Earnings Call: Q3 2019

Oct 30, 2019

Good afternoon, ladies and gentlemen, and welcome to Masimo's Third Quarter 2019 Earnings Conference Call. The company's press release is available at www.masino.com. At this time, all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. I'm pleased to introduce Eli Cameron, Masimo's Vice President of Business Development and Investor Relations. Thank you. Hello, everyone. Joining me today are Chairman and CEO, Joe Kiani and Executive Vice President of Finance and Chief Financial Officer, Micah Young. This call will contain forward looking statements, which reflect Masimo's current judgment, including certain of our expectations regarding fiscal 2019 financial performance. However, they are subject to risks and uncertainties that could cause actual results to differ materially. Risk factors that could cause our actual results to differ materially from our projections and forecasts are discussed in detail in our periodic filings with the SEC. You will find these in the Investor Relations section of our website. Also, this call will include a discussion of certain financial measures that are not calculated in accordance with generally accepted accounting principles or GAAP. We generally refer to these as non GAAP financial measures. In addition to GAAP results, these non GAAP financial measures are intended to provide additional information to enable investors to assess the company's operating results in the same way management assesses such results. Management uses non GAAP measures to budget evaluate and measure the company's performance and sees these results as an indicator of the company's ongoing business performance. The company believes that these non GAAP financial measures increase transparency and better reflect the underlying financial performance of the business. Reconciliation of these measures to the most directly comparable GAAP financial measures are included within the earnings release and supplementary financial information on our website. Investors should consider all of our statements today together with our reports filed with the SEC, including our most recent Form 10 ks and 10 Q in order to make informed investment decisions. In addition to the earnings release issued today, we have posted a quarterly earnings presentation within the Investor Relations section of our website to supplement the content we will be covering this afternoon. Now I'll pass the call to Joe Kiani. Thank you, Ila. Good afternoon and thank you for joining us for Masimo's Q3 2019 earnings call. Once again, we are happy to report 3rd quarter results that exceeded expectations for both revenue and earnings. Our 3rd quarter performance demonstrates the value of our innovative products for improving patient care and reducing the cost of care as we won new customers and expanded our business with existing customers. Our product revenue increased approximately 13% to reach $229,000,000 which was driven by strong performance across our major geographies and product platforms. This growth reflects the clinical advantages of our breakthrough technology. Due to the strong performance we realized in the Q3, we are once again raising our revenue and earnings guidance for 2019. I'll discuss more developments later in the call today. Now I'll ask Micah to review our 3rd quarter results in Before we get started, let me remind you that the financial measures I will be covering today will be primarily on a non GAAP basis, unless noted otherwise. Please refer to our website for today's earnings release, supplemental financial information and the quarterly earnings presentation as well as the Form 8 ks we filed with the SEC for further information regarding our non GAAP measures and reconciliations. As Joe mentioned, we are happy to once again not just meet, but exceed expectations. Our results for the Q3 reflect another strong quarter of product revenue growth, operating margin expansion and earnings performance that exceeded expectations. During the quarter, we shipped 60,700 technology boards and monitors consistent with our guidance of roughly 60,000 drivers per quarter this year. For the Q3 of 2019, our product revenues were $228,900,000 reflecting growth of 13.3 percent or 13.6% growth on a constant currency basis. Please note that our product revenues for the quarter included approximately $2,700,000 of monitoring equipment revenue recognized under ASC 842, which contributed roughly 1% to our growth rate this quarter. Our revenue performance this quarter was driven by strong performance across our major geographies and product platforms which are performing better than the growth rates that we had originally laid out in our long term plan. Moving on to the rest of the P and L. For the Q3, our non GAAP product gross margin increased 270 basis points to 68.3% compared to 65.6% in the prior year period. This improvement was primarily driven by favorable customer and product mix, increased manufacturing efficiencies and the additional cost reduction activities we've implemented to improve margins. Non GAAP selling, general and administrative expenses decreased 30 basis points to 34.7 percent of product revenue compared to 35.0 percent in the prior year period. Non GAAP research and development expenses increased 40 basis points to 10.6 percent of product revenue compared to 10.2% in the prior year period. The higher R and D spend was primarily due to increased staffing levels and project related costs reflecting our commitment to investing in innovative technologies that improve patient outcomes while reducing the cost of care. For the Q3, our non GAAP operating margin increased 260 basis points to 23% compared to 20.4% in the prior year period. Income on a non GAAP basis was approximately $3,600,000 for the quarter compared to $2,300,000 in the prior year period. The increase is primarily driven by an increase in net interest income. Turning to taxes. Our non GAAP tax expense in the Q3 was $12,600,000 resulting in a non GAAP effective tax rate of 22.4% compared to a non GAAP effective tax rate of 22.5 percent in the prior year period. Our weighted average shares outstanding for the quarter were 57,300,000 compared to 56,200,000 in the prior year period. The 2% increase in our weighted average share count over the prior year is primarily due to the dilutive impact that a higher stock price has under the treasury stock method. For the Q3, our non GAAP net income was $43,700,000 or $0.76 per diluted share. In comparison, Q3 2018 non GAAP net income was $33,700,000 or $0.60 per diluted share. This reflects non GAAP EPS growth of 27% over the prior year quarter. Turning to our GAAP results. GAAP net income for the Q3 of 2019 was $49,100,000 or $0.86 per diluted share. In comparison, Q3 2018 GAAP net income was $57,100,000 or $1.02 per diluted share. The decrease was primarily due to the impact of lower royalty revenues and lower tax benefits from stock option exercises. To recap, our global organization delivered constant currency product revenue growth of 13.6%, non GAAP operating margin expansion of 2 60 basis points and non GAAP EPS growth of 27%. Now I'd like to provide you with an update on our full year 2019 financial guidance. As a result of our strong performance in the Q3, we are increasing our 2019 product revenue guidance to $932,000,000 which reflects year over year growth of 12.3 percent on a reported basis or 13.1% on a constant currency basis. This represents an increase of $7,000,000 above our prior guidance of $925,000,000 Please note that we are now projecting approximately $7,000,000 of year over year currency headwinds and $8,000,000 of monitoring equipment revenue under ASC 842 within our full year revenue guidance. Our non GAAP product gross margin guidance remains unchanged at 66.8 percent and our non GAAP operating expense guidance remains unchanged at 42.8 percent of product revenue. Based on these assumptions, we are continuing to project non GAAP operating profit margins of 24%, which represents 200 basis points of improvement over the prior year. Moving further down the P and L, we expect to generate approximately $13,000,000 in non GAAP non operating income in 2019, which is primarily comprised of interest income. Our non GAAP tax rate remains unchanged at roughly 23% and we are estimating that our weighted average shares outstanding for the year will be 57,200,000 shares. Based on all these assumptions, we are now increasing our non GAAP EPS guidance to $3.18 which represents an increase of $0.03 above our prior guidance of $3.15 As a result, our non GAAP EPS is projected to grow 20% in 2019. And from a GAAP perspective, we are now projecting a GAAP tax rate of 17.8 percent and GAAP earnings per share of $3.37 for the year, which represents an increase of $0.07 from our prior guidance of $3.30 For additional details on our full year 2019 financial guidance for GAAP and non GAAP earnings per share, please refer to today's press release and supplemental financial information within the Investor Relations section of our website at massimo.com. With that, I'll turn the call back to Joe. Thank you, Micah. The 1st 3 quarters of 2019 have been strong despite the challenges we face, sometimes unfair and unexpected. Through it all, we never forget our guiding principles and mission to improve patient care and reduce cost of care. We take our mission and opportunity to do good for the world seriously. In August, we received a CE mark for neonatal use of our continuous hemoglobin monitoring technology. This is the first time our breakthrough SPHB technology, which has been shown to optimize blood transfusion and reduce mortality in adults is available to neonatologists outside the U. S. In September, we announced Pathway, a new monitoring feature for guiding neonatal resuscitation. Pathway software available on route provides clinicians with a way to visualize a hospital's recommended resuscitation protocol for a struggling newborn's oxygen saturation, while continuously monitoring SpO2 impulse rate during the first 10 minutes after birth. Masimo was the 1st company to create a specialty sensor for neonatal resuscitation called the newborn sensor. We are delighted to now be the 1st to offer pathway in our pursuit of helping clinicians take care of this very fragile and promising patient population. Also in September, we announced the delta cerebral hemoglobin and delta deoxy hemoglobin indices available on our 3 regional oximetry offering. With these indices, 3 in addition to providing cerebral oxygen saturation can now provide clinicians with additional visibility into blood flow and regulation of the flow in the brain by indicating relative changes in underlying total hemoglobin as well as oxyhemoglobin and deoxyhemoglobin components used to calculate cerebral oxygen saturation or RSO2. Our hospital automation platform continues to be received well by customers as we achieved installations for hospital automation systems in the Q3 at 7 hospitals in America, Kuwait, Morocco, Portugal and UAE. These hospitals are using Root with Uniview, Replica and Patient Safety Net to improve the continuum of care in their hospitals. Our other major strategic initiative, the Opioid SafetyNet System is progressing well. We are still targeting submission to the FDA by the end of this year. We're committed to providing access and affordability for opioid safety net. We believe existing reimbursement codes will cover limited use cases and we plan to apply for new codes for broader coverage. In closing, Masimo is on track for a strong finish to 2019 and great beginnings in the new decade ahead. Our breakthrough technologies are available in over 150 countries and are being used on over 100,000,000 people annually, improving outcomes and reducing cost of care globally. We will continue to take advantage of the opportunity that we have to improve patient safety, to make the world a bit better and create value and hope for all of our stakeholders, including our amazing team, caring customers and long term shareholders. With that, we'll open the call to questions. Operator? Thank Your first question comes from Rick Wise with Stifel. Your line is now open. Good afternoon to everybody and congratulations on another excellent quarter. Thank you. Maybe just to start off at the big picture level, there's been some concern, frankly, based on Philip's comments, and sort of general vague comments about that suggested U. S. Market growth slowing, it seemed in their Connected Care business, which is obviously multiple franchises, but which led to concerns about slower hospital spending or capital spending. So my question is, are you seeing I mean, your results obviously don't suggest it, but are you seeing any new or incremental hospital spending delays, cancellations or anything that might suggest more challenging times ahead, not for the next quarter, but as we look ahead to 2020, just then that might impact Masimo? We are not. But our business model is different than Phillips. Phillips relies heavily on capital dollars spent and our business model is more of razor razorblade and even when it comes to capital, more of a SaaS model. So that might be why you're seeing a divergence between Philips and Masimo's results and outlook. Thank you, Joe. Turning to a couple of products. It's great to see the hospital automation platform story evolve, 7 installed. And maybe you'd remind me how many installations you have so far? And help us think through with just a little color and detail if you could. 1, remind us how many you have installed to date? What's next? How do we think about the ramp there? And I've got to believe obviously that that's not just growth sustaining. I mean, this could be an incremental driver for you, again, as we look ahead to next year and beyond. Sure, Rick. I'll do my best. First of all, off the top of my head and I might be wrong, different pieces of this technology are available at different rates. For example, Patient Safety Net, it's in hundreds of hospitals. Root patient monitoring for automating the spot check mode is again available in at least 100 if not more hospitals. But what I'm referring to as hospital automation is the convergence of all the pieces, route connectivity, so that everything in the room is route connectivity, so that everything in the room is connected to it and the data is then sent to central locations like EMR or central networking systems where patients are being followed, as well as being able to display the information in a way that's more logical and less burdensome to the team that's caring for the patients, whether it's in the OR or the ICU with technologies like Uniview. And then remotely from wherever these clinicians might be, alerting them to issues or on their own checking on their patients with things like Replica. And then as the patient gets discharged following them home both by providing care pathways that are better adhered to and reminded to through our automated system and monitoring them as necessary in the full continuum of care. So bottom line, when it comes to the full implementation, I may be wrong, but I don't think the number is that much more than 7. Remember, we've launched hospital automation early this year, the full suite of everything that we think optimizes the continuum of care. Okay. Thank you, Joe. And just two last for me. And maybe, Mike, I'll turn to you. You highlighted the 60,700 Board driver number reported. Maybe you could give us a little more color. I understand it's in line with your guidance, But for folks who are maybe looking at this for the first time, we're sort of seeing it level off a little bit sequentially that number. Help us understand why that's I mean, it's obviously a great number relative to the past, but what's next there that and what's going to be the driver, so to speak, of the next leg up? Maybe you could help us understand that. Yes. So, Rick, if you go back several years ago, our driver growth was somewhere around 5% to 7% range. Over the last few years that growth has been between 8% 10% on average over the last 3 years. But if you look at our overall revenue growth rates over this period, it's higher. And the reason being is because we're seeing more and more revenue per driver. It's not just generating revenue with SET, but it's now generating with those advanced parameters like capnography. We now have the disposables out there that we've launched this year. SedLine, brain function monitoring and 3 cerebral oximetry as well as Rainbow. So we're pulling in, we're able to generate more revenue per driver as we're able to deeper penetrate into the into our customer base and add new customers. Okay. And when we just last for me for now. The opioid story seems to be on track. No change in your submission by end of 2019. Maybe help us understand what's left to do? And just as you contemplate next year, I mean, is your excitement about the opportunity and your plans and your ability to ramp manufacturing and everything connected with that story, Are you still basically on track? And are you still as optimistic about the potential there? Thank you. Sure, Rick. Yes, we are basically on track, still optimistic about it. We've as you know, we were selected as 1 of 8 companies out of over 250 by the FDA to deal with the opioid epidemic, the only monitoring company for that. And that means we've been working really closely with the FDA and we've been getting excellent guidance. So the things we've been working on is really supplying the FDA of the information they've requested to hopefully not only clear it for prescription model, but even for illicit users that could benefit from it. So everything is looking good. The product is looking good. One major piece of the product is the Radius PPG, which we are now finally at full production capacity. At the American Society of Anesthesiologists, we'll let about a couple of 1,000 anesthesiologists try it for themselves. So all signals are looking good. Thank you so much, John. Thank you, Rick. Thank you, Rick. Your next question comes from Bill Quirk of Piper Jaffray. Your line is now open. Great. Thanks. Good afternoon, everyone. Hi, Bill. Hi, Bill. All right. So a couple of questions. I guess, first off, following up on Rick's last one on opioid safety net. Can you give us an update? I know you were kicking around a couple of different models, but where I guess are you thinking now in terms of the distribution model for that? Well, we haven't yet finalized it. I think our biggest challenge is getting the word out. So we're trying to figure out how to best get the message out there to potential users and potential prescribers. We of course have a nice footprint today in the clinical space. But when it comes to the average consumer, they don't know Masimo and we need to try to elevate that. As far as distribution, it hasn't changed. Obviously, there'll be some towards meeting with hospitals and physicians that prescribe opioids with our direct sales force, but also through our own website maybe depending if we get the illicit use model through websites like Amazon's and other and even retail pharmacies is how we hope to get the product in the hands of the most people. And so Joe just a follow-up on that. So is it reasonable to assume then that you have kind of several different options in place and it really kind of comes down to the breadth of the FDA approval or the claim rather? Correct, Bill. We believe there's a chronic user of opioids. There is the naive users of opioids who go in for say tonsillectomy and get prescribed opioids. And then there's the illicit ones. And we think on the chronic and the naive use, we have an established distribution channel that we'll be able to leverage, albeit they'll need some reinforcement. But depending what the FDA does, if they do give us the illicit use, then that will be more consumer facing model. Okay, got it. And then a couple of questions for Micah, if I may. First off, Micah, can you just give us some sense of the pace of growth across the three groups you've talked about historically SET, Rainbow and other products. I'm just wondering if they're continuing to perform at or above the the expectations that you've laid out? And then secondly, I was hoping to come back to your gross margin comments. Certainly appreciate the favorable mix impact. It does look like there's a few other things going on there, given the magnitude of the year over year increase. So I was hoping you could expand upon that. Thanks guys. Yes. So to answer your first question on the product revenue. So as we mentioned in the prepared remarks, we're performing well across our major product platforms and geographies. We were also seeing our SET rainbow and our advanced parameters. All those are performing above our long range plan targets. So the growth targets we laid out at Investor Day, we're continuing to see performance above those ranges. The other thing too is that we're happy to see in the quarter was we're now starting to see strength coming from our capnography in gas now that we've launched the disposable line. And that's even allowing us to perform even better with those advanced parameters such as SedLine, NOMALINE and 3. So again, just to recap, we're seeing it above the long range growth targets and good results across our major geographies. On the gross margin front, where I mentioned before is we're seeing favorable customer and product mix. Some of that too is we're seeing some benefit too from 842 and a lot of that gets into timing. So that had some contribution in the quarter, but we've seen that ebb and flow throughout the year. And we've also seen very strong results from a lot of our design for manufacturing initiatives as well as our procurement initiatives that are coming through and delivering good results for us on reducing the cost of our products. Got it, guys. Thank you. Your next question comes from Larry Keusch of Raymond James. Your line is now open. Open. Thank you. I don't know if this is for Joe or Mike or both. Just as we start to think about 2020, just curious if there's any puts or takes that we should be thinking about as we sort of contemplate where the business goes next year? Yes. I think Larry, I go back to Investor Day as we've laid out our long term growth targets where the business is heading. Again, we want to be very thoughtful and prudent about our guidance. As we head into next year, we're not going to give guidance on this call, but we always want to be thoughtful and provide guidance that we can that we feel confident that not only can we meet, but we can exceed. We've laid out our revenue growth profile of 8% to 10% growth. We've been guiding more recently at the high end of that range. So that's kind of how we would think about it. And we've said that we're going to be trying to average 100 basis points per year as we march towards that long term operating margin goal of 30%. So that's what we laid out and that's kind of where we're sticking to. Okay. Perfect. Just a couple of other quick ones. Joe, I think you alluded to on opioid safety, some potential reimbursement sort of as you get out the gates. Could you share a little more what you might have been talking about there? Yes, certainly. In January of this year, remote patient monitoring was introduced as a potentially reimbursable service. And so it's possible that the way our product has been designed for the prescription usage, it can take advantage of that and allow patients to have access to our product with reimbursement. What other channels that we're going to be looking at is looking at a specific code for the system. There's also some talks from the administration to give products that breakthrough technology status immediate reimbursement and review that reimbursement 3 years afterwards. So if that does come to effect that could be something we can take advantage of as well. And would that all be predicated that this is a prescription product or does it not matter? Yes. That would be just for the prescription product. Our plan is to create 2 different products, one for prescription and one for over the counter illicit use type of a model and subject to FDA, of course, clearing it for both usages. Okay, perfect. And then lastly, just two quick ones here. So just definition, Joe, so that we're all on the same page because this will start to come up in the future. When you talk about hospital automation and placements, obviously there are, as you noted earlier, a lot of different aspects of this comprehensive offering that you have. So what is the right way when you talk about hospital automation and a placement to define that? Is that route, Iris, UniView and Replica or some portion of that? And does it also mean that those are all subscription based as well? And then the second question just separately is and I may have been wrong on this, but I thought that opioid safety, the anticipation was that you guys were expecting clearance by the end of this year and not that it matters whether it's at the end of the year or early next year, but again, I just wanted to make sure I was thinking about it correctly. I'm going to have to say yes to all three questions. Yes, when we think of hospital automation, we think about route, iris, Uniview replica. If it follows the patient home, for the continuum of care at home, it would add DOPTELET and RAD97, for example, which is a telehealth patient monitoring hub. And then as far as your thinking about our original thinking that we could get clearance by end of the year, that is also correct. That's what we thought, and we think that's still possible. But obviously, I can't control that. That is something that is clearly in the hands of FDA. But given that we've had regular dialogue since the first time that the FDA designated this as one of 8 products they thought could help the opioid epidemic. We have been working hand in hand in making a product and testing it in a way that FDA will find hopefully safe and effective and we'll clear it shortly. Okay, perfect. Thank you very much. Thank you. Thank you so much. Your next question comes from Matt Taylor of UBS. Your line is now open. Hi, thanks for taking the question. So Mike, I wanted to follow-up on your comment on the revenue per driver. It's a little bit hard to calculate now because you don't give all the disclosures that you used to. But can you comment on whether revenue per driver is growing materially faster than some of the mid single digit rates that we saw in years past? And sort of where you think that could go as you start to see increased penetration of these other advanced parameters in rainbow product? Yes, Matt. I mean, we see that as a steady ramp. We're over time as we continue to expand and more of our business becomes higher mix of the rainbow and advanced parameters. And those products are growing at faster growth rates than our core SET technology. So we think that that's a steady pace of revenue per driver. We are seeing internally an increase in revenues per driver. We haven't given that specific number, but it's definitely ticking up and we continue to expect that tick up moving forward just based on the mix of where our growth is coming from in those product lines. And then just really related to that, could you just remind us the current timelines that you expect for Phillips to incorporate some of those other advanced parameters on the boards? And is there any kind of general update on how things are going with the Phillips arrangement? Yes. So, Matt, we mentioned that earlier in the year that we would have 2 of the 3 integrated by the second half of the year. This quarter, we did integrate our technologies into their devices, their monitors. Now it's just a matter of we expect that we'll start launching that probably early next year Q1 as far as getting everything ramped up in terms of volumes. But yes, 2 of the 3 have been integrated and that is no malign capnography as well as 3 cerebral oximetry. Okay, great. Thank you. Thank you. Your next question comes from Mike Matson of Needham. Your line is now open. Hi, thanks for taking my questions. I guess just a couple of pipeline related ones. So I guess first anything new to report on the partial pressure of oxygen PaO2 parameter or the malaria product that you talked about at the Investor Day in May? Yes. We weren't planning to report it, but I can answer your question on those two things. On partial pressure of oxygen, we have finally prepared it and gotten clearance for beginning clinical studies on patients in the operating room. So that should start in the next few days to 30 days max. On the malaria project, we're buttoning up the product to begin clinical trials in the field in affected countries for malaria in 2020. Okay, thanks. And just wanted to ask about the ASC-three forty two accounting change. So it's adding to growth this year. What is the impact going to be when we get into 2020? Yes, Mike. If you look at our results so far this year, you'll see us adding about a point of growth on the top line. So and then the full year, we're of course guiding 13% constant currency growth and it's adding about a point of growth there. So our implied guidance without that is about 12% growth for the full year. As we think about next year, we're still working through because there is a lot of variability in that because it's really related to the timing of installations and where we're putting our equipment out there at customers. But at the moment, we expect that it's going to be relatively flat. So there what you wouldn't see a repeating and the reason why we're providing that disclosure this year is because we expect that it will be flat next year and not provide another one point contribution to our growth next year. Hopefully that helps. Yes. All right. Thank you. That's all I have. Thank you all for joining us today. Do we have any more? More. Okay. All right. One more question, sorry. The last question comes from Ravi Misra of Berenberg Capital Markets. Your line is now open. Hi, thanks for taking the question. I'll keep it brief. Just on that core business growth commentary that looked stronger across those three portals. Mike or Joe, could you help us think about where the strength is coming? I mean, is this an increase in licensing from kind of new driver activations of Rainbow or SedLine or Capnography? Or is the growth coming from kind of increases of sensors going to those existing boards? Thanks. Have a great night. Sure. Thank you. Yes, it's really like I said earlier all of the above. It's not only through multiple of our major product lines, but geography as well. The SET business is doing very well. The installed base is growing and our sensor volumes have been solid. And as you know, we're about to walk into the flu season, which if it matches what happens in Australia could even be a stronger quarter than last Q4 and Q1 of 2019 excuse me 2018 and Q1 of 2020 2019 excuse me. So, yes, so the strength is all around. Rainbow is picking up, hemoglobin is doing very well. We're getting some incredible results from both clinically as well as customer demand and performance. So it's all across the board. Thank you. We have a follow-up question from Rick Weiss of Stifel. Your line is now open. Hey, sorry to bother you with a couple more. Just I was hoping it would get asked. Just obviously excellent quarter and you've sort of hinted at indirectly, but should we assume that everything with Philips is actually on track, going well? And where are we now in rolling out and getting those contracts after the board installations, the contracts for the single use products? Well, I would say Phillips is going well. Some things are behind. We would have expected normal line in 03 to have been released end of last year. So we are behind. SedLine was supposed to be introduced this year, but now it looks like it will get introduced next year following NOMALYNE and 3. But overall, we don't have complaints. It's a relationship that as you know got kick started after successful IP litigation and settlement. And we're learning how to get along and we're doing the best we can. Okay. And just two last quick ones. Micah, any balance sheet updates quickly? And I hate to ask be the one who asked, but any more strategic thoughts, updates in your latest thinking, Joe? Yes. Well, Micah, I think Micah would like to answer that. So go ahead, Micah. Yes. So, Rick, just an update on your I'm assuming you're asking the question on how we're deploying our capital and our cash on the balance sheet. Our strategy hasn't changed there. We're continuing to reinvest in the business. You've seen our R and D as a percentage of revenue. I think it was 10.6% this quarter. Continue to make investments internally because the bar is extremely high internally for what we think we can do. We also want to execute acquisitions that are aligned with our strategy. And really, as we think about those, most of the things that we're looking at right now are primarily bolt on acquisitions that we would use our cash for. But so that's some of the things we're evaluating. And then 3rd is continue to be selective on share repurchases. We have a share repurchase program in place right now and we have about 4,800,000 shares remaining on that program. So that's kind of how we think about our cash. And then just as we think about just more broad strategy with the acquisition side is we want to leverage our strengths of our business, leverage our core competencies, which are signal processing capability, our clinical footprint as well as our manufacturing capability in some of the things that we look at. So hopefully that summarizes it. Yes. Very helpful. Thank you. Thank you all. Thanks for joining us. We wish you all a nice week. Those who celebrate Halloween, happy Halloween. Those who don't, watch out for the ghouls and goblins running around. Look forward to talking to you guys again in February. Thank you so much. Ladies and gentlemen, this concludes today's conference call. You may now disconnect.