Harvard Bioscience Inc (HBIO) 2024 Q4 法說會逐字稿

Good day and welcome to the fourth quarter of 2024 Harvard Bioscience earnings conference call.

(Operator instructions) This call may be recorded.

I would like to turn the call over to Kathryn Flynn, corporate controller.

Thank you, Michelle, and good morning everyone.

Thank you for joining the Harvard Bioscience fourth quarter 2024 earnings conference call.

Leading the call today will be Jim Green, President and Chief Executive Officer, and Jennifer Cote, Chief Financial Officer.

In conjunction with today's recorded call, we have provided a presentation that will be referenced during our remarks that is posted to the investor section of our website at investor.harvardbioscience.com.

Please note that statements made in today's discussion that are not historical facts, including statements or expectations or future events or future financial performance, are forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1,995.

Actual results may differ materially from those expressed or implied.

Please refer to today's press release for other disclosures on forward-looking statements.

These factors and other risks and uncertainties are described in the company's filings with the Security and Exchange.

Harvard Bioscience assumes no obligation to update or revise any forward-looking statements publicly, and management statements are made as of today.

During the call, will also reference certain non-GAAP financial measures which can be useful in evaluating the company's operations related to our financial condition and results.

These non-GAAP measures are intended to supplement GAAP financial information and should not be considered a substitute.

Reconciliation of GAAP to non-GAAP measures are provided in today's earnings press release.

I will now turn the call over to Jim.

Thank you and good morning.

We'll start at slide 3 of the presentation and look at our quarterly results.

Revenue in the fourth quarter came in at $24.6 million, which is 13% below revenue from Q4 last year.

On a sequential basis, revenue were up 12% from the third quarter, and we had a positive book to bill ratio.

Gross margin for the fourth quarter was $14 million or 57% of revenue impacted by lower revenue year-over-year.

Operating income was break even on a GAAP basis.

On an adjusted basis, our operating income measured $2.5 million or 10% of revenue, and adjusted EBITDA came in at $3 million or 12% of revenue.

I'm now turn it over to Jennifer Cote, our CFO, to discuss our financial results in a little more detail.

Thank you, Jim, and hello, everyone.

I'll provide further detail, read a little bit of what Jim said, but just want to go through this in detail.

So on slide 4, if you could please refer where we will look at revenue for the quarter by product, family, and region.

Overall revenues in the fourth quarter showed sequential improvement, finishing at $24.6 million compared to $22 million in the prior quarter.

Revenues for the year were $94 million compared to $112 million last year.

You can see our quarterly trend which shows evidence of quarter to quarter stabilization across the globe.

I will now break it down to look at regional results.

Starting with the Americas, revenues in the fourth quarter grew sequentially by 3% over revenues in Q3, but we're down 11% versus revenues in the fourth quarter of last year.

Our pre-clinical sales rebounded sequentially with a return to normal purchasing during Q4.

As shown in the light blue, CMT is down sequentially, and we did not see the typical end of year bump we attribute to end of year academic budget spending.

Moving on to Europe, overall revenue in Europe in the fourth quarter grew 28% sequentially, but was down 7% compared to revenue in Europe in the last Q4.

Our European revenues have been relatively leveled through the first three quarters of the year and during Q4 experienced a nice growth due to our new products.

Our pre-clinical sales were up sequentially in Q4 over sales in Q3, with increased telemetry and respiratory sales offset by lower behavioral sales.

Cellular and molecular sales grew sequentially and year-over-year.

We are excited to see the impact of early adopters of our MEA systems and MeshMEA chips.

Moving to China and the Asia Pacific.

Overall, in the fourth quarter, APAC revenue was sequentially up by 8% over the previous quarter through APAC, though APAC revenue was down 24% compared to prior year.

The APAC market has been especially difficult this past year, but Q4 was our first sequential improvement this year, and trailing orders have remained consistent over the last few quarters, indicating stability.

Pre-clinical APAC sales in Q4 saw sequential growth over sales in Q3, but we're down compared to the prior year which we attribute to destocking.

Cellular and molecular APAC products showed some minor declines in Q4 sequentially in year-over-year.

We continued throughout Q4 to experience improvements in our booking trend and continue to see growth in our global trailing three month trend.

This has been trending positive now since June.

We do expect to see a dip sequentially in Q1, and Jim will discuss this with our Outlook.

If you can please refer to slide 5 on which we'll discuss additional metrics.

Please refer to the middle of the slide.

Growth margin during Q4 was 57.1% compared to 58% in Q4 of last year.

Sequentially, margins are effectively neutral when adjusted for Fx.

The strengthening of the US dollar relative to foreign currencies in Q4 contributed to a 1% point margin decline during Q4 relative to Q3.

We maintain stability in our growth margin by managing expenses to offset lower absorption of fixed manufacturing costs during Q4 and throughout the last year.

We are encouraged that despite lower revenue levels, we are maintaining growth margins close to our target of 60%.

We are now also operating on one US ERP system which represents 80% of our manufacturing and shipments.

As part of implementing our new ERP system, we are experiencing some inefficiencies as we start to use the new system in our Boston facility, but we are working to stabilize our processes and associated controls as we move deeper into 2025.

This new consolidated environment constitutes an opportunity for us to mature our sales and operations planning, supply chain, and inventory management through automation and further improvement of processing controls.

If you refer to the right side of the graph, our adjusted EBITDA during Q4 finished at $3 million compared to $3.6 million in last year's fourth quarter.

The $3 million adjusted EBITDA figure was a sequential improvement of $1.7 million over adjusted EBITDA of $1.3 million in Q3.

The sequential improvement was mainly due to revenue and margin growth as well as cost reductions taken throughout last year.

Compared to the prior year Q4, the reduction in gross profit was mostly offset by lower operating expenses in Q4.

Now moving to the bottom left where we show both reported and adjusted loss and earnings per share.

First, as I've done in the past, I will remind you of the primary differences between GAAP and adjusted EPS, which includes the impact of stock compensation, amortization, and depreciation.

These differences can be found and highlighted in the reconciliation tables on slide 11 and are all non-cash items.

We recorded a correction during Q4 related to our accounting for the closure of a legacy pension plan, which favorably impacted Q4 of 2024 by $0.03. The impact of this non-cash activity is zero year-to-date and is offsetting activity in Q3.

Cash flow from operations was $1.7 million during Q4 compared to $4.3 million in Q4 of last year.

The Q4 cash flows figure represents sequential improvement compared to Q3.

Now I will move to slide 6 where we will cover the full year results and we can discuss our liquidity and debt position.

We maintained consistent growth margins during 2024 at 58.2% compared to 58.9% in 2023.

We managed our costs to largely offset the impact of lower revenue and gross profit.

For the full year, adjusted EBITDA was down $7.4 million due to reduced gross margin of $11.3 million, partially offset by these reduced operating expenses of $3.9 million.

Full year 2024 adjusted EPS was $0.03 compared to $0.14 in 2023 as a result of the dropdown of lower growth margins offset partially by lower expenses.

This included an unfavorable impact compared to prior year of the loss on sales of equity securities of $0.03.

Differences between GAAP and adjusted EPS during 2024 also included restructuring expenses, commissions for employee retention credit payments, and settlement of an abandoned property audit, which resulted in four senses of unfavorable impact for the year.

We have reduced the quarterly run rate of our operating expenses by $2 million or 12% when you compare Q4 of 2024 with Q4 of 2023, which positions us for improved OpEx in 2025.

If you refer to the bottom middle graph, cash flow from operations for the year ending.

December 301, 2024 finished with a $1.4 million decline and declined by $12.6 million compared to last year.

We struggled early in 2024 to drive favorable operating cash flow, but showed improvements, and you see the results in Q4 through this careful expense management.

On the bottom right, you can see that we maintain stability in our net debt position, and at the end of the year, our net debt was just slightly above net debt at the end of 2023.

As of year end, we were not in compliance with the consolidated net ratio, net leverage ratio covenant contained in our existing credit agreement.

Earlier this week, we entered into an amendment in which the lenders agreed to waive our Q4 non compliance.

Under the amendment, we are required to refinance the existing agreement by June 30th.

We are also precluded from further borrowings under the credit facility.

That said, based on our current operating plans, we expect that our available cash and cash generated from operations will be sufficient to finance operations and capital expenditures while we work to refinance the credit agreement.

For more information on the amendment, please refer to the 8-K that we filed with the SEC last night.

Now, I will turn it back over to Jim.

Thank you, Jen.

We can move to slide 7.

I first want to mention that we've historically we've augmented our European sales through distribution agreements with the large distributors like Fisher and VWR.

We're now working with them to extend this agreement with Fisher and VWR specifically the formal distribution relationship to also now include North America, and we're also planning to offer through the distributors to increase our number of products, including our new unique MEA systems.

Now if we go to the next slide, let's see, actually it's still slide 7.

I just want to say, I'm not going to drain this, but I like to think about our business as our base business and then areas where we're expanding into potentially high growth areas like electroporation and bioproduction, and also expansion into organoid related technologies, another area that we believe provides significant growth opportunities.

The base which we expect to be roughly run with the market, the life science tools market, and it's augmented by, new product introduction, some of which you'll hear about today.

Both electroporation and bioproduction and emerging and our emerging MeshMEA organoid applications are expected to be long-term high growth opportunities that also drive a higher recurring revenue consumable.

Moving to slide 8.

I'll update you on the progress on key new product launches in more detail.

The first row of the table on this slide highlights the commercial status of two new products we consider part of our base business.

Late in 2024, we began production shipments of our new SoHo family of telemetry devices which now enable real-time telemetry measurements of animal models in shared housing environments.

In 2025, we plan to expand our SoHo capable implants to also cover cardiac and neuro monitoring capabilities.

Launching at this month's Society of Toxicology, our SoHo systems are already seeing strong quoting requests from industrial customers and academic customers alike.

The first delivery of our new automated VivaMARS neurohavioral monitoring system went to Labcorp.

We've been working with Labor to tune the system and supporting them in the integration of it into their testing network.

We're now in discussions with them to acquire another VivaMARS system for a second one of their facilities we assume later in this year.

And we're also working to get the next large CRO customer on board with VivaMARS.

The second row of the table highlights the commercial status of our products targeted to potentially long-term high growth electroporation and bio-production opportunities.

Late in 2023, we announced that a large pharma company had adopted our BTX electroporation system configured for bioproduction.

Looking at the commercial status in 2024, we're pleased to see that consumable revenue from this first large customer has now grown to approximately $1 million annual run rate.

This first large customer, a TOP5 pharma company worldwide, has adopted the BTX for bioproduction of vaccine application and is validating our right to win in higher volume GMP applications.

The first application is a vaccine for companion animals, and in this way it allowed us to fast track into bioproduction and get to higher volumes quickly.

The same customer is adopting our system for a second potentially high volume vaccine at another site.

When we talk about human use, Novo Nordisk, a long time customer of Harvard Bioscience, is an early adoption of our BTX for a new generation therapy.

Also for human use, a large US biotech is adopting our BTX for bioproduction of a Car-T based therapy.

And we're also currently prototyping our next generation BTX platform designed for ease of use in new compound creation and also ease of transition to bioproduction in CMP cGMP environments.

Also in '24, we began shipping our new cGMP compliant amino acid analysis system to pharma companies for bio-processing applications.

Our AAA is an adaptation of our leading biochrome AAA system currently operating in clinical labs internationally and is showing initial demand in bioproduction applications such as biomaterial quality control.

The third row of the table highlights the commercial status of our emerging new high growth MeshMEA organoid platform.

We have adapted our MEA electrophysiology system to be the industry's first In-Vitro organoid data acquisition and analysis system.

It's capable of supporting long-life longitude analysis of organoids, and they're initially targeted to neuro and to cardiac applications.

As for commercial progress of MeshMEA systems, in 2024, we initiated five beta sites, three of which were academic sites including the University of Texas, Tempere University in France, and the University of Michigan.

Synaxis is an advanced CRO in France focusing on safety and toxicology applications.

And a leading biopharma company with operations in Cambridge and multiple sites across California is focusing on longitudinal viability testing for neuro and cardiac applications.

In Q4, early adopters, including Stanford and the Mayo Clinic purchased 10 systems for a combination of neuro and cardiac applications.

In 2025 goals include expanding adoption by leading academic sites plus government labs in the US, UK, and the European Union.

Interestingly enough, the NIH itself recently purchased one of our MeshMEA systems for neuro applications.

This year we'll focus on adapting the system to more potential high growth industrial applications in biotech and pharma, and we see a growing pipeline of biotech and pharma opportunities as we look forward this year.

Now in terms of refinancing efforts, we've retained an investment banker to assist, and there have been and we've held multiple discussions with potential lenders.

We plan to complete this refinancing effort by the end of June, and for more information, you can look to the 8-K that we filed last night.

Now if we move on to our guidance and outlook on the next the next slide.

Given the lack of visibility around NIH funding and the recent effects on academic research funding, we're going to hold off on giving an outlook for the full year at this time.

So at this time, we'll just discuss Q1 2025 and some basics about finishing how we're operating for the rest of the year.

Considering the uncertainty around NIH related academic funding and such.

Along with the typical Q4 to Q1 seasonality, we expect Q1 revenue to range from $19 million to $21 million.

We expect Q4 gross margin to be in the 56% to 58% range.

Regarding Q1 EBITDA, we expect unusually high professional fees related to audit and debt-related refinance activities.

When I think about going forward, absent these unusual fees, with our gross margins remaining strong and our continued focus on reducing operating expenses, we expect sufficient positive EBITDA to support continued self-funding of our business and continued servicing of our debt obligations, and this while we work to refinance our debt facility.

So with that, I will turn it over to turn the call back to the operator and to open the open the line for questions.

(Operator Instructions)

Our first question comes from Matthew Parisi, KeyBanc.

Hi Jim, it's Paul Knight calling from KeyBanc.

The question is, how are you?

Number one, this debt financing, what was the metric that was busted?

We with three or four quarters of reducing revenue which we saw through starting in early '24, it really impacted our net leverage ratio, which looks at our current debt divided by our trailing 12 month EBITDA.

So even with positive EBITDA, whether it's, $1 million, $2 million or $3 million, we had built strong EBITDA over the prior years and in fact we had gotten our net ratio down to under 2, I believe but with three quarters, lining up of EBITDA of lower EBITDA even that ratio just starts to get ahead of you pretty fast.

So we were bouncing up against that covenant for a while, and you know we in hindsight we should have earlier tried to work on a refinance, but we worked with the banks to get to get coverage through those to get to this point now.

But either way we knew we needed to put a new debt facility in place and that's really the focus now.

And you were paying on that rate was what what percent rate and then what would a new new transaction look like?

Yeah, we were sitting at, we were at so far so plus 3.75%, so I think that adds up to around, I don't know eight or so I'm guessing.

And then ranges are probably somewhat above 10 and other.

Yeah, I think when you when you look to the more private debt facilities, they're probably, again we're looking at a number of different opportunities and they will range based on, various ways they set it up, but in general we expect it to go up, 2 points to 3 points, maybe 4, so it's going to be higher on the interest rate likely.

But it will give us much more flexibility, we have needs to continue to, we have these new products launching.

I certainly don't want to be held back and not be able to put some of the capital capital into, expanding capacity in a couple of these new areas.

So we we're going a little of that flexibility on the you know ratio covenant like that, at least for a little for a short time, and that's why we need the kind of lender that's used to working with growth companies that makes investments and doesn't get held back by, having a more conservative debt facility.

And Jim, moving to the good news part, it seems like the new product introductions are gaining traction.

What part of revenue are these new products like MeshMEA and BTX and other that you would call high growth and what was their growth in 4Q?

Well, I think when you look at the numbers, for instance, that Jen showed you, what really jumped out is, for instance, MeshMEA systems, we really started heavily in academic research there and heavily in Europe where we have very strong relationships, plus with the pharma companies there so we saw Europe really led the way with growth and, again by placing, 10 or more systems in one quarter, I mean these systems sell for, $700 or $70,000 to $100,000 plus they bring consumers and you know that was a very nice incremental pop for the business and really leads the way toward us this adaption is adapting of this technology into, the much higher industrial users.

So certainly this is going to be a big growth area for us.

We had in general our MEA business had been around 5% of our business.

I think if you go back a year or so, I think in this year we we I think we even put in the presentation that was the MEA that section's around seven, so it's grown by a couple, from 5% to 7% just in just in that one year of that section of of that of that revenue stream.

So it's definitely, a wind up area for us and a growth opportunity.

Bioproduction is another big growth opportunity for us.

It is a longer area because it tends to take more time.

It's a longer sale, you have to get the systems, incorporated and validated in their production environment.

You'll notice that I described some of the applications specifically what was you know because you know the system is really designed for these new types of drugs where you're going to be transecting mammalian cells to create it.

So you know there's often a long time from when you get through testing you get through preclinical before you get into pre before you get into first, phase one clinical human.

So it takes a while for that to really ramp up so the thought was by having a couple of applications like this first one a being being going to companion animals, I mean, I don't know you, but I've always loved selling technology to or selling to people who spend it on their pets because people, I think, can spend more on their pets than their kids these days.

So that gave us the ability to very quickly prove that we could do higher volumes in a cGMP type environment.

And at the same time, we've been working with human applications with a number of our customers, and you know one of them, which I think is pretty exciting, is Nova Nordisk working with them toward one of their one of their applications that would be one of the first that uses the BTX in a bioproduction environment for our next generation therapy.

You know there are others we're working with another one that's coming along is a Car-T therapy, and that's what a very large, well known biotech here in the states.

So we're trying to cover all bases, I want to be able to prove that we can that we can do the transpection efficiently, that we can create these new drugs which they use us often for for discovery, but now they can use us for bioproduction, but I need to be able to show, for instance, with what we're doing with these companion animal applications that we can do volume types of production in the same type of cGMP environment and by the way, this is with a very a Top 5 worldwide pharma company.

This is not a small start.

This is a big opportunity for us, and they are working with us now to have another vaccine application that will go to another one of their facilities using our technology for a slightly different vaccine.

Okay, and then just to quickly wrap it up on my side.

The other cost of $1.4 million in the quarter was Fx I'm assuming, and then the last is your NIH exposure is what, about 15%?

Yeah, it's sometimes hard to describe exactly, but NIH, the way I see academic research, we're about half of our business is academic research worldwide.

A little less than half of that is probably the United States and you know maybe it's I'm kind of eyeballing, maybe it's 40% or so, but then you split that into the sections of what's NIH and what is academic research outside of NIH.

NIH, we generally think of NIH to be around 30% of academic research revenue in the United States.

The rest is generally more, budgeted by the universities themselves.

So that's kind of how we see it but we, it is, we have seen, and given whenever there's some unknowns, certainly we we expect to see some extra time it takes for some of these some of these research grants that we'll have to go back through and be reviewed.

And those are more the specific NIH initiated grants, but I think we're also, we could see some noise just from the general academic research sites where they're maybe worried about what's coming their way.

And so, there is a kind of a lack of visibility with some of that.

We're hoping, of course that sorts out fast.

You're probably hearing something similar from other companies that are heavily exposed to academic research.

But no, we're, those types of impacts, we started seeing, a pull down in our revenue in Q4, where in Q4 in academic research, we would have expected a bump in the US, but if you look at our chart, you see that, the academic research part of our business or the CMT part actually went down some in Q4.

Now the good news for us is it was more than offset by strong growth sequentially in our industrial CROs and such.

But I think we've been seeing a little of this headwind for a bit and, it's kind of hard to predict exactly when it settles out, but we're of course hoping that it settles quickly and in the meantime, As you've heard, we're continuing to manage our cost structure to make sure that whatever revenue stream we're at, if it drops a little or whatever, we are going to make sure that we're able to deliver the even that we need, that we stay profitable, that we generate the cash to service our debt and our CapEx needs.

So however it happens, we're flexible and able to handle it.

Our next question comes from Bruce Jackson, The Benchmark Company.

Hi, good morning, and thanks for taking my questions.

I wanted to go back to the ERP implementation, just real quick and get some more details.

So it's now in place and now it's a matter of like getting it.

Giving the experience with it, do you think that you're going to see any operational efficiencies from the ERP system during 2025?

I do, but you know I've done, I don't at last count I don't know if it was 5 or 6 ERP system, ERP transfers I've done, and there's always some initial learning curve.

So there's usually a little bit of chaos at first when you first turn it on because you're now teaching your people to use, a better, more consistent process.

We basically adopted, we took the ERP system from our group in Minneapolis, which was very up to date, we control it well, we support it well, we brought it up to the latest and it's a leading type of system, and then we've integrated and we've brought the rest of our operations in the US here in Boston to that same ERP.

So we're synthesizing the processes here to adapting these to be the same as what we do in Minneapolis.

That less to be much more consistent that gives us a ton of flexibility.

It also helps us provide better accounting for our inventories and it also gives us a better view of how we can work on reducing inventory and you know more efficient supply chain and shipping.

So again, I always would expect the first maybe couple quarters to be a little noisy, maybe some inefficiencies with your direct labor because they're learning to do something a little different than they've been, but it's a better way to do it and you end up with a process that you can now tune and definitely during the year this will help us provide much better management of our inventory, much better management of the process around how we order the parts to take that are required for shipments, we'll be able to better predict shipment times and with that, just an overall efficiency and that should show up in improving gross margin that's where I would expect financially to measure that.

So gross margin, I would expect to see inventory reductions as we get to later in the year and just an overall, better business.

Okay great and then if we could just go into some of the new product opportunities in a little bit more detail, one of the major bottlenecks right now in Car-T therapy is is production and you've got this large biotech that's working with your technology.

How do you see that business unfolding over the course of this year?

It's going to be hard to predict because it is a longer cycle.

We're talking about, new drugs and we know with the changes in human services that there is, which I think is good for us, there is going to be a push to make sure that any drug going through the pipeline goes through the full sets of pre-clinical testing and proper testing.

So and that means they're going to consume our our products, our temetry products, our testing products.

So that, that's good for us but, so clearly the BTX, it is, the electroparation is a key technology to use for generating many of these, gene edited or DNA or RNA edited, new generation drugs.

And the more of these that go into the pipeline, that to me that's the most important thing.

If I can be a part of more of those and if they're using us to discover and create the compound and they use us to bridge them into production, it's a more efficient way to do it, this should generate not just business for us in, with these types of applications, it'll also then pull in more of our other products as they get to, through the pre-clinical phases.

I don't know if that answers your question, Bruce.

That's helpful.

And then if we could just also take a look at the SMEA organoid business, a lot of that right now is academically focused.

Are these projects fully funded and are they going to be stable going forward and this is just like, just putting aside the uncertain around new grants and the research service expense issue, the current projects that you have going, are they fully funded and moving forward?

Yeah, the, well, I mean, the, as we expected, the initial adopters, and it's exactly what we've seen even in Q4, with placing 10 more systems, they are predominantly academics.

And predominantly in neuro research, neuro applications, and also neurotoxin safety, which is good, and some in cardiac but we are seeing and we have placed a couple of units now with pharma companies who are doing the same kind of thing and as we know, the big opportunity that I've always saw was, prove the technology with the academics, move it into the research departments, discovery departments at the pharma companies.

And then allow that to get into the higher volume testing that needs to take place.

We are getting demand in, moving into those space.

Roche is a big, long term customer of ours, working with us with MEAs and moving towards MeshMEA.

We expect that and as you do that with a few companies that are well known, the word spreads, they all talk to each other, that then we start to see more other pharma biotech type companies, we see, others that are interested.

We're already talking to some who are already in the purchasing process.

Pfizer, [AVB], I mean, these are real players.

It's going to take a while to adopt it because you know it is in some ways that they've been doing something for many years a certain way, they've got to jump that bridge to technology adoption.

And the way to do it is to prove it out with the academics.

I think the other real opportunity that we're seeing is the ability to offer this In-Vitro product as a potential to filtering capability.

As I said, we have Synaxis.

In France working on working with standard types of drugs that you have to test you have to go through as a CSR or as a CRO does with the safety and and and tox testing.

We're also, I think about to announce that we're working with a large CRO here in the United States and we're initially planning on a large correlation study between between a population of small animals.

And correlated with a population with those particular animals.

The idea is those particular animals that we would create brain organized from those animals and then be able to do long term correlation studies for again being able to.

And very quickly and efficiently filter whether a drug is going to have toxic or safety issues before you get into having to wait and spend a lot of money on lots of small animals and you know take months and then have to destroy the animals to find out how it affected their organs.

It's a great way to make this more efficient and at the end of the day it should in theory provide the opportunity for lowering the throughput or shortening the elapse time, which means you then can expand and get more drugs through the cycle.

So it should be an efficiency.

That's why we think that has a big financial, value proposition for the pharma companies.

Okay, and then one last MeshMEA question you mentioned I think with the new distributor arrangements that this products could be included with that.

Is that right?

That's right.

We've always tended to have a good formal relationship with the big distributors in Europe and we've tended to do more of the sales direct here in the United States and less of our equipment going through distribution.

Well, we're now working with the big distributors, as we all know who they are, to now expand and have us be a formal relationship with with them with both those operations here in the United States.

That means instead of me having five or six, sales reps that are, prospecting, I've got 900 sales reps in the United States prospecting and lead generating, so.

And I think, certainly when you do this through distribution, you always look to see does the distributor have an alternative product that maybe they're conflicted to whether they should sell yours or theirs, as we do this, something like MeshMEA is clearly something that nobody has it.

So I expect it to if nothing else just generate a lot more leads, which does it is the entry into generating, more orders and sales.

Okay, great.

That's it for me.

There are no further questions at this time.

I'd like to turn the call back over to Jim for any closing remarks.

Thank you for joining us.

This is today's presentation.

We'll hope you'll come back and join us in May to discuss our fiscal 2025 first quarter results.

Thank you so much.

Thanks, bye.

Thank you for your participation.

You may now disconnect, everyone, have a great day.