Earnings Call: Q1 2021

Apr 28, 2021

Good afternoon, everyone. Before the conference call begins, let me remind you that during this call, management will be making comments and statements regarding its financial outlook and its plans and objectives, which represent forward looking statements that involve risks and uncertainties as those terms are defined under the federal securities laws. Investors are cautioned that any such Forward looking statements are not guarantees of future events, performance or results, and the company's actual results may differ materially from to current expectations. Please refer to the risks and other uncertainties disclosed under forward looking information in today's press release as well as the company's SEC filings for more details on the risks and uncertainties that may cause actual results to differ materially. The company disclaims any obligation to update any forward looking statements that may be discussed during this call, except as may be required by applicable law. You will also hear management refer to certain non GAAP adjusted measurements during this discussion. While these figures are not a substitute for GAAP measurements, management uses these figures to aid in monitoring the company's ongoing financial performance from quarter to quarter year to year on a regular basis and for benchmarking against other medical technology companies. Adjusted net income and adjusted earnings per share measure the income of the company, excluding credits or charges that are considered by the company to be special all outside of its normal ongoing operations. These adjusting items are specified in the reconciliations supporting the company's earnings releases posted to the company's website. With these required announcements completed, I will turn the call over to Curt Hartman, ConMed's Chair of the Board, President and Chief Executive Officer for opening remarks. Mr. Hartman? Thank you, Paul. Good afternoon and thank you for joining us for ConMed's Q1 2021 earnings call. With me on the call is Todd Garner, Executive Vice President and Chief Financial Officer. Today, we will walk you through our Q1 results and share our thoughts on the outlook for our business in the current operating environment. Recognizing the uncertainty that still exists across our global markets, We'll then open the call to your questions. Turning to our results, total sales for the Q1 were $232,700,000 representing a year over year increase of 8.7% as reported and an increase of 7.2% in constant currency. From an earnings perspective, during the Q1, our GAAP net income totaled $9,900,000 This compares to net income of $5,900,000 in the Q1 of 2020. Excluding special items that affected comparability, Our adjusted net income of $19,100,000 increased 26.8% year over year And our adjusted diluted net earnings per share of $0.63 increased 23.5 percent year over year. Broadly speaking, we saw consistent year over year performance throughout the quarter with the latter half of the quarter demonstrating better performance. The U. S. Market in particular showed improvement later in the quarter following weather related procedure delays across the Southwest. Consistent with what we communicated in January, Latin America remains challenged more so than expected, while other international markets saw steady performance throughout the quarter, aside from some procedure stoppage in areas of Canada, France and Asia later in the quarter. Overall, it was great to see both Global Orthopaedics and Global General Surgery achieve year over year growth in the quarter as well as positive in both the United States and international markets. We continue to deliver solid growth in both AirSeal and Buffalo Filter and we're happy to see the state of Kentucky approve smoke evacuation legislation during the quarter that will result in operating rooms across the state going smoke free starting January 1, 2022. In closing, I remain very proud of the ConMed team and the progress we demonstrate in the quarter. We think these results validate many of the steps we took starting in early 2020 in response to the growing incidence of COVID. As a result of our Q1 performance, you will see that we have increased our guidance on both the top and the bottom line. I'll now turn the call over to Todd, who will provide a more detailed analysis of our financial performance and take you through our guidance adjustments. Todd? Thank you, Curt. All sales growth numbers I referenced today will be given compared to the prior year in constant currency. The reconciliation to GAAP numbers is included in our press release. As usual, we have included an investor deck on our website that summarizes the results of the quarter, our updated guidance and also provide sales results compared to 2019 for those of you interested in that view. We did have one less selling day in Q1 2021 compared to Q1 2020. Normally, we would estimate that impact to be between 100 and 150 basis points on the quarter. But given the abnormal external environment in both years, we would not attempt to quantify the impact on the quarter. For the Q1 of 2021, our total sales increased 7.2%. COVID had a meaningful impact on the full quarter. In January February, each month grew slightly on a global basis compared to the prior year, and March grew significantly over March 2020. In Q1, we grew domestically and internationally in both single use and capital products. Capital was strong compared to Q1 2020, but was still below our Q1 2019 levels. For the Q1, our total U. S. Sales increased 4.3% versus the prior year quarter. Our international sales increased 10.8% for the compared to the prior year. Canada and Australia saw good growth in the quarter. Europe was a mixed bag with some countries growing and some declining. As a whole Europe grew slightly for us in Q1. Asia was the most impacted by the virus in Q1 of 2020 and therefore grew nicely against the easiest geographic comparable for us. As Curt said, Latin America was our most challenged geography in Q1 and our near term expectations for that region have decreased as progress against the virus is lagging. Worldwide Orthopedics revenue grew 5.9% in the Q1. In the U. S, orthopedics sales increased 0.2% and internationally orthopedic sales increased 9.4%. Total worldwide general surgery revenue grew 8.2% in the quarter. U. S. General Surgery revenue grew 6.1%. Internationally, General Surgery grew 13.4%. AirSeal and Buffalo Filter continue to show strong growth across the globe. Now let's move to the expense side of the income statement. We will discuss expenses and profitability excluding special items, which include charges related to acquisitions and integrations, restructurings, amortization of intangible assets and amortization of deferred financing fees and debt discount net of tax. Adjusted gross margin for the Q1 was 55.2%, a decrease of 170 basis points from the prior year quarter. This was a little better than we expected as we had forecasted the negative impact from lower production levels from recent periods. We told you in January that after Q1, we expected adjusted gross margin to be positive compared to the prior year quarters as we move through the year, and we continue to expect that. Research and development expense for the Q1 was 4.3% of total sales, 40 basis points lower than Q1 2020. 1st quarter SG and A expenses on an adjusted basis were 39.1 percent of sales, 210 basis points lower than the prior year quarter. Interest expense in Q1 was $6,800,000 on an adjusted basis. The adjusted effective tax rate was 13.4% in Q1. This was lower than we expected principally due to the excess tax benefit from stock plans. This is difficult to predict, but we don't expect nearly the same benefit in future quarters. We continue to model our adjusted effective tax rate to be between 24% 25% in the remaining quarters of 2021. 1st quarter GAAP net income totaled 9 $29,000,000 or $0.31 per diluted share, which was an increase of 55% over the prior year quarter. Excluding the impact of special items discussed earlier, we reported adjusted net income of $19,100,000 and adjusted diluted net earnings per share of $0.63 an increase of 23.5% compared to the prior year period. This is the Q1 where the average stock price has been above our hedged conversion value of $114.92 for the convertible notes. The impact in Q1 was the addition of approximately 170,000 shares to the diluted share count as adjusted. As you can calculate, this had an immaterial impact on adjusted EPS in Q1. And of course, we cannot predict the future stock price, but if it stayed at current levels, We estimate this would decrease our full year adjusted EPS by approximately 0 point 0 $7 Turning to the balance sheet. Our cash balance at the end of the quarter was $36,800,000 compared to $27,400,000 as of December 31, 2020. Accounts receivable days as of March 31 were 63 days, consistent with year end 2020 and down from 70 days at March 31, 2020. Inventory days at quarter end were 78 as we build for anticipated increased volumes. This compares to 150 days at year end 2020 166 days at March 31 a year ago. Long term debt at the end of the quarter was $725,000,000 versus $735,000,000 at December 30 first. Our leverage ratio on March 31, 2021 was 4.7 times. As you probably saw, This month, we exited the suspension agreement we entered into with our banks a year ago. It turns out we never exceeded our original debt covenants, even during the worst parts of the pandemic. And therefore in hindsight did not need the flexibility provided in the suspension agreement. We appreciate the support of our banking partners through very uncertain times a year ago. Cash flow provided from operations for the quarter was $22,300,000 compared to $3,700,000 in Q1 of 2020. Capital expenditures in the Q1 were $3,100,000 compared to $2,800,000 a year ago. Now let's turn to our updated view of our 2021 financial guidance. 3 months ago, we opted to provide full year guidance based on a framework of assumptions on how the virus would impact the year. As a reminder, those assumptions were that Q1 would be significantly impacted by the virus and that impact would linger into Q2 and then ameliorate from there. Our assumption was that the global disbursement of vaccines would take months, but be effective at reducing the burden on healthcare from the known variants of the virus. We continue to see 2021 as a transition year with those same assumptions. Global COVID case counts remain at elevated levels, but our business has also proven to be relatively resilient. As I mentioned earlier, we now have additional concerns in Latin America and also expect the higher diluted share count related to the convertible notes to be a headwind to full year adjusted EPS. Our approach to modeling the remainder of the year is to recognize the over performance in Q1 on the top and bottom line and maintain our expectations for Q2 through Q4 as we had them 3 months ago, while absorbing the new headwinds I just discussed. That results in revenue guidance for the full year between $1,000,000,000 $1,030,000,000 We now expect currency to be favorable to revenue between 50 basis points and 100 basis points for the full year, but just slightly favorable to adjusted earnings. For adjusted EPS, we now expect the full year 2021 to be between $3.05 $3.20 And with that, we'd like to open the call to your questions, and I'll hand it back to Paul. Thank you, Our first question is from the line of Rick Wise with Stifel. Your line is open. Good to ask you, Joe. Maybe one question on the current environment and I'll follow-up with something else. Kurt and Todd, both of you are emphasizing that the slowness or the weakness in January February and the significant improvement in March. We've heard from Most of the other companies giving us a similar scenario and sort of suggesting that that momentum continued into April. Ex the cautionary comments on Latin America, etcetera. Is that what you're seeing? And Maybe just a little more color as part of that on where you're seeing that strength in a particular procedure area or product areas. Just help us think through that if you would. I think we'll probably double team this one a bit, Rick. But I think the January, February commentary is really Just a continuation of what people saw in the Q4. The Q4 was a little tougher from a COVID case impact on procedures that did continue. And then as we got into the month of March, things opened up a little bit. And in addition, the comparables obviously were suppressed given the rapid slowdown in the second half of March of twenty twenty. I also don't want to skip past the weather event that happened in February that had a pretty profound impact across the Southwest area of the country. A lot of things were shut down for Good portion of a week that impacts a lot of surgical procedures. And then on top of that in COVID case volumes, the Southwest California markets were pretty slow at the beginning of the part of the year just because of the restrictions that were in place. As we came through March, Things have gotten better as vaccines have rolled out. So I don't think any headlines have changed as we've started the Q2 relative to that Other than, obviously, I think everybody's aware, India is in a very tough spot. And to our commentary, Latin America remains challenged. We said that at the beginning of the year and it might be a little more challenged even at this point. There's just a little bit lack of Disbursement of vaccines and availability, etcetera, in the Latin American markets based on what we're seeing as an organization. So that's how I'd frame it. I don't know if Todd has any other comments relative to that. No, I mean, I agree, obviously, from on a relative basis, things are progressing as you hear everywhere else, Rick. I would just remind everybody that I know we're in this quest for normalcy, right? And everybody is anxious to when are we back to normal. And we're certainly not there. So yes, March, certainly better than January February. Again, we're not talking about Q2 on this call, but April, just consistent with what everybody else is saying, April looks a whole lot more like March than it does January February. But we're a long way from normal, I would still say as a market. So that's my perspective. Yes. Thank you. And just for my second question, we recently did a bunch of due diligence on your smoke business and What we heard from your customers or potential adopters was that COVID has accelerated smoke adoption, more hospitals are interested, more are trialing, expecting faster decision making, faster movement on legislation. Maybe What do you expect when you get an approval like this Kentucky legislation? How do we think about the impact on 2022 and beyond? And in general, did what we hear is that the did we get the right feedback? Are we hearing the right thing on that decision making acceleration kind of mindset? Thank you. Yes. I think What you've just stated there, Rick, is consistent with go back to this call a year ago and if you reread that transcript, We commented for the first time that we think in this environment as challenging as it is, there is more attention to the Smoke evacuation and the air seal product because of the society publications on the benefits of those devices in surgery. And then at the end of the second quarter, we said starting to show up in the financials in the Q3, definitely showed up in the financials and That has not changed. And I think that was reflected in the survey work that you did that there's just a lot more awareness and It's not necessarily awareness by the surgical staff. It's probably more awareness by the hospital administration And the surgeons who are now have a growing appreciation for the impact of smoke, surgical smoke on the health of the staff and The overall well-being and welfare of the employees in that facility. We've also said that legislation was not pulling this market. It was more wind at the back of the market. And that's because of all the great work that has happened by the societies going back a decade plus, whether it's AORN or other societies around the world who've really been advocating for smoke free environment. So when something like Kentucky comes Long and they legislate mandate. It's obviously positive because it helps move 100% of the market in this direction, and it sets kind of a timeline. So if you look though, we've had other legislation that doesn't have as much teeth. This one appears to have a little more bite to it, so more positive. But I would also say, we're not starting from 0. There were already accounts in the state of Kentucky using smoke evacuation and filtration. So it's just helping motivate the other ones that haven't quite moved as quick. I think it's the way I'd frame it. Got you. Thanks and nice to see the progress in the quarter. Thank you. Thanks, Rick. Our next question is from the line of Robbie Marcus with JPMorgan. Your line is open. Great. Thanks for taking the question and congrats on a really nice quarter. Thanks, Robbie. Two questions from me. Maybe to start with the first one. Appreciate you're historically a very conservative management team And I like that. But just turning to the guidance and I want to just try and tease out the answer. You mentioned you raised guidance Make sure, is that more along the lines of the environment is still uncertain here and you don't want to get ahead of yourself? Or Is it something you're seeing exiting Q1 that would not Prompt you to take the good trends that you mentioned and bring them forward at all. Just want to try and tease out the answer there. Yes, really just it's going to be a year where we got to stay flexible, right, Ravi, and we've got to kind of manage the fuel and the brake at the same time and make sure the fuel is ahead of where the opportunity is and make sure we don't release the break where the opportunity is still lagging, right? And so we've got to just stay flexible as we navigate through the year. We were very pleased with Q1. The business did better than we expected. But as we had laid out the year 3 months ago, we already had assumed improvement, right? We were counting on Q2 being measurably better than Q1. And it was actually a decent step up from Q1 to Q2. So as we leave Q2 where we had it, It's a smaller step up than it was, but it's still improvement over Q1. And there's enough uncertainty out there around the globe. And And as for every I think everybody knows we're essentially fifty-fifty U. S. And international. There's enough uncertainty, there's just no reason to get ahead of yourself here. So we will play it quarter by quarter. We'll count Q1 as a win versus expectations, And we'll continue to focus on executing and managing the business appropriately as we have through the pandemic. And we'll take it from there, and we'll talk about it 3 months from now. Great, great. Appreciate that. Maybe just a follow-up here. At the JPMorgan conference, Prince, you were so nice to tell us that AirSeal and Buffalo Filter were 25% of sales now growing at least 20%. Want to see if you'd comment on how that part of the business did in Q1? Thanks. Those I think we said at least 25% of the business growing at least 20% and that remains true. It beat both of those numbers in Q1. Any color on how much they beat by? Because We can dream big egg. We're not going to get into product line specifics there, But we're pleased with how that's going and the thesis remains intact. All right. I tried. Thanks a lot. Our next question is from the line of Matthew O'Brien with Piper Sandler. Your line is open. Great. Thanks for taking the question. So Todd, not to keep going on the path here on guidance, but you just beat by beat Q1 by $20,000,000 Currency is now going to be more like a $10,000,000 tailwind versus what you were expecting before. So it's about 30 And you're only raising the midpoint by 15%. It seems like things are loosening up here in the U. S. It seems like You're going to get some of those cases back down in the Southwest done here in Q2 and for the rest of the year. Is Latin America and some of the pressures you're seeing in EMEA India, really that big of a headwind to think that there's a $15,000,000 delta between the What we just saw here in Q1 in currency versus the increase in the midpoint of the range? Well, first of all, I like your optimism, Matt, And I like that you're an optimistic guy. I also you've done some rounding up a little bit. I think if you do the math On a prior year of $8.62 I think 50 basis points to 100 basis points works out to between $4,000,000 $8,000,000 And so you've rounded that up to 10. So I'd caution you there on your rounding. But look, We had a wider range, right. All we did for our guidance was take the actual for Q1 and left what we had for the last 9 months of the year alone. And so we had a $15,000,000 range on our Q1 revenue. We've now delivered a specific number. So our revenue range has shrunk by that $15,000,000 right? So We're not more bearish on the year at all. We're very pleased with Q1. We just don't see the need to and there's enough moving pieces out there that there's no need to get that granular or get that specific. So Good start to the year. Lots of work left to do, lots of dynamic external Levers to deal with and manage, and we're going to keep doing it as we have been doing it. Got it. Okay. And I'm sure everybody in the investment community knows me as uber optimistic. So I appreciate you pointing that out. Also, I was curious On the capital side, I know you had an easy comp. We're seeing across MedTech here in Q1 real strength in capital purchases, which you guys Clearly saw. How much of it that is obviously pent up COVID demand? How durable is that, I guess, for The remainder of the year, I mean, are there $100,000,000 worth of capital that was deferred or some number that was deferred that we should expect for the rest of the year? And then what does that say about volumes, as we go into Q2 and Q3 as these hospitals are purchasing capital in front of that? I think, Matt, the way I would comment on capital is we saw more of that in the latter half of the quarter, obviously, based And procedures picking up and our capital is a smaller dollar capital and it is it's essential to procedures being done. So if there's a need, They're going to make the purchase because otherwise they are potentially deferring a procedure because of the lack of capital. And the other thing I would just add on top of that is we did comment, we had new capital come into the market. We had a new video platform and we had a new large bone power tool platform. So anytime you have new products like that, put your sales force back on offense, gets them enthusiastic to revisit customers, new customers. So we had a couple of things going in our favor right now relative to our 2 bigger capital items, if you will. And then we also have in general surgery some capital items, Helix generators, air seal box, the IFS Fox and then to a lesser extent, the Buffalo Filter Capital, small dollar item. But all that adds up to We have a good opportunity here as markets open up and more procedures are getting scheduled that puts more wear and tear on existing capital and that opens up capital. And I think we've said, we never saw the slowdown in capital as being related to a lack of financial Capability, it was about where were they going to put those capital dollars and there were other more critical needs during the height of the COVID pandemic than there A lot of that's been addressed. So now they can move on to that more call it routine capital, if you will. How much capital backlog is out there? That's really hard to quantify. So I don't think I would take a guess at that one. Totally fair. Thank you. Our next Question is from the line of Richard Newitter with SVB Leerink. Your line is open. Hi, this is Erin on for Rich. Thanks for taking our questions. Just a couple of quick ones from me. Could you guys maybe talk about what you're seeing throughout the quarter in the Sports Medicine segment? Have those volumes been starting to pick up with organized sports starting? Just wanted to see what you guys have noticed in that area. I think they strengthened as the quarter progressed. We report orthopedics. We have a lot of different products within orthopedics including video, including power. If you look at our procedure specific category, which is the anchors that are used in soft tissue repair, We generated growth in that category, both in the U. S. And international market. And then the other item that directly reads on sports Medicine procedures would be the MTF tissue Biologics portfolio and we generated growth in that both in the U. S. And the international markets in the quarter. So there was a growing Set of procedures occurring relative to soft tissue repair be that the knee, the shoulder, the hip. And just Just as a reminder, Conmed's biggest presence is in the shoulder. Obviously, we're doing a lot of innovation to continue to expand within the knee and the hip And obviously, extremities as well as that clinician group gets more focused on soft tissue repair, wrist, foot and ankle, elbow, etcetera. So I think the procedures were starting to pick up as we got further into the quarter and That's what we're prepared for. Okay, great. Thanks. And then just another quick one on Buffalo Filter. Congrats I mean, I guess, the Kentucky legislation is great. Have you heard of any other states that have A similar type of legislation coming down the pipe? Yes, Erin, there's about a dozen states that we think are close. And actually, we're in the process before the pandemic started. So we would expect As the legislators across the country get back to work, this will be one of the first things they deal with. I'll just remind you, As Curt said, the legislation is really following the demand and not necessarily leading it. But so we're happy to see it. We welcome it. We think eventually all states will have some rules around keeping workers safe. That seems logical. But it's not something that we're holding our breath for or counting on here at ConMed. We know that the market is going to grow and this is going to become standard of care and we're just trying to make sure we service the customers and get as much of that market share as we can. Okay, great. Thanks so much. Our next question is from the line of Mike Matson with Needham. Your line is open. Hi, Kurt and Todd. This is David Saxon on for Mike. Thanks for taking the questions. First one is just on AirSeal. I was wondering if you could just Give an update on the attachment rate with intuitive robots. I guess what can drive that higher over time? And then in March April, can you talk about how utilization trended and how that compares to kind of pre pandemic levels. And on your March, April question, David, are You're talking about air seal utilization specifically or something broader? Yes, air seal. Okay. So far attachment, I think the way we frame that before is footprint, right. So we framed before that, where you walk into an OR and you see a da Vinci robot, about half the time You'll see an air seal box also in the room, right? And that has been climbing over the past several years and that continues to climb. So It's probably approaching more like 60% now is probably a safe number to say. So that footprint Continues to grow. The procedure capture also continues to grow. That's below the footprint Percentage. So we are now north of 35% of the procedures that are done on the da Vinci will be using the air And that's just because it's doctor by doctor, right? Just because the machine is in the room, You've got to get doc by doc, surgeon by surgeon to try it and adopt Airsteal. But that continues to go well. Those both those numbers continue to go up And we expect they will continue to go up from here. Specific utilization, first of all, we're not going to talk about April here. This is a Q1 call. So we're not going to talk about that. But definitely this is tied to procedures, right? So as procedures Are depressed like they were in January February, you have fewer procedures as those open up, Then we get more usage, right. So certainly a decent increase between February to March. And as Kurt said, February was also impacted by some weather issues in the United States. And so nice pickup between February March. We still think we're a long way from normal. We're still again, across the globe, procedures are still impacted by the virus. Hospitals are still having to prioritize and manage and adjust. And then patients, of course, are also have their own reasons to maybe delay or defer or Be hesitant. So, still not back to normal, but trending in the right direction. Okay, That's helpful. And then maybe another for you, Todd. Just on gross margin, I think you said 2nd quarter should Show some year on year improvement. But just given Q2 last year with the trough, should we kind of be thinking in line with what we saw the Q1? Any color there would be helpful. Thanks so much for taking the question. Yes, great question, David. And yes, I'd say in that range, yes. So probably around the same area as Q1 and decent growth over Q2 and then Q3 and Q4 should be growth over the prior year quarters. Great. Thank you. And our last question is from the line of Matt Bishan with KeyBanc, your line is open. Great and thank you for taking the questions. Hey, I really like how you guys laid out Slide 5 with versus 2020 and versus 2019. And one of the things that I guess is fascinating about this is that orthopedic Surgery was possibly plus 3% versus 2019 and down a bunch in the internationally And down a bunch in the U. S. Could you talk a little bit about the difference there? And whether that you think that on the international orthopedic Do you think you can maintain a positive growth versus 2019 through the remainder of the year? Yes, I guess, Matt, the first thing I would point to is that internationally, about 60 Percent of that business, 60 plus percent of that business is orthopedics. So the point of that statement is our presence internationally in orthopedics is much Bigger, much more pronounced, much better market position. And that is a historical event driven when ConMed bought The Linvatek assets from Bristol Myers Squibb in the late 1990s, we retained a lot of that existing infrastructure And still have that infrastructure in place and the market share that comes with being there and that consistent. The other thing is the we had some market performances that were really heavily focused on orthopedic procedures returning in places like China, which experienced COVID first and foremost. They're kind of back doing procedures and that's a respectable orthopedics market for us. Places like Australia, New Zealand and Canada, Japan, good markets for CONMED because of our presence in good orthopedic markets for CONMED. So as those markets have gotten a lot healthier in terms of their ability to deal with COVID procedures and then the softer comparables that they had for the full quarter. So We have a very good orthopedics business outside the U. S. And I think our orthopedics business outside the U. S. Will continue to have positive momentum. It's been that way for a number of years. In the U. S, we've said from day 1, this has been our biggest challenge market And we continue to evaluate and continue to innovate and good things are happening there. We've got Pat Beyer over the top of the U. S. Now Orthopaedics bringing a lot of the same practices that they employed internationally into the U. S. Market. And I feel positive about where we're going and looking forward to the second half of the year for our U. S. Orthopedics business Where I think a lot of us are doing will really start having traction. Okay. And as a follow-up to the Gross margin question. Todd, have you worked through the unfavorable manufacturing variances, and the higher freight costs you were experiencing? No, they're not all behind us yet. Right, it's a 4 month deferral is how that works from the accounting perspective. So December, So as an example, the unfavorable manufacturing variances we saw in December will hit the external P and L in April, Right. And then January hits in May. And so that's how it works. And so obviously, December was bad, January February We're bad. So that as we said before, that will continue to impact it'll kind of mask margins continuing into Q2. And then hopefully, we'll be less of a clouding factor when we move into the back half of the year. Okay. And last question, just a follow-up to the Aerosil question with da Vinci. Just curious, when doctors train on da Vinci from Intuitive or at in medical school, Are they also trained on AirSeal? And have you are you trying to get AirSeal into medical also when the doctors initially learn how to do the procedure, they're learning it on the Aerosil platform. So there are 2 parts to that question, Matt. Obviously, given the long standing relationship that First SurgiQuest and ConMed has continued with Intuitive, there are a lot of training events that occur with Intuitive Surgical where AirSeal is present. So if a doctor is coming in to an intuitive training event. They're likely to see an air seal platform there and get that exposure at the same time. As far as the direct medical school resident training programs, obviously, we target All those I couldn't look anybody in the eye and say we have 100% success. That's just kind of customer dynamics. But part of our growth Trajectory is to be in medical school programs with all of our products, obviously. So those are certainly priorities. Okay. Thanks guys. Congrats. Thank you. As there are no further questions, this concludes the Q and A session. I'd now like to turn the call back to Mr. Hartman for any closing remarks. Mr. Hartman? Thank you, Paul. And I just want to thank everybody for your time today, and