Q2 2021 Becton Dickinson and Co Earnings Call
Hello, and welcome to BD second fiscal quarter 2021 earnings call at the request of BD. Today's call is being recorded and will be available for replay through may 13th 'twenty 'twenty. One on the investors page of the BD dot com website or by phone at eight five.
8592056 for domestic calls and area code 404537, and 3406 for international calls using confirmation number six and 334356 I would like to inform all parties that your lines have been placed in a listen only mode until the question and answer segment.
Beginning today's call is Ms. Kristen Stewart Senior Vice President of strategy and Investor Relations MS. Stewart you may begin.
Thanks, Regina and good morning, everyone and thank you for joining US. This call is being made available via webcast at BD Dot com, we have a lot of exciting news to discuss today earlier. This morning, we issued two press releases. The first discusses our second quarter results of fiscal 2021 the second announces our intention to spin off.
Our diabetes business into a separate public company you can find these press releases along with an accompanying presentation that we will be referring to during today's call on the investor page of BD dotcom.
Leading from this morning's call today is Tom Polen, Bd's, Chairman and Chief Executive Officer, and President and Chris Reidy, Executive Vice President and Chief Financial Officer, and Chief administrative officer, given the announcement of the spin off other diabetes business. We will also have deaths courtesy car our worldwide president of diabetes care, who.
Has been named CEO of Newco to provide his early thoughts on the transaction.
Following our prepared remarks, Tom and Chris will be joined for Q&A by our three segment Presidents Alberto Mas President of the medical present medical segment, Simon Campion President of Interventional segment, Dave Hickey President of the life Sciences segment and before I turn it over to Tom I want to address a few I.
During the call, we'll be making some forward looking statements and it is possible that these actual results could differ from our expectations risks uncertainties and other factors that could cause such differences can be found in our earnings release, and our SEC filings, including our 2020 form 10, and subsequent form 10 Qs.
We will also be discussing some non-GAAP financial measures with respect to our performance reconciliations to GAAP measures that include details of our purchase accounting and other adjustments can be found in our earnings release and its financial.
Schedules there.
And they are also in the appendix of the Investor Relations presentation slides available on the BD dotcom website, unless otherwise specified all comparisons will be and a year over year basis versus relevant period. When we discuss revenue per cent changes, they are and and FX neutral basis, unless otherwise noted.
To avoid any confusion when we refer to any given period, whether that's on a quarter or year basis, we will be referring to the period in physical terms, unless we specifically call it out as a calendar period.
Finally, when we referred to new co. During today's call. We are referring to the independent publicly traded diabetes company. Following the effective date of the spin while remain co refers to BD post separation.
And with all that said I am very pleased to turn it over to Tom Tom. Thanks.
Thanks Christian.
Good morning, everyone and thank you for joining US today, we will provide an update on how we're executing well and creating value for our stakeholders through our BD 2020 five strategy.
We have a lot of exciting updates for you so let's jump right in.
Our second quarter results came in better than expected and we delivered strong revenue and EPS growth.
We're very pleased with the continued momentum and our core business and.
And therefore based on our first half results and our projections for the second half we are reaffirming our fiscal 2020 one guidance.
We are making steady progress on each of our growth initiatives, which include very purposely shifting our investments and portfolio into higher growth categories and shifting our weighted average market growth rate over time.
We are advancing our product pipeline as well as our tuck in M&A strategy, which now includes making selective investments in earlier stage and potentially disruptive technologies.
And this morning, we announced our intention to spin off our diabetes care businesses.
Into a separate public company.
We see this planned spin as a significant value creating opportunity for all stakeholders for our patients customers associates and shareholders.
As an independent public company, we believe the diabetes business can leverage its global leadership position and unleash its growth potential and this attractive market category through the more efficient allocation of its own capital.
For remain co BD. This transaction allows us to focus on our prioritized core businesses. We expect this transaction to strengthen our mid single digit revenue and double digit total return growth profile.
We expect the spin to be completed in the first half of calendar year 2022 subject to customary closing conditions, including final approval by the BD Board of directors and the SEC declaring our registration statement effective.
We are progressing well against our simplification initiatives.
Which are focused on reducing complexity enhancing our product quality refining our customer experience and improving cost efficiencies are.
Our record initiatives are progressing on track to generate savings of $300 million by the end of FY 'twenty four and these initiatives help unlock value and allow us the flexibility to reinvest back into our business to fuel future growth.
Chris will talk more about our capital allocation strategy later in the call, but we expect share repurchases to return as part of a more balanced capital allocation strategy as our balance sheet position and cash flows have strengthened over the past year.
We also continue to be guided by our purpose advancing the world of health and continued to make great progress on our ESG initiatives.
On Earth day, we reaffirmed our climate change targets, which includes our pledge to be carbon neutral by 2040 across our direct operations.
Last week and I was preparing for our board meeting I reflected on where we were a year ago, where we are today and the progress we've made.
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We achieved my number one priority since taking over as CEO.
Last week, we announced that we submitted our Alere has five 10-K premarket notification and this is an.
Port and milestone and our commitment to our customers and our patients the.
And the Alere as pump is the leading infusion pump and the U S market administering more than 1 million infusions each day.
Second word.
We've significantly strengthened our balance sheet and cash flows.
Over the past year, we've improved our net leverage ratio by a full turn from three four times to two four times and taken actions to meaningfully strengthen our cash flows.
Third.
We answered the call to action with COVID-19.
We developed a series of innovative COVID-19 diagnostic tests and scaled these the diagnosed patients and help control the spread.
And we secured our global supply chain to ensure that our essential medical devices were available to treat COVID-19 patients and ICU as around the world.
Including BD devices used in the treatment of an estimated 90% of U S ICU patients.
And today, we continue to add capacity and enable over 1 billion doses, a COVID-19 vaccine to be delivered using our injection devices I.
I am very proud of our team's impact when it matters most.
Fourth we reinvested in growth.
We set up the BD innovation and growth fund.
And advanced impactful, new innovation programs and each of our businesses.
We acquired 11 tuck in acquisitions since the beginning of 2020 along with early stage investments.
And we are reinvesting some of the BD Vera toward profit back into the business and behind our BD 2020 five strategy.
Fifth we started to shift the BD culture to one of our growth mindset.
We've been systematically advancing our leadership capabilities and culture and this area.
Which includes partnering with the neuro leadership Institute to embedded and enhanced focus on innovation and growth across our culture and mindset.
And the progress, we're making with shifting the culture is very real and tangible.
And today, we are announcing our intention to spin off the diabetes business. We believe this spin off will be another value, creating opportunity for our shareholders.
And what excites me most is not what we've done is where we're going and what's to come over the next several years all of our future and.
And milestones to come.
The BD 2025 value creation story has only just begun.
And later this year we.
We are planning to host an investor day, and we'll look forward to sharing greater insights into our 2025 strategy and pipeline.
So with that let's turn to slide eight and our second quarter results.
Chris is going to run through our financial results in greater detail later on but just to highlight we are very pleased with our second quarter results as the BD team continued to execute well.
Our second quarter revenues totaled $4 $9 billion up 15, 4% on a reported basis and up 12, 2% on and FX neutral basis.
I was particularly pleased with the continued momentum of our core businesses.
Each were above our expectations and all three business segments.
Call out a few.
Our market, leading BD pharmaceutical systems business continues to deliver robust revenue growth of nearly 10%.
Medication delivery solutions business was up over 8% as we continued to deliver on our COVID-19 vaccine injection devices commitments and our results were also driven by higher patient acuity.
Our bioscience business turned in double digit growth as research activity has rebounded and urology and critical care continued to perform well driven by pure WIC and targeted temperature management.
In China, where we began to anniversary the impact of COVID-19, we saw strong revenue growth of 62% and.
And we continue to invest to support our future growth.
Including reinvesting some of the profit from our COVID-19 diagnostics, our R&D spending was up 18, 7% year over year on a currency neutral basis.
Adjusted EPS was $3.19 representing year over year growth of 25, 1% on a reported and 22, 7% on a currency neutral basis.
The performance of our business, particularly our core.
Gives us comfort to reaffirm our fiscal 2021 guidance ranges, which include currency neutral revenue growth of 10% to 12% and.
And adjusted EPS guidance of $12 75 to $12 85 up 25% to 26% on a year over year basis.
Turning to slide nine.
As I discussed before we are proud to play such an important role and the COVID-19 pandemic response across the continuum of care from diagnostics to treatment and now prevention.
And the vaccination campaigns continued to progress I am pleased to announce that we now have cumulative commitments were over one 7 billion injection devices to administer COVID-19 vaccines globally.
These commitments will stretch through our fiscal 2020 two period, and therefore, we now see higher demand and our M. D S hypodermic business as being durable into next year.
We also see potential opportunity for our Prefilled business and the future and are now working with several partners at various stages of formulation testing on possible Prefilled COVID-19 vaccines.
Turning to slide 10.
I will provide an update on our COVID-19 diagnostic testing business.
We recently announced several emergency use authorizations or E ways from the F D. A.
We received EU as for a combination COVID-19 flu assays for both BD, Verity and <unk> and BD Max and.
And we believe combination tests are going to be important and the next flu season.
Next we extended our EUA from the BD verit toward COVID-19 test to include a claim for screening asymptomatic individuals by serial testing.
Several peer reviewed publications have supported the benefits of serial rapid antigen testing.
And we're continuing to develop our BD Vera tour at home test.
Our test is designed to deliver a clear digitally displayed record of test results on a smartphone to eliminate the reading guesswork.
And we also designed it to allow the data to be digitally shared by the user to eliminate errors and report sharing.
Our BD very at home antigen test is also expected to have some other features that we believe will further differentiate it versus others on the market.
Our antigen tests will all be manufactured on the same production lines to leverage economies of scale and our capital investments.
Turning to slide 11.
Growth through innovation is central to our BD 2025 strategy.
We are advancing our R&D pipeline across all three of our segments and as you can see on this slide identified by the green circles.
Several products have launched or achieve clearance since the beginning of the year.
I've already covered a regulatory clearance is related to COVID-19 diagnostics.
And I'm happy to share that we've made steady progress and our medical segment with a healthy cadence of relevant portfolio expansions and extensions across the M. D. S portfolio, such as the broadening of our leading peripheral IV catheter position with the introduction of our first passive safety catheter and the United States.
And the BD Cassena IV safety catheter, we launched a new catheter stabilization solution for peripheral IV catheters with the BD secures stabilization device.
And further advance the safety of the BD, the seal optimal product family with a locking injector.
And interventional, we're launching centrica.
Smart connected Foley catheter, which can be an important tool for the ICU.
It provides wait normalized urine output data that is one of the early parameters used by clinicians to help identify acute kidney injury BD.
BD sensor Cook and wirelessly transmit this data to the hospitals electronic medical record. We're also looking forward to launching pristine later this quarter price.
Christine is our new long term hemodialysis catheter with unique side whole free symmetric white chip just alumina design.
The design of the product is intended to help minimize thrombus adhesion facilitate blood clot aspiration prior to hemodialysis treatment and help minimize recirculation rates and both forward and reverse.
Turning to slide 12.
As I have often said over the last year.
This was my number one priority and last week, we announced a very important milestone.
We submitted our five 10-K premarket notification to the FDA for IBD alert system.
I'm extremely proud of our MMS regulatory affairs quality and R&D teams for their dedication and hard work to ensure a comprehensive submission.
We're also very appreciative of the Fda's collaboration.
We recognize this is one important step and we look forward to working with them through the FDA review process to obtain clearance for the updated BD alert system.
Just to give a sense of what is included in the submission and how comprehensive it is.
And five 10-K submission is intended to bring our file up to date for all changes to the pump since the last five 10-K was cleared.
We are also implementing updated features and addressing open recall issues, including through a new version of the BD <unk> system software that will provide clinical operational and cyber security updates.
These updates are part of our overall commitment to safeguard infusion programming and.
And included in the software will be updates to our BD hilarious guardrail suite and BD hilarious, EMR interoperability, including cyber security updates network security and advanced data encryption.
From a hardware perspective.
Our submission includes updated P. C U L V P syringe and E T C O two modules as well as our existing PCA module.
We plan to continue to advance the BD <unk> system with future updates and subsequent submissions.
We filed a substantial amount of data to support the filing and this is a complex and comprehensive submission there.
And therefore, we would expect that the FDA review process will take some time to complete.
And while we're not intending to predict the F. D. A specific timeline, we certainly recognize that our stakeholders would like to have some input for modeling purposes.
And we believe it would be prudent to think about a lyricist clearance sometime during the second half of our fiscal year 2022.
We plan to update you if there are any significant developments.
For now we expect to continue to ship to our customers who qualify under medical necessity.
We've learned a lot of valuable lessons and gained insights during this journey that we're applying to our ongoing next generation pump platform programs as well as our quality and risk management systems.
Turning to slide 13.
We are making significant progress with our tuck in M&A strategy.
Year to date, we've closed five acquisitions, and we have a robust funnel of opportunities at various stages.
We continue to exercise financial discipline. In addition to ensuring deals meet our strategic and operational criteria.
This includes them being accretive to our growth profile supporting our key innovation themes advancing our strategic positions.
Meeting, our financial hurdles and creating shareholder value.
As part of building a more holistic approach to expanding our inorganic growth funnel. We also expanded our evaluation and selective investment and early stage strategic opportunities.
On slide 14, we highlight our key innovation themes and with some of our tuck in acquisitions and R&D products across our three business segments that align to these things.
Some of which I've already highlighted so within this theme of applying smart devices robotics analytics and artificial intelligence to improve care processes I've already discussed our smart Foley catheter centrica.
And we also continue to develop new modules, a key strength, our total lab automation system keystrokes as you know can improve standardization significantly enhance lab efficiencies and staff productivity.
Within medical or health site platform is designed to continue to support enterprise wide medication management.
We continue to evolve our capabilities with health site diversions, which was originally launched and fiscal 2019 for pyxis.
We have scaled tremendously over the last year in terms of our commercial sites and we have plans to expand into the or followed by integration of infusion data and central pharmacy.
Within the theme of enabling new care settings, you've seen us acquire med bank and GSL solutions to expand our medication management offering into the faster growth non acute settings and.
Strength in our existing dispensing leadership position.
Our pure Wick dry dock urine collection system.
And that's been helping women with urinary incontinence outside of the acute setting and contributing to the strong growth and our UCC franchise.
And I've already talked about how we're excited about the upcoming launch of our BD their tour at home COVID-19 test that enables the expansion of testing into everyday settings.
Lastly, our third theme is improving diagnosis and treatment of chronic diseases.
Already mentioned pristine and I've talked about and the past our BD oncology HPV assay.
Which offers extended genotyping that supports risk stratification, and we look forward to launching this assay on our BD Cor system and the United States later this year.
One other product that we haven't talked a lot about is our BD libertad subcutaneous drug delivery system for the administration of viscous biologics.
Our pharmaceutical systems business is excited to offer this option to our biopharmaceutical partners as a combination product.
These products not only add value to our customers patients and health care system.
But they add to our confidence and a sustainable durable mid single digit growth profile.
Now turning to slide 15.
As I've described so far on this call, we're making substantial progress and advancing our BD 2025 strategy, which is about unleashing the growth potential of BD delivering innovation to our customers empowering our associates and creating value for our shareholders.
And I'm really excited today to announce a bold step and our BD 2025 strategy.
Our intention to spin off our diabetes business to our shareholders, which we believe is a value creating transaction.
Our diabetes care business generated $1 1 billion of revenue and fiscal 2020.
Is a global leader and insulin injection devices.
Consistent with our continuing focus on delivering shareholder value, we undergo strategic reviews to identify ways to create value and determined and that's a strategic priorities of BD have diverged from those of our diabetes care business we.
We believe a spinoff will position both companies for long term growth and success by allowing both to focus on their respective core markets innovation and customer outcomes.
Each company will be able to more efficiently allocate its resources and capital.
And it's positioning the respective companies for their success and value creation.
We see tremendous potential to create value for our diabetes care business ahead, and let's turn to slide 16 to dive into some of the benefits and greater detail.
We see the spin off as an operating catalyst for our diabetes care business.
As an independent public company Newco will be able to more effectively allocate its human operational and financial resources to implement our refined growth strategy that will allow it to focus on innovation and improving the care of patients living with diabetes.
Being a separate entity will also better enabled new co to attract and retain talent.
Line management and employee incentives and have a stock currency that they can use for future acquisitions.
For remain co BD.
We expect the spin off to strengthen our mid single digit FX neutral revenue growth.
We estimate the uplift to our revenue growth rate to be about 30 basis points and see this as strengthening our double digit total return growth profile.
The spin off will allow remain co to focus on our R&D tuck in M&A and customer growth strategies and simplify our overall focus and maintain financial flexibility.
Considering all of these benefits. We believe this transaction has the potential to create value for our shareholders, which will be owners of both companies.
Slide 17 provides an overview of the relevant transaction details.
And I've already covered many of these topics.
The spin off is expected to be implemented by means of a distribution of 100% of the shares of a newly traded publicly traded entity to BD shareholders.
And it is intended to be tax free for U S federal income tax purposes.
Over the next several months, we will be filing our form 10, which will include the carve out financial statements.
Again, we expect the spin off to be completed and the first half of fiscal year 2022.
Subject to market regulatory and other conditions, including final approval by the board of directors and the effectiveness of a form 10 registration statement that will be filed with the SEC.
Turning to slide 18.
Newco will be led by an experienced management team.
And I am very pleased to share the Dev courtesy car, who joined US earlier this year and.
The worldwide President of diabetes care will be the CEO of newco.
That has a long history and the med Tech sector. Most recently, serving as the CEO of cardiac science.
Deb has been engaged with the business now for the last few months and we'll share some of his preliminary thoughts in a moment.
I'm also very happy to announce that Jake <unk>.
The former Treasurer, and Vice President of Investor Relations of Teleflex has joined BD and will be the CFO of new co upon spin.
Jay brings extensive experience and treasury financial planning reporting and analysis and Investor Relations.
We're confident that Devin Jake are the right team to lead new co as they embark on this journey that we believe will create value for all stakeholders. So.
So with that I want to turn it over to Deb to provide his perspectives on today's announcements Deb. Thanks.
Thanks, Tom and Hello to everyone listening to today's call I'm incredibly excited to embark on this journey I see a tremendous opportunity to build shareholder value and had been scheduled for patients who suffer from diabetes.
Total really humbled to be leading this amazing organization.
The diabetes care business has a long history of caring for patients living with the disease dating back to BD is introduction of the words, we're specialized insulin syringe almost 100 years ago, and 19 and 24.
Since then BD has played a leading role and the delivery of insulin, including helping to drive the adoption of insulin pens, which utilize up and needle technology and the.
Leading modality for insulin injection.
Our diabetes care business now reaches more diabetic patients than any other medical device company and the world today.
We manufacture 8 billion devices.
And are the global leader and insulin injection devices.
And as Tom mentioned earlier, the business generated nearly $1 $1 billion and revenue in fiscal 2020 derived from the sale of insulin injection devices, such as the new and insulin and syringes as well other than accessories.
One factor that attracted me to this opportunity with the global breadth of the business with 48% of the revenue generated outside the United States, including 17% and emerging markets.
And why is this important and.
As you can see on slide 21 diabetes is growing chronic condition across the globe with some of the hard prevalent through its expected to be and the emerging market regions.
The international diabetes produced and estimate the number of adults living with diabetes is expected to grow from 263.002 million 19 to 578 million and 2030 and 700 million by 2045.
Most of these patients will likely continue to rely on traditional injection and the body suits within insulin needs.
The rapid growth of their disease will likely place a significant burden on health care systems around the world and it's.
Patients with diabetes at all from the afflicted with multiple comorbidities like cardiovascular disease, hypertension, diabetic retinopathy and lower limb complications.
While I've only been with the company for a few months now I can assure you that my passion and vision for Newco is one of growth.
Injection devices like a needle and syringe is unlikely to remain a key part of their treatment paradigm for people with diabetes on a global basis for the foreseeable future.
We will look to leverage and global footprint to capitalize on these demographic trends.
However, we will also look to invest and novel insulin delivery technologies, including an internal type two patch technologies we.
We also plan to supplement our internal R&D product development efforts more broadly and.
Excellent and our growth profile and through strategic and money to broaden our product offerings and enter adjacencies and new growth categories.
Let me end by saying, how excited and humbled I am to have this opportunity to lead newco.
I am confident that our team will work tirelessly to advance care for patients while building shareholder value.
With that I'll turn it over back to Don.
Thanks Dev.
We see this as a great opportunity for those BD associates that will be part of Newco and we're happy to have you and Jay Cohen Board.
Turning to slide 25 I'd.
And I'd like to provide and update on our ESG initiatives across BD.
For both remain Kobe D and new co.
<unk> Board of directors and management team believe our plans to spin off the diabetes care business will create value for all stakeholders.
With that I'll turn it over to Chris Thanks.
Thanks, Tom and before I turn to the results. Let me also share my enthusiasm for the spinoff regard diabetes care business, let's see the transaction is a win win for all stakeholders are shareholders our employees, our customers and our patients I'm confident that we have the right leadership and navigate new co on those.
Exciting journey ahead.
Now, let me turn to the second quarter financial results.
Slide twenty-seven summarizes our high level revenue performance, our revenues came and just over $4.9 billion up 15.4% on a reported basis and up 12.2% on and FX neutral basis.
As Tom mentioned, we were very pleased with our results.
Our course segment, resulting excluding COVID-19 diagnostic testings were ahead of our expectations across all segments.
Now turning to slide 28.
Our medical segment delivered four 7% FX neutral revenue growth led by our market, leading BD pharmaceutical solution systems business, which continues to deliver robust revenue growth of nearly 10%.
We are proceeding with our capacity expansion to support the future growth of this business unit.
M. D. S grew a solid 8.1%, which included $43 million from COVID-19 vaccination injection device revenues.
We also benefited from higher patient acuity and higher utilization internationally, particularly and China, where we anniversary the impact of COVID-19.
Turning to slide 29.
Ah Life Science segment delivered revenue growth of nearly 38% on and FX neutral basis.
Our COVID-19 diagnostic testing revenues total is 480 million and are included and are integrated diagnostic solutions business.
While BD verditer, asp's, whereas expected and the low to mid teens, the market's overall demand for symptomatic COVID-19 diagnostic testing was lower.
Looking at all right ideas business, excluding COVID-19 testing our routine diagnostic testing has not yet fully recovered to pre COVID-19 levels.
We also benefited from our COVID-19 responses or diagnostic testing and vaccine injection delivery device revenues.
Now turning to the P&L on slide 32 as.
As expected our gross margin was sequentially lower as compared to our first quarter.
Gross margin was 53, 8% driven mostly by the lower COVID-19 diagnostic testing revenues.
On a year over year basis. The gross margin included a 70 basis point negative impact from foreign exchange and 70 basis points from reinvestment initiatives.
Favorable impacts from our continuous improvement initiatives were offset by product quality related expenses.
Our SG&A spending rose, 9% year over year on and FX neutral basis, including a 380 basis point impact from deferred compensation, which as you know is fully offset and other income expense.
The remaining increase and SG&A is primarily related to higher shipping costs and investment spending as part of our BD very to our profit reinvestments.
Slide thirty-three I'd like to provide and update on our capital allocation priorities, but first I want to update you on the great progress, we made with our cash flows and balance sheet on a year to date basis.
For the first half of the year or cash flows from operations have more than doubled growing from 1.2 billion to 2.8 billion driven by the improvement and our net income as well as working capital.
We ended the quarter with 3.7 billion and cash and equivalents no net leopard leverage ratio was 2.4 times, a full turn lower than a year ago.
Going forward R capital allocation strategy will be more balanced and it had been in the past as we were paying down our debt.
Now more of our cash can be deployed to support our growth strategy tuck and M&A, maintaining a competitive dividend and returning capital to our shareholders through share repurchases.
As a reminder, under the existing share repurchase authorization plan and we have just under 7.9 million shares roughly $2 billion remaining.
Also note that we would expect betis dividend to be unaffected by the diabetes spinoff and therefore would increase bd's payout ratio.
Next I wanted to address our fiscal 2021 guidance and provide some general commentary on our overall outlook, which you can see on slide 34.
From a reporting perspective, we will continue to report a diabetes business with our BD results until the spin off of the diabetes business is complete.
We're very pleased with the results for the quarter How're, you building momentum and our core advancing our pipeline and achieving critical milestones. We are also pleased with the progress we see from the BD Barrett to our profit Reinvestments can you believe these projects should begin to provide incremental growth beginning in late 2022.
We are read are firming, our fiscal 2021 financial guidance ranges.
We continue to expect reported revenue growth of 12% to 14% for the full year 2021.
This reflects ethics neutral revenue growth and the range of 10% to 12%.
<unk> very to a revenue towards the higher end of the one to 1.5 billion range and foreign currency, adding approximately 200 basis points.
We also continue to expect adjusted EPS and the range of $12.75 to $12.85, which represents growth of 25% to 20% 26% year over year.
And we wanted to give you some color as you consider your models for the back half of the year.
Selling and manufacturing efforts.
In conclusion, we are really pleased with our second quarter results and the momentum across our businesses.
We are excited about our plans to spin off of the diabetes business and see this as an important opportunity to create value for our shareholders.
With that Tom Alberto assignment, Dave and I are happy to take any questions. You have operator, please open up the line for Q&A.
The floor is now open for questions. At this time, if you have a question or comment. Please press star one on your Touchtone phone if at any point. Your question is answered you may remove yourself from the queue by pressing the pound key and.
In order to allow for broad participation. Please limit your questions to one and one follow up.
And I say well you pose your question. Please pick up your handset to provide optimal sound quality. Our first question comes from the line of Bob Hopkins with Bank of America.
And.
Hi, Bob Good morning, Hey, Good morning, Oh Boy, a lot to unpack here.
And I'll just ask a kind of two straightforward questions first is kind of a housekeeping on the diabetes side you you.
Told us it was roughly 67% of revenues in fiscal 2020 I'm, just curious what rough percentage of operating profit it was and that year and then I've got one follow up thank you.
Yeah, and that first one and Bob will will be clearer on that as we do the carve out financial statements. So you can expect to see that going forward.
But as you know we don't break it out at that level at the operating basis on an ongoing basis, but as we do carve outs and that'll be clearer.
And any rough sense, though just.
Too early too early to say right now, there's we're still going through the midst of that.
Okay.
And then.
Yeah.
So maybe what we can say is is that the diabetes care business. It certainly is profitable and the gross and operating margins are above our corporate average and certainly the company's positive cash flow, which is going to allow it to pursue the growth agenda that we discussed and then again as we filed a form 10 later this year and more detailed carve out financials.
We'll be available then okay, great and then one quick follow up so many things we could ask about 2021, but you offered a few little comments on 2020 two so I'll skip right over into next year for a quick second you know what what are your comments suggest about are the kind of the outlook for operating margins next year relative to where.
And you're ending and the back half of 2021.
Yes. So as you can see this year, you know, where we're spending and investing to drive future growth from the virtue of proceeds and so that will be something that does not reoccur next year. So you will see a lift and clearly you would get a lift from.
And from <unk> coming back.
Because that was a drag on our operating margins as well and I would also add the in and.
In terms of FX, you see some FX pressure that we pointed out this year, we will continue to see some of that rolling through our inventory.
For the remainder of this year that should turn around next year as well.
Any sense for what that roughly sums to those just directionally, yeah, we're not going to give 'twenty two guidance. This early a lot of that will be impacted as you know by what happens to COVID-19 testing.
And you know we're pulling all the levers we can to make COVID-19 testing.
More sustainable as we think about the combined COVID-19 and flu assay and and we're also.
We're working on the at home tests, so that should have some ability to to have sustainability and and COVID-19 testing, but clearly it will come down and where that goes we will have a big impact on operating margins and up and gross margins and total as you would know and Bob just as a reminder, we've said we.
Expect to reinvest about $200 million are very to a profit back into the business. This year right, which are one time expenses hitting the R&D line as well as the G. P line as we discussed that will come out next year, which will be obviously, a tailwind on the relaunch of the expected relaunch.
And you have a laris obviously next year would also be a margin tailwind from that perspective, as we start getting absorption back and that that plant as well as tends to be a higher margin items and so those are all positive and as well as continued volume returning in and should we think about the recovery post pandemic, particularly.
And areas like BD, I, which we saw and we can talk about later on.
And we saw good continued recovery, particularly in the back end of the quarter and March and we continue to see that strong momentum and Simon can comment on that later on as we look at April in and that procedure volume recovery.
So thanks for the question Bob.
Your next question will come from the line of Robbie Marcus with JP Morgan.
Hey, good morning Ravi.
Good morning.
And as Bob said, Theres, a lot to unpack here.
Yeah, maybe I could ask about some of the base businesses here.
Particularly.
Maybe the interventional business seemed a bit.
Weaker than expected and the medical business.
<unk> to benefit from COVID-19. So I was wondering if you could tease out some of the.
And what's impacting intervention all and how do you expect that to recover and then on the flip side within medical how much of that is benefiting from COVID-19 here and.
It should start to come out over the balance of the year.
I can start with maybe just some comments on medical and then turn it to Simon on interventional, So certainly and in medical you see a couple of things happening one is we see.
<unk> durable growth you saw it last year in pharmaceutical systems, you saw it again and the quarter, but they were in 8% plus I think last year growth and and we see that durably.
Hi, highest higher than average company growth has my attention there and and you saw us obviously communicate I think it was last quarter the quarter before over $1 billion $1 $2 billion of incremental investment capital investment and that business to support the long term growth outlook. So that's number one we also.
We reaffirm that we expect.
We are in discussions and we have collaborations going on with several pharma companies about putting COVID-19 vaccines in pre filled syringes. So again another opportunity as we think about that business long term in Mds. We also commented that I remember.
A year ago or less than a year ago, we were talking about that we could do up to 1 billion syringes to help in the COVID-19 vaccination. We know today announced we have orders commitments and hand for $1 7 billion syringes that spans well into FY 'twenty two and so we see them. While we were wondering was they're going to.
Be a cliff of syringes into 'twenty, two we see that demand in our Mds business is being durable into 'twenty, two and certainly as we think about.
Potential even further demand.
From things like booster shots.
That would just make that that demand even more durable overall that business continues to do well in terms of taking share and the catheter space as well as a series of new innovations. They obviously it had some benefits from higher acuity patients in the ICU, which are maybe using products like mid lines or picks which are higher.
Asps and peripheral catheters for shorter time stays but they are strong and durable trends there I think and an M. D S and obviously and then as we look forward with the submission of the 500 10-K to have.
Bigger growth opportunities as we look ahead to 'twenty, two I think I'll turn it over to Simon on BD I, but I would say what you saw is that the impact from the pandemic was very minimal and in the first two months of the quarter last year for BD I and so I think you see just that comparable happening given our product mix.
And then we did see strong trajectory.
And uptake in March and we saw that continue into April assignment.
Good morning, Ravi Simon and so let me just start at the bottom here with the with UCC, a really strong quarter.
And as you see driven by double digit growth and and pure <unk> and TTM. So you'll continues to be a mid to high single digit performer for us this quarter.
And peripheral as Thomas mentioned peripheral.
We did see impact early in the quarter and this space and particularly in the and the <unk> business and that is that should not be surprise to you based on what you've probably heard from from others.
All of them that space, but sequential improvement through the end of March.
And and into April and.
The outlook remains positive there.
And then with with surgery.
No great surprise to US two factors are driving that number one.
And is not and emergent procedure so.
Patients have attorneys for several years, so that is typically impacted first when whenever.
When a resurgence happen.
Happens and are treated later once once and when the recovery isn't this theory and secondly.
The Q2 of last year for us and a particularly high growth and Chlor prep.
Say higher and higher than normal so that's a bit of and offset that as we move into this quarter, but the sustainability of our business I think is demonstrated.
And China for example, this past quarter, we were very significantly impacted in Q2 last year and China and it is <unk>.
Rebound and really strongly in Q2 of this year so.
We remain confident and our ability to recover our business as the.
Resurgent debates here.
I think I would just add two comments.
In terms of intervention.
It actually exceeded our expectations and the quarter, because we had seen in January and the resurgence from COVID-19 and.
And we hadn't seen that going into the February call and that did turnaround in March and happy.
Happy to see it turnaround and April but I'd also take a step back in terms of the core.
Momentum and point to the fact that we see that improving and is helping us with the outlook for the remainder of this year and I would also point to the fact that we.
Showed that confidence and what we said about 22 by moving the core.
Guidance for 'twenty two from <unk>.
Low single to mid digits to solid mid single digits, and that's reflective of the momentum across the business that we see as sustainable.
Great and and I realize youre not going to be able to comment on COVID-19 testing or awareness and sales necessarily for Nash next year, but maybe if we think about the balance of fiscal 'twenty. One here I just want to make sure.
I have some of the data points right. One is that at the high and Zurich towards testing and that implies another $250 million or so and each fiscal three co and <unk>.
And as we think about a second half approval next year for <unk>, just maybe remind everyone about the process of how long it takes from order to delivery to booking revenue just so we can appropriately scale up our sales and the models for next year. Thanks.
Just so Ravi on the question around <unk>. Just a reminder, we've always used and emphasize the word towards the high end and not be high and which is what you just calculated so if you.
Maybe a little bit less per quarter than what you said to get towards the high end of the range right, but to your point. We're almost we ended the first two quarters and almost $1 billion of revenue on <unk>. So you could think of and we're all basically roughly two thirds of the way through that number halfway through the year, which gives us confidence in reiterating.
A rating that towards the high end of that range and as you said, it's maybe a little bit less and what you indicated.
It would be split by by quarter there on.
The awareness, we do have a backlog of orders that we would be able to ship initially and then as we think about upgrades.
Those are a shorter install times than let's say pyxis. So it would be a couple of months and typically in that space from us and order to implementation for Louis.
Okay.
Great. Thanks.
Your next question comes from the line of Vijay Kumar with Evercore ISI.
Hey, guys. Good morning, Good morning fifth morning, Tom Thanks for taking my question and one actually a couple on and the spin itself.
I guess that the base.
Business is now going to accident rate by 30 basis points. So if I look at the prior guidance of five five to six top line.
Are we now looking at.
Perhaps the base being north of five and a half.
And on the spin co.
And I heard some comments on patch pump what should the growth rate for a.
<unk> is that going to accelerate and north of 5%.
Yeah, Chris take that one and I'll, Let me, let me take the first one and so you're absolutely right. We put in a that there would be growth of 30 basis points and just think of that as a one.
$1 billion or so of revenue, which has been relatively flattish compared to the rest of the $17 billion.
Growing that mid single digits, and if you do that math you can see the the drag that that has of 30 basis points.
And I would remind you that our guidance is.
Our recurring mid single digit kind of growth rate and so that 30 basis points gives us greater confidence and the ability to achieve that on a on an ongoing regular sustainable basis.
So that's a positive we haven't addressed the growth rate.
Of spin co going forward.
Third Dev and say that is emphasis is on growth and we think that being a separate public company.
Unleashes that growth potential because right now the spin co would be fighting or diabetes care within BD is fighting for investment against other items that we are feel more strategic so.
As a separate company it can invest whether that is internally.
More investment and R&D or through M&A.
It can do that so more to come on on the the growth profile of spin co as a separate entity, but that's kind of directionally the way to think about it and Vijay you did ask about the this is Tom.
The patch so that that does continue and out and patch pump that continues and our pipeline.
With external.
Development partner is as we've shared in the past and certainly as we approach the actual timing of the spin you can expect that there will be.
Further discussions on the strategy of the diabetes business and updates on that and other products within our R&D pipeline and on Dev and his team's vision for the business post spin, but those discussions as is typical in these situations wouldn't happen until we get closer to the spin.
That's helpful and Tom and maybe a follow up I think the press release noted.
And the transaction the strength in the mid singles top line and double digit GSR profile.
Just wanted to clarify are there any dis synergies and I'm, assuming there are some.
I know in the past you had spoken about double digit EPS is that still intact.
On an underlying basis.
Perhaps parse out the double digit P. S harvest this up and what would it means for EPS.
And so as we said this strengthens.
The spin actually strengthens and gives us more confidence and both the topline and bottom line.
And that'll be clearer as we talk about the the operating margins as we said.
From the spin co. So this gives us more confidence.
And that and.
So it supports that that effort.
And there is no change from O I L RFP correct.
Mentioned and you did mention Vijay that the.
Stranded costs, there would be some stranded costs and any transaction like this.
We feel good about the fact that we can address those stranded costs.
And obviously.
As soon as we think about other opportunities and the company that we have whether or not it's across our intervention will segment and just the tremendous technology opportunities that are happening there and our.
BD medical segment, as well and future of medication management and the opportunities and the non acute space the opportunity to again to apply automation and informatics across both our intervention will and.
Medical and our life science business are significant for us we see <unk>.
Very attractive opportunities in those areas that also of course diabetes business as we look at it it has a more unique business profile relative to our other franchises. So for example, and they have very distinct patience physician and distribution channel dynamics as compared to our other businesses as you think about our BD murder.
Cole.
Excluding diabetes or intervention will and our life science franchise, they have very significant overlap and call points right. They all call on healthcare systems to.
Where we sell of the majority of our life science products or intervention, all products and are beating and.
And Mds products into that channel, that's very different and diabetes and as we think about that digital footprint that we've been building out how we're leveraging data and connectivity connected into electronic medical records across the segments. That's also a different dynamic than what we see in in the diabetes care business, which is again.
And it is not connecting into Emr's in the same way, it's more directly outbound and the patient and as you think about future technologies like patch pump or other options. They also will require a very different commercial channel. Then is the what's inherent and the rest of the BD businesses BVI life sciences or the rest of medical.
So we think that.
Absolutely there are tremendous opportunities for BD diabetes care business, which is why we're excited.
That spinning them will be allow them to unleash that potential not competing with other.
At least towards the.
Typical flu pricing and so that's having an impact and that's being offset and the second half of the year. So we're still within the guidance range on the top and the bottom.
Thanks, Chris and keep in mind, Larry too and.
Q3, there is that a large amount of revenues associated with medical necessity and MMS. So that does have a little bit of optics on a year on year, but last year. There was a very large, yes, and and a stronger revenues for the second half of the year in MMS too for the European.
Revenues to for pumps.
And that's a pandemic was and at its peak.
Thanks for the question.
Next question. Your next question will come from the line of Richard <unk> with SBB Leerink.
Hey, rich good morning, Thank you.
Morning.
There's probably going to be.
And that you've been executing on and then I'm sure, you'll you'll get a little bit more into this one and you had your investor day.
Later on this year, but.
Is there any particular assets.
The five that you did year to date and I think you pointed to six last year.
And that's more needle moving or net debt will be contributing.
And your mind.
And as we head into fiscal 'twenty, two and then also how should we think collectively.
Might be able to add in terms of basis points to growth on top of that mid single digit normalized rate and 2022 just ballpark.
So we obviously view that as a form of we think about organic and inorganic innovation opportunities as both fueling that that growth profile that we have and that we've defined.
As we think about just the five that we've done this year, obviously six last year. There. There are a number of them that are meaningful within the businesses that we have we're really excited about the new catheter for example, in and BD I and and their peripheral intervention business, which is where that will show up and that's gonna be a great product for them.
It's really a breakthrough technology and.
And that's in a market that again is growing much faster than the company average as we think about the two acquisitions and MMS that get us into the.
The non acute medication.
Physicians are.
Participating in markets and we expect to grow that.
Mr. Then and the BD average and again, it's part of our growth strategy.
That's helpful. And then just looking forward do we think of you know now that you're obviously grooming the portfolio a little bit with the diabetes.
And spin off but now do we do we kind of think of you guys and as potentially moving up the size of the kind of the M&A target.
Ed you pool.
You'll be willing to do going forward and to try and 22 and beyond once once the spin off occurred.
And Richard what we're still very focused on tuck in M&A, obviously for us as a company you know and of our size.
Tuck in M&A can be.
Yeah.
Probably in a couple of billion dollar range in terms of deal size, but we certainly are not looking to do anything on the transformational side of life at Carefusion are barred type size and that that's very consistent with the strategy that we've communicated could you see larger tuck in M&A deals that then what we've done to date, yes, but they would still be tuck in M&A.
And <unk>.
Thank you very much.
Your next question comes from the line of Josh Jennings with Cowen.
Hi, good morning, Thanks for taking the questions.
And just one question on Claris and one follow up on all interest.
Lot of focus there and some great updates by the becton team today.
Just wondering if you could help us understand how much of a drag.
And while we're not predicting the fda's timeline right now clearly the timing of approval within FY twenty-two will have a meaningful impact and the answer to your question in terms of how we see the recovery and how much that contributes and 22 and again as I mentioned before.
As we get.
Further in the review process will provide updates as as we can but right now we're saying it will be prudent based on again historical clearance timings as I. Just described to think about the clearance during the second half of our fiscal year 2022, So Chris maybe any comments on the the dragged and it's been just to give a little bit on on.
<unk>.
The revenues.
And and last year, we had.
Medical necessity revenues of about $130 million or thereabouts and don't forget we had some.
Non medical necessity earlier and the year to think about $200 million of of revenues last year.
The the run rate prior to that was about 450 thereabouts. So you could see that step down and then and then this year.
We see less medical necessity, a little bit over.
60, or so and the and the first half of the year, we see that selling off and the second half of the year. So that you're just some things to work with to show that there is certainly a drag on growth rate from.
From the step-down.
Offset.
By some of the medical necessity revenues, but certainly a step down and both 20 and 21 as you think about next year what.
What we were given you a sense of us.
That we think it's prudent to model that is drawing the second half of the year. It could happen sooner was to try to make it happen sooner, but its pros and to to think about it and the and the second half of the year and we did point to the fact that there is some ramping that will happen. The good news is that.
And we will get the full year benefit of that coming back to us and and FY twenty-three, regardless, but we do expect to see some of that ramping and the second half of the year.
Okay. Thank you guys. Thanks, a lot for helpful.
Your next question well kind of in the line of Matt Taylor with UBS and.
Mac tomorrow and that.
Hi, guys. Good morning, and thanks for taking the question.
So I just wanted to circle back on the spending comments and see if we can get some help on understanding how are you going to reinvest the meritor profits over the next couple of quarters and.
The impact on the margin so maybe way to ask this question would be to start with how much of the 200 million and have you spent already or just that spending was about flat sequentially is that good.
A good way to think about modeling the second half and get getting to that low 20th margin.
So we could give some insights into the impact of of that spending we did point to a lot of folks don't realize that some of that actually hits are gross margin and so we pointed to the fact that there was a 70 basis point hit to the gross margin number within queue too.
We.
The way to think about that spending and that 200 plus is that it is more rateable, we do see some.
You would expect some of that to ramp.
A bit and so we're not being precise about exactly how much is and each quarter.
But it is.
There's more to come and so it is putting pressure on the margins, which is why we are saying that the.
The the guidance for the second half is what it is.
As we expected it would be so that it is important to keep in mind that.
That investment that we're making does drive future growth, it's not something that will impact margins going forward and it's not get a repeat and it is as a result, suppressing both gross margin and operating margins this year.
Okay, Okay, and that's that's helpful and then I know and that's one on the guidance.
Fly that you have here was saying that you're assuming that the acute care oriented business and do not return.
The free COVID-19 levels, I guess can you talk about how close and they're gonna get to that or when they <unk>. When you think they will return to free COVID-19 levels or just recent trend and it sounds like April was a continuation of March anything like that to help us kind of triangulate how the recovery is expected to progress sure. So.
I've seen some improvement and.
And utilization and March for example, and that continue and April.
But as we said, we don't expect that to get back to the 100% level. It does get up into the the nineties by the back end of the year.
Where more in the eighties Ah high eighties now so we expect that to start creeping back, but not completely get back in the second half of the year and there are areas as we look at at that maybe Simon it's something we monitor very very closely we feel very good in terms of.
And all of our categories free particularly on them.
All of our categories overall, but on the procedural.
Side, we feel very good about.
Our share positions and we're we're trending there so maybe Simon to comment what you see from a recovery because it does vary we do have some areas that are at 100% of prior year today and some procedure areas that just take a little bit longer again, and I think that's associated with the severity of the condition as it opened up and it varies by geography.
As well so.
Yeah. So so obviously.
Our European business was disproportionately impacted and I think and the last quarter, but some of them are too we do track.
We track. This every every couple of weeks, we've done monthly surveys with with customers and sequentially as I noted earlier on and it has improved across the two main businesses that are impacted ti and surgery and.
Some some aspects of of those businesses. Some platforms did strike of 100 per cent of free COVID-19 levels, and and match and that continues into into April.
I noted earlier hernia is one of those areas that's that severely impacted early and recovers and recovers late so that's that's a bit of a logger, but in general the the procedures that that.
That are critical to to health care are coming back and.
Not only the receipt and our numbers, but the survey data that we gather from from physicians and and we typically survey about 300, a month there, indicating that they are volume the rebounding and obviously patients that were that were put on hold or now and I'm going to start to come back over the next day next four to six months as well so.
And the reason was spot.
Very good okay.
Thank you guys. Thanks for the question Matt.
Your next question will come from the line of Matthew Michelle and with Keybanc Hi.
Hi, Matthew and warning Okay. Good morning, and thank you for some reason and the and Uhm.
First just a quick clarification the revenue growth of mid single digits for for F. Y 22, excluding a loris and and testing honestly testing and it is like the negative, but it's a <unk> a good guy or a bad guy for next year cause I think first half would be less medical necessity, but then you'd have the timing of the FDA and.
And we would expect that to be a net good guy.
Net good guys. So when we're doing that we're saying specifically, excluding the COVID-19 testing, which will get more.
Clarity on as we as we go forward.
And excluding the file.
Come back up the five 10-K from malaria so.
That would be incremental to that that solid mid single digit core growth and we will continue of course to ship under medical necessity for those customers that qualify.
But once we get the five 10-K, which will again and we'll have more clarity on the exact timing of that which will be meaningful and.
And to answer how much of that will fall and 22, and we certainly expect a full year and 2003, but th and on that but and in any situation. We would expect it to be.
Possibly.
Okay, and then just your thoughts on on a large impact on on the overall portfolio.
I think I'd like to I'd like a Texas didn't have and does it have a negative impact on the Texas and and when it comes back and we'll have a broader portfolio and packed outside and just the Laurence and we.
We have seen no impact of course the customers have.
Very very broadly stuck with hilarious lyricist and market leading product for a reason.
That we've talked about the percentage of infusions, and particularly and the U S had happened with a laris and it's a tremendous number and customers. We do expect the majority of customers to upgrade to the new product as we as we ended up watching that and hopefully and 22 as we noted is our expectation so because of that.
We don't see any impact on on Texas, Obviously, there is a a.
Great Valley.
Values that one gets from having the full BD enterprise medication management suite that allows you to do things like diversion analytics and and other parts of our health site platform to use data from not only dispensing, but infusion as well as our software that's in the central pharmacy, and so all of those things remain the case going forward and.
And we think customers will continue to see strong value and that.
And that's great. Thank you very much yep, that's better and we'll take one last question.
Our final question will come from the line have Jason Bedner with Piper Sandler.
Hi, Jason Good morning, and good morning, Jason.
Hey, good morning, and thanks for taking the question squeeze me and I'll just start with one of them to spend and then I'll have a follow up and just get on the spin what should we be thinking about from the balance sheet for from Newco Me and you mentioned new code and have the flexibility to make investments and advanced a strategy, but also seems reasonable that and maybe some level of that will transfer over to the diabetes care.
Business, so and those are those decisions made or will they still be kind of and print process how to think about that.
Yeah. So no. That's those are decisions that will come as as we move forward and will provide more details on that closer to the spend eight we do expect that the capital structure, along with the existing cash profitability will provide them the flexibility to pursue and organic growth opportunities. So we want to make sure.
That they have that kind of flexibility and that'll be part of what goes into the equation in terms of how much that they'll carry.
Okay, Great. That's awful thanks, and then what's the what's the right time line to think about for the the at home COVID-19 tests, and I would still and development, but just timeline there and then what's the what's the right way to think about to go to market for we we do have a proxy out there with and at home offering that hasn't and established price point, So and do you come in.
And at a similar level or do you have a feature set that maybe justify the higher price point.
Yeah. We so has has been our practice until we get the.
The way and hand, we don't.
Projected specific launch Timing's, but we've been very active and development on that for a bit it had been advancing and very well and our pipeline and so stay tuned as soon as we get any way for that product.
You and everyone else will be among the first to know on that and obviously, we are taking actions to prepare for that channel, which we recognize is a unique channel versus the other ones and and we're taking those actions to prepare for that one. So we think will be well positioned when we do get the way.
And stay tuned we'll look forward to announcing that.
Alright, great. Thanks, so much.
Okay. Thank you Jason.
And now turn the call back over to Tom Polen for closing remarks.
Okay, well. Thank you everyone for the excellent questions and before we sign off I.
I would be remiss not to wish Vince Forlenza, a wonderful retirement and I expect that Vince is listening and.
Vince his last day on the BD Board was last week and I've mentioned in the past that Vincent leadership transformed BD.
And I'm also grateful for the time I got to work alongside him and and for his mentor ship. So on behalf of everyone and BD I just want to wish Vince all the best.
And lastly on behalf of the board and the entire executive team I want to thank BD 70000, plus associates around the globe.
Your efforts and sacrifices have not gone unnoticed.
We're making great progress, we're making meaningful impacts for our customers and most importantly, we are advancing care around the world.
I've never been more excited about what lies ahead for us for those who will remain part of BD and for those that will ultimately become part of new co. These are exciting times and I hope everyone stays safe and healthy and thank you for listening today.
Thank you Miss does conclude today's teleconference. Please disconnect. Your line at this time and have a wonderful day.
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