Sharps Compliance Corp.
Q3 2018 Earnings Call Transcript

Published: 25 Apr 2018

[Operator:]

Greetings and welcome to Sharps Compliance Third Quarter Fiscal 2018 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to Jen Belodeau from IMS.

[Jennifer Belodeau:]

Good morning and welcome to the Sharps Compliance third quarter fiscal 2018 earnings call. On the call today, we have David Tusa, the company's President and Chief Executive Officer; and Diana Diaz, Vice President and Chief Financial Officer. David will review the company's business performance, operations, and growth strategies, while Diana will review the financials. Immediately following their formal remarks, we will take questions from our call participants. As you're aware, we may make some forward-looking statements during the formal presentation and in the question-and-answer portion of this teleconference. These statements apply to future events, which are subject to risks and uncertainties as well as other factors that could cause actual results to differ materially from where we are today. These factors are outlined in our earnings release as well as in documents filed by the company with the Securities and Exchange Commission. These can be found at our website or at sec.gov. With that out of the way, let me turn the call over to David. Go ahead, David.

[David Tusa:]

Thanks Jen. Good morning everyone and welcome to our third quarter fiscal year 2018 earnings conference call. Our third quarter fiscal year 2018 revenue was $9.4 million, an increase of 10% over the prior year. The increase was led by higher billings in our Retail, Professional, and Government markets. From a solutions standpoint, unused medications and route-based business led the quarter with higher billings. Billings in the Pharma Manufacturer market were down 29% or $400,000, due to the timing of inventory builds and therefore, correspondingly negatively impacted our mailback solutions billing for the quarter. As we look closer at billings by solution, you will see that the unused medication management solutions represented 20% of the total billings in the quarter. Our route-based business generated 21% of total billings, while the traditional mailback business generated about 47% of the quarterly billings. Therefore, over 40% of our customer billings for the quarter were generated by our solution offerings launched over the past couple of years. This strategic [move what's] resulted us recognizing that we cannot grow our company base, primarily on a seasonal and unpredictable flu mailback business. Nor did the mailback solution alone allows us to capture larger market opportunities in the regulated medical device market. So, we recognize that we needed complimentary solution offerings that can be sold to our existing and prospective customer base to accelerate our penetration rate in the medical waste management business. Additionally, we saw the value in expanding our offerings to include unused medication management considering the new DEA rules at a time when the country was looking for solutions to properly dispose-off unused medications and to help solve the opioid crisis. Now, moving to other markets. We were disappointed in the growth in the Pharmaceutical Manufacturer and Home Health Care markets, as we expected higher quarterly billings. The lower than expected billings were caused by timing and Pharma bills and distributor orders in the Home Health Care market. And while the quarterly growth rate in the route-based business of 15% was good, we expect this growth to increase going forward as we focus on closing larger and additional multistate opportunities, where the combination of our route-based pickup and mailback solutions, along with our online trading, online tracking tools, excellent customer service, and reasonable contract terms position us very well in the marketplace. We are already seeing the success of this initiative which should be reflected in P&L by the September quarter. A bit more progress and growth on our MedSafe program. Our installed base of MedSafe collection receptacles today is at 2,406 units. The base was 2,173 at the end of March 2018 versus 1,587 at December 31st, 2017, and 876 units at March 31st, 2017. We processed about 14,000 [Indiscernible] today and expect this number to increase rapidly as we grow existing programs and launch new ones. Additionally, since the inception of the MedSafe program, we've generated over $4 million in revenue and processed over 600,000 pounds of unused medication. When considering the take TakeAway envelopes, we have processed over two million pounds of unused medications. And finally, a recent GAO report released said that there -- reported there are about 90,000 eligible collectors in the country that could launch a collection receptacles program and only about 2.5% have done so at the time of the report. So, as the leader in this business, we see significant opportunity as we market directly to the 90,000 prospects. Gross margins. For the third quarter, the gross margins were adversely impacted by unplanned incremental costs associated with our treatment facilities and route-based operations in the Northeast related to the severe weather storms. As I'm sure, you all remember, the Northeast in the March quarter was hit by many late-season storms, which caused disruption, operational efficiency, additional cost on our route-based business, as well as our Pennsylvania-based treatment facility for as many as six days in the quarter. The gross margin also reflects a lower margin on the unused medication collection receptacles portion of a major new program recently launched. We expect our margins to return to normalized levels in the June quarter in the low to mid-30s -- 30% range considering the impact of mailback orders to support the upcoming flu season as well as growth in our markets and our other as well as better weather conditions. Diana will go into more specifics about the financials, but before I turn the call over to her, let me provide a bit more color on business and the opportunity in front of us. We are much different company today than we were just a couple of years ago. We believe we're the leader in the $1 billion ultimate user unused medication market with both our MedSafe and TakeAway Medication Recovery System envelope. And when combined with the $1 billion medical waste management market for small to medium quantity generators, it creates a significant and unique opportunity for growth. We've long believed that one of the key elements of effectively addressing the opioid abuse problem is the safe, convenient, and proper disposal of unused medication. While treatment is a key element to solving the crisis, we believe prevention also plays a key and very important role. So, in addition to generating revenue and contributing to the growth of company, we're committed to being part of solving the opioid crisis by keeping unused medications including controlled substances out of the wrong hands and hopefully preventing adverse impact from accidental poisoning. So, with that, I'll turn it over to Diana, who will cover a bit more on the financials of the company.

[Diana Diaz:]

Thank you, David. Third quarter fiscal 2018 revenue increased 10% to $9.4 million as compared to $8.6 million in the third quarter of last year, with gross margin of 24%, down from gross margin of 27% for the third quarter last year. Gross margin in the quarter was impacted by unplanned incremental cost associated with our treatment facilities and route-based operations in the Northeast related to severe winter storms, which disrupted operation for six days. Gross margin was also negatively impacted by the lower margin associated with the launch of a new unused medication program. SG&A expense of $2.8 million or 30% of revenue for the third quarter of fiscal 2018 was consistent as compared to $2.8 million or 32% of revenue in the prior year. The company reported an operating loss of $700,000 in the third quarter compared to an operating loss of $600,000 in the third quarter of last year. Sharps reported a net loss of $800,000 or a loss of $0.05 per share this quarter compared with the net loss of $700,000 or loss of $0.04 per basic and diluted share in the third quarter of last year. The company recorded an EBITDA loss of $300,000 in the third quarter of fiscal 2018 as compared to an EBITDA loss of $200,000 in the same period of last year. Looking at the key comparisons for the third quarter of fiscal 2018, the company achieved revenue of $9.4 million and customer billings of $9.1 million. Retail billings increased by 104% to $1.6 million, reflecting increased billings for unused medication solutions, specifically MedSafe. Professional market billings increased 7% to $3.2 million; Home Health Care billings remains consistent at $1.9 million. Pharmaceutical Manufacturer billings decreased 29% to $1 million, due to the timing of inventory builds. Assisted Living billings increased 5% to $700,000, and Government billings increased 23% to $500,000. Now, let's look at the key comparisons for the first nine months of fiscal 2018. For that period, revenue increased 9% to $30.2 million and customer billings increased 9% to $30 million. Professional Market billings increased 9% to $9.6 million. Retail billings increased 25% to $5.6 million. Pharmaceutical Manufacturer billings decreased 13% to $4 million due to the timing of inventory builds. Home Health Care billings increased 4% to $6 million; Assisted Living billings increased 5% to $1.9 million; and Government billings increased 19% to $1.5 million. For fiscal year 2018 year-to-date gross margin was 28%, down slightly as compared to 29.5% in the first nine months of fiscal 2017. Nine months' gross margin was impacted by the unplanned incremental cost associated with the winter storm in the Northeast and the lower margins associated with the launch of a new unused medication program as discussed before. SG&A expense was reduced by 11% to $8.3 million in the first nine months of fiscal 2018. SG&A for the first nine months of last year includes $700, 000 of acquisition-related costs. Without these acquisition-related costs, SG&A decreased $300,000 or 4% compared to the first nine months of fiscal 2017, reflecting the impact of cost savings initiatives launched in the second quarter of fiscal 2017. Net loss in the first nine months of fiscal 2018 was $500,000 or a loss of $0.03 per basic and diluted share compared to a net loss of $1.9 million or a loss of $0.12 per basic and diluted share in the first nine months of last year. Excluding acquisition-related expenses of $700,000 on a non-GAAP basis, the company reported an adjusted loss last year of $1.2 million or loss of $0.07 per share for the first nine months of last year. Our balance sheet remains solid with $5.5 million of cash and cash equivalents at March 31st, 2018 and working capital of $10.4 million. As David mentioned, going forward, we expect gross margins in the low to mid-30% level considering revenue levels of $11 million to $11.5 million. We expect SG&A to range from $2.8 million to $3 million per quarter depending on the timing of sales and marketing initiatives. And with that, I'll turn the call back over to David.

[David Tusa:]

Great. Thanks Diana. Operator, I believe we're ready for -- to open up for questions.

[Operator:]

Thank you. [Operator Instructions] Our first question is from Matt Hewitt with Craig-Hallum Capital Group. Please proceed.

[Matt Hewitt:]

Good men and thank you for the update and for taking our questions.

[David Tusa:]

Good morning Matt.

[Matt Hewitt:]

A few for me. First, the impressive growth in med disposal solutions, is that all tied to the new customer that you announced last quarter, or are you seeing growth outside of that customer?

[David Tusa:]

We're seeing growth within all markets with all our customers. It's -- whether it be retail pharmacy, Government, drug treatment, [life] and law enforcement, long-term care. So, that's one thing we're really pleased with about. We think from a timing standpoint, we really hit it right with this offering and believe we're enjoying the leadership position in that market right now.

[Matt Hewitt:]

Okay. And then the Pharma delay or the timing issues in Pharma, maybe if you could provide a little bit more color there? And then maybe update on how that pipeline is looking?

[David Tusa:]

Sure. That Pharma bill that missed the quarter, the Pharmaceutical Manufacturers are, I think, doing much job in the timing of their orders to fit better with the actual distribution of the units to the patient. As you may remember, they order in bulk and we had them ordered in bulk. So, they are doing a good job of managing their purchases. We'll probably be for the year -- for the fiscal year a little bit closer to same growth or zero growth or minimal growth from the prior year because we're already damaged, you see in the nine months ended. We haven't had recently any -- we've had some small programs, but not any significant programs. We continue to chase larger programs, but for this year, it will probably be flat year-over-year with respect to Pharmaceutical Manufacturer.

[Matt Hewitt:]

Okay. And then maybe one more and I'll hop back in the queue. Regarding the weather, obviously, a brutal springs for you as well as those here in the Midwest. How does that -- is that simply your -- because of the snow, because of whether you're not able to the safe to make the collections, or was -- it was greater than that, it was impacting your ability to get in place to the treatment facility. Just help us understand how that weather is impacting you?

[David Tusa:]

All of the above. So, labor, over time, repairs, fuel cost. It's six days doesn't sound like a lot, but when you have a large treating facility and you're running many, many trucks up in the Northeast, it does provide, obviously, for inefficiencies. And we were doing -- and we did everything we could to make sure that all the customers where ultimately serviced. We even lost a program where we were literally calling all the customers and advising them upfront of the rescheduling of pickups. So, it was a very interesting time, but I think the best response to you is all of the above.

[Matt Hewitt:]

Okay, great. Thank you.

[Operator:]

Our next question is from Joe Munda with First Analysis. Please proceed.

[Joseph Munda:]

Good morning David and Diana. Can you hear me okay?

[David Tusa:]

We can. Good morning. How are you doing Joe?

[Joseph Munda:]

Good. Real quick. Just to piggyback off of the prior question. Any idea what gross margin would have looked like had you not had those issues, the snowstorm? Any ideas of what the impact was?

[David Tusa:]

Well, I tell you this way. We were -- we shut on a more normalized basis than closer to what, I think, the analyst has 30% to 31% gross margin, which is what we typically would have been at. And as I said earlier, I think we'll be in low to mid-30%s in the June quarter.

[Joseph Munda:]

Okay. And that's the step-up in gross margin, is that just a step-up of leverage on a fixed cost model that you're operating on?

[David Tusa:]

It's both. And then not having as much impact on the items that we talked about for this particular quarter coupled with the increase in revenue. The June quarter is positively impacted by the opening orders on the flu business. And we typically, in the June quarter, consistent with last year generated about $2 billion revenue in the June quarter for flu. So, that plus not have any anomalies to give those gross margins back to what we all expect.

[Joseph Munda:]

Okay. In regards to flu, it's been obviously a crazy season, stronger than people had expected. You think that will carry over into the ordering pattern for -- obviously, for the upcoming quarter, but as we look ahead into fiscal 2019, you think people will remember how bad this season was and look to step-up their ordering?

[David Tusa:]

I sure hope so. We're reaching out -- actually, we're in the process right now reaching out to our flu business customers to be able to get the order, the order level and timing and probably won't be for another, probably 30 days, we'll have a much better idea. But hopefully, that is the case Joe, and hopefully, they don't have much inventory left from last year from the last year's flu season. So, can't guarantee it, but we sure hope so.

[Joseph Munda:]

Okay. And then, I guess, my final question and I will hop back in the queue. The announcement in Cardinal for 60,000 TakeAway envelopes, any significant revenue going to be generated from that. I mean is that a one-time deal? Or could we see further orders add to that? As well as, I know, is it possible that another player steps in and starts ordering envelopes from you guys as well. Just some of the dynamics, if you can, on that deal with Cardinal?

[David Tusa:]

Sure, that's a great question, Joe. We've worked with Cardinal for years and years and years, probably on the mailback side, because they're, obviously, a wholesaler in many, many markets. So, we've a long standing relationship with them. We're very pleased to work with them and gain the recognition from Cardinal of our envelopes. But Cardinal is a great company and they are committed to helping us well with the opioid crisis. They've recognized our solution offerings. And I'm not going to make any forecast projections, but I will just tell you that we're pleased to work with them and hopeful that there will be additional opportunities moving forward and within and maybe the other two as well.

[Joseph Munda:]

Okay, all right. Thank you.

[Operator:]

Our next question is from Kevin Steinke with Barrington Research. Please proceed.

[Kevin Steinke:]

Good morning. So, the rollout of the large MedSafe program with the retail pharmacy chain customer, is that now complete. Just trying to get a sense if we'll see more of the revenue build from that in the June quarter or any impact on the margins from that in the June quarter?

[David Tusa:]

So, first of all, we respect the confidentiality that we have with our customers and we don't typically talk about details about any individual customer or any program. But I'll just say this. With all of our programs, with all of our MedSafe programs, we work with them for continued and rollouts and it's typically not just of one undone deal. Can't guarantee it, but that's typically what our customers do. Our programs with our customers have only expanded. So, we don't expect anything different. But I don't recall, but we just want to be very respectable of the confidentiality of them. And I think, Kevin, what you're about to see is as we report our quarterly numbers and as you see the increase in our MedSafe installs and that's probably the best way to measure the success of that and as well as all the programs.

[Kevin Steinke:]

Okay, fair enough. So, you mentioned, you expect that that route-based revenue growth rate can potentially accelerate in the next couple of quarters, working on some large multistate deals there. So, can you just talk a little bit more about the pipeline there? And what gives you the confidence and potential acceleration and growth in route-based?

[David Tusa:]

That's actually really good question. Well, here is what we did in December -- in the December as well as part of the March quarter. We focused our field sales or route-based sales, especially up in the Northeast, where we have a very, very heavy presence as well as Southeast in Texas, Louisiana and focused on larger deals. Deals that have a larger -- a longer sales cycle. And we did that because we think that we are only one of two companies in the country that can be a full-service provider in multistate deals where we're providing direct service, whether it'd be mailback or pickup, and it's working. So, we've closed a couple of deals or longer sales cycle, I think they hit in the month of June is one particular, but it's working. So, we want to take advantage of the fact that we're a comprehensive service provider. There's only two of us that can launch these larger deals and we wanted to focus on that. So, we think probably in the September quarter then we'll start to see some of the impact of the large deals heading. But we're -- we've been successful at it. We think we're going to continue to be success. And I think the marketplace is looking for alternative providers and again, I think our timing is right with respect to that route-based as well as the mailback business.

[Kevin Steinke:]

Okay, good. Sounds also like you're pretty optimistic about the pipeline for MedSafe. I think you mentioned about 90,000 MedSafe prospects. I guess, without getting into much detail for competitive reasons, can you just talk a little bit more about how you're sizing that market opportunity in the prospect base that you see out there?

[David Tusa:]

Sure. The 90,000, which we think is probably pretty accurate, again, is split between data retail pharmacy, pharmacy and hospital drug treatment, long-term care, and maybe the best way to look at that -- we have Diana, don't we have the split currently of the 2,400-or so units that we currently have, right now, right. So, right now if you look at the business we have now, it's about 48% of Retail, 22% Government, 14% Assisted Living long-term care, 16% in hospitals, pharmacies and hospitals. So, that's probably a good representative of going forward and where the opportunities lay. But it's not too hard, I think 90, 000 prospects are and we are marketing to them literally every day.

[Kevin Steinke:]

Okay, great. Just a couple more here from me. You said, I think, you're a little disappointed in the Home Health Care billings in the quarter specifically, was that just more of a timing issue in terms of how billings came?

[David Tusa:]

Yes, it was. We do a lot of business. Majority of the Home Health Care business through distributors and it looks to be timing. We thought we were going to get couple of hundred thousand more out of the Home Health Care -- of our Home Health Care business, but it looks like that's going to spill over to the September quarter, so -- I'm sorry, the June quarter. But between the 400,000 movement of the Pharma bill and couple of hundred thousand on the Home Health Care, we really expected to be closer to that $10 million revenue range. But those two areas, we were short on, and that's where we came when we did.

[Kevin Steinke:]

Okay. Lastly, the third-party or the environmental billings were down sequentially. I know there can be a lot of variability in that from quarter-to-quarter. Was that at all impacted by the weather? And should we see that may be bounce back a little bit going forward? I know you talked about last quarter, I believe maybe starting to do some third-party treatment at the Pennsylvania facility. So, what's -- how you're thinking about that business right now?

[Diana Diaz:]

We did have a little bit in Pennsylvania this quarter and we have seen more of that. December, we get a lot of volume -- I'm sorry, March we get some spillover from the flu season and we just didn’t have projects this quarter. But we'll be looking for more and see what comes in.

[Kevin Steinke:]

Okay, great. Thanks for taking the questions.

[David Tusa:]

You bet.

[Operator:]

[Operator Instructions] Our next question is from Brian Butler with Stifel. Please proceed.

[Brian Butler:]

Good morning guys. Can you guys hear me?

[David Tusa:]

Good morning. Yes, we can.

[Brian Butler:]

Great. Just I wanted to go back and revisit the gross profit question. Back in the second quarter or your fiscal second quarter 2018, you kind of targeted the 33% to 35% range for gross margins, came in at 24.4%. The difference is somewhere around $800,000 to $1 million -- at about 850 basis points. Can you just break down kind of the magnitude or at least portion it out between unplanned cost, weather, and the lower margin from MedSafe?

[David Tusa:]

Well, we were looking for roughly about 30%, 31% for the March quarter, what is that $500,000 or $600,000 of difference. And that was -- again that was related to both of those issues, whether it be weather-related or whether it be margin on the upfront collection receptacles on a large program. So, they both contributed to that. I think, Brian, the most important thing is that we're looking for some normalization and hopefully is going to happen -- we think is going to happen in June quarter where we will be back to that low to mid-30% level and $11 million to $11.5 million in revenue mid -- low to mid-30% gross margin.

[Brian Butler:]

Okay. I mean on the unplanned cost, how do these unplanned cost differ from the $400,000 you had last quarter?

[David Tusa:]

Well, these were costs related to the weather issues that we had up in the Northeast. They're not related to the unplanned cost we had last quarter. These are different. These are all related to weather-related incremental costs related issues we had up in the Northeast.

[Brian Butler:]

Okay. So, really just two buckets. It's unplanned cost associated with weather and the lower margin on MedSafe. Is that right way to think about it?

[David Tusa:]

Correct.

[Brian Butler:]

Okay. And then the lower margin on the MedSafe, was this a surprise to you guys. I mean is this when you rolled it out, it turns out to be just the margins ended up being lower, or how should we think about this. I guess going forward from sustainability point as you rollout the other MedSafe, is this structurally just a lower margin business?

[David Tusa:]

No, we knew about this, but again, Brian, we were looking for about $700,000, $800,000 more in revenue -- higher margin revenue that would have neutralized somewhat the impact on the margin and then closer to that margin that we would have expected. But we think the overall margin related to the MedSafe is where all the programs, as what we've said before, is consistent with our incremental gross margins on the business, 45%, 50%.

[Brian Butler:]

Okay. And then on the Pharma piece of the business -- the Pharmaceutical side. So, we're now down on an LTM basis, slightly call it 3%. We're looking to be flat, I guess, for the full year versus kind of somewhere in that high single-digit to 10% range prior. Can you give a little color on how much new order or new inventory builds were versus the decline in -- or not necessarily decline, but delay of restocking of current customers?

[David Tusa:]

I don't know, if I understand your question, Brian.

[Brian Butler:]

I'm trying to understand what -- how much new inventory build from new projects offset the decline and -- or less project or less customer support program reordering?

[David Tusa:]

There were some new programs and they weren't significant builds. They weren't large, maybe a couple of few hundred thousand dollars for the -- that we'll see for this year for new programs, for new bills. It's not a significant number. Again, we're chasing a number of opportunities and hopefully, we'll see that in the next fiscal year, but it looks like this -- this year will be -- fiscal year will be flat.

[Brian Butler:]

Right. And I guess, if new orders do not appear, does this run at $6 million a year based on the current base of patient support program that you're currently supporting, is that the right way to think about it? Or you didn't have new programs added to this gradually decline in those programs mature and ultimately, end?

[David Tusa:]

No, no. We -- what we watch is we watch the patient counts on the program and they look to be solid. So, we would expect to see continued bills. We also charge for fulfillment charges and there is a number of service charges and other charges in there as well. So, we would expect to remain flat if we didn’t bring any new programs. But of course, we're focused on new programs and we'd like to see that number increase.

[Brian Butler:]

Okay. On the Retail side of the business, can you give us what the flu revenues were this quarter?

[David Tusa:]

Sure. Diana has got--

[Diana Diaz:]

Yes. For the quarter, flu revenues were just under $400,000, which was up slightly from last year for the quarter.

[Brian Butler:]

Okay. And on the -- I guess question on the Professional Market. Do you have a breakdown on what the mailback contribution in the Professional Market was? Or maybe another way to ask that would be, if you exclude the Pharmaceutical from the mailback, what was the growth there?

[Diana Diaz:]

I think the mailback impact was more in the Pharma market and Home Health Care market rather than a change in the mix on the Professional Market. That's where the mailback declined for.

[David Tusa:]

Roughly about $600,000 revenue there that was all primarily mailback related that caused decline.

[Brian Butler:]

Okay. So, it was about $600,000 from the patient support mailback. And if I were to take that out, I mean, I guess I can try to do this math myself, but I were to take that out of growth, $600,000 mailback from Pharmaceutical this quarter, what was it last year?

[Diana Diaz:]

The decline in mailbacks for the quarter was $550,000 and the decline in Pharma was $400, 000 and then Home Health Care was flat. But there was a decline in the mailback component of the Home Health Care business.

[Brian Butler:]

Okay. So, it sounds like mailback is still not growing, even if you were to adjust for the Pharmaceutical. Am I thinking about that correctly, or is that--?

[Diana Diaz:]

The Home Health Care difference was based on timing. So, if you remember, Home Health Care was up strong -- at a strong level in the first two quarters of the year.

[Brian Butler:]

Okay, all right. And then just last one, just kind of thoughts on acquisitions and growth there. Can you talk about the acquisition pipeline, kind of talk about capacity to do acquisitions and just kind of strategy perspective from this point going forward.

[David Tusa:]

Sure. We continue to look at opportunities for acquisitions. We've got pretty active pipeline. And although most of our acquisitions recently been expanding organically down in the Southeast and continue to grow Texas, Louisiana and the Northeast, where by the end of the year we'll be -- we'll go from 24 to 25 states and 55% of the population just of what we have spent. I will say this, we're -- from the ability to be able to complete more deals, we obviously have a line of credit that's available, but as far as the stock price, stock price right now is really not attractive enough for us. We think that's our most expensive currency, attractive for us to get too terribly aggressive on using the stock, it's currency to complete the acquisitions. But we continue to talk with folks and we'll just have to see how it rollout. And as I said before, a lot of it has to do with where that owner is in their life, are there any triggering events, and if they're truly ready to get out of business. But that's one of the things we look at.

[Brian Butler:]

Great. Thank you for taking my questions.

[David Tusa:]

You bet. Thanks Brian.

[Operator:]

We have reached the end of our question-and-answer session. I would like to turn the conference back over to management for closing remarks.

[David Tusa:]

Great. Thank you. Thank you everyone for participating in the call. We look forward to talking with you next quarter.

[Operator:]

Thank you. This concludes today's conference. You may disconnect your lines at this time. And thank you for your participation.