Q1 2023 Sotera Health Company Earnings Call
Good morning, and welcome to the Telehealth first quarter 2023 conference call.
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I would now like to turn the conference over to Vice President and Treasurer, Jason Peterson. Please go ahead.
Good morning, and thank you welcome to the Terror health first quarter of 2023 results call.
You can find today's press release, an accompanying supplemental slides on the investors section of our website at Terra Dot com.
[noise] web catches being recorded in a replay will be available in the industrial section of visceral Terror health website.
On the call with me today, our chairman and Chief Executive Officer, Michael Pietrus, an interim Chief financial Officer microbial during the call. Some of our comments may be considered forward looking statements that matters addressed in these statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected orange.
Blood.
Please refer to as a telehealth SEC filings in a foreign looking say statements like the beginning of this presentation for a description of these risks and uncertainties. The company's assumes no obligation to update any such for looking statement.
Please note that during the discussion today, the company will present, but gap in non-GAAP financial measures, including adjusted net income adjusted EBITDA adjusted EPS net debt adjusted EBITDA margin and net leverage ratio. In addition to constant currency comparisons a reconciliation of GAAP to non-GAAP measures for all relevant periods maybe five.
And in the schedules attached the company's press release.
Then the supplemental slides for this presentation.
The operator will be assisting with a Q and a portion of the call today. Please limit yourself to one question and one follow up so that we can get everyone an opportunity to ask questions.
As always if you have any questions post call. Please feel free to reach out to me in the industrial relations team.
I will now turn the call over to start Tara held chairman and C E O Michael Pietrus.
Good morning, everyone and thank you for joining telehealth first quarter 20 twenty-three earnings call consistent with the commentary made during our fourth quarter 20 twenty-two earnings call first quarter 20, twenty-three remedies and adjusted EBITDA declined over the prior year driven by the anticipate timing of Nordion cobalt 60 supply harvest schedules.
And lower volumes at Nelson Labs, and stare Jenex the lower volumes are typical for the first quarter, you're all those too sterile genetics volumes increased over the first quarter of 2000 2022.
Microbial will provide more detailed or financial results in a moment, but first I want to highlight a few items from our first quarter results.
Company revenues declined 6.8% and adjusted EBITDA declined 14.6% compared to the first quarter of 2022.
We delivered adjusted EPS of 13 cents for the quarter, which is Ah nine cent decrease from the same period last year.
The stair Jenex team continues to work through inflation headwinds and some customer supply chain challenges.
We continue to invest in additional capacity with six active expansion projects that stare Jenex are also making progress and R. E O facility enhancements in North America.
[noise] industry, leading enhancements underscore unwavering commitment to ensure best in class emission controls for our employees customers and communities in which we operate.
Nordion or other reporting segment within the sterilization services business experience and and anticipated 75% year over year revenue declined due to the timing of Cobalts 60 harvest delivery schedules.
We have consistently stated the timing of New Orleans revenues tied to the harvest schedules from her cobalts 60 suppliers, which are large utilities since we have good visibility into these harvest schedules, we're confident in our twenties twenty-three revenue forecast, even though the timing of New Orleans revenue will be especially irregular.
Sure with approximately 75% of the revenue expected to occur in the back half of the year.
As many of you know nordion sources of portion of its Cobalts 60 supplied from Russia.
Previously we saved at a total disruption of supplies from Russia could potentially result in zero to three per cent impact.
In total 2023, 20 twenty-three cetura held revenues with a quarter complete we now estimate the potential Russian Cobalts 60 supply disruption rich to be zero to 2.5 per cent impact on total so Tara health revenues.
Eden, partly insuring uninterrupted supply of Cobalts 60 is crucial to the global health care community. Because Cobalts 60 is used to sterilize approximately 30 per cent of the world's single use medical devices.
I am proud of the continued efforts fire Nordion team in this area. This is a great example of how we live our mission of safeguarding Global health.
Nelson Labs are lab testing advisory service business experience lower volumes in the first quarter as revenue declined 2.3% compared to the prior year. So.
The first score the ears typically softer for Nelson labs, well, we also have not seen a full recovery of certain types of testing to pre pandemic levels. We are encouraged by some recent trends and are operationally position for returned to preprint demick volume levels.
Asked communicated during our last earnings call, so telehealth clothes on and issuance of a 500 million dollar.
Alone B during the first quarter or net leverage ratio for the first quarter of 2023 was 3.4 times.
Based on where where your position if the first after the first quarter, we feel comfortable reaffirming the outlook that we communicated on our last earnings call. As a reminder, or 2023 outlook calls for both revenue and adjusted EBITDA grew up in the range of 5% to 9% versus 20 twenty-two microbial we'll recap.
The details of our outlook in a few minutes.
Although challenges still exists with inflation labor customer supply changed we are seeing some stabilization in these areas are teams remaining committed to delivering growth and profitability for our shareholders.
I would like to reinforce our mission safeguarding global health, which is at the heart of our work across the company or.
Our products and services serve broad human health and wellbeing needs, whether we are providing critical scientific expertise and regulatory consulting to solve our customers toughest really challenges preventing infection across a broad range of medical and pharmaceutical products or verifying the accuracy of Approx performance, we help to him.
Sure the safety of healthcare and would protect the lives of millions around the world now microbial will take us through the financials in more detail.
Thank you Michael I'll begin by cover in the first quarter of 2023 highlights on a consolidated basis.
And then provide some details on each of the business segments, along with updates on capital deployment leverage.
I will conclude with some additional comments around or.
2023 album.
I'm a consolidated total company basis first quarter revenues declined by 6.8% as compared to the same period last year to 221 million.
This equates to a 5.3% decline on a constant currency basis, as we experienced a total company foreign currency headwind of 1.5%.
We do feel these headwinds are moderating in currently expect foreign currency you become a tailwind during the back half of the year.
Dusted EBITDA declined by 14.6% compared to the first quarter of 2022 90.
$98 million.
Adjusted EBITDA margins, where 44.6 per cent, representing a foreigner 10 basis point decline from first quarter 2022 levels. The majority of which is explained by the anticipated Nordion Cobalts 60 supply harvest schedules.
Our operating performance drove adjusted earnings per share of 13 cents a decrease of nine cents from the first quarter of 2022.
The first quarter of 2023 had net income of $3 million or one cents per diluted share compared to net income of $31 million or 11 cents per diluted share in first quarter 2022.
Are reported interest expense for the quarter was 29 million.
Oh, let's take a closer look at our segment performances.
There are jenex delivered another good quarter was 7% revenue growth to $160 million and over a 4% segment of income growth that $83 million as compared to the first quarter of last year.
On a constant currency basis, stared scenic screw revenue over 8% compared to the first quarter of last year.
Revenue growth drivers for the first quarter include favorable pricing will about six per cent and favorable volume mix and.
Two per cent.
Partially offset by unfavorable changes in foreign currency of about one per cent.
Fair to the first quarter of.
2022.
Driven by the impacts of typical lighter first quarter volume relative to the remainder of the year and inflation, partially offset by favorable pricing.
Doherty on his first quarter revenue declined by approximately 75 per cent to $9 million.
Compared to the first quarter of 2022 with as expected it was.
Given by the timing of Cobalts 60 harvest supply schedules.
Nordion segment income declined to $2 million compared to the same period last year.
<unk> revenue in segment income changed versus the first quarter.
2022 was driven by volume decline and mix up nearly 71 per cent and headwinds associated with changes in foreign currency of over 4%.
For Nelson lab. His first quarter 2023 revenue declined by 2.3% to 52 million and segment income declined by over 17% to $14 million.
Compared to the first quarter of 2022.
As we previously communicated the first quarter's typically the lowest quarter of the year for Nelson labs.
On a constant currency basis, Nelson labs revenue declined approximately 1% compared to the first quarter of last year.
Reduce revenue for the first quarter of two.
2023 was impacted by volume decline and mix of over five per cent as well as headwinds associated with changes in foreign currency of one person.
These were partially offs, but bite at approximately 4% benefit from pricing.
First quarter 2023 margins for Nelson labs attracted to 27.1% or approximately 490 basis point decline versus first quarter of 2022.
The climate is driven by the impact of typical lighter first quarter volume relative to the remainder of the year, partially offset by favorable pricing.
I want to note that we are maintaining staffing levels that and also the labs in anticipation of increased volumes throughout the year.
Oh now provide highlights on cash generation capital of employment in that leverage.
During the quarter the company generated approximately $34 million of operating cash flow.
As of March 31st 2023, we had $648 million in cash and cash equivalents.
For 1 billion of available liquidity.
As Michael mentioned earlier during the first quarter, we close on a $500 million term loan b.
Using cash on the balance sheet and a portion of the new term loan proceeds we paid off the existing 200 million borrowings under a revolving credit facility.
May 1st put it into escrow the $408 million related to the Illinois ethylene oxide litigation.
Although this new that the funding of the 408 million cash settlement well initially increase our leverage ratio in the second quarter 2023 to four times, we expect net leverage to finish the year with it or stayed in longterm target range of two to four times.
408 million funded into escrow will be classified as restricted cash on the company's balance sheet and second quarter 2023 until the settlement is consummated and the funds are dispersed to the subtle and plaintiffs.
During the first quarter. The company also closed out an amendment to its first lien credit agreement, which added $76.3 million of a new revolving loan commitments and increased our total available capacity to $423.8 million.
About a poor pro forma basis at the end of the first quarter. After flooding 408 million to the settlement escrow our approximate liquidity is 600 million.
Plenty enough said strong position moving forward.
We're also able to increase our letter of credit capacity included in the revolving credit facility by $165 million to a total of $361 million.
R capital expenditures for the first quarter of 2023 total of 45 million.
Wrote Capex and facility enhancements drove the increased investment during the border.
As Michael mentioned and based on where we ended the first quarter or what we see for the remainder of the year. We are comfortable reaffirming the outlook. We provided in February of 2023.
To recap the full year 2023, we expect total revenues to be in the range of 1.055 to one point.
Nine zero billion, representing an annual growth rate of five to nine per cent.
Just that EBITDA to be in the range of 530 to 550 million also represented an annual growth rate of 5% to 9%.
The effective tax rate on their adjusted net income in the range of 30 to 33 per cent.
As I outlined at our fourth quarter earnings call increase in the tax rate compared to the prior year is primarily attributable to increased interest expense.
Bold with limitations and then ducked ability of interest expense as a result of 2017 U S tax reform.
Just that east E. P. S is expected to be in the range of 78 cents to 86 cents.
This represents a decline of 10 to 19 per cent.
Which is primarily driven by increase interest expense.
Well, the as well as the increase tax rate compared to the full year 2022.
Capital expenditures are expected to be in the range of 185 to 215 million representing continued elevated investment for growth as we continue to fund capacity expansions that both stared jenex that Nelson labs as.
As well as invested in E O facility enhancements in North America, and cobalt development projects at Nordea.
The other elements of our previously issued outlook remain the same as well.
And so we look at the cadence of quarterly reporting or provide some specifics on each business unit.
Minority on I will comment briefly on the Lumpiness that we continue to expect during the year.
Approximately 75% of Nordion total your revenue.
80 per cent of total your segment income we realized in the second half of the year.
Cause Michael mentioned previously the potential impact of it.
Please loss of Cobalts 60 supply from Russia, and total so Tara health 2000 twenty-three revenues is now zero to 2.5 per cent is there was no disruption in supply during the first quarter.
We expect steroids ethics and also the labs to realise increase volumes.
Origin expansion throughout the year.
I will now turn the call back over to you Michael.
As many as you know the E. P. A has released his proposals to restrict your ego regulations.
Now that the proposals had been issued there's a period for industry participants and members of the public to make comments to be considered by the E. P. A in finalizing the proposed regulations, although the proposals posts challenges that would require all industry participants to make changes to their operations. We've invested a lot of time effort and capital and are you up to silly.
And are confident in our leadership in this area.
Asked for the Illinois.
He'll settlement the planes Executive Committee reports that the process remains on track for the participation rates to be presented in May.
Pursuant to the terms of the settlement agreement on May 1st stair Jenex funded into escrow the agreed upon settlement amount of $408 million <unk>.
Subject to the participation by substantially all the eligible claimants, we expect a settlement to be completed in a subtle cases to be dismissed in late summer.
As I wrap up my comments I want to reemphasize Sutera helps remains in a strong position for growth drought 2023. The first quarter was atypical due to the expected case of Cobalts 60 supply harvest schedules overall, we feel very good about the company's current and future prospects at this point operator.
Oh I'd like to open the call up for question and answers.
We will now begin the question and answer session.
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At this time, we will pause just momentarily to assemble our roster.
And our first question here will come from Patrick Donnelly What city. Please go ahead.
Hi, Good morning. This is lizzie on her Patrick So I think I'm a for them to call you mentioned.
Hi, 30 per cent margins pronounced.
Half the year it sounded kind of can shop to have an order trend can you talk a little bit more about what you're seeing.
Wow.
Good morning, Lucas Michael Yeah, we we expect to see the the Nelson labs margin rates settled in around the levels you just discuss mid to high thirties, and we we expect the volume to continue to pick up as the year progresses.
Great. Thanks, and then on staring Jenex I think you mentioned around six per cent pricing.
For the quarter is that kind of how we should think about it for the area I guess, you know outlook on inflation broadly.
For me.
Mm. Thank you we as we stated across the company, we expect three and a half to five per cent price per year stared Jenks, it's kind of in the middle of that range Nelson's on the lower end that range in New Orleans, and the higher in that range.
Over the last several quarters, we've been running a little higher on those range is because of the inflation offset I think you'll see it's settled in overtime into the more more typical ranges that we've seen.
But but the last couple of course had been a little higher because of inflation offsets.
[noise] [noise]. Thank you.
And our next question will come from Mike Polack with Wolf Research. Please go ahead with your question.
Hi, Good morning, Thank you for taking the question.
Do for me <unk> first time the guidance appreciate the affirmation of the full year.
Any twists and turns in the segment relative.
<unk> to your prior plan my my suspicion is no, but I'm just wondering if.
If they you know maybe Nelson now a little lighter than you had before their journey cause there's a little better at anything like that or or or all three segments individually in year now versus when you first set the outlook.
Yeah, Yeah. My God. This is Michael I would say there there in line with what we gave you back in February when we did the initial outlook, it's it's pretty consistent.
Thank you the follow up on Illinois have you seen the participation rate or or when when it specifically do you expect to.
<unk> will will we the public.
He those at some point this.
This month via filing or or other for them now.
No I am so that my bills or just being presented now to the claimants. So that's just going out they'll have a period of time over the next weeks.
And months that there'll be reviewing that we don't even have visibility to that right. Now we do have ongoing dialogue with the plaintiff's counsel to make sure things are tracking long as we stayed at on the call here today, We did fund the escrow the the the may 1st escrow of $408 million, because we feel comfortable and how things are progressing but we.
Won't have visibility to still late summer as I mentioned in the past as well.
Okay. Thank you. Thank you.
And our next question will come from Sean Dot with RBC capital. Please go ahead with your questions.
Yep. Thank the morning, Michael now with the the [noise] excuse.
Excuse me the E P. A proposed a lot.
Can you update us on on how far along you all are in in upgrading your scrubbing capabilities. How many facilities are done how many are left to go and then the enhancements you've been making are are those sufficient to meet what the E. P. As laid out in these more stringent.
Stringent standards now.
Yeah, we're progressing very well on our improvements Ah we've stayed in the past there's three primary improvements that we've been putting in place a central discharge double scrubbed and permanent total enclosure negative pressure tool for we're very comfortable with the investments. We've made the progress we've made Ah there are some things in the proposal that you know the whole.
Industries Gotta address there's a public comment period that will take place over the next several weeks and months and you will provide our comments to that point there will be some things that we need to modify based on that it may require some additional capital I mean, there are some things that are in there that potentially could be unachievable for the entire industry. I don't think ultimately that's the intention of the E. P. I think when they get an undersea.
Dan from the industry, how these facilities operate.
They'll make the appropriate adjustments. These are draft proposals, but we feel very very good about the leadership position to the investments we've made and the direction that we're heading on that.
Okay, Great and then on the guidance you touch on a little bit microbial and prepared remarks, but.
Steve ramping EBIT Guy ended the kind of the remainder of the year you know I guess, it's the expectation there'll be driven pretty equally across all of the segments or is this mostly dependent on Nelson rebounding and nordion operating at a more kind of consistent caden.
<unk> I guess is there anything more you can cheer on kind of the driver. Then then the visibility you have at this point.
Into the back half of the year.
This is Mike field as you know, we indicated you know with Nordea and being lumpy and we think 75% of the revenues of 80 per cent of the EBITDA will be in the second half.
That that continues to be on track you know with what we had originally said and so there's no really change and.
From what we originally said and really with stereo Jennings and Nelson you know first quarters typically lighters, we've seen historically and we think that'll continue to ramp up over the remainder of the year, you know sort of on an even basis.
Okay, great. Thanks again.
And our next question will come from Luke Sir got with Barclays. Please go ahead with your questions.
More thank you.
I appreciate that you were talking about the recovery here, and Nelson, but and and you're expecting volumes come back, but anything you could point too.
Give us a little bit more clarity there is there anything where there push out in the corridor. You know can you talk about any of your your backlog you're building accents backlog anything just to give us some comfort that volumes will actually come back yeah. We looked at some of our order trends in our backlog, particularly no validation area were seen a little bit more strength then we saw earlier.
Ah So that's that's from a prepared remarks around pre pandemic levels as you may recall, we've talked about validation.
Not fully recovering from the pandemic levels that that in particular some of the things that we're seeing some optimism around that has a mood board.
So the team continues to execute on it is I've stayed in the past you know what I'm. Most proud of is the turnaround time competitiveness that we've improved as well as the customer sat scores in the net promoter scores that we continue to get strong result, so the team's doing doing poorly wells, we expect the ramp to come in one of the other things that we've talked about in the past it's just the labor.
Situation, and we feel pretty well situated on labor as we progress through the year as well.
Okay, and then for follow up here can you just close to recapture rates are for the Atlanta facilities and and your other E O sterilization stereo Jenny.
Please define what you mean by recapture right well the so it's expected that the the new rulings are gonna be around like 99.5 per cent recapture.
There you go I think above that yeah, I think what you might be referenced sheen is process some issues and I don't mean to get too technical here, but yeah, no. It's fine [laughter], yeah, Yeah, sure [laughter] I'm not I'm not an engineer so Sean Orange stare Janet cause it probably throwing up holding his nose right now like.
But but let me let me just say show there's process emissions or human missions. So it depends on where you're talking about I think what you're referencing is probably some of the process of mission stuff and the goal is 99.5, we were achieving in some of these facilities, particularly Atlanta, where we put the improvements and it's been well documented we're achieving 99.99.
Nine six I think is what it is or five Ah. So we've got we feel very good about that the question will become this is one of those things. So there's some monitoring things embedded within the new rules. The proposed rules that I think is can be a challenge for the industry about the the frequency of the monitoring and things like that some of those are really.
Technical matters, but overall, we're not concerned about our ability to capture the efficiency required and the proposed rules.
Alright, great. Thanks.
And our next question will come from David Windley, What Jeffries. Please go ahead with your questions.
Hi, Thanks, I wanted to first come back to to Nelson If I could last year. Michael you talk to you you know you kind of have that first quarter seasonality.
Get into that.
There was a kind of a timing mismatch between inflation that was impacting the labor in the business and your ability to put through price, which was coming in later in the year and then you would also made a couple of acquisitions that came in at lower margins are expected to you know to scale those margins over time.
And so I guess those seem to add an additional anomaly to the margins last year and then this your margins are that much lower so I guess I'm not hearing I'm hearing in my prepared remarks that this was largely as you expected.
And I guess, if that's the case I'm not understanding why that was what you expected.
Yeah, So David I would say the overall geography. The businesses is total and going forward was the question I was addressing we'd like to see more volume in all three of our businesses. Obviously didn't already on when we we are very good visibility onto that as far as Nelson labs, the first quarter's always the lowest.
There has traditionally been the lowest I shouldn't say always has traditionally been the lowest in our labor Ah leverage isn't as strong there because of the fact that you know we've got labor built in and we we don't have the flexibility as dropped labor in and out. So overall you know, we we feel good about where they're going to continue to get price to offset.
<unk> and I tell you the the challenge when you look at it for the quarter on the margin rates that you're looking at relative to last year or previous course would be on the volume side and also the productivity.
Okay. Okay. That's helpful. Thank you on on the E. P. A for my follow up one of the things that stood out to US you you mentioned the the monitoring frequency as as long I. Appreciate the the specificity. There what are the things that that stood out to US was maybe the 18 months to come into compliance.
You have a jumpstart it.
At Terra any investments that you've been making I'm I'm guess I'm one would be interested in your reaction to.
That 18 month time frame is that pretty aggressive and or is it something that because you've started ahead of the game that you could you know you could comply within that timeframe, but maybe the industry couldn't thanks.
A very good question, David I think the 18 month time period as aggressive for everybody, including us, but I do think we're way ahead of this game. Okay. If we had two I think we can be pretty well situated to meet that timeline that doesn't mean us and others in the industry won't take note of that in the proposal.
Our public comments that is a very aggressive timeline. When you think about the amount of equipment in construction and ventilation, particularly the fact is if I recall some of our previous conversations one of the things that we said is important that we took a leader leadership position and design negative pressure permanent total enclosure tool for.
The amount of work that's required to accomplish that with duct work and everything else just the supply change to be able to keep up with the requirement for an entire industry. When you have 100 facilities across the U S is can be very challenging for many we feel really good about where we're at in the advancement. We've made in that area. Those are the kind of things will David M reference and I think they're gonna.
Have to be sensitive to what industry can actually accomplished I think there's already a common in the document that said there could be extensions up to a year on top of that.
But in conclusion, we feel good about where we're sitting on this because we are pretty far along in this.
Got it okay I appreciate that reflected thank you very much.
Our next question will come from Casey Woodring with J P. Morgan. Please go ahead with your question.
Hi, Thanks for taking my questions just to follow up on the E. P. A.
Proposed regulations. So you talked about the comment period that you're taking part in can you elaborate just on the range of outcomes there.
Puzzled goes through as is how much capital would you need to commit to make those further necessary enhancements.
Yeah, Casey, we're still working our way through and we are in early stages of assessing the extent of the proposals and the and the required modifications and capital I don't think it's going to be a huge number but I don't want to throw a number out there till we get further in this in this assessment and also understand where the E. P. A this is a draft proposal that I think is can be very.
There's gonna be a lot of comments on that not only from us, but I think people across the industry would be artist suspicion.
Got it.
<unk> performance has generally been better than expected. So far this year. So I'm wondering if you guys have any upside to the stereo Jack Scott or if your contracts there I'm more or less locked in at this point what did you see any sort of benefit from that three recent outside gross upsized growth from your customers.
Now at this point in time, where we're pretty confident in our guide that we've given in the 5% to 9% across the whole company, we haven't given specific guidance around particular business unit, but.
But we do expect <unk> to see increase levels of year progresses.
Got it and if I could just get one more in what are your new effects assumptions and better than the current guide and have those changed from the beginning of the year. You know I think currency was expected to be neutral on the end of the prior died so what's your constant currency guidance look like now.
Yeah.
Microbial, it's really pretty much the same as what we you know when we originally guidance in terms of the assumptions that are in there.
And we really haven't seen any any big changes to cause us to.
Pause on it.
Thank you.
And our next question will come from Matthew Machine with Keybanc. Please go ahead with your question.
Okay, Great Hey, Michael all morning, the the.
Upside to like Med Tech volumes of question, maybe in a little bit of a different way.
<unk> I'm, assuming that that your customers would probably like you know more volume going through those facilities. As you go through the rest of the rest of the year because I think I think some of their numbers are coming ahead that expectation anything that would prevent you from being able to add a little more capacity in the system and kind of.
To meet some volumes from the customers, especially if they're asking you to do Sir.
No Matthew when we look at it.
We're tracking kind of it and demand within health care and the volumes have been pretty strong we don't see that strength you know one to one correlation translating back to us in in the volumes and that could be caused by Ah inventory that may be in the system or things on supply chain that may be a challenge.
But if the if the demand we're just suddenly start to mirror the on a one to one basis I feel pretty good about our ability to react to that you know we've been spending a lotta time as we've talked to the past right operational excellence and things we've been doing our facilities to try to continue to get more capacity in place not only you know brick and mortar or additional chain.
<unk> or or whatever it may be but also just how do we drive more efficiency within our obligations and and make the team continued to progress in that area as well. So I think we'd be able to react to any opportunities if they came to us.
Okay, and then it looks like you're having continued negotiations with one of your Yo plants in in in Ontario, California.
Can you quantify.
Quantify like to some extent like what percentage of <unk> that that that facility is and and if this were to drag on for you know a little bit longer what would be like the worst case, you know for for that and and the upcoming corner.
Yeah Man just to clarify we we really don't have an ongoing negotiation with them. They they've asked US we have an agreement with him to put the facility enhancements in place that were coming all our U S facilities, and we haven't a timeline across both L, a and Ontario with them and what they've asked us as in the interim period.
To try to figure out how to capture even reduced levels of emissions in that interim period, and that's what you see so occasionally you might have a blip or something exceeds that lower level until the new improvements are completely and that's what you see going right now listen this is important for our customers. So important for us, but we have 50.
[noise] facilities plus around the the world. This is a relatively a small portion of our stare jenex business I mean, the mixing that facility isn't on the higher end of our mixed products I won't get into more particulars in that but I would just tell you. This is not you know our largest plant most profitable plant by any stretch.
Okay, but that doesn't mean, it's not important to our customers doesn't mean, it's not important to us.
And we hope to have that up and running here shortly.
Thank you for the color on that.
Great.
And this concludes our question and answer session I would like to turn the conference back over to Michael Pietrus for any closing remarks.
Thank you Joe. Thank you everybody from participating this morning as you can see the quarter pretty much came in as what we thought little saucer at a couple of areas, but overall you know the big driver here was the noting on which nordion volumes, which we well expected and see that back end loaded throughout the year. So overall, we feel real good about where the company's situated we thank you for.
Your ongoing support and wish everybody a good day. Thank you bye bye.
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