Boston Scientific Corp

NYSE:BSX

Earnings Call Transcript 2018-Q2

[Operator]

Ladies and gentlemen, thank you for standing by. Welcome to the Boston Scientific Q2 2018 earnings call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time. As a reminder, today's call is being recorded.

I will now turn the conference over to your host, Susan Lisa. Please go ahead.

[Susan Vissers Lisa, Boston Scientific Corp.]

Thank you, Kevin. Good morning, everyone, and thanks for joining us. With me on today's call are Mike Mahoney, Chairman and Chief Executive Officer, and Dan Brennan, Executive Vice President and Chief Financial Officer.

We issued a press release earlier this morning announcing our Q2 2018 results, which included reconciliations of the non-GAAP measures used in the release. We have posted a copy of that release as well as reconciliations of the non-GAAP measures used in today's call to the Investor Relations section of our website under the heading Financial Information.

The duration of this morning's call will be approximately one hour. Mike will provide strategic and revenue highlights of Q2 2018. Dan will review the financials for the quarter and then Q3 2018 and full-year 2018 guidance, and then we'll take your questions. During today's Q&A session, Mike and Dan will be joined by our Chief Medical Officers, Dr. Ian Meredith and Dr. Ken Stein.

Before we begin, I'd like to remind everyone that on the call, organic revenue growth is defined as year-over-year growth excluding the impact of foreign currency fluctuations and sales from the acquisition of Symetis, with no prior-period related net sales.

Also of note, this call contains forward-looking statements within the meaning of federal securities laws, which may be identified by words like anticipate, expect, believe, estimate, and other similar words. They include, among other things, statements about our growth in market share, new product approvals and launches, clinical trials, cost savings and growth opportunities, our cash flow and expected use, our financial performance, including sales, margins, earnings, and other Q3 and full-year 2018 guidance, as well as our tax rates, R&D spend, and other expenses. Actual results may differ materially from those discussed in the forward-looking statements. Factors that may cause such differences include those described in the Risk Factors section of our most recent 10-K and subsequent 10-Qs filed with the SEC. These statements speak only as of today's date, and we disclaim any intention or obligation to update them.

At this point, I'll turn it over to Mike for his comments. Mike?

[Michael F. Mahoney, Boston Scientific Corp.]

Thank you, Susie, and good morning, everyone.

We had a strong second quarter, as we continued to deliver on our commitments while further investing in our bright future. Boston Scientific's diversified portfolio and category leadership strategy continued to drive top-tier performance while also enabling us to continue to invest meaningfully in our future pipeline, both internally and via tuck-in M&A.

In Q2, our team delivered 9% operational and 8% organic revenue growth, with excellent balance across our businesses as well as our geographic regions. Both MedSurg and Rhythm and Neuro grew 9% and Cardiovascular sales increased 6%, all on an organic basis. Similarly, Asia-Pac organic sales were up 9%, U.S. up 8%, Europe-Middle East-Africa 7%, and Latin America up 15%. Overall, emerging market sales grew 21%, led by excellent growth in China.

We leveraged this worldwide 8% Q2 organic revenue growth to deliver adjusted EPS of $0.41, which includes a $0.06 tax benefit. Absent this benefit, our adjusted EPS would have been $0.35, representing 9% year-over-year growth and at the high end of our guidance range. And Dan will also provide more details on the tax benefit.

Boston Scientific also continues to generate excellent cash flow with $558 million in adjusted free cash flow this quarter, representing a 37% year-over-year increase. We're excited about the second half of 2018 and beyond given our efforts to drive compelling and durable long-term growth with differentiated financial performance.

As a result of our strong performance and confidence in our outlook, we're bringing up the low end of our full-year 2018 organic revenue growth guidance from our prior range of 5% to 7% to 6% to 7%. We're also raising our Structural Heart revenue guidance from $400 million to $450 million and guiding to Q3 2018 organic revenue growth of 7% to 8%. There's no change to our full-year 2018 adjusted EPS guidance range of $1.37 to $1.41, as we are offsetting $0.03 to $0.04 of headwind from a greater than expected FX hit and dilution from recent M&A.

I'll now provide some highlights on Q2 results and thoughts on our full-year 2018 outlook. In my remarks, I'll reference the growth on an organic year-over-year basis unless otherwise specified. The 9% Q2 growth in Endoscopy was a nice acceleration from the 6% growth rate in the first quarter, due to great results in our global Endo business. Q2 results were led by compelling EndoChoice performance, particularly in pathology and infection prevention, as well sales of our SpyGlass DS visualization platform, Axios stent, and the Resolution 360 platform.

In addition, we're excited about the development of our Therapeutic Imaging platform, as outlined at DDW [Digestive Disease Week] in June. We anticipate this will be a great catalyst that will enable us to double our served endoscopy market to $7 billion globally by 2021. This portfolio of single-use scopes will develop over the coming years and include: the Exalt-D duodenoscope, which is a bronchoscope for use in pulmonary applications; an upper GI scope for emergent bleeds; and a surgical scope for pancreatic biliary applications. This platform will enable physicians to perform procedures more efficiently with better outcomes while improving hospital scope readiness and alleviating cross-contamination risk. We're also very encouraged by physician support and enthusiasm at DDW in June and look forward to launching a single-use scope platform, starting with Exalt-D, by year-end 2019.

Our Urology and Pelvic Health business also continued its strong global performance trend, growing sales 9% in the second quarter, led by double-digit growth in our Stone franchise, where sales of LithoVue, which is our single-use digital ureteroscope, continued to outperform and drive portfolio pull-through.

Sales of Men's Health products grew high single digits while our prostate health business grew mid-teens, with the Rezūm minimally invasive therapy for BPH being a key driver. The advantage of Rezūm that resonates most strongly with customers are the simple in-office procedure, different change of relief from symptoms, and durability of results, which limits the need for reintervention. Recent AUA [American Urology Association] guidelines supporting MIT [Minimally Invasive Therapy] approaches for BPH are also helping driver Rezūm adoption.

Neuromodulation grew an impressive 31% organically in Q2, driven primarily by the successful launch of our innovative WaveWriter spinal cord stimulation platform in the U.S. and increasing demand for WaveWriter in Europe. In the pain segment, WaveWriter SCS is enjoying excellent uptake due to impressive real-world results, particularly in low back pain patients, where the unique ability to offer combination waveform therapies, both with paresthesia and sub-perception, can improve therapy longevity for patients who have been on therapy for many years. Given this difficult to treat condition, we believe these excellent real-world outcomes with WaveWriter and the significant positive impact upon a patient's ability to function and quality of life are resonating with the physician and patient community and are resulting in both share capture and increased usage at existing accounts.

We also continue to defend our intellectual property vigorously and are pleased with the judge's ruling yesterday in the litigation filed by Nevro in California. The judge ruled in our favor on every claim asserted by Nevro, finding that our products do not infringe any valid claims.

Our Deep Brain Stimulation performance capabilities also continue to expand, with strong results in Europe and positive early momentum for the Vercise launch in the U.S. We anticipate continued strength in Neuromodulation sales in the second half of 2018.

CRM sales grew above market 1%, led by high single-digit growth in defibrillator sales, reflecting an encouraging global launch of our Resonate platform and its HeartLogic heart failure alert as well as EMBLEM S-ICD. The projected benefit from our device replacement cycle is also tracking to expectations. We continue to gain share as the number two share player in the high-voltage market. And customer interest in HeartLogic continues to increase, as heart failure practitioners recognize the value of the only FDA-approved heart failure alert over 30 days in advance of an event, which importantly does not require maintenance via data monitoring.

We also continue to enroll patients in the first phase of Manage AF (sic) [Manage HF], which is a multi-center randomized trial designed to quantify the benefit of proactive heart failure management by using HeartLogic.

The highly differentiated EMBLEM S-ICD continues its trajectory, due in part to the growing body of clinical evidence due to the late-breaker SMART Pass at HRS in May, recent guideline inclusion that has enabled expanded private insurance coverage in the U.S., and multiple product enhancements that improve the ease of use and reduce implant procedure time.

Brady pacing sales were down low-double digits in the second quarter, as we lost some share due to competitive launches and the need to close the final MRI product gap in CRT-P. While we expect Brady pacing sales to remain a headwind in the second half of 2018, given the strong global momentum of our defib portfolio, we are confident that worldwide in 2018, our CRM business should continue to grow above market.

EP sales grew 16% in the quarter, led by good growth in our Rhythmia HDx mapping and navigation platform. We've also been very pleased with the recent European launch of our DirectSense and IntellaNav MiFi OI ablation catheters.

Importantly, we're continuing to invest in our exciting and differentiated EP pipeline. The EP market remains highly attractive, with a demonstrated history of mid-teens market growth. In the coming years, we believe our EP business will be uniquely differentiated with the broadest portfolio. We expect to be the only company to offer EP for the second-generation cryo balloon platform as well as an RF single-shot balloon platform for pulmonary vein isolation treatment with the recent acquisitions of the Cryterion and Apama. These platforms will be an excellent complement to our arrhythmia mapping system and therapeutic catheter launches. Both our cryo and RF single-shot AF platforms are targeted to launch by year-end 2019 in Europe.

Turning to our Cardiovascular group, our global PI business performed very strong, growing 9% in the quarter. The PI business grew very well in all segments, including peripheral arterial disease, venous, and interventional oncology. PI sales also increased across all major markets and performed particularly well in Asia. In Europe, we continue to see excellent uptake of our drug-eluting technologies, the Ranger drug-coated balloon and the Eluvia drug-coated stent (sic) [Eluvia drug-eluting stent], as well as our Jetstream atherectomy system. We're also continuing to target drug-eluting U.S. launches in the first half of 2019 for Eluvia DES and a 2020 for Ranger DCB. We really look forward to providing a comprehensive update on this portfolio at TCT in September.

Our Interventional Cardiology business delivered 5% growth in the quarter and really demonstrates the ongoing and very successful diversification strategy of this business segment. In Q2, IC was led by very strong sales in Structural Heart and complex PCI products, partially offset by a challenging quarter in DES, which was as expected. Our complex PCI and PCI guidance business continues to expand globally and is now approaching the same size as our global DES business. Complex PCI grew high-single digits in the second quarter, as the number of patients requiring a complex coronary intervention continues to grow globally. We also enjoyed a successful launch in the quarter with the WOLVERINE cutting balloon and MAMBA microcatheters, as well as very strong sales in China and emerging markets.

Similar to first quarter trends, drug-eluting stents were down mid-single digits this quarter and we would anticipate a similar outlook for the balance of the year. However, with new launches in complex PCI, including the ROTAPRO atherectomy platform, we plan to offset this DES softness.

Our Structural Heart programs continue to build momentum, and our revised $450 million revenue guidance is a result of both the WATCHMAN left atrial appendage closure device and ACURATE TAVR valve being ahead of plan.

We're also very enthusiastic about a recent acquisition of Claret Medical, which will bring Sentinel to the BSE Structural Heart portfolio. Sentinel is the only cerebral embolic protection system approved in the U.S. and Europe to protect patients against the risk of stroke during TAVR procedures. We see a significant opportunity for embolic protection in TAVR both today and longer-term, including intermediate and low-risk patients, as well as other left heart and endovascular procedures like mitral valve repair and replacement, left atrial appendage closure, and pulmonary vein isolation procedures for AFib patients.

There is no change to our LOTUS Edge TAVR valve commentary from earlier this year, and that pending certain technical and regulatory hurdles, our goal remains to launch LOTUS Edge in the U.S. and European markets in 2019. We continue to work towards this goal, but recall that we said our next LOTUS Edge update will be either the filing of the final technical module of the PMA is imminent or that we have chosen not to proceed with the program.

Our ACURATE TAVR platform is delivering impressive cadence of growth and progress in Europe, and we're investing to expand ACURATE globally. We remain on track to deliver multiple ACURATE milestones in the second half of 2018, including the European launch of the next-generation ACURATE neo 2, which has an enhanced seal. Secondly, we'll be completing enrollment in the SCOPE 1 and SCOPE 2 clinical trials, where ACURATE is randomized to SAPIEN 3 and CoreValve. And finally, number three, we're looking forward to ACURATE beginning enrollment in our U.S. IDE study by the end of 2018.

WATCHMAN also delivered excellent growth in the quarter, and WATCHMAN continues to build very strong global physician support, and particularly so in the U.S. All key metrics are trending well, including utilization and reorder rates and account openings. We began enrollment in the U.S. in the next-gen WATCHMAN FLX IDE, with a targeted EU launch in the first half of 2019. We remain on track to launch WATCHMAN in Japan in the second half of 2019. We also continue to invest on multiple WATCHMAN market development programs, including physician training, refer education, and increasing patient awareness.

I'm also pleased that while we've been delivering these very strong results, we have also been actively investing to further strengthen our category leadership strategy and long-term growth profile of the company. In 2018, we've been active with tuck-in M&A, and in the quarter, we announced four tuck-in acquisitions, Claret, Cryterion, nVision, and Securus. These acquisitions all target high-growth markets, enhance our category leadership strategy, leverage existing BSC global capabilities, and further enhance our short-term and long-term growth profile. We also plan to fully absorb the near-term dilution of the combination of these multiple tuck-in transactions while also delivering on our commitment to double-digit adjusted EPS growth.

Our core business has very strong momentum and our pipeline has never been stronger. We believe we are uniquely positioned to drive shareholder value due to our differentiated long-term growth profile, continued ability to improve operating margins, our commitment to double-digit adjusted EPS growth, and a proven ability to deploy capital. I really want to thank our employees for their tremendous winning spirit and commitment to advancing science for life.

Dan will now provide a detailed review of our financials.

[Daniel J. Brennan, Boston Scientific Corp.]

Thanks, Mike.

Second quarter consolidated revenue of $2.490 billion represents 10.3% reported revenue growth and reflects a $37 million tailwind from foreign exchange, about half of the $60 million to $70 million tailwind expected at the time of guidance. On an operational basis, which excludes the impact of foreign currency fluctuations, revenue growth was 8.6% in the quarter. Sales from the Symetis acquisition contributed approximately 70 basis points, which was in line with our guidance. As a reminder, the operational Symetis contribution represents only a partial period, two months, for which there were no prior-period related sales, and the revenue from Symetis is considered organic as of June 1 of this year.

The resulting organic revenue growth of 7.9% in the second quarter exceeded the high end of our guidance range of 5% to 7%, as we continue to realize the benefits of our portfolio diversification and category leadership strategy, evidenced by the outperformance across the majority of our businesses and regions once again.

We leveraged this strong performance and delivered Q2 adjusted earnings per share of $0.41, which includes an $82 million non-cash benefit related to the finalization of our IRS stipulation of settled issues in the quarter. Absent this benefit, our adjusted earnings per share would have been $0.35, representing 9% year-over-year growth and at the high end of our guidance range of $0.33 to $0.35. Earnings were driven by a strong top line and solid P&L metrics, and notably includes approximately $0.01 of negative FX impact as well as a $0.01 charge for an impairment of certain of our investments, which I'll discuss in a few minutes.

Adjusted gross margin for the second quarter was 71.3%, slightly below our guidance range of 71.5% to 72%, and represents a decline of 150 basis points year over year, due primarily to a 160 basis point negative year-over-year impact from foreign exchange. This is slightly below the low end of guidance, primarily related to timing of manufacturing variances in the quarter. For the full year, we continue to expect adjusted gross margin will be approximately 72%, with the first half of the year being slightly below that and the second half being slightly higher due to less of an FX headwind, with Q4 expected to improve versus Q3.

Adjusted SG&A expenses were $865 million, or 34.7% of sales in the quarter, down 80 basis points year over year and a good result towards the lower end of our guidance range of 34.5% to 35.5%. While also leveraging our top line growth, we remain committed to our targeted initiatives focused on reducing SG&A and continue to realize the benefit of efforts such as end-to-end business process streamlining and automation, enhanced leverage of our global sourcing teams, and the expansion of global shared services.

Adjusted research and development expenses were $260 million in the second quarter, or 10.4% of sales. And royalty expense was 0.7% of sales, both roughly flat year over year.

As a result of solid performance throughout the P&L on strong sales in the quarter, adjusted operating margin was 25.4% in the second quarter, within our guidance range of 25.25% to 25.75%. The 60 basis point year-over-year decrease is primarily driven by the 160 basis point negative FX impact at the gross margin line, as I discussed earlier. We continue to expect our full-year adjusted operating margin to be in a range of 25.5% to 25.75%, consistent with the goals outlined at the start of the year, and we remain committed to the long-term goal of 28% adjusted operating margin by 2020.

Now, I'll move to below-the-line interest and other expense. Interest expense for the quarter was $57 million compared to $58 million in Q2 of last year. Our average interest expense rate was 3.6% in Q2 this year, slightly lower than the 3.9% in Q2 of last year, as a result of net investment hedges entered into in Q2 intended to hedge a portion of our net investments in certain of our international entities. Adjusted other expense was $29 million in the second quarter, and primarily included a $19 million impairment on certain of our investments.

With a growing portfolio of over 30 companies, impairments may occur from time to time. However, we believe our venture strategy is working well, as most recently evidenced by the acquisitions of NxThera and Cryterion Medical from this portfolio. Adjusted other expense for the quarter also included dilution from our equity method investments, adjustments to our available-for-sale investments, as well as transactional foreign exchange losses, including hedging costs.

Our tax rate for the second quarter was minus 60.3% on a reported basis, which included a $250 million non-cash benefit from the finalization of the IRS stipulation of settled issues in the quarter. On an adjusted basis, our tax rate was minus 3.8% and includes an $82 million benefit from that settlement. Excluding this benefit and our net benefit from stock compensation of approximately 75 basis points, our operational tax rate was approximately 12%. Our operational tax rate averaged 14% in the first half, consistent with our expectations for an operational tax rate of 14% to 15% for the full year or approximately 13% to 14% all-in adjusted tax rate net of stock comp benefit for the year.

We've been working hard to reduce the contingent risk on our balance sheet over time. Our tax liability decreased to approximately $900 million as of the end of Q2, which is an almost $1 billion decrease from the Q1 ending balance. Of the $900 million remaining, approximately $500 million relates to the tax reform transition tax, which is payable over the next seven years, leaving approximately $400 million for all remaining global tax controversies.

As a reminder, we are exploring strategies to reinvest the tax benefit reflected in our adjusted results into our tax structure, with the goal of reducing our operational tax rate in 2019 and beyond below our previously announced goal of 15%. We expect the majority of this reinvestment to occur in the fourth quarter. And as a result, we do not expect an impact to full-year adjusted earnings per share as a result of this Q2 tax benefit.

Just to recap, Q2 2018 adjusted earnings per share of $0.41 includes an approximate $0.06 non-cash benefit related to the finalization of the IRS settlement. Excluding this $0.06, the $0.35 in adjusted EPS is particularly strong, considering it includes a combined $0.02 of drag from the investment impairment and additional unfavorable FX. Reported GAAP EPS of $0.40 includes net charges and amortization expenses after tax net of the settlement-related tax benefit of $13 million.

We ended Q2 with 1.399 billion fully diluted weighted average shares outstanding.

Adjusted free cash flow for the quarter was $558 million compared to $407 million in Q2 of last year. In the quarter, we used cash and short-term debt to fund previously agreed upon legal and tax settlements as well as our recent acquisitions. We continue to expect 2018 adjusted free cash flow to be approximately $1.9 billion.

We're also making good progress on our mesh litigation, with minimal incoming new claims and approximately 1,500 cases or claims remaining, which represents less than 5% of all of our known claims. We remain on track for our year-end 2018 goal to resolve the majority of our mesh claims. Our total legal reserve, of which mesh is included, was $1.264 billion as of June 30, 2018.

As a reminder of the mechanics, we've already made payments into the qualified settlement fund, which is shown as restricted cash on our balance sheet, with a current balance of nearly $800 million. Yet, this liability is only released from our balance sheet when payments to plaintiffs are made out of the qualified settlement fund. So the way to think about it is we only have $400 million left to fund.

Capital expenditures for the second quarter were $73 million. We expect capital expenditures of approximately $350 million for the year, as we build capacity, integrate acquisitions, and drive growth.

I'll now walk through guidance for the third quarter and full year 2018. For the full year, we expect consolidated 2018 revenue to be in the range of $9.800 billion to $9.880 billion, which represents year-over-year organic growth of 6% to 7%. And we expect the contribution from the Symetis acquisition realized in the first five months of the year to equate to 40 basis points of growth on that full year.

We now expect foreign exchange to be a tailwind of approximately $125 million to $150 million for the full year, which is a decrease from our prior expectations of $200 million to $225 million tailwind due to the strengthening U.S. dollar against most major currencies.

We continue to expect our adjusted gross margin for the year as a percentage of sales to be approximately 72%, which now assumes a negative FX impact of 90 basis points for the full year, down slightly from our prior guidance.

There's no change to our expectations for full-year adjusted SG&A to be in the range of 34.5% to 35% of sales, as we are seeing the benefits of operating expense control programs currently underway. Similarly, there's no change to expectations for our full-year adjusted R&D spend in a range of 10% to 11%, and full-year royalty rates to remain at slightly less than 1% of sales for the year. This continues to imply a full-year 2018 adjusted operating margin in a range of 25.5% to 25.75%.

We also continue to expect our full-year 2018 operational tax rate to be between 14% and 15% and our all-in adjusted tax rate to be 13% to 14%, which reflects an approximate 100 basis points of benefit from the accounting standard for stock compensation, of which the majority was already reflected in our first half 2018 tax rate.

Consistent with prior guidance, we expect below-the-line expenses, which include interest payments, dilution from our venture capital portfolio, and cost associating with our hedging program, to be approximately $300 million for the year and a fully diluted weighted average share count of approximately 1.4 billion for Q3 and the full year 2018.

We are reiterating our full-year 2018 adjusted earnings per share range of $1.37 to $1.41, representing 9% to 12% adjusted earnings growth. This now includes a negative FX impact of $0.03 to $0.04, or an increase of $0.01. In addition, as Mike mentioned, we're maintaining our adjusted EPS guidance despite the dilution expected from product and market development activities required for the acquisitions we've completed or expect to complete in 2018. By investing in our core business through these acquisitions, we believe we can enhance our outlook for durable revenue growth, all while still delivering on our double-digit EPS growth goals. On a GAAP basis, we expect earnings per share to be in the range of $0.99 to $1.03.

Now, turning to Q3 2018, we expect consolidated revenue to be in a range of $2.380 million to $2.420 billion, representing year-over-year organic growth of 7% to 8%. In the third quarter, we expect the foreign exchange impact to be relatively immaterial, with an expected tailwind of zero to $10 million.

For the third quarter, adjusted earnings per share is expected to in a range of $0.33 to $0.35 per share, representing 8% to 13% growth. And GAAP EPS is expected to be in a range of $0.21 to $0.23 per share. Please check our Investor Relations website for Q2 2018 financial and operational highlights, which outlines Q2 results as well as Q3 and full-year 2018 guidance, including P&L line item guidance.

So with that, I'll turn it back to Susie, who will moderate the Q&A.

[Susan Vissers Lisa, Boston Scientific Corp.]

Thanks, Dan. Kevin, let's open it up for questions for the next 30 minutes or so. In order to enable us to take as many questions as possible, please limit yourself to one question and one related follow-up, Kevin, please go ahead.

[Operator]

Thank you. The first question is from the line of David Lewis from Morgan Stanley. Please go ahead.

[David Ryan Lewis, Morgan Stanley & Co. LLC]

Good morning and congrats on a good quarter. Just two questions for me, and I'll ask them all at once. The first, Mike, is more strategic for you and then a quick follow-up for Dan. But on broader M&A, Mike, I think most investors would have expected as your capital flexibility improves that M&A builds back half this year, more acutely in 2019, but we've actually kind of seen the opposite. You've been very active on M&A in the first half of the year, and I wanted you to share with us why you're so active in the first half of the year and what this now says in terms of increased activity into 2019. And then related is does the Claret strategy make sense if you're not going to be in the U.S. market with a TAVR valve for a couple of years. And that's sort of M&A.

And then for Dan, just sustainability of some momentum, the two biggest businesses that broke trend this quarter, obviously, Neuromodulation and EP, kind of your confidence into the back half of the year those businesses can sustain that kind of momentum. Great quarter, thanks so much.

[Michael F. Mahoney, Boston Scientific Corp.]

Sure. Thanks, David. On the M&A front, first comment is our team has really developed excellent capabilities to execute on our integration acquisitions. If you look at the history of what we've acquired the last four or five years, the more mature companies are growing faster and driving more leverage in our hands, and we've been able to bring the newer companies along to successful completion, like ACURATE valve and so forth.

Secondly, on the M&A front, this is not a new strategy for us. We've been very active in our venture fund over the past five years. We've really set the stage for these strategic acquisitions over time. So many of these acquisitions were planned and many of these we actually have an ownership stake in them. So the companies that we're tracking we're very comfortable with.

And I think the third point is it really just continues to reinforce our strategy. We want to have a differentiated growth rate, differentiated financial performance, driving category leadership, and these variety of tuck-in deals all support that strategy. They leverage capabilities that we have today. They enhance our growth profile, and the discipline of the company is such that we can deliver on these acquisitions and also continue deliver operating income margin and double-digit EPS growth while importantly further enhancing our growth profile. So we have a lot of confidence in these. These are well planned, and we expect this strategy to continue.

[Daniel J. Brennan, Boston Scientific Corp.]

And then, David, relative to your second question on sustainability in Neuromod and EP growth rates from a revenue standpoint, you happened to pick on two of the highest growth markets we have. Those are both very high-growth markets, probably two of the hottest ones we have in the portfolio.

If you look at EP, last four quarters, 18%, 18%, 11%, and 16%. So that's kind of at market, which is okay. We'd like to grow better than that and we have new technologies coming. You've also seen as you look at the M&A strategy, three deals in the last 12 months relative to category leadership in EP, so we're investing in that space and we want to continue to drive growth there. So if you consider that market to be mid-teens, we'd like to certainly be at that or above as we go forward.

Neuromod, 31% in the quarter is a real testament to the strength of the portfolio there. With WaveWriter and with DBS launching in the U.S., hard to imagine we put up 31% every quarter but we put up 17% in the first quarter, and I think said very publicly we think that's probably the low watermark for the year. So I would like to think we're north of 20% for the foreseeable future next couple of quarters. So two good businesses with strong growth prospects that we think should continue in the near-term.

[David Ryan Lewis, Morgan Stanley & Co. LLC]

And, Mike, does Claret make sense? Just to follow back up on that, does Claret make sense if you're not going to be in the U.S. market with a TAVR valve in the next two years?

[Michael F. Mahoney, Boston Scientific Corp.]

Claret makes great sense. Ian can comment, but the risk of stroke, not only in TAVR procedures, for intermediate risk, low risk, we've seen high percentages of their procedures have debris. And it's just an excellent complement to our current platform in Europe with ACURATE, and ideally would be the perfect platform for a potential combination of both LOTUS and ACURATE in the U.S., assuming we get through the much discussed technical and regulatory hurdles that we've talked about. So not only within TAVR does it make sense, but also expanded beyond TAVR and other procedures like I mentioned in mitral as well as EP procedures is a nice strategy for us. It leverages our current sales force. They have strong clinical data, and we think it's a really nice complement. Ian, do you have anything?

[David Ryan Lewis, Morgan Stanley & Co. LLC]

Thanks so much.

[Operator]

All right, the next question is from the line of Glenn Novarro, RBC Capital Markets. Please go ahead.

[Glenn John Novarro, RBC Capital Markets LLC]

Hi, good morning, guys, two questions. First for Dan, the EPS guidance that you maintain of $1.37 to $1.41, does that assume – for 2Q, does that assume $0.41 or $0.35? And the reason I'm asking is if I plug $0.41 into the model and given what you've provided for 3Q and revenue guide for the full year, it looks like there will be a step-down in EPS. And if so, is the EPS step-down a function of a higher tax rate, or is that where you're seeing all the dilution coming from the recent deals? Thanks.

[Daniel J. Brennan, Boston Scientific Corp.]

So to be 100% clear, there is no step down in EPS guidance. The guidance of $1.37 to $1.41, with the way you describe it, would include a $0.35 number for the second quarter. The $0.06 of the tax benefit that gets you to $0.41, the plan is to reinvest that, largely in the fourth quarter, so you have $0.06 more in Q2. Likely you'd see the other side of that in Q4, so the $1.37 to $1.41 is still the number and still represents double-digit adjusted earnings per share growth for the year.

[Glenn John Novarro, RBC Capital Markets LLC]

Okay. So just to be clear, I should have $0.35 in the model that shows up for consensus, correct, in First Call?

[Daniel J. Brennan, Boston Scientific Corp.]

Absolutely, the $0.41 is the reported number, but the $0.06 of tax will not be a benefit for the year. It will be in in Q2 and out in Q4.

[Glenn John Novarro, RBC Capital Markets LLC]

Okay, very good, very clear. And then, Mike, I know you don't want to comment on LOTUS, but help us understand the job postings that we found recently on your website referring to the relaunch of LOTUS. Thanks.

[Michael F. Mahoney, Boston Scientific Corp.]

I would encourage you to send your resume in to HR, Glenn.

[Glenn John Novarro, RBC Capital Markets LLC]

Okay. But shouldn't that assume that you're making further progress on the catheter fix?

[Michael F. Mahoney, Boston Scientific Corp.]

We're not going to comment any further. We've said all along that our goal is to launch LOTUS in the U.S. and in Europe and getting over these hurdles, but we also have been through an up-and-down piece with this. So our commitment to our investors was that we wouldn't provide a specific date until the filing of the final technical module of the PMA is imminent or that we've chosen not to proceed. So we just basically don't want to give the blow by blow until this 100% over the goal line or not. In the meantime, the company is growing 9% operational and 8% organic, and our Structural Heart guidance we took up for the quarter. So it's our goal, but we're not going to give you a further update until it's over the goal line.

[Glenn John Novarro, RBC Capital Markets LLC]

Okay, fair enough. Thank you.

[Operator]

Our next question is from the line of Rick Wise, Stifel. Please go ahead.

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

Good morning, everybody. Maybe I'll continue on the TAVR front, Mike. ACURATE, the OUS performance you described is continuing strong. Can you quantify about it at all in dollars or percent? And maybe just talk as you answer about how broadly the products are available in Europe now, the potential impact of the ACURATE neo2 in terms of reaching more patients or facilitating more procedures. And I have a follow-up.

[Michael F. Mahoney, Boston Scientific Corp.]

Sure. On ACURATE, I'm just really proud of the team. It goes back to David's question on our confidence and our ability to acquire companies and integrate them swiftly with our teams. And the team over in Europe has done a great job. We've managed the delicate balance of driving and maintaining the innovation of the company that we acquire but leveraging the global footprint that we have. And so ACURATE has exceeded our expectations.

As you know, it's got an extremely low pacemaker rate, it's very easy to implant, and it continues to get wider visibility now that it has our commercial footprint. As you know, the bulk of the sales are in – call it the DOC [Denominazione di Origine Controllata] region; Germany, Austria, Switzerland, as well as the UK and the Nordics. We're not in France yet. We expect to be there I think by the end of 2019. And we're just now trying to expand ACURATE into other markets like Australia as well as Canada. So you'll see that ACURATE platform continue to – and also Latin America – continue to expand outside of the U.S. throughout the second half of this year and in 2019.

And then in parallel, I'm really excited about the next-generation ACURATE neo, the combined improved PBL rate with the enhanced seal, with the best-in-class pacemaker right now, and ease of use. And then we finish up our SCOPE 1 and SCOPE 2 and hopefully initiate that U.S. IDE here in the second half. So a lot of momentum there, and combined with the potential dual-valve strategy and the complementary nature of Claret really makes a compelling TAVR portfolio for us.

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

Turning to AF, Mike, you highlighted a number of milestones and targets. Maybe talk about the timing. I don't think you said it of the U.S. AF catheter launches. EU you said end of 2019, but U.S., is it 2020 or 2021? And are those launches the key inflection or a key driver that gets you to -- actually you are roughly at -- sustains you at or gets you to above-market levels of growth, or can you get there before with all the portfolio that you have? Thanks so much.

[Michael F. Mahoney, Boston Scientific Corp.]

EP has been a strategic focus for us for a while. Five years ago, we essentially didn't have much of an EP business in terms of any innovation. And over time, we really believe that we'll have the most compelling portfolio in EP as you project out over the next few years. We're the only company with a modern mapping system, full therapeutic catheter launches, including pore sensing over time. And we're the only company with two shots on goal with single-shot therapy with cryo as well as with A-fib – with RF with our Apama balloon.

So we think the portfolio is uniquely differentiated, and we're doing this because this market is so large. It's growing mid-teens, and we're currently growing at market, but we don't have the scale some of our competitors do. So we think the combination of that portfolio, and we'll have the single-shot balloons in Europe in the second half of 2019 and we'll launch the IDE trials in the U.S. in the second half of 2019 as well. So we think that combination, if you look at DSC over the next three years, we'll be uniquely positioned in EP. And where we grow in EP, we also do better in CRM. So it's also important for us from that perspective.

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

I appreciate it. Thanks, Mike.

[Operator]

Our next question is from the line of Larry Biegelsen, Wells Fargo. Please go ahead.

[Lawrence Biegelsen, Wells Fargo Securities LLC]

Good morning. Thanks for taking the questions, and I'll reiterate the congratulations on another strong quarter. First, I also wanted to start with a product question. I think the next big data presentation for you guys is the IMPERIAL IDE with Eluvia at hopefully I think TCT in September, and I think that study is comparing Eluvia to Zilver for PTX. So my question is do you think you need to show superiority in that trial for the product to do well commercially in the United States? And I had a follow-up question.

[Michael F. Mahoney, Boston Scientific Corp.]

We'll have Dr. Meredith respond to that one.

[Ian T. Meredith, Boston Scientific Corp.]

Thanks, Larry. I think the trial is designed on non-inferiority. And I think a lot about that question about superiority or non-inferiority, but I think that point estimate of the difference is something that physicians take home from those studies. So it's designed as a non-inferiority study, and there are obviously safety and efficacy endpoints. I think the data doesn't need to be a superiority study. It's important to look at point estimates.

[Lawrence Biegelsen, Wells Fargo Securities LLC]

That's helpful. And regarding yesterday's ruling between Boston Scientific and Nevro, what does it say about your freedom to operate in the U.S. with paresthesia-free 10,000-hertz spinal cord stimulation? And what are your plans to present the ACCELERATE data? I think the slides say it's going to complete in 2018, so should we expect to see that at NANS [North American Neuromodulation Society] 2019? Thanks for taking the questions.

[Ian T. Meredith, Boston Scientific Corp.]

Larry, perhaps I could take that one. As you know, the ACCELERATE trial is the study of the PRECISION spinal cord stimulation system and now the Spectra WaveWriter system, both modified to deliver high-frequency stimulation up to 10,000 hertz. The estimated primary completion date is being pushed out now from July 2018 to March 2019, and an estimated completion date for that will be between April 2019 and November 2019. This nine-month delay ensures that we can collect sufficient data on the Spectra WaveWriter system.

Now, I might add, as you know, this is a randomized trial, and the primary goal of the ACCELERATE trial is to look at the impact of frequency on pain relief, where we now know that frequency is only one element. The pulse amplitude and other factors are also very important, and you know that we have both the WHISPER and PROCO studies, which have basically demonstrated that choosing between frequencies results in better outcomes. That's the WHISPER study, and the PROCO study was within subject comparison of multiple frequencies, showing that you could in fact actually get as good pain relief with 1,000 hertz versus 10,000 hertz and using significantly less energy and battery life to do that. So I think we're changing our view on what spinal cord stimulation patterns and frequencies need to be to cover both amplitude and waveform.

[Lawrence Biegelsen, Wells Fargo Securities LLC]

Thanks for taking the questions, guys.

[Operator]

And our next question is from the line of Joanne Wuensch, BMO Capital Markets. Please go ahead.

[Joanne Karen Wuensch, BMO Capital Markets (United States)]

Good morning and thanks for taking my question, very nice quarter. Two questions, I'll put them both out there. First of all, in cardiac rhythm management, it looks likes like there are some product gaps that need to be filled. And how do you think about filling those and what timing, and ultimately how do you view that business line?

[Michael F. Mahoney, Boston Scientific Corp.]

Sure. In CRM, we really are on a high degree of offense in defibrillators. We don't see any product gaps there. And we have a lot of differentiation, primarily in two areas, with our S-ICD, which continues to drive double-digit growth globally, and we have a multiyear head start on that. And we continue to drive enhancements to that to improve procedures. And Ken can comment on it in a minute. It's just on the enhanced clinical body of evidence that continues to mount on that. So that's a long-term differentiator for us. The second one is our RESONATE platform with HeartLogic is taking share there. And we want to continue to focus with it more on CRT-D with that platform.

So on defib, we're really in a very strong position. On the pacemaker side, we do have some product gaps with CRT-D pacing with MRI. We hope to fill that gap within the next – I guess fourth quarter this year. So that will be -- so we expect really the second half of this year to maintain pacemaker softness, but that MRI CRT-D gap will be filled by the end of the year. So likely you'll see in 2019 some improvement in our pacemaker capabilities.

The only other gap that we have in pacemaker is the leadless platform, and those efforts are underway in combining a standalone leadless pacemaker and also uniquely differentiated combining our leadless pacemaker with our S-ICD. Maybe, Ken, you want to comment on that piece of it.

[Kenneth Stein, M.D., Boston Scientific Corp.]

Thanks, Mike. Again, Joanne, I think we're comfortable that it's our competitors who have gaps, particularly in the high-voltage arena. Mike mentioned S-ICD. We have the world's only ICD that does not require any leads touching the heart. And as you look to how that's evolving, I think Mike hit on something that we're very excited about, which is our EMPOWER leadless pacing system, which is going to go into IDE trials in 2019, which will include a trial designed to show that that can function as a run of the mill VVI pacemaker and close that gap, if you will, but also show that it can be capable of coordinating with and communicating with the S-ICD, creating, frankly, another product gap for our competitors and resolving what has been the residual anxiety people have had about using the S-ICD in primary prevention patients.

[Joanne Karen Wuensch, BMO Capital Markets (United States)]

Excellent. And as a follow-up question, I'm going very back to the beginning of Q&A. There's a lot of M&A that you're doing a lot faster than I and many investors, I think, would have expected. If we look forward three to five years, how do you big picture view the portfolio? How do you plan for building it out from here? And are there things you don't want to have anymore? Thanks.

[Michael F. Mahoney, Boston Scientific Corp.]

Oh yeah, there's lots of things we don't want to have. So we note all that. So we have a very – I'm not going to share it on the call. We have a very thoughtful laid out strategic plan that we continue to modify some of the tactics and regions and by BU. We know very clearly what spaces we want to invest in, what adjacencies we want to invest in, and what areas we don't. And so it's very well laid out. And not surprisingly, if you look at these small tuck-in deals, none of these are significant and one-size. So they're tuck-in deals that all leverage capabilities that we currently have. They enhance the diversification growth profile of the company, and importantly, probably most importantly, tremendous confidence in our team's ability to deliver on them. And we've spread them out across the BUs and we work very closely with our operations team, and we still see a pipeline of future tuck-in deals over the next 12 months.

[Joanne Karen Wuensch, BMO Capital Markets (United States)]

Thank you.

[Operator]

Our next question is from the line of Robbie Marcus, JPMorgan. Please go ahead.

[Robert J. Marcus, JPMorgan Securities LLC]

Great, thanks and congrats on a good quarter. Dan, I wanted to start and follow up on the tax question. Do you mind spending a minute on where the tax upside will be reinvested in the fourth quarter? Is it all into the tax line, or is it throughout the P&L? Maybe talk about some of the mechanisms that will help lower the tax rate going forward in 2019.

[Daniel J. Brennan, Boston Scientific Corp.]

Sure, Robbie. The short answer to that is it will all show up on the tax line, it won't show up in any other area of the P&L. And just to, again, I think probably worth recapping, so we finalized the 2001 to 2010 IRS settlement. There's an $82 million non-cash benefit to adjusted earnings in the quarter, $0.06, which is the difference between the $0.41 and the $0.35. Our current expectation is that we would reinvest substantially all of this benefit, likely in the fourth quarter. Therefore, there's no change to full-year adjusted EPS guidance.

We've invested in our tax structure with the goal of reducing our tax rate 2019 and beyond. So recall our – we're on record now as saying we'll have an operational rate of 15% in 2019 and beyond. Goal would be to reinvest that in our tax structure, bring that 15% down. The way we would do that is – it's not a cash investment, so this is a non-cash benefit. And what we would do is monetize some of our existing deferred tax assets.

And simply put, when you look at the world and the different tax rates around the world and where you earn your income and where you have certain presences, that's what we would evaluate is how do you do that to take that 15% and bring that down for the future. So hopefully that's clear. We'll be more disclosive as we go through Q3 and Q4 and enact those strategies. We're in the process of developing them now. But goal would be to take that $82 million benefit, reinvest it and bring down the 15% in 2019 and beyond, all on the tax line.

[Robert J. Marcus, JPMorgan Securities LLC]

Okay, great, and then just a quick follow-up. Emerging market growth, strong double digits this quarter. Maybe you can just talk about how sustainable that strength is, some of the health of the emerging markets and are you seeing an impact. And then maybe just give us your latest thoughts on any impact from China tariffs and the latest on the China price decreases this year. Thanks.

[Michael F. Mahoney, Boston Scientific Corp.]

Yeah. So this is a very good quarter with emerging market growth. As we laid out in our Investor Day a while ago, emerging markets will continue to be accretive to our overall growth profile. I think what you're seeing is just an increased commercial capability and portfolio enhancements, whether it be the emerging markets in Asia, Middle East-Africa, and also Eastern Europe. So all three of those regions performed well, China being the largest one. And so I think the capabilities of local team, the regulatory product approvals that we have, and also it's the diversification of the business. So in prior years, it was really a DES play only. So DES is still important for us, but it's diversifying into complex coronary capabilities. Peripheral intervention is growing extremely fast in emerging markets. We're expanding Endoscopy, Urology, and Neuromodulation. So it's the diversification of portfolio and just excellent work by the local teams.

I think the other comment I'll just make broadly, maybe that we're most proud about is the diversification of the company. And five or six years ago, if you would have said DES is going to be down mid-single digits and CRM was going to be up 1%, you'd have a company at Boston probably growing flat. And we put up a 9% operational, 8% organic. And our R&D pipeline in combination with the tuck-in M&A are all reinforcing that category leadership strategy, diversification, and faster growth markets. So it's a much different company, and we're very confident in our ability to continue the momentum.

[Daniel J. Brennan, Boston Scientific Corp.]

And just to tie off specifically on your China question, Robbie, so we don't manufacture in China. We do buy a small portion of our components. It's a small, very manageable percentage of our supply costs, have some ability to substitute in some other suppliers outside of China, so don't see a big impact there.

In terms of the tariffs that are there, currently we don't see any medical devices in that tariff list, so I'm not anticipating a big impact there, and really nothing new on the China tender, so kind of status quo from where we've been the last six months, which is no real updates on that.

[Operator]

Okay, next we have Chris Pasquale, Guggenheim. Please go ahead.

[Christopher Pasquale, Guggenheim Securities LLC]

Thanks, a quick one for Dan and then one for Dr. Meredith on Claret. Dan, can you just quantify the M&A dilution you're offsetting this year?

[Daniel J. Brennan, Boston Scientific Corp.]

Yeah, it's a little north of $0.02, yeah.

[Christopher Pasquale, Guggenheim Securities LLC]

Great, thanks, and then...

[Daniel J. Brennan, Boston Scientific Corp.]

Just a quick comment on that. So none of them individually is that large when you see the press release is they're all overall immaterial on each one. It's just when you do that, the number we've done, and we're excited for the deals we've done it just aggregates to about $0.02.

[Christopher Pasquale, Guggenheim Securities LLC]

Perfect, thank you. And then, Dr. Meredith, on Claret, do you expect to receive a new tech add-on payment for that technology when the IPPS final rule is released in a couple of weeks? And how do you think about the potential for adoption, either with or without that economic incentive for use? And then from a pipeline perspective, what are you more focused on? Is it iterating the technology or expanding the indications for use? I know there has been some question about whether leaving the left subclavian exposed might limit the efficacy of that particular device.

[Ian T. Meredith, Boston Scientific Corp.]

Okay, thanks very much, Chris, for the question. First of all, as you know, there is an application for the NTAP in process, and we'll hear the outcome of that by the end of August, and it will be coming to effect if we receive that in October. But we are not dependent on that nor have we modeled that as that being critical to the uptake in the utilization. More than 100 centers in the U.S. are currently using the device, and it's up to 60% of cases in those centers using device. So I think physicians have essentially voted with their feet. As you know, the last 15 trials in a pooled registry have shown the stroke rate of around 4.5% in more than 8,000 patients, and half of those are disabling strokes. So I think physicians and hospitals are voting with their feet with respect to this. And obviously, the NTAP payment would be much welcome, but it's certainly not – we're not dependent on that.

And as for expanding the indications, I think the first thing to say is to consolidate where we are in the TAVR market, and then obviously the iteration of the device to cover the left vertebral artery. Now does that really matter? Probably not significantly so, it accounts for less than 10%, probably 5% of the flow. The other vessels are more relevant. And of course, seeing that you've mentioned thereafter the indications for other uses, the mitral, left atrial appendage occlusion, and then high-risk PVI for AF ablation, because all of those procedures are associated with somewhere between 0.5% and 1.5% risk of stroke and a 20% to 40% occurrence of asymptomatic cerebral ischemic injuries on MR or other forms of neuroimaging. So I think that's the way it rolls out.

[Susan Vissers Lisa, Boston Scientific Corp.]

Kevin, we'll take one more, please.

[Operator]

And that question is from the line of Bruce Nudell, SunTrust Robinson. Please go ahead.

[Bruce M. Nudell, SunTrust Robinson Humphrey, Inc.]

Thank you for squeezing me in. I just have two questions. One clinical, one M&A-related. So on the clinical side, just to put a finer point on it, the result, Nevro put out a press release this morning saying they're still protected above 1.5 kilohertz. Without the debating the veracity of the statement, just given the day got to date showing of Nevro's response between 1 and 10 kilohertz, the improved battery efficiency, and the importance of waveform optionality, do you actually – is there any evidence that you really are going to have to go above 1.5-kilohertz? That's my first question.

[Ian T. Meredith, Boston Scientific Corp.]

Bruce, that's a good question. And the reality is there's definitely a learning curve for the law of frequencies, but we have level-one evidence in that PROCO randomized trial. And we also have data from the WHISPER trial, and there are other studies like the NORTH study, three randomized controlled trials that showed that when properly delivered, 1 kilohertz provides excellent outcomes. But more importantly, as I said before, there are more things that determine pain relief, the optionality, the ability to use two waveforms simultaneously, a softer session, and a para-3 fib. So it is not all just about the frequency. There are other factors, amplitude, variability in amplitude, pulse sweep, duration, training. So there is really more to it than just the frequency.

[Bruce M. Nudell, SunTrust Robinson Humphrey, Inc.]

Thanks. And my second follow-up is – or my follow-up is to Mike. Mike, you seem to be taking a very aggressive view in some of your acquisitions towards really getting heft in targeted areas. So in EP you bought Apama and you bought a cryo balloon one-shot. In BPH, you're exploring both embolization as well as the NxThera approach. Could you just talk about that strategy of really going after things in a very aggressive way?

[Michael F. Mahoney, Boston Scientific Corp.]

I think I would recall it as very planful and smart because it is all planned. And as I mentioned before, many of these are companies that we already have investments in and we've been tracking for multiple years, so it's not ad-hoc.

And I think the second thing is it just reinforces category leadership. We're the category leader in urology, but we didn't have an MIS play and we didn't want to spend $1 billion to acquire one. And so we felt NxThera is an excellent offering and very good for shareholders, and it creates strengthening category leadership in urology and expands our BPH beyond Greenlight.

EP is a fantastic market that we're committed long term to. There are pull-through benefits to our large CRM business, and we saw an opportunity in the fastest growing segment, which is single-shot, to disrupt and be the only company to have both. And we see that segment growing likely plus 20%. And so we feel like that puts us at a competitive advantage in a fast-growth market with a differentiated portfolio that helps pull through.

Same thing with Claret. We feel that Claret is a proven technology. It will have a revenue impact in the second half of this year and 2019 just like NxThera. So some of these deals will have revenue this year and next year, some of them are longer-term investments. But Claret, as Ian mentioned, is a perfect complement to our TAVR strategy, and there's upside in other indications in structural. So we think all of this reinforces category leadership in spaces that are high growth, that enhance the long-term growth profile of the company, and our team has excellent ability to execute on these.

[Bruce M. Nudell, SunTrust Robinson Humphrey, Inc.]

Thanks so much.

[Susan Vissers Lisa, Boston Scientific Corp.]

Great, with that we'd like to conclude the call. Thanks for joining us today and appreciate your interest in Boston Scientific. Before you disconnect, Kevin will give you all the pertinent details for the replay.

[Operator]

Thank you. Ladies and gentlemen, this conference will be available for replay starting today at 10:30 AM Eastern time and will run through August 8 midnight. You may dial the AT&T Executive Playback service by dialing 1-800-475-6701, with the access code 449752. International callers may dial area code 320-365-3844 with the access code 449752.

Now that does conclude your conference. I do thank you for joining. You may now disconnect.