Hanger, Inc. (HNGR) CEO Vinit Asar on Q4 2021 Results - Earnings Call Transcript
Hanger, Inc. (NYSE:HNGR) Q4 2021 Earnings Conference Call March 1, 2022 8:30 AM ET
Vinit Asar – President and Chief Executive Officer
Thomas Kiraly – Executive Vice President and Chief Financial Officer
Kevin Ellich – Managing Director of ICR Westwicke
Conference Call Participants
Brian Tanquilut – Jefferies
Larry Solow – CJS Securities
Hello and welcome to Hanger's Fourth Quarter and Year-End 2021 Earnings Conference Call. My name is Adam (ph) and I will be coordinating the call today. [Operator Instructions] I will now hand over to our host, Kevin Ellich, Managing Director of ICR Westwicke to begin. Kevin, please go ahead when you were ready.
Good morning. And welcome to Hanger's fourth quarter and year-end 2021 earnings conference call. With us today are Vinit Asar, Hanger's President and Chief Executive Officer, and Thomas Kiraly, Executive Vice President and Chief Financial Officer. Some of the information discussed today will include forward-looking statements in the meaning of the Private Securities Litigation Reform Act of 1995.
These statements are subject to risks and uncertainties that could cause Hanger's actual results to materially differ from those we discussed today. Those risks include, among other things, matters we have identified in the forward-looking statements portion of our latest earnings release, and in our filings with the SEC. Hanger disclaims any obligation to update forward-looking information discussed on this call. And now, I'll hand the call over to Vinit.
Thank you, Kevin. Good morning. And thank you all for joining Hanger 's fourth quarter and full-year 2021 earnings call. Joining me in today's call is Tom Kiraly, Hanger 's Chief Financial Officer. This morning, I will provide high-level thoughts on our fourth quarter and full-year 2021 results including some of our operational highlights and ongoing strategic initiatives. I will also discuss the current operating environment and touch on our outlook for 2022 before I pass the call to Tom, who will provide details on our financial results for last year and our guidance for this year.
Yesterday after the close, we reported fourth quarter revenue of $312.4 million, which increased 12.6% and adjusted EBITDA of $37.2 million, which increased 4.9% over the prior year period. These results were consistent with our pre -announcement on February 7th. Although revenue for the quarter grew nicely on a year-over-year basis, our results were negatively impacted by the spike in COVID infections driven by the Omicron variant during December. For those of you who have followed us for a long time, you know the importance of the last few weeks of the year. We experienced seasonality in our operations and increased volume in our clinics towards the end of the calendar year, which we believe that due to patients reaching an annual deductible as they approach the conclusion of their benefits year.
This generally results in the month of December and fourth quarter being our largest periods of the year for both revenue and adjusted EBITDA. Not only did Omicron adversely impact referrals and patient visits during the latter part of the fourth quarter, but we also experienced a significant increase in sick leaves by our employees who were infected. The safety of our employees and patients are our priority. And unfortunately, the number of increased infections due to Omicron had a negative impact on our ability to deliver on our 2021 earnings guidance. We thought some continuation into the early part of the new year, but it appears the number of cases related to the Omicron variant are normalizing.
And we believe that the worst is behind us. Our business has also been impacted by cost pressures, inflation, and the labor shortage that has affected the U.S. economy generally, really more in the second half of 2021, which resulted in wage pressure, especially in certain job roles, such as our administrative and technical areas. With that being said, the results from our two business segments had some bright spots. Patient Care revenue increased 14.4% year-over-year during the fourth quarter, and it grew 13.4% for the full year. Same clinic revenue increased 5.8% and 9.1% for fourth quarter and full year 2021, respectively, compared to the same periods of the prior year. Turning to our products and services segment. Fourth quarter 2021 revenue increased 3.2% year-over-year, and 4.5% for the full-year compared to 2020.
A couple of things to highlight for our products and services segment. First, the team has done a nice job growing its business with the Department of Defense and the VA. In addition, sales of new products we added to our distribution business in 2021, contributed $3.6 million of additional revenue year-over-year, despite COVID and a challenging operating environment. Overall for Hanger, while our full-year results were clearly affected by COVID, we were still able to grow our revenues by 12% and adjusted EBITDA by 13%. Now despite the challenges posed by COVID in the last couple of years, I'd like to take a moment to put the progress we have made at Hanger in perspective.
During the last three years, we have increased our footprint from 780 to 875 clinic locations. With the recent clinic addition in Alaska, we now serve patients in 47 out of 50 states, plus Washington DC. Currently, we believe that one out of every four O&P patients in the United States seek care at a Hanger facility, which is an improvement from one out of every five patients a few years ago. Over the last couple of years, we have added dynamic leaders like Pete Stoy, our Chief Operating Officer to our leadership ranks.
Pete and his team have been keenly focused on market-based growth strategies, that will help drive continued growth and organic share gains in the Patient Care segment. Our investments in infrastructure, spanning our EHR system and our ERP system, combined with the strength of our revenue cycle and supply chain enhancements, have positioned us well to continue to scale this brewing business in the coming years. As I've told our employees, the pandemic has set us back on our growth plans only in terms of timing, and not in terms of realizing the full potential of our business model and growth plans.
While we have encountered some near-term challenges, primarily due to external factors like Omicron, and the inflationary environment. I want to talk about some of our accomplishments for 2021. First we went live with our state-of-the-art 150,000 square foot distribution center and Alpharetta, Georgia, which will enhance the in-stock availability of componentry, and reduced delivery times in the eastern half of the country.
The expansion of our distribution capabilities in Georgia has also allowed for the consolidation of the number of distribution centers from five to two by mid-year 2022, which is in line with the long-term supply things strategy we have previously outlined. I also want to commend our supply team and fabrication teams, who demonstrated incredible results during the fourth quarter, making sure we had adequate inventory and substantially on-time delivery, despite the worldwide supply chain interruptions. Second, we successfully implemented the financial module of our ERP with the move to an Oracle cloud-based system.
It was a seamless transition with no disruptions, which is a testament to our finance and IT teams and all those involved in the implementation. Third, in November, we fortified our balance sheet by refinancing our revolver, resulting in a greater capacity, a lower interest rate, and an extended maturity. Given the inflationary and rising interest rate environment, it was timely and a great move by Tom and the finance team. Lastly, our acquisition pipeline remains robust. We acquired eight independent O&P businesses during the fourth quarter. And as a result, continued to welcome high-level clinical and management talent into Hanger. Our M&A pipeline remains active and we will continue to deploy capital to grow and add to our business supplementing our organic growth efforts.
In addition to these 2021 accomplishments, we have been pushing a few strategic initiatives that will further support our growth plans. Beginning with our pediatric strategy, Dr. Jim Campbell, Pete Soy, and their teams, have started to implement a highly effective network approach for our pediatric cranial patients and their families. This is the first step in ensuring we drive growth in this area while enhancing the care provided to these children. This initial focus on our cranial patients, which began earlier in 2021 has clearly demonstrated strong results that we are building on as part of an overall pediatric strategy. Another strategic initiative I want to highlight is our partnership with Zimmer Biomet.
This small pilot program using Zimmer Biomet's Mymobility platform, links with the personal device, to provide targeted education, exercise guidance and insights into daily activities for our prosthetic patients. There is a lot we can learn by collecting data in this manner to improve outcomes for our patients. Speaking of data, every healthcare company is now our data repository of sorts. As such, our clinical outcomes programs and data strategy are increasingly informing our business model and care pathways. As an example, Hanger recently published the SAFE-AMP manuscript in the Journal of Assistive Technology. The insight from this analysis provides guidance on the appropriateness for providing microprocessor needs to patients with diabetes, mitigating the costs associated with injuries fall that are more likely to occur when patients are fit with eight non-microprocessor knees.
In a separate study, our research confirmed that individuals who received the prosthesis earlier post amputation, had significantly lower total healthcare costs compared to those with no prosthesis within 12 months of amputation. Additionally, early receipt of a prosthesis following amputation results in reduced healthcare utilization, noting specifically the odds of ER department visit are reduced by 32%. It is these extra findings that we are using to communicate with payers and referral sources to further validate the need for outcomes driven care and appropriate reimbursement. As a result of our efforts in recent years, we believe Hanger is now in the unique position of having the largest clinical outcomes database for prosthetic patients in the world.
Our intent at Hanger is to use data to drive actions, which leads to better clinical outcomes, more efficient care delivery, and lower healthcare costs. We continue to be encouraged by the progress we are making. Before I provide some high-level thoughts on our 2022 outlook, I want to applaud our team for weathering another year of the COVID storm. It has been a challenge in the team and sacrificed and risen to the occasion. While 2021 wasn't exactly what we expected, nor wanted to be, we were able to continue to make investments in areas that will have laid the foundation for years to come.
I believe 2022 will be a year for Hanger to begin to show its true potential. With our pre -announcement on February 7, we introduced 2022 revenue guidance, which represents 6% to 9% year-over-year growth, while our adjusted EBITDA guidance represents 7% to 11% growth over 2021. We expect to implement growth in our Patient Care segment to be approximately 5%. Given the current operating environment, coupled with cost pressures, inflation, and labor issues, we believe this to be a prudent outlook for the year. Tom will provide more details on our 2022 guidance shortly. In closing before I turn the call over to Tom to discuss our financial results, I want to thank our entire organization for their effort, dedication, and sacrifices to generate these financial results.
In early February of this year, Hanger was named Forbes list of Best Mid-sized Employers. This is a great accomplishment for our company and illustrates the commitment and dedication of the entire organization. Although 2021 didn't play out as we expected, I'm appreciative and truly amazed by the things we accomplished during the second year of this pandemic. We continued to strengthen the foundation for Hanger through hard work and focus, coupled with investments, that strategically positioned us to gain share and provide the highest quality care for our patients and customers.
Now is the time to focus forward, and I clearly believe that we can begin to unleash the full potential for Hanger in 2022. I want to thank everyone on the call for your continued interest in Hanger. With that, I'll turn the call over to Tom, who will provide more details on our financial results and guidance. Tom.
Thanks Bennett, and good morning. Has been shareable fourth-quarter results fell short of expectations. It's important to recognize the significant growth in revenue and earnings which were achieved despite, a continuing adverse effects of COVID-19. Fourth-quarter net revenue of $312.4 million reflecting growth of 12.6% over the prior-year period. Adjusted EBITDA of $37.2 million reflected an increase of 4.9% for the quarter. Looking at the full year, reported net revenue was $1.12 billion, which reflected growth of $119.3 million or 11.1%. Adjusted EBITDA was $118.9 million, which reflected an increase of $13.8 million or 13.1% over 2020.
Looking more closely, our performance by business segment results for our Patient Care segment operating even more favorable underlying comparisons to the prior-year period. Fourth-quarter, Patient Care revenue grew by $33.6 million or 14.4% as compared to the fourth quarter of 2020, and adjusted EBITDA grew by $5.5 million or 12.1%. Net same clinic revenue increased by 5.8% over Q4 2020 on a day adjusted basis, and was 95% at the level reported during the fourth quarter of 2019. Asil we've discussed, results for the quarter were primarily affected by the emergence of the Omicron variant, and secondarily, due to increases in labor costs.
We believe the disruption caused by employee absences due to Omicron infection, and the related quarantine contributed to the loss of approximately $6 million to $8 million in revenue in the fourth quarter. This also resulted in the build-up of undelivered work-in-process devices at the years end. Given the Patient Care segments ' high flow group for each incremental revenue dollar, you can see how significant the impact was on fourth-quarter results. For the full year, same-clinic revenue growth for the 2020 in our Patient Care segment was 9.1% and same clinic net revenue was 97% of 2019. Volume growth constituted 8.5% of our 9.1% in clinic growth rate for the year.
The relatively strong growth rates in Patient Care revenue and earnings over the fourth quarter of 2020 were partially dampened by a relatively stable performance in a products and services segment and an increase in corporate expenses. The product and services segment reflected revenue growth of $1.4 million or 3.2% in a modest decline in adjusted EBITDA of $700 thousand. The overall margin in products and services declined from 17% in the fourth quarter of 2020 to 14.9% in the fourth quarter of 2021. This margin decline was primarily due to growth in lower-margin distribution services revenue, and an increase in personnel and private costs within the segment.
During the fourth quarter of 2021, corporate expenses increased by $3 million over the prior year fourth quarter. This was primarily due to the recommencement of our corporate financial and supply chain systems implementation projects, increases in other technology spend, and increased personnel expense. Now, I'll spend a few minutes discussing the effects of inflation on our 2021 results and our 2022 outlook. As discussed in prior calls throughout 2021, we have been able to manage our material costs in a manner that for the most part, as mitigated increases in our unit component pre -costs. We also have not experienced any noticeable disruption due to stock outs. As we enter 2022, we currently do anticipate that we will begin to experience some increases in underlying material costs.
To mitigate these increases, we have put in place certain new clinician formulary in purchasing preference programs, which should enable us to moderate the effects of inflation. From a labor cost perspective, as is common in today's business environment, employee turnover and rising labor costs we're off to an increase and be affecting us. This is occurring particularly in our clinic administrative and technical roles, as well as in our distribution center positions. We currently estimate that wage inflation has increased our average salary growth by 100 to 150 basis points over our past rate.
In 2022, we believe we can effectively manage these inflationary trends while offsetting them with what we estimate will be an average price growth of approximately 3%. This is reflective of the 5.1% Medicare rate increase for 2022, which affects approximately 50% of our Patient Care reimbursement, coupled with increases from commercial payers. Through these pricing increases along with the benefit of approximately 2% volume growth. We should be able to maintain our overall adjusted EBITDA margin in 2022. Now I'll provide some comments on the company's cash flow from operations. In the fourth quarter of 2021, Hanger produced $35.6 million in operating cash flow, which compares favorably to the $30.3 million generated in the fourth quarter of 2020.
Operating cash flow was aided in 2021 by a decrease in disallowances and patient nonpayment, which declined from 4.5% of adjusted gross revenue in 2020 to 4% in 2021. During the year, free cash flow also benefited from lower than planned capital expenditures. In 2021, capital expenditures were $24.9 million, which was roughly $5 million less than the $30 million range we'd originally planned for during the year. As of December 31, 2021, we had $61.7 million in cash and cash equivalents. When coupled with our newly upsized revolving credit facility, this provided us with available liquidity of $191 million. This level of liquidity was achieved despite using $80.1 million in cash for acquisitions, and our increased investment in working capital during the year.
As a reminder, we took some strong working capital reduction actions in 2020 in light of the pandemic and we reversed those during 2021, which has now brought it back to more normal levels. In connection with our management of cash flows and increasing revolver capacity, we were pleased that Moody's noted our improved liquidity position in the February analysis and release on the company. With this new level of cash and liquidity, we're on an excellent position to both continue or acquisition strategy during 2022, as well as support our desire to gradually reduced leverage. With net debt of $461.5 million as of December 31st, 2021, Hanger's net leverage ratio was 3.9 times trailing 12-month adjusted EBITDA and is 3.6 times the midpoint of our 2022 guidance.
Shifting to our 2022 outlook, we believe that revenues Hanger produced in 2021 will serve as the new base for future growth. As we announced in February 7, we currently estimate that are staying clinic growth rate will be approximately 5% during 2022. This is comprised of the price growth of approximately 3% as spoke of earlier, coupled with 2% in volume growth. We believe that the volume growth of 2% will be supported by generally more favorable referral and patient conditions. More stable operations due to future variants have any less disruptive effect, and the benefit of current sales and marketing initiatives.
Overall, Patient Care revenue growth will be aided by approximately $35 million in the annualized revenue effect of acquisitions completed in 2021. These and other operating trends of less estimate that our 2022 net revenue will be in the range, between $1.19 billion to $1.22 billion, and adjusted EBITDA will be in the range between $100.7 million to $132 million. The midpoint of our guidance reflects total revenue growth of approximately 8%, and adjusted EBITDA growth of roughly 9%. With that, I will turn the call back over to the Operator to open it up for any questions that you may have.
Thank you. [Operator Instructions] When preparing to ask your question, please ensure your headset is fully plugged in and unmuted locally. [Operator Instructions] Our first question today comes from Brian Tanquilut, from Jefferies. Brian, please go ahead. Your line is open. Brian from Jefferies, your line is open, please ask your question.
Vinit, can you hear me okay?
Yes. We can hear you fine.
Can you me? Okay. Perfect, there you go. Thank you. Good morning and appreciate taking the questions. Thanks for all the color on the growth plans in the growth initiatives, but wanted to see if you can give us more color on some of the things that you're doing in terms of the thing you talked about the buyers, Zimmer Biomet and a few of the other things you're working on. So just maybe if you can share with us how you're thinking this will all play out in terms of driving growth acceleration, number one, and how it seems like you're gaining market share. I mean, is that where this will come from? And just trying to get a gauge of or you get a sense of how this will all shake out.
Sure, thanks, Brian. So our strategy over the years has been fairly consistent in terms of focusing on the organic growth side and the inorganic growth side. This year, what we're sharing with you all is a little more color on especially in the organic growth side. So one of the -- I'll touch on three of the initiatives we've got going. One of them is we've got this market-based approach. We've looked at all the MSA's across the country and the O&P dollar spend and all the MSA's. And we've put in place strong leadership in some of the key markets, the key MSA's, and given them resources to go out and do their own local growth strategies and capture share in those specific markets.
So this market-based strategy that Pete has implemented is picking up steam at the current time. I touched on the pediatric strategy as I touched on during my prepared remarks, we believe there is opportunity here, in focusing on the pediatric segment of O&P. During 2021, we announced a national network of our pediatric cranial specialists, and we really saw terrific results in 2021. So we're going to build on that pediatric approach in 2022, focusing on the pediatrics side of O&P as well.
And then just to touch on in terms of our approach on the commercial side, we also believe that given our footprint and our infrastructure and the clinical talent we have, we're really well-positioned to support the workers ' comp providers. So we've put in a team that's going to be focused on providing support to workers ' comp providers, and patients that come in through that angle as well. So that gives you a sense for how we're focusing on organic growth. We believe that's helped us gain market share in 2021, and that will continue to help us gain organic market share in 2022 and beyond. And then of course, we supplement that with our acquisition strategy that we've shared with you.
I appreciate it the color, Vinit. Just to that last point. So as I think about capital deployment, right? I mean, as the business stabilizes and you return to a growth trajectory, how are you thinking about capital deployment priorities right now between acquisitions that pay down and whatever else is out there.
Brian. As you know, when you look at the return on investment from the M&A strategy, it's -- it really is superior to the company's other alternatives. And in addition to that, and probably more importantly, the M&A has been very strategic in terms of our ability to really concentrate key markets and build economies of scale in those markets really improve patient access and to lower our overall cost structure. So M&A is continuing to be an attractive use of capital.
Now with that said, a very, very important parallel objective is our ability to reduce debt. And we're very sensitive to the amount of leverage the company's carrying. We've had a commitment and continue to have a commitment to bring it down. We've primarily been focusing on doing that through EBITDA growth. But I wouldn't set aside the possibility that with the company's free cash flow, we take more proactive measures to address that as well.
Got it. And then some last question from me as I think about just the comment Vinit made on growth, the market share gains that you guys are seeing and trying to reconcile that with the guidance that you gave 2% volume 3% rate. So is that just conservatism? Because I'm guessing the market's growing in that 2% range as well. And then maybe the follow-up to that just on pricing, you're getting a 5% rate increase from the government. So backing it, did it come like 1% commercial? Is there opportunity to bump up commercial rate growth given the inflationary environment that we're in?
Yes. So on the market share side, it's difficult to judge the market growth rate, but we've traditionally felt that given the broad base of the market it grows at the rate of population. And as we know, population's growing pretty modestly, 0.5%, 0.8%. So when you look at that additional growth, that's clearly market share expansion, as clearly as the company taking ground. And when you look at 1% growth, call it $10 million in round terms. That's about a quarter point of market share, if you call the market about 40 million per 1%. So that's a pretty meaningful organic commitment. And certainly if there's a natural recovery in the market that helps us achieve the 2%. But I would characterize the 2% as being a very realistic estimate.
At this point, we could outperform it, but we could underperform it, as well. And then from a standpoint of the second question on the commercial carriers, they obviously are the more difficult side of our reimbursement equation. We're having constructive discussions with them. We have baked in a certain amount of the achieved commercial rate growth into our guidance for the 3%, but we've got more work to do and we're very heavily committed to being very assertive with the payers on the importance of them recognizing the value of our care to their members.
Awesome, thank you.
[Operator Instructions]. The next question comes from Larry Solow with CJS Securities. Larry, please go ahead. Your line is open.
Good morning, gentlemen. Perhaps a couple of follow-ups to Brian, and some on your initiatives. They're more blocking and tackling and swinging for the fences, but more on the investment side. You guys touched on and I know with the you have switched over to the Oracle cloud-based system, and you said you've also re-implemented some of your supply chain investments. But if I look back, if I remember before in late '19 or early '20, you were going to spend somewhere between $30 million and $35 million in 2020 and 2021.
Supply chain and IT investments, and it sounds like those are being accomplished. I am trying to tie it all together timeline and stuff. Now to the ERP systems is up and running, how does it help you guys? From a financial point of view and everything put together, you still get spend what you were planning on spending? Do we start to see some of those? Are there actual tangible benefit, we can look forward to down the line in a couple of years?
Larry so in fact, we have been spending underneath all of this and despite COVID, we've remained committed to that strategy and have been realizing the benefits from it. We spent in total probably around $13 million. All those various initiatives during 2021 and about -- just about $5.5 million to $6 million was spent through the P&L on primarily the ERP spend, which we don't capitalize, which we do expenses were installing that. And we have probably about 5 million of capexthat we incurred primarily with our fabrication facility. So we've been committed to that investment and it is an ongoing operating investment, I would say in addition to an investment, we are as a company, we're transformative and we're going to continue to go and advance our systems that advance our processes.
Now from a return standpoint, we are realizing the benefit of disinvestment. One of the things that's enabled us to do is to really cut our freight expense and enjoy some good freight savings and some better efficiencies in terms of the way that we distribute product to our clinics and to our third-party provider customers. So when you when you look at that, it's been a beneficial effect, it does get shadowed or overcome a bit by this overall COVID effect and some of the inflation that we're seeing in freight rates and things such as that. But so far, we've been very pleased with how the underlying investment has paid off.
Great. A follow-up on the 2% volume growth for '22 and perhaps some of the revenue that would sort of pushed out into Q1, maybe that's a rounding error for the full-year. But I'm assuming you're including that sort of in Q1 and I guess Part B of that question is, does this impact the normal cadence at all because I know normally we're Q1 barely profitable. Does that -- I suppose still will be the least profitable quarter of the year or perhaps supplemented a little bit by this push out or but then obviously with some world COVID earlier on in the quarter. So just trying to shift that all out, maybe give us a little more color on that.
Yeah Larry, absolutely when you look at the $6 to $8 million, we did incorporate that into our guidance. It is one of the factors that's assisting us with the 2% volume growth for the overall revenue estimate. Now the challenges, we were also affected in January by Omicron. Omicron did affect adversely the first quarter, that $6 to $8 million should positively offset better assist us in that. So it's very hard to look at Q1 and say that it's going to be anything other than balance on balance a normal quarter. And to your point, a normal quarter for Q1 for us because of seasonality, typically is that we get maybe 5% to 10% of the year's earnings in the first quarter. So it's a very lower earnings quarter due to that extreme seasonality and it's really not determinative as we've seen in past years of how the company is going to do on the full year.
Right. And just touching again on the acquisitions, looking at these spec 40 million in Q4, $80 million for the year. That's a real step-up from what you've come to normally spend. I guess my question there and it sounds like the pipeline is still got a lot of opportunities, but I suppose you can't keep spending this -- not putting this month a capital into acquisitions. And also want to reduce your debt load. L.B. Challenging tests.
Yes. We're clearly balancing the two. Larry, we do have a pretty solid pipeline as I indicated in the prepared remarks. There's some really good regional players still out there that we believe would make good fits to join the Hanger clinic network. So we believe the acquisition pipeline is strong. And we believe we will continue. We're balancing, of course, this issue around leverage that Tom pointed out. And we will keep making prudent acquisitions. A lot of times we like these acquisitions because they are a good fit geographically or culturally and sometimes we do walk away from them. So we're very selective in the acquisitions that we bringing in. But right now the pipelines pretty solid.
Great. Just throw one last question just on the old ARP system business, I guess, the therapeutic pieces inside the hospital. It looks like I haven't heard too much about is that our business has held up through COVID. I guess it looks like capex in that business and drops significantly over the last few years. Is that a sustainably lower level?
Yeah. That therapeutic solutions business is highly dependent, as you know, on the skilled nursing facility environment that hasn't,that environment hasn't stabilized, but the business appears to have stabilized during 2021. We've expanded the portfolio of product offerings and that's been recognized by our customers. Of course it's a small piece of our overall business. But we're monitoring what goes on in the skilled nursing facility environment in this coming year.
And then Larry, to the second part of your question, relative to the capex. Recently, the capex came down there as we had done equipment refresh several years ago, and changed that all that equipment and we're done with that refresh. You're looking at a more normal level of equipment investment for that business.
All right, got it. I appreciate the color. Thanks, guys.
As we have no further questions. This concludes today's Q&A session and thus concludes today's call. Team thank you very much for your attendance. You may now disconnect your lines.
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