Q4 2019 Earnings Call
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I would now like to hand, a conference originally cielo Investor relations for C., but today's conference call.
Thank you Dimitrius and thank you all very much for joining us today.
Before we begin I would like to inform you that certain statements made by Genmark. During the course of this call may constitute forward looking statements any statement about our expectations beliefs plans objectives assumptions or future events for performance are forward looking statements. For example statements concerning our 2020 financial and operational guidance that.
Development regulatory clearance commercialization and features of new products plans and objectives of management and market trends are all forward looking statements.
We believe these statements are based on reasonable assumptions. However, these statements are not guarantees of performance and involve known and unknown risks and uncertainties that may cause actual results to be materially different from any future results.
Expressed or implied by such statements.
Important factors, which could cause actual results to differ materially from those and these forward looking statements are detailed in genmark filings with the FCC.
And Mark assumes no obligation and expressly disclaims any duty to update any forward looking statements.
Reflect events or circumstances occurring after this call or to reflect the occurrence of unanticipated events.
I'd now like turn the conference call over to Scott Mendel interim President and CEO of Genmark Scott.
Thank you Lee good afternoon, everyone and thank you all for joining us.
Before I begin I'd like to say, it's an honor to be interested with leading genmark diagnostics as a longtime member of this organization I have a deep understanding of our core capabilities and the attractive opportunity in front of mind.
Both of which make me excited to lead this talented and dedicated team.
With the launch of the parks in 2017, Genmark has become a leader in multiplex molecular diagnostic testing.
I am confident the significant and expanding clinical value. The Eplex system offers the health care providers will serve as a cornerstone for genmark sustained long term growth.
On behalf of our employees or myself I would like to thank any mathrani per is nine years of leading our company and the role. He played in the development and launch of reflects that has positioned us to capitalize on this very exciting syndromic molecular testing market.
Before we dive into our recent company performance and we'd like to address the topic that is front and center in the news on our minds and impacting our lives in many ways.
The emergence of Kobin 19, because they developing global health care emergency.
Today, we announced our recent development and initial research use only shipments of Eplex test kits designed for the Sars Corona virus to detection.
Well not on our scheduled roadmap, we quickly assembled a team and in less than one month. They designed manufactured and shipped initial tough to customers validation of our tough design.
It's a clear demonstration of our team's ability to execute and the ability to adopt E blocks to meet a specific market need.
We believe launching a task for that's rapidly emerging viruses wasn't imperative for our customers and their patients.
Beginning last week and are you all version of this test was shipped to our distributor in Hong Kong as well to several key sites in the U.S. that have access to clinical samples.
We plan to use information from these customers to support our submission of an emergency use authorization or easy way to allow hospital to adopt this test for clinical use.
And of course, we will continue to monitor this virus and potentially leverage these development effort into a future version of our existing RP panel.
Moving onto our business performance I'd like to briefly look back at 2019, and recap our progress and achievements that have positioned us favorably for the year ahead.
Last year, we had three primary goals.
The first went to expand our menu for the launch of blood culture identification panels.
The second what's the drive strong revenue growth through increasing placement and adoption of Eplex and the third what's the drive gross margin improvement I.
I'm proud to say that our team delivered on all three of these goals.
In 2019, we successfully launched or E class B C I'd panels, which helped drive strong revenue growth.
Total 2019 revenue was $88 million representing growth of 24% over 2018.
Eplex revenue grew by 59% driven by an installed base of 527 analyzers as of yearend.
We were also successful in or other main objective of expanding gross margins toward a long term goal, 60% plus.
Gross margin for full year, 2019 was 32.5% up from 27.5% in 2018, driven entirely by improvement and Eplex gross margins.
Turning to fourth quarter performance total revenue increased to $27.2 million representing growth of 40% compared to the prior year period.
This strong performance with fueled by Eplex growth of 58% compared to the fourth quarter of 2018.
Demand for our respiratory pathogen panel was inline with our expectations for a moderate flu season.
Our commercial team placed a total 48 eplex analyzers in the quarter, primarily driven by interest in RBC I'd panels.
However, our installed base increased by a net 38 due to the reassignment of 10 previously placed analyzers.
The majority of these reassigned units were from one U.S. based customer that did not implement eplex as originally planned.
It is important to note that these analyst analyzers had not begun to implementation process and therefore, they had never generated revenue.
We will continue our commitment to quality placements that will generate recurring revenue stream, which is an important component of our business model.
Our U.S. commercial team is contributing to win in both it's continuing to win in both Greenfield and competitive accounts similar to prior quarters, approximately 70% of placements in the fourth quarter, where within labs that previously had a competitive platform and again BC I'd was the primary driver of about eight.
80% of our placements.
Okay.
Moving onto our fourth quarter gross margin progress, which is a critical step to achieving cash flow positivity and improving profitability.
Our goal is to achieve 60% gross margins from Eplex Justice, we have with our legacy XT eight platform.
We are steadily improving eplex gross margins and have plans in place to achieve our gross margin target and the next two to three years.
Initiatives to drive direct material and direct labor efficiencies saw continued traction and improvement in the fourth quarter.
We achieved record manufacturing output for the quarter, which helped drive strong overhead absorption.
Manufacturing yields have also been a key component in gross margin improvement contributing to both direct labor and direct material efficiencies.
We finished the quarter with gross margin of 33.5% and total your gross margin of 32.5%, which was at the top end of our increased guidance range.
We're very pleased with that progress and in 2020, we expect to further improve manufacturing yield leverage our production capacity and deliver additional direct material cost improvements through both supply chain initiatives and reducing scrap during the manufacturing process.
Looking ahead into 2020 are three main priorities are one strong revenue growth to making significant steps towards cash flow positivity through growth continued gross margin improvement and operating efficiencies and three menu and technology advancement.
I'll start with our priority to drive strong revenue growth.
Our 2020 revenue guidance can be broken down into three main categories.
Recurring revenue from our existing customers.
Revenue from Eplex analyzers already placed and in the process of implementation and additional placements expected in 2020.
We expect the majority of our 2020 revenue to be driven by the recurring revenue of our Eplex systems already and routine use.
In addition, completing implementations of existing placements not yet in clinical use will be a key contributor along with new placements to the extent they are implemented within the year.
I would like to spend additional time discussing these last two categories of revenue starting with completing the implementation of already placed Eplex analyzers.
Since the launch of BC I'd in the Middle 2019, we have learned that the implementation process for these panels requires focused efforts from our team and a variety of constituents within the hospital.
Because the majority of placements now include BC I'd the timeframe for implementation has been trending longer than our initial three to six month expectation.
With additional experience and focus we are confident that we can improve the implementation process.
To put into perspective, why we're highlighting implementation time frames.
Our current funnel of customer implementations is expected to generate approximately $15 million in annualized revenue when they are all in routine clinical use.
Completing these implementations as quickly as possible when increase how much of that annualized revenue, we could realized in 2020.
So what are we doing about us.
We've been implemented detailed steps to streamline the process.
We are measuring and incenting our teams to successfully complete these implementations.
And we are adding additional specialist to help expedite the most challenging steps frequently encountered during the process.
New placements are also expected to drive revenue growth to the extent they can be implemented within the year and began generating revenue.
In 2020, we expect our U.S. commercial team to drive placements in line with 2019 results with our VIP BC I'd panels driving many of those opportunities.
Outside the U.S., we will continue to expand but likely not at 2019 levels, which reflected the broad global expansion through establishing distributors in Europe, the Middle East Latin America and Asia.
We have established our 2020 placement guidance range, reflecting continued strength in the U.S. market and a measured approach to international expansion.
Regarding our second priority, we expect continued progress on improving Eplex gross margin in 2020, our teams are already implementing improvements to drive direct material and direct labor reductions and we should experience continued overhead absorption improvement through increasing production volumes.
As part of our focus on improving margins and driving to cash flow positivity. We will also be close we will also closely monitor analyzer pull through.
This is an important area of focus outside of the U.S., where placements have been generating much less revenue annuity that in the U.S. In fact, the average of US placements is nearly six times that placements outside the U.S.
As a result, we're carefully reviewing country by country performance, including evaluating existing placement on their ability to drive adequate revenue per placement as well as margins in line with our long term goals.
Okay.
This evaluation is an important factor in our 2020 placement and revenue guidance ranges that Johnny will discuss shortly.
In 2019, we expanded our international footprint to more than 30 countries.
And in 2020, we will be laser focused on maximizing return on that investment and allocating our time.
And resources to those areas that can drive both revenue growth and margin expansion.
Turning to our third priority of menu and technology Advancement Archie I panel development is it is the primary area of focus.
Our team is in the optimization phase of development, which include adjusting both assay and key manufacturing processes parameters to obtain the best performance across all targets on the panel.
Our goal is to begin clinical trials in late 2020, which should result in regulatory submission in the first half of 2021.
In addition, we have additional development teams working on future technology advancements to support the longer term pipeline of new products as well as a software team developing enhancements and new features for our Eplex platform, which have been a key feature of Eplex is competitive advantage.
To conclude as hospitals continue to transition to near patient multiplex molecular testing Eplex has established a strong value proposition.
Through our experienced commercial team armed with the best in class system, improving margins and continued menu and technology advancement, we are well positioned to drive revenue growth and profitability improvement.
I'd now like to turn the call over to Johnny for a review of our financial results for the fourth quarter and guidance for the full year 2020.
Thank you Scott.
I'll now provide additional details on our fourth quarter and highlights on the 2019 full year financials.
As previously mentioned fourth quarter 2019 revenue was $27.2 million up 40% versus the fourth quarter of 2018 with year over year Eplex revenue growth of 58%.
Revenue for the full year 2019 grew 24% to 88 million with Eplex revenue growing 59% to over $60 million.
Sales to U.S. customers continue to account for the vast majority of our revenue.
The average annuity per Eplex placement in the fourth quarter was $140000, which represented an increase of 6% over the fourth quarter of 2018. The average annuity for the full year 2019 was $132000 per eplex placements.
Fourth quarter gross profit was $9.1 million or 33.5% of revenue versus $5.3 million or 27.2% of revenue in the fourth quarter of 2018, which highlights the meaningful eplex margin expansion in the last several quarters at the same time that the composition of our.
Revenue continues to shift to higher eplex product sales relative to XT eight.
Gross margin for the full year 2019 increased by 500 basis points to 32.5% of revenue.
This improvement in the flex gross margin is the result of execution on our plans to drive down the cost of direct materials and labor, while leveraging the pipeline of manufacturing improvement initiatives, we have identified.
Total operating expenses were $17.8 million for the quarter, representing an increase of $1.9 million compared to the fourth quarter of 2018.
Total operating expenses for 2019 or $70.4 million $70.4 million the increase over prior year is the result of our focus on the validation and go live of the systems placed for BCD BC I'd use in addition to menu expansion and ongoing technology development.
Our net loss per share for the fourth quarter 2019 was 17 cents compared to 21 cents in the fourth quarter of 2018.
From a balance sheet perspective, we ended the quarter with $53.5 million in cash and investments.
We used approximately $9.3 million of cash in operations during the fourth quarter of 2019 versus $3.6 million in 2018, driven primarily by changes in working capital specifically, a $4.9 million increase in accounts receivable as a result, a significant revenue growth over the prior year.
And an increase in cash used to build inventory of $2.5 million.
With DSO 36 days Dxi of 69 days and depot of 42 days, we will quickly convert those components of working capital into cash.
Additionally, we achieve certain predetermine milestones under our existing credit facility in the fourth quarter, which added $20 million to our balance sheet, along with $10.1 million provided through the sale of shares under our ATM.
These two financing events meaningfully strengthen our balance sheet and along with our expected reduction in operating cash usage give us confidence in our path towards cash flow positivity.
Turning to guidance for the full year 2020.
We expect another year of strong Eplex revenue growth and continued margin expansion, which coupled with our deliberate approach to operating expense management should result in a reduction in operating cash usage of almost 50% versus prior year.
We expect total revenue to be in the range of 102 $110 million representing year over year growth.
Of 19% at the midpoint with expected Eplex revenue growth in the mid 30% range.
As Scott noted earlier, we are focusing our efforts on eplex analyzer placements that will ensure improved utilization and strong recurring revenue streams.
As a result, we anticipate.
We anticipate placements in 2020 to range from 130 to 160 analyzers, reflecting continued strong us placements and the more measured approach internationally with average annuity per eplex analyzer between $130000 and $135000.
We anticipate 2020 gross margin to be in the range of 36% to 39% and operating expenses between 65 and $70 million.
We expect cash usage to be in the range of $16 million to $20 million.
This concludes our prepared remarks, so at this time, Scott and I would like to open the call for your questions.
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And our first question comes from Brian.
Stein with William Blair You May proceed.
Hey, guys. Thanks for taking the questions.
I'll do the obligatory covered 19 thing I'm not sure convinced it mark testing opportunities is mostar, but can you talk about.
Specifically.
This test this is a single Plex test and this is not being added into your broader panel and can you talk about so thats a question, but also can you talk about.
Pricing here, how you're showing this year manufacturing capabilities around ramping up should you need to do that.
And can you just confirm what your installed bases in areas, where there is.
Higher degree of testing like China, and Korea and anywhere else. Thanks.
Sure Brian.
So this test as you as you said is a single target test.
Speed was our primary objective and so thats why we chose that path as I mentioned in the prepared remarks.
We would obviously consider rolling that into our broader RP panel. It this virus.
Is it continues and is seasonal.
From a manufacturing perspective.
We have been ramping up our manufacturing capacity all throughout 2019, and even prior to that and we feel that we have the appropriate capacity to handle the potential increase in volumes. It's important to note Brian that when you think about a single panel tapped it would be most likely and based upon feedback from our.
Customers that they would run the RP panel first because it contains 20 plus pathogens and then reflex to the single target test if the patient comes up negative now if there is an outbreak in a specific region potentially they could run both have simultaneous type simultaneously.
But our expectation is it would be a reflects tapped and therefore, we agree with you while it's an important health concern and we're really pleased have developed it. We don't think it's at this time going to drive a tremendous amount of volumes and certainly not in the fourth our first quarter, which there is only one month left in.
As far as how our customers are distributed as you know Eplex has gained a lot of traction in some of the largest labs in the U.S. and so obviously, that's where a lot of our concentration is and Thats, who we have been speaking to quite a bit to understand their needs.
And then we also to a much more limited.
On a much more limited basis have some distributor relationships in Asia, but nothing material.
I think I answered all the questions that you had there was a whole bunch of them in their theres not yes.
I appreciate all that then when you didn't hit was when it was pricing and maybe you can answer that as part of the second question here. So.
When we look at the guidance range for 2020, it's a little bit lower than what was originally commented on is that due to the BC I'd.
Got it kind of extended time frames for go live, which we've obviously heard from others that are involved in that area of diagnostics. So thats. The question. There and then can you just go back sooner and go through some more specific examples of how specifically you're improving that timeframe to go lives on what your expectations are.
Sure so with respect to pricing on the co bid 19.
We are adjusting the initial phases of launch would anticipated something in the range of what RP panel pricing as at this time.
Again, we felt like it was the right thing to do for our customers and for patients.
As you mentioned in your original question more for that than it is for driving additional revenue upside.
As it relates to the guidance range. So the guidance range that we provided today takes into consideration our experience. Thus far this year all the way through February which is proving to be a moderate flu season from from our volumes.
And then also takes into consideration.
A more measured approach outside the U.S.
You mentioned BCD timeframe, so timelines and what we're doing to improve it it is an important.
Area of opportunity for us because it will drive a lot of revenue growth in the U.S., but we think we've got that dialed in appropriately at this time.
Our teams and our resources that were putting on that is to ensure that we over time get back to that six month timeframe of implementations, but the guidance range is really reflective of the moderate flu season to date and a more measured approach outside the U.S.
Okay, great. Thank you guys how much.
And our next question comes from Tyco Peterson with JP Morgan you May proceed.
Hey, Thanks can you actually elaborate on on the international changes, you're making I mean, you did mention making taking more measured approach that balances additional placements with stronger leverage of geographic expansion last year. So what exactly are you doing different in the international markets and it sounds like that's the bulk of the guidance change for your comments a minute ago.
Sure Tyco Thats exactly right that is the bulk of the guidance change from earlier this year and what we're doing and were looking at country by country, where we've established these relationships and understanding what the potential as for those placements to drive revenue growth and importantly.
That are in line with where we want to go from a gross margin perspective.
So as I talked about in my prepared remarks, we obviously have placements in Europe that are not earning anywhere near what day, what the counterparts in the US do that's to be somewhat expected, but not at that level. So the main focus is where these units that are not earning a strong annuity making sure that the.
Economics makes sense for us and making sure that we allocate our resources in time for the ones that are the most likely to generate that nice strong revenue as well as strong margins.
Again last year, we had significant expansion we planted a lot of flags, we expanded to more than 30 countries, which I think is remarkable and now it's up to us too.
Generate return on that investment and Thats the change in the guidance ranges both on placements as well as on revenue.
And on on pull through the 130 to 135 is still quite a bit below what we've been modeling at about 143 is that a function of the lighter flu season and then.
Phasing out some of these lower pull through systems internationally I'm, just curious why the annuity guidance.
Yes, this is and.
This is Johnny.
Really that that pull through for the year as Scott mentioned, if you look at the the expected placements for the year and then driving the.
Driving utilization of those placements externally that is really what's contributing to that that sort of mid 130 range for the for the annuity for the full year.
And then can you quantify what flu did contribute in this quarter.
So not not specifically, we're not going and talk about the the current quarter revenue quite yet I would just say its felt very moderate to us.
And in line with those expectations for a moderate flu season now no tyco.
Back to the earlier questions what impact Cobot 19 might have on general testing volumes, we don't know yet that's going to be something we have to monitor closely but for right. Now it has felt like and the volumes that we've experienced have been consistent with a moderate flu season for us.
Okay. Thank you.
Huh.
And our next question.
Mike Matson Needham you May proceed.
Yes current buyers tests being kind of our reflex test. So I can understand why that the impact of that directly would be sort of small, but what about you do you expect to see more demand for your regular respiratory panel as a result.
Which you're testing.
Potential current bars patients before they get the reflects sense I guess.
Yes, Mike So that is definitely a possibility and while we will no more as as a situation unfolds, it's really early in the.
In the.
Lifecycle there of this virus and we're just starting to understand what it's like here in the U.S., which is where the majority of our customers are.
Like I said I think it would like you said 10, Chile drive additional testing volumes I think the caveat to that is is if they if the patient or if.
If if.
Citizens go to hospital, yes, because remember we are testing mainly in the hospital environment versus if they are getting additional testing at doctors' offices that may not have an impact for genmark and in our product, but certainly something we'll monitor we'll know about at the situation unfolds its pretty early on.
Okay. Thanks, and then just with regard to the international markets why do you think that the.
Adoption or utilization has been so much lower in those markets versus the U.S. is it just a cost issue is the price too high for those markets or is there something else, that's really eliminating or their adoption of books the panel testing.
Yes. Good question I do think it's an exciting market for us over the long term what what my comments are meant to convey is that we're taking much more measured approach to it we know the U.S. is the main market it and we'll be but we also know that it's important to have a global presence in so I don't mean to communicate that it's not an opportunity for.
Longer term, we just got to we've got to address it in a much more measured fashion in general we would expect European are outside the U.S. volumes to be lower than in the US just based on testing volumes and adoption of of new technologies like multiplex molecular so we don't we don't think it would ever be.
The same volume per for per unit that it is in the United States, but having said that we have.
Some work to do to make sure that the systems that were placed in the prior years are being fully utilized so I would tell you that they they are not I think there's more than half of them are being utilized in a fashion that we would expect but there's there's.
A large percentage that we need to go and evaluate and see what we can do to generate stronger revenue pull through on those units.
Okay. Thanks, and then just finally on his departure.
Just wondering if you could provide an additional color on that it's not I understand thanks, a follow up.
Yeah.
I'll kind of reiterate what we talked about in earlier in February that.
It's it was an agreement with the board into Hani that it was time for a transition and and as the company enters the next phase.
It's lifecycle and we're balancing strong revenue growth and an eye towards positivity. It seemed like a natural time to make a transition.
Thank you.
You're welcome.
And our next question comes from sung Ji Nam.
You May proceed.
For taking the questions.
First of all congratulations on your progress with the G.I. channel and also the for providing the timeline for that Scott would you be I mean to the extent possible could you could you talk about what the differentiating factor might be for your product versus what's already out there and if you.
Maybe able to comment on kind of the panel size in what you're looking at and things like that.
Sure. So we have not yet disclosed panel size, but I would tell you that its design is to include virus viruses bacteria and parasites and we designed the test.
To address what we understand to be the most pressing market needs.
So from from a coverage perspective, we think its appropriately size will share more details as we progress down the timeline, but we're not disclosing exact makeup of the panel for competitive purposes.
The the advantage will be the same as it is for the rest of the eplex panels, meaning it will be a panel that gets rapid an actionable results. But also takes advantage of these streamlined workflow that has proven to be a big competitive advantage for port Eplex. So it'd be a panel that we believe hits the need to the market and then leverages the.
Workflow that is so popular and valued by our customers that duplex brings to market.
Great. Thank you and then just one more question on the krona virus.
Sorry, if I missed it but what's kind of the timeline or how long would it take forward the customers existing customers to validate the are you all piano test for.
Cobot 19, and then could you also talked about the timing for the way approval and also would that do you think that could happen within during this I guess flu season.
Yes. Good question Chrysler seat. Thank you, yes, yep, so from a cobot 19 perspective.
As you probably are aware the FDA has provided additional flexibility for high complexity labs to adopt and LDP test and so.
That is where I think that certain customers will have the opportunity to adopt our argue low.
Test in a much more.
Quick fashion than than others, so as far as how long that takes its really dependent I would assume customer by customer and how quickly they can validate our euro test.
I would say that Thats. That's the main area of focus for most customers right. Now are those that can validate and are you noticed from an easy way application perspective are targeted to how that application completed based upon the information that were obtaining from customers that are currently using our testing our design with clinical samples I would expect that.
To be submitted in the next week or so.
And as far as timing of the review and clearance or granting of anyway.
Positive I would say, our estimates or somewhere in the one month timeframe two to two to four weeks hopefully.
And therefore it would be.
Able to address the tail end of this current flu season, assuming that it's a normal type flu season, then that this this cobot 19 doesn't extend that but I would assume it would be available towards the end of this flu season.
Great. Thank you so much welcome.
And our next question comes from Max myself.
Canaccord.
Genuity procedure.
So first on the 2020, guys just going one layer deeper what's what's included whats excluded and what are the expectations for.
The implementation of the plexus, they're already placed and driving utilization there as it relates to that potential 15 million dollar opportunity you called out in the prepared remarks, how much is that assumed in the guide if any.
So Max's Johnny if you think about how to build up that revenue.
An easy way to do it is think about what our installed base is right 527, ending the year and then you think of our annuity that Weve stated last year in this year, you kind of come up to a number.
Pretty easily and then you you layer in what we've done a done historically from an XT eight perspective sort of in the mid 20 million for the year you can easily get to go to a portion that we need to achieve in this current year from a go live perspective on BC I'd to kind of get into our guidance range and we certainly have factored as Scott mentioned that opportune.
City.
Is up to 15 million, if we turn to all these analyzers on and we're able to the annualized revenue.
We assumed a portion of that and then.
On the appropriate amount of risk and upside in there to get to our guidance.
Okay, Great and then just sticking on on those specific boxes, so and the difference between I guess the gross in the net placements so.
What was the reason why that customer.
Didnt go live with those units and what are you doing to sort of address that going forward.
Sure Matt This is Scott.
So yes from time to time, it does happen, where an implementation doesnt conclude to clinical use and I would say this is is a bit of an anomaly.
Like I said the majority of them are from one customer and it really represented a change in management at that client and just a change in priorities and what that lab.
That manager wanted to do as far as adopting technology.
It was definitely an anomaly was definitely a large.
Number of units and like I said really had to do with the change in management.
Alright, great and then one more if I can can you just give me a bit more granularity on specific manufacturing improvements.
As we look forward to this upcoming year.
Yes, I can do that so the team is really focused like I mentioned on on direct material and direct labor savings and the overhead absorption just naturally increases with increasing production volumes I would say from a direct material perspective on there's a couple handfuls of projects that are expected to drive some signal.
We can savings in direct material and they're mainly related to.
Reducing the amount of material used during the manufacturing process as well as to little bit lesser extent I'm doing some.
Looking at different vendors that will help reduce the purchase price of those parts. So some very discreet projects. The team is managing them very well.
I'm really excited to get those rolled in and again, we feel really good about those on the direct labor side.
It's really reliant upon our teams identify.
Streamline processes as it relates to as an example.
In process quality control points. So there are some automation opportunities and some improvements in some of these quality control on techniques that make it much more efficient for our manufacturing team and therefore reduces the amount of direct labor cost per consumable that is produced.
So the team has got it just like on the direct material side. The manufacturing teams have a nice funnel opportunities to drive direct labor cost improvements throughout 2020, and then they also have funnels. Both teams have funnels beyond 2020, and even into 2020 ones are sorry, 2021, and even into 2022. So feel good about that Max I think they've got a half.
Their hands or their arms around it got a handle on it and they're making good progress.
Great. Thanks for taking my questions.
You're welcome Thanks, Mike.
Ladies and gentlemen, this concludes documenting portion of today's call I would now like to turn the call to Scott Mendel for closing remarks.
Thank you all for joining us this afternoon and thanks for your continued support we look forward to updating you on our progress in the future and we'll talk to you soon thanks.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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