Bio-Techne Corporation (TECH) Q4 2015 Earnings Report, Transcript and Summary

Good morning. And welcome to the Bio-Techne Earnings Conference Call for the Fourth Quarter, for 2015 Year End. At this time, all participants have been placed in a listen-only mode and the call will be open for the questions following management's prepared remarks. I would now like to turn the call over to Mr. Jim Hippel, Chief Financial Officer. James T. Hippel - CFO, VP-Finance & Principal Accounting Officer: Good morning and thank you for joining us. Also on the call this morning is Chuck Kummeth, Chief Executive Officer of Bio-Techne. Before we begin, let me briefly cover our Safe Harbor statement. Some of the remarks made during this conference call may be considered forward-looking statements. The company's 10-K for fiscal year 2014 identifies certain factors that could cause the company's actual results to differ materially from those projected any forward-looking statements made during this call. The company does not undertake to update any forward-looking statements as a result of any new information or future events or developments. The 10-K as well as the company's other SEC filings are available on the company's website within its Investor Relations section. During the call, non-GAAP financial measures may be used to provide information pertinent to ongoing business performance. Tables reconciling these measures to most comparable GAAP measures are available in the company's press release issued early this morning or on the Bio-Techne Corporation website, at www.biotechne.com. One other item before we get started and as I mentioned in previous quarter calls, please note that the commentary today regarding the total company's Q4 organic growth by end market and geography does not include the performance of our Protein Platforms division. With that, I will turn the call over to Chuck. Charles R. Kummeth - President, Chief Executive Officer & Director: Thank you, Jim, and good morning, everyone. Thanks for joining us today for our fourth quarter call. This morning, we reported a 27% increase in revenue for the fourth quarter, with strength organically in most of our end markets and with sales contribution from the acquisitions we made over the past year. Organic growth was solid for the quarter, at 7%, with nice contribution from both our Biotechnology and Clinical Control segments. The strong finish for the year allowed us to end fiscal year 2015 with full-year revenues that grew 26% overall and 4% organically. Protein, the Biotech product that we are most well known for, experienced mid-single digit growth in Q4, just as it has for the last several quarters. We feel Proteins are positioned well to continue this growth trajectory going forward. Antibodies, another significant Biotech product category, also had a solid quarter with mid-single digit organic growth. This marks the first quarter in over eight quarters where we have had positive growth in antibodies. Biotech's Assays product category also performed similarly, and together this is the reasons that the Biotech division had the best quarter in years. We are delighted to see this and it gives us confidence that we are doing the right things to rejuvenate the core of the company. We are very excited about the progress with integrating our Reagents-based acquisitions, PrimeGene and Novus. PrimeGene has experienced near 100% growth in our China for China brand strategy. They've just moved to a new factory, where we will focus on G&P level products as well as boosting the product portfolio. Novus is completely integrated now and the internal system infrastructure that managed over 200,000 antibody products is now a central system in our overall antibody commercial operations. We have now crossed the 800 mark for certified antibodies to run on our Simple Wes platform within our ProteinSimple business. This will allow researchers to purchase our antibodies with confidence that they'll perform as advertised. In Q4, North America continued to experience stable organic growth for the Biotech division. In this region, our biopharma end markets experienced approximately 10% growth, as they've done for all of fiscal year 2015. And our academia end market continued with its streak of sequential improvements since the Fisher channel partnership was put in place over a year ago, with growth this quarter in the mid-single digits. Both our U.S. sales team and the Fisher channel remain focused on engaging customers and understand their specific needs in combination with our new trade show investment and strategies. Europe rebounded in Q4, with most countries continuing to perform nicely. Germany was less the drag on organic growth during the quarter, with low-single digit declines year-over-year compared to the double-digit declines throughout the rest of fiscal year 2015. There are signs now that the pharma research cycle in Germany may have bottomed and we could see an uptick in growth here later in fiscal year 2016. Currency translation in Europe continued to be a significant headwind in Q4 and this is headwind will stay with us throughout the first half of fiscal year 2016, assuming they stay where they are today. When we look at our results in Asia, China really knocked it out of the park in Q4, with 35% organic growth, finishing the year with organic growth in the mid-20%s, just as we expected at the beginning of the fiscal year. What we didn't foresee a year ago was the disruption caused by the Chinese government's anti-corruption auditing activities. But our team in China persevered despite the distractions and I'm very proud of what they achieved this year. We've now grown the Bio-Techne organization in China from just 12 people two years ago to now near 100. We expect exciting times in China to continue. In the Pacific Rim, we reported last quarter this region was impacted negatively by distributors reducing inventories due to the sudden strengthening of the U.S. dollar. In Q4 Japan was still soft, showing signs of stabilizing, while the rest of the Pacific Rim markets returned to double-digit growth. Assuming no further change in exchange rates, we believe the worst is behind us and Japan too will return to growth in fiscal year 2016. In our Clinical Controls division, some new projects from OEM customers that were delayed last quarter began to transfer in Q4, resulting in revenue growth in the high-single digits for the quarter. For the year, Clinical Controls grew mid-single digits. We remain excited about some of the projects that we have for the business and we expect this kind of annual growth rate to continue. Lastly, our Protein Platforms segment finished the year with 22% organic growth on a standalone basis but suffered in Q4 of roughly flat year-over-year revenue and breakeven operating profit. The year-over-year comparable was especially difficult in Q4, given it was the last full quarter under prior ownership. However, the Q4 performance of this division was still below our expectations. There were several setbacks in the quarter, mostly related to the integration of CyVek and commercial team attrition. We have done a lot of reviewing of the situation, the operations, the team and the commercial processes and feel we have corrected the primary issues causing the bump in the road. We also recognize that it's an instruments business that will be more lumpy quarter-to-quarter than our core run rate reagents business model. Nothing has changed in our view of the market potential of the game-changing platform solutions and continue to expect the business to operate at 20% organic growth annually for the foreseeable future. We must also remember that CyVek is a pure start-up. And while we are now selling instruments, the product line should be viewed as a few years behind ProteinSimple. Thus, this product line will be dilutive to adjusted earnings until revenues start to scale, with profitability not expected until fiscal year 2017. But the future is very bright here, it's just not here yet. To help guide us towards this bright future, we have hired a new Head of Human Resources who is experienced in change management. We are very excited about this new addition to our executive team. The company has grown in the past two years from 750 people to nearly 1,500 and from six sites to 21. The promise of success for Bio-Techne will be directly related to how fast we can get businesses and teams working together, collaborating on complete solutions that are comprised of both reagents and instruments in our strategic markets. Focusing on managing change, culture and collaboration will accelerate our time to success. I am proud of our team's record performance this quarter and the increasing amount of dedication to our business. There is true excitement and energy coming not only from our headquarters in Minneapolis, but all our new sites and regions. It shows our recently conducted commercial reviews and in the faces of all those involved. We look forward to another strong year ahead with ever-increasing growth levels of the company, given new many platforms that we now have in our portfolio. With that, I will turn the call over to Jim for more detail on the financials before we open the line up for Q&A. Jim? James T. Hippel - CFO, VP-Finance & Principal Accounting Officer: Thanks, Chuck. As on prior earnings calls, I will provide an overview of our Q4 financial performance for the total company and then provide some color on each of our three segments. As a reminder, at the total company level, reported organic growth excludes the results of acquired companies up to the one-year anniversary date of acquisition and it also excludes the impact of foreign currency translation. However, for the Protein Platforms segment, we are providing organic revenue growth on a pro forma basis as if we owned ProteinSimple and CyVek for all 2014 and 2015. So starting with the overall financial performance for the fourth quarter. Adjusted earnings was approximately flat to the prior year at $32.6 million, while adjusted EPS was $0.87 versus $0.88 in the prior year. The impact of currency translation was a $0.05 year-over-year headwind. For the full year 2015 adjusted earnings were $126.8 million, a 1% increase versus prior year. Adjusted EPS was $3.40 versus $3.39, with a foreign currency translation headwind of $0.18. Under GAAP, EPS recorded was $0.71 compared to $0.72 in the prior year. And for the full year GAAP EPS was $2.89 versus $3 last year. The decrease from last year for both the quarter and the year was driven by the amortization of intangibles and other costs related to acquisitions, in addition to the impact of currency translation. On the top line, Q4 reported sales were $117.7 million, an increase of 27% year-over-year, with organic growth of 7%. Q4 sales included approximately 25% growth from acquisitions and a negative 4% impact from foreign exchange. Full-year reported revenue was $452.2 million, an increase of 26%, with organic growth at 4%. Revenue for the full year included approximately 25% growth from acquisitions and a 2% headwind from currency translation. Moving on to the details of the P&L. Total company adjusted gross margin came in at 70.8% in Q4, down 250 basis points from the prior year. The decrease is due to product mix change associated with the acquisitions that have occurred since last year as well as the impact of currency translation. For the full year, adjusted gross margin was 71.6%, down 190 basis points from last year. Excluding the impact of acquisitions and FX, core gross margins marginally improved year-over-year for both the quarter and the full year due to the business productivity initiatives. Adjusted SG&A in Q4 was 21.7% of revenue and R&D was 9.2% of revenue, 650 basis points and 100 basis points higher than last year, respectively. The increases in these operating expenses were driven by the acquisitions made since Q4 of last year. The resulting adjusted operating margin for the quarter was 39.9%. Operating margins excluding the impact of acquisitions and FX were flat compared to Q4 of last year. For the full year, adjusted SG&A was 21.7% of revenue and R&D expense was 9% of revenue, a 700 basis point and 30 basis point increase, respectively, from the prior year. The resulted adjusted operating margins for the full year were 40.8%. Again, excluding the impact of acquisitions, FX and higher non-cash stock-based compensation, operating margins were essentially flat to the prior year. Looking at our numbers below operating income, net interest expense in Q4 was $260,000 compared to $1 million of net interest income last year. This is as a result of a line of credit that was opened in July of 2014 to partially fund the acquisitions of ProteinSimple and CyVek. Net interest expense for the full year was $0.9 million versus interest income of $2.7 million in the prior year. Adjusted other non-operating income for Q4 was $0.7 million compared to $0.4 million of non-operating expense in the prior year quarter. And for the full year, adjusted non-operating expense was $0.3 million versus $1.1 million in the prior year. Adjusted non-operating year-over-year improvements for both the quarter and the full year were driven by favorable transactional currency exchange fluctuation. Our adjusted effective tax rate in Q4 was 31.2%, up 50 basis points from the fourth quarter of last year due to acquisition and geographic mix. And for the full year, the adjusted effective tax rate was 31% EBIT, up 10 basis points from the prior year. In terms of returning capital, we continue to pay our dividend and paid out $11.9 million in the quarter and $47.1 million for the year. Average diluted shares were up 0.2 million shares for both the fourth quarter and the full year at 37.3 million shares and 37.2 million shares, respectively. Both time periods represent less than 1% dilution from last year as a result of stock option grants. Turning to cash flow and the balance sheet. $37.1 million of cash was generated from operations in the fourth quarter and $139.4 million was generated during the full year. Our investment in capital expenditures was $6.9 million for the quarter and $19.9 million for the year. We ended the year with $110 million of cash and short-term available-for-sale investments, down $50 million sequentially from the end of Q3. The decrease was driven by incremental pay-down of our line of credit. As a result, our long-term debt obligations at the end of Q4 stood at $112 million, a decrease of $75 million from the end of Q3. That wraps up my comments on the total company performance for the fourth quarter and full year. And now I'll discuss the performance of our three business segments, starting with the Biotechnology segment. Q4 net sales for the segment were $83.83 million, with reported growth of 9% compared to last year and organic growth of 7%. Growth from acquisitions was 7%, while the impact from foreign exchange was negative 5%. By geography, North America increased in the high-single digits organically. Biopharma sales continued to be strong in the region, with growth nearing 10%, while academic and government experienced its best quarter in many years, with growth in the mid-single digits. Europe rebounded from Q3 and experienced organic growth in the mid-single digits, with most countries performing well and Germany less of a drag on the growth for the region. China experienced fantastic organic growth in the mid-30%s while Pacific Rim was flat year-over-year. As Chuck noted earlier, excluding Japan, the Pacific Rim grew approximately 10%. And for the full year, Biotechnology segment revenue was $325.9 million with organic growth at 3%. Adjusted operating income for the Biotechnology segment increased 2% in Q4 compared to the prior year and adjusted operating margin was 52.4%, a decline of 340 basis points year-over-year. Foreign exchange currency translation impacted adjusted operating income negatively by 7% and operating margin by 120 basis points. The remaining decline in adjusted margin percentage is attributable to a change in product mix associated with the acquisition of Novus Biologicals. For all of fiscal year 2015, adjusted operating margin was 52.5%, also a decline of 340 basis point year-over-year, driven by the negative impact of FX and mix from acquisitions. Turning now to our Clinical Controls segment, where Q4 sales were $17.2 million. Both reported and organic growth was 9% compared to last year. For all of fiscal year 2015, sales were $60.4 million and organic growth was 5%. Adjusted operating income for the segment increased 5% in Q4 and adjusted operating margin was 30.1%, a decrease of 120 basis points from the prior year. The decrease was attributable to pricing pressure in the blood glucose controls market. However, margins have since stabilized and were flat to Q3. For the full fiscal year 2015, adjusted operating margin was also 30.1%, a decrease of 60 basis points year-over-year. Moving on to our Protein Platforms segment, where net sales in Q4 were $17.2 million. On a pro forma basis, assuming ProteinSimple and CyVek were owned for the entire quarter in both current and prior years, organic revenue for the segment decreased 2%. As Chuck mentioned earlier, the ProteinSimple business experienced a very tough comparable where they grew 48% last year in what was their final quarter of prior ownership. This tough comparable together with the integration of CyVek and commercial transition activities in Q4 contributed to a lack of growth. For the full year, on a pro forma basis, Protein Platforms grew 22% organically and we expect to see this kind of growth in fiscal year 2016 and beyond. Adjusted operating margin in Q4 was essentially breakeven. As independent companies, ProteinSimple and CyVek together reported negative 6.2% adjusted operating margin in the quarter ended June 30, 2014. In all of fiscal year 2015 for the period of time since the acquisitions that formed this new segment, adjusted operating margin was 6.7%. That concludes my prepared comments. And with that, I will turn the call back to the moderator to open the line up for some questions.

Our first question is going to come from Dan Leonard from Leerink. Please go ahead. Dan?

Apologies. I had you on mute. Can you hear me now? Charles R. Kummeth - President, Chief Executive Officer & Director: Yeah, we can year you, Dan. James T. Hippel - CFO, VP-Finance & Principal Accounting Officer: Yeah.

Great. So my first question is on the Platforms business. Can you speak to the visibility you have on the 20% organic growth view and whether there's any sort of backlog to support that or new product funnel? Charles R. Kummeth - President, Chief Executive Officer & Director: There's a strong new product funnel. In fact ProteinSimple's organization has three different product lines, Simple Western, Biologics and some other analytics that go along with the imaging stuff. Biologics was the biggest issue for this bump in the road this quarter. Actually on a Simple Wes platform, we had a record quarter for installations, it was a record number. So the pipeline is strong. They've got deep programs in all the areas, including Biologics. So more products coming and announcements soon to be had.

Okay. And then my follow up. Is there anything we should be aware of as it relates to pacing throughout fiscal 2016, any days issues in any given quarter or anything you'd call out? James T. Hippel - CFO, VP-Finance & Principal Accounting Officer: Yeah, Dan, nothing I'd call out specifically. There may be a day here or there quarter-to-quarter, but nothing that we haven't seen in our pacing from last year.

Okay. Thank you.

And our next question is going to come from Matt Hewitt from Craig-Hallum. Please go ahead.

Hey. Good morning, guys. This is actually Dillon on for Matt. Digging into the Biotech segment growth, just wondering or trying to get a better sense of the customer mix that's driving that growth. Is that just new product growth, getting deeper with existing customers, or are you guys taking business from peers? Charles R. Kummeth - President, Chief Executive Officer & Director: Well, it's a combination of things. I mean, one is we've talked about announcing a new website. We've had strong traction with that. We've had a pretty good lift with our academia by the market this quarter. And the Fisher numbers were the strongest we've ever had as well. Biotech pharma was also kind of on par where it's been, right at around 10%, around there, which is also very good. All things considered, that's what's been adding up to the (19:39) growth in the Biotech side, a record for us while I've been here anyway, probably been many years. James T. Hippel - CFO, VP-Finance & Principal Accounting Officer: Yeah, I would just add it's too early to claim victory in terms of taking share from anywhere. What we've seen from reported results from other companies in our space, biopharma and academic has performed fairly well this quarter as well. So I think we're definitely keeping up with the market, but I think it's too early to say we're at the point of taking share. Charles R. Kummeth - President, Chief Executive Officer & Director: I think the thing to point out is we were much stronger than we have been in the past in antibodies. So that's our biggest, deepest, our broader investment area for the company. I mean, we're on the fence with Proteins, and that's going fine. It's about antibodies and we've make some pretty good strides there.

Okay. And then a quick follow up. Just in terms of the capital deployment strategy in 2016 in the form M&A, are we going to expect any changes in the form of pace or size of deals? Charles R. Kummeth - President, Chief Executive Officer & Director: Well, in terms of capital, we were kind of consistent with the capital the way we've been in the past and for operations. On the M&A side, we did officially one deal we bought in last, (20:42) most of these we did the first month into the fiscal year this last year. And we're on the way to integrating most of them. Novus is completely integrated at this plant. Looking forward, we've never worked any less hard than we are now. We're trying, like everyone does. We've got a strong funnel 60-some-plus targets that we've had. (20:58) They range in size from start-up to large transformational deals. We're on the hunt all the time for things that hit our strategy, but we think strategically first. That said, especially on the front where there's auctions, it's not a great for finding great deals. It's a good time for owners thinking that they should think about selling because everybody knows the market is pretty hot. So that's helpful, but you've still got to get a good price and it's hard on both the private and public side, so we're diligent. We're working the process. We have a deep and very rigorous process, but we won't do a dumb deal, we walked away from lot in this last year because the numbers weren't good enough for us. But strategy first, numbers second. And we'll keep hunting.

Great. Thanks. And congrats on good quarter.

And our next question is going to come from Jeff Elliott from Robert W. Baird. Please go ahead. Jeff T. Elliott - Robert W. Baird & Co., Inc. (Broker): Yeah, good morning. Nice quarter, guys. Chuck, can you provide any other color on the issues you had in the Protein Platforms division? Charles R. Kummeth - President, Chief Executive Officer & Director: Yeah, we've been digging into it pretty hard, as you might imagine. We had a lot of integration typical type concerns. We had some market conditions as well. We had, as you already know and others know, we had some bumps in some running buffers from some ancillary products that go with instruments. We have those corrected this last quarter, but that probably flowed through a little bit. Everything is caught up there, the backlog is caught up As I mentioned, it was a record quarter for shipping Wes systems (22:32). Biologics is little bit lumpy. And on the Biologics side, we have some larger platforms there, hundreds of thousands of dollars. And that's where we've had some issues. I mean, you miss a couple of those and you're off a quite a bit. So could be timing in some of those orders, but they didn't hit. I think also I've got to point out the FX in Europe. This has affected us in demand and our numbers in Europe quite a bit. And we see all that returning. Things are looking much better. We did have some commercial team attrition, fully expected. We knew that a lot of that team would move on with Tim and Terry when they transitioned out of the business, and they did. I will mention we brought in an individual from my past at Thermo Fisher that ran the entire mass spec business for us, (23:21) very strong person. He's on board and like a kid in a candy shop putting in processes for the saves (23:32) this company is in right now in a growth level. It's coming together. I'm very confident that we've got things under control here. It's lumpy. And it is an instrument business, it's going to be lumpier. I think our full plan was low-double digits, because coming off the record fourth quarter last year and they sold everything they could before they sold to us, and that's natural. And so we'll see. Now, if we have another quarter or two of flat going forward, then things are going to change. But we don't have any hair on fire alarms here yet. So it's kind of I think just the usual. And things are looking pretty good there this quarter and I think it's just a natural transition with this type of business model we think. Jeff T. Elliott - Robert W. Baird & Co., Inc. (Broker): Got it. And it sounds like you don't want to give fiscal 2016 guidance, but would you be able to comment on the estimates that you see out there, the stuff in consensus? Charles R. Kummeth - President, Chief Executive Officer & Director: Yeah, we think you guys are closer on the revenue side and still some work to do I think on the bottom line with our investments in SG&A. So I think you're close or catching up. It looks good, we'll give the feedback we can. We still are not giving guidance. We put out our notes for the future and our goals. I will say that we've been very public with everybody about, as we annualize these deals and looking forward, we should be in 8% to 12% kind of growth range going forward. And it could vary a lot depending on the lumpiness of our instrument platform, but that should be kind of the range. Saying whether we can continue in the 7% range, we're not saying that in our organic core. We've said victory for us is mid-single digits and that's what we're sticking with right now. If we do better in antibodies, if we start taking more share, things could be better. It's just like Jim said, it's not time to claim any victory lap yet, that's for sure. But we are really happy with the quarter. It's obviously a lot better than last quarter. For the year we're right on track with where we told everybody we'd be at and at mid-single digit level in our core. And so we're excited, we're happy. We don't have really any homework to do in the core side, everything is looking good. Even as of last we talked about the assays and ELISA being kind of a drag, this year, they've done a lot better. I think a lot of it's market as well. Everybody is looking pretty good this quarter. So, again, no victory lap. We're just happy to be in upper end of path. James T. Hippel - CFO, VP-Finance & Principal Accounting Officer: I'd add a modeling aspect of it is, two things just to make sure and also being mindful of; one is of course the FX impact and making sure we're taking in account the bottom line impact is a very, very high dropthrough for us on that FX impact. And that's going to definitely be with us at least for the first six months of fiscal year 2016. And where rates go from there, we'll see. But that's one item. The other item I'd mentioned is the fact that we had one month in fiscal year 2015 that we did not own ProteinSimple. And in that one month, given how that instruments business works, it's very, very light on revenue, but still has the cost burden of its SG&A and R&D run rate. And so that one month worth of cost was not in our fiscal year 2015 numbers, but will be in our fiscal year 2016. And the same goes for CyVek, where we purchased CyVek outright in November of fiscal year 2015. So there's a good four months of their SG&A, R&D costs in our first four month run rate that's not in fiscal year 2015 that will be 2016. I just would ask you to be mindful of those two items. Charles R. Kummeth - President, Chief Executive Officer & Director: Yeah. Good catch, Jim. Jeff T. Elliott - Robert W. Baird & Co., Inc. (Broker): Good. Thanks, guys.

And our next question is going to come from Drew Jones from Stephens. Please go ahead.

Hi, guys. This is actually Garrett on for Drew. But first question. You talked about placement strength with Simple Wes in the quarter. Was any of that seen on the academic market? Did you kind of... Charles R. Kummeth - President, Chief Executive Officer & Director: I'm sorry, Garrett, you're breaking up. We can't understand the question.

Hear me better now? Charles R. Kummeth - President, Chief Executive Officer & Director: Yes, that's better.

Okay. Hi, guys. This is Garrett on for Drew. You talked about the Simple Wes placement strength in the quarter. Did you see any of that coming from the academic market as you kind of talked about addressing that market with ProteinSimple in the past? Charles R. Kummeth - President, Chief Executive Officer & Director: It's been even mix. So one of the major factors of us even making the acquisition, if you might recall, with ProteinSimple was that the desktop platform, the Wes, would find a significant following with academia because we were concerned academia wouldn't make the switch, and they did. Half their sales have been roughly with academia and I do believe that is continuing about the same trend.

Okay. Great. And then also just on China, given the strength we've seen in the quarter, is this something where you think that strength will continue given more released funding or is this kind of a flood coming through of the funding that you saw in the quarter? Charles R. Kummeth - President, Chief Executive Officer & Director: We were pretty bullish all last year, even when others were flat to low-single digits, we still on strong double-digit growth. And we're largely a run rate business there. And not having instruments ship, (28:51) that's probably part of it. But we're still very much in an expansion mode. And while we're near 100 people, we're still in the front end of our opportunities in China. So as we open and grow in Beijing and other cities, I think we're going to find more growth as these institutions keep driving for healthcare. I think the audit activities are probably progressing and travelling from this space to the next space they want to look at in terms of markets. And I think we're moving through that. I think the next riff of course is their market in general, with everything crashing over there and the government stepping in. I think there's a lot of unknowns for all of us if any of that's going to trickle down into the way purchasing happens within these programs they're funding. Right now we believe and we hear that all funding in these areas is still there, still strong, as it was through the audit (29:43) operations this year, it's just people waiting for the process from the government how to actually spend the money. They're putting in place templates and processes actually how to account for their funding, which they didn't have a lot of controls before. So, now they do. So, I think if all those controls get put in place, we'll probably see maybe hope for some of that pent-up funding we could see come forward. For us to say we're going to do better than 25% growth, probably not. We're going to stick with we hope to be in that range for the foreseeable future, which we think is pretty darned good growth rate. We're just really ecstatic that we had a quarter at 35%. And I could just tell you that the team is really a great team, really jazzed. We had zero attrition in over a year in our China team. I mean, kind of unheard of. So that's how happy they are. We're getting them a new site again. They've outgrown the other one. They were only in it for like two years. We're merging that team with the ProteinSimple team, which is also growing and building over there. So we have a full-fledged company there with demo capabilities and everything else. So that's all coming in the coming year. So they're happy, they're excited, they're young. But it's a nascent market and industry, as we all know. And we're trying to ride that wave as best we can.

All right. Thanks, guys.

And our next question is going to come from (31:08). Please go ahead. He disappeared. One moment. And our next question is going to come from Karen Padgett from Bio-Techne. Please go ahead. Charles R. Kummeth - President, Chief Executive Officer & Director: Hello, Karen. Might be a mistake. She's probably listening in but...

And our next question is going to come from John Souter from Rail-Splitter. Please go ahead. Your line is live. Mr. Souter, did you have a question? Our next question is going to come from Paul Knight from Janney Montgomery. Please go ahead.

Hi, Chuck. I think everybody's confused on the star 1 or 1 star. We figured it out now. Charles R. Kummeth - President, Chief Executive Officer & Director: We know you know how to do this, Paul.

How big is China do you think? Can you say? Charles R. Kummeth - President, Chief Executive Officer & Director: How big. What do you mean?

$30 million revenue, is it $35 million? Charles R. Kummeth - President, Chief Executive Officer & Director: I think all-in this year we're in the $35 million-ish range, with ProteinSimple and everything in. We're mid to high $20 million in the core reagent side of the business.

And on ProteinSimple, what are people saying? What would be their complaint or what do you see is the issue? Is it not enough people on the ground, is it applications? Charles R. Kummeth - President, Chief Executive Officer & Director: I think it's just, as I said, it was a bit of perfect storm. We had a plan in the low-double digit growth because it was a 48% growth comp from last year. We had a backlog issue to clear out from the quarter before on some of the, it's called running buffers, they're reagents that work with the system. That's all been corrected. Remember, that whole company, whole business moved to a new building in the past year. And there were a lot of new building start-up issues which were all – we're through all that. The FX piece is a strong component. When you're in the instrument business, these are big ticket items. There's a lot of currency issues in Europe around that, so that was a hit for the quarter. That, too, has come around. And we have had some commercial turnover. Terry had the commercial of the company before moving on six months to nine months ago. We've had to transition through that. We've gone with an incumbent, actually the person that trained in Terry years ago as Head of Commercial for the company now. She has 20-some years experience. She's wonderful we think and knows all the people. And we're filling in around that. And then on the other operations side, with one of my people from my past at Thermo Fisher, in operations I think we're on track. For us, always was, always probably will be and was the plan going forward, our deepest concern was the R&D team. The development team, with this young company with this strong pipeline of technology and new products and that we preserve that and we preserve all of that. We've had zero attrition there on the R&D front, with Bob Gavin the head of that and running that business for us as the SVP of the division. And that's all gone very well. He's been in the role here for nine months or so. Very pleased with that. So it's just a lot of little things. Going forward, we do still think this is a 20% kind of grower. I do believe that it is probably more feet in the street is probably important. I think regionally for sure we've got some coverage issues to deal with. It is a very, very exciting platform, as I mentioned. With all these issues, we had a record quarter in our Simple Western in our Wes platform. So we're shipping a lot of systems now in the quarter and it's starting to scale. So the rest of the pipeline, it needs to get out. It's the bigger platforms we need to do a little better on and I think it's coming. So we'll watch it this quarter and have more input I guess. James T. Hippel - CFO, VP-Finance & Principal Accounting Officer: Hi, Paul. This is Jim. Just to clarify in case you're looking at this from a modeling perspective for China. A very good guess by Chuck on the $35 million. I actually have the exact numbers here in front of me. What we call our China region finished the year around $33 million. But that also includes that Taiwan and Hong Kong and it also includes products that are made in China that ultimately get exported out of China from PrimeGene. So from a modeling perspective, if you're thinking about Mainland China where the high organic growth is coming from, it's probably more in the mid to high $20 million.

Okay, got it. And then lastly, Europe was a problem in the first quarter. I guess that's over now? Charles R. Kummeth - President, Chief Executive Officer & Director: In the fourth quarter, last quarter, you mean?

Sorry, in the March quarter. Charles R. Kummeth - President, Chief Executive Officer & Director: It was certainly a problem. It's less a problem this quarter. Is it over? Is Europe ever over? We're comfortable saying that we think we've seen the coming back of lot of projects with our Biotech pharma, our largest customer base in the German region. So I can say right now on that, we like what we see. The numbers are improving. It was still a low-negative single-digit drag, but that's a lot better than double-digits like last quarter.

Did the quarter's orders finish stronger, or was it even throughout the period? Charles R. Kummeth - President, Chief Executive Officer & Director: They finished strong at the end of the quarter. It's definitely been a trend.

Okay. Charles R. Kummeth - President, Chief Executive Officer & Director: Another quarter or two and we hope to have Germany something like last year. Remember, last year was double-digit growth and so it is a little bit cyclical there.

Lastly, what do you think market growth is for your core Protein ELISA business, antibody business? Charles R. Kummeth - President, Chief Executive Officer & Director: Yeah, I think as a composite in the market is probably 5% to 6%. I think the best one, of course, are antibodies. We did all the primary research, like you guys do, it's high-single digits. And Proteins we think are 2% to 3% as a market, being the smallest market of the bunch. We've been in the mid-single digits. We definitely think we've been taking some share back the last couple years from these ankle biters that have been chasing us. Our brand new strategies I think are working. We think the website has been phenomenal. Our traffic and our orders are up 8% in only in the first month of this new website. And I think I'd tell you that the website previously was about flat the two years I've been here. So we had immediate response on the new website. And, again, that's coming off a lot of the infrastructure, the process system, tools and experience the Novus team brought with them, who already run this whole thing for us now. And it's been really wonderful, on time, on target, on budget. And I hope the growth in the traffic keeps going.

Great. Thank you.

Our next question is going to come from Amanda Murphy from William Blair. Please go ahead. Amanda L. Murphy - William Blair & Co. LLC: Hi. Good morning. So just a couple on the competitive dynamics. So I appreciate all the commentary around the antibody business and it sounds like Fisher is doing pretty well for you. But have you seen any change – it sounds like you're gaining share, but any change in terms of pricing from any of the competitors? And then I guess you mentioned some pricing pressure in the blood glucose segment, so maybe just talk a little bit about that as well. Charles R. Kummeth - President, Chief Executive Officer & Director: I'll go in reverse. The glucose is kind of old history, it's old news. That really happened almost a full year ago and we kind of worked through it. Amanda L. Murphy - William Blair & Co. LLC: Okay. Charles R. Kummeth - President, Chief Executive Officer & Director: Jim's comment was really quarter-on-quarter the same. So we're through that. It's almost a last man standing kind of strategy here. So we don't think there's a lot more downside, one of the reasons we bought the business. And for us, it's all about building out that funnel to ever-increasing content. It's a bit of a super specialized high-content packaging organization with high volume processes, so we love it for that. And the other side, antibodies, I would say no overall pricing differences there. We're still building who we are in antibodies. We're not at the same level of clout that we are in Proteins, of course. We are probably officially the largest supplier in the world right now, but that's not to say that we're maybe selling the most. We have processes and a website and everything including a wonderfully trained Fisher channel to now move things along and I think it's working. We had the best quarter so far with Fisher. They just keep getting better, so we'll keep feeding that beast and hopefully it keeps working well. They're very committed to us. They're very good with our teams. We've had absolutely no channel conflict. It's been marvelous to watch how we all work together on that. They really like having us on board as a partner and as (40:27). Content rules in this space. It helps to pull through all the other million products they do, so it's a good thing for all of us. Amanda L. Murphy - William Blair & Co. LLC: So net-net, the market share gains were driven by Fisher and then the website. Is that fair? Charles R. Kummeth - President, Chief Executive Officer & Director: I would say less the website. It's been a month. Amanda L. Murphy - William Blair & Co. LLC: Yeah. Charles R. Kummeth - President, Chief Executive Officer & Director: Giving some good initial data, but it isn't material yet probably. Fisher definitely helped on the academic side in the quarter, no doubt about it. Amanda L. Murphy - William Blair & Co. LLC: Got it. Okay. And then just last one on the ProteinSimple side. I don't think you guys talked specifically about the whole revenue synergy opportunity and what that added, if anything, in the quarter. Charles R. Kummeth - President, Chief Executive Officer & Director: For like the antibody catalogue? Amanda L. Murphy - William Blair & Co. LLC: Exactly, yeah. Charles R. Kummeth - President, Chief Executive Officer & Director: It's growing. It's still not material enough to say. Again, no victory lap here either. We are over 800 antibodies now. We're on track for over 1,000 end of the year annual here. And we like what we see. I think this is the kind of thing that takes some time. You're trying to woo academics mainly online into taking – going after your certification process. We're getting traction and it's going the right direction. I think it's the right strategy and for us it's probably all incremental growth. So that's important. Amanda, the other revenue synergy that's much harder to measure is how much of additional instruments we're selling because there's an antibody solution geared for it. And it doesn't really show up in the numbers either, so it is hard to measure. But we believe that the combined offering helps both sides of the business, no doubt. Amanda L. Murphy - William Blair & Co. LLC: Got it. Thank you.

There are no questions in queue at this time. James T. Hippel - CFO, VP-Finance & Principal Accounting Officer: All right. Well, I want to thank everybody for joining in. The number of people listening in here is increasing every quarter. We're happy to see that and see the interest and the following. We're excited and happy about our quarter and we hope to keep delivering for you. And we'll see you again next quarter. Thank you.

Thank you, ladies and gentlemen, for joining this conference call. You may all disconnect. And I hope you have a wonderful day.