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Immucor Inc. (NASDAQ:BLUD)

F2Q09 (Qtr End 11/30/08) Earnings Call

January 8, 2008 8:30 am ET

Executives

Edward Gallup - Chairman, Emeritus

Nino De Chirico - President and CEO

Rick Flynt - VP and CFO

Analysts

Quintin Lai - Robert W. Baird

David Turkaly - SFG

Bill Quirk - Piper Jaffray

Joshua Zable - Natixis Bleichroeder

Randy Gorikson - Baring Capital

Operator

Welcome to the Immucor Conference call. (Operator Instructions). I would now like to introduce your host Mr. Edward L. Gallup. Mr. Gallup you may begin.

Edward Gallup

Good morning. Thank you, for joining us to discuss our fiscal second quarter 2009 results. Participating with me on this call are Dr. Nino De Chirico, our President and Chief Executive Officer; and Rick Flynt, our Vice President and Chief Financial Officer.

Before we begin, I'd like to read the following Safe Harbor statement. Many statements on this conference call constitute forward-looking statements that reflect our judgment about future events and circumstances. However, actual results and events could differ materially from those forward-looking statements.

The forward-looking statements in this call are based upon current estimates and risk assumptions; and unanticipated events and circumstances may occur, causing these estimates or assumptions to be wrong. The company does not intend to update or revise these forward-looking statements unless required to do so by the Federal Securities laws. For a detailed discussion of factors that could cause actual results to vary from these forward-looking statements, please refer to yesterday's earnings release and the company's most recent SEC filings.

I'll now make some brief comments and then go to Q&A.

We continue to experience very good demand for our Echo instrument, which contributed to our solid second quarter performance and our ability to raise our guidance for fiscal 2009. In the second quarter, we received a total of 52 Echo orders worldwide, consisting of 31 orders in North America and 21 orders in the rest of the world, including distributors.

As discussed in our first quarter conference call, we had a special promotion in the first quarter that resulted in a better-than-anticipated number of North American Echo orders. As we expected, the promotion meant that we generated orders in the first quarter from some customers who would have otherwise waited until the second quarter.

At the end of the second quarter the number of uninstalled orders in North America is higher than expected due to the high order volume in the first half of this fiscal year. In the four months May through August 2008 we received 171 Echo orders just in North America.

During the second quarter we increased our North American installation capacity and at the end of the second fiscal quarter our backlog of Echo orders to be installed was approximately three and a half months down from a little over five months at the end of August.

We continue to work on reducing the number of uninstalled instruments and expect to be at a more normal level by the end of fiscal 2009. As we started the year we expected approximately half of our Echo orders in North America to be reagent rentals.

We are finding that close to the 75% of Echo orders are reagent rentals resulting in better than expected margins for our instrument sales. More rentals result in more consistent quarter-to-quarter margins as the revenue in cost of the instrument are spread evenly over the term of the reagent contract.

On a year-to-date basis we have received total of 176 Echo orders worldwide. In the second half of fiscal 2009 we continue to expect strong demand for the Echo. We believe we are on track to achieve our projected 350 Echo orders in the current fiscal year.

In the second quarter we received a total of 16 Galileo orders, one order in North America and 15 orders in the rest of the world including distributors. On a year-to-date basis we received a total of 28 Galileo orders worldwide. While our original expectation for Galileo orders were a total of 70 worldwide for fiscal 2009. We are revising our expectations as we now expect between 50 to 60 orders worldwide for Galileo.

I would like to take a moment to discuss this revision. Unlike Echo, which is being sold in North America, as a rental approximately 75% of the time, Galileo has historically been a capital expenditure purchase approximately 90% of the time. We believe the current economic environment is making capital sales in North America more challenging as hospitals are restricting their capital budgets.

Additionally, as we have previously discussed we have announced the second generation Galileo is in development with a target release date of the end of calendar 2009. Outside of North America, we are seeing better than expected demand for Galileo. We expect this demand to continue to rise for the remainder of fiscal 2009.

As we announced in the first quarter, we closed our acquisition of BioArray solutions on August 4, 2008. We are making investment our future with this BioArray acquisition. As we have discussed our long term goal is to develop a fully automated instrument enhancing the capabilities of BioArray's current market leading technology.

In the near term, our focus for the current BioArray instrument is on increasing the volume of routine tests performed in our installed base in the US. In Europe, we are pursuing a more aggressive instrument placement strategy and initial customer contacts are encouraging, but it will take some time to hire the resources and develop the necessary infrastructure to be effective.

I would now like to turn the call over to our Chief Financial Officer, Rick Flynt who will spend a few minutes discussing our financial results for the second quarter. Rick?

Operator

(Operator Instructions). Mr. Gallup, you may proceed.

Edward Gallup

Okay, I'm sorry. We had a little operator error there. At this point, I'll turn the call over to Rick Flynt.

Rick Flynt

Thanks Ed. In our fiscal 2009 second quarter, revenues were $73 million, up 18% or $11.1 million compared with the second quarter of fiscal 2008. The significant component of the year-over-year improvement in revenue were US price increases, which accounted for $7.6 million of the increase, and US volume increases related to instruments which accounted for $2.7 million of the increase.

Revenues outside the US also accounted for $1.2 million on the increase. Revenue was negatively impacted in the quarter by $1.1 million due to foreign currency exchange rate fluctuations.

Gross margin expanded to 73.3% compared to 67.6% in the prior year quarter. The gross margin improvement was due to US price increases as well as improved margins on instrument revenue, which had negative gross margins in the prior year period.

As Ed mentioned earlier, in the current year quarter, we had more rentals of instruments due to the popularity of that option with Echo. And in the prior year quarter, we had more instruments sold as capital purchases. This change in product sales mix resulted in better margins in the current year.

Operating income was $27.9 million or 38.2% of revenue in the current year quarter, up from $23.4 million or 37.8% of revenue in the prior year quarter. Our R&D expenses doubled year-over-year due to our acquisition of BioArray and our investment in the filed of molecular immunohematology.

Non-operating expense in the quarter was $721,000 due to a reduction in interest income year-over-year from our first quarter acquisition and lower interest rates. In the current year quarter, we also had a $1.2 million loss on foreign currency translation primarily related to an intercompany receivable between the US and Europe.

We have taken steps in our European operations to help us more proactively manage this intercompany arrangement in the future. Diluted earnings per share were $0.24 in the quarter compared to $0.23 for the same period last year. And cash flow from operations on a year-to-date basis was $32.3 million compared to $26.6 million for the first six months of last year.

I will also like to highlight that during the quarter we repurchased $200,000 shares of our common stock for approximately $4.7 million. We believe an investment in our stock is a good use for our free cash flow.

As we stated in our release last night, we raised our guidance for fiscal 2009. We now expect gross margins be in the range of 71% to 73%, compared with our previous guidance of 70% to 71%.

We expect diluted earnings per share to be in the range of $0.97 to $1.02 for the fiscal year, compared with our previous guidance of $0.94 and $0.98. We continue to expect revenue in the range of $292 to $300 million, which is consistent with our previous guidance. Our guidance is dependent upon the US dollars not appreciating significantly during the remainder of our fiscal year.

Now, I would like to return the call back over to Ed.

Edward Gallup

Thanks, Rick. With the excitement surrounding Echo in the market and the continued need for automation in the blood bank, we are excited about our opportunities even in these challenging economic times. At this point, I'll give the call back to the operator to begin our Q&A.

Question-and-Answer Session

Operator

(Operator Instructions). Quintin Lai of Robert W. Baird, you may ask your question.

Quintin Lai - Robert W. Baird

Hi, good morning. Happy New Year and congratulations on a nice quarter.

Nino De Chirico

Thank you, Quintin.

Quintin Lai - Robert W. Baird

This quarter was November fiscal end, could you talk a little bit about how business looked as you went into December? Any change in trends?

Nino De Chirico

No changes in trends. We keep seeing the same types of trends we saw in the six months before.

Quintin Lai - Robert W. Baird

So with respect to volumes and surgeries that require blood transfusion, you are not seeing any changes there?

Nino De Chirico

No, not on the reagent side like we said. The only effect we see now about this economic crisis is only in the capital purchases. Like we said in the beginning of the call, we see a less Galileo capital purchase we assume because of this crisis. We do not see any impact so far on the reagent sales.

Quintin Lai - Robert W. Baird

Have any of your customers that may have thought about Galileo, have they considered doing multiple Echo strategies?

Nino De Chirico

Yes. That is also another variable that we have. Some customers are also buying multiple Echo instead of a Galileo. However you know in Galileo there is another factor. We announced a new generation of Galileo and also we believe that maybe some customers can wait until the new generation is out, or we also had all the major high volume customer already equipped with Galileo. There are multiple factors.

Quintin Lai - Robert W. Baird

Thank you. Then can you give an update on the number of live Galileo's that you have now?

Nino De Chirico

Basically not live world wide we have only 14 Galileo at this point. There are a lot of instruments going live and in US I can give you more specific, we have total community orders 242 and live are 223.

Quintin Lai - Robert W. Baird

Thank you. Final question, I will jump back into the queue. The R&D number that you had for this quarter that takes into account a full quarter of BioArray. Is that a good run rate going forward or do you have any extra plans to maybe for accelerating some of the automation development within BioArray?

Nino De Chirico

Yes, the first part on your question, yes this number includes the full quarter of BioArray and of course out of the BioArray organization all new portion of that recognition goes in R&D. I think going forward this is a good baseline. Of course we will incur some additional expenses once we finalize or we implement the finalization of our automation at BioArray.

Quintin Lai - Robert W. Baird

Thank you.

Nino De Chirico

Thank you, Quintin.

Operator

David Turkaly of SFG. You may ask your questions.

David Turkaly - SFG

Thanks. The Capture number in the quarter and as we follow this trend up in the growth that you reported. Is there any kind of metric that you are looking at that we can use to understand how some of these placements translate into Capture and how quickly that happens?

Nino De Chirico

Well, of course, the Capture sales are a good indicator to remind you of customer going to use automation, our automation of course, meaning Echo and Galileo. It is a good indicator because it tells you when the customer goes, uses this instrument, has to use Capture for antibody screening.

I have also to say that the capture sales quarter-by-quarter also fluctuated based on the cycles. There are different cycles, different products, then it is very difficult to really use this measurement as an absolute measurement, that is my point. Of course, the growth of Capture is an indicator of more customers using our automation.

David Turkaly - SFG

If it is a tick up from a mix percentage to north of 25% now. Is it goal, is there a target as you are looking ahead based on how customers are converting to them. It could go to 30 or 40 overtime or…?

Nino De Chirico

I think, this growth rate is a good growth rate, I think a little at this point assumption, we will keep going with this kind of growth, comparing with the prior cost.

David Turkaly - SFG

Okay and then in Europe, the Galileo is obviously, in the rest of world doing well, is there anything you would point to specifically I thought the penetration on the automation side was higher there so any particular geographies that would help us understand the international strength?

Nino De Chirico

Yes, Germany, I always said in this conference call that Germany's slower adoption of automation and that is what happened. Germany arrived later, but arrived. They are buying Galileo more than any other country in the world, because as I said since many years ago, Germany will get there and in fact if you look at our sales of Galileo most of them comes from Germany.

David Turkaly - SFG

Last quick one. The buyback, what is left on that, and will you possibly consider expanding at anytime soon?

Nino De Chirico

We will always look at this; we have our plans, and we will be an opportunistic kind of buyer. We will always look to buy back shares.

Rick Flynt

There are about 940,000 shares remaining in that.

Nino De Chirico

That is something. We have more than 900,000 shares still in our plans to buy back.

David Turkaly - SFG

Thank you.

Nino De Chirico

Welcome.

Operator

(inaudible), Stevens, you may ask your question.

Unidentified Analyst

Hey, good morning, thank you for taking my questions.

Nino De Chirico

Good morning.

Unidentified Analyst

Can you break out for the quarter what your system gross margins were and what your reagent gross margins were?

Nino De Chirico

Yes. Our system gross margin for the quarter was 18%, 18.1% and total reagents gross margin was 86.5%.

Unidentified Analyst

Great. Ninon, I know you brought up your monoclonal antibodies at your…

Nino De Chirico

I am sorry, the total reagents I gave you the US number.

Unidentified Analyst

Okay.

Nino De Chirico

81.8 worldwide.

Unidentified Analyst

81.8%, great. I know you brought up your manufacturing of monoclonal antibodies at your Norcross facility. Did that have any impact in the quarter; was there any pent up demand with any of those products that maybe benefited you this quarter?

Nino De Chirico

Can you repeat the question sir?

Unidentified Analyst

Monoclonal antibodies at the Norcross facility and now you go to have manufacturing approvals; can you talk about the impact there?

Nino De Chirico

Well, we received over the last four months approval for making our clones here. Honestly we still had a lot of clones raw material made in the old facility and we are not really 100% up and running here, but we plan in the next few weeks to do that. We also experienced in the quarter where we had some backorder that we cleared and everything is up and running but not at 100% capacity.

Unidentified Analyst

Okay. So, may be we will see some benefit on the reagent side next quarter as you get fully up and running?

Nino De Chirico

No, on the region side, because I said we had some raw material from Houston. On the sales side we will not see a big impact. However in the manufacturing side, yes we will make more products here basically.

Unidentified Analyst

Okay. From a pricing standpoint, can you may be talk a little bit about what to expect on a traditional reagent side as we go into calendar year 2009, and especially with Biotest coming into the US markets, does that mitigate your ability to raise pricing next year at all?

Nino De Chirico

We are not trying to give guidance for next fiscal year because, as you know, we give guidance in the May timeframe, and at that time we will give you that kind of guidance. As far as fiscal year 2009, our assumption initially was between $20 million to $25 million, and we are perfectly inline with that assumption.

Unidentified Analyst

Okay. Thank you for taking my questions.

Nino De Chirico

You are welcome.

Operator

Bill Quirk, Piper Jaffray. You may ask your question.

Bill Quirk - Piper Jaffray

Thanks. Good morning.

Nino De Chirico

Hi, Bill.

Bill Quirk - Piper Jaffray

First of, just a couple of housekeeping questions. The [LabCorp] negative impact in the quarter was probably about $800,000. Is that math correct?

Nino De Chirico

Yes.

Bill Quirk - Piper Jaffray

Okay, got it. Is that roughly split between Capture and traditional?

Nino De Chirico

Yes.

Bill Quirk - Piper Jaffray

Okay, very good.

Nino De Chirico

Maybe a little more Capture.

Bill Quirk - Piper Jaffray

A little more capture. Okay. Rick, what was the deferred revenue number for the quarter? You typically give that but you rearranged your press release a little this quarter.

Rick Flynt

As far as what was distributed to revenue?

Bill Quirk - Piper Jaffray

Well, the deferred revenue piece that relates specifically to the effect of the cash instrument placements?

Rick Flynt

You want it of the balance sheet?

Bill Quirk - Piper Jaffray

Essentially yes.

Nino De Chirico

Plus revenue.

Bill Quirk - Piper Jaffray

Yes. That actually was not broken out in the balance sheet.

Rick Flynt

On the balance sheet, we have a little over $22 million I think on that. Let me just clarify for you. Around $20 million. A little over $20 million.

Bill Quirk - Piper Jaffray

A little over $20 million. Okay, very good. Rick also, if you could break out for us the North American Capture as well as the North American traditional contribution?

Nino De Chirico

Yes. I will do it for you. North America is 10.3 and rest of the world is 6.2, and traditional reagents in North America 37.3 and 9.9 for the rest of the world.

Bill Quirk - Piper Jaffray

Okay. Very good. Just thinking a little bit about the promotion in the first quarter and then how that obviously affected a number of purchase orders that otherwise would have come into the second, Nino, do you feel at this point that we have essentially gotten past that? In other words, there was not any order that were, say, pulled from either the third or the fourth quarter that we booked in the first?

Nino De Chirico

I think to answer your question, I will say yes, because I think our guidance of 350 Echo remains a very good number.

Bill Quirk - Piper Jaffray

Okay. Understood. Just as we think about the capital constraints within the hospital systems and the fact that we are seeing a shift in terms of it, a natural shift, obviously. A reaction to that in terms of more reagent rentals as a percentage basis for Echo going from 50 to 75, based on what you are seeing from the field, obviously we are almost halfway through the third quarter at this point.

You probably have a pretty good idea where the instrument purchase orders are tracking in the third, and obviously you are looking at lead numbers for the fourth. Is it reasonable to assume that the 75% sticks or could we see this nudge up even higher?

Nino De Chirico

I think 75% at this point is a good assumption going forward.

Bill Quirk - Piper Jaffray

So said in another way Nino, you are still seeing hospitals out there who are committing to using their own balance sheets to finance the instruments?

Nino De Chirico

Some of that, yes.

Bill Quirk - Piper Jaffray

Okay. Very good. Thanks very much.

Nino De Chirico

Thank you.

Operator

Joshua Zable, Natixis. You may ask your question.

Joshua Zable - Natixis Bleichroeder

Hi. Congratulations on a great quarter and thanks for taking my question here.

Nino De Chirico

Thank you, Josh.

Joshua Zable - Natixis Bleichroeder

A lot of them have been answered but I have a couple of quickies here. So, just on the gross margin here, I know you obviously had a ton of orders in the first quarter, and I think a lot us expected the gross margin to be downs sequentially, significantly more because of all the orders you would account for. Is it a function of that deferred revenue that Bill was referring to giving you a little bit of a tailwind here on the gross margin on the equipment side or is it just the mix? Are our numbers and we just miscalculated?

Nino De Chirico

No, the major factor is the number of reagent rent, the 75% comparing with our original assumption of 50%.

Joshua Zable - Natixis Bleichroeder

Okay.

Nino De Chirico

I think that gives a big difference, and overall also a little better than expected gross margin on the reagent side.

Joshua Zable - Natixis Bleichroeder

Okay, that is helpful. Just on the first generation of Galileo, I am sorry, the second generation. I know, you do not want to talk too much about it, but you did tell us that you are looking to launch at the end of calendar '09. I am just trying to think about it if I recall years ago when you launched the original Galileo, I believe you launched that outside the US first, is that correct?

Nino De Chirico

That is correct.

Joshua Zable - Natixis Bleichroeder

Okay, and so now when you think about the launch, it is just interesting to me that you still have a lot of demand for the first generation Galileo outside the US. Are you having a different launch strategy for the second generation is this a little too early to discuss it, I am just trying to understand the dynamics that are going on outside the US in regards to the first Galileo with the second one coming?

Nino De Chirico

Yes, the first generation of Galileo was the exception. We launched the Galileo in Europe in 2002 and we launched the Galileo in US in 2004. After that, the Echo launch was at the same time in US and the rest of the world and the same will be for Galileo second generation. We will launch the Galileo second generation at the same time here and outside. However, like you just said, we are putting out, we are going to put out a better instrument but the first generation Galileo is still an outstanding instrument and there is still a strong demand for that outside North America.

Joshua Zable - Natixis Bleichroeder

Okay, great and then with regard to the second generation and again, I know you do not want to give too much out. Is it safe to assume that first generation is primarily cap purchases? You have obviously designed a pretty successful rental reagent program for the Echo. Is it safe to assume that there will be some sort of rental reagent program associated with the second generation of Galileo?

Nino De Chirico

There was also reagent rental program for the first generation Galileo. Actually it is too early to say, and mostly I think it is depending on the customer's side the economic situation and like Bill said before, there are customers who prefer to use their balance sheet, their money to purchase an instrument and mostly when you go to large volume customer, you find more of this situation. Medium, low volume customers than you have a much more, less strong balance sheet, and then they prefer to go to the reagent rent. I mean, it is a different market segment and operates in a different way.

Joshua Zable - Natixis Bleichroeder

Great. On BioArray here, I saw sales ticked up a little bit. Can you just give us an idea how we should think about it? Is it that you are slowly ramping? Is it going to be lumpy? Because I know this is not obviously fully commercialized et cetera, so you are still more developing and selling, but I just noticed sales were up. So can you just give us a little bit more color on how to think about BioArray sales for the year. Then the second part of that question would be also, I know you gave us in the last 10-Q a gross margin on the BioArray. Can you just tell us is that progressing, or should we think about as similar type margin?

Nino De Chirico

The volume in BioArray like you said, increased a little bit, but it is still not material for us. I think we are seeing some interest in Europe, but it is too early for us to say that this will have an impact on our numbers. The same for the gross margin, I think we will stay in this range, but the number are still not so important, not so big for us. I understand the message I want to give is that I have got expectations that BioArray's should move when the full year automation will be out.

Joshua Zable - Natixis Bleichroeder

Okay, fine; and then just one follow-up for Rick. I know you made a comment; your guidance assumes the US dollar not significantly appreciating. Can you give us either a number or a range or some idea what your currency assumption is for the US versus the Euro?

Rick Flynt

Well. I can tell that the currency fluctuation that there is one is more significant on the top-line growth as you saw, there was a nearly large swing in the exchange rate during the current quarter and the impact on revenue was $1.1 million. In general, my thinking is to think about that in Europe, because we are investing in Europe France et cetera, we are operating more on breakeven lines.

Joshua Zable - Natixis Bleichroeder

Yes, I got it.

Nino De Chirico

I think the top-line is the one was panelized, but overall we had no impact in the EPS point of view.

Joshua Zable - Natixis Bleichroeder

With that being said just when you…

Nino De Chirico

We made an assumption I know what you want to ask. We made an assumption, when we did our original forecast that was a conservative assumption on exchange rate.

Joshua Zable - Natixis Bleichroeder

Yes. When you say conservative, you mean a stronger dollar conservative?

Nino De Chirico

Yes.

Joshua Zable - Natixis Bleichroeder

Okay, great.

Nino De Chirico

The fluctuation was too much even comparing with our conservative assumptions.

Joshua Zable - Natixis Bleichroeder

Okay. That is helpful color. Thanks very much, congrats, great work.

Nino De Chirico

Thank you.

Operator

(Operator Instructions). [Randy Gorikson of Baring Capital]. You may ask your question.

Randy Gorikson - Baring Capital

Hey, good morning.

Nino De Chirico

Hey, Randy.

Randy Gorikson - Baring Capital

Listen, a quick question on BioArray. When you gave guidance initially when you made the acquisition. I think you would have thought that dilution might be $0.20 to $0.23. As I am looking at the incremental expenditure and R&D that is $1.4 million roughly a quarter, but that only equates to about a nickel. Are there additional SG&A expenses that you expect to incur for the rest of the year? You hinted at a European build out?

Nino De Chirico

Yes. That is one of another point. I want to mention that the BioArray operational cost, not just R&D, they go all over the operation cost because we have manufacturing people and we have support and technical people, marketing people, it is not just R&D. That is one point. The other point is, when we made our calculation there was lost interest impact, amortization impact which altogether contribute to the dilution factor.

I also have to say that the original number we gave, 21-24 if I remember well, 20-23, was maybe little too conservative.

Rick Flynt

It was also for a full year.

Nino De Chirico

It was for a full year of course, but, even with that I think that the 20-23 was a little conservative. A little conservative also because, if you look backwards, the interest rate for instance is going down.

Randy Gorikson - Baring Capital

Right, so that will change the lost interest factor, understood. Right now the cost structure that you have is fairly fully loaded to take into account the development that is going on?

Nino De Chirico

Like I said, we will incur some additional expenses going forward mostly for the instrument program. I will say that it is not 100%, but, fully loaded like you say, we will have additional expenses in the R&D department.

Randy Gorikson - Baring Capital

Okay. Just moving on to the next thing, I think you mentioned that you are very comfortable with the $20 million to $25 million in reagent pricing increases?

Nino De Chirico

Yes.

Randy Gorikson - Baring Capital

Okay, and right now you have about $14.5 million, so it is likely to drop a bit over the next half in terms of US reagent price increases?

Nino De Chirico

I am not going to go into any detail about that.

Randy Gorikson - Baring Capital

Okay.

Nino De Chirico

But, I believe that I am comfortable with that, let me put it this way.

Randy Gorikson - Baring Capital

Okay, thanks for that Nino. Quickly, can you just give us updates on your progress in Japan and France as you build up those infrastructures? Thank you.

Nino De Chirico

As I have always said Japan is like Germany before, it is slow coming. We are making improvement in Japan though. If you look at the first half of the year, we are in a very breakeven position in Japan. We do not lose money in Japan like we used to and we start to install Echo. We have eight Echo installed so far in Japan and we are still talking with the Japanese Red Cross and another large commercial lab SRL in Japan. We are making progress. Financially, we have cost control; the P&L is starting to look good. Now, we need to improve our top line with some major contract.

France, it is going well in terms of sales. We are starting to see the sale ramping up in France better than expected. Of course, like we said since the beginning this year, we will have a loss position in France because of the investment, but we are pleased with the sales number and organization we have in France at this point.

Randy Gorikson - Baring Capital

Does Echo, just the last point, does Echo help either of those markets or are these more large machines type markets?

Nino De Chirico

No, Echo is a winner in both markets. In fact, in Japan we have more Echo than Galileo, and in France of course we just started to participate to tenders. I think we have a couple of Echo already installed in France, but of course, we have a lot of hope that we will have Echo in both countries.

Randy Gorikson - Baring Capital

Thank you very much. A great quarter. Good talking to you.

Operator

At this time, we have no further questions.

Edward Gallup

I would like to thank all of you for joining us and we will look forward to reporting our third quarter at the appropriate time. Thank you very much.

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