Repligen Corporation (RGEN) Q2 2017 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen. And welcome to Repligen Corporation’s Second Quarter 2017 Earnings Conference Call. My name is Abigail and I will be your coordinator [Operator Instructions]. Please note that there will be a question-and-answer session period, following the Company’s formal remarks [Operator Instructions]. I would now like to turn the call over to your host for today’s call, Sondra Newman, Senior Director of Investor Relations for Repligen.

Thank you, and good morning. Apologies for the delay on getting started here, we’ve had a couple of issues with the phone system here. But let's get started. On today's call, we’re reporting financial results for the second quarter of 2017, and we’ll be updating our financial guidance for the year. Our President and CEO, Tony Hunt, will discuss recent business highlights and our CFO, Jon Snodgres, will provide a financial report. Because we will be making forward-looking statements regarding our business goals and our expectations for the financial performance of the Company, we want to remind you that such statements are subject to risks and uncertainties that may cause actual events or results to differ. Additional information concerning risk factors is discussed in our annual report on Form 10-K, the current report on Form 8-K, which we filed today, and other filings that we make with the SEC. The forward-looking statements in today’s discussion reflect management’s current views, which could become obsolete as a result of new information, future events or otherwise. The Company does not obligate or commit itself to update forward-looking statements, except as required by law. So during this call, the financial results and the guidance that we are providing will be presented on an adjusted or non-GAAP basis only. Reconciliations of GAAP to non-GAAP adjusted financial measures are included in the press release that we issued this morning, which is posted to Repligen’s Web site and is also on sec.gov. Adjusted figures today will include the following: revenue growth at constant currency, gross profit and gross margin, SG&A expense, operating income and operating margins, net income, earnings per share, EBITDA and adjusted EBITDA. While these adjusted financial measures should not be viewed as an alternative to GAAP measures, the Company believes that the use of these measures better enables investors to benchmark Repligen’s current results against historical performance and the performance of peers, and to evaluate investment opportunities. So with that, I'll turn the call over to Tony Hunt for a business update.

Thank you, Sondra, and good morning, everybody. Our quarter two was an excellent and important quarter for the Company as we executed on our financial and strategic goals. We are now well positioned for next phase of expansion into broader global markets with the growing commercial team, enhanced R&D capabilities and a clear focus on disposable and continuous manufacturing. Financially, our top line revenue growth of 14% at constant currency was driven by the performance of our filtration franchise with important contributions from individual product lines, like OPUS pre-packed columns and Protein A resins. Given the very tough comp in Q2 2016 where revenue was $3 million to $4 million higher than any other quarter last year, the performance of the business and team execution here in 2017 was really impressive. Strategically, we signed a very important deal to acquire Spectrum, which we’re delighted to say closed earlier this week. I want to personally welcome the Spectrum team to Repligen, and I know we’re all looking forward to working together and creating great value for our customers, shareholders and employees. It’s a pivotal deal for the Company that expands our markets, increases the size and geographical presence of our sales force and importantly, adds hollow fiber technical to our filtration businesses, which directly complements our market leading ATF product line. We now have two very strong franchises in chromatography and filtration to complement our core franchise in proteins led by Protein A ligands. Also, during the second quarter, we successfully executed on a follow-on financing in which we added $129 million in cash to our balance sheet. This puts us in a very strong financial position from which to execute on internal investments and external opportunities as they arise. Before jumping into the quarter, I want to provide some additional comments on the Spectrum acquisition, our integration objectives and financial goals for the remaining five months of the year. As you know our blueprint for growth has been focused on a combination of new product innovations and targeted M&A, where the targets have a strong technology presence. The Spectrum deal hits on all cylinders of our long-term strategic plan to build a global leadership position in the bioprocessing industry. What makes it important is the combination of innovative technologies, expanded markets, a strong commercial organization and attractive financials. We gained leadership in hollow fiber technology, we leverage both our operations and commercial presence and our customers benefit from more technology choices, when it comes to filtration biologics. Finally, we’ve got a business that has been growing consistently at the high end of our organic growth range of 10% to 15%, and that should provide us with gross margin expansion above our corporate average, beginning in 2018. Further, we expect to fully cover the earnings impact of share dilution from both the Spectrum deal on our follow on offering through the profits generated by Spectrum this year. Our Spectrum integration activities are wrapping up here in August as we focused on three areas; operations, where our attention will be on driving increased efficiency in manufacturing and investing in systems and people to improve overall customer experience; commercial, where we’ll focus on integrating our collective global commercial teams, which includes seven call points and territory mass by the end of the year; and finally, finance, where our goal will to be to align Spectrum to Repligen on public company standards. We have hired an integration leader, who will be based in California and our work stream leaders will get started immediately on implementing our integration plans, including driving revenue and cost synergy targets. As a reminder, for the remaining five months of the year, we expect Spectrum sales to contribute between $17 and $18 million. So now moving to quarter two performance. Our filtration franchise was one of the main drivers of growth in the quarter. The TangenX TFF product line continues to perform well with some significant wins for late stage clinical processes, fueling the growth in the second quarter. We are now two quarters into the acquisition, and while the majority of the sales opportunities continue to be U.S. centric, we are encouraged by the opportunities emerging in other regions, especially at select CMOs. We believe that the TangenX product line will benefit in 2018 from the Spectrum acquisition, given Spectrum’s commercial expertise in TFF technology. The XCell AFT product lines also had a strong quarter, driven by a combination of large system orders and increased adoption of our single use ATF portfolio. Regionally, Europe was strong and the second quarter with large farm adoption on the rise and a key win for a single use ATF system in a clinical process. We also have sales of our new and largest single use ATF in the quarter. And I’m pleased to say that the product is officially launching this week. We’re very encouraged by the high level of interest in ATF demos where the number of demos in Q2 was higher than all of 2016. This is a positive leading indicator of funnel strength, and we expect the second half of the year to benefit from a combination of larger XCell ATF system opportunities, and accelerating demand for single use ATF products, as our customers continue to scale and implement the technology in late stage in commercial processes. Our chromatography business performance was led by OPUS pre-packed columns where we recorded the strongest revenue quarter to-date for this product line. If you recall, we had an exceptional quarter in Q2 2017. But even with this tough comp, our pre-packed columns business grew double digits in the quarter, led by strong sales of OPUS-R in both 45 and 60 centimeter formats, and significant contribution from Asia. Customers have reacted very positively to the resin recovery feature on our large OPUS columns as this provides them more flexibility and security in purchasing comps pre-packed with high value resins. We were also very encouraged by the performance of our OPUS-PD business where we are seeing OPUS large scale customers adopting these smaller scale columns in the process development operations. Our Proteins business had a solid quarter with good contribution from our Protein A ligands product line. We continued to be encouraged by the growing market for mass and the pace of approval for this category of biologics. So far this year, the USFDA has approved seven monoclonal antibodies plus one biosimilar for a wide range of medical needs, including MS, psoriasis and bladder cancer. Finally, if we looked at our three businesses for the first half of 2017, filtration contributed 20% to 25% of revenue, chromatography contributed 25% to 30% of revenue and our proteins business contributed 45% to 50% of revenue. These figures also hold true for each of the first and second quarters. So overall, we’re very pleased with our financial and strategic execution in Q2, and the first half of 2017. We have executed on many of our strategic goals for the year. We have positioned ourselves well to obtain our long term growth targets and we are excited about the future as we start on the integration process with our new Spectrum colleagues. With Spectrum providing opportunities to expand beyond monoclonal antibodies and to vaccines and gene therapy markets, we believe Repligen is even better positioned to be an important player in bioprocessing, delivering technology and market leadership in the markets where we play. I'll turn the call over to Jon now to address our second quarter financials and 2017 guidance.

Thank you, Tony, and good morning, everyone. Today, we are reporting our financial results for the second quarter of 2017, as well as updating our financial guidance for the year. As a reminder, unless otherwise mentioned, all 2017 financial measures discussed will be adjusted non-GAAP. Now, moving to our financial results. We are reporting second quarter of 2017 revenue of $32.5 million, an increase of approximately 11% as reported and 14% at constant currency compared to the second quarter of 2016. We experienced the 2.4% headwind in sales due to foreign currency fluctuation, most significantly in our proteins business, driven by weakness in both the British pound and Swedish krona versus the U.S. dollar. As Tony mentioned, our strong second quarter of 2017 revenue performance was driven by growth in our filtration business where we delivered strong double digit growth with our XCell ATF product line and where our TangenX business continues perform well, and is on track to hit our deal model in 2017. We were also pleased with the performance of our Proteins business, where we reported high single-digit organic growth in the quarter, and with our OPUS line of pre-packed columns that continued to drive the performance of our chromatography business. Our adjusted gross profit for the second quarter was $18.7 million, an increase of $2 million or 12% over the second quarter of 2016. And our adjusted gross margin was 57.5% for the quarter, a 30 basis point increase over the comparable 2016 period. Key drivers of our year-over-year gross margin increase, include a positive impact from improved product mix, driven by sales growth and contributions from our filtration and protein product lines. Now, moving to operating expenses. Research and development expenses for the second quarter of 2017 were $1.9 million, consistent with the comparable 2016 period, as we continue to invest in our single use ATF platform another important product line expansions and development. Adjusted SG&A for the second quarter of 2017 was $8.2 million compared to $7 million for the second quarter of 2016, reflecting an increase of $1.2 million or 16%. Approximately 40% of this year-over-year increase is related to expenses from our TangenX acquisition in December of 2016, which were not included in our prior year comparable figures, and approximately 60% of the increase is related to investments in our commercial organization where we had 15 direct sales reps and four field application specialist attending to our customers. Please note that adjusted SG&A in the 2017 quarter excludes a combined $3 million of acquisition cost and intangible amortization expenses compared to $1.1 million in the 2016 quarter. Now, moving to adjusted earnings and EPS. For the second quarter 2017, our adjusted operating margin was 26.6%. Our adjusted operating income grew to $8.6 million, an increase of $0.9 million or 11% compared to the second quarter of 2016. The year-over-year increase was driven by margin pull through from sales growth and gross margin expansion, partially offset by investments and operations, and commercial teams to support current and future growth. Adjusted net income for the second quarter of 2017 was $6.8 million compared to $6 million for the same period in 2016. And adjusted EPS for the second quarter of 2017 was $0.20 per fully diluted share, a 10% increase from $0.18 per share for the second quarter of 2016. In addition to delivering strong operating income in the second quarter, the Company also benefited from improved tax rate position related to our U.S. entity becoming profitable, following an internal asset transfer from the U.S. to Sweden, which drove a reduction in our year-to-date global tax rate. Adjusted EBITDA for the second quarter of 2017 was $9.2 million, a 7% increase from $8.6 million for the same period in 2016. Our cash, cash equivalents and marketable securities at June 30, 2017 were $145 million compared to $141 million at the end of the first quarter. Note that the $120 million cash component of our Spectrum acquisition is not reflected in this figure, nor are the net proceeds of $129 million of cash received from our recent equity financing, as both of these transactions were finalized after the second quarter close. Now, moving to 2017 full year guidance. As we move into our financial guidance section, please consider that we closed on the acquisition of Spectrum Inc. on August 1, 2017, and that our full year 2017 guidance now incorporates the financial impacts of Spectrum for the period of August 1 through December 31, 2017. Effective as of our Q3 earnings release plan for November and as considered in today's 2017 financial guidance, we will be excluding non-cash inventory step-up charges from our adjusted financials as we believe this change enables us to more appropriately reflect the true operating performance of our Company. Our GAAP to non-GAAP reconciliations of net income and EPS for 2017 financial guidance, including the adjustment for non-cash inventory step-up charges, are included in the reconciliation tables in today's earnings press release. As previously mentioned, all 2017 financial guidance discussed will be adjusted non-GAAP. Please also keep in mind that our 2017 guidance may be impacted by fluctuations in foreign exchange rates beyond our projected headwind of 1% on sales, and does not include the potential impact of new acquisitions beyond Spectrum. Today, we are increasing our 2017 full year revenue guidance to $138 million to $144 million, reflecting growth in the range of 32% to 38% as reported or 33% to 39% on a constant currency basis. This projection includes $17 million to $18 million of revenue expected from Spectrum. We are maintaining our adjusted gross margin guidance of 55.5% to 56.5% for the year inclusive of the acquired Spectrum business. We are increasing our 2017 adjusted operating income guidance to $30 million to $32 million, and maintaining our adjusted operating margin guidance of greater than 20% of revenue. This increase from our prior guidance of $27 million to $29 million incorporates approximately $3 million of adjusted operating income expected from Spectrum. We continue to guide to full year cash interest expense of $2.4 million related to our convertible debt financing. We are updating our guidance for 2017 adjusted income tax expense to approximately $5 million, down from our previous guidance of $5.5 million to $6 million with the expectation of a reduced U.S. income tax rate triggered by effects related to valuation allowance reversals associated with an internal product line transfer from the U.S. to Sweden, as well as from the Spectrum acquisition. As a result of our increased adjusted operating income from the acquisition of Spectrum, plus the expected benefit of lower income tax expenses, we are increasing our guidance for adjusted net income by $4 million to a range of $22.5 million to $24.5 million for the year, and raising our adjusted EPS guidance by $0.02 to a range of $0.57 to $0.62 per fully diluted share. We are also increasing our guidance for adjusted EBITDA by $3 million to a range of $34 million to $36 million for full year 2017 with depreciation expenses expected to be in the range of $5 million to $5.5 million, and intangible amortization expenses expected to be approximately $6.2 million, both including Spectrum. In terms of share count, we would like to remind investors of the importance of considering the following share count increases in the second half of 2017; first, the issuance of 6.154 million shares associated with the acquisition of Spectrum, effective August 1st; second is the issuance of 3.288 million shares, resulting from our equity financing, which closed in July; and third is the additional share count implication of our convertible debt, which accounted for 560,000 of unissued shares for Q2 on the basis of the average share price premium above the $32.07 conversion price. We’re expecting the full year weighted average, number of fully diluted shares to be 39.3 million or an additional 4.2 million of shares compared to the quarterly average fully diluted share count at June 30, 2017. We are pleased that the impact on adjusted EPS of share dilution related to both the Spectrum acquisition and our equity financing, are expected to be fully offset by Spectrum adjusted net income and EPS, during our five months of ownership in 2017. Inclusive of the equity financing, the completion of the Spectrum acquisition and the ongoing business of Spectrum, the Company expects to spend $8 million to $9 million for capital expenditures to support maintenance and continued factory expansion. And we now expect 2017 year-end cash, cash equivalents in marketable securities to be in the range of $152 million to $155 million. This completes our financial report. And I will now turn the call back to the operator to open the lines for questions.

Thank you [Operator Instructions]. Our first question comes from Drew Jones with Stephens Inc. Your line is open.

If I think about the benefits from the Spectrum acquisition and some of your commentary around OPUS, what percentage of the portfolio right now has traction in Asia, and maybe China more specifically? And how did that change over the next 12 months?

So, the question, Drew, is what percent of the Spectrum business has traction in China?

And you said OPUS has got traction there now. We know Refine has traction there. What percentage of the portfolio is accessible in China, at this point?

Yes, it’s definitely the last two years has been really successful for us in China and Asian, in general. So I’d probably look at it as how we’re doing in Asia and around 10% of our total revenue is coming from Asia at the end of last year, and I would say that’s increased a little bit. But we’d be in that 10% to 15% range again this year.

And then could you give us a little detail in terms of how do you cross-pollination the sales force is here, Spectrum has so many more products. Is it going to take longer to get them on the Repligen portfolio, or maybe vice-versa, and what’s the timeline look like their?

So we’re really just starting, obviously, this week as the deal just closed with moving into our integration teams. And obviously, one of them important work stream for us is going to be commercial. We recognize straight away that we’re not going to put the Repligen products into the Spectrum bag or Spectrum products into the Repligen sales bag straight away. So what we have to do is part of the integration is really look at how are we going to deploy 35 sales reps or 36 sales reps around the world. And are we going to move to it, stay with the generalist model, are we going to go to a specialist model, or are we going to have some hybrid. And I think each region is going to determinant detect a little bit about how we’re going to go to market. So we’re expecting Drew by the end of the year early next year we will be rolling out this new commercial organization for Repligen.

And your next question comes from Amanda Murphy with William Blair. Your line is open.

So I just had a quick question on the guidance. It seems like that most of raise is just from the Spectrum add. So I just want to get a sense, it sounds like your underlying business is doing quite well as well. So wanted to get a sense of your expectations for the legacy business for the rest of the year? Do you expect it to grow, the various components in line with your stated broader growth rates?

When we look at the legacy Repligen business, what we see is basically we’re still within the $121 million to $126 million range, probably at the mid to the end of that. When you look at our performance in the first half of the year and you compare it to last year and the year before, we typically see first half of the year is slightly higher than the second half of the year. And we don’t expect that to be any different this year. So when we look at our products, outside the Spectrum portfolio, we’re really pleased with the performance of our filtration products, we’re really pleased with the performance of our OPUS pre-packed columns and we had a really solid first half on our Protein A ligands. So I think that’s nothing unusual. Q3 is our typically our weaker quarter for and obviously, Q2 is typically our stronger quarter. So that’s why the second half is usually lighter than the first.

And then I know it's quite early given you closed the deal two days ago. But you’ve outlined the synergy, the revenue synergy opportunity the $15 million to $20 million. I'm wondering if you could help us and even conceptually bucket that across the business. So where do you think you might get the most incremental revenue. I'm assuming filtration. But if you could just help us bucket between those three, that would be helpful too.

Yes, clearly major benefit is going to come in the world of filtration for us. And the way bucket it right now is really we look at it from three areas, one is geographical expansion, like moving into Asia in a stronger way versus what we’ve been able to do in the past. And we would say about probably 20% of the revenue synergies are going to come from that. New products, which are going to be very important as part of the ATF portfolio, we would estimate that that’s probably around 20%. And then the cross-selling of the portfolio, like cross-selling in TangenX product lines, cross selling ATF, cross selling the KR2i systems form Spectrum. We think most of the revenue synergies are going to come through cross selling about 60%. So that’s the split.

And again and maybe may not be a fair question given that it closed to little bit. Based on what you know now, thinking about the revenue synergies. Is there, I guess, just thinking about where there might be upside to that number, conceptually, is there anything that stands out that, hey, if this works out perfectly we might be able to get that number to give it higher? Or anything that stands out there that could be -- that number being a bit conservative?

I think it’s a little early, Amanda. But I would say that, as I mentioned at the last call that, I’m really excited about the R&D potential. So when we look at long-term for the spectrum integration into Repligen, I think our capabilities and ability to bring new products to market that are going to come from our combined understanding of the filtration market, is something that we’re excited about.

Thank you. Our next question comes from Matthew Hewitt with Craig-Hallum. Your line is open.

Just one from me. You mentioned in the prepared remarks that you have a very strong quarter for demos. And I’m just curious, what is the typical lead time from demo to actually closing the sale. I mean are those -- is it typically a quarter, two quarters. Just how should we be thinking about that contribution, given the strength that you saw in Q2? Thank you.

In terms of demos, it really does depend based on each customer and the type of demo, whether it’s an ATF2 type demo or an ATF4, or 6. But in general, you should begin to see some impact from the demo activity within six months and then definitely is very positive for 2018, as well.

Your next question comes from Paul Knight with Janney Montgomery. Your line is now open.

The industry was facing, I guess, difficult comps in Q2 when you look across some of the peers. Did you see that same comp issue, and what do you think second half?

Yes, definitely, we had a tough comp, if you remember Q2 last year was our strongest quarter, it was like $4 million higher than any other quarter we have last year. So we definitely had some difficult comps. But what was encouraging for us was that all our direct customer products all grew double-digit growth. So that just shows, in my mind, that; A, we have differentiating portfolio; we have a healthy market; we have a healthy funnel of activity. Clearly, we feel really good about where we’re going as a company, and how our products are doing in the market. That said, I think when I look at the second half of the year, I think the only challenge really you have in the second half of the year is Q3 is typically a weak quarter. And then when you -- and Q2 this year and every other year over the last three or four years has been our strongest quarter, so it’s a little bit of just where the quarters break out that’s causing a little bit of the challenge. But I think, in general, we’re very bullish about our businesses and where we’re going.

The FDA regulations like 483, I know, have hurt India producers. Is that affected your business at all?

Not, it hasn’t really come up in the conversations that I’ve had with the commercial team it doesn’t mean that it hasn’t slowed things down in that region. But I would say, while India does contribute some revenue to the Company, it's not really significant. So it hasn’t had a big impact for us.

And then also the Protein A world. Do you think Protein A is going to benefit from the material like expansion, or what’s your crystal ball say on Protein A?

The Protein A market, obviously, is driven by the number of commercial mAbs and also by the number of mAbs in development. So if you look at company like Purolite clearly, they’re at the very early stages of building out their customer base, because clearly they would start preclinical phase 1, maybe and phase 2. So its early days for them, but another player in the market, obviously, it just adds another competitor. We compete in the same market. Obviously, we sell Protein A resins, as well. I think the main thing to pay attention to, Paul, would be the number of mAb approvals and the strength and health of the clinical mAb market. I think that’s more a leading indicator of the Protein A business than anyone competitor, whether it's GE, Millipore, Purolite, or us.

[Operator Instructions] Our next question comes from Steve Schwartz with First Analysis. Your line is open.

Tony, with Spectrum coming into the picture, has that prompted you at all to change how you’re viewing new product development efforts between filtration and chromatography?

No, it's not changing how we’ll do product developments for filtration and chromatography. But I do think as we go through the second half of this year and the last five months here, it will definitely force us in a very positive way to look at the whole filtration portfolio, and start to prioritize the R&D programs within filtration.

And then, Jon, you alluded to it in your prepared remarks. But can you give us what the current cash and debt balances given these significant transactions recently?

So the equity transaction, clearly, didn’t affect our debt balance. The cash position, as I indicated, is $145 million at the end of the second quarter, which is up about $4 million from the first quarter. And then the debt position, I don’t have the exact number off the top of my head, but we’ll be in the queue today. And the total debt was at $115 million, so it's going to be somewhere around $100 million on the balance sheet. Obviously, the convert feature adjusts as we move forward and that matures.

So given the proceeds from the secondary offering and payout for Spectrum, the cash balance itself is not different today -- significantly different from where it was -- so it's not significantly from June 30th?

So I can give you some numbers. June 30th was $145 million. We paid, since that time we paid $120 million for the acquisition of Spectrum. We yielded about $129 million from the net proceeds of the equity financing. And we’ll pay around $7 million for fees associated with the acquisition. So effectively, there is not a huge spread between the equity raise and the pay off of Spectrum plus associated fees related to the deal [indiscernible] [36.31].

Yes, two on $245 million is not much. Okay, thank you for clarifying.

Thank you. Our next question comes from Brandon Couillard with Jefferies. Your line is open.

Tony, question on the OPUS business. Could you give us a sense of the mix by product line, and particularly with OPUS are? And I’m curious to what extent that maybe driving new user adoptions of the OPUS platform. And then where is the mix today relative to the percentage of drop shipments and I’m curious if that was a driver of the mix benefit on the gross margin line in the quarter?

For OPUS, so I think last year was really a breakout year for the business in terms of adoption of 45 and 60 centimeter columns moving to the OPUS feature. In Q2, we saw a strong uptick in the number of columns that were ordered with the OPUS features, so that’s very positive. Year-on-year, we had growth on those larger columns. What we’re actually seeing this year is the real health of the 10 to 30 centimeter column business and a significant uptick in terms of the revenue coming from the medium size columns in our portfolio, which I believe from where I sit, is a real strong indicator of our commercial teams’ ability to sell in a competitive environment because that’s actually more competitive down in the 10 to 30 centimeter range. So I think it’s a recognition that we’re the market leader, it’s a recognition that our sale team knows how to sell, and compete. And I think there is strong demand for the whole portfolio of products. And the second part of your question, Brandon…

In terms of split, between drop ship…

I’d say, it's hard in one quarter, because you’ve got a few CMOs coming in it can skew the numbers. But I don’t think this year it’s going to be that much different than where we were in the second half of last year. So I think it’s going to be more around that 50-50 range.

And we did have a good quarter on the OPUS margins because of that split in Q2. But that’s obviously variable as we go forward.

And one more for you, Jon. In terms of guidance for the year, what is it embed for organic revenue growth, excluding FX and acquisitions, because it looks like the currency headwind is now a point less than was embedded last quarter. So 1% headwind plus 2% now you have Spectrum coming in, just curious, because on the surface, it would perhaps suggest that the organic growth outlook is maybe up a little lighter than it was before. Just want to make sure that what’s embedded in terms of organic for the year.

So Spectrum being an acquisition will be excluded, obviously, from the organic growth calculation for a period of 12 months. But our expectation is we’ll be in between that 10% and 15% range that we project over the long-term in terms of organic growth.

Thank you. I am showing no further questions at this time. I’d like to turn the call back to Tony Hunt for closing remarks.

Great, thank you. And thanks everyone for joining us today. And we’d be happy to follow up with people as we go through the day if you have any questions. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a wonderful day.