Q3 2019 Earnings Call
For the next available operator.
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[noise].
Because distributors to reorder product.
As they would typically do during the last three weeks the quarter.
At this point I can't call. It an early October we saw hats, and our viremia data of the approaching respiratory season.
Test rates began to increase.
But the increases in test rates, which were across every region of the U.S.
We're largely due to RSV and other viruses that mimic influenza and the author preceding influenza by 68 weeks.
We have seen increased testing and positivity rates for RSV and Florida.
Which has reached epidemic levels, but to be clear the volume of RSV test data collected by vary by region as not robust enough to be predictive and the and the way that millions of flu data points are across the season. At this point, we are continuing to model a normal season in terms of influenza revenue.
For the next two quarters.
Shifting gears I will probably provides a final update on the status of the integration of the Lear assets.
After just two years from the close of the transaction.
We have effectively completed our integration process on July 1st.
We went live with the integration of our warehouse operations at our summer summers rich facility.
Moving off abbott's ordering and distribution system, and realizing $2.6 million an annualized synergies.
We also successfully migrated India and Brazil to our ERP.
Just one completing the ordered a cash process for 88 of 89 countries.
The Japan the final country. It goes live November one.
Which gives us control of 100% of the business at this point, we are on track to deliver $20.4 million and synergies by year end slightly better than we had planned.
Let's talk for a couple of minutes about product development and pipeline.
Never in my 10 years with this company has the opportunity for revenue growth spin as exciting.
At last not only do we fear the wind blowing, but we can see the trees moving.
Finally, we've become a product development company of significance.
One with the potential for revenue and margin growth driven in large part by the introduction of numerous new products and.
In the first half of 2020, we expect introduced several new Sofia assays for C. diff toxins.
Lime tier two.
A single for Plex Sofia cartridge for flu RSV and human melanoma viruses.
And simpler faster bio assays for T., ESI and TB hi.
Assays for graves Hashimoto diseases.
In the middle of the year, we plan to launch five more Sofia assays for lack to farren h. below our eye parasites, she could toxin and campylobacter.
Before year end, we expect to introduce Sofia, Strep 98, which has demonstrated superb analytical performance and studies thus far.
And Sofia assays for the two commonly seen community acquired pneumonia infectious agents strep pneumonia and legionella.
Then we will head into 2021, anticipating the launch of Savannah, which could be the most important product introduction in our history.
And there's still more in the pipeline to come.
Overall, it was a solid quarter, both financially and operationally and although Q4 will provide the usual challenges we face every year.
We'll end the year in good shape.
Very well position for 2020 and 2021 Randy.
Thank you Doug good afternoon, everyone.
As we reported earlier today revenues for the third quarter 2019 were $126.5 million. This compares to $117.4 million in the third quarter of 2018, an increase of 8%.
On a constant currency basis revenue growth was also a percent, reflecting the minimal negative impact of foreign exchange of $500000 in the quarter.
Rapid immuno assay revenue increased 20% to 42.5 million from the third quarter of 2018 due to strong results for our from our Sofia franchise, which grew 35%.
Flu revenue for the rapid category was $26.6 million, an increase of 37%, whilst strep, a increased 6% and RSV increase 10%.
For the third quarter Sofia revenue was $28.7 million compared to $21.2 million in Q3 of the prior year.
A quick the revenue was $12.7 million as compared to $13.1 million in Q3 of 2018.
Rapid immuno assay inventory at distribution is up 7% from a third quarter of last year more specifically influenza inventories a distribution are up 28% versus last year's third quarter and up 12% versus Q3 of 2017.
In the cardiac immuno assay category revenue totaled $66.8 billion on the quarter versus 65.3 million in the same period last year, a 2% increase.
On a constant currency basis cardiac revenue for the third quarter was up 3%.
Within the category.
I was revenue was $33.8 million a decline of 2% from the third quarter of 2018.
On a constant currency basis, Treehouse revenue was down 1% versus last year.
As reported on a geographic basis.
Yeah, I was realized 6% revenue growth in North America growth in Asia Pacific and Latin America, which was offset by declines in China, and Europe Middle East Africa.
On the Backman BMP side revenue increased 7% over the third quarter of 2000 $18 million to $33 million and on a constant currency basis BMP was up 8%.
Geographically revenue growth for the button business was realized in all geographies, except for North America, which was down slightly.
2%.
Revenue in the specialized diagnostic solutions category increased 1% in the third quarter to $12.5 million as our cell culture business declined by 2% and our micro view bone health and complement business grow a combined 17% in the quarter.
Our molecular diagnostic solutions category increased 5% to $4.7 million driven by 20% growth from Solana assay revenue.
Amplivue revenue declined 25% in the quarter as we continue to migrate the c. difficile and HSV customers over to the Solana platform.
Gross profit in the quarter of 2019 increased $6.2 million to 75.9 million and was driven by higher sales volumes improved product mix and lower scrap partially offset by lower lower overhead factory absorption and a negative FX impact.
Gross margin in the third quarter of 2019 was approximately 60% compared to 59% in the third quarter of 2018. The increase was due to the factors described within the net gross profit improvement.
Based on product mix and the prevalence of influenza, we estimate our Q4 gross margin to the b in the range of 61% to 62%.
R&D expense decreased by $1.1 million on the third quarter as compared to the same period last year. This decrease was due primarily to lower spending our projects related to cardiovascular and slot of platforms as they were largely completed in 2018.
Based on our current project project priorities, we expect R&D spend to be in the range of $13 million to $14 million for Q4.
Sales and marketing expense was $26.6 million in the quarter roughly flat to the third quarter of last year.
We expect sales and marketing spend for Q4 to be between 20% to 21% of revenue.
DNA expense increased by $1.5 million in the quarter, primarily due to increase facility costs from the expansion required to integrate the acquired cardiovascular business and professional service fees incurred in the period, partially offset by lower transition service fees.
Acquisition and integration costs in the third quarter were $4.5 million up from $2.5 million on the third quarter last year, primarily due to the noncash impairment loss recorded for facility lease as we move our company headquarters over to our summers Ridge facility.
In November as well as increase in professional service fees.
Interest expense for the quarter was $3.2 million and includes $300000 related to the convertible senior notes $300000 related the senior credit facility and $1.9 million related to the deferred consideration.
Associated with the purchase of the BMP business.
On a trailing 12 month basis as compared to the prior period, we realized on 11.6 million dollar reduction in interest expense due to the reduction in debt of approximately $168.4 million.
Over the last 12 months, we paid down our revolving credit facility by $75 million reduced our convertible note by $45.4 million and paid $48 million on the deferred and contingent consideration.
In the quarter, we recorded 1.3 million in an income tax provision.
The expense for the quarter was favorably impacted by excess tax benefits benefits from stock based compensation.
We believe our effective tax rate for full year 2019 should be within the range of 18% to 20% of pre tax income before consideration for discrete tax items.
And we continue to strengthen our balance sheet in the quarter, we generated $6.4 million and free cash flow after spending $6.9 million and capital expenditures, we use a portion of the cash to pay down another $10 million on the revolving credit facility.
Additionally, the remaining 8.2 million dollar balances are revolving credit facility was paid in full in October .
2019.
In the quarter, we had depreciation of $4.8 billion and amortization of $7.0 million as of September 30, the company at $28.9 million and cash on the balance sheet and $13.1 million on principle amount outstanding related to the convertible notes.
The outstanding principal balance on deferred and contingent consideration for the acquired cardiac assets remains at approximately $184 million.
And with that we conclude our formal comments for today.
Operator, we're now ready to open the call for questions.
As a reminder question you will need to press star one on your telephone to withdraw your question press the pound or Husky, please standby compiled acuity roster.
Your first question comes from Brian Weinstein with William Blair. Your line is open.
Hey, guys. Thanks for taking my question I guess.
Doug I'll take you up on the.
Opportunity to follow up on the comment related to the Joey on toxicities, and just give us a little bit more.
On the self inflicted wounds and kind of what what's going on there and in how you're dealing with those and then.
After second question just like it.
Sure course, this is pretty straightforward and we trained sales organization.
Toxicology very early in the year, then do the delay in the product launch.
We made a commercial decision to train ourselves one more time.
And so instead of launching in the third quarter as we normally would with the new product.
Some of the guys were working of things and wait until after their training to actually send their reps out to the field. So I would say.
That's pretty good definition of a self inflicted want.
And the reason I mentioned as because with all the 2020 products that we have cued up we can't launch products like that we can't have guys waiting for a couple months to be trained in order to go out and start talking to customers. So.
We've had a recently.
Pretty.
Link the couple of days meeting meetings, where we discussed all that and I think we have a pretty good understanding how we're going to get that done. So I don't know how many product launches I think kind of up but I think it's at least five or six so we're going to do next year and obviously, we can't wait to have a.
And all hands on Dec sort of sales training before we go out and start talking to customers. So.
It's pretty straightforward Brian .
Got it Okay, and then with respect to influenza in the levels of distribution. Randy I think you gave some numbers that indicated that it was meaningfully higher at this point versus last year and even 2017, how should we think about what that might mean for.
The fourth quarter the from the numbers were obviously little bit stronger than we thought here should we should we be taking some out of the fourth quarter and still thinking about the overall season, roughly the same any thoughts on on that would be appreciated.
Yes ill have Randy chime in as well if he likes but.
As we exited the.
Second quarter had.
Surely low.
The lowest ever but fairly low.
Distributor inventories. So it was natural that they what are some but I think some distributors ordered more product than they normally would.
Anticipating a large season, there was a lot of rumors about food in Australia, and et cetera, and I do think.
Theres at least a couple million dollar swing in any quarter.
That can move from one quarter to another and I think what we have in this case is probably a couple of million more in Q3. Then then we might normally have although when you look year over year.
It's only about 8% more versus Q3 last year that was ordered them. So.
Yes, I want to add something Randy No I think that's that's right that's kind of where we're at so yeah, we probably.
Never know going over the last three weeks of the year, whether all that inventory will be depleted.
Which woods necessary.
Necessitate.
An order from particularly the bigger distributors so.
I shouldn't say fingers crossed we're hoping for more flu, but if we don't see an acceleration of flu, which sometimes.
Happens.
No I could see how we might be a million or so heavy.
And fourth quarter.
Okay, that's great.
Thank you.
Sure. Thanks, Brian .
Your next question comes from Bill Quirk with Piper Jaffray. Your line is open.
Hi, This is rich on for Bell. Thanks for taking the questions. So do you have any original potential hi.
Do you have any thoughts on the potential inogen mismatch between the vaccines impossible strands strength. This year, we've seen a few press stories as of late about it. So wondering your thoughts on that.
And then well even in the best year Immunologist would tell you the effectivity of the flu vaccine is only about 30%. So it's not that I would not recommend that everybody get.
The flu vaccination I certainly got mine I think there as a concept of herd immunity. That's helpful. So please get your vaccination, but.
Whether we call the strains right or not doesn't seem to have a great deal of them Pac rim.
Really although there's a lot written about it.
Certainly heard about the mismatch last year on one of the strains.
That's probably not super helpful. Rachel, but that's the reality is the vaccination.
Rates and.
How precise the vaccine is against the at the viruses that are circulating doesnt seem to have a real big impact on severity the season or on.
The volume of testing.
That's helpful. And then last question can you just give us an update on the Beckman Coulter litigation.
Your next steps that you foresee.
Sure So regarding the Beckman litigation matter I'll just provides.
Quick updates.
And then probably will not take will not probably I won't be taking follow up.
Questions.
Where we are as the court of appeal issued a written order regarding.
Our written petition quite Els repetition on August 20 nice.
Of this year ruling in our favor Beckman then petition for rehearing by the same cord.
And that petition was denied on September 13.
Beckman then filed a petition for review at this California Supreme Court.
Challenging the court of Appeals order the granted quite Els written petition.
Quite hill has filed its answer.
We expect the court to decide whether to take the case by the end of the year.
Because of certain developments and another case regarding the same business law.
We understand that there is a significant possibility the court will grant review to clarify the law in this area if that happens.
We remain confident that we will prevail.
If the court on the other hand does not grant the review, we will return to the trial court.
Where we also are highly confident that we will prevail.
Great. Thank you.
You're welcome.
Your next question comes from Jack Meehan with Barclays. Your line is open.
Thank you good afternoon.
Hi, Doug I appreciate all the excitement on new product development was wondering if you could give us a mark to market on the sand that Savannah cartridge design and when you expect to start clinical trials.
Yet we're in great shape with Savannah, now I'm happy to report we have seven panels assay panels that are.
Well on their way many are close to being ready to sits move into the cartridge we.
We do have a cartridge design that we you are highly confident we can manufacture and millions of testing.
At very high yield.
And now we're in the process of of moving through the instrument development phase.
So we should have instrument and at least one or more partridge.
Types ready for submission toward.
The end of next year, just as we previously had said and we're still anticipate being in the market.
In the United States, but anyway.
So.
Compared with last quarter, I would say our confidence level has gone up significantly.
And do you believe havent back to take yet but.
Pardon.
Do you still expect clinical trials and start by the end of year beginning of next year.
This year.
Yes.
No no no no we will be ready with I cartridge and the instrument toward the end of next year.
Yes, sorry, I was referring to clinical trial.
Well the instruments not developed yet so.
We won't be in clinical trials until the end of 20 Twond.
Okay.
And then.
Just wondering if you could maybe just give us a review of the Lyme season, and how much that contributed to Sofia and.
What that was doing in terms of placement rates over the summer.
Well just overall I would say were Atlas lime is we're busy growing and developing a physician office segment that doesn't exist today.
To include the urgent care.
Space.
For a tier one it today.
And I believe we will get even more help with the introduction of the tier two assay, which would be effectively a confirmatory assay and also a replacement for western blot, all of which could be done on the physician's office, while the patient.
Wait so we think that that will add some value.
We did ship a couple of hundred Sofias in Q3 to lime customers, 70% of which included flu RSV on their contracts, we have hundreds of contracts right now.
Mainly in the northeast.
But we're in the hundreds not not the thousands yet so it's still early days.
Didnt really think it was going to be an instant market I knew we'd have to spend some time developing the market we have allocated a several million dollars.
Towards a number of marketing campaigns designed to create awareness in those areas of the country that did have some level of prevalence and and so for I'd say, we're reasonably please.
With what's going on all though.
It's back to the.
Wind blowing in the trees, moving so we hear the wind blowing, but the trees, Jack or not moving yet.
At this point.
Thanks, Doug.
Sure.
Your next question comes from Mark Massaro with Canaccord Genuity. Your line is open.
Hey, Thanks, guys for the questions.
Looking back at what I would call. The mother of all flu season. This is 2017 into 2018.
You know and then looking back at other.
You know flu seasons in the last call it seven years.
Typically Q4.
As flu revenue of at least five to 10 million of revenue above the Q3 level just on a sequential basis.
Yet you just reported a pretty big beat on flu here in Q3. So I guess the simple question is do you expect a sequential increase in flu revenue in Q4, and do you think it can be similar to that range of estimate type I just mentioned.
It is the short answer Mark it depends I'll, let Randy chime in a second but let me give you a snapshot.
As it today.
Of our by Rina data, we look across the nation right now, we're running less than 15% positivity.
Virtually every region, except for the southeast.
And Louisiana and parts of Texas.
If you were to go on map dot quite L. dot com.
You'll actually see the flu map and you can see where things are happening.
So it has started and what you see.
Is.
A pretty good.
Beginning of a flu season, there in Florida, Miami right now, we're reporting positivity rates of 24%, So Miami actually isn't a flu season now.
Tampas at 19%.
And so they're just about right on the custom being an epidemic.
Range as well.
And Louisiana actually has slots as well as you know the two big markets in Texas. So.
I don't know, what's going to happen, it's gotta go more than that obviously, but.
When it does go it will ramp up quickly if it does ramp up before the last three weeks of the year.
Again, those distributors are going to reorder, so we've had years where.
Oh, great 70, 80% of the quarter.
In the last three weeks of the.
As of December .
And we've had we've had years where that was absolutely not the case so.
You know.
I get how you're trying to model going from one quarter in sequentially going to the next I would say normally you would be right Mark.
And I'm not telling you something different.
Just on what we see so far.
We do see flu.
We see it.
Ramping up to epidemic proportions in a small number.
And just as an add on to that Mark you know consistently Q4 in Q1 event somewhere between 60, 575% of a full for the season. So as you know it can shift a little bit between Q4 in Q1 as well.
But certainly for the last five Q3 s. The flu revenue has been 20 million or north any in any event. So we're kind of aligning the same way we have in several of the other previous years.
Thank you well fall and then normal level.
If it were normal Mark and we're seeing normal if it were normal it's going to be screens sequentially higher yes.
Okay.
A question on the guidance I don't think you addressed it but earlier in the year you talked about a constant currency.
Basis revenue guide for the year of 535 million.
With what you've discussed with the toxicology delay are you still on track to hit that.
No.
And that was about 4 million in the fourth quarter.
So were short there.
We've got obviously, some FX headwinds, but your allow me to.
Not to count that by your question.
Asking for constant currency, but.
So we've got what we said we would do.
Minus FX minus that toxicology.
Delay.
Okay, and then maybe on a reported basis, what that looks something similar to 530 million.
Got about 5 million in FX.
Okay.
I want to go back to the question that Brian asked about the.
Just the rationale for the delay so.
Based on my understanding of your comments, Doug you talked about how.
You did two trainings.
Trained them early in the area then you train them again.
Maybe use some clarification as to why they were trained the second time and why they didn't go out the first time.
Because because as the delay there was too much time between the training when we launched so.
I was actually at arguably our best region of the country.
And one that I'm expecting to four perform at a very high level.
I went to their meeting they had been they were trained at that meeting and they hadn't started making calls yet so I was a little bit.
I was a little bit with are right word.
Disappointed and know that isn't strong enough does it.
I was I was not happy.
So because it that shouldn't happen we were trained wants I do understand.
You know, let's let's have a big.
Splash and all that but at the same time you know there were so much going on in Q3 that these people perspective meetings to when they can get it done et cetera, et cetera et cetera I'm just.
I share with you all that detail because.
It's easily fixable.
And I don't expect it to affect the longer term.
Prospects for the product, but it was definitely.
A self inflicted want.
Okay and then just one last one for me you talk a lot about the trees moving.
Can you speak whether or not the trees, you're living on the M&A front.
You've recently talked about three to five targets potentially on your plate.
With the goal of acquiring 150 to 250 million of revenue. So should we think about achieving that potentially with one or two deals or do you see.
Hey, larger number of smaller deals.
It's certainly easy easier to do deals that would have bigger chunks of that 150.
The integration of a smaller company.
It is not an easier than a larger one.
And.
So I would say if a smaller number would be preferred bar.
Okay.
Okay. Thanks, a lot of banking wants to get there.
Okay.
Again, if he would like to ask a question of press Star one on your telephone. Your next question comes from Alex Nowak with Craig Hallum Capital. Your line is open.
Great. Good afternoon, everyone, Doug just kind of following up on that with toxicology being delayed. The next year can you kind of ballpark what the contribution here could be from new products, including Tox Limes proponent plus all the news. If you ask that you mentioned what sort of contribution knows can have in 2020.
That's it that's terrific question, we have done a first pass of our 2020 plan.
We're still modeling and forecasting.
We will present to our board here in a few weeks and so.
Probably would be bad form if I gave you a number now before I.
Rent by my Board, but certainly we will.
Be prepared to discuss the impact of those new products when we present at JP Morgan in January .
Okay got understood and then just kind of going back to one of the core tenets here. The the trios acquisition now two years removed one of the things are moving legacy quinto products into the markets outside the U.S.. So I would say as you mentioned all the infrastructure is now in place you're launching a number of test here over the next 12 months, how should we be thing.
Talking about that potential expansion.
Into new geographies.
We just got approval for <unk>.
What are you whispering to me or India, sorry, So yeah, we just got approval in China for Sofia. For example, we've got a couple of things we're working on Japan.
As another example, plus we're actually leveraging the infrastructure we've put in place. If you look at China right now Weve were up 84% Q3, 2019 over Q3 2018 in China with.
Our legacy products be impart because we've got a larger commercial organization representing those products.
And then we've got the infrastructure there so I'm not telling you we're hitting out of the park yet, but we clearly are taking advantage of the infrastructure that we're putting in place and have put in place across the globe.
Okay got it just lastly can you provide some detail on the Cerro SAP and Terry Bio deal that was announced a couple of weeks ago I didn't see a press release from you, but looks like you will be commercializing are being distributing their g. I ask safe through your channel I'm, just curious how that's going to compete with the Sofia G.I. tests or that you're developing.
Well this is a different segment than anything else. We do today, it's more in line with how we.
Go to market with our Lear products were targeted at the larger institution.
The has a high complexity lap.
And so the number of facilities out there is fewer therefore were mainly using our molecular salesforce.
A small team there to represent the product.
We do have a model obviously, we wouldn't have done the deal without a model.
But we're using the team now to explore actually what opportunities are out there they're actionable in the 2020 timeframe.
And we'll be putting those numbers into our plan for 2020.
And.
We should have a forecast for that shortly but I couldn't really speak to the magnitude.
At this point I would say, though that with each of the ones that I know about we've been talking to the opportunities are fairly significant. So then the question becomes.
Which account actually is going to close and when are they going to close in 2020 and it should be reasonably easy to model, but it's also reason im reasonably easy to get wrong.
If you're if you model some big accounting you don't get it.
So standby we think it's an interesting opportunity. We think we think it's an interesting segment.
And I'm glad we did the deal.
Okay understood. Thank you.
Your next question comes from Tyco Peterson with JP Morgan Your line is open.
Hi, Thanks. This is all Lenny on for Tyco.
Going back to your question.
I was wondering you.
You called out some decline in China, the Middle East Africa could you talk about the dynamics you're seeing there.
Go ahead right yeah.
Kind of some I mean, there is nothing significantly different from prior quarters again, you know in China were gone through 37 different distributors and stop so you kind of see quarter to quarter. Some you know some variances.
Overall, I think in China were seeing on the tree Irish business.
Mid single digit growth on a year to date basis I'm. So that continues to be it as a good growth area for us.
Europe Middle East Africa, you know, we always had spent pretty pretty flat for the year and that kind of continues plus or minus one 2%.
Okay I was happy if I could you just add on China to the Trish businesses, but it is but the the trios BNP portion there actually growing quite rapidly so it's a bit of a mix.
Right now in China.
Okay. That's helpful.
And then in terms of Sofia placements.
Please note this quarter on and you mentioned aided by 100 herself I knew Sofia Lyme customers was wondering how we should expect the cadence going forward.
Well I'm, hoping we get.
Somewhat of a stair step move.
When we.
Introduced product in some of the larger urgent care.
Centers in the northeast and on the upper Midwest.
I don't see it is sort of a linear progression.
And I think also was a word of mouth.
I'm certainly hoping for a big jump in awareness and instead of.
Going from a couple of hundred.
In a quarter.
To maybe doubled after next quarter et cetera, right I expect that that will hit an inflection point and then they'll be thousands it will go.
From hundreds to thousands pretty pretty pretty quickly if we're successful I think thats.
More in line with what we would expect we certainly saw when we introduce Sofia. Initially we were you know.
I don't know moving moving along quite slowly them boom. We had we had awareness and then it jumped so I'm, hoping we see the same thing alone.
Okay, and then I'm going back to your comments on contributions from toxicology Trop problem then.
In the second half of this year you had previously mentioned three to 5 million I know he sad because of the delays that will impact.
We won't see contributions on this range, but I was just wondering given that pent up demand and from large customer list you mentioned for particularly toxicology last quarter. If there is any potential upside there.
Oh sure there's upside you know I suppose were guilty of being somewhat conservative.
It's probably our reputation, but but all things being equal if we don't see a jump from a couple of very large customers. You you might end up being down by about 4 million relative to what we had forecasted.
But could we do better than that <unk>, possibly but.
There's not a lot of time between now and.
End of year.
Thank you.
You're welcome.
Your next question comes from John to with Raymond James Your line is open.
Good afternoon, staying on Sofia can you give us a sense a snapshot of where you are in terms of placements at this point and maybe just a level set on kind of at the end utilized a annualized annuity for placement.
Sure. That's a great question, we were just asking ourselves. This morning, where are we going to be at the year I think we're going to exceed 40000.
So you don't have to wait to JP Morgan for for me to say that [laughter], We're gonna we're gonna be 40000.
Okay, Great and then on the annuity per placement I think I think you said it at different times that you're kind of tracking in that $4000 range or so annualized is that it is that's a good way to think about kind of where we are now is we level set for for next year with all the new menu coming on.
Yeah, it's hard and I hope, you're not modeling by taking a number of boxes times and trying to figure it out because we can't do it that way.
What's happening is we're moving at a different segments with different box urgent care you can end up with big numbers.
But at the same time, realizing that the cost of a Sofia two is dramatically less than originally the Sofia one we're now moving into smaller accounts.
That we weren't end before so and those are less than the 4000.
So I would say over time, we would hope to have Sofia placements for de centralized which would mean that that on a per unit basis, the pricing would be higher but it might be lower volumes. So.
I would suggest it's probably going to move down from 4000.
Okay got it.
And then sounds like the integration is is largely a largely complete here with less country coming on in November can you just remind us what's left in cost synergies. It's I think theres a tail into 2020, and then clearly the teams done a very nice job are there are there other projects that you can outline for us as we think about margin expansion from here.
There are looking into 2020.
Well, what we said was we'd be at 20 million by year. Three as you are tuned we're already at 20, so that I know that you're hopeful.
But I would suggest that we've gotten to where we thought we were going to be.
Approximately here earlier.
And I'm looking at Randy He's saying, please don't tell them that there's more [laughter] sorry, John [laughter]. So I don't know we would get it doesn't mean, it's not there we do have Oh, we called business transformation group that is looking for lots of different ways that we can improve the way.
We do things.
I'll give you just an example, we're looking at our cost to process in order globally. We think we're a little high and we think there's things that we can do to get that down, but I would say that's more business transformation across the entirety of the business now that I've got the infrastructure that at the integration we're now.
The purpose seeing those same people to continue to look for other things.
So that's a very long answer to say I think there's more to do but it wouldn't be directly related to that recent acquisition if that makes sense.
Yep, that's that's great. Thank you so much.
Sure.
That is all the time, we have today. Please proceed with your presentation or any closing remarks.
Well thanks, everyone for your support and of course your interest in quite gel Q3 was another solid quarter and we're in good shape.
As we finished the year and head into 2020, thanks again everybody.
Ladies and gentlemen, thank you for your participation and ask you. Please disconnect your lines Goodbye.