Q3 2021 Meridian Bioscience Inc Earnings Call
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Ladies and gentlemen, this is the operator today's conference is scheduled to begin momentarily until that time your lines will again be placed on music hold.
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Ladies and gentlemen, thank you for standing by and welcome to the Meridian Bioscience fiscal third quarter 2021earnings call.
At this time all participants are in a listen only mode.
After the speaker presentation, there will be a question and answer session to ask a question. During the session you will need to press star 1 on your telephone.
Please be advised that today's conference is being recorded.
If you require any further assistance. Please press star zero I would now like to hand, the conference over to Charlie Wood, Vice President of Investor Relations. Thank you. Please go ahead Sir.
Thank you Shelby.
Good morning, and welcome to Meridian's fiscal 2021 third quarter earnings call with me are Jack Kenny Chief Executive Officer, and Bryan <unk> Chief Financial Officer.
Please note that our SEC filings earnings release and slides to accompany this call are available on our website at Investor Day Meridian Bioscience Dot com.
We will post a copy of these prepared remarks after the call with regards to on a calendar Jack and Bryan will be participating virtually in the H C. Wainwright 20, <unk> annual Global investment Conference September 13th to 15 other events may be added as we approach the fall our last earnings call of fiscal 2021 is currently scheduled for Friday November.
<unk> 2021.
Before we begin today, let me remind you that the presentation and the company's remarks include forward looking statements forward looking statements are subject to numerous risks and uncertainties many of which are beyond the company's control, including risks and uncertainties described from time to time in the company's SEC filings. The company's results on post pandemic outlook may differ materially.
Surely from those projected and note in particular that these forward looking statements may be affected by risks related to the COVID-19 pandemic, including its delta variant.
And makes these statements as of today August 6th 2021 undertakes no obligation to publicly update them. Additionally throughout this presentation, we refer to non-GAAP financial measures specifically operating expenses operating income operating margin net earnings and net earnings per diluted share each on an adjusted basis.
<unk> of these non-GAAP financial measures with the most directly comparable GAAP measures and other related discussion are included in our earnings release and now I would like to turn the call over to Jack Thank.
Thank you Charlie.
As has been the case throughout this pandemic predicting the volume of testing has been a challenge across our industry. The impact of COVID-19, particularly due to the Delta Varian, coupled with the global rollout of the vaccine remains unpredictable and somewhat volatile.
Thus far been Directionally correct with what we see think see things going with where we see things going this quarter is another example of that from the beginning of the fiscal year and again in May we forecasted slowing region demand related to the pandemic in the second half. This quarter's performance in life Science was in line with that forecast. However, what should not be overlooked is that.
For fiscal year to date performance has been exceptional and looking at this quarter alone life science performed significantly better than a typical pre pandemic quarter further validating our message that we have a much stronger business coming out of this pandemic debt.
Diagnostics segment continues to face some headwinds, but continued advancement of our strategy is positioning us well for future growth, let me expand on some of the operational highlights for the quarter and then Brian will cover the financial results in more detail.
Consistent with our messaging in May we concluded the remaining studies for the <unk> Sars Covid, 2 assay and resubmitted, our EUA application to the FDA. Unfortunately, we cannot predict when the FDA will review the application and we eagerly await their response.
We finished this quarter with an installed base of 343 ravaging instruments. The story with new commercial activity remains the same with customers continuing to wait for the approval of the COVID-19 assay.
We expect the pace of installs to return to normal levels. Once the COVID-19 assay received EUA clearance.
On the manufacturing front the production expansion in Cincinnati in Quebec for progressing with initial production on track by the end of September.
As you know when I joined Meridian, almost 4 years ago. There were a number of FTE related issues with our lead care manufacturing facility in Billerica, Massachusetts, including a warning letter issued in October of 2017.
On a regulatory and quality teams have worked tirelessly on improving our quality systems and procedures in billerica and collaboration with the FDA.
In June the FDA conducted an inspection of our billerica facility and earlier this week officially closed that warning letter.
Lead testing in demand for new led tier 2 instruments continue to be a bright spot in the recovery from pre pandemic lows for the third quarter in a row installs exceeded our expectations and our Q3 sales. This year, we're on track to post the best quarter in the products history.
However in May we initiated a recall of specific lots of our lead care assets due to based on our current assessment and apparent contamination with 1 of the components supplied by a third party.
This recall serves as an example of our quality system at work identifying an issue investigating the root cause and taking active steps to resolve the issue. Unfortunately, the recall on supply related issues resulted in a backlog situation pushing some revenue out of the quarter. The recall is still in process and continues to be a headwind.
In addition to lead care H pylori franchise led by breath I D is seeing strong momentum breath that he had the best quarter in its history and the closing of breath 80 orders picked up significantly as our commercial team was able to leverage our broad portfolio of H pylori testing options, we have leading urea breath test stool antigen our lives on rapid test and in partnership with DSR and high throughput.
Stool antigen immunoassay.
Whatever testing modality of the customer requires we have a solution and that is reflected in the continued strong commercial performance of the franchise.
And new product development. The team continues to advance the pipeline of products clinical trials continue to be a bottleneck for some of our products and during the quarter, we redirected resources to the COVID-19 Resubmission project.
As a result, it looks like completing clinical trials and preparing 5.10-K submission for C. Diff on Korean and the GI panel on ravaging will be delayed until next fiscal year. There are many exciting products on the horizon in the diagnostics segments that we look forward to commercializing.
In life Science the team had another strong quarter. We continued the expansion of the new Air drive on Master mix portfolio with mixes optimized for saliva and plant based samples. The first mix has already been included in an EUA approved COVID-19 assay with saliva as a specimen type and the second is getting the attention of the AG bio industry because of the simplicity and.
Enables inhibitor tolerant properties of our mixes enabled lab technicians to bypass a number of typical preparation steps and simply had a plant sample it.
Additionally, we released both DNA and RNA based versions of our ally already mix optimized for land technologies.
The pandemic highlighted the benefit of quicker point of care friendly molecular technologies, and our new mixes can accelerate product development time for our customers.
The pipeline of additional master mixes to be launched in this quarter is robust and it will address critical clinical samples such as stool urine and blood.
Our life Science business continues to launch solutions that accommodate a broad array of the most common patient sample types and test chemistries, while ensuring the performance of the test. We believe this unique approach and pipeline of products provides us a strong competitive advantage on the market by accelerating development of molecular assays.
Lastly, as you know we recently closed the acquisition of the breast Tech business from Otsuka. This is another great example of how we're putting our strong balance sheet to work to drive greater returns for the business.
Meridian remains focused on offering best in class solutions for Gi respiratory and pediatric point of care consistent with that strategy. This acquisition is another example of our commitment to the Gi diagnostics area.
According to the CDC approximately 2 thirds of the world's population is infected with H pylori Meridian is a big proponent of noninvasive testing for this highly under diagnosed infection, if tested and treated patients see great outcomes and we are not treated it as a leading cause of gastric cancer.
This is a customer centric ex acquisition took his organization was moving in another direction strategically and as such a sukkah was looking for the right partner to support the business and their customers. They can see our commitment to H pylori testing and a reputation for strong customer focus at chico's customers will continue to be able to utilize the breath Tech solutions, but we'll now have to serve.
In support of Meridian, we look forward to working with these customers and driving awareness and emphasizing the importance of noninvasive testing for this condition.
We expect to take the opportunity to introduce meridian's other H pylori products, including the option to upgrade to the breath IV solution. When the time is right for the customer.
Meridian acquired this business for approximately 1 times revenue, which is a good value for our shareholders. This business generates over $20 million a year on sales and as Brian will discuss in more detail. We see this as being accretive immediately we're able to absorb this product line with our current infrastructure and do not plan on material increase in head count now I'm going to hand, the call over to Brian.
To talk about the financial results for the quarter. Thank you Jack as we start to transition from COVID-19, being a pandemic to be endemic meaningful comparisons to prior periods will be challenging despite being down from the pandemic highs Q3 was a strong quarter for the company relative to pre pandemic levels, we recorded consolidated revenue.
<unk> of 64 million remembering that Q3 fiscal 'twenty was a peak quarter of that year revenues are down 25% year over year looking back to Q3 fiscal 2019, and good example, pre pandemic performance, we were up 31% Consol.
Consolidated gross profit margin was 58% in the quarter down from 66% in the third quarter of the prior year and roughly flat to Q3 of fiscal 19 for year over year in subsequent quarter reduction in consolidated gross profit margin is primarily a result of a change in business segment mix. This quarter was nearly 50.50.
Between the diagnostics and life science segments versus 25.75 in favor of life Science for Q3.2020.
On an adjusted or non-GAAP basis third quarter operating income was $13 million with a margin of 20% adjusted operating expenses were $24 million down approximately $1 million year over year also on an adjusted basis net earnings for $10 million and diluted EPS was <unk> 22 science.
Again, while down year over year. This represents a greater than 37% increase over the 16th science generated in Q3 of fiscal 19.
Year over year decrease in adjusted operating expenses was driven primarily by lower diagnostics, R&D spending and corporate wide G&A expenses, partially offset by 1 additional month of expense from the excellent <unk> acquisition that closed last year on April 30.
On a GAAP basis operating income was $16 million with operating expenses of $21 million. In addition to the aforementioned operating expense drivers GAAP operating expenses include a credit from an adjustment to lowered the fair value of our contingent consideration obligation for the gene Park transaction GAAP.
Net earnings were $12 million and GAAP diluted EPS was <unk> 26 cents.
Now, let's look at the details of our 2 operating segments.
<unk> delivered revenues of $31 million up from the pandemic low point by 44%. Unfortunately, this was down sequentially by approximately 2% due to the back order situations that Jack mentioned in his opening remarks.
We estimate the Q3 impact on elect care back order to be $1.5 million and expect to be working through the back order situations for the end of the calendar year respiratory as a category continues to lag the recovery, while both Gi and blood chemistry continue to post strong gains while we did have 1 extra month of breath idd revenue on this.
This quarter versus the prior year, both our H pylori in food borne product lines for performing very well contributing significantly to the 86% year over year growth from a category.
Gross profit margin for the segment was 51% down approximately 150 basis points from Q2 and down approximately 140 basis points from the same quarter last year. The decline in margin from Q2 was driven by a lower level of royalty revenue on the current quarter. In addition, the year over year decrease was driven by pricing pressure.
And our H pylori stool antigen products that we have mentioned on previous quarters diagnostics had on operating loss on on adjusted basis of less than $1 million similar to prior quarters. This is a result of our continued investment in new product development and commercial excellence programs, despite the lower level.
Despite the lower sales levels diagnostics adjusted operating expenses for the quarter were down <unk> 8 million year over year, driven by lower R&D spending on incentive comp.
Our life Science segment recognized revenues of $32 million, a decrease of 49% year over year. This was more in line with what we saw on Q4 of last year. When we saw the first break in a pandemic demand. This level of sales is still dramatically above our pre pandemic averages and we're seeing good growth in non COVID-19 product sales. In addition to to continue.
Contribution from Covid related sales on.
Also of note we have a back order of approximately 1 million affecting our life Science segment revenues at the end of the quarter related to core immunoassay blocking reagent products.
We estimate that revenue from COVID-19 products was approximately $14.5 million. This estimate suggest our core revenue was up approximately 15% year over year and would have been even higher had it not been for the back order.
Gross profit margin was 66% in the quarter down 500 basis points from Q3 of last year margins continue to be strong interest levels of sales. Despite the year over year impact of product mix changes.
<unk> operating income was $16 million net margin of 50% demonstrating that this business still produces strong margins even off the peak revenue levels realized during the pandemic.
Turning to the balance sheet as of June 30, we had $70 million in cash and a borrowing capacity of $110 million under our $160 million line of credit.
As you know subsequent to the end of the quarter. We closed the acquisition on the broth Tech business funding. It was approximately $20 million of cash on hand.
Turning to guidance as.
As Jack said in his opening remarks predicting the impact of the pandemic is very challenging going into the quarter. We knew that the second half of the year was going to see slower demand for products used in COVID-19 assays on.
Demand was lower than we would have liked it was still consistent with our range of expectations as such we are holding the low end of our guidance and simply tightening the range and layering in the impact of the breath Tech acquisition.
We now expect consolidated net revenues of between 380 and $314 million, which includes diagnostics revenues of between 128 and $130 million in life science revenues of between 180 and $184 million, we anticipate adjusted operating margin to be between 30% from 31%.
Resulting in adjusted net earnings per share of between $1.61, and $1.67, and now I will hand, the call back over to Jack.
Thanks, Brian Meridian has delivered a strong 9 months and we're on pace to have another record year eclipsing $300 million on revenue, we've made significant investments to reinvigorate our diagnostics segment and our life Science segment has solidified its strong position with key diagnostics customers during the COVID-19 pandemic.
Meridian emergence from this pandemic much stronger in the last 18 months diagnostic tests submitted new products to the FDA and advance our robust pipeline expected for submission in the coming months life Sciences established new relationships with the largest IBD customers and grown our relationships with existing partners, while pioneering new master mix technology with a focus on what diagnostics.
Customers need in this new environment exciting times in each of our business segments.
Before I finish up I want to acknowledge and thank our team in billerica, and our regulatory and quality teams they've worked very hard over the past for years to remediate our quality system. As you know youre never done working on quality and we will continue to invest in the improvement of our quality system, but the closure of the warning letter is an important milestone for the team we remain committed to our strategy and Lisa.
Focused on execution. We appreciate our shareholders continued support of vivo as we transform our business. We're proud of the progress we made but confident that our best days remain ahead of us and now Brian and I would like to take any questions you may have.
Shelby can you open it up for questions.
Absolutely and as a reminder, if you would like to ask a question you may do so by pressing Star then the number 1 on your telephone keypad.
Again that is star 1 to ask a question.
Your first question is from Brian Weinstein of William Blair.
Good morning, Brian.
Hey, guys. How are you doing thanks for taking the cross selling.
I know that.
We're very much focused on kind of this quarter and still in 'twenty, 1, but I kind of wanted to get a little bit of a thought process or at least on some high level thoughts as it relates to how we should be thinking about next year, recognizing there's a lot of uncertainty of course, but just conceptually you've talked about life science is being $100 million.
Kind of coming out of this you adjusted 30 something million here this quarter, so annualizing the well over that but should we be thinking about life Sciences is $100 million plus business next year and on the diagnostics side.
Low to mid single digits is that still kind of the way to think about that you had a couple of delays on some R&D.
I'm just not sure kind of you know what at a high level, we should be kind of thinking about it on on on that side for growth. So I'll start. This Brian you can each wraparound. So so first of all Brian as you saw we were in the in the low thirties, if you will in the quarter.
We have talked consistently over the number of quarters that our life science business is a much different business coming out of this it was a $65 million business going into the pandemic and we have very high confidence that it is certainly a $100 million plus business and when we talk about that we believe that the core business in love itself with no COVID-19.
<unk> is approaching that $100 million range in the $90 million plus range and then as you know there will be some level of Covid testing next year.
I would say that were.
I think we're pretty clear that COVID-19 is not going away.
But the reality of it is we don't anticipate it's going to be like it was this year. So we're going to provide much fuller guidance as we did in Q1, we will provide that but I think your question in regards to $100 million plus we have very high confidence that it is above $100 million business as you head into next year, Brian any comments on net yeah, I would just reiterate we.
We're actively going through our modeling processes as we speak we'll certainly have more to say in the fall when we issued guidance for 2022, but I think Jack is spot on in his comments Bryan. We're really confident we have a strong life science business and it's going to continue to show its strength over the coming years I don't think we have any concerns on that front.
On the diagnostics front, we have been talking about a mid to high single digit kind of growth for that business and we still have very high confidence in our ability to do that I think our number next year is going to look more than that because you've got some acquisition revenue that comes in from the acquisition and also some of the recovery of Covid. So we are certainly expecting Ah Ah.
Higher performance and mid to high single digit next year, it'll be a double digit type of growth year for sure and we'll provide much more guidance on that as we as we get to the end of Q1, our diagnostic business, Brian we have been grinding in that business for a number of quarters, we're making a lot of progress and our confidence continues to build with that business. So we feel very.
Good about both of our businesses as we head into 'twenty, 2 and I would just add to that Brian. We are encouraged by the volume increases we're seeing on the diagnostics side mirror gastrointestinal line of products, we have food borne products as you know we've talked about age for Lori the volumes, increasing even beyond what we've talked about from an acquisition.
Standpoint encourages us that we're starting to see the other side of this pandemic effect.
Got it okay. Thank you for that.
I want also to talk about cash a little bit here and use of cash we're still kind of in.
That same kind of range on R&D, where he had been for a little while now.
There are opportunities there other than just I'm just curious.
How you're viewing kind of any kind of acceleration in R&D to fuel future growth I mean, you're on.
Obviously, you have programs in place, but are there or are there other opportunities are there.
In organic opportunities obviously this 1 over the last month or so was kind of a special situation, where it was a kind of a perfect fit in.
Hold on that asset it was not going to get out of the business, but but I mean, how aggressive should we be thinking about these other ways of kind of accelerating.
The top line here be it.
Increased R&D or or M&A.
So I'll start Brian you can wrap around again, so so first of all Brian we're going to continue I think the investment you've been seeing on the diagnostics side in that high teens 17, 18 type of percent of revenue on that level of spending is what we're anticipating generally speaking going forward the percent will start to come down as our revenue dollars increase right.
It'll be a lower percentage of sales, but will be continue to invest similar amounts of money into R&D and we do believe with that pipeline.
We can we can build a robust org.
Organic growth in the future from that.
As you alluded to before we as you know a couple of years back we eliminated the dividend and thanks to our board for the support of doing that that enables us the opportunity to really begin a more aggressive investment into the business organically and inorganically.
On the cash that we generated through Covid, we've deployed that we made the excellence acquisition and now with the breath Tech acquisition. Both of those were really done to strengthen our position in a post COVID-19 type of environment and so I think what you'll continue to see from US is continued internal investment on the diagnostics. You'll also see increased investment going forward in <unk>.
On the life Sciences side, we've had a very efficient organization Thats done amazing work on the life science side organically, but we're going to increase some of those investments with that team as well as planned investments on the on the life science side organically.
From an inorganic inorganic standpoint, we hired Charlie a year on a half ago for a couple of different reasons..1 of them was IR, but also really from a business development standpoint, and so we have our working pipeline and a process that we are using to really assess opportunities. We have been very committed to staying on.
On the strategy that we have so in diagnostics it needs to be Gi respiratory or pediatric point of care related on the life science Aside I think youre starting to see us build our funnel on the life science side as well. So I think our intention is to use the cash we have to strengthen it and really to get this thing firing on all cylinders life science has been firing where we're going to get.
Sticks firing next but we want to keep putting gas on that fire, Brian Yeah, I would just add to that Brian that on the diagnostics side of the business. We feel very good that we have the right instrumentation platforms available to us now on where youre going to see us building menu content.
From an internal R&D perspective, and then on the life science side, you've seen a number of press releases from us over the last several months, we think we're being pretty innovative and new products were coming out with on the life science side, particularly the air Drivable mixes that you hear us talk about from an M&A perspective.
As we've said before the transactions that we would do need to be on strategy, they need to fit very well within to what we're trying to do strategically.
Things are a little rich right now I would say in terms of valuation. So that's always a consideration, but I think the deal we just did with otsuka.
Good example of something that works not only well for the business, but works well for our shareholders as well so we're trying to make sure.
We're thinking about both of those things as we filter through acquisition opportunities.
Okay and last 1 for me is on cost pressures, obviously, everybody is talking about them can you just talk about the impact of Inc.
Increased.
Loss, whether it be on on the labor freight.
Materials kind of what youre seeing and availability of materials throughout the supply chain things guys in Dallas here in about 10 days I guess.
Okay.
I'll start that so first of all Brian we definitely are seeing some level of price pricing pressure with some of our supplies I think and we're no different than anybody else on that front, we've been working hard with other cost saving programs really with the intent of trying to make sure that we contain any any risk that we have from a pricing standpoint, I don't think we've seen anything that's overly material at this point.
And the data that we've got in from a hiring standpoint, certainly wages are challenging there's higher wages that are being out there, but we're also having a hard time hiring even at higher wages I think like most companies. It's been a challenge to try to hire people on so.
At this point from my perspective, there are some pressures on that it's not overly material to our numbers at this point, Brian would you I would absolutely agree with that and some of the supply chain things, we've alluded to it isn't necessarily a price issue, it's more of being able to secure the volume that we need from a manufacturing standpoint, okay.
Thanks, Brian appreciate it Shelby next call our next question.
Your next question is from Steven Mah Piper Sandler.
Good morning, Steven.
Hey, good morning, Thanks for taking the questions.
Our pleasure.
So my first question is on the your air dry bulk master mixes.
So it seemed like if he can do saliva and plant, which you know my understanding is plant is a pretty hard sample too.
Get it working properly so how hard is it to moving to the different sample types blood urine et cetera, and the second part to that question is.
For these different master mixes for different samples how materially different or are they are they just small tweaks or are they completely different.
So by.
By all means Brian and I are not the most scientific individuals to answer this but I think I can get you at least on the past even and if not will we will get the right people to take it further I'd start first of all by saying our team in London has really built a strong expertise in and how do you use excipient and how do you dry dry down.
On a wet reagents to make them are drybulk and ultimately, enabling high performance and the great benefits of shipping. So we kind of figure that out over the last couple of years and build some strong expertise. After we figure that out we really started to then work on these different sample types. Because every sample type has a different type of inhibitor.
Inhibitors that basically can impact the performance of that sample types stool is completely different than saliva, which is different than blood and urine etcetera, and so I would describe the expertise we have in the dry dock capabilities in the excipient.
Along with the expertise because we had been working with sample types and we know what inhibits them. So we brought those 2 capabilities together and it's really kind of working our way through these so we don't have any debt. We have discomfort that we can get to to build a great mix on it's really kind of like the next 1 up and working their way through the pipeline and so we haven't really high.
Confidence all the mixes that we have been working very very well and in many cases the customers haven't we work right in a few cases, we do a couple of extra tweaks as we work with those customers to really optimize that performance, but we feel very very very good about that.
The only thing I would add to that is that the way I would think about this even as we have on underlying development processor system to where this was maybe a little similar to when you think about menu development on a diagnostic instrument. So on this case we have.
Our mixed process. If you will that we can think about different samples to kind of plug into the same development process. If you will so kind of a standardized process of how we do things that makes it a little bit easier on the development side and it's certainly been very exciting for us on the molecular front to make all of these different mixes. It's a very unique approach competitors are not doing that.
And so we do believe it's a very significant competitive advantage for us as we're as we're helping our customers to build new molecular test, but we also believe that our expertise can take us into some other areas in the future like next gen sequencing and providing some capability our skill sets into that area as well. So that's an area that we're starting to look at as well with our capabilities.
Sure.
Okay, great yeah. Thanks for thanks for that color, Yeah, I think that's pretty exciting that the air Drybulk Master mixes yeah.
Maybe just pivoting over to to Covid.
Been hearing a lot that there's potentially.
You know going to be a flu season, and you know there are some spikes up.
RSV as well could.
Could you update us on on the status of the ravaging respiratory panel.
Clinical trial I know that you guys are having some difficulties.
Enrolling patients.
But just wondering if that change now with the kind of other recent delta variant emergence.
So.
The the first test that we will have will be the COVID-19 only test and that's really what we would like to have as we enter into fiscal 2022.
We do have active programs on the respiratory panel as you noted before Stephen you Couldnt get any flu or RSV specimens.
Any fresh specimens last year, so it was very challenging.
We anticipate debt.
That we would be able to get more of those investments, but it's going to be more likely in any kind of quantity more along the timeframe of when the flu season starts to hit when you can really get any reasonable amount of those specimen so as far as a respiratory panel.
It is unlikely that we would have it in this flu season now there is a chance for its Steven but we are not counting on that in any of the numbers that we have are really only looking towards the COVID-19 only product into our portfolio in the 'twenty 2 flu season, Brian.
The only other thing I would add Stephen is we're trying to make sure. We've got flexibility built into our clinical processes on what I mean by that is if for some reason we have trouble with getting fresh specimens. How do we think about from a regulatory standpoint going and getting frozen specimens that are archived or something like that so we're trying to think of all different angle.
To help us through this process here as we can.
Go through and Thats, 1 other things that it's really a little unclear with how the FDA will work.
5 specimens versus fresh specimens and so that's a little bit of an ongoing active type of dialogue that you would have with the FDA I would say for now Steven as we look at 2022, its really about the Covid Standalone test for US. The other thing if it does happen would be an upside, but I would say that we're not materially counting on that as we head into 2022.
Yeah, no that makes sense.
Alright, Thanks, a lot for the questions. Thanks, Stephen appreciate it.
Sure.
<unk> is from E Chen of H C Wainwright.
Good morning.
John.
Good morning.
Doing fine. Thank you for taking my question so.
Given the current data showing that.
The Delta Varian can transmit and effect in fact, both the best unaided and investing in the individuals do you think in the near term in the current quarter on the falling quarter debt. There's there could be an uptick in COVID-19 related.
Revenue.
So yeah.
It's a little bit harder.
As a hard thing to predict I mean, I think as we all look out in the press today, clearly theres a lot more COVID-19 activity now than there was 60 or 90 days ago right. I mean, if you look in our last quarter.
There was non life was fairly normal and there wasn't a lot of Covid talk I mean, it was still out there. It is certainly surging a bit more with regards to.
With regards to the Delta variant.
If you even if you look at our implied guidance, we are anticipating a bit of a stronger Q4 than Q3, but we are not planning on a huge COVID-19 impact certainly if it does occur we're prepared for it we have the ability with our capabilities from a scale standpoint to handle it but our approach has been to really look at it.
Kind of what's in front of us and so that's what's led us towards the guidance we have.
I would say our business, we do have ordering pattern things that come into play, but it does kind of follow what happens with the overall COVID-19 trajectory around the globe and so that would be the other comment I would make here. The other thing that I would say to this year on the life science side of our business as we are so monitoring screen, how much inventories in the supply chain.
And that can be a factor at least in the near term.
Manufacturers are working through inventory that they have on hand.
Throughout this process.
Got it and.
And.
If we just strip away the cobot revenue and obviously the life science segment is growing quarter on quarter.
Year over year, but.
Do you think this growth rate could be maintained going forward without any COVID-19 revenue or do you think.
It may continue to drop a little bit to.
The growth rate.
So our non Covid business is growing robustly and so and we have very high confidence that that will continue going forward.
We had as.
As Covid hit we were quick to respond and had helped our customers build great tests, but then we also were able to supply them. So what happens is we built a lot of loyalty with some of these key customers and certainly it's been a positive impact for our business during COVID-19, but ultimately now we're working with those customers in their post COVID-19 activities and so.
We have strong confidence in a in a very robust double digit growing business for our life science business outside of Covid. What we don't know is what happens with Covid right isn't huge like it was last year is it here, but not as big and so.
But part of Brian asked the question earlier about $100 million business take $65 million business, and we are approaching $100 million kind of core business over over this next year without any COVID-19 and I think we'd all agree that COVID-19 may not be what it was last year, but it's not likely to go away and so I would describe for you that we have a lot of confidence.
Debt we have.
A robust growing life science business for a number of years going forward.
Okay. Thank you.
Thank you very much I appreciate it.
Shelby it out with your question.
Well first of all I want to thank thank you for joining today as you heard from Charlie We look forward to speaking to you as we have some upcoming conferences and again in November at the conclusion of fiscal 2021. Thank you very much and have a great day.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
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