ICU Medical Inc

NASDAQ:ICUI

Earnings Call Transcript 2021-Q1

[Operator]

Good day, and welcome to the ICU Medical, Inc.'s Q1 2021 Earnings Call. Today's conference is being recorded.

At this time, I will turn the conference over to Mr. John Mills. Please go ahead, sir.

[John Mills]

Great. Thank you. Good afternoon, everyone. Thank you for joining us today to discuss ICU Medical financial results for the first quarter of 2021. On the call today representing ICU Medical is Vivek Jain, CEO and Chairman; and Brian Bonnell, Chief Financial Officer. We want to let everyone know that we have a presentation accompanying today's prepared remarks. To view the presentation, please go to the investor page and click on events calendar, and it will be under the first quarter 2021 events.

Before we start our prepared remarks, I want to touch upon any forward-looking statements made during the call, including beliefs and expectations about the company's future results. Please be aware they are based on the best available information to management and assumptions that are reasonable. Such statements are not intended to be a full representation of future results and are subject to risks and uncertainties. Future results may differ materially from management's current expectations. We refer all of you to the company's SEC filings for more detailed information on the risks and uncertainties that have a direct bearing on operating results and financial position.

Please note that during today's call, we will also discuss non-GAAP financial measures, including results on an adjusted basis. We believe these financial measures can facilitate a more complete analysis and greater transparency into ICU Medical's ongoing results of operations, particularly when comparing underlying results from period to period. We've also included a reconciliation of these non-GAAP measures in today's release and provided as much detail as possible on any addendums that are added back.

And with that, it is my pleasure to turn the call over to Vivek.

[Vivek Jain, executive]

Thanks, John. Good afternoon, everybody, and we hope you and your families are well. It's hard to believe it's May 2021, and we feel the approaching normalcy in our business and operations and are happy to see our hospital customers improving activity monthly as vaccinations have progressed. Like everyone in our industry, we want to start first by thanking all of our customers and their frontline workers for trusting us to serve you during these times. And we look forward to seeing our own teams around the world face-to-face in the near future as local conditions permit. It's been too long.

Today, we hope for a shorter call as results were generally in line with our comments just a few weeks ago, and not that much has changed, but we did want to, first, comment on the broader trends in the customer market and the geographic flows of our business; second, provide any updates on our normal housekeeping items; third, highlight our improving cash flow metrics; fourth, explain the drivers that will allow us to deliver improving sequential profitability; and lastly, articulate how we feel about our positioning in this environment and comment on the specific criteria which we are judging ourselves.

The short story on Q1 is as follows: As we described on the last call, we did see sequential revenue growth in our consumables segment and slight sequential decreases in our IV Systems and IV Solutions segment. On a year-over-year basis, this resulted in a reported sales decline of 4%, which we expected due to the pandemic surge ordering in Q1 of 2020. We finished the quarter with $304 million in adjusted revenue. Adjusted EBITDA came in at $58 million and adjusted EPS was $1.62. Profit was impacted by the weather challenges in February in Texas. And some of the carryover from the Austin maintenance in Q4, and Brian will add additional details. We had our best Q1 of free cash flow generation ever and added $31 million to our balance sheet as operational improvements have materialized, and restructuring and integration costs have dramatically reduced.

When looking deeper at the results on a year-over-year basis, instead of sequentially, it were really specific international markets which had year-over-year declines due to the surge pandemic ordering in Q1 2020. At the current moment, Asia and ANZ are back and open for business. Europe and Canada have been sequentially improving, but were large negatives on a year-over-year basis, and Lat Am continues to be challenged. We are most tilted to the U.S. market where we're dependent on admissions and electives, and again, there were some shortfalls in utilization to the pre-COVID baseline in at least acute care facilities. We can't tell the exact level of shortfall, but is likely somewhere around 5% below historical levels.

Even within the quarter, it was different with the COVID patients leaving hospitals in late January, leading to lower census in February and weekly improvements since then. But again, we did well in the U.S. market in the face of less utilization, and I'll describe some of this in the segment discussion.

So let's go through the businesses quickly and then come back to discuss the current environment. Starting as usual with Infusion Consumables, which is our largest business. Infusion Consumables had revenues of $126 million in Q4 2020, which was a 2% increase year-over-year on a reported basis and flat on a constant currency basis. We had 5% growth in the U.S. market, and that was offset by large year-over-year declines in Europe and Canada due to the pandemic ordering last year.

The oncology market was back to double-digit growth in the U.S. market, which is extremely important to us. We felt positive about U.S. performance in the face of utilization shortfalls and our growth products and performance in the market sets us up well for the balance of the year. The rest of the world opening up could be additive to this, but we are cautious as important geographies for us continue to be delayed in opening.

Just as a reminder, Q2 of 2020 was severely impacted in the U.S. market downward, so the growth we will report in Q2 will be unnaturally high, but we do believe we can again deliver some sequential improvement.

Moving to Infusion Systems, which is primarily our LVP pumps and associated dedicated sets. This segment did $84 million in adjusted revenues, which was a decline of 5% on a reported basis and 7% on a constant currency basis. On a year-over-year basis, the downdraft was essentially completely due to the international market and pandemic ordering in Q1 of 2020. So in the U.S., just like consumables, we held our own, even with utilization declines that impacted the dedicated pump sets and with continued expected deterioration in the non-LVP products. That math works because we had more of our pumps pumping and active in the U.S. marketplace last year.

For Q2, the year-over-year declines in the international markets are expected to be larger as late Q1 and Q2 of 2020 is when we had many of the international pandemic orders, but we expect the U.S. business to continue to improve. Live customer conversations are increasing and installation calendar is much better for Q2 than it was in Q1. We continue to not see capital as a constraint, and we still believe, relative to our size, that there is solid competitive opportunity, and we're focused on commercial execution here.

Finishing the discussion with Infusion Solutions. We had $80 million in adjusted revenue or a decline of 12% on a year-over-year -- on both a reported and constant currency basis year-over-year. Demand was softer for February as the COVID patients came out of the system and ticked back up in March. We continue to believe the quality of our customer book has improved, with us holding the best list of sustainable relationships versus the day we bought the business, and the entire industry has moved forward into renewals of longer-term contracts.

The largest impact to our profitability in Q1 was due to operational aspects of the IV Solutions segment, as we highlighted on the last call because it was happening real time. We knew we would have rollover impacts into Q1 of undertaking our maintenance shutdown later in 2020 than normal due to the pandemic. But the weather events were really expensive for us, both in terms of unexpected operational shutdowns and the excess freight and service cost to serve the customer and to ensure no operational setbacks. And we did not penalize our employees due to the unforeseen weather. And so we spent a lot more than we expected here in Q1.

But these items will not repeat, and therefore, will make a material difference on Q2 gross margins, as Brian will describe. No change here in 2021 as we continue to believe this is an $80 million average quarterly business. Also a reminder here, Q2 of 2020 was impacted in the U.S. market downward due to the pandemic. So the growth we will report in Q2 will be unnaturally high and will not be reflective of underlying trends.

Moving on to some of the housekeeping updates. Commercially, in all regions of the U.S., except the Northeast, slightly more than 50% of our customer calls are now in person, with a sharp uptick in March versus a 30% or so we stated in the last call. Internationally, again, Asia and ANZ are open for business with Canada and Europe, mostly still being a remote business.

On quality, there's not very much new. We had some successful smaller notified body audits that went fine. Operationally, the manufacturing network, logistics and systems of the company are all running well. We had solid global fulfillment rates to our customers, even with the weather challenges. We also renewed our contract manufacturing arrangement with Pfizer for another 3 years with minimum volume and tiered pricing terms.

On the Pfizer discussion related to the calculation of an earn out payment, we have now entered an arbitration process pursuant to our agreement. Pfizer has been a solid partner, and we've worked with them to cooperate in all aspects of our relationship. Pfizer was obviously an equity participant here and our Board of Directors, and we've tried to treat them well at every step as we addressed a litany of issues that came with Hospira. We feel comfortable with our position, but we don't control the final decision and expect that it will be resolved by the end of Q3.

Okay, on to other items. We are pleased that we have gotten back to strong cash flow generation. We've had a solid focus on the high-hanging fruits from our integration that we talked about in 2019. Those have been about improving working capital and efficiencies in how we run. But it has been hard to square that up with underlying profitability levels, and in particular, cash generation was really good, but profitability less so. Q1 was unusual due to the Austin items I mentioned. EBITDA margin should look different in Q2 even with utilization below historical levels as we get to our view of what normal profitability should look like.

It has also been hard to follow the growth and value creation within the segments as the hangover from the IV Solutions changes moved right into the COVID environment and combined with some unique intrasegment issues like the shift away from non-LVP pumps. So we are also looking for a normal environment. To be clean and how we -- to be clear on how we judge ourselves, we have said for a while, we can grow our valuable items of consumables and dedicated sets on a year-over-year basis. And that's exactly the standard on criteria where we are judging ourselves in the medium term.

We believe our Consumables segment will be the largest ever in 2021, and we believe our U.S. and global installed base of LVP infusion pumps and related disposals will be the largest under our ownership. The model is to essentially find normal profitability in Q2 and have the growth of those higher-margin items create value into the future. And we think that is the case without talking a lot about improving utilization dynamics or new products which could be additive. The score ultimately gets measured by us through the lens of, is each business actually bigger and more profitable in absolute dollar terms? We're finally getting close to jumping over some of the items that made this harder to measure.

While the pandemic introduced substantial volatility, strategically, we do think the weaknesses it's exposed in the health care supply chain add to the argument for all participants to be healthy and stable, which has been our commentary since we became a full line supplier. We make essential items that require significant clinical training, capital expenditures and in general, items that customers do not want to switch unless they have to. We are a U.S. manufacturer that's deeply vertically integrated and has core redundancy on products that we do not produce domestically between Ensenada and Costa Rica. We do believe that the market broadly defined, does not want a winner-take-all setup in these essential item categories. And that's before each category is addressed on its own innovation, clinical outcomes, et cetera.

In the new normal or post-COVID world, where supply chain resiliency and diversity matters, we believe our essential items logically benefit and our most differentiated items are still differentiated. So we focus on what we can control in these moments. Having the best list of supportive healthy customers, winning important new customers and waiting for volumes to normalize. We focus on keeping our employees safe while delivering the best operational stability for our customers. We ensure that we drive differentiation and quality in our most valuable categories. We want to have the best liquidity we can for our company our size, and we want to use all of those items to be prepared for whatever realignments or opportunities may arise and to ultimately focus on our own execution.

Our company has emerged stronger from all the events of the last few years. Thank you to all the employees, customers, suppliers and frontline health care workers. Our company appreciates the role each of us has had to play.

And with that, I'll turn it over to Brian.

[Brian Bonnell, executive]

Thanks, Vivek, and good afternoon, everyone. To begin, I'll first walk down the P&L and discuss our results for the first quarter and then talk a little about cash flow and the balance sheet.

So starting with the revenue line. Our first quarter 2021 GAAP revenue was $318 million compared to $329 million last year, which is down 3% or 5% on a constant currency basis. For your reference, the 2020 and 2021 adjusted revenue figures, which exclude contract manufacturing sales to Pfizer, can be found on Slide #3 of the presentation. Our adjusted revenue for the quarter was $304 million compared to $316 million last year, which is down 4% or 5% on a constant currency basis. Infusion Consumables was up 2% or flat on a constant currency basis. Infusion Systems was down 5% or 7% on a constant currency basis. IV Solutions, which we saw primarily in the U.S., was down 12% on both a reported and constant currency basis, and Critical Care was up 6% or 4% on a constant currency basis.

As you can see from Slide #4 of the presentation, for the first quarter, our adjusted gross margin was 37%. This was in line with our expectations. Compared to last year, adjusted gross margin decreased by 250 basis points, and this decrease primarily reflects the impact of 2 items that were unique to this year's first quarter. And combined, reduced adjusted gross margin by approximately 225 basis points. The first and larger of the 2 items is the timing of the annual scheduled maintenance shutdown of our Austin manufacturing facility that was completed in October 2020 as compared to the summer months in prior years. These costs are capitalized when incurred and recognized on the P&L in line with our inventory turns.

As a result, first quarter 2021 gross margins were lower as the remaining shutdown costs were recognized in the quarter. The second item was referenced on our last earnings call and relates to the additional manufacturing and distribution costs incurred during the first quarter of this year, related to the February weather events in the South. Neither of these items will have an impact in the second quarter.

During our last call, we said we expected adjusted gross margin for full year 2021 to be in the range of 38% to 39%, and that remains the case. But it's worth noting that the specific adjusted gross margin rate for any given quarter for the remainder of the year could fluctuate based on the level and mix of Infusion Systems hardware installations during the quarter.

Moving further down the P&L. SG&A expense of $72 million in Q1 was flat year-over-year and was in line with our expectations as we continue to benefit from lower travel and entertainment spend. R&D expense was $11 million for the quarter, flat year-over-year and down $1 million compared to the fourth quarter of 2020. The decrease compared to the fourth quarter is primarily driven by timing of project spend. We expect the level of R&D spend to increase a bit in future quarters as we get closer to regulatory submissions on a few larger projects later this year.

Restructuring, integration and strategic transaction expenses were down to $3 million in the first quarter versus $12 million last year. The first quarter 2021 spending was spread across a number of smaller projects related to acquisition integration and onetime regulatory initiatives. We continue to expect full year spend to be in the range of $15 million to $20 million.

Adjusted diluted earnings per share for the first quarter of 2021 were $1.62 compared to $1.81 last year. This year's Q1 results were favorably impacted by a lower tax rate that contributed approximately $0.10 of benefit to adjusted EPS. The lower tax rate was the result of excess tax benefits related to equity compensation, diluted shares outstanding for the quarter were 21.7 million. And finally, adjusted EBITDA for Q1 decreased 8% to $58 million compared to $63 million last year.

Now moving on to cash flow and the balance sheet. For the quarter, free cash flow was $37 million, and Q1 was another strong quarter of cash flow generation, driven by a combination of solid earnings, declining restructuring and integration spending, and further reductions in working capital. The first quarter of each year tends to be our weakest quarter in terms of free cash flow due to the payout of annual bonuses, and this quarter represents a record for a first quarter of the year. The working capital improvements were driven mostly by inventory, which decreased $15 million compared to the fourth quarter of 2020. Both AR and inventory are now at their lowest levels since we integrated the Hospira business onto our IT platform 2.5 years ago.

Going forward, for AR, we expect DSO to generally remain around current levels, but we may see a slight ramp in inventory over the remainder of this year to ensure we can successfully onboard and support new business. The strong Q1 cash flow allowed us to end the quarter with $455 million in cash and investments on the balance sheet.

In the first quarter, we spent $14 million on CapEx for general maintenance and capacity expansion at our facilities as well as placement of revenue-generating infusion pumps with customers outside of the U.S. Our CapEx spending in Q1 was a bit light due mostly to timing, and we expect the level of CapEx to pick up over the remainder of the year as we still plan to spend around $80 million for the full year.

So to summarize, except for some additional weather-related costs, our results for the first quarter were very much in line with the expectations we had set for ourselves at the beginning of the year. Within U.S. hospital systems, the transition from the heavy mix of COVID patients that we saw in early January, followed by lower census in February and then gradually increasing volumes over the remainder of the quarter seem to play out largely as expected. We also saw sequential top line growth in our most valuable business unit of consumables, generated record free cash flow for the first quarter and recognized the remaining costs related to the Q4 Austin plant maintenance shutdown, which are now behind us.

Overall, we're pleased with business performance in Q1 and feel good about our opportunity to drive growth in our most differentiated businesses going forward.

And with that, I'd like to turn the call over for any questions.

[Operator]

[Operator Instructions] We will now take our first question from Matt Mishan from KeyBanc.

[Matt Mishan, analyst]

Vivek and Brian, I'll try and keep this short as well. On the Pfizer contract manufacturing agreement, does that mean it will no longer be excluded from sales? And will there be a positive margin to that?

[Brian Bonnell, executive]

Matt, it's Brian. I think at this point, we will still, for reporting purposes, keep it excluded for our non-GAAP reporting, consistent with the way that we always have.

[Matt Mishan, analyst]

Will there be a positive margin to it?

[Brian Bonnell, executive]

The margin impact under the new agreement, pricing is positive relative to the agreement in place until now. But I think what really has the most value to us are the commitments around volumes. If you look over the past several years, we've seen reductions in volumes for that piece of the business, and that's impacted our profitability. And so we have more degrees of certainty around volumes going forward.

[Matt Mishan, analyst]

Does it preclude you from entering that market for yourself? I mean I know at one point, that was a consideration.

[Vivek Jain, executive]

I think the reality, Matt, is -- it's Vivek, volumes went down on a number of those products. And that hurt us. And I think I just described the second part of your first question is, I'd just say, at least we've tried to structure so that we don't encounter more turbulence, negative turbulence going forward, it's all part of making solutions stable and predictable, but not only revenues, but profitability.

On the second part, I think we've been a bit reticent in exploring some of those areas because we just don't want to at least until the performance recently, we haven't wanted to enter a category that was frankly declining in units, what was given on -- or value, which was going on in regular solutions. Anyway, we weren't trying to compound that problem. I don't want to say -- never say never because we do have manufacturing assets and production scale that can be used there, but I think we have to be very selective about it.

[Matt Mishan, analyst]

Okay. Excellent. And then just on the language in the R&D spending, I think last quarter, you had said it was double-digit growth for the year. And this quarter, it was like increased a bit. I'm just trying to balance those 2.

[Vivek Jain, executive]

It's just been -- on some of the projects, Matt, it's been hard to spend the money to get kind of prototypes and boards and things we need in certain spots of the world, right? We would like to spend the money. It's just been difficult to get it all spent. I don't think it wasn't a lot more than that.

[Matt Mishan, analyst]

Okay. And then how should we think about like the installations that you're planning in Q2 and the correlation of gross margin?

[Vivek Jain, executive]

May I think the biggest impact actually in gross margin, I'll pass it back to Brian here. The biggest impact in gross margin are the actual items that Brian talked about in Q1. I think we'd rather say we feel okay about what we said the year was going to be. And we contemplated any pain we might feel from installations in the annual number, and we're not changing that view. It might be a little bit bumpy depending on what gets installed where and when. But the primary focus in February and March was just to make sure the calendar is full for Q2 installations. I think the calendar is pretty good for Q2 installations right now.

[Operator]

We will now take our next question from Jayson Bedford from Raymond James.

[Jayson Bedford, analyst]

Just maybe to pick up on the last question. Can you talk about the environment or appetite out there to swap out pumps? Is it better today than it was in the fourth quarter?

[Vivek Jain, executive]

It's better today than it was -- Jayson, it's better today than it was in the fourth quarter. Obviously, there's been lots of twist and turns and changes of suppliers in the market over the last number of weeks and months. I think our lesson from having been in this industry for many years is just everything takes longer than you think, whether that's getting a new customer and getting it onboarded or getting a new product approved or solving issues. It's a market that seems to be doom to that. And I think all participants probably recognize that now. And we are in a pretty okay place at the moment. And so we want to be active and make the best of that opportunity.

So I think certainly getting our hospital customers domestically getting the vaccinations behind them allows us to have a better set of conversations than we were able to have in November, December. January. If you remember last year, we talked about the summer being pretty good and then slowing down in the fall. Again, it's opening back up a little bit, which is good. Different answer -- I'm sorry to go on here, different answer internationally, some of those international markets, the ones I referenced in the script are really still challenging and some of the ones -- the Asian markets, et cetera, are really open. And you can see that in other people's results, just the variety of performance.

[Jayson Bedford, analyst]

Okay. You entered the year, I think, with over 100 basis points of committed share gain. How much of that were you able to get deployed and recognized in the first quarter?

[Brian Bonnell, executive]

Very small amount.

[Jayson Bedford, analyst]

Okay. And then just curious as to what you're seeing in April. Can we assume that April was stronger than March? And then I guess, more specifically, are trends starting to get better in both Canada and Europe?

[Vivek Jain, executive]

Sure. And Brian, can you talk about that?

[Brian Bonnell, executive]

Yes. I think as it relates to April, I mean, we said that in the first quarter, towards the end, we saw gradual improvements in volumes. And I'd say that has -- that gradual improvement has continued in April. So we feel okay about how the second quarter has started.

[Vivek Jain, executive]

Yes. I mean I think the strongest statement we can make there, Jayson, is by saying on the consumables that we felt like there's some reasonable chance, some chance for sequential improvement, again, which means volumes would be going up. And at least feeling solid about our ability to grow the dedicated pump sets over the balance of the year. For the U.S. market, I think we certainly see that improvement coming.

And to the second part of your question, Canada and Europe, both improved sequentially. But Canada -- I know you have a vested interest there. Canada is a bit slow. Things are moving slow in Canada. The business is improving sequentially, but new business discussions are slow in Canada, new business discussions and some spots of Northern Europe are still slow right now.

[Jayson Bedford, analyst]

And just -- I don't want to get too granular, but the size of Canada and Europe in terms of percent of total sales?

[Vivek Jain, executive]

Canada is our single largest country that we do business in outside the U.S. It matters to us.

[Jayson Bedford, analyst]

Okay. And then you're comfortable with this?

[Vivek Jain, executive]

The whole company is really only consumables and pumps internationally. And that represents about $300-ish million of business. And most of that business is still heavier, Europe and Canada, right.

[Jayson Bedford, analyst]

And just, I guess, the messaging on gross margin, I think I had it right in that it was 225 bps off of a gross margin of 37%. As we look at that going forward, with -- is gross margin largely dependent on new pump deployment in terms of where it goes?

[Brian Bonnell, executive]

Yes. Yes. That will be the largest single variable probably for the rest of the year on gross margins.

[Vivek Jain, executive]

That's why I think -- Jayson, Brian's script was saying, we feel okay about the 38% to 39% for the year. But that pump volatility could move that up or down. I think we have the clearest view of Q2, right, because of the -- we're actually talking basis points of gross margin, like very specifically.

[Jayson Bedford, analyst]

And just to be clear, the 38 to 39% for the year starts at 37% in 1Q?

[Brian Bonnell, executive]

Yes.

[Operator]

We will now take our next question from Larry Solow from CJS Securities.

[Peter Lukas, analyst]

It's Pete Lukas for Larry. Just sticking with the gross margins. You've covered a lot of it and given us a lot of nice detail in terms of the outlook for this year. Maybe if you could just kind of talk broadly on the longer-term drivers there that you see. In particular, the shift in systems towards more disposables as well as you mentioned the improvement you get now that Austin is behind you. Do you see with more control in your own testing on the manufacturing distribution side as you built that up in terms of internal capabilities as a driver going forward? Or what else do you see as some of the longer-term drivers there?

[Vivek Jain, executive]

Sure. Pete, nice to meet you. I think we were trying to lay out our view of how earnings should increase over the long term. Again, it's hard -- a little bit hard quarter-to-quarter right now. But if we get to a normal level of profitability in Q2, which Q1 was not, and we continue to either have consumables growth and incremental pump wins that improve our market share that drive disposable usage, the incremental cost and drop-through -- the incremental cost is low from those pieces of business and the drop-through is high. Those are the things we have to do to create value above a normal level of profitability. That normal level of profitability was kind of incorporated into our annual guidance this year.

So I think we're trying to give the formula that it's not going to be IV Solutions that drive profitability here. We got to have differentiated items really going. What we need is IV Solutions, is what we feel like we've delivered for the last 7 quarters, which is stability in the business.

And the last item on the contract manufacturer work making sure that was secure. So it didn't go backwards was important to us. And that's why we were trying to outline the criteria to say, we think we can actually create value and improve margins if we can make our consumable business as big as possible, if we can have as many dedicated sets flowing through the income statement as possible.

That's really it. That's the formula for us right now.

[Peter Lukas, analyst]

Great. And just one last one for me. In terms of being able to -- you mentioned the hospitals starting to improve there for you. In terms of being able to get in and compete for new wins, I think I heard you say 70% of your calls are now in person. How do you see that improving in the short term?

[Vivek Jain, executive]

I think right now, I think we said in the script, 50% with a little bit lower number in the Northeast, which is a bit strange still to us. I think we're seeing travel requests and movement of our people around the country happening. And so I think live calls are going up. I think they're going up quickly, and we will have more spend. So back to the gross margin, well, we will have more spend, but it's a good spend if we're out there seeing customers. And so not every one of those gross margin dollars will drop-through necessarily, but we'd rather be investing it into the revenue generation side. So I think that trend is moving up. It's moving up fast. And at least certainly, if that's what you do for a living, you want that. And so our teams want to get out there and be active with the people we're trying to serve and support.

[Operator]

That concludes today's question-and-answer session. Mr. Jain, I'll pass the call back over to you for any additional or closing remarks.

[Vivek Jain, executive]

Thank you, Ryan. Appreciate it. Thanks, everybody, for your interest in ICU Medical. We tried to have a shorter call today, and we look forward to updating everyone on Q2 as we normally do. Thanks.

[Operator]

This concludes today's call. Thank you for your participation. You can now disconnect.