Bio-Techne Corp (TECH) — Q3 2015 Earnings Call Transcript

Good morning and thank you for joining us as we discuss the third quarter results of fiscal year 2015. Also on the call this morning is Chuck Kummeth, Chief Executive Officer of Bio-Techne. Before we begin, let me briefly cover our Safe Harbor statement. Some of the remarks made during this conference call may be considered forward-looking statements. The Company’s 10-K for fiscal year 2014 identifies certain factors that could cause the Company’s actual results to differ materially from those projected in the forward-looking statements made during this call. The Company does not undertake to update any forward-looking statements as a result of any new information or future events or developments. The 10-K as well as the Company’s other SEC filings are available on the Company’s website within its Investor Relations section. During the call, non-GAAP financial measures may be used to provide information pertinent to ongoing business performance. Tables reconciling these measures to the most comparable GAAP measures are available on the Company’s press release issued earlier this morning or on the Bio-Techne Corporation website at www.biotechne.com. One other item before we get started, and as I mentioned in previous quarter calls, please note that the commentary today regarding the total Company’s Q3 organic growth by end market and geography does not include the performance of our protein platform segment. Now I’ll turn the call over to Chuck.

Thanks Jim. Good morning everyone. Thank you for joining us today for our third quarter earnings call. This morning we reported a 19% increase in revenue for the third quarter driven by our recent deployments of capital in the form of acquisitions. Organic growth was essentially flat compared to the same period last year. When we break down our revenue results by business, by platform, by geography, a different picture of the business emerges which gives us confidence that the current circumstances are temporary and mask the fundamentally solid execution of our continuing strategies to drive long-term growth for the Company and create value for our stakeholders. Our strongest product line proteins, for which we are most well-known, experienced the best growth in Q3 compared to the previous eight quarters. Antibodies, on the other hand, continue to experience the negative effects of an extremely competitive landscape. We are working hard on integrated strategies involving Novus Biologicals branded products, improving our customary website experience especially for price-sensitive customers like academics that drive the largest market demand for antibodies. In North America, we continue to experience stable organic growth. In this region, our bio-pharma end markets were especially strong, experiencing double-digit growth. Both our U.S. sales team and the Fisher partnership remain focused on engaging customers and understanding their specific needs via our new trade show investments and strategies. In Europe too, we experienced solid organic growth in most countries, the one exception being Germany where the pharma market there is still between major research project cycles for us. You may recall that we experienced 20% growth in Germany last year largely driven by pharma, making for a difficult comp this year. When we look at our results from Asia, China continues to perform very well despite the continued apprehension in the overall market brought on by the Chinese government anti-corruption auditing activities. We expect to see continued strength in China as the increase in government-funded research approved in our most recent five-year plan starts to get released and audit activities wind down. For the full year, we still expect China to perform similarly to last year with well over 20% organic growth. This is supported by a strong fourth quarter currently being experienced. Japan, on the other hand, and to a lesser extent other Pac-Rim markets were negatively impacted by the strength of the U.S. dollar. Here distributors reduced inventories in the wake of volatile exchange rates. When currency markets stabilize and inventory frontloading occurs, we expect the Pac-Rim region to return to growth. In our clinical control segment, our hematology controls business continued to execute well, growing at 7%. However, our blood glucose and blood gas business experienced delays in several key new projects with large OEM customers. We are very excited about the funnel of projects that we have in this business and have focused on this since the acquisition. Contracts are in place, but timing is beyond our control and we expect results in the next couple of quarters. These projects involve the transfer of specific customer in-house controls and packaging operations to our facility in Devens, Massachusetts. As these transfers begin to occur in Q4, we believe we will see growth rates in this part of the segment near those of the hematology controls business. Finally, our protein platform segment continued to post strong growth, with organic growth at 23% on a standalone basis. Our teams from both R&D Systems and Protein Simple continue to work very closely together to expand the portfolio of qualified antibodies for the Simple Western platform as well as developing assays for the Simple Plex platform and rationalizing operational strengths and the manufacture of instruments versus reagents for consumers. Speaking of operational strengths, teams across all businesses have done an exceptional job planning savings and achieving productivity in the workflows, which have allowed for both gross and operating margins to expand in Q3 versus last year in our organic business despite the heavy negative impact that currency translation has had as a result of the strengthening dollar and especially the weaker euro. I am proud of our team's perseverance to stay focused on our strategies that should enable long-term growth and not get distracted or deterred by short-term aberrations. And I am especially pleased with their effort on productivity, which has enabled us to continue to make the investments needed to support our strategy while increasing our core margins along the way. With that, I’ll turn the call over to Jim for more detail on the financials before we open the lineup for Q&A.

Thanks Chuck. As on prior earnings calls, I will provide an overview of our Q3 financial performance for the total company and provide some color on each of our three segments. And as a reminder, at the total company level, we reported organic growth excluding the results of acquired companies up to the one-year anniversary date of acquisition. It also excludes the impact of foreign currency translation. However, for the protein platform segment, we’re providing organic growth on a pro forma basis as if we’d owned ProteinSimple and CyVek for all of 2014 and 2015, to give you more relevant insight into the growth performance of that segment. So starting with the overall financial performance of the third quarter. Adjusted earnings decreased by 8% to $32 million, while adjusted EPS was $0.86 versus $0.94 in the prior year. The impact of currency translation caused a $0.07 decline in year-over-year results. Under GAAP, EPS was $0.65 in Q3 compared to $0.85 in the prior year, with the decrease including the amortization of intangibles and other acquisition-related costs in addition to the impact of currency translation. On a top line, Q3 reported sales were $114.2 million, an increase of 19% year-over-year, and organic growth was essentially flat. Q3 sales included 23% growth from acquisitions and a negative 4% impact from foreign exchange. Moving on to the details of the P&L, total company adjusted gross margin came in at 72.5% in Q3, down 110 basis points from the prior year due to the product mix change associated with the acquisitions that occurred since last year. Excluding acquisitions, gross margins were up 80 basis points compared to the prior year. Adjusted SG&A in Q3 was 21.5% of revenue, and R&D was 9.5% of revenue. That’s 800 basis points and 150 basis points higher than last year, respectively. The increases in these operating expenses were driven by the acquisitions we made since Q3 of last year. The resulting adjusted operating margin for the quarter was 41.5%. Operating margins excluding the impact of acquisitions increased by 60 basis points compared to Q3 of last year. Looking at our numbers below operating income, net interest expense in Q3 was $256,000 compared to $529,000 of net interest income last year as a result of a line of credit that was opened in July to partially fund the acquisition of ProteinSimple and CyVek. Our adjusted effective tax rate in Q3 was 31.4%, up 50 basis points from the third quarter of last year due to acquisition and geographic mix. The GAAP reported effective tax rate for the quarter was 37.3%, as it includes the change in the estimated state taxes for fiscal year 2014 and the first half of fiscal year 2015. This change in tax estimate results from final state income proportionate factors being determined following the recent acquisition. In terms of returning capital, we paid out $11.9 million in the form of dividends to our shareholders in the quarter. Average diluted shares were 37,269,000 in Q3, which is up 216,000 shares or less than 1% from last year as a result of option dilution. Turning to cash flow in the balance sheet, $30.8 million of cash was generated from operations in the third quarter and our investment in capital expenditures was $4.9 million. We ended the quarter with $160 million of cash and short-term available-for-sale investments, up $20 million sequentially from the end of Q2. Long-term debt obligations at the end of Q3 were little changed from the end of Q2 at $187 million. That wraps up my comments on total company performance for the third quarter. Now to discuss the performance of our three business segments, starting with the biotechnology segment. Q3 net sales were $83.2 million, with reported growth of 4% compared to last year, and organic growth that was essentially flat. Growth from acquisitions was 7%, while the impact from foreign exchange was negative 4%. By geography, North America increased in the low single-digits organically. Bio-pharma sales were strong in North America with growth in the teens, while academic and government declined by low single-digits during the quarter. Europe also declined in the low single-digits but with many countries experiencing high single-digit and even double-digit growth. However, this growth was more than offset by double-digit declines in Germany. As Chuck previously mentioned, our business in Germany is being impacted by the timing of research projects in the regional bio-pharma market, which experienced a highly active cycle last year, making for a difficult year-over-year comparison. China experienced solid organic growth in the mid-teens, even with the ongoing Chinese government anti-corruption auditing activities that slowed the release of research funds there. In the Pacific Rim, sales declined in the mid single-digits, led by Japan, which decreased by low teens. As sales in this region are handled through distributors and transacted in U.S. dollars, the strengthening U.S. dollar has encouraged our distribution partners to lower stocking levels until we believe exchange rates stabilize. Adjusted operating income for the biotechnology segment was essentially flat in Q3 compared to the prior year, with an adjusted operating margin of 55.6%, a decline of 200 basis points from the prior year. The lower adjusted margin percentage is attributable to a change in product mix associated with the acquisition of Novus Biologicals. Turning now to our clinical control segment, where Q3 net sales were $15.4 million, with both reported and inorganic growth essentially flat compared to last year. Revenue growth was strong in the hematology part of the business; however, the delay of a few key OEM projects in the blood glucose and blood gas part of the business negated its overall growth. We expect these projects to begin their transfer to us in Q4, with full ramp-up in fiscal year 2016. Adjusted operating margin for the segment decreased by 6% in Q3, and adjusted operating margin was 30%, a decrease of 180 basis points from the prior year. The decrease is attributable to pricing pressures in the blood glucose control market. We expect higher margins from new projects beginning Q4 that will help to mitigate the pricing pressures going forward. Moving on to our protein platform segment, where net sales in Q3 were $15.7 million on a pro forma basis, assuming ProteinSimple and CyVek were owned for the entire quarter in both current and prior years, organic revenues for this segment were 23%. We saw growth across all product lines, with over 200 instruments placed during the quarter. Q3 adjusted operating margin was negative 10.9%, as independent companies ProteinSimple and CyVek together reported a negative 19.1% adjusted operating margin in the quarter ended March 31, 2014. That concludes my prepared comments, and with that I'll turn the call back over to the moderator to open the line for some questions.

Hi Chuck, how are the second, excuse me, how is the current quarter resuming in terms of orders, etc? Is Germany back to what you think is more normal and overall for the quarter?

Overall, we've had a much better start since that quarter. Things are looking much better in a lot of areas but not specifically Germany. Germany is a little more of the same; it's going to take another quarter to get it back in the right cycle. These are all real large company deals, a lot of bulk sales, and we've reached out to work there. It’s just a cycle thing. But probably not much this quarter yet, maybe a little better but not like last year.

You had lost additional day's sales to weather this quarter versus last year?

We lost three like everybody else; it was comparable to the same three or four we lost last year, so there was really no excuse there, no additional.

Lastly, what are you doing specifically to kind of recover from currency? Are you adjusting pricing and how quickly does that get changed?

I'll let Jim handle that. We're looking at a couple of things.

Well, first of all on the cost side we're definitely driving productivity for a number of reasons. But everyone internally is obviously aware of the pressure that FX is putting on the business, and the fact that our core gross and operating margins actually increased year-over-year despite that FX headwind I think speaks to the effort we are making internally to try to mitigate as much of that pressure as we can. Regarding any kind of hedging activity, we're not interested in doing that. With regard to pricing, the only area where that could come into play potentially would be in Japan, the Pac Rim, but the reality is that most of the competition there is in the same boat we are and there's not a lot of internal sources to that competition, so we're not seeing any price decreases coming competitively yet. We believe that this kind of reduction in inventories will play itself out, and we hope the business can come back at our historical pricing levels.

And then lastly, the reagent products I think were introduced for ProteinSimple in the March period. Are you seeing traction with that antibody catalog addition?

Yes, we are actually seeing a lot of good strong traction. We have well over 600 in the catalog, and we'll double that by this calendar year, and traction's beginning.

Hi guys, this is Katherine filling in for Jeff. We were wondering if you could give us any color on the protein platform's margins, any reasons they've gone negative?

Well, I think year-on-year we've actually made a big improvement, over 10 points. It's probably more aligned with CyVek being part of it.

And I'd also suggest that the revenue profile of the business as well, so the instrument business has a cycle that's a little bit different than our consumer business. Given that the calendar year-end tends to be the stronger quarters for the instrument and with a lower revenue dip that naturally occurs in Q1, it's not so much the cost structure increase; it was more of a cycle with a lower revenue dip.

You need to keep in mind that this is an instrument, which is quite different from our standard consumer business that we are more prepared to manage. The end of our fiscal year typically brings stronger quarters, so you can expect improved results this quarter due to the cycle time. The last quarter's performance aligned with our expectations. We experienced the usual product ramp-up challenges, along with a couple of weeks of slowdown due to some issues that were reported, similar to what happened last quarter but went unreported then. These are all normal operational matters, and our backlog was completely addressed by the end of the quarter, making this a typical cycle quarter for that part of our business. Achieving 23% organic growth exceeds our acquisition model, so we are optimistic about reaching 25% or more this quarter; we will see how it goes.

So going forward I guess how should we think about those margins, just think about them on the instrument cycle?

Well, you know it was all put out in the S1 and kind of commented on; we talked about it being in the high 60s overall. I think that will come down as we meld in the CyVek numbers, but ProteinSimple on its own we always think hopefully north of 55% gross margins. With a little extra volume and strong IP holding out, 70% is still a goal for us, but we haven’t achieved that yet.

A couple on the protein platform’s business. First off, could you put the 200 instrument placements in the quarter in context? How does that compare year-over-year and is that mix mostly West, and any other color you could offer?

Well, I don’t have the numbers; maybe Jim does. I’ll let him comment in a second. From a high level, we are actually right on target on the forecast for the imaging section of the business. The other two, the Simple Western is roughly comparable to the Biologicals site, and both are kind of where they need to be. I'd say Biologicals we're a little above where we expected, and Simple Western maybe just a hair below; but nothing out of the ordinary for that kind of business. It’s hard to divide up and get too much in the 200 instruments total across the board; just not granular enough.

I guess I would add to that, to give some color to the number: we’ve had some questions in the past about instruments, so I thought I’d put it out there. But I think the number of instruments year-over-year is comparable to the revenue growth that you see. With regards to what the breakdown looks like, as a reminder we had three product lines: imagers, Biologics, as well as Simple Western, and the price points of those instruments vary quite a bit. For example, the Biologics instruments cost over 100,000, we have large Simple Western instruments that could be as much as 300,000, and then we have the desktop Simple Western which could be 50,000 to 60,000, and then the imagers they are much lower. So that the number of instruments can mix can vary quite a bit on the profile.

Just timing on one or two of what we call the big $300,000 instruments can dramatically change the outlook of a quarter for us.

And then secondly my follow up, I was curious if you can quantify the various timing issues you pointed out in the press releases impacting the quarter. And regarding Germany did you just have more customer concentration in Germany than you do elsewhere, and that’s why that’s worth calling out? Thank you.

We do. We have strong relationships with the largest bio-pharma in Germany, and you know the characterizes I don’t like to comment on their businesses. But they are all strong with us, and last year was an exceptionally good year. We sell a lot of what we call bulk to them. So these are large orders.

And I’d say in Germany roughly 20% of our revenue in Europe is concentrated in Germany.

Actually, it’s 23%.

And just in terms of the variance versus plan, if you think about the issues divided between Germany, the OEM in clinical controls and the third, is there relative contribution you could offer?

Could you repeat that question one more time? It didn’t come across clear.

So the three issues you pointed out in the press releases is timing related. One with Germany, the other was Japan currency, and then the final was clinical controls. Is there a contribution you could offer in terms of how much each of those issues contributed to variance versus your plan? Was it a third, a third, a third? Or was one of them more impactful than another?

Honestly I'd say they were all fairly comparable in their impact, which is why we called them mild. They’re all off; none of them are hugely materially large, but all together just a couple of points. I would like to point out we had pretty good U.S. business in Academia; we had talked about our negative double-digit contraction in the past and we were only in low single digits. So the Fisher relationship is still working and our U.S. business is doing pretty well. There were several timing issues to consider. The impact from Japan, as well as the controls from the Devens unit and Germany, contributed to that situation. The U.S. market was not an issue at all. Had we been operating at our usual levels, these other regions would have performed normally for us. Therefore, we are quite confident; these issues are all understandable and manageable. Foreign exchange factors will create challenges; they have led to stocking issues for us. However, as Jim mentioned, in Japan, we do not face any competition from Japanese companies, so our inventories are not affected in the same way as others. Supplies will run low, and purchasing is likely to increase again. We are already beginning to see some of that.

Looking at operating margin improvements over the past couple of quarters and the drivers there, the gross margin improvements and improvements with SG&A spending, are those sustainable?

I think they are. We’ve had, as you know, we’ve talked about our productivity projects. We’re not trying to place into a Six Sigma unit or anything but there has been a lot of good work here on the operations side starting with a year and a half ago when we created the operations unit. We separated the business into actual factory versus what’s development, and that’s actually paid off quite well. I could get into specifics, but we’re known for our quality and lot of quality data. These testing workflows are all being addressed, we’re doing much more statistical process control, we’re improving our quality while also reducing costs and taking out costs for the way of testing advantages as one example.

Perfect. You guys have talked a lot about the antibody certification program, and just you touched on it a little bit earlier; can you give us any color about that group of — I think you said 800 that you certified so far? How they are doing compared to the rest of the portfolio?

Well I said 600 or so; we've had about 1,200 - 1,250 at the end of the year. These things take a little while to catch speed because a lot has been done over the web and anything else. So there is traction. We have hundreds of orders already on these and it's starting to pick up. I guess a way to look at it from our point of view is we look at it compared to how other new reagents that we offer start out and how they’re doing, and these are fitting the model. For us, it's all incremental upside, so it's all good. So we hope that it continues to track with us, and we think this is the way to go. This is why we bought ProteinSimple, to have this value-add solutions-based focus into our customers, so they don't have to fuss with the antibodies themselves. They can get these and they right away have the recipe on how these things work. So we want to keep driving this. Is 600 enough? It's really not. I mean we’re getting some traction but we need probably a couple of thousand here. It will take a couple of years to get this and one of our operational strategies is to figure out how to get more of these certified, how to grind through it. It’s a lot of work. And you need to get that data and you need to verify and commercialize everything all around it and get all in line. It's a lot of work but the team has been really good at this and we’re actually great on schedule; maybe a little ahead of schedule on our account.

And then the last one from me, but just to clarify as far as the impact from the strong dollar, is the only place where you are seeing a transactional impact is Japan?

No, let me clarify that. In terms of the impact that’s fitting our translational adjustment to the P&L, it's more entirely out of Europe. With regards to Japan, the Pac Rim, we actually sell to distributors there in U.S. dollars. So there is no currency translation impact there for us. It does make the products more expensive in local currency, i.e., yen, but again we’re not seeing much in the way of local competition there and we’re not seeing price reductions from competition that requires us to react at this point.

This is actually Anthony in for Amanda. How are you guys doing?

Doing good.

Real quickly, even as a follow-up regarding this year distribution, in regard to that I guess could you provide a little bit more maybe insight or the potential upside over time?

I have been very clear about this. We started the arrangement, and we’re looking at negative double-digit declines in our academia markets and how to catch up. The one key thing that is starting is coming in here from our relationship being I understand the Fisher model pretty well coming from Fisher, and then Jim as well coming in later. I’ve always said getting this back to even would be great. We've bounced around between this negative 2% to positive 3% in the last couple of quarters, and I expect we will be there. I think it will drift into lower single digits and be steady there. I don’t ever see Fisher getting us into double-digit gains or anything like that. It will take other strategies. I think the strategies that we just talked about with certified antibodies there is a better strategy for incremental growth. But how to take on competition, how to get more of that wall share of academia, it's all about coverage. We have five reps in the key regions that help work with the bigger accounts and work with the inside sales team locally. But how do you get actually hundreds or thousands of academic research, who largely buy online and through citations and references, etc.? So the combination of Fisher with better web experience strategies for that. We’re well on our way with Fisher; I am very happy with how it's working. It’s working really well in their favor because there is a lot of swap right now, but their numbers look good. But the net of it all is positive, which we were after, and that’s how we pay them as we’ve talked about in the past. Into the coming year, we’re adding features and improving our website all the time. It's our single biggest adventure here in IT and we have folks from Novus really working on this, and taking new ship rolls in this being their website and their model is very good in this. We think more to come. So the combination should get us back to low to mid single-digit growth; I think we're on track with Fisher, and it is what it is. I also know CyVek, but I don't, they're also working hard as a company to really get their Life Tech portfolio online. You got to remember these guys are good at dealing with millions of SKUs and we don't see any distraction right now with LifeTech at all; we’ve very little overlap with them. As you know we talked in the last quarter, somebody had a question, so no issue there either, and the teams get along very well. It's the best non-conflict I've ever seen, so I'm very happy.

And I appreciate the insight, we know it's a huge undertaking and as another question, in regard to the recent acquisitions I guess would you also be able to provide a little bit more color regarding the actual revenue contributions or even the potential timing of synergies related to those recent acquisitions?

Well, I think you're seeing some of it here, I guess in our margins. There are synergies coming; again, the antibodies certifications are all sale synergies. In terms of cost synergies, not a whole lot; everybody knows how lean we are as a company, so we never did any of the deals for real cost synergy opportunities; it's more about sale synergies. There will be some synergies between the CyVek unit as we integrate that into ProteinSimple, and we've seen some of that, certainly in the channel and the commercial activities. That said, it's got to be carefully worked because we don't want to distract or have any dilution of the activity on the ProteinSimple channel organization, so we've been very careful there. But there are some synergies there, and they're showing up a little bit along with the productivity numbers.

Perfect, thank you. Then lastly, would you be able to provide just a little bit more insight as to while regarding this M&A going forward?

Well, as you know, things aren't real cheap out there right now. We've actually been hunting as much as we've ever been hunting and we've been fairly quiet for nine months here still, but we've been very active; you just don't see it or hear about it. As I repeatedly said and Jim's here to make sure I'm always honest on it, that we aren't going to do a bad deal. So we’ve been engaged, and we've walked away from some. We're looking at some. We're still interested in our primary strategies. We're interested in doing more to create more critical mass in our clinical and control segment, especially as it relates to more on the regulated side or more towards diagnostics or point-of-care type of direction which that industry is going. We're interested in diagnostics; we're interested in diagnostics in China; we're interested in other solutions like ProteinSimple that can give us platforms that can leverage our content here. So those are still in strategies and we're engaged in some, and I can't comment further; that they get done when they get done, and then we'll do a deal when it makes sense. Other than that there's been no change in our philosophy, intent, or hunger, okay? We have a strong balance sheet; we’ve got lots of debt capacity to take on yet, even to stay well beyond covenants. We're roughly flat here, and when you look at our cash we have, and what we have for debt, we just need some better deals.

Hi guys, quick follow up here. I know PrimeGene you had a deferred lumpy order in Q2. Did that come through in Q3? I know you continue to cite 20 plus percent organic growth in China, so just trying to think in context.

Our PrimeGene unit is roughly half on the OEM lumpy order side and half on a branded commercial retail business model. We're more focused on trying to expand that side of it for China and leverage them as a factory for China, etc. We want to drive this OEM business as best we can even globally, but that's hard. So there's some lumpiness. This quarter is starting out better; some are coming through and you know it's not a large business, so it's not that material, but we're very happy so far. We've not lost a single employee there; pretty much to say about in China. They're working on a new factory, so we bought them when they were kind of just getting started. They're well connected to Fudan University, and we have a brand facility expansion planned for mid-summer for an expansion of their business, which will give us a lot more G&P capability. So a lot of good stuff to come. Hopefully, more China to China, but the OEM segment is still important; we're trying to drive that, but obviously, it's more competitive and trying to get that to work in orders that may over a year is difficult as well right now. So it’s a little better.

As a reminder, I'll add that we just passed our one-year anniversary of acquiring PrimeGene here in April, so in Q4 those results will be included in our organic growth through the years for China.

Can you provide any updates on the utilization of ProteinSimple? I'm aware of the 600 proteins being added to the platform. Are you observing an increase in utilization rates for the instruments that have already been placed, particularly regarding consumables?

On consumables, yes, it's all brand incremental. Getting data on additional purchases for those machines is probably challenging. Our main competition has been with antibodies, so we're likely still a quarter or two away from seeing traction with these strategies. We have several machines in Minneapolis that are actively used in development, and we are utilizing a significant amount of content on them. If there are more installations, we expect to see more purchases. They also support other companies' products on their websites; it's just not a closely-knit business and open system, which we are comfortable with.

And then the last one from me, is I know you guys have tried to right size the portfolio for the most part, focusing on core verticals and products, etc. What kind of runoff are you seeing from legacy products where maybe you are not investing in or maybe you are just letting it fall by the wayside? Are you seeing 1% to 2% pressure there or is it more now?

There has been very little change. As we can see from the reserve waterfall chart, we have essentially established a long-term life cycle here. We have not phased out many products on the content side. We have made progress with our inventory, stock, and cost reductions; some items in our warehouse have been there for around 20 years and are still good and sellable. I’m not sure we need all of it, but we have addressed situations like that. However, regarding the removal of SKUs or fee reductions, the curing cost of these products is minimal. This means managing these products isn’t as complex compared to other business models. The complexity tends to arise from maintaining the website and online support. None of the products in the reagent side is valued over $2 million. Our larger sellers are typically also our oldest products, so the age doesn’t significantly impact performance. We can rejuvenate products; sometimes we might add something and then decide it’s not worth pursuing, only for interest to pick up again due to new research. It’s an unusual model in that respect.

All right. Again, we took more time than usual. That’s good, good questions. We’re very happy with a lot of results; we’re disappointed, of course, with some. It'd be nice if it had been at 2% or 3% growth, but timing issues are really everything on this stuff. But I would like to thank all of you. I know our team is working hard here and even harder. And we'll be back to talk to you again next quarter. Thank you.