Earnings Call Transcript - AFYA Q3 2020

Operator, Operator

Good morning, ladies and gentlemen, and welcome to Afya’s Third Quarter 2020 Earnings Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session and instruction will follow at that time. As a reminder, this call will be recorded. I would now like to introduce your host for today's conference Renata Couto, Afya’s Head of IR. You may begin.

Renata Couto, Head of IR

Good morning everyone. Thank you for joining us for Afya’s third quarter 2020 conference call. With me on the call today is Afya's CEO, Virgilio Gibbon; and Luis Andre Blanco, our CFO. During today's presentation, our executives will make forward-looking statements. Forward-looking statements generally relate to future events or future financial or operating performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from those contemplated by these forward-looking statements. Forward-looking statements in this presentation include, but are not limited to, statements related to our business and financial performance, expectations and guidance for future periods or expectations regarding our strategic product initiatives and the related benefits and our expectations regarding the market, as well as the potential impact from COVID-19. These risks include those more fully described in our filings with Securities and Exchange Commission. The forward-looking statements in this presentation are based on the information available to us as of the date hereof. You should not rely on them as predictions of future events, and we disclaim any obligation to update any forward-looking statements, except as required by law. In addition, management may reference non-IFRS financial measures on this call. The non-IFRS financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with IFRS. We have provided a reconciliation of these non-IFRS measures to the most directly comparable IFRS financial measures in this presentation. Let me now turn the call over to Virgilio Gibbon, Afya’s CEO and starting with Slide 4.

Virgilio Gibbon, CEO

Thank you, Renata, and thanks everyone for joining us today. I hope that you and your families are all doing well. Since our last earnings call, the overall business environment did not materially change. Our key priority remains the health and safety of our students, faculty and employees. Although there have been some disruptions from COVID-19, our teams devoted to leverage our online and virtual technology capabilities and adjust offerings for our students that allowed us to generate strong results this quarter. We once again saw organic revenue growth contribution from acquisitions, underlying margin expansion, and cash flow generation. Before we start with our financial and operational highlights, I'm proud to share with you that we have just refreshed our brand. We are the only complete medical education platform serving every stage of the doctor's career, providing solutions and methodologies for a personalized experience. And when company awareness grows, its brand also does, so this is our new logo that reflects our DNA and will support gradually every service and local brand. Please take a few minutes to watch our brand manifesto. Moving to Page 5. We'll discuss our main highlights. Starting with our top line. Third-quarter adjusted net revenue increased 52% year over year, mostly due to maturation of our medical school seats and consolidation of acquired companies. It's also important to highlight that the discounts granted by the state decrees and legal proceedings due to COVID-19 on-site classes restrictions did not impact us materially and represent around 1% of our net revenue in this third quarter. In 2020, profitability continues to run ahead of last year, as we not only grow the business, but we are capturing synergies from acquisitions to leverage net growth. Adjusted EBITDA margin increased 340 basis points year over year and net income was up 47% to BRL101 million. At the end of the quarter, we had approximately BRL1.1 billion in cash and cash equivalents on our balance sheet and the cash conversion for nine months 2020 was 86%. Despite any short-term challenges posed by COVID-19, we remain confident in our strong cash flow and healthy balance sheets to manage through the current crisis and beyond. With respect to M&A, our team continues to successfully execute both on generating and closing new business, as well as capturing synergies. We are particularly pleased with our acquisitions in the digital health service with PEBMED, which is quickly followed by iClinic and MedPhone. At the same time, we continue to grow our medical seats, acquiring two companies during the quarter and another one subsequent to quarter end. With these acquisitions, we are now at 85% of our IPO three-year target of adding 1,000 medical seats. On a separate topic, I'm very pleased to share that we were the winners in the education sector in the Epoca Negocios 360 survey. This award, which has been held annually for seven years, is one of the most significant in the communications industry and recognizes companies that are market leaders across six different categories, including financials, corporate governance, sustainability, vision, and human resources. Besides that, we also won the Golden Tombstone in the equity category. This award is evaluated by IBEF Sao Paulo and recognizes equity operations in aspects such as complexity of the transactions, innovation, price, and others, and Afya's award was due to our successful IPO in 2019. Moving next to a discussion of our recent digital acquisitions on Page number 6. Even during these challenging times, we remain committed to delivering innovation to our students, faculty, and other healthcare professionals. COVID did not slow down the implementation of our strategic initiatives. In fact, we have accelerated our digital investments. We are expanding our digital offers, and we began this digital journey with the acquisition of PEBMED, which we discussed on the last quarter call. As a reminder, PEBMED provides tools and content for healthcare professionals through the WhiteBook and Nursebook apps and through the PEBMED news portal. It's also the market leader in clinical decision software and is an extremely popular app, ranking in the top 10 Brazilian apps by consumer spend and an NPS of 85. The business model consists of both paid subscription and free content, providing an additional source of revenue for us. We followed this with the acquisition of iClinic, a leading practice management software for physicians in Brazil, which includes electronic medical records, a clinical management system, telemedicine, and a complete marketplace that connects doctors and patients with scheduled consultations. We currently have close to 12,000 monthly subscribers with a monthly average per user of 107 hands. With this acquisition, we have strengthened our position in the digital health service segment, complementing our end-to-end offering to healthcare professionals and providing another revenue source. Subsequently to the quarter end, we announced the acquisition of MedPhone, the number two medical app in Brazil behind WhiteBook, a PEBMED company. MedPhone has 175,000 registered users and close to 60,000 monthly active users, with a score of 4.9 in the app store and more than 9,100 reviews. The integration of MedPhone's clinical decision software with PEBMED will generate synergies and allow us to offer both products from the same platform. Importantly, the founders of these acquired companies will join Afya and will be an integral part of the digital team driving our growth in health tech services. These have been key acquisitions for us as they accelerate our digital efforts to improve the user experience and efficiency of both healthcare students and other healthcare professionals. There are approximately 500,000 doctors in Brazil and close to half of them are currently using our digital products and services. Our goal is to improve even more penetration to support the largest majority of physicians in Brazil with our digital health service platform. Now on Page number 7, we'll discuss our overall strategic positioning. As we look to the future, we see the opportunity to maintain a long-term relationship with physicians from the time they enter into our school as undergraduates through residency prep, specialization studies, and then through their entire career. We believe the investments in our medical programs and new digital health products will provide growth and revenue impact for many years, as well as strengthening our relationship with medical students and other healthcare professionals. Importantly, our digital investments are already paying off by opening new business revenue opportunities for us. We will also continue to consider acquisition targets. As shown on the bar chart on the right, we have been adding medical seats, 851 seats in just 15 months while also increasing our geographic footprint. This increase in medical seats drives a predictable revenue stream and maximizes cash flow predictability as well. We are also looking to further grow our digital assets through disciplined acquisitions of businesses complementary to, as well as further broadening this business. Importantly, our balance sheet remains healthy with positive cash flow generation that provides us with the results to continue to grow the business both organically and through M&A. Turning up and before turning the call over to Luis, our accomplishments in 2020 as we continue to navigate through an unprecedented environment are proof of the strength and resilience of our business model and the exceptional work of our passionate team. We are focused on creating shareholder value by delivering our financial targets, investing in growth, driving top-line momentum, and implementing our strategic priorities. I will now turn the call over to Luis for a further discussion of our financial results and second-half 2020 guidance. Thank you.

Luis Andre Blanco, CFO

Thank you, Virgilio, and good morning, everyone. Moving to Page 9. Similar to past calls, my discussion this morning will focus on the main and most significant P&L items. There is additional info in the earnings press release that you can refer to for further information. I'm pleased that we delivered another good quarter across all key metrics. Let me highlight a few. Both medical seats and students saw a significant increase during the quarter. With respect to the number of medical seats, we added 294 seats year over year for a total of 1,516 seats. Reflecting the seat maturation process and acquisitions, the total number of students in the third quarter 2020 was 9,567 students, an increase of 50% over the same period of the prior year. Adjusted net revenue for the quarter, which includes the impact of the state decrees and individual and collective legal proceedings related to the strongest grade related to COVID-19 on-site classes restrictions was up 52% year on year to BRL313 million, partially benefiting from recognition of revenue that has been deferred earlier in the year when practical classes were unable to take place. This deferred revenue amounted to BRL14.4 million in the quarter. Excluding the acquisition of UniRedentor, Sao Lucas, and PEBMED, net revenue grew by 16% year over year reaching BRL239 million. The increase was primarily driven by organic revenue growth, mainly due to the maturation of medical school seats, and an increase in the average ticket. The strong top-line growth combined with cost efficiency and synergies from acquisitions was reflected in adjusted EBITDA increasing 63% to BRL149 million, with a margin expanding 340 basis points. Adjusted EBITDA also benefited from the inclusion of the deferred revenue I just mentioned. Excluding the consolidation of UniRedentor, Sao Lucas, and PEBMED, adjusted EBITDA increased 32% year over year to BRL121 million, a margin increase of 620 basis points to 50.4%. Adjusted net income increased 47% from the third quarter 2019, reflecting the revenue contribution, synergies captured, and margin expansion from the consolidation of acquisitions. Earnings per share increased 48% from BRL0.54 in the third quarter 2019 to BRL0.80 in the third quarter 2020. Moving on to Page 10 for a discussion of key operating metrics by business unit. We delivered solid growth across both business units. Growth in key operating metrics as shown on this slide, is being driven by a combination of organic growth and acquisitions. Starting with BU1, our average monthly medical tuition fees at the nine months were BRL8,053, which was 17% above the same period in 2019. This reflects the combination of new students enrolling with a higher tuition rate combined with students graduating with a lower tuition. As a reminder, this does not include UniRedentor and Sao Lucas. As shown in the middle chart, 78% of our combined tuition fees are derived from medical schools, up from 69% in the same period of the prior year. The combination of 50% increase in the number of students and a 17% increase in the average ticket, resulted in net tuition fees of 41% when compared with the same period of the prior year. With respect to BU2, we have 130,000 active paying users at the quarter end, which included 95,000 from PEBMED. Excluding PEBMED for the nine-month period, we saw a 40% increase in active paying students. We saw the largest increase of 132% in the specialization due to the acquisitions of UniRedentor. Now turning to Page 11 for a discussion about different traction we are gaining from our digital assets. All these recently acquired businesses are also helping to elevate our brand, as well as deepening our connections with students and physicians. We have focused our efforts over the last year on continuing to enhance the student experience. We're closely monitoring their behavior and targets, personalized approach to keep them engaged. The digital investments that we have made enable us to be agile and ensure that we are supporting our students as well as the broader healthcare industry with what is so important to them, quickly and timely access to important medical information. This is more critical now than ever and is also a key leverage for both members of acquisitions and retention. And so on the charts on this page, we are seeing positive gains from our move to digital engagement. In the third quarter, combined monthly active users across our Medcel and PEBMED platform, we are close to 180,000 users. On the chart on the right, you can see trends in the current consumptions. Content that users are consuming included podcasts, learning assets, as well as structured medical webinars. We are also seeing positive traction here with a 9% increase when compared to the first quarter of 2020 when we began our push into digital assets. The higher performance in the second quarter is partially reflective of our opening up of our digital assets for free at the start of the pandemic to our students and healthcare professionals, temporarily inflating the number of users. In summary, we keep looking for ways to modify and enhance our business units to elevate our service offerings. And as we further build our additional capabilities, we will have strong foundations of products offering to support our long-term growth objectives to empower the physician. Moving on to a deeper analysis of revenue and EBITDA on Slide 12. As shown on this page, we have provided adjusted net revenue and adjusted EBITDA from our historical third-quarter 2019 revenues to the reported third-quarter 2020. For the nine-month period, adjusted net revenue increased 62.3% to BRL860 million. Excluding UniRedentor, Sao Lucas, and PEBMED, adjusted net revenue grew 35% through September to BRL750 million with a contribution of BRL93 million from acquisitions and BRL90 million from organic growth, which is comprised of the maturation of medical school seats and an increase in the average ticket. UniRedentor contributed revenue of BRL64 million in the nine-month period, while Sao Lucas' contribution was BRL73 million, and PEBMED was close to BRL7 million. Luckily, there was also a BRL4 million benefit from the nonrecurrence discount granted due to COVID-19. On the right side of the page, we show nine-months 2020 adjusted EBITDA. During the period, adjusted EBITDA increased 77% year over year to BRL480 million with 390 basis points expansion in the margins due in part to a BRL50 million contribution for UniRedentor, Sao Lucas, and PEBMED and BRL4 million contribution of mandatory discounts granted due to COVID-19. Excluding the contribution of these acquisitions, adjusted EBITDA advanced 54% to BRL356 million with BRL48 million contributed from acquisitions and BRL75 million from organic growth. The adjusted EBITDA margins excluding these three companies expanded 1,020 basis points. Moving next to a discussion of our cash flows on Slide 13. Cash and cash equivalents of BRL1.1 billion at the quarter end were 3% higher than the period in the second quarter, reflecting the strong cash generation that we had in the quarter. The majority of this fund is invested in low-risk Brazilian real-denominated instruments. Total debt was BRL599 million at the quarter end 2020, up from BRL535 million at the end of the second quarter 2020 and BRL361 million at year-end 2019. The increase reflected the acquisition payables. Cash generation remained strong in the nine-month period, increasing 39% to BRL325 million, which resulted in a cash conversion of 86%, compared to 109% in the same period of 2019. The decrease in cash conversion rate year over year is mainly due to the consolidation of Medcel business, our student renegotiation of overdue monthly installments due to COVID-19, and we saw a decrease in advances from our students. Turning next for a discussion about pro forma cash and debt on Slide 14. On this slide, we have upgraded our cash positions at the end of the third quarter to arrive at the pro forma level. This bridge takes into account the cash outflows for the five announced acquisitions since the second-quarter end, coupled with an increase in the bank debt to support our growth initiatives. All of these options have resulted in a pro forma cash position of BRL656 million, compared with BRL1.1 billion at the end of September. By contrast, our pro forma gross debt has increased to BRL1.3 billion from BRL599 million at the end of September. The increase reflected the increase of the bank debt that I just mentioned, coupled with the debt we had summoned with the acquisition of Ciencias Medicas. Turning next for a discussion about guidance on Slide 15. We are reaffirming our second-half 2020 guidance based on the solid performance in the third quarter. Our guidance takes into account the successfully concluded medical students intake for the second half of 2020. As a reminder, the world is still in the middle of a pandemic. The economy is slowly opening up and our guidance takes into account the best information available at this point in time. Two key metrics for the second half 2020 guidance are as follows. The second half net revenue is between BRL600 million and BRL640 million. Second-half 2020 adjusted EBITDA margins ranging between 45.5% and 47%. Our guidance includes the impact of the adoption of IFRS 16, UniRedentor starting from February 2020, Sao Lucas from May 2020, and PEBMED from late July and excludes other acquisitions that may be concluded after the issuance of this guidance. Additionally included in the revenue outlook is the revenue recognition for some medical classes that could not be held during the first half and were pushed out to the second half of 2020 upon the resumption of classes. This amounts to BRL40 million. Before opening the call to questions, let me finish by saying that we are pleased with our performance in the third quarter in the context of this challenging environment. I would like to thank every one of our employees emphatically for their continued hard work and resilience during these unusual times. We remain confident that our strategic investments are established as a solid foundation, creating further differentiation and positioning us for continued strong financial results that will drive long-term shareholder value creation. This ends our prepared remarks. We are now ready to take your questions.

Operator, Operator

Thank you. Our first question comes from Marcelo Santos of JP Morgan. You may proceed with your question.

Marcelo Santos, Analyst

Hi, good morning. Thanks for taking my questions. I have two. The first is if you could provide some update on the intake for the medical unit in 2021, specifically regarding seat occupancy and ticket outlook. The second question is about the PEBMED integration and cross-sell initiatives. Could you give us an update on how this is progressing and if you're preparing to launch any initiatives that might include Medcel courses? Any information on that would be very helpful. Thank you.

Virgilio Gibbon, CEO

Hi, Marcelo. Thank you for your question. I'll take the first question here, then Julio will help me with the second answer here. So the intake for our medical seats for 2021 is in very good trend. We are not expecting any kind of surprise and keeping the same trend to have 100% occupancy of all seats, including the maturation and the new institutions acquired in 2020. So there will be no surprise on the intake side and also renewal for the following semester. On PEBMED, integration and cross-sell opportunities, Julio?

Julio de Angeli, Executive

Hey, Marcelo. Hello, everyone. I hope everyone is healthy and fine there. In regards to PEBMED, we started not integrating the company yet, Marcelo, but we started with all the activities in terms of offering products to the different audiences. So Medcel has been promoting PEBMED and the other way around as well. So we just finalized, especially now the Black Friday period, which is important in terms of subscriptions for both business and enrollments. So we don't have yet concluded, but we've been doing integrated activities, commercial activities at this point. So far, I mean, PEBMED is now at a very, very different level. I mean, it's been growing, it's above 100,000 subscribers at this point, and Medcel has been doing quite well as well in the intake, where we started in September. So it's been growing above market levels as well. But so far, answering your questions, we are doing more of the commercial activities at this point. We have a couple of projects to be launched, especially with initiatives where we're going to add educational components to the offer. And we are about actually to launch a specific marketplace where students will be able to have bundle offers from the different services and this is yet to come.

Operator, Operator

Thank you. Our next question comes from Susana Salaru with Itau. You may proceed with your question.

Susana Salaru, Analyst

Hi, good morning. Thank you for taking our questions. We have two. First, regarding the MedPhone and the WhiteBook, will you maintain both lines or are you planning to unify and create a new combined product? That’s our first question. The second question concerns the Medcel student base, which hasn't changed compared to the previous quarter. What can we expect moving forward? Are you anticipating a scenario that differs from your business plan for Medcel? That's it, thank you.

Julio de Angeli, Executive

Hi Susana, this is Julio. To address your first question, we aim to keep the MedPhone application operational while transitioning users from MedPhone to WhiteBook subscribers. Our primary focus is to grow WhiteBook's user base, and we plan to maintain both applications. Regarding Medcel, the student base has seen a slight decline, primarily due to the pandemic. However, as I mentioned in my previous answer to Marcelo, the intake—which is crucial for Q4 and next year—is performing well, exceeding market growth levels.

Susana Salaru, Analyst

Thank you, Julio. I would like to follow up on the Medcel student base. Are we seeing cross-selling among last year students and those in earlier years, or are most of the sales primarily coming from students who are graduating?

Julio de Angeli, Executive

The majority of the students are still in school during this period from September to December, finishing their fifth or sixth year. The intake of doctors who are already physicians tends to be higher from January to April. Currently, we have more students who have not yet graduated, and this pattern remains consistent with previous years. The market is growing, and we are keeping pace with that growth, but at this moment, the focus is primarily on students who are still completing their studies.

Operator, Operator

Our next question comes from Fred Mendes with Bradesco. You may proceed with your question.

Fred Mendes, Analyst

Hello, and good morning, everyone. Thanks for the call. I have two questions as well. The first one regarding the discounts that you recognized in this quarter. Just wondering if this is something that you already recognized. The mandatory discounts, right, that's something that you already recognized everything? Or should we expect to see more of these discounts as we move forward? This would be my first question. And then on the second question, I know as the state of the total revenue is not as much, but we saw a significant decrease in the number of students not related to healthcare courses. So just wondering what can you expect from this business as we move forward? Thank you.

Luis Andre Blanco, CFO

Thanks, Fred. It's Luis speaking. Regarding the mandatory discounts we had in the third quarter, that was all we received. These discounts are related to state decrees that require us to provide them during this period, reflecting a judge's ruling for us to implement the discount. As a result, we recorded BRL3.9 million in discounts for the third quarter. Looking ahead, some state laws will still be effective, so we anticipate some discounts in the fourth quarter. I estimate this will be around 1% to 2% of our net revenues.

Virgilio Gibbon, CEO

Hi, Fred. Just to add a point here. This is Virgilio. So that will not put in risk the guidance, we are very comfortable to reach the guidance for the second semester. On your second question about the nonmedical programs, we are closing many of them. That's one of the main reasons for the leverage in our operations, many of the programs from the institutions acquired. They came with low margins of negative operational results, so we are closing these programs. And also we have seen the impact of COVID on the traditional on-campus undergraduate program. So that's a combination of this, too. We are closing. We are very disciplined in closing programs that are not sustained in the long term. We are not going to challenge the competition or if there's distance learning and lowering our price. So we are just keeping on track the programs that are sustainable and make the difference in the region that we have the operation. So it's expected to dilute nonmedical programs on our penetration. Last year, if I'm not wrong, it was around 18% and this year it's around 14%. So this is also considered in our expectation for the entire year.

Operator, Operator

Thank you. Our next question comes from Mauricio Cepeda with Credit Suisse. You may proceed with your question.

Mauricio Cepeda, Analyst

Hello, guys. Thank you for the time, for the questions. I have two questions that are kind of specific. We noticed that the receivables for the quarter are still up compared to last year. We'd like to know if this is a new level or if it's something that is contingent to COVID only? And also, we saw that the cash flow this quarter specifically was a little bit lower than last year's. So if you could give a little bit more qualitative insight on this. We saw that it was something related to tax payables and advances from customers. But if you could give some more, let's say, rationale for what's happening. Thank you.

Luis Andre Blanco, CFO

Hi Mauricio, it's Luis. Regarding the receivables in the third quarter, they were somewhat higher than the same period last year, but lower than what we reported in the second quarter. There are three main reasons for the differences between the years. First, the advances received from students were lower this year compared to 2019. Typically, students pay early to receive financial discounts. Second, during the pandemic, we provided financial support to our students through installment plans instead of discounts, which we anticipated would increase our receivable days, but it is already declining when comparing the third quarter to the second quarter of 2020. Third, Medcel was integrated with Afya in the second quarter last year, and the Medcel business recognizes revenue before receivables. Last year, we recognized revenue before Medcel joined Afya, and we continued to receive that cash in the second and third quarters. These are the key factors explaining the changes in receivables.

Operator, Operator

Our next question comes from Irma Sgarz with Goldman Sachs. You may proceed with your question.

Irma Sgarz, Analyst

Thank you for taking my question. I have a more technical follow-up. Your earlier comments were very helpful, and from what I gather, you seem comfortable with how the underlying dynamics are shaping up. Regarding dropouts, is there anything additional worth mentioning about how you expect that to evolve and how early dropouts can reposition? Since you're discussing 100% occupancy, I assume that’s factored in, but any extra insights would be appreciated. Moving to the medium term, can you share what new characteristics you're looking for from an M&A standpoint, whether that’s regional, quality, or other variables as you evaluate potential targets? Lastly, could you provide a quick update on the approval process for the remaining Mais Medicos' two campuses? Thank you.

Virgilio Gibbon, CEO

Hi, Irma, this is Virgilio. I received your first and third questions regarding Mais Medicos. In terms of dropouts, we initially anticipated a higher dropout rate before renewing all students for the second semester, but surprisingly, we did not observe that. The renewal rates mirrored those of the previous year, and we plan to start renewals in January due to the extended second semester caused by COVID. We do not foresee any issues with renewals and maintaining full occupancy of our students. It's important to note that demand remains robust, and candidates perceive it positively as we are just beginning the classes. Therefore, I don't expect any surprises concerning student payments for medical students in the first half of 2021. For other programs, excluding medicine, we are experiencing dropouts and lower intake, and the competition from distance learning doesn't align with our strategy. We will remain disciplined in discontinuing programs that are not sustainable for our operations and focus on increasing medical program revenues to nearly 90% of our BU1. As for Mais Medicos, we have completed the first intake for Santa Ines, which was our first licensed institution. We anticipate receiving approval for a second institution in the North region very soon, possibly within weeks. Currently, we have five more awaiting final authorization and expect to secure two by the end of the first quarter of 2021 and the remaining three by the end of next year.

Luis Andre Blanco, CFO

Irma, it's Luis. I'm taking the questions about M&A. Starting with the M&A opportunities in BU1, we are very close to reaching our goal of 1,000 seats established in the IPO. We have a strong pipeline and several promising prospects, so we can achieve this goal in the short term. Looking ahead for BU1, we plan to be more strategic with our actions. We are maintaining our focus on units that derive more than 6% of their revenues from the medical segment, and we have set our minimum IRR for those acquisitions. We continue to see opportunities and will maintain our discipline. As for BU2, it's important to note that we are in the final stages of signing and closing the iClinic deal, which we expect to finalize in early January. We are in discussions with Bruno from PEBMED and Julio about the opportunities to advance in the health tech sector. Our goal is to empower physicians by providing them with access to the best tools to achieve optimal outcomes, enhance efficiency, and increase productivity, allowing them to concentrate on patient care. We have analyzed the market in health tech and its functionalities, and we are collaborating to determine the next steps to integrate these into the future environment we are creating to support physicians. We are very excited about the M&A prospects in both business units.

Operator, Operator

Thank you. I am not showing any further questions at this time. I would now like to turn the call back over to Virgilio for any closing remarks.

Virgilio Gibbon, CEO

Thank you all for joining us today. We remain very confident that our strategic investment will establish a solid foundation for our company. We have a very good trend to end 2020 as expected in our guidance released. So, I hope to see you all on our next quarter earnings call safe and sound. So have a nice day for everyone. Bye-bye.

Operator, Operator

Thank you, ladies and gentlemen. This concludes today's conference call. Thank you for participating. You may now disconnect.