Heska Corporation
Q2 2015 Earnings Call Transcript

Published: 29 Jul 2015

[Operator:]

Good day, everyone, and welcome to the Heska Corporation Second Quarter 2015 Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Brett Maas with Hayden IR. Please go ahead, sir.

[Brett Maas:]

Thank you all for joining us today. On the call today with us are Kevin Wilson, Heska's Chief Executive Officer and President; Jason Napolitano, Heska's Chief Financial Officer; and Bob Grieve, Heska's Executive Chair. They appreciate the opportunity to review the results for the second quarter of 2015 and to provide an update on the company's progress. Prior to Heska's officers discussing results, I'd like to remind you that during the course of this call, Heska's officers may contain forward-looking statements regarding future results, events or future financial performance of the company. We need to caution you that any such forward-looking statements are based on company's management's current beliefs and expectations and involve known and unknown risks and uncertainties, which may cause actual results and performance to be materially different than what is expressed or implied by those forward-looking statements. Factors that could cause or contribute to such differences are detailed in Heska's press releases or in the company's annual, quarterly or other filings with the SEC. These forward-looking statements speak only as of today. Except otherwise as required by law, Heska does not intend to update any forward-looking statements to reflect events that occur after today's call. Now I'd turn the call over to Kevin Wilson, Heska's Chief Executive Officer and President. Kevin?

[Kevin Wilson:]

Thanks, Brett. Heska had a great second quarter exceeded my expectations. The men and women at Heska did a great job taking market share from our competitors. They gained the trust and friendship of customers and they worked extremely well with their colleagues at Henry Schein. Year-over-year comparisons, as well as sequential acceleration in key areas was in abundance throughout the second quarter. Gross margin expanded during the period even as volumes grew, sales were up and expenses rose far less than sales and the team did a great job. On Chemistry, Hematology and Blood Gas device revenues realized during the second quarter rose 318% when compared to the prior year period. For the first half of 2015, device revenue rose 177% indicating that device revenues are accelerating due to our efforts, the impact of Henry Schein sales of devices, and term capital leases, and treatment for bundles and subscription that are 72 months or longer which increased during the period. Efficiency, as measured by sales per individual sales rep, in Heska's sales team improved 67% in the second quarter 2015 as compared to the same period in 2014 which demonstrates a traction in Heska's in-training, our narrative, our new products, and our go-to-market strategies. Total consumables run on Heska blood analyzers rose 17% in the first half of 2015 and more encouragingly it's important to note that the consumables accelerated to 21% in the second quarter 2015 as compared to the same period in 2014. Analyzer placements for Q2 grew a nice 29% over the prior year's period and 25% sequentially over a nice first quarter of this year. 79% of those placements in the first quarter and the first half were to new customers, which is an impressive 18 points above the first half of 2014 when 61% of chemistry placements were new pickups. The trend noted last quarter of improved quality of customer wins continued during the second quarter, with a higher proportion of larger clients choosing to switch to Heska, as evidenced by an 18% increase over the prior year in the initial minimum testing commitments by those new customers who made the switch to Heska. Coupled with an increase in total placements its 18% improvement and the quality of new contracts represents a superior mix of placements and it bodes well for Heska throughout the normal 60-month to 72-month term of those larger volume commitments. I'm very encouraged with the direction, the momentum, the sustainability, and the magnitude of these trends. Now, while we're early innings in these trends it's encouraging to see confirmation through a 24% growth for instance in our chemistry slide sales during the second quarter. At the end of 2014, we announced the release of our new Element HT5 Hematology Analyzer. Our commercial shipments for lease went extremely well in Q1 and accelerated during Q2. We continue to replace competitive hematology systems at an accelerating rate, including the most coveted and larger customer account sites. Hematology placements for the second quarter of 2015 grew 132% over the prior year's period and 46% over the first quarter of this year. 74% of these placements in the quarter were to new customers. The uptick from Heska's Element HT5 Hematology continues to impress and it continues to open new doors, and I'd like to congratulate our teams for their excellent execution on the product launch. Another product launch at the end of 2013 we released the Element POC. In Q2 of this year Heska's Element POC blood gas electrolyte and lactate analyzer placements grew 41% year-over-year and 61% compared to the last quarter. Element POC Test Card usage grew a nice 58% compared to the same period last year. It's nice to note that with roughly 25% of the number of chemistry and hematology users having purchased or implemented an Element POC, we can see nice growth in this platform for really several more periods. The team has executed this release extremely well, and again I'd like to congratulate on the good work. In 2013 and 2014, Heska launched a new line of ALLERCEPT Testing in Therapy Drops. Heska's allergy business continues to grow nicely, showing a 16% increase in the period over last year to $2.6 million in the second quarter. Now, the team has again done a great job launching a new product and continuing the sustainable growth in that new product. Our Heska's product and marketing teams have repeatedly demonstrated expertise and confidence in launching new products during the past seven quarters. Today, we plan our efforts to another exciting new platform called Element i. Element i is an in-clinic immunodiagnostics platform for testing Cortisol, which is useful for Cushing's and Addison's Disease for instance; Total T4, which is useful for screening and monitoring broad thyroid function; and TSH, which is critical to specifically discovering precise thyroid function. Core thyroid function is difficult to diagnose and quantify properly. For instance, hypothyroidism presents with a wide and complex related symptom such as lethargy, weight gain, and dermatological symptoms. Because of these common symptoms, hypothyroidism is one of the most commonly suspected challenges for a significant population of dogs. Element i and other devices test for Total T4, which has long been used as a screen for thyroid disorders, but Total T4 is only a partial and an in-precise screen of highly complex, yet common diagnosis that can and should be confirmed with the specific TSH result. With Element i, Heska again leapfrogs the competition with the first and only in-house immunoassay test for TSH in our market. With TSH results, Element i precisely completes the thyroid function picture that is only hinted by an abnormal Total T4 results in dogs. Until today TSH testing for specific thyroid function has never been available at the point-of-care for veterinarian patients and their owners need it most. Before Element i to get a precise TSH result after an abnormal Total T4 screen, it was necessary to ship off samples to our more reference laboratory, which increases cost, time delays, and worry, while reducing treatment and follow-up convenience and compliance. Today, Element i changes all that by providing results in under 10 minutes in the hospital. Pet care professionals can now have a new confidence and perspective on thyroid function by testing for both Total T4 and TSH in the exam room. We expect a solid launch of the Element i during the second half of the 2015. Now, I'd like to turn our attention to our lateral flow heartworm business and lateral flow rapid test in general. Our lateral flow rapid heartworm testing business grew nicely in the second quarter, up 21% over last year on good volume and good pricing. Late in the quarter, to continue our progress, Heska began shipping a new private label version of Heska's respected Solo Step Heartworm Test called Mono Step. This private label product is being introduced into the trust of Henry Schein brand of line and products. With Heska Solo Step and Henry Schein Mono Step we're moving closer together with Henry Schein in our customers to grow market share by offering veterinarians the benefits of superior products, lower prices and trusted partners. We're excited about this project and the model that it brings for us for expansion, which brings me to another exciting initiative. During Q2, Heska crossed another very important product development threshold in the lateral flow rapid testing space. For over a year now, Heska has been working to leverage our long success with the Solo Step lateral flow heartworm test by putting to work our USDA experience, logistics and assets found within our Diamond Animal Health Team to expand our family of rapid test products. For some time, we've anticipated that the broad market for a full family of lateral flow test could be opened to Heska's competitive advantages. With the opening of the distribution channel for those tests, this opportunity moved up our list of priorities late last year. After a great deal of work, I'm pleased to report that we've begun the USDA registration process from an entire family of Heska rapid single-use lateral flow test to complement our heartworm line. Testing process include key test such as FIV/FeLV, Anaplasma, Lyme, CPV/CCV and Giardia. We intend to compete even more intense in lateral flow test in 2016 and beyond with these new tests and with private label initiatives with partners. And finally, I just want to take a moment to congratulate the Heska Imaging team. Heska Imaging was brought into Heska in the first quarter 2013. Today, it has proven to be a major key to unlock big bundle accounts. But aside from the strategic benefits, the performance of Heska Imaging has been super. In Q2 Heska Imaging grew sales 36% while expanding gross margins greatly over the prior year period and even doing a great job. So to wrap it up, during the second quarter our teams continue to do deliver profits and growth by increase in sales in every product area that we directly control, by improving margins and mix and by maintaining cost discipline, all of apparent to the future with new growth platforms like the Element i and our newly expanding family of lateral flow tests that are anticipating to begin coming online in the next several quarters. I'm proud that Heska is winning and competing at the highest technology levels like the Element i and in a more commoditized segments of veterinary care and in the spaces in between. It's been fun; it's getting to be more fun. And with that, I'll turn the call over to Jason, for a more detailed review of our financial results.

[Jason Napolitano:]

Thanks, Kevin. Our second quarter 2015 results were strong and better than expected. We faced a difficult comparison this quarter; particularly in our OVP segment with the second quarter of 2014, saw strong revenue from shipments to Elanco Animal Health, who had recently assumed cattle vaccine contract from AgriLabs at that time. Despite this, we were able to grow total revenue by 4% to $23.9 million from $22.9 million in the second quarter of 2014. For the first half of 2015, total revenue was $46.8 million, an increase of 7% as compared to $43.7 million in the first half of 2014. Our Core Companion Animal Health segment or CCA generated $20.8 million in revenue in the second quarter of 2014, an increase of 19% as compared to $17.5 million in the prior year period. Our 54.6% owned subsidiary Heska Imaging contributed $4.4 million in revenue in the quarter, an increase of 36% as compared to $3.2 million in the second quarter of 2014. Revenue growth in our instrument consumables or hematology instruments and our chemistry instruments were particularly strong. This was somewhat offset by lower revenue from our canine heartworm preventive Tri-Heart, which we manufacture from Merck Animal Health. While our canine heartworm preventive is down year-to-date as compared to the prior year period, based on firm purchase orders, the latest forecast and contractual minimums to maintain exclusivity, we expect revenue from this product area to increase in 2015 as compared to 2014. Although, it was not a major contributor to our growth this quarter, we saw an increase in domestic revenue from our Solo Step Heartworm Diagnostic Test. Competition in this segment has been quite fierce of the last couple of years and we are glad to see the market appearing to stabilize this quarter. We were quite pleased with revenue growth of 19% in our Core Companion Animal Health segment in the quarter, and we continue to believe low-double-digit revenue growth is a reasonable target for this segment over the intermediate term. For example, our CCA revenue grew by 12% when comparing the year-ended June 30, 2015, to year-ended June 30, 2014. Revenue in Other Vaccines, Pharmaceuticals and Product segment or OVP was $3.2 million in the second quarter of 2015, a decrease of $2.3 million from the second quarter of 2014. Lower revenue from sales to Elanco was a key factor in the change. Despite the difficult comparison this quarter, we expect our OVP segment to increase revenue in 2015 as compared to 2014. Our gross profit in the second quarter of 2015 was $10.3 million, including $1.7 million from Heska Imaging. This represents a 13% increase in overall gross profits from the second quarter of 2014 results of $9.1 million, which included $882,000 in gross profit from Heska Imaging. Gross margin that is gross profit divided by total revenue was 43.1% in the second quarter of 2015, as compared to 39.6% in the prior year period, an increase of approximately 3.5 percentage points. A lower relative contribution of revenue from our OVP segment, which tends to operate at lower gross margin and a consolidated gross margin, improved gross margin from Heska Imaging, and improved gross margin in the rest of our CCA segment due to product mix were key factors in the strong margin improvement this quarter. For the second quarter of 2015, total operating expenses were $8.5 million, including $1.6 million recognized from Heska Imaging, a 4% increase as compared to $8.2 million, including $1.5 million recognized from Heska Imaging in the second quarter of 2014. Increased distributor incentives and sales commissions were factors in the increase. Second quarter 2015 operating income was $1.8 million, nearly double the $917,000 in operating income we generated in the second quarter of 2014. For the first half of 2015, we generated operating income of approximately $2.9 million; more than triple the $816,000 in operating income we generated in the first half of 2014. Depreciation and amortization was $2.1 million in the first half of 2015, up from $1.6 million in the prior year period. Stock-based compensation was $879,000 in the first half of 2015, up from $586,000 in the prior year period. Net income in the second quarter of 2015 was $1.2 million, up from $778,000 in the prior year period. The difference between this line item and net income attributable to Heska Corporation, is net income or loss attributable to the 45.4% of Heska Imaging owned by minority shareholders, which of course we expect will be positive net income for 2015 as a whole. Net income attributable to Heska Corporation increased by 12% to $1.2 million in the second quarter of 2015 from $1.1 million in the prior year period. Diluted net income per share attributable to Heska Corporation also increased year-over-year, but results rounded to $0.17 in both cases. Net income attributable to Heska Corporation was $1.8 million in the first half of 2015, an increase of 42%, as compared to $1.3 million in the first half of 2014. Diluted net income per share attributable to Heska Corporation was $0.26 in first half of 2015 as opposed to $0.20 in the prior year period. In summary, the second quarter of 2015, was a stronger quarter than expected, and set the table for a positive second half of 2015. We like the underlying trends we see and are hopeful they will continue. We look forward to an even stronger 2015 than we previously expected. With that, I'll turn it over to Bob Grieve, our Executive Chair.

[Bob Grieve:]

Thanks, Jason. I'd like to spend a few moments providing you with thoughts regarding our future expectations. At our year-end 2014 call, we provided some overall direction about what we expected for financial performance in full year 2015. Well, we're not giving ongoing guidance or anymore detail on future quarterly expectations, it's important to note that both our first and second quarter operating income results exceeded our expectations. Accordingly, rather than expecting annual operating income to improve by 50% to 70% in 2015, we now believe we will achieve something closer to 90% to 100% improvement in year-over-year operating income. For the past two earnings calls, we've said that our OVP business segment had unusual growth in 2014, and that we wanted investors to understand that 2015 would not see the same growth in that segment. Specifically, we said on a full year basis that segment should produce very low single-digit percentage growth on a full year basis. And we indicated that for the foreseeable future quarterly results would be lumpy. Accordingly, since revenue in that segment has been down roughly 27% year-to-date, investors should expect a nice rebound in OVP in the second half of 2015. As also we're commenting again today on why we focus on the operating income metric. The reason in large measure is that we because of our valuable NOL asset we do not expect to pay material federal income taxes for some time. Investors may recall we had $108 million in federal NOLs reported at the end of 2014. We will continue to show a deferred tax line on our income statement consistent with GAAP rules. However, there is no cash or virtually no cash associated with our tax line. We believe the operating income metric is far more helpful for investors to understand our performance and relative value. Okay. Back to you, Kevin.

[Kevin Wilson:]

Thanks Bob. Go ahead and open the call for questions.

[Operator:]

[Operator Instructions] And we’ll take our first question from Nicholas Jansen from Raymond James.

[Nicholas Jansen:]

A couple of questions here. First, on kind of the strong instrument trend that we're seeing this far, I just want to kind of get better understanding of where that's coming from. I think you're talking about [indiscernible] are kind of competitive accounts. But just want to get a little bit more flavor on where you're seeing success? Is it smaller accounts, larger accounts? And then, conversely with all the new innovation that you've bought to the table here, are you reaching customers? How many of the customers are you reaching today are ones that would have never considered Heska in the past? Thanks.

[Kevin Wilson:]

Well, I mean, I'll take the second one first. Our reach into these clinics has expanded with the Henry Schein relationships. It's expanded with better training, better narratives, better products with our own sales force. We had a nice upward trajectory and a more aggressive sales team firing before the fourth quarter of last year. And I think that’s super important. You can't turn an unhealthy sales effort and narrative into a healthy one simply by adding scale to it. So I feel pretty good that we had the sales team moving in the right direction. We had the products moving in the right direction in terms of product releases, pricing programs and those types of things, and with the traction that we've seen in the first quarter and the second quarter with Henry Schein scale, we've combined health with scale. And I think that’s why we're starting to see accelerating growth. We're not experiencing kind of a one-time pop, which is encouraging. So that’s a long answer to say yes, I think we're reaching people that never would have considered Heska before impart from the Henry Schein scale. In part, because we have new products that frankly are better and technology tends to be cyclical. So when there is a good vibe and a good buzz out there and people know that their friend has switched to Heska from what they used to think was the standard and had a great experience that kind of word mouth is super important. Also, even within the industry the sales teams also gain that enthusiasm as well. I hope that answers the question.

[Nicholas Jansen:]

That was great, Kevin. And then just two more, one on kind of the pricing environment. One of your competitors have talked about kind of maybe being shut out to some situations, because there are some aggressive pricing here and not sure if they were talking about you or others in the space. But just wanted to kind of get your broad sense of are we seeing a major change in discounting or promotional activity associated with these instrument placements? And kind of how do we consider that, because it doesn't look like to get showing up in your gross margin, but just wanted to kind of get a better sense there?

[Kevin Wilson:]

Yes. I don't see that. I guess I have an observation. I've been in the veterinary capital equipment and technology sales since I was 20. I've seen a lot of these cycles, and a couple of observations. I did it from our people and I'm sure the leadership and our competitors get it from there people. But when you lose competitive deals that are high profile and big and important, it's hard to look internally and look in the mirror and say I lost, I'm not as good, I didn't do as good a job, whatever the reason is and own that and get better. A lot of times it will bubble up and the most senior management as I lost because what they did was crazy. And you really want to do that, it doesn't make any sense. So some of that I don't think is backed, some of that sentiment is not necessarily backed by data. Our data is very good. We make economic decisions and we have bundles with imaging, it's one of the reasons that we made a strategic decision to do imaging and I think it's paying off. So that's again another long answer to say we're not really seeing that. I don't think the pricing pressure is being reflected in our gross margins and our sales teams are not reporting that. I have one other observation as well. If you're an entrenched player or you feel like you have right be an entrenched player you're defending, which is a far less enviable position than if you're a small player like Heska on a growth trajectory, you're not defending, you're playing offense, and I think that really affects, it kind of colors the perception from the sales teams all the way up to the executive suite.

[Jason Napolitano:]

Yes. Nick, this is Jason, just to add some comments to Kevin's. This is the first quarter in a while that are Solo Step ASP has actually increased. We mentioned the fierce competition before; ASP is up this quarter. And as I look back to last summer, you couldn't get the rental deal you could've gotten last summer and our digital radiography this summer. And it's a higher price this summer. And on the instrumentation, before we entered Henry Schein we had a lower price. We took a price increase when we started working with Schein to somewhat offset some of the margin we would be sharing with Schein. So when I look at what a typical blood testing instrument will cost you, it's higher this summer than it was last summer. So I don't see a lot of reason to believe this heavy price competition that's influencing the market right now.

[Nicholas Jansen:]

That's great color. And last one and then I'll hop. Your discussion to make a broader investment in the rapid I think is a very smart one. Just want to kind of get a sense of how quickly we can get these tests through the R&D pipeline or through your partners to get approved? And what should be the cadence of the five or six tests you announced yesterday or this morning in terms of the kind of the launch timing? Thanks.

[Kevin Wilson:]

Welcome. So we feel like we're over the R&D hurdles and production hurdles. We are down to the USDA filing hurdles. Unfortunately, so that's a process that we don't control, that could be six months, it could be 24 months. It could happen with all of the tests at once or it would happen individually. So there are variables that are outside our control, but we're past the R&D and production and manufacturing and any kind of science and cost of goods and those types of questions. And we've filed and pursued the paperwork with USDA and that process has to run its course. So I would say somewhere on the order of from two quarters to six to eight quarters. We really just don't know.

[Nicholas Jansen:]

Thanks for all the color guys. And again, great job.

[Kevin Wilson:]

Thank you.

[Operator:]

[Operator Instructions] We'll got next to Ben Haynor with Feltl and Company

[Ben Haynor:]

Good morning, gentlemen. Great quarter. Thanks for taking the questions. First off, just wanted to focus on the new Element i immunodiagnostic product announced yesterday. I imagine that very similar to the HT5 launched earlier this year that this would appeal quite a bit to what you guys have called from past large and mega size practices. Would you expect this to be the case? And also would you expect to see and find its way in the small practices as well?

[Kevin Wilson:]

Yes. I don't suspect we'll see it in the smallest of practices, but I have to say hyperthyroidism in dogs is an enormous market amongst all practices. So if you're a two-doctor practice or you're a 20-doctor practice, you're going to be seeing patients present with weight gain and dermatological problems and those things. Kind of a interesting side on that, we're a leader in the dermatology space and we do have experience in thyroid treatment. So we really like this space. And until today, Heska has lacked both a T4 test, which is the screening for disc kind of blunt instrument in terms of thyroid screening entirely. So getting us into that segment just removes just one more barrier or one more excuse to not choose Heska. And what's pretty cool about that is not only did we check that box for big and medium size clinics with the total T4 test, but we leap-frogged it, which would be consistent with their philosophy, which is we want the best. So if they want they want the best, the best is T4 and TSH for a much more precise and definitive thyroid function. And so clinics that wouldn't choose us or even give us a look, because we couldn't provide a T4 test, I think now we're almost obligated to give us a look, because not only did we provide a test, we're the only ones who can provide the TSH test. But I don't think it's limited to mega hospitals at all, I -- but I also don't see it in one-doctor practices on a large scale.

[Ben Haynor:]

Okay. So it sounds like it could improve chemistry instrument intake as well.

[Kevin Wilson:]

I believe so. I mean it's -- one of the first things that I identified when I came here buddy maybe two years ago I'd been almost there was getting product right, and one of the things about getting product right was T4, TSH, Cortisol, those types of tests were lacking in our menu. So, for instance, we just had a competitor release a total T4 on their order chemistry platform. And so they believe that it's important to have T4 in the clinic. We agree with them, thyroid function is important. We do think the total T4 disc is a very in precise and a screening picture. So we focused on who do we bring THS into the picture as well without having to send it out to the reference lab. So yes, I think it will have tag along certainly with chemistry, hematology and blood gas. It won't be as big of a market as chemistry and hematology, but it will be a broad market for us we think.

[Ben Haynor:]

That's helpful. And then it looks like it’s available on canines at present are there or at present. Is there plans to add feline and then also is there possibility to expand the menu beyond the three tests available to your launch with the instrument?

[Kevin Wilson:]

I can’t be specific on the menu expansion but, yes, it is a platform. It’s not a three trick pony. But having said that, the first part of your question the device has extremely high range, does a fantastic job to total T4 in cats and dogs. But the reality is the majority of markets with hypothyroidism is a canine problem and that’s -- I can’t put a percentage on it but it’s a vast majority of the challenge. TSH testing in cats is really not clinically called for, at least as I understand it. I’m a layman but we got a lot of smart people that have kind of given me that rundown. So, that’s why we focus on the canine aspect of TSH because that’s really where the test is useful. It's not that can’t be run on cats; just it’s not useful on cats.

[Ben Haynor:]

And one another thing I noticed in the release is you mentioned some activity, should I read that to mean integration with Shein's practice management software? And if so, when would you expect that to be available?

[Kevin Wilson:]

It operates on the same principles and the same protocols as are other devices. So the connectivity that we’ve achieved would Schein with access queue works with the new device as well. It’s one of the things that our team is tasked with is to make sure that we have a fully integrated solution. So, we’re really very sensitive to trying to make sure that on launch all of our products follow the same communication protocol so that they seemly get locked right into integrations with things like access queue.

[Ben Haynor:]

So that would put you guys with similar capabilities if not the same capabilities as your larger competitors?

[Kevin Wilson:]

Yes, yes. And I would point out our devices are two-way communication. There’s a new launch here but the ability to order a test into a device is as important as getting the results out of the device. And put another way, if I’m in a exam room and I order a test for Fluffy and its patient 018624, I have to get that information into my device so that the results are then tagged with patient 018624 so that those results come back into the practice management. Some of the devices by some of our competitors only communicate in one direction meaning that they have to actually enter that patient data into the device in order to run the sample or they have to actually code the results of the sample with a specific patient number before it can be integrated back into the practice management. Our devices have two-way communications. So they automate the process in both directions. So it'd be more on par with really the better integration as opposed to only the partial integration that you see out in the market sometimes.

[Ben Haynor:]

Okay, that’s great color. And then lastly from me, I apologize, Jason, I missed this but what was D&A, depreciation and amortization during the six months?

[Jason Napolitano:]

It was $2.1 million.

[Ben Haynor:]

$2.1 million. All right, that’s it for me. Thanks, gentlemen.

[Operator:]

And with no further questions in the queue, I would like to turn the call back over to Kevin Wilson for any additional or closing remarks.

[Kevin Wilson:]

Well, thanks, everybody. Just to recap, we finished the first half of 2015 a bit ahead of our internal schedule. We've got a lot of work to do. The competition is stiff. But overall, I see great trends, we're confident, we have great teams with healthy margins, we're success with bundling programs and we have a robust sales and product pipeline as we enter the second half. So we combine those things with new product additions like the Element i and the anticipated second half tailwinds from our OVP segment. So these factors we're pointing towards a strong second half finish for 2015. So I look forward to updating you again surely after we get our third quarter report card and until then thanks for your interest in Heska and have a good day.

[Operator:]

This does conclude today’s conference. We thank you for your participation.