Q2 2019 Earnings Call
Q.
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Good day, ladies and gentlemen, you are currently on hold for today's conference call. At this time, we're assignments days audience I'm planning to run rate. Shortly we appreciate your patience and please continue to hold.
Good morning, ladies and gentlemen, thank you for standing by welcome to Invacare second quarter 2019 conference call and webcast.
After the management overview, we will open up the call to questions investors and analysts interested in asking questions will need to dial in as questions cannot be submitted via the webcast for the first part of the call. All phone lines have been muted. This conference is being recorded on Tuesday August six 2019.
I would like to turn the call over to lowest Lee Invacares director of Trevor Treasury and Investor Relations. Please go ahead.
Thank you John joining me on today's call from Invacare are Matt Monaghan, Chairman, President and Chief Executive Officer, Kathie, Lenny Senior Vice President and Chief Financial Officer.
Today, we will be reviewing our second quarter 2019 financial results and providing investors with an update on our transformation.
To help investors follow along we've created slides to accompany this webcast.
For the family and you can find a link to our webcast slide presentation that we will refer to during today's call at Invacare Dotcom Flash Investor Relations.
Further information can be found in our SEC filings.
Before Matt begins I'd like to note that during today's call. We may make forward looking statements about the company that by their nature address matters that are uncertain.
Actual future results may differ materially from those expressed our statements today due to various uncertainties and I refer you to the cautionary statements included on the second page of a webcast slides and our second quarter earnings release.
For an explanation that item considered to be non-GAAP financial information that will be discussed on today's call such as constant currency net sales constant currency SGT free cash flow adjusted EBITDA and adjusted net loss. Please see the notes in the appendix of our webcast slides and related reconciliations in the earnings release posted on our website.
I will now turn the call over to Matt money.
Thank you Lewis and good morning.
In the second quarter, we made good progress against our transformational goals and we delivered broadly improved financial results. We are reaffirming our 2019 2020 guidance today, and we'll talk more about our plan.
On slide four you will see we approved at all the key consolidated performance metrics during the second quarter progressing towards our long term targets.
Consolidated constant currency net sales grew for the first time since third quarter 2015.
Consolidated constant currency net sales increased 2.9%, excluding respiratory products, where we'd expected softness in North America. As a result of previously announced reimbursement changes and where despite the anticipated declines in respiratory sales margins still improved.
Consolidated mobility and seating net sales grew 5.5% on a constant currency basis due to strong customer demand.
Net sales in Europe grew 4.2%, where mobility and seating sales grew 11.2%.
In North America mobility, and seating units increased at above market growth rates and margin improved offset by adverse price and mix.
Within North America mobility, and seating or powered mobility business was up robustly with declines in other product areas due to limited portfolio trimming of legacy products late last year and competitive pressure in some smaller sub segment.
We expect new product and other actions will improve revenue growth in the coming quarters, which I will discuss in more detail in a few moments.
All the while we continue to emphasize a culture of quality and regulatory excellence as part of our core values.
Consolidated operating loss improved by more than 33% with North America, showing a significant improvement of $6 million or 83%.
Consolidated adjusted EBITDA increased $5.2 million returning the company to positive results.
Improvements in operating loss and adjusted EBITDA were driven by reduced SGN expense improved gross margin, despite foreign exchange headwinds and previous restructuring actions taken in 2018.
Lower SG they expense in the first half was due to actions implemented in 2018 in both Europe and North America.
These actions will help simplify how we do business improve customer experience and will enable us to be more competitive to drive additional sales growth.
We will continue to improve business processes and reduce costs.
Free cash flow improved nearly $25 million compared to last year end compared to first quarter. This year, resulting in positive free cash flow of $300000. This significant improvement was due to planned reductions in working capital and lower operating loss.
We achieved all of this in a very dynamic international trade environment with escalating tariffs a significant unfavorable foreign exchange rate, we are still evaluating the impact of the tariffs announced last week, we expect our previous actions would mitigate the majority of any new negative impact.
Overall, we're pleased with the strong improvement in our results. We continue to execute our transformation plan and believe we are on the right path to sustain this positive trend.
As a result, we remain confident in our outlook for the remainder of the year expecting normal seasonality to additionally, improved results and profitability and cash flow in the next two quarters.
Turning to slide five I'd like to review the keys to success for the second half of the year.
Starting in North America, we're focused on returning the segment to profitability.
As demonstrated by our results we've made great strides with more to come.
Augmented commercial leadership team is fully engaged to drive profitable sales growth across all product lines.
Importantly, we are bullish about our growth opportunities and mobility and seating and are well positioned to accelerate sales and increase adoption.
We realized above market unit growth and higher margins with revenue adversely affected by price and mix among the product categories.
As we progress further with our planned supply chain actions and process improvements in the coming quarters, we will be increasingly able to drive share gains with revenue growth and improved margins.
We also expect our strong pipeline of new mobility and seating products will help improve mix and drive growth.
The pipeline includes our new sit to Stan powered seeding system.
The smooth manual wheelchair power add on already launched in Europe .
And our new Bariatrics manual wheelchair, which recently won a 2019 Red Dot award for product design excellence.
Lifestyle product sales have performed well and respiratory products sales were lower than prior year are performing better than expected.
When coupled with continued process improvements, we expect to realize improved gross margin lower as you the expense and enhance profitability during the second half.
In Europe , we continue to have good performance and as guided expect continued net sales growth in 2019.
In mobility and seating new products and seasonal buying patterns are expected to drive stronger sales.
And then lifestyle newly introduced products such as the Norbit Invacare stand assist inverted ebo patient lists are expected to provide a sales boost as well.
We have plans to simplify how we do business in Europe , and strengthen profitability within Europe . We expect further improved gross margins as our France operation normalizes with consolidated volume from plant transfers and new product introductions.
Turning to slide six the path to reaching our 2020 long term goal remains unchanged. We have a diversified plan with contributions from different regions product lines in many opportunities to improve business processes.
Over the next 18 months, we see a strong opportunity to drive topline growth with continued commercial execution.
New products and simpler customer interactions.
This will be done along with systems improvements and a supreme streamline supply chain that will reduce costs and improve competitiveness.
We expect that some of these actions will be profitable sales growth and lower costs to achieve our objective of $85 million to $105 million of adjusted EBITDA run rate by the end of 2020.
I'll now turn the call to Kathy Lenihan to discuss the performance of the segments and additional financial results for the second quarter.
Thanks, Matt before we get into the numbers I want to remind you that beginning in the first quarter Tony.
We retired our segment reporting with the former North America, It to me and I PG segments being unified into a single operating segment called North America.
And the former Asia Pacific segment, now being reported as part of all other.
We revised our segment reporting to more accurately reflect how the businesses are managed and how performance has assessed.
Turning to slide eight reported net sales decreased 4.2%, while constant currency net sales increased 6.6% with strong growth in mobility and seating offset by expected declines in respiratory products.
Excluding respiratory products constant currency net sales grew 2.9%.
Consolidated gross margin, including respiratory products increased 20 basis points to 27.6%, primarily driven by lower freight and material costs, partially offset by unfavorable foreign exchange.
Constant currency SDMA improved by $2.8 million or 3.8% driven by restructuring actions implemented in 2018 and lower product liability costs.
Operating loss improved by $2.3 million to $4.5 million.
Primarily related to reduced as DNA expense, and partially offset by lower gross profit higher restructuring costs and unfavorable foreign exchange.
GAAP loss per share was 38 cents as compared to 50 cents last year and adjusted net loss per share was 31 cents as compared to 41.
Importantly, free cash flow was positive $300000, a significant improvement of nearly $25 million due primarily to reduced working capital and lower operating loss.
Adjusted EBITDA also returned to positive territory, a $3.6 million an improvement of $5.2 million driven by reduced operating loss.
Turning to slide nine.
During the second quarter reported net sales in Europe decreased 3.5% compared to the same period last year due to strong foreign exchange headwinds.
Constant currency net sales increased 4.2% driven by an 11.2% increase in mobility and seating products.
Operating income increased $300000 or 5.8% due to constant currency net sales growth offset by unfavorable sales mix and unfavorable foreign exchange.
The unfavorable impact from foreign currency translation was $800000 in the quarter.
Moving to slide 10.
North America reported net sales decreased 4.3% in constant currency net sales decreased 3.9% largely impacted by an anticipated decline in respiratory product net sales of $4.4 million or close to 24%.
Well mobility and seating sales dollars declined after a narrow set of product discontinuations.
We otherwise strong strong unit growth during the quarter.
Gross margin increased 150 basis points due to improved product mix, resulting in better margins in every product category and lower freight expense. Despite the negative impact of tariff and related material cost increases of approximately $400000.
Operating loss improved by $6 million or nearly 83% primarily due to improved gross margin and reduced SDMA expense.
Returning the profitability remains central to our transformation and we are making strong progress against this objective as demonstrated by the quarterly results.
Turning to slide 11.
Reported net sales in all other decreased 10% in constant currency net sales decreased 3.9% impacted by a slowdown in reimbursement in New Zealand as a result of the government's fiscal year end.
Operating loss increased $3.1 million, primarily driven by the decrease in net sales and increased corporate stock compensation expense.
Moving to slide 12.
Free cash flow was positive $300000, a significant improvement of nearly $25 million compared to last year and sequentially.
Primarily due to reduced working capital and lower operating loss.
While we expect significant improvement in adjusted EBITDA in the second half of 2019 as compared to the first half of the year.
We anticipate higher restructuring costs and capital expenditures that are supportive of our transformation and therefore for the full year 2019, we continue to expect free cash flow at our previous guidance of at or favorable to usage of $25 million.
Total debt of $299 million excludes operating lease obligations of approximately $21 million that were capitalized on the balance sheet. As a result of the adoption of the new FASB lease accounting standard effective January one 2019.
The company's credit facility remains undrawn.
The company believes that a return to positive adjusted EBITDA driven by operational performance cash balances on hand, and expected free cash flow will support the company's transformation plans and enable the company to address future debt maturities.
On slide 14, we continue to make progress towards meeting our full year 2019 goal.
During the second quarter, we realized improvement in every key consolidated metric with constant currency net sales growth gross margin expansion lower constant currency EPS DNA expense reduced operating loss higher adjusted EBITDA and positive free cash flow generation.
Although year to date adjusted EBITDA is only $5.1 million of our full year guidance of at least 20 million, we expect performance to accelerate in the second half of the year due to typical seasonality of sales the normalization of the French production transfer supply chain initiatives to expand gross margins and realizing the benefit of cost reduction.
As a result, we have full confidence in attaining our guidance of adjusted EBITDA in 2019.
Regarding free cash flow, we expect free cash flow to be consistent with our previous guidance to be at or favorable to usage of $25 million.
The second half 2019 free cash flow is anticipated to be impacted by the timing of cash collections from expected sales growth as well as higher capital spending and restructuring costs that support the transformation, which should be offset by a lower net loss and inventory reductions.
Based on our visibility into the transformation and the trends. We are seeing we are confident we will meet our 2019 goals I will now turn the call back over to Matt.
Thanks Kathy.
In summary, we continue to strengthen the business and execute our plan to deliver significant improvements throughout the remainder of the year ended 2020, I'm confident in our ability to meet our 2019 guidance and our long term objective of $85 million to $105 million of adjusted EBITDA run rate by the end of 2020.
We appreciate your continued support of our shareholders associates through this process.
Thank you for taking the time for the call. This morning.
We will now take questions.
Thank you.
Ladies and gentlemen, if you would like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speakerphone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.
Again as a reminder, please press star one to ask the question, we'll pause for just a brief moment hello, everyone an opportunity to signal for questions.
We will now take our first question from Matthew Mission of Keybanc. Please go ahead. Your line is open.
Oh, Hey, Matt Cathy Lewis actually spending this quarter.
Good morning, I believe.
Good morning can you could you go a little bit further and talk about the pricing and mix issue you are seeing in North America mobility and seating.
My sense is and you guys were we're building depth in that portfolio.
For a larger more specialized salesforce is that is that strategy not working.
No, it's actually working pretty well, Matt Thanks for the question.
At the end of last year, we had some legacy manual products that.
We wanted to renovate and make space in our portfolio. We discontinued a number of those they were relatively minor I don't think we thought we were going to Skinner knee with those turns out of the second quarter. After we have gotten through the inventory of those.
Did turn out to be a headwind for us, but we've got great new products in the pipeline and before too long, we will have an even stronger replacement so that was really it.
On the on the power side, we were very positive about the unit uptake the margin improvement and overall the supply chain improvements have driven margin in the category.
I would say the other item is a new power device with a more simplified seeding system had been a really strong seller in the quarter and I think our sales team was out with a lot of excitement and emphasis of that product turned out to be a lower ASP in the lower margin products and that was also due to the mix shift for this quarter, we think temporary it's a great product, but as part of our whole portfolio and we'd expect that to get back to normal levels were as unit sales growth margin in revenue expanded following quarters.
Okay excellent.
And then moving to the respiratory business.
What do you what do you see as like the long term outlook now for for for that business as as you've had a little bit more time to assess.
The some of the changes in reimbursement and the impact it had on on on that portfolio.
A couple of things have happened I'd see their agreement external and internal I think externally at this wave of new metropolitan reimbursement has kind of gone through the marketplace. It will it will stabilize at the levels, we think thats probably close at hand.
And we can deal with that.
Positively going forward internally this downturn from a year ago in volume has forced us to really look closely at how we spend money how we develop products what makes us easy to do business with and you can see the interesting results that despite being down 20% to 30% in the last few quarters profit from that segment is actually up. So we look forward to the market comes back in a more normalized fashion, which we anticipate.
Happens in the second half of this year as fleet owners and operators.
Start planning for the winter flu season, but if even if it's late coming back we expect to be continued strength in that marketplace and then lots of new products in the pipeline over the medium term that will help us a viable as easy to do business with for our great respiratory providers.
Okay.
Perfect and.
And then lastly, I mean your businesses is much more concentrated now in Europe .
As you start and it's been it's been nice to see the sustained momentum there over the last over the last several quarters, but as you start thinking about like Brexit.
How are you how are you planning for it.
Have you seen any kind of pull forward from from some of your customers to get ahead of it.
And Ken and it seems like it seems like a large issue to kind of address.
Interesting question, obviously, there's no firm answer, but it seems like we're all speeding towards an outcome here pretty shortly I think we'd like lots of companies put some inventory in the UK a number of quarters ago. When it was thought then to be close at hand, just to prevent any cross border issues from disrupting supply chain, we have not had to add any inventory.
Increase it for that purpose lately, we do have a facility in Wales, which continues to be a great facility for us in the bed and sleep surface part of the market, we do some wheelchair business there.
It doesn't support all of the UK exports and things in the balance there with our forecast on foreign exchange really is very manageable.
I don't know Cathy weather comments Nick.
For us it's not a huge strategic shift at this point no and to your point earlier in the year, we did add inventory into that facility anticipating that Brexit what happened earlier in the year that what is that.
Timing is but we wouldn't anticipate that we'd have to add any more than that what we have there.
All right. Thank you very much.
Yes, Thanks, Matt.
We'll now move onto our next question from Chris Cooley of Stephens. Please go ahead. Your line is open.
Thank you.
Congratulations on the quarter and appreciate you taking the questions.
Maybe just weren't there thanks.
Maybe just two or three quick ones from me if I may just follow on that as we think about the north American mobility and seating business.
Could you remind us the headwind created by the legacy manual products that you've exited in terms of the impact not only into the Two Q2 but also how we should think about in terms of what you have to hurdle.
Here in the back half and I had just two quick follow ups.
Yes, we don't normally break that level of detail out, but as we were looking at how the quarter developed this year. We saw that what we thought was going to be a relatively minor product discontinuation had some some bigger results I think.
It really blunted, the very favorable business that we had in the power side I think as we look to the second half of the year in North America, we affect power to continue to accelerate for more time in the market with the existing products plus we have some really exciting new powered mobility products, which we think will overwhelm.
Any headwind that remains from our legacy products and then.
It won't be too many quarters before we have an entirely new line of annual products that are especially exciting some of those are starting to come out now in Europe , and we've had really great feedback from the marketplace and end users on as utility to products and how novel. These are.
So I think in the short term, we probably can overcome this in the third quarter because third quarter is normally have been accelerating quarter four as seen with fourth quarter should be a little bit of.
Deduction from overall growth, but the net should be positive and then next year.
I think we'll be solved in mobility and seating growth in North America was down about 2.6% on a constant currency basis, which is roughly about $800000. This was a piece of that NAFTA majority of that.
So that just gives you a round of the maximum that it could have passively event, but it wasn't the maximum amount or the majority of the amount of the decline of 800000. It was more related to the mix issue that Matt spoke about earlier and the pirates your side of the house, yet we had nice growth on the volume side.
Good sales enthusiasm for a lower price lower margin product and power, which we think now is in the portfolio people understand it will get back to a normal level of analysis from our commercial teams. So that will balance out and then we had a few little product sub segments, where theres some competitive dynamics going on that we have to get ahead of here in the second half of the year, so that should move forward.
Understood I appreciate all the additional color there.
And then if we I guess just shifting gears a little bit just about looking at the portfolio. You highlight that you will continue to adjust the portfolio.
Going forward.
And your path to the long term adjusted EBITDA guidance.
And when I look at your four key metrics for the quarter, if we excluded.
North American respiratory you're essentially a 5.5% so you're in that mid single digit organic growth.
Clearly.
Adjusted EBITDA margin would be.
Much higher than where you were I was with cash flow.
Yes, I'm going to be the proverbial dead horse here, but.
What additional metrics do you think you need to see here in the back half of the year to kind of further evaluate the north American business are there.
Other changes that we've all perceived as being structural that maybe you think are actually more temporal in nature or are there ways to further drive leverage there.
Thanks, so much.
Yes, I think I'll start new Kathy can follow up I think second quarter for us was getting a lot of things in order and making sure shareholders understood what was going on to the balance sheet and cash management, we feel very comfortable about how we executed on working capital improvements as we had predicted and we want to see things growing so really everything grew except.
Where we screened or need here with this product discontinuation, a little bit of mix shift in power mobility.
I think.
In the second half that ought to continue pretty strongly and we like the overall portfolio in North America, which should generally improve as Kathy mentioned in her remarks through the year, we've only accumulated $5.1 million of EBITDA towards our 20, but thats easily actually pretty appropriate and what we're looking for in third quarter and seek all investors should look for third quarter is that that's really got to be the EBITDA growth quarter. This was like cash flow containment mixture there any problems in the underlying machinery third quarter and then fourth quarter also have to be EBITDA growth quarters growth of the topline good margin and EBITDA expansion.
That's what we expect.
Congratulations on or trying to constant currency organic sales growth. Thanks, so much thanks, Chris.
Appreciate it.
We will now move onto our next question from Bob Labick of CJS Securities. Please go ahead. Your line is open.
Good morning, Bob.
Hi, I wanted to dig in a little more on North America, obviously terrific progress on reducing the losses, there and you had a few stats on it but maybe talk about is it more.
Was it more from a higher gross margin or lower risk and how sustainable are those changes and then also can you.
Reduce the loss or sequentially from here or was this just such a particularly good quarter I'm talking you know for the back half of your how should we think about the losses going forward and the balance of 19.
Thanks for the question, so I think pretty good balance between gross margin improvements that are sustainable.
Listeners will remember from prior quarters, we've talked about headwinds from tariffs headwinds from freight.
Freight variances from product moves to different plants. Those things are all beating now so some work to do in France, but generally much better there and then cost reductions that you would expect.
Manufacturing enterprise to be undergoing to improve gross margin has improved and then on the M&A side. We did a number of things in 2018, which are still annualizing into benefits plus what we've announced in 2019 also and I think between the two all sustainable and.
Balance Kathy.
Any more color.
I think you're right that the positive impact that we saw in Q2 was from both gross margin expansion as well as Ftn a cost reduction we'd anticipate the gross margin would continue that favorable mix should continue for the remainder of the year and the CNS side of the house much of the reduction in Sq, where cost reduction actions that we took last year. So I think the SNA structure is probably where it needs to be at.
Although we will continue to look at it as we evolve the business and as we go into next year from an ERP perspective that should also give us.
An opportunity to reduce and streamline on the M&A side of the house, but I wouldn't anticipate that large step down until 2020.
So some big chunky things to do to streamline our business processes that make us, especially easier to do business with that should yield some benefits on sales growth.
And.
Lower cost as well and.
We've become as Kathy mentioned, probably the middle of next year, but look we're always looking at saving cost and be more efficient along the way.
Got it great and then in terms of just seasonality of North America.
Europe is pretty pronounced but given the.
Consolidation of the prior segments into North America, and the change in the portfolio underlying portfolio, how should we think about the seasonality of North America.
Second half versus first half on a from a revenue perspective.
I think.
Third fourth should generally be bigger than first second combined I think there is.
Fair amount of consolidation in the marketplace. So we're going to see some more pronounced trends I think emerging over this year, probably next year and into the future.
The take respiratory which has some seasonality that goes winter flu season, and lifestyles, which is relatively level, maybe there's a little bit of peak around the federal.
Fiscal year end.
But I think overall, we'll see an acceleration this year for us seasonality will be added two new products that are going to continue to come out in third quarter, and especially in fourth quarter and then first second third and fourth I think next next year also so we'll be looking at a.
Seasonal curve that repeats every year, but it will be amplified by our productivity, our ease of doing business, which should attract more customers and are increasing portfolio of pretty different products. So I think it's a bit of seasonality in a bit of just more good things that we're adding to the invacare mix.
Okay, Great and then just to kind of follow up on your answer there and for my last question.
One of the big questions, we've been getting certainly as we expect the second half improvement and mathematically just picking a number you need 8 million a quarter and EBITDA to hit your guidance around numbers and stuff.
And typically you've been seasonally a lot slower in the first half and the second so if you hit the eight and eight just call it and and finished the year at or above guidance, which is terrific. What happens in the first half of next year what will change.
Seasonal.
With seasonality to continue to you know.
Grow or not to pay as much off of that level first half next year versus second half this year.
Well I would want next year to have an improved respiratory business globally, and especially in North America, we will anniversary beyond the decline that we've experienced that with new products and kind of a restoration of normalcy that should go away. So the first quarter decline should be less pronounced and that I think our new product portfolio, which we'll be launching some really great products in first and second quarter kind of mitigate the first half next year, but then those things should be amplified in the second half of next year, especially because of Europe's seasonality. So I think.
When we model. This out we have a general positive line going up to the right in terms of time and profit or time sales.
Overlaid with this negative sign curve.
Of of seasonality, which leads to the Sawtooth curve that kind of goes up and positive to the right and everything we do well that helps first half just does even better in the second half and there's more demand generally in the marketplace.
Terrific. Thanks, so much.
Okay. Thanks.
We will now move onto our next question from Mike Matson of Needham Company. Please go ahead. Your line is open.
Yes, thanks for taking my questions.
You know I appreciate the Uh huh.
Hey, I appreciate the comments around.
Your ability you know that you feel comfortable that you can address future debt maturities, but I guess I'm, just wondering where do you feel like you really need to be from an EBITDA cash flow perspective, <unk> to do that comfortably do you feel like you've got to get to your targets that you've laid out or is there. Some wiggle room. There that if you don't reach those targets you still think you can refinance the debt that you have.
Yeah. Good question, Mike. Thanks for that we've been spending a lot of time getting ourselves smart about the options that the absolute number one two and three priority for restructuring our.
Dead and capital structure is EBITDA outperformance so of course, the higher the EBITDA, we have and we're very confident of being in a range in the future that gives us a fair amount of flexibility. It for some rational reason that was slightly less let's say there are interim or different mixes of things that the company could undertake to still make that equation workout. If it were known to be short term in nature. There are generally counterparties that will help you with short term fixes to that but we feel very strongly about our cash position now the forecast of the balance sheet over the next 18 months and our progress on EBITDA, which makes for a pretty normal refinancing as we get into the time to do that.
Kathy answer.
No I think that's absolutely true and we would also consider the cash that we have on the balance sheet. The availability that we have on the l., but as Matt mentioned, we are trying to get smarter and what our options would be so that we can address that first tranche of debt, which would come due in 2021.
Okay. Thanks, and then with regard to that.
Increased tariffs I understand your point about you know your ability to offset that cost, but I think part of what you said in the past when when the rig tariffs originally went into place that it was kind of putting you at a bit of a disadvantage. Because you are there components were being tariff, whereas some of the finished products. Your competitors. We're importing we're not so with a 10% tariffs that were recently.
Introduced store now, it's I guess, they haven't gone into effect, yet, but assuming that they do does that then start to help level field with your some of these competitors. They have that make finished goods in China.
Yes, I don't know exactly it I'm sure that competitors, who are disadvantaged we'll do like we did try to to make.
Better supply chain decisions to lessen the impact of those things I think worst case, it's kind of the same or similar to where we are now but chances are they're probably better.
I think generally we think the more that the harmonize chair codes include finished goods. The war the playing field will be leveled and that will be good for us with so much vertical supply in North America.
Still early to see but we're also very confident for the $5 million to $7 million of estimated unmitigated impact that we saw last year that have essentially gone away and that those are pretty robust solutions that should serve us well going forward.
Okay. Thanks, and then just finally on.
Upcoming competitive bidding round 2021, just curious if you're hearing any kind of feedback from from customers about.
Where the bids come in and how much reimbursement decline you're expecting.
No I'd say no early read those and just speculation.
I would say the Browns getting into the Super Bowl is a little more certain than where national competitive bidding is going to come out next year. So we'll see how that goes I think still early days.
Alright, Thanks, a lot.
Thank you.
It appears there are no further questions at this time I would like to turn the conference are Mr. monahan for any additional for closing remarks.
Okay. Thank you for your time and attention on todays call Cathy Lewis and I are happy and available to any follow up questions. Today. Louis we can coordinate that her contact information is on our website. Thanks very much.
Ladies and gentlemen, this concludes today's conference call. Thank for your participation you may now disconnect.