Masimo Corp (MASI) 2016 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to Masimo's Third Quarter 2016 Earnings Conference Call. The Company's press release is available at www.masimo.com. (Operator Instructions) After the speakers' remarks there will be a question-and-answer session.

I am pleased to introduce Eli Kammerman, Masimo's Vice President of Business Development and Investor Relations.

Hello, everyone. Joining me today, our Chairman and CEO, Joe Kiani, and Executive Vice President of Finance and CFO, Mark de Raad.

This call will contain forward-looking statements which reflect Masimo's current judgment including certain of our expectations regarding fiscal 2016 financial performance. However, they are subject to risks and uncertainties that could cause actual results to differ materially. Risk factors that could cause our actual results to differ materially from our projections and forecasts are discussed in detail in our SEC filings including our most recent Form 10-K and Form 10-Q. You will find these in the Investor section of our website.

I'll now pass the call to Joe Kiani.

Thank you, Eli. Good afternoon and thank you for joining us for Masimo's Third Quarter 2016 Earnings Call. We are happy to once again be reporting results that surpassed our projections. Similar to the second quarter, we realized strong US adhesive sensor growth due, we believe, to our growing customer installed base as evidenced by shipment of 45,800 set and Rainbow SET oximeters in Q3 and increase in hospital sensors. Our projected worldwide installed base excluding handheld and Finger Pulse oximeters is now poised to exceed 1.5 million units by end of this year.

Here are some other highlights from our third quarter. We once again achieved double-digit growth for product sales, which rose by nearly 11%. Our Q3 2016 GAAP earnings per share was $0.52 a share, including a $0.05 per share gain related to the new accounting rules for gains realized on stock option exercises, and some other near zero-sum items that Mark will address later.

In the clinical arena, at the recent annual ASA meeting in Chicago, new SpHb and PVI study results were presented that showed 30% and 25% mortality reduction at 30 days and 90 days after surgery, respectively, for the group that had SpHb and PVI monitoring. Over 18,000 patients were in this French study. These are remarkable results, and if they can be repeated at other institutions it should create a standard-of-care argument for SpHb and PVI.

We also received three important new product clearances in the EU, which I will discuss later. We signed a new agreement with Medtronic that will not only assure our royalties through the first part of October 2018 but minimize the chances for further litigation with Medtronic.

We're well positioned to enter 2017 and successfully complete our 10-year plan. Our product portfolio and our customer reach all over the world is continuing to expand, which will help more patients gain better outcomes and more hospitals reduce their cost of care. With Q3 results exceeding our expectations, we are happy to be able to once again increase our financial guidance for the remainder of 2016.

Next, Mark will review our third quarter financial results in more detail and also provide you with our updated 2016 financial guidance. I will then discuss some additional Q3 business, product, and clinical highlights. Mark?

Thank you, Joe, and good afternoon, everybody. Our third quarter product revenues of $160.3 million rose by 10.8%, or 10.3% on a constant currency basis versus the third quarter of 2015. As Joe noted, our Q3 product revenues were above our expectations due primarily to our ability to continue to expand our customer base as our superior technologies and innovative products are resonating with both hospitals and clinicians. Our third quarter total revenues, which include royalty revenues, were $167.6 million up 9.9% from $152.6 million in the prior-year period.

Rainbow product revenues for Q3 totaled $18 million, up by 5% from $17.1 million in the prior-year period. Rainbow sales were strong in the US but because of a difficult comparison for OUS Rainbow sales related to a large Saudi Arabia order in the year-ago period that did not repeat due to their unexpected financial crisis, the overall worldwide growth rate was adversely affected.

Still, year-to-date Rainbow revenues totaled $489.8 million, which is up 16.5% from the same prior-year year-to-date period, and we are maintaining our forecast for total 2016 Rainbow revenue growth of approximately 10%.

Our Q3 SpHb revenues were $5.8 million up by 24% from $4.7 million in the prior period. In fact, SpHb sales are now up 36% year-to-date and on track to reach nearly $20 million this year.

Our worldwide end user, or direct business, which includes sales through Just In Time Distributors grew 14.3% in the third quarter to $137.4 million versus $120.2 million in the year-ago period. Our direct business represented approximately 86% of total product revenue in the quarter versus 83% in the prior-year period. OEM sales comprising the remaining 14% were down by approximately 6% due to lower year-over-year sales to an OUS customer.

By geography, total US product revenue increased 12.9% to $114.6 million compared to $101.5 million in the same quarter of 2015. Our Q3 OUS product revenues of $45.7 million rose by 6% versus $43.1 million in the same prior-year period, and we're up 4.3% on a constant currency basis.

Excluding our business in Saudi Arabia, our OUS business grew 11% compared to the same prior-year period. As total OUS revenues represented approximately 29% of total Q3 product revenues.

Our third quarter 2016 GAAP product gross profit margin was 64.1%. However, included in this was a $2 million adjustment related to a new customer contract in which due to language required by the customer, we were required to immediately expense the up-front monitoring equipment versus over the life of the agreement as we normally do. Without this $2 million adjustment, our product gross margin would have been 65.3%.

Also, as you will recall, at the start of the year, we discontinued the consolidation of Cercacor. Had we not consolidated Cercacor in fiscal 2015, our prior-year product gross margin would have been 64%. Therefore, on a true apples-to-apples comparison, our year-over-year gross profit margins have actually increased from 64% to 65.3% or by 130 bps.

This very strong improvement is due to a favorable product mix tied to higher single-patient use adhesive sensor sales, the aggregate benefits from our value engineering efforts, as well as the benefit from favorable FX movement in the value of the Mexican peso versus the US dollar. And, in fact, because of this true apples-to-apples growth profit margin strength, we were actually increasing our own internal Q4 product gross profit margin forecast.

Reported third quarter 2016 total expenses were $73.5 million, a decline of $600,000 versus the prior-year period as we realized that $3 million benefit from an insurance recovery related to legal defense costs from a prior period.

In addition, our current year total operating expenses no longer include Cercacor operating expenses, which totaled approximately $3 million in the prior-year period. So adjusting for the impact of these items, our total adjusted operating expenses would have been up by approximately 7.6%. This increase was primarily due to higher employee-related costs as well as additional marketing and engineering project-related costs including new staffing related to our continued commitment to reinvest the savings from the two-year suspension of the medical device tax.

Third quarter 2016 operating income was $36.6 million compared to $28.1 million in the prior-year period. Our reported operating income margin was 21.8%. However, adjusting for both the $3 million insurance recovery and the $2 million contract expense, our adjusted operating margin would have been 21.2%.

Non-operating income in Q3 2016 was $500,000 compared to non-operating expense of $1.1 million in the prior-year period. The $0.5 million in Q3 2016 non-operating income includes approximately $900,000 in net interest expense related to borrowings under our line of credit offset by slightly favorable FX benefits related to the translation of our foreign entities' financial statement.

Our third quarter 2016 effective tax rate fell to 23% down from the 33.8% in the same period last year and was well below our expected rate of approximately 30%. This lower effective tax rate was due entirely to a $2.6 million benefit we recognized in the quarter related to our early adoption of ASU 2016-09, the new accounting guidance regarding the reporting of tax benefits resulting from the exercise of stock options. Without this discrete item, our adjusted Q3 effective tax rate would have been 30.3% near our 30% forecast.

As a result of this new accounting rule, our Q3 2016 fully diluted EPS was increased by $0.05 per diluted share. Our average shares outstanding for Q3 was 53.6 million, essentially level with the 53.7 million shares in the year-ago period but up from the 52.7 million in Q2 2016. The sequential increase our Q3 weighted share count was due to the exercise of stock options and the diluted impact that a higher stock price has on the dilutive value of stock options outstanding.

Third quarter GAAP net income increased by 44.4% to $27.8 million, or $0.52 per diluted share including the $0.05 per diluted share benefit related to the discrete Q3 accounting charge. The Q3 insurance recovery added $0.04 to our Q3 earnings per share, although that was largely offset by a $0.03 charge related to the new customer contract equipment charge-off that I alluded to before.

Adjusting for these items, our EPS would have been approximately $0.46, a 28% increase compared to EPS of $0.36 for Q3 2015.

As of October 1, 2016, our day sales outstanding was 54 compared to 47 as of July 2, 2016, and compared to 46 as of January 2, 2016. Our Q3 day sales outstanding is typically the high point for the year due to the later selling activity in Europe. And, in addition, our Q3 day sales outstanding also increased slightly due to the aging of a receivable from our Saudi customer.

Inventory turns were 3.4 compared to the April 2, 2016, level of 3.7 and 4.2 as of January 2, 2016.

Total cash and cash equivalents as of March 1, 2016, were $126 million compared to $132.3 million as of January 2, 2016. During the first nine months of this year, we have generated approximately $88 million in cash from operations, and $26.1 million from the exercise of stock options. These funds have been used to repurchase $1.5 million shares at a total cost of approximately $63.4 million to repay $32.5 million in our line-of-credit borrowing and to fund our operations.

During the third quarter, we repaid $22.5 million on our line of credit, lowering the total borrowings outstanding from $175 million to $152.5 million.

Now I'd like to take just a moment to update our fiscal 2016 financial guidance, which is based on the best information we have available to us. We are now projecting our total fiscal 2016 GAAP revenues to be approximately $692 million including $661 million in product revenues, which was up from the prior estimate of $658 million and with no change in our estimated $31 million in royalty revenues.

We expect our annual GAAP 2016 product gross profit margins to be approximately 65%, which is consistent with our prior guidance. We now expect our fiscal 2016 operating expenses to be approximately $310 million, which is down from our prior guidance of approximately $314 million due primarily to the $3 million Q3 insurance recovery.

We continue to expect our tax rate for the remaining three months of fiscal 2016 to be approximately 30%. And we are now projecting that our average quarterly weighted shares outstanding for the final quarter of fiscal 2016 will be between $53.7 million and $54.1 million.

As a result of these changes, we are now expecting our 2016 GAAP EPS to be approximately $2.13, up from our prior estimate of $2.01 per share.

And, with that, I'll turn the call back to Joe.

Thank you, Mark. Our third quarter results reflect the great clinical and financial value of our SET technology and the success of our new products, such as Rainbow and Root, as well as our improved productivity.

Our outlook for the remainder of the year is encouraging as illustrated by our ability to once again boost our financial projections for 2016. We are realizing higher sales of pulse oximeters and pulse CO-Oximeters as well as solid growth for newer products such as SedLine Brain Function monitors, Nomoline Capnographs, and all three regional oximeters.

We are also realizing higher revenues per driver across our installed base as utilization rises and even greater numbers of customers incorporate the use of our new Rainbow sensors.

We are especially happy to be able to say that another premier hospital organization in the country has now become a Masimo customer. Stanford Health Care including Lucile Packard Children's Hospital together with the hospital of the Stanford University School of Medicine has standardized on our Rainbow set technologies. I believe the clinicians at Stanford are equally happy as they get to use our breakthrough technologies to help them better care for their patients.

2016 has so far been a great year to get some of the most sought-after conversions for Masimo, as we also reached partnership agreements with Cedars Sinai Hospital in Los Angeles and Walter Reed Army Hospital in Washington, D.C. We are very happy to welcome these and many other prestigious institutions as new customers.

We should be able to maintain our steady growth with increases in our customer base, rapidly rising sales of our Nomoline 03 and SedLine products and a solid stream of planned new product launches.

During Q3 we received three noteworthy product clearances in the EU. First, we received the CE Mark for our new Rad-97 CO-Oximeter. The Rad-97 has a smaller form factor than our standard Radical-7 but a similar high resolution touch-screen user interface. It will be value-priced to increase our penetration of accounts in developing countries and the home market.

The second new product to receive the CE Mark in Q3 is the pediatric version of our 03 regional oximeter. This new sensor will enable us to more fully address the market opportunity for cerebral and regional oximetry with the 03 module that plugs into Root communications hub.

Lastly, we received a CE Mark for our new Ras-45 sensor for Rainbow acoustic monitoring of respiration rates. The new Ras-45 sensor is a trimmed-down, more-user, and patient-friendly version of our original Ram respiration rate sensor, another device which can plug into Root or into our Radius-7 tetherless wearable monitor.

On the clinical front, the recent American Society of Anesthesiologists meeting in Chicago included multiple abstracts and presentations on Masimo technologies. As I mentioned in my opening remarks in a study presented by researchers at Hopital Dupuytren, part of the University Hospital Center of Limoges, France, the clinical utility of SpHb and PVI were assessed at a scale of a whole hospital to measure any improvements in mortality and transfusion needs.

In this prospective observational study, Professor Natalie Nathan and colleagues reviewed two sets of patients over two 11-month periods. Before and after implementation of a clinical algorithm to guide transfusion and fluid administration. Masimo Radical-7 Pulse CO-Oximeters were installed in all operating rooms, recovery rooms, and intensive care units. In addition, the Radical-7s were connected to Masimo patient safety net for trend data collection.

The study included 18,867 patients of whom 3,450 underwent SpHb and PVI monitoring via a Radical-7. The research was compared, the percentage of patients in the monitored group will receive transfusion within the first post-operative 48 hours to the percentage in a non-monitored group. They also compared mortality rates for each group at 30 and 90 days following surgery.

These researchers found that the patients the group monitored with the SpHb and PVI had a 30% reduction in mortality at 30 days and a 25% reduction in mortality at 90 days. The proportion of patients receiving transfusions did not change significantly between the two groups nor did the number of blood units transfused within 48 hours.

However, in non-cardiac surgery, patients were transfused sooner in the operating or recovery room. The researchers concluded that monitoring SpHb and PVI integrated in a vascular-filling algorithm allowed earlier transfusion and reduces mortality at a scale of a whole hospital with different clinical practices and unselected patients.

They further stated access to continuous monitoring of hemoglobin levels and fluid responsiveness has changed the way we address blood and fluid management. We strongly believe that surgeries of intermediate severity such as hip or knee replacement procedures as well as severe surgery will benefit from this technology. Because it is easy to use, quick to administer, provides continuous data, and does not harm the patient in any way, it is more applicable to common clinical practice.

Continuing on the clinical front, I want to update you on our NAChO trial of SpHb. NAChO is an acronym for non-invasive and continuous hemoglobin monitoring for surgical blood management, a trial which began in 2012 and should reach its targeted enrollment of 470 patients sometime around mid-2017. The trial includes patients at eight centers around the world, and we are hopeful for an outcome that shows the value of SpHb for decreasing unneeded blood transfusions.

We have also begun a new six-center study that incorporates continuous SpHb and PVI monitoring to help clinicians optimize intra-operative transfusion, volume and assess the impact on post-operative complications. The defined outcome measures include any reduction in overall blood transfusion intra-operatively and post-operatively. Two, any reduction in excessive blood transfusion. Three, any reduction in the percentage of patients with incidence of the above-mentioned excessive transfusion, and, four, we will measure the ability to optimize or minimize infusion of IV fluids, reduction in hospital length of stay, and reduction in post-operative complications.

The timeframe for this new study is targeted completion by Q2 2018 based on recruitment of approximately 2,300 patients within six centers. Results should be published thereafter.

We have three clear objectives -- make Rainbow the standard of care in developed countries; help automate hospitals cost-effectively with Root; and expand the penetration of SET. For the past 20 years, we have focused largely on the needs of those who are fortunate enough to live in more heavily resourced parts of the world where approximately 2 billion people live. While not abandoning our roots, we are adding our attention to the world's other 5 billion people in order to de-marketize SET pulse oximetry and, with it, hopefully achieving vastly improved health care in these settings.

Given the enormity of the task at hand, we are especially proud to be partnering with a number of public and private organizations in a groundbreaking alliance dedicated to increasing access to health care, oxygen supplies, and pulse oximetry. Our partners in this fight include the Bill and Melinda Gates Foundation, the United Nations, PATH, Philips, GE, the Pneumonia Innovation Team, Save the Children, UNICEF, and USAID among others.

The Gates Foundation recently granted Masimo $5 million towards this effort on a project we have named Rad-G. We hope this work will allow us to sustainably help save nearly 1 million lives, mostly children, annually. We will provide you more detail on this at our next earnings call and a planned Analyst Day in Irvine early next year.

In closing, our Q3 financial results have once again exceeded our projections and have enabled us to increase our guidance going into the last quarter of the year. We are well positioned to complete the final year of our 10-year post-IPO plan next year in a way that will continue to illustrate the financial strength and earning leveraged in our business model.

We also intend to lead the industry in new innovative technologies, products, and direction, all while we remain faithful to our promises and responsibilities and our mission to improve patient outcomes and reduce the cost of care with our breakthrough non-invasive monitoring technologies.

With that, we'll open the call to questions. Operator?

Thank you. (Operator Instructions) Larry Keusch, Raymond James.

So a couple of quick questions. I think you were pretty clear on most of it. But I was wondering if you could expand, either Joe or Mark, on the OEM sales decline in the customer that you indicated delayed or deferred an order in Europe?

Sure. It was actually tied primarily to a customer who had made a rather large order from us in the same quarter a year ago that, for various reasons, did not basically replace that order this year. So that's, essentially, all it was.

Okay, so a comp issue?

Yes, year-over-year, yes.

Okay. And then a couple of other smaller ones. Could you break out, at least I don't think I heard it, the FX impact in the gross margin and then the US SpHb growth, which you indicated was quite robust.

Well, the overall FX impact in the margin was approximately between $0.1 and $0.02, Larry, in the quarter, because we received a little bit of benefit on the revenue line and then as I noted in our prepared remarks, we also benefited from the movement in the Mexican peso during the quarter, at least relative to the prior-year period. So, in total, in a range of about $0.01 to $0.02. (inaudible)

And then the US SpHb growth?

In terms of the reason why?

No the growth rate for SpHb. I just missed it.

Oh, oh, oh, I think it was 48%. Yes, we said SpHb was up by 24% year-over-year.

And then just lastly for Joe. Obviously, I recognize that you're not providing 2017 guidance, but I was wondering if there is any sort of high-level thought that you might provide as, sort of, how the environment feels as you head into next year?

We're feeling pretty good about next year. We've had multiple meetings (inaudible) both headwinds and tailwinds for the year coming, and we think, all included, it's going to be another great year.

Chris Lewis, ROTH Capital Partners.

I guess, first, the second consecutive quarter now, if you just look at the core SET sales growth, excluding Rainbow, it's nearly 12% back-to-back quarters. Can you just spend a minute or two to elaborate just on what continues to drive that core pulse-ox growth profile higher? And as we look forward, how should we think about the core business growth rate?

Sure. I think, first of all, we're seeing increased demand for our technology. We're seeing it in our direct business as well as our OEM business, where a greater percentage of our OEM sales are with our technology.

Secondly, we're seeing an increase in sensor utilization, which we believe is due to the increase in sensors in hospitals both inpatient and outpatient. So except for some small pockets in the market, like UK and France and Saudi Arabia, it's been generally very positive sensors-wise and financial purse-wise.

Okay, great. And maybe just going off of that -- we've heard some varying commentary from some of the other reports out there in terms of utilization, hospital utilization, maybe some softness over the summer months. It sounds like it's picked back up, but can you just elaborate on it? Obviously, it sounds like you're utilization kind of pull-through numbers are trending positively. So can you just elaborate on what you're seeing in terms of utilization during the third quarter and what you're seeing so far into the fourth quarter?

Yes, sure. We've seen -- obviously, summertime is softer than Q1 and Q2 and Q4, but from a year-over-year perspective, we saw the similar growth in our summer quarter for the same quarter a year ago as we've seen in Q1 and Q2 compared to the same quarters a year ago.

So we did not see that softness, and we'll continue to see the same pattern of -- as you know, our sensors are single-patient use in the US and some parts of the world, so we think that gives us a good view of hospital sensors. But while I cannot predict the future, I can just tell you of the last several quarters have been very positive, sensors-wise.

Great, and then, Mark, maybe a question for you. I think it's been about a year since you announced the new Red Diamond sensor. Where are you in terms of rolling that out across your installed base? What impact is that having on gross margins? And how should we think about that layering into the gross margin expansion story over the next 12 months? Thanks.

Sure. Well, the good news is that the product is actually rolling out both in the US and OUS. It's not yet, as we look toward the end of this year, probably not in substantial enough volume to have a dramatic impact on this year's numbers. However, as you know, we talked pretty openly about the fact that we expect, over the next two, three years, as we are able to migrate both new customers and, hopefully, a large percentage of our existing customers, to the new RD sensor that we expect that transition to actually result in -- or cause one of the reasons why we're very optimistic about our ability to see overall product gross margin continue to rise similar to what they've done over the last couple of years for some slightly different reasons.

Of course, as you know, the last couple of years the value engineering efforts related to primarily boards and some of our other products have yielded the kind of margin improvement that we've enjoyed. Looking forward to the next couple of years, there are a number of other cost initiatives that are underway, but the Red Diamond conversion is going to be a key element of why we're confident about the ability to continue to see increases in overall year-over-year product gross margins.

And do you feel that -- I think in the past, you've pointed to a 50-basis-point goal in terms of product gross margin expansion year-over-year. Is that still the appropriate range or target to think about?

Yes.

Brian Weinstein, William Blair.

Hey, this is Matt Larew on for Brian this afternoon. I just first wanted to ask about a couple of the product growth drivers. First, if you could just update on where Root stands at this point, and if you think you're going to hit the number you talked about for 2016. And then obviously a nice SpHb quarter and just wondered if there are other measurements, in particular, that you're really seeing nice traction on that's help driving that Rainbow total?

Yes, we do believe we're going to hit our numbers for Root for 2016 as well as for Rainbow and SpHb, in particular. And, obviously, we think what's driving Root is the appeal that product has in terms of not only providing a great way of monitoring and trending the measurements that we have but also creating a hub, as a rule, for everything to connect into and displays information through the cockpit or and sends it to an electronic medical record.

As for Rainbow and hemoglobin, we just think not only is the evidence piling up on the outcomes, there's now three studies in three different continents -- US, Europe, and Middle East and Asia and Japan that have shown dramatic blood transfusions on patients with hemoglobin and now this new study from France that shows mortality reduction.

Plus, I think that plus customers own experiences is driving further adoption. We're getting really great traction with consumables with hemoglobin and Rainbow, and we see that trend increasing as Philips has now launched Rainbow in not just the low end, but their high end, and Philips has been helping get the word out on Rainbow. So we expect that will continue to move up.

Years ago, we talked about the technology adoption curve for any new technologies that does look like an S-shape. I think we're beginning to go up to the steep parts of that curve. So I hope we're right.

Okay, thanks for that, Joe. And then, Mark, just one for you. Obviously, while the top line has been taking off pretty nicely here, the expenses have been controlled really well. I'm just thinking about, moving forward, I know you talked today about a new initiative to move more [broadly the] OUS, but in terms of the organization here in the US where the (inaudible) are developed countries, do you feel good about the size of the organization to be able to sustain this really nice uptick on the top line that you've seen?

Sure, Matt. The quick answer yes. We've spent the last seven, eight, nine years building the infrastructure of the Company to essentially put us in the position that we've enjoyed for the last couple of years, and that is one of leverage. We will selectively continue to make investments all over the world, some of which Joe was alluding to before. But it will all be done within the overall guidance relative to our ultimate goal, which is to continue to focus on delivering earnings per share results that are far in excess of the growth rate of our product revenues.

And, obviously, to do that, we're going to continue to need to see total operating expenses as a percent of revenue continue to decline over the next couple of years despite making the appropriate selective investments that we need to make all over the world to continue to see the overall aggregate product revenues get to the levels that we think they ought to be able to achieve over the next three, four, five years.

Bill Quirk, Piper Jaffray.

Thanks, this is Laura Sand on for Bill Quirk. Can you talk about the transition for the new lightweight sensor? Do you have any programs in place to help accelerate the process within existing customers?

You're referring to the RD sensors?

That's correct.

Yes. Well, yes, it's an important part of our salesforce and clinical specialists to transition our customers to RD. The good news is that the center offers so much value to the customer both from its low profile lightness, and in the US we can't talk about it but, actually, more accurate. So in Europe we do get to talk about that.

So the customer's experience is fantastic and, for that reason, it has not been difficult to get them to want to transition to it. So we believe that transition is going to happen, and it will be, as Mark said, a good reason for us to expect improvements in our margin, as well, next year.

Okay, great. And can you give us an update on the integration with the dedicated hemoglobin salesforce? Are you seeing any early traction here? And what are you expecting on timing?

Well, yes, I think it has worked well. We are seeing a better, more productive group that's not just selling hemoglobin and PVI into the OR and critical care, but also the new products that have recently been introduced like O3 regional oximeter, SedLine Brain Function Monitor. So, yes, overall, it's been a good move. We're happy we've done it, and we'll continue to move it on that path.

All right, and then last one for me -- any update on the Philips litigation?

Yes, we've had really good results. Recently, Judge Stark from Delaware recently ruled on multiple motions -- summary judgment motions, that were intended to define what's going to happen at trial coming this January. We are very happy with the results. We believe we're set for a great trial in January.

Sounds good, thank you.

Thank you so much. I think that was our last question. We appreciate you all joining us and look forward to our next call at the beginning of the year and hopefully seeing you all in person at our Analyst Day here in Irvine, California. Thank you so much.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect.