Q2 2020 Perrigo Company PLC Earnings Call
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I'd now like to turn the conference over to Bradley, Joseph Vice President Global Investor Relations and corporate Communications. Please go ahead.
Thank you good morning, and welcome to Parago second quarter 2020 earnings Conference call. We hope everyone is remaining healthy unsafe. During these times I Hope you all had a chance to review the press release, we issued earlier this morning, a copy the release and they presentation for today's discussion are available within the Investor section of the Pergo.
Dotcom website.
Joining today's call, our president and CEO, Murray Kessler, and CFO Ray Silcock.
I'd like to remind everyone that during this call participants will make certain forward looking statements. Please refer to the important information for shareholders and investors and Safe Harbor language regarding these statements in our press release issued earlier this morning.
Discussing the business Maria will reference only non-GAAP adjusted numbers for the quarter unless otherwise noted comparisons to prior years will also exclude divested businesses and currency changes unless otherwise noted in the appendix for today's call. We've provided reconciliations for all non-GAAP financial measures presented.
A few other logistics to mentioned before we get started first excluding divested businesses excludes contributions from divested animal health business previously included in that consumer self care Americas segment.
And the divested cabbage on product previously included in the consumer self care International segment.
<unk> organic growth excludes the oral care portfolio, which includes the acquisitions of Rainier start reporting dr. fresh.
Vested animal health business, I'm, kinda derm products and currency and third as a reminder, worldwide consumer includes the consumer self care Americas, and consumer self care international segments, as well as corporate and with that I'd like to turn the call over to Mark. Good morning, everyone I want to begin todays call by once again.
Thanking our people both in the manufacturing facilities and those working from home for their incredible efforts and continuing to meet societies needs for our central products during the cold in 19 pandemic and delivering another superior quarter financially while at the same time advancing the comp.
And its transformation plans and improving our balance sheet.
I'm truly proud of how our team has performed.
Here's why I say that.
During the second quarter our team.
Once again maintained uninterrupted operations in all of our 27 manufacturing facilities around the world.
Most of which had been running 24 hours a day seven days a week without missing a single shift due to cover 19 to meet the self care and health care needs of society. During this fan damage.
Faster than on strategic Rosemont Rx business for 195 million at an attractive multiple.
Provided greater assurance of liquidity by refinancing our 2021 bonds into 2030 bonds at an attractive 3.15% coupon rate.
Increased the company is cash position to approximately 850 million.
Achieved over 200% cash conversion.
Broader net leverage down to 2.9 times.
Oh, the Doctor fresh oral care acquisition for $113 million.
Committed 50 million to purchase an approximate 20% stake in cats, Mira, a leading supplier of hemp based.
See free CBD products to enter that market in a responsible parago away.
Began rolling out our new business intelligence platform to allow more sophisticated dishes and make decision making companywide.
And as I said delivered another quarter of superior financial results well ahead of expectations. Despite the constant set of challenges we face.
On our last quarterly earnings call, we did not update our original 2020, adjusted EPS guidance as the uncertainty and numerous moving pieces surrounding the pandemic.
Did not allow us to produce an accurate projection.
And while there is still significant uncertainty regarding the potential for a second wave of co bid and its implications on supply and demand. We know a lot more now than we did three months ago and not a lot more experience managing through that's terrific pandemic.
We know that our team has implemented best in class protocols in action plans, including enhanced cleaning practices and contact tracing procedures to keep our manufacturing facilities running when it colleague test positive or is presumptive positive with Carbonite team.
We know better stay at home colleagues and effectively keep almost all of our transformation initiatives moving forward with minimal delay, including project momentum cost savings and new products.
We know that most retail and wholesale inventories have been restored so that shouldn't be a factor going forward.
But we also know that we are still playing catch up on her own depleted inventories, which could limit or potential to meet consumer demand. If another pantry load similar to March happened within the next two months and while we cant forecast the potential for a second wave nor its potential timing.
We can't forecast the impact it would have to our business under various scenarios and we don't think there would be the same pantry load mentality. So this shouldn't be an issue but to maintain or conservativism. We are not assuming a second major demand increase in our forecast and this would be upside.
We know which of our products they increased demand from spikes in cobot 19 infection rates and the extent to which our portfolio is also benefiting from channel shifting from traditional in store shopping to E commerce.
We know from our experience right now in Florida, Texas, Arizona and California.
That when a surgeon cases occurs a corresponding spike in consumer demand re occurs and does not appear to include a second pantry mode.
We believe we know the extent of the initial Q1 consumer pantry load that was due to covert 19 and expect to retain about half of that benefit for the full year.
We also know which of our products were negatively affected by Lockdowns close doctors' offices and stay at home orders.
Some of these products are fully recovered.
Them are recovering more slowly and on those we have conservatively forecasted only a modest recovery in the second half.
We know that about half of the $18 million, an A.M.P. savings we benefited from in the first half versus last year needs to be shifted to the second half of this year to stimulate awareness and remain competitive on products that were negatively impacted by locked down.
We know the incremental costs associated with operating at a lot down environment, including benefits and bonuses for our people safety procedures overtime pay and built it was on budget as expenses into the balance of here.
We expect TNL impact of $20 million to $25 million for 12 to 15 cents per adjusted EPS in 2020.
We know how the cares act will positively affect our effective tax rate and have also built into the balance of the year and we know that after our divestment Rosemont, we will have a negative impact of six cents per share an adjusted Dps net take away from remarkably strong first half is.
That when all of the puts and takes we know so far in this uncertain environment are taken into consideration. We now have line of sight to reconfirm, our adjusted diluted EPS guidance of 395 to $4.15. Despite headwinds of 18 to 21 cents from incremental cobot nine.
Gain related impacts and the Rosemont divestiture.
One could argue that this is a conservative estimate, but there is still significant uncertainty and I believe reaffirming its prudent at this time.
Now I'll review each of our businesses in more detail, where the primary focus on revenues and business drivers after which Ray will walk you through the rest of the piano.
All net sales comparisons I refer to our versus second quarter and first half year ago.
On a consolidated basis Parago reported net sales were up 6% for the second quarter and up 10% for the first six months.
Adjusted operating income finished up 9% in the quarter and is up 10% for the first half.
Adjusted diluted EPS was a dollar three up 20% for the quarter and up 12% for the first half.
All segments contributed to our Q2, plus 10% consolidated revenue growth, excluding divested businesses and currency.
Consumer self care Americas, C.S.C.A. increased 13%.
Consumer self care International C.S.C.I. increased 3% and generic Rx increased 13%.
Our worldwide consumer businesses once again delivered a solid performance with Q2 revenue growth up 9%, which included the benefit of bolt on acquisitions.
Excluding such acquisitions Parago organic revenues were up nearly 3% in Q2, and importantly, our up 7% for six months.
This is well ahead of our 3% organic growth goal for which we continue to base, our forecasts and guidance.
Equally impressive is our organic growth over the trailing 12 months, which is plus 6% for consolidated parago.
Plus 7% for C.S.C.A.
Plus 3% for C.S.C., I, and plus 8% for Rx all are above our 3% golf.
Now, let's take a closer look at the drivers within each of our business segments for the second quarter.
Starting with consumer self care Americas.
Yes, yeah. It remains in good shape through this crisis second quarter net sales increased 13% versus year ago that big drivers were as follows.
First surge related consumer demand for OTI C products continued in April and May.
You May note you may have noticed this is different than I or I move, though offtake data data for may which was negative compared to last year.
Part of the reason for this is that we were still replenishing retailer and wholesaler inventories.
Were lowered in March and April to below normal safety stock levels as retailers attempted to keep up with surging consumer demand.
The other reason was the strength of ecommerce, which is not included in IYR I'm more loaded.
I'll speak to that in a moment.
Within our strong OTI see performance there were significant differences by product category.
Sales on products, such as a set of met a fan and promoting never slowed and orders are still at significantly elevated levels.
Other products Troughed following the March April surge, most notably cold cough products.
Cold cough began recovering late in the quarter, which has continued into July.
In the category is approaching pretty cobot levels.
More regimented categories, such as allergy.
Heartburn relief and nicotine therapy also trough, but rebounded beginning in early May and every car returned to growth versus year ago taken in totality R. U S. O T. C portfolio has performed extremely well, it's clearly our strongest performing business and.
The biggest driver of the company's organic growth year to date.
Just as it was last year.
Bakken and as I just mentioned.
Parago Otcs strength was also bolstered by the rapid acceleration of our E commerce business, which more than tripled versus year ago in the quarter.
The dramatic channel shift of traditional brick and mortar customers to E. Commerce, We noted last quarter continued unabated.
We're really benefiting from the investments we undertook last year as our E commerce sales more than offset losses and traditional outlets.
Third.
The oral care acquisitions over the near stared fraud, and Dr. fresh incrementally added $63 million two year ago comparisons, Although April and May sales were negatively affected by lower foot traffic and consumers not traveling.
Travel sizes are a meaningful portion of the oral care portfolio, especially for Dr. fresh but.
The oral care businesses were below our expectations, but importantly, oral care like our regimented odisi products appears to have fully recovered and is back on track against our internal growth expectations in June and July.
And fourth.
Infant Formula gave back much of its March gains in April in early May but also was back on track mid quarter, finishing up slightly for the quarter.
New products, where the key driver here.
Turning to consumers self care international net sales grew 3% versus year ago.
Yes, the I consumer offtake was negatively impacted versus our expectations as approximately 40% of the portfolio. It's self care products focused on preventative health and wellness.
These products such as lights treatments Sun care skin care and weight loss were directly impacted by stay at home orders and school closings.
Encouragingly, she sci maintained or increased its market share in these categories that experience lower demand market wide.
Consumer demand in Europe is recovering, albeit slower than some of the U.S. categories. I previously mentioned and are still below pretty covered levels.
As we have projected the c. I see I see I portfolio to recover more slowly.
And we will be advertising more heavily in the second half to jumpstart the business.
This will have a negative impact on year over year margins in the second half.
Of note E Commerce, which grew rapidly and our store brand business in the UK, where both bright spots for C.S.C. I in the corner.
Our Rx Division grew net sales, 13% in the second quarter due to the continued strong performance of generic albuterol.
This more than offset year over year declines in our base Rx portfolio.
Our our ex portfolio strengthen dermatological topicals was particularly sensitive to the inability of patients to get to their doctors in April and May.
We did see recovery in June, but not nearly to pretty called at levels, but I think the important point here is with the performance of Albuterol Rx net sales and operating income are still except expected to be higher compared to last year, albeit to a lesser extent them would have occurred absent that covered 19 impact on patient visit.
Since scripts.
So to summarize.
It was another strong quarter with all three of our business segments contributing top and bottom line growth.
The strong demand and see I see a along with new products like albuterol and bolt on acquisitions significantly exceed it declines in product categories negatively impacted by cobot, netting the strong growth we've seen year to date.
In the second half we are focused on getting our U.S. supply chain fully replenish preparing for the consumer demand and supply chain implications of a potential second wave of covert cases.
Launching of Altera in jail Storebrand equivalent.
Integrating dr. fresh launching the partnership process with CASM Mira reinvigorating, our see Sci branded businesses and continuing our transformation activities to meet our 357 business goals.
We have reconfirmed our adjusted EPS guidance range, despite absorbing 12 to 15 cents.
Of expected incremental cobot related expenses and six cents up dilution from the Rosemont Rx sale <unk>.
The repeat this range prudently assumes no second wave surgeon consumer demand for our central products.
A slow recovery on negatively impacted products and businesses and it assumes we spend about half of our first half and P. savings incrementally to our original plan in the second half a year.
One last point.
Business continuity still remains critical.
But safety for our people comes first.
None of the strong results I share today could have been possible without the dedication of our people who have continued to go above and beyond through the pandemic.
They're here.
Thanks to their efforts.
We're more confident.
Than ever that Parago is very well position to capitalize on three important drivers that we believe will be critical in a new normal world self care value and E commerce.
Ill now turn the call over to re who will walk you through the financial details and then we'll come back to answer your question.
Thank you Mary and good morning, everyone.
Now the Murray has gone through sales and business drivers for the quarter I'd like to walk you through the rest of the piano.
Now consolidated GAAP net income for the second quarter was $61 million and don't diluted earnings per share 44 cents.
On an adjusted basis Q2, consolidated net income was $141 million an earnings per share we're at dollar three.
Seventh quarter in a row in which we met or exceeded market expectations.
Non-GAAP adjustments to net income up to tax <unk> $18 million, primarily $73 million of amortization, which we added back and an $18 million loss on the sale of our Rosemont subsidiary, which we exclude.
Full details of these and other smaller adjustments can be found in the non-GAAP reconciliation table attached to this mornings press release.
The adjusted consolidated effective tax rates of 16.7% this quarter is lower than in Q2 last year.
Remember lead you to the increased interest expense tax deduction that we've received a result at the Kazakhs.
Well this going forward all dollar numbers basis points and margin percentages in my presentation will be on an adjusted basis, well growth percentages will exclude the impact of currency and divested businesses unless otherwise described.
Worldwide consumer second quarter gross profit was $373 million an increase of 4.4%.
This increase was driven by the addition of the oral self care businesses plus gross of a U.S. LTC business, partially offset by adverse margin mix between essential and non essential products, you know see Sci business.
Q2 worldwide consumer gross margin was down 190 basis points to 39.3% due primarily to mix and see a cie with lower sales volumes and higher margin categories and the impact of the all self care acquisitions, which have a relatively.
The lower gross margins than a worldwide consumer average.
These these were partially offset by margin improvements from manufacturing efficiencies in the quarter.
Second quarter operating income was $132 million up 16% versus same quarter last year. This improvement in operating income.
You mean pop from reductions in advertising and selling expenses delayed in response to consumer behavior arising from the coded disruptions.
Well listen were approximately $10 million in savings from project momentum.
These improvements helped offset the gross margin decline and drove a 60 basis points expansions and operating margin this quarter.
Year to date worldwide consumer gross profits was $799 million an increase of 10%.
While gross margin decreased 210 basis points to 38.8%.
The addition of the oral self care acquisitions, and lower sales assistant CSC only high margin products, plus manufacturing and fish inefficiencies in the first off all combined to negatively impact yesterday gross margins.
Operating income as compared to prior year increased $44 million in the first six months of this year, a 24% increase.
In Q2. This increase came from operating leverage the reduction in advertising and promotional spending plus $18 million in project women's in momentum savings so far this year.
Overall, a very solid performance for the worldwide consumer business, both quarterly and year to date.
Now, let's take a look at the consumer segments, so little more detail.
Due to see us see a gross profit increased $16 million plus 9% that's increased volume in the quarter and the addition of the oral self care portfolio helped offset price erosion.
I had direct labor costs incurred to improve customer service and incremental cobot related manufacturing costs. The gross margin of 32.9% declined 110 basis points versus last year due to price erosion and that ongoing investment in additional.
Direct labor.
Operating income for the quarter was 124 million an increase of 9% due primarily to the addition of the oral soak up portfolio as well as from delaying advertising spending to later in the year.
The operating margin declined 50 basis points to 19.8%.
Year to date gross profits.
426 million increased 16%.
Increased volume and the addition of oil so can offset price erosion higher direct labor costs, an incremental cobiz related costs.
Yes. The date gross margins, 32.1% was down 120 basis points driven by the same causes as those in Q2.
And year to date operating income was 262 million an increase of 20% also for the same reasons as we saw the operating income increase in the second quarter.
The U.S.C. only second quarter gross profit of $166 million declined 1%, while gross margin declined 180 basis points to 51.7% primarily due to adverse margin mix.
The margin mix came from reduced branded sales as well as from highest store brand sales in the UK and the addition of all self care.
Both oral self care and UK storebrand have lower gross margins in the CSC <unk> average.
These factors were somewhat offset by manufacturing efficiencies.
Due to operating income was $15 million up 10% from last year, while adjusted operating margin was up 30 basis points to 15.6%.
The impact of lower gross profit was more than offset by reduced advertising spend.
Year to date CSC I gross profit of $362 million was up 4.3%.
Gross margin of 51.5% was down 220 basis points.
The addition of the all self care portfolio together with adverse mix from out are primarily responsible for the margin decline.
Year to date operating income was $114 million.
19%, while adjusted operating margin was up 80 basis points to 16.2%.
Operating margin improvement was due to reduced advertising spend partially offset by the impact of lower gross margin.
Turning now to Orix Q2, gross profit increased by 7% to $107 million as contributions from generic albuterol more than offset the lower volumes on our base business.
Gross margin was 39.5% down 220 basis points from last year, primarily due to fewer prescriptions, having being written which caused a volume decline on a higher margin products.
Operating income $68 million was up 4.4%. However, operating margin declined 210 basis points to 25.3% as a result at the already described gross margin decline together with an increase in R&D spend yeah.
To date Rx net sales were 528 million up 9.4%. That's gross profit of 216 million was down 1% and gross margin declined 430 basis points to 40.9%.
This decline is due to lower prescription volumes as well as price erosion test 162, which occurred in the first quarter.
All rigs operating income was $142 million with an operating margin of 27% down 360 basis points.
This was actually a result at the gross margin decline together with the impact of continued investments in selling and R&D to drive long term growth.
Moving onto the balance sheet at quarter end on June 27.
We had almost $1 billion in cash on our balance sheet.
Oh $1 billion from Q1 after repaying that draw against our revolver that we made at the beginning of the pandemic crisis.
This cash balance includes both the $195 million of proceeds from the sale of our Rosemont Rx business in late June as well as the proceeds from our successful 750 million dollar 3.1515% bond offering on June 19.
The purpose of which was to repay $590 million in Twentytwenty one Bose.
We made the bond offering to take advantage of low interest rates strong liquidity in the bond markets and to add certainty to our capital structure.
Due to timing, we did not pay off the twentytwenty one bonds until after the end of Q2.
Type we paid the bonds at quarter end, our cash balance would have been $850 million and on net debt $2.7 billion.
Additionally, cash flow from operations in the quarter amounted to $291 million more than 200% of adjusted net income.
This strong conversion ratio resulted from the March and April elevates. Its sales collected in Q2, partially reduced by increased inventories as we were finished products. So during the cycle search.
Shifting now to Twentytwenty guidance as Larry told you we're reconfirming, our adjusted EPS in the range of $3.95 to full doesn't 15 cents. Despite our divestiture of Rosemont and increased cobiz related costs principally in manufacturing.
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The divestiture of Rosemont adversely impacts on Twentytwenty adjusted operating income by $11 million.06 per diluted share.
Well, the increasing coatbridge related cost is expected to be $25 million to $30 million of which we anticipate recognizing 20 to 25 million in twentytwenty.
12 to 15 cents per diluted share.
In summary, I'd like to put this into perspective from the CFO chair.
We've come a long way here at Perrigo over the past 18 months, we are starting to see real improvements in our financial and operational metrics.
We are seeing repeatable sales growth and were reversing the trend on declining operating income.
We have been able to meet or exceed expectations for the past seven quarters, which underscores our reliability.
Our cash flow is being strong and we brought at age 72 off balance sheet and finally, we have continued to do this while successfully weathering the coded 19 store.
Operator, please can we now open the lines for questions.
Thank you we will now begin the question and answer session.
You ask a question Matt Press Star then one on your telephone keypad.
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At this time, well pause for a memo to assembler our roster.
Our first question today will come from Chris Shaw of JP Morgan. Please go ahead.
Great. Thank so much further questions. My first question was just the I think it's in the slide you talked about performance year to date ahead of expectations I'm, just trying to balance that I guess, the maintenance or the main maintaining topline guidance just help me bridge that dynamic a little bit the strong hat first half performance with the maintenance of.
For the year and my second question was kind of a bigger picture question on the growth of E. Commerce is there a merchant difference that we need to think about their versus traditional channel or not and how does pick a share in that vertical compare with traditional channel I'm trying to better understand it took us a net beneficiary of this E commerce trend or this is more about sustaining.
Good position thanks, so much.
Let me do that and good morning, Chris its Murray.
First things first but there is no margin difference there and they're very similar and second I believe.
We are a a higher share because we have invested anywhere we tend to be the partner of choice in store brand on our categories because of all the investments we've made or the ecommerce business is more sophisticated then I understood. When I first joined the company and the investments were made and then you would pay.
Probably expect it's not.
Just you know we shifted to the customer and they salad E Commerce and and you know how do we do at the end of the day, we are a partner in that we generate the content. We work on the web sites. We we designed the promotions we did the analytics to say where that is there's you know we have dozens of people that are working to do.
So all that to provide the input and and the guidance and that's when you go into you know what Amazon and all that in your type in the products for the most part you'd see it and we help develop the brand. So on basic hair Parago was the one who develop the brand and ultimately I over the last year has sold that to Amazon, but with.
Benefits that come to Parago that provide a little bit of a moat around that for a number of years. So.
That's an easy one ecommerce growth is a very good thing for Parago.
Going back to your.
Initial question on how do I reconcile not changing the guidance that's a combination of.
Two things.
The first is all of them you know that the initial surge on the essential products happened in the first half right. So we certainly didn't build that into our plans. When we were building the year and for the most part on those kind of positive categories almost the entire so you'll see a portfolio.
It it's mostly feels like its normalized there'll be some effect, but we haven't planned on any upside for the second half. So you got that benefit in the first half then towards the latter half of the first six months on the products that were negatively affected.
They are you know they happened right towards the end or them, let's call. It from May on 'cause they got a little bit of some coverage in the beginning until consumer demand showed what was going to be up and what was down and then we projected that to continue with only modest recovery in that in the back half so well.
Yeah, you're basically hear me, saying as we over performed on our strongest central products and we've kind of go onto <unk> I'm not a normal level of estimate for the balance of the year kind of pretty cold bid.
In totality, but we've have and the second half the year some give back on the products that were negatively affected because I don't have them going up to normal cover levels. Now you could argue that conservative, but I think thats away, that's a prudent way for us as an organization.
To to plan and again, you know its I've gone from a three months ago. When it was crazy and you were trying to get your handle on it and I Hope you heard in my comments that you know we do have a good handle on it now to the best we can with whether there's a second waiver or or not and we know.
What will happen in those cases, but I'd like to be sitting here at midyear.
With a better handle on the business.
For you to be able to rely on us and to be still sitting there with more upside than downside.
Okay. Thank you.
Our next question today will come from Ami Fadia of Leerink. Please go ahead.
[noise] good morning, Thanks to the question, maybe just following up on.
Good morning, a follow up on the guidance.
I'm surprised.
That you continue to sort of think about the midpoint of the guidance range I I understand some of that pushes in close that you talked about.
What are your assumptions that you got to be cough, and cold season, and just the evolution.
All the businesses.
Then and then international just on the topline and gross margin level.
And then just separately on albuterol, you posted a pretty strong quarter better than what the script trends, but indicating so it's couldn't give us color on whether it was benefited from any credit related stocking and how you anticipate.
Market share and availability of inventory to meet demand for the remaining Nokia. Thanks.
All right let me.
Well the assumptions on cough cold I mean, the guidance I think we've walked through a number of times I just don't see anything in it for four Parago at this point that has gotten a good handle on the business and with the puts and takes.
So taken or aggressive position on it I you know what I've never in my career managed quarter to quarter and I'm not going to start now I'm I'm focused and I loved Ray's comments at the end of how far we've come over the 18 month. This is a completely different company that has done a fantastic position and I'm I'm, great that you would like.
I guess to raise guidance, but to get back onto the playing field. This is a good start we have incremental covered costs.
That we that weren't built into the original plan something you know in that neighborhood of 20 to 25 million. We sold Rosemont. So in my mind I did raise guidance I raise that you know 2026, yeah, probably 20 cents. When you combine those two issues together because I did it on a against the core business with.
With two big things that Werent anticipated when we gave the original guidance.
Having said that I plan to conservatively. So you know I'm just saying the same thing I already said is we plan to normalized level in the second half.
We have a little bit of give back.
We're estimating about 50% of the the pantry low not that total consumer effect of the pantry load that we got in the.
March April period of time on or the businesses in the U.S. on a a central businesses primarily.
That would give back that multiple a good portion of that's already happened and those businesses have normalized the one I've built into the plan for further give back is.
His cough cold.
Yeah, cough cold I'm, not going to really now and so again, an upside because we planned on a little bit more get back into the cough cold season, because I'm not going to really know what that full pantry loading fact is until cough cold season, and whether someone already has it in there there medicine cabinet or no or not.
And whether it's incremental and you know that's probably the most complex area for us to estimate how much of that pantry load came from competitors branded products not having it how much was consumed because of illnesses or how much as it's still sitting there, but the rest of the portfolio. When it's the bulk of it has already shown it.
Self about it it's recovering now I am encouraged and I don't like to forecast too much but you know.
In the <unk> when we came out of the second quarter cough cold was still a pretty far but on our numbers and we have more line of sight to the total business of E Commerce and Pos data of what our top customers are shipping out.
That business is coming out and license and nice and strong so well.
Again, I think I've taken a conservative perspective to it but I think it's the right position right now and for us to stay focused on.
The total business on albuterol.
It's it probably was in the initial for sure. It was upfront positively affected and I think we gave you a number there was no pantry load on albuterol it was.
But we had a lot of inventory that we had built thinking we were going to get the approval a little bit earlier.
Part of life, you know we were expecting it last year and it came early this year. So we had been running so yeah, you got a nice bump on that but going forward. It's yes, it's about capacity on that and we have you know our partner Katelyn as going flat out and we'll sell everything they can make for the year and if they can make a little bit more.
Well fell a little bit more but right now we haven't to assume that so that's going well I don't have the from the market share numbers at my fingertips, It's well, we'll celebrate think we we make as my belief right now sitting here so.
Did I leave anything else that U.S. no that that was very helpful. Thank you all right. Thank you.
And our next question today will come from Randall Stanicky of RBC. Please go ahead.
Great. Thanks, Mary I want to stay on this implied guidance question because it's it's an important one stocks down 9% the guidance implies.
A 10% decline at the midpoint over last year and that includes several bolt on deals and opportunities in there.
So investors and trying to understand what the real growth rate in Parago is because to be fair the company hasn't grown and more than three years. So it's an important question. So so on that can you help us understand.
With respect to the C. S T. A business what are some of the pushes and pulls in the back half the could have those numbers higher or lower and specifically should we be thinking about the second half outlook as a normalized way to think about the parago.
Earnings base from here. Thanks.
Well I'm going to answer the last part first which is absolutely not we you know what I've said that you shouldn't think of the second half as a as a normalized space that this was going to I said it in the last conference call. This was gonna be a highly unusual year you were going to have a lot of front loaded hmm volume and.
Sales pulled forward and taken out of the second half an add on top of that incremental costs that should come out again, but you know I mean, you're out and 25.
$30 million off I mean, you have a <unk> the only normalize part is rosemont and will be out going forward, but you're adding you have 20 $25 million of additional expense you up some volume that was front loaded into the.
First half from the second half and you have businesses that ultimately ought to benefit. So you know coming out as you go forward you ought to once we get passed this virus shouldn't be paying which some of it may even be.
Opportunities and the balance so this year, but you shouldn't be paying for you know air Freighting Apiay in order to try to keep up with surging demand you won't be operating with 30% absenteeism that forces you want to 24, seven operation to be running and paying overtime on the remaining 70%.
Continuously instead of our normal schedules eventually the security costs ought to be getting into place on pp and and everything else and I won't be paying employee bonuses and.
And all of that but a good portion of that 20 25 million as its second half you're right you know they they do they started happening, but they they fall into the second half a year. So there's a lot of things that will make the numbers not look.
Great and the second half of the year, but the business is very strong and I I take issue with your comment of the three years. We are doing exactly what we said we would do and nothing is going to shake me from that I came into a company that wasn't I'm not growing it was declining and declining for.
Currently and its volume and growth had almost evaporated and we set our first priority was to get revenue growth going again, and we grew beautifully last year and will grow beautifully this year and by the way I think in the end of the day covered all have very little to do with that for sure bolt ons or part of it.
But we will be delivering our I believe will be delivering our organic growth rate, which people were very skeptical about a year and a half ago. This year again and.
And I, you know I love the the plate of opportunities that we've identified and what we haven't our pipelines and and that topline as beautifully. The second thing I said I would do with stabilized operating income, which was a you know after more than three years after four or five years of declining operating income.
That that would.
Be our first step because we were still making $50 million of in investments, which we're doing and that we were setting ourselves up for 2021 going forward to deliver the 357 algorithm nothing's changed the businesses that strongest can be I can't help if the market knee jerk reactions to.
Company that is killing the numbers like we are right now because they wanted us to go up in nickel or a dime it it it.
We are focused on building a fantastic great company that will deliver repeatable sustainable growth top and bottom line.
For the future and not as all on track.
All right. Thanks Barry.
Our next question today will come from Greg Gilbert Upturn West. Please go ahead.
Thanks, Good morning, Maria what are your latest thoughts on the dispute with the Irish revenue a and what do you expect in terms of next steps and win and then my second question is on your CBD announcement I realize the Kazmir arrangement certainly a long term play, but when do you think this product line could be meaningful to parago.
And does that rely on proof that CBD actually helps patients in a proven way or this it relies simply on the ability for you to differentiate based on purity and consistency and the other things we already know about Kashmir that probably led you to select them and then for selective thank you.
Well on cashmere it is a ladder. So I think you've got that just right you know as a as a starting point, we have exclusive rights to private label and all of that and cast Mira Youve, obviously done your your homework and they are they pride themselves on being first off.
CBD only THC free metal contaminant free et cetera, but they are relatively small didn't have the dollars to be able to scale up to be able to put good manufacturing practices and we will work with them and the FDA to take get that part.
Certified and I'm not that's our goal then and to meet all of those same practices. So that the investments are on a you know equipment and all the things you wouldn't know went processes and and controls and and I don't me to say they don't do it now they do their their noted for that but they do it on a a much smaller scale once we get that we will become.
Dribble launching products and when we can you know all of our customers ask for it but I want to be able to say, it's been done in a parago away and so you know I wouldn't be surprised to see us.
And within the next couple of years certainly not the next 12 months of.
Starting to see products from Parago, you'll see it before that for cats Mira because they you know there you know think of them net today is primarily an IPO Ivan we own 20% stake and they may go faster on some branded products, what we'll see but that's them driving.
But the ship on that but for us get the I.P.I. the clean CBD that can be relied on that takes out this.
This thought that it's the wild wild West that it's you know controlled and reliable and and when it says it has a level of CBD in it it does.
And that by the way it doesn't have that by through its CBD isolate that limits the potential for efficacy. It has it through a full spectrum.
CBD oil as opposed to <unk>, the dry isolated and at and then and as and everything else, so and that when they say its THC free it really is taxi phrase so we will.
I'm excited about it but you're right, it's a bit of a longer term play, but think of it that way first first is getting all the the certifications and scale in place maybe cashmere does something branded maybe not we'll see once that is done you know will work with the FDA on it next step is is probably for us.
Private label.
And that doesn't preclude us internationally firms and doing some other things and then the third step would be the efficacy, which will be a few more years out I think because that is going to take in a traditional clinical trials and and things like that to give F.D. I confidence, but there is that there's movement on it there I think we're expecting some guidance on that.
Especially on Injectables, and the and the near future as it.
Relates to the Irish tax dispute you know during the quarter, we had the judicial review were.
Probably within six months now that we should we should get some kind of <unk> an answer in that regard.
Way.
We kind of view it as.
I think our our legal team did a an excellent job.
Putting out there why we believe our legitimate expectations and and if there was ever gonna be illegitimate expectations case to be to be one and upheld with under under Irish legitimate expectations law. This is the one.
And and I think it's all that in the judge by the way. He said you know the lot to go through it all take me some time to get back to you.
We'll see if that creates any willingness to buy the.
Irish revenue to get reasonable or not but as it stands right now.
Middleby, we hear that where the judicial review is if we win it's done if we don't when we start the normal appeals process, where are we still think all of the calculations and everything else, our flawed and and that will ultimately either a win that we were right in.
Tax Appeals court that it was.
A trade versus a capital gain or will dramatically knock the number down so I'm, assuming if you believe that were reflecting a lot of that in the stock which I do.
Almost any scenario is is upside for parago and and you see our balance sheet has improved significantly. So we you know we're in a strong position to to handle almost any scenario there is.
Thanks.
Our next question will come from Elliot Wilbur Raymond James. Please go ahead.
Thank you. Good morning first question on the S. C. S C. A segment and specifically language in the press release around pricing pressure generally get that language always seems like its reserve for the Rx segment and not the C. S. C. A segment I understand it's probably normal part of the business, but maybe you can just provide a little bit more clarity in terms of the magnitude.
What that number looked like this quarter versus recent trends and then I'm just curious what what drives pricing pressure in the.
See I see a business makes sense, obviously theres, an incremental competitor on a specific product, but given your dominant share across most skews I would think it that's.
Somewhat of an anomaly. So is it just buying more shelf space or or trying to understand that dynamic there that might drive pricing pressure what price erosion kind of outside just the new competitor coming in the market and they just a quick follow up you guys didn't include any of the metrics for the individual.
Product segments within CSC Air CSC I, it anything that perhaps Mary you could call out.
In terms of Overperformance or underperformance, where you saw relative wins and losses. Thank you.
Okay, I tried to do that but all oh.
Oh revisit that.
On.
First I should the pricing pressure the pricing pressure has.
And I'd say you know we showed that we showed that our may nine.
And in Investor day presentation and.
That's why sometimes I get the question how was your market share Beth you know your revenues or.
Parago as revenues are as high and the answer is that we are a private label supplier for the most part out of the U.S. So.
Our volume is always growing faster than our revenues and it's on average it's been a couple percent over the past.
The old President of C. I see I would tell me over the past forever I mean, it's just a normal part of doing the business, but remember we have to bid for the business right I don't get to set the price that show.
We don't go in and say you know take a dime price increase or not that's that's you know <unk>, Walmart or target or CBS, whatever there's there are deciding whether to raise the price or not and it has nothing to do with with our revenues our revenues, we negotiate they'll try to put.
Products out for bid and in general if we end up having a new competitor and it's not a new competitor. So for example, the pricing pressure that we would carry and from last year was there. We were one of the only private label manufacturers out there for years on a member.
As all with that with the regulatory approval to do it would they and they were at the end of the or a couple more competitors. Finally got regulatory approval. So now they're able to compete for that and try for them they'll they'll come in and try to cherry pick up and and under price.
On the other Ham we go back and we say, yeah, but we're providing 140 or 150 products to you and.
If we give you a little bit on this area you got it adds distribution our AD in new items or take on new products and those are the typical negotiations, but bottom line that wasn't meant as a red alert in fact pricing was for C. I see a which isn't a normal level on the business.
Yes, I'm was actually.
A good quarter and the second quarter, because our co but most of those bids that would have been the normal part of the business.
Were pushed back to either later in this year early next year. So it wasn't.
Really wasn't much of an issue at all in the second quarter. It was just the normal things that carried and from the prior year and I would say on pricing we have our estimates of the impact of the here, where we're ahead of plan.
On that.
Categories, but under or over performed I started to go through that for us pain were over half the U.S. supply of a set of met a fan out and we're still multiples of normal.
That's never let up so that we're at where multiples that's affects the mix a little bit on gross margin because if it's not as profitable a component allergy was.
Fantastic and continues to be very strong.
Well, we're doing well in the G.I. area, because you know Richard you know the banning of zantac like products for us it sort of hurts the category, but it helps us because we have larger shares in the areas that consumers went to so our Archie I businesses.
Strong I'm cough cold started strong but cough cold.
Well, it's probably.
Half of our give back but as almost all in almost all the way recovered here.
[noise] coming out of July and back to growth again so.
What else did I Miss nicotine replacement nicotine replacement was again consumer stocked up they wanted to make sure. They had it it troughed a bit but it's a regimented product and its back to its growth trajectory again oral care, you've got a travel component that's off but we had a couple of them.
So when I was very challenged where people weren't buying things like whitening strips and.
And replacement heads et cetera, but that again that business has.
Recovered beautifully so you're not ideal fantastic about our our U.S. business infant formula.
That's a challenge having nothing to do with covered I've been talking about the since I got here that we have major capacity issues and I'm. They continue to play I guess, where I'm. We you know we can't be as aggressively can promote the way we want to and.
The system got tax so you know we've got a good surge and then way gave some of it back.
Well, we've talked in the past about the significant investments that we're making but they take time debt to get that capacity up and so we can get that business growing the way, we like but it's not a question.
Of demand it. So it's a question of our ability on that business to supply and I think I covered them all.
And then you heard what I said about international.
Same thing seen other products that that people demand that they thought would be helpful. You know just what you would expect I think it as much as our see Sci business was.
Hurt by locked down grade school closings I think we outperformed all the major branded companies and in Europe during the quarter and either maintained or gain market share with the categories that got hurt, but like again, you know lights treatments of kids aren't in school, you're not going to do it on Sun care people aren't.
Traveling and going to vacations, those businesses get hurt, but they'll return.
<unk>.
That I cover enough of them for you I left out Rx Rx is just about dermatological visits or probably one of the areas hurt more than others of.
You know versus you know routine maintenance scripts and we need.
Our patients up by our products have to go into the Doctor to get the the script. So we'll see how fast that recovers.
Thank you.
Our next question today will come from day did rise in tariff Morgan Stanley. Please go ahead.
Hey, David.
Hey, Murray so congrats on the on the very strong performance I have ER.
A couple of questions. If I may so first regarding your plan to enter the CBD market a in a responsible way with good manufacturing controls that makes a lot of sense, but given.
The companys pharmaceutical clinical expertise this parago see an opportunity to conduct efficacy studies to support any CBD claims second with respect to [noise].
[noise] or the consumer launches ahead.
And I may have missed this I missed part of the call, but I'm interested in how you would characterize the top three most important consumer do product launches to watch for Parago over the next year or so.
And then third as we think about this demand surge in 2020, and obviously, there's the cost surge associated with it.
Any high level points that that you'd sort of frame for us this week.
Start to try to model 2021 relative to those are those comps. Thank you.
But what are your last question was a mouthful, but the the first one on the efficacy studies. The answer is yes and by the way. They are a lot of clinical trials on efficacy out there I'm I'm anxious to see that got guidance that comes in on CBD on.
And just the product says as well to see the pathway for what they'll be looking for but yeah, well, we'll go at <unk> at all those I you know I view it as a longer term play probably you know that.
We would not wait for the efficacy claims but to get more aggressive or for that category to get its full potential I think that's critical so yeah, we'll can we'll invest in that it.
Within our normal budget levels on consumer launches, a you know I'm I'm hesitant to other than to say you know about.
Our Voltaire, an equivalent and Voltaire is off to buy away by the way up in my opinion, a super start on the brand decide which I'm a bit more successful. They are the more successful will be so that's good.
And that's still on track for third quarter end is so that'll be there soon.
Beyond that you know we.
Our our we've been investing in R&D, and we have a half a billion dollars and our new product pipeline and the only one we gave you a preview on and I'm still not willing to say what it is is that one of our our five core strategic areas that we're looking for growth on is in a.
One of the.
Make sure I got my train of thought here on the.
[noise] nicotine I'd say.
Well on on infant Formula we pushed back a couple of new products or you're gonna have some effect of new products scheduled in the second half the year Bank first so we had told you about that one and then the second was wasn't natural based science based natural products and on May nine I talked about one that would be coming out of line of of natural based products that love.
Her to our expertise and Europe, which we have $400 million worth of sales in the science based naturals business and basically nothing here, so CBD would fit into that too, but it's a few years out, but we expected to be launching a consumer line of products like that next year. If it remains on track private said weve.
And we have.
And we're doing a bunch of test markets on different spending levels and what's the right level of investment, but that could be a you know a bigger launch as well and there are.
Dozens of other bus, but I don't want a share them because I haven't spoken about them and that would be putting the company at a disadvantage.
Did I get all your questions.
Product demand surgeons thirdly costs, how does it.
Translate into second half without the question or what are what pushes them pole.
Well basically the this year is it's fully on track Here's what I think about I think the basic surge you got and and a fair amount of that coming out has made the year lopsided. So that I don't really believed on an ongoing basis that the you know the 10% first half.
Jeff We've said all along our goal is 3% organic and with Rineer lapping in July you know, that's what all big measuring and gearing because the other bolt ons. We've had so far our sparse small, we'll probably beat that number but I haven't forecasted it or put it into the guidance on this year.
Pending ultimately how cold cough season does and and what remaining give back is but were worse, believing we're retaining about half of the the positive impact on the the the products that consumers need so much affecting us.
For this year so.
You got some give backs incremental costs. They are what they are you know when you have that kind of 500% demand on certain products. Your air Freighting Apiay. When you have 30% absenteeism, you're paying a lot more overhead when you treat youre.
Your people the way we believe is the right way to treat them you don't lay them off or fire them, you give them bonuses and reward them for being brave and coming into the plants when everybody else's sheltering at home. So we gave employee bonuses and we were awarded on them, we provided meals for them and we.
For those who we believed were at high risk, we supplemented what they were being paid in.
And the unemployment where that was available and those were incremental costs. Because we're also paying overtime of the other 70, 75% of the people that work coming and work to keep those plants running 24 hours a day seven days a week. So how do I think about it and you know it's a bit early to be talking about it but I'd expect the reverse I'd expect it to.
To normalize I think it's a good thing that we're staying near our original targets rather than getting a onetime bump and having to explain declines on it next year, but I I think it should be looking at Parago based on the strength in the fundamentals of ramping up growth with lots of growth potential.
So that has project momentum and costs and these cobot costs all come up to get us back on track. So I haven't swayed an inch from my 357 I'm. The only thing would be differences for these two years it'll be a little bit lumpier. So down some you know up way up in the first half of this year the cost.
Then on some of the EM.
Negative impact continuing negative impact until.
Our next fully recovers that scripts and Doctor's office is fully open up and.
Has a negative impact in the second half of the year.
That reverses itself next area, probably do better on cost, but you don't have that initial surge, but then you have the full year hopefully have recovered products on some of these brands that are down so yes, I think it's lumpy but in general.
I think we're right on track I, you know I I was worried about that last question much more three months ago, then how I'm, saying it shake out now we've got our arms around it.
Thank you.
And our last question today will come from David Hughes of Wells Fargo. Please go ahead.
Hey, Thanks, so much I'm, just maybe could you expand on the gross margin performance soon.
Consumer I think it was down 200 basis points. So.
Oh, there's clearly a mix mix impact there, but how should we think about that for the second half the year and 21 thing consensus on gross margins improving next year secondly, the.
Could you do you quantify what the E commerce sales during the quarter I think we press release of the doubled and then finally, just how you're thinking about bolt ons and a timing for US dollar spent about products. Thanks.
Ray wanted to do the first two of those and you can talk about bolt ons that view.
If you want all out a little bit to that.
Okay.
So on the first as you pointed out on the second quarter.
We had a 200 basis point decline and the two major factors that impacted that with the addition of the okay business, which is about a half of the 200 basis points because as Weve said on several occasions, the okay business as a low average margin.
The gross margin line.
The other half of the 200 basis points in the second quarter. This year was basically the mix of products in the CSC I. We had that's nice already referred to a loss of some of the high margin products, specifically, our weight loss <unk> products.
And parasite products, both of which high margin, but we saw significant drop in sales a these roots of non essential products. If you like that so that came about during the second quarter.
In terms of the pounds of the Yeah. You know I think this is with respect to Oh, Okay. Oh, we anniversary the acquisition in July. So we are supposed to read it should say in July so I'm going forward into the bounds of the yeah, we don't have that tailwind.
In respect to the C. Sci business I think the still uncertainty.
And we tried to reflect that in a conservative approach to guidance I'm that the stool uncertainty in the bounds of the yeah.
With respect to so I think they just did you have any further questions on the on the margin.
Wondering about 2021 of them in consensus I was modeling an increase year over year.
Yeah, I mean, given the I think you too.
It there again this I think it's difficult to see a that far into into the future at the moment, but our I think our expectation would be that we would start to some of those headwinds that we talked about in Q1 would would not be there in the in 2021, but I think it's very.
The to really make prognostication about 21 at this point in time.
Yeah I mean.
Yeah, just add onto what ray, saying, but one of the things that.
Made the margin look like it was down further in the company and especially see I say I was.
No no no fundamental change or weakness on the company. It's just you bought Ryanair that had a which is a big item that had a lower gross margin and.
And it became in so it was a mix issue, but not a consumer trading down to lower gross margin items that was 100% incremental.
So, but they that's gone going forward. So you won't have that negative year over year.
Comparison as opposed to.
Things like.
Hopefully you know cobot get into the world gets a handle on covered and vaccines or get out there and a lot of the costs and spending I'm sure like some of it will go into the beginning of the air but you get back up a good portion of that and then the other thing we did in the first half of this error, which is.
Again should probably reverse itself is we'd if if you remember from the last call we stopped making products that were higher margin items in favor of what the world needed.
In the world needed.
A set amount of being on promoting and things like that which were a and we stopped making a bunch of the portfolio products, which were back making again now and so the comparisons on those ought to be pretty good. So there are a number of positive factors, but you know I think you saw sequential improvement and.
And gross margin on C., I see a and that should improve so and you won't hopefully have the overtime costs et cetera. So it's we're focused on everything we hear everybody loud and clear and we you know it's not an area where not focus on but I you know I think some of the big drivers that were the headway.
Ends are.
Our gone at this point as E Commerce, Brad can give you those numbers I don't have them off the top of my head because we look at them by.
By business, but I want to say a with something like.
Yes, Brad help me around 8%.
Exactly.
140% to around 80 million or or call it 8% across total parago.
Right, but it's actually a much bigger percentage of.
Of certain customers uncertain businesses, we have you know what our top five customers, we have customers, where it's 4% of the business I'm I'm not gonna, saying by name, but you know to other retailers, who have really invested in it.
Outside of Amazon that are you know, it's 20% of our our business that a couple of our top five customers. So it it varies in by category within Us and segment within it.
Pain as a big item the regimented products tend to do better in E Commerce in Europe. It.
It's you know it it's a big number it's also probably or you know around that same percentage, but it's a much higher percentage because we're not in every country with ecommerce yet and a man and we're still in the expansion phases. So lots lots of running room on on E Commerce and at the more important thing is it.
It literally offset it was big enough to offset the and tire decline and for us, it's adding probably in the quarter from what you would see if you're tracking more low I'm just the <unk> right.
Traditional in store grocery drug consumer take away from brick and mortar stores, it's probably adding to the to the total parago business 320 basis points of additional growth on top of that.
To the total Oh Tc.
What was the third.
Hey.
How you're thinking about bolt ons and our acts.
Bolt ons kind of came to wall, a two way oh a bit of a halt.
And during the height of this crisis and frankly, you know, it's still very difficult to do due diligence. We obviously have built a lot of cash. So you know we are restarting our process.
We had some in the pipeline beforehand. So we.
You may see something sooner than.
Sooner than later, but you know, but it's not full the process isn't fully up and.
And running again, but we're in a good position.
Yeah, but right now consumer multiples are holding up pretty well through this old crisis. So am I was hoping for some opportunistic.
Value buys here, which may show themselves later here, where we're still early on it will say and will but it's an important part of the strategy, especially until that innovation pipeline reliable reliably as giving me that 3% organic growth.
Okay.
Our next separation no change.
Yeah its.
The only thing that I would say that's changed on our acts as a thrown off a ball load a cash and their performance will be you know I believe this will be the second year in a row that our Rx business gross top and bottom line and and it does the volatility has come out of that from from our side, yet or the industry multiples are.
So low there's one we went out last time, there were no strategic buyers and the mix until that resolves itself will manage it down and invest in it and take that cash and invest in our priority consumer strategy. So.
But I think like proved when we can get a multiple on Rx with the sale of Rosemont, which sold at around 10 times kinda.
Double that kind of numbers, we were talking about them. When we were looking at selling the U.S. Rx business.
That we would refine the portfolios and we did so.
You know, it's going slower than we would like on and we will make sure that business isn't not collected and it takes no management time, it's under great leadership, and they're an important part of the Parago family right now and until they're not and but it'll it'll take some time.
Okay.
Thanks very much.
Ladies and gentlemen, this will conclude our question and answer session and at this time I'd like to turn the conference back over to Murray Kessler for any closing remarks.
Yeah, I mean in reflection of the you know the comments from the I'm the questions.
But I got today I I would just reiterate.
Ray and I and the management team that was here that we've promoted and ER and several other folks that we bought on are dramatically changing parago I'm proud of what we've accomplished over the past couple of years. This is an entirely different company then it.
<unk> was a couple of years ago, when I joined and it is now beginning to look a lot like the parago that was a success in winning but there's work to be done to make sure that's not something that happens over a six month period of time and then.
Under delivers and gets back into that pattern again, we are focused on building a great company. We have returned the company to growth we have built the talent in the management and this organization.
We are building and and have restored a winning culture to this organization, we have filled our innovation and new product pipeline and there's probably triple the growth opportunities of what I anticipated coming in whether it be through E commerce or bolt off or new adjacent sees and going forward we.
Have work to do on finishing off our capital investments and infrastructure and and and getting that new product pipeline and and and we're doing that while rapidly accelerating the growth of the business and at the same time stabilizing operating income for the first time.
In years to position us to be able to deliver a continuous sustainable business that delivers on its business objectives.
Consistently over the long term, which is.
The kind of company, we want to be and the kind of company with we hope investors.
Want to be a part up and so you know I I'm I believe were right on track.
I'm shocked that we're right on track despite the crisis This company.
And the World went through in the first half of this year I get it it makes the year a bit uneven in lumpy, but but basically it hasn't changed.
Anything again, and I'm proud to be leading a company that its people were able to rise to the occasion through this crisis keep everything on track and help society continue to set us up or the.
The the long term and deliver a quarter after quarter after quarter after quarter meeting or exceeding expectations. So thank you for your interest and Parago.
Ladies and gentlemen conference has now concluded and we thank you for attending today's presentation.
You may now disconnect your lines.