Haemonetics Corp (HAE) 2006 Q2 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Haemonetics second-quarter fiscal conference call. At this time all participants have been placed on a listen-only mode and the floor will be open for your questions following the presentation. Please note that during the course of this call Haemonetics may make statements that could be characterized as forward-looking and actual results may materially differ from the anticipated results. Additional information concerning factors that could cost actual result to differ materially is available in the Company's press release and the 10-K. Brad Nutter, Haemonetics President and CEO, will moderate this call. Mr. Nutter?

Good morning. Today I'm joined by Ron Ryan, our CFO; Lisa Lopez, General Counsel and VP of Administration; Julie Fallon, Director of Investor Relations; Pete Allen, President of the Donor Division; and Brian Concannon, President of our Patient Division.

Our call today will cover three things. First, I'll comment on the Company's overall performance for the second quarter. Second, Ron Ryan will detail our operating results. And third, Pete Allen will discuss progress in the donor division. I'll end with some closing comments.

We made good progress this quarter. Our revenue guidance for the year is 11 to 13%. And for the quarter revenue was up 10.5% to $100.5 million. This is the first quarter since I've been with Haemonetics that we've achieved double-digit sales growth. So we're real pleased with that. Year-to-date revenue is $204 million, up 9.8%. It will be important to evaluate our sales over the next quarter to get more clarity on OrthoPAT revenue growth as we transition to a direct salesforce in the U.S. So for now we're most comfortable with the low-end of our revenue guidance.

We continue to improve profitability. Let me highlight our performance versus our remaining guidance goals. We said we would improve gross margin over FY '05 margins of 51.6%. Gross margin was 51.5% for the quarter, up 140 basis points, and 52.2% year-to-date, up 230 basis points.

Now I'll review the rest of our results versus our guidance. Please note that the following results include a $1.1 million inventory reserve which negatively affected our P&L for the second quarter. We planned for annual operating income growth of approximately 20%. In fact, operating income grew 10.6% for the quarter and 17.3% fiscal year-to-date. Our annual operating margin is targeted at greater than 16%. Operating margin for the quarter was 15.3% and year-to-date is 16.6%.

Finally, our guidance has been earnings per share in the range of $1.73 to $1.83 for the year. Earnings per share for the quarter was $0.40, up 17.6%, and year-to-date earnings per share is $0.87, up 19.2%. We're particularly pleased with our consistent earnings growth given our second-quarter inventory reserve of $1.1 million.

Now as you saw in our press release, we have raised our earnings per share guidance for the year. As I said, our previous guidance for earnings per share was $1.73 to $1.83. This month we received a $31 million payment from Baxter Healthcare Corp.; this was following a favorable arbitration ruling. That award adds approximately $0.61 to our Q3 earnings per share. As a result, we're raising our annual guidance for earnings per share to a range of $2.34 to $2.44.

So we continue to make headway against our first corporate strategy which is leveraging the core business to improve profitability. On a year-to-date basis we continue to see positive drop through. Sales are up 10%, gross profits up 15%, and operating income is up 17%.

Our second strategy is to expand the business. This quarter Pete Allen will give you an update on the plasma market, the ZLB contract, and the launch of new donor products. Execution of the ZLB contract is important to our success this year and new product launches will position us for continued growth in FY '07 and beyond. Before we get to Pete, however, let me turn the call over to Ron Ryan to give you more details on our financial performance. Ron?

Thanks, Brad. Good morning, everyone. Today I'll review our second-quarter and year-to-date financial results, then I'll share some comments on divisional operations. As Brad noted, for the quarter revenue grew 10.5% to 100.5 million. Year-to-date revenue is 204 million, up 9.8%, with less currency tailwind than we experienced in the first half of FY '05. To be specific ,in Q2 FY '05 3.2% of revenue growth came from currency whereas in this quarter 2.7% of revenue growth came from currency.

For the quarter gross margin increased 140 basis points to 51.5%. Year-to-date gross margin increased 230 basis points to 52.2%. In the quarter we took $800,000 out of structural manufacturing costs. We're targeting $4 million of structural cost reductions for the year. We've shown the sustainability of our structural cost reduction program through more than $25 million in cost savings over the past seven years.

Operating margin was 15.3% for the quarter, level with Q2 FY '05. Year-to-date operating margin is 16.6%, up 100 basis points. Earnings per share were $0.40, up 17.6%, and year-to-date earnings per share are $0.87, up 19.2%. In the quarter earnings benefited from currency, interest income, hedge points and a lower tax rate. As Brad said, in the quarter we took a $1.1 million inventory reserve for components of an existing productline that we decided not to support any longer. Nevertheless we still showed improvement in our P&L and year-to-date we're seeing the positive drop through that we're committed to achieving annually.

We also maintained a strong balance sheet producing $12 million of operating cash flow which we define as free cash after working capital and capital expenditures. For the year we expect nearly $40 million of operating cash flow. Beyond operating cash flow we generated $2.9 million from stock option exercises. We now have 210 million of invested cash and $47 million of short- and long-term debt.

Before I move on to productline sales, let me talk more about the Baxter payment. Brad reviewed the impact that the Baxter award will have on earnings per share. I would add that this award will result in approximately $28 million in pretax income in the third quarter. We estimate that this will break down as follows -- $26.3 million of other income, $1.3 million of interest income, and $400,000 credited to SG&A for recovery of legal expenses incurred in FY '06. We anticipate a related tax expense of about $11 million. The award will increase our Q3 cash balance by approximately $20 million.

Consistent with past communications, all numbers I refer to in my remarks on the P&L and balance sheet are as reported. If you want to review our results with and without the impact of foreign exchange, look at our website for the detailed P&L breakout as well as an operating cash flow metric.

Now I want to drill down a little deeper into revenue. First I'll review disposable sales for our donor product family which consists of the plasma, blood bank and red cell product lines. Then I'll review disposable sales for the patient products. Finally, I'll review the equipment and miscellaneous and service lines.

In the plasma business we plan for disposables revenue growth to increase this year from 7 to 9%. For the quarter plasma revenue was $26 million, up 7.0%. Year-to-date plasma revenue is $53 million, up 7.1%. Disposables unit growth from our new customer, ZLB Plasma Services, as well as from other U.S. customers was a key sales driver.

Now let me turn to the blood bank business which includes platelets, cell processing and intravenous solutions. We plan for blood bank disposables revenue to increase single digits for the year. Blood bank disposables revenue for the quarter was $32 million, down 3.4%. Year-to-date blood bank revenue is $65 million, up 1.2%. For the quarter we're comparing against a Q2 FY '05 when we had a large one time sale of a generic drug, Fluconazole, as produced in our South Carolina intravenous solutions plant.

Turning to the red cell business, we planned for annual disposables revenue to increase 30 to 40%. Q2 FY '06 red cell revenue was $9 million, up 33.8%. Year-to-date red cell revenue was $17 million, up 32.4%. Red cell growth is coming mainly from increased unit growth and product mix in the U.S. as Haemonetics continues to execute well in converting existing customers to our higher priced filtered red cell collection kit.

Filtered red cells offer cost savings and improved efficiencies for customers. As a matter-of-fact, as of next week all 20 American Red Cross regions that Haemonetics sells to will have begun their conversion to red cell filtered kits.

Now let me review revenues from our patient division which includes Cell Saver and OrthoPAT brand products. Cell Saver disposables revenue for the quarter was $15 million, down 1.7%. Year-to-date Cell Saver revenue is $32 million, up 1%. Our growth expectation for Cell Saver for the year is 1 to 3% so we are in line with that expectation.

OrthoPAT disposables revenue for the quarter was $4.5 million, up 2.6%. Year-to-date OrthoPAT revenue is $10 million, up 15.3%. The slowing of revenue growth comes from the U.S., just as we predicted when we announced the move to direct sales on August 30th. At that time we said that we expected OrthoPAT growth to be in the 25 to 35% range for the year. We will take Q3 to gain more visibility into how OrthoPAT sales will progress. On our Q3 call we'll have additional information about OrthoPAT revenue growth for you.

Brian Concannon is joining today's call to answer your questions on sales of the OrthoPAT in the U.S., but let me spend a few minutes to recap the information we've shared. In addition to Zimmer's failure to perform its obligations under our contract, we decided to move to direct U.S. sales for four strategic reasons.

First, direct sales of the OrthoPAT will allow us to achieve higher sales growth rates. Second, direct sales gives us access to the entire U.S. market. Our distributor's customers represented only one-third of the U.S. market. Third, direct sales position us well strategically as we expand our patient division product offerings. And fourth, direct sales consistently improve our margin on the OrthoPAT product.

To date we've secured our first contracts for direct sales in the U.S. We've also agreed to ship our distributor a limited amount of product based on a purchase order pending at the time of termination. So we'll be competing with our customer in some accounts through the end of February, but we'll also be selling direct. We're pleased with our progress to date, but we'll have a lot better idea after this quarter of how quickly we can convert existing accounts to be Haemonetics customers.

Moving to the equipment line, we had a strong quarter in which equipment sales were $7 million, up 157%. Equipment sales year-to-date are $13 million, up 37.6%. Year-to-date equipment sales growth comes from sales of cell processing systems in the U.S., plasma systems in Europe and the newly introduced Cell Saver 5 Plus devices worldwide.

I'll finish my discussion of the product lines with the miscellaneous and service line. Q2 FY '06 revenue was $7 million, up 69.6%. Year-to-date miscellaneous and service revenue was $13 million, up 50.8%. Most of this revenue came from our 5D information management division. 5D continues to penetrate the broader blood collection market. In fact, 5D was recently contracted by the U.S. Department of Defense to upgrade the blood logistics hardware at U.S. military bases around the world.

I'll close by summarizing that while the mix of our productline differs somewhat from our plans, we are pleased that we continue to reach higher sales growth rates. Now here's Pete Allen, President of our donor division.

Thanks, Ron. Good morning, everyone. Ron spoke about some of the factors contributing to our sales growth so far this year. Now let me add to our progress to date on plasma sales, review plasma market trends and highlight two of the new products we have in the pipeline for the donor group.

First, after two years of flat to declining sales in the plasma business due to the acquisition of Alpha by our competitor and reduced collections we are excited to see 7% disposables revenue growth. Let me remind you that in April of this year we completed Phase I of the process to convert all of ZLB Plasma Services' U.S. business to Haemonetics technology. At that time we placed more than 700 PCS 2 units at 22 ZLB centers. Right now we are preparing for Phase II of the conversion process by training staff at the new ZLB centers in the use of our devices.

We will began converting the 32 centers in December and expect to finish by the end of January 2006. Originally Phase II involved the placement of about 1,300 more machines. I'm happy to report that ZLB has experienced strong collection growth and has now requested over 200 incremental devices. So by early FY '07 we will have more than 2,300 Haemonetics devices at U.S. ZLB centers, thus succeeding our expectations.

Within the plasma collection market generally some regions in Europe are still working through excess inventory while others are starting to see moderate collection growth. Japan still has significant plasma oversupply. Over the course of this fiscal year we expect Japanese collections will decline from about 900,000 donations per year to about 750,000 donations per year. Haemonetics retains about 80% plasma market share in Japan.

In the U.S. demand for plasma is strengthening as excess inventory is finally depleted. Some industry research indicates that in the U.S. about 12 million collections per year are needed to meet the end demand for plasma derived pharmaceuticals. Currently there are about 10 million plasma collections per year in the U.S. So over the next two to three years projections are that the industry will return to growth mode to align collections with demand.

Now let me turn to the donor division progress on new products. I will first share with you a brief update on the Scansystem and Crit-Scan and then focus my time on two new products in information management that address the need to manage the blood collection process. First, the Scansystem, this is a device which tests for bacterial levels in platelet products. We have an exclusive agreement to market Scansystem in Europe and we launched the product earlier in the year in an estimated $20 million niche market.

As expected the Scansystem has a long sales cycle as decisions to move forward often must be reviewed by medical and even political authorities within a country. We have three customers to date in several blood collection systems trialing Scansystems.

Now let me move to Crit-Scan. As Brad shared with you last quarter, the launch of Crit-Scan is delayed. In the process of doing our customer acceptance trials, we identified significant design modifications that need to be made to the Crit-Scan before it will be able to meet Haemonetics' standards and our customers' needs. Crit-Scan's manufacturer has begun these modifications and at this time we decided to return the product to development rather than consider it a product ready for launch.

The good news is that our launch process of customer acceptance trials, limited market release and full market release works. We like the noninvasive hematocrit testing market and we will make a decision our pass forward by the end of Q3.

Now Brian Concannon has spoken in the past about moving the patient division toward a blood management focus. As we expand the donor division's product portfolio we will also be looking at products that give us a total blood management offering. In the donor area this means products that help blood collectors manage the process of collecting and distributing blood from the beginning process with the donor to the end process with the patient receiving the transfusion, vein to vein so to speak.

As we have reported many times, all blood collection center CEOs have three constant challenges -- recruiting enough donors, managing regulatory requirements, and keeping costs down. Our two new products will address all of these issues.

Both are software products that come to us from 5D information management and are scheduled for introduction at the end of fiscal 2006. These are EQ and E-Links (ph) which were previously known as the einterview and HaemoConnect. What's exciting about these software products is that through them 5D software can be completely integrated into blood collection operations which begin to realize the vision of managing the blood supply chain from vein-to-vein as I described earlier. These software products will also expand 5D's reach and product offering beyond the plasma industry into the larger blood collection market which has tremendous need for software systems that can support the industry's quality standards.

Now let me review the products. EQ is electronic donor questionnaire and assessment software tool that automates the health history form that everyone must complete prior to donating blood. EQ would replace most of the manual interview process. It even includes artificial intelligence that will allow it to make recommendations on a person's donation eligibility. On October 12th we submitted our application to the FDA for 510-K clearance. We are on schedule and on budget with this product.

E-Links on the other hand, coming from 5D this year is a donor floor automation system that replaces the paper trail that follows donors from the interview process through donation and then follows the blood product into the laboratory. E-Links can work with any blood donation device, not just Haemonetics' systems. We expect to submit our 510-K request in December. We are on schedule and on budget with this product also.

Both EQ and E-Links can be sold initially through our blood bank and plasma salesforces with the 5D sales group assuming responsibility for the final sale. The market for this software is all blood collection; that is the 60 million annual blood and plasma collections worldwide. Collection centers would license the software. For every donor that presents to donate the blood center would use the software one or more times and be charged per use. Essentially we would charge on a per click basis, somewhat like our disposable sales model. The value proposition for customers would increase as they integrate multiple 5D software systems into their operations.

So let me sum up. The donor division has a significant plasma agreement that will contribute to growth and we have a U.S. plasma collection market that is rebounding. We continue our learning curve on new products and are excited about the information management business which will be a meaningful contributor over the next several years. These opportunities combine to lay the foundation for strong sales growth. Now let me turn the call back to Brad.

Thanks, Pete. Over the last two years we've done a good job of implementing our first strategy which is leveraging the business to improve profitability. Now I'll make a few comments on our second strategy, to expand the business by leveraging our core competencies. The products in our pipeline have a combined market potential exceeding Haemonetics' current annual sales life. Now we have $8 to $10 million in new product sales projected in our plan this year. But I'm less focused on the targeted sales number than I am on learning the process of launching new products.

I believe we're making good progress. We're executing particularly well with the Cell Saver 5 Plus as we're annualizing $5 million in revenue. Now Pete just updated you on the status of key products in the donor division. To touch on the patient division, we have received 510-K clearance and begun customer acceptance trials on SmartSuction HARMONY. CardioPAT is planned for a relaunch in Q4. So you can see why I'm pleased that we're learning how to efficiently launch new products.

Now let me share an update on another great opportunity. As you may remember, we have an equity position in Arryx. This technology utilizes lasers to separate small particles and we have now proven the ability to separate red cells, platelets and white cells. We continue working on throughput as the next step to exploit this technology. As you saw in the press release today, we've expanded our field of use for Arryx technology to include all healthcare applications. There may be therapeutic or diagnostic applications for this technology in our future. So we'll keep you posted.

So let me sum up. Q2 and on the year-to-date progress our progress is good. Our double-digit top-line growth in the quarter is a new growth profile for your Company. We are pleased with our expanded product pipeline but, more importantly, we're learning how to launch new products. We just concluded a Board meeting where we refined our five-year strategic plan. While we have made good progress, I can share with you that we have higher expectations for creating shareholder value.

With that let me thank all Haemonetics employees for their outstanding efforts this quarter. And operator, I'll turn the call over to you for questions.

(OPERATOR INSTRUCTIONS). Steve Hamill, Piper Jaffray.

Good morning. First question, I was wondering if you could talk a little bit more about the blood bank business this quarter which was down year-over-year. And I know you cited the tough comparison there, but I was hoping you could also address the situation in Japan again and whether or not that was at all a cause of the decrease?

This is Pete, Steve. Regarding our business in Japan, as we reviewed with you in a past quarter and others, our placement of equipment is the key driver to our volume there and we continue to keep the same share percentage of our equipment. Of the total 1,976 machines in Japan we still have our 1,389 machines or 70% of that volume. So we continue to make a strong position and in fact feel good about our abilities to convert those that are actually in the market.

And Pete, just can you confirm, is that really the right metric to look at is equipment share? Because I'm assuming some of these machines are at higher volume centers than others? Is your share also holding up on more of a unit disposable volume basis?

Yes, it is. And it is a good metric to look at, although there are other metrics that we measure. But this is the one that we use to give us a good gauge.

I might just jump in, Pete, and remind the audience that in Japan, which is a little bit unique, these machines have been purchased by the JRC versus being on used plans in other parts of the world. So the JRC has made a significant investment in this technology and in Haemonetics. And that's why we believe it's a real good metric of looking at how the market and market position is for Haemonetics versus other competitors.

David Zimbalist, Natexis.

Wondering if you could talk a little bit about the implications of your inventory reserve. Could you talk a little about what kind of product we're talking about here? Is the reserve essentially for expected returns? And if that would actually be offset by new placements of product into that category? If you could talk a little bit about that.

Yes, David, this is Ron. This was a product that we were planning at a point in time in the past to possibly launch and we acquired some components. Based on a long-term purchase we determined at the end of the day that that equipment was not going to be suitable to be launched and we ceased development.

And that launch was, David, additional color sometime ago. So it's not like it's a new product being launched at this time. We hope that's helpful.

Yes. And then just a follow-up. How far along are we in converting U.S. red blood cell to filter sets?

That's a great question. We have -- all 20 regions of the American Red Cross are now actively involved in that conversion. So we feel very good about the progress that just started at the beginning of our second quarter and are making excellent progress, so we feel good about. it

Pete, you might also comment on how we're doing with the Red Cross generally in terms of RBC?

This is a relationship that I've been involved in along with John Grande (ph), our head of the North American business, and Paula Kessler (ph). We have got a great relationship with the ARC in our opinion. We've been collaborative in this effort for this conversion as well as other initiatives and are making good, good progress toward helping them achieve their objective.

And do they play a role as well with the way you're rolling out the software products? Is that part of the plan?

The software products meaning?

E-Links and --.

We don't have 510-K approval on that at this juncture in time, so we're not in a marketing mode at all.

Okay. Thanks. I'll circle back in.

David Borah, Century Capital Management.

Good morning. 230 million in cash, which is what you will have as of next quarter, is a lot of cash for company your size. Do you have any plans to use it more effectively to pay a dividend or to buyback stock? Thanks.

We don't perceive Haemonetics as a dividend kind of company. Secondly, in evaluating our cash position what we have been trying to do is reach a higher growth profile. You may remember that over the previous three years we were mid to somewhat higher single digit revenue growth and so with our revenue growth of double-digits we are anticipating taking that cash and reinvesting in parts of the business as we continue to expand that growth profile going forward. That is really what we are intending to do with our cash versus do share buyback or dividend.

Okay.

Steven Hamill, Piper Jaffray.

I was wondering if you could talk a little bit about the surgical business, a bit more color there mainly because when I look at the Cell Saver, business it was down sequentially from Q1, Q2. And I was wondering if that is just normal seasonality or if there are other factors there?

We typically see the seasonality of the second-quarter impact us, I think that is what you're referring to. We continue to see especially in the U.S. market, that market continue to be challenged from a growth standpoint. It is still in a decline, many experts predicated it would start to bottom out. We've not seen that yet. The good news is that we continue to hold our own. I think it is also fair to say that the U.S. team has clearly been very involved in the OrthoPAT transition and that has certainly taken up a great deal of their focus but I think it is primarily impacted by the market conditions.

I would also mention that Q2 is our seasonal quarter where we see less growth on the top line. It has been that way for a number of years as you know so that is why we are particularly pleased with our 10 plus percent growth in what is traditionally our weakest quarter. Pete's business and the donor business, fewer people during the summertime are out giving blood so we see our growth rate generally kick up in Q3 and Q4 as you know. That has historically been the case for some time.

And then as my follow-up, the Cell Saver 5 Plus, which obviously is doing great so far, is that a bit of a gross margin drag though since that's all equipment at this point?

It has typically been for us in the past, Steve, but, no, it is not. We've improved our pricing process with that product dramatically and it's contributing to our performance.

Great. Am I going to get another question? On the plasma side, any feeling right now that there are more significant contracts out there for you guys to try to pick up? Obviously probably none as large as ZLB, but are there more that are in your sights right now?

There are two elements to that. Of course one of them is -- inspect your current contracts in making sure that those are performing solid and then secondly for opportunity. But at the moment there isn't anything in our sights that is as dramatic as ZLB.

We're really pleased -- this is Brad again -- that we're seeing the interest in ZLB as they grow their business and stabilize that for an additional 200 machines which is well beyond our expectations. So that's great news. But I'd give credit to Pete and the plasma team here in the United States for really securing many of the agreements prior to the ZLB contract which we won at the beginning of this fiscal year. So those additional contracts or other contracts that we have been really negotiated and will be very stable on forward as we look forward into FY '07 and the future.

Steve, it's Lisa. The real story here with plasma is the ability to help those customers increase their collection as they ramp to meet the expectation that the market is probably going to be leveling out ultimately at about 12 million collections annually in the United States.

And then as long as you spoke up, Lisa, any update on Italy right now?

I guess the only other thing I can tell you is that just this week the independent counsel to the audit committee submitted a report to the Board again stating that he found no misconduct or evidence of any corruption.

Great, thank you.

(OPERATOR INSTRUCTIONS). David Zimbalist, Natexis.

A couple things. First, for the red blood cell business, could you talk a little bit about where you expect penetration to go for apheresis red cells in fiscal 2006 and where might we go from there? And the contribution of things like Mobile, etc.? And then talk about the OUS market?

Yes, in terms of our growth our projections are 30 to 40% for the year and we believe we're on target with those projections. So we feel comfortable with that. Outside the U.S. our growth in Europe is taking root as donations from donors are actually beginning to decline a little bit and we see our customers there beginning to consider other methodologies to collect red cells.

To that end we've got a great deal of experience here in the U.S. doing mobile collections and we are working very closely with our European colleagues to develop programs in order to help our customers there address their needs. So we see demand in red cells beginning to drive up there. So that's where we -- as we see the market there. In Asia red cell collection, as you probably know, from an automated standpoint has far greater limitations due to the nomogram.

Right. But in the U.S. when you talk about 34% growth, what does that imply in terms of market penetration in terms of collections for the fiscal '06?

In terms of apheresis market itself, it's about 85% of the market is Haemonetics devices and disposals. In terms of the overall red cell market, it's about 5% of the U.S. market.

You may remember, David, that when we first began to penetrate the U.S. market it was really red cell shortages that was driving penetration. That's now evolving so that it's the economics of automation that is driving penetration. And we have some customers whose systems are more than one-third collecting by automation now. So we're not quite sure where the ceiling is. And in Europe we're seeing that same phenomenon play out whereas we're beginning to see the kind of red cell shortages that we saw in the U.S. a number of years ago drive the interest in automation.

All right. And then can you talk about the OrthoPAT efforts outside the U.S.? I'm presuming that the distribution side of the business there wasn't particularly changed because of your shift to direct distribution in the U.S. So what kind of traction are you getting there, any incremental improvements or signs for the future?

This is Brian. We continue to see the OrthoPAT business outside the U.S. to be strong for us. We've improved our profitability outside the U.S. We're growing well within the reported ranges that we've provided for you and that is a direct selling organization, always has been. So we have learned from that as we take our OrthoPAT direct in the U.S. We've learned from that outside the U.S. as well.

The profitability is being driven by price?

Profitability is being driven by price, yes.

Great. Thank you.

There are no further questions and here's Mr. Nutter with closing comments.

Let me sum up our comments. Q2 and our year-to-date progress is very good. We're pleased with our double-digit top-line growth in the quarter and clearly this is a new growth profile for your Company. We're pleased with our expanded product pipeline as these products represent market opportunities that exceed the total sales volume of the Corporation today. Most importantly, we're learning how to launch new products and doing a very effective job with it. With that we look forward to sharing our progress with you in Q3. Thank you very much.

This does conclude today's Haemonetics conference call. You may now disconnect your lines at this time and have a wonderful day.