Q2 2022 Orthofix Medical Inc Earnings Call
Our managers to our U S. GAAP financial results at this point I will turn the call over to John .
Thank you Lisa.
Welcome everyone and thank you for joining our second quarter 2022 results conference call on today's call I'll provide an update of our second quarter performance and review progress towards our strategic initiatives before handing the call over to Doug who will provide our financial update I'll close the call with a perspective on the balance of 2022 before opening.
Line for questions.
Starting with our second quarter performance total revenue in the quarter was $118 1 million and was flat year over year on a constant currency basis.
As a result of our commercial channel investments and new product offerings, we delivered solid execution across our spine business and achieving strong performance in our global orthopedics business.
These positive results were partially offset by macro headwinds, which had greater than anticipated effects on our business. In particular, we continue to see slower than expected rebound in elective complex procedure volumes due to ongoing staffing heart hospital staffing issues as well as patient reluctance to seek elected.
Procedures in select areas, which impacted our PDT spinal implants and biologics businesses.
Reported revenue for the quarter was materially impacted by the strength of the U S dollar relative to other currencies in which we transact negatively impacting reported revenue by approximately $2 7 million.
Turning to the performance of our two business units I will comment first on the spine followed by orthopedics.
Starting with bone growth therapies, or BTT sales for the quarter were $48 million down 4% on a reported basis and constant currency basis compared to second quarter of 2021.
The decrease in the quarter was largely a result of reduction in complex procedures, which generate a relatively large portion of our spine BGP prescriptions continued.
Continued staffing issues and patient cautioned to see elective surgeries.
On a positive note we continue to capture market share with physio stim and are seeing early commercial traction of the sales team.
These share gains and sales traction reflect investments we have made in our fracture management channel, which caused primarily on orthopedic and podiatric communities to treat fresh and non union fractures.
Moving to our spinal implants, which includes both spine fixation and motion preservation.
Revenue was down 6% on a reported basis and down 5% on a constant currency basis as compared to the second quarter of 2021.
The decline was due in part to lower than expected complex cases volumes in the U S as well as global competitive headwinds in motion preservation.
We continue our positive view of the disc replacement market and the leading edge technology that <unk> artificial disc provides with its demonstrated clinical outcomes.
Turning to our biologic portfolio revenue was flat on a reported and constant currency basis compared to 2021.
During the quarter, we saw positive trends from new product introductions, such as fiber fuse and from new distributors added in the last 12 months.
These trends help offset the macro headwinds, which negatively impacted hospitals' abilities to perform complex of elected procedures that often require our biologic solutions.
Moving on to global Orthopedics business sales were up 2% on a reported basis and 11% on a constant currency basis over 2021. This growth was primarily a result of the strength in international geographies driven by the benefits from investments we have made in our sales organization.
Well as revenue from international stocking distributors.
In the U S. We have started to see positive benefits from the new sales leadership team put in place over the last 12 months.
Both markets are also starting to benefit from our recent product introductions of true lock Evo and Galaxy Gemini.
Now moving on to our strategic initiatives, let's start with the product innovation and differentiation since January of 2020, we have launched 28 spine and orthopedic products.
Starting with DVT in May we received FDA PMA approval for our sales team bone healing therapy.
Sales, Tim user's life as our ultrasound technology for the healing of both fresh and non Union fractures. We started the initial limited U S market launch during the second quarter, which included conducting Salesforce training.
An initial contracting with our payers. We are pleased to see a high rate of physician adoption from our early training and education initiatives and we are expecting more meaningful revenue contribution as we move towards the end of 2022 and into 2023 and beyond.
Moving to biologics during the quarter, we achieved the first clinical implementation of virtual <unk> or advanced first of its kind shelf stable complete autograph substitute.
<unk> was developed as part of our strategic partnership with MTF Biologics, who prepares this complete autograft bone substitute through a proprietary process that preserves all biologic components necessary for bone healing within the graft.
It is provided in a room temperature ready to use multiple grafts purchase offer significant logistical and cost saving advantages to hospitals with improved shipping storage operating room efficiency due in part to its environmentally friendly packaging.
Surgeons involved in the exclusive launch of virtuous and provided favorable feedback and we look forward to broader commercialization later in the year.
He will comment later in the call an exciting announcement, we made earlier this week on a strategic partnership with CJ bio for recombinant bone morphogenetic protein or BMP two product.
Turning to new products in North of predicts we partnered with Lima orthopedics in the U S to create a solution for patients with chip dysplasia or abnormalities of the hip that lead to the labeling discrepancy.
This novel hip digitalization procedure solution, using our <unk> phone intermediary limb lengthening technology reflects the strength and versatility of the <unk> platform.
<unk> patented portfolio and will be available through the FDA compassionate use exemption.
Turning to our second initiative, the ongoing development of our commercial channel to expand patient and surgeon access to our products worldwide in.
In Q2, our U S strategic channel partners continued to see growth over the prior year.
As Youll recall, our channel partners include distributors that carry multiple ortho fixed product categories, such as hardware and biologics most of our channel investments in the quarter was focused on adding U S direct reps and BTT to support the launch of a cell stem as well as growing our orthopedics commercial infrastructure.
Investment areas are important for the future growth and we are pleased with the progress we're making here.
Our internal team worked hard during the quarter to bring the launch of two significant new products on a limited basis, and DVT and biologics with these launches associated with physician education and sales training, we have put ourselves in a great position for success as the macro environment improves and the volume of elective procedures.
Return to historical trends now.
Now I will turn the call over to Doug to review, our financial performance Doug.
Thanks, John and good morning, everyone as many of the financial measures covered in today's call are on a non-GAAP basis. Please refer to today's earnings release for further information regarding our non-GAAP reconciliations and disclosures.
Starting with revenue as Don noted earlier total net sales in the quarter were $118 1 million or flat in constant currency as expected when compared to the second quarter of 2021 in the U S. Total net sales were $93 million or <unk>, 79% of total revenue.
Approximately 3% year over year. The primary drivers were reductions in complex procedures consistent with many in our industry this year and other macro and competitive headwinds, but John covered earlier.
Our national total net sales of $25 million for the quarter were up 7%.
Over the second quarter of 2021 as a result of the recent salesforce investments in orthopedics and sales to international stocking distributors.
GAAP gross margin in the second quarter of 2022 was 73% compared to 77% in the prior year period.
Due primarily to changes in our sales mix as well as increased inventory reserve expenses related to set builds for an expanding sales force and increased safety stock requirements driven by the risk of global supply chain disruption.
For the full year 2022, we expect GAAP gross margins to be approximately 74%, 75%, which implies an average rate of 75% to 76% in the second half of the year.
GAAP sales and marketing expenses in the second quarter were 51% of net sales up from 47% in the second quarter of 2021. This increase reflects our investments in direct reps and sales management in orthopedics and BTT as well as additional training and marketing expenses related to the <unk> launch.
We will continue into the third quarter.
These were offset somewhat by the lower commissions on orders from international stocking distributors.
For the full year 2022, we still expect GAAP sales and marketing expenses to be in the range of 49% to 50% of net sales.
GAAP G&A expenses in the second quarter were 13% of net sales down from 15% in the prior year period.
The decrease reflects lower legal and professional fees as well as lower employee expenses.
GAAP R&D expenses for the second quarter stayed flat at 11% of net sales compared to the prior year period.
Our focus on innovation and differentiation has increased year over year.
New product development expenses, which were offset this quarter by a larger development milestone payment made in the second quarter of 2021.
We now expect full year 2022, GAAP R&D expense to be approximately <unk>.
11% of net sales, including an impact of about 200 basis points related directly to our EU MTR implementation efforts.
Which we adjust within our non-GAAP financial metrics.
Adjusted EBITDA margin in the second quarter decreased to 10% of net sales compared to 15% in the second quarter of 2021, driven by increased Cogs as well as investments in sales management direct sales reps and the launch of <unk>.
We continue to expect our adjusted EBITDA margin for the full year 2020 to be approximately 12% of total net sales as we continue to profitably invest in growth. We expect our adjusted EBITDA margin to increase sequentially in the back half of 2022.
The GAAP acquisition related measurement expense year over year decrease of $9 $6 million, primarily reflects our second quarter 2022 noncash credit related to the change in the fair value of the spinal kinetics contingent revenue milestone payment liability.
We continue to believe in the growth of the <unk> and the cervical disc replacement market, but based on the current operating environment, the lower fares lowered fair value of the underlying liability.
Flex the anticipated achievement of the remaining revenue based milestone beyond the contractual measurement.
<unk> 2023.
Now turning to tax we had GAAP income tax expense of $600000 or 18% of income before income taxes in the quarter as compared to a GAAP income tax expense of $2 million or 48% of income before income taxes in the same period of 2021.
The tax rate in both periods was driven by timing of earnings as well as GAAP losses without a corresponding tax benefit.
For the second quarter, we reported GAAP EPS of <unk>, 12, which stayed flat compared to the second quarter of 2021.
After adjusting for certain items and when normalizing for tax using our non-GAAP long term effective tax rate of 28% adjusted EPS for the second quarter was eight <unk>.
Compared to an adjusted EPS of <unk> 32 in the second quarter of 2021.
Regarding cash our liquidity position remained strong with $60 million at the end of the second quarter compared to $88 million at the end of the fourth quarter of 2021.
The decrease was primarily related to the $14 million of increased net inventory as I mentioned in the $2 million final contractual payments made to the fifth bone seller.
Capital expenditures were approximately $6 million in the quarter compared to $5 million in the prior year period.
The increase was primarily due to investments in operations the expansion of our manufacturing capabilities as well as an improved customer training and experience better for our partners at our headquarters in Lewisville, Texas.
We still expect capital expenditures to be in the $25 million to $27 million range for 2022.
Now shifting to guidance for the full year of 2022, we now expect reported revenue to be in the range of $455 million to $465 million, which.
<unk> utilizing current FX rates represents flat to 2% growth at constant currency.
This revenue guidance reflects a roughly $10 million or 2% anticipated headwind to our top line for the full year at reported rates due to the strengthening U S dollar compared to the 2021 FX rates.
From a macro perspective, we continue to expect an overhang through the end of the year and into 2023 related to hospital staffing issues and patient reluctance to seek elective surgery.
Key products like itself them and Burke draws will gain momentum, but we do not expect to see significant contributions to revenue from these new products until 2023.
Reflecting on our quarterly revenue cadence in the back half of this year, we anticipate that our third quarter revenue will reflect typical seasonality with a 3% to 5%.
The decrease in procedure volumes sequentially versus the second quarter of 2022 as well as the increased FX headwinds from the strengthening U S dollar versus the second quarter of 2022.
For the full year 2022, we now expect our adjusted EBITDA will be in the range of $53 million to $57 million or.
12% of revenue and our adjusted earnings per share will be between 45 and 55.
These ranges reflect the $3 million FX headwind to our top line due to the strengthened U S. Dollar since the May earnings call inflation, uncertainties. Our continued investment in delivering a robust pipeline of differentiated products and expansion of our commercial channel to accelerate our growth trajectory.
I would now like to turn the call back over to John .
Thanks, Doug.
Moving to the back half of 2022, we are focused on solidifying ourselves as a leader in the regenerative healing technologies in the spine and orthopedic space, while also delivering sustainable profitable growth driven by innovation and differentiation within our product portfolio as well as optimizing our commercial channel.
We will also continue to be focused on working capital management.
Our top line sales.
In the near term, we will continue to advance several of our growth drivers, including the <unk> artificial cervical disc.
<unk> limb lengthening system DSL stem bone growth stimulation device and our expanded biologic portfolio I'd like to provide a quick update on each of these growth drivers starting with the <unk> artificial cervical disc we have one of the leading cervical disc platforms in the market with over 16000 global <unk>.
Discs implanted over 16 plus years.
We are pleased with the continued strength of the clinical evidence for this technology and in the U S. We are progressing the <unk> 62 level clinical trial, which remains on track.
We are also in the middle of a global real World evidence study that will access over 3000 patients to expand and further reinforce our body of <unk> clinical evidence.
We also recently analyzed our internal records records of over 16 years, and 60000 discs implanted with long term survivorship analysis, which projects a global cumulative survivorship of 99% at 10 years. We believe it is important to invest in these clinical studies to ensure surgeons has.
The best available information to inform their implant decisions with their patients.
Turning to the fifth <unk> limb lengthening system. It was added to the list of Reimbursable products and services for the French Ministry of Health and prevention.
This makes <unk> the only <unk> lengthening now included on the French Ministry list and thus the only reimbursable lengthy Neal by the public health system in France.
As a result of the French reimbursement decision in our Lima partnership we mentioned earlier, we expect to see marginal increase in <unk> revenue growth in the second half of 2022 and continued growth during 2023 with the planned U S launch of the fifth on Trochanteric now as well.
As mentioned earlier, our sales Tim ultrasound product in DVT for the healing of phone with fresh fracture and non Union fractures had a limited launch in the second quarter.
Although the sales force training will not be complete until the end of the third quarter 2022, and contracting with payers is still ramping up we expect to see more meaningful revenue contribution in 2023 and beyond.
Let's move to our biologics near term growth drivers.
The virtuous allows our first of its kind shelf stable complete autograph substitute for spine and orthopedic procedures recently had the first patient implant in limited market release, we anticipate increasing surgeon demand as we continue to commercialize throughout the rest of 2022 and into 2023.
In addition to virtual <unk>, we are very excited to launch legacy demineralized bone matrix and partnership with MTF biologics in the coming weeks.
Legacy a feature rich rich cost effective new option for surgeons is an HFC process pre hydrated and global DBM putty that is ready to use out of the syringe.
On July 32022, the company entered into a strategic license and distribution agreement with <unk>, a developer of innovative synthetic bone graft.
The agreement grants or the fix an exclusive right to conduct preclinical and clinical studies commercialized promote.
In cell <unk> recombinant human bone morphogenetic protein, two or RH BMP, two bone graft materials.
And other future tissue regenerative solutions in the U S and Canada noticed this is the next evolution of the bone growth factor technology market.
<unk> has been commercially available internationally and implanted in over 50000 patients and presents a potential compelling alternative to the single product available and the over $650 million current U S market.
Our deeply experienced biologics clinical and management teams are excited to work to bring an alternative BMP two solution to the market.
With virtual <unk> and legacy added to our biologics offering <unk> now commands one of the industry's most complete biologic portfolios for spine and orthopedics, giving surgeons the ability to select the best options to meet their procedural and patient needs.
Bone growth factor is the largest growing segment in the biologics market and our partnership with <unk> represents an important new future strategic market opportunity.
To wrap things up I would like to touch on our future plans in direction.
Our strategic plan and goals remain the same we are steadfast on our transformational path focusing on executing against our short term goals and driving our long term high single digit profitability growth and EBITDA margin expansion strategy.
We've made significant progress already and expect to continue to do so in the second half of this year and beyond supported by our clean balance sheet and strong cash flow, which have allowed us to internally fund our growth activities.
We are excited about our key new product introductions in 2022.
We will expect to contribute meaningfully in 2023 and beyond to our portfolio performance.
Lastly, as previously demonstrated with our successful disciplined approach, we will continue our inorganic business development and see a great deal of opportunity with our balance sheet capacity to execute in the current macro environment.
On a closing note I am extremely proud of our global team members as they have shown flexibility resolve and focus as we've navigated this unique and challenging business environment.
Well for their commitment to our mission and have confidence in our strategic plan and future. Thank you for your time today and your continued interest in the success of <unk> fixed.
Operator would you please open the lines for questions.
Of course, thank you if you would like to ask a question. We invite you to Paas staff by one.
Thank you Pat.
If you change your mind US maybe a question has already been on.
Followed by two to withdraw your question and please enjoy the unlimited like even preparing to ask your question.
Yes.
We will be taking our first question today from Matthew Blackman of Stifel.
AVG.
Good morning, everybody. Thanks for taking my questions.
I have a couple for John and then one for Doug.
John everyone's called out similar headwinds in <unk>.
And into two <unk>, but the magnitude you're implying for the back of the year.
It was more intense how would you explain that is that.
Is it that you have.
Outsized complex procedure mix relative to peers, just any thoughts on your business relative to what we're hearing from others.
Yes, Matt Thank you.
Regarding the procedure base.
We've highlighted as well as far as complex procedures that we rely on for our <unk> business, because thats, where their utilized postoperatively as well as the biologics many of our high potential high potency biologics have used the most complex procedure. So as we look at uncertainty in that area based on the <unk>.
Hospital feedback, we get the flow of those patients and some of the patient reluctance in this time those complex procedures, we see that as it is.
As a headwind.
Additionally, in that area as far as the headwind in the competitive environment on <unk>.
Such as well.
Looking at motion preservation, we see that as another issue that we're going to deal with.
And maybe to that point, Jon just maybe talk a little bit more about the competitive environment. I know you had some comments in the prepared.
Remarks, but is that business still growing year over year or quarter over quarter and I appreciate you.
Youre counting clinical data and generate more clinical data.
Do you to stem the share losses.
Is there a timeframe where you think.
We could maybe stabilize that business and return it to to maybe more.
Typical type growth rates and then a follow up for Doug.
Yes, Matt Thank you spaces.
Some more competitive obviously, there is a new entrant.
Market place as well.
Forsman and some of the other products that are out there.
Promoter.
Promoted heavily however, we see that as an opportunity to expand the market and that's why we have absolute conviction in <unk> as far as the leading technology in the space.
And then clinical clinical data will drive that as well.
The performance of the technology. So we'll fit were robust on that still robust.
Artificial disc surgical market and we're going to continue invest in that and.
It will level off and we'll get back to growth I mean, the fact is we are growing but we're not going to pace with <unk> and so.
That's the reality of where we're at and we're looking forward to the performance in the future.
Alright, and then Doug can you bridge us from the old FX guidance to that on the top line to the new kind of thing I think it sounds like the downdraft is probably concentrated in the.
The U S hardware biologics NPG business is that the right way to think about where it's at.
The back half of the year it gets more challenging.
Yes, good question Matt.
Seem like everybody. The continued strengthening of the U S. Dollar we've got about 22% of our topline is from U S and is heavily exposed to the euro dollar rate. So that's strengthen.
Strengthen our results have been impacted two.
2% to 3% I think since last time, we guided in may but <unk> seen further degradation from what we expected.
By about $3 million, but overall for the year.
Sort of in the two.
Two 5% to.
The 3% range.
Sorry, I was I was.
Asking about the ex FX the bridge from your old ex currency guidance did it to the new ex FX.
Guidance, yes so.
So it takes some taking out the currency.
Yes, it's probably another half to 1% add about another $3 million from from when we guided last night.
And again, that's going to be isolated probably as I'm hearing the commentary with the complex headwinds to that the U S hardware and biologics and PGD business.
I guess.
My question there is still expect strong growth in the orthopedics orthopedics franchise.
Yes, the remainder of that.
The guidance shift.
Really is sort of FX on one side related to.
Although U S exposure, but the rest of it is like John just alluded to.
Our comments in the script summarized.
The complex procedures.
Our spine hardware as well as our <unk> and biologics product categories, and then we've seen macro headwinds with hospital staffing issues.
Inflation patient caution to come back into a clinical environment across the board in all geographies.
Alright, thanks, so much.
Thank you for your question well move to our next question, which comes from the line of Jeffrey Cohen of Ladenburg. Jeffrey. Please go ahead.
Hi, John and Doug how are you.
Hey, Jeff.
Yes.
Just a couple of questions from Aaron So I guess, firstly could you talk a little more about.
Hospital staffing and the cadence on the back half as you could call out a relatively strong global business for the quarter Youre seeing the same issues there and do you expect that to flow through into Q3, and Q4 as well similarly to the U S business.
Jeff from our channel checks.
Hospital staffing.
It's all staffing is just not nurses and doctors and it comes down to that theyre projecting to last for another three or four quarters on.
On the short side, that's in the hospital, we see migration of cases to the ASC for the smaller of the easier and more straightforward cases on the Evs and the sports.
Straightforward cases, and so we see that on the on the Oes standpoint, it's country by country region by region.
Without going into each individual activities there.
Some markets are back and being more robust and there are some that are still compressed, but we'll see.
No.
On a global basis, we see there is still an impact out there we don't even address COVID-19 anymore in that conversation, but doctors get sick patients get sick you don't even look at that in those areas.
Put that into the hospital hospital headwinds.
Okay got it and then second can you talk us through a little more about cell stem in it. So this launch and some of the initial users.
What you are finding out there are the users for <unk> all.
Current users.
I assume product or are you finding that you're picking up some interest elsewhere outside of Israel.
Yeah.
Yes.
We are pleased where our sales spend of that.
<unk> has been well accepted in the marketplace, we're getting positive feedback from the clinicians and those are new clinician. So we're getting a good lift into.
Podiatric area as well as the orthopedic area on fresh fracture and so we've been there for quite some time with our physio stim and the non Union area.
So those customers are using physio stim.
We're moving towards new customers and sales team.
Okay got it and then lastly, I had a question for.
Doug.
The Capex guide was that 25 to 27.
Okay.
That's right.
Consistent.
With where we were last quarter as well.
Perfect. Okay that goes across thanks for taking the questions.
Thank you Jeffrey before before we do take the next question today.
If you would still like to ask a question you can do you save by pressing star followed by one on your telephone keypad will be taking our next question today from James Sidoti of Sidoti <unk> Company, Jim EBITDA.
Good morning, and thanks for taking the question so.
It feels like you.
<unk> strategy to get the products out is working.
Expand the sales force is working but that's being overshadowed by the.
Pressure on procedures right now.
Do you want to look into the Crystal ball.
Give us any kind of indication when you think procedures get back to pre COVID-19 levels.
Sure.
Tim This is John Thanks for the question.
Part of it is part of the discussion on procedures return.
We see procedures return turning more CSC, but in the complex factors that patients have some reluctance in some of the financial economics from our channel checks.
But also hospitals have less of the capacity to flow through there.
They are all open they are all moving forward, but the fact is they are doing fewer cases in there. They also have to prioritize which service line. They want to prioritize cases into so they're working through this activity both on the macro headwinds from both the economic standpoint from there.
The inflationary pressures, but also for how patient behavior occurs.
We look we know that these complex.
Patients do not get better on their own they are out there and they will come back into the services into the hospitals be treated these are hospital base cases, and the challenge for as we see it in our portfolio is that we are bvt at biologics.
To some extent our spine business as well that gets impacted by those.
Complex cases.
<unk>.
A portion in that area and Thats why I think we've seen some of that what we're suggesting some of the results that we're seeing.
Yeah.
So you talked a little bit about inorganic opportunities would you consider maybe getting some devices used in the ASC.
Kind of a hedge against the.
The pressure on equal complex devices that do you think youre going to stay.
In the.
In the hospital for most of your most of your products.
Well, we have we have an initiative to go into <unk>, we have not only our <unk> C disc.
We managed through that.
<unk> headwinds and we've put together an ASC package. We believe we're going to have a strong position in asp's going forward and that is part of the strategy to deal with it just this issue we're talking about today are complex procedures.
Our balanced portfolio of across all the service line areas.
Alright, and then one for Doug inventory right.
Sure.
Very similar to other companies.
I cover.
Inventory levels kind of heading into some of these supply chain issue I think it's up about $15 million for the year.
Do you think this is a good level for you or do you think youll continue to increase inventory and do you think you'll get back to free cash flow positive in 2023.
Good question, Jim Thank you on inventory and that inventory is up.
And the $15 million range that you suggested about half of that is from raw materials as we tried to take any.
Slack out of anticipated supply chain issues and our procurement team has done a terrific job of making sure that that way.
We haven't missed any.
Dr Chan or have any issues from.
For many of those parts and so we're happy with where we are from an inventory perspective, now I wouldn't expect much more inventory build through the remainder of the year.
<unk>.
And yes is the answer to your last question in terms of positive cash flow in 'twenty three and beyond.
Alright, Thank you Jim if I could just.
Jim Jim if I might add one other thing to your ASC discussion.
We've launched virtual switch as a as a shelf stable complete autograph substitute work with MTF biologics, it's a very appropriate product for the ASC as well as with legacy and legacy which is a DBM product is another appropriate AC ASC market and.
Purposely building the portfolio to go across not only the ASC, but hospital, but were also on a global basis, we talked about our success with orthopedics and had 11% growth there and we built that is predominantly.
And our European channel, but we're basically increasing our U S channel area.
Many of those cases can be done in an ASC or moving towards an ASC in that regard as well. So yes, we feel good about where we're at across not only spine, but also our orthopedics business along with our biologics.
I think I think we're well positioned for the future.
As we've talked about where to transition our transformation point in our in our strategy and there is a number of factors that are coming together that came to a confluence right now and that's what we're managing through and Thats were articulating to you.
Understood. Thank you.
Okay. Thank you for your question Jim.
No further questions at this time, so I would like to hand back to the management team for any closing remarks.
We'd like to thank everyone for their attending the call and their continued interest and support of <unk> fix going forward and have a wonderful day. Thank you.
Thank you. This concludes the call today you may now disconnect your lines.