Ladies and gentlemen, thank you for standing by. Welcome to the Quidel Corporation Second Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, instructions will be given for the question and answer session. If anyone has difficulty hearing the conference, please press star zero for operator assistance. I'd now like to turn the call over to Mr. Ruben Argueta, Quidel's Director of Investor Relations. Please go ahead.
Thank you, operator. Good afternoon, everyone, and thank you for joining today's call. With me today is our President and Chief Executive Officer, Doug Bryant, and Randy Stewart, our Chief Financial Officer. Our second quarter 2019 earnings release is now available on ir.quidel.com, our investor relations website. We will also post our prepared remarks on the presentations tab of our IR website following the conclusion of this call on August eighth, 2019, for a period of 24 hours. Please note that this conference call will include forward-looking statements within the meaning of federal securities laws. It is possible that actual results and performance could differ significantly from these stated expectations. For a discussion of risk factors, please review Quidel's annual report on Form 10-K, registration statements, and subsequent quarterly reports on Form 10-Q as filed with the SEC.
Furthermore, this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, August eighth, 2019. Quidel undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call, except as required by law. Today, Quidel released financial results for the three months ended June 30, 2019. If you have not received our news release or if you would like to be added to the company's distribution list, please contact me at 858-646-8023. Following Doug's comments, Randy will briefly discuss our financial results. We'll open the call to your questions. I'll now hand the call over to Doug for his comments.
Thank you, Ruben. Good afternoon, everyone. For today's call, I'll cover three topics, our financial performance for the second quarter, the status of products and development, and very briefly, as we've done in previous quarters, the status of the Danaher litigation. As always, I'm happy to answer your questions as well following Randy's remarks. Regarding our financial performance, I'll begin by saying that we had a solid, profitable quarter. We met our expectations. Total revenue was $108.3 million on a reported basis, up 5% over last year's Q2. On a constant currency basis, total revenue was up 7% versus last year. Randy will walk you through the specifics on each of the businesses in a moment. I'll just comment briefly on a couple of the key revenue drivers in the quarter. Clearly, the prolonged influenza season was a tailwind.
Many of you had asked what our expectation was for influenza test revenue in Q2. We said publicly that we certainly expected to exceed last year's Q2 influenza revenue, which was $5.5 million, and thought that $6 million-$10 million seemed like the right range given our experiences in previous years. Total influenza revenue for the quarter was $13.1 million, driven mainly by influenza test sales on existing and new Sofia instrument placements. Our forecast was a bit off as we may have misunderstood the impact that the new Sofia placements would have. The other revenue driver I will comment on is the Triage cardiac and toxicology business.
We had said that we were expecting $276 million in revenue for the year, not considering FX, which would mean an overall growth rate of just under 4%, driven by introductions in the back half of the year of the new toxicology panel globally and high-sensitivity Troponin I in Europe. We said further that we would expect to see Triage revenue in the range from $64 million-$69 million in the early quarters, given sometimes significant variability in distributor orders in any given quarter. For Q2 2019, cardiac revenues were $69.9 million on a constant currency basis or $68 million on a reported basis. During the quarter, we did receive FDA clearance to market the Triage toxicology assay and began shipping product to distribution partners earlier this week.
In addition, we're shipping TriageTrue, our high-sensitivity, point-of-care troponin assay, to a limited number of European customers and expect the publication in the fall of the APACE study could generate excitement for the product and accelerate our launch as we expand more broadly in Europe. In terms of development, product development, the R&D and regulatory teams continued their work at their usual quick pace and made noticeable progress on many fronts. We currently fund and manage over 20 product development programs. I will provide an update on a couple, and if there are others you would like me to comment on, I'll be happy to do that during the Q&A.
I've said on several occasions that sustainable growth over our longer-range plan relies on our ability to leverage our assets and infrastructure. Our Sofia instrument base is an asset that provides incredible revenue and margin opportunity in the near to medium term. When all R&D programs are adjusted for technical, regulatory, and commercial risk, the Sofia assay program, with its 11 assays in development, is the highest growth driver in the LRP. Nearest to launch are Sofia C. difficile and five other GI assays, which are expected to be cleared in the U.S. around the first half of 2020. The other large potential growth driver is Savanna, and here's a quick update. Our confidence that we have a high-performing cartridge that can be reliably manufactured in the millions at very high yields has never been higher.
The assay development team in Beverly is running ahead of all the other teams, and the development of menu will clearly not be a constraining factor. Our third-party instrument manufacturer is engaged, and we still believe that we will achieve FDA clearance on the instrument by year-end 2020, and will launch in the U.S. with a significant menu in the first half of 2021. Regarding the Danaher or Beckman litigation matter, just as we managed our communication last quarter, I will not be taking questions regarding pending litigation today. The Court of Appeal issued an order agreeing to hear our writ petition on the merits of the case and has stayed the trial court's December 7th order. We are pleased that the Court of Appeal has agreed to hear the merits of our challenge of the trial court's decision.
The timing for hearing oral arguments is scheduled for the morning of August 13th, with a decision from the court expected within 90 days from when the court hears the matter. Our position remains unchanged. We view Beckman's claims as meritless and in opposition to Beckman's long-standing strategy of honoring the supply agreement with its previous partners, Alere and Biosite, over the last 15 years. We remain confident in our position and confident in the outcome of the matter on appeal and ultimately at trial as the matter progresses. In summary, we had another solid quarter, and we accomplished a great deal. Sofia placements continue to grow, aided somewhat by the launch of Sofia Lyme, although we are still in the early stages of creating patient and physician awareness. The Triage business is performing as expected, and the integration of the Alere assets is nearly complete.
We're generating cash and continuing to pay down debt. It was a quarter when we pretty much did what we said we would do. Randy?
Thank you, Doug. Good afternoon, everyone. As Doug mentioned earlier, today, we reported total revenues for the second quarter of 2019 at $108.3 million. This compares to $103.2 million in the second quarter of 2018, an increase of 5%, on a constant currency basis, revenue increased a solid 7%. Rapid immunoassay revenue increased 30% from the second quarter of 2018 due to strong results from our Sofia franchise, which experienced growth across virtually all products. The largest rapid immunoassay dollar growth came from the influenza category, up $6.2 million. Flu revenues for the rapid category was $9.3 million, while Strep A declined 9% and RSV increased 6%. The Strep A revenue decline was purely driven by fluctuation in distribution inventory levels. Rapid immunoassay inventory at distribution is down 41% from the second quarter of last year and down 44% sequentially.
More granularly, influenza inventories at distribution are down 56% versus last year's second quarter, and Strep A inventories are down 33% versus the second quarter of last year. For the second quarter, Sofia revenue was $11.6 million. This compares to $5.1 million in Q2 of the prior year. QuickVue revenue was $8.9 million, compares to $10.1 million in Q2 of 2018. In the cardiac immunoassay category, revenue totaled $68 million in the quarter. This compares to $69.9 million in the same period last year. On a constant currency basis, revenue was in line with last year. Within the category, Triage revenue was $36.8 million, a decline of 4% from the second quarter of 2018. Regionally, Triage saw revenue declines in the U.S. and, to a lesser extent, Latin America and Asia Pacific, and this was partially offset by a 16% growth in China.
On a constant currency basis, Triage revenue was down 1% versus last year. On the Beckman BMP side, revenue decreased 1% over the second quarter of 2018 to $31.2 million, and on a constant currency basis, BMP was up 1%. Regionally, North America and China delivered top-line growth, which was offset by revenue decline in Europe, Middle East, Africa, and Asia Pacific regions. Revenue in the specialized diagnostic solutions category increased 13% in the second quarter of 2019 to $14.3 million as our cell culture business grew 10%, driven by growth in China and our MicroVue bone health and complement business, which grew a combined 19% in the quarter. Our molecular diagnostic solutions category increased 7% in the second quarter to $4.2 million, driven by a 26% growth from Solana assay revenue. AmpliVue revenue continues to decline as we migrate the C. difficile and HSV assays over to Solana.
Gross profit in the second quarter increased $1.5 million to $59.2 million, primarily the result of increased revenues and improved product mix. Gross margin in the second quarter of 2019 was approximately 55%, as compared to 56% in the second quarter of 2018. The slight decline was a result of an unfavorable foreign exchange impact, geographic product mix, as well as unfavorable factory absorption. In the back half of the year, we anticipate an improvement in gross margin versus 2018, and full-year results should be consistent with last year. R&D expense decreased by $1.6 million in the second quarter compared to the same period last year. This decrease is primarily driven by lower compensation costs, partially offset by higher spending on Sofia assay development and the Savanna platform. We reiterate our estimate of full-year spend between $52 million and $55 million.
Sales and marketing expense was $26.9 million in the quarter, a decrease of $600,000 as compared to the second quarter last year. This decrease was largely due to lower transition service expenses that were partially offset by higher salaries as we complete the globalization of our commercial team. G&A expense increased by $1.4 million in the quarter, primarily due to higher facility costs associated with our international expansion, as well as professional service fees, somewhat offset by lower transition service fees as our integration of the acquired cardiac assets nears completion. Acquisition and integration costs in the second quarter were $1.8 million, down from $4.9 million in the second quarter last year, as a larger portion of our global operations became fully integrated into the overall business.
Interest expense for the quarter was $4.5 million and includes $800,000 relating to the convertible senior notes, $500,000 related to the senior credit facility, and $2.2 million relating to the deferred and contingent consideration associated with the purchase of the BMP business. The $2.3 million increase in interest expense over last year was due to the reduction in debt of approximately $158.4 million over the last 12 months, and this includes the deferred and contingent consideration. In the quarter, we recorded a $700,000 income tax benefit. The benefit for the quarter was due to the fact that the discrete tax benefit for excess stock-based compensation expense was greater than the income tax liability for the quarter. We believe our effective tax rate for the full year 2019 should be within the range of 19%-21% of pre-tax income before consideration for discrete tax items.
The impact of the 2017 Tax Cuts and Jobs Act regulations are yet to be finalized. That will help us determine where we fall in this range. We continue to strengthen our balance sheet. In the quarter, we generated $34 million in free cash flow after spending $6.8 million in capital expenditures. We used a portion of the cash to pay down another $15 million on the revolving credit facility. Additionally, in April, we made our second $48 million payment to Abbott. Finally, in June, the company exchanged approximately $45.4 million in aggregate principal amount of our convertible notes for 1.5 million shares. In the quarter, we had depreciation of $4.9 million and amortization of $7 million.
As of June 30th, the company had $28.6 million in cash on the balance sheet, $13.1 million in principal amount outstanding relating to the convertible notes, and $18.2 million outstanding on the revolving credit facility. The outstanding principal balance on deferred and contingent consideration for the acquired cardiac assets is now approximately $184 million. With that, we conclude our formal comments for today. Operator, we're now ready to open the call for questions.
Ladies and gentlemen, if you have a question at this time, please press the star, then the number 1 key on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Your first question comes from the line of Jack Meehan with Barclays. We're now live.
Thank you. Good afternoon.
Hi, Jack.
Doug, I was curious. Hey, good afternoon. I was wondering if you could, as you think about some of the new products you've rolled out, wanted to start with Lyme. I was wondering if you could parse out how much that contributed in the quarter, and can you talk about any success you're having in cross-selling and utilization of other products as you push that?
In the quarter, I think the Lyme launch helped a lot with placements of Sofia. Right now, it looks like on the contracts that we have in place
A little over 80% of the contracts include the other products, flu, Strep, and RSV. That's been somewhat helpful, and we did see some sales of flu, Strep, RSV in a quarter, as I suggested earlier. The real incremental growth will come as both patients and physicians become aware that the product is available. It is the world's first CLIA-waived Lyme test. It's a big program that we have in place to create that awareness in order to stimulate the volume. We are getting contracts signed, but we need to get patients pushed to the places where there are Sofia 2s. We have had some success with urgent cares partnering there. We're spending a bit of time, effort, and money on a word-of-mouth marketing campaign in the Northeast. That's taking off pretty nicely.
We've also partnered with one of our key distribution partners in the Northeast, to run a growth program as well. I think we have both the physician side covered with our distribution partner and our salespeople. I think we'll see increasing pull-through from the patient perspective as we create word of mouth over the next several quarters. We're not converting a market, we're creating a market. I'm trying to be a little bit patient, but we are seeing traction.
Great. Maybe moving to Savanna. Appreciate the updates and the confidence in the cartridge design. Can you just confirm, is the design officially frozen? What's the timing for starting some of the clinical trials, and is that what's assumed in the R&D step-up in the back half of the year relative to the first half?
Yes, the step-up is due to development on the instrument side as well as clinical trials. Yeah, we're pretty confident. We're down to a decision to be made very shortly on the final cartridge design. From there, we'll begin the process of increasing the number of cartridges that we'll be making in advance of the clinical trial.
Do you think the trial start in the third quarter or more likely in the fourth quarter?
Fourth quarter. First quarter. Yeah.
Fourth and first.
Okay.
I think the important thing is the assays will definitely be ready to go. As long as we can get the instruments made and the cartridges made in sufficient quantities, we'll be in good shape.
Great. If you don't mind, one more. Can you talk about the initial demand with the toxicology launch and what commercial resources you're putting behind that?
Well, I would have to say, since we're shipping product this week, it's a great question, but perhaps a little premature. I can tell you that when I was at the AACC, where actually you and I saw each other, we did, I'm told from our folks there in the booth, see a bit of traffic and interest in toxicology. As I mentioned on a call previously, that we do think we have pent-up demand. We have a customer list. We know that at least the initial wave, we know where to go, and who's going to want the product. I think it should go fairly according to our plan. That's important because there's a number of drivers to the back half of 2019. That's one of them. Obviously, I'll just add quickly, the T2 launch in Europe is important.
Continuing with Lyme, obviously we'll see some pull-through with flu Strep in the fourth quarter. That's pretty important, too. Those are really the drivers to the back half of the year.
All right. Thank you.
Sure.
Your next question comes from the line of Brian Weinstein with William Blair. You are now live.
Hi, guys. Good afternoon. This is actually Andrew Brackmann on for Brian. Before I get into my question, just one quick housekeeping one as it relates to the guide. Maybe I missed this, but Randy, did you confirm that $535 million target for the full year and then the $276 million for the cardiac business?
Yeah, I can answer that, and then Randy will jump in with further detail as he would like to. There's no reason to change the forecast at this stage on the 535. The reason I say that is because it's dependent on the new products, we certainly don't have anything that would tell us we can't do it. We're just now shipping toxicology. As I expressed before, we have a limited launch going on in Europe. In the fall, we expect the publication of that big study that I told everybody about called APAS. Remember, we had initiated a study with 2,000 patients, 6,000 samples. In that study, we had hoped to demonstrate the fact that TriageTrue troponin was actually a high sensitivity-Troponin I product that performed comparably to the bigger boxes.
When we see that published in the fall, I would hope that that will stimulate even further growth. I've got tox, the growth, and again, I don't really know anything more about the fourth quarter at this stage in terms of influenza. If we assume normal, there's no reason to adjust the $535 forecast at this time. Same with the $276 on a constant currency basis. We're pretty comfortable, but again, there it depends on the tox launch and troponin in Europe. Internally, we're not changing our forecast.
Okay. Thanks for that. As it relates to the quarter on the Triage business, the U.S. still seems to be a little bit soft and China a little bit faster. Any things that you can point to that specifically might be driving that? Thanks.
No, it's not unexpected. As the customers run more and more BMP, often they switch to a laboratory-based product. We expected some erosion in the U.S., and as we said before, we expected, though, to solidify that with the introduction of the new product, the toxicology product. Not really commenting yet on whether we think we can succeed with the introduction of T2 in the United States. That would clearly be upside. That's what's going on there, and then, of course, it's being completely offset by what we're doing in China.
Anything specifically that you can point to in China that might be driving that? Thanks.
The Chinese people would tell you that there are a lot of people there with cardiac issues, and there's growing awareness that using biomarkers to diagnose cardiac disease is the way to go. There's quite a bit of growth. The government's spending a lot of money on chest pain centers, and so in every community, eventually there will be a chest pain center where these markers will be performed, and that's another growth category. Just the population, the amount of disease, the government spending on the category are essentially what's driving sales there. We have a very competitive product.
Thank you.
Yeah, and just from an operational perspective, we did cut out a middle tier at distribution. That had somewhat of a pickup on a year-over-year basis as well.
Your next question comes from the line of Bill Quirk with Piper Jaffray. You are now live.
Great. Thanks, and good afternoon, everybody.
Hi, Bill. Bill from Piper Jaffray.
That's right. It's me. Doug, quick housekeeping question. With respect to the APACE study, you mentioned that the reference methods would be the kind of typical bigger box troponins. Can you just remind us specifically what the control is or the reference method is in that study?
The sample set that was used is the same sample set that has been used by all the major manufacturers of big boxes that have clearance in Europe for high-sensitivity troponin. It's the same patient with the same outcomes, same samples. The comparator is actually those 2,000 patients and those 6,000 samples and how that performs relative to what all the other guys did, too.
Okay. Got it. Two additional ones from me. First, with respect to the molecular business, I appreciate that the put and take as you're shifting to Solana. Should we continue to think about full year 2019 as this is a 20% growth business?
You're asking if Solana is a 20% growth business?
No, no. The overall molecular business, I think.
Oh, overall category. Yeah. Okay. Most of the growth obviously coming from Solana, but yeah, the whole category should grow 20%.
Okay, great. Last one for me, you've certainly heard this a lot in years past, Doug, it's the second quarter, we're going to ask it again. We're seeing a pretty significant early flu season going on in the Southern Hemisphere, would love any and all thoughts on what that might mean for those of us in the Northern Hemisphere. Thanks.
It's the same question, I think it might be the same answer, Bill. Quite often there is a correlation, but we certainly don't know if it's cause and effect. I think the R squared on the last 25 years, not counting this one because I haven't looked at it this year, but that I looked at previously, was 0.76. It says there's a correlation, but does it really mean anything? I don't know. I certainly think if it were that simple, it would be easy to forecast flu, wouldn't it? I know that you spend a lot of time on this and I think you probably know more about it than I do. That's my answer. I'll be curious later to know, Bill, if that's the same answer I gave last year. I think it was.
I'll go back and check the transcript. Thanks, Doug. Thank you, Randy.
Your next question comes from the line of Tycho Peterson with JPMorgan. You are now live.
Hi, this is Eleni on for Tycho. Thank you for taking our questions. First, on BNP. Last quarter you mentioned some timing issues. You called out some U.S. order delays, and I was just wondering if you saw any reordering dynamics this quarter, and if you can quantify how much was recaptured.
No, I think it's somewhat normalized. I spent some time with one of our key distributors here in the U.S. and saw their out sales, and it's incredible that they have equally the same variability that we're experiencing. I don't think there was really anything of any significance that was abnormal in this particular quarter. I would say, Randy mentioned that we did change the way we distribute product in China. That's obviously made its way through. In Europe, we actually signed up a number of distributors. We also signed up a number of tenders. I think that's pretty stable and smooth as well, and we certainly didn't see anything that would tell us differently in Q2.
Got it. Thank you. Can you give us some more color on what drove the strength in flu this quarter? You mentioned Sofia placements, but can you compare it, what you saw this quarter versus what your expectations were?
The real driver, remember, was the prolonged influenza season. In particular, we saw A go all the way into the quarter, which is not normal, and then followed by the continuation of B, flu B, until probably halfway through the quarter. There's not a lot more than that. I do, though, want to say that although we can't calculate it precisely, we had a lot more new Sofia customers, too. We were able probably to take full advantage of it just because we had more instruments on the ground.
Okay, great. One last one from me. Can you talk about your gross margin progression for the remainder of the year? You've reiterated guidance of margin expansion for 2019, you've also decreased it by 100 basis points this quarter, you mentioned FX, geographic mix, and factory absorption as headwinds. Just wondering how you're thinking about that.
Yeah. In the comments, I had indicated that we do, for the back half of the year, see gross margin expansion versus 2018. We did see in the first six months our full-year guidance. We did see some headwinds with currency, as well as geographic mix, as you saw a little stronger growth in China versus U.S. on the cardiac business. We see pretty much FX less than a $1 million impact in the back half of the year, and so we do see margin expansion in the back half of the year versus 2018.
Yeah. I think it might be helpful, Randy, to say also we expect that million, it would be pretty even between Q3 and Q4. It's about a half million in Q3 FX unfavorable impact, and then another half million in Q4. That's what we're forecasting.
Yep.
Got it. That's helpful. Thank you.
Your next question comes from the line of John Hsu with Raymond James. You are now live.
Good afternoon. Just a couple from me. Doug, I was wondering if you could comment, appreciate the color there on Lyme and get that it's still early. There's obviously some direct-to-patient work to be done there. How are you thinking as far as progression on two-tiered Lyme ? I think prior that you had said that you were hoping to get a product to the FDA and maybe on the market by the second half of 2020. Is that still the right way to think about that opportunity?
Yeah. We're nearing the point where we're ready to go to clinical trials. We've engaged in dialogue with the FDA. I'm going to look it up for you to get the specific quarter.
Your next question comes from the line.
Hang on, I'm answering the question. Yeah, looks like we're good.
No worries. Maybe while you're looking.
I got it, John.
Okay.
I knew it was going to be in the fall. Looks like the schedule says September.
Okay, great. I appreciate that. Just the only other one I had, maybe an update as far as how the synergies are tracking and perhaps whether at this point you think there could be some upside to the total number?
Yeah, we're still confirming the $20 million for 2019 that we had said earlier.
Yeah, we're slightly ahead of schedule of our internal expectations. We did convert over our distribution center from Abbott over to our Somers Road.
Yeah, why don't I just give an overall integration update.
There you go.
since you're mentioning the warehousing.
That would be great.
Yeah. During the quarter, we transitioned both India and Brazil to distribution partners there. That means at this stage, we've migrated 88 of the 89 countries selling Triage to Quidel's full control, and that represents well over 99% of the revenue. The only remaining migration is Japan, which is well underway and targeted to be completed soon, and Chris and I actually saw on your whiteboard, you had September 1st. That's pretty specific. We also achieved a major milestone by eliminating Abbott from the distribution of the Triage products completely. That's now done solely by us from our expanded distribution center here in San Diego. Within the first month, we actually shipped over 1,800 instruments from the new warehouse, both domestically and internationally. We're in very good shape from an integration perspective.
We're nearly done, and it's gone extremely well thanks to a number of people here, but a very talented group of people who were able to complete that process.
Okay, great.
Hopefully this is the last quarter that I have to actually talk about integration.
Great. Appreciate all the color. Thank you.
Sure.
Again, ladies and gentlemen, if you have a question at this time, please press the star then the number 1 key on your touch tone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Your next question comes from the line of Alex Nowak with Craig-Hallum. You are now live.
Great. Good afternoon, everyone.
Hello
A few calls here, this may have been already asked, but Doug and Randy, what are you thinking about from an M&A perspective? The debt is pretty much paid down and, based on the last answer you had there, it would appear you are ready to layer on some new products onto the existing infrastructure.
Yeah, it's a great question, and it's also a question I really can't answer. I can tell you that we have three to five targets among many that we've looked at, that we continue to look at. Other than that, I really can't comment. You're right, we have the ability to go get capital if we want it. We certainly have paid down nearly all of our debt. What's our total debt remaining, like $31?
Yeah.
18
31, yeah. 18 and 15.
18 and 13.
Excuse me.
Yeah.
Yes.
You're right. There's not a whole lot left, and we would be in a position to do something should we want to.
Okay. Got it. Then Randy, regarding the $535 guide, if you did exclude the new products like Lyme and troponin from that guide, what would the number be?
I'm sorry, you're asking of the 535, how much of the new tox and troponin-
How much are new products? That's right.
Yeah. We said, anywhere in the $3 million-$5 million range in the back half of the year.
Okay. Got it.
For those two.
Yes.
For those two, then also if you include Lyme, it's a bit more.
Yeah.
Okay. Got it. Understood. Just last question, what is the latest on the Danaher Beckman Coulter lawsuit? What are we waiting on, and what's the next steps there?
I started the call by saying I wasn't going to answer questions on the matter, but I did say in the script that oral arguments will be heard on the morning of the 13th of this month.
Okay, understood. Thank you.
Again, ladies and gentlemen, if you have a question at this time, please press the star then the number one key on your touch tone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. That is all the time we have today. Please proceed with your presentation or any closing remarks.
I'll just end by saying thanks everyone for dialing in. We had another great quarter, and I should have pointed out that this actually was the first profitable Q2 we've had since the pandemic 10 years ago. We're pretty happy that moving forward, we would expect every single quarter to be profitable, and it's a pretty important milestone for us. I think we should probably make a cake or something, Randy. I think it was a great quarter for us, and we're just happy that we got everything done that we thought we would. Take care, everybody.
Ladies and gentlemen, we thank you for your participation and ask that you please disconnect your lines. Goodbye.