Good day and thank you for standing by. Welcome to the Second Quarter Fiscal Year 2021 CONMED Earnings Conference Call. At this time all participants are in listen only mode. After the speaker's presentation there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to CONMED for a brief announcement.

Good afternoon, everyone. Before the conference call begins, let me remind you that during this call, management will be making comments and statements regarding its financial outlook and its plans and objectives which represent forward-looking statements that involve risks and uncertainties, as those terms are defined under the Federal Securities Laws. Investors are cautioned that any such forward-looking statements are not guarantees of future events, performance or results and the company's actual results may differ materially from its current expectations. Please refer to the risks and other uncertainties disclosed under forward-looking information in today's press release, as well as the company's SEC filings for more details on the risks and uncertainties that may cause actual results to differ materially. The company disclaims any obligation to update any forward-looking statements that may be discussed during this call, except as may be required by applicable law. You will also hear management refer to certain non-GAAP adjusted measurements during this discussion. While these figures are not a substitute for GAAP measurements, management uses these figures to aid in monitoring the company's ongoing financial performance, from quarter-to-quarter and year-to-year on a regular basis, and for benchmarking against other medical technology companies. Adjusted net income and adjusted earnings per share measure the income of the company, excluding credits or charges that are considered by the company to be special or outside of its normal ongoing operations. These adjusting items are specified in the reconciliations supporting the company's earnings releases, posted to the company's website. With these required announcements completed, I will turn the call over to Curt Hartman, CONMED's Chair of the Board, President and Chief Executive Officer for opening remarks. Mr. Hartman.

Thank you, Jonathan and Julie. Good afternoon. And thank you for joining us for CONMED's second quarter 2021 earnings call. With me on the call is Todd Garner, Executive Vice President Chief Financial Officer. Today, we will walk you through our second quarter results and provide an update to our full year outlook. We'll then open the call to your questions. Turning to our results, total sales for the second quarter were $255.2 million, representing a year-over-year increase of 61.7% as reported and an increase of 58.2% in constant currency versus the same quarter in 2020. Given the COVID impact on the markets in Q2 of 2020, I wanted to also note that relative to the second quarter of 2019, sales increased 7.1% as reported and 6.7% in constant currency. In that view we feel this was a solid quarter considering that various factors like vaccination rates and sporadic COVID shutdowns and disruptions impacted the Q2 of 2021 surgical schedules. From an earnings perspective during the second quarter our GAAP net income totaled 13.3 million. This compares to a net loss of 27.4 million in the second quarter of 2020. Excluding special items that affected compatibility our adjusted net income was 22.2 million during the quarter and our adjusted diluted net earnings per share were $0.71, each of which increased meaningfully versus our COVID impacted results from the prior year. Our Global Orthopedics business is improving as we projected, as expected sports related procedures overall still remain below the pre-COVID levels. The International export markets remain the most challenge relative to 2019. While international direct markets and the domestic business showed continued improvement in procedure specific results. As we said in our January outlook, we think our sports medicine business will take longer to return to historical procedure levels than…

Thank you, Curt. All sales growth numbers I reference today will be given in constant currency. The reconciliation of GAAP numbers is included in our press release. As usual, we have included an investor deck on our website that summarizes the results of the quarter, our updated guidance and also provide sales results compared to 2019 for those of you interested in that view. For comparison purposes, Q2 2021 had the same sales days as 2020, but one less sales day than Q2 2019. We said in January that we expected 2021 to be a transition year and that it would likely take the full year for the sector to be in a post-pandemic environment. Halfway through the year, we continue to believe that. For the second quarter of 2021, our total sales increased 58.2% compared to the trough quarter of the pandemic a year ago. Our Q2 US sales increased 64.2% versus the prior year quarter. Our international sales increased 50.7% for the quarter compared to the prior year. Consistent with our expectations, the US is recovering faster than outside the US. State and federal governments in the US are allowing hospitals to manage their own capacity issues, whereas international governments still locked down selective regions based on spikes in case counts. We expect this dynamic to continue until vaccination rates improve. Worldwide orthopedics revenue grew 72.9% in the second quarter. In the US orthopedic sales increased 90.7% and internationally orthopedics increased 63.1%. Total worldwide General Surgery revenue grew 49.1% in the second quarter. US general surgery revenue increased 55.7%. Internationally General Surgery revenue increased 35.2%. Now let's move to the expense side of the income statement. We will discuss expenses and profitability excluding special items which include plant utilization costs, product rationalization costs, charges related to acquisitions and…

Certainly. [Operator Instructions] Our first question comes from the line of Rick Wise from Stifel, your question please.

Hi, good afternoon, everybody. Nice to see such a solid second quarter. Maybe I'll start off with just the general trends. Obviously, as you said, Curt, seeing a solid general surgery rebound, maybe just give us some color on, to use your language, how is, how has customer engagement changed? How is it changing? What's different now? And how do you see that trending as the rest of the year unfolds?

Good to talk to you, Rick. I think as we look globally and I'm going to try to answer this question on a global perspective. Some of the Latin American markets still remain pretty dynamic in terms of surgeries being down and access still being very restricted. And then as you think through the quarter, there were various geographic lockdowns, if you will, the areas around Toronto and parts of the UK at various times, et cetera. So those areas, that variability is just every company is dealing with that and we're dealing with that as well. But in areas where COVID cases have been muted or vaccination rates have been higher, accessibility has been very good for our sales teams and customer engagement as they're looking at their increasing procedure volumes has grown dramatically for our sales teams. And the enthusiasm to be doing the job that they were trained to do is certainly at the forefront. So accessibility, I would say has increased as the year has unfolded, customer engagement has increased. There are still some areas where they're very tight and how they're running their organizations and we deal with that and we understand that. It's similar how we run our organization in terms of accessibility to our facility. So we understand those restrictions in today's environment, but overall, I think we feel the trend broadly speaking is in the right direction.

And the sales investment, Curt, obviously, it's unusual for you to do it midyear. But can you give us any color or flavor about rough numbers, the number of people or teams you're adding are any perspective and sort of how you expect to deploy them. And I assume the impact on sales is going to be felt more next year might set up for next year more than this, I assume.

I think that's a fair statement, Rick. Anytime you do sales force expansion, whether it's direct reps or associate level reps supporting the existing reps, those impacts tend to be a little further out in the future. With that said, I think everybody on the call understands that within the world of smoke evacuation, there is a lot of demand and CONMED is in possession of the market leading portfolio on a global basis. And we frankly, need more feet on the street to support that. And on a positive note, I'm thrilled to say and we said it in the scripted comments, we're also expanding our domestic orthopedics business really largely based on what we're seeing in the marketplace, in concert with the product portfolio that we've been working on and are introducing. And then outside the US, they're a little bit smaller in terms of the scale of the expansion. But there's five or six country markets where we're either taking the general surgery business direct or expanding our orthopedics presence. And I'm not going to give you exact numbers for competitive reasons, but they're double digit increases in all the businesses and on an absolute number. And we're excited to be doing that right now. And the sales organizations recognize the support they're getting when we do this through new products. And I think it's been well received by the company.

And just a quick follow up for Todd, just related to this question of sales expansion. SG&A as a percentage of sales 39% in the first quarter, 38 this quarter, I had assumed that might follow the percentage of sales. But does the expansion even with improving sales levels in the second half, do you stay more at this 38% of sales level? Or no, it could come down in the percentage of sales? Thanks so much.

Sure, Rick. So we didn't guide this year to specific targets on SG&A as a percentage of revenue. This will be supported by revenue very quickly. And we feel good about the leverage of our operating expenses as we move to the end of this year and into next year.

Thank you.

Thank you. Our next question comes from Robbie Marcus from JP Morgan, your question, please.

Great and congrats on a good quarter. I guess we could start on the guidance here, I just want to make sure I understand it. You guys are always and especially through COVID have been, I would say more on the conservative side than some of your peers. So third quarter, flattish with second quarter and the guidance raised at the midpoint just a little below the beat of second quarter. Maybe walk us through your thinking there. How much is conservatism? How much is what you're seeing in the market through July so far and if you could quantify the impact of sales expansion on EPS that would be helpful also.

Sure. All right, thanks Robbie. Good question. Six months ago, we talked about 202, right and felt comfortable giving guidance. There was a lot of uncertainties at the time. But I felt like we had a good enough handle on what was going on out there to give you guys financial guidance. Six months later, we still see the year the same way we did back in January, with just a few adjustments. I would say six months ago, we didn't expect the Delta variant, right. So cases are a little higher sitting here at the end of July than we would have contemplated back in January. But the good news is the business has been fairly resilient through these periods of surges, right. And so it doesn't really change how we see the back half, although we remain cautious about where this goes and nobody really knows where it goes. But we're still holding the back half with the same vision that we had for the back half back in January. The other thing that I would say might be a little different. I think back in January, there was a prevailing thought out there in the market that the Q3 vacations that we sees typically seasonally in this space would be reduced as physicians were anxious to make up for lost procedures from last year. I think that feeling has muted a little bit in the marketplace from what we're hearing and everybody sees it in their own circle of friends and family, everybody's very anxious to take vacations and get back together with family. And so we do think there'll be a little more of that typical seasonality that shows up than we thought back in January. Now, the procedure should also be getting better, right. So that's why you end up - we currently - that's why we currently think Q2 to Q3 is probably a sideways move on revenue, where back in January, we thought it would be a step up from Q2 to Q3. And then the good news, of course, versus what we thought in January is we've over performed on the top and bottom in the first two quarters. And so what we've done in both of those quarters is take the over performance to the guidance. So we've passed that through with the one exception this time being the sales force expansion, which we think is absolutely the right thing to do for the business and for shareholders. And so while it does cost us a few cents, which is the difference between the beat and the raise, we think it sets us up better for next year. And we're still well ahead of our commitments for 2021. So that's how we thought about the guidance. And hopefully that helps.

Yeah, that's great. I appreciate that. So I just want to make sure, it's not like you're seeing a serious impact from Delta out there today, but you're just remaining cautious considering it as a pandemic, because we've heard from several of your competitors that they're not seeing and they're not expecting an impact, but remaining vigilant. I just want to make sure that that's the thought process.

Yeah, well, again, it did - it hasn't changed our view of the back half of this year that we had back in January. So we remain bullish on the improvement and step up that we'll see in the back half. I think to say that the Delta variant isn't affecting anything can't be true, right. You're seeing hospital increases in areas around the world related to the Delta variant. And as hospitals fill up, it makes them make capacity and priority decisions. And so of course, it has an impact. The question is, is it enough to offset the nice trend in procedure growth. We still think we're going to get that continued trend in procedure improvement despite the Delta variant being - having a bigger impact than we thought the case counts would be six months ago.

Great and if I could slip one more in. You mentioned you're already back to percentage of sales in SG&A where you were in 2019, but with a lot more feet on the street. How do we think about your ability to keep that SG&A as a percentage of sales down and moving down with more people, but as maybe some activities return, conferences and so on, as we're thinking about the back half of this year and the exit rate into next year? Thanks.

Sure. Yeah look, that's a key part of how we manage the business, right. We've got to grow expenses slower than we grow revenue. We understand that. We've been doing that. We're committed to do that. So we will - the idea of adding these heads is to grow revenue faster than expenses. And obviously, there's a quarter or two where those resources aren't totally productive yet. But we think that's a pretty short time period. And as we move into 2022, we should be getting good leverage off of those resources.

Great, thanks a lot.

Thank you. Our next question comes from the line of Travis Steed from Barclays, your question, please.

Hi, good afternoon everybody. So you said you grew 6.7% in Q2 versus 2019. And the math that I was doing is the full year guidance assumes about 9% in the back half. So just want to put that in context for kind of where you're at now kind of June, July, if that's about where you're at now. And you're assuming kind of more stable growth versus 2019 as you move in the back half. Just kind of curious if you'd put any color on the back half versus kind of the end of the quarter.

Sure, Trav. We might need to revisit those numbers. I think if you take the midpoint of the revenue guidance and adjust for currency, I think you'd get growth in between 7 and 7.5 for the full year versus '19. And so it's not a big step up from where we've been in the first half, but it is a step up. We definitely think the virus will have less of an impact on procedures in the back half of 2021 than it has on the first half of 2021. So there is a step up in revenue growth versus '19, second half versus first half, but I don't think it's as dramatic as you suggest.

Okay. No, it's helpful. I'll check my math on that. And then on the 57% gross margins, it's already 100 basis points, so it's kind of where you were pre-COVID. Any color on how much of that's coming from kind of a more of a mix shift from Buffalo Filter and AirSeal versus some of the underlying things that you're doing on the gross margin font and kind of any flavor of how to think about that and the opportunities that you have on the gross margin line?

Yeah, I mean, I think mix is at the top of the list of the driver. We've also - we've talked - over the last year we've talked about how COVID has kind of forced us to get more efficient and get smarter in operations. At the same time we've got this elevated freight costs and pricing issues that we've talked about and that everybody is dealing with in the world. So thankfully, we've made the improvements that we have up till now. And thankfully, the mix is going in the right direction for us. As volume improves and hopefully as the logistics channels open up around the globe freight will come down. But what we based the guidance on for the last six months or the year is what we can see now. And we'll continue to manage it closely and try and mitigate those increases as best we can.

Okay, last question, on the sales force expansion strategically is there something you're seeing with the competitive landscape coming out of COVID where you think there's a bit more opportunity to take share from some of the larger players or just trying to think through that the strategic decision there to do it now.

No, our decision around sales force really comes from the, I would say the bottom up meaning those closest to the action, the business leaders, they're looking at the marketplace opportunity with a portfolio of products that they have both the acquired products like Buffalo Filter, but also the organically developed products and there's just genuine enthusiasm for the product portfolio, which then leads into decision around feet on the street and customer coverage. And we've always been undersized relative to the peer group that we compete with in the marketplace are some really big names and more feet on the street is a long term part of this company's offence and we're just in a good spot to do that right now. Given our profitability, given the product mix and given the organizational leadership that all the businesses have right now. So it's a good time for us to make this choice.

All right, thanks Curt and Todd. Great quarter.

Thanks Trav.

Thank you. Our next question comes in the line of Young Li from UBS, your question please.

Alright, great. Thanks for taking our questions. I guess first one, it's good to see that the US ortho business improved in Q2 sequentially I think than on the international direct side. But you mentioned the export international markets remain challenged. Can you maybe talk a little bit more about that dynamic and the differences you're seeing in those international markets? And also the visibility on when those export markets can return to growth?

Yeah, I think speaking to CONMED's historical approach, we have direct sales channels and we have export sales channels and the export sales channels tend to be in markets that maybe don't have quite as developed of the healthcare system as what you might find, say in Western Europe, or they historically tended to be on the general surgery side. CONMED always had a very strong orthopedic presence in the international markets where the health care systems were developed. So our channel expansions in export have been really on both fronts. And then what we're seeing in the export markets on orthopedics is that the COVID case counts just remain very high, and hospital capacity is being consumed by those. So procedures like soft tissue repair are just very low on the priority list in those environments, so we're patiently waiting. Our export partners are patiently waiting. We don't want to settle them with inventory. I think we mentioned in our previous call about waiving some of their requirements because we understand the pressures that are in their markets. We want to be good partners to them as they're good partners to their local hospitals. So it's really the variability around COVID, COVID caseloads. What's the outlook? That's a really tough question to answer. It's improved steadily if not a little bit slow. But it's improving. And we'll patiently wait for that improvement. I'm not sure I can give you any more color than that Young at this point in time.

Okay, great. Really appreciate the color. And I guess maybe it's the second one. This on smoke evacuation, you mentioned the Kentucky win last quarter. I know, legislative action isn't a major driver for the business. But I'm just kind of wondering in the subsequent quarter, are you seeing any impacts of that legislation? Is it easier to get into accounts or other changes in the tone of the conversation and any updates on some of the other dozen or so states that might have legislative updates in the second half the year?

The topic of surgical smoke to the credit of the societies in the marketplace, ARN and others, they have done a fantastic job creating awareness on the health risk associated with surgical smoke. And as we've said, many times the legislation is kind of wind at the back of an already strong wind. And in places where legislation has passed or been put into place, in some cases where there's teeth in the legislation, it may get somebody to move a little quicker. But there's already a lot of movement. And I think everybody on this call is probably aware of the dynamics in the marketplace. It's a strong growth market and we're in possession of an incredible portfolio. And I think it just bodes well, for everybody in the marketplace, that legislation helps, but it's not essential to the success. And there is a lot of activity around other geographies and legislation, whether it's legislatively or through OSHA, but again, it's kind of in process and we just patiently wait for that to get approved. Todd, I don't know if you'd add any other comments on that.

No, I mean, it's tough to predict, who's the next across the line. I think there's a dozen states that are in the red zone. There's a couple that seem to be on the five yard line. But we'll just wait to see who comes next. And yeah, I mean we already had these - like we've said from the start, the market demand is leading the legislation. It's not the other way around. And so Kentucky was already moving towards smoke evacuation, and the general market legislation helps, and hopefully there's teeth in that, and they enforce it. And that would be great. But we're responding to customer demand and welcome any legislation that comes.

Alright, thank you very much.

Thank you. Our next question comes from the line of Matt O'Brien from Piper Sandler, your question, please.

Hi, guys, this is actually Joe on for Matt, thank you for taking the questions. I just wanted to start off on the capital side of things. It looks like things have remained steady, but the growth rate did soften a little bit sequentially versus 2019 here. I know there's always some noise. But obviously, the concern could be that some of the initial demand was pulled for during the uncertainty of the pandemic and is now kind of working its way through the system. So maybe you could just speak a little bit what you're seeing on the capital front and kind of how you're thinking about capital internally from a modeling perspective.

But I think capital is driven by a couple of different factors, availability of funds, we've said consistently, we don't think that there's a shortage of funding available. Prioritization of those funds, we think in 2020 and early part of this year prioritization of funds were all around supporting of investments that would help with COVID caseloads. And then the third item is kind of what I refer to as the basic wear and tear on existing equipment. So as procedure volumes pick back up, wear and tear on existing equipment increases as procedure volumes expand beyond the baseline that a facility might have as they try to work into the backlog of procedures, there's a demand for more equipment. I think we're moving into those categories, those last two categories, I do think procedure volumes have picked up. I think that's evident in everybody in the marketplace has results. And number two, people are trying to work off some backlog here. And that's going to increase wear and tear. So those two things to me paint a good picture for what should happen with capital, hard, very difficult to pinpoint exactly when that is. And I think the best thing we can do as a company is have a portfolio that's ready for that. And we've talked about some new product launches on the capital side and the power tool system and the video side. And we see the market starting to be receptive to looking at those products. So I think we feel optimistic, but until the market fully opens up, it's going to be a little bit slow to develop.

Okay, very, very helpful. And then on AirSeal, I just want to ask a more longer term question, I guess, looking back now pre-pandemic, you did add a couple new indications to the label. Just as we're thinking about the future of AirSeal in '22 and beyond, anything new to be expecting from an indication perspective and any new geographies where you still need to roll that product? Thank you.

So right now we have indications and obviously in general surgery and then in thoracic cavity, and then in pediatric applications. There is some interest being expressed about broader pediatric application indications meaning smaller patients, which would involve a tremendous amount of clinical work because the smaller the body the more issues you potentially get into with pressurization. So that would not be a quick turnaround. That would be a long term study clinical body of work that would have to happen. But again, we're seeing great success with AirSeal. And then geographically, I think it's more about the channel development and feet on the street. The partnership in robotics continues to remain strong and continues to be a mainstay of our US business. And it's growing outside the US. And then as we've said, from day one, the opportunity to get into general laparoscopic procedures is really the very large market. And we've said before, our international team has demonstrated the ability to do that. And part of putting more feet on the street is to shrink territories and get people to focus on all opportunities that AirSeal presents and I think we're well on that path.

Thank you.

Thank you. Our next question comes from the line of Richard Newitter from SVB Leerink, your question please.

Hi, this is Erin on for Rich. Thanks for taking our questions. I just have one here. I was just hoping that maybe you could talk about the backlog and maybe quantify, if possible, how much you think is still out there. And if that can kind of give you a boost looking ahead into the second half of the year.

Really tough to quantify backlog at this point in time Erin, I wouldn't even want to hazard a guess. I mean, we could - if you call 2019 in normal market and you look at procedures, if somebody's got a good metric to aggregate the specific type of procedures that we mostly call on and look at where the run rates have been so far in 2021, which I don't think that data has been reported out. That would be the best way to go about calculating an estimation of the backlog. But I just don't think I would hazard a guess at this point in time. I look at CONMED as a smaller company in a big market. Our job is to be going after every procedure, whether its backlog or not. And we've got a lot of market share to go after. So we're really focused on that.

Okay, great. Thank you so much.

Thank you. Our next question comes from the line of Mike Matson from Needham & Company, your question please.

Yeah. Sure. Thanks. So I got a few on the orthopedics business. So the slide say that you expect the orthopedics to grow at above market rates for the long-term. But putting aside what happened last year with COVID and everything and looking back over the last few years prior to that. The business never really seemed to grow above market. It kind of grew maybe in line with the market at best. And so just wondering what it's going to take to get it to actually grow above market, your confidence and ability to do that. And then do you need to do some sort have M&A of some kind of higher growth product similar to what you did on the general surgery side to get there.

Sure. And just before I go in Mike, I just remind everybody on this call that our orthopedics business is about two thirds outside the US, one third inside the US. So if you look at that split and you look historically at the International orthopedics business, that segment grew above the market pretty consistently. Our domestic segment has been - had a lot more variability. We've had quarters where we've gone up into the 6%, 7%, 8%, which I would say as above market, but we've also had quarters below and candidly in the negative. The US market has been a tougher market for us to develop consistent performance. So it remains and Todd and I have said this, frequently, it remains a work in progress. There were some changes made last year, we're now running the business as a Global Orthopedics business, looking at it globally. Same approach in the US as we're using internationally, very consistent focus on the product pipeline. I don't know if we've talked other than one other time in the last five years about sales force expansion for domestic orthopedics, we just noted that we are expanding our sales force in the US market for domestic orthopedics. So we continue to focus on what I would call the basics product innovation, sales force expansion. No one should assume that we haven't looked at M&A for our orthopedics business, we have a great international channel, we have a large presence, we have a good channel in the US. It's just a lot harder space to find great M&A that fits with our profile. So everything remains on the table to get this business to be more consistent specifically in the US market. I'm proud of what the team's done internationally. And we just got a little more work to do here in the US market.

Okay, thanks. That's helpful. And then just as far as the sales force expansion both general surgery and orthopedics, I know you've provided a lot of commentary already on it. But maybe you could talk just a little bit about how you're actually deciding where to add the reps, which territories or hospitals, et cetera. And then how you're sort of managing any risk around disruption as you layer in these additional reps.

I think our approach this year is consistent with what we've done in years past. We look at where the market demand is and we look at our results and whether we're looking at historical procedure volumes, where our products fit in and do our results line up and say we're getting our fair share or do they not. And typically our sales force expansion targets those areas where we're not generating the revenue that we would expect, given the procedure base there where our products have overlap. And oftentimes, you just have sales reps who have big geographic territories and they're making choices about how and where they spend their time. And so we try to take a very constructive approach that we're going to give them more time, closer to home, we're going to carve off a piece of their territory, maybe a piece of somebody else's territory or another approach is to take a great sales rep and say, we know you can do more and we're going to give you a little bit of help, but down the road that may mean carving off a piece of your territory as that sales associate takes on a full time role at some point in the future. So we're doing a little bit of everything there. But again, it's also supported by new product innovation, either what we've released or what we see coming that we think can make a difference.

Okay, thanks. That's real helpful. Appreciate it.

Thank you. Our final question today comes from the line of Matt Mishan from KeyBanc, your question please.

Great and thank you for taking the question guys. Hey, Curt first, does it matter to you if a procedure is performed in the ASC versus hospital outpatient? And is it a different - it's a different sales process for you?

It does not matter to me. And I think I can confidently say it doesn't matter to our sales force. They're comfortable going to the hospital. They're comfortable going into the ASC. Is it a different process? Yeah, I would say there's a different process. The ASC especially where you have surgeon ownership, though there are more ASC groups now, you tend to see a little bit different financial profile than you might see in the health the large hospital systems. And large hospital systems can have more layers to get through. Both have what I would call the equivalent value analysis committees and decision making processes and trials and evaluations and throw in the mix that a lot of health systems now own their own freestanding ambulatory surgery center. So there is some overlap there. CONMED developed - part of our broader healthcare solutions team has an ASC approach, where we're working from the top down and the sales reps continue to work at the street level. So it is addressing the customer in the venue that they see fit and offering products.

Excellent. And then for Todd, on the gross margins especially exiting the year at 57% in the back half, it doesn't sound like there's a whole lot of mitigation of the freight and logistics incorporated in that number. And so potentially - that's actually a higher number for you outside of that, is that a good starting point for 2022? Or is there just more typical seasonality in the first half versus the second half to consider?

It's a great question. I'm not going to get into guiding 2022. But I will say yeah, I mean, I think as we move to the future, we should be moving north in general right. Now, there's a lot of uncertainties and we need this macro environment to settle down a little bit. But yeah, I think it's a fair - it's certainly my assumption that the margin will be headed north not south.

And then lastly, you did 30 million of free cash flow this quarter. You've had a very strong start to the year despite the inventory builds. I guess my question would be, as we get into later this year into early next year, is M&A a potential consideration for you guys again.

M&A has been a consideration since the day after we closed Buffalo Filter. We didn't turn the strategic development team off. And they'd be very disappointed to hear me say anything different and we have very good thorough process. Certainly as our leverage has gone down, our ability to look bigger has increased. But M&A has always been on Matt, but that's just part of our offence. It has been from day one, so we continue to look for appropriate technologies. I think everybody on the call understands the markets really pricey. The IPO market is really heated up, never mind all the money going into specs. So being very disciplined is a key part of our offence, but M&A always is on the table here.

Right. Thank you very much.

Thank you, Matt.

Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Curt Hartman for any further remarks.

Thank you, Jonathan. And I just want to thank everybody for your time today and we look forward to speaking with you on our next earnings call. Thank you.

Thank you, ladies and gentlemen for participation in today's conference. This does conclude the program. You may now disconnect. Good day.