Globus Medical, Inc. (GMED) CEO Dan Scavilla on Q1 2022 Results - Earnings Call Transcript

May 10, 2022 5:57 PM ETGlobus Medical, Inc. (GMED)
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Globus Medical, Inc. (NYSE:GMED) Q1 2022 Earnings Conference Call May 10, 2022 4:30 PM ET

Company Participants

Brian Kearns - Senior Vice President, Business Development & Investor Relations

Dan Scavilla - President & Chief Executive Officer

Keith Pfeil - Senior Vice President & Chief Financial Officer

Conference Call Participants

Shagun Singh - RBC Capital Markets

Matthew O'Brien - Piper Sandler

David Saxon - Needham and Company

Kyle Rose - Canaccord

Jason Wittes - Loop Capital

Richard Newitter - Truist

Vik Chopra - Wells Fargo

Operator

Welcome to the Globus Medical's First Quarter 2022 Earnings Call. At this time, all lines will be on mute and a Q&A session will be held after the prepared remarks. [Operator Instructions]

I will now turn the call over to Brian Kearns, Senior Vice President of Business Development and Investor Relations. Mr. Kearns you may begin.

Brian Kearns

Thank you, Richard and thank you everyone for being with us today. Joining today's call from Globus Medical will be Dan Scavilla President and Chief Executive Officer; and Keith Pfeil, Senior Vice President and Chief Financial Officer. This review is being made available via webcast accessible through the Investor Relations section of the Globus Medical website at www.globusmedical.com.

Before we begin, let me remind you that some of the statements made during this review are or may be considered forward-looking statements. Our Form 10-K for the 2021 fiscal year and our subsequent filings with the Securities and Exchange Commission identify certain factors that could cause our actual results to differ materially from those projected in any forward-looking statements made today.

Our SEC filings including the 10-K are available on our website. We do not undertake to update any forward-looking statements as a result of new information or future events or developments. Our discussion today will also include certain financial measures that are not calculated in accordance with Generally Accepted Accounting Principles or GAAP. We believe these non-GAAP financial measures provide additional information pertinent to our business performance.

These non-GAAP financial measures should not be considered replacements for and should be read together with the most directly comparable GAAP financial measures. Reconciliations to the most directly comparable GAAP measures are available on the schedules accompanying the press release and on the Investor Relations section of the Globus Medical website.

With that, I'll now turn the call over to Dan Scavilla our President and CEO.

Dan Scavilla

Thanks Brian and good afternoon everyone. Q1 sales were $231 million or 1.4% growth with non-GAAP EPS of $0.42 a share and an adjusted EBITDA of 32%. These results reflect modest revenue growth against a difficult prior year comp coupled with COVID-related revenue impacts in key countries and a slower capital purchasing quarter.

While these revenue headwinds impacted EPS and adjusted EBITDA results, it is important to point out that we remain unaltered in investing in our strategy of above-market growth by increasing investments in R&D resources competitive rep recruiting and surgeon education, focusing on the goal of sustained long-term growth.

US Spine grew 3% for the quarter against headwinds of a challenging Q1 prior year comp of 20% growth coupled with additional COVID impacts. January was slow as noted in our Q4 earnings call. February showed sequential improvement and March became our highest sales month on record.

The strong performance continued in April where we achieved our highest average daily sales. In addition our competitive recruiting pipeline is strengthening, which is a leading indicator of future growth.

Enabling Technology sales were $13 million, down $2 million from prior year due to lower placements in the quarter. After a record Q4, we experienced a slowdown in hospital purchasing as administration focused more on COVID and staffing shortages in Q1.

Robotic procedures and implant pull-through continued to accelerate, growing 27% versus prior year and surpassing approximately 31,000 robotic procedures performed since launch.

Entering Q2, our pipeline is stronger and we're focusing on driving robotic sales throughout the rest of the year. In May, we began shipment of our Excelsius 3D imaging system and successfully completed the first surgeries in several sites. Surgeons have said this is a game changer. Excelsius3D is a 3-in-1 imaging platform offering three image modalities in the single cart with high maneuverability a large field of view and seamless integration with our ExcelsiusGPS Robotic Navigation System. It is a key component to realizing the Globus ecosystem in the operating room. Market interest is high on the state-of-the-art technology and customer orders continue to grow. Excelsius3D is positioned to be a major growth driver for us as we continue to penetrate the market.

On the international front, our spinal implant business was flat in Q1. Strong mid-teens growth, driven by the UK, Italy, Belgium and Brazil was offset by declines in Japan, a trend we identified last year and expect to continue through the third quarter. We remain positive on the potential of our international business for long-term growth, as we continue to reset the Japanese market.

Our Trauma business delivered its strongest quarter to date with 61% annual and 28% sequential growth, driven by sales force expansion, strong uptake of our ANTHEM Mini Frag Plating System and double-digit growth in every product family. We're on track to launch meaningful products throughout the rest of 2022, while investing in future product lines and sales force expansion.

In Q1, we launched HEDRON P, a 3D printed articulating lumbar interbody spacer, adding to our HEDRON portfolio, one of our fastest-growing product lines, as well as increasing the articulating spacer offering along with Signature and Altera. As we move into the rest of 2022, we remain focused on three core elements for long-term growth, innovative new product introductions, robot and imaging placements and competitive rep recruiting. I'm pleased with the record US sales in March, April's highest average daily sales record, the Excelsius3D imaging system launch and the strengthening competitive rep pipeline. Globus Medical is well positioned to achieve our mission of becoming the preeminent musculoskeletal company in the world.

I will now turn the call over to Keith.

Keith Pfeil

Thank you, Dan and good afternoon everyone. Our Q1 results reflect continued growth coming off strong prior year comps, almost facing COVID impacts through much of the quarter. Our business remained resilient and our core approach and fundamentals remained intact. Q1 revenue was $230.5 million, growing 1.4% as reported and 1.9% on a constant currency basis.

Ongoing COVID impacts affected procedural volumes in the early part of the quarter, which began to improve in February, however we did not see consistent momentum building until March. Our capital business also experienced softness in Q1, reflective of slow development of our robotics pipeline in the early part of the quarter, with many hospitals limiting access and shifting their focus to managing through the uptick in COVID cases, while also managing staffing shortages. As we approach the middle of March and entered into the second quarter, our pipeline showed improvement, as deal activity and discussions ramped up. We remain confident in driving this business forward as we progress through 2022.

Moving further into sales. Our Q1 musculoskeletal revenue was $217.4 million, growing 2.3% as compared to the prior year quarter, driven primarily by growth in our US Spine business, which was partially offset by lower Japan sales. The declines in Japan are primarily related to our continued Japan commercial transition to a direct sales force. Q1 Enabling Technology revenue was $13.1 million or 11.9% lower as compared to the prior year quarter and is reflective of my earlier comments around our robotics pipeline.

First quarter US revenue was $196.4 million, growing 1.6% as compared to the first quarter of 2021, driven by growth within US Spine, partially offset by lower INR revenue related to robotic sale.

International revenue for the quarter was $34.1 million, essentially flat to the first quarter of 2021, which was driven by my earlier comments around our Japan sales transition and in line with our expectations. Excluding Japan, our international business grew in the mid-teens as we continue to drive deeper penetration of Spine, within our focus countries mainly within Western Europe and Latin America.

First quarter gross profit was 74.3% compared to 75.8% in Q1 of 2021. The lower gross profit was primarily the result of manufacturing inefficiencies related to our new plant higher inventory write-offs increased freight costs and product mix. The higher inventory write-offs are primarily related to increased scrap costs within our biologics business and implant manufacturing, while the increased freight expense was driven by fuel surcharges and freight mix change.

We estimate a roughly 30 to 40 basis point impact to gross profit as a result of inflation which is primarily the increased freight costs as well as some slightly higher raw material costs. Looking ahead we expect gross profit to remain in the mid-70s as we progress through 2022.

Our research and development expenses for the quarter were $17.4 million or 7.6% of sales compared to $14.9 million or 6.6% of sales in the first quarter of the prior year. The increase in spending both in dollars and as a percentage of sales is consistent with comments made in 2021 regarding our plans to increase investment across our business primarily within Spine and Enabling Technologies, which will further position us to drive our class-leading capabilities.

SG&A expenses for the first quarter were $100.7 million, or 43.7% of sales compared to $97.9 million or 43.1% of sales in Q1 of 2021. The increased spending is primarily due to a return of pre-COVID levels of spending around travel and entertainment meeting expenses and training events. This increase in spending is partially offset by lower comp and benefit costs as well as lower bad debt expenses.

Overall, this increased level of spending is consistent and in line with our expectations. The effective income tax rate for the first quarter was 22.1% compared to 20.7% in the first quarter of 2021. The increased rate was driven by lower tax benefits associated with stock option exercises.

GAAP net income for the quarter was $38.1 million, and non-GAAP net income was $43.9 million which delivered $0.42 of fully diluted non-GAAP earnings per share. Adjusted EBITDA was 32.2%, as reflective of my earlier comments on sales gross profit R&D and SG&A impacts. We ended our first quarter with $1.02 billion of cash, cash equivalents and marketable securities. Our Q1 net cash provided by operating activities was $44.7 million and free cash flow was $24.7 million.

Our Q1 free cash flow is reflective of working capital investments and inventory mainly within our INR business as well as higher CapEx focused primarily on machinery and equipment. The company remains debt free. Our full year 2022 guidance remains unchanged at $1.025 billion in net sales, and $2.10 in fully diluted non-GAAP EPS.

Looking ahead, we remain extremely positive around our expectations for the remainder of the year and we will remain well positioned to execute and drive growth against our objectives. Our team is committed to driving value over the long term, for our patients, our customers and our employees.

We will now open the call for questions.

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And our first question on line comes from Shagun Singh from RBC Capital Markets.

Shagun Singh

Great. Thank you so much for taking the question. I'm going to start with one on capital. It does seem that Q1 was soft and we've heard it from several other companies. Can you just put a finer point to it? How much of it was pulled through to Q4 due to, I guess, remaining COVID dollars? How much of it was typical seasonality versus the COVID related delays that you talked about due to staffing shortages? And what trends are you seeing in Q2? You did mention that the pipeline is strengthening. But will Q1 and Q2 kind of net out to where you expect it to be? And any comments you can provide on your outlook for 2022. It does appear that hospitals are facing more margin pressure. So do you expect it to impact spending on medical devices in any way? And then I have a follow-up.

Keith Pfeil

Okay. Thanks again. This is Keith. I'll take the first part of that. Capital as we -- as I mentioned a couple of weeks ago, the capital business -- the pipeline really didn't develop in Q1. You commented that some of other competitors made comments regarding the capital environment. Really what we didn't see was the maturation of the pipeline. So as we get through the quarter, we want to see deals progress and we didn't see that happening during the quarter.

And the feedback we're getting is hospitals returning our attention to dealing with COVID for fear of a potential uptick, but also dealing with staffing shortages and focusing on that being the critical thing they needed to work through. We saw that really start to improve as we got to the back end of the quarter. And as I sit here in the second quarter, the pipeline what we're seeing that we didn't see in Q1 is that maturation of it, as we progress through the quarter. So we feel better about where we're at with robotics and capital entering Q2.

Plus, the other thing to think about is we have our imaging systems are starting to ship. That's creating a bolo discussion around global ecosystem and enabling technologies. There might have been one or two other points that I didn't catch there Shagun, but that's my general overview.

Dan Scavilla

I'll add to that Shagun. As I would think back to your latter half of that question, very difficult for us to predict what hospitals could or would do. We don't know what the environment is. We'll keep our eyes on that. But as we're signaling today by keeping our guidance consistent, we believe we have enough muscle to actually deliver these results albeit we may throw levers differently to get there, but to-date with capital we're not seeing any reason why we'd want to back away.

Shagun Singh

Got it. That's really helpful. And just as a follow-up, can you just talk about the cadence of growth through the balance of the year for sales and EPS. I think consensus is looking for $262 million in sales and $0.53 in EPS in Q2 and it implies a pretty rapid sequential increase of 14% and 27% higher than would it has been pre-pandemic. Obviously, Q1 was soft as well, but any color on cadence would be helpful? Thank you for taking my questions.

Keith Pfeil

Thanks Shagun. This is Keith again. We haven't really given quarterly guidance and we don't really plan to start. I think where we're at today is we're reaffirming guidance for the full year. We remain positive about where the business is and really look forward to getting further into the year.

Shagun Singh

Thank you.

Operator

Thank you. Our next question on line comes from Matthew O'Brien from Piper Sandler.

Matthew O'Brien

Hi. Thanks for taking my questions. Either Dan or Keith. The total spine number that you're projecting for the year, I think, that's kind of implied by guidance is less than what you guys saw in 2019. And again, I don't have perfect numbers here. But in 2019, you did -- you were up about $68 million year-over-year. In spine this year, I think, it's more like $41 million. I know OUS is a headwind but you've got the 3D tailwind. So why is it that the Spine business would be slower kind of than what we saw in 2019? And is there specifically anything on the expandable side, which I think is a couple of hundred million bucks for you guys that where you're seeing incremental pressure?

Keith Pfeil

Yeah. I mean -- this is Keith. Thanks for the question. I would say that there -- we haven't really gotten into trending out and projecting what our US Spine business is going to be for the year. But, when we step back and look, we've grown pretty significantly between 2019 to 2020 and then 2020 to 2021 we obviously had a great year. As we look at the dollars that we've added to our business really the primary drivers of that are, again, our new product launches, our competitive were up precutting and the pull-through from robotics. We don't see that changing. We're going to continue to double down and work to increase the business.

Dan Scavilla

Yeah. Matt, I would just say maybe we could have a conversation later. I'm probably not lining up with your calculations on that, because we see very strong growth, continued growth of our sales are Spine, including new product launches, which are going to be fairly strong this year. So, I don't think I would come up to that same conclusion.

Matthew O'Brien

Okay. And Dan, you're still doing well in expandables?

Dan Scavilla

Absolutely. Keep in mind that we've got so many generations of that. That's one of the main drivers for us to date.

Matthew O'Brien

Okay. And then, a quick follow-up is on 3D, feedback on that one that we get is unbelievably strong. Should we expect that to be a $15 million, $20 million product for you guys this year? Thanks.

Keith Pfeil

As we look out to the year we haven't given specific guidance on what we felt the sales will be this year. I will say that we still -- we have more than double-digit orders. The enthusiasm is great. Every time someone sees this product, they want to buy one and we remain excited to achieve our year in our guidance.

Matthew O'Brien

Got it. Thank you.

Operator

Thank you. Our next question online comes from David Saxon from Needham and Company.

David Saxon

Good afternoon, and thanks for taking the questions. Maybe I'll start with the Spine business in Japan. I think if memory serves, last quarter you were expecting that business to return to growth in the second half. It sounds like that might be pushed to maybe third quarter or fourth quarter. So, just wondering if anything has changed there, or I guess, what's the plan to kind of get that business back on track?

Dan Scavilla

Thanks David for the question. So, obviously fourth quarter is the second half of the year. And so we're going to continue on that path. Nothing has really shifted with that other and I've gotten a little more precise as to the quarter since the last time we spoke. That said, I will tell you, I'm bullish on Japan. When I look at the leadership team we're putting in place, the sales team we have in place, the surgeon interest from recent events that we've had, I do see this as a very large area for us over the next coming years. And so, we're going to do what's right by cleaning up and going direct. And with that, we'll continue to contract to that point. And then once we stabilize, I expect significant growth going forward.

David Saxon

Okay. That's helpful. And then, maybe I'll just ask my follow-up on the Recon robot. Any update there in terms of time line? And then, how should we think about the robot launch? Do you feel like you have enough in the StelKast portfolio today to support that launch? And then, any plans for hiring ahead of that expected launch? Thanks so much.

Dan Scavilla

Okay. So I would tell you that we're progressing well with the robot. We have yet to file and get approval. I would always be difficult to call out where that is at this point in the acceptance rate. But I will tell you that with the features and the feedback as we develop it with surgeons, it's very promising and it will be a major part of our portfolio, doubtfully this year though as we go with that. At the same time we have been reinvigorating the tell cast or now Globus Ortho portfolio to match with that. And that is paired to be filed and launched in unison with the robot to give us that way. And, yes, you are correct. We have plans to expand our commercial team and that's something that we'll most likely get more active with in the latter part of this year as we get more product status and decide when to pull that trigger.

David Saxon

Great. Thank you.

Operator

Thank you. Our next question on line comes from Kyle Rose from Canaccord.

Kyle Rose

Great. Thank you for taking the questions. I just wanted to ask one about capital allocation. I mean we've seen some big dislocations of valuations in the public markets. You've got $1 billion in cash on the balance sheet no leverage. You've talked in the past about being acquisitive strategically. I just wanted to see if the weakness we're seeing in the public markets if that's creating a buying opportunity and if you think that we should expect an increased period of M&A on the part of Globus moving forward?

Keith Pfeil

Thanks for the question. This is Keith. I would say that your -- that's accurate from the standpoint of thinking about M&A. We're always out there looking at M&A. One would have thought when COVID happened that there would have been great buying opportunities but the market really took off. As we're seeing rates climb, we're seeing a general -- generally speaking inflation there's talk about a slowdown in recession. As rates go up, I think that smaller companies out there that might be laden with debt would become -- will be opportunities for us to potentially look at and acquire.

In terms of where? I think it's again looking at our Ortho portfolio. From a spine perspective looking at some small spine companies looking at R&D that's really not fully developed yet, I think those are the places that you would think about us looking to do acquisitions. And, obviously, complementary pieces of technology that would help with our enabling technologies business. But I think that your assertion overall is accurate directionally speaking.

Kyle Rose

Thank you. And then when we think about the leads and the pipeline you have for the 3D product, can you maybe just talk to us about what that looks like? Is it current robotic Globus users? Is it current robotic competitive users? Is it people that haven't used robots in the past? Just trying to really understand where the demand is coming from? Thank you.

Dan Scavilla

Thanks Kyle. It's really a mix of all of the above that you just called out. It's not particular to just the people who have our robot. We've seen interest all around with this. And as you know it's applicable throughout. It's not tied just to our Excelsius robots. So the good news is it's really coming from multiple directions.

Kyle Rose

Thank you for taking the question.

Keith Pfeil

Thank you.

Operator

Thank you. Our next question in line comes from Jason Wittes from Loop Capital.

Jason Wittes

Hi, thanks. If I could just start with a follow-up. On acquisitions in terms of adjacent orthopedic technologies could that potentially be a hip and knee type technologies like that implant type company, or is that something that you look to build internally like as you've done so far in Trauma?

Dan Scavilla

Jason I guess it depends really on what the opportunity would be. It needs to be something innovative, something that would actually shift our time line meaningfully and we would take a look at that. So it's possible. But as we pursue today, most of what we're using and what we're planning on is internally built. But again it really just depends on if the opportunity is the right one and it makes a meaningful difference we would consider it.

Jason Wittes

Fair enough. Appreciate that. And then in terms of the visibility on the capital equipment from order to install. Has that changed at all, or generally speaking what, kind of, visibility do you have? Is it a full quarter visibility? Is it a six-month visibility? Just trying to get a sense of you mentioned you have double-digit booking orders, how good the visibility is in terms of when you can actually install them?

Keith Pfeil

Sorry. This is Keith. We're trying to follow your question there for a second. In terms of visibility really there's a rollout plan. So we've done our soft launch sites, we're getting those installed they're doing cases and there'll be a cadence from there that we start to roll out the robots. We know what our double-digit orders are. We know how they're going to ship.

The key thing is since it's a new product getting it out there and I've said before this is a really important launch for us. So, we want to make sure that we don't miss anything. So we want to make sure that the training is there for the hospital staff. So our staff will be there to get them on board. But we have basically a launch timeline. As we continue to get new orders, once we work through the backlog, we'll begin to sell those or ship those as well. But to me by the time we work through the backlog into the third quarter and probably a little bit into the fourth quarter.

Dan Scavilla

And I'll just build on that Jason too, is to-date because these are sensitive pieces of equipment but they have shipped well. They've been received well and they've been installed with minimal efforts so far. So we're pleased with the ability to get them up and running. I would second what Keith said is, I think it's more about the training and getting used to it as opposed to actually getting the piece of capital functioning.

Jason Wittes

Thank you. I will jump back in queue.

Operator

Thank you. Our next question line comes from Richard Newitter from Truist.

Richard Newitter

Hi, thanks for taking the question. Maybe the first one to start off on margins. Dan you've always suggested that during investment periods your EBITDA margin would -- could go as low as 30 -- low 30s or 32% in flex periods or payoff periods, it could should trend in the 37% to 38% range. I'm just trying to figure out the 32% EBITDA margin. Would you consider this kind of more in that discretionary investment period? And now that we have kind of one of your key products launching we should see kind of the payoff and move more towards the mid or even upper 30s into the quarters ahead?

Dan Scavilla

Rich I do. Again, I think what I was signaling when I opened up with my script is even with the lighter sales that we had against tougher headwinds we did not step back and are spending our investment of R&D people of recruiting et cetera. And so to your point what we've called out through the years this is the right example of that where -- we continue to invest for the long term and willing to take these lower EBITDA. I think as the volumes pick up it will naturally lift. And so, I feel comfortable with what Keith has been saying that, we will remain focused in the mid-30s.

Keith Pfeil

Yes. And just to add on to what Dan said, 33% to 37% is the range that's been talked about in the past. Sitting here today coming in with 32.2% this will obviously be at the lower end of that. But as I sit here and look out at the rest of the year, I'm still confident that we're in mid-30s EBITDA business. Quarter was a little bit light from an EBITDA perspective.

But again, we talked about increasing our investment in R&D, we did that. I called out some things in gross profit that we saw. But the thing that I wanted to raise there is that, I did make a comment on inflation on raw material inflation and is really immaterial to the bigger picture. So that to me is an important message to get out there because as I look up and down our P&L that mid-70s gross profit is very important to us because that's -- that's going to help drive profitability for the rest of the business.

Richard Newitter

Thanks for the color there. And just one on the environment the spine market in the US. So, you guys were pretty outsized share gainers in the spine market throughout most of last year. It appears that you guys got impacted along with the rest of the spine market. But even relative to some other players that also had tough comps smaller than you granted. You grew a little bit slower than maybe even some of them.

So, I guess I just want to get a feel for, what you're seeing that drove your performance back up to a record March. Do you feel like that's just some delayed recapture of procedures for the underlying market or is that something that's specific to your business, where you're back into the share gain mode that maybe you had been in previously, or is it some combination? I'd love to just hear some commentary on March and April trends? Thanks.

Dan Scavilla

Yeah. Thanks, Rich. I would think for sure there's some recapture of a slower January February that's come into March and April. I think that would be logical very difficult for us to quantify, but it's an assumption I would go with. I would also tell you that competitive rep recruiting which was decent in the first quarter bared fruit in both of those March and April months as well and we'll continue to do so. And I think as well we've seen through the news a drop-down in the concerns or the cases of COVID, which I think opened up some of those surgeries. So I think it's a combination of those things mainly in the March April time frame.

Richard Newitter

Okay. Thank you.

Operator

Thank you. Our next question on line comes from Vik Chopra from Wells Fargo. Please go ahead.

Vik Chopra

Hey. Good afternoon, and thanks for taking the questions. I guess one Dan, you had touched on new product launches. I'm just kind of wondering which ones beside the imaging system will be most impactful to growth this year. And just remind us what the growth contribution of new products is to total growth. And I have one follow-up after that. Thank you.

Dan Scavilla

Okay. So Vik, we don't actually break out obviously product retailer their contributions for growth. Certainly, 3D imaging is a major plan that we had to get out there and I think that will be one of the main drivers. I would tell you that we do have planned upward of 10-plus Spine launches just for this year. And as I said, Trauma quite frankly has got a great portfolio that they plan to roll out through kind of the second half of the year. All of those have been factored in really, as main drivers for us to not only meet, but it possibly be as we get through the rest of this year.

Vik Chopra

Okay. Great. And then my follow-up is on your international business. We just love to gauge your confidence on your international business, how should we think about the contribution from Japan this year? And do you still see a pathway to recovery in the back half of the year and return to that mid-teens growth in your international business? Thank you.

Dan Scavilla

Thanks. So I would tell you that with Japan and I had gone deep with this. Again, I feel very confident as to the plan we have in place who we're recruiting the surgeon interest and actually the sales force replenishment all of those things are very strong. I think we still have to work through account access and that's why I'm saying that would possibly go out and begin neutralizing in the fourth quarter.

I don't anticipate Japan being a contributor, when it comes into the rest of this year so much as a reset and stronger growth, as we get into next year forward. That's really it. On the rest of the world, again we had some really good results and some fairly significant COVID headwinds. People will tell you that in Australia the government paid hospitals not to do surgeries. There's different areas like that that once I look at our internal estimates of those impacts and what it could have been without I feel very bullish that rest of the world will be a decent contributor for us in the second half of the year without any significant COVID resurgence.

Operator

And we have no further questions at this time. And with that thank you ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.

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