Trinity Biotech plc (TRIB) Q2 2021 Earnings Report, Transcript and Summary

Good morning, everyone. And welcome to the Trinity Biotech Q2 2021 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please also note today's event is being recorded. At this time, I would like to turn the conference call over to Joe Diaz with Lytham Partners. Sir, please go ahead.

Thank you, Jamie, and thanks to all of you for joining us today to review the financial results of Trinity Biotech for the second quarter of 2021, which ended on June 30, 2021. Joining us on today’s call is Ronan O’Caoimh, Chairman and Chief Executive Officer of Trinity Biotech; and John Gillard, Chief Financial Officer. At the conclusion of today’s prepared remarks, we will open the call for a question-and-answer session. Before we begin, I must inform you that statements made in this conference call may be deemed forward-looking statements within the meaning of federal securities laws. These statements are subject to known and unknown risks and uncertainties that may cause actual results to differ from those expressed or implied in such statements. These risks include, but are not limited to, those set forth in the Risk Factors section of our annual report on Form 20-F filed with the Securities and Exchange Commission. We undertake no obligation to publicly update or revise these forward-looking statements to reflect events or circumstances after today or the occurrences of unanticipated events. With that said, I will now turn the call over to John Gillard, CFO of Trinity Biotech, for a review of the results of the quarter, and he will be followed by Chairman and CEO, Ronan O’Caoimh, for an update on sales, marketing and revenue. John, please proceed.

Thank you, Joe. Good morning, everyone. Thank you for joining. As Joe mentioned, I will now take you through the results for Q2 2021. You will notice from our press release that a non cash impairment charge has been recognized this quarter and is disclosed in the press release. I will give further details on that charge later in the call. The income statement metrics I will quote exclude the impact of that impairment charge. Starting with revenues, total revenues for the quarter were $25.8 million compared with $16 million in Q2 2020. As Joe pointed out, and is our typical approach, Ronan will discuss revenues in further detail later on the call. As such, I will move on to discuss other aspects of the income statement. Gross margin for the quarter was 42.7%, which is broadly similar to the $42.9 million achieved in Q2 2020. The small decline in overall margin is driven by a lower comparative margin from VTM products partially offset by a higher margin from our core products in Q2 2021 when compared to Q2, 2020. As ever, our gross margin remains susceptible to product mix changes, geographic spread, currency fluctuations and product level variation. Other operating income increased from $2,000 in Q2, 2020 to $2.9 million in Q2, 2021. This income relates to loan funding received in 2020 under the US government's Paycheck Protection Program. Four Paycheck Protection Program loans received by the company in 2020, totaling $2.9 million were forgiven during the quarter Q2, 2021 and therefore being recognized as income this quarter. These four loans were treated as short term liabilities at March 31, 2021. Moving on to R&D expenditure, this decreased slightly to $1.1 million, compared to $1.2 million in Q2, 2020. Meanwhile SG&A costs have increased from $5 million in Q2, 2020 to $6.3 million in Q2, 2021. It is important to note that SG&A expenses were unusually low in Q2, 2020 due to the furloughing of employees as a result of the pandemic. Government payroll support related to COVID-19 which are not available in 2021 and other cost savings. In addition, Q2, 2021 SG&A cost reflect increased professional fees, plus additional sales and marketing team costs reflecting expansion of our international sales and marketing team. These results in an operating profit for Q2, 2021 of $6.3 million, compared to $500,000 reported in Q2, 2020, an increase of $5.8 million. This increase in operating profit is primarily driven by increased revenues and the forgiveness of the Paycheck Protection Program loans partially offset by higher SG&A expenses to the slightly lower margin. Moving on to financial expenses. This includes the quarterly cash interest costs for exchangeable notes of $1 million; $200,000 relates to notional finance charges associated with leased facilities. These notional finance charges are required by the relevant accounting standard IFRS 16. You will note that there is also non cash financial net income of $900,000, which is made up of accretion interest of $100,000 in the accounting carrying value of the exchange of a note less than $1 million fair value adjustments to the derivatives embedded in the exchange of a note as required by the relevant accounting standard. Profit after tax before impairment one-off items and non-cash financial expense was $4.4 million, compared to a loss of $800,000 in Q2, 2020. As in prior, and set out in the press release, we quote earnings per ADR effectively or equivalents of EPS on standard basis, and also before the impacts of impairments, one off charges and non cash financial items. Using that modified measure earnings per ADR have increased to $0.212 from a loss of $0.036 in Q2, 2020. Our diluted earnings per ADR have also increased, in this case, the $0.203 from $0.01 in Q2, 2020. I will now provide you with more information on the aforementioned impairment charge of $6.1 million. This charge results from the accounting standard driven impairment review, we're required to carry out under IFRS. For a number of factors taken into account in calculating the impairment due to the company's period end share price, calculation of the company's cost of capital, and future projected cash flows from individual cash generating units in the business. In addition, the company examines individual project costs for indicators of impairment. The non cash impairment charge of $6.1 million has been recognized against the following assets, intangible assets $3.9 million, property, plant and equipment of $1.9 million and current assets of $300,000. I'll now move on to talk about the significant balance sheet movements since the end of March 2021. There was a decrease in property, plant and equipment of $2.1 million, additions in this quarter were $400,000 and this was offset by depreciation of $600,000 and the aforementioned impairment charge of $1.9 million. In the same period, our intangible assets decreased by $2.3 million. This was made up of additions of $1.8 million, offset by an amortization charge of $200,000 and an impairment charge of $3.9 million. Moving on to inventories, you would have seen we have decreased by -- these have decreased by $2.9 million and now stands at $34.7 million. In Q1, 2021 we've reduce the level of production of our PCR Viral Transport Media, VTM in line with projected demand, and this is the main reason for the reduction in the previous quarter. Meanwhile trade and other receivables have increased by $0.5 million to $15.4 million reflecting slightly lower cash collections. Our trade and other payables reduced by $9.6 million compared to March 2021. This reduction was mainly driven by the formation forgiveness of the PPP loans, and a reduction in trade creditors and approves of the company paid VTM suppliers for previously supplied raw materials, are reducing the level of purchases of raw materials to reflect the reduced demand for new VTM orders as a quarter continued. You will see from the balance sheet that we have presented the exchange of a notes liability and the related embedded derivatives within current liabilities. Previously, this has been recorded within non current liabilities. The reason for the change this quarter is because the notes have a put option on 1 April, 2022. As the company doesn't have an unconditional right to defer settlement of liability, at least 12 months after the reporting period the accounting standards require us to show the exchange note as a current liability as of June 2021. Finally, I will discuss our cash flows for the quarter. Cash generated from operations during the quarter was $1.3 million. Non operating cash outflows during the quarter included capital expenditure of $2.2 million, and payments for property leases of $0.7 million. In addition, the company paid $2 million of interest in exchange of a note. Overall, this resulted in a cash balance $28.6 million at the end of Q2, 2021. Thank you. I will now hand over to Ronan who will bring you to our revenues. Ronan O’Caoimh: Thanks John. I'm now going to review the revenues for quarter two, and for the corresponding quarter of 2020, before opening the call to question-and-answer sessions. Our revenues of quarter two were $25.8 million, compared to $16 million in the corresponding quarter, which is an increase of 61%. Point-of-Care revenues in quarter two were $2 million, compared to $1.3 million in the corresponding quarter, which is an increase of 55%. Despite this increase, our HIV revenues are lower than normalized levels, due to delays in the issue of HIV rapid test orders from Africa as a result of COVID-19 and that is further exacerbated by difficulty procuring air freight transport into Africa. However, we are seeing evidence of these COVID-19 driven delays abating and we expect the Point-of-Care of HIV revenues will quickly return to normalize levels. In March 2021, we announced that we had submitted our TrinScreen HIV product to the World Health Organization for approval. This product once approved, will allow the company to enter for the first time, the HIV screening market in Africa, which had 117 million tests annually is a 12 fold bigger market by value and the confirmatory test market where Trinity Biotech has for many years had a dominant market share with our products UNI-GOLD. During the last week, the company received an update from the WHO on the approval process whereas the WHO confirmed that the final assessment phase is now well advanced. The company is confident of receiving approval over the next number of months, and then quickly leveraging the quality of its product, given its advantages over the competition. Even also its experienced sales and marketing team on the ground in Africa, even also our reputation for excellence with UNI-GOLD and also given our high volume automated production capacity, capability in Ireland. And we believe that all these factors will enable us to quickly take market share in screening HIV Africa market. Moving on to our Clinical Laboratory business, our revenues for quarter two were $23.9 million, compared to $14.8 million in the corresponding quarter 2020, which has an increase of 62%. This increase is primarily explained by strong COVID-19 related product revenues with our PCR Viral Transport Media products in the most significant contributor. We have developed and continue to develop a strong suite of COVID-19 related products, as just mentioned our FDA approved PCR Viral Transport Media products performed well during the quarter, it's a sample collection device for a COVID-19 PCR molecular testing which is used to store the nasal pharyngeal swab, which contains the patient sample, allowing it to be transmitted in a stable environment, and transport medium stabilizes sample and prevents bacterial growth and maintains its integrity until such time as a test is run in the laboratory. In addition, the company has developed a COVID-19 ELISA automated antibody test, which is available for sale in the United States, which sells in modest volume. The company also developed another antibody test, which is a COVID-19 Point-of-Care antibody test. And in June, it made an emergency use authorization application to the FDA for the test. However disappointing the FDA informed the company given the volume of EUA request test is not prior to -- prioritizing this type of test for review. Given the rapid adoption of COVID-19 vaccines, and the focus on using evidence of vaccination rather than the presence of antibodies as proof of immunity, we believe that the use of antibody tests in this pandemic would be very limited, and we will therefore make no further investment in antibody testing. Moving on then, as previously announced, the company is well advanced in the development of a COVID-19 Rapid Antigen test, and that's an antigen test as opposed to an antibody test. It uses a nasal pharyngeal swab, which will run in 12 minutes. The test will be manufactured in our automated manufacturing facility in Ireland with the cassette which is virtually identical to that of both HIV UNI-GOLD and HIV TrinScreen. The test which is largely developed is demonstrating excellent analytical results. And the focus for the remainder of the development process would be on transfer to automate manufacture and -- for validation. We now expect that we will have achieved CE Mark during quarter two 2022, thereby enabling sale of the product throughout Europe. While we do expect to launch the product in the US, regulatory path for such products remains fluid. And most of the company will continue to assess what may be the most appropriate regulatory approval pathway to allow a US launch of the product. However, we do expect that will be achieved within a short number of months after European approval, given the evidence of breakthrough infections for those vaccinators and a continuing threat of new variants, we believe that rapid antigen testing will have a continuing place in the overall public health response to COVID-19 and that this will be a significant market fraternity into the future. As previously stated, our increase in revenues is mainly due to strong revenues about COVID-19 PCR Transport Media products, the company noted a significant reduction in demand for new orders of VTM during quarter one and quarter two of 2021 and despite fluid situation given delta and the fact that over the past few weeks, we are seeing increased interest in the product, we believe that our VTM sales in quarter three will be significantly lower than the prior quarters. And now moving back to our core business. Comparison between this year's revenues and quarter two of 2020 is meaningless. Given that there was a virtual total shutdown during quarter two of 2020. Moving to our hemoglobin A1c business, we continue to have low instrument placements with just over 30 instruments placed during the quarter, which is less than 50% of normal placement levels. This was expected as hospitals and clinics are unlikely to purchase new capital equipment during the pandemic. However, we are confident that these patients will fully recover in a post pandemic environment. Meanwhile, hemoglobin reagent revenues, and by this I mean the number of tests being run in our diabetes business are running at about 90% of normal, again due to the fact that patients are less likely to perform discretionary tests during the pandemic. Meanwhile, we anticipate launching our new mid sized hemoglobin A1c instruments in early 2022. This instrument will enable us for the first time to target 1000s of smaller hospitals and diabetes clinics around the world, mostly outside of the US and the EU. Previously, we had been unable to service this market as the processing capability of our premier instrument, and also what it cost was too large for their requirements. Although we have designed and developed the instruments in Kansas City, it will be manufactured in China, thereby enabling us to make the instrument available in the market at a very attractive price. And lastly, our autoimmune business generated revenues approximately 7% lower and in the pre pandemic environment with reference laboratory volumes down approximately 10% and product revenues marginally down. We believe that this is entirely due to the pandemic, as many patients defer doctor visits unless absolutely necessary. And we are confident that these revenues will fully recovered post pandemic. So I now open the call to a question-and-answer session, please.

[Operator Instructions] Your first question today comes from Jim Sidoti from Sidoti & Co.

Hi, good afternoon, Ronan and John. Can you hear me? Great. So it sounds like you're in the final stages with the WHO for TrinScreen. Is the WHO similar to the FDA and that you're not allowed to talk about the test with potential customers until the approval is received or can you start to market the device now ahead of the approval? RonanO’Caoimh: You could start to market the device ahead of the approval but I don't think you'd be taken very seriously in the individual countries without approval being in place so I mean, you can kind of warm people up a little bit but you can't really seriously market it as such.

So how should we think about the ramp and sales for this new test? Is this some thing that it's going to take, a couple quarters to get going, or do you think you'll be able to get orders within the first quarter or so after you receive the approval? RonanO’Caoimh: Jim, unfortunately, it's not as simple as that, in order to have any meaningful sales, we will have to basically be put on to the algorithm for a particular country, all right. So basically, each individual African country, despite the fact that they don't actually pay for the tests themselves, they actually decide what products they'd like to use. And after that, then the Americans and the Europeans actually make the payments. So basically, what happens is that the individual countries will decide our test, normally, just one test will be the confirmatory -- of the screening test, although they cancel it, and then it also decide what tests will be the confirmatory test. And some countries review that every year, but typically, it's every two years, right. And so, but it's not a kind of end of year, December thing, it's the varying time they review it. So in order to really, in order to actually basically sell in meaningful volume, you need to basically be put on the algorithm as the screener of choice for a particular individual country. So that will take time, but those algorithms make reviews, all the times, as always algorithms in the melting pot, and whenever and in each individual country, we have a distributor, and we are involved with opinion leaders, and we have technical people on the ground. So we'll be working the system all the time. As each algorithm comes up for review. But it's not a straight out. It's not a straight. It's not like 100 meter race, it's not like you're straight out of the blocks.

Understood, and then how will you handle ramping up production? Or have you started to build some inventory yet or are you going to wait to actually receive some of these orders before you build up your inventory?

As if primarily Jim, we'll wait until we receive orders or at least have, I suppose a significant line of size. As Ronan suggested, it's a relatively long sales process. And we're lucky to have a very experienced team at both from UNI-GOLD and also some kind of key people, we've got on board. So we have the team that are able to make those kind of judgment calls, in terms of our solid orders are, what we have been spent a lot of our time is optimizing our manufacturing process here in Ireland, to make sure that we can efficiently reach the levels of volume that we expect. So to Ronan's point earlier, the screening market is a much larger market, it's a much, much larger volume market. So in terms of our efficiency, and the level of volumes for plants here, it's really a step change for us. And that's really where we're putting our focus to make sure that when there is -- when those orders are ready, we are ready to be able to fulfill them.

So is it reasonable for us to assume that you'll have some level of orders in 2022? Assuming you get the approval in 2021?

Oh, absolutely, absolutely. We believe we will get moving very quickly. And we believe this couple of the bigger countries may actually decide to split the algorithm as in for the screening, to take -- to basically put us in alongside Abbott.

Okay, and then similar question for the hemoglobin device, the new A1c tester, do you think you'll have some revenue from that product in 2022 or that going to be further out?

Yes, that will be but I mean it's difficult to estimate when we'll have the instrument fully approved. But I mean, I think mid-2022 would be optimistic. Yes, I think that order of timeframe.

Got it. And then the last one for me. Can you tell it? I'm sorry.

Sorry, go ahead, Jim.

Okay, can you tell us what the VTM sales were in the second quarter and how they compared to a year ago?

Well, I mean, I think our total COVID product sales would have been around seven and change in this quarter.

And where were you a year ago with that product? Were there any sales in June 2020?

Yes. I think I made about $3.5 million. $3.5 million.

Our next question comes from Paul Nouri from Noble Equity.

Hey, good afternoon. Did you say towards the end of your formal remarks that the COVID sales will be down for the third quarter? RonanO’Caoimh: Yes, I did, Paul. Yes. I mean I think you're seeing this right across, I think possibly thing is right across all diagnostic companies that basically it's more and more people are vaccinated. I mean despite the fact that the Delta variant is proving very problematic. The reality is that the total volume of testing is actually is dropping. And what you would also have seen, I think we signaled is that there was almost like panic buying towards the end of last year of VTMs and in general of total products. And so there was an element of -- there's an element of stockpiling that had to be kind of watch through a system. So I think so having said that, on a positive, so despite the fact that we said that, I also indicated that we were seeing renewed levels of interest, just in the last short number of weeks. Again, so a very fluid situation. But yes, we have said that we, quarter three will be down.

And Paul, I think what you've seen is-- we are obviously towards the end of the quarter, as Ronan said, we're seeing increased interest. To what extent that interest manifests itself into significant orders towards the end of this quarter is just home care at this point. But, we clearly don't have a full quarter of that renewed interest.

Okay, and then for the autoimmune panel that you guys are running out of the lab. Is that posting any significant sales yet?

You mean actually COVID sales, like long COVID sales, no, we got only at the commencement stage, Paul. And then just to remember I said today in general terms our autoimmune, large volumes are probably down about 10%. And that's just because, again, if people have a choice to kind of stay away from a hospital or a doctor, so it's done -- the problem is pressing into tend to get deferred so yes, along COVID.

Go ahead.

I have to say that along COVID products, we've a very interesting range of products, but they're very much just being rolled out as we speak.

Yes, what's going to be your strategy in terms of creating awareness about it among physicians? I mean, it seems like the type of physician that could order or that might order this kind of panel is just so wide ranging. So how might you go about marketing it?

Paul, I mean, we have a US sales team involved in marketing those products. And what we do is we do papers on it, the academic papers, we try and talk to opinion leaders; get them interested, direct sales efforts as well. And that's the kind of methods we're using.

Okay. And I think you said earlier on the call that the sales team expanded, I was just wondering, is that in anticipation of the WHO approval or is that for your current product on the market?

No. When we said that we were referring only to Africa. And so what's happened there, basically, is Abbott, so Alere had basically had a dominant position within African HIV screening. And they were acquired by Abbott a number of years ago, fairly recently. And basically, what's happened is, is that we have managed to basically recruit the senior management team, that develop the business for Alere. So we have a really good team in place. So the senior people of that team now work for us, and they're the people that basically, managed to have a kind of who built that 85% market share for Alere, now Abbott. So their argument is that we have a very experienced with the perfect, arguably the perfect marketing team. We have a good reputation with UNI-GOLD. The product itself is performing excellently, and is quicker than the Abbott test. I mean the WHO ran their own trials. And they got -- we got 100% sensitivity and specificity on large sample sizes. And on top of that, we have this very sophisticated automated system in Ireland for manufacturer which can -- will be very easy -- will respond easily to demand at any level. I think we put all those factors together we're confident and taking -- of taking meaningful market share. But only -- with only the slightest standard use of pricing will only come in marginally below them -- the number one.

Our next question comes from Bill Labs.

Good morning. I got just several questions, Ronan. What is the pricing on the Alere product right now for the test in Africa --? RonanO’Caoimh: It is recently moved from $0.80 to $0.90. So it's basically $0.80 for about 12 years, and it moved in the last year to $0.90.

Okay. All right. Well, that sounds good. You said there are 117 million of those tests a year? RonanO’Caoimh: Yes, 170.

170 not 117. Better. Thank you for the clarification. I have another question on the rapid and the COVID rapid antigen test. Now, you've disbanded going forward for the antibody test, but you're still pursuing the antigen test. And it seems to me, if you go to target or some of these stores in the United States, you can get that test for $23 without going to a doctor's now they're talking about on TV yesterday at CNN, about this guy from Harvard that's pushing that you should get it quicker, and the United States I believe is going to really wrap it's going to really accelerate the testing. So I mean you have to go to a doctor to do your rapid test to get it done. And how are you going to compete? You're not even going to be in the ballgame until 2022. If you get there, you'll be in Europe, but you won't be in the United States. What's the thinking on this antigen test? I mean, you're already almost there. But your approval in the US will be at least a year away, correct? RonanO’Caoimh: Yes, probably about a year away. I think by the time we get and then the only reason we can put a firm date on Europe because we were exactly what the regulatory pathway is. But, in the USA, we're just being more cautious because, the rules pertaining to the EUA, the Emergency Use Authorization, and then the notification status have changed, have changed and changed regularly. And for example and we're in a situation where under EUA notification basis, we can sell our antibody tests. But when we submitted the rapid antibody test, they said that they didn't want to review it. So we're just being cautious when we say that we're just saying we don't -- we're not certain of what the pathway is because pathway is tending to change. But there's a huge market in Europe for us, for the antigen tests. And we believe although we're coming late to market, we're coming with something of really high quality. And in terms of pricing, we can manufacturers arguably in around $0.50 and therefore, there'll be very strong margin on us. Whether the product is run by a doctor or individually, I think it's kind of almost like a sideshows. In some jurisdictions, you can do some, but typically, it doesn't have to be run by a doctor. But there are many instances where it can be run from home. As you know, many employers are doing it. My own daughter's is working in London in Goldman Sachs and she's tested three times a week with an antigen test in every week, for months on end. And so I think COVID is with us. We could debate how long, what would they be the characteristics of COVID how long it'll endure. But I do believe we believe within this company that antigen testing is going to be with us for an extended period of time, extended that into years. And although we come to the party late, we believe that we have an excellent test.

Okay, and is it 12 minutes fast? And I mean, that's pretty fast test, but it doesn't have to be administered in a doctor's office. So you're now telling me I could buy that kit and administrator at home or the employer can, you don't need a clinician to do it? RonanO’Caoimh: It depends. It depends on the jurisdiction, depends on the rules. I mean obviously there's lots of antigen tests available for home use and then just test where you can you take the swab and you posted. And then if the result is run in a lab, and then you sort of various ways of doing this. There's a -- suffice it to say there's a very big market for antigen testing. I mean they're selling the millions and millions of them.

Are they currently selling antigen rapid test in Europe quite a bit. They are right? RonanO’Caoimh: Yes, I mean I was just in Goldman Sachs in London, 8,000 employees, and they're all tested three times a week. So I mean the only the one -- [Multi Speakers] Many as far as doing that.

24,000 men, okay. RonanO’Caoimh: Many examples.

What are they using? What are they using for their antigen tests? Are they just a competitor -- what test are using? RonanO’Caoimh: Okay, mostly Chinese tests, mostly Chinese tests. Yes, and remember also our flights in and out of the UK required antigen test now. From UK and out of Europe is requires antigen test, when you return back into -- the return back into the country. So, there's lots, believe me, there's endless antigen test requests.

And the way we think about a Bill is, the position has shifted, again, somewhat, given the level of breakthrough infections, vaccination is no longer the strong signal that it was expected to be in terms about somebody not having COVID. And that can be either in terms of comfort from yourself, comfort to your employer, comfort to your co workers, comfort to your co travelers around being free from infection. And I suppose the antigen test, we've seen, lots of examples of employers pushing et cetera, is a way for people to get a level of comfort that they are not infectious, or the people around them are not infectious. And I suppose, just a short time ago, we thought that vaccination was probably going to give that level of comfort with the Delta variants and the level of breakthrough infections. That doesn't seem to be the case anymore, because that's probably the key driver as to why we think it'd be greater longevity, in this test these types of tests than we would have just a short while ago. RonanO’Caoimh: Just some other examples Bill, like, for example in Dublin, Dublin Google and Facebook and salesforce.com, centers and are all testing their employees weekly. And for example, also, I'm sure you're reading about this, I'm not sure so much on top of it, but like, for example, in the US, sorry in Europe, and admittance to concerts, and to all sorts of social events require an antigen test.

Really? Okay. All right. Well, with add and with that, so I mean, it's still it's something that's more of a bonus, but your real excitement is that WHO, you said that your most exciting thing you got going, I mean, besides other things that really make a change, correct? RonanO’Caoimh: I mean we are excited about the both.

Okay. That's good. All right. And there's nothing you can say further on the refinancing of $100 million loan at this point, right? So is there anything further, you can add? RonanO’Caoimh: Well, we've appointed professional advisors. And we're confident that there are a number of options available to us today with them out of bucket, as you can imagine, it's very much in thoughts and in thoughts of the board and we're working diligently honest.

Ronan O’Caoimh: Thank you, Bill. And there appears to be no more questions. So I think maybe we'll close the call. And thank you, everybody, and thanks for your support and your interest. And hope to see you soon.

Thanks everybody. Have a good day. Bye.

Ladies and gentlemen, the conference has now concluded. We do thank you for attending today's presentation. You may now disconnect your lines.