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Operator: Greetings and welcome to KORU Medical Systems Fourth Quarter and Full Year 2022 Earnings Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Hannah Jeffrey of the Gilmartin Group. Thank you. You may begin.

Hannah Jeffrey: Thank you, Doug and good afternoon everyone. Earlier today, KORU Medical Systems released financial results for the fourth quarter and full year ended December 31, 2022. A copy of the press release is available on the company’s website. During this call, we will make certain forward-looking statements regarding our business plans, financial guidance and other matters. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to many risks and uncertainties, including those mentioned in the associated press release and our most recent filings with the SEC. We assume no obligation to update any forward-looking statements. I encourage listeners to have our press release in front of you, which includes our financial results as well as commentary on the quarter and year and financial guidance for 2023.

During the call, management will discuss certain non-GAAP financial measures in our press release and accompanying investor presentation and our filings with the SEC, each of which are posted on our website. You will find additional disclosure regarding the non-GAAP measures, including reconciliations of these measures with comparable GAAP measures, in our press release and accompanying investor presentation and those filings. For the benefit of those listening to the replay, this call was held and recorded on Wednesday, March 8, 2023 at approximately 4:30 p.m. Eastern Time. Since then, the company may have made additional comments related to the topics discussed. And please reference the company’s most recent press release and filings with the SEC.

Joining us on today’s call is Linda Tharby, President and CEO of KORU Medical Systems and Tom Adams, KORU Medical’s Interim Chief Financial Officer. Linda, please go ahead.

Linda Tharby: Thank you, Hannah. Good afternoon, everyone and thank you for joining us today. During today’s call, we will use slides to support our commentary. I will begin with a business update of the fourth quarter and full year €˜22 focusing on the company’s progress towards our Vision 26 business strategy. I will then turn the call over to Tom to discuss the quarterly financials before ending with our €˜23 guidance. After concluding our prepared remarks, Tom and I will then be happy to open the call up for Q&A. In December of €˜21, we communicated a 5-year strategy that we called Vision 26. This vision which we have made significant progress on in €˜22 is driven by a three-pillar growth strategy that will remain our focus in 2023.

The first pillar is increasing our leadership position in a growing subcutaneous immunoglobulin, or SCIg market through a focus on expanding our label indications, new patient starts and driving pre-fill adoption. Second is expanding our current leadership position in large volume drug delivery in the home to new drugs, the business we call novel therapies. Finally, expanding both of these businesses into international markets. Supporting our three growth pillars is a foundation rooted in innovation, quality and regulatory expertise and operational excellence. 2022 has been a tremendous year as we advanced several key milestones in our Vision 26 strategy and strengthen our position as a leader in drug delivery solutions in the home. Vision 26 focuses on growth and TAM expansion with specific commitments to accelerate revenues to a 20% revenue CAGR reaching approximately $60 million by €˜26.

This will be accomplished through a strategy to grow our core business revenue by double-digits and through transforming the business from an Ig player to a broad drug delivery partner with an investment in our novel therapies business. Within this novel therapies business, we committed to signing multiple new drug delivery collaborations that would lead to five Phase 3 trials and one commercialized new drug indication. In addition, we committed to 8 new 510(k) products and/or indications and a $1.3 billion TAM. Lastly, we committed to doing this with a disciplined investment strategy aimed at innovation, commercial investments and strengthening our foundation. I am very proud of our progress in 2022, our first year against these key milestones.

We posted year-over-year revenue growth of 19%, marking our fifth consecutive quarter of double-digit growth. We saw strength across the portfolio including double-digit growth in our U.S. core outperforming the market and our international core business we saw double-digit growth in the back half as we increased our focus there. The more transformational part of our growth has been the increase in our novel therapies pipeline and associated total addressable market. Novel therapies was a key driver of our year-over-year revenues. We ended €˜22 with 14 total collaborations across 7 drug categories, supporting a broader movement to subcu drug delivery in the home. This included one collaboration that progressed through the pipeline to a commercial launch, Apellis’ EMPAVELI or Aspaveli outside the U.S. Most importantly, these 14 total collaborations give us confidence in our target of 5 Phase 3 trials by €˜26 and then exceeding our target of one new commercial drug indication.

The total of our collaborations to-date has doubled the potential of our total addressable market to $2.5 billion well in excess of the $1.3 billion target. We also committed to doing this with a disciplined investment strategy. This year, we focused the majority of our investments in three areas: expanding our innovation capabilities, increasing our business development and commercialization efforts, and building a stronger foundation with a move to new facilities. We did all of this while keeping an eye on cash and ending the year with $17.4 million, an increase from the third quarter and ahead of our guidance of $60 million. We executed with diligent cash management while investing where needed to support growth. We have made significant strides towards Vision 26 over-performing in the first year of our plan, with clear progress towards our €˜26 milestones.

In our U.S. business, we focused on growing our leadership position in the SCIg drug market. We outperformed the underlying market growth growing 11% despite a supply interruption in the second and third quarters. We have used the underlying drug market growth as a marker of our success and a target for which we strive to outperform. For the full year €˜22, the SCI drug market grew 8%, up from 2% growth in €˜21. We are excited by the positive momentum in the overall market and the year, including fourth quarter reported script growth of 17% and SCIg drug market growth of roughly 12%. As we have communicated, we generally see a one quarter lag from the script timing to our revenues, accounting for the timing it takes to get the patient operational with the KORU Freedom system in the home.

We are excited by the fourth quarter drug and script market growth and we anticipate strong start to €˜23. At the end of €˜22, 16% of total patients are now on subcu drug therapy in the home, representing growing trend as SCIg therapy is outpacing IVIg therapy. New patients continue to be a primary focus for the company. And we remain uniquely positioned to capitalize on new patient starts with the broadest on-label indications in the market. To-date, KORU Medical has 9 on-label indications with 5 different partners. In the past 18 months, we have added 4 new labels to with Octapharma and Grifols for Ig, one for pre-filled syringes with CSL and one for a non-Ig label this year Apellis’ EMPAVELI. Increasing are on-label indications and new patients starts will remain a core part of our strategy.

And finally, since receiving our FDA clearance of our FreedomEdge system for use with pre-filled syringes in November of €˜21, we have seen the pre-fill market grow from approximately 3% penetration to 10% of the total market in €˜22, ending the fourth quarter with roughly 12% penetration. We also tracked this growth with doubling of our FreedomEdge pumps. Although still in its early stages and with current pre-filled syringe sizes, supporting about a third of the market, we continue to see an opportunity to grow our share and drive increased conversion to subcu therapy through ease-of-use and patient preference for pre-filled syringes. We anticipate additional PFS indications to come to the market in the near future and we remain well-positioned to capitalize on this growth.

In our geographic expansion efforts, we have seen positive momentum, with 8% year-over-year growth in our international core business driven by an impressive second half growth of 15% as we accelerated and focused our efforts internationally. We currently have distribution in over 25 countries, providing immediate leverage as our pharma partners expand their ex-U.S. indications. As plasma shortages alleviate in €˜22, we also see a growing Ig drug supply ex-U.S. in €˜23. New patient starts is an essential driver of both our core and international business. We continue to increase efforts to deepen relationships with our global pharma partners and to work together to capture the various opportunities across countries. Notably, in €˜22, we saw one new drug launch, Aspaveli in multiple international markets and we anticipate further geographic launches in €˜23.

Our second focus area is to strengthen our distribution partnerships. We have identified several key markets representing meaningful growth opportunities. Our initial efforts have seen our EU pump sales double year-over-year, indicating growth in new patient capture. We also see an additional opportunity to penetrate the existing base of electronic pumps and are in the process of building new clinical evidence for the benefits of the Freedom system, including patient comfort, device reliability and economic advantages. Moving to our novel therapies business, 2022 has marked a year of exciting progress. We have created a solid pipeline that has significantly contributed to accompanying growth in the short-term. Most importantly, it creates the opportunity for future drug indications that when commercialized, we will grow our business substantially.

Our NT business consists of revenues generated in non-recurring engineering revenues and products and services in support of clinical trials prior to a drug’s commercial launch. When the drug launches, this revenue becomes part of our core business revenues. Over the past few quarters, we have shared our pipeline and provided a more detailed view of this opportunity, including this quarter, providing more transparency on projected launch dates. In total, we now have 14 collaborations, which include over 2.8 million potential patients and a TAM of roughly $2.5 billion, roughly 2x our original aspirations. The new collaborations we established in €˜22 created the majority of this new market opportunity, including in our core immunology business and across multiple new drug therapy areas.

We are pleased with the execution on our collaborations and the increased engagement from the biopharma companies that have trusted us to help deliver their drugs. Our novel therapies team is increasing at our event revenues as they execute on innovation milestones in our agreements and increasing clinical product sales for feasibility and trials for Phase 2 and 3 research. We look forward to continuing to build our momentum in €˜23. Based upon the company’s capabilities, we have become a clear leader for consideration in every large volume opportunity. Due to the nature of novel therapies, drug opportunities may be canceled, the drugs may fail and timelines will shift. However, we believe our pace of new deals will remain relatively stable, and we anticipate ending the year with an additional six collaborations, bringing our total number of collaborations to approximately 20.

This pipeline, along with multiple new opportunities we are working on includes multiple candidates in Phase 3 and a clear line of sight to our €˜26 commercialization goals. We have a strong start to €˜23 with another pre-filled syringe deal announcement in quarter one, a successful first year of execution on our Vision €˜26 growth strategy. I will now turn the call over to Tom to review our financial results.

Tom Adams: Thank you, Linda, and good afternoon, everyone. I’m excited to report a strong year of approximately 19% double-digit growth with total net revenues of $27.9 million, an increase of $4.4 million. We achieved double-digit revenue growth in our domestic core and novel therapies businesses. Domestic core growth was 11.3%, driven by increased volume attributed to SCIg market growth and new label indications, including pre-filled syringes. Novel therapies revenue grew 330% related to services performed on an NRE innovation services agreement as well as increases in clinical trial product sales for several pharmaceutical customers. International core revenue grew by 8%, driven by volume growth. The international business showed strong second half results of 15% growth, led by new distributor revenue growth in Germany and a new label indication launched in several EU markets.

Looking at the full year by quarter, we delivered strong double-digit growth every quarter. Our growth between Q3 and Q4 was impacted by the Q3 backorder clearance. Taking this into account, as we compare first half to back half, we grew our back half revenues by 21% higher than the first half of 17%. Our Q4 net revenues were $7.3 million and represented a growth of 13.2%, novel therapy sales grew by 260% or $584,000 and was primarily driven by significant milestone progress related to an NRE innovation service agreement. We also booked revenues in support of ongoing clinical trials. Domestic core growth of 6.2% was driven by growth in FreedomEdge system revenues for pre-filled syringe payments, offset by store consolidations and a large specialty pharmacy account and the impact of lower SCIg script volumes from Q3.

We generally see a one quarter lag in revenues from script volumes, accounting for the time it takes the patient to be operational with the Freedom system in the home. International core revenue was lower by 3.2%, driven by prior year timing of orders from two distributors, partially offset by new distributor growth in Germany and growth in other markets related to new label indications. Reported gross margin for the full year was 55.1% and was lower than prior year by 350 basis points. We had a 400 basis point increase in COGS, 210 basis points was due to labor rate and material increases, primarily driven by the inflationary impacts. The remaining 210 basis points was due to one-time additional labor incurred for clearing the Q2 to Q3 backorders and subsequent Q4 inventory recovery leveling.

We also incurred 50 basis points in one-time costs for our manufacturing transition and Chester facility ramp down to continue progress toward our outsourcing margin improvement initiatives. Our NRE service revenue had a 50 basis point impact €“ negative 50 basis point impact, partially offsetting these declines was an increase in core average selling price and product mix. Our growth €“ our Q4 gross margin was 55.5% and remained flat with Q3 at 55.7%. As compared against last year, gross margin declined 350 basis points. Walking this down, we experienced 223 basis point decrease, due to higher labor wages and material driven by a challenging inflationary environment. In addition, we had 257 basis point decline, due to maintaining one-time labor and increased overtime to replenish our finished goods inventory to meet our safety stocks and manufacturing transition inventory requirements.

Finally, we had 190 basis point decline in one-time costs as we initiate the ramp down of the Chester site that will close at the end of Q1. Offsetting these manufacturing increases was a higher margin for novel therapies and NRE mix and an increase in core average selling price and product mix. Moving forward, with the Chester site closure on track for Q1 and the passing the final validations for outsourced manufacturing, we are on track to generate significant margin improvement in the second half of 2023. Our cash balance at the end of 2022 was $17.4 million, representing a $7.9 million decrease from the beginning of the year. Cash during the year was used for strategic investments as previously communicated in our Vision 2026 plan related to innovation in support of novel therapies business, also in increasing our commercial and business development capabilities across our U.S. and novel therapies businesses.

In addition, we invested in our Mahwah, New Jersey facilities and quality and regulatory investments to support our novel therapies and geographic expansion initiatives. We incurred a heavier cash burden in the first half of the year, driven by the facility investments in our new Mahwah facilities, including R&D labs and manufacturing clean room build-outs. We also had cash outlays for the annual bonus and year-end accrual payments in the early part of the year. During the second half, our use of cash was lower as we increased revenues, had lower expenses and implemented improvements in working capital. I will now turn the call back to Linda for guidance and closing comments.

Linda Tharby: Thank you, Tom. Turning to expectations for fiscal €˜23, KORU Medical’s guidance for full year €˜23 reflects many assumptions, including those set forth in our accompanying press release. We are pleased to report the following guidance and key milestones. We expect full year €˜23 revenues of between $32.5 million and $33.5 million, representing growth in the range of 17% to 20%. We have identified several key milestones we will update throughout the year to support this revenue growth. These include core SCIg drug market growth of approximately 10%, pre-filled string penetration of 15% to 20%, expanding our novel therapies pipeline with 6 new collaborations, bringing our total number of collaborations to approximately 20 and two new 510(k) filings in the back half of the year.

We are guiding to a 58% to 60% gross margin on the full year and to exit the year between 60% and 62% gross margin. Key drivers behind our €˜23 gross margins include our Chester site closure and headcount ramp down in Q1 and completion of outsourced manufacturing transition in the first half of the year. We are guiding to a 55% to 57% gross margin for the first half and 60% plus margins in the second half of €˜23. We also expect cash balance at year end €˜23 to be greater than $10 million. In order to support our strategic initiatives and continue to drive top line growth, we expect to increase operating expenses to roughly $30 million, inclusive of stock-based compensation. Our operating expense includes continued investment in our strategic initiatives with near-term goals of continued TAM expansion through securing additional new non-IG novel therapies deals, building our innovation and pipeline, including advancements in our Freedom system and development of our next-generation pump.

We forecast improvements in working capital, specifically a $2 million inventory reduction as we outsource manufacturing. We expect to see higher cash burn in first half, driven by annual year end accrual payments and innovation investment timing. As in €˜22, we expect to see lower cash outlay in subsequent quarters due to increasing revenues, gross margins and working capital improvements. We’re ahead of our operating plan, and we have visibility to breakeven in the second half of €˜24 based on our current strategic outlook. While we may choose to increase our cash on the balance sheet to take advantage of additional growth opportunities through debt or non-dilutive financing, we are not anticipating any equity raises at this time. In closing, we ended the year a stronger organization with a team that has delivered on several key milestones and is making significant progress towards Vision €˜26.

We have delivered multiple quarters of double-digit growth and full year revenue growth of 19%, ahead of our initial expectations. We are executing a business strategy in our core business that outperforms the underlying market growth. In our novel therapies business, we are delivering impactful short-term revenues and as we continue to progress our collaborations, we have increased our overall commercialization outlook to $2.5 billion TAM. Our innovations in building a new novel therapies team are beginning to pay off with the commitment to new 510(k) filings and multiple new novel therapy collaborations in €˜23. This gives us confidence to provide revenue guidance in the range of 17% to 20% and a gross margin profile of greater than 60% by the end of the year.

We are on track to deliver over $60 million in revenues by €˜26 and multiple new novel therapy drug indications. We are well positioned with a solid year of execution behind us to continue growing our leadership position and subcu drug delivery systems, providing increasing value to patients, customers and shareholders. And finally, a big thank you to our KORU employees and to our customers and patients. I will now turn the call over for Q&A.

Operator: Our first question comes from the line of Alex Nowak with Craig-Hallum. Please proceed with your question.

Alex Nowak: Okay. Great. Good afternoon everyone. I was hoping we could first start off on the business outside the U.S. It sounds like you are seeing some early gains there, but I am just curious how to think about the expansion outside the U.S. this year? What are you assuming in the guidance for it? And then also, other than just engaging with distributors over there, what can you do to really accelerate that business this year?

Linda Tharby: Yes. Thanks Alex. Great question. So first of all, last year, we saw an overall plasma shortage in the market, and most of the key pharma partners, if they were short, gave the product to the U.S. So, that’s the first thing. We see by and large pharma companies having no plasma shortages and therefore, a lot of Ig drug supply. So, we see that being the first boost to our international business. Second is, we hired a new leader with clear capabilities in distributor management. So, we are focused our efforts with our current distributors, and we are starting to see the payoff. Third is the Aspaveli launch, they are utilizing the KORU Freedom system as their preferred partner of choice outside the U.S. So, we have seen a tremendous boost in the initial launch countries there.

And then finally, and I would put this one out as €“ it will take us a little bit more time, but conversion of electronic pumps, we think both from a patient preference, from a cost position, we have a great value proposition versus electronic pumps, we are generating now the clinical evidence to prove that out. So overall, we feel confident in international business and outlook to a double-digit growth in €˜23.

Alex Nowak: Okay. Understood. Makes sense. And then going back to the plasma shortage that we had in the market throughout COVID, the guidance has Ig drug market growth of about 10% built-in. Pre-COVID that market maybe was in the 15% to 20% range. A couple of weeks ago, CSL was out there saying that plasma collection supply is now above 2019 levels. So, maybe just speak to what you are seeing in the Ig market? What are you seeing around plasma supply share gains? And how do you settle in on that 10% number versus maybe being more like 15% or 5%?

Linda Tharby: Yes. Great question. So first, let me just talk about plasma supply. We saw both Grifols and CSL come out and say that they see high-double digit collections, which is great. That’s going to lead to the Ig product supply. And so as we look and remember the numbers that we are quoting, we are looking at full year guidance is here. We saw, as you noted, pre-COVID growth in the area of 15% to 20% on a much smaller base. Last year, we saw 2% growth and obviously a big uptick to 8% this year. We are guiding to 10%. We saw the first month of the year come in around 8%. So, this could be an area where we see it come out a little bit more. But as we know, this market can bounce around quarter-to-quarter. So, at this point, we feel pretty confident at 10%, knowing that last year, we called an 8% and the market grew 7.8%.

So, we feel pretty good about our capabilities, but there is one area that I am super excited about like you is, seeing the fourth quarter script growth levels. We are seeing for the first time, a really clear break between subcu market growth versus IV market growth. So, we think we have this in the right place. We will continue to track it. And when we see an update to that, you will all be the first to know.

Alex Nowak: And you have certainly done a great job at growing above that rate as well. Maybe just one last question around the pre-filled syringe side, can you just remind us which sizes of pre-filled vials are currently approved in the U.S.? And then how to think about new approvals of different vial sizes coming this year and incorporating that into your pump that you have right now?

Linda Tharby: Sure. So, what we see approved in the market is a 5 ml, a 10 ml and a 20 ml pre-filled syringe. And patients use these in a variety of ways. The way that works the best is that they simply take the pre-fill and pop it into our FreedomEdge pump. But a variety of patients take much larger doses. So clearly, the big opportunity will be when we see a 50 ml approval come into the market. We see two things occurring. First of all, we see current pharma partners in the market, expanding their overall ranges of sizes. And second, we see new entrants, our new pharma partners coming out with pharma with pre-filled indications. So, I think that’s fantastic. What’s been very nice for us to see is that the overall growth in pre-fills is essentially the single biggest driver. We actually see the biomarker beginning to flatten out and slightly decline.

Alex Nowak: That’s great. Appreciate the update. Thank you.

Linda Tharby: Thank you, Alex.

Operator: Our next question comes from the line of Caitlin Cronin with Canaccord Genuity. Please proceed with your question.

Caitlin Cronin: Hi. This is Caitlin on for Kyle. Congrats on a great quarter. And just a quick question, if you could maybe provide some more color on the cadence of margins this year. So, NRE service revenues seem to be a driver of margins the past few quarters. And what’s kind of the expectation for that to continue to affect margins in 2023? And then also could the timing of the manufacturing transitions caused different margin expectations, cadence start the year than you have guided to? Thank you.

Linda Tharby: Go ahead, Tom.

Tom Adams: Yes. Thanks Caitlin for the question. So, when you look at our margin in 2022, it was really three factors that impacted it. One was labor and materials that we saw driven by inflationary increases. Second was, we added incremental costs for the back order that we had that we mentioned in Q2 and Q3. And then finally, we spend money on the transition of our manufacturing footprint by reducing our Chester footprint and moving to our third-party outsourced organization. So, when you think about 2023 going forward, two of those things will not repeat themselves. We will not spend additional money on labor for shifts, referring to the backorder situation we had earlier in the year. And secondly, the one-time costs for all of the transitional work as we ramp down the Chester facility, will also not repeat itself next year.

So, we see in the second half of next year, significant margin improvement, and that will be driven by those factors not repeating themselves as well as lower cost of goods from our low-cost outsourced provider that begins in the second half of 2023.

Linda Tharby: And maybe the only other thing that I would say, in addition to what Tom had to say is we are confident now in our Q1 Chester site closure. So, we will release all the expenses and headcount related to that. So, you will see the margin as we have guided to ramp up from that 55% level in the first quarter, we will see it ramp up steadily throughout the year. And we have passed all our final validations to our outsourced manufacturing. And so we are confident that will wrap up in the back half as well. As for our margins on our NRE and core, our NRE margins, we are continuing to forecast that to have no meaningful impact on our gross margin at this point.

Caitlin Cronin: Great. Thanks so much.

Operator: Our next question comes from the line of Jason Bednar with Piper Sandler. Please proceed with your question.

Joe Downing: Hey. Thanks for taking the questions. This is Joe Downing on for Jason today. So, one from us on the revenue guide. So, we are curious on what will drive revenue to finish at the low end versus the high end of the guidance today? And can you talk about the assumptions around U.S. market growth versus international market growth? I know you mentioned six new novel therapy partnerships in the 2023 guide. How much growth should we be thinking comes from the novel therapies pipeline this year?

Linda Tharby: Yes. So, you asked what could impact the range of our guidance up or down. And I would point to a couple of things. The first was the first question we got from Alex, which is at the U.S. market, we see that underlying Ig market grow faster, that could bump us up nicely. I think we have international probably in the right place. And then the biggest thing is our novel therapies pipeline. And we start the year, obviously with a number of collaborations and a number of commitments to revenues. And if we get €“ if their trials progress well and they do well, they will order more, if the trials don’t do well, they will order less. Sometimes those trials are canceled, etcetera. So, that’s the biggest variable in our overall pipeline.

However, at this point, obviously, with those broad guidance ranges for U.S. and international, we are expecting significant growth again in our novel therapies overall revenues. And then just then coming back to our U.S. and international, we don’t provide specific guidance. What I would say is that we expect, as we have in the past year to outperform that underlying 10% that we issue for the U.S. market by a couple of points, and we would expect our international business to be on track and maybe a little bit better than our second half performance.

Joe Downing: Great. Thanks Linda. And then one for Tom, just looking at the 2023 margin guidance, what are you looking at in the guidance as it relates to the €“ like further material labor or early OpEx costs? How are you contemplating that in the 2023 margin guidance?

Tom Adams: Yes. So, in terms of labor in the €˜23 guidance. So, as I have mentioned, we are going to be ramping down our Chester location. So, labor will significantly drop as we reduce that footprint and remove that labor. The second part is, as mentioned earlier, our NRE will be slightly improved from last year in terms of overall margin and footprint. And then thirdly, with the outsourcing, that’s the big one. So, the outsourcing will allow us to purchase products at a much lower cost than how we were making them and manufacturing them today. So, I would say with those components, those are the main assumptions that are going to drive lower margin for us this year.

Linda Tharby: And we have built in as well. I mean what Tom is alluding to is, obviously now we have a purchase price that comes from a much lower labor cost environment because our outsources is in Latin America. But on top of that, our costs here, we have built in those inflationary impacts that we saw this year into a much lower base here.

Joe Downing: Very helpful guys. Thank you.

Linda Tharby: Thank you.

Operator: That is all the questions we have for today. I would like to turn the call back to Linda Tharby for closing remarks.

Linda Tharby: I am very proud of our progress in €˜22 against our €˜26 vision. We look forward to continuing to update you in €˜23 and just again, a big thank you to all of our KORU employees.

Operator: Ladies and gentlemen, this does conclude today’s teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.