RTI Surgical's (RTIX) CEO Camille Farhat on Q4 2017 Results - Earnings Call Transcript

RTI Surgical, Inc. (RTIX) Q4 2017 Earnings Conference Call March 1, 2018 9:00 AM ET

Executives

Nathan Elwell - Investor Relations

Camille Farhat - President and Chief Executive Officer

Jonathon Singer - Chief Financial and Administrative Officer

Analysts

Matthew Hewitt - Craig-Hallum Capital

David Turkaly - JMP Securities

Jayson Bedford - Raymond James

Operator

Good day, ladies and gentlemen, and welcome to the RTI Surgical's Fourth Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Nathan Elwell, Investor Relations. Sir you may begin.

Nathan Elwell

Good morning, and thank you for joining the RTI Surgical's fourth quarter and full-year 2017 earnings conference call. On the call Today are Camille Farhat, our Chief Executive Officer and President; and Jonathon Singer our Chief Financial and Administrative Officer.

Before we start, let me make the following disclosure. The earnings and other matters we will be discussing on this conference call will involve statements that are forward-looking. These statements are based on our management's current expectations, but they are subject to various risks and uncertainties associated with our lines of business and with the economic environment in general.

Our actual results may vary from any statements concerning our expectations about future events that are made during this call. We make no guarantees as to the accuracy of these statements. Accordingly, we urge you to consider all information about the Company and do not place undue reliance on these forward-looking statements.

During the call, we will also present certain financial information on a non-GAAP basis. Management believes that non-GAAP financial measures, taken in conjunction with U.S. GAAP financial measures, provide useful informational for both management and investors by excluding certain non-cash and other expenses that are not indicative of our core operating results.

Management uses non-GAAP measures to compare our performance relative to forecasts and strategic plans to benchmark our performance externally against competitors and for certain compensation decisions. Reconciliations between U.S. GAAP and non-GAAP results are presented in tables accompanying our earnings release, which can be found in the Investor Relations section of our website.

Now I will turn the call over to Camille.

Camille Farhat

Good morning, everyone and thank you for joining us today. As I approach my first anniversary of the Company, I'm pleased to report that we have made considerable progress towards our strategic transformation.

We initiated significant changes in every aspect of the business and delivered on our 2017 commitment through four consecutive quarter, produced results in line with guidance and deliver organic growth in every core product category.

To quickly review the year, we set and implemented our three strategic objective, focused on reducing complexity driving operational excellence and accelerating growth. We assembled a world-class management team to enact this transformation.

Since our last earnings call, Brian Price joined that Company as Vice President of Global marketing bringing more than 20 years of commercial and medical device experience across multiple healthcare disciplines including orthopedic, pain management neurology, urology, cardiology and gynecology.

Brian's focus on implementing portfolio management and demand generation strategies designed to help accelerate growth. Adding Brian, essentially rounded out our senior hiring and meant we completed our 2018 planning with new team in place.

Of course the most obvious aspect of our efforts to reduce complexity last year was the successful divestiture of the CP business in August. We also designed and began to implement programs to drive operational excellence and market enhancements at multiple location.

The initial round of cost reduction will produce savings of $13 million by the end of 2018. Approximately half of $25 million target. We fully expect to meet that target within the 18 to 24 time frame we outlined last year.

Importantly we are making the necessary investments to accelerate the growth of our franchise which is a big part of our growth strategy going forward. To that end, we announced the acquisition of Zyga Technology in early January.

Acquiring Zyga added an minimally invasive treatment that extenuates our robust spine portfolio and opened significant opportunities. It is perfectly aligned with our spine expansion strategy to pursue niche differentiated product, to gain scale, to improve customer retention and support portfolio.

The Zyga hit the ground running and we have clinically implemented an effective integration plan led by Brad Swatfager from the Zyga team under the supervision of Jon Singer. During the fourth quarter, we were pushing forward on multiple fronts and delivered financial results in line with our guidance.

For the quarter, we produced revenue of approximately $71 million, which was driven by stable performance in most product lines and growth in the OEM business offset by reduced revenue due to the sale of the CT business. We recorded adjusted EBITDA of $9.4 million or 13% of revenue.

Adjusted net income of $1.6 million and adjusted EPS of $0.03. These three measurements were improvements compared to fourth quarter 2016. While our initial progress in 2017 is gratifying, we are still in the early stages of our transformation with considerable work ahead of us.

Let me provide more details regarding the next steps we are undertaking. First reducing complexity, as I noted earlier, we fully expect to further simplify our existing structure in 2018 and focus our energy on the aspects of the business that will help build scale and scope in growing the markets. We are also strengthening our OEM focus and expect our OEM business to continue to grow in 2018.

Next, driving operational excellence. We began implementation of our initiatives late in 2017, which we believe will produce significant process improvements in cost savings. We are deploying lean manufacturing across additional manufacturing sites in 2018 and we are taking a hard look at our balance sheet and working on areas such as inventory reductions to improve cash flow and return on invested capital.

While not all of those initiatives will have that instant payoff, we will certainly pay dividends over the long run and we are pleased with the progress we have made in our trajectory going forward.

Finally, accelerating growth. Last year, we quickly recognized the need to strengthen our R&D discipline and rebuild our innovation pipeline to accelerate long-term organic growth. While these efforts will take time, we still expect to launch some important new products in 2018 including Fortilink and 3D printed radiotranslucent interbody.

Of course, as we expand our efforts to enhance our product portfolio, we remain opportunistic with regard to M&A possibilities and we will prudently explore deals that will add products or companies that would advance our strategy and enhance our competitiveness.

As we look forward, 2018 will be a year of continued focused execution for RTI. We have assembled the world-class group of individuals; we will have quickly gel into an effective management team closely aligned around driving our strategic transformation.

The progress we have made to-date has created a solid foundation for a continued long-term profitable growth, which was highlighted by the fiscal 2018 financial guidance and long-term strategic goals we issued in early January.

I want to thank our employees for all their hard work implementing the significant changes we initiated in 2017. We are all focused on achieving RTI’s considerable potential in the years ahead. While our initial progress is gratifying, we are still in the early stages of our transformation with considerable work ahead of us.

By successfully executing our strategic initiatives, we will create a company that is focused on its core capabilities with a strong tissue-based portfolio generating consistent predictable earnings and cash flow, and continued investment in our growing spine portfolio.

With that said, I will hand over to Jon to outline our financial performance.

Jonathon Singer

Thank you, Camille. Revenues for the fourth quarter of 2017 were $70.8 million, a slight decline from the prior year fourth quarter revenue of $71.3 million. Our direct revenues decreased by $3 million or a 7% to $41.5 million, our OEM revenue grew by $3.1 million or 12.9% to $26.8 million and other revenues decreased by $0.5 million to $2.5 million.

The decrease in direct revenue is the result of the loss of $2.8 million of revenue from the sales of cardiothoracic closure business. The increase in the OEM is driven by higher orders from certain commercial distributors primarily in the dental market and the transition of the cardiothoracic manufacturing to an OEM relationship.

Gross profit for the fourth quarter of 2017 was $36.3 million or 51.2% of revenue compared to $21.8 million or 39.4% of revenue in the fourth quarter of 2016, which included inventory charges of approximately $9.6 million. Marketing, general and administrative expenses decreased $3.2 million or 10.1% to $28.3 million in the fourth quarter of 2017 from $31.4 million in 2016.

The decrease was primarily due to the sale of the CT business and the reduction of our organizational structure driven by improvements in organizational efficiencies. Market, general and administrative expenses decreased as a percentage of revenue from 44.1% for the three months ended December 31st 2016 to 39.9% for the three months ended December 31st 2017.

Research and development expenses decreased $0.9 million or a 22.4% to $3.1 million in the fourth quarter of 2017 from $4.1 million in 2016. This decrease was primarily due to the reduction of our organizational structure. R&D spending decreased as a percentage of revenues from 5.7% for the three months ended December 31st 2016 to 4.4% for the three months ended December 31st 2017.

The company incurred the following non-recurring pretax charges in the fourth quarter of 2017. Severance and restructuring charges related to reduction in headcount and improvement in operational efficiencies resulted in $1.6 million of expenses. Executive transition costs primarily related to incentive compensation expenses resulted in $2.8 million of expenses.

Asset impairments and abandonment charges primarily for the termination of certain development projects resulted in $3.7 million of expenses and acquisition related expenses of $0.6 million related to the acquisition of Zyga. During the fourth quarter of 2016, the company incurred $6.2 million of non-recurring pretax charges, primarily driven by $5.4 million asset impairment and abandonment charges in our German facility.

Adjusted earnings before interest, taxes, depreciation and amortization also known as adjusted EBITDA for the fourth quarter of 2017 was $9.4 million or 13% of revenue compared with $6.1 million of 9% of revenue for the fourth quarter 2016.

The increase in adjusted EBITDA is primarily driven by the reduction in operating expense through our efforts to reduce complexity and increase operational excellence implemented during 2017.

During the fourth quarter of 2017, we recorded an income tax provision of $3.2 million which included a discreet tax expense of $2.2 million related to the impact of the Tax Cuts and Jobs Act. The expense consist of $1.4 million to revalue our differed tax assets and $0.8 million related to transition tax on foreign earnings. Also included to provision is approximately 17,000 of tax benefit from non-recurring charges.

The net loss applicable to common shares were $8.6 million or $0.14 per fully diluted common share in the fourth quarter of 2017 compared to a net loss applicable to common shares of $11.8 million or $0.20 per fully diluted common share in the fourth quarter of 2016.

As outlined in the reconciliation tables provided in our earnings release, excluding the impact of the various non recurring charges in the impact of the Tax Cuts and Jobs Act in the fourth quarter of 2017.

Adjusted net income applicable to common share was $1.6 million or $0.03 per fully diluted common share in the fourth quarter of 2017. Briefly, for the fully worldwide revenues were $279.6 million for the fourth quarter 2017 an increase of 2.5% compared to revenue to $272.9 million for the full-year 2016.

Annual growth across product category including 5% in the spine franchise, 56% growth in surgical specialty, 15% international growth and 4% in OEM where offset by a $3 million reduction from the sales expect substantially all the assets of the cardiovascular exposure business in August 2017 and a reduction in other revenues.

Gross profit for the full-year 2017 was a $142.5 million or 51% of revenue compared to $132.3 million or 48.5% of revenue in 2016. During the year the Company recorded non recurring pre tax charges including $12.2 million of severance and restructuring charges, $2.8 million of executive transition expenses, $3.7 million of asset imperilment and abandonments expenses and $600,000 in expenses related the January 2018 acquisition of Zyga technologies.

During 2016 the Company incurred $26.6 million of pre-tax non-recurring charges. As you know during the third quarter of 2017 we completed the sale of substantially all the assets of our cardiovascular closure business for total consideration of $54 million plus an additional $6 million in contingent cash consideration.

In conjunction with the sale of the cardiovascular closure business the Company recognized a gain of $34.1 million or $18.2 million after tax. Adjusted EBITDA for the full-year 2017 was $32.3 million or 12% of revenue compared with $29.8 million or 11% revenue in 2016.

Net income applicable to common shares was $2.5 million or $0.04 per fully diluted common share for the full-year of 2017, compared to net loss applicable to common shares of $17.9 million or $0.31 per fully diluted common share for the full-year of 2016.

Excluding the after tax impact of the non-recurring charges and the impact of cardiovascular closure sales gain, adjusted net income applicable to common shares for the full-year was $3.1 million or $0.05 per fully diluted common share.

Briefly, looking at liquidity, our cash position at the end of the fourth quarter was $22.4 million and working capital totaled a $132.7 million. During 2017, we utilized $32 million of the proceeds from the Cardiothoracic closure business to retire outstanding borrowings.

At the end of the fourth quarter, we had approximately $46.3 million of debt with $20 million available under our revolving credit facility. We did borrow approximately $18 million to support the Zyga acquisitions on January 4, 2018.

Turning to guidance, based upon our current business outlook the Company is reiterating financial guidance for 2018 originally issued on January 5, 2018. The Company expects full-year revenues in the range of $280 million and $290 million, the Company expects full-year EBITDA to be in the range of $32 million to $38 million.

The following assumptions are included in our guidance. Relatively stable marketing conditions in regulatory environment. Positive revenue contribution from the acquisition of Zyga Technology announced on January 4, 2018.

Ongoing positive impacts and efforts to reduce complexity and implement operational excellence and continued marketing of map3 and minimal negative revenue impact related to our recent FDA warning letter.

Our guidance is intended to be for the full-year, however given that everyone develops quarterly models, I would share some thoughts on the performance drivers in the first quarter of 2018. Q1 2017, we had approximately $70 million in revenue which included $3.2 million of revenue from the Cardiothoracic business that will not occur.

In addition, we are experiencing some mild headwinds from the map3 warning letter and most of our new products revenues as planned are driven by late Q2 and Q3 launches. Accordingly we anticipate for the first quarter of 2018 to be sequentially down from both the comparable first quarter and the fourth quarter of 2017. All of these factors were anticipated as we provided our original 2018 earnings and guidance.

Operator, I would like to open the line to questions.

Question-and-Answer Session

Operator

[Operator Instructions] And the first question comes from Matthew Hewitt with Craig-Hallum Capital. Your line is now open.

Matthew Hewitt

Good morning gentlemen, thank you for taking our questions. Camille maybe the first one for you. So as you look at some of the changes you have made to your team over the past year in particular looking at the R&D team, do you think that you have all the people in place there to really start to crack out some new and differentiated products?

Camille Farhat

So Matt if you kind of go back in looking at at the three pillars of our strategy, the focus was almost parallel and sequential more in the first two between reducing complexity and operational excellence. With Brian coming on board right now on the marketing side, we are undertaking for the first time what we are calling a worldwide product planning that is going to generate a multi-generation product plans in 2018.

This exercise is helping us hone in exactly on the specific skills and qualifications that we need to look for in that individual. So on the hardware side, I feel good about the R&D positions we have, the tissue and biologics job is open and we are going through the regular motions, I’d rather hire the right talent needed than just speak for hiring now. But I feel very confident in our ability to generate the plans that are going to continue to support our strategy and solidifying these as we go through.

Matthew Hewitt

Okay. And then separately, you have commented previously about the inventory management and trying to get that more aligned, and I don’t want to say beneficial, but helpful for both parties, you and the party on the other end. As you look at that, is that something that we can start to see the benefit here in 2018 if so, is there the first half, second half, or is this something that’s going to play out over the next couple of years.

Camille Farhat

Let me just set it up a little bit here. I think if you look at what we are doing in lean manufacturing and the activity we are doing – even if you – just let’s not talk about process improvement, just velocity will reduce herewith and will also increase the predictability, may reduce your raw material and as such, your cycle time is a lot shorter and you will see some of that free enough. In terms of timing and phasing, I’ll look to Jon to add more of color and commentary there.

Jonathan Singer

Yes. Well, if you look at the balance sheet, we did reduce inventory this year by about $8 million. So we are already seeing the benefit of the many of the initiatives that we put in place. As Camille indicated, as we continue to work with our channel partners and look at driving efficiencies through the manufacturing process, we do have goals to continue to reduce those levels and I think you will see progression throughout the year based upon the progress we made.

Yes, I think you will see more progress in the back half of the year, because I think the first half of the year as Camille indicated is really focused on executing against the operational excellence initiatives, which correlate to the cost reduction and those are going to have a bigger impact on the consolidated financial statements in the short run. And so that’s where we are really driving the operations team to focus their energies, but I think we’ll make progress throughout the year.

Matthew Hewitt

Okay, great. And then maybe two more from – regarding the warning letter with map3, is there any chance that you could provide an update on maybe what that product is considering from a revenue percentage today or some metrics there just to help us kind of triangulate how big of a portfolio product it is today and then also, what are you seeing so far from doctors, has there been any hesitancy given the warning letter and how quickly do you think you could provide an – or you have some update from the FDA as far as your plans to stay in the market whether it be filing an IND and working towards BOA or anything – any additional color there would be helpful.

Jonathan Singer

Yes, so from a financial impact, it’s well less than 10% of total revenue and the margin on that product is less than the average margin across the entire portfolio, so the revenue shows in both the spine and the sports franchises, because we are selling in both in spin procedures and extremities. What was the second?

Matthew Hewitt

Position reaction.

Jonathan Singer

Yes. So, the position reaction has been – I don’t want to say in different, but they – reviews they did in over 14,000 procedures and they’re getting excellent outcomes. And so they are continuing to feel that it’s an integral part of a successful procedure and we had a very, very good continued support with the physicians. We do have some headwinds at the IDN level, where you have organizations at the safety committee level, need to understand the context of the warning letter in the most influences once we get in front of the committee and walk them through it.

We were able to maintain the position, but we have had some slowdown or institutions in which, just the mere existence of a warning letter without the background facts are causing some challenges. And then the last point around the FDA just to kind of complete the answer to your question. There is nothing really new here.

We would just like to re-communicate it and we think that’s a good thing, we are continuing to work our plan further deadline and the plan we shared with the agency, so that progress is ongoing and then the second part of that is, yes like we said last time on the call and we shared with various parties, our path forward on our side is we are lining up and finalizing clinical protocols to go to the agency for an IND submission and the cost for that is built into the 2018 guidance that we shared with you.

Matthew Hewitt

Great. Thank you for all that and then I guess one last one as we think about your M&A strategy going forward, Zyga obviously a little bit on the smaller side of things, but obviously a unique product that you can really augment your portfolio with. Is that the type of transaction we should be expecting or is there a range maybe there is something a little bit larger, but it really kind of fits the portfolio, just any color on your M&A strategy would be helpful. Thank you.

Jonathan Singer

So again, I think we may sound like a broken record, but I think that’s a good thing. With that, we are going to do the deals that are going to enhance our competitiveness and advance our strategy. Zyga is exactly a great example I would see on the culture and the team that Jim Bullock had assembled and the type of products we would like to add for the differentiation and the growth that it provides.

At the same time like when we talk about our strategy on accelerating the spin business, there is a need for scale that would be driven mainly as a response for the consolidation happening in the healthcare market. We believe as we progress and make our strategy come to life that we need to be in the top 10 provides in the markets that we are in to ensure that we have the scope and the sale of the products to serve our customer needs.

So, it’s really not an either/or, it’s really both, but it is I think as you have seen us now, we are only going to do the right deal and a deal that we see the value in it and it fits into the strategy and will enhance our position, and it could very well be also a deal on a technology, a platform or something unique on the OEM side too. So like we said we are very opportunistic, but each one of them is going to be focused on the value of what we bring to the strategy.

Matthew Hewitt

Great. Thanks very much.

Jonathan Singer

Thank you.

Operator

Thank you. And our next question comes from David Turkaly with JMP Securities. Your line is now open.

David Turkaly

Thanks for that. I think you said in your prepared remarks that you expect OEM to grow in 2018 as part of your 280 to 290 guidance. I was wondering if we look at the divisions, your direct lines, should we anticipate that they grow, maybe sort of like they did in 2017 for the year? Any color sort of – and for those three or four other businesses in terms of what they might look like from a growth standpoint?

Camille Farhat

Yes. We anticipate that we’ll get contribution really across the portfolio and growth in line with as we said, we believe our spine growth target is twice the market that will move it likely manifest the stuff in the back half of the year as we get a ramp-up from Zyga and the new product launches, the OEM business we are continuing to see a demand across the portfolio that contribute to growth.

The surgical specialty businesses in particular, the dermis that’s being used in breast augmentation has a clinical superiority that the users really are beginning to recognize and so we anticipate that that should continue to see solid progression. And then I would say on the sports franchise, that’s relatively maturing and we haven’t invested as much to-date in the innovation.

And so we anticipate stability in that portfolio. And then international is a key focus and Enrico is doing a great job of getting that organizations focused and really on the five key countries plus China. We are working with our existing distributors and expansion of our overall distribution network and we anticipate that that’s going to be a core part of our growth going forward.

David Turkaly

Thank you. That’s helpful. Zyga if we can talk about again and again, I know it’s still kind of a smaller part, but you mentioned the team that Jim has build there and did you take on their sales reps and just for an update maybe you can tell us sort of what your force looks like today in spine?

Camille Farhat

So right now, we are still in the middle of the integration and yes actually, I would be also happy to report that some of the leaders that came from Zyga. We are excited to have them also lead some of the functions we have on the RTI side. So, we are seeing some of that. So it’s really good to round up our team that way.

From the sales organization, we really haven’t integrated yet or trying to understand the sales cycle, understand all of the details and so the team is coming in fact from the time that we did the acquisition as we are trying to make sure that we absorb that into our organization in the right way and continue the momentum that they have built and leverage the learnings that they have done. What is very clear here is, that you would have expected a smaller organization does everything.

I think we are going to be able to take some of the administrative stuff off their plate and be able to integrate into our spine franchise and as such then anticipate to help them accelerate the growth and treat more patients and identify and train more doctors. So that's kind of the integration plan at a high level.

David Turkaly

Thank you for that and I know you mentioned Fortilink in the prepared remarks. Could you just talk a little bit about your 3D capacity and will you be bringing more 3D printers in plants to market?

Camille Farhat

So I think that our low range plane we believe that this allows us to do things differently. One of the things that you get in the benefits of the 3D printing here is we are getting the translucency in a product that solved errors and problem. At the same time, I also feel that it does add an advantage in that through the 3D printing we are able to make a antimicrobially coded.

So to the extent that 3D printing solves the relevant problem then the answer is yes, but it's not a goal in and of itself, we think that yes as families of product whether the material or the infection reduction we feel that these are valuable and will be an integral part to our solution.

And again as everybody would expect 3D printing can facilitate for example part of the customization of instruments that some of the doctors like. So as a technology that facilitates solving a problem, yes it is part and parcel to our competencies that we are developing and products we are going to bring to market.

David Turkaly

Thanks a lot.

Camille Farhat

Thank you.

Operator

Thank you, our next question comes from Jayson Bedford with Raymond James, your line is now open.

Jayson Bedford

Good morning and thanks for taking the questions. So just a few, I guess first on spine, I realize it was a tough year-over-year comp, I get that. But typically there is a decent sequential lift to this segment we saw less of that this quarter and you may have answered the question with your last comment on Map3, but why the relative weakness given that kind of the strong trends over the prior three quarters.

Jonathon Singer

Yes so it's really a function of performance in the previous year in the comparisons and ease you remember we brought on a pretty significant GPO relationship last year and that was ramping up, and so you had really strong comps, is that stabilized and then you know you indicated that the headwinds from Map3 to a certain extent and the maturity of the hardware platform which we've been talking about.

Ever since Camille has been on board you know so that the performance overall last year was 5% which is generally in line with our goal of being twice the market growth rate and we anticipate you know similar performance this year but again we've had to make investments in innovation through the Zyga acquisition or the launch of Fortilink which are we generally going to have a bigger impact in the back half of the year.

Jayson Bedford

Okay, that's helpful and maybe Jon, just the EBITDA guidance of 32 to 38, I was a little unclear. Is that EBITDA or adjusted EBITDA.

Jonathon Singer

Adjusted EBITDA.

Jayson Bedford

Okay.

Jonathon Singer

Absent non-recurring charges it should be generally the same thing with the exception of stock comp, but it is adjusted EBITDA guidance.

Jayson Bedford

Okay, and then maybe for Camille, you mentioned simplifying the structure and I think in that press release you mentioned finalizing the remaining portfolio decisions. So I guess question is does the guidance assume further divestitures and maybe can you talk through the potential timing of some of these moves.

Camille Farhat

The guidance as provided does not assume any further divestiture in terms of actively managing the portfolio. I think you guys know and know us by now we usually don’t like to comment on that. But sufficed to say we don’t analysis. We think that there are opportunities to continue to align the organization towards our strategy in creating a long-term sustainable predictable higher margin and higher, better cash flow that would be deployed to using the spine opportunity to continue to grow that business with the opportunities we see. That is a long-term strategy and we continue to refine the portfolio to get to that.

Jayson Bedford

But Camille the expectation is that will be finalized at some point 2018.

Camille Farhat

I would say that the answer to that is it depends on the opportunities and it depends on what presents itself, but the guidance you have does not assume any adjustment for the portfolio we have.

Jayson Bedford

Okay, thanks. I will jump back in queue.

Camille Farhat

Okay. Thank you Jayson.

Operator

Thank you. [Operator Instructions] I'm showing no further questions at this time. I would like to turn the call back to Camille Farhat, President and CEO for any further remarks.

Camille Farhat

Thank you for your continued interest in RTI Surgical, we are confident that our three strategic goals focused on reducing complexity, driving operational excellence and accelerating growth will produce profitable and sustainable long-term growth.

We at RTI have early momentum on the three pillars of our strategy and the whole organization is focused on execution of our plans and acceleration of its impact throughout the next 12 to 24 months.

We look forward to updating you in our progress during our first quarter earnings call, in early May. Thank you guys and have a great day.

Operator

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