Earnings Call: Q2 2017

Aug 3, 2017

Good afternoon. This is the COSCO conference operator. Welcome and thank you for joining the DiaSorin First Half 2017 Results Conference Call. As a reminder, all participants are in listen only mode. After the presentation, there will be an opportunity to ask questions. At this time, I would like to turn the conference over to Mr. Carlo Rosa, CEO of DiaSorin. Please go ahead, Hector. Yes. Thank you, operator. Ladies and gentlemen, good morning or good afternoon, and welcome to the quarter 2 call. I will split my speech into parts. First, I would like to comment on the recent acquisition of certain assets from Siemens, and then I will get into the quarter two results. So discussing the Siemens acquisition, I think is a typical bolt on acquisition for Dia soaring. If you remember when we met with seasonal investors and also a month ago when we presented the 3 years plan and we discussed about M and A strategy, it was very clear to us that there is an opportunity it is an opportunity for the company to buy good products, maybe with aging technology, but these products do come with a set of customers that can be converted then to the most updated chemiluminescence technology provided by the LIAISON platform. And we did this already twice. We did it with the pharma virus line when we bought BioTrine and we certainly did it with Nurex with hepatitis and HIV. In this case, this asset is extremely strategic for DiaSorin because it provides access to few hundred customers in Europe. The bulk of the revenues generated with these products are coming from Europe. Europe today is a market that is consolidating. There are less and less customers as a result of the fact that hospitals are getting synergies, combining their labs operations. And in certain countries of Europe like Germany and France, private labs are taking as it has already happened in the U. S, the lion's share of the market. So in a market where certainly there is consolidation, accessing to new customers sometimes is complicated. And in this case, through this acquisition, we would access the market. I think it's worth noting that if you look at this ELISA product that today are carried by Siemens and will be transferred to their assuring at closing. We do have available on our existing platform 95% of the product. So there is no need to do any product development. All products are available, and so we would be ready almost immediately to proceed with approaching these customers and provide them with a better solution than what they have today. So in this sense, it's a bolt on acquisition because it is it fits like a glove, our existing business. It is strategic because it's directed toward the European market that for us does represent a little bit less than 50% of our revenues. And it is made of products, which are all infectious disease products, which as you know are strategic when it comes to the assuring, infectious disease products today do represent over 50% of our overall revenues. As far as time is concerned, today, we have filed with antitrust and we expect clearance by the end of August and we expect closing to happen at the beginning of October, actually October 1. The implementation, moving forward, there is going to be transfer of customers and then Siemens will continue to supply the products to Diasorin for 3 years after closing, and that would give us enough time to proceed with approaching customers and directing customers toward our own products. From as Mr. Pedro will comment from a profitability point of view, we expect the profitability provided by this business to be in line with the current diaspora and profitability. In terms of additional OpEx, we expect to add few headcounts in Europe to support the expansion of the LIAISON installed base related to the fact that, again, this will become more an additional accounts for our Liaison business. Now let's go back to our current business, and let me comment briefly quarter 2. And then Mr. Petrone will take you through the numbers. Quarter 2, as you have seen, has been a very good quarter from a revenue perspective as well as from a profitability perspective. The company now is, back to 39% and change percent EBITDA margin, which bring us back to where we were with when vitamin D was the lion's share of our revenues. Certainly, the situation has not changed. Since then, vitamin D represents only less than 20% of the total turnover. And therefore, the risk exposure today is much less than what it used to be. And this level of profitability is related to a series of products, as we've discussed many times and not just to one product, that makes our portfolio attractive for customers, is a portfolio that is driving growth in different geographies and guarantees very high margins for the company. Now if we discuss about different geographies and we start from Europe, as you all know, Europe is a market that overall is consolidating. And if we go to the EDMA statistics at the country level, we see that at best is flat, if not declining as a result of price considerations. And the fact that in several countries, tenders, public tenders today are grouping several hospitals together and therefore the government are trying to obtain savings increase in volumes. So notwithstanding that, our business is growing 8%, which again is very good. And the very good news is also relating with Italy because as you have seen in the last part of in 2016, actually, there was a decline in business Italy related to the application of certain policies by the government directed to decrease testing volume. Today, starting from Q1, as you have seen last time and now with quarter 2, Italy is back in business, is growing again over 3% for us. And this is certainly good news because Italy is our 3rd largest market and is a very profitable business for Diasporin. As far as the other European countries, again, Germany is joining us as a result of a very successful acceptance, like you say, of our platforms in the main large chains that do dominate the German market. What is very interesting is that in Germany, the has always had a disproportionate amount of its business associated with large laboratory chains. And the Siemens acquisition would be very interesting because a good chunk of the Siemens business is actually directed toward hospital, the hospital market in Germany. And so we see specific in that market the opportunity through this acquisition to move from the private lab chains, which again, where we are having lots of success today, also into the hospital market, which is a very sophisticated market. Usually, we are talking about very large centers with research and development activities, which have been traditional Siemens accounts for the specialty products and now will become a diaspora account. So overall, I would say Europe today is doing very well. And strategically, with this acquisition, we are providing a further opportunity to grow to the various European countries. Let's move to the U. S. U. S, again, it has been a very good quarter. U. S. Is like for like, meaning excluding the molecular business, which today makes the U. S. Still not comparable for Q2, is growing single digits, which is good because that growth, as you know, is a combination of declining franchise for vitamin D and a very strong growth. We are talking about 20 up 28% growth of the ClearX Vitamin D business in the U. S, certainly supported by the fact that we won a very large contract last year. And now we are with the month of July, we are at the final implementation of the contract, which is starting then full steam in quarter 3. So the result of the U. S. Is very reassuring because it's a combination of 2 good quarters plus the fact that from the Q3, we expect an acceleration because of the full implementation of the infectious disease contract. As far as now if we move to South America, South America is solid business, is growing of 12%, mainly driven by the success in Brazil, which is confirming to be a very good in a very good cycle as we speak. We continue to develop business in mainly in the big private laboratory chains as well as some of the reputable public hospital institution. And I'm happy to report that Brazil is also becoming a very good contributor to the company profitability. The mix is right. The customer mix is right. And certainly, positioning of the company as a specialty company allows in that difficult market, the company to build a solid to own a solid spot in this market. Last but not least is Asia Pacific. Asia Pacific, good growth, 20% in China, which is the main driver in this area. The 20% in the 20%, we see that in quarter 1 and quarter 2 compared to last year, we had a softening of some of the volume related to some of the products we sell in the prenatal market. And this is because newborns in 2016 were at record year 17,800,000 newborns in China in 'sixteen. The forecast for 2017 is that the is going to be an average year. So usually an average year means for China around 16,000,000 newborns, which certainly leaves some gaps visavisvolume for some of the prenatal testing, but notwithstanding that the company is growing 20%. So China continues an opportunity for the company, very solid installed base going to China. We are continuing to install roughly 20 system per month, and we expect to finish up the year with over 2 40 systems, new systems installed in the country, mainly in Class III, Class II hospitals. As far as if we look at the product lines, I just would like to comment on vitamin D and provide the usual guidance for vitamin D. Vitamin D in Q1 and Q2 has been good for us. As you have seen, we are up 1.6% overall versus last year, whereas our typical recommendation about vitamin D is a declining franchise is a combination of price pressure happening in the major markets. And so I would like to avoid that analysts take a bullish view as far as vitamin D is concerned. If I don't get desperate when vitamin D quarter is down 5%, I'm not getting overexcited if it is up 1.6%. So we continue to read the market, the vitamin D market as usual is a market that is heavily depending on volume in certain countries. It can be up one quarter, it can be down another quarter. But overall, as outlined in our plan, we expect this franchise to decline over time. Last but not least, a couple of comments on product development. In the 1st 6 months, we launched 4 new products when it comes to CLIA and we launched the first three products when it comes to molecular. So we are taking the we were able to get to Diaspori molecular and have an impact on the ability of this company to develop products and develop products on time. As you know, this is key as far as allowing the company to reach menu and become more competitive for our long term future growth. And we believe we are on the right path visavisat. I will now give the podium to Mr. Pedro, who will take you through the financials, and then I will move to Q and A. Thank you. Thank you, Carlo. Good afternoon, everybody. In the next few minutes, I'm going to walk you through our financial performance of TSRIM during the first half of twenty twenty. I will also make some remarks on the contribution of the Q2. Before we start, again, let me please remind you that we began reporting the Focus business since May 2016. And so the perimeter of consolidation in H1 'seventeen is different from the one of 'sixteen. The Focus business contribution will be normalized starting from the next quarter quarter on quarter, I mean. Said that, as usual, I would like to start with what I believe are the main highlights of the period. We closed half 1 revenues in line with our full year guidance and with a material increase over 2016. This has been influenced by the just mentioned different perimeter of consolidation and by the strong performance of the like for like business. Indeed, half one revenues growth at constant exchange rate and scope of consolidation is a touch above 7%, and this increase has been fueled by a very strong quarter too. We closed half one EBITDA better than our full year guidance, with a strong growth over the previous year, about 22% or €23,000,000 at constant exchange rate, with an EBITDA margin at 39.5 percent, better by 110 basis points compared to last year. This increase is the result of the different scope of consolidation, some positive phasing on operating expenses, lower non recurring expenses and most important, our capability to confirm a strong profitability of the like for like business. Lastly, DSRM keeps confirming its ability to generate a strong free cash flow, €61,000,000 in the period, with a growth of about 13% compared to 2016, which allowed us to close the half year with a positive net financial position of about €90,000,000 after having paid in May dividends to our shareholders for about €44,000,000 Let's now go to the main items of the P and L. We said half year 2017 revenues at €3 €319,300,000 grew by almost 20% compared to last year and by 18.3% at constant exchange rate. During the 1st 6 months of the year, we had a positive FX tailwind of €4,300,000 mainly driven by the appreciation of the U. S. Dollar and Brazilian reais against the euro, just partially offset by the depreciation of the Chinese renminbi and the British pound. Gross profit at €219,000,000 drew by almost 20%, or €36,000,000 compared to last year, closing the 1st 6 months of 2017 with a ratio of revenues at 68 0.7%, which is basically in line with 2016, the difference being negative for 20 basis points and in line with what we have seen in the past few quarters. This is the result on one side of higher sales specialty products, some positive effects on manufacturing efficiencies and lower depreciation rate of revenues, which almost completely offset, on the other side the price pressure on clear me too products and the slightly dilutive effects of the Focus business. Total operating expenses at €114,600,000 or 35.9 percent of revenues have increased by 19% compared to last year, whereas the growth at constant exchange rate was just a touch above 17%. Let me please remind you that as we saw in the previous quarters and we will see for the next few months about €3,200,000 of the reported quarterly OpEx is driven by the depreciation of the intangible assets, mainly nohow on customer list coming from the Focus Business acquisition. Net of this depreciation, Harfuana reported OpEx would have grown by about 14% and the ratio on revenues would have been 33.9% against 35.6% of 16. This improvement is the result mainly of operating leverage and some phasing and expenses slipped to the following quarters. Halfway and other operating expenses at €3,400,000 are lower than 2016 by €1,400,000 Please let me remind you that 2016 was affected by some material non recurring expenses, mostly driven by the costs associated to the Focus business acquisition, which explain most of this difference. Besides, please note that H117 is already accounting for some of the one off costs related to the acquisition of the Siemens and Eliza business that Harvey just talked about. As a result of what just described, upfront EBIT at €101,200,000 or 31.7 percent of revenues has increased compared to 2016 by 23%, almost €19,000,000 The tax rate at 32.3 percent is 70 basis points better than 2016. This variance is in line with our expectations and as already said, is mainly driven by the reduction of the Italian corporate income tax rate from 27.5 percent to 24%, which took place starting from 2017. The net result at €66,400,000 or 20.8 percent of revenues is higher than the previous year by €12,400,000 or almost 23%. Lastly, Hafun EBITDA at €126,200,000 is better than last year by almost €24,000,000 or 23.4%. The variance at constant exchange rate is 22.3%, which is better than our full year guidance. Is 110 basis points better than last year. This increase has been driven mainly by the following three factors: our ability to basically preserve our manufacturing margin, offsetting some price pressure suffered on CreME 2 products and the slightly lower profitability of the Focus business with more sales of high value specialty products on one side and higher manufacturing efficiencies driven by increasing volumes, operational excellence initiatives and tight cost control, as discussed during the recent Investor Day. Our constant effort aimed at delivering operational leverage through a careful cost control, plus, as I said, some favorable phasing of operating expenses. And lastly, some positive effects coming from the other operating expenses line, as we said, mainly the non recurring expenses for the reasons that we just described. Let me now move to the net financial position and the free cash flow. Yesor enclosed the period with a positive net financial position of €89,200,000 €129,000,000 in cash. This is the result of what discussed so far and is confirming the ability of the group to generate a predictable and strong cash flow. During half 1, the group has generated €61,000,000 compared to almost €54,000,000 of 2016, with an increase of about €7,000,000 or 13%. I believe it is worth mentioning though that during Q2, the Esalen paid about €11,000,000 more taxes than last year, mainly driven by the tax payment phasing mechanism in place in Italy. Lastly, in view of the group operating performance, the management has decided to raise the guidance for 2017 EBITDA growth at constant exchange rate to about 13%. The previous guidance was a growth of about 11%. The guidance for 2017 revenues, which is calling for a growth of 11% at constant exchange rate is confirmed. Please let me remind you that this updated guidance does not take into account the impact of the Siemens Eliza deal, the closing of which should take place, as we said, beginning of October. We will review our 2019 guidance to incorporate the Siemens Eliiza business acquisition after the closing of this deal. Now, let me please turn the line to the operator to open the Q and A session. Thank you. Excuse me. This is the Corusco conference operator. We will now begin the question and answer session. The first question is from Maya Pataki of Kepler. Please go ahead. Ms. Pataki, your line is open. Please go ahead. Yes. Hi, good afternoon. I had a couple of questions. I'll stick to 3 and go back into the line. Apologies if I've missed that, but could you tell us what the organic growth was for the quarter and for H1 for the group? And second of all, if we look at the molecular business, there was a pronounced slowdown compared to Q1, which is probably most likely related to the flu season. Can you help us out a bit how we should think about the remaining two quarters of the Focus business? Should we see Q3 being more or less in line with Q2 and then Q4 see a pickup again as maybe the flu season starts again? And then the third question would be about the Siemens acquisition. Carla, how should we think about the next 3 years? So for the next 3 years, you're actually distributing the ELISA test from Siemens to their customers. And can you actually already during this time try to convert some of the customers? Or is it really a like a blocking period of 3 years and then after that customers will be ready to use your already existing portfolio? Thanks. Yes, Maria. I will take the last question and then Pier Giorgio will address the first two. The way you should think about it is very simple. Starting from day 1, we do have access to hundreds of accounts in Europe. We need to sort out certainly the size of these accounts and then we have 3 years where we can go approach this account and push conversion of technology from our own technology to the from the existing Liaison ELISA technology to the Liaison product. So there is no blocking period. It's a matter of time at the beginning for us to be introduced to the accounts. The accounts will buy the products from us. And so they will become effectively diasering customers from day 1. And then again, there is a clock ticking. And during that period of time, we are going to approach and move them to our technology. And I see honestly from these 2 benefits. First one is the fact that, as said before, Europe is becoming a very tough market and you can see it from the competitor numbers. Veosirn is an exception because of the kind of products that we make. But certainly, there is a shrinking number of customers in Europe, physically shrinking. And therefore, it's more and more complicated to access a new customer base. And therefore, this acquisition, the real what is strategic about this is the fact that we get lots of new customers. And so we get access to a new customer base. Some of this customer base can be converted 1 to 1 because we have all the products. And from a financial point of view, they will be able with the existing turnover to support an excel. Some of it will require cross selling, meaning that the customer in order to have access to the LIAISON, they will have to add on more products. So there's going to be the possibility not only to cannibalize, but to expand. Last but not least, as you remember for the smaller accounts, we were actually we are in process of developing the Neasone XL. If you remember in the previous calls, we always stated that the Neasone XL was never going to be really a platform intended for the European market. It was designed for the physician office labs and smaller hospital labs in the U. S. And or to the emerging smaller clinics and hospitals in China. Well, this acquisition is changing this a little bit because it's adding Europe to the map, because some of the accounts that we will inherit through this acquisition are too small for an XL, but they fit the excess. And therefore, again, it is strategic also in a different setting, where it provides now an opportunity to the LIAISON XS also in Europe. Maja, so your first question regarding the like for like growth. So what I said is that in half 1, it was a touch above 7% like for like, helped by very strong and healthy Q2 at more than 7.5% like for like. I believe this at constant exchange rate. I'm quoting to you numbers at constant exchange rate. Your second question, I believe it was regarding molecular sales. I believe it's not possible still to make a comparison on molecular sales because the Focus business was acquired in May last year. But what I can tell you is that Molecular Products are growing double digits overall year over year, which is in line with our expectations. Thank you very much for that. Just a quick follow-up on molecular. I understand that Focus was just acquired last year, but then again, the previous Diator and molecular business was small. So it shouldn't really make a difference. So I'm just trying to understand if there if the slowdown is related to the flu season, so we should see the seasonal patterns throughout the year or whether there was something else in there? I still don't understand how you can say slowing down. On Q1, no, just on Q1, if we compare Q1 Quarter to quarter, yes. Yes, quarter on quarter, I'm sorry. Yes, yes, yes. Not slowing down in last year, just quarter on quarter. Quarter on quarter is certainly flu. I mean, a good chunk of that business that we bought is flu related. And so you expect that Q1, Q4 to be higher and Q2 and Q3 to be softer. Yes. Okay, brilliant. Thanks. That's what I was trying to understand. Thank you. Thank you. The next question is from Scott Bardo of Berenberg. Please go ahead. Yes. Thanks very much for taking my questions. So first question or series of questions relate to clarifying the Siemens Eliza acquisition. And apologies for relatively simplistic questions, but I'm sure you'll be able to bridge my understanding. Firstly, question is, how were you able to buy this business for 2.5 times EBITDA? Seems a very cash generative, relatively stable business. So I mean is there something structurally wrong with this business? Is it also deteriorating rapidly? 2nd part and following on from that, Siemens, to my understanding, already has bench top clear based technology with Advair Centur. So why is it they didn't convert their existing customers and instead selling it to you cheaply? The last and related question, just to understand actually the structure of their customer relationships. Why is it you need to acquire this business to convert these customers to your platform? Why can't you just do so in free market today without having this business within your current mix? So perhaps if you could just talk a little bit about that and complete my understanding, I'd appreciate. And then I have a follow on. Okay. I will take this Scott. First one, why a small price? I don't think you should ask us. You should ask Siemens. But let me just give you a hint. We have a history of acquisitions where when you and I think the Eurex 1 was also paid in line with these numbers, where when you go to a very large conglomerate and you buy a piece of it, which is non strategic, usually the conglomerate, the large company is valuing this in terms of decreasing the entropy of the system and providing them with more strategic focus. All these intangible benefits that are that dismissals. And for that reason, the tangible value that they attach to these assets usually is smaller. And again, it's not only Siemens with this, I said, but with Eliza. And in a way, also the acquisition of Focus has been, if you compare to market prices and multiple, has been a very good acquisition. So this is part of when we talk about it, about our M and A strategy, and we keep saying, guys, we don't go after the traditional assets because it's too simple. When you go after a traditional asset, then you have Thermo Fisher and Danaher competing with you, and then you are left at square 1. These are the kind of very good acquisitions that you can make to create value for your shareholders. So non strategic asset that can be strategic for you. Now the second question is why you guys why Siemens didn't convert? It's very simple because they don't have their menu. So Siemens went through conversion of part of this business with the exception of those products, which are specialty products that they don't have on their center platform. But they had on the Eliza. Don't forget that these Eliza line was is actually a glorious line. It was the bearing line. And it was this was us, Diasorin and bearing and Biomerieux were the first companies that launched this kind products in the world 30 years ago. Some of it has been cannibalized, but then what's remaining is other specialties that we do have on the platform in Siemens, Roche, but don't have. And at that point, the only if you look at Siemens, they only had 2 opportunities. 1 was to if it is non strategic, you shut it down, but then you leave a good customer base with a problem. The other one is get a value from these assets, but also get a value for your customers because I actually have not seen the customer base, but I expect that these are Siemens customers. So they're not only people buying Eliza, they're people that most likely have lots of products bought from Siemens. And so Siemens being a big a good supplier for the customer base, had to find a solution that allowed these customers to someone that could continue to supply. And actually, that was a long part of the discussion with Siemens, the fact that they wanted to make sure that we would continue to provide service and support to their loyal customer base, okay? So this is why they didn't convert. Why is it difficult? Why do you need to buy this? And why you cannot go after this? As said, yes, but this is a seamless customer base. This is again, we expect that to go in these labs. There are labs in Germany, in Austria, in Eastern Europe, where there is Siemens pretty much, there is a Siemens acceptance over the full product line. So these were good products in Eliza. For this account, we were winning some of these accounts, but certainly, it would take more time to simply get in the list and go visit and you are a supplier at this point of theirs with the Eliza. You are there with the Siemens Blessing because you bought this business from Siemens and you promised pretty much win the contract that you will continue to supply and service these accounts. So it's different than just trying to sort out through statistics where the business is and go after it. Okay. I hope that's enough. Very good. Thank you for clarifying. So just to think about then the how we think about the phasing of this sort of transition. Do the revenues for this business decline over the next few years until you affect the conversion? Or do you see it sort of stable at this 47 level and growing? Perhaps just a few comments there. And also, are you done actually with respect to your Eliza asset acquisitions in Europe to support this Liaison Access endeavor? Thank you. Okay. First question, Eliza is traditionally declining business, but you should really split I think when it comes to this business, you see that the European core business that they have is relatively stable because again in specialties and there are a few blood banks in Germany that are using some of the ELISA products. So that portion of the business is relatively stable. There is a portion of the business of this business that is more related to very large tenders in the so called export markets, typically Middle East and some other countries. And that kind of business is less, let me say, stable because you can get the tender for 3 years, you can lose the tender for 3 years. So overall, we see that this business, stand alone, probably is a historical decline of 3% to 5%, but again, as a combination of stability in Europe and then up and down visavis international markets. The next question is from Luigi De Belis of Equita SIM. Please go ahead. Yes, good afternoon. Two quick questions for me. The first one, could you quantify the phasing of OpEx expected in the second half? And secondly, still on Siemens acquisition, I know it's too early, but could you give us a rough indication of commercial rate expected from EMEA to CLIA in the next 3 years period and the charter rate expected? Thank you. Look, I'll take the second one. I think you will need to wait because we are going after closing, we are going to revisit the 3 years plan, and we're going to give an indication of what we expected this business to add to the plan just presented a month ago. So I cannot count I cannot today comment on conversion. Yes. Hi, Luigi. The question on OPEX, I cannot give you the exact number. But historically, what happens is that H2 usually is higher in terms of OpEx compared to H1. And on top of that, we also had some, let me say, projects which were expected to happen in H1, which will actually happen in H2. So that's why I was saying in my remarks that we're going to see we've had a positive impact in H1 coming from phasing of OpEx. So that's it. I cannot give you our budget number. If I may make a qualitative comment on the OpEx, I see 2 just to explain to you why we expect an increase in Q2, mainly for two reasons. If you remember, we have discussed about initiatives intended to increase efficiency. When it comes to manufacturing, these initiatives are that were expected. We would expect to incur some of the cost in Q1, Q2. Some of this cost is moved to Q3, Q4. That's one example. The second one has to do with Diosori Molecular because we, as you know, have changed all management in Diosori Molecular, replaced it. We are getting to pull stuff now. Actually, we hired the general manager. We hired some senior people. And therefore, the running rate of cost, vis a vis molecular that you've seen in Q1 and Q2 is a little light compared to what you will see in Q3 and Q4. This is why I think Pier Giorgio was hinting the fact that historically, our cost base in the second and third and fourth quarters is higher than the first two. Thank you very much. Very clear. The next question is a follow-up from Scott Bardo of Berenberg. Please go ahead. Thanks very much for taking my follow-up. Yes, sorry, I have a mindful effect. We didn't get to, if you like, the second part of the second question, which was, well, there's an expression that good things coming through as you've done through acquisitions more recently, but this latest one not really materially dents in your capital position. So are there more acquisitions to come? Do you foresee or do you enough on your plate now to focus on internally? So that's a question for Carlo, please. And second question for Mr. Peugeot. I think at the beginning of the year, if I recall correctly, you were somewhat cautious about gross margin pressure or deterioration year on year, a suggestion you would compensate that with operational leverage. We've seen relatively stable gross margin. So could you give us an update on where you foresee the gross margin on a full year basis and whether this is the principal driver of your improved guidance? Thank you. Yes. I will start with the gross margin one, Scott. It's very we don't give guidance on gross margin. We give guidance on EBITDA. And it's not that easy to forecast the gross margin ratio when you have so many moving parts. Here, we are talking about the difference of €1,000,000 to €2,000,000 over revenues of €319,000,000 Such that, the overall trend, which I see is that, again, I believe that gross margin will be flattish as best. We lost 20 basis points, which is not much, but still we lost 20 basis points compared to H1. As a result, I said, of several plus and minus amongst the plus, we have the fact that we have been able to do well on the manufacturing margin because of the fact that we are selling a lot of high specialty products, which deliver to us better margin. As you heard, we sold more vitamin D in the 1st two quarters than what we expected, which is kind of helping the margin. And we start seeing kicking in at the positive effect of the operational excellence initiatives we discussed about during Investor Day. And also there, it's new projects, it's not very easy to be very accurate on gross margin. So I believe you should allow us a little bit of flexibility there. I believe the main message we are trying to deliver is that at EBITDA level, we are in a very good position to maintain the 39% 38.5%, 39% profitability that we basically gave. I believe the other question was on the acquisitions. Look, as said, we do not participate to transition to traditional acquisitions, let me call it roadshows, because we know that if we go for this kind of assets, competition is fierce, and we are not prepared as we speak to pay for certain multiples that today market for certain very hot assets is demanding. And also as I keep saying, we are not forced into an acquisition spree because we have what we need. We have the technologies. We have ideas. We have products with people. And so our acquisition strategy has always been, let me call it predatory, if I may, meaning that it may be that for a couple of years, you don't see much as it happened. But then it may be that through our channels and alliances, we source assets. Now we found 2, I mean, focused last year, these assets in 2017. I cannot honestly foresee whether we're going to find 1 tomorrow or 2 years from now. We keep you know that what we are interested to buy. And you know that there is a very serious commitment by our main shareholder to allow the company to pursue its strategic interest when it comes to strategic assets. So it's a wait and see. It's very complicated to say when it is going to happen again, Scott. All right. Thank you, and thank you for your time. Perhaps just very one quick follow-up, maybe ask in a slightly different way. Does this Siemens acquisition you may provide enough infrastructure or addressable opportunity for a self supporting, self sustaining liaison excess model in Europe? Or do you need to add additional relationships to make that a stand alone model in Europe? Thank you. No. Stand alone will never be stand alone because I said, if you compare Europe to the potential for this platform in other geographies is still small. But the difference fundamentally is that it used to be we were not considering Europe at all in our strategy, whereas today is back on the map, meaning that this is why I did comment before. Europe strategically for DiaSorin is very well positioned because short term, you see that we are enjoying growth. Midterm, which means for the next 3 years, we now have a business. This acquisition is fundamentally to support our European business where we get lots of new customers, a good customer base and now also allows us to put at play the Delhaize on excess. Not to mention the fact that when it comes to Europe, as you know, we also have the full opportunity for molecular because Quest was not playing at all in the European arena. This is why I'm saying Europe strategically is very well set as far as what it needs to continue to contribute in a positive way to the growth of our business. Mr. Rosa, there are no more questions registered at this time. Thank you, operator. Bye bye. Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.