that we had to bring up a crank path and synchronize,” says Stan Pietrowicz, a researcher at Perspecta Labs who is working on a black start network analysis and threat detection tool through RADICS. A “crank path” is a plan for restoring substation networks and seeding power back into a grid. “It had a realism that you don’t really find in lab environments that made you rethink the approach. Do you turn up everything at once? Do you turn up smaller pieces of the grid and put them in a protected environment to do cyberforensics?”

A substation in the RADICS test grid on Plum Island, NY.


Black Start

The test grid was designed to mimic the hodgepodge of technologies that coexist in real industrial control deployments. Vital systems like the grid can’t be taken offline casually or overhauled easily, so equipment often remains in place for decades. Black start recovery, especially after a cyberattack, involves navigating, defending, and configuring generations of technologies.

The Plum Island exercise emphasized the difficulty of physically delivering and installing equipment during a massive power outage. The teams established secure landline systems to communicate, with many researchers working at a remote station on mainland Long Island and other crews on Plum Island itself. The exercise included volunteers from major utilities around the country in addition to cybersecurity researchers.

One of the recovery tools in development for surveying a grid from above is simply a balloon that has lightweight electromagnetic radiation detectors inside. In a blackout, utilities could launch the balloons, which would look for simple indicators of live power, like whether home Wi-Fi routers are on and emitting a network. The balloons could also detect whether two grids were operating separately or had come into sync, by listening for the “hum” around 60 Hz emitted by electrified infrastructure. Other tools included black boxes that monitor grid equipment, and remote equipment that can hook into secure industrial control networks.

The conditions on Plum Island factored in throughout the week. Multiple rainy days with high winds made taking the ferry back and forth to the island, and physically working on the grid, difficult. One day, the researchers were instructed to pack overnight bags in case they couldn’t come back from the island until morning. The balloons weren’t reliable in the bad weather, so some of the researchers tried flying the sensors on a kite instead. That proved impractical with the winds. And all the while, the so-called red team kept hacking away.

“Most of the exercise was really about trying to figure out what was going on and deal with the conditions,” Pietrowicz says. “It wasn’t a hit and run—while we were cleaning things up the adversary was countering our moves. There was one instance on the third day of the exercise where we almost had the crank path fully established and the attacker took out one of our key substations. It was sort of a letdown and we had to just keep going and figure out our next viable path. Even that small victory got taken away from us.”

Ultimately, the participants succeeded in black starting the two grids, and largely achieved the two goals of the exercise. But they say that the most valuable insights came from the setbacks along the way.

New Tools

DARPA will run another even more sophisticated version of the exercise on Plum Island in May, and hopes for more after that. Eventually RADICS’s Weiss hopes that the entire apparatus will be adopted by an organization like DOE to offer preparedness training exercises for government workers and utilities over the long term.

And though many of the RADICS response tools remain in development, some are already in use in active grid instillations around the country. One is a machine intelligence tool from researchers at the National Rural Electric Cooperative Association, a trade group that represents more than 900 independent utilities around the US. NRECA’s tool establishes a baseline for normal behavior on critical infrastructure networks and then uses that standard to help detect deviating voltages, new devices on a network, or other unusual behavior. A handful of utilities around the country, including Wake Electric in North Carolina, have already put it to work. And it has benefits beyond doomsday scenarios; it has already detected seven fires and identified situations where too much current is flowing through a transformer and wearing it out.

Though NRECA is composed of independent utilities that serve low-density areas, NRECA chief scientist Craig Miller says that the organization supports RADICS research because its members are worried about cybersecurity intrusions. “We see probes multiple times a day. People try to get in, they knock on the door,” Miller says. “We’re concerned about cybersecurity because the grid is changing. The new grid is more distributed and it’s something that’s actively managed, which makes us greener and more efficient and more reliable and resilient. But it also makes us more vulnerable.”

For researchers exposed to the elements on Plum Island and scrambling to handle the RADICS exercise day after day, that vulnerability was palpable. Given the urgency of strengthening grid defenses and recovery plans, there may be nothing more important right now than that reality check.

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4 Types of Chronic Stress That Can Drain Your Energy and Productivity

However, too much stress without the appropriate tools and awareness can become the very thing that derails your growth and development. Stress is a tricky entity with multiple identities that can appear in a multitude of ways in our lives.

With that said, here are four types of chronic stress that can slow down your growth.

1. Emotional Stress

Emotional stress is challenging to handle because it quickly leads to less-than-ideal behaviors due to situations in life not going your way. Emotional stress can appear as you being easily agitated, moody, overwhelmed with feelings of little control over your life, feeling bad about yourself, and difficulty quieting your mind.

No matter the symptoms you show, emotional stress left unmanaged leads to avoidant behaviors which only place you further from the solution.

It’s essential to remember that you can’t control the world around you nor how people respond to you. But you can control your response to those situations.

When it comes to dealing with emotional stress, the most important trait to develop is self-awareness.

Self-awareness can be developed through committing to a mindfulness practice such as meditation or journaling your thoughts out so you can make logical decisions instead of ones fueled solely by emotions.

2. Environmental Stress

Your environment can either propel you into growth and expansion or it can keep you mired in stagnation and frustration. To start improving your environmental stressors, it starts with awareness and auditing areas where you frequently visit.

What type of friends do you hang around with? How does your city make you feel? Does the inside of your home elicit good feelings? What about your work environment? If you’re not being inspired and feeling energetic from those things, you’re discreetly accumulating stress.

If work is an issue, you might not be able to completely overhaul your office or hand over your two-week notice, but you can add elements that conjure up positive feelings and emotions.

You could add small plants for your desk, photos to remind you why you’re working so hard, and listen to audiobooks on the way to inspire you.

3. Relational Stress

Whether it’s a partner not feeling like they’re getting the attention due to your work schedule or friends peer pressuring you into old habits that no longer serve you–it’s vastly important to equip yourself with the proper tools to handle these potential types of relational stress.

For example, when it comes to your partner, don’t be critical of them. Acknowledge their concerns and then respond to it, not react. The difference between your response and reaction often stems from the amount and type of emotion involved.

When you choose to respond after listening, your knee-jerk reaction will be softened.

And lastly, another powerful tool to utilize is to pause and attempt to see the world through the other person’s eyes.

Your friends may interpret you passing on the weekend hangout spots as a sign that you’re going to leave them behind as opposed to you merely attempting to work on your personal development

4. Work-related Stress

What makes work stress one of the most formidable types of chronic stress is that it can follow you everywhere. You’re home, but you can’t enjoy and relax because you’re either worked up from the day or anxious about what’s to come.

The first step to handle work stress is to have a mental brain dump by writing down all your work stressors. Once you write them all out, identify the big rocks? The big rock stressors are things that if handled will provide the biggest ROI toward alleviating your stress.

After you track your stressors, take notes of your default patterns of reaction to those stressors. Next, create healthy boundaries by establishing a hard cutoff time from work emails and activities.

While stress is a part of everyday life, you don’t have to let stress become your kryptonite to getting what you want. No need to hope stress magically disappears. Instead, identify the particular masks of stress and implement specific tools to handle those various masks that will inevitably sprout up in your life.

Five Rules for Getting the Year-End Bonus Right

Now’s the time for you to start figuring out year-end bonuses. As much as you’d like to, you can’t really put it off any longer being that December is right around the corner. Honestly, the whole deal would be so much easier and less stressful if we distributed bonuses in July instead of in the midst of the holidays. If you’re a typical entrepreneur, though, your people are paid twice a month, which means that you’ve got to distribute their bonuses with their first check in December so they have a little time to spend it on holiday presents.

I was going to say, “time to decide what to do with it,” but these days the idea of “saving” some of that extra cash doesn’t even enter into the discussion. These bonus payments are often pre-spent, which just makes the pressure greater on you to get the amounts right. This is no easy task in the age of over sharing, profound entitlement, exaggerated expectations, and dysfunctional transparency. As hard as you try and as diligent as you can be, a bunch of your people are still going to be unhappy.  Get used to it.

If you’re a startup CEO who’s even a little bit conscientious, and most of us are, you’ll spend way more hours than you’d imagine stewing over these decisions, slicing up the fixed and often shrinking pie in a million different ways, and trying to do right by everyone.  Which, of course, is unrealistic and impossibly subjective as well. You’ll work really hard to try to do the best job you possibly can.

You can collect input and suggestions from your board, your accountants and other team members (who, as a rule, are always willing to spend more money than the company can afford to take care of their own folks) and you can look at “industry” guidelines, which are usually just as useless. Because, especially at this time of the year, every business sits on its own bottom; has its own Rashomon history of the past year; and a big bunch of explanations, rationalizations, and “woulda, coulda, shoulda” excuses.

 So, there are no pat patterns, flawless formulae, or even good guidelines to really help you make these personal and highly emotional decisions. And, as you’re sitting and sweating these decisions out on the Sunday after Thanksgiving, you’ll quickly realize that this is another one of those “buck stops here” situations. If your business has had a lousy year, I guess it’s a little easier to be more modest in payouts, but — nine times out of ten — those overall results weren’t the fault or the responsibility of most of your hardworking employees. So, don’t bother whining too much to them about the bottom line. That explanation might work better on the managers who truly understand the math — but don’t count of any of them stepping up to take a bullet for the team, either.  It’s fair to say that baseball is still the only place in the real world where a sacrifice is actually appreciated.

Even if every case is ultimately a little different, there are a few things to keep in mind, and to learn from those who’ve suffered through the painful process over and over again.

1      There’s no silver bullet and this never gets easier. On bonus day, you’re gonna be sitting opposite a bunch of people — one at a time — who think that you have measured their value and worth as human beings, not just as employees, and converted that opinion into dollars and cents. A lot of heat and emotion is bundled into that bonus amount and you can count on some sparks flying during those conversations.

2      Percentages are a really poor proxy. Comp committee members and other experts are notorious for telling you (with little or no basis in fact or even experience) that bonuses in “a new business like yours” should be around X% of most employees’ salaries. In my experience, this advice always results in dollar amounts that you’d be afraid to give your doorman or letter carrier. My advice is to build your bonus structure from the bottom up. Start with a dollar amount that you won’t be embarrassed to present to your youngest and newest employees, and go from there.

3      Making mediocre people happy is a good way to lose your best performers.  Trying to buy peace so you won’t get a bunch of dirty looks and evil eyes at the office party is a bad bet for the business overall. Some people are alive only because it’s against the law to kill them and some people deserve exactly what they’ve earned — or not earned. And they shouldn’t get one dollar more. Overpaying for peace sends the worst possible message to everyone and really discourages the people who are hitting it out of the park. Get in the habit of sacrificing the few, if necessary, to save the many. Always be raising the average.

4      Don’t make promises you can’t or won’t be able to keep. It’s easy, in your haste to get out of the room and end the conversation, to fall into the “there’s always next year” trap. Please don’t. First, because it doesn’t really help the situation — no one wants to be happy tomorrow. And second, because if you really think things are unlikely to improve, you’re just delaying a more difficult and more critical decision. And, by the way, when you say to yourself that you don’t know about a person, the truth is that you do. Try to always be able to say that your average employees now work somewhere else.

5      Buckets are much better than brackets or bands.  Using systems of brackets or bands for comp or bonus determinations are okay, but they often miss a very central consideration, which is that some of the most impactful and important people in your business could have relatively low salaries.  So, the pure math can be misleading, but in your heart and your head you know who these people are. And that’s why I like the “buckets” approach. Start the whole process with 3 big buckets. Bucket 1 is for the best people in the business– wherever they are and whatever they may be earning. These folks need to be rewarded. Bucket 2 holds the vast majority of your employees and hopefully they’re doing more than their fair share and contributing. These people need to be recognized. Bucket 3 is for the people who are just doing their jobs and not much more. Frankly, if they aren’t getting better, they better be gone. These people need to be reminded. Use bonuses to send the appropriate messages to each group.

And one last reminder. Don’t take it personally if employees aren’t grateful, or thank you. That’s just another part of the job.

Germany wants binding deal on EU digital tax at December meeting

FILE PHOTO: German Finance Minister and vice-chancellor Olaf Scholz attends the weekly cabinet meeting in Berlin, Germany August 1, 2018. REUTERS/Joachim Herrmann//File Photo

BERLIN (Reuters) – German Finance Minister Olaf Scholz said he favors getting a binding deal on a European Union digital tax at a meeting of EU finance ministers in December and that he supported the French model.

“If the negotiations continue the way that they have been going, we’ll still be in talks in 100 years. That is why I support the French model and want to offer the proceeds to the EU,” news weekly Der Spiegel quoted Scholz on Monday as saying.

There has been discord among European Union member states over a proposed EU plan to tax big internet firms such as Google and Facebook on their turnover.

Germany called this month for a revision of the plan that would exclude from the proposed tax activities linked to carmakers.

French Finance Minister Bruno Le Maire said on Monday that an agreement was close to being struck.

Scholz also said the EU should push ahead with minimum corporate tax rates and effective taxation of digital companies from January 2021 if states fail to reach an international agreement on tax avoidance. “We are in principle in agreement with our French friends on such a two-step strategy,” he said.

Reporting by Michelle Martin; Editing by Maria Sheahan/Mark Heinrich

SoftBank seeks hard cash in Japan telco IPO

TOKYO (Reuters) – SoftBank Group Corp (9984.T) has won approval to conduct a 2.4 trillion yen ($21.04 billion) initial public offering (IPO) of its Japanese telecoms business, in a deal that will seal the group’s transformation into a top global technology investor.

Japan’s SoftBank Group Corp Chief Executive Masayoshi Son bows his head after his presentation at a news conference in Tokyo, Japan, November 5, 2018. REUTERS/Kim Kyung-Hoon

The following are details of the planned IPO.


SoftBank Group has shifted its focus from being mainly a Japanese telecoms operator to a major investor in global technology startups.

By listing the domestic carrier business, SoftBank is seeking to concentrate on its global investments and give investors a choice to decide between a stable mobile business and a more risky investment business.

The parent group’s founder and chief executive, Masayoshi Son, has said the IPO proceeds will also enable SoftBank to pay down debt and provide a supply of cash for further investment.

“By spinning off the mobile unit, we have a company with relatively stable cash flow on one hand and a big private equity fund on the other,” said a top executive at one of SoftBank’s major creditor banks.


The total size of offering could rise by 240.6 billion yen if an overallotment is exercised, taking the total fundraising closer to the $25 billion that Alibaba Group Holding Ltd (BABA.N) raised in 2014 in the world’s biggest-ever IPO.

While IPOs usually offer opportunities with relatively young companies with big growth potential, SoftBank’s offering will provide investors with access to an established business with stable cash flow generated from its 40 million mobile subscribers.

SoftBank Corp forecasts net profit to grow 4.8 percent to 420 billion yen in the business year through March 2019.

But some analysts fear its growth will be limited due to government support for more competition and lower prices, while e-commerce firm Rakuten Inc (4755.T) aims to enter the market in October.

“The domestic market is mature, so growth will be tough. Rakuten’s entry will also increase competition,” said Takashi Nakamura, senior strategist at Tokai Tokyo Research Institute.

“Without growth in the top line, and expectations of price competition ahead, one cannot be optimistic.”

Based on a tentative offering price of 1,500 yen per share, SoftBank Corp’s market value will be about 7.2 trillion yen, making it the eighth-largest listed firm in Japan, immediately above Uniqlo clothing chain operator Fast Retailing Co Ltd (9983.T).

Japan’s biggest mobile phone network provider, NTT Docomo Inc (9437.T), has a market capitalization of 9.6 trillion yen and second-ranked KDDI Corp (9433.T) is at 6.2 trillion yen.


SoftBank plans to offer 89 percent of the shares on sale to domestic investors, nearly all of which will be targeted at retail investors, people familiar with the matter have told Reuters.

Japanese households are an attractive target with their 1,800 trillion yen in financial assets. But they are famously risk-averse, holding over 50 percent of assets in cash and deposits and only around 11 percent in stocks. By comparison, Americans hold 13 percent of their assets in cash and deposits, and 36 percent in stocks.

SoftBank is wooing individual investors with a pledge to return 85 percent of its income to shareholders. That is well above Docomo’s around 57 percent payout ratio expected in the current fiscal year and KDDI’s 39 percent.

Banking industry sources have said SoftBank’s wide brand recognition should also prove popular with individual investors, including those new to stocks.

The triple IPOs by Japan Post Holdings Co Ltd (6178.T) and its two financial units in 2015, which raised combined 1.4 trillion yen, helped attract record numbers of retail investors to stocks, data by the Tokyo Stock Exchange and other bourses showed.


Nov 30: Indicative price range set

Dec 3-7: Book-building period

Dec 10: Offering price set

Dec 19: Trading starts


Nomura Holdings Inc (8604.T), Mizuho Financial Group Inc (8411.T), Deutsche Bank AG (DBKGn.DE), Goldman Sachs Group Inc (GS.N), JPMorgan Chase & Co (JPM.N) and SMBC Nikko Securities Inc are joint global coordinators.

($1 = 114.1700 yen)

Reporting by Taiga Uranaka; Additional reporting by Kentaro Sugiyama; Editing by Miyoung Kim and Christopher Cushing

A TSA Agent Swiped Away at My Groin. A Fellow Agent Came Over to Cheer Him On

Absurdly Driven looks at the world of business with a skeptical eye and a firmly rooted tongue in cheek.

It was Election time, so I wanted to leave the country.

Fortunately, Web Summit in Lisbon coincided perfectly, so more than a week ago, my wife and I moved through a relatively empty San Francisco Airport, ready to get away.

I went through the TSA’s Body Scanner and suddenly, a beep.

I knew there was nothing in my pockets. However, the TSA agent said: 

The machine says there’s something in your groin area.

There’s no palatable answer to that. The agent continued that he’d have to perform a more thorough search of my groin. And buttocks.

He gave me the option of a private room, but frankly I’d prefer not to be sequestered away with a lone TSA agent if I can help it. 

Whatever he was going to do, I wanted it out in the open.

And so he began. My buttocks and my groin were given a thorough — some might even say enthusiastic — wiping.

His arms moved from side to side in the manner of a speed skater, desperate to take the last turn in first place. The contact was, how can I put it, firm. 

But then a fellow TSA agent came over and felt forced to cheerlead. In a deeply admiring tone, he roared: 

Look at his moves!

Please forgive me, but it’s bad enough when you’re being publicly examined like a show horse at the breeder’s office.

To have some hearty bro’ come over and add his enthusiastic fandom made me rather want to pull him aside and ask about his priorities in life.

Instead, of course, you know there’s no point in saying anything, so you take the humiliation and move on.

I contacted the TSA to ask whether bro’-down cheerleading of intimate examinations is part of its standard procedure.

The administration referred me to Covenant Aviation Security, which has the contract for security work at the airport. It says it’ll investigate.

There is, though, an even broader issue here.

When you have a sensitive job, it might still be dull. It’s always worth remembering, however, that the people you’re dealing with aren’t enjoying what you do one bit.

They may — or may not — accept the necessity for it. They’d appreciate, though, a little aforethought on your part.

As we walked away — yes, the machine had been entirely mistaken — my wife turned to me and said: 

Did he really say that?

My personal scanner indicates at least one agent might work on the Respect part.

Apple finds quality problems in some iPhone X and MacBook models

The new Apple iPhone X are seen on display at the Apple Store in Manhattan, New York, U.S., September 21, 2018. REUTERS/Shannon Stapleton

(Reuters) – Apple Inc said on Friday it had found some issues affecting some of its iPhone X and 13-inch MacBook pro products and said the company would fix them free of charge.

The repair offers are the latest in a string of product quality problems over the past year even as Apple has raised prices for most of its laptops, tablets and phones to new heights. Its top-end iPhones now sell for as much as $1,449 and its best iPad goes for as much as $1,899.

Apple said displays on iPhone X, which came out in 2017 with a starting price of $999, may experience touch issues due to a component failure, adding it would replace those parts for free. The company said it only affects the original iPhone X, which has been superseded by the iPhone XS and XR released this autumn.

The screens on affected phones may not respond correctly to touch or it could react even without being touched, the Cupertino, California-based company said.

For the 13-inch MacBook Pro computers, it said an issue may result in data loss and failure of the storage drive. Apple said it would service those affected drives.

Only a limited number of 128GB and 256GB solid-state drives in 13-inch MacBook Pro units sold between June 2017 and June 2018 were affected, Apple said on its website.

Last year, Apple began a massive battery replacement program after it conceded that a software update intended to help some iPhone models deal with aging batteries slowed down the performance of the phones. The battery imbroglio resulted in inquires from U.S. lawmakers.

In June, Apple said it would offer free replacements for the keyboards in some MacBook and MacBook Pro models. The keyboards, which Apple introduced in laptops starting in 2015, had generated complaints on social media for how much noise they made while typing and for malfunctioning unexpectedly. Apple changed the design of the keyboard this year, adding a layer of silicone underneath the keys.

Reporting by Ismail Shakil in Bengaluru and Stephen Nellis in San Francisco

A New Study Ranked All 50 States By How Fat Their People Are, and the Results are Eye-Opening

A new study ranks all 50 states plus the District of Columbia by how fat their residents are. And there are some real surprises.

Across the United States, a staggering 70 percent of people are either overweight or obese. It’s part of what drives the $66 billion weight loss industry, which is always a good target for entrepreneurs.

But it also adds $200 billion a year to our nation’s health costs. 

So, this state ranking combines 25 different data points on each state’s population to help us figure out which states have the biggest problems. Each state was then assigned a combined score from 1 (best) to 100 (worst). The data included things like:

  • percentage of residents (adults and children) who are overweight or obese;
  • percentage of residents who are physically active (or not);
  • percentage of adults with high cholesterol;
  • percentage of adults with healthy diets (and who eat at least 1 serving of fruits and vegetables each day).

Obviously, the mere fact that someone lives in a supposedly fit or fat state doesn’t mean he or she personally is overweight or not. Heck, I live in the 11th fittest state according to this, and I’m well aware I could lose a few pounds.

But the ranking does challenge some of the stereotypes about where the healthiest people might live in the country. Here’s the list, which was put together by WalletHub. We’ll do this backwards, going from worst to first, and discussing the states briefly in tiers.

Tier V: The fattest states

All of the worst states on this list were in the South, and the absolute worst state in terms of fatness ranking was Mississippi, with a score of 72.97 out of a possible 100.

Mississippi also had the worst ranking in the country in terms of obesity and overweight prevalence. And in another study, Mississippi workers also reportedly got the least exercise of anyone in the country. The full bottom tier looks like this:

51.    Mississippi    72.97 out of 100 (1 is best; 100 is worst)
50.    West Virginia    70.14    
49.    Arkansas    69.69
48.    Kentucky    67.71
47.    Tennessee    67.67
46.    Louisiana    66.89
45.    Alabama        64.56
44.    South Carolina    63.64
43.    Oklahoma    63.09
42.    Texas        62.45

Tier IV

The second to the bottom tier largely consists of states in the so-called Rust Belt.  

41.    Indiana        62.44
40.    Ohio        62.39
39.    Delaware    62.27
38.    Georgia        61.46
37.    Michigan    61.30
36.    Missouri    59.70
35.    North Carolina    59.17
34.    Iowa        58.77
33.    Maine        58.36
32.    Kansas        58.30

Tier III

It’s a little more difficult to say exactly what states like Rhode Island, Florida and Alaska have in common. However, these are largely states with a larger percentage of senior citizen residents, which could be a factor.

31.    Wisconsin    57.87
30.    Rhode Island    57.86
29.    Nebraska    57.24
28.    Maryland    57.12
27.    Pennsylvania    56.83
26     Wyoming        56.72
25.    North Dakota    56.46
24.    Illinois    56.15
23.    Florida        56.12
22.    Alaska        55.90

Tier II

If you were to look at the list of states where people get the most exercise at work, you’d see that the top 20 in each list are almost identical. (The order is different, but the grouping is very close.) Seems like that could be a big clue.
21.    Virginia    55.83
20.    New Mexico    55.49
19.    South Dakota    55.15
18.    Washington    55.10
17.    New Hampshire    55.10
16.    Arizona        54.68
15.    New York    53.75
14.    Minnesota    53.64
13.    Nevada        53.07
12.    Idaho        52.52

Tier I

Here are the top 10 states (plus D.C.), with the most fit residents. Interestingly, they’re also largely (but not exclusively) urban states, where you’d think people have limited outdoor space and are more likely to work long, stressful, sedentary jobs.

But, apparently the people in metro areas around places like New York, Los Angeles, San Francisco, and Washington, D.C. are the ones who make time to exercise, eat right, and watch their weight.

And to the folks of Colorado, who topped both this list and the exercise at work list, keep up the good work. 

11.    New Jersey    52.40
10.    Oregon        52.13    
9.    Vermont        52.07
8.    Connecticut    51.80
7.    Montana        50.83
6.    California    49.97
5.    Washington, DC    49.49
4.    Massachusetts    48.09
3.    Hawaii        46.97
2.    Utah        44.41
1.    Colorado    44.35 

DENTSPLY SIRONA (XRAY) Q3 2018 Results – Earnings Call Transcript

DENTSPLY SIRONA, Inc. (NASDAQ:XRAY) Q3 2018 Earnings Call November 8, 2018 5:00 PM ET


John P. Sweeney – DENTSPLY SIRONA, Inc.

Nick William Alexos – DENTSPLY SIRONA, Inc.

Don M. Casey – DENTSPLY SIRONA, Inc.


Brandon Couillard – Jefferies LLC

Jeff D. Johnson – Robert W. Baird & Co., Inc.

Tycho W. Peterson – JPMorgan Securities LLC

Jonathan David Block – Stifel, Nicolaus & Co., Inc.

Erin Wilson Wright – Credit Suisse Securities (NYSE:USA) LLC

Nathan Rich – Goldman Sachs & Co. LLC

Steven Valiquette – Barclays Capital, Inc.

Steve Beuchaw – Morgan Stanley & Co. LLC

John C. Kreger – William Blair & Co. LLC

Yi Chen – H.C. Wainwright & Co.


Good day, ladies and gentlemen, and welcome to the Dentsply Sirona Third Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. As a reminder, this conference call is being recorded.

I will now like to introduce your host for today’s conference, John Sweeney, Vice President of Investor Relations. Sir, you may begin.

John P. Sweeney – DENTSPLY SIRONA, Inc.

Thank you, Ashley. And good morning and thank you, everybody, for joining us today. Welcome to our third quarter 2018 conference call. I’ll remind you that an earnings press release and slide presentation related to the call are available on our website at

Our earnings call presentation and many of the numbers discussed on the call today will be non-GAAP financial measures and there are reconciliations provided in our press release and in our earnings deck. The earnings call will be a little longer than usual today, as Don and Nick would like the opportunity to tell you about the diagnostic they’ve completed on the business and details of the upcoming restructuring plan.

But before we begin, please take a moment to read the forward-looking statements in our earnings press release. During today’s conference call, we’ll make certain predictive statements that reflect our current views about the future performance and financial results and we base those statements on certain assumptions and expectations of future events that are subject to risks and uncertainties. Our most recent Form 10-K and Form 10-Q lists some of our most important risk factors that could cause actual results to differ from our predictions.

And with that, I’ll now turn the call over to Don Casey, Chief Executive Officer of Dentsply Sirona.

John P. Sweeney – DENTSPLY SIRONA, Inc.

Thanks, John, and thank you for joining us on our third quarter earnings call. We have a lot to cover, and appreciate you taking time with us this evening. Before talking about the specific results, I wanted to offer some perspective. After spending nine months here, a few things are very apparent. The first is that the dental industry is a great place to be with positive underlying trends relating to demographics, technology and economics.

Further, I believe, that Dentsply Sirona is well-positioned to succeed with a strong global footprint, important brands that have a loyal following, a strong track record of innovation tracing back over 100 years and, most importantly, a dedicated, passionate workforce.

But it’s equally clear that our current business performance and trajectory over the past three years is not where it needs to be. We are not living up to our potential to deliver for our customers, investors and our employees. Our results in this quarter further highlight the need to take decisive action to better position the company for long-term value creation.

As part of the call today, we will outline the results of an extensive diagnostic and offer a major restructuring plan that we’ve begun executing against. Key components of that plan will focus on how we deliver sustainable 3% to 4% revenue growth and an operating margin of 20% by 2020, with further improvements targeted through 2022.

We plan to simplify the organization and have developed an aggressive cost-cutting savings target of over $200 million today. Just as we are disappointed in and fully accountable for our results, as we go through the presentation today, you will see that we are optimistic about the future of the business and that we are committed to taking the necessary steps to deliver attractive financial performance going forward.

Let’s begin with the summary review of the third quarter. As you can see on slide 7, our top line was down 6.5% on internal basis in the third quarter. The revenue decline was significantly impacted by planned changes in our dealer inventory stocking levels in our Technologies & Equipment segment; and a $20 million reduction in Consumable revenues, resulting from a startup challenge in the new central distribution hub in Europe.

Our lower top line and increased expenses drove an adjusted operating income margin of 13% and adjusted EPS of $0.38. Operating cash flow was $126 million in the third quarter, reflecting the strong underlying cash flow generating capabilities of Dentsply Sirona.

Before I go into more detail on our restructuring plan, I will now turn the call over to Nick Alexos, who will go into more details on our financial performance and outlook for the rest of the year.

Nick William Alexos – DENTSPLY SIRONA, Inc.

Thank you, Don. And for everybody’s reference, we’re on page 9 of the slides, the segment performance for Consumables. As you know, we report across two segments: Consumables and Technologies & Equipment. Our Consumables segment accounted for 47% of our revenue for the third quarter and represents a diverse portfolio of products that provide steady growth at stable margins.

However, in Q3, as Don mentioned, our Consumables segment had an internal revenue decline of 3%, as we had a $20 million revenue shortfall resulting from operational issues at our European distribution center in Venlo, the Netherlands. Venlo is our centralized European distribution site.

As a result of the move to Venlo during the last year, in Q3, we experienced startup shipping delays for some of our product lines. We’ve put systems and a team in place now to fix these particular issues, and have seen improvement back to levels required for hitting our fourth quarter shipment forecast. While this was unfortunate, the facility will provide us with the infrastructure to more efficiently serve our customers in the European market.

Excluding the Venlo impact, Consumables revenues actually achieved low-single digit growth. The lower shipment volumes for Venlo, however, which caused also an unfavorable mix shift on our product sales, were the principal driver of our Consumables segment margin decline by 370 basis points as compared to the 2017 third quarter.

If you now go to page 10, segment performance for Technologies & Equipment. This segment accounted for 53% of the revenue for the third quarter. As you all know, our T&E segment has a number of unique technologies and includes our implant and healthcare businesses.

Q3 revenues in this segment declined by 11.3% and were down 9.3% on internal basis. Here, we had planned for and previously discussed some of the significant revenue reductions during the third quarter due to the dealer inventory restocking (00:06:37) of our equipment.

We had $34 million of dealer destocking in the third quarter, as opposed to $35 million of dealer stroking increases in the prior-year quarter for a net reduction in year-over-year revenue growth of $69 million.

Excluding the year-over-year stocking and destocking, T&E would actually have posted commendable growth for the quarter. In partnership with our primary dealers, we had actually a very successful DS World in October, which evidences good retail demand for our full range of products.

We did also see positive traction in implants and in our healthcare business, Wellspect, which serves the hydrophilic catheter market. Healthcare showed strong performance, up mid-single digits. This is a business that continues to realize revenue and profitability growth.

Technologies & Equipment margins were down 1,330 basis points as compared to prior year. This is significant margin compression as a result of a variety of factors. The year-over-year changes in Technologies & Equipment revenue due to the destocking that I mentioned versus stocking the year before, reduced T&E margins by about 600 basis points through just lower absorption in our fixed cost structure.

Product mix and pricing in certain businesses in Technologies & Equipment further reduced margin by approximately 300 basis points. And we also had some investments in marketing and sales capabilities, which we’ve talked about previously, in order to drive the continued growth that we’re seeing in retail demand. And this impacted margins by about 200 basis points.

If you now go to slide 11, we can speak to the regional revenue performance. Looking at our business performance on a regional basis, U.S. revenue declined 10% on an internal basis in the quarter mainly due, once again, to the inventory destocking in our CAD/CAM and imaging business, which is principally in the U.S. Looking to the balance of 2018, we expect our revenues will continue to be lower versus prior year for the same reason.

Going to Europe, revenues declined 8.4% on an internal basis, primarily driven by the revenue shortfall we mentioned with regards to Venlo and some softness in the equipment markets in Central Europe. As we move into the fourth quarter, we’re beginning to see signs of normalized growth in the European equipment market suggesting that the downturn was temporary. Rest of world revenues increased 1.5% on internal growth.

Now, why don’t we go to slide 12 for our consolidated non-GAAP financial summary. Revenues on a consolidated basis, excluding precious metals, declined 7.7% in the third quarter and were down 6.5% on an internal basis.

Of the $77 million of year-over-year decline in revenues, as you reconcile back, $69 million was due to the differential in stocking versus destocking for CAD/CAM and imaging; $20 million was due to the problems we encountered in shipping for our Consumables business at Venlo; FX reduced revenues year-over-year by $70 million; and then, acquisitions added $5 million; with the remainder of approximately $20 million driven by organic growth.

Gross profit was $512.1 million or 55.4%, down 360 basis points, as compared to the prior year. Net destocking in our T&E segment accounted for about 200 basis points of this gross margin decline. And then, other factors, including Venlo, mix in price, accounted for the remainder of the gross profit margin compression.

Total operating expenses, which includes R&D, were $391.8 million, up $12 million as compared to prior year or $18 million on a constant currency basis. While our operating expenses benefit from our cost savings program during the quarter, these savings were more than offset by increased marketing and selling expenses and expenses related to restructuring and the building out of our new organization, as well as additional R&D expenses ahead of IDS and the timing of certain other costs.

Adjusted non-GAAP margins consequently declined to 13%, down 812 basis points, as a result of the gross margin declines that we discussed and the increased SG&A expense.

With regard to the targeted $100 million cost savings initiative, we’ve already achieved year-to-date about $50 million of actual savings and expect to achieve another $20 million for the remainder of the year, with the balance flowing into our new restructuring program. On a net EPS basis for Q3 were $0.38, compared to $0.70 in the prior year.

Let’s go to slide 13 on cash flows, which shows that cash flow from operating activities for the third quarter were $125.6 million, down 24%; and cash flows from operations, less capital expenditures, were $76.2 million versus CapEx of prior year. In 2018, we continue to expect that capital expenditures will be approximately $200 million or slightly less.

One additional cash flow initiative we have is a detailed program to reduce internal inventory levels. At the end of the third quarter, we continued to hold inventory at higher levels than 2017 due to the elevated requirements in Venlo. And we are now targeting a reduction versus our Q1 level peak of $20 million versus the level that we had targeted previously of $30 million.

Lastly, in terms of guidance, page 14. On an income statement basis, at this point, based on our Q3 performance and our view of Q4, we continue to expect revenue of 2018 at $3.95 billion or a 2% constant currency decline over 2017. As we are seeing better retail demand for T&E products in key markets, our estimate for the dealer destocking for 2018 is now $110 million to $115 million, slightly above our previous guidance range of $100 million to $110 million, which we think is a quite healthy achievement for this year. To-date, we’ve incurred $69 million of destocking, which means we are planning approximately $40 million to $45 million of destocking in the fourth quarter, and that’s reflected in our revised guidance.

As a result of the weaker performance expected or resulted in the Q3, we now are looking at an OI margin of 15% to 15.5% for the full-year 2018. Given the lower-than-expected level of performance, adjusted EPS is now at or slightly below the bottom end of our previous range of $2 to $2.15. The new guidance includes the impact of Venlo, as well as some of the noted Q3 SG&A variances and the higher anticipated level of inventory burn.

Our tax rate assumption for 2018 remains at 22%. I want to reiterate our disappointment in our results, and I would also highlight the clear necessity to undertake the actions of our planned restructuring which are long overdue. At the same time, I share my appreciation for all our employees’ efforts in working to improve the financial and operating performance of Dentsply Sirona.

And with that, I turn the call back over to Don, who will give an overview of our restructuring plan.

Don M. Casey – DENTSPLY SIRONA, Inc.

Thanks, Nick. As I mentioned in the opening, over the last six months, we’ve conducted an extensive review of our business. This involves our board, leadership team, customers, partners and outside advisors. The conclusions have reaffirmed our thoughts on the positive long-term prospects for both the market and that of Dentsply Sirona. The analysis shows that the dental market is an attractive category with sales in excess of $25 billion. It is one that has consistently grown in the mid-single digits, with 2018 being no exception.

Growing economies, favorable demographics and new procedures will continue to fuel the market, more than offsetting some of the category consolidation and pricing pressure that has been seen over the last few years.

New innovations can drive growth and create entirely new platforms. As we’ve seen with CAD/CAM, imaging, implants and clear aligners, technology can transform dentistry and improve patient outcomes while making the dentist more efficient. The technology also allows general dentist to develop capabilities to perform procedures that were historically done by specialist, expanding care options for patients and enhance revenue streams for the dentists. All of this underlines the growth potential of dentistry.

Our assessment also highlighted Dentsply Sirona’s unique positioning within this market. We have a truly global footprint that allows the company to maximize the sale of our innovations. Our company has major brands that serve as anchors in many of the critical procedures. These brands are well-recognized and have a very loyal following, and will service platforms for us to expand from and to cross-sell solutions.

Our tracking study shows the company and many of our marquee brands have a well-deserved reputation for innovation and quality. We have an experienced and committed workforce of over 16,000 people today that carry on the legacy of serving customers for over 100 years. But reputation and legacy are no guarantee for future success, and our diagnostic has helped clarify critical areas where we need to improve. These areas include: inconsistent growth, margin compression, and organizational complexity.

Starting with growth on slide 17. Today, our analysis identified four major causes for our lack of consistent growth. The first is that our R&D program has not delivered a consistent level of substantial innovation needed to increase sales. The second is that we have not created scale with the customer. Our individual businesses have viewed the customers as unique and distinctive, resulting in multiple approaches to often the same customer. They would be Tulsa customer or a CEREC customer, not a Dentsply Sirona customer. This diminishes our impact, while increasing costs.

The third is the need to improve our sales and marketing execution. Our analysis shows it will be important to take greater responsibility for our own demand creation. The major change in the U.S. Technology & Equipment area over the last two years highlighted that we’ve historically relied heavily on partners to create demand for a number of our products. While we think that is a very important part of our sales and marketing model, they also highlight the need for Dentsply Sirona to do a much better job supporting our own products with demand creation activity.

The second area of improvement in sales and marketing execution is being more rigorous around decision-making and the measurement criteria. By bringing greater discipline and evaluating our sales and marketing programs, we will generate greater impact and improve returns on this investment.

Finally, given the breadth of our platform, we believe it is imperative that we move from a product orientation to a customer focus in order to deliver meaningful solutions. Our margin compression can be attributed to several factors. The first is that we have a high fixed cost structure. Whether on our manufacturing network or sales and marketing organizations, we have a high level of fixed costs mainly related to human capital. This does not allow us to react quickly to changes in the market. Our results in 2018 highlighted this as we faced significant dealer inventory reductions without the corresponding reduction in our cost structure.

The second factor has been an expansion in sales and marketing spending at both the country and the strategic business unit level in anticipation of growth that has not been generated. The final area is pricing compression in some categories, like imaging. This pricing compression is a function of shift to lower price parts of our lines, as well as promotional efforts designed to maintain competitiveness.

The diagnostic also highlighted an unnecessarily complex business model. With 10 dental strategic business units interfacing with over 50 individual countries and over 200 legal entities, our current business matrix creates challenge that is expensive to maintain and makes clear accountability and prioritization very difficult.

While various restructuring programs have started in the past, they’ve not been completed. The result has been a partial evolution of the organizational structure that now needs to be addressed. Based on the review of our business, we formulated a comprehensive program to enhance growth, improve margins and simplify the organization. We believe that this program will enable us to deliver 3% to 4% revenue growth, and operating margins of 20% by the end of 2020, and a return to pre-merger levels by 2022 with continuous improvements thereafter.

In order to deliver this improvement, five new operating principles are being incorporated into the company that will help us achieve our aspirations. These operating principles include, first, approaching our customers as one across the entire organization. By understanding all the ways that we have a relationship with that customer across the entire company, Dentsply Sirona will be better able to serve that customer.

Second, we recognize the need to take full responsibility for creating our own demand. As we launch new technologies that can transform procedures, we have a response ability to educate dentists and their staff on how to use them and why our products are unique. And while our dealers do a wonderful job, it is our role to bring KOLs, clinical education and unique sales and marketing programs to help successfully sell our solutions.

Third, innovation is our lifeblood and, going forward, we have to ensure that our innovation is substantial and supportive. We need to prioritize our R&D spending across the entire company portfolio, rather than looking at each of the individual business units that have been driving their own innovation plans.

Fourth, Dentsply Sirona is the leader in clinical education, but we must take that to a new level. As there is more and more technology and product innovation, we believe that we can play a unique role across procedures by providing best-in-class clinical education, whether it’s through our state-of-the-art training facilities in places like Charlotte and Bensheim, or regional and local training events, or through our online presence. This will be a differentiator for us.

And, finally, we need to operate at scale. Our history of loose integration has not allowed us to get the operational efficiencies we need, whether in procurement, logistics, manufacturing, sales force or other marketing programs, we will look to create cross-company leverage going forward to take full advantage of our scale.

Under our plan to accelerate growth, there are four key programs. The first is a significant consolidation of our commercial organization, starting with the strategic business units. We will be moving from 10 dental SBUs to 4, while forcing them on strategic marketing and innovation.

Moving to a more focused approach here will allow for the creation of centers of excellence, elimination of duplication, and can allow the organization to better prioritize R&D and marketing programs.

As part of this consolidation responsibility for supply chain, we’ll move from the SBUs to a newly created central supply chain organization. While we’re keeping the current reporting segments, we will have five product groups. They’re: healthcare, which will continue to stand alone; we will then look at digital dentistry, which is composed of CAD/CAM and Orthodontics; next comes equipment and instruments, which will include treatment centers, instruments and imaging; implants will be stand-alone; and finally Consumables, composed of our restorative, preventive, endodontics and lab businesses.

In addition, we will be consolidating our regional commercial organization to focus on common country clusters. This strategy puts the customer at the center of how Dentsply Sirona is organized and, importantly, leverage sales and marketing infrastructure across multiple countries. This also serves to eliminate the duplication of resources at the corporate, regional and country level.

While we will continue investing in R&D, with spending in 2018 exceeding $160 million, going forward innovation will be prioritized across all the businesses to focus on the large initiatives that can generate the most benefit to the entire company.

As noted earlier, our current model relies on each SBU developing their own R&D priorities, and this has hampered the company’s ability to capitalize on the largest opportunities and allocate resources accordingly. This approach will lead to bigger ideas that are delivered faster with more complete support.

One of our biggest assets is our sales force. In addition to maximizing our return to this critical area, we are making some important changes. To become more customer-centric, all countries will move to a single unified sales and marketing structure.

Today, resources in the countries are mixed between some commercial efforts run by the SBUs versus other run by the countries. Further, we’ve recently concluded a major segmentation study in the sales force effectiveness diagnostic in the U.S. The results will allow for a much more analytically driven approach to targeting and call planning.

This will be enhanced by a single view of the customer, a single CRM system, and a single sales operation platform. It will also facilitate cross-selling opportunities and more pricing discipline, and we will bring this process to the globe.

Our experience in places like Latin America and China have also shown the importance of the emerging markets. In these developing economies, we have seen high-single digit growth opportunities. Applying our model of focused support to other areas of the world will continue to be an important part of our growth strategy. All of these activities will contribute to restarting our growth engine.

I will now turn to margin improvement and organizational simplification. In addition to the structural changes mentioned before, we’ll be looking at several other programs to improve our margins. A major initiative is moving to a centralized global supply chain.

Our supply chain has historically been run at the business unit or country level. This does not allow us to leverage critical areas for scale, including manufacturing, global demand planning, logistics, distribution or procurement; all areas that, given our size, should be a competitive advantage for Dentsply Sirona.

Moving to one supply chain will allow for scale, improved costs and more reliability. It’s important to note though that this movement will happen over two years as we build the structure necessary to accept this organization and avoid supply chain disruption.

As part of our diagnostics, several opportunities to shape our portfolio have been identified. Going forward, our focus will be on looking to address businesses that are non-core, not profitable or underperforming. There will be a strong bias to action.

It should be noted that Wellspect is not one of these assets. This business has been performing well and is accretive to our growth and profitability. It also benefits from leverage in our share back-office areas. As such, this would be an area of continued investment for us.

Supporting both the growth and the margin improvement initiatives is our organizational simplification effort. In addition to the consolidation around the strategic business units, the regional commercial units and the centralized supply chain, we will be reorganizing our support functions to serve these units. Functional realignment will happen as the commercial units are made operational.

Slide 31 details our head count reduction goals. As a result of the streamlining initiatives and margin improvement programs, we are targeting a net head count reduction of 6% to 8% by 2021 from the current level of roughly 16,300 people today. This is a very difficult decision for the organization, and we will work with our employees and workers council to determine the best outcome for all of them.

On slide 22 (sic) [32], we outline our anticipated $20 million to $25 million cost reduction program. We fully expect to drive margins of 20% by the end of 2020 and return to pre-merger levels by 2022, with additional improvements thereafter. The restructuring will result in a onetime charge and expenses of up to $275 million.

On slide 33, we outline our multi-year expectations. In terms of revenue growth, we can see Consumables holding steady at 2% to 3%. We anticipate Technologies & Equipment returning to growth in 2019, partially as a result of getting through our 2018 inventory destocking, but also due to the generally improving U.S. retail trends. This segment should grow 4% or even more going forward.

Taken together, we believe this will result in Dentsply Sirona revenue growth at/or above market, with our target of 3% to 4%. In terms of our operating income, our goal is to realize a margin of 22% by 2022. While 2019 will be a year focused on execution, we expect to see margins of 20% by the end of 2020.

This revenue and margin algorithm yield solid double-digit growth and adjusted EPS. This will translate into growth in operating and free cash flow, which we will then utilize to further enhance our financial performance. We understand that we need to reinforce our credibility by demonstrating that we are on track to achieve our goals.

On slide 34, we detail the key activities and associated metrics that will allow you to measure our success and our financial progress. Among the key activities we will report progress on, include the SBU and RCO consolidation, with our expectation that the majority of them will be completed in the first half of 2019.

A second key activity will be implementing a sales force effectiveness program, which we’ll be starting in the U.S. and transferred around the world through the course of 2019. Another critical activity is progress in creating a comprehensive R&D portfolio program. We expect it to be completed in 2019, and we’ll provide progress reports as appropriate.

And we will also provide an update on our portfolio shaping activities. Among critical non-financial metrics we will report on, include head count reduction, progress in critical growth markets, and the number of clinical education contacts that we have.

Financial measures will include revenue growth, operating income margin, as well as our progress on restructuring charges. This is an ambitious and comprehensive program, and there are obviously risks in pursuing a change initiative of this size. We’ve worked with our entire organization and outside advisors to make sure there are adequate resources to accomplish the plan.

A phase approach will allow us to focus on completing critical priorities before moving on. And above all, we have prioritized managing our customers and implementing a strong system of financial control to improve management visibility during this process.

So now to summarize. As you heard today, we are taking major steps to restructure our businesses to deliver on the promise of our portfolio. We’ve outlined a path that will lead to substantial value creation. We are focused on driving growth, improving margins and simplifying our business. We do recognize the scope of the undertaking and the task at hand.

Coming out of that business diagnostic, the board and management are convinced that this is the right plan. But we also acknowledge that the restructuring will take time. Our near-term priority’s execution in 2019 will be a transition year, but you will see signs of progress. We’re cognizant of risk mitigation to making sure that we do this in a way that does not disrupt our revenue stream, impact our customers or interrupt our supply chain.

You will see margins of 20% by 2020, with improvement to pre-merger levels thereafter; and we’re not done. We’re looking for more and are on a path to returning margins to pre-merger levels over the long run or higher. Our team looks forward to providing an update in 2019, including our progress against the KPIs and business initiatives that we’ve laid out for you today.

As this comes to a close, I wanted to relate that we just completed a two-day Leadership Summit with our top 50 leaders. I was very impressed by their passion for this company and commitment for delivering to our investors, customers and employees.

They’re excited about this plan, and this excitement is critical as we put Dentsply Sirona on a more sustainable path. We look forward to updating you on our progress regularly. In light of the restructuring we announced today, we will not be holding an Investor Day in the fourth quarter. We believe it is critical that we are focused on executing and delivering sustainable value.

And with that, we’ll open it up for questions. John?

John P. Sweeney – DENTSPLY SIRONA, Inc.

Yes. Operator, we’d like to take the first question, please.

Question-and-Answer Session


Thank you. And our first question comes from the line of Brandon Couillard with Jefferies. Your line is now open.

Brandon Couillard – Jefferies LLC

Thanks. Good afternoon. Quite a lot to digest there. I guess, Don, with respect to your 3% to 4% sort of top line growth outlook for the next few years, can you sort of speak to how you expect to achieve that, given the number of moves you’re making internally and the potential risks from disruption, as we’ve seen with the distribution center facility transition this quarter?

Don M. Casey – DENTSPLY SIRONA, Inc.

Yeah. I think that’s a great question. Thanks, Brandon, and thanks for spending time with us today. Look, right now, as we’ve gone through this change initiative, we’ve established two core priorities that we refer to as guardrails. The first is, we can’t interrupt our customer service and we’ve got to make sure our supply chain is reliable.

So if you listen to the presentation, we kind of talk about the fact that we will make the supply chain changes gradually. And one of the things we’re learning with things like Venlo is, we’ve got to make sure our processes are in great shape before we transfer. So we’re saying that supply chain will be a little bit more of a gradual kind of over the next 18 months, 2-year program to make sure that we have adequate supply of product that needs to support our selling initiatives.

In terms of – on the commercial side, it’s really interesting. I’ve been here nine months and I’ve been really impressed with our ability to generate sales in a lot of different places. But I do find it somewhat difficult to say, at a local country level, what our priorities are. So in our mind, by looking to move to four SBUs – four dental groups, if you will – and really focusing the R&D on bigger and more substantial innovation, we really think that we are going to actually simplify the execution at the country level, which we think will have a positive impact even though there’s going to be some change in the back.

The other issue is, we’ve been really working hard to make sure that our sales force effectiveness program, which we’re starting to implement in the U.S. in the first quarter of 2019, is really gradual. I mean the thing you don’t want to do is literally have 2,000 sales and marketing people waking up the following morning and doing something different.

So we’re really looking on focusing on maintaining each of the salespeople relationship with their critical customers and really helping them do a better job in understanding all the other areas that that customer is touched by Dentsply Sirona and look at cross-selling it and other solution things.

So, yeah, look, we understand it’s a big program. We have spent a lot of time with our leadership group to make sure that we outline clear priorities of, don’t interrupt your revenue stream, make sure that you’ve got an adequate supply of products, and let’s really get the commercial organization where it needs to get to quickly, and then let’s focus on really making our sales force hum in the field.

Brandon Couillard – Jefferies LLC

Thanks. And I guess one more…

Nick William Alexos – DENTSPLY SIRONA, Inc.

Go ahead, Brandon.

Brandon Couillard – Jefferies LLC

…if I could, just on the head count reduction. Could you just elaborate on what areas of the business that will come out of, whether it’s sales, R&D? Thank you.

Don M. Casey – DENTSPLY SIRONA, Inc.

Yeah. Thanks, Brandon. Look, we understand we gave you guys a ton of stuff tonight and we’re going to relax our one-question policy. So, look, as we go forward, I would tell you the strategic business unit and the regional commercial organization consolidation, it’s obviously a big chunk of what we have in the plan right now, and that will happen most immediately.

But as you begin to look at other areas, where we think that there’s significant opportunity is around supply chain, around some of the functional areas, that need to begin to reflect the new organizational structure. We think there’ll be considerable savings as we go through that. And a lot of this, Brandon, is really eliminating duplication. If we have a strategic business unit that is in charge of, say, Western Europe; and then the countries in Western Europe have similar people doing marketing of, say, implants, we really want to eliminate some of that duplication.

And then, over time, we also really have done a pretty extensive portfolio shaping analysis. And as we go through that, we think that there are some opportunities to really focus on units that may be not strategic, not really in our core, or really been underperforming for a number of years that we think we can move on, and that’s going to have an impact on heads (00:37:22).

So I would tell you, look, the SBU and RCO consolidation, followed by supply chain, are obviously areas of portfolio shaping. And, ultimately, we really don’t think that it’s going to be a big change in our sales force. We just like to make our current sales force more effective.

Brandon Couillard – Jefferies LLC

Super. Thank you.


Thank you. And our next question comes from the line of Jeff Johnson with Baird. Your line is now open.

Jeff D. Johnson – Robert W. Baird & Co., Inc.

Thank you. Guys, can you hear me okay?

Don M. Casey – DENTSPLY SIRONA, Inc.

Yeah, Jeff.

Jeff D. Johnson – Robert W. Baird & Co., Inc.

All right. Great. Hey, Don, how are you? So I guess my first question, and I’ll make it two very quick questions. But just kind of that path to 3% to 4% revenue and the path to 20%, it sounds like exiting 2020, if I’m hearing you right on that. But I would assume that’s going to be choppy. You’ve laid out a little bit on 2019, but I would assume we shouldn’t connect kind of dots as they’re more of a ramp at the end of it or kind of an acceleration in some of those improvements as we get deeper into these efforts.

Don M. Casey – DENTSPLY SIRONA, Inc.

First, Jeff, thanks for the question. And they don’t even have to be quick. Look, we’re not going to give you kind of a quarter-by-quarter margin expectation. I do think that we’re timing some of the commercial changes relatively quickly. And, look, the portfolio shaping, which are relatively minor businesses, will occur over the time period that we’re outlining.

I do think that, if you saw the press release, that we do say as – one of the ways we’re really looking to make sure that we’re showing performance quickly is we’re committing to our operating expenses being lower in 2019 than they were in 2018. And that’s kind of a way that we’re really holding ourselves accountable for not only head count changes, but really getting after cost.

And, Jeff, one thing I really want to emphasize and it’s one of the challenges when we’re trying to communicate a program this significant is, obviously, the hard numbers are sitting there in the costs and the head count. And I’ve referenced the top 50 meeting. Our leadership team fundamentally believes that really focusing the organization on bigger priorities and bigger bets and more substantial innovation is actually going to liberate the organization and really help it grow.

So one of the things when we talk about this program internally is really focus on, A, delivering the margin improvement that we have to deliver. But, boy, we get excited about the opportunity to really get after growth.

Jeff D. Johnson – Robert W. Baird & Co., Inc.

That’s helpful. And then, yeah, I guess let me just follow up, Don, on the question or on the point you made there on operating expenses coming down next year. Where do you think gross margins go next year and over the next couple years? Obviously, you talked about some price mix issues in imaging this quarter? We’ve written some notes, I’m sure others have, on kind of some of those pressures maybe continuing for a while. And some other cost pressures on the manufacturing side, you might have it on the product mix side. So just where do you think gross margin really move here in the next one to two to three years?

Nick William Alexos – DENTSPLY SIRONA, Inc.

Hey, Jeff. It’s Nick. Let me take that. Thanks for the question. As you know and as Don has mentioned, we’ve got a high fixed cost structure. So as we look at the performance that we’ve targeted in the strategic plan, I think you’re going to see both gross margins and then consequently operating margins improve as we better control our operating expenses.

So I don’t have any specific gross margin target for you. But if you kind of pencil out where we’re going to end up for the year given our guidance of 15% to 15.5% and then the 20% and 22% target, I think you’re going to see a good portion of that – I guess an even split between gross margin and operating margin. And, certainly, the savings that we’ve targeted fall into both buckets.

Jeff D. Johnson – Robert W. Baird & Co., Inc.

Thank you.


Thank you. And our next question comes from the line of Tycho Peterson with JPMorgan. Your line is now open.

Tycho W. Peterson – JPMorgan Securities LLC

Hey. Thanks. I’m going to try to (00:41:24) you guys out a little bit for 2019 as well. Just given that your long-term guidance is 3% to 4% in the top line, Street has you just under 3% top line next year. As we think about portfolio transformation, are you comfortable with where the Street is? And is it going to be a product-heavy year, given that it’s an IDS year or should we think about the following IDS cycles being maybe more important for you guys?

Nick William Alexos – DENTSPLY SIRONA, Inc.

Hey, Tycho. It’s Nick. I would say that we are definitely expecting a good IDS year, and I’ll let Don follow up on that. We’re in the midst of our budget process, so we don’t have a specific view on 2019. But as you know, with a dealer destocking of $110 million to $115 million this year, certainly, we would expect an uplift from that. And that will certainly help our absorption levels in our fixed cost facility. And that we’re also targeting OpEx being below. We should have a good year next year while we’re still ramping up our top line growth rate strategies.

Don M. Casey – DENTSPLY SIRONA, Inc.

Yeah. And, Tycho, just – obviously, you’ve tracked the category for a long period of time. IDS years tend to be significant years. The strategy we’re taking right now is we’re focusing on probably five to six big ideas and we’re really going to drive them, which is a little bit of a different tack than we’ve taken in the past, where it might have been 30 or 40 things where we try to be all things to all people.

We’re very comfortable that the innovations we are bringing and announcing at IDS are going to be significant. And, look, we’re not going to outline exactly what they are. Obviously, we’re in markets where you can tank markets in advance if you get too specific on what you’re launching. But we are very comfortable that we’re going to have a really strong IDS.

Tycho W. Peterson – JPMorgan Securities LLC

Okay. And then, a follow-up on equipment. The CAD/CAM numbers out of Schein were great, up 40%. You obviously had the destock headwind. Can you maybe just talk the momentum in the underlying market around CAD/CAM? And Jeff alluded to the pricing in his question. So can you maybe just talk on some of the strategies you’ve taken around pricing for CAD/CAM?

And then, lastly, if I look at your comments a year ago, you’ve called out I think about an $8 million inventory destock headwind. Today, you’re saying it was $34 million in the year-ago. So was that just the restatement that’s the difference?

Nick William Alexos – DENTSPLY SIRONA, Inc.

No. I think last year’s destocking for Q3 was the $34 million. Why don’t we check on that Tycho? And, Don, can you answer on the pricing for CAD/CAM and/or imaging?

Don M. Casey – DENTSPLY SIRONA, Inc.

Yeah. And, Tycho, if you go back to our second quarter call, we said that we were unhappy with the performance of our Technology & Equipment business, and we took a couple very specific actions; and I’ll come back to where pricing fits in that. The first is, we stood up at sales force that was focused on CAD/CAM. The second is, we launched a pretty comprehensive marketing program designed to create interest in not just CAD/CAM, but imaging as well.

The, third, we worked with our dealer partners, and they’ve been terrific and getting their sales forces aligned, giving their sales forces the right level of incentives. We also offered some financing and we’re seeing some very positive trends underlying. And Nick mentioned in his script that – he was talking about a very positive DS World, and we had a very good DS World. So I would tell you – and it hasn’t been about price. It is realistically getting back and fundamentally delivering the benefits of chairside dentistry, which we think is transformative.

I think longer-term one of the questions that we have to look at is, what is the impact of DI and CAD/CAM. And the interesting thing is that right now we’re finding that CAD/CAM is moving and we are seeing positive momentum there. And I don’t think that’s coming at the expense of DI. I think, there, some of the customers are beginning to segment themselves to say, look, I want to do DI and some of them want to do full chairside.

So, again, I think some of this is getting back to good old-fashioned blocking and tackling around CAD/CAM. And again, it was my first DS World. And listening to the loyalty that CEREC doctors have for this product is really impressive.

Tycho W. Peterson – JPMorgan Securities LLC

Okay. Thank you.


Thank you. And our next question comes from the line of Jonathan Block with Stifel. Your line is now open.

Jonathan David Block – Stifel, Nicolaus & Co., Inc.

Hey, guys. Thanks and good afternoon. I’m actually going to apologize in advance for this question, but I really think it’s important. You guys are about 30% below the EPS range for 2018 that you gave only nine months ago; and numbers have essentially come down for each of the past three quarters. You’re giving today numbers and goals that are two and four years out. And I guess what I’m asking is, why should people have conviction in those numbers?

And I am asking because if you look at the numbers, I think it implies to well over $3 in earnings power in 2022, which is really compelling. But how do you get people comfortable on the road map to achieve that? And then, I’ve got a shorter follow-up.

Don M. Casey – DENTSPLY SIRONA, Inc.

Sure. And, Jonathan, look it’s a question we fully expect. And, look, I would tell you nobody is more disappointed in the movement that we’ve been doing with guidance than Nick and myself. So that’s the first thing.

The second is why should people believe us? Well, if you listen to how we’re kind of laying out our KPIs. We are laying out three, kind of, things for you to measure things along. And the first is what we kind of call activities. And we fully expect to provide transparency on these major initiatives. Where are they? Did we deliver on our R&D portfolio? Did we deliver on the sales force effectiveness program and where are we?

The second part of that is, we’re really talking about non-financial metrics as we kind of go forward. And the last issue is, we’re saying that we’re going to report out on seven key financials, which are margin and all that stuff along the way.

In terms of what we’re trying to get done? Look, on the underlying part of the business, the first thing starts with growth. And right now, if you basically peel back our third and fourth quarter, one is an issue that we didn’t comprehend when we put together our budget in 2018, which was a major change in the dealer destocking of $110 million. That was pretty significant.

The second was, as we began to stand up a centralized facility in Europe, we had startup issues at the end of the quarter. We feel that that’s been resolved and that site is moving along nicely. So as you look at what has impacted our 2018, they’ve been very significant headwinds.

If you look at going forward, we’re trying to outline some very transparent steps around organizational structure, growth initiatives that we should be able to report on and give you mileposts along the way. But you’re only as good as your – as we deliver. So without trying to quote Bill Parcells, we understand that we have to deliver on these commitments.

Jonathan David Block – Stifel, Nicolaus & Co., Inc.

Okay. That was very helpful. I appreciate that. And maybe just a shorter follow-up is, something that’s certainly still the case, but might be temporary loss of investors as you’ve got a really under-levered balance sheet and good cash flow. But how do we think about deploying capital during this time of restructuring? Is management going to be overly focused on what you guys need to do over the next two to three years? Or can we still think about you guys executing on some tuck-ins along the way? Thanks for your time.

Don M. Casey – DENTSPLY SIRONA, Inc.

Yeah. Thanks, Jon. And I would say it’s the latter. Look, we believe that our go-to-market capabilities are really strong. And, look, we have a lot of areas that we think tuck-ins can really help us with the technology that we haven’t developed internally or help us with a solution.

So, look, I’m not going to give an exact number of where we expect to deploy cash in terms of make it available for tuck-ins versus other uses. But we are going to be actively in the market, where we can see technologies that would help us accelerate growth. Next question?


Thank you. And our next question comes from the line of Erin Wright with Credit Suisse. Your line is now open.

Erin Wilson Wright – Credit Suisse Securities (USA) LLC

Great. Thanks for taking my questions. So how is innovation a part of these new efforts to reinvigorate growth? And you mentioned the stepped-up innovation this year and an IDS year, but can you elaborate a little bit more on the pipeline? Do you have some more meaningful launches coming up even at Greater New York? Thanks.

Don M. Casey – DENTSPLY SIRONA, Inc.

We’re not going to do anything at Greater New York, Erin. Really the next big tranche of things will be IDS. And again, it’s new to me, to be honest, because coming out of medical devices you could usually talk about the next couple years. But, obviously, in our Technology & Equipment business we have a consumer that pays attention to what we say. And if we announce specific innovations, we have a potential to change our buying trajectory before them. So we’re not going to do that.

But most people tend to focus on our Technology & Equipment business. We feel pretty good that we’ve got some good innovations coming along in OraMetrix and our orthodontia business. We like what’s going on in some of our implant businesses. In addition to straight up innovation that’s coming out of our own shop, when you look at buying technologies that we don’t believe we fully deployed, like, things like MIS, we get excited.

We think that there is some real work that we can be doing in our resto business and our Preventive franchises as well. And then, the last issue near and dear to our hearts is endo. And if we look at our track record of innovation over the last decade, it’s been pretty important for us to innovate in endo. And right now, I would tell you that’s a very high priority for us. So, Erin, we’re looking forward to again a very, very fulsome IDS.

Erin Wilson Wright – Credit Suisse Securities (USA) LLC

And how would you characterize U.S. Consumables growth parsing out specialty, as well as general Consumables? And I guess I’m focused here on the U.S., and (00:51:40) that you have visibility on the end market demand trends? Thanks.

Don M. Casey – DENTSPLY SIRONA, Inc.

Yeah. And while we don’t give specific guidance on Consumables in the U.S., I mean, we feel the underlying U.S. business has been pretty good. Again, without quoting direct numbers, we feel our Consumables business is very competitive in the U.S. business. And again, we think that that marketplace has been growing in the mid-single digits, mid to low-single digit numbers. And again, we feel pretty good about how we’re performing in that market, in that area.


Thank you. And our next question comes from the line of Nathan Rich with Goldman Sachs. Your line is now open.

Nathan Rich – Goldman Sachs & Co. LLC

Thanks for the questions. Don, could you maybe help us think about the major buckets of the $200 million to $225 million of cost savings between head count and some of the other areas. Just think it would help getting that additional visibility as you think about the achievability of those targets?

Don M. Casey – DENTSPLY SIRONA, Inc.

Sure. Actually, I’ll turn it over to Nick.

Nick William Alexos – DENTSPLY SIRONA, Inc.

Yeah. I mean, I would say that the major buckets are obviously some level of head count reductions. Also, there is some rationalization of facilities and program management within that. I would say that they are half between kind of gross margin level expenses and then operating expenses across it. But as Don said earlier, we are looking to rationalize the organizational structure and eliminate some redundancies within the business by having fewer business units within the two segments, and that will increase efficiencies.

Don M. Casey – DENTSPLY SIRONA, Inc.

Yeah. And just to amplify what Nick said, Nathan, is, look, we believe that there is a significant opportunity in terms of the RCO SBU consolidation, some other functional consolidation. So put that in the head count bucket, the second area that we’re excited about is procurement. Again, it’s kind of hard to develop the really effective procurement organization when you’ve got SBUs in countries as the primary management point. So we think there’s significant money there.

And then, in some of the portfolio shaping opportunities, we believe that there are businesses that are non-core and not particularly productive. So I would bucket it head count operational savings. And then, obviously, we’re going to get a fair amount of margin lift in the accelerating growth portfolio or so.

Nathan Rich – Goldman Sachs & Co. LLC

Okay, great. And then, just one on the disruption in Europe on the Consumables side. It looks like it was slightly more than 400 basis points of a headwind this quarter. Can you maybe just talk about the remediation efforts you put in place? And how quickly you think you can kind of get back to that more normalized growth?

Don M. Casey – DENTSPLY SIRONA, Inc.

Yeah. And just for perspective, Venlo is something that we think is important for our ability to serve our customers long-term and it’s a centralized activity. If you think about that particular facility, it services some of our direct – kind of smaller direct-to-doctor businesses; and that went fine as we were transferring a lot of the work we do with our dealers, which tend to be larger orders. Moving in, it was a new technology and new process in place for Venlo.

At this point, we feel pretty good that the Venlo situation is under control. We feel very good that the facility at this point is producing at a level that it should be able to meet any demand that we see currently forecasted in the fourth quarter. And then, Nick and I are actually going to be in Venlo next Tuesday to see for ourselves. But at this point, we feel pretty good that the situation has been remediated.

The other thing that it’s going to be a learning opportunity for the organization, where, okay, how do we – what are the five key things we learn when we’re doing these things. And I think it was an important trial-by-fire that I think will make us better as we really begin to look at doing some other supply chain consolidation.

Nathan Rich – Goldman Sachs & Co. LLC

Makes sense. Thank you.


Thank you. And our next question comes from the line of Steven Valiquette with Barclays. Your line is now open.

Steven Valiquette – Barclays Capital, Inc.

Thanks. Good afternoon, Don and Nick. Thanks for taking the question. So couple of things to think about here. I guess I’m framing this a little bit differently. The legacy Dentsply company went through a very similar deep dive analysis about five years ago with the strategy to do some major restructuring cost savings that would also lead to a lot of margin expansion. And the company actually did achieve some of that and actually most of that margin expansion from, call it, 2013 to 2015 or 2016 or so.

But I guess the question really is that, given that Dentsply restructuring wasn’t that long ago, first, is more of this restructuring related to legacy Sirona assets versus legacy Dentsply assets, although it doesn’t really seem like it based on the slides? But then, number two, I guess is there still a lot of low-hanging fruit on the legacy Dentsply side of the business given that again this broad restructuring took place not that long ago? And do you run the risk of too much cutting just leading to, let’s call it, unintended consequences on top line growth? Thanks.

Don M. Casey – DENTSPLY SIRONA, Inc.

Yeah. Thanks, Steve, and great question. It’s interesting, one of the things coming in new, I get to read about all the projects, and the legacy Dentsply organization went through a relatively significant restructuring designed to do a much better job of integrating what at that time was six SBUs.

I would say it was reasonably successful, but was about halfway through about the time of the merger. And as such, some of the rationalization work that was targeted and planned on the legacy Dentsply side wasn’t gotten to. And then, all of a sudden, you basically had a company the size of the legacy Dentsply organization on top of the organization that hadn’t necessarily completed the transition it needed to do. So I tend to think that there – if the legacy Dentsply company had another 18, 24 months, I think that they would’ve delivered continued benefit there and it’s benefit we’re looking to get after now. That’s the first point.

The second thing is, we’ve really stopped thinking about the company as kind of legacy Dentsply and legacy Sirona. And it’s really interesting, one of the things that we need to start thinking about is you look at some of our specialty businesses, our Technology & Equipment businesses, there’s cost leverages because we’re calling on the same dentist with 10 different platforms.

And so, in my mind, it’s less about how are we going to carve out savings on one side or the other. But let’s take a customer approach and then let’s look at what’s the best way for us to understand the best relationship we have with that dentist and make sure that we’re approaching it that way.

So in my mind, one of the opportunities of putting the companies together was to create a much broader portfolio that should be of a high degree of relevance to that dentist and deliver it that way and we just haven’t done that. And then, as you think about the cost savings and the reason we say 20% by 2020 and then we say, look, we want to get back to premerger levels and beyond is that we think that there’s a significant amount of supply chain work that we can do. We just don’t want to do that right out of the gate as we’re going through kind of a commercial evolution.

So that’s kind of how we think about it. A long-winded way of saying Dentsply did not get all the low-hanging fruit and that the combination of these two assets, put together, should create other opportunities for us to get after.

Steven Valiquette – Barclays Capital, Inc.

Okay. That’s definitely some helpful color. Thanks.


Thank you. And our next question comes from the line of Steve Beuchaw with Morgan Stanley. Your line is now open.

Steve Beuchaw – Morgan Stanley & Co. LLC

Well, hi, and thanks for the time here. I want to try to help everybody get maybe a little bit more comfortable with the top line trajectory, maybe come at it a couple different ways. But, first, when I think about the challenges that the company has faced historically, they’re actually pretty different in different regions. We tend to focus a lot on what’s going on in the U.S. But I wonder if you could talk about the balance of improvement that you’re contemplating in the top line trajectory and the extent to which they’re different in the different regions, and the extent to which you think in the different regions, given their different market dynamics, the critical success factors might be more in your control?

Don M. Casey – DENTSPLY SIRONA, Inc.

Yeah, Steve. Let’s take things one at a time. I mean, first, we’ve been relatively consistent over the last nine months talking about the fact that we think developing market should be a good place for us, and we’re going to continue investing in them. I mean, if you look at the growth we’ve been seeing in places like Brazil and China and the model we approach there, so we think that that’s a model that we can continue investing in and replicate.

In terms of the different trajectories in the different parts of the world, look, there are lots of different trajectories. But I would tell you, in my mind, there’s been two things that are consistent across all the regions and the first is, we’ve got to deliver major innovation. And whether it’s major innovation in our Technology & Equipment business that’s going to be relevant in Europe, that is going to be relevant in the U.S.; or whether it’s coming up with new innovation and what we’ve considered like a specialty business like implants or in endo or something like orthodontia. We don’t see a huge difference in the impact that those new products could have across the board.

So in our mind, there is not a regional strategy on, okay, do we need to develop a tailored North American strategy versus a Central Europe versus like emerging market. In our mind is how do we really look at innovation that’s truly relevant across the market around the world. So I realize it might not sync completely up with your thesis there. But in my mind, if we can really get the new products and the pipeline flowing, point one; point two is make sure that we’re consistently excellent in our go-to-market strategy, I think we’re going to be in good shape.

Steve Beuchaw – Morgan Stanley & Co. LLC

And then, just building on the commentary about new products, how much do you think you can improve price and mix trends over the course of the forecast horizon with new product flow? Thanks.

Don M. Casey – DENTSPLY SIRONA, Inc.

Whether we improve it or arrest the decline, it’s – I’ll take those as two sides of the same coin. Look, the innovations that we’re pushing out, we think have the potential to do very, very well in the marketplace. And we’re very conscious of whether they’re going to be margin accretive or dilutive. And one of the reasons that I cited the fact that we need to change our approach to R&D and begin to focus on bigger bets is, look, we need to look across our portfolio and say what’s going to have the best benefit to our top and bottom line at Dentsply Sirona as to what might be the best for our Preventive SBU.

And in doing that, obviously, if there are higher-margin products that are more relevant in areas of the world that we have higher-margin profiles, that’s where we’re going to be able to pick up resources and reallocate them to deliver there. So again, I get very excited about some of the things in our pipeline and the fact that we do think that they are going to really help us on both the top line and margin basis.

Steve Beuchaw – Morgan Stanley & Co. LLC

Okay. Thanks, Don.


Thank you. And our next question comes from the line of John Kreger with William Blair. Your line is now open.

John C. Kreger – William Blair & Co. LLC

Thanks very much. Don, can you maybe go back to the strategic review you guys did of the market overall, dental market? What did you conclude for longer-term dental market growth? And what did that study conclude in terms of how the market’s evolving, just to give us a sense of what Dentsply needs to do to sort of be able to outpace the market long term? Thanks.

Don M. Casey – DENTSPLY SIRONA, Inc.

Yeah. Thanks for the question, John. I would tell you, we break it up in kind of Consumables and Technology & Equipment. We think that there are positives in the Consumables business that are offsetting some of what you may think about consolidation, whether it’s in the DSO’s or some of the pricing compression. So we believe that the Consumables business is kind of a 2% to 4% relatively consistent. And again, there is positives in new products and other things that will offset what we consider, like consolidating related pressure.

On the T&E business, again, we really look at this year, and the largest market, there was a significant anomaly at the wholesale level, where we saw tremendous amount of inventory destocking. Again, I hope you hear that we were pretty happy with how the third quarter T&E business was performing. And we think that’s indicative of we’ve got a good portfolio of products in T&E, whether that’s CAD/CAM or whether that’s being more competitive in DI or instruments or other areas.

We believe that business should be a 4% to 6% or potentially higher grower depending on where we are in new product. So on an aggregate basis, we really look at the combined business sitting around 3% to 5%. And we said, both in our transcript and I believe in the press release, that we believe we ought to be able to track that market, if not outpace it. It’s clearly our objective to outpace it.

John C. Kreger – William Blair & Co. LLC

Okay. Thanks. And maybe a follow-up, Nick, for you. What is your thinking about destocking at this point? Are we done? As you think to 2019 and beyond, is the inventory in the channel appropriate? Or do we need to be thinking about more of that in 2019?

Nick William Alexos – DENTSPLY SIRONA, Inc.

Yeah. The short answer, John, is that our expectation is that this will be a good year to get the level of inventory in the channel to where demand at a retail level corresponds with demand at the wholesale level. So it’s obviously a significant reduction this year. $110 million to $115 million, and that’s been trending pretty well. So we feel pretty good about getting this behind us.

John C. Kreger – William Blair & Co. LLC

Okay. Thank you.

Don M. Casey – DENTSPLY SIRONA, Inc.

Thanks, John.


Thank you. And our next question comes from the line of Yi Chen with H.C. Wainwright. Your line is now open.

Yi Chen – H.C. Wainwright & Co.

Hi, sorry for that. Thank you for taking the question. So my question essentially relates to the revenue growth. What do you see in revenue growth essentially reversing?

Nick William Alexos – DENTSPLY SIRONA, Inc.

Well, Yi, the answer to that – I mean obviously, as we said, the dealer destocking will help us certainly with revenue growth going into next year on the Technologies & Equipment side. And on the Consumables side, we believe the Venlo issue as certainly getting behind us and we’ll be able to see a positive growth on the Consumables side as well. So, clearly, the expectation is positive revenue growth into next year.

Yi Chen – H.C. Wainwright & Co.

Perfect. Thank you so much for that.

Nick William Alexos – DENTSPLY SIRONA, Inc.



Thank you. And I’m not showing any further questions at this time. I would now like to turn the call back over to Don for any closing remarks.

Don M. Casey – DENTSPLY SIRONA, Inc.

Okay. Well, first, we appreciate that we went a little bit long today. But, obviously, we had a lot to talk about. So thank you for your time, and we look forward to reporting back as time moves on. And again, we mentioned in our transcript, at this point, we are not planning on doing a Investor Day at this point. So, again, hope everyone has a good evening and we appreciate the time you spent with us. Thank you very much.

Nick William Alexos – DENTSPLY SIRONA, Inc.

Thank you all. Bye.


Thank you. Ladies and gentlemen, thank you for participating in today’s conference. This concludes today’s program, and you may all disconnect. Everyone, have a wonderful day.

Vietnam wants 50 percent of social media users on domestic platforms by 2020

HANOI (Reuters) – Vietnam wants 50 percent of its social media customers to use domestic social networks by 2020 and plans to prevent “toxic information” on Facebook and Google, the information ministry said in a statement on Thursday.

The ministry has been drafting a code of conduct for the internet to “build a healthy and safe network environment”.

“We are also conducting research into measures which would prevent negative and toxic information on two foreign platforms, Facebook and Google,” the ministry said in its statement.

Despite sweeping economic reforms and growing openness to social change, Vietnam’s ruling Communist Party tolerates little dissent and exercises strict controls over media.

Last week, the government released a long-waited draft decree on guidelines to implement a cybersecurity law that global technology companies and rights groups have said could undermine development and stifle innovation.

Both Facebook and Google, both of which are widely used in Vietnam and serve as the main platforms for dissidents, do not have local offices or local data storage facilities and have objected to the localization requirements of the law.

In September, Minister of Information Nguyen Manh Hung said Vietnam should promote home-grown social media networks to compete with the likes of Facebook and capture more of the market.

Thursday’s statement said three Vietnamese firms would be assigned the task of increasing the market share to 50 percent: a messaging app called Zalo, owned by VNG Corp, a video-sharing platform called Mocha, and an online publisher, VCCorp, which runs several news and e-commerce websites.

Zalo is Vietnam’s premier chatting platform, with more than 100 million users, but Mocha and VCCorp struggle to match the massive popularity of Google’s YouTube, and Facebook.

Reporting by James Pearson and Khanh Vu; Editing by Robert Birsel

Midterm Elections 2018: What the Election Results Mean for Big Tech

It may not have been the tsunami some expected, but the Democrat’s long-promised blue wave was enough to carry the party to a majority in the House of Representatives on Tuesday. The Senate, meanwhile, remained firmly in Republican hands.

With control of the House, Democrats will be able to fulfill their promise to be a check on the Trump administration these next two years. And yet, the power split in the two chambers of Congress could make it harder than it already was to pass new legislation—even legislation with bipartisan backing. For the tech industry, that’s both good news and bad news.

The good news: As House Democrats spar with the Republicans in the Senate, the last thing either party will want to do is hand the other side a win. That means that until 2020, it will be much more difficult for Big Tech’s critics on Capitol Hill to push through much-threatened regulations on the industry’s ads or its monopolistic business practices.

The bad news: There are some regulations that the industry desperately wants to pass, namely, a federal privacy bill that would preempt a much tougher bill in California, set to go into effect in 2020. Tech giants and industry groups like the Internet Association have been lobbying hard for a federal bill, and senators on both sides of the aisle have expressed support for some federal legislation. It’s unclear at this stage whether a Democratic House would let President Trump be the one to sign off on such a historic law.

The tech industry also faces a notably less cozy environment in the Senate after Tuesday night. Marsha Blackburn, for one, won her race in Tennessee. As a House representative, Blackburn battled tech giants at nearly every turn. Backed by the telecom industry, she opposed net neutrality protections and voted to overturn an Obama-era rule that would have required broadband providers to get people’s permission before selling their browsing data. On the campaign trail, she took every opportunity to criticize the tech industry for alleged liberal bias. That’s been a rallying cry in the House that Blackburn may well amplify in the Senate.

If she does, she’ll have a friend in Senator Ted Cruz. The Texas senator defended his seat against Democratic insurgent Beto O’Rourke, whose campaign was heavily financed by the tech industry. Like Blackburn, Cruz has seized on the opportunity to accuse tech giants of partisan censorship and recently skewered Google over its experiments in building a censored search engine for China.

Former Missouri attorney general Josh Hawley, meanwhile, will replace Democrat Claire McCaskill in the Senate. Hawley, a Republican, took a tough stance on tech as attorney general, opening separate investigations into Google, Facebook, Uber, and Equifax over anti-trust and data privacy issues.

Tuesday’s race also alters the dynamics of the congressional committees tasked with holding these companies accountable. Senator Bill Nelson of Florida lost his re-election to governor Rick Scott on Tuesday. That means Nelson’s role as ranking member of the Senate Commerce Committee will likely fall to someone like Minnesota’s Amy Klobuchar or Connecticut’s Richard Blumenthal, both of whom have voted to crack down on the tech industry.

But the biggest shift will undoubtedly come in the House, where Democrats will take over control of the House Intelligence Committee, which was tasked with investigating foreign interference in American elections. Current ranking member Adam Schiff would likely take on the role of chair. He’s vowed to pick the Russia investigation back up. Given the continued covert actions taken by Russia on social media platforms, such a probe could land Facebook, Google, and Twitter back in the hot seat.

These new dynamics may not last long. In two years, Democrats will have to defend the House seats they won all over again. Thanks to a congressional map that’s been gerrymandered to favor Republicans in states across the country, that won’t be easy. On Tuesday, Democrats carved out a win by relying on states like Pennsylvania, where a badly gerrymandered map was recently replaced by a court-ordered one. And yet, the midterm elections also yielded wins for Democrats that could change the playing field in 2020 and beyond. A ballot initiative in Florida restored voting rights to more than 1 million former felons, who will now be eligible to vote in 2020. And anti-gerrymandering proposals passed in Colorado, Michigan, and Missouri, which would take redistricting power away from a single party and scuttle the maps all over again after 2020.

By the early hours of Wednesday morning, both Democrats and Republicans were claiming a victory. Time will tell if tech’s most powerful companies can do the same.

More Election Coverage from WIRED

3 Simple Strategies That Help Women Leaders Succeed

Are you a woman in a leadership position? If you’re like a lot of women, that may be a new role for you. Many women have emerged as first-time candidates for public office this election season. Now the midterm elections have brought New York Representative Alexandria Ocasio-Cortez and many other women to elected office for the first time.

What should a woman in a newly powerful position do when she first gets there? “Exactly the same as a man would do,” seems like an easy answer, but it’s not good enough. “Although good leadership is good leadership, women have unique challenges because they’re women and men have different unique challenges,” says Wendy Capland, an executive coach who focuses on women in leadership, and bestselling author of Your Next Bold Move. Capland is my coach, and for the past couple of years, she’s been coaching me and I’ve been writing about it

Here’s her advice for women taking on new leadership roles:

1. Find a sponsor–of either gender.

The very first job for nearly anyone in a new leadership role is to get to know everyone you’ll be working with–your peers and counterparts in other areas as well as the people reporting to you and the people above you in the hierarchy. 

At the same time as you’re developing your internal and external network, you should be looking for a sponsor, Capland says. “A sponsor is different from a mentor,” she explains, adding that smart leadske sure to have both. “A mentor or coach can be either inside or outside your organization, but a sponsor will be somebody inside. They’re someone you can tell your career aspirations to, and your salary aspirations, and their role is to help you get there. Of course, what you desire has to be something they believe in and support.”

Your sponsor, she says, is the person who will speak up on your behalf when you’re not in the room. He or she will put your name forward for opportunities that you have no way of knowing about. Your sponsor will share contacts with you to help you succeed.

Research over the years has shown that women are significantly less likely than men to have sponsors in their organizations, although they may have multiple mentors. And, Capland says, when women do seek out sponsors, they are reputed to look for women to sponsor them, whereas men are equally likely to seek sponsors from either gender.

Women seeking out female sponsors has a nice sisters-in-it-together feel to it, but Capland says that women who only seek other women as sponsors risk holding themselves back. “It can be a career derailer for a woman leader because sometimes men hold most of the leadership positions and you’re limiting your support,” she says. “You may not have access to the executive suite if there are mostly men there.”

2. Make sure your voice heard.

Sadly, it’s an often observed phenomenon that in meetings and other settings–especially in groups that are mostly men–people seem to have trouble hearing female voices. “What we typically hear is often when a woman makes a suggestion at a mostly male table, it doesn’t get picked up right away and soon thereafter, a man says the same thing and everyone says, ‘What a great idea!'” Capland reports. When that happens the woman who made the suggestion originally faces an unpleasant choice: Either say nothing and let someone else get the credit for her idea, or speak up at the risk of seeming churlish, self-serving, and not a team player. 

In that situation, it’s much better to have someone else remind the group who said what first. So much so that, in the Obama White House, a group of government women informally agreed to repeat and emphasize each others’ ideas in meetings, a practice called “amplification.”

If you’re a woman in a leadership or executive role, Capland suggests looking for some amplification for yourself, not necessarily from other women, but from your sponsor or someone else who seems interested in giving you support. “An amplifier is someone you talk to ahead of time and whom you ask to amplify your voice if it’s nor heard at the table,” she says. “So what would happen is the person you’ve selected would say, ‘You know, Sally just said that a few minutes ago. I want to make sure we track where we first heard this.'”

Your amplifier should be someone you already have a good relationship with, she adds. “It should be someone who knows you’re trying to have more executive presence and make more of an impact, and has shown an interest in helping you do that. You don’t walk into the room right before the meeting, find some guy and say, ‘I need some support.'”

Even if you have no amplifier, it’s important to make sure you’re heard on the issues you feel strongly about, Capland says. Especially if you’re new to the executive world, she recommends putting some time and effort into developing your executive presence so that you are more likely to command attention when you speak. 

“It can be overwhelming for some women to be the only woman or one of a small number at a powerful table with other powerful people, mostly men,” she says. She once heard a woman describe being the only woman at the executive table during discussions of a possible business deal. “She said, ‘I feel pretty strongly we should not do this deal,’ and all the men said, ‘I think you’re wrong,'” Capland recalls. “She said, ‘I want to be heard loud and clear that this is a mistake and here’s my thinking as to why.'”

As she explained her reasoning, it became clear that a big part of the issue was timing–she would be much more in favor of the deal if they waited six months to do it. The company did wind up waiting six months as she recommended, and when it happened, the deal was a huge success. “She believes pretty strongly that if they had done the deal when first discussed, it would have caused a big drop in revenue,” Capland says.

3. Surround yourself with people who will help you be more confident.

Experts such as Capland have long flagged lack of confidence ast’ one of the ways women unknowingly can deal themselves out of career opportunities–for example by considering themselves unqualified for a role that they could in fact take on.  

“I have a client who says she’s going to get an advanced degree because she feels like she doesn’t stack up with the men in her department,” Capland says. “She doesn’t think she’s done enough, and it’s not true.” 

It’s easy to see why women tend to think this way–we live in a society that tells us from childhood on that we have to work harder than our male counterparts to achieve the same results. The likelihood is high that you’ve let this kind of thing affect your thinking, whether you want it to or not. You can fight back by taking the time and effort to build your own confidence. One of the best things you can do is make sure to spend time talking with people who believe in you and will frequently tell you how awesome you are. “Have regular conversations with your mentor and sponsor and coach,” Capland says. “Surround yourself with people who will remind you about your own capabilities.”

Earnings Review: Alibaba Falls Short Of High Expectations

It wasn’t great. Alibaba’s (BABA) calendar third quarter earnings release saw revenues miss consensus while non-GAAP earnings had a strong beat. In addition, the fiscal year revenue forecast was reduced. It still remains to be seen whether or not a near-term slowdown in growth due to regional expansion will reap dividends in the future.

Below are some key points from the earnings release and subsequent analyst call.

Headline results

Revenues of $12.4bn missed Wall Street’s consensus of $12.54bn in what was a rare miss for Alibaba. And while the trend of revenues looks to be exponential, it’s worth remembering that there have been several large subsidiaries added to revenues from income from equity investees, such as Eleme, Koubei and Cainiao.

Alibaba revenues Q3

Revenue breakdown. Units: RMB billions. Source: Alibaba investor relations

To compound this disappointment further, it’s the first time in three years that the firm has missed analysts’ expectations on revenues.

Alibaba earnings revenue surprise

Earnings and revenue surprise. Source: Alibaba investors relations and Seeking Alpha

As for earnings, $1.40 this quarter was well ahead of the $1.07 consensus, but it should be noted that earnings growth is slowing. The ramp up in growth seen during 2016 and 2017 has been followed by a slowing during 2018. This has been caused by slowing revenue growth and operating expenses that have been larger than before.

Alibaba earnings Q3

Rolling sum of the most recent four quarters of non-GAAP diluted EPS, and the quarterly growth rate. Units: RMB. Source: Alibaba investor relations

Expanding China commerce into less-developed areas

A key point from the prepared statements of CEO Daniel Zhang is that the Taobao business is expanding further into rural China; something that has been going on for a while but likely accelerated by the rapid growth of Pinduoduo (PDD). In the most recent quarter, 75% of new Taobao customers came from these regions.

Alibaba revenues China ecommerce

China retail commerce revenues. Units: RMB billions. Source: Alibaba investor relations

On the one hand, it’s an important move for Alibaba. I don’t believe it can successfully expand its ecommerce platforms overseas, such is the dominance of Amazon (AMZN) and because Chinese firms have a long history of being strategically trapped within their borders. A quick look at Baidu’s (BIDU) expansion into Japan, Egypt or Brazil tells a common story. Therefore, by targeting new customers in China, it is a new revenue source.

However, there’s an issue with this strategy because, as we’ve seen with Pinduoduo, these consumers have low annual spending on ecommerce platforms. Pinduoduo’s annual spend per active customer is around 10% of’s (JD). I believe that this has been a cause of the slowing revenue – particularly from China commerce – and the growing expenses, which have led to slower earnings growth. While not disclosed any more, I believe the effect is best seen in the firm’s monetization rate, i.e. the revenue generated from the average user’s transactions, which would be seeing slowing growth.

Expectations for Singles’ Day

I want to highlight an interesting relationship between Alibaba’s calendar third quarter China commerce revenues and Singles’ Day sales. Logically, it would make sense that lower-than-expected China commerce revenues in the third quarter would be due to consumers delaying purchases ahead of the big Singles’ Day sales event on November 11. Why buy in September when you can get a 30/40/50+% discount in November? In other words, there should be a negative correlation between China commerce revenues and Singles’ Day sales.

However, that doesn’t seem to be the case. In fact, the correlation is positive. The growth of China commerce revenues in Q3 is similar to the growth of Singles’ Day transactions. This is a disappointing sign for those – including myself – expecting a blowout Singles’ Day because a slowdown in annual Q3 revenue growth usually leads to a slowdown in Singles’ Day growth.

Alibaba Singles Day Revenues Q3

Calendar third quarter China commerce revenues and their growth, as well as the year-on-year growth in Singles’ Day transactions. Units: RMB millions. Source: Alibaba investor relations.

November 11 will be the day to see whether this trend holds.


Readers can find my other calendar Q3 earnings previews and reviews of Chinese firms, asset managers and investment banks here.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

EU states divided over digital tax, fear U.S. retaliation

BRUSSELS (Reuters) – EU governments are divided over a plan to tax big internet firms like Google and Facebook on their turnover, fearing retaliation from the United States, and could delay its application until a global deal is reached, top officials said on Tuesday.

Facebook signs are seen during the China International Import Expo (CIIE), at the National Exhibition and Convention Center in Shanghai, China November 5, 2018. REUTERS/Aly Song

Under a proposal from the EU’s executive Commission in March, EU states would charge a 3 percent levy on the digital revenues of large firms that are accused of averting tax by routing their profits to the bloc’s low-tax states.

But the plan, which requires the support of all 28 EU states, is opposed by a large number of them.

The Commission’s effort to come up with a system to ensure internet companies pay adequate tax has been running in parallel with a study of the subject by the Organisation for Economic Cooperation and Development seeking a multi-lateral approach.

“It is very difficult to see an agreement on the digital tax because so many technical issues are not solved yet,” Danish Finance Minister, Kristian Jensen, told reporters on the sidelines of a meeting of EU finance ministers.

He added that the proposed EU tax was devised in a way that would hit mostly U.S. companies and therefore it would attract U.S. retaliation. “Of course there will be a reaction from the U.S.” he said, calling the tax “not a good idea for Europe”.

His remarks echoed comments made by diplomats from several EU states, including Germany, Sweden, Ireland and Malta, in a meeting last week, according to EU officials.

France, which has long been the main supporter of the tax, proposed in September a sunset clause, as a step to convince reluctant states. It suggested on Tuesday that it could support allowing more time to implement a new tax system, so that the OECD can finish its analysis.

“There must be the adoption of a directive on digital taxation by the end of this year,” Finance Minister Bruno Le Maire said, using the term for EU laws.

“There will be the question of implementation of the directive. We are open on that question, because we know there is work done by the OECD,” he said.

EU states are discussing two options put on the table by the European Commission. The most ambitious plan would entail a tax on the turnover of digital firms imposed unilaterally by the EU before a deal is reached at global level.

This approach is opposed by several countries, including small ones like Ireland where many tech firms book profits on sales in bigger EU countries.

The second option, which has so far been sidelined, would revise the tax rules so that levies could be imposed on companies based on their “digital presence” in a state. This option would take longer to be applied and would be in line with work at OECD level.

“We hope we can have a unanimous decision that will go down the OECD road,” Jensen said.

Reporting by Francesco Guarascio; Editing by Peter Graff