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GenMark Diagnostics (NASDAQ:GNMK)

Q2 2014 Earnings Call

August 11, 2014 4:30 pm ET

Executives

Erin Lynn -

Hany Massarany - Chief Executive Officer, President and Director

Scott Mendel - Chief Financial Officer

Analysts

Michael Matson - Needham & Company, LLC, Research Division

Tycho W. Peterson - JP Morgan Chase & Co, Research Division

Brian Weinstein - William Blair & Company L.L.C., Research Division

Shaun Rodriguez - Cowen and Company, LLC, Research Division

Nicholas Jansen - Raymond James & Associates, Inc., Research Division

David E. Hynes - Canaccord Genuity, Research Division

Operator

Good day, ladies and gentlemen, and welcome to the GenMark Diagnostics Second Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded. I would now like to turn the call over to Erin Lynn.

Erin Lynn

Thanks, Nicholas, and thank you, all, very much for joining us today. Before we begin, I would like to inform you that certain statements made by GenMark during the course of this call may constitute forward-looking statements. Any statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance are forward-looking statements. For example, statements concerning our 2014 financial guidance, the development and commercialization of new products, plans and objectives of management and market trends are all forward-looking statements. We believe these statements are based on reasonable assumptions. However, these statements are not guarantees of performance and involve known and unknown risks and uncertainties that may cause the actual results to be materially different from any future results expressed or implied by such statements. Important factors which could cause actual results to differ materially from those in these forward-looking statements are detailed in GenMark's filing with the SEC. GenMark assumes no obligation and expressly disclaims any duty to update any forward-looking statements to reflect events or circumstances occurring after this call or to reflect the occurrence of unanticipated events. I will now turn the conference call over to Mr. Hany Massarany, President and CEO of GenMark. Hany?

Hany Massarany

Thanks, Erin, and good afternoon, everyone. I'm joined on the call today by our Chief Financial Officer, Scott Mendel. And before we start with our typical agenda, I first want to comment on the press release we issued today regarding Chris Gleeson's retirement from our Board of Directors due to personal health reasons. As I stated in the release, Chris has been a friend, mentor and close adviser to me and other members of our team. On a personal level, Chris and I have been friends and business colleagues for over 25 years and I will certainly miss working with him. Of course, Chris remains committed to GenMark and will continue to be a significant shareholder. We wish Chris and his family the very best of luck, happiness and success in the future. With Chris's retirement, we are fortunate to have Dr. Jim Fox available to take over the role of Chairman, and I'm confident we won't skip a beat during this transition. Jim has been a key member of our board for the past 4 years and has recently taken on broader day-to-day responsibilities in his role as Vice Chairman. That, coupled with his more than 25 years of public company experience in international health care businesses, in CEO and Independent Director roles, makes Jim an ideal Chairman, who will work closely with our leadership team to maintain our strong execution and excellent momentum.

Turning to the -- our normal course of business. We have a few prepared comments and then we will be happy to respond to any questions that you might have. Our prepared comments will cover the following topics. First, I will provide an overview of our performance in the second quarter of 2014, then Scott will walk us through our operating results for the quarter and finally, I will update you on the progress of our ePlex program and 2014 milestones.

So before I hand the call over to Scott, let me review our Q2 2014 performance. Our U.S. commercial team delivered excellent results in the second quarter. Excluding former customer NMTC, we grew our base business by 71%, compared with the second quarter of 2013. We also placed 31 net new XT-8 analyzers in the quarter, which expanded our installed base to 475. Base business annuity was $56,000 per analyzer in the second quarter, compared to $45,000 in Q2 2013. Our FDA-cleared RVP test and research-use-only HCV Genotyping Test were the main drivers of our XT-8 placements and revenue growth. And based on strong sales performance in the first half and robust commercial funnels for the balance of the year, we are raising our 2014 revenue guidance by 10% to 15% from $25 million to approximately $28 million. We're also still on track to place 125 XT-8 analyzers in 2014.

In the second quarter, we also made excellent progress toward the introduction of our ePlex sample-to-answer system and we are very pleased with both the instrument and the assay performance results that we've achieved so far. During the second quarter, we completed the development of the ePlex instrument. We remain confident we will bring to market the most competitively differentiated multiplex molecular sample-to-answer system. And while we are excited to complete development as soon as possible, we recognize the need for additional time beyond this summer to thoroughly address the important remaining tasks. We are confident that these tasks do not involve substantial technical risks and expect to complete them by the end of this year.

So with that, I will now hand over the call to Scott Mendel. Scott?

Scott Mendel

Thank you, Hany, and good afternoon, everyone. We issued our financial results prior to this conference call and will be filing our Form 10-Q shortly after the call is completed. During the second quarter of 2014, our team delivered total revenues of $6.6 million, an increase of 26%, compared with the second quarter of 2013. Our base business revenue, which excludes former customer NMTC, grew from $3.8 million in the second quarter of 2013 to $6.6 million in the second quarter of 2014, representing a 71% increase. Our gross profit for the second quarter was $3.4 million, or 51% of revenue versus $2 million, or 39% of revenue in the same quarter last year.

Our second quarter 2014 gross profit was driven by higher-than-expected absorption due to higher revenue and related production volumes. Overall operating expenses were $14.6 million for the quarter, an increase of $4.5 million compared to Q2 of 2013, mainly due to an increase of $3.1 million in research and development expenses related to our ePlex instrument and assay development activity; an increase of $800,000 in sales and marketing expenses from continued expansion of our sales force ahead of the launch of the ePlex system; and an increase of $600,000 in general and administrative expenses primarily related to personnel costs. We reported a loss of $0.27 per share for the quarter with weighted average shares outstanding of approximately 41 million, compared with a loss of $0.25 per share for the same quarter of 2013, when our weighted average shares outstanding were approximately 32 million.

We ended the quarter with nearly $90 million in cash and investments. We plan to continue utilizing our cash balances primarily to invest in our ePlex system, as well as to expand our commercial organization. Based on our current business plan, we anticipate that our cash balances will be sufficient to bridge [ph] us to a positive cash flow position. We are focused on minimizing our working capital requirement, resulting in DSOs of 32 days and DSIs of 74 days as of June 30.

We currently have no long-term debt. As Hany mentioned earlier, after the strong execution in the first of the year, we now believe we will deliver revenue of approximately $28 million and gross margin of approximately 50% for the full year, up from previous guidance. Consistent with prior guidance, we're on track to place 125 net new XT-8s, which would bring our total XT-8 installed base to 538 by the end of the year. Our 2014 estimates for SG&A and R&D expenses remain unchanged from prior calls, at the mid-$20 million level for SG&A and the mid-$30 million level for R&D.

And with that, I'll now turn the call back over to Hany to discuss our progress on the ePlex system.

Hany Massarany

Thank you, Scott. I would now like to review our progress and expectations toward the development and launch of the ePlex system. As we've discussed on prior calls, our R&D organization has been exclusively focused on the development of our ePlex instrument and its associated test menu. As you also know by now, this is a multiplex molecular sample-to-answer system, which will integrate sample preparation steps, including extraction and amplification, together with our proprietary eSensor detection technology and enabled by proprietary digital microfluidics to allow the detection of multiple molecular targets on a single test cartridge. I'm pleased to report that our R&D organization and partners have completed the design of the ePlex instrument and are in the final stages of completing development of the associated consumable or test cartridge and lead assay panels for blood culture ID, both gram-positive and gram-negative, as well as respiratory pathogens.

Regarding the instrument, we have completed design, development and testing of early prototype units and have transferred the product design to our manufacturing partner. We currently have alpha units in our facility and at partner site, and we are performing verification testing of the units in various configuration. Our manufacturing partner is procuring parts into inventory in preparation for building instruments that will be used in internal and external validation studies, clinical trials and European placements. In the meantime, we have continued to demonstrate the ePlex prototype to numerous prospective customers in Europe and the U.S., who continue to indicate strong interest in the system and provide very positive feedback about its functionality and capabilities. We are very pleased with how well the ePlex instrument has met its design objectives.

Our progress and test performance on the lead assay panels have been excellent. We have designed full consumables for both blood culture ID panels and our respiratory pathogens panel. And we are now optimizing assay performance to address time to result and sensitivity performance targets. We have tested thousands of cartridges and are pleased that digital microfluidics has met our performance and reliability goals. We are now focused on optimizing and testing other aspects of the consumables, primarily sample and reagent delivery and onboard liquid and dry reagents storage. We are also well advanced in establishing key supplier relationships to ensure availability and supply-chain continuity of these reagents. At this time, we are in the process of completing design optimization and lock of the full consumable. Concurrently, we are working to complete the transfer of the consumable and assays to manufacturing. This will closely be followed by internal verification testing as well as better testing at customer sites.

In summary, we are nearing completion of development of the overall ePlex system and are confident that the remaining tasks do not involve substantial technology risks and we now expect these remaining tasks to be completed by the end of this year. Furthermore, we continue to make good progress with the initial ePlex test menu beyond the respiratory panel and gram-positive and gram-negative blood culture ID panels, which are nearing completion of development. Our initial ePlex assay menu will also include panels for gastrointestinal infection, HCV Genotyping, CNS and fungal pathogens. While a major focus of our R&D organization has been completion of development and transfer to manufacturing of the lead assays, we have made substantial progress on the design and development of the remaining assays as well. Market requirements have been researched and validated, sequences have been analyzed, primers designed and tested, PCR and detection have been initiated and many thousands of samples have been collected, tested and stored. Once the ePlex system has been launched, we expect to launch additional assays at the rate of several per year and I look forward to updating you on our product roadmap at a future date.

So in conclusion, Q2 was another quarter of strong performance for our company and we are very optimistic about the remainder of this year and beyond. Our North American commercial team has again delivered excellent results and with continued strong sales execution on funnels, we believe we will sustain the projected growth of our revenues, market share and installed base of XT-8 Systems over the next several quarters. Furthermore, our sales force, both domestic and international, continue to lay the foundation and prepare the most important markets for the imminent launch of our ePlex sample-to-answer system. Our R&D organization is focused on completing the development of our ePlex system and transferring its design to manufacturing. We have already completed the design of the instrument and transferred it to our manufacturing partner and we are in the final stages of completing development of the associated consumable and lead assay panels. In addition, with 7 assay development teams working on ePlex assays, we expect to follow up our blood culture ID and respiratory pathogen panels with additional menu content in the not-too-distant future. And of course, we will continue to focus on organizational talent, infrastructure and processes to scale up our business and support future growth.

Thank you very much. And we will now open the call to questions.

Question-and-Answer Session

Operator

[Operator Instructions] And our first question comes from the line of Mike Matson with Needham & Company.

Michael Matson - Needham & Company, LLC, Research Division

I guess I just wanted to ask about the timing on the other assays that you mentioned that will be -- or were expected to be launched with the ePlex products, the GI, HCV, CNS and fungal test. You mentioned those, but it wasn't clear whether those would be available at the same time as the 2 other tests or 3 tests?

Hany Massarany

Okay. Thanks for the question, Mike. No, we don't intend to launch the system together with all 7 panels all at once. So the initial launch will include several, one or more of the initial panels including the blood culture ID panels, both gram-positive and negative and the respiratory panel. Then soon after that, we'll start rolling out other panels as we go along.

Michael Matson - Needham & Company, LLC, Research Division

Okay, got it. And then, when you start to launch the product in Europe, what sort of sales force do you expect to have over there? How many people on the ground do you think you'll have? And what countries do you expect to focus on first?

Hany Massarany

Okay. Thank you. So we are going to be direct in the major markets in Central and Western Europe. So we expect countries like France, Germany, U.K., Austria, Switzerland, et cetera, to be managed directly by GenMark teams and employees. We will be looking at other important markets also, but we will address them through distributor relationships and partnerships, initially including Italy and Spain. And then we'll look at other markets in Eastern Europe, for example, beyond that. So we will be continuing to build our direct sales force in Europe over the next several quarters. We already have employees today in the U.K., in France, in Germany, in Switzerland and we'll continue to build up an organization over the next several quarters. Eventually, we expect that we will have 30, 40 people in Europe, but that's going to happen over the next couple of years.

Michael Matson - Needham & Company, LLC, Research Division

Okay. And then, just given this continued success of the XT-8, I was just wondering what the plans are for XT-8 once you have launched the ePlex. I guess, from what I recall, discussions with you in the past, it sounds like you are planning to continue to sell that product along with ePlex and potentially there's not a complete overlap in the customer base, but I just want to get your updated views on that.

Hany Massarany

Yes, that's correct, Mike, and that has not changed because as you know, not all the menu on XT-8 will be developed on ePlex. So of course, we will continue to support existing customers. We'll have 500-plus systems in the field soon. So we'll, obviously, continue to support existing customers. We don't intend to continue to expand the menu on the XT-8 System, but we still have runway with XT-8, as we have demonstrated over the past several quarters. We expect that, that will continue. Of course, over time the opportunity associated with ePlex will be substantially more than XT-8, and therefore, our effort will be focused more on ePlex.

Operator

Our next question comes from the line of Tycho Peterson with JPMorgan.

Tycho W. Peterson - JP Morgan Chase & Co, Research Division

Yes, just a couple, I guess, starting with the XT-8. Can you maybe just talk about feedback you've gotten from the European KOL sites? And should we think about some of those as early adopters for ePlex as well?

Hany Massarany

Yes, thanks, Tycho. Yes, as you know, we have replaced 12 XT-8 Systems in Europe, as sort of beachhead sites, if you like, in order to introduce our technology, our eSensor technology and our company to the European markets. And the feedback has been tremendous. Many of those key opinion leaders have already presented data, for example at ECCMID, and have been very positive about our technology and the performance of XT-8 in their hands. The panel that we used in Europe to perform these studies was the Respiratory Viral Panel. And like I said, performance has been very positive and the feedback, very encouraging. And yes, you can certainly consider that some of those sites will be early adopters of ePlex system.

Tycho W. Peterson - JP Morgan Chase & Co, Research Division

Okay. And then can you give any more color on just the 31 XT-8 placements this quarter? Are any of them repeat customers? Are any of them multisystem orders?

Hany Massarany

Yes. Most of the XT-8 Systems that we placed in the second quarter were in new customer sites. So there were a number of them. The minority were in existing customer sites. The majority were in new customer sites, new addresses.

Tycho W. Peterson - JP Morgan Chase & Co, Research Division

Okay. And then, just lastly, on the delay. I mean, it's a slight delay in terms of the European rollout. It seems like it's certainly manageable, but can you maybe just provide a little bit more color on what might be causing the delay?

Hany Massarany

So yes, of course, as we previously discussed, Tycho -- look, there are no substantial technical hurdles here that are remaining. So we've already said that in our prerelease and prior discussions. We are combining multiple very sophisticated technologies, including digital microfluidics eSensor detection, fluid storage and delivery, et cetera. And really our focus has been on integration and optimization of this multiplex system. And frankly, it has taken a little longer than we expected. We are committed to developing the best system that we can. And rather than be too concerned about meeting an exact date -- of course, we take that seriously and we want to do this as early as possible. But much more importantly, we want to make sure that we bring to market the best system that we can, and that's we've given ourselves time until the end of this year rather than the end of summer to do that.

Operator

Our next question comes from the line of Brian Weinstein with William Blair.

Brian Weinstein - William Blair & Company L.L.C., Research Division

My first question is on your HCV Genotyping product. Is there anything that you see as a risk with that product, given the recent FDA comments about regulating LTDs and with the fact that there is an FDA-approved product out there competing against your RUO? Is there any kind of a read through or anything we should be thinking about with that?

Hany Massarany

Yes, Brian, of course, we have been very clear all along that we have a research-use-only product. We market the HCV Genotyping RUO product as such, as a research-use-only product. So it's important, obviously, that we don't make any claims that we can't support either through our sales force or on our website or any published materials. And we also have all of our HCV Genotyping customers sign an agreement, sort of understanding or declaring that they understand that this is a research-use-only product. And so we feel pretty good that we are not crossing any lines, of course, that we shouldn't be crossing. We are also, as you know, we're also working with FDA on bringing to market an IVD, an HCV Genotyping IVD panel. And we have completed a pre-submission in relation to this and we're in discussions with FDA about it. So at this stage, we're very strictly complying with the rules that relate to promoting RUO products, and we have no indication that this is a problem for us at this stage.

Brian Weinstein - William Blair & Company L.L.C., Research Division

Okay. And then you had mentioned that you'd completed design of the cartridge for blood culture ID in the respiratory panel. Can you talk at all about where you are on the -- for consumable or the gastro panel and the design of the cartridge?

Hany Massarany

Yes, not specifically, Brian, other than to say that, and I think you already know that, we have been working on and we've successfully been designing a universal cartridge or consumable, which will allow us to develop multiple different panels on the same consumable without redesigning it. So there's no hardware redesign with every panel that we work on and ultimately bring to market. So most of the work are beyond the initial few panels, so obviously, we've been working concurrently on developing the consumable together with the initial panel. But beyond that, the focus will be more on the assay development component of that as opposed to any hardware redesigning of the panels -- of the consumable itself. And of course, a lot of it is software and programming as well.

Brian Weinstein - William Blair & Company L.L.C., Research Division

Okay. And then my last question is, can you comment at all about how the genetic test performance has been? Is that business still growing? Does that still represent kind of the basis of the XT-8 going forward?

Hany Massarany

Yes. The driver on XT-8 growth has been infectious disease panels. So we've discussed that before and that continues to be the case with RVP and Hepatitis C Genotyping RUO. But our other panels have been stable. They're growing. But the driver of the growth has been the infectious disease panel. So we continue to sell and support the other panels, of course, as well.

Operator

Our next question comes from the line of Shaun Rodriguez with Cowen and Company.

Shaun Rodriguez - Cowen and Company, LLC, Research Division

So my first one, I guess, is a follow-up to Tycho. So I'm just trying to put your growth performance in the context of how the multiplex class as a whole is doing and expanding the market versus some share shift going on. And I know ePlex is really how you hope to expand in the market, but given competitive commentary, I was hoping you could speak to where your new customer growth is coming from, the dynamics behind competitive swaps versus those new to multiplexing.

Hany Massarany

So in relation to XT-8, you mean, Shaun?

Shaun Rodriguez - Cowen and Company, LLC, Research Division

That's correct, yes.

Hany Massarany

Yes. So like I said, in the second quarter, most of our XT-8 placements came from new customers that we didn't do business with before. Now remember, XT-8 is a post sort of PCR system. So sample prep is required to be done offline with extraction, amplification, et cetera. And therefore we can only target the large molecular labs. We said before that there are only -- let's call it 1,000, 900 to 1,100 of those labs around the country. And that's the market segment that we're focused on right now. These are the labs that are capable of handling all the sample prep steps and so on and the setup required to do these types of tests. So obviously, that's not only where we will go with ePlex. ePlex will go to many thousands of other hospital labs not performing these tests today, but of course, because of the menu expansion on ePlex, we expect that some of the existing labs will also want to adopt ePlex for the menu that's not going to be available on XT-8, like CNS, GI, blood culture ID, et cetera.

Shaun Rodriguez - Cowen and Company, LLC, Research Division

Okay. Maybe to clarify -- and I appreciate that most of the new placements in the quarter were new customers to GenMark. I was really curious about whether these are new customers to multiplex as a whole and they're -- I'm asking about whether they're competitive swapout versus directly having placements into nascent multiplex labs.

Hany Massarany

No, no. I'm sorry, I missed that part of the question. But I will say that most of them came from competitive displacements. These are the labs who are well-established and already doing molecular testing. And so occasionally, we secure a lab that wasn't doing molecular testing before, but in this segment, the vast majority is competitive takeaway.

Shaun Rodriguez - Cowen and Company, LLC, Research Division

Okay. So next on the gross margin trends. Those are encouraging. So my first question is, is whether this is all on the consumables as you just -- you benefit from scale efficiencies, or have margins on the systems continued to improve as well? And related to that, to help us modeling for 2015, should we assume that XT-8 gross margins can continue to improve from here, appreciating that we'll have the ePlex impact to consider as well next year?

Scott Mendel

Sure. Shaun, it's Scott. So the gross margins on both the consumable as well as the system have been encouraging for this year. We continue to see quarter-over-quarter expansion. A lot of that's driven by the higher volume that we're experiencing on a top line, driving additional absorptions, so we're very pleased with the results so far. Relative to going forward, we haven't provided guidance for 2015, as you know. We continue to see expansion in our margins, given volume increases on XT-8 alone. And obviously, from an ePlex perspective, as it launches and comes up to scale over the longer term, we would expect that to also have very high margin rates and increasing margin rates, given the higher price points that we would expect.

Shaun Rodriguez - Cowen and Company, LLC, Research Division

Okay. And lastly, on ePlex. In terms of understanding the dynamics there a bit more, I was hoping you could speak to the works with ALL, now Illumina, in terms of how much of the work remains with them versus being done internally and how that progresses as you get to the commercial launch. I know their work was pretty fundamental, but will there be a continued role for that collaboration?

Hany Massarany

Yes. Thanks for the question, Shaun. Look, our partnership with ALL, now Illumina, has been exclusively focused on electrowetting. So of course, there are many aspects to ePlex beyond electrowetting. Electrowetting is a very important technology that really enables all of our microfluidics sort of movement on ePlex cartridges. But of course, there's a lot more to it than microfluidics. So our work with Illumina in terms of the development effort is pretty much complete, or if not, then it's very, very close to complete. And we have a very strong relationship with Illumina and we are obviously going to continue to work with Illumina over the next several quarters as we assess sort of other opportunities that may be relevant in relation to our supply -- ongoing supply. But I would say that the development piece of it is pretty much complete.

Operator

Our next question comes from the line of Nicholas Jansen with Raymond James.

Nicholas Jansen - Raymond James & Associates, Inc., Research Division

Most of mine have been answered, but maybe 2 for me. In terms of the $28 million a year or the revenue guidance for the year, to me that implies a slight step down relative to your first half of the year trend and typically, as we know with the flu season, it typically builds in 3Q off of 2Q, and then certainly 4Q off the 3Q. So just wanted to kind of get a sense of what your expectations are for the balance of the year and why revenue guidance may look -- appear a bit conservative relative to the run rate that you exited 2Q in?

Scott Mendel

Nick, it's Scott. So we feel very pleased with what we've driven so far this year. As we enter into the back half of the year and looking at what we have left to go, we felt confident about raising our guidance to the $28 million level. Obviously, in the first half of the year, we had slightly smaller comps to deal with, so I think that's why you're seeing a slight difference in that -- the year-over-year variance. But -- and we feel really good about where we're heading for the second half of the year. The assumptions do assume a relatively moderate flu season, so stay tuned on that; we can't predict what's going to happen with the flu. But the $28 million of revenue guidance that we gave, we feel pretty good about.

Nicholas Jansen - Raymond James & Associates, Inc., Research Division

Okay, that's helpful. And then secondly, I know you guys aren't providing anything yet for '15, but just wanted to get some broader, maybe R&D commentary, obviously, a lot of the instrument cost or spend, it will go away in '15, relative to what you're spending this year, but certainly the assay development costs will kind of rise next year as you ramp to get several products to the market. So I just want to kind of get your sense of any broad color with regards to how we should be thinking about R&D expense at least for '15?

Scott Mendel

Yes, I think one of the important parts, Nick, as we look at R&D cost is, we still think it will be in the mid-30s for this year. And then if you look at the exit rate, obviously, that's going to build towards in the back half of this year as we get ready for clinical trials, et cetera. So if you think about the exit rate this year heading into next year, I think that's probably a pretty good way to think about next year's cost. As we complete and finish off the development of this system, obviously, we are going to continue to focus on menu. And so a lot of those dollars overall will continue on in the future. So again, think about it as it relates to the exit rate this year and then some modest increases, it's probably a pretty good way to think about it.

Hany Massarany

But of course, Nick, we'll provide a lot more detail, sort of as we -- in due course when we get -- when we're ready to guide for 2015.

Operator

Our next question comes from the line of Mark Massaro with Canaccord.

David E. Hynes - Canaccord Genuity, Research Division

This is David filling in for Mark. I just noticed that in this quarter, inventory is significantly lower than what it's been in the past. Is there any specific reason for that?

Scott Mendel

David, this is Scott. So the inventory levels did come down a little bit, based upon the higher-than-expected revenue outlined. So obviously it's gotten to a point where it's a little bit lower than we'd expect it, driven by the top line growth. We'll continue to keep an eye on that and build it up as we need.

Operator

I'm not showing any further questions in the queue. I would like to turn the call back over to the speakers for any closing remarks.

Hany Massarany

All right. Well, thank you very much. And on behalf of our Board of Directors and employees, I want to take this opportunity to thank you for your ongoing support. I look forward to reporting our progress on a quarterly basis going forward. So thanks for your time and have a good evening. Bye-bye.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. And you may all disconnect. Have a good day, everyone.

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