Hamilton Thorne Ltd.

Welcome to the Hamilton Thorne LDT Fourth Quarter and Year-End 2021 Earnings Conference Call. Before turning the call over to your host today, please be reminded of our standard public company filing on forward-looking information and use of non-EFRA measures. Certain information presented or otherwise discussed on this call may contain forward-looking statements. These statements may involve but are not limited to comments related to strategies, expectations, planned operations, product announcements, scientific advances, or future actions. This information is based on current expectations that are subject to significant risk and uncertainties that are difficult to predict. Should one or more risk or uncertainties materialize or should assumptions underlining the forward-looking statements prove incorrect, actual results, performance, and achievements could vary materially from those expressed or implied by these forward-looking statements. These factors should be considered carefully and prospective investors and other parties should not place undilute undue reliance on these forward-looking statements. The company assumes no obligation to update such forward-looking statements or to update the reasons why the actual results could differ from those reflected in the forward-looking statements unless and until required by security laws applicable to the company. Additional information identifying risk and uncertainties is contained in filing by the company with the Canadian securities regulators, including without limitation the company's management discussion and analysts for the quarter and 12 months ended December 31, 2021, which filings are available under the company's profile at www.cedr.com. During this call, the company may reference adjusted EBITDA, organic growth, and constant currency as non-EFRA measures, which are used by management as measures of financial performance. The section entitled Use of Non-EFRA Measures and results of operations in the company's management discussion and analysts for the period covered for further information and a reconciliation of adjusted EBITDA to net income. Now, let me turn the call over to Hamilton Thorne's CEO, David Wolf.

Thank you, and good morning to all, and welcome to the Hamilton Thorne fourth quarter and year-end 2021 earnings conference call. As most of you know, my name is David Wolf. I'm the president and CEO of Hamilton Thorne. With me on the call today is Michael Bruns, our Chief Financial Officer. This morning's call will have the following format. First, I will provide a summary of operational and financial results for the quarter and year ended with a focus on our sales, markets, and operational performance. Michael will follow with a more detailed discussion of financial results for the periods, as well as a review of our financial position and liquidity. And I'll return for a few minutes to provide some information on our outlook for 2022. I'd like to remind all participants that we do not provide financial guidance, so I'd ask you to limit your questions to either historical periods or general trends in the business. I'll begin with our sales results. I'm very pleased to report that we finished the quarter and the year with record revenues and record adjusted EBITDA in both periods, highlighting the continued strength of our business as demand and growth of most of our markets has returned to normal levels following a more COVID-impacted 2020. Let me give you some of the highlights from our performance. Sales increased 32% over $52 million for the year and sales for the quarter increased 27% to $15.6 million. Sales in constant currency increased 28% the year and the quarter, reflecting currency fluctuations as the dollar strengthened throughout the year. Gross profit increased 29% to 26.2 million for the year and 22% to 7.9 for the quarter. Net income increased 150% to 2.4 million for the year, but did decrease 15% to 836,000 for the quarter. Adjusted EBITDA increased 48% to 9.8 million for the year and up 17% to 3.0 million for the quarter. Organic growth in U.S. dollars was 23% for the year, 22% constant currency, And organic growth was 12% for the quarter and also in recorded U.S. dollars and also in constant currency. And cash generated from operations was $5.6 million for the year, and we ended with total cash of $17.9 million. To give you a little more color on this, sales were up across all of our product categories, consumable sales, which largely represent organic growth, leading the way with over 50% growth for the year, ahead of strong equipment sales growth, which was in the mid-30% range, and services growth in the teens. Looking at field of use, sales into the human clinical market were up substantially for the quarter and year, driven by strong demand for all products and services. Sales into the cell biology research markets also grew substantially for both periods, albeit off a much smaller base, while sales into the animal breeding market went down for both periods. Gross profit margins were down at 50.1% for the year versus 51.3% for the prior year, primarily due to product mix, particularly the impact of additional direct sales of third-party products and the addition of the somewhat lower margins, say, IVF tech products in the second half of the year. We were also impacted by increased cost of materials and shipping due to supply chain issues. which was partially offset by increased sales of higher margin proprietary equipment, branded consumables, and quality control testing services. Gross profit margins for the quarter were up versus the prior quarter, so up sequentially at 50.7%, but also down versus the prior year. Our operating expenses were generally in line with our expectations with increased costs associated with maintaining investments in R&D and sales and support personnel, as well as variable costs of sales returning to historical levels and acquisition expenses post-transactions. We also completed a significant expansion of our product line, graphic coverage, and scale when we acquired Tech Event in April of this year and IVF Tech in July, which also, as you know, expanded our direct sales footprint into Australia and the Nordic countries. I'll now turn the call over to Michael to provide a more detailed discussion on the numbers.

Thank you, David. Good morning, everyone. I am Michael Bruns, the CFO of Hamilton Thorne. I will briefly highlight the fourth quarter in December year-to-date performance. David has already provided an update on sales and gross profit, so I will focus on other elements of the income statement, as well as the cash flow and liquidity of the company as of the year-end December 31st. Operating expenses increased 32% for the quarter and 28% for the 12 months ended December 31, which included $80,000 of acquisition-related expenses in Q4 and $688,000 for the year versus no direct spending during the COVID impact in 2020. Excluding those acquisition costs, comparable expenses increased 31% for the quarter and 24% year-to-date. Expense increases are also attributable to the inclusion of IVF tech and tech event expenses post-closing acquisition, as well as increased non-cash share-based compensation. Expenses also increased due to volume-related increases in variable costs of sales, as well as continued investments in R&D, sales, and support resources. The continued return to normalization included increased spending for sales and support teams' travel to customers and increased trade show activities. The gain on debt extinguishment of $775,000 was the result of the forgiveness of the U.S. Paycheck Protection Program, or PPP, loan obtained in May of 2020 by our U.S. subsidiary. The prior year 12-month change in the fair value of derivative was attributable to debentures which were fully converted to equity in April of 2020. Income tax expense increased to $400,000 for the quarter ended December 31 and $1.8 million for the full year. primarily to substantial increases in non-cash deferred tax expense. The 2021 deferred tax expense increased to $435,000 for the quarter and $1.2 million for the year. The significant non-cash expense is attributable to changes in the valuation estimates of deferred tax assets and related foreign tax credits, which required reductions in those previously recognized deferred tax assets. Net income for the quarter was $836,000, a decrease of $124,000 from a very strong Q4 of 2020. Net income for the 12 months of 2021 increased 151% to $2.4 million, an increase of $1.5 million over the prior year, primarily due to increased sales and related gross profit, debt forgiveness, and the elimination of changes in fair value derivatives, all partially offset by increased operating expenses and increased income tax. Adjusted EBITDA, which we consider an important metric of our financial performance, increased 17% to 3.0 million in Q4 and increased 48% to 9.8 million for the full year 2021 versus the prior year Q4 of 2.5 million and 6.6 million for the year 2020. This is primarily due to more normalized operations in the 12 months of 2021 versus the substantial revenue and gross profit decreases in the second quarter of the previous year, again attributable to the COVID-19 pandemic. These 2021 gains were somewhat offset by the impact of mix and supply chain issues on gross profit margins and planned increases in operating expenses in the period. As a reminder, adjusted EBITDA is a non-IFRS measure. Please see the reconciliation of adjusted EBITDA and net income for the quarter and the full year in our FD&A report filed today on CDAR and also on our HGL website, as well as the definitions of adjusted EBITDA, organic revenue, and constant currency. Turning now to the company's cash flow and balance sheet, the company generated cash from operations of $1.8 million in the fourth quarter and $5.6 million for the 12-month year to date, down 6% from the prior year. This operating cash flow is attributable to the substantial revenue and gross profit improvements offset by increased inventory levels expanded over several months to address increased product offerings and supply chain issues. Cash flow was also impacted by reduced accounts payables and accrued expenses, primarily attributable to the timing of that gradual increase in inventories. Cash used in investing activities was $9.0 million. increased due to the total cash payments of $6.9 million made in connection with the IVF tech and tech event acquisitions in July and April. In addition to the normal expenditures for ongoing investments and capitalized intangible development costs by our R&D teams and cap extra equipment and demo units for production and sales teams. Cash utilized by financing activities was a net of $423,000, including the new term debt of $5 million obtained as partial financing for the IDF tech acquisition, all offset by scheduled term loan and lease obligations, and the final $2 million of payments in 2021, reducing the company's line of credit to zero as of December 31. Companies' resulting cash balance of December 31, 2021 decreased to $7.9 million for the 12-month period, that decrease of $3.9 entirely attributable to acquisition activity in 2021. Working capital for the period actually increased 980,000 to 23.1 million. Total availability in our lines of credit has increased to 12.5 million, consisting of the 8.0 million acquisition line of credit, as well as the full 4.5 million of availability in our revolving line of credit. This combined 12.5 million of bank lending is an important additional resource in our ability to complete acquisitions with a relatively low cost of capital. This availability, combined with our cash on hand of approximately $18 million, makes us well-positioned to support our operations in the coming months, including the continuation of our acquisition program and financing further growth as the business climate continues to improve. Now let me turn the call back over to David to comment on the HTL outlook.

Thank you, Michael. So looking forward into 2022, we continue to be extremely optimistic on our revenue performance as demand and growth have returned to pre-pandemic levels in nearly every market that we serve. As I mentioned earlier, our Q4 gross profit margin was up sequentially and we have implemented across the board price increases in early 2022 that should help address supply chain costs as well as general inflationary pressures. That being said, We do see the possibility for quarter-to-quarter variability in sales and margins during the year as we continue to work to manage the supply chain issues that admittedly are of the type we believe are affecting all market participants, and also as the scale of our manufacturing and logistic capabilities scale up to meet demand. In addition to working on stronger organic growth, I'd like to spend a few minutes discussing some of the initiatives that we're working on that we expect will contribute positively to our growth and profitability over the longer term. First, as I mentioned, we continue to work on strengthening our supply chain and expanding our manufacturing and logistics capabilities in both of our major locations in the US and our UK location. Second, we have significant efforts across the board to manage the transition to the new medical device and in vitro device regulations in the European Union. Third, we continue to invest in expanding our direct sales and field service initiatives in Europe and the U.S. to support the growth in the sales of the full range of Hamilton Thorne brands augmented by select third-party products that allow us to support an entire lab. Finally, we continue to make progress on accelerating our acquisition program. We have an active pipeline right now and are actively working on multiple opportunities. As we have seen over the last couple of years, the world is full of uncertainty. Even as we face the possibility of the resurgence of COVID-19 cases due to new variants affecting demand, supply chain issues and lockdowns affecting supply, and the war in Ukraine roiling markets, we feel good about our market position and our confidence in our team's ability to address these challenges. In summary, we feel that we are well positioned to continue to execute on our strategy of driving long-term growth and EBITDA expansion by investing in organic growth while building scale, enhancing our product offerings, and expanding our geographic and direct sales footprints through acquisitions. We'll now open the lineup for questions.

To ask a question, you'll need to press star one on your telephone. To withdraw your question, press the pound key. We do ask that you please limit yourself to one question and one follow-up and then return to the queue for any additional questions. Please stand by while we compile the Q&A roster. Your first question comes from the line of David Martin with Bloom Burton.

Hi, David and Michael. Can you hear me?

Yes.

Yes, we can. Okay, great. So, you too. You mentioned the return to pre-pandemic levels. Does that apply to early this year as well? January, February, certainly, you know, a lot of other companies were mentioning that was a difficult times because of Omicron.

Yeah. So again, I'll, I'll remind people that, um, you know, our conference, you know, it's a funny thing because our conference call is designed to talk about 2000 and, um, 21, but here we are in April of 22. So I understand the natural inclination to want to talk about 22. I would say in general, in most markets, we did not see significant differences in demand due to problems from COVID. We certainly saw, as everybody knows, we've seen more cases, and that did affect some of our manufacturing capabilities. We had more people and other capabilities in companies. We have had more people out sick. But I would say we haven't really seen a significant change in demand. I would, again, you know, now we're in a realm of speculation, but as everybody knows, this COVID situation in China with their zero tolerance policy now has Shanghai shut down, which may in fact affect some demand in China. And of course, if that spreads, that could be a more important issue. We do feel these are transitory and, again, our history and the history from 2020 first half into second half of 20 and early 21 is that the demand, if for whatever reason, either clinics reduce activity or customers and patients are nervous, the demand doesn't go away and it really just is deferred and you end up with this greater demand in the following quarters.

okay just to be clear when you say no change in demand is that versus pre no change versus pre-pandemic levels or no change versus say last year when pandemic was still impacting volumes yeah i would say again we're broadly generalizing but broadly generalizing no significant change with you know some exceptions country by country versus pre-pandemic levels okay um Second question, you mentioned the IVF tech impact negative on gross margin. Is that something that you can work towards improving as you go forward? I know with some of your other acquisitions, as you layer direct sales in the place of distributor sales, you can improve the margins. Is that something you can do here too?

Absolutely. So that's clearly... Part of our business plan is to, again, when we buy a business, we generally buy what I would say are strong businesses. So the IVF tech is a strong business, great products, great brand, but the reality is based on the kinds of products that they have, and particularly as there's a lot of, frankly, steel and aluminum in them, which were impacted in the second half of the year by inflationary pressures, we saw some meaningful margin pressure we have done price increases on those products fairly significant price increases on those products as well as looking to and have gotten first signs of success in converting uh what had previously been distribution sales to direct sales so that is that is our i guess our mo uh and you know so far we're we're um on track i will say Given the inflationary issues, it's hard to know exactly when everything will work through the system, but we still feel that that's a solid plan.

Okay. That's it for me. Thanks. Thank you.

Our next question comes from the line of Tanya Armstrong-Witt with Canaccord.

Good morning. Thanks for taking my questions. So first off here, I guess this is more on the macro side. Could you speak to how the acquisition of Cook Medical by Cooper could impact you guys in the competitive landscape globally?

Sure. So I will call everybody's attention to, without getting too deeply into it, that Cooper has made a bid to buy or I guess has an agreement to buy, at least an agreement in principle. Cook Medical, which is a fairly large player, about two-thirds of their business is in IVF and a third is in general medicine. gynecological products, which is an area we don't participate in, as you know. And as far as I know, at least as of yesterday, the deal hadn't closed. And we'll wait and see how that turns out. In general, I would say that we don't see this having really significant effect on the competitive situation. Cook is a fairly large player, and it will obviously increase Cooper's size, but it doesn't – one of the things we've often said is while they would be a large player, they're certainly not a dominant force in the market. And I think there's, from their perspective, a lot more product overlap, and that Cook is much stronger in products like catheters and needles, which are products that we do sell some of but are not – um, you know, not by any stretch, um, uh, significant part of our business. So I would say in the, in the short term, we certainly wouldn't expect to see, you know, any meaningful, any meaningful impact, um, over the longer term, particularly as we expand our product line into areas, again, similar to what, what Cook sells, we could see, um, more competitive, it being a more competitive situation. Okay.

Perfect. Thanks so much, David. And then secondly, I think you touched on one of your growth initiatives being strengthening that supply chain and your manufacturing capabilities. The latter is something I think we've talked about like months, maybe years ago about moving some of that consumables manufacturing in-house. Can you provide any more color on where that stands?

Sure. So we've always had, for the most part, our consumables manufacturing has been done through contract manufacturers, which I don't think is frankly all that unusual in our field, given the scale. We have brought some of that in-house and moved, indoor moved contract manufacturers to have a little more control over things. But in general, the areas where we're doing the investments are in manufacturing On the manufacturing side, in our equipment manufacturing, again, we're building capacity to meet demand and also building capacity to meet the logistics needs of doing more third-party products, and particularly consumables distribution, which the consumables tend to, you know, they're relatively individually low value but collectively high value and high margins. and take up a lot of space. So we end up needing a little more space for those.

Okay, excellent. Thank you. I'll get back in the queue.

Your next question comes from the line of Justin Keywood with Stiefel.

Hi, good morning. Thanks for taking my call. Just on the outlook and the comments around the expectation for continued good growth, By geography, is that pretty consistent around where Hamilton Thorn operates, or are there any rising geopolitical risks or other factors that may affect demand in any particular region?

Yeah, so that's a good question. Allow me to talk a little bit about the geopolitical issues. So in general, if you followed in our investor deck and our AIF, which I believe will be filed today, we – look we show um the progression of our our business and uh we had more growth last year in the americas and in asia pac than um in europe i think that's consistent with what we what we've told people we expect the asia pac region um is you know it's going to be a continued high growth region for a long time which we're putting a lot of effort into and we would continue to see that happening uh so that's so i would say that trend will continue the they tend these Longer-term macro trends sometimes have some convolution, I guess, because when we do an acquisition, the mix of the acquired business may be a little bit different, so it tends to fuzzy things up. But certainly that longer-term trend we would expect to continue. In terms of geopolitical risk, I will say obviously the biggest geopolitical risk today is around the – Russian-Ukraine war. We do have exposure, have had exposure to Russia and the Ukraine in terms of sales through distribution. We do not have either facilities or personnel in either location. We expect we'll see how things develop because perhaps Kyiv is coming back to normal, but we certainly would not expect to see significant business from the Ukraine this year, but one never knows. And certainly in Russia, we've made the decision to suspend sales to Russia for the time being, given the status of the behavior there. So collectively, these amount to maybe a percent, percent half of our business. So, you know, not zero, but not showing our material. And, you know, it's going to get a little small headwinds. You know, again, you know, if you look at our risk factors, you can also ask, well, you know, what happens if these conflicts expand and then you end up in a slightly different situation. But certainly we're not expecting these, you know, the geopolitical risks to have a big impact on us. I will say one of the fallouts of the geopolitical situation has been, which is a trend that started last year, has been currency. The Euro and the pound, which we trade in a fair amount, have both weakened against the dollar. So that'll give us a little headwind on reporting. But as you know, we report constant currency numbers, and you'll have a good sense of how the businesses are truly doing beneath the surface.

Thank you. That's helpful. And then on the price increases, has this already been initiated and completed, or is it in progress? And also, what has been the response to the price increases? Has it been relatively easily passed through or any resistance?

So, they were announced in Q4, implemented in Q1. We saw, as you would imagine, not a huge amount, but at least some level of forward buying, people wanting to buy in to lock in old prices. And we did honor quotes that we had outstanding. That would be more on the capital equipment side, but sometimes we had some big quote for consumables. So we'll see the impact of these scale in throughout Q1 and probably mostly through Q1, and then we should be largely impactful in Q2 and beyond. In terms of resistance, I think whenever you raise prices, you always get some level of resistance. But there's certainly a recognition that all prices or costs are going up across the board. And I think, our, our price increases were, um, you know, we've seen, we've seen, you know, getting anecdotal reports of price increases from competitors in our field. And ours would, I would say we're, um, uh, in, in line in line generally with what's going on a little higher than some little lower than others. But so across the board, I'd say they're being implemented again with, with, with exceptions where we have either contractual commitments or, or, or quotes outstanding.

And do you have any insight into the consumer receptiveness to the price increases? Like, has that been just largely, I guess, accepted? Or has there been any, you know, change in demand at the end level of the consumer?

Yeah, so the, you know, it's an interesting situation that we're in because particularly on the consumable side, we're price increases, you know, can be conceivably be cast on directly, you know, and pretty quickly we, you know, our price increases were pretty modest. They were in the low single digits in general. And, um, as you know, average amount of consumables used in each IVF cycle is, you know, it can be depending on the procedure, three to $500. So add a few percentage points to that. And it really doesn't have a meaningful impact on rounding broadly a $15,000, um, thousand dollar cycle so i i don't believe our costs are going to flow through directly to the consumer and or have any impact on consumer um you know consume you know the consumer that being said i would imagine everything else at the clinic level from um you know the pharmaceuticals the other other products that are used uh the labor which is the biggest spend rent and all the other infrastructure are also having inflationary pressures. So we might see some price increases, and then we'll find out, I guess, if that affects demand.

Okay. Thank you for taking my questions. Thank you.

And as a reminder, if you would like to ask a question at this time, simply press star, then the number one on your telephone keypad. Your next question comes from the line of Paul Stewartson with IA Capital Partners.

Good morning, David and Michael. Paul calling in for Chelsea. That's Ion Capital Markets. Must have been a typo there. Just wondering about your margins. Given all of the colour you've given for 2022 with the revenue growth rebounding even more and being at pre-pandemic levels, but the costs obviously going up quite a bit, how does that shake out in terms of the EBITDA margins? Any directional guidance there?

Yeah, so maybe I'll ask Michael to make a few comments on it, again, given context that we don't give guidance on the numbers.

Sure. I think that in very general terms, I think we are seeing that the inflationary challenges and supply chain issues are increasing. are still out there, still substantial, and still being sort of calculated and impacted into our inventory purchases and obviously flowing through to our cost of goods sold. So I would say that those are, as much as we are working on those, those are certainly impactful. So I think that from the, our outlook is for the long term, we will continue to improve but that challenge is of quarter to quarter in terms of mix, in terms of how that shakes out in terms of our different relative sales levels for the products within our mix, the amount of third-party products, which we like to sell and part of our lab strategy for providing everything for the lab, but obviously an impact on margins. All those factors are going to contribute to Variability, choppiness, lumpiness, the kinds of things that are going to be as much as we would like to control them are going to be somewhat beyond our level of control. So I would say very short term, the quarter to quarter can be impactful. Very much long term, we think we have the right things in place.

Okay. And then just to follow up, in terms of your R&D, I know we've talked in the past about some of the opportunities that you have there with new products. Can you talk a little bit about the cadence of that? Is that something that we saw some of the organic growth in 2021 coming from any new product launches? Is that something that we'll see concentrated in any quarters coming up or is this relatively smooth over the coming year?

Sure. So I would say in 2021, we certainly saw some impact from new product development. Now I'm thinking about it. With new features and new benefits for the customer, increased sales of those in a pretty meaningful way. Um, we also came up with, have come out with a new, um, incubator system, um, at planer that is, um, going to increase sales. And we're working on some new freezers that should be introduced in the middle of this year. I would say in general, um, you know, our business is not, um, you know, it's not like a pharmaceutical business where we, you know, you get your, your, your phase three, um, um, you know, and, and, and FDA approvals and off you go. And you just have this whole, you know, this new, you know, entirely new, um, revenue line, I think, in general, the kinds of R&D that we've been doing is more, has had more incremental effect, meaningful, but more incremental effect. I will say that also, and I mentioned it briefly, that we're spending a lot of effort this year on the MDD to MDR conversion, which by nature has pretty significant involvement from our R&D teams in terms of developing you know, the documentation and risk analyses and the various specifications and things for the products. So we may see, you mentioned cadence, we may see a little less in the way of product development in 2022 as same resources are tied up with other activities.

Okay, that's great, Tyler. Thank you so much, guys. I'll jump back into you.

Your next question comes from the line of Stephan Quinville with Echelon Capital.

Markets. Hi, guys. This is Sam here. Thanks for taking my question. I just wanted you to talk maybe a little bit more about the M&A landscape. I know you guys are always sort of vague about what's going on in the M&A pipeline, and I respect that. But obviously, there's some M&A in the sector, you know, A nice multiple page for Cook. But at the same time, in the overall markets, valuations have come off, at least in public markets. And as you mentioned, there's a stronger U.S. dollar impact. And I'm just wondering if those different dynamics are how they're impacting the M&A landscape and what you're seeing out there.

Sure. So in general, I would say, and this is a little bit repetitive to what we've said in the past, is we try not to answer this question too differently from time to time to avoid inadvertently signaling anything. But I certainly can give you a little bit of the color on attitudes and valuations to the extent we can. So continuing a trend we've talked about in the past, we generally are seeing very good receptivity at the target level to having discussions with us. If we go back two, three, or four years ago, people were a lot less interested in having these discussions. Now, that possibly means that there are others talking to them as well, and that creates a competitive dynamic, but nevertheless, I think it's good to be able to have open discussions with targets. So in terms of the numbers of targets that we have and the stages of development, the potential for... I won't say necessarily the potential for closing, but the pipeline is as strong or strong as it's ever been. So there's lots of activity. In terms of valuations, even though you mentioned one particular deal and there just aren't enough transactions, certainly reported transactions in our particular sector, I think to be able to draw a huge amount of, doing a lot of trend analysis, in terms of this. Clearly, when we think about acquisitions, we've always tried to be a responsible buyer. And as we look at today, we're clearly seeing all the issues you talked about. Rising interest rates is another one I would throw into the mix because when we do an analysis, we certainly look at EBITDA multiples, but ultimately we're as focused on a DCF model And as interest rates rise, then, you know, valuations, you know, it's just an inverse relationship to valuations. Sometimes that's a little hard to explain to a target, but I think they certainly can understand that at other levels, which is suddenly the cash that they get in this can go and earn them more. So they can see that relationship pretty clearly. So I would say that we have not yet, or I can't give you any, I guess I wouldn't even if I could, but I can't give you any concrete information that that the valuation structure is changing or that people's attitudes are changing. But I know that we take those into account, and we're certainly, you know, again, we try to be responsible and also reactive to, you know, the changing environment.

Great. Thanks for that.

Your next question comes from David Martin with Bloomberg.

Yeah, I thanks for taking the follow up was just wondering, large lab build outs and workstations, those types of big contracts, are they trending the same way as the rest of your business, you know, rebounding from a slower period during the heat of the pandemic?

So clearly in 2021, the last half of 2021, we saw a pretty meaningful increase in lab build outs and workstations in the U.S. They tended to be a little bit smaller in terms of size. And that's hard to know, again, because you're talking about, you know, a handful of these a year, whether that's, you know, a trend or just that's the way it flowed out. Um, for 2022, uh, you know, again, we have a, we have a pipeline of these as we get bigger, though, these can be, you know, they're always great. They just tend to be a little less impactful. Um, even a couple hundred thousand dollars of, of sales is, is, you know, it's always great to pick up, but it's, you know, it's just not going to have as much, um, you know, meaningful impact on the, well, the top of the bottom line as, um, at least in terms of aberrations, as it once did. So almost now I would say that those have become very much just part of our standard business.

And how do you compete against the larger companies in that part of your business? Are you acknowledged as one of the leaders as far as the large lab build-outs, or would you say – you're proportionally positioned to, you know, where you stand overall in the industry?

Yeah, so I would say it varies a little bit market by market, which is country by country. In some countries where we have a little less longer experience and footprint in direct sales, you know, I would say we're not quite as well positioned as we are in countries where we've been there for some time. So in, let's say, Germany, And in the US, clearly, we are one of the very small number of go-to providers of lab build-ups. And we tend to win our, I believe, our fair share, maybe more than our fair share, based generally on the things that matter, which is sort of the part of it is table stakes, which is breadth of product line capability to deliver and install on time. And then the other somewhat intangible attributes, which would include quality of our consultative sales force, quality of our installations, service and support teams. And therefore, we try to make a little more of a total cost of ownership pitch than a pure price pitch. We tend not to be the price leader. So that's a game we try not to play. and we do see some others who compete much more on price, and we try to compete on product and service quality.

Great. So one last related question. If you went back to before you made the Zander acquisition, and you've made, you know, including that four acquisitions since then, what would you say before that your percent of third-party acquisition product was in these large lab build-outs and what would you say the percent of third-party product is now?

Yeah, so I can tell you what it is now because we published that, as I said, in both our investor deck and in our AIF. So it's right around 70%. I can tell you for the last couple of years, it's been right around 70%, give or take, you know, a percentage point or two or so. I'd have to really think back to before you said exactly when was that. It was probably in a similar number, maybe a little bit lower. As you know, the Gynomet business has a significant amount of its products are third-party products. Again, I'd mentioned catheters and needles earlier that we don't make ourselves, so we sell those. So that was probably the one that moved the needle most in increasing third-party products. Then we stabilized, and now we've been, you know, again, increasing it.

Okay, great. Thanks.

There are no additional questions in queue at this time. And, Mr. Wolf, your closing remarks, please.

All right. Well, I would like to reiterate my thanks to all of our employees. shown remarkable resiliency and dedication to our business, as well as our customers and our business partners, and obviously to our shareholders for the support they continue to show to our company. And I look forward to talking to you all again on our next conference call in May. Thank you very much.

This concludes today's conference call. Thank you for participating. You may now disconnect.