Globus Medical, Inc. (NYSE:GMED) Q3 2022 Earnings Conference Call November 8, 2022 4:30 PM ET
Brian Kearns - Senior Vice President, Business Development and Investor Relations
Dan Scavilla - President and CEO
Keith Pfeil - Senior Vice President and Chief Financial Officer
Conference Call Participants
Matt Miksic - Barclays
Vik Chopra - Wells Fargo
Shagun Singh - RBC
Richard Newitter - Truist
Matt O’Brien - Piper Sandler
David Saxon - Needham and Company
Caitlin Cronin - Canaccord Genuity
Welcome to Globus Medical’s Third Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded.
I will now turn the call over to Brian Kearns, Senior Vice President of Business Development and Investor Relations. Mr. Kearns, please go ahead.
Thank you, Stacey and thank you, everyone for being with us today. Joining today’s call from Globus Medical will be Dan Scavilla, President and CEO; 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 identifies 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 mostly – 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 will now turn the call over to Dan Scavilla, our President and CEO.
Thanks, Brian and good afternoon, everyone. We achieved the strong third quarter with growth throughout our business delivering sales of $254 million, a 11% as reported or 13% in constant currency growth, with non-GAAP EPS of $0.50, including significant non-operational headwinds for currency and tax rate that Keith will discuss later in the call.
US Spine had a great quarter with 9% growth and notable gains across our product portfolio in expandables, 3D printed implants, cervical and lateral offerings, biologics and pedicle screws. The gains are driven by competitive rep conversions and robotic pull-through. Our competitive rep recruiting is tracking ahead of prior year and as we enter into Q4, the strong recruiting pipeline should lead to a record recruiting year, setting the stage for meaningful growth in 2023.
I’m pleased with the growth acceleration delivered by the US team. Enabling technology sales are $24 million, up 20% on a constant currency basis versus prior year, driven by robotic and imaging system sales. We’re seeing increased interest in placements, both domestically and internationally. This was our highest Q3 since launching Enabling Tech, surpassing last year’s Q3 sales that delivered 124% growth post-COVID.
Robotic procedures continue to accelerate, growing 48% versus prior year and exceeding approximately 40,000 robotic procedures performed to-date. The Excelsius3D Imaging System rollout is going well as we continue to penetrate the market and increase orders for future deliveries. Entering Q4, our pipeline is strong for both robots and imaging systems.
ExcelsiusGPS and Excelsius3D are two foundational pieces of the digital ecosystem we have been talking about, designed and built from the ground up to communicate between each component and surgeon seamlessly in the operating room. The system provides a scalable, an unmatched clinical experience for the surgeons.
The successful rollout and market acceptance of ExcelsiusGPS and Excelsius3D validates our direction and strategy. We’re making significant progress developing other components of the ecosystem with plans to enhance our offering over the next several quarters to fulfill our goal of changing the way musculoskeletal surgery is performed.
On the international front, our spinal implant business delivered a record sales in Q3, growing 25% on a constant currency basis compared to prior year. We deliver double-digit growth in most markets, including the UK, Australia, Brazil, India and Poland, where growth rates continue to exceed 40% for each market. I remain impressed with our international team’s performance and the potential of our international business to contribute to our long-term growth.
Our trauma business delivered in other record sales quarter, growing 83% versus prior year, and 20% sequentially versus Q2 ‘22. Trauma performance is driven by salesforce expansion and strong uptake in all 14 product lines, delivering high double-digit growth in each product offering. In Q4, we have two meaningful launches plan to further strengthen our offerings that fuel continued growth. Our recruiting pipeline is strong entering into Q4.
As I mentioned last quarter, despite being faced with supply chain challenges, we’ve been able to offset vendor delivery delays and supply shortages without significant impact to sales. To remediate the extended vendor lead times, we’ve altered our ordering pattern to increase inventory levels. The electronic component market remains difficult, but has been offset so far by our nimble procurement team. In addition to these disruptions, freight surcharges continue to impact our cost of goods. We will continue to seek offsets to mitigate these challenges.
Our product development engine continues to make progress, focusing on procedural solutions, designing implants, instrumentation and procedures that will function together with our Globus Ecosystem for seamless and comprehensive approach in spine, trauma and joints.
At the same time, we are expanding our solutions to cover the comprehensive continuum of care, supporting surgeons in preoperative planning, intraoperative execution and postoperative patient care, capturing outcome data that can be used to enhance future surgical planning. While this complex approach has extended development timelines beyond our historical rapid pace, I believe the upcoming launches will have greater significance and shaping procedures of the future.
In addition, we have increased our investment in supply chain to boost the output, streamline manufacturing and enhance production capacity, supporting our continued growth. As we move into the final quarter of 2022, we remain focused on three core elements for long-term growth, innovative new product introductions, robot and imaging system sales and competitive rep recruiting.
I’m pleased with the Q3 results throughout the business with high single-digit growth in US Spine, strong performance from Enabling Tech, record international and trauma sales and meaningful progress in bringing the ecosystem and procedural solutions closer to reality. Q4 is all about focus and execution to deliver value to our customers and drive growth. I know we are well positioned to achieve our mission of becoming the preeminent musculoskeletal company in the world.
I will now turn the call over to Keith.
Thanks, Dan and good afternoon, everyone. Globus delivered on a strong third quarter with significant sales growth across its portfolio and is reflective of our continued ability to take share in our markets. It remains a testament to our drive, focus and continued investment in our people and products.
Third quarter revenue was $254.1 million, growing 10.6% as reported and 12.6% on a constant currency basis, as compared to Q3 of 2021. Q3 net income was $47.4 million, essentially flat to the prior year quarter. Non-GAAP net income was $50.3 million, compared to $52.7 million in the prior year quarter, and delivered $0.50 of fully diluted non-GAAP earnings per share flat to the prior year.
Our Q3 results include $0.07 of non-operating headwinds driven by a higher tax rate and currency, partially offset by higher investment income and a lower share count. Adjusted EBITDA was 32.6% and includes a 1.7% unfavorable currency impact in the quarter. During the quarter, we generated $20.9 million of free cash flow.
Moving into sales. Our third quarter US revenue was $217 million, growing 9.5% versus the third quarter of 2021, led mainly by US Spine. Dan’s earlier comments provided insights into the drivers of growth. To help further put that into context, our US Spine business has grown 26.1% over the trailing four quarters when compared to the full year 2019. This longer-term growth figure is an important call out given the quarterly COVID impacts we’ve seen over the past few years and underscores our continued confidence in our US Spine business.
International revenue for the third quarter was $37.1 million, growing 17.7% as reported or 31.8% on a constant currency basis. Strong growth was seen across our Spinal Implant portfolio as Dan mentioned earlier, in addition to this implant growth, we’ve continued to see solid gains with ExcelsiusGPS sales growing internationally, mainly in Western Europe.
Gross profit in the third quarter was 74.2% compared to 74.5% in Q3 of 2021. The slight decline in gross profit was driven by product mix, continued freight inflation, as well as non-operational currency impacts, partially offset by lower inventory reserves and improved operational spend efficiencies. We estimate inflation had a roughly 50 basis point impact on the quarter between freight surcharges and higher material costs.
Q3 research and development expenses were $18.7 million or 7.4% of sales versus $15.9 million, or 6.9% of sales in Q3 of 2021. The increased spending is predominantly focused on our US Spine and Enabling Technologies businesses and is in line with expectations. These increases are driven by overall headcount growth as we realign and further invest in our product development engine to focus on procedural solutions and expand the Globus Ecosystem.
SG&A expenses for the third quarter are $106.6 million or 41.9% of sales compared to $96.4 million or 42% of sales in the third quarter of 2021. The increased spending is reflective of higher sales and marketing expenses, driven by higher sales volumes as well as increased traveling and meeting expenses offset by fixed cost leverage. We continue to take a focused approach to managing our SG&A cost structure in a way that delivers against our needs, while working to minimize negative inflationary impacts.
The effective income tax rate for the third quarter was 22.8% compared to 13.3% in the prior year quarter. The increased tax rate was primarily the result of lower tax benefits associated with stock option exercises. Given this lower tax benefit, we are now projecting a full year tax rate ranging between 22.5% and 23%.
Our cash, cash equivalents and marketable securities were $909.3 million at the conclusion of Q3. Net cash provided by operating activities was $32.9 million, and free cash flow was $20.9 million as noted earlier. Year-to-date, free cash flow was $58.8 million as a reflective of continued investments in inventory, as well as sets, machinery and equipment to further facilitate our ability to drive growth into the future.
At this time, the company is reaffirming as 2022 net sales guidance of $1.025 billion, however as a result of continued non-operating headwinds, we’re revising our non-GAAP EPS guidance to $2.03 per fully diluted share versus the previous $2.10. This reflects an additional $0.05 currency headwind and a $0.02 tax headwind versus our previous non-GAAP EPS guidance.
Our third quarter results delivered on a strong top line performance across the business. Spine realized strong growth in the US and international, trauma continued down its path of above market growth and our Enabling Technologies business demonstrated resilience in delivering its new and exciting technologies to the market.
Though we did experience more non-operating headwinds than previously expected, the business continues to deliver on its strong earnings quality as evidenced in our profitability, while maintaining discipline in our approach to costs and expenses, all while investing aggressively within R&D to drive continued future growth. We look to continue to drive execution as we seek to close a strong fourth quarter and build momentum going into 2023. As always, thank you to the Globus team for their continued pursuit for excellence. The best is yet to come.
We’ll now open the call for questions.
Thank you. At this time, we will conduct a question-and-answer session. [Operator Instructions] Our first question is coming from Matt Miksic of Barclays. Matt, please go ahead with your question.
Hey, good evening. Thanks so much for taking our questions. Congrats on a really strong top line quarter here. So one follow-up if I could. Just some of the drivers you mentioned, Dan in the quarter, particularly expandables and 3D printed and competitive rep recruiting. Just if you could maybe update us on sort of you know how does the mix of expandables and 3D printed have been driving the business? You know what – what’s been driving that in terms of demand? And what does that do to margin mix? And then just obvious question you know given the sort of merger and acquisition activity in the space, how, if at all, do you expect that to create new opportunities in recruiting?
Thanks, Matt. Appreciate the question. So just couple of things. I’m signaling that the growth is really throughout the portfolio and so, you’re right, I said expandables, 3D printed implants, but also the cervical lateral offerings, the biologics, the pedicle screws is really kind of a healthy growth route. It’s not just one product outgrowing the others. You know with that, though, I would tell you that the uptake of 3D printed has been great, and stable itself, the expandable really doing well and driving it that way.
So I’m pleased with it, you know those drivers beyond just existing and dedicated surgeons using us as again, the competitive rep recruiting, bringing in and helping us penetrate the market. And as we’ve always stated, once we put the robots out that pull-through of robots is just a great way to get more volume and lots of good things through. So it’s really, to me a healthy portfolio that way and I’m pleased with the mix of growth among the products.
With recent changes that are occurring in the market, certainly anytime there’s a market of uncertainty that may get some folks jittery. And I think if anything, Globus is considered a stable growth, high investment place, a place that reps would want to be. And so we’ll look at that opportunity. I’m not sure we’ve seen anything of significance right now. But we’ll keep our eyes open. But again, regardless of where it’s coming from, our goal is to continue to penetrate the market, convert surgeons and reps regardless of where they currently are.
And one for Keith, if I could just on margins. You know it’s – you’re not as global as some of the larger global you know MedTech companies in the space that have all you know been held down and impacted by some of the factors you mentioned, FX, in particular. Can you talk a little bit about how – you know how we should expect that to kind of carry over into next year? Maybe what some of the math is dropping through the P&L, on FX, given that that was part of the reason for the slight missed expectations and the guide down on the bottom line?
Sure. So as we – thanks for the question. So as we go into next year, I think it’s fair to assume that our OUS business will continue to grow faster than our US business you know as we really grow deeper in the markets that we’re operating in. So I expect us to you know we’re still primarily US, but over time, our OUS business is going to continue to grow and grow. As I think about this year in the currency impacts.
You know last quarter I talked about having about a $0.09 currency impact. We felt that we were able to really offset that with the impact of the share buyback and some higher interest income. You know when I look at Q3 alone, our Q3 currency impact was greater than what we experienced in the first two quarters. So as I look out, the guidance change going from $2.10 down to $2.03, $0.05 that is simply because of the higher currency impacts versus what we previously had expected.
That’s helpful. Thanks a lot, Keith.
[Operator Instructions] Our next question is coming from Vik Chopra of Wells Fargo. Vic, go ahead with your question.
Hey, good afternoon and thanks so much for taking the question. Two for me. First one on capital equipment. Just wondering what you guys are hearing on how hospitals are thinking about their capital budgets for Q4? And any sort of color you can provide and expectations for next year? And then my follow-up question is on 2023, not asking for guidance, but any sort of potential headwinds and tailwinds we should sort of be cognizant off as we head into next year? Thanks so much.
Thanks. Look I’ll take the first one. You know I would think with anything, the hospitals still remain under some level of pressure, whether it be staffing or paying for traveling, the thought of recession, different things like that. So I would just tell you that the selling cycle is probably turning back to what it was pre-COVID, meaning, taking about you know 9 months to 12 months for where that is. And certainly we’re looking at that.
We haven’t seen any real stops or hesitation with anything yet to-date. You know hard to say look Q4 will do, we’re sitting at the election night and things could always change in one way or another. So there’s some uncertainty out there. But nothing that would be of a concern for us and nothing that we would have reflected in our guidance as we round out this year. I’ll let Keith kind of respond, but on 2023, I would just say you know, I think we’ll be in a better spot to discuss that more in January, as we go out and give our guidance and stuff right now. I’m not sure there’s anything that I would see, that I would want to signal out in advance to the investors.
And just a couple of comments that I would add there is just in some of my earlier prepared comments, I really talked about you know third quarter delivering a strong top line performance, really across our portfolio. And as I look ahead, we feel good about our business. That’s what that statement was intended to imply. We feel good about where we’re going from business, whether it’s musculoskeletal or Enabling Tech.
As I think about you know headwinds or tailwinds going down the P&L, we’re going to continue to obviously monitor currency impacts that happen out there, which is really non-operating, but also the impact of inflation you know that’s something that’s real and something that’s out there. As time passes, perhaps the fuel surcharges will change. But right now, I don’t really have any further comments to add as it look – as it relates to 2023.
[Operator Instructions] our next question is coming from Shagun Singh with RBC. Go ahead with your question.
Thank you so much for taking the question. Dan I was just wondering if you could elaborate on the Recon robotic launch, especially as it relates to timing you know soft versus a full launch in ‘23? You know what’s will be unique about it, the value proposition? How we should think about economics? And you know really what I’m trying to get at is you know you talked about the best is yet to come. And I’m just wondering how meaningful this launch could be in helping you drive an inflection in sales in ‘23.
Thanks, again. I appreciate the question. So you know the big question there is that we need to get that filed and approved from the FDA. So to call out a timing in 2023 will be difficult right now to be hesitant to do it. Certainly our goal is to have that later in the year, I just don’t have a clear line of sight to tell you I feel strongly if that’s Q3 or Q4. With that, and without talking a lot about the features, because it’s yet on approved.
I will tell you that I’m excited to bring this forward. I think there’s meaningful differentiation in it. I think that it will certainly help us in penetrating this market and offering a very viable solution that’s out there. But I’ll stop there. We’ll get further along in that perhaps later in 2023 you and I can have a deeper conversation about that.
Got it. That’s helpful. And then I was just wondering if you could elaborate on the enhancements or additional components that you expect to add to Excelsius to be Excelsius platform to maintain and probably enhance your competitiveness. And any timing you can share there? Thank you for taking the questions.
I think you know if anything, we continue to evolve and add to it, look to learn and improve with it. I think the closest to come out that will be a significant differentiator is going to be XR headset or Augmented Reality. And I think with that, we’re going to actually shift how procedures are done, add a great deal of value to the surgeons. And I think that’s probably the biggest upcoming addition into that ecosystem platform that we’re looking towards right now.
[Operator Instructions] Our next question is coming from Richard Newitter with Truist. Richard, please go ahead with your question.
Hi, thanks for taking the questions. So just a couple of for me, maybe just on you know your US Spine growth rate, we accelerated nicely back towards 9%. You know you’ve been double-digits for a period of years leading into COVID and through COVID. And then, obviously, there’s some distortions. That 20% growth rate you drew out you know thank you for that. But how should we think of the go forward? What is the normalized kind of for US Spine growth rate for Globus? Especially with all the competitive rep higher momentum you have, we have easy comps to standing into next year, just can you give us a sense as to what we should expect? And should it even accelerate?
Thanks for the question. You know I think as we look ahead this business from a US Spine perspective, we still have a lot of room to grow. You know we know that our number overall is getting larger. But you know Dan commented on competitive rep recruiting, as well as the pull-through that we’re seeing from robotics and just the development of the ecosystem. From my perspective you know we should be a high single-digit grower as we look ahead in the US Spine market. You know we feel really good about where the business is, and really feel good about where it’s going.
Yeah, I’d add to that, Rich. That you know, just again, we’re approximately a nine share in the US that gives us a lot of runway to go. Obviously, it’s predicated on meaningful ways to address unmet clinical needs. And so at the end of the day, it’s going to be about the right products and making a difference that allow us to do that growth. And so we’re not going to lose focus on that. You know that said, for the near future, I would say that that mid-to-high single-digit in US is something that we would want to take a look at. Okay?
Okay, thanks. And what about the split between imaging and robots? Or if there’s any way you can give us a sense as to whether or not your robot component grew year-over-year in the third quarter? Just trying to get a sense of what’s – you know what’s driving that? Thanks.
Yeah, I appreciate that. And you know obviously for competitive reasons, we’re not looking to split that at any level of detail. And so I would just tell you very pleased with our Enabling Technology growth of both robot and imaging, but splitting that out is something I’m going to refrain from doing right now.
Okay, thanks. Dan if I could do one more, just how should we think of operating leverage going forward and where your target EBITDA margin is, especially with some of the non-operating items that are at play in the P&L? Thanks.
Yeah, so I’ll take that question. So from a SG&A perspective, you know fixed costs leverage, we’re thinking one point to two points max, as we look ahead. You know as we look at the business going forward, we should be able to get more efficient and drive the business forward without adding a lot of incremental costs. So one to one to one and a half points is probably where we think leverage will take us.
[Operator Instructions] Our next question comes from Matt O’Brien with Piper Sandler. Matt, you have the floor.
Okay, thanks for the question. So you know if I look at Globus pre-pandemic, you were kind of high single-digit, low double-digit top line growers, we’re guiding this year to 7%. You’ve got all this robotic tailwind, pull-through, trauma, 3D coming, international business is going quickly. So as I look at the straight numbers for next year at 9%, it’s back to kind of that pre-pandemic level. Do you think about Globus in that kind of pre-pandemic level of revenue growth over the next several years, high singles to low doubles?
I think you know, this is Keith you know as we think about the business, and again, I fall back to some of the things that both Dan and I said. You know the business is operating and performing across our portfolio, we feel that we have you know good products coming, Dan comment on some of the – commented on some of those. So, short answer is yes. You know, we feel good about our portfolio. You know as things happen you know, it’s never perfect for everything to hit perfectly at the same time. But looking ahead, without getting in the guidance for next year, I feel good about where we’re at, and really good about where we’re going to go.
I’ll second that too. I think obviously 2021 compared to 2022 is flawed as you know with the post-COVID bolus and all sorts of activities. And I do think that returning to normal, assuming nothing else comes from a pandemic level would certainly where we would want to expect 2023 to be.
Okay, appreciate that. And then as I look at the Enabling Tech business over the last seven quarters, if I add up the revenue there versus the previous kind of you know 13 quarters. And I get that there’s some 3D in there and everything, but you’ve just done about the same amount of revenue the last seven versus the previous 13. I’m just, I’m wondering about are you approaching first of all, and I’ll give it a shot anyway, I’m not sure if you’ll answer this, but around 300 Excelsius systems out in the field. And then you know Dan, you’ve always talked about a lot of pull-through revenue coming, shouldn’t we get a huge chunk of pull-through revenue in ‘23 and in ‘24 from what we’ve seen over the last two years, specifically.
So a couple of things that we won’t comment on the number of placements out there you know we’ll leave you to do your math and figure it out in that range. And I think the pull-through that we have seen with robots is one of the reasons why we grow above the market today. So again, unless we have other data, I’m still going to call the Spine market at roughly 3% growth, possibly 4%. And I think for us to outpace that by 2 to 2.5x is a factor of us using that pull-through as well as competitive convergence.
Perfect. Thank you.
[Operator Instructions] Our next question comes from David Saxon with Needham and Company. David, go ahead with your question.
Yeah. Good afternoon, and thanks for taking the questions. I wanted to ask about the cellcast portfolio, maybe if you could just give an update on you know how that product line is going? Is it in a good position to be competitive when robot does launch? Or is there still more wood to chop in terms of getting products to the market?
David, thanks for the question. There’s more work to do to get the products to market. While we have a strong primary cemented knee, our ability to move into cementless knee as needed, medial congruent type things are needed, updating some of our vision systems just to be market appropriate. They’re all in play right now and need to be finished. They’re not all needed for us to make an impact next year, I think next year is really about us finishing up filing and hopefully getting approval for the robot. And with that, starting the placements that allow that pull-through, but really seriously work to be done in all angles. That’s one of the reasons also I’ve refrained from talking a lot about it. I think that will change as we kind of get into next year and get more traction.
Got it. Thanks. And then on the international business, I didn’t hear you say anything about the commercial team in Japan, that’s been a drag for a while now. So maybe just give an update on you know how that market is doing and whether or not the team is kind of on the right track now? Thanks so much.
No, I appreciate it. And good for you for calling that out and you’re right, didn’t leave it out, just because I think they’re on the stage of stabilizing like we would have thought as we exited Q3. I want to take my eyes on that. I think there’ll be fairly neutral in Q4. And I think it’s going to be more of a 2023 story as we do that. But the change wasn’t meaningful enough in Q3 versus prior year for me to really call anything out at that point. That’s why it was removed from my comments.
Great, thank you.
[Operator Instructions] This question comes from Caitlin Cronin of Canaccord Genuity. Caitlin, go ahead with your question.
Hi, this is actually Kyle on for Caitlin. Can you hear me all right?
We can hear you, Kyle.
Hi, everybody. So just you know lot’s been asked. So I just wanted to you know get an updated thought on, you know I appreciate the pipeline commentary about the – you know going back to you know maybe a pre-COVID type pipeline on the capital side of things. Maybe just help us understand what you’re seeing from you know ordering demand when you think about you know going to new customers from a multisystem placement perspective you know 3D and the robot. And then I’ll throw another one in there as well as just capital allocation updates here. I mean, how do you see the market as it stands now? And you know how should we think about capital deployment on a go-forward basis?
Kyle, I’ll certainly take the first one. We have certainly had several deals, where both the ExcelsiusGPS and Excelsius3D have been placed out into hospitals or hospital systems and we’re pleased with that. They’re obviously meant to work seamlessly together. And so it’s nice to see that uptake occurring. I won’t necessarily reveal how much, but I think at any given point, that’s the goal. Of course, it can also as a 3D system standalone by itself. And so, right now we’re early on I can’t say there’s a big trend with what we’re doing. But certainly multiple units have been placed along with robots to-date. With the capital allocation, are you speaking about the hospitals and their plan or us as Globus?
Just speaking on Globus when you think about capital deployment with respect to the strength of the balance sheet and any potential M&A buybacks, things of that sort?
I’ll take that part of the question, Thanks for asking. So capital allocation you know the primary purpose still is to focus on acquisitions, whether it be a tuck-ins or something slightly larger, to complement our portfolio that is still the first and primary focus.
Secondarily, obviously, we’re going to continue to invest in our business, whether it be through R&D or growing out our supply chain you know because we continue to grow our business so much, and we drive a lot of vertical integration you could expect us to spend dollars there. You know, thirdly, on the share repurchases, we have roughly about $150 million left on our remaining share purchase – repurchase authorization. We did not rebuy anything during the quarter, but that’s the order that I would put those in.
Thank you very much.
Thank you for your participation in today’s conference. This does conclude the program you may now disconnect.