Accendra Health, Inc. (ACH) Q3 2017 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and welcome to the Owens & Minor Third Quarter 2017 Financial Results Conference Call. My name is Brian, and I'll be your operator for today. At this all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference call. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Ms. Trudi Allcott. Please proceed, Ms. Allcott.

Thank you, operator. Good morning, everyone, and welcome to the Owens & Minor Third Quarter 2017 Earnings Call. I'm Trudi Allcott, and on behalf of the team, I would like to read the safe harbor statement before we begin. Our comments today will be focused on financial results for the third quarter of 2017, which are included in our press release. In our discussion today, we will reference certain non-GAAP financial measures. Information about these measures and reconciliations to the most comparable GAAP financial measures are included in our press release and in the supplemental information posted on our website. In the course of our discussion today, we may make forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Please see our press release and our SEC filings for a full discussion of these risk factors. Participating on our call this morning are Cody Phipps, our Chairman, President and CEO, who will provide an overview of the business, our strategy and the just announced acquisition of Halyard's S&IP business. And Randy Meier, our Executive Vice President and Chief Financial Officer and President of International, who will provide details on the transaction, an update of our financial results and more insight into our business performance. Now I'd like to turn the call over to Cody Phipps, who will start things off this morning. Cody?

Thank you, Trudi, and good morning, everyone. Thank you for joining us on the call this morning. We are very excited about the acquisition of Halyard's surgical and infection prevention business and the potential we see for this combination. I'll talk about the transaction and our ongoing business transformation. I will then turn the call over to Randy to discuss our quarterly results. Let me remind you of our 4-part strategy and how the Halyard S&IP business fits. First, we are building the most intelligent route to market for medical products. Our second strategy is to expand across the continuum of care. Our third strategy is to become the preferred outsourcer for leading manufacturers. And finally, our fourth strategy is to drive value to data analytics and services. The Halyard S&IP transaction is strategically and financially compelling. Here are some of the reasons we like this transaction. It's highly synergistic with our core distribution and CPS businesses and will drive significant growth and profitability. It allows us to create compelling product and service bundles across the continuum of care and at the point of care. It provides a product platform to expand our own brand products and solutions. And finally, the transaction will be nicely accretive beginning in 2018 and will be value enhancing over time. This is a significant step that will strengthen and diversify our business model, with a market-leading portfolio of surgical and infection prevention products. Halyard's differentiated portfolio of products is highly complementary to the innovative solutions we currently provide to the market. Halyard's product portfolio includes sterilization wraps, surgical drapes and gowns, facial protection and protective apparel and gloves. By working together, the S&IP teams around the world have created a leading global provider of medical supplies and solutions that are designed to protect against health care-associated infections. This transaction also enables global expansion for Owens & Minor, with significant opportunities for growth in key new markets, including Canada, Japan, South Africa and Australia. With the rapid pace of change in today's health care market, we are taking aggressive steps to position Owens & Minor to meet the evolving needs of our health care customers. We look forward to welcoming the Halyard team onboard once we close the transaction in the first quarter of 2018. We know they will bring valuable new skills and resources to our team. This new business will be an integral part of our growth strategy, accretive to our operating earnings and is aligned with our strategy. Now turning to the quarter. We are disappointed in our quarterly results, but we continue to make meaningful progress in transforming our business and in executing our strategic plan. We are focusing on improving our operating performance through our rapid business transformation. And we're also hard at work, enhancing the value propositions to both our manufacturer and provider customers. In our domestic business, expense control and productivity measures, along with contributions from Byram are having a positive impact. However, these actions were not sufficient to offset current headwinds in the quarter. The international team has taken steps to reduce expenses by pursuing a shared services model and the team is better positioned to leverage future opportunities. And our CPS unit has stabilized its production environment, which will help lower costs and enable a greater focus on selling and growth. Our teams are responding to the challenges we face, and I commend them for taking creative and positive steps to improve our operating performance and to advance our strategy. We have more work to do, but our team mates have embraced our 4-part strategy and are aggressively putting our plans into action. While the current environment remains challenging, the Byram acquisition and the upcoming acquisition of Halyard's S&IP business are significant steps in the transformation of our business. Our focus remains keenly on executing our strategy and on improving our operating performance. With that, I will turn the call over to Randy to review our financial results. Randy?

Thank you, Cody, and good morning, everyone. I'll begin with an overview of the Halyard S&IP transaction and then provide an update on the quarter financial and operational results, with a look at our performance across the three segments. And wrap up with our outlook for the remainder of the year and the status of our guidance. Let's start with Halyard. As Cody said, we're excited about our agreement to acquire the surgical and infection prevention business. This transaction is strategically and financially compelling. Once closed, it will allow us to enhance our product offerings to our acute and non-acute care customers in a wider range of global markets. We look forward to providing a diversified portfolio of service offerings and a more focused pipeline of products to our customers. First, I'd like to provide a few more high-level details of the agreement. We'll be acquiring the assets of the S&IP business for approximately $710 million in cash. We intend to finance the transaction with a combination of cash and debt. We believe this transaction will bring revenue of approximately $1 billion and approximately $80 million in EBITDA. Following the close of the transaction, we expect to consolidate approximately $750 million in incremental annual revenue. The difference being the revenue which already flows through our channel. We also believe the deal has the potential to deliver $40 million to $50 million in synergies by 2021. At present, we are targeting the close of the deal late in the first quarter 2018. From an earnings perspective, we estimate the acquisition will be nicely accretive in 2018 and meaningfully accretive in 2019 and beyond. After the transaction closes, we expect to provide more information about our financial projections, and we also intend to maintain our current dividend policy. Overall, we believe, the combination of Owens & Minor's platform, Byram's expanded capability and Halyard's clinical orientation will provide the basis to achieve sustainable profitable growth. Looking ahead, once we work through the customer -- customary closing conditions and regulatory approvals, we expect to provide more information about our financial projections. Turning to the quarter. As we have been saying all year, 2017 continues to be a very challenging year, with a variety of industry and market pressures. Our teams continue to work on a variety of initiatives designed to improve our productivity and efficiency as pricing and margin pressures remain at the forefront of our operating challenges. While exogenous factors continue to be a limiting factor in our financial performance, we remain on track to have initiatives associated with our 4 strategic areas, yield a combined $100 million to $150 million and incremental operating income through 2019. We expect the rapid business transformation or RBT initiatives to yield between $40 million and $50 million and annualize benefits by year-end and to make incrementally higher contributions in 2018. In addition to our productivity and efficiency initiatives, we continue to make strategic investments in global networks and systems and expand our value proposition for service and solutions, such as QSight and automation technology in our warehouses. These investments as well as the aforementioned market pressures have offset a portion of this value. As we have said before, the long-term financial goal of our business transformation continues to be to achieve long-term sustainable earnings growth of 8% to 10%. Turning to the quarterly results. For the third quarter, we reported net income of $10.9 million or $0.18 per share and adjusted net income of $24.3 million or $0.40 per share. Performance in the quarter continued to be hampered by ongoing customer margin pressures, softness in our proprietary product segment and expenses incurred in Europe to support new business. The loss of a large domestic customer in 2016 also continues to affect our business, and there was one less sales day in the quarter. Benefits derived from Byram Healthcare included in our Domestic segment and our ongoing expense control and productivity initiatives only partially offset these challenges in the quarter. For the first 9 months of the year, net income was $49.8 million or $0.82 per share. Adjusted net income was $76.5 million or $1.26 per share. Net income year-to-date benefit -- benefited by $3.4 million or $0.06 per share from the release of an income tax valuation allowance during the second quarter. For the quarter, consolidated revenues were $2.33 billion in the third quarter versus $2.42 billion in the third quarter for 2016. For the first 9 months of 2017, revenues were $6.93 billion compared to $7.36 billion for the same period last year. Consolidated quarterly operating earnings were $29.7 million for the quarter compared to $53.6 million last year. While adjusted operating earnings were $48.5 million compared to $58.8 million for the prior year period. For the year-to-date period, consolidated operating earnings were $98 million compared to $151 million in the prior year period. Year-to-date consolidated adjusted operating earnings was $138 million versus $178 million for the same period last year. The effective tax rate was affected by the addition of Byram and softer income in lower tax jurisdictions, which resulted in a tax rate for the quarter of 48.1%. For the year-to-date period, the tax rate was 34.3%. As a reminder, the release of an income tax valuation allowance in Europe in the second quarter also affected the year-to-date effective tax rate. Looking ahead, we continue to expect an adjusted effective tax rate for the year to be in the range of 33% to 35%. Asset Management metrics included DSO of 27.6 days and inventory turns of 8.1x, both measurements include Byram. The ongoing diversification of our business model continues to impact Asset Management metrics. Following the acquisition of Halyard's S&IP business, we will provide guidance on our future expectations. That said, we continue to aggressively manage the working capital of our base distribution business. Cash flow from operations was about $6 million compared to operating cash flow of $145 million last year. The sequential improvement in operating cash flow during the third quarter resulted primarily from changes in working capital. Now let's look at the 3 segments. Domestic segment revenues for the third quarter were $2.19 billion compared to $2.29 billion for the prior year. Revenues in the quarter was impacted by one less sales day, lower growth from existing customers compared to the prior year and the exit of a significant domestic customer in 2016. Year-to-date revenues were $6.53 billion compared to $6.95 billion. The Domestic segment includes Byram, which contributed $80.3 million in revenue for the quarter. Third quarter domestic operating earnings were $36.1 million versus $41 million, 1 year ago. The change in operating earnings reflects the revenue shortfall, continued margin pressures and incremental cost to serve customers before, during and after the hurricanes; and mitigated by expense control actions, successful productivity initiatives and the earnings from Byram Healthcare. For the year-to-date period, operating earnings were $103 million versus $126 million last year. Turning to the International segment. Quarterly International segment revenues were $96.7 million compared to $83.8 million last year. The improvement was driven by organic growth from existing customers and new business. For the year-to-date period, International segment results were $288 million versus $256 million last year. For the third quarter, the International segment reported a loss of $2.2 million compared to income of $1.4 million than last year's third quarter. For the year-to-date, operating losses of $754,000 versus operating earnings of $3.4 million in the same period last year. International results reflect an increase in expenses, primarily resulting from the cost to support the new business. To offset spending, the International segment has taken steps to improve its cost structure and is better positioned to leverage future opportunities. Next, our proprietary product segment, which delivered third quarter revenues of $125 million compared to $133 million last year. Decreased sales of sourced products contributed to the decline in revenues. For the first 9 months, revenues were $393 million compared to $409 million last year. Third quarter operating earnings for the segment were $9.1 million compared to $14.3 million in the prior year. Operating earnings for the year-to-date period were $26 million compared to $42 million last year. The declines resulted primarily from the revenue shortfall and increased production costs for custom procedure trays. The steps taken in recent months to stabilize the production environment have been effective as evidenced by the sequential improvement in this segment's performance. We expect further improvement ahead. Now let's turn to our guidance for the remainder of 2017 and 2018. As we have indicated, we have revised our outlook for non-GAAP diluted earnings per share in 2017 to a range of $1.75 to $1.85 from the previous range of $1.90 to $2. As for outlook for 2018, we intend to update our guidance for 2018 upon the close of the Halyard S&IP transaction. However, we believe the Halyard transaction will be nicely accretive in 2018 and meaningfully accretive thereafter. The Halyard S&IP transaction is strategically and financially compelling and enhances our product and service offerings to our acute and non-acute care customers in a wider range of global markets. It also enables us to expand our direct channel access, improve our utilization of our global network, allowing us to create a more scalable business model and position us to achieve sustainable, profitable growth. Thank you. And with that, we will turn it over to the operator for questions.

Thank you, sir. [Operator Instructions] Our first question will come from the line of Erin Wright with Credit Suisse. Please proceed.

Great, thanks. Could you talk about sort of the underlying growth rate for the Halyard business? I think I saw in the release today, they mentioned kind of the pricing environment and commodity dynamics, I guess, relating to that business. Can you give us a sense of the underlying fundamentals across the Halyard business, and how we should think about the long-term growth rate?

Yes. Thanks for the question. First, let me just say, we know this business very well, where the -- we've been for a long time their largest customer in North America. So we know the business well. In our assumptions, the underlying growth rates are low single digit. And that's what we have in our planning assumptions. Because again, we see channel opportunities in our business for these products. Randy, you want to add anything?

Yes. Erin, I think from what we're acquiring, I think, the business has been a little soft over the past couple of years, but I think, Cody is exactly right. As we look at this business, the combination of their clinical expertise and the sales force that we'll be getting, combined with our channel access to make a vertical structure. We think is going to give us tremendous opportunity to leverage market share. And we think there's opportunity to grow it in the low single digits going forward.

Okay. Great. And then on the domestic distribution business, operating margins across that segment. I guess, how should we think about the quarterly progression here as you sort of wrap maybe the customer loss and some of those dynamics there? Thanks.

As we look at the business and echoing a little bit of what we said in the second quarter, we continue to see sequential improvement across most of our franchise. We saw improvement from the second to the third quarter, probably not as good as we had hoped. But we continue to see an improving environment in our business as we move forward. So again, as we sort of get over the loss of our large customer, that will have completely exited last year by October. So we'll finally have a relatively speaking, clean quarter. In the fourth quarter, we would continue to expect to see sequential improvement there.

Okay, great. Thank you so much.

Thank you.

Thank you. Our next question will come from Lisa Gill with JPMorgan. Please proceed.

Thanks very much. Randy, I just wanted to confirm when you talked about the $80 million of EBITDA, you talked about the fact that you had $1 billion of revenue but sounds like maybe $250 million already goes through Owens & Minor. Were you -- will all $80 million accrue to you next year, or there's some lesser component because of what flows through your business already?

No, that's -- we wanted to just highlight the revenue on a consolidated basis, would be less than that sort of the headline number. But all $80 million will flow through our organization. But again, might not be in 2018, only because the delay in the closing, as we've highlighted here that we're targeting kind of a late first quarter close. And when we get to that point or a little closer to the closing, we'll give updated guidance relative to what we think 2018 will do. But on a pro forma basis, we would be expecting to consolidate about $80 million in EBITDA.

And obviously, Lisa, there'll be costs associated with bringing the 2 companies together. So we need time to work through that.

Right. Okay. But I just want to understand that. So I mean, if we think about this run rate beyond 2018, you should be able to grow that $80 million. And then you talked about synergies on top of that?

That's correct.

Okay. And then, Cody, can you just -- you talked a little bit about the margins on the last question, but what's going on in the overall hospital environment, right now? It seems like it's a pretty difficult environment when we think about utilization trends. What are you seeing in the marketplace right now, number one? And number two, how do you think about the competitive landscape? Has there been any changes from a competitive standpoint?

Yes, I think, as you sadly say, overall, it's a pretty challenging environment right now. There is, as you said, utilization has come down. There is extreme cost pressures on the providers. And all that is leading to a zero-sum game in the market, where everybody is chasing market share, and that's put pressure on margins. And so the way we -- we're dealing with that through our rapid business transformation, trying to improve every aspect of our current distribution business. But ultimately, our conclusion was that we needed to diversify -- strengthen and diversify our business model. And that's why we really like the acquisition of the Halyard S&IP business. Because what it brings to us now is, in addition to all the distribution, logistics solutions we bring, it brings a much stronger, much more compelling product portfolio. And we think that's going to allow us to compete more effectively in marketplace.

Okay. That’s helpful Thank you.

Thank you.

Thank you. Next question will come from the line of Sean Dodge with Jefferies. Please proceed.

Yeah, good morning. Thanks for taking the questions. So maybe just following on that last one. In looking at domestic revenues, there are lot of things going on there, some more onetime, some not. Can you give us a little more insight into or quantify some of the different drivers or dynamics there? So parsing out the impact of lower utilization, for example, in the quarter versus things like the Byram contribution, the hurricanes, what's left from Kaiser? Any organic gains you've been able to make so far pushing into the alternate sites?

Sure. As we've continued to transition through each quarter this year. We've had a variety of things going on, and as we've highlighted in our comments, with the acquisition of Byram, that contributed about $80 million in the quarter. We continue to do fairly well in terms of retention and acquiring new customers. But again, pricing and margin pressures are impacting in terms of profitability associated with that. I think well, as Cody indicated, it's penetrating our existing customer base, where we've been a little softer year-over-year than what we had anticipated. But again, retentions are going fairly soundly. Our acquisition of new customers continues to move ahead nicely. Byram, we contributed in the quarter. But it's some of the penetration and the additional sources. I think, we've done a good job over the past couple of quarters of beginning to further define our value proposition with our customers and are starting to see some good momentum there, which is why we have confidence as we move into the fourth quarter. We'll continue to see sequential improvement in our domestic top line.

And Sean, let me just add on the non-acute or continuum of care. We just added Byram in August and really like that business. It's a great team. We're kind of working back from the direct-to-patient home space, connecting that back through the continuum. We also plan to build out from our strength in the acute setting into ASCs and physician offices. But really, our work is just beginning there. So we see a lot of opportunity there. Obviously, that's a higher growth channel, set of channels for us. But we're really just getting started with that.

So I want to add on to sort of Cody's comment to Lisa's question. The industry continues to consolidate. And with that, we continue to work with customers that are significantly more diversified. So our opportunity to add different revenue streams, a broader set of value propositions for them is really what we're working toward and that was part of the reason for this acquisition.

Okay. And then within proprietary products, there was some increased production costs, Randy, that were referenced there. What are those, and is that something that you expect to be transient, or has there been some sort of structural change that's taken place there?

Well, as everyone knows we've been going through a pretty good transition with our CPT business, which is part of the overall proprietary product segment. And what we were trying to allude to here in our proprietary products is there's been some softness with our broader private label business, which has some softness in terms of the top line of the proprietary products. On the cost and expense side, as we move through the first 2 quarters, the CPT business, or what we used to call the CPS business, has continued to improve sequentially. And while we continue to experience some cost issues there, we're starting to see sequential improvement in operating income. So we think most of the challenges are behind us. And we're in a good position to start leveraging volume as we go forward.

All right. Thanks, again.

Thank you.

Thank you. [Operator Instructions] Our next question will come from the line of Robert Jones with Goldman Sachs. Please proceed.

Hi. This is Nathan Rich on for Bob this morning. Just going back to the Domestic segment. You talked about it being more challenging to penetrate existing customers than you had thought. Just wondering if you could add some more color around those comments. Just kind of given the focus on Amazon among the investment community right now, and then potentially getting into distribution of medical products. Have you started to see any share shift into some of these non-traditional channels?

Yes, Nathan, I think, there's two questions in there. First, on the software, I think one thing we're alluding to is, it's taking us longer to onboard new business than we thought. So that's been a bit of a headwind in the quarter here, and certainly, throughout the year. With respect to Amazon, our view is this--Amazon is a formidable competitor in any distribution business. What we're trying to do is focus on our strategy, which is bring more solutions and more point of care solutions across the continuum. And we think by doing that, we have a strong business model going forward. Now with the acquisition of Halyard's S&IP, we have products to flow through that solution set. So it's hard for us to speculate. There's a lot of talk about Amazon right now, in both the pharma space and the medical supply space. My own personal view is, the part of the industry that's most at risk from Amazon is the part that looks most like a consumer purchase. And so stuff that flows -- small orders, small parcel deliveries into either physician offices or direct to patients in the home, where there's not some sort of a Medicare, Medicaid payment to it. Those are areas where Amazon has a very compelling business model. So that's not a lot of what we do today. We're kind of in areas that are differentiated from that.

Okay. Great. That's helpful. And then, Randy, I guess, is it possible to kind of break out the level of investment that you guys are making this year with initiatives like RBT and some of the other spending that you're doing to reposition the business? I'm just trying to think forward into 2018, what costs that we're seeing this year might be more onetime in nature? And what lift, we could potentially see in '18 as those expenses roll off?

Sure. I think as you look at some of our adjustments to our earnings, you can get a glimpse into some of the investments that we're making into our systems. And when you look at the cash flow statements, you can get a sense of where we're investing. Again, I think, as we've talked about, we've got kind of a transformational program along with our strategic initiatives that are looking at improving our core business and network by creating an end-to-end business unit. And those investments, as we indicated in Investor Day, will probably take over the next 2 to 3 years to fully implement. But we think that will also give us opportunities to start expanding our revenue base and our value proposition. And as Cody just indicated, further penetrating customers with value-added services at the point of care. So we would expect to continue to see some of these investments go for the next, probably, 2 years or so.

Okay. Great. And just one quick point of clarification, Randy, if I could. I think you said Byram contributed $80 million of revenue in the quarter. I just wanted to make sure I have that number correct?

That's correct. It was recorded as of August 1, and that represented about 2 months of revenue.

Okay. Thank you.

Thank you. Next question comes from the line of Eric Coldwell with Baird. Please proceed.

Thanks very much. Good morning. So first question, will Halyard continue to sell through your competitors like Cardinal and Medline? And if so, how do you think they might respond to your ownership? Do you see any potential change in their behaviour? I know, you guys distribute some products for Cardinal, of course. So maybe it's going to be just the mirror image of that situation. But I'm curious on how you think your distribution competitors might view your ownership of these, now what will become you're own effectively branded products? And then do you think it will change their interest in selling or promoting or working with Halyard in any way because of that ownership?

I think, first of all, we will continue to sell the Halyard products through those channels. And I think in many ways, this move was anticipated by our competitors. In the industry, we distribute a lot of their products. They distribute a lot of ours. So we don't think, in the short term, there's any big move that is going to happen, because we distribute a lot of products with them. They will distribute a lot of products for us. So where we're going with our strategy is to bundle products and services at the point of care and to differentiate our offering through that means. But in the short term, we'll continue to sell products through those distributors.

Eric, and just as a reminder. Both of our competitors have product sales forces. And our customers, the IDNs, the hospitals are the ones that are ordering these products. So it's their choice that is driving what goes through our purely distribution channels. So we see this as the acquisition of the clinical sales force that Halyard will bring as being significantly value added. And just put us on equal foot as our 2 competitors. So we see all these products continue to go through our channel. Because it's really the demand that's being driven by our customers.

And Randy, how many salespeople do they bring, can you disclose that?

Yes, I think, we're going to be getting a little north of 200 salespeople. And that's on a global basis. But again, about 70% of this business is North American. So the bulk of that is here in United States.

And how many salespeople do you currently have?

Well, remember, we don't have a clinical sales force that's driving product. You've got a few people that oversee MediChoice and a hand up -- and a nice sales force. So we've got only about really 3 people that I characterize. On the distribution side, we've got over 300 people that are handling that site.

Yes. I was thinking more on CPT and MediChoice. I know it's not -- they're not huge businesses for you. But I thought, perhaps, there were more salespeople there?

We've got about 80 to 100 on that side of the fence.

Okay, great. Thanks very much for the answers.

Thank you.

Thank you. [Operator Instructions] Our next question will come from the line of David Larsen with Leerink Partners. Please proceed.

Hi. In the International division, did your adjusted operating income come in at minus $2.2 million? And if so, like can you talk a bit about that. I mean, it looks like revenue was actually pretty good. But that's really relative to our model what sort of drove the miss?

Sure. Yes, you're correct. Adjusted income over in the international business was negative $2.2 million. Most of that is driven by what we see it as the cost of onboarding some new customers and the investment we're making in a more direct to our customers sales force over there, which was part of the strategic initiatives that we put in place this year. It's a little bit behind schedule. So we're not real pleased with where the results were in the quarter. But it was something that we decided to do strategically, especially, in light of what we're doing with the transom [ph] excuse me that's the codename, with the Halyard transaction.

Okay. So it's really sales force ramp. Like how many guys did you hire?

Over the course of the last 2 quarters, we've added about 8 to 10 people. But we've also had onboarding costs of ramping up a direct organization.

Okay. Great. And then, you've talked a couple of times about the sort of 4 pillars to the business transformation process and the operating income -- the incremental operating income that those initiatives are expected to produce. Are those -- is all that operating income going to flow through to the bottom line, or will there be some cost offsets to those numbers?

Yes, David, as we've said in the past, this has to do with our rapid business transformation. We see the opportunity for about $100 million to $150 million of incremental value over the next 3 years. Some of that will go to offsetting headwinds in the industry and some of it will be offset by costs so it won't all flow through to the bottom line. That said, we've got a very robust improvement agenda for the core distribution business.

Okay. And then just my last question. For the fiscal '18 guide, Halyard is expected to be accretive. But I guess, you're going to -- is there going to be sort of a revisit to the base guide as well when this update is provided? Thanks.

David, when we get closer to the close and 2018, we're going to give an expanded guidance for 2018 and potentially longer than that. So I think, we'll give a -- similar to what we did on Investor Day this year, kind of a review of the overall business and where we expect to -- it to be for 2018 and most likely 2019.

Okay, great. Thanks very much. I appreciate it.

Thank you.

Thank you. There are no further questions at this time. I will now turn the call back over to Mr. Phipps for his closing remarks.

Thank you, everyone, for your questions and interest in Owens & Minor. We're very excited about the Halyard S&IP acquisition and look forward to welcoming the team to Owens & Minor. Before we finish the day, I want to say a word about our team mates, who worked so diligently to serve our customers during two major hurricanes that hit Texas and Florida. Our team mates did amazing job overcoming obstacles and ensuring that our customers were able to take care of their patients, just extraordinary work there. And we're very proud of our teams, who continue to serve in really adverse conditions. They represent the best of Owens & Minor. Again, thank you, today for joining us on the call, and we look forward to speaking with you in the future.

Thank you for your participation in today's conference. This does conclude the call. You may now disconnect. Good day.