Roper Technologies Inc (ROP) — Q4 2017 Earnings Call Transcript

Thank you, Jim, and thank you all for joining us this morning as we discuss the fourth quarter and full year financial results for Roper Technologies. Joining me on the call this morning are Brian Jellison, Chairman, President and Chief Executive Officer; Rob Crisci, Vice President and Chief Financial Officer; Neil Hunn, Executive Vice President, Jason Conley, Vice President and Controller; and Shannon O’Callaghan, Vice President of Finance. Earlier this morning, we issued a press release announcing our financial results. The press release also includes replay information for today’s call. We have prepared slides to accompany today’s call, which are available through the webcast and are also available on our website. Now if you’ll please turn to Slide 2, we begin with our Safe Harbor statement. During the course of today’s call, we will make forward-looking statements which are subject to risks and uncertainties as described on this page and as further detailed in our SEC’s filings. You should listen to today’s call in the context of that information. Now please turn to Slide 3. Today we will discuss our results for the fourth quarter and year primarily on an adjusted non-GAAP basis. A full reconciliation between GAAP and adjusted measures is on our press release and also included as part of this presentation on our website. For the fourth quarter, the difference between our GAAP results and adjusted results consists of the following items on a pre-tax basis: a $215 million one-time net gain resulting from the Tax Cuts and Jobs Act; a $73 million adjustment for amortization of acquisition-related intangible assets, and lastly an $8 million purchase accounting adjustment to acquired deferred revenue relating to software acquisitions and $1 million of related commission expense. This represents revenue and commissions that those companies would have recognized if not for our acquisition. Now if you’ll please turn to Slide 4, I’ll hand the call over to Brian. After his prepared remarks, we will take questions from our telephone participants. Brian?

Thank you, Zack, and good morning everyone. We will discuss the Q4 and full-year 2017 financial results, along with the 2017 segment details and our outlook for 2018. You'll notice that our segments have significantly changed over the past few years, becoming much more diverse, which presents some opportunities that we aim to take advantage of soon. In 2018, we will present our enterprise guidance for the year and then address your questions. Focusing on the quarter, it was quite impressive. We achieved record results in revenue, net earnings, EBITDA, and cash flow, with revenue up 21%. We experienced organic growth of 5% in the fourth quarter, consistent with our performance over the year and what we expect next year. Our gross margin increased by 30 basis points to 62.6%, keeping us comfortably ahead of any cost-push inflation we may face. Though we did see some inflation, we feel well-prepared to manage it. Our debts rose by 23% to 270, which will likely generate interesting headlines due to GAAP reporting incorporating a one-time $215 million tax benefit for Q4. GAAP earnings amounted to 427. We prefer adjusted earnings as they provide a clearer picture, which came in at 270. EBITDA rose by 21% to $441 million in the quarter. Operating cash flow was remarkable, up 36%, totaling $369 million on revenue of $1.230 billion. Deltek and ConstructConnect both had strong fourth quarters and exceeded our full-year revenue and cash flow expectations. Over the full year, we paid down $1.06 billion in debt, and the effects of this deleveraging will be visible shortly. Looking at the Q4 income statement, the tax rate for the fourth quarter was 26.9%, lower than our guidance of around 29%. Net earnings stood at $280 million. Here we summarize the four segments for the fourth quarter to highlight their numerical impact, demonstrating a strong quarter that sets a solid foundation for 2018. In the RF segment, we saw organic growth of 4% when excluding toll and traffic, though the overall organic growth was slightly down at 1%. The acquisitions greatly contributed to the strong results, with revenue increasing by 45% and EBITDA rising by 47%. Notably, Deltek and ConstructConnect had a stub period in the fourth quarter last year, which is essential to recognize. We recorded all revenue and income as acquisition-related, although some could have been categorized as organic. The medical sector saw a 4% increase in revenue, while EBITDA remained flat. We will discuss the reasons for this and its potential implications in the coming quarters. The energy and industrial segments, however, delivered outstanding results, with energy revenue increasing by 12%, EBITDA up by 11%, and 9% organic growth. Industrial revenue grew by 14% organically with a total increase of 16%, marking a truly stellar quarter. Shifting our focus to the full year, we achieved 5% organic growth and a revenue increase of 23%. Gross profit rose by 90 basis points. With projections running at 61.7 in ’16, adding 90 basis points of gross profit reflects exceptionally on our management quality. We see a significant increase in net earnings, amounting to $975 million, which doesn’t fully capture how our cash conversion has improved. We'll delve into that later. The tax rate for the year was 28.9%, slightly lower than our expectation of around 30%. With the new tax reforms, we anticipate a 7% to 8% lower tax rate for 2018. This year, we witnessed our revenue jump from $3.8 billion to $4.665 billion, closing in on the $5 billion revenue target. EBITDA increased by $290 million, and for the first time, we surpassed $1 billion in operating cash flow, adding $233 million this year to reach $1.234 billion. On the topic of cash flow, our free cash flow at the end of the year was $1.175 billion, a 22% increase from last year's $961 million, making cash the clearest performance indicator in an environment of adjusted commentary. Our full-year operating cash flow represented 26% of revenue, with free cash flow at 25% of revenue, resulting in a free cash flow conversion of 121%. On a GAAP basis, the figures are significantly higher. We reduced our debt by $1.06 billion, demonstrating the powerful effects of our deleveraging. Our asset-light business model has continued to progress, closing the year for the first time with negative working capital. The changes from our previous years show considerable improvements; five years ago, net working capital was at 7%, and now it stands at negative 3.3%. This is a tremendous shift—about $500 million of our revenue no longer needs to be tied up in net working capital. Consequently, as we grow, this growth now becomes a source of cash rather than a drain. Our deferred revenue finished the year at $566 million. Looking back a decade, our net working capital was at 13%, while it is now at 3.3%. On our balance sheet, we have $671 million in cash, a significant figure considering net debt to EBITDA analysis now carries weight since our cash is no longer held outside the United States. We're targeting a billion dollars in debt repayment, reducing gross debt from $6.2 billion to $5.156 billion. If no further deals are made and an additional billion is repaid, our debt could drop to $4 billion, with EBITDA trending upwards. Our net debt is reported at 4.4, yielding a 2.8 debt-to-EBITDA ratio, an improvement from 4.1 in the previous year—indicating strong cash flow management and the discipline to maintain this downward trend. Tax reform has presented numerous advantages for us. We anticipate our tax rate will fall between 21% and 23% for 2018, which translates to increased earnings and cash flow. Repatriating over $500 million in offshore cash will quickly enhance our acquisition capacity. The newfound mobility of our global cash is advantageous, as previously, 20% to 25% of our earnings and cash flow were generated from outside the U.S., constraining investments to international areas. Our newfound flexibility will allow us to deploy capital strategically. Before diving into segment details, I want to outline some adjustments we are making to improve our segment structure. The evolution of our segments necessitates revisiting our reporting structure to optimize clarity and communication regarding our growth strategies over the next few years. Therefore, we are going to appoint Neil Hunn as Executive Vice President and Chief Operating Officer to help facilitate this process. His appointment heralds less opacity in our management structure and will greatly aid our communication with investors. In the RF technology and software segment, we see a critical need for restructuring. Historically dominated by toll and traffic, accounting for over half of the revenue, acquisitions like Deltek and ConstructConnect have shifted that balance, with over 75% of our segment revenue now coming from project management and application software. While toll and traffic will continue to experience some growth, its overall contribution is diminishing. We spent considerable time during Q4 reviewing three-year strategic plans with our segment teams, who operate in diverse end markets. Deltek and ConstructConnect's performance exceeded expectations, with organic growth of about 5% across our software segments led by Freight Match and Aderant. The RF products also witnessed positive growth, while the toll and traffic sector experienced modest contributions due to low shipment levels early in the year despite strong later performance. Looking at 2018, we expect Deltek to show entirely organic growth, and we believe the software businesses will grow 5% to 6% with strong margins. In the medical and scientific imaging sectors, our medical products business, led by Verathon, remains the largest revenue contributor, with robust growth seen in various areas. Recent product launches, including the GlideScope Go and a new BladderScan, are anticipated to drive substantial performance in the second half of the year. The alternate site healthcare business continues to perform well, complementing our acute care software growth, which gains momentum from our decision support SaaS solutions. While the U.S. lab business has faced challenges, significant projects abroad have emerged, offering a mix of investment opportunities and growth prospects. In scientific imaging, we experienced record orders for cryo-EM products in Q4, with significant carryover expected into 2018. For 2018, we forecast organic revenue growth for the segment at 4% to 6%, with margins expected to decline slightly but remain strong compared to previous years. Turning to the industrial technology sector, we have had an outstanding year, particularly with Neptune gaining market share and great growth in our fluid handling businesses. The Roper pump business rebounded, and the overall segment's operating leverage exceeded 40%. For 2018, we project organic growth of 5% to 7%. Our 2018 guidance is set at a range of $10.88 to $11.20 per share, forecasting organic revenue growth of 4% to slightly more. We expect a tax rate around 22%, possibly a little lower or higher, with first quarter guidance established at 244 to 250 and a lower tax rate anticipated for Q1 compared to the rest of the year. In summary, our asset-light niche strategy is sustaining impressive performance with over 20% growth across all categories—revenue, earnings, EBITDA, and cash flow. The consistency of our broad-based organic growth is promising as we move into 2018. Deltek and ConstructConnect have exceeded expectations, and our ability to compound cash has substantially improved. With the debt reduction, our balance sheet is healthier than ever, and tax reform will further enhance our cash flow capabilities, allowing us to capitalize on growth opportunities without requiring heavy investments. We anticipate increasing our capital deployment from $6 billion to over $7 billion over the next four years, given the benefits arising from tax reform. As we begin 2018 with exceptional momentum, we welcome your questions.

Thank you, good morning everyone.

Hey, good morning Deane.

Congrats to Neil in his new role at COO. First question, maybe take us through the dynamics in the fourth quarter in RF technology - it came in lighter both top line and earnings versus our expectations. I know there were some puts and takes in the quarter and you had called out last quarter there was some pull-in into the third quarter for Deltek - I don’t know if that was a factor, or if this was that stub from a year ago. But could you take us through that for starters, please?

Rob is chomping at the bit.

Hi Deane, good morning. Yes, so it was right in line with our model on EBITDA. We actually were a little bit above our internal guidance model on EBITDA for the segment. We were a little light on revenue - I think we guided to low single digits and it came in minus-1, just because of the difficult MTA comp versus last year and timing on some of the TransCore projects. But it really was in line with our model, so I think, not to speak for the analysts, but it seems like the analysts may have missed the fact that we did have this $35 million or so of revenue last year, and it seems like people weren’t taking that into account when they were doing their RF estimate for Q4. So from our perspective, in line, and more importantly really exceeded in terms of cash flow. The cash flow performance in the quarter was better than we expected, again driven by the new acquisitions, Deltek and ConstructConnect, and really good performance there. So from our viewpoint, it was a solid quarter in RF.

I just want to reassert that Deltek and ConstructConnect outperformed in the fourth quarter versus our model. It solely centers on the intelligent traffic system side of project management at TransCore.

Got it, could you elaborate on the impact of tax reform? Rob, can you walk us through the implications for Roper’s tax position for 2018 and beyond? What causes the shift from 21 to 23? We had initially projected 23, and what factors in the first quarter might be leading you to lower that estimate?

Certainly. A lot of effort has been put in by our tax department, who worked long hours throughout January to prepare for the earnings call and the upcoming 10-K. As Brian mentioned, our long-term tax rate is approximately 22%. We chose to provide a range due to various factors, making it challenging to ensure accuracy under the new law, but we feel confident about that 22% figure in the long run. For the first quarter, there are specific items, especially relating to compensation deductions, that might bring our estimate slightly below 20%. However, for a full-year model, using 22% is a reasonable approach.

Got it. Then if I can sneak one more question in, maybe hear from Neil, just broad brush - you may be early in the process, but what might we be seeing in the way of a re-segmentation? It sounds like that’s one of the first orders of business for you.

I'll give him a second to respond. Most of the businesses report to either Neil or myself. Looking at our structure in RF, one of our key leaders is Tracy Marks, who oversees the ITS business. Another important leader is Mike Corkery, who heads Deltek, our largest business. The two largest revenue segments, TransCore and Deltek, are completely unrelated. We also have a segment that includes various products, some reporting to Paul Soni and others to Claude Pumilia. Over the past year, we've made significant talent upgrades because candidates are interested in understanding who they'll report to and the responsibilities they'll have, and it can be confusing to explain how our structure works. I’m looking forward to spending some time with Neil discussing my perspective on the company since 2016. We categorize our products mainly into precision technology, fluid handling, medical products, and RF products. On the software side, we have four subcategories: healthcare software, alternate site business, application software, and project management. We've likely held on to the same segment reporting for longer than necessary. This won't impact how the 50 P&Ls operate but will influence how Neil and I consider our future structure and long-term executive leadership roles. So with that, I pass it over to you.

Yes, the only thing I would add, Deane, is this is about how we organize ourselves, not how we operate the businesses. I’d just leave it there and look forward to unveiling more of that as Brian and I work through it in the next few quarters.

Great, thank you.

Thanks, good morning. Good to see the free cash flow conversion remains best in class after the switch to adjusted net income. Relative to the 121% this year, is that a good proxy for how the cash flow versus the adjusted net income is structured?

Yes, so I would say long term, excellent year in 2017. If I had to give you a 2018, we’d probably be 120% conversion on OCF, maybe 115% on free cash flow is sort of a framework. I think the 2017 performance was exceptional and we might be able to do that again, but we’ll certainly always be running at 120% OCF conversion to the new adjusted net earnings, so I’m always trying to clarify. We don’t really report cash EPS, we reported adjusted EPS, and our cash is quite a bit higher than that.

Right, great. Thanks Rob. Brian, since you brought it up, even though you downplayed it, how would you comment on the timeline around ultimate succession?

Who knows, three to five years? I think I have an obligation to notify the board two years in advance, and I haven’t done it, so this is not about succession. What this is, is an opportunity for Neil, who has worked diligently with everyone on our strategic planning process, where he and I spend much more time together as we develop our plans. I believe we were at a retirement age of 78, and I think the board recently raised the retirement age to 80, so I’ll be here for a while. I expect to be here during the deployment of the next $7 billion - I’ll leave it at that.

Great, thanks.

Good morning everyone. Congratulations on a strong end of the year and a constructive guide for ’18. I think I had just two questions. Back on the expiration of the segments, and I think I know the answer to this and it might be a high decibel answer from Brian nevertheless, you guys were pretty clear that this is about how you organize, not about how you run the underlying businesses. But you are a collection of businesses, of high quality businesses that you’ve acquired over time with entrepreneurs or hard-charging execs in those roles, and is this going to lead to potentially some consolidation of those roles or new faces? In other words, do you think of this change of how you’re operating from maybe more of a feudal system with some guidance above to more centralized management of the businesses?

I don’t see anything regarding centralized management. You would need to educate me about the feudal concept. We don’t have any serfs, and you’re right to describe our people as you do. We actually sent out a note this morning which stated that this probably will have nothing to do with your independent businesses. I don’t think it will have much impact. We’ve never found that consolidating things and creating internal synergies has been particularly beneficial. We believe a focus on long-term growth is important, and I think there are processes we’ve been developing around strategic deployment and strategy that Neil is well-equipped to work on with our team. So, I’m hoping for better long-term sustainable organic growth from this, but it doesn’t change anything for individual businesses. It’s just beneficial for all operating personnel to ultimately report to one person. Then, looking towards the future, when considering succession, I believe that at some point Neil will probably decide that this role isn’t necessary anymore. This is simply a good opportunity for us to align everyone. Neil, would you like to add anything?

The only thing I’d add is this business has been built over a long time with a system that’s about the niche orientation, the resource allocation decisions being made at the field, the field operators being held accountable to results, and I don’t see any of that changing for a very, very long time, if ever. I mean, it works for us and it will continue to work.

Thanks for that helpful clarification, because obviously that’s been the secret to your existing and continuing success. A related question to that is do you anticipate the output of this analysis or this process that you’re putting together, could this lead potentially to perhaps identifying businesses that are non-core and perhaps would be better served as a separate entity? I mean, obviously this is the old chestnut of the break-up of Roper or a spin of certain more cyclically or capital-intensive businesses of Roper.

We’ve discussed this, and the company is not going to break up, end of story. We may divest some assets or spin off something minor. The recent tax reform has made portfolio adjustments more appealing when considering divestments. These businesses have been established for so long that they have very little tax basis, so when it comes to selling them, paying 35% in taxes feels impossible; however, with only 21% to pay, the situation is somewhat improved depending on how you utilize the cash obtained from the sale. Overall, I would say our willingness to divest has seen a small increase compared to three years ago. Most of our businesses incorporate firmware in their products and have connectivity features. Only a few of our businesses do not follow this trend, and we will thoroughly evaluate those to determine their optimal use.

If I could add one more question quickly, you mentioned an increased focus on U.S. mergers and acquisitions regarding the ability to redeploy capital here. Could you elaborate on that? Also, considering how software has improved your opportunities in M&A by enabling you to identify businesses focused on information domain management and automate them or have a subscription model, have there been any technological changes in the last five years that create even more opportunities for a different type of software business? Additionally, could you discuss the appetite of businesses, especially in the U.S.?

Well, the technology is not the driving force there. The driving force is that you have, say, 20 or 25% of your cash that you’re generating each year is offshore, and you can’t repatriate it without a big penalty. Instead of having 100% of your cash flow generation being able to go to deployment activity, you only have 75%. So now we have 100% and we’re not constrained. A lot of the software niches that we buy are U.S.-centric businesses as opposed to global businesses, and so having 100% of your cash available to deploy on those U.S. niche businesses is very likely to lead to us buying more U.S. niche businesses that will get hooked up with Deltek and ConstructConnect and Aderant. That’s the reason we’re sort of raising what we expect to deploy on capital. Now you know, it could be the next acquisition we announce will be a German company, but we’re live on four things now and they’re all software-related, and most of them are U.S.-centric.

Thus endeth the lesson.

There you go.

Hey guys, good morning. I just wanted to start with your comments on U.S. lab. Are we talking Sunquest specifically here, and how would you categorize that dynamic now? Is it more market-based, is it a share loss kind of situation, is it a combo, and how does this kind of change your outlook onto bolt-ons to supplement that business? I know you’ve made a few in the past, and is that less likely now?

No. The additional parts of the business are performing exceptionally well, with all of them experiencing double-digit growth. The U.S. lab business, however, is in a unique situation over the past few years as companies implement their ERP systems acquired over the last few years. This led to a period of artificial growth due to meaningful use when we acquired Sunquest, which we anticipated. As that effect faded, it was replaced by various ERP projects, where Sunquest was often the niche lab provider but may not continue once those systems are fully implemented. This trend began to negatively impact us two years ago and worsened last year. We expect this to be a challenge this year and next as well. We have identified that around 5 to 6% of our install base will shift to the ERP users. Once that transition concludes, we expect not only to maintain modest single-digit growth but also to start replacing customers who adopted cumbersome ERP systems unsuitable for laboratories. We are currently in a phase where the CFO's preferences may overshadow those of laboratory managers, but we believe that our technology offers the most cost-efficient solution for hospitals.

Fair enough. Then on the TransCore side, is there something that we have to think about from a structural margin perspective related to tags, and we’re seeing more of these systems go in that are camera-based where you don’t need a tag and it just flashes against your license plate. Is that a structural shift in the market that we have to think about the margin dynamics of that business a little bit differently?

Well you know, the tags are relatively high margin compared to any of the project work, but all the other technology, we still lead in all the other technology, so if you’re looking at readers and cameras, we actually use our Luminara brand cameras for a whole bunch of the things you’re talking about, and those businesses all have decent margins. It’s just that as the project business continues to grow, and it’s growing at the expense of other public companies that I really shouldn’t name, and all you have to do is read about their total malaise, but the margins associated with our project business are the worst we have. They’re best in class for TransCore - their results are spectacular, but for us they’re a drag on our margins. I don’t think that’s going to change anytime soon.

I would just add, even with the camera technology, you still need that tag. I mean, that’s the whole point, is the tag allows the agency to properly collect the funds from the user. The camera is just a back-up, and so you’re always going to have the tag.

But don’t a lot of the systems now just take a print of your license plate and mail you a bill in the mail? That’s what a lot of the ones in New York have now, right?

Absolutely some of the ones are license plate drive, but it’s still our collection technology, and oftentimes it’s our collection administration -you know, somebody gets a call for a bill payment, it’s actually our admin people masquerading as whatever the tolling authority in the area is. That’s the big administrative business we’re talking about, which continues to grow at the expense of others but is a little less exciting for us. Its growth will always diminish our gross margins.

Last from me, the delivery of imaging backlog - you know, we’ve been waiting for the cryo-EM stuff we’ve been talking about for a while. How much is that contributing to your lower margin comments for the medical segment? I figure that would be kind of good on top line but mix negative for you guys, I’d assume, right?

Yes, those are good margin products. Their shipments are primarily in Q2 and Q3, so in Q1, the margin performance of the medical segment will be lower than the annual average, decreasing by more than 100 basis points due to the delay in shipments. Additionally, many start-up costs in Australia will impact the first quarter. However, once we move into Q2 and Q3, margins should align more closely with the segment expectations, and there shouldn't be significant challenges from the product mix.

Yes, the medical segment margins are going to be 41 to 42% EBITDA, for heaven’s sake. They’re still going to be the highest in the company.

Fair enough. Thanks guys.

Hey everyone, this is actually someone filling in for Steve Tusa. I have a few questions. I didn’t hear it mentioned, but I’m curious whether you saw any impacts from or will see any impacts from the revenue recognition accounting change ASC 606.

Yes, thank you for the question. We are implementing that this year, but the impact is less than we initially expected before completing our analysis. It will result in approximately a $15 million impact to deferred revenue on the balance sheet as of January 1 of this year, but then the revenue recognized under the new standard will effectively cover that amount during 2018. Therefore, we do not anticipate any impact on our earnings on a net basis. While this will be reflected in our GAAP earnings, we don't think it requires us to highlight it for any adjustment, as there isn't expected to be much of a net impact. This is part of our thorough review across all our companies. The revenue recognition project has been ongoing for over six months, led by Jason Conley and the accounting team, and we are confident in the process.

Got it, cool. Thanks for the clarification. Then for the other segments outside medical, can you give a sense of the operating leverage targets? Is 40% a good ballpark to think about year-over-year, operating margin leverage?

The enterprise likely falls into the category of over 30% leverage, with medical demonstrating lesser leverage. For industrial and energy sectors, you would anticipate leverage exceeding 40%. In RF, although it will have high leverage, predicting the exact revenue is challenging due to TransCore, so it's probably closer to 35% in RF.

Got it, that’s helpful. Lastly for me, do you have a sense of timing or likely timing around when we’re going to learn about some decisions around the segment restructuring?

Oh, it could take a year - who knows? We’ve been talking about this since 2016, and there’s a lot of moving parts plus we have acquisitions that will be going on. But part of it is just finding a better way to nest the acquisitions into segments that make a lot of clarity, right?

Thank you, good morning everyone. Just two quick ones from me. Brian, is it inconceivable that you could do some M&A in industrial or energy when we think about the technology overlap and infiltration that we’re starting to see into industrial markets?

It’s possible that we might consider an acquisition that is appealing. While I’m unsure if we would proceed with it, I believe it would need to be focused on software or algorithms related to data collection rather than a mechanical product. Unfortunately, many of those opportunities tend to require more assets than we are comfortable with, especially if they involve setting up a factory rather than just an assembly operation.

Great, regarding the re-segmentation, I don’t want to downplay the complexity and the effort involved, but it seems like you’ve been considering this for quite some time and you're all quite knowledgeable, so I would assume you have a clear idea of your objectives. I’m not sure what I’m overlooking that could justify a year to resolve everything. Is there something more?

We have a lot of talented people on our team. The recent addition of Deane Price, who is leading Aderant, is fantastic. Mike Corkery also has incredible potential; I believe he could run our company. Dave Conway brings a lot of capability as well, so much of our focus is on investing in our human capital.

Hi, good morning. Could I just double back for a minute to the medical scientific? I’m just curious, Neil, perhaps could you just define how much of medical scientific, or in particular the medical software, acute care software is international versus U.S.? Perhaps just as a follow-on, speak to the investment that is going into the business - is it going in to make the software more appropriate for the international market? Where is the investment going that you speak to?

Of the acute care software segment, approximately 40% is international and 60% is in the U.S. Regarding our investment strategy, as previously mentioned on this call, there was an investment in 2018 for a start-up in Queensland, Australia. In the U.S. market, we believe we have adequate R&D resources, so our focus is less on additional investments and more on how we allocate and program those R&D funds for new products. We have also changed our approach to the U.S. market by realigning teams and adding new managers to enhance our strategy. Therefore, the emphasis is on reorienting our efforts in the U.S. rather than seeking incremental investments.

Okay, and is any of that stepped up investment going to med products, or have we already funded that given some of the new products sent out to market on the BladderScan side?

In the medical products group, there is a noticeable product investment year-over-year and significant channel investment across several of our businesses occurring in 2018. This is a specific item.

Thank you everyone for joining us today, and we look forward to speaking with you during our next earnings call.