LeMaitre Vascular Inc

NASDAQ:LMAT

Earnings Call Transcript 2023-Q1

[Operator]

Welcome to the LeMaitre Vascular Q1 2023 Financial Results Conference Call. As a reminder, today's call is being recorded.

At this time, I would like to turn the call over to Mr. J.J. Pellegrino, Chief Financial Officer of LeMaitre Vascular. Please go ahead.

[Joseph Pellegrino, Chief Financial Officer]

Thank you, operator. Good afternoon, and thank you for joining us on our Q1 2023 conference call. With me on today's call is our Chairman and CEO, George LeMaitre; and our President, Dave Roberts.

Before we begin, I'll read our Safe Harbor statement. Today, we will make some forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, the accuracy of which is subject to risks and uncertainties. Wherever possible, we will try to identify those forward-looking statements by using words such as believe, expect, anticipate, pursue, forecast and similar expressions. Our forward-looking statements are based on our estimates and assumptions as of today, May 2, 2023, and should not be relied upon as representing our estimates or views on any subsequent date.

Please refer to the cautionary statement regarding forward-looking information and the risk factors in our most recent 10-K and subsequent SEC filings, including disclosure of the factors that could cause results to differ materially from those expressed or implied. During this call, we will discuss non-GAAP financial measures, which include organic sales growth as well as operating income, operating expense and EPS excluding special charges. A reconciliation of GAAP to non-GAAP measures discussed in this call is contained in the associated press release and is available in the Investor Relations section of our website, www.lemaitre.com.

I will now turn the call over to George LeMaitre.

[George LeMaitre, Chairman and Chief Executive Officer]

Thanks, J.J. Sales grew 22% organically in Q1, 13% price and 9% units. Our five largest product lines led the way. Valvulotomes were up 29%, carotid patches increased 17%, bovine grafts 22%, allografts 42%, and carotid shunts 18%. By geography, all three regions reported growth. The Americas were up 21%, EMEA was up 17% and APAC was up 6%.

At least on the Q1 sales line, it felt like we were in a new movie, Everything Everywhere All At Once. The growth was partially driven by the improving macro environment you've already heard about. Procedure volumes increased in Q1 as hospitals staffed up their ORs to pre-COVID levels. But we also saw growth from three LeMaitre specific items, pricing, a larger sales force and competitor stumbles.

In Q1, we realized a 13% price increase largely from our domestic Valvulotomes and European shunts. We also had 128 sales reps on March 31, 14% more than we did a year-ago, and we plan to end the year with 135 to 140 reps. And finally, in Q1, we benefited from competitor stumbles, which came in two flavors, backorders and abandoned European MDR approvals. While many of the backorders have resolved, several competitors have withdrawn their products from Europe due to the high costs of gaining next-gen CE marking.

I'd now like to give an update on our continued expansion efforts in Asia Pac, our new office in Seoul is up and running. Korea sales are trending above previous expectations, and we should post a 2023 topline of $1.5 million. This is about double the historical sales volume to the ex-Korean distributor. This subsidiary should also turn a small profit in 2023. Additionally, we recently agreed to buyout our Thai distributor, and plan to begin selling directly to the Thai hospitals in Q3. This will be our 29th direct market.

In other APAC-related news, in Q3, we expect to receive Japanese approval for an additional XenoSure indication for use in the carotid artery. Our Q1 annual run rate for XenoSure in Japan is $1.9 million, so this additional indication could be meaningful. Currently, our Japanese salesforce market, XenoSure only for use in the femoral artery, whereas worldwide usage of XenoSure is typically in the carotid artery.

With that, I'll turn it over to Dave.

[David Roberts, President]

Thanks, George. On April 20th, we signed a three-year agreement with the Aziyo Biologics, to be the exclusive distributor of their cardiac patch product line in the U.S. with an option to acquire the worldwide business during year two or year three. Excluding the initial inventory purchase, there is no upfront payment. 2022 U.S. sales of these products were $6.8 million.

We now have several patches in our portfolio, perhaps some clarification is warranted. XenoSure is the first-generation bovine patch used primarily by vascular surgeons. CardioCel is a second-generation anti-calcification bovine patch used by cardiac surgeons. Aziyo is a third-generation porcine patch designed to be resistant to infection and to remodel into healthy tissue. Aziyo is used primarily by cardiac surgeons. LeMaitre expects to record Aziyo sales of $800,000 in Q2 and $3.8 million in the full-year 2023 with a 50% gross margin.

With that, I'll turn it over to J.J.

[Joseph Pellegrino, Chief Financial Officer]

Thanks, Dave. Q1 2023 sales were $47.1 million, an increase of 19% on a reported basis, and 22% organically versus Q1 2022. We are now guiding 15% organic sales for full-year 2023 as we expect sales growth to moderate as hospital procedure volumes may begin to normalize. In Q1 2023, we posted a gross margin of 65.6% flat versus the prior year period as average selling price increases and manufacturing efficiencies were offset by FX headwinds and unfavorable product mix.

Going forward, the addition of the Aziyo product line will decrease our gross margin by about one half of 1%. We increased our direct labor manufacturing team by 54% in 2022. This increase in personnel has already helped us mitigate issues related to the MDR transition, product line changes and supply chain disruptions. Training of this larger staff has driven inefficiency, however, which has hurt the gross margin. Although we have begun to see improvement in this area, gross margin guidance is 65% for the full-year.

Q1 2023 operating income was $7.9 million, reflecting an operating margin of 17%. Operating expenses increased 28% in Q1 versus the prior year. Much of the increase was due to higher selling commissions as Q1 sales significantly surpassed sales quotas. In addition, we had 16 more sales reps versus the prior year and resumed our three regional January sales meetings.

Regulatory costs were up 47% in the quarter, as we continue working to obtain our MDR CE marks. We expect to slow the growth of operating expenses as we move through the year. Indeed, headcount of 591 was flat from December 31, 2022 to March 31, 2023. For the full-year 2023, we expect an operating margin of 18% and EPS growth excluding special charges of 17%.

For guidance, please see our business outlook issued in today's press release, but a few highlights include reported sales growth of 15% in Q2 and 18% in the full-year, organic sales growth of 13% in Q2 and 15% in the full-year, reported EPS growth of 103% in Q2 and 29% in the full-year and non-GAAP EPS growth excluding special charges of 10% in Q2 and 17% in the full-year.

With that, I'll turn it back over to the operator for questions.

[Operator]

[Operator Instructions] And our first question will come from Matthew Mishan of KeyBanc. Your line is open.

[Brett Fishbin, KeyBanc Capital Markets Inc.]

Hey, guys. This is Brett Fishbin on today for Matt. Just wanted to start quickly on the quarter. You definitely touched on three of the key drivers at a high level, driving some of the outperformance on the topline. Just wondering if you could expand a little bit on what you were seeing specifically in the Americas and EMEA, maybe around like what type of procedural trends took a step up versus expectations, and then like maybe where else you were just surprised versus the outlook coming into the year?

[George LeMaitre, Chairman and Chief Executive Officer]

So Brett, this is George. Thanks for your question. Actually, you guys, the KeyBanc team sends around a fantastic report about the credit card swipes that take place in these hospitals. And when we looked at that, I think it sort of says it all. There was 14% more KeyBanc credit card swipes in Q1 in USA hospitals. If I got this right, you're welcome to correct me by the way, since you sent the data out versus Q4. So it was a very strong sequential change between Q4 where we sold $41 million worth of medical devices. In Q1, we sold $47 million worth of medical devices. And again, I think we're 68% Americas. So this is where it happens for us. And I think your data captured a lot of what's happening. The hospitals are open for business and doing procedures.

[Brett Fishbin, KeyBanc Capital Markets Inc.]

All right. That's really helpful. And then I was also just looking ahead at the guidance, a pretty nice step up. It seems like to me a lot of the upside in 1Q might have been driven by volume just based on how you quantified it. Maybe some upside on the price side as well. But is that something that you expected to continue in terms of what's driving the increase in guidance? Like, are you seeing – are you expecting an uptick in actual volume versus the initial outlook?

[Joseph Pellegrino, Chief Financial Officer]

Yes. So I think for the full-year, if you're thinking of the drivers, the pricing topic probably sticks with you in one form or another. It may not be 13% quarter in and quarter out. There's a mix issue underneath that. That seems particularly robust to me. So maybe it's not quite that, maybe it is, but we'll see. But the hospital procedure piece, I think we're assuming that there's going to be some return to normalization over time. So there'll be a little bit of a step down in that, maybe there was a backlog topic in Q1 and you sort of work through that in Q2 and Q3. So elevated levels still, but not like you saw in Q1. And then the third piece for the full-year is the Aziyo distribution agreement. So $3.5 million to $4 million of sales maybe coming from that in the year. So I think those are your big chunks as you think of guidance for the full-year.

[Brett Fishbin, KeyBanc Capital Markets Inc.]

All right. Really helpful. And then actually last question, just to clarify the point. I know there was a little bit of a tailwind expected from some of the Omniflow backorders, and you thought that it would be resolved by the end of 2Q. So could you possibly like quantify how much of a tailwind that was this quarter? And if you still expect it to go away next quarter? Thanks very much.

[George LeMaitre, Chairman and Chief Executive Officer]

Sure. Thanks a lot. So Omniflow grew year-over-year in Q1, 1% on a reported basis and 4.8% on an organic basis. So a little bit of a year-over-year tailwind. And then specifically on the backorder, things are improving. I would say largely we're still holding to that estimate that the backorder will be cleaned largely by the end of Q2. But for some real facts here, approximately at the beginning of this year, we came into the year with $800,000 in Omniflow backorders, and we ended Q1 with $400,000 in backorders. So we've helped – we've pushed an extra $400,000 through that – to cut that backorder. But again, to go year-over-year here, it was up 1% reported. So what didn't really help us at all, but it was nice to not be suffering like we were in Q4.

[Brett Fishbin, KeyBanc Capital Markets Inc.]

All right. Thanks very much. I think that probably clears up that, not too much of the beat was driven by that or anything one-time. Thanks again, for taking the questions.

[George LeMaitre, Chairman and Chief Executive Officer]

Thanks a lot.

[Operator]

[Operator Instructions] And our next question will come from Rick Wise of Stifel. Your line is open.

[Frederick Wise, Stifel, Nicolaus & Company, Inc.]

Good afternoon, everybody. Apologies, George, I was juggling three calls tonight and I missed the very start of your comments. But I want it so – maybe you commented on it, but I wanted to touch on the salesforce. You had 131 reps at the end of the year, you have a 127 this quarter, I assume just normal attrition. But what are your thoughts about this year and do you have the right number and if this is the right number, does that suggest all things equal? And I appreciate there are a lot of moving pieces here, maybe a little more operating leverage as the year unfolds?

[George LeMaitre, Chairman and Chief Executive Officer]

Right. And so one of the things that we're saying here, Rick, is that we have 128 reps right now, we had 131 at the end of the year. And we continue to plan to be around 135 to 140 for the year. So there's still, let's call it, seven or nine more reps that will be sitting on the P&L by the end of the year. So if we're looking for leverage, I don't know if we get it there, but that's not that many. What's that's an addition of, I don't know, 7% or 8%, if that's part of your question. I mean, we do have op margin keyed in for the year at about 18%. And I think for the guidance, and I think we posted a 17%. We are doing that right in Q1.

And so Rick, short answer to your question, there's a little bit of leverage here. The other key fact here I think that we wanted to focus on is that we ended the year with 590 employees. And at March 31, we only had 590 employees also. And so the slowing down of headcount growth, not just reps, but all headcount, really began in about October, November of last year. We stopped approving hiring requisitions largely. And so we're slowing down and I think we're knowing we need to get better leverage at the end of the year than what you're seeing in the Q1 report.

[Frederick Wise, Stifel, Nicolaus & Company, Inc.]

Got it. And maybe a question for Dave. Dave, that was a great quick and certainly a clarifying perspective on the patch, first, second, third gen. And I'm clear now about the Aziyo patch opportunity. Can you give us some clarity on the potential opportunity and what you think you're going to be able to do with the product? Maybe that hasn't been done or just is it about – you have more reps, you can be more effective. Just any more color there that helps us appreciate – better appreciate the opportunity.

[David Roberts, President]

Yes. Sure, Rick. Thanks for the question. Aziyo had – was selling these patches primarily through their own relatively small to LeMaitre direct sales channel of maybe about a dozen or so reps plus they had a handful of independent agents. But that channel was selling primarily a different – and very interesting product they have, which is used in EP which is a biologic pouch. And so really for them it was a strategic choice to focus their sales team's efforts on that product. So they were looking for a home and they recognized that LeMaitre has a relatively large salesforce in the United States. We have 64 sales reps in the Americas, probably about 58 or so U.S. salespeople.

And of course, we're very familiar with the patch space with XenoSure and CardioCel selling both peripheral vascular and cardiac surgery patches. So we just felt like it was a really good combination. It's a very interesting patch if it – when it's implanted properly, it resorbs in the body, which can have a lot of benefits and neither one of our patches does that. So it's a very good fit. And we're very pleased to have signed the distribution agreement. We have an option to acquire that you're aware of and yes, we're excited to see where it goes.

[Frederick Wise, Stifel, Nicolaus & Company, Inc.]

And does this deal in any way preclude you from pursuing other M&A? I know that you're always anxious to share with us your specific plans.

[David Roberts, President]

No. I mean, well, first of all, the transaction is complete now. We actually didn't put any upfront cash into the deal. So it didn't really affect the balance sheet at all. In fact, we expected to be accretive as we've described. And so if anything, it should improve our balance sheet for future deals. Something that's interesting is it came with a fairly large number of customers, which always is good in terms of when we do future acquisitions, having more cross-selling potential. And frankly, the deal – it was very straightforward, so it didn't absorb an inordinate amount of bandwidth. And so the answer is no, we're out there hunting just as we were before this deal, and I don't think it slows us down at all.

[Frederick Wise, Stifel, Nicolaus & Company, Inc.]

Great. And just a last one for me. Just maybe a little more commentary on thinking about the growth that we saw in the quarter, sort of the volume versus price versus the procedure recovery aspect of things. Especially, to what extent did price help you out in the quarter overall?

[Joseph Pellegrino, Chief Financial Officer]

Sure, Rick. Yes. It was pretty straightforward. Price was 13% and unit growth was 9% to make up that 22.

[Frederick Wise, Stifel, Nicolaus & Company, Inc.]

Got it. Thank you so much. Nice to see this strong start.

[Joseph Pellegrino, Chief Financial Officer]

Thanks a lot, Rick.

[Operator]

[Operator Instructions] And our next question will come from Michael Petusky of Barrington Research. Your line is open.

[Michael Petusky, Barrington Research Associates, Inc.]

Good evening, guys. Strong quarter. Well done. I guess, let me start. Dave, is there a risk that the Aziyo business in any way cannibalizes CardioCel or other business that you guys have?

[David Roberts, President]

The Aziyo patches are primarily cardiac patches, and as you are pointing out, CardioCel is also. But as we negotiated with Aziyo on this, they fully understood that. So obviously, I think that the key idea is when we have a customer and a current customer is using CardioCel or a new current customer is using Aziyo, then we're going to support those customers with the current products. Of course, there are a lot of customers out there who are using neither. And so for us, it's just extra optionality for our sales reps to present to those specifically cardiac surgery customers. So I don't really see it as a conflict, I see it as additive to the bag. And like I said, we'll be supporting each set of customers going forward.

[Michael Petusky, Barrington Research Associates, Inc.]

Awesome. And I guess, possibly George, but anybody wants to weigh in on this. Valvulotomes, it's a mature product category, to get 29% growth on that is just sort of stunning to me. Can you guys describe, I guess price was a big part of it, but I guess how were you able to raise price on this type of product in this – at this point of its life cycle? I mean, had it just not had an increase in a while or was there an innovation or can you guys just speak to what's underneath that 29%?

[George LeMaitre, Chairman and Chief Executive Officer]

Sure. So a couple things. Maybe I go at units first. And as you're pointing out, it's mostly price, but still there's some unit action here too. You remember that January of 2022 was a Omicron, it was sort of the last gasp of Omicron. And so Q1 2023 versus Q1 2022, you're getting in sort of a little bit of a lift. I don't know what it is in this 29%, I can't even guess, maybe it's 5% or something like that because January of 2022, excuse me, was so weak, and January of 2023 was normal. So you get a little bit of that. So there's some of that.

But even if you look at the Q1 unit and you annualize them for Valvulotomes, we are seeing something like, and I don't have the number with me here. I think it's something like a 5% or 8% annualized unit growth rate on Valvulotomes versus last year. That's not very typical. We don't grow them that much. One possible reason is there was a really important study published in December. Although I don't know that this is true, this is just a possibility called BEST-CLI. And BEST-CLI is coming to the surgeon and the radiologist and it's saying – and a cardiologist, and it's saying, this bypass that you do with a Valvulotome is usually more durable than putting stents and using angioplasty balloons in bodies. So it's a very big study. It was published in The New England Journal of Medicine. Very important study for us. Maybe that's helping out.

And then – so these are the couple answers there. I know it's not perfect here, Mike. But then finally on the pricing, we bought the Eze-Sit Valvulotome in 2019. And we finally – this year – going into this year, we finally said, you know what? It's too complicated for the customers to see one price on the Eze-Sit and one price on the old LeMaitre Valvulotome. So they're all the same now. And so I would say that was sort of the key pricing move was to just bring the two of them to the same level to deconfuse anyone about what the price of a Valvulotome was.

So it was a hefty price increase for that reason. But I agree with you when you're supposing, wow, it's late in life, what happens. Maybe this is a validation of LeMaitre's nichey business plan. We try to be number one or number two in these markets, and there's not that many competitors hanging around. And we do feel like we have some pricing power in some of these – in some of these product lines.

[Joseph Pellegrino, Chief Financial Officer]

Mike, I can give you some more detail on numbers from my private reserve that George hasn't seen.

[Michael Petusky, Barrington Research Associates, Inc.]

Excellent.

[Joseph Pellegrino, Chief Financial Officer]

And so in Q1, it was up 29%, 19% was from ASPs from a price hike. And so 10%, I guess, units. And then of that, if you split it between the Eze-Sit and the HYDRO, the Eze-Sit was really the bulk of the increase, 30 plus percent increase HYDRO sort of in the normal range, high-single digits kind of the answer. So it really came from that Eze-Sit piece. And 19% of the increase was ASPs for Valvulotomes in particular.

[Michael Petusky, Barrington Research Associates, Inc.]

Awesome. And J.J., I didn't catch – I heard the $800,000 in Q2, but I didn't catch the full-year Aziyo contribution?

[Joseph Pellegrino, Chief Financial Officer]

For the full-year we're – sort of baked into our guidance is about $3.7 million, $3.8 million.

[Michael Petusky, Barrington Research Associates, Inc.]

Okay. Last item I guess, just because you guys have these building cash and included in that as marketable securities. What's your assumption, I guess, on interest income for the remainder of the year or by quarter, however you want to break it out? And also, I'm just curious, tax rates still roughly 24.5%, 25%. Has that pulled up? Thanks.

[Joseph Pellegrino, Chief Financial Officer]

Yes. 24%, 25%, depending on whose exercising options, it'll be lower if you have more. And our normal sort of ETR operating, if you will, is sort of 25.5%. So if nothing weird happens, you're sort of at that level. For interest income these days, Mike, you know we're kind of at $600,000 or $700,000 a quarter, something like that, probably closer to $700,000 these days.

[Michael Petusky, Barrington Research Associates, Inc.]

But there's no unusual items, you're doing more than a $0.5 million on that line going forward a quarter.

[Joseph Pellegrino, Chief Financial Officer]

Yes. That's right.

[Michael Petusky, Barrington Research Associates, Inc.]

Outstanding. Thanks, guys. Really impressive start. Thanks.

[Joseph Pellegrino, Chief Financial Officer]

Thanks, Mike.

[Operator]

[Operator Instructions] And our last question will come from Scott Henry of ROTH Capital. Your line is open.

[Scott Henry, ROTH Capital Partners]

Thank you, and good afternoon. A couple of questions. For starters, I always like to ask could you give me the mix between biologics and non-biologics?

[George LeMaitre, Chairman and Chief Executive Officer]

49% biologics.

[Scott Henry, ROTH Capital Partners]

Okay, great. Thank you. And then just as a follow-up to the conversation you just had on Valvulotomes. With regards to price increases and if we think about price increases is in addition to inflation, so excess price increase. How much room do you believe you have for your product lines on pricing? Do you get much pushback? Does it vary? Just how should we think about the sustainability of being able to put through price increases beyond inflation?

[George LeMaitre, Chairman and Chief Executive Officer]

Okay. That's a good question. And I think your question would be even more full if you said, depending on when you do this. Because right now in December and January and February, just that we came around the corner of the year, very little pushback on everything we did. And I was just visiting our European subsidiaries last week. And the European reps were very conscious about price hikes were making remarkable statements to me like George, no one cared, it didn't matter. They're so nervous about not getting supply from their manufacturers. They're just happy, you're talking to them right now. So I think the supply chain dynamics and then also the external inflation in Germany of 10%, let's call it. Those two things conspire to when you put a 13% price hike at these hospitals right now, at least for now, they're not blinking.

Now, I hadn't – two years ago, four years ago before all this that was not the case. And we have this chart in our online PowerPoint presentation about the company where we call out these price hikes, and I think we did 13 in this Q1 and you guys help me out, eight or nine in the last two years before that. And you got a little bit more pushback two and a half years ago, but nothing right now.

[Scott Henry, ROTH Capital Partners]

Okay, great. Thank you for that color. That's helpful. And then just on the model, a couple of numbers. I noticed G&A was a little bit above trend. And then when I look at sales and marketing, I usually calculate expense per rep, which was a bit higher than it's been in the past. Are those trends or is that noise, just how should we think about that?

[Joseph Pellegrino, Chief Financial Officer]

Yes. So in the quarter, you're asking year-over-year, I think maybe that language. G&A up 9% year-over-year, I'd say a few more hires, a few more employees. And then COLAs, cost-of-living and salary increases year-over-year. And then more T&E, we're definitely traveling more, I think generally speaking. So I think that's what's driving that 9% growth. And then selling and marketing up 39% year-over-year. And that's a number of things. One is, as George was talking about more, more reps, 16 more reps year-over-year.

But also commissions were significantly higher in Q1 than sort of year-over-year or run rate or however you want to look at it. And that obviously goes hand-in-hand with the higher sales. So quotas for sales reps were made back in October, November, December, and Q1 turns out to be a fantastic quarter, cases are up, and so commissions are way up as well. And so that piece of it, that will stay high if the sales piece stays high, that hospital backlog, “case surge” stays high and it'll come and normalize if it comes down. So we'll see.

And then the other piece in Q1 is the sales meetings. We have typically historically done annual sales meetings in January for the Americas, for Europe, and for APAC. We were off last year, but we were on this year. And so that's a decent number for the year-over-year comparison.

[Scott Henry, ROTH Capital Partners]

Okay. Great. And final question, when I look at the Aziyo transaction, I mean, it looks just like the type of deal where you want to try out the product for a couple of years. And if everything looks good, you buy this. And obviously you have the options. I mean, is that a fair way to think about it? If this is as good as you hope it is, that this is something you would want the entire thing. And this is more of a process to understand the product better and to get a little more sharpened pencils on the transaction.

[George LeMaitre, Chairman and Chief Executive Officer]

Yes, Scott. We've been familiar with this product line for a while, but of course, you never get a perfect due diligence look. And so for us to have it in our own bag and be selling it ourselves in the United States is just a really good way to try before we buy it. So that's exactly what it is. And if we do exercise the option, I imagine, as we talked about, it was $6.8 million of revenue in the U.S. There's a little bit OUS. But it would be the third biggest acquisition LeMaitre would've done or if it grew, it could be the second. So it's not small for us. Of course, we have our site set on larger transactions going forward, but no, this is a nice size transaction, sort of a perfect drop in for LeMaitre, except this time we get to try it out before we buy it.

[Scott Henry, ROTH Capital Partners]

Okay. Great. Thank you for taking the questions, and congratulations, really strong results.

[George LeMaitre, Chairman and Chief Executive Officer]

Thanks a lot, Scott.

[Operator]

[Operator Instructions] I am showing a follow-up question from Michael Petusky of Barrington. And Michael, your line is open.

[Michael Petusky, Barrington Research Associates, Inc.]

Yes. J.J. rather than texting you later, I was wondering if you could…

[Joseph Pellegrino, Chief Financial Officer]

Well, I'm driving…

[Michael Petusky, Barrington Research Associates, Inc.]

Exactly. I want to keep you safe. Stock-based comp, CapEx and cash flow from ops?

[Joseph Pellegrino, Chief Financial Officer]

1.29 of stock-based comp, [$1.290 million], depreciation and amortization 2.351 and CapEx, $2.13 million.

[Michael Petusky, Barrington Research Associates, Inc.]

I'm sorry. Did you give cash flow from ops? It cut out there for a second.

[Joseph Pellegrino, Chief Financial Officer]

2.28.

[Michael Petusky, Barrington Research Associates, Inc.]

All right. Thanks. Have a good night, guys. Thank you.

[Joseph Pellegrino, Chief Financial Officer]

Thank you.

[Operator]

Ladies and gentlemen, that concludes today's conference. I would like to thank you for your participation and you may now disconnect. Have a great day.