Surmodics, Inc.
Q3 2021 Earnings Call Transcript

Published: 7 Aug 2021

[Operator:]

Good day, everyone, and thank you for standing by. Welcome to the Surmodics Third Quarter Fiscal 2021 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Tim Arens, Senior Vice President of Finance and Chief Financial Officer. Please go ahead, sir.

[Tim Arens:]

Thank you, Hannah. Good morning, and welcome to Surmodics' fiscal 2021 third quarter earnings call. Before we begin, I would like to remind you that during this call, we will make forward-looking statements. These forward-looking statements are covered under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and include statements regarding Surmodics' future financial and operating results or other statements that are not historical facts. Please be advised that actual results could differ materially from those stated or implied by our forward-looking statements resulting from certain risks and uncertainties, including those described in our SEC filings. Surmodics disclaims any duty to update or revise our forward-looking statements as a result of new information, future events, developments or otherwise. We'll also refer to non-GAAP measures because we believe they provide useful information for our investors. Today's news release contains reconciliation tables to GAAP results. This conference call is being webcast and is accessible through the Investor Relations section of the Surmodics website, where the audio recording of the webcast will also be archived for future reference. A press release disclosing our quarterly results was issued this morning and is available on our website at surmodics.com. I will now turn the call over to Gary Maharaj. Gary?

[Gary Maharaj:]

Thank you, Tim. It has been an exciting quarter filled with many important accomplishments. We have these updates and developments to share with you and our strategic initiatives. In addition, we are pleased to announce in July the acquisition of Vetex Medical. I will provide an update on this important acquisition and certain key milestones and timing related to The ReVene Thrombectomy Catheter, which is now an important and complementary product to our Pounce arterial thrombectomy platform. Let's begin with a summary of our third quarter financial performance. During the quarter, we generated $23.9 million of revenue compared to $26.9 million in the year ago period. Recall that a respective period last year included $6.7 million in revenue from the receipt of a $10.8 million CE mark milestone payment from Abbott. Excluding the impact of this milestone payment, third quarter revenue grew 17%. Our performance was fueled by a second consecutive quarter of record IVD revenue as well as significant royalty revenue growth. Also, as expected, we reported a GAAP loss per share of $0.24, which included a $0.03 of Vetex-related acquisition cost and a non-GAAP loss per share of $0.17. Tim will provide additional details on our quarterly results, including the impact of the Vetex acquisition and an update to our full year fiscal 2021 guidance. While I'm pleased to read our financial performance this quarter, I'm extremely proud of the significant progress we have made executing on our key fiscal 2021 objective, which I'll remind you, include

[Tim Arens:]

Thank you, Gary. During today's call, I will provide an overview of our third quarter operating performance, discuss financial implications of the recent Vetex acquisition and provide our updated outlook for our full year fiscal 2021. The revenue for the third quarter of fiscal 2021 declined 11% to $23.9 million, which was favorable to our expectations. The prior year period, as you recall, included several favorable and unfavorable impacts that should be noted when evaluating our current performance. The prior year quarter benefited from $6.7 million of revenue recognized from the $10.8 million CE Mark milestone payment achieved under our SurVeil Distribution and Development agreement with Abbott. Excluding the impact of this milestone payment, revenue grew 17%. Additionally, you will recall that it was a year ago quarter that saw a significant unfavorable COVID impact on our revenue. Medical Device revenue declined 18% to $16.8 million and exceeded our expectations. As previously mentioned, the prior year period included the CE Mark milestone revenue. Our in vitro diagnostics business grew 12% to a record $7.1 million, just exceeding last quarter's revenue. IVD performance was driven by favorable order timing for our distributed antigen products as well as microarray slide development projects. Our third quarter royalty and license fee revenue totaled $8.8 million, down $3.6 million from the prior year period, primarily as a result of the prior-year impact from the CE Mark milestone payment. License fee revenue under the Abbott Agreement totaled $1.0 million in the third quarter of fiscal 2021, compared to $7.6 million in the prior-year quarter. Royalty revenue increased 63% to $7.8 million in the third quarter compared to $4.8 million in the prior year quarter. Our third quarter fiscal 2021 royalty revenue growth benefited from an easier prior year comparison that was unfavorably impacted by reductions in procedure volumes due to COVID-19. In the third quarter of fiscal 2021, we continue to see broad-based underlying growth in our royalties portfolio, including our serene hydrophilic coatings, which essentially doubled compared to the prior year period. Serene now accounts for greater than one quarter of our total royalty revenue. Product revenue of $12.1 million in the third quarter was essentially flat compared to the prior year quarter. In our Medical Device business, product revenue was $5.5 million, down 5% or $270,000 due to softness in legacy Balloon catheter sales, which were impacted by a product replacement matter for one of our contract manufactured products. This was offset in part by strength in our coatings reagent sales. Our in vitro diagnostics business reported product revenue of $6.6 million, up 6% or $370,000, due primarily to favorable order timing of year-on-year for our distributed antigen products. R&D services revenue of $3 million was up 20% or $500,000 compared to the prior year period as our IVD business continues to benefit from increased customer development project opportunities. In our Medical Device business, we saw modest growth in R&D services revenue. Product gross margins were down in the quarter at 58% as compared to 63% in the prior year quarter. Product gross margins were unfavorably impacted by $730,000 in charges in our medical device business related to the previously mentioned product replacement matter for one of our contract manufactured products. This was offset in part by the favorable impact of revenue mix with a shift to relatively higher-margin product lines. R& D expense, including the cost of clinical and regulatory activities was 51% of revenue or $12.2 million for the third quarter, down 8% or $1.1 million compared to the year ago period. As expected, SurVeil-related costs declined, including TRANSCEND clinical study costs. SG& A expense in the third quarter of fiscal 2021 was 33% of revenue or $7.9 million, an increase of $470,000 or 6% compared to the year ago period. Personnel and other investments to support product development and our strategic initiatives contributed to the expected increase. Our medical device business reported an operating loss of $2.5 million in the third quarter compared to operating income of $530,000 in the year ago period. Driving medical device operating performance was lower revenue that was partially offset by lower operating expenses as the prior year quarter's operating results benefited from the $6.7 million of revenue recognized from the CE Mark milestone payment. Our IVD business grew operating income by 4% to $3.4 million in the third quarter. Operating margin was 48%, down from the prior year quarter's 51% on lower gross profit from a shift in revenue mix on strong sales of our distributed antigen products. Now, turning to income taxes. We recorded income tax expense of $780,000 in the third quarter of fiscal 2021 compared to income tax benefit of $1.3 million in the year ago period. The current quarter's tax expense reflects strong year-to-date pretax results, including the receipt of the $15 million clinical report milestone payment from Abbott. Both periods reflect the impact of taxable income for the full year in the U.S., non-tax benefited amortization and operating losses in Ireland. On a GAAP basis, we reported a loss per share of $0.24 in the third quarter of fiscal 2021, which includes $0.03 per share associated with Vetex acquisition-related costs compared to diluted earnings per share of $0.18 in the prior year quarter. On a non-GAAP basis, we reported a loss per share of $0.17 in the third quarter versus diluted earnings per share of $0.21 in the prior year quarter. Moving to the balance sheet. We continue to have a strong cash position. In the third quarter, we began with $70 million of cash and investments and generated $2.8 million of cash from operating activities. During the quarter, we paid $900,000 for capital expenditures. As of June 30, 2021, we had cash and investments totaling $72 million and no debt. Next, I'll discuss the financial implications related to our July 2nd acquisition of Vetex Medical. This acquisition reflects our strong financial position and our ability to utilize our balance sheet to accelerate our long-term growth strategy. The upfront cash payment of $39.9 million was funded with cash on hand and $10 million from our $25 million line of credit. Following the acquisition, our cash and investments totaled approximately $42 million, which provides adequate capacity to support our strategic growth initiatives. Purchase accounting is preliminary. However, we expect majority of the purchase price to be recorded as developed technology and tangible assets. Further, we estimate amortization expense for the acquired intangible assets to be approximately $2.4 million on an annual basis. Vetex acquisition-related costs totaled $460,000 in the third quarter of fiscal 2021 and we expect to record a similar charge in the fourth quarter. Overall, the impact of amortization expense and acquisition costs to earnings per share for the full year fiscal of 2021 is expected to be a reduction of approximately $0.11 per share. In addition, our updated full year outlook includes our expected R& D expense to continue to support fiscal 2021 activities, including manufacturing and process validation to further advance the Vetex Venous Clot Removal product. Looking forward, we expect the acquisition to begin generating product revenue in the second half of calendar year 2022. Further, our estimates suggest that low to mid-single-digit U.S. market share is all that is necessary for the Vetex acquisition to be accretive to our non-GAAP earnings, which we expect to occur beginning in the second half of fiscal 2023. Turning now to our outlook for 2021. As Gary mentioned, we have refined our fiscal 2021 guidance to include the Vetex acquisition. We now expect fiscal year 2021 revenue to range from $103.5 million to $105.5 million. This outlook includes between 16 and $17 million of license fee revenue associated with the Abbott SurVeil agreement. Our guidance reflects growth in royalty revenue of mid-to-high single-digits year-over-year. For the full year, SG& A is expected to grow in the low double digits and R& D spend is expected to be consistent with the prior year. In addition, we expect the full year impact of income taxes to range from $1.5 million to $2 million of tax expense. Our fiscal 2021 revenue outlook excludes revenue associated with the achievement of the final SurVeil milestone payment upon PMA, SurVeil product sales or SurVeil profit sharing revenue. We expect fiscal 2021 diluted GAAP EPS in the range of a loss per share of $0.10 to earnings per share of $0.05. Our GAAP EPS guidance reflects higher tax expense and approximately $0.11 from Vetex amortization expense and acquisition cost. We expect non-GAAP diluted earnings to range from $0.16 to $0.31 per share. Operator, this concludes our prepared remarks. We would now like to open the call to questions.

[Operator:]

. And we'll go first to Mike Matson with Needham & Company.

[Mike Matson:]

I guess I want to start with SurVeil. So it sounds like you're now expecting the approval to be a little later than you thought before. But I guess what I was wondering is if you have any feel for timing of when you could start to see revenue once you get the PMA? And then, what does that order pattern going to look like from Abbott? I mean, is there going to be kind of a large upfront stocking order and then subsequent orders? Is it going to be more distributed, smoothly over time?

[Gary Maharaj:]

Sure. And I'll turn the second part of that question Mike over to Tim. We had to collect the data on a significant amount of patients at 3 years, which resulted us getting it in, as I said apart, it was 6/21. Typically, this process is about 180 days, but the clock stops for quest-in. So by the end of September, early October, we will have the -- what I'd call the 90-day feedback from the FDA about the substantive review of the file. And so, then, we'll understand a little bit more of what questions they have, what further analysis they may want. So while it's not out of the question, I mean, 6 months, some 6/21 is still December. It's highly unlikely, especially having -- they have to do 3 pre-authorization inspections in 3 different countries for this product, where we manufacture it. So it's unlikely and that's why we want to make sure I understood. While we're still targeting, I think it's more responsible for us to look at the second fiscal quarter. The second part really depends on our commercialization decisions with our partner Abbott, primarily because the question becomes whether you take the risk before you have the PMA in hand and then develop the launch from that or do you take a risk, do you wait for that or do you take a risk before? There positives and negatives of both, which we'll have to clearly with our partner Abbott will guide that decision. The issue there is, it will take us 3 to 4 months to really fulfill an opening order to get our manufacturing machine up and running. So let's say the PMA and I'm making the subtest of purposes of discussion. But let's say the PMA was February of '22, and then we get the binding order from them. It could take 3 to 4 months for us to fulfill that for them to then do their launch quantities. If they decide to do it in October-November based on the initial FDA feedback that was short in the time frame. So there's a little bit of a window there. So Tim, I don't know what other comments you have in terms of the periodicity and so forth.

[Tim Arens:]

Right. Thank you for the question, Mike. And Gary, you did a nice job of framing up expectations. I'll just add a little color Mike. The discussions that we've had with Abbott are similar to the discussions that we had the last time we had our earnings call, which is the anticipation for a launch would occur at some point following PMA approval. We're not at liberty to provide any more detail than that. But Abbott certainly does appreciate and understand that it takes time to get the manufacturing engine started to deliver on their initial stocking orders. I think that speaks to your second part of your question on the order pattern. So what we've received from Abbott is their forecast to support the commercial launch. One would expect that there would be continued orders following that. I would think that at some point here in 2022, we will be able to provide a bit more detail and context. But at the time here, we'll need to respect confidentiality with our partner. The final thing I'll say is we were excited and pleased with what we saw in the forecast.

[Mike Matson:]

Okay. Great. And then, I wanted to ask one on the thrombectomy product. So you now have 2 products in your portfolio. It sounds like Vetex, do you expect that to potentially be commercialized under the existing 510(k) and CE Mark, is that right? And then, maybe just talk about the future indications there for things like stroke and pulmonary embolism, where -- I guess, which product would be used for each of those if you know at this point?

[Gary Maharaj:]

Sure. We started working with Vetex in due diligence, I may have mentioned labor deal in 2020. So they had not received CE mark, no FDA clearance at that point. And so, it was serendipitous that it was able to achieve it during the diligence period, which makes it terrific for us. So given the current indications, they're sufficient to support commercialization in Europe and in the U.S. As you noticed, market is very competitive. So the clinical development, I mean, Vetex has done 19 patients, as Steven Black, one of the world's famous Venous - experts presented at the American Venous Forum earlier this year. We believe we'll need -- after we complete that process validation, both in Europe and in the U.S. to continue that clinical development because that data will be important in a competitive environment for us, so a partner down the line. The second thing is going for the DVT claim with the USFDA will be important as well. Right now, we have a claim of the ability to remove clot from veins. And I know there are very subtle differences. But one is an acute condition claim and one is a claim of mechanically removing clot. So eventually, to be fully competitive, we want to make sure we get that claim, but that's what the clinical development will facilitate. The second thing is, what we really liked about the ReVene system that's also what we liked about our Pounce. This market has got a lot of complicated products that are used in high-end academic centers, where that is present at every case. What we saw in Pounce with Dr. Backer down in Sioux Falls, South Dakota, he wouldn't pull out complicated devices, but he would pull out the Pounce. And that's what we saw in the same thing for the venous side in the ReVene system. You don't have to be highly specialized rep in your hand to use this system. And that's where we see the power of it. And so, the intellectual property that we have from this end Pounce, we believe will help us both in PE and stroke. We have already started just an R&D team with mad for me saying this, but really just broad bush concept development and problem definition for PE. So I want to give them time for that to percolate. I would hope to see viable concepts come from that in fiscal '22. Shortly maybe a little bit further down the line because we want to really secure the winning for Pounce and ReVene at this point.

[Operator:]

We'll go next to Brooks O'Neil with Lake Street Capital markets.

[Brooks O'Neil:]

A lot of detail you've provided, we really appreciate all of that. I just have a couple of questions. First, could you just give us your current sense of the paclitaxel sentiment, both in terms of clinical use and in terms of what you're hearing and seeing from the FDA?

[Gary Maharaj:]

Sure. And Tim, you may have looked at a recent IMS data as well. So I'll pass that on to you. But what -- that recent application, which included authors Ramone Volkov and Peter Schneider, at least to me put the seal on it. I mean it's really now an overwhelming evidence in favor of paclitaxel in my opinion. And even if you throw away half of it, that would still be overwhelming. I can't comment on how the FDA is viewing this and what they will do to unwind the label it. It's really a label issue. But I'm hopeful that it would be around the time when our partner Abbott ready to launch. So that would be wonderful. And I believe there's been some bounce back in markets use, but I'm not up to speed on the recent IMS data. Tim, I don't know if you've looked at that recently either?

[Tim Arens:]

Yes, Gary. And there is also maybe -- I'll just step back for a moment and provide Brooks with a little feedback here. I think the initial safe pad data was published here recently I think in June. And I'm not sure where it was presented Gary, you might know, but it was published in the endovascular today June edition. And it is a retrospective study. So it's more of the observational data. But we just continue to keep seeing more and more data that supports the view that there are -- there is no signal. And so, I think in this particular study, the observational study look at about 160,000, 170,000 Medicare patients and follow them up for almost three years and there's just no difference. I think this data and what the FDA has said previously is going to be important for them to make decisions, hopefully favorable decisions in the not-so-distant future with regard to the restrictions that are in place. That being said, the IMS data, the data that we're seeing and what we're hearing anecdotally suggest that there's greater uptake of paclitaxel-coated devices. We've heard other companies that have paclitaxel devices on the market represent on their earnings calls that they're seeing growth and uptake in their paclitaxel-coated devices. That bodes well for the industry. And the IMS data that Gary refers to really speaks only to U.S. hospitals. But we've seen that trending higher over the last several quarters and it's over $45 million per quarter. And again, that's only the U.S. hospital system. So I think in the U.S., we could be looking at the market getting to about $200 million right now. All in all, the data looks good. What we're seeing on the sales trends and what we're hearing from other companies that have these devices all bode well for paclitaxel-coated devices.

[Brooks O'Neil:]

Great. That's what I was thinking, but I'm glad to hear you say that. So secondly, I just wanted to ask a little bit about the core business. I have a sense that patent expirations have affected business and patent transitions, I guess, maybe have affected the business. Can you just refresh my memory on where you're at with regard to core patents in the base business?

[Tim Arens:]

Yes, absolutely. So the patent issue that you're referring to Brooks is the expiration or the patent expiration of our Gen-4 patent family. And I think folks might recall, we had about a $5.5 million unfavorable impact in fiscal year 2020. Going into fiscal 2021, we guided to about a $3 million impact. We're happy to announce that that impact that headwind is complete. I think we've had about $1 million impact here over the course of the year. And it's really a testament to our business development team, working with our customers and continuing to sign agreements to provide continued access of the important technology for their products. So in fact, in the quarter here, I think Gary and I both mentioned that the royalty portfolio grew about 63%. Every element of that patent portfolio, whether it was serene, our most recent generation of hydrophilic coatings or Gen4, Gen3, every single patent family saw year-on-year growth. And again, that's coming from what I would consider to be more of a depressed quarter. And Q3 of 2020 given the pandemic impact on procedures, but we are very happy to see the performance was broad-based across all different patents. And we're seeing it across all different categories of devices that leverage our coating technology. So again, a really great quarter and part of our business development team.

[Brooks O'Neil:]

Great. Let me just ask you, I'm kind of curious, as you have broadened and deepened the product pipeline, has your thinking about whether you would ever self distribute any of these products or product families changed, are you still totally committed to partnering on the field and distribution side of the product development pipeline?

[Gary Maharaj:]

Well, given our recent Sublime experience, I was actually pleasantly taken aback. Their rules, legal rules of how much evaluation product you can provide to physicians and clinics. And then, beyond that time, you can't continue to provide free products for clinical evaluation. So the fact that a couple of these clinics said, look, these product have changed our practice, we'd like to continue using it. We even compel to find a way to continue that. But we first experienced this a couple of years ago with our Telemark product. And woefully, we just had to wait. We didn't have the systems and processes to facilitate that. So we have to wait till we found a strategic partner. I think we're carefully evaluating all of these Brooks, because we have to think through what will create long-term shareholder value. But now we're happy to be providing the product under a selling agreement and also getting the clinical -- much more clinical data from the product and use in different types of cases. So we'll look at that in the coming months here. But I'll say it's a good problem to have to think through. We'll have to see our Pounce and the heavy hitters like Pounce and Venous and ReVene go as well as we anticipate that. Nonetheless, I'll say this, generating revenue, subsequent evaluations can only enhance the value either to us or a strategic partner. So it's either way, the river is flowing the way we want it.

[Brooks O'Neil:]

Yes. That's great. Let me just ask one last question maybe for Tim. And that is -- I know you're not ready to provide guidance for 2022. I know there's a lot of moving parts. But as you can -- is there any way you can help us think about what the impact of SurVeil could be using basic assumptions about what you're seeing of market size now, penetration, et cetera, in terms of how it might impact your revenue and profits next year, assuming things come along more or less the way we think they're going to?

[Tim Arens:]

Brooks, it's a great question. I'm sure you're not the only one that has that question top of mind. All I can tell you is, Gary and I are firm believers in the guidance. The longer-term guidance that we've provided here just recently again, which is double-digit top line growth. And other than that, I'll ask you to be patient. I'm hopeful that we'll be able to share more here in the coming quarters. But we remain excited about the partnership. And clearly, we were excited to see the forecast from Abbott. And I think it's -- all I'll say is, I find it to be meaningful.

[Brooks O'Neil:]

Yes. All right. That's good. Thanks for giving me all that color and congratulations on continued progress.

[Tim Arens:]

Thank you, Brooks.

[Operator:]

We'll go next to Jim Sidoti with Sidoti & Company.

[Jim Sidoti:]

So I guess, you don't have any plans to share that those initial estimates from Abbott with us today, do you?

[Tim Arens:]

I wish we could Jim, but we'll have to remain silent on that for the moment. We look forward though, as I mentioned to share in more news on this during the coming quarters. So again, just asking for some patience. We wish it were otherwise. But we'll respect the confidentiality of our agreement.

[Jim Sidoti:]

Okay. So the one question for me is, you look at your pipeline, you have SurVeil, you have Pounce, you're going to have Vetex and that ready to go in the next 12 months. When you go out and talk to strategic, do you talk to these products as a group or do you talk to -- as individual products? And could these 3 things go to 3 different parts?

[Gary Maharaj:]

Yes. I don't see -- it's odd to tell. I mean if a strategic has a white space that encompasses both radial access and thrombectomy that could be, I think that's highly unlikely. I think given the -- how hot the thrombectomy spaces, that may be one strategic. The radial access space is a real sleeper however. And you have to believe that 5 years from now, the majority of procedures will be done radially. And if you drink that water, the strategic would vision, we'll see this as quite an important positioning move from them. But right now, it's hard to tell to get an insight of the strategic portfolio planning of a strategic and say for redundancy. So I think combination of individually, we expect that the values wouldn't be that different.

[Jim Sidoti:]

And when you're talking to strategics, do you consider the size of the strategic distribution when you're making the deal? I mean, would you take a slightly lower rate from a partner with a much bigger sales force than you would with a small apartment?

[Gary Maharaj:]

Yes. And to be clear, we are not -- strategic to, I'll say one talk to us. As I've said, Tim and I have informed our teams to keep the heads down, keep the blind zone and generate the clinical data. Tim usually has these very sophisticated financial modules that tells us which way is up in any deal. And I know Tim likes forget to a market share sensitivity as sort of the water line for us. Tim, I don't know, if you want to comment on that?

[Tim Arens:]

I was just going to thank Jim for helping share a little context here that might better position our potential partners in their negotiations with us. So I think Jim, we'll remain silent on that. But what I will tell you, I'll just feed off Gary's response. Yes, we look at a number of important criteria. We do our diligence on partners. And we look at things more holistically in terms of what the overall value creation is. And we understand that sales forces provide and bring a lot of value to the thesis. But the technology and its advantages, it's differentiation, ease of use, safety profile. All those things are really important. And we want to make sure that from a Surmodics shareholders' perspective, we're capturing the value that we deserve for the investments that we've made in the platform. So we'll talk more about this. But today, we'll remain a little bit quiet on some of the negotiating things that we look at.

[Gary Maharaj:]

Tim, I'll just add. We see our portfolio, I don't know how investors and the strategic see it. But our portfolio is incredibly valuable. We know with the addition of ReVene and Pounce and you look at the comparables of companies who have products of this Ilk. Now we have to go generate the clinical data and demonstrate that. But these are not $5 million product lines. I don't believe they even $50 million product line. I think they're substantially more valuable than that. So just to note that we intend to keep the bar high in any form of negotiation because with this clinical data, we know what we got.

[Tim Arens:]

Gary is referring to revenue.

[Gary Maharaj:]

Yes, yes. Thanks, Tim.

[Jim Sidoti:]

Last one for me. Do you think the portfolio is pretty set right now or will you continue to go out and look at acquisitions and expand it further?

[Gary Maharaj:]

Well, Tim will comment a little bit on this. Behind the scenes, we have a very active corporate development program. We looked at, Jim, I would say, half a dozen serious ones and give or take a few per year, and we're very, very picky in what we look at. As I said, I mean, we started with Vetex over 10 months ago. That's what it took to really get that deal done and make sure it was the right deal for our shareholders. So clearly, as Tim and I have said in the past, we want our balance sheet not to be a static indicator of performance, but to be used as a dynamic tool for growth, making sure we have the buffer to continue to run the business. So the short answer is, we will continue to scan full complementary high-value technologies in our companies.

[Tim Arens:]

Gary, I have nothing to add. I think that you articulated that accurately and well.

[Operator:]

. And it looks like there are no further questions in queue at this time. I'd like to turn it back over to you for any additional or closing remarks.

[Gary Maharaj:]

Thank you everyone for joining us on our third quarter earnings call. Be safe out there. Thank you.

[Operator:]

And that concludes today's conference. Thank you for your participation. You may now disconnect.