Heska Corp (HSKA) 2017 Q1 法說會逐字稿

Good day, and welcome to the Heska Corporation First Quarter 2017 Earnings Conference Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Brett Maas, Hayden IR. Please go ahead, sir.

Hello. Welcome to Heska Corporation's earnings call for the first quarter of 2017. I'm Brett Maas of Hayden IR, Heska's Investor Relations firm.

Prior to discussing Heska Corporation's first quarter 2017 results, I'd like to first remind you that during the course of this call, we may make certain forward-looking statements regarding future events or future financial performance of the company.

We need to caution you that any such forward-looking statements are based on our current beliefs and expectations and involve known and unknown risks and uncertainties which may cause actual results and performance to be materially different from that expressed or implied by those forward-looking statements. Factors that could cause or contribute to such differences are detailed in writing in places, including Heska Corporation's annual and quarterly filings with the SEC. Any forward-looking statements speak only as of the time they are made, and Heska does not intend and specifically disclaims any obligation or intention to update any forward-looking statements to reflect events that occur after the time such a statement was made.

We have with us this morning, Kevin Wilson, Heska's Chief Executive Officer and President; John McMahon, Heska's Chief Financial Officer; and Jason Napolitano, Heska's Chief Operating Officer and Strategist. Mr. Wilson will begin with brief comments on the results we report today, followed by further comments by Mr. McMahon. Then we'll open the call up to your questions, followed by Mr. Wilson's closing comments.

Now I'll turn the call over to Kevin Wilson, Heska's Chief Executive Officer and President. Kevin?

Thanks, Brett, and good morning, everyone. Heska's first quarter 2017 represents a nice continuation of the solid performance in the past 14 quarters. Broadly, veterinary market indications continue to point to a strong environment for the rest of 2017. Specifically, Heska continues to gain market share, possess good subscriptions model visibility, target large addressable markets, improve operating leverage, maintain a solid balance sheet and pursue a multipronged growth strategy. Margins have expanded, profitability has increased, top line growth is in line with my expectations, and our teams are healthy, growing and motivated.

In part, Heska is able to provide revenue and margin sustainability because of our early and full commitment to diagnostic subscriptions beginning back in 2013. Today, blood diagnostics subscriptions continue to grow, and we have nice visibility due to these market share gains. This strength was again reaffirmed by a 22% first quarter growth in that key area.

The Heska Reset subscription model has now entered its fourth year. Over 80% of our blood diagnostics customers are now being served by a Heska-owned analyzer under subscription. The benefits of owning and retaining these in-service analyzer assets is now becoming, and will later become, more apparent as subscribers add to and extend their subscriptions for additional 72-month periods.

For the past many years and again in the first quarter, blood diagnostic subscribers and months under contract have continued to grow through market share gains in North America. The combination of these market share gains, nearly universal retention in current subscriptions, new subscription additions and extensions, new product offerings, strength in end-user hospital visits and contracted price ramp have formed a nice basis for our healthy growth.

Our customer satisfaction is fantastic. This is proven by our financial performance and more importantly perhaps, by the hundreds and hundreds of Heska Reset subscribers who in writing by video testimonial and through unreserved peer recommendations regularly voice their enthusiastic satisfaction with their switch to Heska from competitive offerings.

Our sales force and customer evangelist footprint has expanded in a healthy and organic way in North America. There's still a great deal of white space for Heska's direct and partner expansion in North America. We will continue to find more positive people, train them well, provide them with great offerings, manage them clearly and work daily to put them in front of veterinarians and hospital staff so that they can ask for their trust in their business. It's really somewhat straightforward, and it's working.

We are also continuing to lay the foundations for a healthy international launch of our Reset subscriptions model, which requires a higher level of on the ground execution than a traditional "sell to a country distributor and hope for the pull-through" approach that is traditionally followed. Getting it right is worth the extra time, which is a healthy tactic that's been aided by our ongoing good fortune of growing nicely while doing the strategic expansion work for the international business.

We will get on the international field and when we do I am confident in the winning character of our strategy. We're hard at work on these and numerous other growth initiatives, both big and small, even as we remain vigilant in protecting our islands of strength and growing profitability against the efforts of our larger competitors to disrupt our momentum.

Now I'll turn the call over to John to detail the first quarter financial results. Following that, we'll open up the call to questions. John?

Thanks, Kevin. As Kevin mentioned, we once again had another strong first quarter to start the year, and we recorded revenue of $30.4 million, a 12% increase over $27.1 million in the first quarter of 2016. Revenue for the Core Companion Animal Health segment, or CCA, was $24.6 million, a 5% increase over $23.4 million in the first quarter last year. The performance from our core blood diagnostics instruments and consumables subscription model remain strong as we achieved 22% year-over-year Q1 revenue growth. As expected, we did see a 26% decline in our imaging business, coming off what was a very strong 34% growth performance in 2016 and now as we begin our strategic transition to a long-term rental offering with digital radiography sales.

Our vaccines and pharmaceutical segment, or OVP, had an outstanding quarter, generating revenue of $5.8 million, up 56% from $3.7 million in the first quarter of 2016. While growth was broadly spread throughout our entire customer base, increased revenue from our agreement with Eli Lilly's Elanco unit served as the main driver.

Our gross margin improved in Q1 to 43.5% as compared to 42.1% in the first quarter of 2016. As we've mentioned in the past, we typically expect our margins to remain consistently in the 41% to 42% range, with any fluctuations resulting from product mix in our OVP segment. That was the case this quarter as our OVP business achieved significantly stronger margins from product mix over last year on top of higher volumes that made that product mix a larger component of the overall consolidated Heska business during the period.

Total operating expenses on a year-over-year basis grew 10% to $10.4 million from $9.5 million. As a percentage of sales, operating expenses dropped slightly to 34.3% from 34.9%. The increase was driven partially by expenses related to our international imaging business, which we did not own in the comparable Q1 period. Excluding those costs, operating expenses grew 8% year-over-year, an indication that we continue to leverage our expense model to deliver operating income.

Operating income grew 42% on a year-over-year basis to $2.8 million compared to $2 million in the first quarter of 2016. Depreciation and amortization was $1.1 million in both Q1 of 2017 and 2016, and stock-based compensation was $700,000 this quarter compared to $500,000 last quarter.

Our effective tax rate for the quarter was greatly impacted by the new ASU 2016-09 standard that changed the accounting for the tax treatment of stock exercises. All companies were required to adopt this accounting standard as of January 1, and it has affected all companies differently. In our case, we received an excess tax benefit of approximately $2.5 million that now runs through the income statement based on the new accounting rules. In prior years, these benefits were hung up on the balance sheet as additional paid-in capital. As a result of this discrete benefit, we recorded a tax benefit of 51% in the first quarter, and estimate an earnings per share impact of $0.29 on a diluted basis when compared to our full year 2016 tax rate.

Like all companies, we will continue to see variability in our tax rate going forward as a result of this required accounting change, and we cannot predict the magnitude to which it will impact us on a quarterly basis since it is a function of stock price and the behavior of our internal stockholders.

As a result of this strong operating performance, coupled with this larger-than-anticipated tax benefit, net income attributable to Heska Corporation for the quarter was $4.6 million or $0.61 per diluted share, a 288% increase over the $1.2 million or $0.17 per diluted share generated in the first quarter of 2016.

Over the past several calls, we have discussed regulatory investments that will substantially expand our lateral flow test menu. The process with the USDA is ongoing, and while we did not incur the levels of spending we anticipated in the first quarter, we do still expect to incur $1 million during the course of 2017 as we discussed at our year-end call, and we still anticipate at least 1 new product approval in this area late in the year as a result of this investment.

Later this month, we intend to officially complete the buyout of the remaining minority interest in Heska Imaging US. We are planning to deliver the $13.8 million put payment on May 31 in cash. While we expect this acquisition to be neutral to slightly accretive to 2017 EPS, due in part of the elimination of any future minority interest income allocation, we once again remind investors that revenues from Heska Imaging in 2017 may fall year-over-year due to record 2016 comparisons and the aforementioned initiative to offer imaging diagnostics as part of the rental program rather than exclusively as capital sales. We expect that this rental program will lead to an increase in placements but a decrease of approximately $4 million in revenue when compared to what we would have otherwise expected utilizing just the capital sales approach.

As a result of these anticipated changes to the current imaging revenue model, we expect to forego larger upfront revenue and profits in the next 12 to 18 months for the benefit of a longer-term annuity stream, similar to how we have positioned ourselves in blood diagnostics. We are confident that this model will resonate equally as well with veterinarians who are selecting and bundling imaging diagnostics as it has with our Reset subscription model for blood diagnostics.

So for full year 2017, we anticipate reported revenue of between $140 million and $144 million, driven by continued solid growth in our core blood diagnostics business, along with middle single-digit growth in our vaccines and pharmaceuticals business and the previously mentioned approximately $4 million reduction in anticipated imaging revenue due in part to the impact of moving to a rental model versus capital sales model.

As a result of these revenue initiatives, combined with continued operational leverage, anticipated cost reductions and other strategic initiatives, we anticipate EPS between $2 and $2.05, which includes the first quarter additional tax benefit from stock compensation and assumes there are no other tax benefits from stock compensation in subsequent quarters.

With that, Kevin and I would like to open up the call for questions.

(Operator Instructions) We'll take your first caller from Nicholas Jansen from Raymond James & Associates.

I just wanted to drill a little bit into the imaging business. Certainly, the magnitude of the miss relative to our model was centered on that dynamic. And I think you just mentioned on the call that you expect imaging to be down perhaps up to $4 million year-over-year, and that seems a little bit higher than what we were anticipating a couple of months ago when you gave the original kind of flat to modestly down expectation. So just wanted to get your broader thoughts on it. Is there anything underlying fundamentally changing in the imaging business, maybe you pulled forward some revenue from 4Q into 4Q last year as Cuattro was trying to break out the earnout? Just wanted to get your better thoughts on the imaging business.

Nick, it's Kevin. And I think you've got it. We tried to signal on our last call what we're seeing today, and so we were more specific on this call. Placements are good and we're confident -- just like we did back in 2013. When you convert from a capital sales model to a subscriptions model, you get huge long-term benefits from doing that and we think that reporting $4 million less revenue while maintaining really nice profitability, while you make that transition is a great trade. So we were just much more discrete this year to try and make some of these models a little bit more precise. I don't think the models misunderstood the concept. I think it was just really the size of the concept, and so are just trying to be a little bit more specific.

No, that's helpful. Just to clarify, when you talk about imaging revenue, is that just solely U.S.? Or are you now lumping in the international piece?

A little bit of -- I would say a little bit of both. We look at it as an imaging business but obviously, internally, we break it out. The international imaging piece is $6 million to $7 million a year, and the U.S. imaging piece is roughly $25 million to $26 million a year. We will do the rental model in the U.S. market almost exclusively. So I would anticipate that you would see international discontinuing because most of that business goes through partners in certain countries. And then where we control the assets and where we want to keep them on the balance sheet, which would be the U.S. and perhaps Canada, we'll start the conversion to some of that $25-ish million in North America imaging to rentals. And again, we've called out that we think that's probably a $4 million. So for just materiality, you can kind of back into what percentage you think we're going to be doing in rentals.

Okay. That's very helpful. And I just wanted to kind of clear that up. So when you talk about imaging revenue down 26% year-over-year, is that just in the U.S. or is that the total?

I think that's the total, but the international business in the first quarter is very, very minimal. That is a very much a third and fourth quarter business and has been that way for 15 years. So that's really -- there's not much of a pickup in the first and second quarter in the international revenues by owning that business. The majority of that is back-end loaded. So for all intents and purposes, again, just looking at -- just where the meat of the matter is, that's the imaging number. And again, to say that it was in line if you take the 25-ish range and imaging and you roll 20% of that into rentals, you back into the $4 million, and there's probably a few points of unbelievable fourth quarter, rebuilding the pipeline in the first quarter, so there's probably a couple of points of that in the first quarter. So a 26% reduction year-over-year in imaging was not remotely a surprise for us. So we wanted to be a little more specific on this call so that it would not remotely be a surprise for you.

Great. This is very helpful color. And then switching gears to the blood diagnostics segment, another very strong performance. Clearly, your efforts over the last 24 months are paying dividends. Just wanted to kind of get your sense of the dynamics in store in terms of the marketplace. We've seen both your 2 largest competitors announce some sales force expansions last week. Just trying to -- how you're thinking about your positioning today and do you need to counter in terms of any sort of sense of either your own sales force expansion or anything along those lines?

Yes. I mean, I think we meant a sales force expansion late in the third quarter last year, and we began that hiring in the fourth quarter and had pretty good traction from those new hires in the first quarter. I know the investment community is always looking for news on what's driving what. My presumption is any growing company, is growing its sales force so we'll continue to do that, but we probably won't launch press release-level big expansions. We just -- when we have whitespace and somebody can't get to all the activity in their area, we hire a new person and train them. And we'll continue to do that.

And then just last one for me. In terms of the product line extensions that you're targeting, anything else outside of the rapid assay space that you're looking at? And I know there is a small hole in your portfolio relative to some of your peers on the urinalysis front, but just wanted to get your broader sense of new product introduction flow over the next 2 -- 12 months.

Yes. So I don't sense a big hole in the urine space. And what I mean by that is we have a very large, very, very well-run competitor who is building, for all intents and purposes, a urine space business in veterinary medicine and they're doing a great job of it. So they've earned their first mover advantage, and I think they're having a great deal of success in that. I think the other 2 of us in the space intend to be fast followers, and that's really always been our strategy in that. So I think for the foreseeable future, the first mover advantage from our large competitor in the urine space is well earned, and I'm happy to let them build that out and raise awareness and make those investments. So we will get in every space in diagnostics. That's our mission. We're a diagnostic company, whether that's imaging diagnostics, blood or fluids or fecals or anything.

In terms of just expansion of menus and tests and things like that, again, that's something that we're always doing. We launched a bio-acids test, for instance, on our immuno-diagnostics platform during the last quarter and so our job is to just regularly bring new tests and new benefits and new features to our installed base. But we probably don't spend as much time making as much fanfare out of each individual release because, ultimately, the customer will meet with a well-trained rep who will explain how the new benefit will help them and it'll just roll into the subscription and everybody's business will be improved. So we can probably do a better job maybe of a little more fanfare in that area, but we're constantly releasing new tests and test menu expansions. We are excited about the lateral flow tests. I know it's not groundbreaking, revolutionary stuff but in terms of actual good solid business, it provides us a really nice large target to grow from in 2018. So that's probably the biggest one that's on the radar, it's why we called it out.

(Operator Instructions) We'll hear next from Jim Sidoti from Sidoti & Company.

Can you talk a little bit about the OVP business in the contract? Is the level you had in this quarter, is this something that you would expect to grow from in the remainder of the year? Or were there any onetime sales in this quarter?

So John (sic) [Jim], it's Kevin. The way I look at that is we call out mid- to high-single digits growth for the second, third and fourth quarter. Meaning that the outperformance in the first quarter I think is earned and clean, and it wasn't a pull forward.

Okay. Great. And then with regards to the acquisition for the remaining piece of the Cuattro business. I think you said you're going to pay that all in cash, so I assume you have a line of credit available for that. Is that correct?

Yes. It's John, Jim. Yes, we do. We have plenty of liquidity to make this cash payment, so we're not concerned at all.

Okay. And then with regards to share count, then we should assume it will stay relatively consistent with where it was in the first quarter?

Yes, that's correct.

David Westenberg from CL King & Associates.

So there's a little bit of a step-up in the sales and marketing and the G&A in the space. Is this -- have you been doing any more additional investment in Europe? Or is this kind of how -- just been regular step-up from prior quarters' hiring? Or how should I think about that?

Yes, I think it's a regular step-up. Remember we had salespeople coming online, which is a good thing during the first quarter. And as they travel and earn commissions and produce, you see a normal step-up. There was also a little bit of a pick-up because of the international expenses in imaging that we didn't have last year. And I think John called that out on the call. I want to say, excluding the addition of the imaging international expense, I want to say it was at 8%. And so if you use that as your baseline, I think you see there's still really nice operating leverage in there.

Got you. And can you give a little bit more color to how the allergy Tri-Heart and Rapid business did in the quarter?

I think really the takeaway here is they had their good, solid, normal performance in the first quarter, and we had a large bump from our contract with Elanco. It's primarily related to the difference between what the sales guys were able to do and what the Elanco production folks forecast, and the sales guys had a great quarter. And probably more importantly, the Des Moines folks were able to produce and ship and fulfill that demand while producing and shipping and fulfilling their normal baseline demand. So it was just a great quarter and there's really nothing magical, other than we had a large customer in Elanco need more staff than they thought they would.

Got you. And then the R&D on the Rapid assay project, is that -- should we put that into our '17 models in Q3 or Q4? How should we think about that coming around? I know that's been -- I know you haven't been able to go forward with that project as fast as you'd like, but should we still anticipate that in the back half of the year?

Yes, for sure. I mean, I would put a couple of hundred in the third quarter and the balance of it -- or the second quarter, I'm sorry, and then the balance of it in the third and fourth quarter.

All right. And if I may add, this question is probably more for John. Would you be able to parse out the benefit, that tax benefit that you got, that you recognized in the quarter. Is some of that stuff that we might be able to see in the future or was that all just in the quarter and separated because that's just really is a onetime thing? I mean, I would think the accounting rules is permanently now in place so you should see some of that on a go-forward basis. I mean, I know you guys don't actually pay taxes because you have the NOL, but just on the cosmetics on the earning line.

So David, we'll continue to see it quarter-over-quarter because it's new this year. So we'll continue -- so all companies will continue to see it from a comparative basis based on the comparing to the previous quarters last year. So it's a pretty big adjustment from the way it hung up on the balance sheet versus the way it was going through the P&L now. I'll give you kind of an example, a real-world example. So we grant a stock option at $20. You get your stock comp expense at -- set at the time it's granted at $20. And then a year later, that same share is sold for $80, so there's a $60 difference in compensation for the employee for which we get a tax benefit. That tax benefit used to go on the balance sheet. Now it's being run through our tax expense, and it's offsetting taxes that we would pay or expense that we would record. And in our case, the amount of benefit that we had completely dwarfed any tax expense that we would have booked. And I think the larger the difference between your share exercise price that you granted at and the vesting price, the more of these benefits that you're going to have. So for folks, companies that have stock options that are underwater, they won't have any impact. And for companies like us that the stock price has grown so dramatically over the year, we're going to have enormous benefits. Like I said, it used to be hung up on the balance sheet and now we're running directly through our P&L.

So basically, it sounds like a pretty good problem to have.

Well, yes and no. Probably, you're just -- it's just reflecting the rewards of stock appreciation and employees who were granted stock options years ago before the stock had appreciated, so it's really not a monetary benefit. It truly is an accounting change. I think it was $0.29 in the period.

$0.29 in Q1 alone, and it's never a good -- you're never in a good place if you're explaining accounting benefits.

(Operator Instructions) We'll hear next from Raymond Myers from Benchmark.

First, a clarification, and then I'll ask another question. Kevin, the stock gain. It sounds like it actually has a cash benefit to the extent that it shields you from cash taxes.

Well, that would be correct, but we don't pay cash taxes to begin with. So it's really kind of a benefit that we lose because of our NOL. But in general, that's the case.

So at some point, when you do pay taxes, you would shield those taxes so it's not a noncash gain. It actually is a tax gain for future periods.

Yes, that's correct. It also shields us from paying any cash state tax.

So my main question is I wanted to ask you to describe the competitive environment because we've all heard from competitors of yours who described programs to try to regain lost customers from an undisclosed competitor, and they're working hard to do that. Can you describe the competitive environment and has that had any effect on your rate of competitive wins?

That's a great question. That's probably the crux of the matter, isn't it? So we're not struggling to win folks back, because I suspect we're the unnamed competitor, at least -- or at least certainly part of the unnamed competitor when folks talk about that. We have been for many, many, many quarters calling out market share gains, and we think that's reflected in our growth. So from a competitive response standpoint, we just intend to remain positive. We have a positive story. We do a really good job. We hire really nice people. Our veterinarian customers are really nice people who take care of pet owners who are really nice people and we go out and we do the work. So I don't think we are in need of big, grandiose, new launches and programs and those types of things. We just need to keep doing a really good job and keep our customers happy, which they clearly are, and continue our growth. But it's competitive. You have a very, very large competitor, who's the market leader, and they execute extremely well and I suspect they've picked up some market share, and it's going to keep being competitive. And everybody on every side is full of pride of their solution, is convinced of the truth of their solution and will go out and fight really hard to convince other people of the same. So that's not going to -- it actually wouldn't be any fun if that wasn't the case. So it's -- I think the competitive nature of it is going to continue.

Great. And then one final question on margins. The margins were relatively strong in the quarter. Was that mostly influenced by the mix and having low imaging mix in the quarter? Or were there other positive margins effects in certain businesses?

Yes. Go ahead, John.

So the -- along with -- you're right, on all cases. So our subscription -- our diagnostics margins are higher than our imaging margins. And then you add on top of that a strong product mix from our OVP segment, and you've got a 2% or so increase in margins. So it was really product mix throughout the entire business, but most specifically in OVP.

And I'm going to pile on a little bit on that, too. Part of the strength of our subscriptions model is when somebody is in a contract with us, we offer price protection, but they also agree to reasonable price increases. And because we have such great retention, in most cases, these folks are signing up for 6 years, those annual price increases really matter. And what's kind of neat about our model is they happen on a regular basis. They don't happen once a year, they don't happen twice a year. They basically happen 12x a year, depending on when each customer signed up for their subscription. So I think part of the beauty of our model is just that we have the ability to continue to realize good price and good margin improvement over a long period of time. And so that's a nice growing baseline, and then you add to that some of these other things. And then you add to that just managing your business a little more tightly, and you can pick up a couple of hundred basis points and improve operating profits. And I think that's what you've seen for really the last couple of years, and I intend that it will continue.

We'll go back to a follow-up from Nicholas Jansen from Raymond James & Associates.

Just 2 quick follow-ups for me. One, in terms of the earnings guidance that you kind of gave on the call. Just wanted to confirm that, that does not include any more tax benefit and also that it bakes into the analysis, the expected increase in R&D.

In both cases, yes. So it bakes in the first quarter $0.29 pick-up, and it does not assume any future benefit. And if there is any future benefit, we'll bump that number to reflect really just whatever that discrete benefit is. So you can remove the $0.29, and that will give you kind of the non-GAAP growth. And then on a go-forward basis, we would just bump it if there was additional tax benefit. And on the other question, yes, it's kind of an all-in number.

Perfect. And then just one other follow-up on just the 22% growth that you saw on blood diagnostics. Obviously, your share gains have kind of accelerated over the last 18 months. I'm just trying to get a sense of how that 22% number kind of shaped up relative to some of the recent disclosures we have -- we haven't gotten that specific number in prior quarters, so just trying to better understand the moving parts as we think about that revenue growth vis-à-vis the recent trajectory.

Yes, I don't feel like it was crazy. It was nice, it was solid. But I think what I was trying to share with you is, I see this year as a slightly dampened top line year, with really good continuing profitability growth. And ultimately, the way we look at our business and our job is we're paid to generate earnings per share for shareholders, and we're paid to do that in such a way that it's sustainable, visible and doesn't surprise people if it were to stop. And I think and what we're trying to signal to you guys is, there are times where you'll strategically change your model and take the revenue number down, but that is really not a metric in this case, to look around the corner and say the growth is slowing. So we decided to go ahead and call out that 22% number in the blood diagnostics space because that's a key space, and I think it's really important for people to understand that we've got 80% of our customers in a nice growing subscription for many, many years, and we continue to add those customers. And that's all rolling up to, in this case, 22% growth and a key driver of our business. If you then layer on top of that a strategic shift into rentals with digital imaging, which is really just another diagnostic. It really fits with what we did 2 or 3 years ago on the blood diagnostics space, and it's why we're continuing to get growth rates that we just reported in that segment. And we think that those are sustainable and visible. So a long answer, but I hope we accomplished that.

No, that's helpful. And as we think about the longer-term growth, obviously, you have product line extensions and geographic expansions to consider for next year as well, correct?

That's exactly right. And so I think you'll see revenue growth start to pick up as you expand into some of those areas because those are new revenue areas for us. But ultimately, we're about profitability and health and sustainability in the markets that we're in. That is our primary job. And when these product line extensions and geographical extensions come online, I think that's when you start to see some of that growth. The good news is if we manage the business well and the costs well and the margins well, those revenue expansions, those new markets and new expansions are, by definition, more profitable because we've got a good model, and we've managed cost, margin and expenses well.

And at this time, there are no additional callers in the queue. I'd like to turn the conference back over to management for any additional or closing comments.

Super. Thank you. And thanks, everybody, who joined the call. I hope it was helpful. I'd like to congratulate the entire Heska team. They delivered a great, solid performance, and they did it in a healthy way. I'd like to send a special thanks to the Des Moines team. They've produced a wonderful 56% surge in growth in their area. I know it was a lot of work, and they performed fantastically, so great job. I'm very pleased with our early 2017 performance, and I look forward to updating you on our progress again in another couple of months. Until then, have a great day.

That does conclude today's teleconference. We thank you all for your participation.