Earnings Call: Q3 2019

Feb 5, 2019

Good day, ladies and gentlemen, and welcome to the Q3 2019 Haemonetics Corporation Earnings Conference Call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will be given at that time. And as a reminder, today's conference call is being recorded. I'd now like to turn the conference over to Olga Vlasova, Investor Relations. Please go ahead. Good morning. Thank you for joining us for Haemonetics' 3rd quarter fiscal 2019 conference call and webcast. I'm joined today by Chris Simon, our CEO Bill Burke, our CFO and David Wilson, President of our Plasma Business Unit. Please note that all revenue growth rates that we will refer to on this call are in constant currency unless noted otherwise. Our remarks today will include forward looking statements and our actual results may differ materially from anticipated results. Information concerning factors that could cause results to differ is available in the Form 8 ks we filed today and in all other periodic filings that we make with the SEC. This morning, we posted our Q3 year to date fiscal 2019 results to our Investor Relations website. We posted revised fiscal 2019 guidance and tables with information that we will refer to on this call. Those tables are within the document entitled Analytical Tables with Supplemental Information, to which we provided a link in our release. Today, Chris and Bill will discuss our financial and business performance, trends in our served markets, our strategy, our complexity reduction initiatives and revised fiscal year 2019 guidance. David will discuss highlights about the plasma market and Nexus launch, and then we'll proceed to take your questions. Before I turn the call over to Chris, I would like to mention the treatment in our adjusted results of certain items, which by their nature and size affect the comparability of our financial results. Consistent with our past practice, we have excluded certain charges and income items from the adjusted financial results, which we'll talk about today. Such items included restructuring and turnaround charges, accelerated device depreciation, deal related amortization expense, asset impairments and charges and certain legal charges. In the 1st 9 months of fiscal 2018, we also excluded the gain we realized upon sale of our Zebra line of bench top and hand sealers. Finally, in all periods, we excluded the tax effects of such items. Further details of Q3 and year to date fiscal 2019 excluded amounts, including comparisons with the same periods of fiscal 2018, are provided in Form 8 ks we have posted to our Investor Relations website. Our press release and website also include a complete P and L, balance sheet and a summary statement of cash flow as well as reconciliations of our reported and adjusted results. And now, I'd like to turn it over to Chris. Thanks, Olga. Good morning and welcome to today's call. We are making good progress at the midpoint of our turnaround and our performance reinforces that our strategy to create leading positions in winning segments to deliver superior short and long term results is working. The company is in launch mode as our plasma and hospital value drivers propel us forward. The complexity reduction initiative continues to deliver savings and free up resources for growth as we change the way we work to ensure a scalable, sustainable business for the future. In the quarter, we grew revenue 6% compared to the same period last year. This is an acceleration of 4.80 basis points, primarily driven by strong demand for our plasma $6.3 which is comparable profitability to the prior year. Bill will talk about the details of the quarter in a few minutes. Year to date, we grew revenue 7% and adjusted earnings per share twenty 4%. Adjusted gross profit expanded by 170 basis points versus fiscal 2018 and adjusted operating margin was 17%, a 150 basis point improvement over the same period last year. Plasma and hospital grew 14.5% and 7.3%, respectively, and they are becoming a larger part of our total portfolio. Declines in blood center revenue were consistent with our expectations as we continue to streamline our product offering and exit unprofitable contracts. Over time, the resulting shift in portfolio mix will have favorable impact on our gross margins. The complexity reduction initiative and productivity efforts are delivering expected savings and helping to create increased operating and financial leverage. We are generating increased cash flow to fund investment in 3 areas: sales and clinical support, product launches and performance based compensation to attract and retain the best talent. We have had ongoing operational challenges that impact near term results. However, we are confident in our plans to address these issues to drive sustainable long term growth and increased profit. Turning to our business units. We continue to be excited about Plasma and the NexSys platform and the value it brings to our customers. I will turn the call over to David Wilson for an update on the launch and our performance. Thanks, Chris. 1 year ago, I discussed our plans for the which are tangible evidence of the advantage of our fully integrated system is creating for contracted customers. For the market, North America plasma center collection volume growth by select customers continues to be the key driver in our fiscal 2019 year to date results. The underlying demand for immunoglobulin based medicines within our customers' portfolios is incentivizing them to continue invest in key aspects of their operations, including the number of plasma centers and plasma fractionation capacity. Published estimates for immunoglobulin drug demand are at or above 8%. Historic plasma collection volume growth has been about 9%. And new plasma center openings have been approximately 12%. The Protein Plasma Therapeutics Association, the Marketing Research Bureau, our customers and our own forecast models support the projection that the volume of available plasma must effectively double by 2025 to keep pace with clinical demand. As the market leader, we have invested to expand our disposables production by 50%, and we'll continue to expand as appropriate to support projected industry growth. Our Nexus platform is a paradigm shift allowing customers to collect more plasma at a lower cost, we enabled that by yielding more plasma per individual collection while enabling more collections per day. Donor safety is at the forefront of our efforts. The NexSys platform comprised of both the NexSys PCS and NexLynk DMS provides a bidirectional paperless environment, which helps to eliminate the potential for human error. This digital environment supports both the biometric donor data determining the operating parameters of the plasma collection device as well as the center operational data necessary to document and track essential aspects of daily processes. Haemonetics' capability to offer both the machine and the donor management software gives us unique capabilities and insights to innovate and safely support our customers' needs. Our experience in the field and our customer benefits are powerful. We have now converted approximately 20% of our North American installed fleet to the NexSys PCS device and have 6 months of real world experience at scale, we have demonstrated across more than 100 centers we have converted, in many cases overnight, that we can reliably restore them to full operations in unprecedented rates and cannot risk disruption in center productivity. Our rigorous attention to detail pre rollout and our donor center experience programs enabled us to prepare all aspects of center conversions in advance, enabling the seamless transitions. Now with over 2,000,000 NEXUS collections completed, we continue to refine our offering, including customers training and service, device and software maintenance and as necessary component upgrades. Converted centers are benefiting from the capabilities of the new platform. Pure plasma gains per collection with YES technology have yielded on average the indicated increase of 18 to 26 milliliters, about 3%. In a sample set of over 500,000 NexSys PCS collections PCS collections with Yes technology, the average gain was 23 milliliters, which was expected given the biometric profile of the North America donor population. Addition, a recent sample at an early adopting customer shows approximately a 20% reduction in donor door to door time. Notably, we are seeing a decrease in plasmapheresis process times, which accounts for about 1 third of the increase in center throughput. The other 2 thirds are pre- and post phlebotomy. For a busy center with waiting donors, this will correspond to meaningful increase in volumetric productivity without increasing the number of collection devices. Increased donor retention is a goal for our customers and the positive impact of the NexSys platform experience on donor satisfaction is foundational to sustain growth at established centers. One of our key learnings has been the critical importance of DMS software to our customers. While we have the ability to offer our NexSys PCS as an open architecture device, we believe that most customers will want to operate a NexSys PCS with the accompanying NexSys order to fully realize the immediate and future benefits of our fully integrated bidirectional platform. Unlike device conversions, software platform upgrades take months. Fortunately, we began that process over 2 years ago and our advanced phases of upgrade or installation across our existing DMS customer base. We have demonstrated that we can sequence customer conversions as device first, software first or parallel path. Software first is emerging as the preferred pathway to seamless activation of the full NEXUS platform. In closing, we have established NEXUS as our flagship platform. It is designed for seamless upgrades, which our R and D teams are actively pursuing to further improve yield, center productivity and donor safety. It's truly an exciting time to be at Haemonetics. Thanks, David. Moving to our Hospital business unit. 3rd quarter revenue grew 4.5% as there was timing impact in select markets. Year to date, we grew 7.3%. The sales force expansion we did last year is paying dividends as our teams are becoming fully productive. Hemostasis Management's double digit growth in all of our major markets is evidence that our plans are on track and our investments are accelerating growth. CellSaver is benefiting from our pricing initiative and equipment sales, which are up over the prior year, and we are exiting OrthoPAT, which is not core to our portfolio. We have positive momentum in transfusion management, and we are excited about the FY 2020 launch of next generation of SafeTrace Tx, a new browser based version with intuitive workflows and seamless interfacing that will strengthen our presence in the hospital information systems market. Across the portfolio, we are making targeted R and D investments in new indications and product line extensions, and we are generating clinical and health economic evidence to drive usage. As expected, we filed our application with FDA in the Q3 for the TEG-6s trauma indication. Overall, we continue to build competitive advantage for our products and create operating leverage by running hospital as a combined business unit. Blood center revenue was down 9.2 percent in the quarter. We are on track overall, and our 5.8% year to date decline is consistent with stabilizing the business. We are focused on product quality and customer service and support. Importantly, we have taken steps to rectify the quality issues we experienced over the last year. Our new manufacturing leadership is working to improve our products, processes and productivity. We continue to make selective investments to ensure we deliver safe competitive technology to preserve our apheresis market share. We recently rolled out a double dose protocol in Japan, and we continue to launch the universal platelet protocol in EMEA and Asia Pacific to ensure our customers have access to our latest technology. We have momentum and we are charting a path beyond the next few years. Our plans to create enduring value are dependent upon 6 value drivers. These include healthy and growing markets in plasma and in hospital as well as a customer centric operating model. Today, I'd like to highlight 3 others. Our innovation agenda is rooted in segment specific roadmaps for periodic disruptive and ongoing incremental innovation. We will augment our portfolio through acquisition of substantially derisked growth assets, and we recently formed a technology committee within our Board of Directors to place heightened importance on innovation. We are also committed to operational excellence to get better returns from our portfolio and our resources, while pursuing a more flexible and agile infrastructure. We are looking at every aspect of our operations with 3 objectives: increase product quality, improve customer service and reliability and reduce cost of goods. Finally, we are allocating capital to the highest value creating opportunities. Our investment priorities are clear: organic growth, targeted M and A and share repurchases. In the quarter, we completed our $260,000,000 share repurchase program to address prior and ongoing dilution. Our fiscal 2019 plans are on track, and we are committed to delivering short and long term results. Our teams are working hard, and we are making strides to become a fast growing medtech company capable of outpacing the market. Thank you. I'll now turn the call over to Bill. Thank you, Chris and David, and good morning, everyone. Please refer to the tables we posted to our website with a link in our earnings release. We provided specific revenue and income dollar amounts that derive certain percentages I will refer to in my comments. All revenue growth rates I will discuss compare with the appropriate prior year period. On that basis, we reported 3rd quarter and year to date revenue growth of 5.9% and 6.7% respectively. Plasma revenue increased 16% in the 3rd quarter and 14.5% year to date. North America plasma, which accounts for about 80% of plasma revenue, was up 20.7% in the 3rd quarter and 18.3% year to date. North America plasma growth included disposables revenue growth of 19.2% in the 3rd quarter and 17% year to date. Revenue growth in the 3rd quarter accelerated compared to the first half of fiscal twenty nineteen as NexSys pricing strength in liquids benefited results. We believe that our plasma business will continue to see strong revenue performance and we reaffirm our fiscal 2019 guidance for global plasma revenue growth to be 14% to 16% and North America revenue growth to be 17% to 19%. Hospital revenue increased 4.5% in the 3rd quarter 7.3% year to date. Within hospital, hemostasis management grew 9% in the 3rd quarter 17% in the 1st 9 months. This slower rate of growth in the 3rd quarter was partially caused by order timing in China and North America that we experienced in the first half of this fiscal year. While we continue to develop many of our markets, revenue fluctuations are expected within the capital sales cycle and the associated ramp of disposable usage. We considered these impacts in November when we updated our hemostasis management fiscal 2019 guidance to a high teens percentage revenue growth rate and we are reaffirming this guidance today. Continuing on to the other part of the hospital business, cell processing revenue increased by 1.4% in the 3rd quarter and 0.8% year to date. Excluding OrthoPAT disposables, a product whose commercialization will end this fiscal year, self processing revenue grew by 4.1% in the 3rd quarter and 3% year to date. Cell processing growth in the Q3 was driven by strong performance across all geographies in transfusion management software such as BloodTrack and Safe Trace TX. We remain confident in the performance of our hospital business and reaffirm our fiscal 2019 revenue guidance to be in the range of 6 percent to 9%. Blood center revenue declined 9.2% in the 3rd quarter and 5.8% year to date. This higher rate of decline when compared with the first half of fiscal twenty nineteen was expected and was driven by the timing of strategic contract and product exits in whole blood, including order timing associated with these exits. We continue to expect a revenue decline within our Blood Center business of 3% to 6% and reaffirm our fiscal fiscal 2019 revenue expectations for the total company at 6% to 8% growth over the prior fiscal year. Adjusted gross margin in the 3rd quarter was 47.3%, down 30 basis points compared with the prior year. We've benefited from complexity reduction savings and pricing initiatives, collectively driving a 290 basis point improvement to our gross margin. Offsetting these benefits were product mix, higher NexSys TCS depreciation, higher freight and logistics costs, inventory charges primarily related to impacts from poor quality and currency. Adjusted gross margin year to date was 47.6%, improving 170 basis points compared to the prior year, primarily driven by the factors that drove the net favorability we saw in our 3rd quarter results. Adjusted operating expenses in the 3rd quarter were $74,200,000 an increase of $4,500,000 or 6.5% compared to the prior year. As a percentage of revenue, adjusted operating expenses in the 3rd quarter increased by 20 basis points to 30%. Adjusted operating expenses year to date were $219,400,000 an increase of $15,400,000 or 7.5 percent compared to the prior year. As a percent of revenue, adjusted operating expenses on a year to date basis were 30.5%, essentially the same as the prior year. There were 4 specific factors driving increased operating expenses in the 3rd quarter year to date, which more than offset the savings our complexity reduction initiative. First, we had ongoing investments required to support the rollout of the NexSys PCS devices. 2nd, we continued sales and marketing investments at Hospital to further penetrate and expand our markets. 3rd, we had higher equity and other performance based compensation as we continue to transform our company culture. And 4th, we had increases in freight costs due to increasing volume, higher carrier rates and inefficiencies in our logistics planning. 3rd quarter adjusted operating income of $42,700,000 increased $900,000 or 2 percent, while adjusted operating margin of 17.3 percent was down 60 basis points. The 3rd quarter adjusted operating income was impacted by gross margin dynamics as well as the higher operating expenses we just discussed. Although operating income growth was lower than the results in the first half, on a dollar basis, adjusted operating income in more than 3 fiscal years. On a year to date basis, adjusted operating income of $122,300,000 increased by $18,300,000 or 17.6 percent, while adjusted operating margin of 17% improved 150 basis points compared to the prior year. In summary, while accelerating revenue growth and complexity reduction savings drive meaningful margin expansion, We continue to make strategic investments to support our growth. We are encouraged by the operating income growth and leverage we have experienced in our year to date results and we are committed to achieving our longer term objectives. Our income tax provision on adjusted earnings was 16% in the 3rd quarter compared with 18% in the Q3 of the prior year. The year to date income tax rate on adjusted earnings was 17% compared with 24% in last year's 1st 9 months. These lower tax rates were due to the full year impact of U. S. Tax reform and higher share vesting and option exercises, which were immediately deductible for tax purposes. 3rd quarter fiscal 2019 adjusted earnings per diluted share was $0.63 an increase of $0.01 or 2% compared with the prior year Q3. Year to date fiscal 2019 adjusted earnings per diluted share was $1.78 compared to 1 $0.44 in the prior year, an increase of $0.34 or 24%. Our expectations are intact for fiscal $2.25 to $2.35 We remain on track and also reaffirm our expectation to realize $80,000,000 of savings from our complexity reduction initiatives and a run rate in excess of $40,000,000 at the end of fiscal 2019. We continue to make significant approximately $0.40 to $0.50 of earnings per share that are funded with our complexity reduction savings. We incurred $2,000,000 of restructuring and turnaround expenses in the Q3 of fiscal 2019 $7,000,000 of such expenses year to date. Cumulatively, including amounts in fiscal 2018, we have incurred approximately $44,000,000 of the $50,000,000 to $60,000,000 restructuring and turnaround expenses anticipated by our complexity reduction initiative. These expenses were excluded from our adjusted earnings. Free cash flow before restructuring and turnaround costs was $58,000,000 year to date compared with $113,000,000 in the same period in fiscal 2018. The lower free cash flow in the 1st 9 months of fiscal 2019 with higher investments related to capital expenditures and inventory, including the deployment of NexSys PCS devices and expansion of plasma disposables production capacity. We finished our Q3 with $155,000,000 of cash on hand, down $25,000,000 from fiscal 2018 year end. Capital expenditures are included in our fiscal 2019 cash flow projections at $150,000,000 to $160,000,000 up from $75,000,000 in fiscal 2018. Capital expenditures include the completion of capacity expansions at plasma manufacturing facilities to accommodate anticipated volume growth and production of NexSys PCS devices. We are encouraged that the operating income leverage we have seen has resulted in increased free cash flow. This has enabled us to increase our free cash flow guidance $65,000,000 to $75,000,000 from the original guidance of $25,000,000 to $50,000,000 In the Q3, we completed our $260,000,000 share repurchase authorization. During fiscal 2019, we repurchased 100 and $60,000,000 of our common shares and when combined with the previous $100,000,000 repurchase from late in fiscal 2018, a total of 3,000,000 of our common shares were repurchased at an average cost of about $87 Our share repurchase program was used to address recent dilution. However, further dilution from existing share based compensation programs has and will continue to offset this benefit. We appreciate you joining today and we will now proceed to your questions. And our first question comes from David Lewis of Morgan Stanley. Your line is now open. Good morning. I'll just ask two questions here. I'll ask them right upfront. Maybe on the plasma side. Krish, just the Street's forecasting plasma acceleration in fiscal 2020 for the business. How do we think about plasma in 2020 as it relates to the market and NexSys contracting? Can the Plasma business accelerate next year? And then Bill for you just seeing significant reinvestment in the business still deep into 2019, where are we on the pace of investments? And how should we think about this level of investment heading into next year? Thanks so much. Thanks, David. It's Chris. With regards to the growth in plasma, as David outlined in our prepared remarks, we are working hard to keep up with robust demand in our market. We're not in a position today where we're going to guide on fiscal 2020, but we feel quite good about what we've put out there for the current year and how we'll finish here in this quarter. And longer term, we've spoken about 8% to 10% growth in collections based on the end market demand, the expansion and fractionation capacity, the addition of new collection centers and our success in the market, both with PCS and with Nexus, we feel quite good about our ability to deliver that long term growth. Okay, David. And on the second part of your question on the investments, we're still tracking at the $0.40 to $0.50 investments that we committed to sustainable or repeatable going into FY 2020. A lot of the investments that we're making this year are, what we classify as depreciation related to the capacity expansion that we're making for plasma as well as we deploy the Nexus PCS devices, we have incremental depreciation on those devices. We're also incurring rollout costs as we start to place the NexSys PCS devices. So there's a timing element of the devices rolling out versus the benefits associated with that rollout and those costs. We are continuing to invest in R and D and we see that going forward. And this year, we do have the dynamic of on the hospital side of the business, we invested last year in the sales and clinical specialists. So we're seeing annualization of those costs. But in the P and L, obviously, those costs will remain as Thank you. And our next question comes from Anthony Petrone of Jefferies. Your line is now open. Again, Anthony, your line is now open. I apologize, I was on mute. Congratulations on the 6th ring up in New England, although a little asterisk on the same loss to the Rams, but we could debate that another day. Maybe just a couple of questions on plasma in particular for the implied Q4 guidance. And so it seems like there's a big swing factor. So year to date, you're trending certainly within range. But if you kind of guide 13% to 16% for the year, you can kind of swing from below the low end of the range to above the high end of the range. So what are the swing factors in plasma for the Q4, particularly in volumes and placements in Nexus? And I'll have a follow-up question. Thanks. Anthony, it's Chris. Let me comment and if David wants to add further to that. It's we feel good about the range. We're trying to get out and it's always challenging at this point in the year. We don't issue quarterly guidance for all the reasons we've talked about in the past, but inevitably we do when we reaffirm our Q3 performance. But the way we're thinking about it, It varies quite dramatically from one customer to the next. What we've we have constant dialogue with them about this, where are they, how are they thinking about their quarterly needs as well as the ongoing rollout of Nexus, PCS and all the associated offerings hardware, software and our services. So that all factors in as you would have seen in the quarter and Bill detailed in the prepared remarks, we have both organic demand, we have pricing, we have benefit on liquids, we have benefit on software. The combination is what gives us confidence. We'll be very confident in the range we've put forth. And then the follow ups would be on freight and logistics, maybe for Bill, like how much of that can be offset going forward? And how much of that sort of sticks certainly into fiscal 4Q, but maybe does that bleed into fiscal 2020? Thanks again. Thanks, Anthony. So overall on the freight costs, we are seeing an increase in our percent of freight costs to revenue. So that neutralizes the volume impact. We are in the process now of really going through and analyzing the data in terms of where the rising freight costs are coming from as well as looking at the inefficiencies that we have in our logistics planning processes and we're looking for quick wins that we can address immediately and get some benefit not just in Q4, but also in FY 2020. That's helpful. Thanks. Thank you. And our next question comes from David Turkaly of JMP Securities. Your line is now open. Great. Thanks. Based on your commentary of the North American fleet conversion, I guess our back of the envelope calculation might be something like 1500 new systems. I'd love to just get any color on that math. And then obviously the 10 hour conversion for the machines is impressive. You mentioned the software first sort of being a preference. I'm just curious if that would make potentially that sort of a placement number we referenced earlier by quarter sort of a more likely ramp or rate as we look forward given that some are choosing to install that first? Yes. Thanks, David. I'll let our David speak to the sequencing and the timing and how that plays out. In terms of quantifying the progress on the launch, we felt it was important back at last summer to communicate that we had moved into commercialization. We wanted to give you a sense and we will continue our macro progress. I would like to walk back some of the detail about individual devices or centers over time. Candidly, I think if we give you a rough cut of how many collections, back into what you need to track our progress without betraying either confidentiality or putting ourselves at competitive disadvantage. So, we want to be transparent, but not to the point where, it conflicts with confidentiality. And I think going forward, we'll probably talk in general terms about just total volume of collections, which gives a good measure of our progress as well as the reliability of the device in a commercial setting. Yes. As I said, we can convert we've demonstrated that we can convert a center the machines in a center overnight less than 10 hours. Software is different. It does take months. It begins with installation or configuration, validation, customer reports. So all of our customers are at various stages of either upgrading or converting to our latest platform. And I can tell you that we're heavily engaged with all of them on their individual strategies to get the software converted. As I mentioned earlier, to really take advantage of the full NexSys platform, having both our DMS, NexLynx software and our NextTCS connected really supports the value prop around plasma yields, center productivity, safety compliance and overall donor experience, we're seeing the validation of that. So heavy planning upfront, execution follow through both with the machines and the software and we're well positioned to move exactly at the pace that our customers request. Got it. And congrats on the FDA, the filings on the TEG side. But just to sort of try to get a little more color there, I think you said order timing in China and North America. I was just wondering any color on the 5,000 versus 6s or any other color you could give in terms of obviously 9 is not a bad number, but based on the growth rates we've seen lately, it does look like a little step down. I see you reiterated the year, so you're comfortable it's coming back. But I would just love to get any color you'd be willing to give on why that sort of happened this quarter. Thank you. David, it's Chris. I think in any given quarter, you're going to see that jump around a bit. That is just a nature of the market. We like the 5,000 a lot, but the 6s is a superior product. And for all the markets where we have the broader indications there, we are upgrading and converting. It is the disproportionate driver of our growth trajectory, both for TEG, but also for hospital. But that ties us to the vagaries of the capital purchasing cycle and we can see a few devices literally in 1 quarter versus the next or as was the case here for China, a set of distributor contracts on the associated volume requirements against that will move us meaningfully from 1 quarter to the next. We feel quite good about the annual guidance and maybe even more so about the long term growth trajectory of the TEG product, again propelled by the success. Thank you. Thank you. And our next question comes from Brian Weinstein of William Blair. Your line is now open. This is actually Andrew Brackmann on for Brian. I wanted to follow-up on the previous question on the NexSys rollout. In the past, it kind of seemed like maybe the rollout wasn't as linear as the Street may have been expecting. So I guess when you are getting pushback from customers, is it more around price? Or is it around that, I guess, perceived operational burden of bringing on a new system during the tightened demand of plasma collection? Thanks. Yes. I would say all the above. And the one piece I would comment I would make about contracting per se is it's a bit more complicated than we've probably gone into detail in the past, right? We have disposable agreements. We have software agreements. We have, in some cases liquid agreements and we have services agreements and we don't generally break those out. They are frequently, but not exclusively tied to the underlying platform. Certainly, Nexus gives us the ability to open up those discussions in an appropriate way. But contracting isn't binary and the sequence and the timing as David discussed will vary in ways that probably won't be intuitive or obvious outside in for obvious reasons. Got it. Thanks. And then just one quick follow-up. Any update on the competitive front that you're seeing in plasma? Thanks. Yes. We've said all along that we welcome innovation based competition in plasma. We think what we're doing here, as David articulated, is a paradigm shift. There is meaningful value to be created for our customers. And with the leadership position that we've enjoyed in the market, if our competitors follow our lead and manage accordingly, I think it just bodes well for a healthy end market and our ability to continue to innovate and compete on innovation going forward, which is really our intent. Thanks, Chris. Thank you. And our next question comes from Jim Sidoti of Sidoti and Company. Your line is now open. Good morning. Can you hear me? Yes, sir. Great. So I know you're reluctant to get into too much detail regarding the quantity of units that you're rolling out. But can you just give us a sense, as you look into the Q4 and into fiscal 2020, what the acceleration will be? Will it be 20% more next year, 25%? Or can you just give us some idea how fast you're going to accelerate the rollout? Yes, Jim, it's Chris. I know you appreciate this. We're not going to guide for FY 2020 today. We reaffirmed guidance for FY 2019. I will say this, we remain highly confident in our ability to succeed with Nexus, probably even more so now based on the growing evidence of the value to our customers, the proven reliability and our demonstrated ability, as David highlighted, to transition's platform seamlessly. All that said, it is a paradigm shift and that may take time. What I would say is we will be patient because we are quite appreciative of the value we've created and the potential of that platform going forward. Everyone have a great day.