Q4 2019 Earnings Call
Good evening, ladies and gentlemen, and welcome to any could therapeutics fourth quarter and full year 2019 earnings conference call.
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Well now turn the call over to fill the interim Chief Financial Officer. Please proceed.
Thank you Larry.
Good evening, everyone and thank you for joining us.
With me on the call today Dr. Sharon Blanchard.
Interim Chief Executive Officer, and Jim Laura.
Sector, Vice President of business development and strategic planning.
During today's call Cheryl, Jim and I will review, our fourth quarter and full year 2019 financial results in key business highlights, which were summarized in our earnings release issued today.
Copy of the earnings release is available on our Investor Relations section or web site at Annika Therapeutics Dot com.
In addition, a slide presentation is posted on our website in the Investor Relations section under the events and presentations tab.
We invite you to take a moment now to open a file and followed a presentation along with us.
Please turn to slide into.
Before we begin please remember that certain statements made during this conference call constitute forward looking statements as defined in the Securities Exchange Act of 1934.
These statements are based on our current beliefs and expectations and are subject to certain risks and uncertainties.
The company's actual results could differ materially from any anticipated future results performance or achievements.
Please see our FCC filings for more information about factors that could affect our results.
Certain financial measures, we will discuss on this call our non-GAAP financial measures.
We believe that these measures provide.
I hope investors gain a more complete understanding of our results and it's consistent with how management views our financial performance.
A reconciliation of these non-GAAP financial results to the most comparable GAAP measurement calculated and presented in accordance with U.S. gap is available in the Investor Relations section of our website.
I'll now turn the call over to our interim CEO Dr. Sharyl Blanchard sure.
Thank you Silvia and good evening everyone.
Before we discuss our financial results and outlook for the year ahead, I'd like to start by remembering Anikas, President and CEO, Joe Darling, who passed away unexpectedly on January 29.
When I interviewed to join Anikas Board, Joe talked about Annika, and the people who make up annika with the passion you Hope every leader exhibits about his or her company.
Joe was a wonderful leader and a trusted colleague who led the beginning of our transformation into a global commercial company.
Over the last two and a half years. He sat annika on its current path reinforcing its strong foundation, leveraging its strength and embracing innovation.
Most recently he led the development of our five year strategic plan, which will continue to guide or growth over the next several years.
Joe was a great man with a well deserved reputation in our industry for being a strong leader who is passionate about health care.
No certainly we'll miss his leadership will Miss his character humor and friendship even more.
Our thoughts and sympathies go out to his wife Marine and children, John and Jordan.
We are grateful to Joe for all the he did for Annika and we will continue to work to honor and build on his legacy.
So what do you have asked about Joe's passing.
Well, we will continue to respect his families wish for privacy I can share that in early 2019, Joe informed the board that he was experiencing some health issues.
Following that communication the board and Joe we're in regular contact regarding has helped.
We continue to perform his responsibilities well throughout 2019 and into 2020 and Overdeliver progress against our strategic goals.
Based on an ongoing dialogue and Joe's exemplary performance record the board remain confident in his ability to lead and the board respected Joe's wishes to keep his health condition private.
The board designed in interim office of the present in any event, Joe might need to take a short leave of absence, which she never needed.
He is unexpected passing was a shock to all of us here at Annika.
And we are deeply saddened by his law.
Upon learning of goes passing the board activated the interim office of the president to provide immediate ongoing leadership and oversight of Anikas day to day operations. While we began the search process to identify Anikas next CEO.
After that time, the board had an opportunity to consider what would be best for Annika in light of all the circumstances and in particular to consider the impact on the interim opposite the president structure for the time it would take to conduct the CEO search.
With the support of the interim opposite the President the board decided to appoint an interim CEO.
I'm honored to assume that role and look forward to working alongside the Annika team to continue delivering for our shareholders and other stakeholders.
I have a long history and the biotech in Med Tech World in orthopedics, and specifically with joint preservation and regenerative medicine businesses.
Given my experience in passion for the field I was impressed with the company's achievements and excited by the potential.
I'm confident in the strength of the company's market position and growth prospects.
As I step into the role of interim CEO I am optimistic about the future of the company.
During my time on the board I've gained unique insight into the business strategy and operation and if seen firsthand the growth and development of the organization.
Annika is well positioned both strategically and financially with a talented team that has deep expertise and an innovative product pipeline.
I look forward to working with the board and the management team to capitalize upon the opportunities ahead.
Please turn to slide number three.
I'd like to now discuss the significant progress that Annika continued to deliver in 2019.
Last year, we took significant steps to transform annika into a global commercial company focused on joint preservation and restoration by executing on our five year strategic plan.
We redeployed resources and added World class talent to our leadership team successfully completed the build out of our small internal hybrid commercial sales force in the U.S.
Launched our first surgical orthopedic product packed OSAT under our hybrid commercial model and continue to expand internationally.
We also recently completed the acquisition of Park is medical and Arthur surface, which expanded our joint preservation and restoration product portfolio expanded our commercial capabilities and infrastructure enhanced our innovative product pipeline and diversified our revenue base from our successful legacy commercial partner.
As in distributors.
These acquisitions accomplish these strategic goals and more importantly, they strengthen anikas unique position in the $7 billion sports and regenerative medicine market.
They improved our ability to address significant unmet medical need which will deliver better patient outcomes and drive sustained revenue growth that will ultimately enhance value for shareholders.
Please turn to slide number four.
Joe Austin said that our growth strategy is driven by our focus on the three piece people products and performance.
And in many ways, our 2019 results and accomplishments are a testament to that continued focus.
Let's start with the people last year, we added several seasoned executives to our leadership team to enhance our ability to achieve our growth objectives.
Including Jim Laura Executive Vice President of business development and strategic planning.
Dr., Bob Richer Vice President of research and development.
Steve Goldie Vice President of U.S. sale.
Merely want vice president of regulatory quality and clinical affairs.
Additionally, we successfully on boarded for highly skilled regional sales directors in the U.S. under our hybrid commercial model. These sales directors are currently focused on the full watch attack to set.
Please turn now to slide five.
The recent acquisitions of park is medical and Arthur surface brought a wealth of talent into our organization and further enhanced our commercial capabilities and infrastructure combined they added approximately 40 sales reps and more than 150 distributors in the U.S. to our hybrid commercial model and over 70 international distributors.
These acquisitions enabled us to achieve of level of commercial scale far more efficiently and quickly then greenfielding a commercial team.
We're excited to fully deployed our hybrid commercial model, which will provide annika with a direct line of sight to the market and deliver more favorable economic result.
Turning to slide six in December we commenced the full scale commercial launch of tack to set in the U.S. at the 2019, orthopedic summit and evolving techniques conference or owes that.
Nearly 100 procedures have been completed today and we continue to receive positive feedback from the physician community regarding the therapies ease of use and procedural efficiency.
In 2019, we surpassed our initial gold onboarding five distributors with product availability intends surgical centers.
To date, we've Onboarded 17, new distributors and we plan to grow in leverage the distribution networks at Arthur surface and parking.
For 2020, we expect revenue from tack to set to be approximately $3 million.
Product development for our rotator cuff repair therapy is we're progressing according to plan. We continue to anticipate that we will submit a five 10-K application to the FDA in the early 2021 timeframe.
This therapy is highly synergistic with many product offerings that park is medical and Arthur surface.
Please turn to slide number seven.
Single, our novel third generation Viscosupplementation therapy, combining ha in steroid continued to deliver strong performance in Canada and across Europe.
International revenue from single grew close to 30% year over year in 2019.
The continued growth of single coupled with a strong feedback from both doctors and patients has reinforced our confidence as we advance singled towards regulatory approval in the U.S. market.
We remain on track to initiate the singled pilot study in the first half 2020.
We are in the process of preparing for U.S. site initiation and patient enrollment. We expect this study to confirm or trial design increase our probability of success in a phase three trial and generate data that ultimately will be needed to support a FDA approval.
There are three key differentiators in this revised protocol compared to the prior phase three six Tino to study.
The first is the inclusion of Zibo arm. The second is the addition of a much larger steroid arm in the third is the modification of the patient enrollment selection criteria for targeting our ideal patient profile.
We continue to expect that the pilot study will take approximately one year to complete.
We remain confident in singles U.S. market opportunity, which we estimate to be approximately $1 billion annually.
Please turn to slide eight.
On the regenerative medicine front Weve advanced the clinical development for our cartilage repair therapy Hyalofast.
During the fourth quarter, we continued work on adding new sites, especially internationally, we expect to initiate 10 new sites in the first half of 2020.
The trial is currently close to 70% enrolled and we continue to expect to complete patient enrollment by the end of 2020.
I am excited about anikas momentum confident in our market position and the opportunities ahead.
And look forward to the continued execution of our plan.
With that I will now turn call over to Jim Laura to discuss our integration plans for the park is medical and Arthur surface businesses Jim.
Thank you true.
Please turn to slide nine.
I will start by discussing our integration plans for parkas medical and Arthur surface and touch on some of the key targets that we are looking to achieve a near term.
Similar to our acquisitions were focused on delivering growth we view the integration process as a growth story.
We are deploying an official matrix organization with local management.
Our focus is on adding capabilities rather than consolidating them. When we first announced the acquisition. We were confident that both park is medical and art for surface were highly synergistic with Anikas technology platform and that it's become even more covenant following the completion of though transactions.
Anecdotally I can share that on the commercial side, we have already heard from distributors across all three companies about adding products from the combined company was significant cross selling opportunities.
We are encouraged quite a positive feedback we have received thus far we will work to capture these revenue growth and cross selling opportunities as we continually integration process.
In the immediate term our goal is to focus on quality portfolio Cross training and leverage our consolidated distribution network to commercialize tough to stuff.
Longer term our goal is to optimize our commercial infrastructure reap the benefits from cross selling and increased profitability.
The acquisitions of Parkers medical can offer surface also expand our innovative product pipeline and enable us to increase the number of new products, we will bring the markets in the coming years.
We are currently using our stage gate process to evaluate our enhanced pipeline. Following these acquisitions and prioritize resources towards supporting programs with the highest growth potential.
We will share a pipeline roadmap later this year after completing this assessment.
In the near term, we expect that the acquisitions will be accretive to earnings on a non-GAAP basis by the end of 2021.
Delivered double digit revenue growth.
And contribute to achieving three vitality index had above 25%.
I'll now turn the call over to Sylvia to review, our fourth quarter and full year 2019 financial results.
Yep.
Thank you Jim.
Please turn to slide 10.
Total revenue for the fourth quarter increased 10% year over year to $29.8 million compared to 27 million for the fourth quarter of 2018.
Revenue growth for the quarter was driven primarily by global biscuits supplement products, which delivered worldwide growth of 11% year over here.
Total revenue for the full year 2019 increased 9% to 114.6 million compared to 205.6 million for 2018.
Domestic the school supplement revenue increased 8% year over year for the quarter.
During the fourth quarter, U.S. and user average selling price increased around mid single digit for both Orthovisc and monovisc on a year over year basis.
On a sequential quarter basis, U.S. and user net average selling price decreased in a single digit percent range for Orthovisc and Monovisc.
On a year over year basis, and user volume for the quarter increased 5% for Orthovisc and 13% for Monovisc.
International Viscosupplement revenue increased 24% and 20% year over year for the quarter and for the full year respectively.
Product gross margin was 71% for the quarter compared to 74% for the fourth quarter of 2018.
The year over year decrease was primarily due to certain inventory Chargers and changes in the product revenue mix.
For the full year of 2019, we delivered a strong product gross margin of 75%.
Total operating expenses in the quarter were $25 million compared to 17.2 million in a fourth quarter of 2018.
The year over year increase in total operating expenses was due primarily to higher SGN <unk> expenses related to the acquisitions of Perkins medical and ortho surface.
The U.S. commercial launch of tactics that as well as be higher cost of product revenue.
Acquisition costs totaled 2.9 million for the fourth quarter of 2019.
For the full year total operating expenses were 80.4 million compared to 83.8 million for 2018.
Net income for the quarter with $4.1 million for 28 cents per diluted share compared to 7.7 million worth 54 cents per diluted share in fourth quarter 2018.
Excluding acquisition costs adjusted non-GAAP net income for fourth quarter of 2019 was $6.3 million or 43 cents per diluted share.
For the full year net income increased by 8.5 million to $27.2 million or $1.89 cents per diluted share compared to 18.7 million or a dollar in 27 cents per diluted share for 2018.
Excluding the acquisition costs adjusted net income for the full year of 2019 was $29.4 million or $2.05 per diluted share.
Adjusted EBITDA was 11.1 million for the quarter compared to 12.2 million for the fourth quarter last year.
For the full year, adjusted EBITDA increased 27% to $49.2 million compared to $38.7 million for 2018.
Adjusted EBITDA as defined by the company as U.S. GAAP net income, excluding depreciation and amortization interest in other income or expense income taxes.
Share based compensation expense and acquisition related expenses.
In 2019 acquisition related expenses consisted of investment banking legal accounting and other professional and related fees associated with the ortho surface and parkas medical transactions.
These are talk that the company would not have incurred except as a direct result of the acquisitions.
For the 12 month ended December 31st 2019, we generated approximately $37 million in cash from operating activities and approximately $22 million in cash from employee stock option exercises.
We ended the year with cash and investments totaling 185180 $5 million.
The first quarter of 2020, we used 95 million from existing cash on our balance sheet to fund the acquisitions or park, if medical and ortho surface.
We also completed our 30 million a salary to share repurchase program in January of 2020.
Since may 2019, we have repurchased approximately 600000 shares of common stock under that program.
We have not yet had any shares repurchased under the board approved 20 million dollar open market repurchase program.
We will continue to take a disciplined approach to capital allocation to ensure we are deploying our capital to the opportunities with the greatest potential to create shareholder value.
Please turn to slide 11 to review our guidance and key initiatives for Twentytwenty.
Total operating expenses.
For the year.
Sorry for the full year of Twentytwenty, we expect total revenue to be in the 160 to 165 million dollar range and total operating expenses for the year are expected to be in the 150 to 155 million dollar range.
This includes purchase accounting acquisition and integration costs.
Which is currently estimated to be around $27 million for the here most of which are noncash charges.
Product gross margin for 2020 is expected to be around the low 60% range due to acquisition accounting and related one time inventory fair value Mark ups.
We expect product gross margin to return to the 70% range in Twentytwenty one.
Research and development expenses as a percentage of revenue is expected to increase in twentytwenty due primarily to the initiation of the single Piven study and advancement of ongoing development programs.
Selling general and administrative expenses as a percentage of revenue is also expected to be higher in 2020, as a result of our enhanced commercial capabilities and infrastructure from the acquisitions or Perkins medical and ortho surface.
As Jim discussed earlier, we plan to optimize our global distribution network following the integration to drive SGN a efficiencies.
For the full year of Twentytwenty adjusted EBITDA is expected to be in the high 42 high $50 million range based on a GAAP net income expectation in the $5 million to $12 million range.
Non-GAAP adjusted net income is expected to the to be in the mid 20 to low $30 million range.
Adjusted EBITDA and net income excluding expenses related to acquisition accounting and nonrecurring integration charges currently estimated to be around 27 million for the year most of which again are noncash charges.
Capital expenditure for the year are expected to be between five and 7 million primarily for manufacturing and operations automation initiatives.
I would like to emphasize that this guidance reflects our best estimate for the very recently acquired Arco surface and purpose businesses.
These transactions closed in late January early February of this year.
The final fair value determination of acquisition related purchase accounting may differ from the preliminary estimates once anikas valuation of the fair value of tangible and intangible assets acquired and liabilities. The soon have been completed and those differences could be material.
[noise] and Twentytwenty, our disciplined financial plan is focused on the following four key initiatives first successfully integrating percuss medical and ortho surface, including a refreshed product pipeline road map in the third quarter of 2020.
Second continuing to execute the U.S. commercial launch of tactics that and expanding our fiscal supplement and surgical product portfolios globally.
Cert commencing the single pilot study in the first half of Twentytwenty to advance the therapy towards regulatory approval in the U.S.
For advancing our regenerative medicine product pipeline, including how fast rotator cuff repair therapy and other development programs.
Lastly, with the acquisitions of purpose medical and ortho surface, we significantly expanded our product portfolio beyond our historical focus on Austria arthritis team management interest therapies for joint preservation and restoration.
Going forward, we will report revenue for Threed product lines.
First is the joint pain management therapy, which includes the human and animal bespoke <unk> products.
Second is the orthopedic joint preservation and restoration care products.
Which include capital sat idle staffed and sports medicine surgical products from purpose medical and our <unk>.
And lastly, the other category, which includes legacy products, such as ophthalmology advanced wound care anti adhesion surgical products anesthetic dermatology products.
Thank you very much for your attention I would now turn the call back over to Cheryl.
Thank you Sylvia.
We're pleased with the company's performance in 2019 and look forward to continuing our momentum in 2020.
We are well positioned to achieve our strategic initiatives and we are confident that we're becoming a leader in sports and regenerative medicine, while also doubling our total revenue over the next five years.
We're now happy to take your questions. Thank you.
As a reminder, ladies and gentlemen to ask a question you will need to press Star then one on your telephone keypad.
To withdraw your question press the pound key.
And the interest of time, we ask that you limit yourself to one question and one follow up question then rejoin the queue for any additional questions.
Our first question comes from line of Joe Munda with first analysis. Your line is now open.
Oh good afternoon can you hear me okay.
Yes, we can show good afternoon, and first off I want to convey our sincere condolences regarding the passenger Joe He was a really really great guy.
With.
He said I want to talk to you a little bit about the guidance in the quarter in regards to the quarter itself can you give us some sense of what what was the mix Monovisc Orthovisc and then maybe the contribution from seeing on the quarter.
And then my second question in regards to the guidance can you give us some sense of what the incremental contribution will be from Parkinson Arthur service in 2020 in terms or forecast. Thank you.
Okay. So I see it just want to make sure. The first question is on the Orthovisc Monovisc mix and the second is on single and then the third question is on the revenue contribution from from purpose and Arthur surface in terms of.
The split of revenue for Monovisc, and Orthovisc and Monovisc is roughly 45% to 50% of our total revenue.
For the year and Orthovisc is roughly between 35% to 40% of our total revenue for the year.
Thing all continue to grow very strongly and we had mentioned that for the year the growth a year over year as close to 30% and as a percent of total revenue is roughly about 5% of our total revenue.
For the year over year.
For the year, Yeah, we would like to stick to I'm, commenting on here just because of the inherent does quarterly variability because of our distributor model.
Yeah. So thank you for for your understanding on Oh with regards to revenue contribution. So we provided our consolidated total revenue guidance.
For the year, which is between $160 million to $165 million, we do not plan should provide guidance on a company by company basis.
Having that said I can reiterate markets from a historical standpoint, they achieved a $30 million of revenue in 2019 and delivered 15% growth year over year for 2019, and ortho surface revenue for 2019 was 30 million and they achieved 10%.
Growth year over year from 18 to 19, and our expectation is that they will continue double digit growth this year and into the future.
Okay. Thank you.
No.
Our next question comes on line of Mike Pitofsky with Barrington Research. Your line is now open.
Good evening.
I guess just from a modeling perspective are you going to sort of separately.
In terms of <unk>.
Businesses or are you going to break them out are they going and other revenue how will you be disclosing that Uh huh.
Yeah, so from a reporting standpoint, a will consolidate markets and our from surface. The revenue product families will be recasted I instead of having the historical orthobiologics surgical dermal and other we will.
Be recasting the revenue into three revenue product lines are three families. So joint pain management will be a human and animal bisco supplement products, meaning orthovisc monovisc single and Hyvisc.
The joint.
Reservation and restoration care products will be the surgical products from park is an arco surface as well as our own legacy surgical products like how fast as well as tactics that which is newly launched a in December 2019, all the other product line.
The ophthalmic products, the wouldn't care dermatology products and anti adhesion products will be groups in the other category. I think this provides a better visibility in terms of understanding our office space products, which would now be Andy He management category and the operating room based surgical price.
Products, which we have full control of because of our hybrid and direct sales model that would be in the orthopedic joint preservation and restoration care product line. So hopefully that's clear and its helpful for you Mike.
Probably added an hour.
Okay.
[laughter]. Thanks, Thanks, [laughter] Oh.
And then in terms of the integration.
<unk> expenses is that that's going into its DNA or are they going to be a separate line item for the that each quarter.
Yep so.
So.
The on the estimate the preliminary estimated purchase county integration and acquisition costs, it's roughly about 27 million, they're they're really three buckets and.
Most the majority of that would go through the cost of goods sold line, which is related to purchase price accounting and having to mark up the inventory balance to fair value and this was the reason why in the script section I mentioned that the product Bros. Mark.
Surgeon expectation for 2020 is in the low 60% range and that is due to the result of purchase price accounting, having to mark up a inventory.
Okay.
And the remaining portion will primarily go through SG anyway.
Okay.
And then on not just in this quarter.
By any chance that capex for the for the fourth quarter handy.
Capex is roughly about 300000 for the fourth quarter and close to 3 million for the year.
And just I guess one other question is there any.
Change.
That's a strategic vision.
In terms of.
Right.
[noise] leadership transition capital allocation priorities as there is there any change.
Relative to what we had been hearing about.
<unk>.
Hi, Mike This is Sheryl I'll take that one I would let you know that there there are no changes that the five year strategic plan that we've been talking about is the way we're moving forward and nothing has changed in that regard so no change in assumptions there.
Okay.
Thank you very much.
Oh my.
Our next question comes from lineup, Jim Sidoti with Sidoti and company. Your line is now open.
Hi, Good afternoon can you hear me.
Yes, we can now.
Great I, just want to give more color on that 27 million of charge through integration charges in 2020.
2020.
Well that all the one time in or will those worker at all in 2021.
Yep, So most of the that charge would be I.
One time and most of it is noncash and I think it may be helpful. Given the size and the fact that there's a repeat question for me too.
Yeah, I provide a little bit more color earlier I would think that there are three buckets of these acquisition related expenses. The first bucket is really purchase price accounting, which includes fair valuation of assets and related amortization costs. So the majority of the valuation is gonna be.
Based on what we.
Half at this point will be on inventory and that charge is noncash and we expect that majority of that will flow through a twentytwenty. So that's a one time event.
Some of the purchase price accounting will have ongoing amortization effect, but that's a smaller portion and I'll get into at a high level. The split acquisition costs is.
Going to be a related to banking legal accounting and other professional costs and those are purely onetime.
And integration related expenses are.
Routine in nature from that I agree integration standpoint. These are professional fees and some of it is related to I will be related to system costs and those would be one time as well. So when we look at the the 27 million dollar estimate.
I would say there roughly about 80% of that would be noncash and the majority of that will be onetime charges.
Okay and will will there be more in the first quarter, because that's when the deal closed or will they.
What would be spread out throughout the year.
Yeah, so from a timing standpoint, I would say roughly about third would be in the first quarter and this is due to the timing of the closing of Parkinson ortho surface transaction and the remainder will be roughly evenly spread between Q2 and Q4 of the share.
Okay. So it based on your share count you're talking about it.
Ever better Dollarsthirty your share and your fair and about 40 cents, a battle warmed up in that first quarter.
Roughly yes.
Okay. Thank you.
We have a follow up question coming lineup, Joe Munda with first analysis. Your line is now open.
Oh, sorry, I still yeah I was on mute a real quick so if we werent backing out that.
Impact to gross margin.
Essentially from the 27 million I know you gave us some data and I'm trying to run through the numbers here, but what would product gross margin be without the impact of the 20, some would still be in the mid mid to low seventies.
For 2020.
We.
We're.
We're not in a position to breakout the business and the different line items on on the piano with and without the acquisition what I can share is that the reason why the product gross margin is expected to be in the low 60% range comparing to the preview.
As a historical 70% product gross margin cheapened is due to the noncash acquisition related the expected a estimate at noncash acquisition related adjustment.
We do expect that starting 2021 will be back to the historical a level of product gross margin.
Okay. So there's nothing else in there other than the.
Acquisition related.
Charges that is driving gross margin down yes.
He is that is that the way to think about it yeah. I think there a number of there there are a number of factors as you know the largest one is the noncash item that I spoke about on.
The prior a investor call, we had talked about the product gross margin for the two acquired businesses are slightly lower than Anikas historical consolidated product gross margin. So that is a one factor, but it's a smaller factor and product gross margin as you know it is also a director.
The impacted by pricing. So I don't think on this call. We it's appropriate to get into a detailed discussion on each of these points are the key take away is the main driver for the product gross margins to to be in the low 60% range is due to a one time.
Hi, noncash charges related to.
The park is in ortho surface acquisitions.
Okay, and then just one more here and then on the adjusted EBITDA that you're looking for a 40 757 million in your prior comments.
Regarding acquisition, you know you're talking about and then weighing on EBITDA or having a the impact in wanting in bouncing back and 21 and be non job a profitable as a result can you give us some sense of what impact EBITDA is from the combined businesses in 20 the expectation.
Yes, we.
Our policy is to provide.
The EBITDA guidance and expectation on a consolidated business standpoint, and not break into the individual business entities.
What I can share with you is our goal and we.
Plans in place and are on our pathway to achieve those is to half that you acquired businesses be EBITDA positive as well as be a net income.
Non-GAAP net income positive or accretive for us starting in 2021.
Okay.
Okay.
Right.
We have a follow up question from a line of Mike Pitofsky with Barrington Research. Your line is now open.
Yeah, So sylvia.
The tax rate. It looks like are you guys are expecting more like mid Thirtys <unk>.
And could you could you just I guess explain that and then talk about.
That's sort of.
Forward or do we go back.
Post the integration of all this to sort of a mid twentys range for effective tax rate.
Yep.
The current expectation on the effective tax rate is in the mid to high 20% range. Obviously as you can imagine after the acquisition of two new entities. There's a fair amount of work to do on a number of fronts, including purchase.
As price accounting I'm looking at the tax positions for each of those three individuals.
So there's a lot of.
A lot of detailed work that we're currently focusing on it and we'll look to update and provide additional information in future quarters. The information that we have provided in the earnings release as well as on this investor call are based on our best estimates.
And as you all know the acquisitions just recently closed within the last few weeks has done a lot of work in terms of looking out the two businesses and put together our best set of estimates and throughout this year, we'll be looking to report actual and providing information on the differences and.
Any up material updates that we have.
It's Sylvia.
Okay. So I'm looking at page three of the release, where you're essentially say estimate a provision for income taxes.
<unk> point Sevenmillion on net income.
Obviously, that's 34% and it's the same for the high end.
Are you, saying that your [laughter].
Estimate is.
It's now lower than what's in this release or.
Understand it's very possible.
Yeah, I think there there's a [noise].
Good.
On page three of the earnings release, if you're looking at the estimate a provision for income tax that should equate to about mid 22 high 20%. Okay. Sorry, it's on against pretax sorry, Yeah, what ignored 14 hours already today, sorry, sorry.
Okay. Thank you very much thank.
You're welcome.
I'm showing no further questions in queue at this time I'd like to turn the call back to sure electric for closing remarks.
Thank you for your time today.
We look forward to updating you as we continue to deliver progress toward our strategic initiatives. Thank you and have a great evening.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
[music].