Lemaitre Vascular Inc Q2 FY2024 Earnings Call

Welcome to the LeMaitre Vascular Q2 2024 Financial Results Conference Call. As a reminder, today's call is being recorded. At this time, I would like to turn the call over to Mr. J.J. Pellegrino, Chief Financial Officer for LeMaitre Vascular. Please go ahead, sir.

Good afternoon, and thank you for joining us on our Q2 2024 conference call. With me on today's call is our CEO, George LeMaitre, and our President, Dave Roberts. Before we begin, I'll read our Safe Harbor statement. Today, we will make some forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, the accuracy of which is subject to risks and uncertainties. Wherever possible, we will try to identify those forward-looking statements by using words such as believe, expect, anticipate, pursue, forecast, and similar expressions. Our forward-looking statements are based on our estimates and assumptions as of today, August 1st, 2024, and should not be relied upon as representing our estimates or views on any subsequent date. Please refer to the cautionary statement regarding forward-looking information and the risk factors in our most recent 10-K and subsequent SEC filings, including disclosure of the factors that could cause results to differ materially from those expressed or implied. During this call, we will discuss non-GAAP financial measures, which include organic sales growth, as well as operating income, operating expense, and EPS excluding special charges. A reconciliation of GAAP to non-GAAP measures discussed in this call is contained in the associated press release and is available in the Investor Relations section of our website, www.lemaitre.com. I'll now turn the call over to George LeMaitre.

Thanks, J.J. Q2 is an excellent quarter, featuring 12% organic sales growth and 44% EPS growth. I'll focus my remarks on our top line salesforce and the MDR CE Marks. Our 12% organic growth in Q2 was broad-based with 7 of our 12 product lines posting records. RestoreFlow allograft was up 30%, bovine patches 12%, and shunts 22%. APAC was our strongest region again, up 20% thanks to Thailand and Korea, our recently converted direct markets. AMEA sales were up 13% in Q2, while the Americas were up 10%. Two of our larger subsidiaries continued to excel in Q2. Canada was up 33% and the UK was up 27%. Both benefited from exceptional RestoreFlow growth. We added seven reps in Q2, ending the quarter with 144, and we're now targeting 155 to 160 at year end. This mid-year expansion is largely about North America, where the territories remain too large. As for our International sales offices, we continue to hire staff into the new Paris office, and we've begun scouting for an office in Zurich. We also continue to evaluate go-direct opportunities in Europe, including Portugal, Czechia, Poland, and Greece. Turning to regulatory. Since our last call, we've received 11 more MDR CE Marks bringing our total to 14 of the 22 approvals we're seeking. These eight remaining CE Marks should be received in 2025. Some analysts believe that only 70% of all MDD cleared devices industry-wide will eventually receive MDR CE Marks. Europe's regulatory barriers have been raised and it's allowing us to capture share. As an example, we now have approximately 90% of the European shunt market due to Bard's CE driven exit. One of the CE Marks, which we expect to receive in 2025 is Artegraft, our largest American product. We have also submitted Artegraft’s applications in Thailand, Malaysia, and Singapore, and we plan to make filings by year end in Australia, Canada, and Korea. Bringing this device to international markets was a key consideration at the time of the 2020 Artegraft acquisition. With respect to RestoreFlow, we now believe our Irish and German approvals will be received in 2025 and 2026 respectively. RestoreFlow needs to be approved by each individual country as there is no pan-European approval. We currently have approvals in just three countries, the U.S., the UK, and Canada, with a combined sales CAGR of 23% since the 2016 RestoreFlow acquisition. I'd like to welcome back analyst Jason Wittes of ROTH Capital, who reinitiated coverage in May of this year. In 2014, Jason initiated LeMaitre coverage while at another firm with an $11 target and three headlines, owning a niche, disciplined acquisitions and international expansion. To conclude my remarks, 2024 is shaping up to be another year of healthy sales and profit growth. With that, I'll turn the call over to J.J.

Thanks, George. In Q2 2024, we continue to execute the LeMaitre playbook, a targeted call point, niche markets, and a focus on the bottom line. We posted a gross margin of 68.9%, up 490 basis points year over year. The increase was driven by productivity improvements and higher ASPs. Productivity improvements were driven by higher direct labor utilization, lower times to build, and lower quality costs. ASP increased 10% in Q2, driven by our highly differentiated Artegraft, valvulotomes, and shunt devices, as well as our supply constrained RestoreFlow. Our gross margin was 68.1% in Q4, 68.6% in Q1, and now 68.9% in Q2. Operating expenses in Q2 2024 were $24.1 million, an increase of just 6% versus Q2 2023. This compares favorably to last year's 20% operating expense increase, reflecting our shift from significant post-COVID rehiring to a more restrained hiring posture. As a result, Q2 2024 operating income increased 52% year over year to $14.4 million, an operating margin of 26%. Our operating income was $10.1 million in Q4, $11.9 million in Q1, and now $14.4 million in Q2. We ended Q2 2024 with $113 million in cash and securities, an increase of $4.8 million in the quarter. The increase was driven by cash from operations of $9.6 million and was partially offset by dividends of $3.6 million. With regard to guidance, sales growth in the back half of 2024 should accelerate into the mid-teens, while operating expenses increase moderately as we continue to build out the sales channel and invest in new regulatory approvals. As a result, we have increased our full year 2024 sales guidance by $3.8 million and our full year EPS guidance by $0.07 per share. Our guidance implies an operating margin of 23% for 2024 compared to 19% in 2023. For more details, please see today's press release. A few Q3 highlights include: sales growth of 14%; organic gross margin of 68%; operating income of $12 million, up 31%; and EPS of $0.44 per share, up 32%. With that, I'll turn it back over to the operator for questions.

And our first question will be from Rick Wise of Stifel. Your line is open, Rick.

Great to see this excellent quarter. Let me start off there's a lot to chew on here. I think let me start off with the sales force expansion. I mean, this is a meaningful step up and you're raising the bar again. Just a couple of questions surrounding it and I'll let you take it away. Just help us understand your thinking behind raising that bar for the rest of the year. And you were particularly emphatic about North America and the territories being too large, implying, I assume the opportunity to split them and help drive increased sales. Just talk us through some of those factors in your thinking.

It's George. I touched on this a bit last time. As you've noted, there's a greater sense of this at this call since we've opened several new territories. Over the years, we've seen organic growth of 10%, 12%, or 14%, and while that's good, we never fully adjusted to the sizes following the Artegraft acquisition in 2020. We're still working with these $2 million territories in the U.S., which are too large both geographically and financially. About a year ago, we prepared for this by reorganizing the sales force, creating four area sales manager positions for the first time to oversee what were then 10% or 11% regional managers. Previously, it was just a VP of sales and nine regional managers. I believe we're now better structured to manage this. We've launched several initiatives, and we'll see how they perform. Interestingly, while hiring has become easier as reported, we are still finding it challenging to recruit for sales roles.

Rick, this is J.J. from a financial perspective as well. I mean, it's a nice time to fit them into the P&L, and you can see operating income going to $12 million in Q1 and $14.4 million in Q2, up 52% for both quarters year over year. And so, it's just a nice time to slot those investments into the P&L story that we have going on.

Regarding operating margins, J.J., you clearly mentioned that you're targeting an increase of around 400 basis points year over year for '24 compared to '23. I have a couple of questions about this. First, can you help us understand the sustainable drivers behind this? You've mentioned factors like volume mix and price, as well as gross margin productivity. How should we consider the potential for operating margins in '25, '26, and beyond? What are the possibilities for improvement, and is it simply a matter of continuing your current strategies? Please help us navigate this.

That's a challenging question because it involves looking far into the future, and we don't typically provide guidance that far out. However, in the past, we've often mentioned growth targets of 10% for the top line and 20% for the bottom line. Achieving those targets would enhance our operating margins. I'm not suggesting we are strictly at 10% and 20% anymore, and we have been surpassing those figures lately. It's uncertain what the future holds beyond this year since we haven't addressed it. That said, if we continue to see strong top-line growth while managing operating expenses, we should yield positive results. On the other hand, if you're envisioning a 30% operating margin in the long run, that isn't our aim. We could achieve such numbers temporarily by cutting expenses, but if we intend to invest in the medium and long term, we would remain within a certain range. So while I can't fully answer your question, that's a general guideline for you.

Our next question will come from Suraj Kalia of Oppenheimer & Co. Your line is open.

This is Seamus on for Suraj. Thank you for taking our questions. Just looking at the gross margin guidance for Q3 and for the full year. Just kind of wondering, you put up a very nice quarter there, about 69%. It looks like a little step down in Q3 and I think the full year was lowered a little bit, but you guys raised revenue guidance, increased EPS guidance, just looking to understand the puts and takes there if you could.

If you look at our Q3 guidance of 68%, then you can sort of impute a little step up in Q4 to 68%, two or three or four or something like that. And so that's the cadence for you. I think the Q3 step down is a number of things. One is our manufacturing team has been doing an awesome job and they've been really pulling through a lot of efficiencies, and I'm sort of trying to outguess that and say maybe that doesn't continue steadily throughout the rest of the year. So maybe that's one thing. Thing two is, we know we have some higher costs coming at us on the RestoreFlow side, so we take that into account and maybe some E&O topics outside the U.S. coming up for the back half of the year. So, I'll take that into account. And then seasonally, oddly, generally speaking, Q3 is lower in the year than the other quarters. So, it would make sense that you would step down in Q3 maybe and then move back up in Q4. I don't know if that totally answers and gets at what you were asking.

Do you have any updates on mergers and acquisitions? Last quarter, you mentioned discussions with two different companies, so I'm curious if there's any new information on that. Additionally, we've noticed that you have increased prices over the past year. As we begin to finalize our projections for 2025, where do you see potential for further price increases? What figures are you considering? Any insights you can share would be appreciated.

Seamus, I'll take the acquisitions question then maybe I'll turn it over to George on price, but on acquisitions, I mean obviously, there's nothing too specific that I can share with you. The acquisitions department is healthy, is busy. We just added another person to the department. And we continue to seek out the same targets with the same criteria. Of course, what's nice is that our cash balance is growing. Our EBITDA is growing. So the size of the deal we can look at is increasing, and I'd say everything else equal, we would prefer to do a larger deal. There are various active targets at various stages, and when I can disclose more, I will. Sometimes you think things are moving along and they don't. But we continue to be active and I do expect at some point, I don't know exactly when we'll be able to announce something, but we're not sitting on our thumbs.

And Seamus, on pricing, I would say concretely for 2025, we're not going to try to set our prices until November or December. So, there's that a little bit. If you wanted to get some insight into how we price, I think we've updated our slideshow on the internet, on our website and it shows the last four years of pricing, I think they were 8, 8, 12, and 8 or something like that. And also, it puts it up against the CPI. So, you could look at that and you could make your own inferences about where you think we're going. A couple of the things I would say is that the two items really help us with doing more price hikes, which is when we expand the sales force, a lot of the responsibility that we put in the hands of a sales rep is to go get that price hike. When you see us expanding the sales force, that's our army to get price hikes of course. And then also in Europe, where the CE mark, the transition of the MDR is putting up a lot of barriers, and I think they're making it significantly easier to pass along price increases as long as you stay in your segment because a lot of the other companies are electing not to stay in the segment. It's to just not file for the MDR CE mark. So, barriers to entry help us, salesforce expansion helps us. And then, the record's fairly clear over the last four years. If you could surmise what you think we might do next year.

Our next question comes from Jason Wittes of ROTH. Your line is open.

A solid quarter here. And I guess also thanks for the mention at the beginning. I guess if $11 was my target. You guys have done great on execution since I last looked at you guys, so congrats on that as well. That said, so a couple questions. One, I apologize if this was mentioned already, but can you break out what price and volume was in the quarter for revenues?

Sure. So organic growth was 12% and 10% was price and 2% was units.

That's helpful. And then you mentioned shunts are benefiting from Bard dropping out. I'm wondering if there are other large product lines that are also seeing competition drop out, especially in the biologic front over in Europe?

Yes, interesting. You mentioned biologics that the first place I would go to, which is we've seen patches, biologic patches by Abbott, and then I think BioIntegral, a Canadian company, drop out of the European markets. That's helped us a lot with XenoSure over in Europe as well as CardioCel over in Europe.

Are these driving the upside to the year or is this the sales force addition that you've recently added?

I would say over the last two or three years we've felt the dropping out of competition allowing us to do pricing and giving us better unit share. And then I think the European rep surge, if you will, came a little bit earlier than the American rep surge, so I feel like they picked up a bunch of reps. Here, we had 47 reps a year ago. Now we have 52 over in Europe. And so, they've had a bit of a surge in Europe, and that's helping us as well.

And then just I don't know if you also break out on gross margins between biologics and non-biologic for implants. If there's a breakout there that we could track, meaning what's the gross margin?

So, we don't do that. We just give one number. I think sometimes we answer are they above corporate or below corporate. And if you ask which particular brand are you interested in?

I'm just interested in the bovine patches and the allografts, I imagine they are a little bit different, but you've had a nice rise in gross margin. I always thought part of that was due to the fact that you've improved your yields dramatically on the biologic front. I thought that was a major driver. I don't know if that's the case right now.

Jason, this is J.J. Generally, when we say RestoreFlow has done well and Dacron has done well, that's going to hurt the margin. And generally, when we say XenoSure is doing well and Artegraft doing well, that's generally going to help the margin. That's helpful directionally for you.

I’ll jump back in queue.

Hit a little quiet pocket here. So, I know there's a couple other questioners out there. I don't really know how to get to them. Would the operator want to introduce the next questioner?

Certainly. The next question is coming from Danny Stauder of Citizens JMP. He’s on the stage.

So, I guess just first real quick on the sales rep adds. I know you upped your full year target, but could you just give any color on your plans or your expected cadence for adding these new reps? And with that, how long does it typically take for these new reps to ramp up to the corporate average or even above the corporate average typically?

Danny, I've handled this question a number of ways over the years, and I always give an unsatisfactory answer, but I'll try it again. The cadence for hiring is we put a lot of approvals out there and our guess that we're trying to do for you guys right now is that will have 155 or 160 reps by the end of this year. And I think what happens after that, I don't know, but it feels like we'll get to that. So, there's the timing of that. And then the second question you're asking is, when do they get up to snuff? And I would say we've done a couple studies around here lately, and oddly the good ones get up to snuff right away, and the ones that aren't going to make it don't get up to snuff. It's not really that much about time. I think in the old days, the answer we would give to everyone, the generic answer was about nine months until they really get going and understand everything. But in terms of if you really look and study quota for all these reps that come on board, it happens pretty quickly for a good person at the sales position.

And then just one more for me. Asia-Pacific really strong again, you talked about some of the drivers there, but as we look out for the rest of the year or I guess in the back half and into 2025, how much of a runway is there for this outsized growth?

I think the runway there, I don't, and it never guides past the year that we're in. So, we're in 2024 for these six months, I think there's terrific runway and space for the APAC. We're on fire over there, we're starting all these new entities and I said on the last call, it's just simply an old-fashioned virgin territory play, where we didn't exist in Asia except for Japan until about 10 years ago. So, I feel really excited about what's going on over there. They also have half of the approvals we need over there, whereas in Western Europe and North America, you largely have all the approvals you need right now. And in Asia that's not true; you're about 50%-ish.

Our next question will be coming from Michael Sarcone of Jefferies. Your line is open.

You talked about adding reps particularly in North America and some of these territories getting up to $2 million. Sometimes, we do see potential for disruption. When you do split sales territories, I guess, how confident are you that you can split some of these territories and not cause any disruption and basically how do you plan to mitigate the risks there?

It's true, sometimes there is a kerfuffle when you break up a territory, the person doesn't want it to happen, the person does want it to happen. So yes, that's true. Although, I would say, we've been doing this for years and years in Europe and the U.S. and so how we do it, I think is, I think we do it the right way, which is we announce it early, we're very open about it, and we pay double commissions for the back of the year after the person gets hired in the new territory. So, the person who's running the, who was previously running the territory is getting full commissions the whole time. And then when the new person comes on, let's say in October, they're getting commissions on that on the split, the smaller territory that's been split off, and so is the sort of legacy rep there. So, we try to do it like that and we always tell the reps that we believe the way it'll be set up, your W2 will go up next year. So, we have a new plan every year that takes into account what their base quota was with the new smaller territory.

And just one on Q2, really strong gross margin expansion there. I know J.J. mentioned, on the manufacturing side, your team has been doing great work. I was just curious, if you could help parse out, how much of that year over year expansion was related to these solid productivity improvements versus the price taking?

Yes, Mike, so about half of that was the ASP, so 9%, 10% ASP increase sort of equates to 2.3% to 2.4%, which is nice on the gross margin. The rest of it basically sort of manufacturing improvements around the ES manufacturing team being more efficient, being more utilized, reducing their times to build, but also our quality costs have been flat now for a little while and it's, I think it's a nice story within the Company that we don't really see too much outside of it, but it's popping through now in the gross margin line and helping about 0.3% or so year-over-year, just keeping that sort of constant.

Thanks, J.J., and if I could just squeeze in one more. Just on pricing averaging about 9% for the first half of this year. Do you feel like that's sustainable through the back half and is that what's baked into the guidance?

We have I think 14% organic in Q3 and implied 14% organic in Q4. We try not to split out what of that is going to be units and what is going to be pricing. But it seems like you got a couple quarters that you can run with and figure it out.

Mike, as I was trying to say in my script portion, these differentiated devices in these categories with lower rivalry, where you have big market share, really allow you to sort of take advantage of some of that to some extent. And it's sort of a nice tailwind there. And then on the RestoreFlow side, there's a supply constraint issue. And so if we can make them, we can generally tell them they're really in high demand in the marketplace, and that helps as well. So, some nice dynamics as tailwinds for pricing.

Our next question will be coming from Michael Petusky of Barrington Research. Your line is open.

So, George, I'm just curious with the positive comments around APAC. Anything new in China worth talking about? Or is that just not a market that is worth the time and energy when you've got everything else going on over there?

We've had our ups and downs with this issue. We were enthusiastic about it for five years, but it seems like we've avoided discussing it on conference calls during that time. However, I see two positive developments. First, our small organic business has five different approved products, and while it’s challenging to get approvals, that business is performing well. Currently, it’s around a $1.3 to $1.4 million annual revenue, with a 93% growth rate in the first quarter and a 35% growth rate in the second quarter. I expect this growth to continue, as we have only four sales representatives in a large country, which indicates we've barely begun to tap into the market. The second, and perhaps more exciting, development is our lengthy eight-year clinical trial. Although we haven't discussed it much, we are nearing the final submission in November, and we believe we'll receive approval for XenoSure next year. Let's see what happens.

Don't bet my house…

No, I bet your house on organic growth and other markets not.

Absolutely. Just real quick, and you guys talk faster sometimes than I can take notes. On Artegraft, you may have mentioned it in the prepared remarks, but have there been any additional regulatory approvals OUS on Artegraft, in the last 90 days or what's there going forward?

That's the big good question. I'm glad you're asking that. Maybe we glossed over it quickly, which is, so, we're applying in seven different places all over Europe. In the prepared remarks, we're talking about Thailand, Malaysia, Singapore that have already been applied for, and then Australia, Canada, and Korea will go in by the end of this year. One positive thing that happened in the last three or six months here has been that we had previously been thinking Artegraft was a late 2025 approval, and we're now thinking it's more like a June approval of 2025 in Europe. Sorry about that. We feel really good about that. And so, that's the biggie because, this is our largest American product. I think sales are approximately $33 million this year annualized for Artegraft. We talked on the last call that maybe there's an $8 million market over Europe, and then maybe we were just sort of, this is very high-level stuff, but maybe there's another $8 million market over an APAC or something like that. This is the big one that we want to get approved, and things are going well in the approval process in Europe.

If I could just sneak one last one in for Dave. In terms of M&A, obviously, this is probably the longest period of time that at least since I've been around that I can remember you guys not doing anything like super meaningful in terms of external growth opportunities. What are the hangups? I mean, is it just a lot of valuation? Are you not seeing the assets that really strategically make sense? Like what are you coming up against in terms of just this sort of gap in closing a meaningful deal? Last few things.

Thanks Michael. I mean the target pool where, if we stick very close to our call point, which is open vascular surgery, they are on 25 targets with more than 5 million or 10 million of revenue. So, we obviously know who they all are. We have ongoing dialogue. Those targets product lines are owned by about 18 companies. And some of those companies have never done divestiture. So, we've been very close to those targets, et cetera. We've also expanded a little bit. We've looked in an adjacent field, cardiac surgery. Some cardiac surgery products would work better inside LeMaitre than others because some are crossover used by vascular surgeons and others aren't. But there's a strategic question there about, do you want to get into cardiac surgery and how much and which products? And then also on the other side, another immediately adjacent market is endovascular. While some of the products, there are dozens of endovascular products, some are more used by our physician specialty, the vascular surgeon than others. But what you run up against there is much more competitive markets. A lot of bigger players in that space. Endovascular products get used by other specialties like interventional cardiologists and radiologists. So, strategically, we're factoring all of those things in. The good news is, as I mentioned on previous calls, we've been active with letters of intent over the last couple of years. Sometimes, it's valuation. Sometimes, there's a divestiture from a large company and they want to sell us a bundle of products, and we want some, but we don't want others. So, we might bid just for what we want, but they don't want to sell the garage without the house. So, I think that's some of what we're up against. But I would say, we're not discouraged at all. To state it positively, we're waiting for our pitch. I've done this long enough that I know doing an acquisition that isn't strategically on is very painful. It takes a long time to unwind that. You're much better off just waiting for the right strategic target at the right price. In the meanwhile, we're just building our cash. Additionally, if I could just add one more idea it's been a nice opportunity for the Company to really get the house in order with respect to regulatory and quality and salesforce optimization and all that. You see the Company performing well while we're building the bank account. At some point, you'll get news from LeMaitre, but I hope that answers your question.

Our next question will be coming from Frank Takkinen of Lake Street Capital Markets. Your line is open.

Congrats on all the progress. Maybe I'll start with kind of following up with what you were alluding to right at the end of that last question, Dave. Maybe is the sales force and kind of doubling down in a way, expanded hiring goals for the year, a function of the bright acquisition not showing up and in turn saying we have the right product portfolio right now, let's maybe double down a little bit more on the sales force and get prepared in that way instead of going down the wrong avenue with the wrong acquisition.

For sure. I mean, look, you can grow two ways in this life. You can grow organically or inorganically. What I focus on a lot for the Company is the inorganic growth, and sometimes that's only so much within your control. On the organic side, there are buttons you can push. Clearly for us adding sales reps is a critical growth driver. Expanding the channel, not just filling in reps in the United States and other markets where we're already direct, but investing in new countries like Korea and Thailand. As George mentioned on this call, there could be others in Europe maybe next year. Getting regulatory approvals in new markets, that's really important. Getting and supporting price increases, that's really important. There are a bunch of things we can do to accelerate organic growth. At a high level, it feels like that's been working. While my team has been off hunting for the next deal, I would say the organic growth team and organic operations team here are doing an excellent job pushing the business forward, and we're getting stronger in all departments. So, the day when we do an acquisition, I think our ability to integrate will be just that much stronger. That's how I'd answer that question.

And maybe a little bit bigger picture question on Salesforce productivity. You alluded to it on this call; the U.S. reps over $2 million. I think in previous calls, you kind of said EMEA reps in just over $1 million range, and then APAC reps a little below $1 million, I think around $700,000. Where can those international reps really mature from a utilization standpoint?

That's a good question. Frank, thanks for remembering the figures from the last phone call. So, we actually have answers to that already, which is in Germany and the UK, you have reps pushing 1.1 million, 1.4 million euros or pounds in those respective markets. So, there's no reason they can't get larger size and can control more revenues than what they are right now. So, it does happen overseas and I think, I have one example over in, I think the Nagoya rep is something like $800,000 in revenue. So, it does happen over there. It is taking longer. And of course, pricing is lower in all those places; it takes more units to get there. Right now, we have 67 North American reps, 52 European reps, and 25 Asia-Pac reps, and that should get you to 144.

Our next question will come from Brett Fishbin of KeyBanc Capital Markets. Your line is open.

This is actually Liv on for Brett. If I could just start a little bit more broadly, could you share what you've been seeing in regards to procedural trends in the U.S. and Europe? We've gotten into some mixed commentary so far and we'd just love to get your take.

Interestingly enough, it's your data that we'd go to for a lot of this with those credit card swipes. And so, beyond what we see for our sales units and dollar growth, we then go back to the KeyBanc Capital Markets data, and we try to figure out what's going on. I think you'd corroborate this, which is, it's been a very healthy six months of staffing inside the hospitals, which we get from the Bureau of Labor Statistics, and then also credit card swipes, general credit card swipes in the hospitals are up and indicating full hospitals. So ironically, you're asking that question to me, but I'd flash it right back at you.

I'm glad we can be of use to you guys. Could you also update us on where you're at with the new ERP implementation and what that timeline looks like?

Yes, so we implemented in the U.S. on February 1st and then spent the next two months putting out fires and keeping the business functioning. We've started to settle down on that topic and we've started looking towards Europe. We recently signed an agreement to start our implementation in the UK as our first European geography. We'll create a template of what Europe needs from an ERP perspective and then, we'll roll that out to the other geographies in Europe, maybe Germany next, and then Italy and France, et cetera. So, it's ongoing.

Thank you. Ladies and gentlemen, that concludes today's conference. I would like to thank you for your participation. You may now disconnect. Thank you and have a great day.