Cantel Medical Corp.
Q3 2019 Earnings Call Transcript

Published: 4 Jun 2019

[Operator:]

Greetings and welcome to Cantel Medical Corporation Third Quarter of Fiscal Year 2019 Earnings Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder this conference is being recorded. It is now my pleasure to introduce your host Mr. Matt Micowski, VP of FP&A and Investor Relations. Thank you, you may begin.

[Matt Micowski:]

Thank you, Michelle and good morning everyone. On today’s call we have Chuck Diker, Chairman of the Board; George Fotiades, President and Chief Executive Officer; Peter Clifford, Executive Vice President and Chief Operating Officer; Seth Yellin, Senior Vice President, Strategy and Corporate Development; Shaun Blakeman, Senior Vice President and Chief Financial Officer; and Brian Capone, Senior Vice President, Corporate Controller and Chief Accounting Officer.Earlier this morning, the company issued a press release announcing the financial results for the third quarter of fiscal year 2019. In addition, we have posted a supplemental presentation to complement today’s call. This presentation along with reconciliations of non-GAAP references can be found on Cantel’s website in the Investor Relations section under Presentations.Before we begin, I would like to remind everyone, that this conference call may contain forward-looking statements. All forward-looking statements involve risks and uncertainties, including, without limitation, the risks detailed in the company’s filings and reports with the Securities and Exchange Commission. Such statements are only predictions and actual results may differ materially from those projected.Additional information concerning forward-looking statements is contained in our Supplemental Presentation and Earnings Release. The company will also be making references on today’s call to the non-GAAP financial measurements, non-GAAP EBITDAs, non-GAAP income from operations, non-GAAP gross profit, non-GAAP diluted earnings per share and net debt. Reconciliations of these financial measures to the most directly comparable GAAP financial measurements are provided in today’s earnings release.With that, I’m pleased to introduce to you, George Fotiades, President and CEO.

[George L. Fotiades:]

Thank you, Matt. Good morning all. On the whole our third quarter came in as expected and was consistent with our earlier guidance. The medical segment had a very strong quarter with 12.2% organic revenue growth year-on-year. The dental segment returned to positive organic revenue growth of 3.4%. Now this is a meaningful recovery from the first half of the year which was impacted by inventory destocking and a shortage on a key chemistry.Looking ahead to the fourth quarter we estimate the dental business will grow sequentially quarter-over-quarter with flat performance year-over-year due to an unusually strong prior year. Life sciences ended the quarter more negative than we expected, however, our analysis indicates this past quarter should be near the low point as this business moves towards stabilizing. We expect continued weakness in the fourth quarter of this year, but we are encouraged that we will return to modest growth in the second half of next fiscal year.Before we get into more specifics on the third quarter performance, I want to spend a few minutes speaking to other developments during this past quarter. It has been exactly three months to the day since I became CEO, a lot has taken place first and foremost with the leadership team of Cantel. In my public comments at the outset as well as internally I said I would work fast to ensure we get focus and alignment on what's most important and to do that we wanted to get the right people in the right jobs and I knew I could rely on existing Cantel talent to get this done.In our medical segment Mike Spicer was appointed President. Mike is the chief architect of our customer success in endoscopy over the past several years and now brings outstanding leadership to the entire medical segment. Outside the U.S. we strengthened our commercial focus by moving from one international President to two to separate the focus on Europe and APAC. Neil Blewitt who has successfully led our UK business is now President of Europe. Michael McGrath who has done an excellent job in Canada is now leading APAC in addition to Canada. In our corporate office Jean Casner was promoted to Chief Human Resources Officer and she's been instrumental in coordinating all aspects of these appointments.And sitting around the table with me now are two more recent leadership appointments Peter Clifford has assumed the role of Chief Operating Officer and most of you on the call know Peter well including his command of our business and the strong operational focus he brings to the company. And with Peter's leadership we plan to strengthen our operating model for Cantel to drive more organic growth opportunities and operational excellence. Also Peter's appointment gives me even more time to devote to our new product effort, M&A, and organizational development.Following Peter into the CFO role we are welcoming back Shaun Blakeman. Shaun was most recently in a senior financial role at Medtronic and prior to that was the CFO of our medical segment. Now while I previously said that all of our promotions are from within conveniently ignoring Shaun's sojourn to Medtronic to keep my pledge intact as we're happy to have him back. As similar to Peter, Shaun grew up with a strong operational focus in his finance career which is a terrific compliment to the great talent in our finance organization. While this represents a lot of change you've got to remember these executives are all from within, familiar to our people, and well-respected for their leadership and accomplishments. So this allows us to not miss a step in terms of speed of transition.Beyond the scope of leadership changes there were some other important developments during the quarter. We have completed an assessment of our key new product priorities. As a result of this process we are moving more resources to REVOX as we gain more confidence in the potential and timeliness of this technology. We are also focusing on core product enhancements in our medical segment that drive future growth including our equipment, procedural products, and chemistry product lines. As we make further progress we will begin to talk more about these developments.There are several initiatives in process around our cost structure. In the U.S. dental business we are consolidating our manufacturing sites and improving our supply chain capability by expanding our operations in Rochester New York. We've also taken steps to address cost in our Life Science business to align with revenue performance. While all of these actions will ultimately contribute to margin performance it also frees up funds to support product development initiatives which are key to our long-term success.We have made significant progress in our assessment of strategic alternatives in the medical water business. We have a little more work to do and expect to be able to communicate more specifics in the next few weeks. Concurrently our M&A pipeline is as productive as it has ever been. We have promising prospects in both the medical and dental markets that are strong strategic fits with our long-term vision. The focus is on larger opportunities that bring scale to support our expertise in infection prevention and reprocessing workflows.Finally we have decided to move away from providing five year guidance in terms of a set numerical target. Instead we will continue to provide transparency around annual guidance for the company as well as transparency on the key drivers that will allow this business to continue its strong growth story. And we look forward to discussing updates through our strategic vision when we get to next quarter's earnings call.Okay with that since Shaun joined us only a couple of weeks ago Peter will discuss financial results one last time before he transitions this responsibility to Shaun. Peter.

[Peter Clifford:]

Thanks George and good morning everyone. On a consolidated basis our top line Net sales increased 5.2% year-over-year in 3Q 2019 versus the prior year and 6.5% on a constant currency basis. The consolidated net sales walk elements where Organic came in at 2.7%, M&A was 3.8%, and FX was a headwind of 130 basis points. Gross margins for the quarter, GAAP gross margins contracted by 140 basis points to 46.8% versus 48.2% in 3Q 2018. While non-GAAP gross margins contracted by 110 basis points year-over-year when adjusted for the recast of APAC service cost we contracted in our core 60 basis points operational year-over-year. Note the primary drivers of the dilution were our previously announced livable wage actions ERP project and REVOX. The impact of these investments on our non-GAAP gross margins was a 90 basis points dilution.Operating expenses for the quarter, GAAP operating expenses increased by 14.5 million or 18.6% in 3Q 2019 compared to the prior year. The impact of acquired costs from acquisitions was roughly 3.2 million or 4.1%. The impact from restructuring related actions was roughly 7.9 million or 10.3%. This impact -- the balance was purposeful and that investment aligned with our strategic planned initiatives. Op profit for the quarter GAAP op profit decreased 45.3% year-over-year to 14.8 million though there were few items driving our GAAP dilution year-over-year key changes in senior leadership positions resulted in an increase in restructuring related costs coupled with higher depreciation, amortization, and acquisition related expenses, continued investment of REVOX and the livable wage actions taken in 4Q 2018.Our non-GAAP op profit decreased 10.4% year-over-year to 32.6 million. The key drivers were continued reinvestment in REVOX, previously announced livable wage increase, and ERP project. The impact of these investments on our non-GAAP op profit was approximately 250 basis points headwind. Our effective tax rate for the quarter, GAAP EPR for the quarter was 33.6% as compared to the prior year rate of 26.7%. This change is primarily driven by the non-deductibility of executive compensation related to restructuring activities in the quarter and the unfavorable impact of excess tax expense related to stock compensation as a result of a decrease in our share price.On a non-GAAP basis our effective tax rate for the quarter came in at 23.6% as compared to the prior year rate of 28.3%. Key drivers were the impact of federal statutory rate change provided a benefit during the quarter which was partially offset by the mix of income in our foreign operations. EPS for the quarter, GAAP EPS decreased 56.4% year-over-year to $0.20. In addition to the commentary discussed earlier related to our GAAP op profit dilution we incurred higher interest expense as a result of increased borrowings and the current rate environment. While our non-GAAP EPS decreased 7.5% year-over-year to $0.55, the impact as previously discussed investments was approximately $0.11. Adjusted EBITDAS for the quarter, 3Q adjusted EBITDAS came in at 41.4 million down 5% year-over-year. Cash flow from operations, 3Q cash flow from ops came in at 21.1 million. Note to buffer against disruption to our customer base we consciously increased the inventory in the early part of the quarter which we expect on line over the next few quarters.Now let's provide some insight into the segment results, for our medical segment for the quarter sales grew 10.4% year-over-year to 130.7 million. Organic was 12.2%, our GAAP op profit increased 18.5% to 24.3 million while our non-GAAP op profit increased 11.2% to 29.3 million. For our Life Sciences segment for the quarter sales decreased 14% year-over-year to 46.5 million. Organic declined 17.6%. Lastly our backlog increased for the quarter 3 million driven by medical water equipment. GAAP op profit decreased 46.3% to 4.8 million while our non-GAAP op profit decreased 44.3% to 5.6 million. Note X incremental REVOX investment non-GAAP op profit decreased 32% and as George previously mentioned we have taken actions in the third quarter to align our cost structure with the new revenue environment in our water division.For our dental segment for the quarter sales increased 18.5% year-over-year to 46.6 -- 43.6 million, organic was 3.4%, while GAAP op profit decreased 32.3% to 4.8 million or non-GAAP op profit decreased 5.4% to 7.8 million primarily driven by previously announced livable wage adjustments and the material inflation. For our dialysis segment for the quarter sales decreased 3.7% year-over-year to 7.7 million. Our GAAP op profit decreased 35% or our non-GAAP op profit decreased 35%.Now I'd like to hit few balance sheet and liquidity details. Our balance sheet remains strong with significant capacity. We ended the quarter with 51.3 million in cash and cash equivalents, 201.5 million in working capital, our gross debt ended the quarter at 235.5 million, our net debt is 184.2 million, and our net debt to adjusted EBITDAS is 1.07. Capital expenditures were 13.3 million which reflects the ramp down at SAP costs now that we've gone live in our two key sites.In terms of guidance for the remainder of the year we anticipate revenue growth at the lower end of our range at 5% with organic growth of 3.5% and FX headwind of 1%, announced acquisitions of 3%, and dispositions at 50 basis point headwind. We estimate the medical business will continue to grow at approximately 10%, the dental business will be flat to the prior year. While we previously guided the Life Sciences segment to decrease in the mid single-digits we have experienced larger than expected amount of deferrals for central water units in the third quarter. Due to this trend the business will decrease in the high single-digits for the year.Finally we anticipate total fiscal year 2019 GAAP EPS of $1.61 to a $1.63 and our non-GAAP EPS on the lower end of our previously guided range of $2.34 to $2.36. Thank you for listening. As a reminder we will be filing our 10-Q at the end of the week. We are ready to take some questions.

[Operator:]

[Operator Instructions]. Our first question comes from the line of Larry Keusch with Raymond James. Please proceed with your question.

[Larry Keusch:]

Okay, great, thanks and good morning everyone. So I guess the first question is obviously it was a nice performance in the medical business for the quarter and really sort of continued the trends that we've seen in the prior three quarters. But I guess the implied guidance would again suggest a deceleration in the fourth quarter so just if I'm thinking about that correctly I am trying to understand why?

[Peter Clifford:]

Yeah, it's going to be centered almost exclusively on Life Sciences Larry. We would expect our dental business implied in the year being flat as our fourth quarter in dental is by far our toughest comp year-over-year. But again we would expect sequential growth in dental from 3Q to 4Q but likely closer to flat year-over-year on an organic basis in the fourth quarter. And we would view the medical profile in the fourth quarter similar to the first three quarters.

[Larry Keusch:]

Okay, perfect. And I guess just two other questions for you. First on, George you mentioned obviously you're working on your review of the medical water business or Life Science business broadly. What steps are left to be done, what are you still working through, and once you come to a conclusion how would you anticipate making that aware to investors, is that something that waits until the fourth quarter or is there some separate announcement that comes out of that? Then I had one other one.

[George L. Fotiades:]

Yeah, I'll start with the end in mind here. I think what we're -- our expectation is to be at our fourth quarter call with a clear sense of what we're doing and also to be able to factor that into our outlook for fiscal year 2020. So that's the answer. What's happening now is we are first and foremost managing the business to get this thing back on track. As Peter mentioned we've done the right sizing aspect of it but at the same time we're mindful of ensuring that we have a strong national base of sales and service. So that's a key feature of the business.The second thing we've done with quite some granularity as we have been in discussions with our customers to develop a far more robust demand forecast and we've reached one multi-year agreement with one customer and we're working on another. This was what gives us more insight and confidence about where we think the bottom is and an expectation of returning to modest growth as we get to the second half of the year. At the same time we obviously continue to evaluate at the end of the day are we the best owner of the business long-term. But again this is a business with great long-term demand characteristics and a short-term issue related to cyclicality and the in-sourcing of customer. I think we've gotten a much clearer picture in the last few weeks of what our -- what the future looks like from a volume standpoint going forward. I think we're getting the cost structure in place and putting the position in a better place for the long-term. But again just to repeat I think as we work our way through the next few weeks our expectations will be here three months from now talking about how this impacts fiscal year 2020.

[Larry Keusch:]

Okay, perfect. And then last one for me is just you mentioned a couple times continuing to invest in REVOX and I think again George in your prepared comments you indicated that you've got some greater confidence in that product that warrants more investment. So again I guess same sort of question which is what have you learned recently that that gives you confidence in that product to make additional investments and again what sort of a timeline that we should be thinking about for kind of a real commercial launch where we can start to see some revenues off of this?

[George L. Fotiades:]

Yeah, so first of all what we're doing from an investment point of view is really reprioritizing our spend in new products, so we're moving money from one place to the REVOX. So incrementally it won't be additional but it will be from the REVOX point of view. The confidence really sort of relates to what continues to evolve externally with respect to ETO in particular. Clearly we've got a number of customers that are quite anxious and apprehensive about what the current situation and trying to understand what alternatives are there for the future and what kind of timing will these materialize. So I think that's more what has been driving more confidence in this and obviously we continue to make strides in developing particularly the machine design. That's where our focus is now to optimize what the commercial opportunity is as well as what the market is asking for in terms of their requirements.From a timing point of view this is a situation where we would like to meet under promise and over deliver but I think we're operating under the assumption that two years from -- that this is 24 months at the outside maybe we do it in 18 months. But that's sort of what the horizon looks like.

[Larry Keusch:]

Okay, perfect. Thanks very much, appreciate all the thoughts.

[Operator:]

Thank you. Our next question comes from the line of Matthew Mishan with KeyBanc Capital Markets. Please proceed with your question.

[Matthew Mishan:]

Great, thanks for taking the questions George and Peter.

[George L. Fotiades:]

Hey Matthew, how are you this morning.

[Matthew Mishan:]

Good, good. Thank you. I guess I'll start off with the Life Sciences business. It does seem like you're pretty far along in that process here. How should we be thinking about how separate that business is from medical or dental and how clean of a carve out that could potentially be, would there be costs that could be reallocated -- would be reallocated to synergies associated with it or would it be pretty isolated to the op income from that segment?

[Peter Clifford:]

I mean all three of our divisions are generally pretty distinct in their cost structures. There is some modest share cost that would get reallocated but it's not substantial. It is a general rule where we do have overlap across all three of our businesses, it is really around our chemistry manufacturing. But outside of that mostly the cost structure is distinct and tied to the individual divisions.

[Matthew Mishan:]

And then can you talk about the strategic priorities for the dental business longer term. I guess you're consolidating the manufacturing at this point but what are you missing in the portfolio that could enable you guys to be like a full service infection prevention player similar to how you look at endoscopy? And then is there a lot of integration work that needs to be done given it's been built through various acquisitions over time?

[George L. Fotiades:]

Yeah, I'll answer part of it and I'll let Seth answer as well because he's obviously spent a lot of time on this. Look probably from a revenue growth point of view look we have a number of very good assets in this business that we've acquired over the last three to four years. I think about in-line water treatment biological indicators, our Accutron, Omnia so a real focus we have now is around building these individual assets more aggressively than we have in the past. We've done a great job with them but I think there's more opportunity to develop new products in this space, being able to take these internationally which is what Omnia affords us the opportunity to do. I was just there a couple of weeks ago. It's a great operation, we've got really good management, and there's a lot of enthusiasm for taking some of these Crosstex products into Europe. So I think we've got a lot of upside within our current portfolio. And as far as the cost structure is concerned obviously we're taking a fairly meaningful step today with both our manufacturing platform but also our supply chain with our distribution center which will be upgraded considerably with the move to Rochester. So this will allow us to continue to try to protect our margins and as well as to potentially a handsome as we go forward. Seth if you want to comment at all about the portfolio itself.

[Seth Yellin:]

I think long-term we see the opportunity to really develop a cohesive complete circle of protection strategy in the dental suite similar to what we've developed in our medical offering where we can offer to our customers the ability to really understand and manage complex reprocessing workflows in the dental suite to maximize efficiency and drive improved outcomes and safe working environments for both patients and caregivers. We've been very successful with that strategy in the medical space, see a lot of opportunity to continue to enhance that potential in the dental space. Right now we have great specific offerings that provide great unique product elements but I think to create a closed loop, complete circle is really our aspirational goal there. And we're working actively to develop that strategy and bring it to fruition.

[Matthew Mishan:]

Okay and last question for me, on the single use procedural products in medical, what's the opportunity there to bring those products to international markets and what's been holding that back over the last couple years?

[Peter Clifford:]

Yes, when you think of the procedures set in Europe it's we think of the U.S. as sort of mid 20s as kind of the number of procedures happen as a potential. And Europe would be sort of in the low 20s and the reality is we'd probably have penetrated the U.S. market procedures at about 35%ish in terms of number of procedures used in a single use valve as an example. Obviously the penetration is much deeper on the hospital side and less so on the ACS. We think that opportunity still exists in Europe, I think our opportunity and challenge has been really influencing the regulatory bodies and the third party thought leaders at the same pace right. Obviously in the U.S. you're dealing with less governing bodies. So it is although not easy to move there you're moving less regulatory bodies. And on the European side if you want to have an impact in each local market you are usually having to influence somebody in that local market from a third party or regulatory body governance perspective. So that is where we are pivoting more resources now here this summer, is to help drive that top side sale. You know we've spent the last two years really refining the bottom up sail, getting the right folks in the field trained, and in the right pods structures. And now we're pivoting more to try and help sell from above.

[Matthew Mishan:]

Alright, thank you very much George and Peter.

[Operator:]

Thank you. Our next question comes from the line of Mike Matson with Needham & Company. Please proceed with your question.

[Mike Matson:]

Good morning. Thanks for taking my questions. I just want to ask about the dental business, good to see the growth improve there. Are you still seeing kind of mid single-digit growth out the door at the distributor customers from your tracings?

[George L. Fotiades:]

Yeah, the out the door sales from our distributors remains robust. Again we will see sequential growth from 3Q to 4Q. The only sound bite there earlier is in the prior year our fourth quarter we had near double-digit organic growth in 4Q 2018. So even though we feel good about the order rates and the fact that again we will grow sequentially it may look lighter year-over-year just due to the prior year comp on a two year stack basis. I think the fourth quarter look exactly like our traditional viewed business sort of in that mid single-digits.

[Mike Matson:]

Okay. And then can you just remind us what you've factored in to the guidance for 2019 for tariffs and with Chinese tariffs potentially increasing or expanding. What's the outlook for 2020 and then it doesn't look like you have any plants in Mexico but I don't know if you're sourcing any supplies or raw materials from Mexico that would be affected by the tariffs?

[Peter Clifford:]

Yes, so two parts to that. So look we have been impacted in China earlier this year, we kind of said, look if anything it probably accelerated some revenue from some of our customers in China that wanted to buy ahead of the tariffs.So I think we had a very strong organic growth in the first half. Candidly the third quarter was still very strong as well but we are seeing it -- there's more pressure on the bids and the businesses that we're trying to chase in China. It may drive us to look at other supply chain options in 2020 and 2021. As far as Mexico and the recent 5% tariff there, we're scrambling currently to monetize that or quantify it but our best indication is we probably have exposure to the sense of there's probably a $5 million to $10 million book of annual spend that we deal in stuff that's eventually sourced out of Mexico. So you could kind of look at it as it's probably a half a penny to a penny annually in terms of a headwind if that tariff stays in place for us. But we would look hard with our sourcing projects and initiatives to offset that as well as look at incremental price actions at the beginning of 2020 to hold our ground on those types of pressures.

[Mike Matson:]

Okay and then just one final financial question, so I know you've got a lot on your plate, there's a lot of cost cutting and other kind of reinvestments going on and whatnot but I guess just your tax rate, I know it's come down because of tax cut but is there any plans or opportunity to reduce that over time? Thanks.

[Peter Clifford:]

Yeah, I mean obviously our original guidance here at the beginning of the year was 24.5% so on a year-to-date basis we're now sort of at 28 points or 24.7. Look I think our next opportunity down the road would be to one, as we continue to see our international based businesses become more profitable there are geographic jurisdictions which could naturally help us reduce our tax rate. Two, we've really never looked at not only the I'll say low cost manufacturing and labor arbitrage there but there are other tax initiatives coupled with lower cost country manufacturing that could also help us be a tailwind to the effective tax rate as we look out a couple of years.

[Mike Matson:]

Great, thanks a lot.

[Operator:]

Thank you. Our next question comes from the line of Mitra Ramgopal with Sidoti and Company. Please proceed with your question.

[Mitra Ramgopal:]

Yes, hi, good morning. Thanks for taking the questions. George, I know it has been busy few months as you get settled in here and I was just wondering, I know you have talked about moving away from the five year guidance, however, if as we look longer-term out in terms of the business and what you are seeing here right now should we see any real fundamental changes in the underlying business as it relates to maybe organic growth no longer being double-digit 10% loss or more mid single digit, any color on that would be great?

[George L. Fotiades:]

I actually feel more confident about the growth rates when you look by segment. You know Medical, I think we talked about the drivers in the past but when we think about -- support and will support the 10% plus the growth in procedural product penetration and growth in selling our full bag, the growth internationally whether we are talking about China, the growth of procedural products in Europe. What we're doing in terms of new product emphasis that has been rejuvenated with the appointment Mike Spicer in tandem with working with Daniel Khalili our Chief Technology Officer so I am continuing to feel very confident about that.In dental we obviously went through this year which was a challenging year in the first half. We believe we are getting back on track to mid-single-digit. There's nothing that as we look out the door sales, I mean the market continues to perform as we expected. We talked earlier in the call about some of the things we can do from a growth initiative point of view that we're pushing out on. I mentioned Omnia again internationally but some other things on some of our individual business lines that we recently acquired I think continue to represent opportunities. And the challenges we have talked about is in the Life Science business but again I think we can get this business, the water business again as we look at long-term I think the characteristics of the entire Life Science business from mid single-digit. Well, again there is work to do in the short-term to address that.The other consideration that obviously that doesn't have predictability other than that over the long term we've been predictable with respect to acquisitions being a component of our business model. It continues to be as active as it has ever been, feel very good about some of the things that were in the pipeline and as to when they happen again that's -- there are different stages and that is difficult to predict or talk about. But again I feel as I said what I have learned in the past 90 days is to be even more bullish about our opportunities, recognizing challenges to deal with short-term as mentioned in the hemodialysis business.

[Mitra Ramgopal:]

Okay, noted, very helpful thanks for the color. And I guess as you mentioned acquisitions maybe Seth could probably also address this, as it relates to the pipeline, I know it is always very robust but I was just curious if you are seeing any changes as it relates to maybe more competition and any changes potentially in valuations that you are looking at?

[Seth Yellin:]

Thanks Mitra. I think from a value perspective it has been a competitive environment for the last many years and so depending on the need for the assets it always is a healthy market. So, obviously as George said earlier, we are looking at larger acquisitions that have more scale and maturity. And as you look at some of the larger assets especially at the higher end of some of the valuation ranges, that said I mean our focus is first and foremost on strategic fit and overall financial performance of the potential business. And so we remain disciplined in how we think about acquisitions. And despite the environment that have healthy evaluations we see plenty of opportunity for us to continue to execute.

[Mitra Ramgopal:]

Okay, that is great. And finally George I know you mentioned earlier you made several changes as it relates to management and senior personnel. Just looking out now with one more quarter to go in 2019 you feel comfortable now at your place or you pretty much have your team in place and now it is really a question now focusing on driving the growth again?

[George L. Fotiades:]

Yeah, everybody around the table is looking at me apprehensively now. I feel very confident in the Executive team that is in place. And look the focus going forward as it should be consistently over the long-term is developing the talent deeper in the organization. It is a great growth company, great growth companies are places that attract people. We want to be sure we are getting the best people in some of these positions and as well as addressing diversity which is a great business opportunity for us. So that is really where the focus is. But with respect to the leadership team and the management of our segments things are in place.

[Mitra Ramgopal:]

Okay, thanks again for taking the questions.

[George L. Fotiades:]

Thank you.

[Operator:]

Thank you. There are no further questions at this time. I would like to turn the call back over to management for any closing remarks.

[George L. Fotiades:]

Thank you all for joining us on this call this morning. The management team here looks forward to updating you on our progress on the fourth quarter call and as well as to provide you with an outlook for our fiscal year 2020. Again thank you.

[Operator:]

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.