Q4 2019 Earnings Call
Good afternoon, everyone does the operator in today's conference is scheduled to begin momentarily.
So that same or lunch will again be please don't hold thank you for patients again. This is the operator in today's conference is scheduled to begin momentarily.
So that time or lights will again be please don't go thank you for patients.
[music].
Good afternoon, everyone and welcome to the Q4 2019, I see you Medical earnings Conference call.
At this time all participants are in listen only mode. Later, we'll conduct a question and answer session and instructions will follow with that type.
If anyone should require assistance. During this conference. Please press Star then zero on your Touchtone telephone.
I would now what they had a conference over to your speaker today Mr. John Mills.
Good afternoon, everyone. Thank you for joining us today to discuss the I see your medical financial results for the fourth quarter 2019.
On the call today, representing our acute medical Isabel Jane Chief Executive Officer, Chairman, and Scott Lam Chief Financial Officer.
One of what everyone knows that we have a presentation accompanying today's prepared remarks to Buda presentation. Please go to our investor page and click on events calendar and it'll be under the fourth quarter 2019 events.
Before we start are prepared remarks, I want to touch upon any forward looking statements made during the call, including beliefs and expectations about the company's future results. Please be aware there based on the best available information to management and assumptions that are reasonable.
Such statements are not intended to be a representation of older adults and are subject to risks and uncertainties, which results may differ materially from management's current expectations.
We refer all of you to the company FTC filings for more detailed information on the risks and uncertainties that up a direct bearing on operating results and financial position.
Please note that during today's call. We will also discuss non-GAAP financial measures, including results on adjusted basis.
We believe these financial measures can facilitate more complete analysis, a greater transparency and I see medical's ongoing results of operations, particularly when comparing underlying results from period to period.
We've also included a reconciliation of these non-GAAP measures in today's release and provided as much detail as possible on any attendance or added back.
And with that it's my pleasure to turn the call over to go back.
Thanks, John a good afternoon, everybody a fourth quarter fiscal 2019 showed sequential revenue improvement and commercial stability in our most valuable product line and allows us to hold firm on our view of profitability in the near term.
For the full year of 29 chain, we delivered cost improvements on the piano from T. yesterday, and other operating expense savings that allowed us to best offset revenue declined versus 2018.
When we reflect on the year and at least where very glad it's over we were able to one stabilize our operational platform. After our systems cut over in late 2018.
To survive a rapid deceleration in the IB solutions segment, which was always expected, but not necessarily at the pace. It came.
Three handle some unique backwards revenue situations in consumables.
Well for finishing the year with the best list of customers. We've had since we acquired H.I.S.
Five deploying some capital some capital sensibly with all of the other issues, we faced and lastly, advancing our product quality and service levels to the customer.
We do believe the majority of issues.
Hi, just from an operational perspective that the earnings impact and recovery with adequately captured in our previous commentary.
And that 2020 becomes a year that is about commercial execution and showing ourselves and our investors that we can grow our businesses.
On today's call we wanted to comment on Q4 and full year 2019 results and discuss our current view of the business and recent performance trends.
We've been a few quality items given some of the recent industry developments provide an update on the actions we've been taken given the 2019 changes and the last integration items.
A quick comment on any corona virus related knock on effects for us to date.
And our.
Outlined the criteria, we're judging ourselves by and our near term goals and how they fit with the longer term positioning of the company and the opportunity for value creation.
Meaning in plain English, how do we get back to growing our differentiated product lines that adding cash to our balance sheet quarterly comparisons will get easier for us. After Q1, 2020, but we don't really care if it doesn't show up with cash on the balance sheet.
Q4 was a reasonably clean quarter and showed the gross margin pressure. We described in mid 2019 as the production slow down effects came through the piano.
The company's operationally running well the competitive environment seems have stabilized a bit and we do not have any material production constraints any longer and most manufacturing work has been around optimizing the Ivy solutions production environment. The income statement with straightforward with sequential stability in revenues that allowed us to deliver fiscal 19.
The EBITDA down the middle of our revised guidance from last August.
We finished the quarter with 297 million and adjusted revenue adjusted EBITDA came in at 61 million adjusted EPS came in at $1.94 and cash was 293 million.
Adjusted revenue was down 7% quarter over quarter on a constant currency basis due largely to the Ivy solution segment. There were no unusual charges restructuring integration charges were down to 11 million.
Starting as usual with infusion consumables, which is our largest business confusion consumables had revenues of 120 million in Q4, 29 team, which implied a 1% decrease year over year adjusted for currency and 2% decrease on a reported basis. It was a bit of a mixed quarter for us we expected it to be maybe two to three.
The million better than it was.
And to go into a little bit more detail U.S. volumes were okay, and the customer wins, we talked about previously were implemented and this offset some of the back these offset some of the backwards items, we talked about on the previous calls.
Where we did have some variance was first in Europe, and a few select international markets, which was probably one of the half to 2 million light to our expectations. The remainder was in oncology consumables, where we did solve our production constraints in Q4, but we did not get all the volume we expected implemented at customer sites basically to be.
What we had customers at a holding pattern for months. We then released the production and didn't have enough time left to do the proper implementations Europe appears to be improving so far in Q1, 2020, and we've improved our process for implementation planning there's been no change the demand for our oncology consumables, but the number of desired installs does.
As required better planning from us.
On the last call. We did go into more detail on some of the individual subcategory issues that hurt in 2019 to explain what was going on there while there was no major customer churn et cetera.
To aggregate that for all of 19, we had somewhere around 15 million of slippage backwards. In this segment across take go Swabcap and some price harmonization between legacy I see on legacy Hospira.
We believe most of that is behind US and provides a better Florida start 2020.
It's early but we're pleased with our acquisition of pursuit vascular the people and the team share our values and the products are helping customers deliver better quality outcomes for their patients we havent tinkered with it very much and are primarily focused on supporting the team to broaden awareness of the product and starting to work and how the core technology.
Our consumables business over time.
The rest of the segment was pretty much as we expected. This is a segment where were the most advantage and we have all the pieces all the technology all the scale to compete globally and should be ever it should be able to offer more value. The customer for 2020. We believe this segment gets back to growth in our assumption for now is in the mid single digit range.
Moving to infusion systems, which is the business it sounds like pumps dedicated sets and software which is important because it's a business that brings in a lot of recurring revenues and helps to support our competitiveness in consumables.
This segment at 85 million, an adjusted revenue, which was down 7% on a constant currency basis, and down 8% reported which was inline with our expectations. As a reminder, we had a very strong Q4 2018 at Ivy systems.
But most importantly for the LDP pumps segment. We finished the year strong in terms of competitive customer signings and are confident that we've stabilized the 10 plus year install base decline.
Given the recent industry news there in many investor questions around the implications for us let us first walk through our views on the events and any knock on effects to us and then how it could impact our year.
First infusion pumps or some of the most highly scrutinized medical devices by the FDA.
Each year really since 2010, the regulatory compliance bar has been raised with new standards and it appropriately forces customers to look deeply at the choices and focus on the right areas of stability safety and track record of innovation.
Now our team has a unique experience of working at a senior level at two of the three primary manufacturers in the category.
Our collective lesson is when the industry lives in a glass house don't throw stones.
We've been asked if we could face the same scrutiny that others are facing an industry and the truth is that's the reality of the business. We prepare ourselves every day, we don't skimp on Resourcing and we focus on building compliance into our operations each day to do our best to not make regulatory compliance and event.
We want a high complexity and high standard for regulatory authority in the category as it makes market share capture difficult for any new entrant.
Second as we look towards any potential implications of the recent industry news, we would say it's too early to tell what the impact could be we will not speculate on this situation other than what has been commented publicly regarding timing.
We do know that safety is a critical factor when choosing infusion pump.
We believe our palm LTP technology is positioned well as evidenced by the recent clinical ECRI and I SMP guidelines around Ivy pumps, UL cyber security certification and the other technical evaluations like class.
We've gotten back to the core marketing message around our plum Lv pump as these independent and clinical reviews have validated our differentiation.
So on the margin recent events are probably good thing for us long term in the core LDP segment of our infusion systems business. However, small percentage of sales in our infusion systems segment is from non LDP products. We do have some headwinds on the periphery from the non lv products in the segments such as the dedicate.
Weighted prefilled are empty syringes for the PPA pumps that we get from Pfizer, Rocky Mount and certain ambulatory products.
Since the last call Pfizer supply, a PPA vials and MP syringes has become more consistent and we do not see much backwards slippage in that line.
As we thought about fiscal year 20, we plan for some deterioration in our non Lv product lines and we thought the wins were holding in LDP pumps could finally have the business close to flat on an annual basis.
Part of the previous comment, it's really difficult to precisely handicap exactly what happens competitively with recent events for 2020. The most comfortable we would say right now is flat plus or minus a little we continue to feel like we're in good dialogue with many customers across a range of geographies.
Finishing the segment discussion with infusion solutions, we had 81 million and adjusted revenue or down 14% year over year flat sequentially like last quarter, we did see and feel some more stable footing here right now at these levels, we will skip the usual solution. Some speech for this call and just cut to the chase.
Commercially we did have some wins that have started to come into the book These wins allowed us to handle the changing competitive environment better as we stepped in to defend our market share and handle the continued erosion of our non committed business. We continue to believe the quality of our customer book has improved from us holding the best list.
Staying nimble relationships versus a day, we bought the business and we've survived the bleed out of the majority of our trading oriented business.
Operationally the items, we described on our Q2 call last year, including reduced production with extra down days adjustments to Pfizer purchases et cetera have made their way into the PNM and showed in the lower gross margins in Q4.
To go through the laundry list of items of the laundry list of items in the business.
First on the manufacturing variances, we've gotten after as much cost as we can and we're running the best model for the time being.
On the supply chain costs are adjustment to move to a more efficient warehousing and distribution model is in flight with our new center starting to come online in Texas.
I would have the same commented last call, it's a bit slow, but it doesn't make sense to destroy product versus moving into our own facilities. If it's perfectly fine sellable inventory.
In the short term, we feel like our comments from Q2 2019 as the business has been stable still apply and continue to feel that way for this year.
Longer term from a value perspective, we feel the business unit to be stable.
On the positive side, we've added new customers to our book are forecasting less production and sales as inventory goes down and that will normalize late in the year and into next year and we are bringing on line new production in Austin to allow us to move away from Pfizer Rocky Mount on the highest running skews.
We've also flipped the switch on our system conversion in Austin, which was our final integration activity, which we believe can lead to longer term efficiency.
These are balanced against the reality of the competitive environment and acceptance of risk on the small amount of non committed business we have remaining.
Basically we're trying to make sure the business unit is not a value to tractor longer term from where we are today and have modeled it as such.
To synthesize the comments on the business segments.
For us the criteria and lens, we are judging ourselves from at this time has to be the ability to improve our position in our most differentiated businesses of Ivy consumables, and Ivy systems and to prove stability in our less differentiated businesses.
We talked about the industry structure attractiveness for two years, why we fit in the puzzle and our products are in a good position from a technology quality and manufacturing perspective.
And we think today, we have the best right to win across our portfolio. Since we bought the business. So 2020 for us is about commercial execution.
Moving to housekeeping items, we ended Q4 with excellent global fulfillment rates to our customers the core I T cut over activities in everything non Ivy solutions was completed in 2019, the cut over Austin systems is happening as we speak and we'll update status on the next call. Then we are fully stood up in our attention.
Will shift to optimizing what we've done.
From a quality perspective, not much really to report is there were no material audits are inspections in Q4, we're still awaiting the next Austin inspection and we are prepared.
A brief comment on Corona virus.
On the eastern Hemisphere, we have a very small amount of sales via distribution into China.
To date, we've seen no change what is more in our minds is supply chain of components from China.
Solutions is a north American business only in consumables, we are deeply vertically integrated can make just about everything ourselves in our factories outside of the currently impacted geography. So as a reminder, our four factories globally or in the US Mexico in Costa Rica.
However, we do source most of the core electronic components for the pump business from China.
We have months of components stock on hand, and we will further secure this necessary where possible.
From the Western Hemisphere, we do a healthy business, an infusion consumables in Italy and in particular northern Italy.
As anyone who has followed the infusion industry knows northern Italy also produces a number of infusion consumable components.
It is too soon to have any view if anything has been impacted to sum. It up so far we have not experienced an immaterial impact either commercially or in terms of supply chain. However, we cannot predict how the situation will evolve for the rest of the year and will provide future updates as appropriate.
Okay. So bring this all back to the topic of earnings results and how we think about 2020.
Ultimately it comes down to growing our differentiated highest margin lines and running ourselves as efficiently as possible overtime.
The only change in our SGN a year over year has some commercial investment adding back to our incentive pool program.
Or infrastructure that came via acquisition.
Our puts and takes for 2020 are summarized as follows we believe in a return to growth in consumables driven by oncology some wins in the base business and some supplement from pursuit vascular and stopping or bottoming out the lines that were going backwards.
In Ivy systems, we think we had the best chance we've had in LPP pumps to date.
In an Ivy solutions, we have the manufacturing savings that we moved on last year.
These are viewed against the competitive environment in IP solutions erosion of non Lv product lines and margin in the short term on LDP capital sales.
We do believe from a revenue perspective, we start to look again like in normal company as we finish lapping all the solutions volatility after Q1, but thats really optics.
From an EBITDA perspective, we believe our previous commentary still applies that for the time being it's best to remain at 60 to 65 million a quarter, we continue to be cautious given the environment and what we did to our shareholders and ourselves when we rebased our view in Q2 last year and want to make sure we have the flexibility to come.
Pete across all of our product lines.
Given the spend on pursuit and the events of 2019, we didn't put material cash on our balance sheet. We do want to start that again in 2020, we believed that even with a little less cash we have a safe and strong balance sheet that can protect shareholders and be deployed for value creation as opportunities emerge we've made significant capital investments into our factories and so.
Systems over the last two years and are in the final stages of some major production upgrades with more vertical integration sterilization across our network, new tooling and an investment mindset for quality and growth. We have a set of strong experienced people to do the work and we have a culture of not wasting shareholder resources in respect for our capital.
As always I'd like to close when things are moving fast we're trying to improve the company with urgency and we're trying to take responsible actions and break some of the nurse show that many in our companies in our position face 2019 was the toughest year. Our team had in our 10 year Nice you the company will be stronger from the experience.
I really appreciate the effort of all combined company employees to handle the bumps move forward focus on improving results and our company appreciates. The support we've received both from our customers and our shareholders.
Before I turn it over to Scott.
This is the last time I am saying that sentence. After six years as Scott is retiring after 17 years with the company with the last three years felt like 10.
I wanted to say thank you on behalf of all colleagues.
We took a company whose core existence might have been question five or six years ago and turned it into an important industry participant and an interesting and fun place to work that required an unhealthy amount of work and we could not no way know how have done it without you I appreciate your friendship and partnership over the last six years and wish you some down.
On time.
So with that I'll turn it over to Scott.
Thank you for that Vic and good afternoon, everyone.
To begin I'll first walk down the PM element take a little talk a little bit about cash and the balance sheet and finished with some detail to our guidance for 2020.
So our fourth quarter 2019, GAAP revenue was 316 million compared to 340 million down 7% from last year and for your reference the 2018 and 2019 adjusted revenue numbers, which exclude contract manufacturing sales to Pfizer at cost can be.
Seen on slide number three of the presentation.
Our adjusted revenue for the quarter was 297 million compared to $322 million last year down, 8% or 7% on a constant currency basis.
Infusion consumables were $120 million down, 2% or 1% on a constant currency basis.
These solutions, which we primarily sell in the U.S. were $81 million down 14%.
Infusion systems were $85 million down, 8% or 7% on a constant currency basis and critical care was down 2 million, 13% bolt on an adjusted and constant currency basis.
Adjusted diluted earnings per share for the fourth quarter of 2019 were $1.94 compared to $2 in 14 cents for the fourth quarter last year.
Our adjusted earnings per share for the quarter was favorably impacted by approximately 21 cents related to year end screw up some excess tax benefits connected to equity compensation.
We estimate our GAAP and non-GAAP tacker tax rates for the full year of 2020, not including these tax these excess tax benefits from equity compensation to be in the normalized range of 21% to 23% with the non-GAAP rate at the upper end of that range and finally as.
As expected adjusted EBITDA decreased 12% to $61 million for the fourth quarter of this year compared to $69 million last year.
As you can see from slide number seven of the presentation. Our adjusted gross margin for the fourth quarter was 40% compared to 42% for the fourth quarter last year. The two largest drivers for the year over year decrease were similar to the last quarter.
We are similar to last quarter and include the impact from the ramp down of Ivy solution production.
And the associated loss overhead absorption and additional supply chain costs related to higher than optimal inventory levels.
For 2020, while the changes minimal we've updated the methodology for calculating the growth our gross margin in order to conform with the presentation of our other non-GAAP measure measurements, including adjusted EBITDA and adjusted EPS by excluding amortization and stock based compensation.
Expense.
A comparison of the historical an updated calculations of adjusted gross margin for 2018 and 2019 by quarter is provided in the slide presentation.
The impact of the change is to increase adjusted gross margin by 23, and 33 basis points for the full year 2018, and 2019, respectively.
For 2020, using the updated methodology, we expect gross margins to be between 39 and 40% similar to the second half of 2019.
As expected year over year SGN, a decrease approximately $6 million and was 22% of revenues. The decrease came primarily from TSA savings as a result of separating from Pfizer and lower incentive compensation related to performance.
For the first time since we bought Hospira infusion systems, we expect an increase in SGN a for 2020 due to a reset of incentive compensation and the acquisition of pursuit vascular.
As a percentage of revenue R&D expenses were relatively flat year over year at $13 million and we expect R&D to continue to run approximately 4% of revenues in 2020.
Restructuring strategic transaction and integration expenses were down $30 million to $11 million in the fourth quarter versus $41 million last year. This is primarily the system integration costs for our often manufacturing facility.
And a onetime charge to move our us pump service depot to our existing Salt Lake City facility.
In 2020, we expect to spend approximately $30 million in the first half with most of that related to our Austin manufacturing facility integration with a significant decrease in the second half of the year.
Now moving onto cash in our balance sheet for the quarter free cash flow was $25 million.
After the purchase of pursuit vascular in the fourth quarter, we ended the quarter better than expected at $293 million in cash and investments as we reduced inventory and continue to reduce dsos.
By the end of two 2020, as we continue to make working capital improvements such as reductions in inventory, we expect to have over $350 million in cash and investments.
This includes a one time 22 million dollar payment to Pfizer expected in the first quarter related to the take or pay charge that was recognized in the second quarter of 2019.
In the fourth quarter, we spent 20 form $10 on Capex and similar to the third quarter was primarily related to general maintenance system integration capacity expansion for consumables business.
And transferring a portion of contracted solutions products from Pfizer to our Austin manufacturing facility.
In 2020, we expect to reduce spending on capex by approximately 10%.
For 2020, we expect our adjusted EBITDA to be between 240, and $260 million and adjusted EPS to be between $6 in 50 cents and $7 in 20 cents and just to reiterate adjusted EPS include a normalized.
Tax rate when compared to 2019.
And for modeling purposes, we expect diluted shares to be approximately 21 and a half million.
Lastly, as I move to the next chapter I did want to say a few words on Brian Bendel, our incoming CFO.
Brian has been inside the company now for almost two years came with financial oversight for the exact same products at another industry participant.
As a terrific work ethic and as a 10 plus year relationship with the Vac Christian Virginia, and the rest of the team.
I could not imagine a more smooth transition.
For me, it's been an amazing experience. The last 17 years has been a worthwhile last several several years working with the vac and the rest of the team.
I want to thank everyone I've worked with that I assume medical and I look forward to the next chapter in my life.
And with that I'd like to turn the call over for any questions.
Sure participants if you have any questions at this time. Please press Star then number one in your Touchstone telephone. If your question, it's been answered or you wish to remove yourself from the Q give me press the pound Keith.
And your first question comes from the line if Matthew mission.
Keybanc Matthew your line is now open.
Excellent. Thank you for taking the questions I guess.
Hey, Hey, just started off effect.
Is 80 million the right run rate in Ivy solutions from here Im just trying to get confidence in that rate as you as you work through.
Some major contracts and I think are still up in 2020.
Sure I mean, I think when we called it down last summer I think we said 75 to 80 was the range we've averaged above that and I think you hear us, saying, we continue to believe somewhere in that range.
[music].
Is the right range I don't think we have a difference you have anything we've said historically.
Yes.
And then just any thoughts on our part of flu benefit in either.
Fourth quarter or in the first quarter 2000.
We had the opportunity we did we did.
Get some calls if we would like to.
But a bit more maybe into the channel on the notion that flu started off very strong in the fall.
We chose just to kind of stick with normal business. So we did not get any benefit in flu and.
Right now into the.
First quarter of this year, we haven't seen anything unusual.
No but.
And then on moving on to the infusion pumps.
Is it possible that you can say when when Klum LDP last went through a five 10-K update with.
And we'll including some of the software updates.
And then as a follow up to that just didn't in early conversations how willing are hospitals to dual source infusion pumps.
And given the history why not a certain level of redundancy in supply.
Great questions.
For the Plum hardware.
The latest five 10-K that was submitted which was a version 15 10.
Was after we owned the business in March.
2017.
ER April 2017 March April 2017.
Some of the software.
Five 10-K's on bed network earlier than that.
But those are the the facts on what where our latest submissions for.
In terms of the customer.
I think the answer is somewhere in between what you said, which is our experience has been at both places large systems have been willing to have multiple vendors.
Where it gets more complicated people typically don't multiple vendors inside a single building. So a system may say for this portion of the country or this region or the state or this group.
It makes sense to use watt versus the other but typically inside the four wall. It gets more complicated people prefer not not to do.
Okay, and then and now I know you actually AARP has been launching some some new products just curious how the Diana 2.0 platform.
Has been received by customer so far.
And then just relation to that have have they been asking for an end to end close platform from compounding to delivery or is this something that news like a new solution that you're bringing to them.
I think you're afraid I think youre at asked HP, you must have seen this and so.
We haven't talked about a very much I think it's been an limited market release for US we've been reworking. It we brought it back into tweak things a little bit. So it's just starting to get out there.
I think it's the notion of if you look at all these guidelines you look at U.S. Hpeight hundred the notion of.
Closed medication delivery has been a topic for a long time, I don't think or inventing whole new cost there hasn't been an easy solution from a workflow workflow perspective, thats what were trying to bring to the equation I think like all markets. It is early days it requires education and Theres. All these individual fires that happened in different.
Parts of the.
Infusion Jane right. It was it was.
He was on solutions.
A number of years ago right. So.
We got to stay on point and just keep hammering away at our message there and it's about safety and quality and that those are the things we believe we add value in.
All right, Thanks, and congratulations Scott on your retirement. Thank you very much for all the help you've given me over the years.
Thanks, Laura appreciative.
Yes, good working with you. Thank you Matt for the kind words, you were the newest one to the party had so were just teasing you a little bit [laughter]. Good all good.
And your next question comes from the line of Larry Solow CJS Securities Larry Your line is now.
Great. Thanks.
Hi, this is an.
Right.
Scott I will thank you for that that shot I will appreciate I do appreciate all your helps elastic nine years due.
I wish you best of luck as well you deserve you deserve a break so god bless I.
I guess the fact, just a couple of questions. You're just so to summarize summarizing I think it's sort of been sort of your thesis for for a while down.
Keep that solutions business sort of on the flattish.
Ray on the topline and maybe over the next couple of years, some through some margins a little bit that have sort of been reset, but get a little bit back into your pockets as you bring some production in house.
And then grow the other two businesses.
Maybe not so much it's only about 21 and beyond.
You know without going into exact numbers, what you know what is sort of a good target or what do you hope for or [noise].
Expect these two businesses can grow is it sort of a 3% grower a little better than.
What do you sort of aspire to.
[music].
Looking at a high level.
We have to prove our thesis right. That's our point, we we always to ourselves and our shareholders to show that we can grow the businesses. So thesis is a hypothesis right we want it to be reality.
That is exactly right. Our view is we need to show that we can grow the stuff that's the sticky and the most differentiated which is consumables and pumps.
And we got to show stability in.
Solutions et cetera.
I I think we had years of growth in consumables, we had an off year in 19, and we're saying we want to get back into mid single digit range for 20, I don't think Theres any structural reason why we don't think that.
That's not a realistic assumption for a number of years, we used to do that before we had all this stuff.
Pumps is super hard to call right now because of the different lines going into it I think that.
There you know, it's been well talked about what's the market replacement rate in the market.
Expansion into there's not a huge.
Growth in net hospital beds in the country right.
So pumps is about share gains and pumps is about globalization in the right markets and it's about changing the value prop to away from just the box itself to software and other the service and other features versus.
Adjusted dedicated set which has been about historically, so I don't really want to make prediction there.
And solutions is totally about census in holding the best customers, so whatever whatever someone's viewers of use census installations.
And I know you don't guide to the quarter.
And you sort of guide to sort of 60 to 65 million run rate for the per quarter for the year.
In terms of cadence would would you expect to exit 20 on a little bit of a higher bottom line run rate then you start the year.
Yeah, I mean, I think thats, certainly our belief that supply chain stuff the other things.
Kick in.
Right gives us time to get more for C. So.
Right sequentially.
You don't we spend a lot of time on revenue and cost.
We don't sit around and try to perfect and EBITDA by quarter understood.
Right.
Not that big of a company, but general trends, obviously should hopefully position due to build it better.
Just 21.
We havent fully we havent fully lapped we havent I mean after Q1 will fully lap some of the negative stuff that was going backwards right and so that helps.
And the wins got more timing and implemented that helps et cetera.
Right, Okay, just on the other the cash flow.
Particularly working capital and Noah.
You talked a couple of years about capex going down and that's certainly should help your your free cash flow, but I would think the business I just had an operating cash operating.
Cash flow basis should generate a little bit more than it's been doing over the last few years.
As you know you it was positive.
Mr. Obviously did [noise].
Integrated not all probably call somebody but also just looks like on the working capital side, you had more of a usage that you would have thought.
And any thoughts to that.
Okay. Thanks couple of years, you think that's it.
Yes, let me make a comment Brian's here in the room with US let me, let Bryan answer some of that too.
We spend a fortune on integration or just talking about it today and so that was a huge consumer of cash.
That's why I kept has been saying that needs to stop.
That's like more important frankly, the working capital changes right and then once that's done then it becomes very much more important than than the dsos et cetera. Once that's done then all the other activities brides working on.
Pick up.
But the integration consumed a ton of cash and look where we are we.
Add back the cost of pursued were kind at the level of cash we had before this.
Transaction, and we spent hundreds and millions of dollars integration. So I'll just say that was the biggest kind of negative stuff polar user of cash and I'll, let Brian talk about the regular the work streams going on a broader working capital.
Larry This is Brian so for 2019.
It's it's clear that from working capital standpoint.
We used more cash than we probably would have liked.
I think we've made some good progress in Q4.
To reverse that trend and.
The goal would be to continue that.
That progress during 2020, and there's there's an opportunity there.
Got it okay, great and just decided that the capex.
Did I catch the right 30 million total was that just growth capital front have the 30 million Scott refer to that was integrate that's the last of the integration Alcala succeed. Okay. Got you is that 30, a little bit less in Q2 does it add it back half an awfully unless I could not a lot a little less a lot a lot less right.
Right.
Excellent. Thank you well set.
And we have one more question from the line, it's Jason Bedford Raymond James Jason Your line is open.
Good afternoon, and thanks actually have a couple of questions but.
First pumps it looks like you saw some kind of green shoots there was with the quarter on quarter increase did non LTP business grow sequentially.
No.
Okay.
In the expectation is that it's.
No BP is kind of flat to down in 2020.
Definitely down.
Okay.
And then.
Earlier in the year you back you mentioned, a 100 basis points of share gain in LDP.
Have you seen the impact of that on the revenue line.
Did that contribute to the fourth quarter.
Not really that's that's when I said, we believe what we're holding in.
Transactions under contract that we havent implemented yet.
That we felt good between that and what was going down that we had the chance to be close to flat that wasn't really the driver of the fourth.
Fourth quarter, Okay, and just to be clear.
Doesn't look like your guidance assumes any notable share gain as it relates to the current industry environment.
Yes.
We don't want to speculate on anything Thats gone Air things go slowly we've been around the stuff for a long time.
So.
Okay, and and then just on the consumable side is a little softer than I expected.
When you talk about the 15 million in slippage backwards is that just all supply related is that we mean by news backwards.
No not at all I mean in 2000 and.
You know ball ballpark these are not precise.
In 2018, we sold.
$10 million a tagle for example, and maybe we sold half of that in 19 or something product lines actually went backwards.
The we had a big issue with Oems Swabcap, where there's a lot of load in 18. It didnt happen in 19 less dollars of revenue. So individual things went backwards and then a little bit of price harmonization that I talked about that wasn't at all supply related that was why we had to step into pursuit.
Why for the first time, we didn't have consumables growth because we just too much stuff to jump over and the Hospira distributed products, we talked about a little bit historically, there was always a now that even those things were going on year to year in the background. They never shows up on it got to 15 or.
That kind of number it gets much harder to out outgrow that.
Okay.
From a supply perspective, though.
To the extent there was an impact in 19, you enter 20 here with full supply.
No we have very very high service levels right now across the board.
So said differently as I think where you're going had we had our production issues solved earlier in the year I think all of US believe we could have delivered a better Q4, even Q3 oncology number than we did.
Basically we had orders on the books since March we didn't really get the product released until September October and then to call up the customer insight I know you've been waiting for six months can you help us an extra weeks got install the calendar just didn't work out is in many places as we thought we could do that exactly right probably to the June of a million Bucks.
That's up business got away sitting there, we just got to get it on the schedule and get an answer it was frustrating to us. So thats why I said there was it was two to 3 million less than we thought the international markets were sluggish and I think I said that either at the color at an investor meeting midway through last quarter as turned around a little bit right now.
Okay. You said, there's no change in demand for oncology, what is end market demand for from a growth perspective for oncology.
I think a safe number we feel comfortable saying, Jason is sort of like.
North of double digits, I'd say that 10% or better.
Okay.
On the gross margin.
Have you seen the worst from a ramp down a Bobby solutions production.
Many of you see.
Is the bolt.
Impacts behind you now.
All right, let Brian I'm going up Ryan go there just yeah. Jason. This is this is Brian I would say that the majority of the impact.
Shows up in Q4, and 2020 and forward, it's going to just you can assume its margins are flat.
Okay. I guess, we've got a couple of Theres a couple of little offsets Jason like on this systems cutover in Austin right, we lose a little bit of production absorption on things like that.
So for US it's the manufacturing was the biggest chunk that rolled through in Q4, Theres still a few things out there, it's better to be safe and just say kind of days.
Flat for a while we took we took it.
Okay. That's helpful. Thanks, and Scott Congratulations I wish you the best.
Thank you Jason Thanks for all your your effort you spent on the company for years and support and Scott in US we appreciate very much.
I'm showing no further questions at this time I would now like to turn the conference back to CEO Nick Jane.
Thanks to everybody I recognize obviously, it's been a couple of all.
Eventful days in the market here and I'm sure people have many other things going on so we appreciate you spending time with us even what's going on we're very happy last year is over and we look forward to getting back to work and looking like a normal company in 2020. Thanks, everybody appreciate it.
Thank you so much there presenters and to everyone who participated in this concludes today's conference call. You may now disconnect have a great deal.