Q2 2020 Cerner Corp Earnings Call
Ladies and gentlemen, today's conference is scheduled to begin shortly please continue to stand I think you pay patients.
[music].
State is July 29, 2020, and this call is being recorded.
The company has asked me to remind you that various remarks. Many today constitute forward looking statements, including without limitation those regarding projections of future revenues or earnings operating margins operating and capital expenses bookings new solution services and development.
Capital allocation plans cost optimization and operational improvement initiatives.
Future business outlook, including some markets our prospects by the company solution and services.
Expected benefits of our acquisitions divestitures or other collaborations and expect it impacts of the Coca 19 pandemic.
Actual results may differ materially fund as indicated by the forward looking statements she's she's saying, so nice earnings release, which was furnished to the FCC today.
That does that Investor section of center Dot com.
Filings with the FCC for additional information concerning factors that could cause actual results could differ materially some does and the forward looking statements.
Conciliation of non-GAAP GAAP financial measures discussed in this earnings at least.
Hello can also be found in the company's anything so at least seven assumes no obligation to update any forward looking statements or information, except as required by law.
At this time I like this in the call over to Brent cheaper and CEO of Ciena Corporation.
Thanks, very much good afternoon, everyone. Thank you for joining the call.
Most of you were doing this call from remote locations today. So please bear with us through any technical challenges hopefully we won't have any I'll spend a few minutes, providing my thoughts on the business in current environment before handing the call over to CFO Mark.
Our chief client services Officer, John Peters or.
In our president Don trick for more on the numbers in the marketplace commentary.
Well covered has hurt our clients financially by significantly reducing elective procedures. Another margin contributors cerners intense focus on supporting them through the pandemic has enabled us to strengthen and extend the client relationships and actually helped plan for their post cobot recovery.
As an example, we recently announced the expansion of her back banner health relationship to include centers.
Revenue cycle management solution.
With 28 hospitals in six states banners or one of the country's largest health systems and we're very proud to globe grow our relationship with them.
In addition to clarity Weideman focus cobot has also produced a real burst of innovation Cerner teams delivered critical quick turn projects.
Our lights on network analytics solution released more than 15, new reports and dashboards and 45 days.
We stood up a new version of our cloud based care where solution to support the center for disease control on a national scale in just 72 hours.
And we developed and deployed new Syndromic in surveillance reporting to support clients in a matter of ours.
The flexibility and commitment weve shown our clients, it's been inspiring and Cerner solutions are helping caregivers responded the crisis and plan for recovery from its impacts.
In many cases cobot is helping our clients to actually Reimagine, new post carpet business models to reflect the increasing importance comprehensive data and network strategies.
We'll hear more front door and about the forces of change impacting health care.
Cerners flexibility is largely the result of our ability to execute and deliver on our transformation efforts.
We've made meaningful progress on cost optimization and business simplification initiatives will drive efficiencies and ultimately make it easier to do business with Cerner.
[music].
Oh Tomorrow marks an important milestone.
The one year anniversary of our agreement with Amazon Natomas U.S.
The pandemic has underscored the value and relevancy of this relationship.
Sooner recently deployed the innovative eat up U.S. cloud based Cerner Command Center.
That's a tool that provides real time data and predictive analytics that enable health systems to monitor and more effectively manage critical resources, such as bed utilization I see you occupancy staffing levels.
Launched in January Cerner Command Center is already helping health systems like Northern White health.
Cook County, Health and hospital system, and Christiana care Health services and I'm pleased with the considerable interest that is coming from other clients in this tool.
Service Cobot Task force continues to inform our clinical business and operational decision making.
The task force regularly interacts with the CDC.
World Health organization, and other global health agencies to help guide their recommendations.
And the health and wellbeing of our associates.
Paramount concern as are our workforce provides critical support to Cerners global client base.
As I mentioned last quarter I went to again, thank our center associates for adapting so well get into this virtual work environment, they've just done an outstanding job and deserve our robust times.
Since we last spoke.
We've also welcomed a new chief Technology officer drone Labatt.
Your own brings more than 30 years of technology experience, including more than 10 years and cloud based environments.
And drone will define and implement Cerners technology vision and strategies to deliver next generation innovations for clients across all platforms. You will also provide leadership over all development resources were collaborative collaboratively with our sales marketing and consulting teams.
I can tell your job Jerome is passionate about health care and he has a proven track record record of transformation leadership and really thrilled to have him on the Cerner leadership team.
Finally, I'd like to recognize the work, we're doing to build more diverse and inclusive culture at Cerner.
Well diversity and inclusion efforts have been underway for many years recent events are challenged organizations to reexamine their strategies.
And as I mentioned at a recent all associated town Hall. The Cerner leadership team is committed to making even more progress in our diversity inclusion programs and policies.
For two consecutive years, we've been named a leading diversity employer by Forbes and we will continue a series of actions that will further advance our culture and improve the communities, where we live and work.
Also this week.
Cerner was named the technology partner and initiative led by nonprofit testing for America.
CFA is driving an effort to safely reopen historically black colleges and universities by developing comprehensive covert testing safety plans for students faculty administrators.
Sure will play a key role and safely routing test results from partner labs to the H.B.C. use.
The other healthy agencies.
As for our financial results.
I'm pleased that we've delivered a very solid second quarter, especially given the unique.
Expected circumstances.
Our quarterly bookings reflect strengthen our client relationships in our strong focus on cost control drove a favorable favorable earnings result.
We're fortunate to have a resilient business model.
Engaged associates worldwide.
Highly relevant healthcare technology.
And a solid transformation plan that positions us to manage through the pandemic with less impact than many other companies.
But that is context I'd like to turn the call over to Mark.
Thanks, Brent good afternoon, everyone I'm going to cover our Q2 results ensure updated views on the remainder of the year.
This quarter, we delivered strong bookings the revenue came in slightly below our expectations, primarily driven by some low margin items being impacted by that pandemic more than we expect.
This was offset by expense control, we delivered earnings the behind the values right.
Adjusted our revenue guidance reflects lower Q2.
More current view of the co that impact going forward and the anticipated sale of are remaining rep work services.
We also tightened our full year earnings outlook, while maintaining the same midpoint.
Overall, we're pleased with our results and outlook given our prior guidance was provided in the early stages of an unprecedented environment.
Now I'll go through our Q2 results, starting with bookings, which were 1.34 billion down 6% from second quarter 2019, but above the high end there were guidance range, primarily due to strong levels of managed services bookings in the quarter.
We ended the quarter with the revenue backlog of 13.66 billion would you down 9% from a year ago, primarily due to the termination of a rep work outsourcing agreement that we discussed last year as one of the lower level of bookings in the first half of this year.
Backlog revenue combined with other contracted revenue that is excluded for me at the six as six backlog definition still provides visibility of more than 85% of expected revenue over the next 12 months.
Revenue in the quarter was 1.33 billion down 7% from Q2 of 19, driven primarily by Q4 19 exit of the rub works outsourcing contract and the impact of the pandemic.
Revenue was 10 million blow our guidance range with the impact of cobot contributing to lower levels of technology resale and reimbursed travel.
We also have left third party services licensed software and transaction processing revenue during the quarter.
As I mentioned these are primarily lower margin revenue streams. So the impact on earnings was limited we were able to offset it would access control.
Well now go through the business model detail in year over year growth compared to Q2 of 19.
Licensed software revenue Q2 is 150 to go down 23% from a record HIF 197 million in Q2 of 19, what we expect to license software would be down this quarter did come in a bit lower than expected as strong growth in our SaaS offerings was offset by decline traditional licensed software.
Technology resale of 42 million in Q2 was down 31% year over year, primarily driven by a few anticipated new business deals pushing out of the quarter.
Pandemic.
Subscription revenue grew 3% in Q2 to 92 million. This was slightly below our expectations due to lower transaction processing revenue, which is volume based and was impacted by significantly lower level of ambulatory visits.
Professional services revenue was down 5% in Q2 to 461 million largely in line with our expectations with the decline driven by the impact the pandemic head on project activity Lower third party services and the termination of large rebel works agreement.
Note that while we expect implement it takes connectivity to grow in the second half of the year.
Total services are expected to decline due to the termination of large rub works agreement the sale of noncore assets in Germany, and Spain, which closed at the beginning in Q3, the sale of the rest of where reports services business, which is expected to close during Q3.
All this activity has been factored into our guidance.
Managed services was up 3% in Q2 to 307 million lives for expectation support maintenance of 274 million was down 1% year over year, and essentially flat to last quarter, which remains in our expectation range. It continues to reflect the impact of attrition and reduced hardware maintenance revenue.
And finally reimbursed travel just 2 million was down 93% in Q2 due to travel restrictions that went into place toward the end of Q1.
We had anticipated travel would be down in Q2, but the ongoing restrictions related to kogan 19 impacted our ability to travel even more than anticipated.
Looking at revenue by geographic segment. This domestic revenue was down 8% from the year ago quarter at 1.17 billion and non U.S. revenue of 162 million was down 2% from the year ago.
Moving to gross margin our gross margin for Q2 was 84.1% up more than 200 basis points, where maybe 2% last quarter and that nearly 300 basis points from 81.2% year over year.
As a reflection of the overall mix of revenue quarter with the largest revenue declined primarily coming from low margin technology resale third party services and reimbursed travel.
Now I'll discuss spending operating margin in that or.
For these items, we provide both GAAP and adjusted or non-GAAP results.
Adjusted results exclude share based compensation expense acquisition related adjustment organizational restructuring and other expenses.
Cobot 19 related expenses and other adjustments that are detailed and reconcile the gap in our earnings release.
Looking at our operating spending our second quarter GAAP operating expenses of 971 million were down 6%.
Fair to 1.03 billion a year ago period.
Our just operating expenses were down 4% compared to Q2 of 19, primarily resulting from our continued cost optimization efforts. We also had some areas where covert drove lower expenses such as <unk> Unreimbursed travel entertainment Associate medical expenses looking at the line items for Q2 sales decline serves expenses decreased 3%.
Year over year, driven by lower personnel and non personnel expense software development expense decreased 2% from Q2 of 19 was essentially flat gross R&D and a 9% increase and amortization that was offset by increased capitalized software DNA expense in Q2 was down 7% driven by applying to both personnel and non personnel.
Yes.
Moving to operating margins, our GAAP operating margin in Q2 was 11% compared to 9.2% in a year ago period, our adjusted operating margin for the quarter was 18.4% up from 18% in Q2 of 19, reflecting improved revenue mix and the impact of our cost optimization efforts.
We remain on track where plant cost optimization efforts additional measures we implemented to mitigate the impact of the crisis. As a result, we continue expect our full year adjusted operating margin to be around 20%. This would be approximately 150 basis points of full year and margin expansion, which we view as impressive given the circumstances for Q4, we still.
Expect our operating margin to be 50 to 100 basis points below our original 22.5% target, reflecting the reality that even with going beyond our original optimization targets, we won't fully offset the impact of covert 19 by the end of year.
This would still reflects strong margin expansion of approximately 150 basis points compared to Q4 90.
We also believe the framework for ongoing margin expansion, we shared at our Investor day remains valid and we expect to continue improving margins beyond this year as we implement additional optimization efforts and aim to realize a longer term opportunity to benefit from platform organization.
Moving in that earnings any P.S., our GAAP net earnings in Q2 were 135 million or 44 cents per diluted share is up from 39 cents in Q2 of 19.
Adjusted net earnings in Q2, 193 million and adjusted diluted EPS was 63 cents compared to 60 cents 66 cents in Q2 of 19.
Both our GAAP and non-GAAP tax rates were 21% for the quarter.
The remainder of 2020, we continue to expect our GAAP and non-GAAP tax rate to be between 20 and 22%.
Moving to our balance sheet remains solid position, we ended Q2, and 441 million of cash and short term investments well debt remained at 1.34 billion given our relatively low leverage. We believe we were remain well positioned to access additional capital is needed to support our growth and capital allocation strategy.
Moving to receivables and Paul the last quarter, we previewed the we anticipated some impact on collections from covered in the near to intermediate term.
We did experience some of that impact in Q2 total receivables ended the quarter at 1.18 billion up 33 million from last quarter.
Our Q2, Dsos 81 days, which is up from 74 days in Q1 of 20 and 78 days in the year period.
Looking forward, we expect some continued impact on collections, but we view it as more of a timing issue in the Collectability issue and do not currently expected to materially impact our operations.
Operating cash flow in Q2 was 259 million and capital expenditures were seasonally higher and 117 million well capitalized software was 78 million.
Free cash flow was 64 million for the quarter.
For the second half a year, we expect higher operating cash flow and lower capex to drive stronger free cash flow.
Moving to capital allocation as we mentioned last quarter due to the uncertainty into the current environments significant level of repurchases in Q1, we pause we purchase activity in Q2, we still have 1.03 billion remain on the current authorization and we'll continue to evaluate our program, which may also be impacted by the about funding used for other purposes.
As such as acquisitions or investments.
Moving to our dividend program, we pay the dividend Q2 of 18 cents per share were $55 million and our sustained strong financial position should enable us to continue our dividend program subject to board approval.
Before moving the guidance and I'd like to comment on the announcement from early June that are one RCM inc. will acquire our rough work services business. This divestiture is consistent with the portfolio manager Mint activities. You have discussed as part of the transaction Cerner will extend our ones revenue cycle capabilities to our CLI.
Into new prospects as part of an integrated offering.
The Republic services business represents approximately 80 million of annual revenue, there's a profitable revenue stream, but we do not expect the transaction to have a material impact on Cerners earnings. The transaction is expected to close in Q3, we effectively and approximately 30 million less revenue into our full year guidance to reflect this timing.
Moving to guidance, while the pandemic continues to progress there remains difficult is precisely quantify the extent to which will affect our business operations and financial results for the rest of the year as we were able to demonstrate Q2, our businesses generally resilient with significant recurring elements, we believe that the largest impact from the pandemic occurred in the second.
For the project in sales activity will improve in second half of the year, assuming the impact of the pandemic begins to subside during this period.
The following guidance essentially reflects minor tweaks to our prior expectations based on what we have learned during the early stages of the pandemic.
Well, we continue to believe it is helpful to investors to provide our current view of expected results for the future I would caution that our guidance remains subject to a higher than normal amount of risk given we are operating an unfamiliar territory, especially with the recent surges in koby cases.
Now I'll walk through the guidance for the third quarter in full year.
For Q3, we expect revenue to be between 1.35, and 1.4 billion. As a reminder, Q3 of 19 included a little more than 80 million of revenue from our Red works and global divested businesses.
Which approximately $7 million is not in Q3 20 revenue.
1.375 billion midpoint of this range reflects roughly flat growth from Q3 of 19 after adjusting for divestitures.
The Q3 range reflects a slightly larger pandemic impact than we originally anticipated in factors in the pending sale of the remainder of our revenue works services business that is expected to close in Q3, which we expect to reduced revenue by about 10 million in the third quarter and 20 million in the fourth quarter.
For the full year, we expect revenue between 5.54 or five and 5.55 billion. Once again I would note that 2019 included approximately 330 million of revenue from our divested Rev works in global businesses of which approximately 220 million is not in 2020 revenue.
The 5.5 billion midpoint reflects roughly flat growth from 2019 after adjusting for divestitures.
This new ranges down from our prior guidance range as we effected in the sale of the remainder of our Groundworks business the impact of the lower revenue in the second quarter and an updated outlook for the second half of 2020 to reflect our current view of the impact of the pandemic.
We call that are full year guidance already reflected the exit of our large revworks outsourcing contract in Q4 of 19, and our global divestiture as I indicated adjusting for all of the portfolio management activities now captured in our guidance would result in roughly flat organic growth. We recognize that there are a lot of moving parts that we do believe the actions we are taking position us.
For solid growth when the pandemic impact subsides and the divested revenue is out of the comparable periods.
Moving to EPS, we expect Q3 adjusted diluted EPS to be 70 to 74 cents per share the midpoint of this range represents 9% growth over Q3 of 19.
For the full year, we expect adjusted diluted EPS to be $2.80 to these out to $2.88, reflecting the narrowing from the prior range up to 78 to $2.90, while maintaining the midpoint of $2.84 and expected growth of 6% over 2019.
The expected EPS growth in Q3 and for the full year.
Reflects our ability to offset the impact of lower revenue from coated and the last earnings from divested businesses through our cost optimization initiatives today.
Moving to bookings guidance, we expect bookings revenue Q3.
1.35 billion to 1.55 billion the midpoint of this range, which represents a nice sequential increase over Q2, reflecting our expectation activity will ramp as we move through the year.
Overall, we view this guidance is solid with lower expected revenue being offset by additional expense control leading to our expectations were solid earnings growth in a very challenging environment.
In conclusion, we are pleased with our solid results given the circumstances were focused on continuing to execute throughout the second half of year with that I'll turn the call over to John.
Thanks, Mark good afternoon, everyone today I'll provide results highlights and an update on our federal business.
I'll start with bookings, we delivered solid bookings given the circumstances exceeding the high end of our guidance range. While this did not translate to revenue upside given the mix of bookings. It does feed our backlog increased visibility going forward. This mix is evident in a high level higher level of long term bookings at 32%.
Total compared to 22% a year ago reflect reflecting strength in managed services.
Well the pandemic did impact the volume of new footprints, we were very competitive where decisions were made winning several new committee worked footprint. We continue to see activity with larger systems included a noteworthy win against our primary competitor and Wisconsin based Marshfield point it.
We had solid bookings across our strategic growth businesses, reflecting the relevance of these solutions as hospitals cope with the pandemic and continue with our long term strategies.
Additionally, we continue advancing our revenue cycle footprints with another strong bookings quarter. This was highlighted earlier. This month early in the month as we announced the continued expansion of our strategic relationship with banner health, adding our revenue cycle solutions.
Another positive related to revenue cycle is the relationship recently announced with our one as part of the expected divestiture of our web works services business. This puts our clients in good hands from a revenue cycle services standpoint, while allowing cerner to focus on it continue advancement of our solutions. Additionally, we're working with our.
I want to bring an integrated offerings, combining our ones tools and services capabilities with our solutions and we believe will further strengthen our revenue cycle value proposition.
Moving to federal like a vast majority of our clients and healthcare in general the and V.A. had been on the frontline's combating could cobot 19 will this has required us to adapt to virtual interactions less intrusive user engagement and limited onsite activities, we continued to make.
Yes on both programs on April 18, the federal electronic health record modernization program office DSD NVCA launched a joint health information exchange, enabling seamless secure exchange of health information among each department and their expanded network of community partners.
Since the launch more than 2000 hospitals 8000, pharmacies 33000 clinics a thousand lab 800 federally qualified health centers and 300 nursing homes across the country have access to be a in DMD patient information later this year.
Beauty and V.A. expect to connect to the Commonwell health, Hawaii, which will add an additional 15000 providers to the network.
We continue to work with the VA and Deo deed to update the go lives schedules for the impact of the pandemic. While revised go live dates have not been announced for the DJ We continued to move forward with the VA centralized scheduling solution go live and our first VIP program go live on the deal decide as part of the lightest partnership for defense.
Since health, we're making significant progress working virtually to advance the program and activation scheduled in the coming months, including US Coast Guard pilot site.
Now I'll discuss the broader marketplace and how we are executing in this environment as discussed last quarter, while the pandemic has created some disruption to business activity in the near term I'm very pleased that a clear message. We're hearing from our client is they want to continue and in many cases accelerate their strategic plan and Cerner.
Is essential part of those strategic plans, we continue working very closely with our clients as they manage the challenges of response and recovery.
To date the impact of the pandemic is playing out close to how we anticipated it would when we talked last quarter Q2 had very little activity early in the quarter then activity increase towards the ended the quarter, we're closely monitoring the financial and operational impact to the pandemic, including the recent surging cases at this point.
Lee our outlook is achievable over.
Overall, both cerner and our clients have adapted to different ways of doing business, we have modified or sales and service delivery approach and our clients have been receptive we have shifted to virtual interactions for most contracting activity demos open houses and road mapping sessions.
The project side, our professional services organization performed well and mitigating the impact of the pandemic as mentioned on our last call we shifted doing to doing as much work as possible remotely early in the early stages of the pandemic our clients were supportive and we quickly adapted to this approach as traditional loss.
At the site event inclusive of go lives were done completely virtual.
As reopening occurred we have shifted where possible and feasible to a hybrid model combined in limited onsite presence with the virtual capability. This is approaches is proving to be effective and getting the ongoing travelers restrictions. We plan to continue this approach for the foreseeable future over time I expect our.
Onsite presence will increase from our current levels. However, I believe the hybrid model will continue resulting in overall less travel than before the pandemic. This will be more efficient and cost effective for both cerner and our clients in summary, I am pleased with our execution in the second quarter and I believe we are well positioned to deliver.
Against our forecast in the second half of the year.
With that I'll turn the call over to Don.
Thanks, John.
I had the chance to spend the afternoon yesterday with the chief executive and the leadership team one of our leading health system clients.
We delve into covered response, we dialogue on revenue recovery, we talked about what both might tell us about the chance to rethink the future of care delivery and their region and nationwide.
The current pandemic continues to showcase the very best and frontline caregivers at the same time. It also eliminates the lack of an integrated system of health and care focused on the person.
We still lacking unified help network architecture.
Systems and data gaps decrease access to care increased complexity of care and complicate the delivery what was described but the team yesterday as the essential need for one patient experience.
As entrepreneurs, we're excited about the opportunity to solve these challenges as our late founder Neal Patterson framed healthcare as a system and name only and Cerners technology and data solutions hold the promise to change that.
Our product and larger platform vision operates at three levels the person the enterprise and the health network.
Thats Cerner, we always begin with the person only one thing is common across any health care process. The individual our focus is on the whole person and there are always shifting role as a patient as a member caregiver for an extended family. We're increasingly has a consumer.
Our so our support solutions must supply a person centric experience that have the potential to change behavior.
Overtime healthcare itself.
Our consumer business delivered a solid second quarter booked revenue was a particular bright spot nearly doubling in the first half of 2020 compared to the same period in 2019.
This growth signals that our digital front door strategy is working.
Partnerships with industry leaders, such as our Tele health efforts with Amwell provider matching with high risk and self monitoring with get well loop all have solid momentum within our unified consumer framework.
As we elevate from the person our next systems level focus is the enterprise.
Tier, where our Cerner millennium DMR and care aware solutions are deployed and one third of us healthcare and key global geographies worldwide.
And it's also here, where we automate critical provider workloads, and where we differentiate with our ability to drive decision, making within the last mile workflow of the provider.
And the second quarter, we made important progress unifying our access management solutions and the revenue cycle business with our consumer solutions. These front end patient engagement and access capabilities move us closer to the touchless registration experienced the current pandemic requires and as we look beyond covered.
They will ensure the person the provider and the payer all have the right information to deliver a better experience and a lower total cost.
As Brent framed in his comments our care where solution suite also continued to see solid demand in the second quarter.
Providers are looking to our care, where communications capabilities and our health systems operation solutions as critical for both Cobot surge response and durable revenue recovery in the business is on pace for over 30% growth for full year 2020.
This providers look to tackle the operational and financial challenges of coded. It also is pushing them to think not just at the enterprise level, but at the larger health network level as well success requires them to manage a patient member or consumer across multiple organizations, regardless of the Korean Omar.
And our earmark Gnostic Healtheintent platform was architected to enable this a central work across diverse stakeholders and payment models and the second quarter Healtheintent saw new footprints at organizations ranging from the University of Southern California to the Marshfield clinic to Western Health and Australia.
It also delivered important displacements and organizations like Altman, how this market is beginning to define what a total solution offering must look like and also beginning to recognize cerner and it's increasing capabilities to deliver it.
The person the enterprise the health network. They are the architectural building blocks that will drive cerner forward in the decade ahead.
Finally, we believe our data business holds the potential to be the next cerner our release of information businesses on a path to exceed an aggressive 2020 revenue target growing over 100% off a small base.
The team also has meaningfully advanced our Cerner learning health network hitting their full year goal of 40 participating provider organizations by June Thirtyth.
And then the strong demonstration of the real world potential of this data academic researchers researchers have launched 42 active projects leveraging our free co bid de identified data cohort to tackle challenges ranging from racial and ethnic determinants two advancement of new coated therapeutics.
As we look beyond the cobot crisis, we see important secular forces a change playing out we've always understood that today's future is tomorrow's present.
And that the best way to predict the future is to lead it.
Some content in the solutions to the client's needs that framed my conversation yesterday will come from Big Tech others argue Silicon Valley startups will bring the next wave of change. However, I would argue that none of them have our depth of knowledge of health care and IP. None of them have the same ability to impact the last mile provider workflow.
And none of them have our combination of entrepreneurial scale cerners value proposition has never been more relevant or more needed than it is in 2020 and the current crisis as mobilizing a new generation of Cerner leaders to advance it.
With that I'll turn the call over for questions.
Thank you to ask a question you want me to press Star one on your telephone to withdraw your question.
Please standby, let me conclude the chairman Dave there.
Our first question comes from Sean Dodge with RBC capital markets. Your line is now open.
Hey, good afternoon status color on for Sean Thanks for taking the questions.
Going on on the VA implementation.
No more color on what types of projects are still actives and how long. This can sort of background work continued before the onsite work becomes essential.
And I still assuming that some of this work can be done simultaneously residents sequential that sort of a catch up with news travel restrictions are lifted.
Yes. This is John ill address a couple of those issues. So the background work can continue it is continuing and we're preparing for the first the first go live in subsequent go lives as well and we're already making plans to be able to go on site. So we're we're working in everything from testing protocols.
Other things so that odds of so that Werent are able to go go live the exact date to those while not public have been proposed than we should be hearing something sometime in the near future on more publicly about when those go lives go lives occur, but I'm actually very pleased with how we're making progress in this sort of hybrid environment of virtual.
And limited on side and we continue to progress as we would in any other project given the types of restrictions they have particularly around travel, but I see that that moving forward and we've already made plans to when we can go on site, how will activate and continue on.
Excellent. Thank you.
And then just not on real quick and they'll spend a lot on R&D and kind of in the past sound like there is some opportunities to rationalize or refocus some of the spend.
This has been done and what do you think the right amount is going forward from here.
Yeah. This is mark.
We were in innovation company so.
Our our widget their strength is to invest in R&D. So.
Most of our work has been necessarily focused on reducing R&D a lot of its been focused on how can we maintain current levels in R&D without increasing it but deliver significantly more innovation from that spend certainly the hiring of your realm as our CTO as a great step in.
Those in that direction, we continue to work on the processes and how we develop.
And certainly with the modernization efforts on the we're doing relative to our platform.
The current less spend level that we have I think is something we want to maintain.
But I think for US the goal is to figure out how we can get an even bigger bang for the Bob and how we can get to market more quickly with our solutions. So.
We overtime that doesn't doesn't grow relative to the rest of the revenue, we'll get some margin expansion opportunities.
But I don't see us drastically cutting.
Our innovation.
And the money we spent on R&D.
Okay. Okay. Thank you very much.
Thank you. Our next question comes from Elizabeth Anderson with Evercore. Your line is now open.
Hi, good afternoon, guys. Thanks for that question.
You talked a bunch of that they've done Landon.
Measure staying at this years looking forward.
Seeing any differentiation the tree in places where called Red hat sure does how do we saw an uptick Russia is not or a little difference is entitled to think about in terms of like size of customer who are sort of able to look more longer term at this point versus not or would you say that your demand environment is fairly even all around.
This is John if I understand the question correctly.
I think it wouldnt come in as a big surprise that where there's cobot surges and where there's not there's there's deferring.
Different priorities in terms of.
Our clients are working on in the near term and a surge activities that occurred in different parts of the country in different parts of the world now General statement.
And I mentioned that in my set of the comments is that this is not stopping health carrying its tracks.
The initiatives that were going on the strategies that are the broad healthcare environment. We're embarking on they are still incredibly relevant if not more relevant in the new world. So the strategies that have been placed out and most clients and regardless of where they are frankly in the us for around.
World They want to continue the strategies and in many cases advanced them more quickly.
There are a big part of the recovery. So so yes, there will be individual.
Ships as surgeons occur in different spots, but broadly.
People remain focused and they want to advance their strategies.
Yes, I just said I'd, just say one more thing which is rather than geography. If we were to think about it relative to business model and mix, obviously organizations that have provider sponsored plans and are taking first dollar risk.
Clearly have had differentiated performance relative to their peers.
And I think Thats one of the reasons why we're excited about the capabilities that we've built off healtheintent the partnership with numerous we think.
Strategies around risk will have a tailwind around them as we kind of get to that after cobot window and people start thinking about business model strategy go forward.
Done this mark do you worry about the Cures Act are we seeing the benefit from that in our client base, yes, absolutely I mean, I think theres a set of things that are having a uniform impact on kind of the financial health Mart clients and they start with the fact that the stimulus dollars have had big an important impacts for those organizations and I think.
Most organizations would anticipate that there'll be additional stimulus dollars coming forward given the essential role that they've played the last 90 plus days.
And then I think beyond that.
Obviously very focus to John's point on.
Durable revenue recovery elective surgery recovery in their their hotspot dynamics do play a role relative to the realities of what that does or doesn't look like.
That's very helpful. And then just in terms of all question just in terms of yours.
Revenue cycle that when banner.
And now.
Can you talk about what what people are particularly interested in terms of solutions that you guys provided there should have new additions or or the integration with the core networks or whatever the case, maybe that would be helpful. Thanks.
Yes, it's a great question so.
One of the things, which.
Clearly as top of mind right now for every healthcare organization is how they think about front end access management, so strategies around how you engage the consumer make it easy for them to think through registration and scheduling help them think about that on a virtual basis increasingly so I talk about touchless registration.
That's the framework that.
I'm discussing so the front end as is a major area of focus and emphasis and to John's point. It's one of the things that we're excited about around the our one relationship they have some capabilities like tonic for intake that we think will have big big impact there.
So that's a real focal point today, and then obviously from a banner perspective beyond the front end, they're really looking for that opportunity for that integrated front, middle and back and and our ability to to deploy that and.
Weve to Mark's point plan on delivering that from a solutions perspective.
And in some cases complemented by the capabilities of our one.
As we think about the blend of technologies and services required to derive the financial metrics of those organizations.
Great. Thank you very much.
Thank you Sir our next question comes from Kevin Kelly Endo with you.
Line is now open.
Hey, Adam Noble in for Kevin. Thanks for the question I just wanted to talk about some of the kind of virtual go lives or hybrid go lives that you talked about.
Yes to what extent do you think those will become the norm in the future.
And beyond reimbursed travel how could more virtual go lives impact to revenue and margins.
For those petition for that implementation.
And this is John I'll answer it in a general context as it relates to the go forward and I mentioned, a little bit in our 10. My comments is that an absolute virtual purely virtual goal line, they've actually gone pretty well, but the more complex ago light is the more difficult is to do some of that stuff. So I believe.
Leave that moving forward that we are going to bring this being this hybrid model, where we don't bring as many people on site and that we're able to use our virtual capabilities or remote capabilities are centralized capabilities to support. These go lives with fewer people.
Fewer people on site and and they worked really well the ones that we've done both in a virtual.
Keep a purely virtual that we did early in the quarter. They went very well the ones that we've done in a hybrid model they've been working very well as well and the context of the cost is travel is always a big part of the costs both for our clients as we scope these projects out.
And being able to limit that will not only be more cost effective for our clients, but frankly, it should the lot of them to purchase more capability as well, yes. There is more when we think about when we travel with associate they're traveling a half day out and a half date back. So they can to in essence, Bill four days worth of time.
With that we're doing work virtually we can get a full five days or so that's a 25% increase in their productivity. So if we continue to leverage the virtual nature. Once again John's point of there are things we have to go on site for but if we're doing 85% to 90% of the.
Work remotely as opposed to the 60% we were doing.
That's all at a much much higher efficiency and therefore, low overall lower cost while higher margin. So those are the things that.
At least in that business from the year somewhat the exciting opportunities from a virtual world.
Great and as a follow up question could you remind me what the revenue contribution of any you guys get from your and wells will help partnership and given the major surgery telehealth demand have you considered restructuring that relationship are finding more direct ways to participate in that.
Our health market similar to some of your DMR competitors.
This is Don so I think one we.
We think about virtual health more broadly than than just aren't partnership with with and lost and we're really thinking about.
To John's construct what what is the mix virtual and physical activity, that's going to make up strategies around the person the enterprise and the house network. So.
We have big strategies and investments in that space and and we think it will be a meaningful contributor to top line.
In terms of the Amwell partnership as I indicated.
At the network level, we feel very good about that partnership and the capabilities that we've been able to take to the market.
Around debt, but I think we have a broader view of what the opportunity looks like around virtual and we think some of those opportunities will be in higher acuity settings like the hospital in the I see you Werent care, where platform becomes particularly differentiating.
Great. Thanks for the question.
Thank you. Our next question comes from Lisa Gill with JP Morgan. Your line is now open.
Hi, if any on for Lisa.
Yes.
Given some of the delays at the D.A.T.C. that impacting the timing of your target for will turn to slide 8% growth.
Yes. This is mark.
Clearly 2020 as we've talked about is the reset year for the topline right. We just basically over the last kind of six quarters.
Divested $330 million worth the revenue. So we're really rebasing the organization focusing on the things, we think have high growth potential and can drive.
Operating margin so I think from from an overall revenue to point to any any particular business, we continue to be on track.
So we saw that as a fairly important part of our growth and that is delivering as very close with our expectations were the ones that we shared with investors. So I think that country continued continues to contribute but when you look at getting to a are.
That kind of the organic growth rates, we talked about.
You got to kind of we've got to get through 2020 that kind of rebase and reset our revenue, but all the things that don's talking about the focus to covert is creating only up the capabilities. We have been in our in our client base. Some of the strategic growth initiatives are really complement that.
I think we are well set up to continue growing once we get kind of the comparables washed through from these divestitures, which have all been.
Done Bennett focus for us through the first half of the year really getting giving those those things taking care of ideally we're going to be open the second half the year looking for opportunities.
We still like the opportunities of.
Looking for potential acquisitions, and we think can really leverage and drive forward some of our initiatives, particularly in the strategic growth area and that was previously contributes to some of the inorganic elements of growth but.
Overall would ship kind of asking investors hey, let's get through 2020, let's get the gets you a good exit revenue number and then we'll lay out the growth strategies from there the what should be consistent with what we've talked about because we don't see anything in the business or in the environment. The changes our topline growth strategies or expectations or they are.
Operating margin growth opportunities we've seen.
That's really helpful. And then maybe to your point on the strategic growth are you finding that the disruption in the marketplace is opening up any potential opportunities for M&A or new partnerships.
As the great question, So I talked about some of the areas inside the strategic growth side of the business that have real traction and trend I think in particular, we've been very excited about the communication and hospital operation capabilities office care were.
Right and about the dialogue, that's playing out around our consumer capabilities in consumer framework.
And and see some interesting.
Other pockets of growth in areas ranging from behavioral how to what we're doing in the workforce health place all of which have been catalyzed by dynamics around covet.
So as the first thing I would say the second thing I would say as bill by partner strategies are dimension of how all of those organizations think about.
Going to market and interestingly, we think that cerner as a destination location for partnership has really been accelerated over the last 90 days. These earlier stage companies don't have the same access to provide our clients who are focused on coated and they're looking for partnership operates.
Entities with Cerner as a means by which to create access to.
Provider client base.
And then obviously as Mark suggested were going to Opportunistically think about.
Acquisition opportunities contextual for those strategies and if they can be catalytic and help us move further faster and those are things that we're going to look at in terms of deployment of capital not only in the second half of the year, but going into 2021.
Very helpful. Thank you.
Thank you. Our next question comes from Ricky Goldwasser with Morgan Stanley. Your line is now open.
Yes, hi, Thank you so clearly a lot of uncertainty around around covanta, but.
You can help us with just giving a little bit more color on what are the underlying assumption for trajectory of covered.
All right embedded in the low end foster revenue guidance range.
Yes. This is mark.
I think the.
As we look out across our client base, we look at our do are fairly rigorous forecasting activities that we do on a quarterly basis.
Got it gives us gives us a view of what we think that business is going to do it includes backlog includes projects that we think we're going to be able to go work on it includes all of those elements relative to.
To the timing so I don't know that Theres anything certainly we would expect don't have built into our expectations that there's going to view.
Second wave of co that that's going to shut everybody down and that basically they're going to go back into the motive responding and not being able not being a recovery mode that most of our clients are in now.
With the cures acting with fee.
The reinvigoration of some of the elective procedures.
There there are a little bit back on track to some extent at this point, so I don't know that Theres any specific co.
We're not doing percentage points, we're not doing those types of activities. It theres something that's material that impacts our clients abilities to focus on the projects in the things that we're bringing to bear, yes that could impact us and thats one of the things.
We're talking about when we when we tell you that this is the this is an environment has got a lot of while changed the thing we do have is.
85% of our revenue plus comes out of our backlog are highly recurring revenue so.
For Us we've decided we're going to give guidance because we think we have.
Decent view of the business.
Once again codes puts a bigger bigger risk range to that and but we think it's important.
We can give people a view of what that looks like.
From a guidance perspective, so I don't know that Theres anything specific.
And really when you look at our when you look at our revenue there's very little this specific to certain health care volumes, so the real impact of.
Increasing cobas is the focus of our clients and being able to move forward on things that that are in our forecast in the we are expecting to to land. So.
That's that's done nothing being more precise because we're not tracking this at this cases go to this number than our revenue is going to go to this number there's just not the tight copeland.
You might be expecting.
No, but that's helpful. Because I think the point is that it's about the second wave and then just in terms of clarification, we talked about 32% of contracts coming from long term.
Is this just kind of like the nature of the current hospital spending environment or they're less focused on.
Near term projects just Justin increase.
Versus the strategic focus right and moving away from these long term contracts. So is 32.
Just.
Is there a section of current environment or is this more of kind of like.
Steady stated we should expect.
Going forward as well, yes, just from a percentage.
Really the 32 is a little bit is higher than a year ago quarter, but yes, 30% is pretty consistent if you look across everything but the year ago quarter, you would see it in the upper twentys to around 30%. So I don't think it happens and John if you want to comment on just the goods these longer term bookings.
Yeah.
They include an expansion of most of the relationships my comment we'd be done that that the longer term and and expansion are very complementary that almost without exception.
That would you do in expansion, it's inclusive of new solutions, it's inclusive of new capabilities as well as the extension of the current capabilities. So it's not it's not one of the other they're very complementary.
Thank you.
Thank you.
She comes from Steve Halper with Cantor Fitzgerald. Your line is now open.
Hi, just a quick housekeeping question on the cash flow statement. There was an acquisition for $35 million could you just tell us.
Yes no.
We had it was a cyber security.
Company that we acquired.
We see that as a as an opportunity we offer those services through our professional services organization.
But we think in the current environment.
Security has always been a big focus and us being able to to bring on.
Resources, the Pip contacts in that particularly contact outside of our client base, where we can extend that that service capability beyond our existing clients with something that was attractive to us so pretty small therefore not.
Other than beyond the cash flow statement is really something we've talked about a lot but is.
Enhancing our capabilities in cyber security space, that's fair. Thank you.
Thank you.
Next question comes from Michael Cherny with Bank of America Securities. Your line is now open.
Yes.
Hey, thanks, so much the detail so far maybe the whole at that string a little bit more from a future based on off as John or Don you mentioned some of the dynamics regarding capital deployment going forward is there anything about co bid and the response that your customers are doing two co bid that potentially opens up various different avenues.
In terms of the type of acquisitions, you might want to pursue nor to build out your search capabilities. While also driving that incremental growth. That's part of long term plan.
Add mantech, that's a great question I guess I would say.
Content offering to my earlier comments I'd to our start by saying all of the areas that we've made.
Capital allocation and bats in the strategic growth space are things that we like.
And we felt like were supported by macro trends that we're playing out prior to covance. So.
Most of them I would say.
Have seen acceleration as part of kind of that pulling forward those secular trends that were already playing out so we loved to the BH space before we think it's going to be an area of growing crisis and focus going forward.
The employer space was probably one that we were taking took a real hard look at.
In terms of how to think about focus that business again, that's an area where that relationship between employer employee has never been more relevant and where that dialogue has never been more real time. So interesting dynamics, there and then certainly back over on the provider side of the business.
Yeah.
Interesting traction and trend around the acute assets from a care aware perspective.
The Healtheintent space, we think is interesting.
Hi.
This probably isn't a time when I'm going to stand up a provider sponsored plan I'm trying to work through a pandemic and crisis setting, but but we think that's one on a three year basis that looks pretty interesting to providers as they really step back and say, what's it look like to take more control over my top line revenue and might go forward business strategy. So I think.
Each of them have individual dimensions around them, but I think in the main because they were tethered to larger macro trends that we're playing out.
We feel like most of whats playing out there has been accelerated.
And then finally just to reiterate what I said earlier.
Absolutely if theres an opportunity for us to accelerate those strategies through acquisition and in areas like in an area like cyber.
Then we're going to look to do that.
And we've got a set of business leaders and space. They are absolutely capable of integrating those acquisitions.
And using them to scale their larger growth strategies.
And just a quick follow up to that Mark you mentioned the capital availability you have obviously the balance sheet has long been one that's been very clean is there any thought or any openness to more exploring utilization the balance sheet in the event that something more sizeable whether it's an internal investments or potential acquisition.
What's come along.
Sure No I mean weve.
Part of our strategy was have dry powder available right. So we do have a strong balance sheet.
Yes, we've traditionally done kind of smaller tuck in acquisitions.
Numerous with a larger investment that we made similar to what we're talking about is.
An area that we see us growth provider sponsored plans.
But I think from from we are well situated given our balance sheet to be able to.
To be able to start looking at some things that much.
More sizeable.
Most of you know doing doing any M&A that size transaction moderately increasing the difficulties so doing things that can have.
Big impact on our on our growth and certainly.
Hope.
Leverage some of our existing thoughts.
So I think you know the things that Don was talking about I think certainly one one of the additional things you have probably certainly put on that list would be the data space because thats. Once again, we are looking for things that we can acquire that.
The issue for Millennium, We don't want we're going to innovate online.
Regarding monetization, but where we can invest is primarily in the things that in don's area and strategic growth.
No. If you want to talk hit the data topic, just a little bit to give some ideas as can you I know, it's it's a it's another. Good example, I think of where cobot has been interesting in terms of reinforcing a thesis. If you look at their release of information side of that business from an organic perspective, how to do virtual and touch less.
Release of information for legal and life insurance Workman's comp, it's got a lot of traction and trend around it I think more interestingly from to Mark's point from a learning health network perspective.
The team setting up a structure around that with under 40 participating organizations in the first half of the year I mean very impressive against that full year goal achieved at the mid year and what that tells me is that these organizations are thinking about data and analytics contextual for what's playing out with covance many of them.
See interesting opportunities to advanced research strategies around it to participate in research economics.
And those are things that aren't going to be unique or point in time to co that there are things that are going to absolutely.
Accelerate.
On a multi quarter basis, and if we could do an acquisition in that space and use it as a way to catalyze and move forward we what.
Thank you and our next question comes from Jeff Garro with William Blair and company. Your line is helpful.
Hi, good afternoon. Thanks for taking the questions. A couple of quick ones from me managed services from Us and a couple of times as a positive bookings area in the quarter. So I'm curious whats driving demand for what I would expect this mostly hosting and and how we should view that as a positive long term indicator for platform modernization.
So in terms of managed services. It is there is hosted involvement but there's other things involvement as well as we surround most of our solutions with some type of our managed services. So in many ways I view expansion extension and managed services directly related to expansion extension of solutions.
So for me, it's an incredibly positive thing we need to Ron care for.
And support to our all solutions, we put out there and there's more to the extent that is the element is is hosting.
It's definitely positive indication of when we're moving to the cloud because in essence, our hosted solutions our private cloud for those clients that are using it. So it can they are used to having someone else handle all that and do the work.
And be able to depend on that infrastructure to very high level of reliability.
And we have that reputation in the industry.
Well earned so thats. So it is definitely positive as we go forward to more of a cloud based.
Opportunity in the future.
Great that makes sense and the second one from me probably for John curious if theres any change in client risk receptivity to SAS offerings versus licensed software that would require larger capital expenditures given the current on firemen for providers.
I will speak to the capital survival 600 receptive side I think that there is a lot of interest in SaaS offerings. It's a it's sort of a pay as you go type of type of model and what clients are really interested in is just.
Being a very specific an intentional for what they use and how they use it. So yes, I think the SaaS business model or the SaaS offering, which we do offer many of our solutions in our model is attractive.
And allows people to consume that they use.
I, just remind people that half of our license revenue today assess though.
Great. Thanks for the on the questions guys sure.
Thanks.
And our next question.
Comes from Eric purchase Nephron Research. Your line is now open thank you.
Thank you.
Mark did you give a number for Kobe the impact similar to that 30 million I believe you projected something around 95 million last quarter.
I.
No match with call it by 200.
Hey, Eric This is Alan there's really it's difficult to give a precise number but but I think our point is that we we essentially flowed through for the rest of the year, a similar impact and looked at our forecast a little bit differently for things like reimbursed travel that was less than half of what we had projected.
And adjusted for that so for the most part I'd say other than taking out the the sale the rest of our Rev works business. The rest of the change as largely coated inclusive of the amount we missed.
To buy relative to our guidance.
Gotcha. That's that's helpful. We come back into that and then mark the areas of weakness you've seen it doesn't feel like anything that would necessarily tell us any changes in the way backlog or bookings convert into revenue, but as you thought it through the risks.
The plan, how do you think about.
What might be meaningful in terms of changing the book to bill.
Yes, I think that certainly as we.
Yeah.
Move forward and.
Kind of resettle 2020 keep.
Keep in mind, the any historical bookings have many of them have a chunk of rather works sales line. So.
Those those are things will not doing that so youre going to have a little bit of a challenge with comparability of bookings in time getting the booking ratio, but clearly once we've kind of we work our way through 2020, we're going to just be growing bookings at or above the rate of which were growing revenue I mean, that's just that's a given.
I think your point, you're taking away the appropriate point is the adjustments were making here to our to things that are.
Little bit more tactical little bit more quarter of type of bookings rather than some of the 12 month sales cycle type of things that we have been.
Based on our pipeline based on what we're seeing the opportunities are still their clients.
As excited or more excited about what they can get from us and what that does to help them deliver care.
Than we've seen I mean, its continues to be enacted environment clearly our caution is.
The covert is going to going to impact.
Things and we'll try and give you our best view, but our view is based on backlog based on.
The them hard mechanics of doing a pretty rigorous forecast once again.
You can't can't foresee everything clearly in Q2, we didnt see that tech resale will go significantly lower and certainly we didn't see that reimbursed travel or travel was going to fall off a cliff completely as it did so.
Still things that that are there being impacted.
Even the federal business is going to be impacted somewhat by the coded but it is based on our current view of what we expect to deliver we're on track for that so.
Our plan is based on our best view.
And our guidance is based on our plan. So that's that's the best we can kind of provide at this time.
That's that's helpful, particularly the federal commentary thank you.
When we take one more question.
Thank you and that question comes from George Hill with Deutsche Bank. Your line is now open.
Hey, good afternoon, guys and thanks for sneaking me and under the wire I'll, let mark and Don kind of tag team. This one I guess one of the macro themes of the cobot environment has been telemedicine I guess from a telemedicine perspective can you talk about the demand that you're seeing from your clients. I guess is this something that you guys feel like you have to own maybe talk.
About the build person versus buy.
Approach to what I know you guys have the relationship performed well.
And just I guess kinda talk about how I remember when we used to come out to Kansas City. When we can still fly we will do the pop health visits and talk about centralized patient monitoring it centers initiatives. There just trying to think about I guess, how you guys are bridging what was the prior view of that business to what is the future view of that business as it relates to telemedicine.
Covance I know that was complicated but thank you.
Nine and to good question, George maybe I'll start and Mark wants to amplify on and he can.
But.
At first and foremost I think this this concept of a a virtual health system. Our system of health is one that's been are central to the thinking that company for a long time.
You're right, we've had strategies, both and low acuity settings that we've experimented with over the years we've had.
Strategies tethered to Intensiveness dynamics.
Around virtual line that and other strategies in the space. So I think we have a pretty informed view in my opinion about what it takes to deliver.
On the provider supply side and what the expectations around clients are going to look like.
Having said that you've got a.
Accommodative administrative environment relative to tell a major shifted reimbursement shifts and leisinger. Those things are all playing out and I think organizations are experimenting with a lot of different strategies. So it it would be very typical for John I'd have conversations with clients and for them to have multiple tele health strategy.
That they're pursuing and the current environment at the end of the day, what we think that ends up netting out to George as a.
Banner sophistication around these organizations around what the combination of virtual and physical needs to look like most importantly, contextual for the regulatory and the reimbursement model.
We think that certain areas of this space, particularly higher acuity areas in the enterprise setting and at the network level.
Sensitive areas like BH end up being areas, where we can particularly create niche capability.
And and with the margin profile that we're looking for and then I think importantly, just a tethered to something that John said earlier, we're going to think about it from a total solution perspective, so the accommodative environment that we have around things like cyber and security right now.
Pendulum will swing back and so it will create interesting opportunities for us to think about areas like cyber security, where we've made big investments contextual for strategies like Tesla as we see increased sensitivity to what the go forward strategies need to look like in a different regulatory and administrative invite.
Permit so.
We think we have multiple strategies, but we think those strategies are going to have interesting topline and bottomline dynamics to it and it it's not as buying areas build or buy I think we're going to do a mix of things to create.
Something thats going to have tangible impact on the topline.
Okay.
Thank you guys.
Thank you well I want to thank everyone for their times afternoon. Once again, please be safe and take care of yourself and your family good afternoon.
Ladies and gentlemen, this concludes today since call. Thank you for participating you may now disconnect.
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