Q1 2022 Agiliti Inc Earnings Call
In relation to our business and our customers.
In early Q1 as expected we saw the return to lower non COVID-19 levels of device utilization by our customers. Likewise, we've seen a recovery toward normalized surgical case volumes across much of the country with <unk>.
Previously discuss the balance of our business across both the medical and procedural sides of our customers' operations. The ramping of case volumes as favorably offsetting some of the financial impact from normalization of equipment demand. These areas have shown an inverse correlation throughout the last two years as.
Our organization's routinely canceled or deferred surgical cases to tackle the surge in COVID-19 patients as each wave of Covid moved across the country. The normalization of demand continues to play out very much as expected and our financial performance.
We've also seen a clear shift in our customer's mind share focus.
Short term COVID-19 driven needs to an increasing focus on longer term strategic initial initiatives emphasizing cost control and quality of patient outcomes.
Shift is only accelerating due to the significant economic forces now facing our customers, which Tom highlighted earlier.
We've described the impact of these external economic forces on our customers' operations now I'd like to take a moment to touch on general subjects of labor availability wage inflation and supply chain risk and their impact on agility.
Much as we shared last quarter, we are not seeing a significant impact from these macro issues.
Starting with labor availability, coupled to start with an understanding of our labor market.
<unk> competes for our critical skilled labor categories from within a relatively closed pool of healthcare focused talent.
Biomedical technicians as one example, our skilled professionals that are in a certificate from an accredited education institution before theyre qualified to repair medical devices.
There are numerous high paying jobs within health care for biomass is a relatively closed market for talent.
Most of these jobs and employees today are working in hospitals and health systems, we enjoy a significant advantage and hiring and retaining these professionals.
And agility these are high visibility revenue driving frontline roles.
Our techs earn competitive salaries plus they share in the success of the company through our generous incentive plans as well as various equity ownership plans.
Additionally, we offer opportunities for continued career growth advancing training as a path to higher compensation and pass to management.
Third from within a rapidly growing company with a nationwide reach it's a combination of benefits and opportunities that health system simply can't match.
So while we have experienced some minor impacts from trends around wage inflation and labor availability.
Been absorbed to date to the flexibility of our operating model employee retention that has remained relatively steady over the last three years and overtime levels that are nearly unchanged.
Bigger picture the agility prides itself on mission driven work, we offer the opportunity to build a rewarding career doing worked it makes a difference in the lives of patients and that supports our nation's health care system.
As further evidence we recently completed our annual employee engagement survey.
With nearly 80% of our employees responding we achieved an overall engagement score of 72.
Places us within five points of the extraordinary company benchmark, representing the top quartile of all companies and across all industries.
Turning briefly to supply chain risks our outlook remains unchanged from prior quarters.
<unk> generally operates under longer term supply agreements with relatively fixed pricing, our centralized purchasing and supply chain management processes ensure efficient acquisition and management of critical repair parts for the devices that we service.
For our own fleet and for the devices that we manage for our customers.
Further with the recent addition of manufacturing capabilities through our acquisition of size Wise, we believe that we are maintaining adequate safety stock to support the business through potential short term disruptions.
Further as we primarily self manufacturer for our own rental fleet any potential financial impact from short term supply chain interruptions would likely be immaterial.
A few final points on M&A and our recent acquisitions.
We noted last quarter that we are substantially complete with the integration of our Northfield acquisition.
I'm pleased to report that we're making great progress with our integration of size wise as well.
As I've shared we've already aligned our commercial selling team and our operations leadership, which was our highest integration priority.
Our combined team has successfully collaborating in the field to bring our newly expanded solution directly to customers and we are realizing the benefits of that in our results.
We're now taking steps to combine our financial and operating systems as well as our corporate functions.
And we're just beginning to merge our facilities vehicle fleet equipment inventory and operations personnel.
That will span roughly the next two years.
More broadly and reiterating that we what.
What we shared previously agility maintains an active pipeline of M&A opportunities and the financial flexibility to pursue them.
We continue to seek targets that can drive profitable volume through our at scale nationwide infrastructure extend the value we provide for our customers and enhance our competitiveness.
With that let me turn things over to Jim to review our financial performance.
Thank you Tom.
I'll start with an overview of our Q1 financials and then offer some comments on our outlook for the year.
For the first quarter total company revenue totaled $294 million Rep.
Representing a 25% increase over the prior year.
Adjusted EBITDA totaled $89 million.
A 3% increase compared to Q1 last year.
Adjusted EBITDA margins totaled 30% for Q1 of 2022.
Adjusted EBITDA margins versus the prior year were impacted by the acquisition of size wise as well.
Well as the acquisition of North field medical.
Youll recall that agility generally enjoys a very strong margin profile.
So the companies we have acquired all start with lower pre synergy adjusted EBITDA margins.
In addition, <unk>.
Adjusted EBITDA margins were impacted by the renewal of the HHS contract.
As well as lower medical device rental utilization as.
As we saw a return to pre COVID-19 placements in the quarter.
Our strong operating performance drove net income of $20 million up over 100% compared to Q1 of last year.
Adjusted earnings per share of <unk> 29.
Compares to 30 in the year ago period.
With strong earnings growth offset by the increase of 33 million weighted average fully diluted shares outstanding associated with our April 2021 IPO.
139 million shares in Q1.
Taking a closer look at the first quarter across each of our service lines.
We delivered strong revenue growth across both equipment solutions and clinical engineering.
And an expected decline in onsite managed services revenue as we had previewed when we provided our annual guidance in March.
Equipment solutions revenue totaled $122 million up 48% year over year.
Our October 1st acquisition of size wise contributed approximately $43 million in revenue in Q1.
In addition, COVID-19 demand continued in the first part of Q1 and while it's challenging to quantify we estimate had a net favorable impact of between five and $7 million versus pre COVID-19 levels.
A reminder, that in the prior year period.
We have experienced a favorable impact from COVID-19 of approximately $10 million to $12 million.
Moving to clinical engineering, Q1 revenue was $103 million representing year over year growth of 37% for the quarter.
Revenue derived from our HHS contract was lower year over year, reflecting the previously described reset from active deployment and in market support of stockpile devices to vote.
Longer term pricing levels associated with the ongoing maintenance of the stockpile.
In Q1, the revenue contribution from North field medical and acquisition, which closed in March of last year.
Was the primary driver of year over year favorability.
Finally, our onsite managed services revenue totaled $70 million, representing a year over year decline of 10% for the quarter.
This was primarily driven by the renewal pricing in our revised scope of our HHS agreement.
Reflecting on our onsite services for nearly two years customers have been focused on near term challenges related to COVID-19.
Which primarily benefited our equipment solutions service line.
As we emerge from this COVID-19 dominated period we.
We are once again engage with our customers on their longer term more strategic cost and quality initiatives.
We continue to see new onsite managed opportunities moving through our sales funnel.
Continuing down the P&L.
Gross margin for Q1 totaled $124 million.
An increase of $22 million or 22% year over year.
Our gross margin rate was 42%.
Down 110 basis points from the prior year.
The decline in margin rate was driven primarily by the acquisition of north field and the prior year.
In addition.
Lower medical device placements from a return to pre Covid levels also had an impact.
SG&A costs for Q1 totaled $86 million.
Increase of $17 million or 24%.
The increase was primarily due to SG&A costs from our 2021 acquisitions net of achieved synergies.
SG&A expenses as a percentage of revenue totaled 29%.
Which was consistent with the prior year result.
Moving to the balance sheet.
We closed Q1 with net debt of one point over $7 billion.
Which includes $1 $1 2 billion of debt less $52 million of cash on hand on our balance sheet.
Our cash flow from operations for the quarter was over $67 million.
Driven by strong operating results and lower interest costs, resulting from the Paydown of our second lien debt facility as part of the IPO.
In addition.
Our cash flow from operations less cash flow from investing activities totaled over $50 million.
Which represents a conversion of two five times, our net income in the quarter.
Strong cash flow generation and adjusted EBITDA growth resulted in our reported leverage ratio of three two times in Q1.
In addition in the quarter.
<unk>, our cash on hand to pay down over $70 million in debt obligations.
Looking forward, we will remain diligent in determining the optimal uses for our strong cash generation.
This principal reduction is expected to reduce our cash interest payments.
More than $3 million annually.
We continue to target leverage in the low to mid <unk> range as we expect to use our strong balance sheet and cash flow generation to fund opportunistic M&A over time.
Agility maintain maintains a position of significant liquidity.
With $294 million available as of March 2022.
This includes our $250 million revolving credit facility as.
As well as cash on hand.
Finally.
A reminder, on the terms of our debt given the macro view unlikely near term interest rate increases.
In total of our $1 7 billion of debt.
We maintain an interest rate swap agreement on $500 million of our debt.
Which is swapped floating rate terms for fixed rate terms.
This provides a partial hedge for any anticipated market rate increases.
Turning now to our 2022 outlook.
We are reaffirming our full year financial guidance.
Specifically.
We expect to deliver 2022 revenue in the range of $1, one six to $1 one 9 billion.
Representing top line growth of 12% to 15%.
We anticipate adjusted EBITDA in the range of $305 million to $315 million.
Our net cash Capex guidance reflects.
Expected reinvestment into our business in the range of $80 million to $90 million.
Capex should normally be in the range of 6% to 7% of revenue each year.
But as planned slightly higher in 2022.
As discussed last quarter. The increase is due to three specific investments.
Targeted incremental investment in our it infrastructure.
And increasing manufacturing investment tied to our size wise acquisition to ensure we are fully prepared to meet our longer term growth goals.
And timing of some targeted 2021 equipment fleet purchases shifted to this year when a device manufacturer was unable to supply in 2021.
Finally.
We continue to expect adjusted earnings per share in the range of 89.
To <unk> 94 per share.
From a qualitative perspective and as we have shared in our prior earnings calls.
Throughout much of 2020 to our financial results will comp against the $30 million to $40 million in high margin Covid driven revenue tailwind from 2021.
While we saw some COVID-19 driven demand very early in Q1 of this year, our 2022 plan.
Assuming a return to pre COVID-19 equipment utilization levels for the balance of the year.
Additionally, as we have previously shared our new HHS contract consolidates several prior agreements.
And it's narrowed scope reflects the ongoing management and maintenance of the device stockpile.
Without the incremental activities associated with its initial standup for deployment.
While the financial details of the contract remain confidential.
Implicit in our guidance is that agility will see an approximate $40 million to $50 million of revenue reduction in 2022.
That difference is accounted for within both clinical engineering and onsite managed services.
So the majority of the impact is expected within onsite.
Consistent with our ordinary course of business.
We expect to continue signing and implementing new contracts for our solutions throughout the year as.
As customers turn attention back to their long term strategic and financial initiatives, where our solutions play an important role.
Net of the Covid impact and a re scoped HHS contract and.
And adjusting for the annualized impact of acquisitions made in 2021.
Our guidance continues to imply organic revenue growth in the mid to high single digit range consistent with our historical pre COVID-19 growth rate.
Our implied full year, adjusted EBITDA margins, which can be calculated from our 2022 guidance.
Our expected to be in the range of 26% to 27%.
Primary drivers that will impact margins for the balance of the year.
Include the normalization of rental device utilization back to pre COVID-19 levels.
Our internal assumptions on the new HHS contract.
And the impact of our acquisitions of Northfield medical and size wise.
Both of which start with lower pre synergy EBITDA margins when compared to agility historical average.
Finally, our business does experience some seasonality with the first and fourth quarters generally representing our strongest quarters based on the historical timing of the annual flu season.
We expect a similar trend in seasonality this year.
With a return to pre Covid demand.
And the recently signed HHS renewal, which occurred in late Q1.
Echoing Tom we.
We are pleased with our first quarter results and remain confident in our outlook for the year.
I'll now turn the call over to our operator to provide instructions for Q&A.
Thank you very much.
Ladies and gentlemen, we'd be don't be conducting a patient on sufficient.
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In the east interest of time.
Could you please limit yourself to one question and one follow up.
You may rejoin the queue. If you have any additional questions.
The first question comes from Matthew Borsch of BMO.
<unk> capital markets.
Yes. Thank you.
No.
Just to be clear.
Are you still saying that the impact in the first quarter from Covid was.
Net neutral.
I think that was your earlier view.
Though we haven't been through the <unk>.
Full quarter I'm, just curious if that changed.
No Matt.
The Q1 impact was $5 million to $7 million. It was actually right in line with what we had expected as we plan for the full year.
Okay, and then that's it for the full year.
Yeah, that's right okay. Okay.
And and just a question on an onsite managed services.
Expecting that cube that to pick up.
Things normalize.
Just curious.
The 10% decline I think that I'm, sorry, if I got the wrong number figure there, but I think it was a 10% decline in revenue year over year.
Yes, you did.
Yet in the first quarter or will correct me, if I've got that wrong.
In terms of the math you have the math right Matt keep.
Keep in mind, what I shared in my prepared remarks.
Is that for the full year, what we expect in terms of the impact from the HHS renewal it was about a $40 million to $50 million reduction from the prior year.
Specifically I said that the majority of that.
Would be with them on site.
And so as I've shared I think.
In the prior script and in March.
It's shared that we expect is that.
That will impact negatively the onsite piece, so it's hard to see that the goodness from the new customer growth.
Okay Thats helpful.
Yes, Matt just more broadly if you were to.
Reflect on our historical performance.
15 to 19 period, which is all organic that impacted by M&A that impacted by COVID-19 that impacted by the government business.
See that it was on site was very consistently a a high single digit grower and that's a good assumption to use when you think about how to think about that business how to model that business.
There is nothing fundamentally different and that probably as much or more demands today as ever with that solution.
Fantastic. Thank you.
You got it Matt Thanks for the question.
The next question comes from Kevin Fischbeck of Bank of America.
Good afternoon actually this is Joanna <unk> filling in for Kevin today. So thanks for taking the question. So so first I guess a quick.
<unk> on the on your guidance and I guess.
Most of the <unk>.
First quarter, so it sounds like that.
The covenant.
The related revenue contribution was as expected a $5 million to $7 million estimate, but how is the quarter overall versus your internal expectations. Because I mean, you might you kept your full year guidance kind of implies that quarter was in line, but versus the consensus estimate obviously EBITDA came in much better. So I don't know, whether we were just modeling it.
Incorrectly in terms of seasonality. So I guess the question is how.
Q1 came in versus your internal expectations.
Yeah. Good question it was very much in line with our internal expectations.
I called it out in the script as it relates to seasonality seasonality definitely does play a part so when you think about the quarters.
To keep that in mind.
And then there is some just normal timing that occurs from quarter to quarter. So.
Was the biggest piece in terms of the modeling piece.
Is making sure that the seasonality in some of the timing things that we've talked about in prior quarters are factored in but as bottom line very much in line with what we had internally plan for.
Thank you Ed if I may.
On the discussion around the labor.
Labor instead, but also I'm curious any color on that.
<unk> fuel costs.
<unk>.
I guess that part of the P&L into any fuel costs and what are you assuming your guidance essentially thank you.
Yeah. Good question, so we make mention of it.
In our 10-K and I think we also did again this quarter in the quarter, but just in the quick math.
He said that a 10% increase to our prior year's costs.
Would be about 6% to $700000 ish.
Increased costs. So overall not a big factor is the long and short of it.
And what are you assuming that in the guidance is.
So let me inflation year over year.
Great.
Yes, we don't break out every assumption that we make we're comfortable that we haven't covered.
Okay.
Okay, great. Thanks, so much that's all I really had thanks.
Yes, you got it.
Thank you.
The next question comes from.
Jason Christina <unk>.
Great. Thanks for the questions.
I wanted to go to your conversations you are having with hospitals just in terms of the continued shift towards the longer term strategic initiatives. Maybe can you just delve a little bit deeper into those conversations and perhaps if hospitals are approaching their relationship with you differently at this point.
What maybe different demand for your services just given the backdrop just any color on those conversations and how they're developing would be very helpful.
Yes. Thank you for the question the answer is yes.
Our hospital customers are.
A different demands for our services and while we of course have been socializing to our full capabilities. We're finding that they are out reaching to us because they are learning about our full breadth of offerings and wanting to see if we can help them with medical equipment management, not only within the individual facilities, but perhaps.
Across their entire IGN and in doing so as Tom mentioned in his remarks, we're able to identify material savings could range anywhere between 10, and 2025% and so that is really compelling to the customers that we speak to it is creating great opportunities for us and it's become.
Pretty viral in certain markets, where we're seeing more and more customers enthusiastic about what our capabilities are.
Got it. Thanks, that's helpful color and then maybe just.
Towards your commentary around the longer term supply agreements with generally fixed pricing I guess.
As you are renewing contracts with hospitals is amid this backdrop are you seeing pressure from customers for price concessions at this point, maybe just for your customers that you already have they already providing services for and it just looked like a little bit better pricing on that or how would you frame that thanks.
Yeah, and just try to kind of separate that that comment related to.
Our supply agreements. So we need for example to spare parts.
Manufacturers and we generally sources on longer term supply agreements with relatively fixed pricing, but reflecting on.
<unk> customers in our discussions with them no, we're not seeing pressure to change reduced pricing.
But it's important understand the value proposition that we have for our customers.
We're not a body shop, we don't badge flip and try to sell back.
Same bodies to the hospital they could have hired for themselves.
I've described in one of the examples I gave when we take over an environment for a hospital would typically saving them 15 that 25% over what they were able to do that work for for themselves while still as we shared delivering a best in class margin profile for the company.
When we go in and work with our customers were reducing their operating costs, 15% to 25%.
Alternative.
Is to take this on themselves and have their costs go up.
So just it's the nature of our business model, that's not really a discussion that we end up having.
Can you can you adjust down your pricing or already significantly lower cost than what they could do it for themselves and frankly, what others with body shop, Badged flipping models could possibly do for them as well.
Yes.
Just to clarify here for the customers, who are already saving 15% to 25% youre not seeing them come back to you incrementally at this point, suggesting price concessions just want make sure alright.
Exactly.
It's not even the nature of the kind of Congress.
With customers.
What the alternative is.
It would be to do it themselves, which would be the higher the bodies employee a direct model and have their costs go up 15% to 25% or more in that rising cost environment that the experience we have more conversations with our customers than we've ever had before because of our unique model everything that we do.
Reduces the operating costs for our customers otherwise, we wouldn't be in that business model.
That runs completely counter to that type of.
The business model and contract relationship that we enjoy with our customers.
Got it okay. Thank you thanks for the color.
Thank you the next.
Question comes from Matt Hewitt.
Nation of Keybanc.
Hey, good afternoon guys.
Taking the questions.
Sorry for the broader one here.
I just wanted to get your staff.
The hospital capital spending environment, and how you think it's progressing.
2022, you get the sense that hospitals may be a little bit more incrementally cautious sort of in hospital capital spending and how do you think that may.
Benefit of agility.
Yeah. Thanks, Thanks for the question, Matt Good to hear from you.
We don't see all of hospital capital spending we do see a good bit of hospital hospital capital spending on medical equipment.
And if I can paint with a broad brush here's what I'd say.
<unk> have already owned too much equipment has already been a value proposition for us to help them free up excess capital tied up in owning excess equipment in the operating expense associated with that what we saw during the pandemic was they tended to buy more to meet that short term need so.
I think hospitals are generally flush at this point with capital medical equipment and many of our conversations as we go in with our onsite programs are.
Okay now im stock because I have overbought I've got too much can you help us can you help us run what we have more efficiently can you help us get rid of this excess can you help us make this all.
Less expensive, taking these costs out of our health care system, so with that as our view of where we see it I would imagine that hospitals are typically find themselves fairly flush with medical equipment.
Generally the conversations we have them, reaching out to us saying that we are in this position can you help us.
Thank you for that and then.
Just had a couple of times that.
Mix is driving.
Mix of Northfield and size wise is a headwind from a year over year margin.
As previous acquisitions, you guys have made how long did it take to realize synergies and get them up to where.
<unk> average margin.
It's typically.
So these are the first two of any real scale that we've done. So we don't really have the benchmark I think cornet of points, we made in the prepared remarks.
As we've integrated with size wise as an example, our commercial selling teams, but the work to take their physical footprint their vehicle fleets their equipment fleet merge it with ours.
Rationalize what isn't needed out of it making sure we have the rights.
People the right equipment, the right facilities in the right markets Theres going to be a couple of year journey.
I think that's a good way to think about it that we'll be making.
Incremental progress over the first couple of years until that work is done what we guided to when we did and the depth of the size wise acquisition was that we would deliver $5 million in cost synergies in year, one growing to 15 by year, three and we're very comfortable with.
That initial guidance that we shared at the time of the acquisition.
Alright, thank you.
Thank you. The next question comes from Zach <unk> of Jefferies.
Hey, everyone. Thanks for taking the question.
We did a survey on hospital Ceos and Cfos are ahead, we are repricing. So just curious if you can give some color on that.
We're hearing that.
Wafer pricing is high and we will continue to be high for the next several quarters, just curious how that will impact the broader business here.
Yes, so it is a tailwind for us.
Agreed.
Labour pricing is up on an apples to apples basis, we are very fortunate and I say uniquely fortunate.
Our operating model is directly dependent on that apples to apples comparison.
Let me explain.
In one of our largest labor groups, we're seeing for a biomed.
Level III.
The cost to hire is about 6% for that exact same level of experience exact same role about 6% higher year over year based on something I used to work with data analysis, we did a couple of months ago.
But we don't see that flow through to our P&L why not.
Our operating model isn't just about hiring a biomed level threes, if I need to hire I may get taken a level. One I may use these lower level technicians cost me about half as much let me call them medical equipment technicians, who do some semi complex repair work under the supervision of a biomed.
We have several thousand lower level technicians or customer support tax our hospital support tax cost me, even less and medical equipment technicians. We are it's blended with a blended resourcing model that we deploy.
From our local service centers that are down the street from our customers.
It means whether one individual.
Physician type might cost me, 6% higher per year. The way this all bleeds through ultimately in my P&L.
No no meaningful no real impact.
That as it blends out into the.
The P&L for the year.
Perhaps not as elegantly stated as the model works.
But we're not feeling the impact of.
Of wage inflation in our P&L today, because of the flexibility of our operating model.
No that's helpful and then I guess.
Further to that are you seeing any.
Tailwind in terms of new contracts or.
Extension of current contracts due to the current labor environment.
The value that we provide to our customers even greater today, because it's hard for them to source. These resources and when it is just a direct hire for those skill sets.
Without the kind of scale that we have the ability to apply that kind of.
<unk> labor model that we can employ our customers are seeing their costs go up at that rate of six 7% per year.
It is only in our in the operating model, where we can blend these labor rates across that scale that we have to play locally.
We don't see it or experienced hit like our customers. So the value proposition that we have.
As increased for our customers and yes, that's driving a lot of activity in the field.
Thanks for taking the question.
Thank you. The next question comes from Amit <unk> of Goldman Sachs.
Thanks, Hey, good afternoon folks just just a couple from me here.
One is that just on a government contract side I think in your prepared remarks, you mentioned state and local governments too and I don't know maybe thats always in your prepared remarks, and I missed it but I'm just curious if there's anything to that if you're having any progress with.
Stockpiling contracts at state and local level.
Able to call out or just tough to quantitatively.
Yes.
The thing that we have been periodically thresholds and we haven't had that in our remarks.
For a while since we've been a public company.
What should standout at hopefully folks minds is I'm not aware of any other company that actually supports stockpiles at any level and over the course of the seven years I've been with the business.
We've been taking on these types of arrangements some cities have stockpiles, where generally the one that's called on to manage those a number of states have stockpiles as well, but generally the company called upon to manage deploy and support those and then.
We can take on a number of stockpiles for the federal government has well so.
Well, there's always been.
An inordinate amount of focus on the HHS contract.
Our unique capabilities have always made us.
Best in perhaps the singular choice for.
For managing these types of stockpiles and it's something we've been doing for the better part of my seven years here.
Yeah, and just just to follow up on the guidance kind of seasonality piece you called out <unk> that's appreciated.
Maybe just to ask you specifically on <unk>.
In terms of just color on anything that you would want us to consider from a seasonality perspective in trying to model the divisions.
And the flow through to margins, obviously, we heard you on the.
Covid piece, but anything else that you'd call out would be super helpful for modeling thanks folks.
Yes look.
I'd say a couple of things just to keep in mind.
Historically, when you look at each of our service lines equipment solutions is the area that typically sees the most variation.
Q1 and Q2.
The strongest so thats a point and then further knowing that as I described in the guidance what we've assumed for the balance of the year is that we return to a pre COVID-19 level and we had some COVID-19 that $5 million to $7 million in Q1.
That's eight point with respect to equipment solutions.
All I would tell you is and we've talked about this a little bit before too.
Which is that within clinical engineering, it's a bit lumpy.
Quarter to quarter based upon some of the PNM work.
Thats performed.
That would be the one other area where in Q1, we did.
Fair amount of PNM work in.
There is some lumpiness there between Q1 and the balance of the year.
Those would be the two.
Pieces that I would point you to and that PNM work was really driven by the HHS contracts, it's not normally a lumpy.
Very good color.
That's right it was related to the HHS agreement.
Does that helpful for you.
Yeah. That's helpful. Thanks very much.
You got it.
Thank you ladies had changed.
<unk> reached the end of our Q&A session.
This concludes today's teleconference. You may now disconnect your lines at this time thank.
Thank you for your participation. Thank you.