Q2 2020 LeMaitre Vascular Inc Earnings Call
Ladies and gentlemen, please standby.
During the meat vascular Q2, 2020 financial results conference call begin momentarily. Thanks for your patience and please standby.
[music].
Welcome to be Lemaitre vascular Q2, 2020 financial results Conference call. As a reminder, today's call is being recorded at this time I would like to turn call over to Mr. JJ Pellegrino Chief Financial officer of the lead vascular. Please go ahead Sir.
[laughter]. Thank you Josh good afternoon. Thank you for joining us on our Q2 2020 conference call.
With me on todays call, our chairman and CEO, George Mason, Our President Dave Roberts before we begin.
Read our safe Harbor statement today, we will make some forward looking statements within the meaning of the U.S. Private Securities Litigation Reform Act.
1995, the accuracy of which is subject to risks and uncertainties wherever possible. We will try to identify those forward looking statements about using words, such as believes expects anticipates or sue for cash.
And similar expressions.
Forward looking statements are based on our estimates and assumptions as of today July 23rd 2020, and should not be relied upon as representing our estimates or views on any subsequent date.
Please refer to the cautionary statement regarding forward looking information and the risk factors in our most recent 10-K subsequent SEC filings, including just talked about the factors that could cause results to differ materially from those expressed or implied.
During this call he will discuss non-GAAP financial measures, which include organic sales growth numbers well with adjusted operating income in E. P. S. Excluding certain acquisition related charges.
A reconciliation of GAAP to non-GAAP measures discussed in this call is contained in the associated press release.
Is available on the Investor Relations section of our website www Dot dot com.
I'll now turn the call over to George for me. Thanks.
Thanks, Jay Jay.
On today's call I'll focus my remarks on co bid and our Q2 results.
Dave will discuss the autograft acquisition, and JJ will discuss Q3 guidance and related topics.
I'd like to dress health issues first six it will make 404 employees are known to have tested positive for coated and five and fully recovered well, we'll await news on the most recent report.
We are fortunate to have a dedicated workforce that is respected the many changes we've implemented now workplace, including a switch to two shifts mask wearing temperature checks social distancing working remotely travel restrictions and most recently distant sensing and tracing wrist bands.
Despite the pandemic remains employees have been able to continue to supply our life and Lynn saving devices to hospitals surgeons and patients worldwide.
I'm grateful and humbled by the effort and sacrifice, which I see on Placemaking.
From a sales perspective, as a pandemic has reduced surgical procedures significantly and our Q2 sales were down 16%.
Geography sales declined in the Americas by 15% and in Europe, Middle East Africa by 21%.
Asia Pac was flat.
Byproduct distorted with similar has nearly all products declined in Q2.
Within the quarter sales were down 33% in April.
21% in May and up 7% in June.
Our products are generally used in patients over 65 years old the age group most susceptible to cobot.
Not only were most elective surgeries canceled or deferred in Q2, but our core patient was likely hesitant to enter the hospital setting.
Our sales reps in our Sams have also been saying away from hospital has visitors have become less welcome than in pre coven days.
At the height of the crisis in April and May I'd estimate that we made a total of 30 total hospital visits per month in North America in Europe combined.
Prior to July one our policy was that reps needed approval from corporate to go into hospitals and not many did.
It remains unclear what will happen in Q3.
Our European Rep seem to be getting back to some semblance of normality.
Perhaps operating about 50% of the normal activity.
Whereas in North America, the answer is a bit less and we'll certainly be affected by U.S.A. wave number two.
Suffice to say that the job description of medical device sales Rep has been significantly impacted and it remains unclear how welcome they will be in hospitals until a vaccine is widely distributed.
As you know we were a profit oriented organization and we responded aggressively during the early stage of the pandemic as we saw sales declined 39% in the first half of April.
We honestly did not know where the bottom would be.
As a result, we've reduced head count implemented temporary base salary reductions and benefited from a natural downdraft of expenses.
On a combined basis. These reduced Q2, adjusted operating expenses down to $11 million down 24% year over year.
As a result, our Q2 adjusted operating income increased by 3% versus Q2 29 teams.
In Q2 2020, our operating margin was 20%.
Delivering a solid bottom line to our shareholders has been our north star for quite some time.
Healthy margins allow us to pay dividends acquire companies and in normal times raise our employee salaries.
This focus on profits enabled the debt funded RT graft acquisition.
At this point I'll turn it over to Dave. So he can give you additional insight into this important transaction.
Thanks George.
On June 22nd we acquired RT graft for $72.5 million in cash plus potential earn out payments of $17.5 million.
The 12 months ended may 31st trade sales were $15.6 million.
We estimate that hospital level sales were $18.6 million for the same period.
Our gets unit sales pre coal bed grew 10% in 2019.
Autograft processes themselves biologic Bachelor graphs derived from bovine carotid arteries.
The product line is sold only in the U.S. and is now the cornerstone and limits dialysis access offerings.
Prior to the acquisition, 40% of autographs units were sold through independent distributors, whose contracts were terminated in the days after closing.
We estimate our the graph sales for the period July 120, 20 through June Thirtyth 2021 to be approximately $20 million.
We took on six aren't a graph sales reps and they will continue to focus on that device through the end of year.
Her terms of the deal.
We'll continue to operate autographs manufacturing facility in New Jersey for at least three and a half years.
Pre acquisition Autograft had a gross margin of approximately 65%.
Through the remainder of 2020, we expect artist graph to carry a gross margin up roughly 40% due to purchase accounting.
In 2021, we expect Arda graphs gross margin to approximate that up on me and.
And its operating contribution margin to exceed that up we'll need.
With that I'll turn the call over to JJ.
Thanks, Dave.
Given the significant impacted to cope with 19 pandemic and our financial results on our financial results I think it is more pertinent to compare results sequentially rather than year over year.
In particular, I would like to touch on the following items.
Our Q2 financial results.
The impact of Arda graphed on our Q2 results in our balance sheet.
Finally, our Q3 guys.
Q2, operating expenses were $12.2 million with 25% decrease versus Q1 20 twond.
The decrease was driven by layoffs in February April as wells are temporary salary reduction program initiated in April.
In total these programs decreased operating expenses by approximately $1.6 million per month.
In addition, Q2 travel and entertainment expenses as well as sales rep missions for understandably like.
As a result, GAAP operating income in Q2 was $4.9 billion, a 12% sequential increase versus Q1 2020.
And our operating margin was 20%.
Net income increased 10% from Q1, Q2, EBITDA increased 12% sequentially.
The newly acquired autograph chronicling generated $185000.
Q2.
Polluting approximately 1.2 million in one time acquisition related costs.
Incremental amortization in operating expenses.
The graph reduce our Q2 2020 net income by $1 million or five cents per share.
Excluding the onetime acquisition related costs, <unk> EPS impact within minutes.
Finally, our graph transaction, we used $9.1 million of our own cash and bar up $65 million in the form of 40 million dollar term loans and a $25 million fully drawn revolver.
Current interest rate, 3.5% in the term up the loan was five years.
We ended Q2, 2020 with $25.1 billion in cash and $65 million debt.
Expect interest expense to be approximately $660000 per quarter.
Principal payments to be $500000 per quarter for the next year.
At the midpoint, our Q3 sales guidance represents a sequential increase of $7.6 million versus Q2.
This increase is largely driven by $4.9 billion arda grass seeds.
And $2.8 million I assume pokeweed recovery as hospitals continue to reopen.
These increases are partially offset by approximately $1.5 million and assumed Q3 sales declines related to a delay transitioning our CE mark to a new notified body.
As you recall one of our three notified body LR key way made an abrupt exit from the CE, marking business effectively levy locks and 55 other companies without many of our CE marks.
If subsequently we obtained a number of the CE marks with a new notified body QVC food and we are in the application process for the remaining devices.
We estimate the CE Mark issue as well reduced Q3 sales by approximately $1.5 billion.
Principally in the Dacron graft in bovine patch categories.
This issue is included in our Q3 guidance.
At the midpoint, our Q3 operating income guidance represents a sequential increase of $1.7 million or 34% for 34% increase from Q2.
The increase is the result of $3.4 million, an additional gross profit and $1.7 million an increased operating expenses.
The operating expense increase in Q3 is driven by the inclusion of a full quarter autograft related expenses as well the partial elimination of employee salary reductions and increased selling commissions.
Q3 operating income represents a year over year increase of 11% versus Q3 2019.
That's for autograph, we expect Q3 sales to be $4.9 million into Q3 gross margin to be 41%.
The gross margin is temporarily reduced by purchase accounting.
After Q4, we expect the Arctic grip gross margin to approximate our corporate gross margin.
In Q3, we expect our to get up to approximately $130000 of op income and reduce net income by approximately $400000 due to interest expense.
As Dave mentioned, we do expect the Arctic graph that do have similar gross margin than operating contribution margins to eliminate in the long term.
With that I'll turn it over to Josh for questions.
Thank you.
As a reminder to ask a question you'll need to press star one on your telephone to try your question press the pound Keith Please standby compiled acuity roster.
Our first question comes from Cecilia for a long with Canaccord Genuity.
You May proceed with your question.
Hi, Thanks for taking your question I guess I wanted to start just on autograft I'm really just how you're thinking about the shift bringing it in house, but really the shift to a full direct sales model going forward, how you're thinking about the near term impact from distributor termination and really how you view that you see.
I was ramping from a keen in standpoint, and then your longer term expectations. Once it's fully under your umbrella.
Hi, Cecilia, it's Dave Thanks for those questions, yes, so as.
We discussed on the call partner grafted sold roughly 40% of their units through.
Five independent distributors, whose contracts were terminated in the days following the closing I would say those terminations have generally gone smoothly.
Although.
We're not sure that we've received all the inventory back from them. They might have sold some of it out in the channel that being said, we actually you know hired six of autograph sales reps as part of the acquisition plus their VP of sales and so through the remainder of this here right.
Expecting those sales individuals from Arda graft to continue selling the autograph product while domain sales reps, let's call them. The legacy U.S. sales reps, roughly 35, or so will be selling just let me bag.
But we'll be getting a bounty and bonuses on Rd graph sales starting January one next year.
We expect all of the sales reps in the U.S. to be selling the entire bag. So we think the back half of 2020 is a transition period. If you will as for cadence, we're not really breaking down sales by quarter, except obviously in Q3, we're taught.
In about $4.9 million from R&D graft.
And then in 2020, Oh, excuse me 2021, we're expecting $20 million.
Of revenue and I would say you know this is just as you can appreciate a.
A difficult time to make really tight projections on sales dollars because of coal, but and so but we felt like it would be useful to give you all some.
Instinctive Guide post score, where we see the business going so I would say that's what we can say about cadence at the moment.
Great. Thank you David I guess, just kind of following up on that point.
I'm curious, how you're thinking about your broad sales strategy going forward I'm really beginning in 2021 with Arta graphs known in the bag and just your thoughts around direct and indirect product pull through and talk from autograft and really how you're going to bring on the Arctic ourselves reps and the cross selling opportunities.
Right.
They really good question and.
I would say Arda graft implicit in your question, obviously as the other draft is becoming the cornerstone product of laments dialysis access product offerings.
We're delighted to have it in the bag autograft as you know is a graft for dialysis access we sell other types of graphs for access and the you end the U.S. like protocol life span and even some of our allografts. So I would say RV graphs and sort of competes with those you'd only use one grass for her.
Procedure, but a given surgeon may be interested.
Who is using arda graph to learn about other products that we offer specifically enanta dialysis access space I think particularly of our a nasacort product line, he's an official accretion as well as embolectomy.
Catheters, which are used to declawed crops and fish was so there are some nice complimentary products, which could be used on the same or different procedures.
And so we're hopeful that overtime, we could see some pull through.
I'll add that we the Arctic Ralph had 600 plus customers in the U.S., many of whom were well meet customers, but certainly some of whom we're not and so we see an opportunity to.
For this to be a door opener for us and Umeighty overtime start selling some of these complimentary products.
Great. Thank you politically.
Good luck.
Thank you and as a reminder to ask the question I will need to press star one on your telephone. Our next question comes from Rick Wise with Stifel. You May proceed with your question.
Hi, guys. Thanks, It's drew Ranieri on for Rick Tonight.
Thanks for taking the question, but just to start kind of as you talk to your vascular surgeon customers.
Are you getting a sense of where they are procedure volumes are running kind of in terms of New York out or pre cobot levels are they back to 100% yet.
And maybe what are you expecting in terms of a second half 2020 volumes thinking steady state levels or more pressure from some of the research and areas that we're saying all in the country now.
Okay. So drew this is George I'll try to take that question is a lot of questions in there when I answered. This I think I'm answering it from a very localized perspective about our sales in our procedures that I see and I'm not talking about other people, but the cadence that we gave you to use that word here was it was really bad and.
People it got better in May and it got okay. In June it felt like June was kind of.
5% below normal 5% above normal something like that in terms of procedures. What happens next and I heard in your question you want to talk about the U.S. what happens next in the U.S., We really don't know, we're very nervous about what happened.
All those procedures given that we have the second wave going on in the not northeast part of our of our country.
So that's a pretty good when I do think you know as we were discussing today how to present these results.
There's some possibility here that the end of June was some way of a catch up for all the mis procedures in April and May, but we can't know that we just know what we're shipping and the other point I made about the sales reps on the phone call is there is markedly decreased interaction.
Between sales reps and surgeon and now the typical interaction now for US is a surge we'll be doing a case and they will ask the rep to come in and watch the case or help with the case in the past our reps have all been pressing into hospitals of course, that's part of their job.
Rob and trying to talk to surgeons and get into cases and now it's much more on an invitation basis and so you have a lot less information now about what's going on but I hope that answers a lot of your questions.
It was helpful and just kind of yes, right through just like just still getting a little more color. This is sanjay.
So in my comments I mentioned the increase sequentially sales.
About 7.7 million in our guidance sort of just based on our Q3 guidance 4.7 to that as aircraft with another two and a half the tree millionaires is sort of a covert bounce. If you will so there's some optimism built in there.
Maybe as much in Europe as anywhere else in terms of a bounce and I think we do think there will be some but we certainly have to be aware that there may be a resurgence somewhere but into our guide to take some of that.
To answer kind of it so.
So just kind of sticking on this topic for a second and I hear your somewhat optimistic about procedures recovering, but just with states that you're seeing an influx resurgence of patients and just curious if you're seeing your eager your customer being able to manage through any cases cobot case increases are they able to.
If they were able to get to a certain level volume are they able to keep that or do you see them, taking a step down.
Right and so I don't want to get into talking about July and I know, that's not exactly what you're asking but this is all new as I've sort of July 1st or fifth let's call. It. So this is new stuff to us.
But I.
I I will say that in general terms.
What happened in June is going to be.
The last piece that we talk about here.
Got it and just lastly on on your sales force it just seems like.
Your you've been talking more about profitability recently on calls and just as you think ahead and looking ahead at the recovery I mean, how are you thinking about sales first hiring and participating any procedure volume recovery.
But maybe not even in 2020, but in 2021 and beyond should be kind of be thinking you get back to adding five reps per year.
You know that may be a safe place to stay well have to figure out what happened on but I do think we've always sort of thought we were going to be a sales driven organization. So this is a bit of a strange place for us to being I think maybe we got it right here for this time right now, but it's clearly going to change in six months and I would say once a back.
Scene is discovered and distributed widely I think things change a lot.
Thanks for taking the questions, yes, thanks room.
Thank you. Our next question comes from Brooks O'neil with Lake Street capital.
<unk> proceed with your question.
Thank you good afternoon I have a couple.
David maybe you could just talk a little bit about this.
Our to grab your termination of the distributor arrangements, that's 40% of the sales of BARDA graph. What is your expectation would regard to.
That business does it just go away.
Do you hope to picked it up some in your direct sales what do you think.
Next I would say that we expect a pick up a vast majority of it.
Our competitive products like I mentioned once to Cecilia like we refer life span, which has a P.T. graft or allografts and are also use pro call. One of our products is a isn't competitive product in the Vienna graph world, So, but I would say Arctic craft has had a very long.
History of building on a consistent stable sales space with a consistent fairly dedicated group of customers. So I think we're going to be relying on that you know sometimes the distributors as they exit.
Will you know have some shenanigans I'm, hoping that this will generally goes smoothly I would say so far a generally has so we'll have to see but I do expect will capture most of the revenue which is part of the reason why you know, we're saying that.
Congrats sales for the year ended may 31st were 18.6 million at the hospital.
We're sort of advancing that by a year in a month a year ended June Thirtyth 2021, we think we'll be at about 20 million of revenue or more but let's call. It 20 million of revenues. So I think we ought to be able to capture most of that.
Okay. That's good and then.
Just a slightly different question hopefully you don't think business too funny, but obviously you guys had been historically focused on generating the high return on invested capital in your business you've done a terrific job of that.
How do you think about the impact of Arda graft acquisition.
On that metric in the short and maybe the longer term.
Yeah. So this is Jay Jay Thanks for the question.
So depending on how you want to define our life he.
You know it has sort of different impacts, but generally speaking you know.
The acquisition in the short term and we know it did in Q2 sort or Hertz net income and so that numerator.
Goes down, but if you don't include the debt in the denominator use include equity well then in the long term as you increased your net income because this acquisition should be very accretive over time, but I think you're going to do a very nice thing to that to that metric.
If you include death in the denominator done it does it certainly changed a little bit but I think.
The the highest return here for for investors is using but the cost of debt is 3.5% plus whatever color blended four or 5% all in and the cost of equity theoretically anyways in the mid teens I'm. So if you find a deal like this one where its throwing off a lot of cash and you can pay down that get pretty rare.
It will your covenants pretty readily than I think the cheapest way and the most the highest return way to fund that runs through debt and that's what we did even though it's a pretty tough environment wasn't a great.
I think the fact that we were able to fund this through debt speaks pretty highly up the core well made profitability in the core business and the sustainability of it so keybanc Qs with great working through this process with us and I think they understood that.
Both the core business and need to acquired business could be much more profitably going forward combined so I think that's the most efficient way because that's what we just.
Right. So the three they have reset that sounds like a great rate do you would you'd be willing to give us a rough idea. When you think you might be able to pay down instead is that a three or three year five your what do you think yes. It's a five year term until we have amortization we have amortization.
Payments of 2 million Bucks over the first 12 months of 500 Grand a quarter, which are required.
And then I think it's a little bit higher than that maybe three and a half million for a couple of years and then.
Sort of staying in that range. So and then a bullet at the end for the remainder, but I'm going to gas, we're gonna have brooks excess cash and we're going to be able to start paying down either revolver over the term.
And then that will create some more dry powder for the next acquisition and I think thats. What the goal is so I think I think the answer is well, we'll pay down they required payments.
As do will pay the interest as do.
About 660, K., a quarter or so I think I'm sure the interest.
And then as we have excess cash we'll put that towards the pay down of the debt right. Now at 20 25 million in cash you could say well you could probably get by with 16 or 17 or 18 million of cash you could use some of your internal funds to pay down some of the debt right away. So we're not gonna do that we're going to wait and see how it looks and feels.
But I think there's some options there.
That's good I wanted to get Dave Roberts back on the road do it another area I wish it pretty quick yet.
Absolutely, we got to give more dry powder.
Right. Thank you very much for taking my questions.
Thank you Brooks.
Thank you. Our next question comes from my Petoskey with.
He did research you May proceed with your question Hey, guys. Good evening I'm I'm, if I've missed as.
What was your commentary if I didn't Miss is on current number of sales Rep and just in general the folks that are that you had a let's go a few months ago. How have you started bringing people back are filling those roles or can you just speak to that and in particular around sales were up. Thanks sure. Mike. This is George Thanks for the question so in general.
We had about 110 reps for the last three or four quarters at at Q1 of 20 in March of 20, we had 102 reps and then we got down to 88 reps right now at the 630 measuring point and as to your question, where we'd be rehiring. We haven't started yet we're still generally in a hiring freeze.
Right now at the company as we wait to see with this next wave looks like one a question before I think drew asked or what should we expect going forward and maybe thinking when they got to get hiring at some point, but we might wait perhaps until the vaccine comes or perhaps until we have more clarity gotcha.
And George is there any way for you to sort of.
So in dice in terms of just your exposure to say some of these states, where they're they're really getting over run right now like Florida, Texas, and California like what's your what's your sort of revenue exposure and some of these states it looks like there.
Anything real trouble for for the time being anyway.
Well, that's a real good question I don't have that right at my fingertips I can tell you that Florida is always about 10% of our business I know that just off hand, it's a big piece I'd also say that the hot spots. If you will are happening on top of the stroke belt that it's known by so the stroke belt is kind of North Carolina.
Go all the way Western Kansas, and then go down through Texas and that quadrant of the company country is referred to as the stroke belt, because a lot of vascular surgery happens there and that's exactly what is happening. So I would say this is a real something that we got to watch for I mean again covered way covered wave two in the U.S. our.
Known to everyone, but we didnt know enough to make all this we know about all this stuff and we gave you the guidance that we did so we think that that's baked into guidance, but we gave you a slightly wider field goal. This this quarter I think we gave you a from 30.5 to 34.5 for guidance.
Usually it's a little tighter and we did that because the uncertainty around the pandemic. We're also aren't sure how many of our.
Competitor companies are going to giving guidance. So we figured at least to get back on track and give guidance.
Absolutely.
Can I just ask you know you like you guys. Obviously went through it particularly in New York, New Jersey, Boston in the northeast or are there things that you learned up they are your reps warmed up there just in terms of.
Getting access to docs I think things that during that period of time that you can sort of apply and in some of these you know, particularly hot spots.
Better or.
Sort of more in the on on the headlines right now.
I mean, certainly there's always chatter going on amongst the reps. They all have tech strings that talk to each other.
But I would say generally speaking the amount of learning has been pretty low because you know when it's going on the reps aren't really able to get out of their house and into hospitals.
So I would say the whole rep experiences upside down right now and the RSM experience in the U.S. has upside down right now it's changed a lot.
I hope that get a part of your question Mike.
Absolutely and then I hate JJ could can you share.
Talk based comp and Capex for the quarter Amendment. So I have them ready for you might think depreciation and amortization 1.6, yeah stock based comp 800.
Yeah Capex 310.
All right guys heck of a job managing through in Q2. Thanks.
Thanks, Mike.
Thank you and or next question comes from Jim Sidoti with Sidoti and company.
Proceed with your question.
Good afternoon can you hear me.
Yes.
Great.
You talked a little bit about the U.S. and how things are things that are went there during the quarter.
And I understand you don't want to talk too much about July but can you give us some comments on how things are in Europe are you seeing procedures back to pre kobin levels there yet.
Yes, and so.
I wouldn't I wouldn't comment I know exactly what are your question, but I would say, where we're getting a feeling as things are getting back a little bit more towards normal in my script, I think I said, something like 50% of normal and that's just a gas here in in Europe, a lot of our sort of salary reduction programs, where these were were in conjunction with government program.
Swear.
Yeah, we would pay extra kinda salary that government pay why and then they government would say, but the employee can only works defended the time and what we're getting back from Spain and from France in from Italy, and Germany is our reps are chasing underneath the mandate that they can only worked 50% of the time, so they're pushing back toward.
Yes, and saying Hey, let's abandon that government program and just go back to normal. So we can visit hospitals and I think that you're leading edge indicator for us in Europe that they need they want to go out more and they've been restrain so far so we're starting to lift some of those same UK also we had a program there as well.
Sure. So is it fair to say that being a Europe and you carry or are quite earlier, how to do you work in terms of the recovery.
I mean, I, Jim I read the newspaper just like you do and I'm just all over that New York Times website, where they talk about country cases, and it's so much better over in all those countries than it is in the U.S. right now it would be hard to imagine that if not better over there.
Alright, and then a person on the guidance you gave you gave some pretty wide guarded PSTN revenue, which is understandable considering you know the uncertainty related pandemic, but.
You gave gross margin guidance of 62.8%, which sounds pretty specific what gives you confidence in that number and whitewave. So specifically.
On the gross margin when you have.
For $4 million or variability on themselves.
Well you got me there Jim I will say this is Jay Jay I was I was mentioning that it around that for you guys.
That's the way the math worked out for me.
For you, but I think the high level answer here is.
You've got 5 million or so of new revenue coming in at 41%. That's only for two quarters going a little revert to something around corporate gross margin as we discussed, but that's what negative 4% impact from a margin then we've got some inefficiencies coming through in Q3 as well. So that's how we get down to that low number which we.
You can think of 63% [laughter], Sweden less precise [laughter] sorry.
And Dave No no you said a couple times today that you expect the <unk> you know the revenue from autograph next quarter to be about 4.7 million, what's doesn't sound like it's that much lower than it would have been had they stayed independent and I'm just as it doesn't that seem a little aggressive considering you saw.
Down all these distributors and there's got to be some inventory in the channel.
Yeah I mean.
We think there is some but you know eventually they run out of that and I mean, some of the distributors Jim have the turn inventory and other pockets that happened but.
No I believe that or you know I believe on.
The guidance, we've provided is perfectly reasonable.
Okay. All right now I I think that their number 2021 sounds very reasonable. It's just I was a little bit surprised to.
I see the number for the third quarter because of that inventory.
And then the last one did you did you take any PPP money in the quarter.
So this is Jay Jim So I'm not I'm not prior question to you know we have information from the most recent month, obviously that you don't have so that probably helps inform us as to the Q3 guidance answer for the Arctic graph piece as well.
To your question of the P. P P.
Yes, we applied for yes, we got it I think it was.
4.5 to 4.9 or 5 million or something like that.
Like three days later, the Treasury issued their revised guidance and basically said if you're a publicly traded company. This is not for you and so we gave it back three days later.
Okay. So so none of your margins were affected by that you didnt take any of that money.
We did not take any of that money, we took it for three days or four days or something like that right.
Okay, but I mean, the margins or what you reported do their work and working with any onetime benefit from the PPP.
No no no.
Okay.
Good [laughter] alright, that's it for me thank you.
Thanks, Jim.
Thank you.
Ladies and gentlemen that concludes today's conference I would like to thank you for your participation and you may now disconnect.
Great.
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