Q3 2019 Earnings Call
Good afternoon, ladies and gentlemen, and welcome to Mussina third quarter 2019 earnings Conference call. The company's press release, it's available at Www Dot lets you know dot com.
At this time, all life would be placing easy prevents any background noise.
After the speaker's remarks, there will be a question and actually session I can be seen sure do you like cameraman, let's see most vice presidents and if it's almost like an investor relations.
Thank you Hello, everyone.
Joining me today are chairman and CEO , Jokey, Arnie and executive Vice President of financing Chief Financial Officer, Mike a young.
This call will contain forward looking statements, which reflect mass most current judgment, including certain of our expectations regarding fiscal 2019 financial performance.
However, they are subject to risks and uncertainties that could cause actual results to differ materially risk factors that could cause our actual results to differ materially from our projections and forecasts are discussed in detail in our periodic filings with the FCC you will find these in the Investor Relations section of our website.
Also this call will include a discussion of certain financial measures that are not calculated in accordance with generally accepted accounting principles workout. We generally referred to these as non-GAAP financial measures. In addition to GAAP results. These non-GAAP financial measures are intended to provide additional information to enable investors.
To assess the company's operating results in the same way management assesses such results management uses non-GAAP measures to budget evaluate and measure the company's performance and seize these results as an indicator of the company's ongoing business performance. The company believes that these non-GAAP financial measures increased transparency and better reflect the.
<unk> financial performance of the business reconciliation of these mattress to the most directly comparable GAAP financial measures are included within the earnings release and supplementary financial information on our website investors should consider all of our statements today together with our reports filed with the FCC, including our most recent Form 10-K and 10-Q and.
Her to make informed investment decisions. In addition to the earnings release issued today, we have posted a quarterly earnings presentation within the Investor Relations section of our website to supplement the content, we will be covering this afternoon now I'll pass the call to Joe Kiani Stickier look.
Good afternoon, and thank you for joining us for Massimo third quarter 2019 earnings call.
Once again, we're happy to report third quarter results that exceeded expectations for both revenue and earnings.
Our third quarter performance demonstrates the value of our innovative products for improving patient care and reducing the cost of care.
As we won new customers and expanded our business with existing customers.
Our product revenue increased approximately 13% to reached $229 million.
Which was driven by strong performance across our major geographies.
And product platforms.
This growth reflects the clinical advantages over breakthrough technologies.
Due to the strong performance, we realized in the third quarter, we're once again, raising our revenue and earnings guidance for 2019.
I'll discuss more developments later in the call today, no I'll ask Mike to review, our third quarter results in more detail and provide you with an update on our 2019 financial guidance.
Thank you Joe and good afternoon, everyone before we get started let me remind you that the financial measures I would be covering today will be primarily on a non-GAAP basis unless noted otherwise.
Please refer to our website for todays earnings release supplemental financial information and the quarterly earnings presentation as well as a form 8-K, we filed with the FCC for fourth for further information regarding our non-GAAP measures and reconciliations.
As Joe mentioned, we're happy to once again, not just meat, but exceed expectations. Our results for the third quarter reflected another strong quarter of product revenue growth.
Operating margin expansion and earnings performance that exceeded expectations.
During the quarter, we shipped 60700 technology boards and monitors consistent with our guidance of roughly 60000 drivers per quarter. This year.
For the third quarter of 2019, our product revenues were 228.9 million, reflecting growth of 13.3% or 13.6% growth on a constant currency basis.
Please note that our product revenues for the quarter included approximately 2.7 million of monitoring equipment revenue recognized under HFC, 842, which contributed roughly 1% to our growth rate this quarter.
Our revenue performance this quarter was driven by strong performance across our major geographies and product platforms, which are performing better than the growth rates that we had originally laid out in our long term plan.
Moving onto the rest of the piano.
For the third quarter, our non-GAAP product gross margin increased 270 basis points to 68.3% compared to 65.6% and the prior year period.
This improvement was primarily driven by favorable customer and product mix increased manufacturing efficiencies and the additional cost reduction activities, we've implemented to improve margins.
non-GAAP selling general and administrative expenses decreased 30 basis points to 34.7% of product revenue compared to 35.0% in the prior year period.
non-GAAP research and development expenses increased 40 basis points to 10.6% of product revenue compared to 10.2% in the prior year period.
The higher R&D spend was primarily due to increased staffing levels and project related cost, reflecting our commitment to investing in innovative technologies and improve patient outcomes, while reducing the cost of care.
For the third quarter, our non-GAAP operating margin increased 260 basis points to 23% compared to 20.4% in the prior year period.
Non operating income on a non-GAAP basis was approximately $3.6 million for the quarter compared to 2.3 million in the prior year period.
The increase is primarily driven by an increase in net interest net interest income.
Turning to taxes, our non-GAAP tax expense in the third quarter was 12.6 million, resulting in a non-GAAP effective tax rate of 22.4%.
Compared to a non-GAAP effective tax rate of 22.5% in the prior year period.
Our weighted average shares outstanding for the quarter worse 57.3 million compared to 56.2 million in the prior year period.
The 2% increase in our weighted average share count over the prior year is primarily due to the dilutive impact that a higher stock price has under the treasury stock method.
For the third quarter, our non-GAAP net income was 43.7 million or 76 cents per diluted share.
In comparison third quarter 2018, non-GAAP net income was 33.7 million or 60 cents per diluted share. This reflects non-GAAP EPS growth of 27% over the prior year quarter.
Turning to our GAAP results GAAP net income for the third quarter 2019 was 49.1 million or 86 cents per diluted share.
In comparison third quarter 2018, GAAP net income was 57.1 million were one dollar and two cents per diluted share. The decrease was primarily due to the impact of lower royalty revenues and lower tax benefits from stock stock option exercises.
To recap our global organization delivered constant currency product revenue growth of 13.6% non-GAAP operating margin expansion of 260 basis points and non-GAAP EPS growth of 27%.
Now I'd like to provide you with an update on our full year 2019 financial guidance.
As a result of our strong performance in the third quarter, we're increasing our 2019 product revenue guidance to 932 million.
Which reflects year over year growth of 12.3% on a reported basis or 13.1% on a constant currency basis.
This represents an increase of 7 million above our prior guidance of 925 million.
Please note that we're now projecting approximately 7 million a year over year currency headwinds and 8 million of monitoring equipment revenue under HSC 842 within our full year revenue guidance.
Our non-GAAP product gross margin guidance remains unchanged at 66.8% and our non-GAAP operating expense guidance remains unchanged at 42.8% of product revenue.
Based on these assumptions, we're continuing to project.
non-GAAP operating margin profit margins of 24%, which represents 200 basis points of improvement over the prior year.
Moving further down the Pinedale, we expect to generate approximately 13 million a non-GAAP non operating income in 2019, which is.
Primarily comprised of interest income.
Our non-GAAP tax rate remains unchanged at a roughly 23% and we are estimating that our weighted average shares outstanding for the year will be 57.2 million shares.
Based on all these assumptions we are now increasing our non-GAAP EPS guidance to $3, an 18 cents, which represents an increase of three cents above our prior guidance of 3015 cents.
As a result, our non-GAAP EPS is projected to grow 20% in 2019.
And from a GAAP perspective, we're now projecting a GAAP tax rate of 17.8% and GAAP earnings per share of $3.37 for the year, which represents an increase of seven cents from our prior guidance of $3.30 per.
For additional details on our full year 2019 financial guidance for GAAP and non-GAAP earnings per share. Please refer to today's press release and supplemental financial information within the Investor Relations section of our website at Massimo Dot com with that I'll turn the call back to Joe. Thank you Mike.
The first three quarters of 2019 have been strong despite the challenges we face sometimes unfair and unexpected.
Through it all we never forget our guiding principles and mission to improve patient care and reduce cost of care.
We take our mission an opportunity to do good for the world seriously.
In August we received a CE mark for neonatal use of our continuous hemoglobin monitoring technology. This is the first time, our breakthrough ESP HP technology, which has been shown to optimize blood transfusion and reduce mortality in adults is available to neonatologist outside.
The U.S.
In September we announced pathway and new monitoring feature for guiding Neil resuscitation pathway software available on route provides clinicians.
With the way to visualize a hospitals recommended resuscitation protocol for a struggling newborns oxygen saturation, while continuously monitoring espial two in pulse rate during the first 10 minutes after Burke.
National was the first company to create a specialty sensor for neonatal resuscitation called the newborn sensor.
We are delighted to now be the first to offer pathway and our pursuit of health and clinicians take care of this very fragile and promising patient population.
Also in September we announced a delta cerebral hemoglobin Delta Oxy hemoglobin and Delta Deoxi hemoglobin indices available on our old three regional oximetry offering.
With these indices all three in addition to providing cerebral oxygen saturation cannot provide clinicians with additional visibility into blood flow and regulation of the flow in the brain by indicating relative changes in underlying total hemoglobin as well as oxy.
Mclaughlin and Deoxi hemoglobin components used to calculate cerebral oxygen saturation or Rs two.
Our hospital automation platform continues to be received well by our customers as we achieved installations for hospital automation systems in the third quarter at seven hospitals in America, Kuwait, Morocco, Portugal and do a.
These hospitals are using route with Uniview replica and patient safety net to improve the continuum of care in their hospitals.
Our other major strategic initiative the opioid Safetynet system is progressing well, we're still targeting submission to the FDA by the end of this year.
We're committed to providing access and affordability for opioid safetynet, we believe existing reimbursement codes will cover limited use cases, and we plan to apply for a new codes for broader coverage.
In closing Massimo is on track for a strong finish to 2019.
And great beginnings into new decade ahead.
Breakthrough technologies are available and over 150 countries and are being used on over 100 million people annually, improving outcomes and reducing cost of care globally.
We will continue to take advantage of the opportunity that we have to improve patient safety to make the world a bit better and create value and hope for all of our stakeholders, including our amazing team.
Carrying customers and long term shareholders.
With that we'll open the call to questions operator.
Thank you ladies and gentlemen, if you have a question at this time, Please press star and the number one on your touched in telephone. If your question has been answered one you wish to remove yourself from the Q. Please press the pound.
Your first question comes from Rick Weiss with Stifel. Your line is now open.
Good afternoon.
And to everybody and congratulations on another excellent quarter. Thank you.
Maybe just to start off at the Big picture level, there's been some concern.
No frankly based on Philips.
Comments.
And sort of general big comments about.
That suggested us market growth slowing it seemed in their connected care business, which is obviously multiple franchises, but which led to concerns about slower hospital spending or capital spending.
My question is are you seeing me your results. Obviously don't suggested but are you seeing any new incremental hospital spending delays or cancellations or anything that might suggest more challenging times ahead not for the next quarter, but how should we look ahead to 2020.
Justin that might impact Massimo.
We are not.
But our business model is different than Phillips Phillips relies heavily on capital dollars spent and our business model is more of razor razorblade and even when it comes to capital more of a SaaS model. So.
That might be why would you are seeing a divergence between Philips and mass similar results.
And outlook.
Yes.
Thank you Joe.
Turning to.
Couple of products.
The.
It's great to see the hospital automation platform.
Story, if all seven installed and maybe you'd remind me.
How many installations you have so far and help us think through with just a little more color in detail. If you if you could.
One remind us how many you have installed today too.
What's next how do we think about.
The ramp there and I got to believe obviously that that's not just gross sustaining this could be an incremental driver for you again as we look ahead to next year and beyond.
Sure Rick I'll do my best first of all off the top of my head and I might be wrong.
Different pieces of this technology are available at different rates for example, patient safetynet, it's an hundreds of hospitals.
Route.
Patient monitoring for automating the spot check mode is again available and at least one hundreds if not more hospitals.
But what I'm, referring to as hospital automation is the conversions of all the pieces.
Root connectivity.
So that everything in the room is connected to it and the data is then send to central locations like more or central networking systems were patients are being followed.
As well as.
Being able to display the information in a way that's more logical and less burdensome to the team that's carrying for the patients whether it's in the or the I see you with technologies like Uniview and then remotely from whatever these clinicians might be alerting them to issues or on their own checking on there.
Patients with things like replica.
And then.
As the patient guest this charge following them home.
Both by providing care pathways that are better adhere to and reminded to through our automated system and monitoring them as necessary.
And the full continuum of care so bottom line.
When it comes to the full implementation I, maybe wrong, but I don't think the number is that much more than seven.
Number Weve launch hospital automation early this year.
The full suite of everything that we think optimizes the continuum of care.
Okay. Thank you Joe.
Just two last.
For me and maybe Mike I'll turn to you you highlighted the 60700.
Hi.
Board.
Driver number reported at maybe you could give us a little more color I understand it's in line with your guidance, but for folks or maybe.
Looking at this for the first time Mark.
We're sort of senior level off a little bit sequentially.
That number.
Maybe help us understand.
Why that's it's obviously a great number relative to the past.
But what's next bear that in what's going to be the driver so to speak of the next leg up it maybe you could help us understand that.
Yep.
So Rick if you go back several years ago, our driver growth was was somewhere around 5% to 7% range.
Over the last few years that growth has been between eight and 10% on average over the last three years.
The but if you look at our overall revenue growth rates over this period that it's higher and the reason being is because we're seeing more and more revenue per driver.
It's not just.
Generating revenue was set but it's now generating with those advanced parameters like cap Naga fee. We now have the disposables out there that we've launched this year.
Sedline brain function monitoring and oethree cerebral oximetry as well as Rainbow. So we're pulling in that we're able to generate more revenue per driver as we're able to deeper penetrate into the into our customer base and add new customers.
Okay.
And.
When we just last from me for now.
The opioid story seems to be on track no change in your submission by end of 19, maybe help us understand what's left to do and just so you know as you contemplate next year I mean.
Is your excitement about the opportunity in your plans and your ability to wrap ramp manufacturing and everything connected with that story are you still basically on track and are you still is optimistic about the potential there. Thank you.
Sure Rick Yes, we are basically on track still optimistic about it.
Weve.
As you know we were selected as one of eight companies out of over 250 by the FDA to deal with the opioid epidemic. The only monitoring company for that and that means we've been working really closely with the FDA.
And we've been getting.
Excellent guidance.
So the things we've been working on is really supplying the FDA of the information they requested to hopefully not only cleared for prescription model, but even for illicit users that could benefit from it so.
So everything's looking good the products looking good.
One major piece of the product is the radius PPG, which we're now finally.
At full production capacity at the American Society of Anesthesiologists was at about a couple of thousand anesthesiologists Tri Ed for themselves.
So.
All signals are looking good.
Thank you so much so thank you Rick Thank you Rick.
Your next question comes from Bill Quirk of Piper Jaffray. Your line is now open.
Thanks, Good afternoon, everyone.
Hi, Bill Hi, Bill.
Right. So a couple of questions I guess first off on following up on Rex last one on opioid Safetynet can you give us an update I know you are kicking around a couple of different models, where I guess are you thinking now in terms of the distribution model for that.
Well, we haven't yet finalized it I think our biggest challenge is getting the word out so we're we're.
Trying to figure out how to best get the message out there to potential users and potential prescribers.
We of course have a nice footprint today and.
Clinical space.
But when it comes to the average consumer they don't know Massimo and we need to try to elevate that as far as distribution.
It hasn't changed obviously there'll be some towards meeting with hospitals and physicians that prescribed opioid through our direct salesforce, but also through our own website, maybe depending if we get to elicit use.
Model through.
Websites like Amazon's and other and even retail.
Pharmacies.
How we hope to get the product and to answer the most people.
And so just a follow up and that's the is it reasonable to assume then that you have kind of several different options in place and it really kind of comes down to the breadth of the FDA approval or the claim rather.
Correct Bill we believe there is a chronic user of opioids.
There is the naive users of opioids, who go in for the state of Tonsillectomy and get prescribed opioids and then there was illicit ones and we think on the chronic and the naive use we have an established distribution channel that we'll be able to leverage, albeit don't need some reinforcement.
But if pending with the FDA does if they do give us to listen to use then that will be more consumer facing model.
Okay got it and then a couple of questions for Mike If I may 1st off Mike can you just.
Give us some some.
Sense of.
Pace of growth across the three groups, you've talked about historically sat rainbow and other products I'm just wondering if they're continuing to perform at or above the expectations. You've laid out and then secondly, I was hoping to come back to your gross margin comments certainly appreciate the favorable mix impact does look like there was a few other things going on there.
Given the magnitude of year over year increase I was hoping you can expand upon that thanks guys.
Yes, yes, so to answer your first question on the product revenue so.
As we mentioned in the prepared remarks, we're performing well across our major product platforms and geographies.
We were we're also seeing are set rainbow and our advanced parameters.
The other thing too that we were happy to see in the quarter was we're now starting to see strength coming from our cap Naga feed gas now that we've launched the disposable line.
And that's even allowing us to perform even better with those advanced parameters such as Sedline No malign INO three so so again just to recap where we're seeing at above the long range good growth targets.
And good good results across our major geographies on the.
On the gross margin front.
Some of that too is we're seeing some benefit to from from 842 and a lot of that gets into timing.
So that had some contribution in the quarter, but we've seen that ebb and flow throughout the year.
Got it guys. Thank you.
[noise].
Your next question comes from Larry can shift Raymond James Your line is so.
I don't know if this is for four or Joe or where Mike or both.
Just as we start to think about 2020, just curious if there's.
Any puts or takes that that we should be thinking about as we will all sort of contemplate where the business goes next year.
Yeah, I think Larry.
No I go back to Investor day, as we as we've laid out our long term.
Gross target, where the business is heading again, we want to be very thoughtful and prudent about our guidance as we head into next year, we're not gonna give guidance on this call, but we always want to be thoughtful and provide guidance that we can that we feel confident that not only can we meet that we can exceed.
We've laid out our revenue growth profile of 8% to 10% growth we've been guiding more recently at the high end of that range.
So that's kind of how we would think about it.
And we've we've said that.
We're going to be trying to averaged 100 basis points for years, we march towards that long term operating margin goal of 30%. So.
That's that's what we laid out and thats kind of where we're sticking to.
Okay perfect just couple of other quick ones.
Joe you I think you alluded to on opioid safety.
Some potential reimbursement.
You know sort of as you get out the gates could you share a little more what you might have been talking about there.
Yes, certainly.
In January of this year remote patient monitoring.
Was introduced as a potentially reimbursable.
Reimbursable.
Service and so it's possible that the way our product has been designed for the.
Prescription usage it can take advantage of that and allow patients to have access to our product with reimbursement.
Well other channels that we're going to be looking at is looking at specific code for the system.
There's also some talks from the administration to give products to have breakthrough technology status immediate reimbursement and review that reimbursement three years. Afterwards, so that does come to affect that could be something we can take advantage of as well.
And with that all the predicated that.
As a prescription.
Product or where does it doesn't matter.
Yes that would be just for the prescription product. Our plan is to create two different products one for the prescription and one for.
Over the counter illicit use type of a model and subject to FDA of course clearing it.
For both usages.
Okay, Perfect and then lastly.
Just two quick ones here. So just just definition Joe so that we're all on that same age because this will start to come up in the future. When you talk about hospital automation and placements obviously, there as you noted earlier a lot of.
Different aspects.
Of this comprehensive offering that you have so what is the right way when you talk about hospital Autonation and the placement to define that is that.
Route Iris Uniview and replica.
Some portion of that and does it also means that those are all subscription based as well and then the second question just separately as and I may have been wrong on this but but I thought that opioid safety.
The anticipation was that you guys were expecting clearance by the end of this year and not that it matters, whether it's the ending the year early next year, but again I just wanted to make sure I was thinking about it correctly.
I'm glad to say, yes to all three questions. Yes, when we think of hospital automation, we think about route Iris uniview replica if it.
Both the patient home.
For the continuum of care at home would add duck Tele and Rad 97 for example, which is a tele health patient monitoring hub and then as far as.
Youre thinking about our original thinking that we could get clearance by ended the year that is also correct. That's what we thought and we think thats still possible.
But obviously.
Hi.
Good I can't control that that is something that is clearly in the hands of sta, but given that we've had regular dialogue since the first time that FDA designated this is one of a products that thought could help to opioid epidemic.
We have been working hand in hand and.
Making a product and testing it in a way that FDA will find hopefully a safe and effective and will clear it shortly.
Okay perfect. Thank you very much.
Q.
Thanks, So much. Your next question comes from Matthew Taylor.
Your line is now open.
Hi, Thanks for taking the question.
So Mike I wanted to follow up on your comment on the.
Revenue for driver.
It's a little bit hard to calculate out because you don't give all the disclosures that used to but.
Can you comment on whether revenue for driver is growing materially faster than some of the mid single digit rates that we saw in years past and.
Where do you think that could go as you'd start to see increased penetration of these other advanced parameters and Rainbow product.
Yes, I mean, we see that as a steady ramp.
Sure.
You know overtime as we continue to expand and more of our business becomes higher mix of the Rainbow and advanced parameters.
And those those products are growing it faster growth rates than our core set technology. So so we think that that's a steady pace of revenue per driver. We are seeing internally an increase in revenues per driver, we haven't given that specific number but.
It's definitely ticking up and we continue to expect that tick up moving forward just based on the mix of where growth is coming from and those product lines.
And then.
This is really related to that could you.
Just to remind us.
The current timelines that you expect for.
Phillips to incorporate some of those other advanced parameters on the boards and.
Just any kind of general update on how things are going with Philips arrangement.
Yes, so Matt we mentioned that earlier in the year that we would have to the three integrated by the second half of the year. This quarter, we did integrate our technologies into their devices are monitors.
Now, it's just a matter of we expect that will start launching that probably early next year Q1.
As far as getting the getting everything ramped up in terms of volumes, but yes. Two of the three have been integrated and that is nomoline capnography as well as.
Oh, three cerebral oximetry.
Okay, great. Thank you.
Thank you. Your next question comes from Mike Matson Needham Your line is that within.
Hi, Thanks for taking my questions.
I guess, just a couple pipeline related ones. So I guess first anything new to report on the partial pressure boxers P.
Two parameter.
For the malaria product that you talked about at the Investor day in May.
Yes.
We weren't planning to report out, but I can answer a question on those two things on partial pressure of oxygen we have find the prepared and gotten clearance foot beginning clinical studies on patients in the operating room, so that should start the next.
A few days to 30 day snacks.
On the malaria project, we're buttoning up the product to begin clinical trials in the field in affected countries for malaria in 2020.
Okay, Thanks and just.
Just wanted to ask about the ASU 242 accounting change so it's adding to growth this year.
What does that impact going to be when we get into 20 Twond.
Yes, Mike.
If a if you look at our results. So far this year, you'll see us, adding about a point of growth on the topline so.
And then the full year, we're of course guide and 13% constant currency growth and it's adding about a point of growth. There. So so our implied guidance without that is about 12% growth for the full year.
As we think about next year, we're still working through.
Because there is a lot of variability in that because it's really related to the timing of installations, and and where we're putting our equipment out there customers.
But at the moment, we expect that it's going to be relatively flat. So there what you wouldn't see of repeating and the reason why we're we're providing that disclosure. This years, because we expect that it will be flat next year not provide another one point contribution to our growth next year.
Hopefully that helps.
Yeah, Alright. Thank you that's all have.
Thank you all for joining us today, how do we have anymore. Okay. One more question sorry.
Your next question comes from Ravi Misra varying bird capital markets. Your line is now open.
Hi, Thanks for taking the question I'll keep it brief just just on that core business growth commentary that looked stronger across across those three three portals.
Mike or Joe could you help us think about where the shrink this coming I mean is this an increase in licensing from kind of a new driver activations of rainbow or sedline or capnography or is are the growth coming from kind of increase of sensors line of those existing board. Thanks have a great night.
Sure. Thank you, yes, it's it's really it like I said earlier, all the above its not only through multiple of our major product lines, but geography as well.
Set business is doing very well the installed base as a growing.
And our sensor volumes have been solid and as you know we're about to walk into the flu season, which if it matches what happens Australia could even.
The a stronger quarter than last.
Fourth quarter and Q1 of two.
2019, excuse between 18, and Q1 or 2000 2020 to 2019 excuse me.
So yes, so the strength is all around rainbows picking up a hemoglobin is doing very well.
We're getting some incredible.
Results from both.
Clinically as well as a customer demand and performance. So so whats.
All across the board.
Thank you we have a follow up question from Rick Weiss with Stifel. Your line is that Wilson.
Hey, sorry.
Bob you with a couple of more just I was hoping you would get asked just.
Yes, obviously excellent quarter, and you've sort of hinted that indirectly, but should we assume that everything with Philips is actually on track going well.
And you know where are we now and rolling out and.
Getting those contracts.
After the board installations.
The contracts for the.
Single use products.
Well I would say Phillips is going well.
Somethings are behind.
We would have expected the.
Normal line and no three to have been released.
End of last year. So we are behind Sedline was listening to do this year, but now it looks like it'll get into next year.
Following normal line and Oethree, but overall, we don't have complained so it's a relationship that as you know got kick started after a successful IP litigation and settlement and we're learning how to get along in.
We're doing the best we can.
Okay, and just to last quick ones might kick in the balance sheet updates.
Quickly.
And.
I hate to ask he's the one who asked but any more strategic thoughts update in your latest thinking Joe.
Yes.
Mike I think Michael would like to answer that's a good luck, yes. So.
Rick just an update on your I'm, assuming you're asking the question on how we deploying our capital and yes, our cash on the balance sheet.
Our strategy doesn't hasn't changed there were continue to reinvest in the business you've seen our R&D.
As a percentage of revenue I think it was 10.6% this quarter continued to make investments internally because the bars extremely high internally for what we think we can do.
We also want to execute acquisitions that are aligned with our strategy and really as we think about those most the things that we're looking at right now are primarily bolt on acquisitions that we would use our cash for.
But.
So that's some of that things were evaluating and then third is continue to be selective on share repurchases.
We have a share repurchase program in place right now and we have about 4.8 million shares remaining on that program. So so thats kind of how we think about our cash.
And then just as we think about.
Just a more broad strategy.
With the the acquisition side is we want to leverage our strengths of our business leverage our core competencies, which are.
Signal processing capability, our clinical footprint as well as our manufacturing capability in some of the things that we look at so.
Hopefully that summarize.
Very helpful. Thank you.
Thank you all thanks for joining us we wish you all.
A nice week those to celebrate Halloween happy Halloween, those who don't watch out for the goals and goblins running around.
Look forward to talk can you guys again in February thanks, so much.
Ladies and gentlemen. This concludes today's conference call you may now disconnect.