Q1 2023 CONMED Corporation Earnings Call
Speaker 2: Before the conference call begins, let me remind you that during this call, management will be making comments and statements regarding its financial outlook, its plans and objectives. These statements represent the forward-looking statements that involve risk and uncertainties as the...
Speaker 2: Please refer to the risk and other uncertainties disclosed under the forward-looking information in today's press release, as well as the company's SEC filings for more details on the risk and uncertainties that may cause actual results to differ materially.
Speaker 2: The company disclaims any obligation to update any forward-looking statements.
Speaker 2: The company's actual results may differ materially from its current expectations. Please refer to the risk and other uncertainties disclosed under the forward-looking information in today's press release, as well as the company's SEC filings for more details on the risk and uncertainties.
Speaker 2: non-GAAP or adjusted measurements during this discussion. While these figures are not substitute for GAAP measurements, management uses these figures to aid in monitoring
Speaker 2: the company's ongoing financial performance from quarter to quarter and year to year on a regular basis and for benchmarking against other medical technology companies.
Speaker 2: Adjusted net income and adjusted earnings per share measure the income of the company, excluding credit or charges that are considered by the company to be special or outside of its normal ongoing operations.
Speaker 2: These adjusting items are specified in the reconciliation supporting the company's earnings releases posted to the company's website. With these required announcements completed, I will turn the call over to Curt Hartman, ConMed's Chairman of the Board, President, and Chief Executive Officer for opening remarks. Mr. Hartman? Mr. Hartman, thank you for joining us today.
Speaker 3: Thank you, Justin. And before I dive in, the forward-looking statement comments cut in and out a little bit. So I just want to point everybody to our investor website where the presentation has been uploaded. That also includes the comprehensive forward-looking statement in case you missed part of that opening dialogue. Let's talk about rebalancing, right?
Speaker 3: With that said, good afternoon and thank you for joining us for CONMED's first quarter 2023 earnings call. With me on the call is Todd Garner, Executive Vice President and Chief Financial Officer. Today we'll share with you our first quarter results and the overall outlook for our business. We'll then open the call to your questions.
Speaker 3: I'll start by reviewing our first quarter results. Total sales for the quarter were $295.5 billion, representing a year-over-year increase of 21.9% as reported and 25.1% in constant currency. From an earnings perspective during the first quarter, our gap net income
Speaker 3: year over year and our adjusted diluted net earnings per share of 66 cents decreased 5.7% year over year.
Speaker 3: Overall, I'm very encouraged by the quarter and the company's performance.
Speaker 3: We were able to ship the warehouse related backlog, benefited from increased surgical procedure volumes and staffing level improvements, saw incremental improvements to global supply chain constraints, and participated in two exceptional industry trade shows that highlighted our growing product offering and evident innovation.
Speaker 3: with six active and five pending adoption through July of 2024. When all 11 are fully active, this will bring approximately 21% of the U.S. hospital beds and 26% of the U.S. population under some form of legislation.
Speaker 3: At last count, we also see 10 additional states working on legislation, including Texas and California.
Speaker 3: Finally, but importantly, we delivered solid results on both the top and the bottom line and are set up for continued strong 2023 performance.
Speaker 3: In closing, I'm pleased with our start to the year, excited by the broad underlying strength across the portfolio, and very encouraged by the positive engagement we are seeing in both of our 2022 acquisitions.
Speaker 3: While still early, both of these transactions have lived up to and exceeded our expectations.
Speaker 3: and we remain convinced it will be transformative to our overall revenue and margin performance in the years ahead.
Speaker 3: I will now turn the call over to Todd who will provide a more detailed analysis of our financial performance and take you through our full year guidance. Todd?
Speaker 4: Thank you, Kurt. All sales growth numbers I referenced today will be given in constant currency. The reconciliation to GAAP numbers is included in our press release.
Speaker 4: As usual, we have included an investor deck on our website that summarizes the results of the quarter and our updated guidance.
Speaker 4: For the first quarter of 2023, our total sales increased 25.1%. Revenue from the recent acquisitions was $13.6 million in the quarter, putting our global organic growth for Q1 at 19.4%.
Speaker 4: Airceal Buffalo Filter, Interboants and Biode Race together represented over 30% of our total revenue in the quarter.
Speaker 4: As Kurt said, the reduction of the warehouse-related backlog, strong performances by both Intabones and BioBrace, and strong organic demand around the globe drove the revenue growth in the quarter.
Speaker 4: Our results also benefited from one extra selling day compared to the prior year quarter, which we estimate contributed between 100 and 150 basis points of growth on the consolidated number.
Speaker 4: For Q1, our sales in the US increased 25.4% versus the prior year quarter, and our international sales grew 24.7%.
Speaker 4: Worldwide orthopedics revenue grew 26.0% in the first quarter. In the U.S., orthopedic sales grew 29.0% and internationally orthopedic sales increased 24.3%.
Speaker 4: Total worldwide general surgery revenue increased 24.4% in the quarter.
Speaker 4: US general surgery revenue grew 24.0%, while internationally general surgery revenue increased 25.5%. Now let's move to the expense side of the income statement.
Speaker 4: We will discuss expenses and profitability in the first quarter, excluding special items, which include charges for acquisitions and contingent consideration, restructuring and software implementation costs, amortization of intangible assets and amortization of deferred financing fees net of tax.
Speaker 4: Just a gross margin for the first quarter was 54.0%, a decrease of 210 basis points from the prior year quarter. This was the result of 110 basis point FX headwind, consistent with our projection a quarter ago, with the remainder coming from inflation.
Speaker 4: Research and development expense for the first quarter was 4.2% of sales, 20 basis points lower than the prior year quarter.
Speaker 4: First quarter, adjusted S-GNA expenses were 37.9% of sales.
Speaker 4: Leverage gained on the higher sales drove the 180 basis points improvement over the prior year quarter.
Speaker 4: On an adjusted basis, interest expense was $8.7 million in the first quarter. The adjusted effective tax rate in Q1 was 25.3%.
Speaker 4: First quarter gap net income was $1.8 million. This compares to gap net income of $15.0 million in Q1 of 2022.
Speaker 4: Gap earnings per deluded share were 6 cents this quarter compared to 47 cents a year ago.
Speaker 4: Excluding the impact of special items discussed earlier, in the first quarter we reported adjusted net income of $20.6 million, a decrease of 12.3% compared to first quarter of 2022.
Speaker 4: Our Q1 adjusted diluted net earnings per share were 66 cents, a decrease of 5.7% compared to the prior year quarter.
Speaker 4: Turning to the balance sheet, our cash balance at the end of the quarter was $26.5 million compared to $28.9 million as of December 31st.
Speaker 4: Accounts receivable days as of March 31 were 65 days compared to 69 days at the end of 2022.
Speaker 4: Inventory days at quarter end were 215 compared to 251 at December 31.
Speaker 4: The return to normal shipping levels during the quarter as we worked through the warehouse related backlog drove the reduction in inventory days Long term debt at the end of the quarter was 99 was $995.3 million versus $985.1 million as of December 31. Our leverage ratio on March 31 was 5.4 times.
Speaker 4: Consistent with what we told you last quarter, we expect a leverage ratio to drop below 5 times in Q3 and below 4.25 times by the end of 2023 and be in the low 3s by the end of 2024.
Speaker 4: Cash used for operations in a quarter was $3.8 million compared to cash flow from operations of $0.3 million in the first quarter of 2022.
Speaker 4: Cash flow in Q1 was better than we expected.
Speaker 4: The decrease compared to the prior year is a function of the lower reported gap net income in the current quarter.
Speaker 4: We continue to expect operating cash flow to be around $130 million for the full year of 2023.
Speaker 4: Capital expenditures in the first quarter were $4.3 million compared to $3.7 million a year ago.
Speaker 4: Now let's turn to Fantural Guidance.
Speaker 4: We now expect reported revenue for the full year to be between $1.205 billion and $1.250 billion compared to our previous guidance range.
Speaker 4: between $1.170 billion and $1.220 billion.
Speaker 4: This continues to include currency headwinds of 150 to 200 basis points.
Speaker 4: As a reminder, Q2 will be the last quarter we disclose interbones revenue as inorganic.
Speaker 4: And that will only be up until the anniversary of the close of the acquisition on June 13th.
Speaker 4: As a reminder, we sold $2.1 million of intervones products in June of 2022.
Speaker 4: We now expect Fulure-adjusted EPS in 2023 to be between $3.30 and $3.50.
Speaker 4: compared to our previous range of $3.20 and $3.45.
Speaker 4: This continues to include estimated FX headwind between 20 and 25 cents.
Speaker 4: As discussed previously, the full year 2023 will have one less selling day compared to 2022. The way our calendar falls, Q1 had one extra day, and Q3 will have two fewer days.
Speaker 4: As we look at the second quarter, we expect reported revenue between $300 and $310 million.
Speaker 4: That includes approximately 200 basis points of FX headwind.
Speaker 4: We expect adjusted EPS in Q2 to be between 77 cents and 82 cents.
Speaker 4: As Kurt said, we are very pleased with the Q1 performance and we are focused on executing as we move through 2023.
Speaker 2: And with that, we'd like to open the call to your questions and I'll hand it back to Justin. Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. So, would you draw your question, please press star 11 again. Please stand by, we compile the Q&A roster and we do ask that you limit yourself to one question and...
Speaker 5: good afternoon. Great to see the strong performance and the excellent guidance. Just to start on the guide you beat.
Speaker 5: You beat the guide by, you know, the midpoints due to a variety of factors and you're touching on some of them. But, could maybe help us understand just.
Speaker 5: We've heard from obviously some of the larger companies over the last week and half, but how did the quarter progress, did volumes or orders return more aggressively at the end with its steady, how did you exit, how have you started this quarter?
What's driving the, whatever it is, the math is 4 million approximately increase at the midpoint. Is that the new products is that the environmental just help us help frame what you're seeing and how we should be.
Thank you, Matt, for the rest of the year. I'll give a short answer and then a long answer. Better markets, better performance. The markets are better. The procedure volumes better. The staffing levels continue to incrementally improve. They're not back where they were pre-COVID. In fact, I had some dinners.
better performance, you know, as the quarter progressed and as we caught up with our backlog, it turns our teams more on to offense and we put our customers and our sales force through the ringer with the warehouse-related backlog and that consumed a lot of their time and we know that.
That's why our focus was on execution and catching up.
to allow them to get back on offense. We do have a lot of new products, both organic and inorganic. Obviously, endobones was not impacted by the warehouse issue and neither was BioRes, but everything else we sell was impacted around the globe. So getting those products moving, getting our teams back on offense, that's...
and we're happy with it.
Thanks for those eloquent words Todd. Maybe so much to unpack here, but let's keep it to the two. Maybe Todd, you could give us a more color on gross margins.
Adjusted most margins at 54% a little less than we thought, but help us understand how that's going to flow through over the course of the year. Or, you know, one of the drivers that maybe...
especially related to supply chain raw material trends, resin costs, all that stuff, and the context of your thinking of full-year guidance. Thank you. Sure, thanks Rick. Yeah, so I think margins were just slightly lower than we thought too. What I said was,
They should be close to what they were in Q4. In Q4 it was 54.2%.
and we came in at 54.0% this quarter. What, from our perspective, the reason it was a little lighter than we thought was because the revenue over achievement was, a lot of it was in Asia. So Asia had really strong...
revenue performance versus expectations and they do come with a little lower margin mix. So from our perspective it was simply an issue in the first quarter with geographic mix of where the overperformance came from.
So we're not concerned about it, still very, very close to what we said, and we're sticking with our full-year gross margin guidance for the year.
The way that plays out, and we talked about FX is heavy in the first half of the year, the FX headwind. I would expect Q2 margins are in the mid-54s, and then it gets meaningfully better in the back half of the year to get to our full year guide that we said in January .
So that's kind of how I think you should think about margins. Supply chain.
I would say, I think it's true that it's moderately better. It's still a big issue and I think it is for everybody. It certainly did not get worse and it probably got better over the last three months.
But I certainly wouldn't want to overstate that the fact that it's
better than it was, it's still challenging. So that is still out there, but.
But on the margins, better than it used to be. Gotcha. Thank you.
and the margins better than it used to be. Gotcha. Thank you. Thank you.
And one moment for our next question. And one moment, please. And our first and next question comes from Robbie Marcus from JP Morgan. Your line is now open.
Hi, this is Lillianne for Robbie. Thanks for taking the question. Can you talk a bit about the sales that you lost to competitors from the warehouse disruption and how much progress you've been able to make in recapturing that? And do you think that you can get back to your historical levels at some point and how should we be thinking about that progression?
Yeah, Lily, great question. I think in January on the call, what we described occurred in the fourth quarter. advert laser Dr Farmer dessert
when customers were doing procedures and we could not get them the product they needed.
or an alternate that would work in the procedure, they clearly went to...
competitors and there may have been some competitors who said we're happy to help you out but we need some ongoing volume to help you out.
In other cases, it was simply a singular transaction that occurred. We think as we proceeded through the first quarter that those customers that switched some of their volume, we've recovered greater than 50 percent of them back and we see the remainder occurring over the next couple quarters.
Inevitably, there will be some on the edges that may never come back, but we're not seeing any hesitation at this point in time. It's more about us having product available for the cases when they want to do the cases, and we've made great strides there. Again, as our team gets more on offense, as the product was moving out quicker, as the quarter unfolded. CHET Halo saga
Those things come back, tend to come back. And then obviously it really didn't have a lot of impact on the capital side of the business, which is 20% of our revenue, give or take a little bit. So it's more about the single use consumables that we sell across general surgery and orthopedics.
what customers were doing a procedure and they might use an alternate product or a competitive product and Getting them back onto the main product. So we think we've made good progress in that And then maybe just one on decadence how should we be thinking about
the progression of revenues and EPS over the course of the year just given the disruption from the warehouse issues. Should we expect normal seasonality or will it be more of a back-end loaded year? Thanks so much.
Yeah, so Lilly, so you have the results for Q1 and I just guided for Q2. So I said revenue for Q2 between $310 million and EPS between $0.77 and $0.82.
So that gives you the first half of the year. We're not going to break out Q3 and Q4 here today, but obviously it is. You'll see that that is kind of a gradual progression as we move through the year. Things get better. FX. And I'll remind you that.
the way FX falls for us is essentially all of the FX headwind that I've talked about for the full year is all in the first half of the year. So that that becomes relatively neutral in the back half of the year, so that helps.
Got it. Thank you. And thank you. And one moment for our next question.
And our next question comes from Ian Toll from Bank of America. Your line is now open.
Hi, this is Ian on for Travis. Just wanted to ask about Buffalo and AirSeal. Last quarter I think you mentioned they grew below 20% given the warehouse issue. Looks like the new slide deck no longer references the Buffalo AirSeal growing above 20%.
just an apology if I missed this earlier in the call, but did those grow over 20% in the quarter and then just expectations moving forward for those two specifically
Yeah, Travis, they definitely did grow over 20% in Q1. We did take that out of the side deck because now as we move through 23, we've added intervones and BioRaz, who are going to be big contributors to that growth profile and the margin mix shift as well.
it kind of didn't make sense to just isolate those two product lines. And so what I said in my prepared remarks was I did disclose that those four product lines, product families,
now represent over 30% of our revenue in Q1. And those are all, you know, there's no change in our expectation that air seal and Buffalo will continue to grow at that 20% mark or better. And we've talked about the growth rate we expect for into bones, which is kind of mid to high teens essentially.
And then obviously, BioReds, which is starting at a very small number in 22, we've said would be single digit millions in 23 and then double digit millions in 24 and beyond. That obviously, the growth rate on the BioReds number is well, well, north of 20%. So, you know, we're going to get away from that specific disclosure that we gave you through last year and now we're going to talk about all of these high growth technologies that are contributing to our...
growth and margin profile improving. I would just add to that if you've attended any of the trade shows here recently or perhaps last year.
The extent of our portfolio and the innovation that we're trying to put through the refreshes in the next generations is all part of the evolving mix and margin enhancement story that we're building and have been building at ConMed. It's important that we open up future Creatures
Investors have full awareness of that story that it's not isolated to one or two products It is the work of the company. It's the work we've been undergoing for a number of years now and We'll keep adding to that whether it's organic or acquisition driven
Okay, great. And then just, I know you were asked to just ask about it a little bit, but maybe to ask in different ways. So, where house issue impact sort of the normal Q2 to Q3 seasonality that you've seen over the last few years just.
So that few millions step down. Or are you expecting sort of a bit more of a bump just given sort of recaptured sales growth later in the air?
I think the way I would describe it, the markets we serve and broadly, at least for my
time in the world of MedTech, MedDevices. The second quarter is bigger than the first quarter, the third quarter is a little below the second quarter, and the fourth quarter is the big quarter. And the industry does that. What ConMed does through those quarters is driven by new product cadence, and in this case we had an interruption in the fourth quarter because of WMS.
I think as long as we are executing back to execution, focused on execution, we should fall in line with those those type of trends. Todd gave you the second quarter number. We're not commenting on third and fourth quarter at this point in time.
Our goal in 2023 is to get back to fundamental basic execution, whether that's on the fundamental of delivering a product to innovative on products and taking care of customers.
Okay, make sense. Thanks for taking the questions. Then thank you. And one moment for our next question.
And our next question comes from Vic Chopra from Wells Fargo. Your line is now open.
Hey, good afternoon and thanks for taking the questions. Congrats on a great quarter. Just two for me here first.
Can you maybe talk about some of the trends that he's seeing on the capital side and now that I have a follow-on? Thanks.
I would say no change. There is still money available for capital purchases. There is still budget cycle planning. There's still.
open evaluations, I have not seen any change in the external market need for capital and just as an ongoing reminder our capital is in the lower end of the price point of capital in the world of Medtech. So I think the capital cycles remain fairly consistent with what we saw last year.
for the last couple of years. Great. And then you had said, I think, in your presentation deck that the backlog is now back to normal levels. Can you perhaps quantify that for us or give us some color on that? Yeah, I'd like to do that.
Yeah, that's correct. As we announced earlier in the first quarter, during the quarter that we had worked through the backlog. Now, keep in mind, there's always backlog. There's customers who give us orders that are future-dated. They don't want them right now. They want them in weeks. There's things like product back order created by supply chains that create backlogs.
Justin, I think the. Thank you.
And one moment for our next question.
And our next question comes from Matthew O'Brien from Piper Sandler. Your line is now open.
Afternoon, thanks for taking the questions. I guess 1 for Todd and then 1 for for Kurt Todd. As far as organic growth goes, and I know there's a bunch of moving parts here, but that facts and acquisitions, et cetera, but it looks like the organic growth of the business in Q1.
adjusting for everything in days and all that was more like six or maybe seven percent. Is that math about right? And it would just seem like in this quarter of really strong procedural trends should it or could have been a little bit better? I don't know if there was something on the you know orthopedic side that was a little slower than you were expecting as the general survey did so well. Just a little bit of commentary about the
for everything in days and all that was more like six or maybe seven percent. Is that math about right? And it would just seem like in this quarter of really strong procedural trends, that number should or could have been a little bit better. I don't know if there was something on the orthopedic side that was a little slower than you were expecting as the general surgery did so well. Just a little bit of commentary about the math there. Thanks.
Yeah, I definitely get a higher number than that. Now, I remind you, when you come to trying to adjust for the warehouse issue, right, if you're calling that not organic, I'll remind you a couple things. First of all, we're giving you big round numbers, right? So we start at 30, that's a round number. Okay.
And it's not zero, right? As Courage just explained, there's a normal level. I would call it a day less than a day, because not every order that comes in goes out within minutes, right? And so you have, there's some number of what's a normal level. And so you wouldn't reduce that by 30 million, first of all, even if you were looking at it that way.
The other reason you shouldn't deduct all of that from your organic number is that as Kurt explained, those were...
procedure or disposable type products that were supposed to ship in Q4 to satisfy a procedure but did not. They shipped in Q1, right? Well that procedure that happened in Q4 didn't get delayed to Q1. It was done with a substitute product.
And so when our product arrived in Q1 instead of Q4, it satisfied a procedure in Q1.
So that is real business, right? So some of that catch up to the backlog.
served current demand. Not, you know, that old demand from Q4 to the extent that it was about...
single use or disposable products which was most of it, it's gone, right? It doesn't come back. So, so catching up on all those shipments.
provided for procedures in Q1. So it would be inaccurate to try and assess the organic growth of our business by just subtracting out all of that from your organic number.
Okay, that makes sense. And then, you know, maybe for Kurt or Torta, but I've had a bit of, you know, the interbones and bile res contribution in the quarter was much higher than we were modeling. It's usually a seasonally softer quarter in those markets and it wasn't affected by the warehouse at all. Last quarter.
that product knowing that BioReds is probably a little bit more.
A little bit more 24, 25 kind of kind of loaded at this point. Thank you.
Yeah, great, great question. I think I would start out with going back to my scripted comments, both acquisitions are ahead of where we thought they would be.
Great question. I think I would start out with, going back to my scripted comments, both acquisitions are ahead of where we thought they would be.
I've ever been a part of. And um...
the revenue model for that when we put out the announcement on that transaction. We said, you know, kind of single-digit millions in 2023 and I would tell you on this call that we're ahead of that. We think it'll be on the high end of single-digit millions at the end of Q1. The trends point us that direction.
into bones, which is foot and ankle. That is not a big foot and ankle trade show. Academy is not a big foot and ankle trade show. They have their own specialty trade shows, but the attention we got at the booth was really encouraging. And part of that is driven by the new products.
the PCR plating and the ankle and extent of the portfolio. So really good customer traction and interest and enthusiasm. And part of the acquisition was buying a standalone company with a dedicated sales force. And our ability to help grow that sales force. So we feel really.
We found good targets. We'll see what the rest of the market does, but we feel good about what we were able to accomplish in the quarter.
good targets. We'll see what the rest of the market does, but we feel good about what we were able to accomplish in the quarter. Understood. Thank you.
And thank you and one moment for our next question. One moment please.
Yeah, good afternoon. Thanks for taking my questions. You know, I guess I want to ask one about kind of OPEX leverage in the quarter. So I understand what happened with gross margin to kind of address that. But, you know, it looks like the kind of SG&A and RD grew almost at similar levels to revenue. So just wondering, you know, if you told me what the revenue was number was going to be, I would have kind of expected more BPS upside, I guess, than pre-delivered. So.
Mike, I'll remind you that the acquisitions, you know, they are dilutive in 2023. They both come with
higher levels of SG&A and R&D. So, you know, we had about a 10% beat roughly on the top and a 10% beat on the bottom. As I look at where the street was, I think the real...
The real change is in the below the line items where interest expense for some reason was a little low in the consensus and your tax rate was low. So we said tax rate was going to be around 25. We came in a little bit above that 253.
you know that's kind of what the taxes are looking like so far we'll see how that plays out during the year but as I look at where expectations were and where we landed I think the gaps are and interest expense being loaded to the beginning of the year because debt's going to go down as the year goes on it looks like
That's the difference I see as I look at the performance.
Okay, now that's helpful. And then I noticed that you were excluding some software and implementation costs related to this warehouse as you assume, but I mean, is that largely over now those costs, or is that going to continue kind of beyond the first quarter here?
Yeah, so we continue to be very focused on that. We are not to the efficient levels that we need to be out or plan to be out. So there's still a lot of focus to get to the next level of granularity and efficacy. So those we continue to spend extra money there.
I would expect that that should largely be behind us after Q2.
Okay, got it. Thank you.
Okay, got it. Thank you. And thank you.
And one moment for our next question. And our next question comes from Matthew Michan.
From KeyBank Capital, your line is now open. Great. Excuse me. Thank you for taking the questions. I'm not trying to get too cute here, but it looks like the revenue beat in the quarter versus your 1Q guidance is pretty close to the increase in the revenue guys at the midpoint. And I guess it just sounds like you guys feel better.
it is one quarter and we did raise the bottom range, the bottom of each range by more than the beat and Q1, right? So we do have...
Yes, we have increased confidence on the year, and we have taken guidance up more than the beat, but I'll grant you not a lot more. So we'll see, let's get another quarter in the book, then we'll talk after Q2.
I think fair enough. And then just to clarify on the comment around biobrace, are you in the high end, the greatest complaint? Is that what that comment was basically saying like one Q was, you know, somewhat if you annualized it was pretty close to the high end of that single digit millions. And then would you expect?
Would you expect a level of sequential improvement, I guess, you know, from here as more surgeons become more familiar with the procedure? Yeah, so yeah, Kurt did make a little bit of news there by saying that, you know, we're ahead of schedule and so where we said before was single digit millions without quantifying whether that was mid or high, Kurt did say we're after the first quarter it looks more like high.
single digit millions at a minimum. And then the second part of the question, sorry Matt. Sequentially. Oh sequentially. Yeah, I mean, yeah, we definitely expect the bio-brace product line to grow sequentially. Okay, excellent. Thank you very much Todd. Thanks, Rick.
And thank you. And one moment for our next question. And our next question comes from young Lee from Jeffries. Your line is not open. It's not open.
All right, great. Hey, Kurt and Bob, thanks for taking our questions. I guess to start, thank you mentioned that additional states are considering smoke legislation. I was wondering and you called out in California and Texas.
I was wondering, you know, in some of those states, especially between the two, is there more enforcement language in either California or Texas's proposals?
I do not know the answer to that question. I know that the states that are current, the 11 that are currently in place, they do run the gamut. I would say more legislation recently has had more.
kind of substance behind it. So I would expect that as more states come online, their legislation would have substance behind it. It just reminds you, it's not that people are not using smoke evacuation in states that don't have legislation they are. I mean, our sales force covers.
every state and the globe and we're out there every day advocating the benefits of smoke elimination and filtration in every operating room that we enter and surgical staff and surgeons know the value and the benefit and we think that the legislation just adds substance and enthusiasm momentum whatever
until you see the final version. So I'd probably leave it at that.
All right, great. That's very helpful. And then I guess as a follow up, you know, it seems like the warehouse issues are resolved. So most far up in the presentation. I think you mentioned ultimate impact remains unknown, but the one key waters were strong throughout.
I guess, you know, any way to help us understand the potential near-term or medium-term impacts from that comment? You know, are your reps mostly or fully going back on offense now, given more confidence in supplier consistency? Yeah, I think what we're trying to convey in that comment was…
quarters in front of us, including in this quarter. So, you know, our goal is obviously to get them all back and be on offense and get new customers with the innovation in our portfolio. But I can't predict that we'll get 100%. Obviously, our sales reps, market teams, our ND teams are working on that every single day.
And the goal is to get 100 percent. We'll see where it shakes out, but I think we're out of the gate with a good start in Q1. And we keep working on it.
All right, thank you very much.
Thank you very much. And thank you. Okay.
And I am showing no further questions. I would now like to turn the call back over to Kurt Hartman for closing remarks. All right. Thank you, Justin, and thank you, everybody, for your time today. We look forward to speaking with you on our next earnings call. And again, thank you for joining us. Good evening.