Q2 2020 Earnings Call

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Hi, good morning, everyone as usual on today's call way of Walt Rosebrough, our president and CEO and Microcutter Senior Vice President and CFO .

Do you have a few words of caution before we open for Cameron.

Okay. Good talent.

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There's the FTC filings are available to the company and on our website.

In addition on today's call non-GAAP financial measures, including adjusted earnings per diluted share segment operating income constant currency organic revenue growth and free cash flow will be used.

Additional information regarding these measures, including definition is available in today's release.

Including reconciliations between GAAP and non-GAAP financial measure.

non-GAAP financial I presented during the call it would be in concept, providing greater transparency to supplemental financial information used by management and the board of directors and their financial analysis and operational decision making.

That does caution I will hand, the call over to Mike.

Thank you Julie and good morning, everyone.

Just wanted to get my pleasure to be with you. This morning to review the highlights our second quarter performance.

For the quarter constant currency organic revenue growth was 10% driven by volume and 90 basis points of price. We continue to experience strong underlying growth from our customers at success with new products.

Gross margin for the quarter increased 150 basis points to 43.6% I was impacted favorably by productivity price and currency somewhat offset by higher labor costs.

EBIT margin for the quarter was 20.3% of revenue an increase of 150 basis points from the second quarter last year.

The adjusted effective tax rate in the quarter was 19.1% somewhat lower than we had anticipated due to favorable discrete items, primarily the benefit of stock compensation expenses.

Net income in the quarter grew 21% $213.1 million at earnings increased to $1.32 per diluted share benefiting from revenue gross margin expansion at a lower effective tax rate.

In terms of the balance sheet. We ended September with 225.5 billion up cash at 1.2 billion in total debt.

During the second quarter capital expenditures totaled 48.4 billion, while depreciation and amortization it was 49.6 million.

Free cash flow for the first six months declined slightly as anticipated $262 million due to the planned increase in capital spending.

However, we have not invested as much capital as we thought in the first half of the fiscal year simply due to the timing of projects. As a result, we are decreasing our for your expectations for capital spending by $20 million to 260 million, an increasing our free cash flow expectations to $320 million.

With that I will turn the call over the wall for his remarks well.

Thanks, Michael and good morning, everyone.

As you've already heard from Mike Our second quarter continued the trend of outperformance that began in our last fiscal year.

Growth meeting or exceeding our expectations in all four segments.

The additional volume higher margin attainment, and a lower effective tax rate combined to drive earnings above our expectations for the quarter.

Based on our performance in the first half and our expectations for the rest of the fiscal year. We're once again updating our full year outlook.

Starting with revenue, we now expect constant currency organic revenue growth of 7.5% to 8.5% for fiscal 2020 up 150 basis points from our prior range of 6% to 7%.

The increase was due to outperformance of the underlying business as well as the impact of several small tuck in acquisitions that we have completed primarily in health care products.

Well now the transactions are material on a standalone basis. When combined we expect they will add about $30 million or 100 basis points to our constant currency organic revenue growth for the full fiscal year.

Well, you're modeling purposes second quarter revenue benefited by about $5 million from these tuck in acquisitions, what the balance to be spread across the second half of the fiscal year.

As a reminder, our fourth quarter has challenging comparisons which gives us some caution on the growth rate for the second half in fiscal year.

Oh care products and they asked here the two segments principally driving this increased organic revenue growth.

Health care products are seeing improved demand across the segment with steady growth in consumables improved performance from service and ongoing strength in capital equipment.

S. T is delivering strong growth has increased demand for more core medical device customers continues and the capacity expansions that have come online the past year. So have allowed us to meet that demand.

Now as you may have read several ethylene oxide facilities offer it operated by others in the industry have been close temporarily or permanently due to concerns around the emissions of ethylene oxide gas.

The safe and efficient use of ethylene oxide sterilization is required to meet the global need for critical life, seizing lifesaving life changing medical devices for patients.

For context, approximately 50% of single use medical devices around the globe that require sterilization, our sterilized using ethylene oxide.

These devices in food items as simple as that he's advantages and as complex as pacemakers and surgical kits.

Through the second quarter fiscal 2020, we have picked up a modest amount of volume from customers, who have been impacted by the closures.

However, our U.S. ethylene oxide plants are running full which will limit our ability to take on significant additional capacity in the second half.

Given the strength, we've seen so far this year across our business segments and the pipeline a business we see for the back half. We now anticipate adjusted earnings per diluted share to be in the range of $5.50 to $5.65.

Up 12 cents from last quarter's outlook.

The acquisitions discussed earlier are expected to add approximately five cents to our outlook in the second half with the remainder coming from outperformance of the underlying business.

The upper end of our earnings outlook range assumes no impact from the medical device excise tax in our fiscal for fourth quarter, which is the calendar first quarter.

Although we believe the device tax will be delayed or repealed around the first of the calendar year.

The lower end of our arrange it should absorb this possible uncertainty if it is not.

We've had a strong first half of the year and continue to expect another year of record performance in fiscal 2020.

We believe the short term and the long term future for Steris is bright.

We appreciate your ongoing support.

I appreciate the work of the 12000 people Steris, who are making that happen.

Wrapping take any questions you may have for the balance of the meeting Julie Please open the call for acuity.

Thank you, Mike well for your common Keith.

Given the instructions and I started asking me, yes, certainly well now begin the question and answer session plus a question. Your press Star then one on your Touchtone phone. If you didn't speakerphone. Please pick up the handset before pricing that he's to tell your question. Please press Star then too.

At this time, we'll pause momentarily to assemble the roster.

And the first question today comes from my Dave Turkaly fallen JMP Securities.

Great. Good morning, well, thanks for the color on the E. O side I was curious if you might refresh our memory in terms of how many of those plants you guys have and then when you look at the issues.

Good I'm sure you're closer to it then certainly who we are.

Is it fear out there that's kind of driving you know that the sentiment or is it was there an actual problem that you think you can address just I guess any color on how you stay clear of any other things that have happened.

Yeah, Good morning, Dave.

First answer to your question I guess rest of your first question how many facilities we have we have about.

We have nine facilities in the U.S., a that sterilizers nothing I'm excited about double that worldwide.

And which makes sense because this is used globally and from intensive purposes. It's the only gas use for this purpose around the world.

That second answer to your question is.

You know I do think a this is more around fear that around science and.

There are.

Conversations going on that or scientifically don't makes a lot of sense.

And that's that's just want to things that has happened in this process, but our view is.

We are absolutely adamant about running say facilities safety may be the strongest virtu inside of Steris and when we talk about safety, we think that about the people to work with us and for US and we also think about the community that we live in so we.

We are absolutely committed to safety, we hit we know that we are at the <unk>.

The better end are strong and.

Industry in terms of the way we deploy.

Everything about our facilities not just how we handle gas.

And also because we do it so much we could look across plans will look for best ideas across those facilities. So we do think we're at the the positive end of this spectrum.

Theres, because we understand it roughly 100 plants around the country to do this kind of a kind of work and so.

Sure there is a full spectrum of of activity.

So, but I do think most of the conversation has not been handled scientifically and I do think I.

I applaud both the FDA, Andy EPA for working hard to.

Manage this effort and to handle things scientific scientifically in the process and I think that's the way it will end up.

Great. Thank you for that and I apologize I've asked you this a number of times, but.

I'm still trying to get my my finger on the positive what is happening in terms of surgical procedures. So I mean, another 10% constant currency growth I know you had you know maybe a little help from from some small deals but [noise].

Yeah, [laughter], we talk little bit about baby boomers, a number of procedures, maybe there's something from.

Don't know fear about Medicare for all but at any anecdotal.

Commentary from your cost little customers like what they know what's driving the strength and how sustainable do you think it is.

Yeah, I mean, I I think we've talked about this out and this was a broad question and and there are very answers overtime.

As you pointed out when people have.

More ability to pay for things they tend to do a little more and when they have less ability to pay for they do a little less but you know since this is health care much of it or most of it is not.

Not necessarily something one can decide to or not to do there are some cosmetic procedures, obviously, the where that's not the case, but those tend not to be driven by healthcare reimbursement those tend to be driven more by personal payments. So.

Brian .

In broad.

It's just very clear that the number of procedures is rising and in my view. It will continue to rise we are right now where the middle of the baby boom generation is in their mid Sixtys and so we still have a called the back half of the baby from generation to get to the mid Sixtys and really it's the so.

Sixtys and Seventys, where we spend most of our money. So in terms of health care. So procedures are clearly rising.

And as we've discussed there's more and more going out to outpatient type facilities built in in house in hospital systems and outside of hospital systems, but at the same time hospitals still busy and more and more complex procedures are being done. So you know for every for every.

Arthroscopic me that goes to outpatient there's another transplant hearts are longs or something that goes days inpatient. So even though the number may not be rising the complexity continues to rise in in the hospital settings, and then and is and in many respects in the outpatient setting their complexity is rising as well.

And when you put all that together that drives growth the industry. I think you guys have seen the other medical device companies reporting and they're reporting strength as well and that's a function of procedures.

Thank you.

Thank you and the next question comes online Cushe with Raymond James.

Good morning, everyone I'm wondering Larry.

I want to come back.

The comments and I agree with your thoughts there but.

A lot there there's certainly our communities at our voice in concerned about adding New York facilities in your backyard. So.

I also want Guy that same time, there's just a you know.

Yeah.

Hey, Larry you are very soft and bringing up so like we did not catch the last piece of your comment yes, sorry about that.

Yeah. So really the question here as you know look I recognize their lack of.

Viable alternatives very E mail, but you know communities, our voice and concern about it. So what do you. What do you think comes out of the AD Com. This this week <unk>, where do you think that.

The suggestions from the yet they are gonna be Ted to handle at the situation.

Oh.

Well I think Larry again, the agency is doing a good job of gathering information I believe those who attended the meeting and for those who don't know this would mean the FDA has called in order to discuss.

Potential alternatives to ethylene oxide and to discuss other sterilization methods of my personal view, we are presenting their is if you would like to see our cut some or thoughts if you will in that space. The after they asked for presenters.

They chose the ones that they thought would be the better ones to discuss are not every presenter who requested to speak is speaking.

So in any event I think you will see what.

Largely no that is there a lot of ways to sterilize things and we know that because we use virtually all of them someplace somewhere it is just certain methods of sterilization or better for certain.

Activities and at this moment in time and I think for the certainly the intermediate to long term future ethylene oxide is going to be a significant portion of that because it's particularly effective for single use devices that cannot withstand a heat or radio.

Asian and on the other hand can except that gas and that gas is very gentle on the devices and frankly, a lot of that is because it's been the method of choice by both the agency and medical device makers for decades, now and so everyone's designed around that designed for that so for a long.

Time in my opinion that will be a significant method and and you know even though my earlier comments were I believe exactly what I said that we have a lot of non science being discussed.

That does it mean.

In our view that we can't continuously improve we have been improving our processes in the way, we manage that technology for decades, now and we will continue to improve that and one of the biggest areas in our view is that and it's typical of a lean approach two things in the key is not to remediate accused to use less and so.

A year or so ago, well two years ago almost now.

We.

Had developed a procedure and process to do what we call sustainable ethylene oxide and we have seen many of our customers, except that and and they can use.

Maybe up to 50% less gas and if you used 50% less gas you have even lower than 50% less.

Going out of the out into the air because.

Some of the gas was used to obviously and so in any event.

We think that that's a great approach that's one of the things we will be discussing the next couple of days at the agency and we're seeing more and more customers for semi obvious reasons.

Thinking that that's a good idea. So I think we'll see a much greater use of lower levels of gas to to get the same level sterilization. It's still sterile we kill all the bugs, that's what's Daryl meetings, but we can do so with less gas.

Okay. That's that's helpful. And then two other questions for you it's.

Just help us think a little bit more about that implied.

Deceleration.

In the organic constant currency revenue.

Base for the second half the year I think if you use the midpoints of their age and take that 100 basis points Oh.

Organic contribution the back half is going to imply something like four and a half ish percent I'm. So maybe just again flush that out a little bit and I guess the other question is how do we think about the health care products backlog, which I believe declined about that 2% in this quarter. Thank you.

Sure Larry as we mentioned in the that in our prepared remarks.

The fourth quarter last year was pretty phenomenal and it was pretty phenomenal on top of a previous year of pretty phenomenal and you know we just we just don't forecast, beating beats all the time and so.

Our our pause is related to.

The strength of the fourth quarter last year, not a lack of strength in in our current business.

And and as I've mentioned before as our plans to get more full which they are getting pretty full right now.

It is more difficult if if you have built something for one customer and they at the last minute decide they're not going to take something and you know if you. If you have a lot of capacity, it's easy to flip that to another customer or to move things around it is more difficult to do that one way or had.

But the stronger end if you will have a use of our capacity our guys have done a great job.

Adding capacity without building buildings, the last several years and so.

We do have the ability to do that we do have the ability to meet the forecast we have in place, but we have less flexibility at the last minute to move something so it could slip out of the quarter. It only takes a couple of significant projects to move out of the quarter in order for us to have a little bit lower growth rate I think your numbers might be a little low.

In terms of the numbers.

In terms of what the quote unquote implied deceleration means.

But and truthfully, we don't worry that much about quarters, the implied acceleration years pretty pretty positive.

In terms of backlog backlog as a function of orders coming in and shipments going out and as you have seen our shipments in health care have been extraordinary the last two quarters and as a result at our and our orders have been quite strong and our pipeline continues quite strong and so we have this.

Temporal thing, where we should we shipped a little bit more than the orders that came in but you are talking by new levels I think couple of million dollars or something like that year over year, Yeah. Larry It's Mike. If you look we did grow backlog sequentially by about $12 million at towards point, our first half capital equipment shipments in health care were up almost 9% year over year.

Which is we haven't seen that in the past so that definitely explains why backlog is down just slightly year over year.

And then like backlog is at near record levels. So total backlog is still up about 2%.

Yep great. Okay. Thank you very much appreciate the thoughts.

You're welcome.

Thank you and the next question comes from Jason Rodgers with Great Lakes Privia.

Oh, Yes, I Wonder if you just make some comments on any new developments as far as the outsourcing trend in the U.S., that's picking up any steam at all.

Yeah sure the Oh.

We continue to have customers I'm talking to us about outsourcing as I've mentioned before I think the models will be somewhat different in United States and they have been in the UK and <unk> and I think there will be various models that come into play, but we're still on track.

For the revenue gross that weve revenues than we'd expected revenue growth than we'd expected and we don't.

Don't have any reason to change that do so we still think thats a positive.

Grower for our business and we continue to see the same in fact, what are the things we talked about a is that we.

Our spending money again in the service business you have to spend in front of growth. That's always true in every business, but we have to spend money in front of growth to get people ready for future revenues and so we clearly have seen that when I suspect, we'll see that in the back half of the year that we will have but we'll be spending ahead of future growth in the business.

And speaking of spending for future growth or looking at the age FSS segment.

Operating income was held back somewhat by the investments there.

Is that that the expectation over the next few quarters.

I don't know about next few quarters I definitely would say.

The next quarter I'm pretty sure. That's the case and then the question is how quickly the revenue comes in to support it but we are can we are continuing to and expect to continue to spend for growth going forward.

The question is how quickly the revenue comes along with it but orders of magnitude.

We're still thinking double digit got to kind of profitability. So it's not like were again, we're not anticipating going from.

You know, where we are now to 8% or something like that it's more modest conversation I think.

Yeah. Thank you.

Thank you and the next question comes from Chris Cooley with Stephens.

Good morning, and appreciate you taking the questions and congrats on a really strong fiscal second quarter.

Just maybe two for me on the growth side, Walt its little bit uncharacteristic for you to raise full year guidance. After the second quarter I'm looking back here.

Historically, that's a threeq you event for you so with a strong fourth quarter palm that Youve referenced a number of times here now this morning.

Could you maybe just help us think through all the different puts and takes here in the back half and what really gives you that much competence.

And just kind of revised range when we look at both.

Revenue and earnings and cash flow.

And then I have a quick follow up as well.

Sure Chris.

First of all we've discussed that these tuck in acquisitions raise our revenue a point and we moved a point in half and you know we needed to move because of those and for another half a point, we thought that was well within what we should expect and we kept the range roughly the same so at a high level. That's that's really the.

Simple description.

When we <unk> on the earning side again Ah theres. The the first component is indeed, the piece that we talked about with the Oh the business development. So those acquisitions do provide some level of earnings but then in addition to that we've clearly seen our plants are running full and when plants run.

Full they tend to do a little bit better that's that's a the expansion and we continue we haven't talked about it but we continue to do more and more insourcing.

And so our plants. In addition to adding volume are continuing to in source and that's a.

<unk>.

That just squares of the impact because you're growing and your insourcing. So it makes it even better.

So that's the those are the positive things that we did leave the range in earnings roughly the same which.

For the year, we only have half year to go but we still haven't seen.

Hi, stack sort out we still haven't seen Brexit sort out we still have a trade is every other day conversation so.

Let the range as it is because we do think there's a bit more uncertainty of what may occur but given.

Given what we have already put in the bank and what we anticipate and the orders we have in hand in the orders we see coming.

We just thought it was advisable to move up.

Understood appreciate additional color and I apologize hopping between a couple of calls for this morning. My final one is just on the cash flow guidance and.

It's hard to nitpick at what's essentially 10% of sales at the midpoint of guidance, you know really really healthy cash flow target for the year.

But we're not believing that much levers there it looks like it's the Capex Delta that's really now going into cash flow. So.

I guess, just bringing together I understand you have to spend to continue to grow when there's been a lot of investment in A.S.T., but.

Is this kind of as good as we can get when we think about cash flow going forward or is there opportunity for greater leverage from a cash flow perspective, as we just kind of think dramatically over the next three years as you start to leverage some of the different investments you've made in the capacity comes online and gets you.

Logs today estee, thanks, so much.

Hey, Chris This is Mike So good question and all we did you are right in the guidance as we have taking down.

Capex and we did increase cash flow by the exact same $20 million, but what you're not seeing is we do not just free cash flow. So there is another roughly $15 million of impact to free cash flow for the acquisition. The integrations are restructuring costs are still coming it impacting.

So if you were to back those out you would add another $15 million, which I think what help solve the issue that you're looking for and instill doing a nice job of generating solid free cash flow.

Super Congrats on a super quarter. Thanks.

Yes, Chris.

Thank you and once again. Please press Star then one if he would like to ask a question.

And the next question comes from Matthew Me, Sean with Keybanc.

Great. Thanks for taking questions well Nike Julie and congratulations on on really continued strong momentum in the business I'm. Thank you Sir.

Just a quick question on on the sites that you're in the N.S.T. and the sites at your your.

Opening expanding could you give us a sense of of the breakdown between you know ido gamma E beam, and whether or not that to U.S. capacity or international capacity.

Yeah.

We're doing so many Matt [laughter] that Apple my head.

That level of break jobs will top I will tell you that we do announce those on our website and so if you want details you would you could easily pick them up off of our website, but at a high level I can say the preponderance of the openings, both U.S. and globally, our radiation based not ethylene oxide.

I'd base that we are growing.

Our capacity in ethylene oxide and we have have grown it in both the U.S. and Oh, U.S. and orders of magnitude you know roughly in line with with our expectation of what the growth will be which is more of that 5% to 7% range.

And but on the other hand on the on the.

Radiation side, we have expected a bit faster growth and so we are growing our radiation business again, both in the U.S. and over U.S. more rapidly even than that have and continue to.

And all things being equal.

We are expanding much more in either E beam or X ray than we are in COBOL gamma radiation.

And we see those as being complementary and so but generally speaking, we're expanding in either x. rayed or E beam in or both.

In or around Cobal facilities, we already have as well as locating some in new sites and the reason for that is customers.

May not be comfortable or said differently would be more comfortable moving to exar E beam, if they have cobal backup as the one thing and it all so that's also where the customers are that need radiation. So it's a combination of those two events. So generally speaking.

We expect see cobal around a long long long time, but more of the growth of the business. We expect that happened in either E beam or X ray so those forms of radiation.

Hey, Matt just for some context, a if you look at our Ito business. Our E. O is about 25% of total S.T. revenue. So that gives you some context of the impact of video with our facilities and the total revenue for the year.

I mean, it and maybe this is this isn't this is a bad question right I tend to ask a lot.

[laughter].

How interchangeable our some of the products you know between E O and and gamma isn't there are certain percentage that that could switch and the same question you know eo versus versus the E beam and X Ray.

Yeah. If you can answer that kind of gas versus radiation in short add any O specific specifically you know gas there is a small percentage or product that can be done with either one of numbers. They are.

For lack of better term semi interchangeable we happen to have some product of our own that we used our lives that we know we can do either way, having said that the preponderance of products are one or the other.

Because.

The the it's not that they both wouldn't sterilize in most cases or some cases, where they actually wouldn't sterilized because the radiation or for gas can't get to the product, but generally speaking they can sterilized you ruin the product with the sterilization methodology and so.

Obviously, we can't run the product, while we're sterilizing so at a high level.

I'd say, it's and this is ballpark, but you know maybe 10 or 15% of either one could go either way, but we're not talking 90% that can go either way to decide at a high level. So there is some substitution possibility but limited.

Having said that that's why we have virtually every form of sterilization on the planet because what is really good do you do in hospitals for reprocessing, where we commonly use headed for oxide is almost useless for most industrial sterilization, where we're doing it the first time and things that are pretty.

Package for a variety of reasons.

The same is true for most of the gas versus Oh steam for example, steam is commonly used in hospitals is completely irrelevant industrial because that's already package and so you would be ruining the packaging if nothing else and it probably wouldn't work anyway. So at a high level. It's very limited now when you come to the.

Inside of.

Radiation X ray versus E beam versus cobalt there the combination of X. rayed cobalt, there's much more substitute ability if you will and it varies based again on the device itself the packaging in the device that the way it is put in place so.

There is much more substitute ability.

In radiation versus radiation, there is very limited really substitute ability gas to radiation <unk>. Okay. That's that's actually very helpful and I really appreciate you, giving all this color.

On this business on the conference call.

And then just moving to margins I rooms.

Yeah, especially on health care products, where we're now moving into that Internet mid twentys level. It appears and I remember you talking previously about you get a you know you get a little bit worried once you get up and that enter into that mid twentys level or have we kind of reached a point, where where those are about to level out.

You know Matt your problem is you've been covering us too [laughter], we're going to be looking for a new analysts have only been around six or seven years, because I haven't said that preserves the seven years.

You know.

The short answer is <unk>. There is no business that we don't believe we can improve and so we're always working to improvement.

In any business, there's a point at which for any product line or any space.

You know you risk.

Creating a price umbrella and other competitors decide to take that business from your because of pricing. We monitor that very carefully. We that's why you as you know, we we reduce costs faster than our profits rise because we tend to play some of that cost production back into price, if you will or not raising prices is not that.

Were.

Cutting prices usually it's it is that we're not raising prices to that's a part of our mantra.

Yes, you are correct you get a certain levels you have to start watching that but the other side of this you. After a number is.

Our or less return on sales is not the only determinant of whether things are priced correctly or or whether it's harder difficult to enter to compete.

Oh I see is also a very very important component in fact more important component and so.

Some of those products that are making very healthy returns on sales we have to invest an awful lot of capital to get there and whether that capital's capital.

You know intellectual property types or capital or whether that is purely capital spending kind of capital or.

Inventory and receivables kind of capital working capital.

We also watch at very carefully we're comfortable with where we are and you know I'm not ready to declare an end as I think I said, maybe four or five years ago. When we get to 20, we'll talk about it well.

We're talking about it so.

So we're we're not feeling any natural cap.

Yes.

Right and actually I know last one I'm I'm done of all of the small deals that you you done. It is there any of it you want to particularly call out as being you know as being a long term growth driver something that's a pretty good at this point something that's a pretty nice adjacent see what too.

To what your strategy looks like.

No not at this time. These are these are tuck ins I think each one of them will help there they're spread kind of across the various.

Product lines. So it's not like there's forums that in one product line, that's going to change things when we and HSS. When we were buying three or four companies at one time that was significant.

Because it was concentrated these are spread out even though most government healthcare products are spread out across the very different product lines and health products. So in total does that does that enhance our health care products business, absolutely, yes does enhance our ability to serve our customers are hospitals better yes, but these are these are not the I'll call it world change.

I think acquisitions.

Thank you very much.

Thank you and then ask questions a fall from Larry Cushe with women James.

Hey.

Well I.

Hi, I suppose that at the AD com, there will certainly be discussion around.

Alternative sterilization methodologies.

And again I I certainly recognize bad.

You know just her purely practical perspective.

Gas is going to remain a key sterilization bode for many many years.

But just on alternate.

Do you see any out there or are you do you guys have something that.

That.

You may be developing that could be a viable I'd say large scale commercial alternative to ER to gas to email gas.

You know Larry.

First of all we don't discuss future product to fried development acquisitions for a reason.

So that's kind of statement number one we are presenting on one alternative which.

We'll be is and will be used in this space.

It which is a hydroxide for this space, but but it's our own view and and we see as you might expect everyone who has a thought for a novel thought about how one might sterilize something when they think about who they should go to to see if it works and or to see if.

We can commercialize it since we are the brought as deep as widest sterilizer in the world.

It it has a habit of coming to us one way or another and and I can say unequivocally that for the.

Short to intermediate term and I'm talking not.

Days and weeks I'm talking.

Years and decades.

We do not see an alternative of scale that will change the ethylene oxide.

Picture for industrial sterilization in the world.

Okay very good thank you.

Thank you.

As our no question, it's a president Tom I would like to return the for the management for any closing comments.

Thank you everyone for joining us again today and for your continued support and we look forward to thing.

On the road in the coming.

Thank you.

In France has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.