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VCA Antech (NASDAQ:WOOF)

Q3 2012 Earnings Call

October 25, 2012 4:30 pm ET

Executives

Tomas W. Fuller - Chief Financial Officer, Principal Accounting Officer, Vice President and Secretary

Robert L. Antin - Co-Founder, Chairman of the Board, Chief Executive Officer and President

Analysts

Ryan Daniels - William Blair & Company L.L.C., Research Division

Kevin K. Ellich - Piper Jaffray Companies, Research Division

Brian Tanquilut - Jefferies & Company, Inc., Research Division

James Macdonald - First Analysis Securities Corporation, Research Division

Erin E. Wilson - BofA Merrill Lynch, Research Division

L. Mitra Ramgopal - Sidoti & Company, LLC

Operator

Good day, ladies and gentlemen. At this time, I would like to welcome everyone to the VCA Antech Inc. Third Quarter 2012 Conference Call. [Operator Instructions] Today's conference call is being recorded.

Before we commence the discussion, I would like to preface the comments made today with a statement regarding forward-looking information. The information contained in this presentation includes forward-looking statements that involve risks and uncertainties. Such statements appear in a number of places in this presentation and include statements regarding our intent; our belief or current expectations with respect to our revenues and operating results in future periods, our expansion plans and our business strategy and ability to successfully execute on that strategy.

We caution you not to place undue reliance on such forward-looking statements. Such statements are not guarantees of our future performance and involve risks and uncertainties. Our actual results may differ material from those projected in this presentation for reasons, among others, discussed in our filings with the Securities and Exchange Commission.

The information in this presentation concerning our forecast for future periods represents our outlook only as of today's date, October 25, 2012, and we undertake no obligation to update or revise any forward-looking statement, whether as a result of new developments or otherwise.

Listeners should also be aware that today’s discussion includes reference to non-GAAP financial measures, which management believes are useful to understanding of our business. A reconciliation of these non-GAAP measures to the most comparable GAAP measure will be included with our earnings release and posted on our website at investor.vcaantech.com. Our earnings and guidance releases are available on our website at investor.vcaantech.com. In addition, an audio file of this conference call will be available on our website for a period of 3 months.

I would now like to turn the conference over to today's host, Mr. Tom Fuller, CFO. Mr. Fuller, please begin.

Tomas W. Fuller

Thank you, Janine, and thank you, all, for joining us for the Third Quarter WOOF Earnings Call.

Today, we reported $0.38 per fully diluted share, which compares to an adjusted diluted per share of $0.37 in the third quarter of 2011. We did book a -- last year's number reported was $0.35, which included $0.02 charge for debt retirement cost, so $0.38-ish compared to $0.37. Lastly, we had a good quarter marked by sequential improvement over what we saw in the second quarter.

We're clearly making good progress after seeing continued improvement in our growth rates in Q1 of 2012. We did see rates fall off a little bit in the second quarter, and we're pleased to see now the growth rates improving here in the third quarter.

So Laboratory growth rates at 5.2% in the first quarter, which at the time we thought may have been benefited by the weather a little bit, dropping off to 2.6% in the second quarter, now up to 2.5% in the third quarter.

Hospital growth rates going from roughly flat in the first quarter to 1.1% in the third quarter, so a nice improvement there.

But the real story, I think, is great margin improvement. Both our Animal Hospital and Laboratory margin showed great improvement compared to the second quarter where, in the second quarter, Lab margins were up 10 basis points on 2.6% internal growth. Hospital margins were down 280 basis points on roughly flat growth. And now we're seeing in Hospital down only 70 basis points on 1.1% internal growth. Lab margins were great, up 100 basis point on that 3.5% growth.

So we're still challenged by our internal revenue growth rates, but we're clearly seeing improvement. I think the improvement in operating margins demonstrate the entire leverage in our business.

Consolidated operating margin was down 90 basis points, which actually is very good. It's relative performance has been the best operating margins we've seen quite a while, 14.1%. Much of that improvement comes from the relative improvement in Hospital and Lab operating results. And we did anniversary through that large stock comp expense, which was running roughly $3.5 million to $4 million per quarter year-over-year, which is included in SG&A cost.

So overall, I think we had a very strong quarter. Our core Hospital and Laboratory internal growth rates are improving. They should be not where they -- certainly not where they need to be or where I think they can be, but we are seeing sequential improvement.

Our Laboratory, great operating leverage, 3.5% internal growth, 100 basis point of margin improvement. I think our Hospital did a good job of upholding margin on that 1.1%, same-store growth margins down only 70 basis points, which compares very favorably with what we saw in the second quarter. And for the quarter, $0.38 per share at $0.01 over the prior year adjusted earnings per share.

In terms of the details, Antech diagnostics revenue increased 2.9% to $81.3 million on day adjusted internal growth of 3.5%. There was one fewer business day in the third quarter this year compared to last year.

Operating income increased 100 basis points. Operating margins increased -- actually, operating margins increased on a basis points to 36.8%.

The components of the gross number of requisitions increased 2.2% to $3,145,000. Average requisition increased 1.3% to $25.83 for that 3.5% internal growth. Total requisitions for the quarter was $3,147,000, so it was nice to see the volumes improving substantial over what we saw in the first quarter -- or rather the second quarter.

Lab count. We added one lab in the quarter, bringing the total lab count to 55 laboratory locations.

So the growth rates are improving. Our operating margin increased 100 basis points on that 3.5%. We're seeing great leverage in what's a very leverageable business. Controlling cost, I think we're clearly in a great position to capture higher margin on incremental revenue going on into the future.

And our hospitalization revenue increased 13.1% to $342.8 million mostly due to acquisitions including AVC, which we acquired on February 1, 2011. It added roughly $94 million of annual.

Revenues and the day adjusted same-store growth was up 1.1%. Our same-store margins, as I said, decreased 70 basis points to 16.5%, and our total Hospital gross profit margins decreased to 120 basis points to 15.8% and that difference is due to the lower margins that acquired hospital, which has typically been the case for many, many years.

So the components of same-store revenue, average revenue -- or average order rather increased 2.7% to 164.09, a number of orders were down 1.6% to 1,751,000. Total orders for the quarter, 1,894,000.

In terms of acquisitions, we had a great quarter for acquisitions. If you remember, callback through the end of the second quarter. We're a little bit behind schedule, but we anticipated a strong back half of the year. And that's, in fact, what we're seeing. 10 hospitals acquired the third quarter with revenues of $34 million, bringing the total revenue acquired for the year-to-date to $57 million, plus AVC for $94 million, bringing our total acquired revenue for the first 9 months to $151 million.

The pipeline is good. We expect to deliver $40 million in the fourth quarter, bringing the annual revenue acquired, including AVC, to well over $190 million.

The revenue on the Hospital account started the quarter with 592 hospitals acquired in net 9, bringing that total to 601 hospitals, which is a great milestone for us exceeding 600 hospitals.

Our other segment includes Sound-Eklin. It includes Vetstreet, which we acquired on August 8, 2011, and ThinkPets, which we acquired in February 1, 2011. Revenue in our other segment increased $9.2 million to $28.1 million due mostly to that acquisition of Vetstreet and ThinkPets. Operating income decreased $389,000 to a loss of $345,000, primarily to the losses as expected at Vetstreet. The Vetstreet integration is proceeding on plan, and the losses are about what we expect so things are moving along.

So I think, in total, we're very pleased by the improvement -- the sequential improvement in our core Hospital and Laboratory businesses. Internal rates are improving. As I said before, our rates are not where we needed to be, and I think they're certainly not where they can be. But our results for the quarter clearly demonstrate that we're very well positioned to see further improvement in our margins as our growth rates continue to improve.

So looking ahead, on our call in July, you may recall when we reported our second quarter results, we expressed our belief better results for the year would be close to the bottom end of our range -- our guidance range previously released. Our results for the third quarter were within line with those expectations.

So now Bob will go through more and then to your Q&A.

Robert L. Antin

Thank you, Tom. And also, I'd like to wish Tom a happy birthday.

It was a good quarter. I'm extremely pleased that we saw improvement in the Hospital division. I know that people in the division worked incredibly hard, focusing on labor and cost control. And we did see a bottoming of margins in the second quarter. And we saw a nice bounce back, with a focus on positive same-store growth, as well as an improvement to the margins on the same store to 16.5%. So I think that was incredibly good.

I think, as Tom mentioned, our Hospital acquisition program has done incredibly well. The development team has acquired $150 million year-to-date in book revenue. And as I think Tom said that we have a pretty good fourth quarter that we expect. I think in those -- in that respect, it's been a great quarter.

We've also seen the beginning of the rollout of what we call WoofWare. It's our computer systems that over the next 18 months, we will improve our systems by a system we've developed and the people have been working incredibly hard on it. It will give us greater abilities inside the hospitals to both manage data results, as well as communications. So we're incredibly excited about it.

We've also gone through in the quarter, a continued rollout of our own product line, Vethical, with the recent introduction of ComboGuard, a heartworm and flea, tick product.

On the Lab side, it was a very, very good quarter. As Tom mentioned, we had a same-store growth in a competitive market of 3.5%, with the team, a great team that improved the operating results by a full 100 basis points.

I also like to say that on the side of Vetstreet and Sound, I like the direction they're going in. We continue to build out both the divisions and the capabilities in it. And in addition, we have just finally completed our rollout of Vetstreet inside of our hospitals.

So I think, by and large, our quarter was a very, very good one, especially in lieu of what we experienced in the second quarter. And while we still express and feel headwinds on -- in the economy, I think the hospitals responded in an incredible fashion.

So I'd now like to open it up and take some questions.

Question-and-Answer Session

Operator

[Operator Instructions] And our first question comes from Ryan Daniels of William Blair.

Ryan Daniels - William Blair & Company L.L.C., Research Division

Can you talk a little bit more about perhaps some of the cost controls you put in place? Clearly, the growth, especially in the Animal Hospital, wasn't enough to kind of drive the year-over-year performance but significant improvement from Q2 performance. So curious if you could maybe talk a little bit about what drove that?

Robert L. Antin

Well, I think, clearly, the operating team focused on the areas they could and a lot of it is in labor and paying attention on the Hospital side to the hours worked by still keeping morale up in the hospitals which, obviously, we have to do. So I think there was a real complete dedication to looking at expenses, which, maybe, in the second quarter, we had anticipated a more robust economy, which we didn't get. So I think it was a refocus on cost in the quarter, and I think that was great.

Ryan Daniels - William Blair & Company L.L.C., Research Division

Okay. And then any color on the quarterly trends. Our check seem to indicate that quarter or month-over-month performance continue to gain traction throughout the quarter. I'm curious if you would confirm that or if you saw anything different?

Robert L. Antin

Ryan, you look at the same -- some of the same stuff and it goes up and down and, regionally, where you see up and down. So I couldn't tell you that things are changing, but we certainly saw some positive trends. Whether they stay there or not, it's hard to predict, but we certainly saw a little bit of positive trends.

Ryan Daniels - William Blair & Company L.L.C., Research Division

Okay, that's helpful. Then maybe one broader one for you, then I'll hop off. Just in regards to rolling out Vetstreet, ThinkPets to your own animal hospital, it sounds like you successfully completed that. And I know it's probably too early for you to see any of the benefits with the foot traffic, but I'm wondering if there's early indicators that you look out that are positive, like owners signing up for the pet portal, things of that nature, which kind of give you a leading indication that, that should start to drive growth next year?

Robert L. Antin

Well, I think going through and going through the installation, that was the first part of it. We're beginning to roll out programs now to get the clients into the portals. So I think you're right. It's too early to see it, but there is little question. Our ability now to electronically communicate with clients, which you see more in the industry by itself, is an important part. So I think we'll end up seeing an increasing amount of communication with clients, which can only be good for everybody. So I think it's really too early to tell.

Operator

Our next question is from Kevin Ellich of Piper Jaffray.

Kevin K. Ellich - Piper Jaffray Companies, Research Division

Happy birthday to Tom as well. Just wanted to follow up there on the think -- on the Vetstreet deal. Wondering how much more do you guys have to do in terms of integration? And are you seeing any increase in competition in that business or in that market?

Robert L. Antin

The answer to the second question is, yes. Our dear competitor is competing with us at every which way, and they have had a history of communicating between hospitals and the hospitals, so we see that. But our focus in it, in Vetstreet, it's a very, very broad platform. It is not only the 7 -- approximately the 7,000 clients that we touch in every which way that is showing some stickiness, but we also are a pretty good provider of data to the manufacturers. We support marketing programs on their behalf. So we also have a content level that's different from others. So yes, we do see competition, which, I think, is positive because I think what it's going to do, it's going to help educate an entire sea of pet owners to be able to actually access and communicate with their veterinarians in a way that we haven't seen in years and years. So yes, it's competitive. Yes, we have a much broader platform in Vetstreet. And in terms of integration, we are still working through integrating both on networks software and data center stuff. So that's been a rough challenge, as I said, in the last call. That's still a work in progress.

Kevin K. Ellich - Piper Jaffray Companies, Research Division

Understood. And then, I guess, from all angles, thinking about the Animal Hospital business and the competitive environment that you're seeing on the Vetstreet side, strategically, what are you doing and what can you do to try to counter efforts made by others?

Robert L. Antin

Well, to start with, I think the overall company, the size of the company, and you break it down by the 2 divisions, Vetstreet is a small part of the company. And it is a great package that has great potential in the software and the communications side. But as an influence, even in the earnings of the company you've seen in this quarter, it hasn't played yet a large role. So we will have competition, and we have competition on the Animal Hospital side. There were a number of privately funded companies that are out there, and yet we've managed now. We operate in United States and Canada over 600 hospitals. So I think competition is a way of life. But I think the important part of it is some of the competition that's out there is really supporting the veterinarian to provide a greater breadth of services to the pet owner, which is what floats everyone's boat. So I think in some respect where that competition is, it's actually driving to get more traffic from a person's house and their pet into a veterinary where they can be best cared for. And one of the other things that we're doing is we're focusing on some product. It is a long-term strategy of having a private label brand where our clients can come into our hospitals and they can enjoy a brand that is made by a major manufacturer that's a private brand that they're not going to be able to buy elsewhere. So it's trying to drive into hospitals. And one of the benefits that we experienced is one of the manufacturers out there had some difficulties on 2 popular brands. They had FDA problems. But because we had a private label brand from an alternate manufacturer, we were sheltered a little bit from that impact. So I think there's a number of things we're doing better that are very positive.

Kevin K. Ellich - Piper Jaffray Companies, Research Division

Understood. That's helpful. And then just wondering on the Lab business. Obviously, you're seeing some pretty good growth in terms of number of requisitions. Were there any promotions or anything unusual that you guys saw in the market or anything that you guys bid to help drive that 2.2% or 2% same-store volume growth?

Robert L. Antin

Well, I think it's a little bit -- as Ryan asked in his first question, you're seeing a little bit of growth. When you look at the lab market, if people are starting to come into the hospital with greater frequency, which we're not saying they are, but there's been some improvement, that will help drive. We also have introduction of other tests, other programs. There's recommendations for different kinds of panels that maybe previously there, that incrementally is adding to the demand inside marketplace. Besides which, you have numbers of companies, both pet food companies, that are focusing on nutrition, which, by its nature, also focuses on laboratory. And you also had 2 very successful and good operators in the Lab business who are among the largest providers of continuing education to veterinarians. So I think all those things together are starting to have an impact.

Operator

Our next question comes from Brian Tanquilut of Jefferies.

Brian Tanquilut - Jefferies & Company, Inc., Research Division

Bob, just a quick question for you on the volume. So good same-store number in the Animal Hospital side. Just wondering if I were to put it to you and say, "Is that driven more by company-specific initiatives and efforts? Or do you think that the industry is starting to really see a recovery in volumes?"

Robert L. Antin

Well, I could tell you from the activities that we have going on from SCOs to humane societies to direct mail, I mean, we're active to the mobile sites to local support. I also think whatever efforts that we make cannot combat the overall sense in the economy, so we need the economy. We need to have the election behind us. We need the economy to start moving forward, and then I think you'll see it. I couldn't tell you that -- definitively, we have programs. We do know that we create programs that has positive impact, but I think the heart of your question is you can't compete against the wind of the economy. It's been very, very hard to do that. I think all of you know that, but we do have some very good active programs that are contributing.

Brian Tanquilut - Jefferies & Company, Inc., Research Division

Okay. And then on the Lab side, just to piggyback on Kevin's question. How would you describe the competitive environment in the Lab segment now? Do you think it's stabilized? Or is there still -- is it still pretty aggressive at this point?

Robert L. Antin

Well, it's aggressive to share the comment of our competitor. It is an aggressive marketplace with 2 very, very capable companies and a recent third entrant in it. It's very competitive. But in spite of that, the requisitions are going up. The reliance in the marketplace for all is greater on diagnostic than it's ever been just because of the focus on specialty medicine. And although it's price-competitive, there is some intensity-driven changes that have taken place that allowed our average succession to stay a little bit positive. So I think that's very, very good.

Brian Tanquilut - Jefferies & Company, Inc., Research Division

Okay. And then, Tom, when -- just wanted to get a gauge on how your acquisitions are going? Obviously, you've been very inquisitive. The acquired hospitals, are they comping close to where you guys are on the same-store side? Or are they worse or are they better? Just wanted to see if you could give us color on that?

Tomas W. Fuller

By nature, the fact they're acquired, we comp off kind of pro forma pre-owner acquisition numbers. So it is not necessarily reliable so what we would use internally you. But for the most part, yes, I mean, everything tends to be growing. We have wide range in growth rates in all of our hospitals. But revenue at recently acquired hospital growth rates should be pretty similar to our overall total growth rates.

Brian Tanquilut - Jefferies & Company, Inc., Research Division

Okay. Got it. And then last one for you guys. Without going to guidance, obviously, for 2013, how should we think about your pricing strategy for next year?

Robert L. Antin

Well, I think they'll be -- there would be marginal price increasing. They're sensitive on the Hospital side. Certainly, we look at it hospital by hospital. It builds out to areas into regions. We look at the landscape, and the landscape no longer is just animal hospitals. It's also some of the retailers, some of the alternate providers so -- but you'll see some price increase. We need to take one. And in some areas, we're actually -- we actually have been lowering them to become more competitive in some of those consumer shop items. On the Lab side, we will take an annual price increase, and that will take place in the beginning of next year.

Operator

The next question is from Jim MacDonald of First Analysis Securities Corporation.

James Macdonald - First Analysis Securities Corporation, Research Division

Could you give us some more on your strategy with ComboGuard? And I think you mentioned a new initiative, as well as maybe how your new test AccuPlex 4 and FastPanel are doing?

Robert L. Antin

Well the -- I'll start with the products. We have been in a process of working with our key manufacturers on FDA products. So we have worked with most of our partners in developing alternate products to the marketplace that are out there under the Vethical line. So we've covered many of the flea, heartworm. And soon, hopefully in the coming years, we'll be working with some others on pain management. So that's a continuous process to trying to brand products at our hospitals, so we don't experience again what we've experienced in the past for alternate competition outside. And they're high-quality products because they're made by the same manufacturers that are the leaders in the marketplace. So those rollouts are taking place. And we have things like SkinGuard, SimpleGuard, AcuGuard, and most recently made by -- it's a Trifexis product. ComboGuard is made by Elanco, which is, right now, probably the fastest-growing product in the industry. So we've -- and that was also one that I referred to before where their competition had a little bit of issues with the FDA. So we've seen great results out of the product.

James Macdonald - First Analysis Securities Corporation, Research Division

And where are you going on to AccuPlex 4, any of those in the platform?

Robert L. Antin

Oh I apologize. AccuPlex 4, we continue to be in the marketplace. We've seen increase. It's a slow increase because we're offering veterinarians a change from what they have done in-house. It is as we predicted. It takes a lot of continuing education out of the field to change people's behavior, but we've seen slow, steady increase in it. We -- I never anticipated that it would be a straight vertical line up. I expected it to continue over time and continue to grow, and we're seeing that.

James Macdonald - First Analysis Securities Corporation, Research Division

And then just shifting gears as we start to think about 2013 and the future. What are your thoughts on when you can get the Vetstreet-type combined operation to profitability? Or how -- what are your thoughts on kind of getting there and when that might be?

Tomas W. Fuller

I think we're on track to be where we said we would be last time we talked about this. So we are generating operating losses this year. I will point out that our EBITDA is actually positive for the year. And we're on track to reach profitability beginning of next year, breakeven and profitable.

Robert L. Antin

But Jim, it's not what I was saying that I think you know and you follow it, it is a bit more challenging than we first anticipated. And we're working through the issues, and we're making progress on them as evident by the fact that we were able to install them successfully at all of our general practice hospitals. So we look very positive, but it's not without its challenges.

Operator

The next question is from Erin Wilson of Bank of America Merrill Lynch.

Erin E. Wilson - BofA Merrill Lynch, Research Division

On the lab competition out there, I mean, are you still seeing -- or are you seeing more or less aggressive bundling practices from your competitors? And has your view or interest changed in your own point of care platform at all? Or any interest in that?

Robert L. Antin

We do see -- we see a lot of bundling out there, including the new entrant into the market, which I read their transcript, and the number of machines they provided to clients in doing it. So we see competition, but that competition comes with one lab and the other 2, us, have 50 to 60 labs each. So it is a competitive market. Bundling plays a role, and we also have other capabilities in the hospital that are provided to clients. Moving forward to the point of care, we are evaluating it. We are taking a look on what our approach is going to be to point of care. We are probably more closely evaluating than we have in the past.

Erin E. Wilson - BofA Merrill Lynch, Research Division

And any time frame on that sort of initiative?

Robert L. Antin

Thank you for the question, but I couldn't tell you.

Erin E. Wilson - BofA Merrill Lynch, Research Division

Okay. That's fair. And on your private label business, are you going to sell some of those products or those Vethical products through the Vetstreet e-commerce platform? .

Robert L. Antin

Probably to our own hospitals. Our focus on the private label isn't to get into the business of non-VCA hospitals. So our focus on the private label is simply to our own. We will use the platform, and we do now because we do provide home delivery. We'll use the platform in the future, but it is not to provide our product to non-owned hospitals.

Erin E. Wilson - BofA Merrill Lynch, Research Division

Okay. And then just one more on Vetstreet. I guess, I noticed that the AAHA put out a statement severing your relationship with Vetstreet or their relationship with Vetstreet. That seems to sort of conflict with what you have articulated in the past as it pertains to the conflicts of interest or potential conflicts of interest between the independent hospitals and Vetstreet.

Robert L. Antin

The answer to that is, no. They did cancel. But the reasons for us and for them walking away has nothing to -- had nothing to do with the product. It's in order to have a preferred provider relationship with the organization. You have to pay -- you have to support them with large dollars, and we just decided that we didn't pay -- we didn't want to pay those large dollars. We support AAHA in another way, and that is our hospitals have a dedicated focus to being members of their organization. So I would suspect we represent the largest component of AAHA hospitals. And we support and they're very, very valuable. But in this particular case, as they, like other organizations, look for other resources and other sources of income, we didn't think that the amount of money to support their efforts was worthwhile for Vetstreet. So we still have great relationship. And it wasn't a conflict, it was purely a monetary one.

Operator

[Operator Instructions] Our final question will come from Mitra Ramgopal of Sidoti & Company.

L. Mitra Ramgopal - Sidoti & Company, LLC

Tom, you mentioned that pipeline for acquisitions remain very robust. I was wondering if you're limiting your expansion to U.S. or is the Canadian market sort of doing better than expected and you're looking to maybe be more aggressive there?

Tomas W. Fuller

We have a great team up in Canada, so our acquisitions this year include some up in Canada. And our target for this year, the additional $40-plus million does, in fact, include hospitals and clinics, including some very large hospitals. So we have a very active team up there. And as we said before, it's a great market, we think, that is right for consolidation, and we're the first and biggest player up there. So it's definitely part of our growth strategy.

L. Mitra Ramgopal - Sidoti & Company, LLC

Okay. And again, Bob, I think you mentioned being able to implement some modest price increases going forward. Is that regardless of whether the economy improves or not?

Robert L. Antin

Well, the price increases, I also said, with great sensitivity to the marketplace. And because we do touch 600 communities where there are hospitals, the pricing isn't a top-down. It's a bottom-up. So we're in the process right now in the Hospital side, evaluating every price and every community through management, where you look at the pricing so it is not a top-down. So there will be some, and there will be differences in prices and also the services. So it is not an across-the-board price increase. So they're in the process right now of going through them to make sure that we remain competitive. And in some cases, as I said, some of the services that are offered will actually be reduced to the pet owners.

L. Mitra Ramgopal - Sidoti & Company, LLC

And Tom, finally, again, I don't believe there was any change to the guidance. Am I correct?

Tomas W. Fuller

That's correct.

Robert L. Antin

So I would like to thank everybody. I think, for us, on the management team and throughout the company, we were very pleased with the change in the Hospital side. I think they did a great job focusing on comps and expenses with this many hospitals, at the same time, going through $150 million of acquisitions. I think they had done a great, great job. And the Lab side, with improvement in margins. And as many of you pointed out, the competitive landscape that we live in, I think that's a heck of a testament to them. We are still going through and still have lots of faith in our alternate businesses. And I think they're doing what we expected.

So I would like to thank all of you, and I'd like to thank all the management that's on the team. You did a great, great job in a great quarter. Thanks a lot. Bye-bye.

Operator

Ladies and gentlemen, thank you for participating in today's program. This does conclude the conference, and you may all disconnect. Everyone, have a great day.

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