Haemonetics Corporation (HAE) Q3 2020 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by and welcome to the Haemonetics Third Quarter Fiscal Year 2020 Earnings Conference Call. At this time, all participant lines are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Olga Guyette, Investor Relations. Thank you. Please go ahead, ma’am.

Good morning. Thank you for joining us for Haemonetics Third Quarter Fiscal Year 2020 Conference Call and Webcast. I’m joined today by Chris Simon, our CEO; and Bill Burke, our CFO. Today, we will discuss our third quarter and year-to-date fiscal 2020 results. All revenue growth rates are on an organic basis and exclude impacts from currency, products end-of-life decisions, and divestitures. Our remarks today will include forward-looking statements, and our actual results may differ materially from anticipated results. Information concerning factors that could cause results to differ is available in the Form 8-K we filed today and in periodic filings that we make with the SEC. This morning, we posted our third quarter and the year-to-date fiscal 2020 results to our Investor Relations website. We included updated fiscal 2020 guidance and posted analytical tables with the information that we’ll refer to on this call. I would like to remind everyone that consistent with our best practices, we have excluded certain charges and income items from the adjusted financial results and guidance. Details on excluded items, including comparisons to the same periods of fiscal 2019, are provided with the Form 8-K and been posted to Investor Relations website. Additionally, our press release and website include a complete P&L, balance sheet, summary statement of cash flows as well as reconciliations of our reported and adjusted results. And now, I’d like to turn it over to Chris.

Thank you, Olga. Good morning, everyone, and thank you for joining. Haemonetics delivered strong third quarter and year-to-date fiscal 2020 performance, as our value drivers are powering revenue and earnings growth. Our multi-year turnaround plans are on track and we are building momentum to create long-term value. We grew revenue 8.2% in the third quarter and 8.3% year-to-date with all 3 of our business units contributing meaningfully. Third quarter adjusted earnings per share was $0.94, up 49% from the prior year quarter and up 47% year-to-date, due to revenue growth and margin expansion. Adjusted operating income margin expanded by 570 basis points year-to-date as we continue to achieve productivity benefits, strengthen our product portfolio and remain disciplined with our spending. Moving to our business units. Beginning with Plasma, revenue grew 12.9% in the third quarter and 14.5% in the first 9 months. In North America, we grew 13.3% in the third quarter and 15% in the first 9 months. The underlying demand for plasma-based medicines remains strong and we are seeing a second-half rebound in collection growth to the high-single-digits. The majority of our customers showed good volume gains in the quarter, especially in the U.S., while volumes in Europe have also increased over the course of the year. We also benefit from pricing, software upgrades and competitive conversions. NexSys continues to deliver across all 4 dimensions of its value proposition, yield enhancement, collection efficiency, donor safety and overall satisfaction. We completed an additional $1.5 million YES collections since our last call, bringing the total to approximately 8.3 million procedures, yielding over 190,000 extra liters of plasma. Notably, NexSys customers grew collections at twice the rate of our other customers in the third quarter and they achieved meaningful improvements in device turn rates and donor satisfaction. We remain confident in Plasma, its underlying market growth and our ability to help customers safely and efficiently collect more plasma. We are investing in incremental and transformational innovation across all components of the NexSys platform. Our donor management software is a key enabler of NexSys. NexLynk DMS has established itself as the industry standard. And our software market share is rapidly approaching our device market share. Earlier this year, we made a strategic decision to divest our Union, South Carolina liquids facility and rationalize our product portfolio to exit the rapidly commoditizing margin-dilutive liquids business. We expect a negative revenue impact of approximately $2 million in fourth quarter as a result of this decision. Overall, we are encouraged by the uptick in customer collection volumes and our DMS share gains. Therefore, we are reaffirming Plasma full-year revenue guidance for fiscal 2020 of 13% to 15%, and anticipate growth will be at the lower-end of the range. Next up is Hospital. Revenue grew 11.4% in the quarter and 9.9% year-to-date. TEG continue to drive our performance growing 20% in the quarter on improved utilization, market share gains and new product launches such as the TEG 6s PlateletMapping cartridge and the U.S. trauma indication. We also benefited from pricing and investments in sales force. The U.S., our largest TEG market globally, delivered exceptionally strong results in the third quarter. Year-to-date, TEG grew about 17%, with all major markets contributing. We are excited about our recent acquisition of the underlying TEG 6s technology previously licensed from Coramed. This allows us to pursue our new growth channels outside the hospital, such as outpatient clinics and also helps improve profitability. Transfusion management grew mid-teens in the quarter and year-to-date, with both BloodTrack and SafeTrace Tx contributing. We continue to support the launch of the next generation of SafeTrace Tx and remain optimistic about the growth of our software solutions in the hospital information systems market. Cell Saver disposable showed some improvement in the quarter, but Cell Salvage continues to be a laggard due to vagaries in the capital equipment sales cycle that distort quarterly comparisons. We are continuing to drive improvements in product performance and sales execution in this area. Overall, we are building momentum in our Hospital business. Therefore, we are reaffirming full year revenue guidance for fiscal 2020 of 11% to 13% and expect growth at the lower end of the range. Turning to Blood Center. Revenue was up 0.6% in the quarter and declined by 0.5% year-to-date. Apheresis revenue was up 2.8% in the quarter and 2.2% year-to-date. The main growth drivers were order timing in a situation in Japan, where our customer faced shortages due to technological difficulties with the competitor’s product. Our team was proactive to ensure our customer had product to meet demand. Improved market share from this situation and continued success in the global rollout of our Universal Platelet Protocol were partially offset by higher double dose collection rates, particularly in Japan. Whole blood was down 0.2% in the quarter and down 3.4% year-to-date. Favorable order timing in Japan and EMEA in the quarter were offset by the ongoing decline in whole blood utilization rates in North America. In addition, Blood Center software was down double digits in the quarter and year-to-date due to previously discontinued customer contracts. We expect higher Blood Center declines due to unfavorable order timing in the fourth quarter and a competitive loss of apheresis business to lower cost sources of supply. This business was historically higher margin, but the market in compressing and we chose not to compete on price alone. We expect a revenue impact of approximately $2 million in the fourth quarter and $17 million in fiscal 2021. Overall, we are taking action to further stabilized Blood Center performance. Therefore, we are reaffirming full year revenue guidance for fiscal 2020 and expect to be at the better end of the 4% to 6% decline due to strong year-to-date results. Collectively, our business units delivered robust performance and we remain committed to executing against our customer centric growth strategies. The launches of NexSys, TEG 6s, SafeTrace Tx and the Universal Platelet Protocol are propelling us. Therefore, we expect total company revenue growth for fiscal 2020 to be at the midpoint of our guidance range of 6% to 8%. Now, I’ll turn the call over to Bill.

Good morning, everyone. Our adjusted gross margin in the third quarter was 52.1%, improving 480 basis points compared with the prior year. This expansion reflects benefits from productivity savings from both our complexity reduction initiative and operational excellence program, improved product mix and pricing. We also had higher depreciation costs related to both NexSys device placements and expansion of our plasma production capacity, which were more than offset by the benefits I just highlighted. Adjusted gross margin year-to-date was 52%, improving 440 basis points compared with the prior year with essentially the same factors influencing results as in the third quarter. Adjusted operating expenses in the third quarter were $73.4 million, a decrease of 1% compared with the prior year. As we continue to leverage our operating structure, operating expenses were 28.3% as a percentage of revenue or 170 basis points lower in the prior year. We’ve realized productivity savings from our cost savings initiatives, and had lower research and development costs mainly as a result of project timing. Partially offsetting these items were continued investments in sales and marketing as we expand our Hospital sales organization. Adjusted operating expenses year-to-date were $220.1 million, essentially flat when compared with the prior year. As a percentage of revenue, adjusted operating expenses year-to-date were 29.3% of revenue down 120 basis points versus prior year. Similar to our third quarter, our year-to-date results were favorably impacted by productivity savings and lower research and development costs, partially offsetting these benefits were investments in sales and marketing. Third quarter adjusted operating income of $61.6 million increased by $18.9 million or 44% compared with the prior year. Adjusted operating income year-to-date was $170.8 million, an increase of $48.5 million or 40% compared with the first 9 months of fiscal 2019. Adjusted operating margins were 23.8% in the third quarter and 22.7% year-to-date, an expansion of 650 and 570 basis points compared with the prior year respectively. While we remain disciplined with our spending, the majority of our adjusted operating margin expansion came from our improvements in gross margin. We remain confident in our efforts to improve our operating performance and raised our fiscal 2020 adjusted operating margin guidance to be approximately 22%. Our third quarter adjusted income tax rate was 17% compared with 16% in the prior year. The third quarter adjusted income tax rate was higher than our first half as the benefit of share vestings and option exercises were lower in the third quarter compared with the first half of the year. Our year-to-date adjusted income tax rate was 14% compared with 17% in fiscal 2019. This lower tax rate was due to higher share vestings and option exercises in our first half fiscal 2020 results. Our third quarter adjusted earnings per diluted share was $0.94 compared with $0.63 in the prior year, an increase of $0.31 or 49%. Adjusted earnings per diluted share year-to-date was $2.61 compared with $1.78 in the prior year, an increase of $0.83 or 47%. Our year-to-date adjusted earnings per diluted share included a net benefit of $0.08 from the lower adjusted income tax rate and lower share count partially offset by higher interest expense. Our year-to-date performance has enabled us to increase our fiscal 2020 adjusted earnings per diluted share guidance to a range of $3.30 to $3.40 from our previous guidance range of $3.10 to $3.20. This revised guidance implies 38% to 42% growth in our adjusted earnings per diluted share when compared with fiscal 2019 and represents the highest growth since we started our turnaround in fiscal 2017. Free cash flow before restructuring in turnaround costs was $95 million in the first 9 months of fiscal 2020 compared with $58 million in the first 9 months of fiscal 2019, primarily driven by higher income and lower capital expenditures, partially offset by higher working capital in fiscal 2020. Our working capital cash outflow was $81 million year-to-date, despite an $11 million cash inflow in the third quarter. The majority of the working capital increase was related to high inventory balances, which included the continued manufacturing of NexSys devices and a build in our disposable safety stock levels. Due to strong cash flow in our year-to-date results, we were able to increase our free cash flow before restructuring and turnaround guidance for fiscal 2020 to a new range of $125 million to $150 million compared with the previous guidance of $100 million to $125 million. In the third quarter of fiscal 2020, we entered into an accelerated share repurchase agreement that resulted in the repurchase of approximately 436,000 shares for $50 million. Coupled with the share repurchases we executed in the first half of fiscal 2020, we have repurchased approximately 1.5 million shares for $175 million at an average price of $118 per share under the current share repurchase authorization. We finished our first 9 months of fiscal 2020 with $126 million of cash on hand, a decrease of about $43 million from fiscal 2019 year-end. Once again, we are pleased with quarterly and year-to-date results, our revenue growth, operating margin expansion and EPS growth reflects strong execution and improved efficiency of our operations. And now, I’d like to turn the call back to Chris.

Thanks, Bill. I want to close by reinforcing a few points about our performance and growth trajectory. Third quarter and year-to-date growth are evidence of the strength of our business unit strategies and the value our products bring to the market. Complexity reduction and operational excellence, our multiyear restructuring efforts, our additional value drivers that are having positive impact on the organization and our P&L to make revenue growth and margin expansion sustainable. We are rationalizing our product portfolio to focus on the products and markets that meet our strategic goals, prioritizing investment and allocating capital to strengthen the core capabilities and technologies that make us distinctive. We are committed to profitable growth, and we act from a position of strength. We are excited about how our people are championing these efforts and about how success is transforming our organization. We have momentum and we are using it to drive value creation. Accordingly, we are increasing our fiscal 2020 adjusted operating margin, adjusted EPS and free cash flow guidance. We also reaffirm our fiscal 2021 aspiration of doubling fiscal 2016 adjusted operating income and quadrupling fiscal 2016 free cash flow before restructuring turnaround. Thank you for joining today and I’ll turn the call back to the operator for your questions.

[Operator Instructions] Our first question comes from Anthony Petrone with Jefferies. Your line is open.

Thanks, good morning and congratulations on a good quarter here. Maybe, Chris and Bill, just to start with just some guidance question, just the bridge from the first 9 months through the end of the year and just the implied guidance for fourth quarter, both on the top-line and margin side. It sort of implies, as you mentioned, Chris, little bit of a slowdown at the top-line, but also from a margin standpoint by our math, something in the range of 200 basis points of lower margin versus the third quarter, so just a little bit of color on the bridge there. And then I have a couple of follow-ups. Thanks.

Hi, Anthony, it’s Chris. Thanks for that. Let me start with the revenue breakdown and then I’ll turn it over to Bill to talk through the margin implications. You know we typically don’t guide quarterly, preferring instead to focus on longer-term value creation. However, we do aspire to give the markets full transparency. Our year-to-date number of 8.3% we think is, obviously, robust and speaks to the underlying value with the products. If we’ve guided to the midpoint of our 6 to 8 point range, you can back-solve for that pretty straight forward. And what’s driving the difference in the fourth quarter, really all three businesses have a roll. So for Plasma we have benefitted meaningfully from the annualization, from the NexSys contracts, which will annualize at this point in the year. We have gone through a process to help upgrade and convert customers to our NexLynk software platform, which is a onetime benefit that in some cases will not repeat. And then, as we called out on our prepared remarks, we made a choice not to compete going forward in the commoditizing liquids play. So we’ve taken that out and we called out that $2 million implication for fourth quarter. In the Blood Center business, by and large, the number one factor is order timing. It’s the nature of the business. It’s contractual. It’s lumpy, and that continues, we’ve seen that previously. We also have a specific challenge associated with a customer loss, where we chose not to compete on price alone, as we called that out in our prepared remarks, that’s a $2 million hit. Hospital is a positive and they continue to show robust growth and momentum, which will help us get them back into the range. But they’re really the factors on revenue. And obviously, revenue first and foremost implies the implication for margin, but I’ll let Bill talk about the details of that.

Hi, Anthony. It’s Bill. So our adjusted operating margins in the quarter were 23.8%, which for Haemonetics is an all-time high. And for the year, we’re at 22.7%. And that 22.7% is almost a 600 basis point improvement versus the prior year. Now, if you look back to FY 2017, we’re up almost like a 1,000 basis points in our operating margins over the course of this 3 or 4 year period. We did up the guidance to about 22%. And when you really look at the margin, you’re talking about like $2 million that is a point on the operating margin. So if we have some investments in a particular quarter that the timing is off and slide into the next quarter, it could be a swap of upwards of 2% just on that $2 million when you look at quarter to quarter. So, yeah, it is implied that there is slight margin move down in Q4, but longer term, we’re not concerned that that’s reflective of where operating margin is going to be.

That’s helpful. And maybe the follow-ups here would be one on Plasma. Just anything you’re seeing there on IG shortage as we pulled out the latest FDA notices on drug shortages. So any update there you can share. And then, just to clarify, Bill, on margins, how much of the benefit that we’ve seen year-to-date is from the second restructuring program where the gross savings, I believe, are $80 million to $90 million, that’s the target over the next few years, just how much of that has been realized to date? Thanks again.

Yeah. Anthony, it’s Chris. Thanks. We’re encouraged by what we see on organic growth in Plasma collection volume as we had suspect it would happen. We see a rebound more towards what we believe is the long-term historical average, which is now in the 8% to 10% range. We’ll see high-single-digits in the second half, which gets us fully back into our forecasted range. So we feel great about that. There are lots of puts and takes from one customer to the next, given variability that exist there and then contracts and tenders, et cetera that they compete for, with 80% share that tends to normalize out, not entirely, but mostly, and quarter to quarter. But we feel very good, both short and long term about that. And we feel great about the role that NexSys is playing in helping enable those connections.

And, Anthony, on the 570 basis point operating margin improvement, you could say that 2/3rds of that improvement is due to the combination of both the Complexity Reduction Initiative and the Operational Excellence Program savings.

Thank you so much.

Thank you. Our next question comes from Larry Keusch with Raymond James. Your line is open.

Thanks. Good morning, everyone. Just starting up on Plasma, could you just help us understand the difference between the 9% in disposals growth and the 13% for the category?

Yeah, Larry, it’s Chris. So, good growth on the organic side in terms of collection volume. At any point in time we also participate in liquids, which we’re backing away from now. We still have contracts in place, we’re not going to leave any customers in the lurch. But we don’t have a proprietary advantage there and the customers understand that, and we’ll seek sources accordingly. We also have software. Software is really lumpy. As you know, the accounting standards there have evolved and we have challenges in terms of quarter-over-quarter and when we recognize things. In addition, we are involved in services and support, it looks different in the U.S. than it does elsewhere in the world, but the combination of those things will contribute and along with some annualization effects, make up for the relative difference that you see, and we’ll continue to include that in our overall forecasting.

Okay. So the messages, however, the underlying demand of 8% to 10%, you still feel good about and obviously you’re looking for high-single-digits in those disposals’ growth in the second half. Is that right?

That’s exactly right, Larry. We actually feel excellent about it. And we feel excellent about the role that NexSys is playing, making that happen. Our NexSys customers grew at twice the rate of our other customers in the quarter in their collection volume.

Okay. Perfect. And then 2 other quick ones. Chris, you alluded to in your prepared comments, again, a pipeline against NexSys. Sounds like it could be software driven, but any comments around that and the timing there? And I guess, I’ll just ask for Bill quickly. Again on the inventory and the working cap issue, it looks like inventory increases did decelerate, if my math is right in the third quarter. But again, I’m just trying to understand, again, what’s behind the inventory. I think, again, as you mentioned, it’s really NexSys capital builds. But how should we think about that inventory number going forward.

Okay. So Larry, it’s Chris. On the innovation front, right. So we have a robust innovation agenda, it’s one of our core value drivers for the company. We have product roadmaps across all of our products. For NexSys, we think about that across 4 dimensions. There’s the device itself, there are – is the software, which is not – the device includes the embedded software. Separately, we have our donor management software offering, NexLynk. In addition, we have our kits, which is both bottle and harness, the plastic disposables that are at the core of this. And then we have services, which includes data and analytics and tech support and customer service. And we are challenging ourselves to innovate across all of those. I do think that software, as we called out in our prepared remarks, software is having the most immediate and positive effect, our software share. We now have 12 of our 14 customers in North America on our software, all of whom are upgrading to NexLynk. And we are in the process of further innovating there. That gets us 75 shares of the procedure volume on our software, and we are committed to continuing to innovate, small and large to make that the standard for the industry.

And Larry, on the inventory. Yes, we’ve continued to have an increase, I think, most of the increase in that inventory balance happened in the first 6 months of this year. So you did see a flattening out of the build in inventory. And again, the build in the inventory was a combination of both NexSys devices and a build in our safety stock levels. We were at a very low safety stock level, and we’ve built that up to a reasonable level now. Now that we’ve hit that that level of disposable inventory that we’re comfortable with we’ve obviously – you don’t see an increase in the balance there. Now going forward, I think you can consider us to be reverting back to what we have seen historical on inventory. You’re not going to see the same type of build that we’ve seen over the last 9 months.

Okay. Perfect. Thanks, guys. I appreciate it.

Yeah.

Thank you.

Thank you. Our next question comes from Dave Turkaly with JMP Securities. Your line is open.

Great. Thanks. The comment that the NexSys customers grew at twice the rate of others, I guess, I’d love to get your thoughts on if that surprises you at all, and then sort of what that implies as you look at sort of your market share? As some of these other customers convert, could we see disposables growth, I don’t know, at double the rate you’re seeing today if you continue to convert folks?

Dave, thanks, I appreciate the question. I think, what you were observing is, again, another aspect of the adoption cycle of the annualization, right? We worked very hard with our early adopters to make this seamless and as positive experience as possible. We’re confident in our ability to help customers do that. That’s said, it’s meaningful change, particularly when they change the device and the DMS software as they have. So in doing so, there’s a complete new set of standard operating procedures and a learning curve that comes with it. And I – the comment is more about the customers who have converted and the learning curve benefits that they are experiencing. To extrapolate that to the entire customer base would be a bit of a reach and probably not something that I’d be comfortable doing from where we sit today. That said, when we look at those $8.3 million collections, the 190,000 additional liters collected, the 20% plus reduction in cycle time, the 90% improvement in compliance for under and overdraws and the spike in donor satisfaction, it gives us confidence that the NexSys value proposition is real.

Great. And as a quick follow-up. I noticed that you bought some IP, I think, around the TEG on the Hospital side, and there was a comment about maybe moving it beyond the hospital setting. I was just curious, if you might add any additional color on that. Thanks.

Yeah. Happy to, Dave. Yeah, we are excited about TEG. We’re seeing growth rates that approximating 20% here, a really nice acceleration, particularly at this stage in the products lifecycle. The transaction that we announced in the quarter was we bought out the remaining rights from Coramed, the originator of the product. We’ve had a really positive long-term relationship with Coramed, but the buyout helps improve our profitability in the near-term, because we’ve eliminated the royalty and payments, they’re in. But really, what it does for us is it opens up the potential scope of use. We can take this now to outpatient clinics. We can take it to mobile settings. So I think emergency care, I think mobile stroke units, et cetera, all of where we’re seeing demand for our form of the TEG diagnostic and viscoelastic testing, which we think over time has the potential to expand the total market opportunity associated with that product.

Thank you.

Thank you. Our next question comes from David Lewis with Morgan Stanley. Your line is open.

Hi, this is Mason on for David. Thanks for taking my question. So we’re starting to see some of the OEP savings as expected. Could you just talk about how you’re feeling about the trajectory of those savings over the next couple of years? Are they still look ratable or more back-half loaded? And, I guess, as a quick follow-up, margins inflected pretty meaningfully in fiscal 2020. Should that tamper down a bit in fiscal 2021 or should we think about margin expansion in kind of a similar cadence?

So on Operational Excellence, we are seeing early savings. We started the program in – we announced the program in August or so. I’m not going to talk specifically about the ramp by year. But when we issue guidance for FY 2021 in May we’ll be more specific in our May earnings call on what the OEP savings are in our guidance. And you mentioned the comment about it being more back-ended loaded. We haven’t said that specifically. What we’ve said is that a lot of these savings are related to the manufacturing and supply chain portion of our business. And those savings may take a little bit longer to get to, just because of the nature of what has to be done to attain those savings. But again, will be more clear in May. And then on margin improvement, we – I’ll speak operating margin specifically. We’re really confident in where we are at the 22% for this year. And given the Operational Excellence Program that is out there, we should continue to see improvement, all else being equal in the business.

Great. And then, just as a quick follow-up, can we just confirm that the 2 largest fractionators customers are now using NexLynk?

No, we’re not going to talk about individual customers, just out of respect to privacy for those customers, Mason. I appreciate the question. I know it’s important to the investment thesis. But we’re just not going to go there. Thanks.

Right, thank you.

Thank you. [Operator Instructions] Our next question comes from Mike Matson with Needham & Company. Your line is open.

Good morning. Thanks for taking my questions. Just want to ask about fiscal 2021. I know you’re not giving guidance at this point. But Street is modeling about 250 basis points of operating margin improvement it looks like. It seems to be that you could probably get there just with the restructuring and some underlying leverage without any benefit of any additional large contracts with NexSys. Can you give the thoughts on that?

Yeah, Mike, it won’t be a surprise, right? This is our third quarter earnings call. We are focused on delivering what’s right in front of us and finishing this year with all the appropriate intensity and velocity that’s implied by our guidance. The only thing we’re prepared to say about FY 2021 is that the original 5-year aspiration of doubling operating income and quadrupling free cash flow as it related back to fiscal 2016 is an aspiration that we intend to meet and deliver on. Beyond that, we’ll talk in May.

Okay. That’s fine. And then, just on the hospital sales channel, can you maybe talk about the latest investments you’re making there and whether or not you’ve been adding reps.

Yeah, we – so we made a series of investments there. It relates back to our innovation agenda. We’re really excited by what we’re seeing in the trauma setting. We got that indication proof from FDA earlier in the year and for North – for U.S., excuse me and the U.S. team has really embraced that. We have the PlateletMapping cartridge, which is available now globally, and has helped close some competitive product gaps, particularly outside the U.S. The combination of those 2 things and essentially a 50% expansion in our commercial capacity, we have both your traditional sales representatives, account managers and we have clinical specialists that are quota carrying, but really focused on education and helping drive utilization. And what we’re seeing more so than any prior period is a meaningful uptick in that utilization, which gives us confidence that we’re building the right capabilities commercially for hospital and we’re building the relevance of our product base, which I think helps us get comfortable with the acceleration in growth rate that we see even at this stage in the product cycle. So more to come; and I think there candidly is more we can do outside the U.S. as we refine this. We have a new head of that business unit globally. And I think we’re just now beginning to see the full potential of that customer-centric global model.

Great. Thank you.

Thank you. And I am currently showing no further questions at this time. Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.