Q1 2020 Earnings Call
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Thank you for calling me athletes and your conference I'd.
373827 night.
Thank you so much man how do your first and your last name. Please.
Personally David.
Last name wrong.
Thank you and your company.
IRA.
Hey, I era.
Yes.
Thank you so much there connecting you know one moment.
Thank you.
Hi, good.
In addition, any forward looking statements represent our views only as of today April 20, Threerd 2020.
And should not be relied upon as representing our views as of any other day.
We specifically disclaim any obligation to update such statements.
Please refer to the section entitled disclosure regarding forward looking statements in today's presentation for important information regarding such statements.
Please also refer to our recent most recent filings with the FCC for a detailed discussions of factors that could cause actual results to differ from these forward looking statements.
This presentation also contain certain non-GAAP measures.
Reconciliation of non-GAAP measures to most to the most directly comparable U.S. GAAP measures are included in today's release in presentation furnished to the FCC under form 8-K.
Both today's preliminary earnings release and presentation are available on our company's website.
Brian. Thank you very much ladies and gentlemen, once again. Thank you for joining US reminder, that I slide deck is available on our website and we would ask you to refer to that if you have interest.
We have a lot of financial metrics today, and so I'm going to be relatively brief.
And discuss some of the highlights that I think you.
Most likely already read but that being said, let me start out.
By saying that we had a positive year over year resolved a in terms of our revenues.
And I find that extraordinarily a rewarding in light of the fact that we started seeing some early evidence a slowdown in China are starting in late January.
Almost going to zero by the end of February and Mark.
Subsequent to that we have seen a rebound of China's revenues as we have moved into the month of April.
We also saw about the last two weeks of the quarter.
Hey, slow down in U.S. and I I think these are things that you've been hearing from everybody.
I think we were hit early with China. However, as we move it now into the second quarter that will be a positive at least coming back to a an area that we've we know we felt like we would accomplish in our forecast.
I think another advantage that we have if there is to be one is that we have had our heads down and arms and legs moving for several months.
We've been in the process of reducing expenses planning on the movement of 14, new products and consolidation of facilities. We've been looking at revenue we've been looking at inputs and outputs we've been balancing.
The expenses along with those revenues.
We've taken a number of steps that wouldn't food or reduction and management pay.
The use of furloughs, while still keeping intact, our sales force because we believe that's an important asset in our company.
We have reduced some head count.
And those are the things are not pleasant to do.
Discretionary spending and Capex and those things Rahul will talk about and just a few minutes.
We've also taken and condensed our R&D efforts.
And also balance that in terms of some short term furloughs.
It's effectively reducing the amount of time worked like 25%.
That being said, it's important to understand that our R&D pipeline, even though its condensed.
He is very fall.
And at some point when hospitals are receiving a salespeople and things returned to whatever the new sense of normally see is we believe that these products are going to have a major play.
I'm in safety and efficiency for physicians and healthcare workers.
Oh, we've also been using this time.
To do a lot of training you know as you all know merit has a very very broad product line and in many ways that has been very helpful. With these events.
We've had pluses and those have been things like paired to Neal dialysis. It would be our hemodynamic monitoring and other products that had been helpful and the treating of covert 19 patients.
But we've also had those products that would be so called elective.
And really have to tell you that I never thought that treatment of and you know and other types of things would be considered elective, but that's how it's worked.
Oh, just yesterday and meeting with the Governor the state of Utah, He announced that they were opening up elective procedures. Starting the first week of me, we're hearing that across the board, but anywhere from early may through the month of May we're hearing it from healthcare professionals from administrate.
There's a and from clinicians.
We've been using this time also to train I think you would all agree and you're using these tools now that I'm. There's a lot of things that we've learned how to conduct business I would have to say that in terms of use of.
Teams, which is on our Microsoft platform, that's been very very effective in terms of communication training and we've trained literally hundreds I I said in my press release 100, but it's more than that in terms of the use of doing our procedures.
Up for personal dialysis catheters, many of those being done laparoscopic Lee and now being done Percutaneously and moving over to the IR Docs. That's been very helpful. So this time has been helpful for us to consolidate our training in our understanding.
No I also want just briefly address the supply chain.
Over the last several weeks I've had many calls and many people who have bass how're you doing with supply chain do you see any disruptions.
The answer is it's been minimal one of the things that you're all aware of is that merit is very much vertically integrated.
That includes our molding and includes our extrusion. It includes our sensors many of the things that we do ourselves a recently I saw a report.
That indicated that the 24000.
Purchase park, and incidentally that would be instruction for use it would be boxing packaging Springs coils, you know all kinds of things we had only 14.
That were in jeopardy, and they were not meaningful to the business I think just that in of itself is an extraordinary accomplishment.
We also HM have been able to look at new things.
Just yesterday, we talked about our new nasal fair Geo swabs.
It was something that there was a press release out on and you can read that let me just give you a little more color we were approached by the the governor the state of Utah.
Who talked about the shortages, but they had and they needed somebody to step up.
I presented it to our R&D staff and within a day or two they had developed a plan.
That would allow us to get into production within two or three weeks and as I speak to you today.
We are in production, we believe right now we can produce approximately 10000 a day.
We have an order from the state of Utah as you have read from 400000, but this very day I perceive request, a and people talking about another couple of million well, it's kinda take us quite a bit of time and although we believe that at some point that this will turn down will not always be at these levels. This.
This is gonna be something that's going to be around for a long time I at least a reasonable period of time and merit believes that we will be able to ramp up over the next few months to 50000 units a day.
And we think that this is a great opportunity. It also maybe I think equally important fills the gap where our employees.
And where we've seen slowed down another areas. It fills a gap in although I never want to say their advantages to these horrible things that are going on this planet right now.
One of the things that is going to be a benefit to the company is the reduction.
A of the pressure that we've seen for labor there'll be plenty of people looking for work and miracle have plenty of jobs for them down the road and so there are some things that are yeah that helped the business at the same time, it's important for us to help our fellow human beings and I think we're doing that.
HM anyway, I think that pretty well covers the things that I wanted to say and I'm going to turn the time over now to roll and roll you've got a lot of things to talk about very interesting things and so I'll, let you pick it up from here.
Great. Thank you Fred I'll start on the revenue front.
No work my way down the piano.
So revenue for the first quarter was approximately 244 million as reported.
An approximate 2.2% increase over the comparable period of 2019.
And approximately 3% on an organic constant currency basis.
Key puts and takes on these results include.
FX headwinds of approximately 2.8 million for the quarter.
Peripheral intervention sales were up approximately 2.4 million or 2.9% from the corresponding period.
Driven by our axis and drainage products, which saw increased demand offset partially by decreased sales of and geography and vertebral compression fracture a products.
Custom procedure solution sales were up approximately 1.8 million or 3.8% from the corresponding period driven by our trays in critical care products, many of which saw increased demand due to colder 19.
Offset partially by decreased kit sales.
Oh, Yeah, I'm sales were up approximately 800000 or 3% from the corresponding period driven by our custom caused a custom procedural solutions in cardiac intervention products offset partially by decrease sensor sales.
Endoscopy sales were favorably.
Affected by sales of our arrow, many and handle Max fully covered it's off a geo stance.
Kobin 19 impact for the first quarter was approximately 16 million.
Which was within our previously given guidance.
The negative impact was partially offset by 6 million in EMEA.
The U.S. reagents that were tracking ahead of plan in Q1 until covert night cobot impacted sales in the last two weeks of March.
The cobot 19 impact was as follows a packed impact.
Was approximately 9.2 million with China accounted for 8.4 million.
The remaining balances coming from EMEA at 1.3 million and U.S. regions at 5 million.
Our revenue contributions by sale division based on an organic constant currency currency basis were as follows.
Yeah me up 15% U.S. direct up 3%, OEM up 3% and to tick up 2% and worldwide dealers down by 7%.
We did roll out or new revenue reporting as disclosed in the press release and form 8-K.
This was filed on April 3rd with historical numbers for those that Mr.
Operating margin, our Q1 operating margin on a non-GAAP basis was 12.7% in the quarter.
70 basis point improvement over the comparable period.
As we discussed during our Q4 call over the last six to nine months, we have been working on getting leaner and we saw a 1.7 million reduction in operating expenses from Q1 over the comparable period.
This makes a two consecutive quarters was operating expense reductions the operating expense reductions was offset by decrease in gross margin of 70 basis point.
Which was due to lower sales in China, which is a higher gross margin market for us.
Overall, we are pleased with how our operating margin improvement plan is going and it was nice to be able to deliver continued cost savings.
Those cost savings as Fred mentioned came from principally from our San Jose office consolidation, a leaner R&D process reduced headcount and lower discretionary expenses, including travel and trade shows in.
In addition, we continue to evaluate our head count and footprint to increase our operational efficiencies. We will continue to take that approach as we continue to deliver on our operational efficiency programs in 2020.
The tax rate on a non-GAAP basis was 23.8% for the quarter compared to 20.9 for the comparable period. The difference in the tax rate was primarily driven by a decrease in stock option exercise as compared to the comparable period.
On the earnings from non-GAAP earnings were 38 cents for the quarter as compared to 37 cents for the comparable period.
Again, we're happy with our operating margin improvement plan is going and we believe our results on the bottom line show evidence that our cost control efforts are materializing, even with the impact of cover 19 on a revenue.
To wrap up let me hit a few balance sheet and cash flow items, and some more color and cover 90 for everyone.
Debt balance was 446 million and our cash balance was 50.1 million putting us at a 2.92 net leverage ratio on an adjusted basis.
Available borrowing capacity on a net basis was approximately $147 million our cost of debt is approximately 2.8%.
As we discussed we have given.
I didn't on free cash flow for 2020, and as an area of targeted improvement for US. We're happy to report that we had free cash flow for Q1 of approximately $15 million.
Working capital was 297 million.
And we do not expect to pay any material contingent payments the remainder of the year.
Capex for the quarter came in at 14 million.
DNA of approximately 23 million and stock expense stock options expense of 3 million [noise].
A little more color on cobot 19.
The decline in procedure volumes observed in the first quarter has expected to continue to create a headwind in 2020.
But we're also seeing some tailwinds.
Visibility for procedures for the remainder of the year is limited and we are not able to predict when or how quickly procedure volumes will recover nor do we expect the tailwinds to outpace the headwinds.
Accordingly, as we mentioned in our press release, we are withdrawing our annual financial guidance for 2020.
Our decision to withdraw our guidance is centered on the unpredictability, resulting from the volume of data points in wide variations with these within these data points feeding into our models, we feel our broad product portfolio is particularly well suited to weather the storm, but we also cannot be precise on the pace of the recovery.
Models from some of our markets at more advanced states in the process give us some optimism as we tried to estimate the timing and the impact of the pandemic on our operations and financial results.
However, we can't predict how long it will take to see the rebound, but we know this is a very fluid situation and with some areas of our business down. We also have some areas with higher than normal sales.
Having said that it is our current belief based on the information. We have reviewed the sales will see a gradual U shape returned to normal through the remainder of the year.
However, with the fluctuation in models and underlying assumptions, we're not in a position to make any concrete forecast.
As we continue to manage through the impact of Cobot 19, and as we start to see some markets stabilize our models will continue to improve.
In the meantime, we have taken the following steps.
Continued execution on previously disclosed operational efficiencies.
Please reference the slide deck for an update on previously disclosed plans.
Implementing salary reductions for executive offices, and most nonproduction employees.
Furloughs for certain sales in R&D employees.
Controlling discretionary spend across the organization, including travel trade shows and events.
Deferring and or controlling capital and project spend.
Adjusting manufacturing capacity based on demand, while ensuring sufficient inventory levels to support parent demand.
And finally, we also believe that given the challenges we experienced in Q2 in Q3 of 29 team that we have a very robust plan on leaning out the business and have been focused on delivering on those plans.
We believe this has given us a head start in an advantage in the current situation.
Fred well roll and that's that's a lot and I think the point is this is that.
It's not over for US we continue to work on becoming more efficient and challenging product lines locations and strategies should we continue to look at that.
But I do believe that with our pipeline and where the interest that we've created and incidentally. We've done this and provided as you pointed out a number of areas, but we're in high demand, but we've done it at fair pricing, we've not gouged anybody we had run the business as we always happen, that's with integrity and I think a customer.
You know really appreciate that I'm. So when the current time comes when those procedures and things will get back to whatever sense, but they will marriages probably uniquely.
Position to take advantage and to have the business grow at higher rates. So I'm really looking forward to of the challenge a and I really want to thank the staff.
You know the endless hours.
I was joking with someone the other day, saying that you know I need us to get back to normal so I can get some rest.
We start usually at five in the morning, we'll go to nine o'clock at night, a everybody has been working hard everybody has been planning and thinking and executing.
And it's really rewarding to see a team and a staff.
I think on the free cash flow to go from essentially neutral were flat in the fourth quarter, which was an improvement to $15 million. Its a big swing and I think that takes attention and I think we've executed on a number of areas that you will see in this and yet we understand that there's this.
A best if you will that we'll see that being said I have absolute confidence in the future the company.
The products.
Some of the really exciting things like the Rhapsody there a lot of things that we have that patients need and that physicians need to treat those patients and make their lives easier. So we want again. Thank you for your time brought a little and I will be here for the next several hours.
To clarify things and we appreciate the support your interest and that being said, we'll go ahead not turn the time over to our administrator and we'll start taking questions. Thank you very much for joining us.
As a reminder, ladies and gentlemen to ask a question well need to press Star then one on your telephone keypad to withdraw your question that's the pound key.
My first question comes from Larry Biegelsen with Wells Fargo. Your line is now open.
Thank you for taking the question. This is actually going in for 90, Oh, Fred <unk> could you share with US what was the growth that you saw in January and February ready.
What did in line with guidance and what was the exit growth rate in March and I'm also curious to get your talks on you know what kind of growth you're seeing in April and how that has informed your expectation for the remainder of Q2 in the rest of the year. If you could provide any color by segment by geography will be very helpful. Thank you.
Okay.
Yes, so as far as our guidance you know we were we were essentially at or slightly.
Slightly above.
It's through February honor, the higher end of our guidance. So the 5% to 7% on core growth no. We where we were doing really well and you know as a matter of fact, no as we looked out for a forecast for for March we feel pretty confident that we are you know we'd have we'd have a a strong revenue number obviously you know the.
Second week of March you know that kind of tailed off for our U.S. and EMEA regions.
I think in terms of China, we talked about a little bit.
We started seeing signs of weakness in January I think the good news is as we enter this quarter we've seen at rebound.
You know initially we were saying 75% to 80% at least through this point, we're seeing it.
Almost back to normal.
But that being said 30 more information today about some other things that have popped up in China. So we're cautiously optimistic about China. The Nordics, if we take a look at the Nordics.
They've been very very strong even through all of this yeah and of course, the biggest concern in our biggest market is the U.S. and that's why I think word or I will look forward to watching the pace and the release as the procedures come back online. So that's kind of the best we can answer your question, but thank you very much for that question.
Its not if I could just follow up you know can you give us directional color on the impact by business segment.
Which ones do you expect will be hits more materially and where do you see increased utilization our potential offsets any range that would be helpful. Thank you. So much you're welcome I I really just talk more about the the areas I think our critical care business that we talked about has been very very busy in Singapore.
I think we've seen segments or or product in our peripheral group club, where there's a lot of demand most of those though associated with hospital wide types of needs as well as our infection control products. So I think all of those areas collection drainage peril cardio some pieces to make.
Well across a number of the problem a line some of them in the cardiac areas some of the peripheral Ah, but again not enough to offset.
The you know some of the declines in the procedures done OEM has also been very strong going forward. So that's the best call I can give you right now. Thank you very much. Thank you.
Our next question comes from Mike Matson Needham and company. Your line is now open.
Hi, Thanks for taking my questions I guess first I just wanted to ask about kind of what you were seeing in the last few weeks of the quarter I know you quantified the impact and I wasn't sure I got the numbers right here, but I think you said that the co that impact for the full quarter was.
16 million and that there was about 9 million of that in Asia Pacific One just over 1 million in Europe. You gave me I guess and then about 5 million in the U.S. is that right and then is it safe to assume that the M.D.A. and U.S. impacts were pretty late in the quarter kind of in the last.
A few weeks in particular.
Yeah, I think Thats a fair statement, we started seeing a tail off usually in Europe, you have 'em. After the first of the year you have a little bit of a slow start up as well. So it's a little slower start started gaining some momentum and then of course, a we saw the fall offs is kind of a sequence of events role you want to add yeah. It was.
It really in the last two weeks I'd say as of March.
I think on a net basis really but the impact was about $10 million. You know so we had some areas like you gave me a OEM U.S. direct that we're doing really really well through February.
Okay.
And is there any way I mean is.
Yes, just in terms of modeling the second quarter. Your should we kind of look at those impacts and.
Try to look at the run rate youre at at the tail into the quarter and.
Project that into the second quarter, I know, you're not giving guidance, but I guess I'm just trying to figure out what you're seeing kind of what you were seeing from a growth perspective at the very ended the quarter in the early part of the second quarter. If you can comment on that I understand that may or may not last through the entire second quarter, though.
Yeah, I, Mike listen I think we want to stay you know on track in terms of what we said I think what we did see and I think the more important part of this is what we saw at the beginning of the year prior to this falling off the strength in the business.
And then we saw in over the last couple of weeks. So I think we don't want to wander off and I think our statement stands I'm not trying to be evasive, but like like you trying to figure it out we're trying not just to figure out, but we're watching things every day.
And you know watching softness here strength there it's a unlike anything any of us have ever seen I mean, we <unk> yeah, we get to see it on a day by day basis, but I think we're just going after state with our previously our you know our statements that we've made just stay on track. So we don't crossing into ft issues and things that we shouldn't be talking about.
Great. That's fine fair enough and then just had one on Rhapsody and then I'll, let someone else going on so just with Rhapsody I think you're expecting a CE mark.
This year or potentially hubs. So can you talk about your confidence in that and then can you talk about the market opportunity maybe the size of the potential market both in the U.S. and in Europe, and then you just the competitive landscape. There are there any competing products I think becton Dickinson has.
As a stent graft Costco Vera I didn't know if that was a direct competitor or not thank you.
Yes, Thanks, Mike.
We believe that.
The Rhapsody is the most exciting product that marriages ever had its taken us seven of the half years. We've conducted a first in man Oh study in Europe very successful.
We are just weeks away and when I say week, one or two of submitting our application for I'm, an I'd. He would the U.S. government than they've worked and you've seen the breakthrough designations, but we have in terms of the.
He mark.
We believe that we have and we have in fact submitted I'm all the documentation.
That's required answered questions and we believe that our product I will be going to staff within a week and we'll be going to panel I'm in the next few weeks.
So it's possible that we could have the CE mark sometime in May now.
As you know everything in Europe.
You know they've moved some things out with AMDR and there's this and there is that they're just a lot of unknown I think we're confident in the data.
And we're confident in the process. So it we think it's a big deal.
Yeah for the company and I and rather than just talking about the initial indications which are important I.
I think it's really talking about the technology and its broad use initially in the outflow circuits for dialysis patients and the central veins.
Those are areas in which we have some indications that others do not have it does compete with co Vera.
There are some other products, but nothing really quite like this and I believe the data will show and and at the appropriate time that will come forward.
That is a product that we believe is superior to anything in the marketplace and there's a lot of reasons for that but all that being said, we think that this will come.
Hopefully in the next 30 days or less.
Now that one of the other questions that will be very interesting is that the access both in starting up the trial. We've been working during this period of time of getting all the work done of.
So that's one of the things this has allowed us to do but we have inventory we're ready to go in Europe, if it's not in Europe than we're ready to swing and we can run both of these simultaneously.
I'm going forward in terms of both the European release, which then will also lead to other areas that we will file on and ER in Canada, Australia, and I think we're already approved in New Zealand. So I think we've done everything that week and we'll just sitting cross our fingers for the next few weeks.
And see how that shakes out of the much bigger market of course is in the Oh, the peripheral side and we start talking about really acts and and some of the areas or you know.
That we're talking about there those are just great opportunities. The market size, you know depending on who you talk to and I'm just talking about on label use now $100 million $150 million globally.
One of the things we tried to do Mike is when we went into this.
We wanted to go in and get to the market the fastest way, we put in and develop the technology. Even that took seven years. So we spent a long time, we're looking forward to the business and depending on we should hopefully we'll come out in a very specific lay out of markets strategies those that we.
And release will talk about separately into a press release Enercom friends Press conference or the days shortly following the approvals and we'll make those announcements should they come now if they don't come from Europe, then, we'll we're ready to start the I.D. and and then work towards the PMA approval. So we're on track.
We're build all that product right here in Salt Lake City.
And it's very exciting future at the technology at the broad area. The technology is something that we'll be doing for many many years to come.
Thank you.
You bet, Mike Thank you.
Our next question comes from Matthew O'brien with Piper Sandler Your line is now open.
Thanks for taking my question afternoon, everybody.
You know Fred or for it enroll can we just start with Utah, specifically I know, it's a smaller U.S. markets.
Specifically from the state perspective, but your base there you've had this conversation with the Governor yesterday, you know about opening things back up I speak the moratorium on elective procedures started up.
I'd say a month ago I think with March 23. So can you talk about what you saw I mean, our user elective business down 70, 80% issued in the first three weeks of the quarter expect things to maybe stabilize a little bit next month, and then maybe get back to a little bit a growth in June is that.
Fair way to think about how the quarter can kind of play out just in Utah alone.
Yeah, you know I said that I would kind of stay on track I will tell you that I saw the very same things that many saw the Johnson and Johnson some of these other report.
Our business, it's not seeing those kinds of declines or anywhere close to those Rob will I'm going to let you maybe talk about there. So I just have [laughter] that you can get yourself and I'll give you guys. Some color because I think I'm going to try and dance around this a little bit matter, because obviously, we want to make sure that we don't you know.
Oh, the reality is that there's a lot of variables and I'll get into those here in a minute, but I think if you look at our OEM business, which is roughly 10% of our business that seems to be stable.
So as you can pull that off the table from you know whatever you projected for that I think the nordics is around a 20 million dollar.
You know business for us.
You know that seems to be either stable or just a little bit above what we forecasted.
So you know that's stable stable business you know.
China you guys know is about 11% of our business that seems to be coming back I'm, a little bit right, but you know Fred mentioned it there was news today that you know maybe things are picking up again, so no that's and I think the hard part about this is that you've got.
China, which we you know gives us a very good footprint of what to expect.
The problem is that.
The rest of the World is not going to act like China, We don't think because one the government in China can force you know a certain narratives and a certain processes.
What you have with the rest of the World is that you got individual countries.
At different parts of the curve.
You've got different states here in the U.S. at different parts of the curve.
You've got.
You've got countries and states that have different policies.
And then you have the added no component of patients and how they're going to react to either aid not wanting to go to the hospital or go into the hospital and so it's just there's just there's just a kind of moving parts and so it's hard to kind of.
Anymore than that Youve, Matt you've had a lot of calls and lot of people are everybody's asking questions.
I made a comment and I believe this I believe our business will respond.
Faster than others and the reason I say that is because.
Yes, there is not the orthopedic part of it no offense to my orthopedic friends. These are things that have been growth areas. Our peripheral business has been the strongest area and many of those IR docs have been pulled down into a critical care or emergency room care and many of those are coming back on <unk>.
Let's talk into a position Bakkies, who is going to be back in his lab next Monday, it's just the pace of of working the patients up and very candidly, it's like a football team or basketball team that hasn't played for a couple of months and it's going to take time, but I think in terms of our product are.
Mix our Brett.
And our geography that we in my view will respond probably at least again. This is my own opinion, but I believe that will respond in a faster than most.
As this our belief.
So I don't know that an answer your question, but that's the best [laughter].
No. It does it but it also dovetails into another one that I had which is just in the you may kill me for asking mistake. Just people are trying to get a sense for what 21 is going to look like I'm coming out of this and so is it fair to say because of the breadth of your products because of the geography is in the mid dispersion there, but 21 most light.
We will end to better than 19 for its excuse me 2000 that night team did that a fair way of kind of thinking about it.
Im just going to stick with my previous statement Mer will rebound again, you know the other part of this is we have a number of new products that were launched in January that Didnt get launched.
And so we have all of that.
We have the OEM part of it we have the critical care. We think is going to continue to grow. We think these other procedures will come back and then we've been continuing to work in our R&D projects.
And focused on bringing more things to the market. So were loaded and we've been fusion that time as we talked about to train, but but maybe equally important one of the other things and I know, we've said pair to nail dialysis, but but theres a lot of interest out there from physicians and year. The president prior to this and talked about how he wanted to move and have I.
I think 50% of procedures in dialysis by 2025.
We're seeing tremendous interest in training and very candidly revenues in these areas. So I think that you're going to see this company rebound faster a leaner and then I think what we've tried to do to protect the salesforce one of the questions will be well what does the salesforce and are they.
I have access and you're going to be able to do these things I think the things that we've learned as of the training that we can do online, but when we talk about that training, we're talking about physicians trading other physicians online and we know we had one today, where we had 150 and this was to do peril cardio some pieces, which is one of these.
Factors.
As a complication of cobot 19. So a this is taught US a lot. It's also created a lot of opportunity there'll be a lot of products that come out of this that we've already developed one of them as the swap and the test kits Oh, that's going to go on for quite some time, that's not over and you know there's not been much question.
And on that and Thats fine, but it it's they're a lot of things that are really merit can respond to very quickly. So Matt my expectation is I cant specifically say, we will do I'll just say, it's my belief that will be faster than most and that we have a full pipeline of product and I think we've used this time very effectively with our salesforce while.
Mmm intact, but but that's the same time, reducing the expense when that was through.
Having a furlough and so we've run that I think very effectively where we've only for load a half of our team for a week then I won't go through all the details, but we've reduced the cost by about 25%, while using that time to train and to get ready.
To get back out there isnt as we're allowed to so that's the best way I can answer event.
That's very helpful can I sneak in one more for I will real quick.
Sure.
Just you know that free cash flow number in the in the quarter was great to see I, just I know rally you've made some comments about.
The full year projection pre Kobe I wasn't sure if I caught what she said during the script as far as what you think free cash flow will will look like this year are you still expecting.
Then I think was the $40 million to $50 million range. This year, even with the cobot impact.
Yes, [laughter], we're not going to give that color, Matt I I will say that nowhere in the.
You know we've got some initiatives in place that we talked about and we were excited about the $50 million and we'll just leave it at that well and but I will say this we made improvements from third and fourth quarter. We brought it back to neutral we were able to bring a $15 million worth of free cash flow and I think under normal terms, you will see the things that weve.
Put into place will help now the question becomes you know yeah, a lot of other parts of the business that's difficult to predict but I think it be initiative and the momentum that you're seeing is something that we would expect to continue I mean, it's a it's what we get paid on it's what we're looking at and we're spending our time.
And most more importantly, it's the right thing for the business So I.
I just think you'd hope that you'll just look at the momentum that we've created and what we've done to turn that I think speaks volumes.
Absolutely very helpful. Thanks, so much thanks, Matt.
Our next question comes from Jason Bedford with Raymond James Your line is now open.
Hi, good afternoon I hope.
So on safe and healthy so I have a couple follow up questions and then more original question, but just on China and the ramp at what point do you think China will be flat on a year over year basis is that some science into Q is at a three cure for Q event.
Well, that's tough question I don't know that I've and what I can tell you as we sought fall off.
As you know and what were we to forecast in the first quarter of roll well, we were down year over year, we were down about 17%, 17% down year over year.
And then what we're seeing as we start this quarter and here. It is the 20 threerd that were at forecast. So we've come back and that forecast would have been above neutral.
And we're seeing that now we also seeing that the rest of southeast Asia has not come back to that effect, that's probably at 50% This point, but starting to come back we're starting to see Taiwan, Vietnam, but some of those other places just haven't started ramping back up yet so but the big number is.
China and that that has ramped up and is one of the part of China. Our business. There that's really interesting and that is.
And this is a.
Well that.
I'll just I'll just blurted out net is our critical care business has not been a big factor in and in China, but what we have seen as an example, one of our distributors over their orders about 5000 of a product at $20 a quarter.
Just two or three weeks ago that very same distributor again. This is just one data point ordered.
60000 units at $20. So yeah, I mean, thats a huge delta.
To go from five to 60, an order of magnitude and so we think there's some other things that are coming out of China for the long term, they're going to be to our benefit in our critical care business and these are these are products that are better than 50% gross margin, even though they are coming out of our critical care division, which is generally.
Lower margins, so theres a lot of things that we see positive and maybe one of the more another little settled point is particularly in the treatment of HCC.
We've seen a huge upsurge, which tell me that there was a lot of pent up demand for drug Reloadable, Embolics, which are approved in China, and we've been seeing a big upswing and that treatment, which tells me there is a huge backlog of patients.
That have to be treated for HCC and that's one of our most if not our most profitable product and the company. So those are all to cut the positive signs Jason that we see in China.
Okay. That's helpful.
When we looked at the five reported segments in your revenue line.
In which segment do you expect to see the biggest impact from Cove. It is it.
Is there one.
One division that we're going to see more of a hit in a than others.
Yes.
That's in the endoscopy and that's because its elective, but it's also the smallest park.
So thats one that was up in the first quarter is going to be down. This can probably would be the biggest one just simply because it's one of those where they just shut that whole thing off and so it's not zero, but it's the one that will have the biggest but in terms of impact on the business.
It will be the smallest impact if any of the groups because of that Brazil do you want to talk maybe about the others give some thoughts there yeah, just maybe a little bit more color. So as we mentioned OEM seems to continue to be.
Staying in the fight.
Custom procedural solutions as Fred mentioned, we're seeing you know demand in that area.
And then.
We've got take some puts and see I npis, so, but obviously you know the headwinds there or or or are not going to.
They're not going outpaced or the headwinds or you know, they're going to be outpaced by the tailwind. So I mean, there. So yeah, we're gonna see listen there's no question I think from anybody that's in the industry and you guys know this you've been listening to pay everybody. A you know those areas are going to be down, but they won't be down for very long no because.
Right now where they're going to come back. So we expect to start seeing probably in June I know people are saying may but they'll start up in may, but I think it will be rather you know a slow as they get back into gear and eight loosen up the arms and start going through spring training. So to speak and then we expect that we'll see a pretty dramatic increase in I will.
Lets say this.
We are hearing or these are these are administrators' hospitals talking about.
Procedures being at a 125% to 150% of normal we're getting phone calls from customers, saying are you ready for this you know now I guess the next question is do we believe it I don't.
I believe that it will read it will resume I believe that they'll be those things I just think it's going to be a little slower I don't expect to see 125% to 150%, but it is interesting to see customers call and ask us that for ready I think in my prepared comments, one things I tried to talk about we've sized the business for what we are doing.
But because of the really unique nature of this company and its vertical integration our supply lines to be able to respond to this are really really short we do our molding. We do all the things a lot of things ourselves and our ability to get back up to full speed or above that very quickly.
Is I think something that gives us the confidence they will have a faster rebound than most because of our ability to respond to it.
Okay. That's that's that's all helpful. Just last quick one from me, what's the timing on the transition to Mexico for the 14 products and then just a similar oh the consolidation of the four facilities. Thanks, Yeah. So we believe that that will be through the balance of the.
Here. So we have some things moving this week, we have things moving from Salt life from Melbourne from other locations. It. So the 14 or things that we've talked about through the year not someone said well with all this can't you accelerate though let me answer is we have less people today.
We have a lot of other things to deal with in terms of just internally with no safety for our employees for you know sizing the business and so on and so forth. So again our statement I think has been very consistent it's for the balance of this year all of the four facilities I think now the decisions.
Have been made for three of the four and are in process and will be completed one of the facilities, which is probably the smallest one in terms of the impact is one that we're planning on producing our testing swabs and and kits and depending on that demand. It may stay open a little bit.
More a little longer but I think we have that lease that's through for about another six months. So we could still either move that into an existing facility. It's unique in its its manufacturing because of bristles and this and that sort of point as.
You really see all of that 2021 of you'll see that some of these things will have a big effect. So we think on both gross margins in our expenses. So we think the decisions. We've made will help make the business much more efficient going forward, but it really is still on the original plan. It is not accelerated but it has not slowed down.
Yeah.
And our plan I think the message has been very consistent role.
I mean, we're on we're on pace. We're I mean, we think our slide that kind of says and.
It's one of the things that we continue to focus yeah.
Good thank you.
That was that the original question. Jason You said you had an original question well I Didnt was that if it hadn't been asked and so that's what made it originally I'll have a nice guys hi, thanks, so much changed.
Our next question comes from Steven Lichtman with Oppenheimer. Your line is now open.
Thank you hi, guys.
Just one clarification then just two quick questions.
Well I think you mentioned you can do you down Steve year impacts during once you squeeze that worldwide impacted covidiens. Nonetheless part of March was that would you referring to.
I mean, the Coburn 19 impact you know is $16 million, but the business was doing.
Pretty pretty good through February and so I'm on a net basis it into the being about $10 million, but I guess, what I'm trying to say that we were on pace to do a $60 million more but because of Coca 19, we weren't able to get that.
So we were able to do so by about 6 million on on that basis. Okay.
Okay, Great actually there does seem somewhat to my next question, which is under this initiative to food were similar lines.
That we're running a hills.
And if you could talk qualitatively, what we're submitting that were going better than expected as you marching through six months, yeah. If we look at our again, our critical care business, which would include our our hemodynamic monitoring. These are products that are used in IC used to measure blood pressure whenever you see the the.
Pressure waveforms those are because of these products things like our pressure infuse. Your bags. These are the things that we build in Mexico.
I would say that business is probably up 50% to 70%. It's a small when I say small product line its.
Under 10 million, but it's a nice profitable product line and even today right, where we are right now not just in the first quarter, but as we moving forward. There are of that business continues to increase and we're getting large orders from you the national Health service.
In Great Britain, we have.
A number of countries and these are being used these are pretty good sized orders 25000 units 40000 units 10000 units and this for a product thats about $14, but it's a night product and then you take a look at parity Neal dialysis I talked a lot about that that business has got to be approaching two.
25% to 50% above it probably closer to 50% above our previous sales levels and again something that we'll continue to see I think what this does is kinda give a a a a jump to.
I and initiative that was already in place to move in that direction and I think with the training of the physicians to do it percutaneously rather than through a labs come by the way the reason they did that.
As you can do this had a cath lab and you can send the patient home without an overnight stay and then you can do dialysis at home think up all of the advantages of that with no higher morbidity or mortality. So when you start thinking about this is something that probably should have been done a long time ago, I mean places like a Thailand or Canada.
Then somebody's places 80% of all the procedures are done and this is a product line that merit produces totally in house and and one that will continue to see so those are three that come to mind or for.
I will have anything else you want to add to them I was going to say you know axis.
Products drainage you covered drainage out there is that there's another one of you know like I said.
Apparel, cardioversion teasers and any of the assessment pieces.
Again, you've been reading about all these complications that come from from Cobot 19, and there's a lot of our products that are that have accelerated because of that need we had one customer who is one of the larger medical device companies that increase their orders that we produce form by almost 50%. So you know.
Things like that I've been very helpful.
Picked up some of the slack in some of the elective procedures.
Great and then just last week, when I know, obviously, not providing guidance, including on free cash flow, but can you talk to your capex.
Occasions understood that's working tubal in this environment. How are you can you maybe relative to your prior prior slots.
Well I I think you know we're definitely looking at it right just from a liquidity standpoint, making sure that you know anything that we can differ or things that are just not high priority right now you know where either pushing them out or before you know I'm really just kind of stopping them. So I think will you know, we're definitely going to pull back on capex.
Where we can but again.
We've got certain products that we just.
I feel that we need to invest dollars in and no from a long term perspective, we're not going to cut in those areas, but to the extent. We can you know will push things out yeah. Let me, let me maybe get a little color on that too. So as you heard us say that in our R&D projects, we have condensed Bose and we've reduced.
The amount of labor, that's going to those by 25%. So we've probably cut the number of projects across the board by about almost 50% no. Please be reminded disease when I say, 50%. We've just we're focusing by putting more resources on less product, but that means that.
You don't have all those other capital expenditures for all the others and then you pull back on the time and there's just one area.
And then you also find when you go through these things, which I think that's helpful. Like all of US has found out we can all do more with less in every aspect of our businesses in our lives. We've all learned that and as ROE pointed out and as we've commented we kind of had a head start on this we started working on this last year.
Year.
We stumbled, we you know and everybody knows the story. So we've had our heads down and so some things that and again I'm not thinking on others I'm, just simply saying that some people are just getting started on some things. These are things that we were well down on the road and had in place or we're initiating months in months ago. So it was just.
Kind of.
Yeah, well wasn't unusual or shocking we just.
I think was to our advantage and I think you'll continue to see that as we are as we move through the year that we've we've done the things that needed to be down theres more to be done and we will do that as well.
Thank you guys.
Okay. Thanks, Steve.
Our next question comes from Jason Mills with Canaccord. Your line is now open.
Hi Fi denial well in this instance, Julia on for Jason and something that maybe could you provide a bit more color just around your decision making process that you've got about R&D on what you're prioritizing maybe not specific but just trying to generalize basis, what you're prioritizing today and how.
You're thinking about this in light of whats your expectations for 21 and and going fine.
Yes. So thank you very much as you know one of the commitments that Rob will and I made was to leverage all aspects of the income statement in the past, we've essentially utilized all of the.
The increases in sales would be the percentage that we wouldn't handover to talk to R&D I think as we looked at it and thought about how are we going to we can't do those things and get leverage, particularly on that topline if you're not getting the leverage on the on the gross margin.
What would you do it so we've really made a commitment that all the way through gross margins, you'll see those and in fact I think it is important to point out that despite all of this we saw sequentially a 20 basis point improvement up from the fourth quarter to the first in gross margin, but I think we looked at all of those.
And we put a specific plan together.
In the SGN, a side and the R&D as well as up on the gross margin side of say what about manufacturing efficiencies. What can we do to cut costs here and our commitment was is to improve operating margins in profits and an order do that we had to hit all of these so that's what we've done and again.
We've been doing it now for several months and we continue to do that it's it's by the way painful, but necessary and Thats, what weve done I think in terms of what priorities that we have a again at any given time.
We kind of sit down and look at the projects and say, okay, What's hot and what's not what's changed from our original thinking what's coming in what's going out data changes.
For instance.
Again, I'm sorry to have to you know there could be so redundant on things, but like.
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There's some teachers products, we have two or three cents thesis products in R&D or the reason. That's important is we think thats an area that's going to continue to grow and in fact it has so we try to take a look at what will the world look like.
And what will people focus on going forward and I think those are the irrs, we say that learning from the as looking at the previous trends and what.
I'll give you I'll give you an example of one.
Anything that air realizes into the air.
In drawing out.
A sample of fluid closed systems.
That you can prove.
Do not hit the atmosphere, and we'll protect the health care worker and the patients it's pretty important step as we evolve reading and hearing every day.
So we have products like that and things that we would accelerate over that we would put more focus on that because we think again not only do we think those products are going to be demand, but it's it's what it does for health care work as we know it's what we hear every night, it's what we know it's a great sacrifice. These great heroes all of the world.
We've got to do more things that protect them.
And the people that around and working in hospitals. So I think those kinds of things that's not just a trend for now it's going to be a trend.
Forever in the future what are we doing how are we doing it and how can we improve.
To minimize risk to people around there.
With that all these folks helping us in treating us.
Uh huh.
It's not going to be a fun picture. So I think thats, what weve spend our time is really focusing on a areas that we think are gonna grow show infection control our caps.
You know other areas. We think there are products that we havent development of the things were spending time on because it's not just about co but it's about the next cold, but it's about the next thing what are we learn from all of this and Thats what were working on so thats how weve.
Looked at this what safer more convenient what gives you better results I mean, I know that sounds maybe.
Yeah pretty primitive.
But it's I think it's allowed us to stop and say Okay. Why are we doing this what result, and how does this fit and does it fit with the new mantra that we see again. This is not the last time that the human race will be affected we saw mares. We saw Sars, we've seen cobot 19, and there's just another one just around.
A corner and I think those are the kinds of product safety products. Those sorts of things that will help us outgrow the business and provides a great services that we hope to do.
Oh, Thank you for all the color and now I'm not at all makes kind of color.
<unk> your comments dovetail kind of in into my next question, which is you talked about a few times on the call getting back to a new normal whenever that happens to me and I just like your perspective on what does the hospital landscape I wrap access or treatment say too what what does the hospital landscape look.
Like coming out of this Karen and I know you just commented on a few component, but just since you're thinking about stretching your business today for the future what are the key.
Gary It's you're focused on.
You know I think its preparation I think if we look back today and we look at how everybody is hustling to get these products that are not necessarily complex, but is is streamlining both states federal government and hospitals to being a better position to respond to these sorts of things I'd.
Think we've all what that these and said why.
And again this is what you're hearing on the National news businesses are going to come back to America.
Companies are going to produce more and be maybe less concerned about getting something offshore cheap to get something that you can respond quickly that you have short supply chain and provide the need so I think thats going to be part of about a lot of people were hearing administrators talk to us and we're starting to be people are already.
Talking.
The the medical Association for engines had a meeting through our professional associations with MDM eight.
People are talking about what would we do differently than we did then it's not about fingerpointing or blaming it just takes the facts look at them and then what are we going into the future. So I think one of things you will see a more supplies more reserves more preparation is what I'm hearing now will it change.
Page disease states and those sorts of things I don't think so the question then becomes.
Mike, we're seeing now orthopedics and whats necessary and what's not necessary. So I think there'll be a lot more scrutiny on you know if someone has and again.
Lot of people have bad needs are bad hip but is that going to be with health care system is spending their time and the resources I think it's going to be on more diagnostics more testing more preparation and then more safety I think thats, where marriage looking at and every product in everything we talked about kind of focus is around.
Does it meet the needs we called it a user spec what does the user want and our job is to meet those needs and to identify them and I think that's where we're going to spend our time.
I think he's fed politically.
Alright, thank you.
Our next question comes from Mike Kupinski with Barrington Research. Your line is now open.
Hey, guys. Thanks for taking the time Tonight I'm.
Role on the on the cap ex commentary you know you said sort of pulled back it because at 14 million and the in the first quarter Capex and it's sort of said I think I think 20 to 25 million down from last year's 78 ish. Originally when you say pulled back you're talking about pulling back from sort of the.
Current run rate of 56 or are you talking about this.
You're pulling back from 78 to sort of mid Fiftys was already planned.
Yeah, I mean, I I think you know we gave guidance on Capex and so I'm you know I think one of the things you know that we saw during the Q1, we did have some building costs you know from from the building we were.
Finishing out I will have a little bit of that coming into into Q2.
But again I think it's it's it's too early I think you know we're trying to we're pushing things out right now and as as we see what happens in the business will decide how we treat that original guidance on capex.
Okay, but when you say pulled back or is that commentary relative to you work I mean, the sort of the guidance of mid fiftys or or are you, saying.
That's what I'm trying to get out I mean is is it is there downward likely I guess is it likely to be less than the current run rate.
Yes, Okay [laughter] led the way you did [laughter] yeah. Okay. I had just there and then you try hey, Mike I can I jump into the second one of the other things that we are doing here as we are running a monthly meetings.
On Capex him, it's not just let's see where we are Oh my gosh. We went over we're looking at each decision each month, where we stand against our budget, what we're going to push off than what we're going to make sure. We had our number so I think the way that we're approaching it is dramatically different than what we've ever done in the company's history. So we pull all these things.
We look at the products that are online and the things that demand capital and if something pops in.
Ben something has to pop out so I think setting the priorities is a very important I think we've been doing that to have the distant but more importantly to have the data. So that we can make sure that we know where we are and I think thats been a big improvement.
In our thing and the other segments and so many people are focused on the day to day we're.
Keeping people healthy and you know all of our considerably to producing we know where are the central provider, but we've had to do a lot of things I'm you know for for division in safety and separation. So a lot of the other things that we might have done are being deferred and a lot of these are lot less so I would I would agree with what what he said is.
But we're just not.
At this in the mode of.
The grandiose, we're going to live with what we have or less.
And that's kind of I think the theme that we've been working on for sometime now when I say sometime.
We spent a lot of money to build this business, but I think we are we're just doing the things that we need you don't you think about.
Our lives.
We're out there we need to go do this when we need you to go do that.
None of us are doing that anymore.
Sorry, you know, we're not going to the dry cleaners everyday we're not going out to dinner, we're not doing this and going on we're doing things differently.
But we're doing those things in the business as well.
Okay, great great. Thank you you bet role I guess on on the free cash generation, which was excellent was there anything on your sort of unusual in that in that number that benefited you guys that was sort of a timing.
You know you really caught some favorable timing on collectible or you know some kind of a our or can you just speak to that.
Well no receivables helped US you know obviously, we're managing one of the one of the metrics that we put out there when we were.
Forecasting or for our free cash flow was you know our working capital and receivables and payables. So you know we benefited from receivables collected would you know for from some customers in a in the middle East specifically, so large dollars flowing from there. So when there was there a really unusual element to that or one big there was no unusual elements I would say.
Okay. Okay is there any is there any just for consideration if there's any way you guys can put in Oh cash flow statement in your in your news releases that would be awesome. If you consider that alright <unk>.
Yes, I did want to ask about the 3.9 million impairment can you just sort of walk us through what that's all about.
Yeah that was just a it was a purchase option that we had in place obviously a under the current circumstances.
We didn't think it was at the right thing to do and so you know obviously from an accounting perspective, you have value assigned to that purchase option and we walked away from it.
Okay, Alright, and then just last one for Fred Fred I think you alluded to your nobody has a crystal ball and I know you're not you're not.
Absolutely projecting this but your gut tells you that you see sort of a U shape recovery and then some commentary that you've made during this call.
Seems to indicate that your view would be that maybe the bottom of that you is sort of late second quarter is that is that fair characterization of your thinking.
Yes, I think that is fair because here. We are you know as april's done here. We are as we move into May will start to see a procedures come back online.
You will see I think robberies, albeit Brendan I have to he calls it the Nike swim I'm going to go out and say, it's kinda like that or come back up and then I think we'll see interestingly enough in the summer quarter.
That's the interesting part of this bridge historically, it's always our slowest quarter you know people go on vacation and people do this and go to beaches and everybody checks out I think it's going to be a little different this year.
Maybe the folks in France will actually stay in the office in August Yeah, they've been there yeah I know that's not picked on the front.
We have a facility there should all be getting yeah, they're going to say you know yet talks the task you not to say things like that sorry that I know, that's maybe they can make or where you might get placed with yeah. They can call me with their complaints alright. Thanks, Okay I'll direct all the complaints you might thank you very much like alright. Thanks, you bet. Thank you Sir.
Our next question comes from Jim Sidoti with Sidoti and company. Your line is now open.
Good afternoon, and it's good to hear your voice birdwell.
Hey, Thank you Jim it's nice to hear yours is while you're in a you're back and golf in there right.
[laughter] not yet, but soon our yet okay all right.
Quick question on the on the collection kits that you announced earlier this week, yeah, those specific to any manufacturers device or those good for.
You mean, the diagnostic systems that are out there yeah. I know this will work in anybody's diagnostic system. There are many of them that are out there to including the habit system. There's a this will work with any of those and again, we just think it's an opportunity that will be around for a long time there'd be a lot of testing going on for a long time.
You said you have one order already with your state, but are you talking with the other 49 states about this.
Well you know [laughter] one at one of the you're always going to be careful about is my commitment was for the state of Utah onto the governor and he's the guy that came to US and said we got to have these and nobody else can get them here.
Can you help me and I sat down with Jim Matola, R&D and his team and and we sat down and we said yeah. We can help you and yeah. We worked with the state lapping a whole bunch of folks and and you saw the order.
By the way Jim This is all taking place in three weeks.
So that's how quickly we've responded I will be producing.
Of starting Monday, but we're producing today 10000 units a day.
50000 units a day within 30 days.
So that means that in to fill in order of 400000, that's a production days. So we will have capacity and opportunity and I'm getting calls from everybody in the country. It's amazing to me and it goes back to one of the questions that was asked by one of our our folks earlier about.
What do you see differently and one of things you will see you'll see a lot of more these supplies that will be station. So people can respond to this I think you'll never see a shortage.
NPP on some of these things again, because people respond you may even have overcapacity that pendulum swing anyway, there's a lot of opportunity there and we'll just I want to make sure that just saying that we're going to go do this would go do that I want to get this order done measure where I am and then I'll I'll start talking I'm talking they're calling me ever.
The data call from Texas, one from Pennsylvania, one from Ohio, One I can Nebraska, Idaho I could go on and on I mean that press release hit a lot of people, there's a big need out there and it hasn't been Phil will be we hopefully that we can help oh, it's one of those products Jim that.
Makes a difference it's a big deal you're helping a a global caused a soap the answer is there will be a lot of opportunity, but as it presents itself and we can meet it then we'll talk about that kind of after the fact not in front of that.
Alright, and then whereas where it can be you will you said you read where under 2.9 their leverage ratio right now are they running covenants that you're close to at this point.
No no we feel pretty comfortable where we're at and yes, we feel good.
Okay.
Alright, thank you.
Hey, Jim Thank you very much.
I'm showing no further questions in queue at this time I'd like to turn the call back to Mr. Lampropoulos for closing remarks.
Well. This thank you very much for your help today and to all of you. Thank you for your time interesting times, we'll look forward.
To when we have some visibility will come back and we'll talk to you and we'll keep you up to date, just so that you know that we are deeply engaged everyday.
In this business and that we have a great business and one that we're very excited about looking forward, so well get over a few bumps that everybody is going to hit and will go from there. Thank you for your attendance, Robert and I will be around for a few hours and I will afford your pauls a in clarifications bless you all good health.
And good night. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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