ANGO
#Yes.
So continued double-digit, stronger on the free cash flow standpoint versus third quarter.
But you are right: it was down, I think, about $1 million.
I think we are at $12 million and it is $11 million this quarter.
So AR, unfortunately, yes, there is an item in that a lot of our revenue ---+ a little more than usual came in the last month and a lot of it in the last 2 to 3 weeks.
That, unfortunately, causes AR to build because of the timing.
Had it come more evenly during the quarter, you wouldn't have had as big end AR and that is probably the biggest contributing factor to why operating cash flow was a little lower.
Also, on the inventory side, we did meet our goals of reducing ---+ start reducing some of the safety inventory, but we had to build for some of these product launches some inventory, which increased ---+ which reduced the reduction of inventory in the quarter.
So that was probably the two factors.
If those had not happened, probably cash flow would have been better by about $3 million, which would have been more towards where we were thinking about, which was mid-teen operating cash flow in the quarter.
Yes.
You should see some benefit in AR inventory.
We have the Midline launch that is happening, so we are building inventory for that.
So you will have some inventory from that and there are some other products we haven't talked about where I know we are building some inventory.
So I think the bigger benefit is the safety inventory comes out will be in the second and third quarter as we finish moving all those lines.
Well, we normally don't give those kind of numbers, but that is probably right: $12 million to $14 million.
Hopefully closer to the higher end, but it could be in that range.
We are looking to see ---+ I think we have gotten over the initial product launch growth rates and now we are really more focusing as much as possible on utilization, procedure development, and site development instead of new account generation.
And so a healthy consumption in growth is around that 20% level.
And I think we get there and continue and continue to develop our clinical development and we will see progress.
And if our clinical development hits and accelerates, then we could start seeing the hockey stick we hope to happen in the later part of the five-year plan we have.
So I think we are on a ---+ we needed that new product.
It has worked well and I think we are feeling a lot better going forward.
Well, we just have to keep blocking and tackling.
When I look at ---+ we set ourselves our $50 million goal.
That is 5,000 procedures with a little bit of ASP attrition.
It is not 1 million procedures.
It is not 100,000 procedures.
It is 5,000.
And we are running maybe 600, 700 procedures right now.
We need to get to 5,000 procedures.
And I don't see that as an incredible mountain when you look at 14,000 filter removals or 80,000 right atrial mass extractions, or you see the amount of IDC work being done.
So even if the product is niched, which I don't think it will be, 5,000 procedures is not a lot to ask.
So what we have done is we have gone out strong getting the accounts up and running.
And where our focus is right now is making our accounts successful, billing the networks within the hospitals, building the clinical data pathway for people to have experience on what are the effective procedures and how to build their programs and practices.
And so it is taking increased time and effort from the sales force, which is classic and appropriate market development activities that we are going to down the path of right now.
So we have gotten over the initial hurdle ---+ not hurdle, but the initial euphoria of, hey, we got all these people signed up and now we are in the hard work of getting the procedures going, delivering great education, and building a marketplace.
So then, of course, from a reimbursement standpoint, there is no specific code for it yet.
But it does offset some other procedures and I believe the cost of the ---+ the hospitals believe it is more than cost neutral, if not an official.
But there will be a point in time in the five-year period that CMS may put a code on it and that is always a risk if that results in ASP erosion.
But we think AngioVac is saving the healthcare system a significant amount of money dealing with some of these complicated patients and procedures.
And although that is always a risk, we are going to do everything we can to continue the value that AngioVac brings.
So it is standard classic disruptive medical device market development activity, and I am very pleased that our team has gotten on top of it.
Yes.
Just one thing to build on Joe's point, and Joe talked about it a lot during his discussion, is one of the items a little bit in the way was the size of our PV bag.
And all the changes Joe talked about allow us to get the reps a little better focused on both AngioVac and EVLT.
And we think that will help drive the practice development that Joe is talking about as we go through 2016.
Yes.
Exactly.
I mean, to that point, I know there ---+ just as a follow-up to <UNK>'s comment.
AngioVac has ---+ we have seen now this great uptick again.
And we have wanted to put a commensurate amount of sales focus on that and EVLT and have started the process of building additional specialty into the PV sales bag, because it was just becoming too many priorities and we got to that tipping point.
So we have a plan in this year to create that greater focus and energy.
And we think it should very positively contribute throughout the years.
I will make the first comment.
They do that every year, so it is in there.
It was in there last year and the year before.
And our periods haven't changed the annual plan and the ability to run hasn't changed.
So no, I don't think ---+ I think, yes, people work around a plan to accomplish for a deadline, but they do that every year.
The one thing that, Jeff, did impact it is we did have higher capital in Nano and it did a lot of it come in in the last month and that affects the AR.
Well, we have tried to steady the ship over the last year, year and a half, and focus on ---+ we have so many moving parts within the Company.
We have gone through distribution consolidation.
We are in the midst of a plant consolidation.
We have been doing integrations.
We have been doing Oracle integrations over an 18-month period.
We have been doing some finance remediations and building a very strong financial team.
And so when you are doing that and you are building your foundation, to make a lot of changes is really disruptive to the business.
So we have been focusing on pure execution and, even in light of that, the Morpheus kind of hit us between the eyes.
But regardless, that is a thing of the past and that is reflective of the past.
And the things we are doing today are at what we would believe a much higher standard of rigor.
Regarding acquisitions, there is a lot of things we are looking at, but they would be much lower in magnitude as far as things that we can tuck into the bag and things that we can enhance our current portfolio.
I've mentioned multiple on times, it is not in our near-term focus to do large transactions.
And regarding divestitures, that is always an option if we feel it is necessary.
Our current goal is to execute on our plan and we are very mindful of the ebbs and flows that we provided investors.
And we are really intent on creating consistency and delivering the numbers, hopefully above the ones that <UNK> are mentioning.
But regardless, I obviously cannot comment on any future transactions, but our view is that we want to really focus on building consistency because our current products are in enormous marketplaces.
We are seeing ---+ this year, NanoKnife grew 27%.
AngioVac grew 22%.
BioFlo grew I think for the year 30%.
And if we just steady the ship and continue to focus on the growth drivers, interestingly, the growth drivers are getting bigger.
And as they get bigger, they contribute a greater percentage of the revenue, the mix goes up, they are all margin accretive, et cetera, et cetera, et cetera.
So we are not looking for easy fix to get to our five-year plan.
We are looking to execute on the investments we have made and to deliver.
Sure.
You mean from a cost standpoint, Jason, or do you mean from a revenue standpoint.
Yes.
It ended up being about $1.5 million.
We had $3 million of Morpheus last year.
We converted half of that to non-Morpheus products.
So you lose about $0.01 to $0.015 from all that.
And the other ---+ it's probably more towards the $0.015, when I think about it, because we did give price breaks to our customers as they converted to keep them ---+ give them BioFlo at a non-BioFlo price.
So it was probably about a $0.015 hit in the quarter from Morpheus.
Well, you never know.
I mean, we have put them through a lot and the sales force put a lot of energy in.
We don't expect it, but you never know, <UNK>.
What we have done is we have given them ---+ we have replaced a lower end non-thromboresistant catheter and we have given them a high-end thromboresistant catheter at the same price.
Now at some point, we need to move them off that lower price, but ---+ which would probably, if anything, be where the rub point is.
But we have done everything possible to ease the transition.
But I would ---+ I think a lot of the ebbs and flows are over.
Yes.
And <UNK>, we have assumed in the first half a continued 50% conversion.
We haven't assumed that it will continue to atrophy.
Morpheus is a product that is designed for interventional radiology.
And it is designed to have a certain type of placement feel and a certain stiffness.
The whole name of Morpheus is it is kind of stiff and then it morphs into this softer tip.
And so radiologists are really concerned about how it feels and they like to have a stiff catheter.
BioFlo, in its nature, is a little softer.
And it wouldn't be the preference ---+ forget about the whole antithrombic pharmagenic.
It wouldn't be the preference of an interventional radiologist because it is not as steerable and it is a little softer than our Morpheus PICC.
And so when you take frustration, when you take some back order, you take change, and then you take the fact that they have tried it.
They said hey, we want something that is stiffer.
That is probably the biggest reason why the IR customers who already didn't convert to BioFlo, before when we offered it to them, didn't do it this time.
But there is also a lot of the business converting from ---+ there are some IRs who are willing to do it and obviously a lot of business already converting from IRs to bedside nursing.
That was much easier to convert over.
But the biggest objection is for an IR has been the placement and feel.
Yes, well, we have seen ---+ first of all, the market is pretty aware that we are working on a next-generation microwave.
And so some of the capital budget has been pushed out and that is one of the areas that <UNK> has identified.
And also, we had a pretty poor RF quarter.
We have been seeing ---+ we are not the only microwave player out there and there is some other players with new systems, too.
And when accounts are converting over from RF and the microwave, it is not necessarily always 100% to us.
And that is why we have been racing to this next-generation system.
So we had a pretty weak RF quarter, as that has being cannibalized by microwave.
I think in the hepatobiliary community, there is a growing awareness and understanding that NanoKnife in addition to standard-of-care therapy is a value-add.
And I don't think they ebb and flow on any one piece of data, but it is a pretty small tight-knit global community.
And I think there is an increasing awareness that this adds value.
We have been ---+ and it is what has been, I guess, driving the overall awareness throughout the entire year.
We started off from a utilization standpoint a year ago seeing an uptick.
And it is maintained through the year.
So I think there is a slow, gradual, general understanding that data is being more well understood.
I don't see us having the aha moment, where everyone goes, oh, now I get it.
But the data being there is just another step of validation.
You have seen in the past us put data out from Dr.
Raj at the University of Miami, which was some of the earliest survival data on pancreatic cancer.
And that was very exciting and an early set of awareness.
So oncology moves in decades and I think we are seeing a slow building realization and awareness.
And I think the data helps and will continue that momentum.
But I don't think it is a short-term pop.
I think it is a general growing, very positive awareness of the benefits of the technology.
Well, I think vascular access is going to have a good year.
We have ---+ if I had more people, I would be doing more evaluations.
I think the business is going to have a good year.
I also think PV is going to have a good ---+ actually, it is kind of tough, because I am choosing between this.
But I think PV is going to have a pretty strong year as well.
I think last year, we learned some lessons regarding the sales force.
I think this year, we are doing a better job.
And I am pretty excited about how that organization is going to be.
I think our international team had a terrific year this past year in 2015.
I do feel there is a little bit more pressure for them in 2016.
So ---+ and while they have some NanoKnife opportunities now in registration and that is exciting, I think that is probably an area where it will be hard-pressed within the ---+ to repeat at the levels they did in 2015, given the FX and other challenges.
But I think real winners this year in the year will be led by VA and overall growth rate.
And then PV.
And then I think second half of the year when the new microwave system comes out, it will give a shot in the arm to the oncology team.
And we have high hopes for our international group, but again, they did a great job, helped us get across the finish line this year.
And given some conditions that are there, it might be hard-pressed to repeat that.
Yes.
I will just build a little bit on, <UNK>.
Oncology is probably going to have the widest variation because we did have a very strong capital year in NanoKnife.
As I said in my comments, if we meet that, do a little better than that, because of the CFGs, because of reimbursement, it could be a good year in oncology.
But we have seen a trend of every other year in capital, so we are very wary of that in building our oncology revenue guidance.
Is that helpful.
No.
The fourth quarter was down 6%.
And for the year, (multiple speakers).
Thank you, <UNK>.
We did a really ---+ we did a pretty extensive deep dive over the last 90 days.
What we had said regarding delays in procedures and deductibles we believe is true.
We believe that there have been a push off of procedures.
But we have also experienced, especially from the last 90 days, and given the environment for EVLT where there is just a lot of activity in varicose vein ablation, and also given the opportunity for AngioVac and the amount of growth that we are looking for and the market development activity, we actually started to see a little bit of diminishing returns from our sales force.
We know that the PV is a very diverse bag.
And it was doable to launch an AngioVac-type product when it was much lower revenue.
But if we want to reach our goals, if we want to continue to grow in EVLT and AngioVac, we need to invest in the sales force.
And we did.
We launched a program that within 12 months, we are going to be able to, if we reach our goals, split off a separate fluid management sales force, which is a different type of call point and different kind of salesperson.
And which, if you are looking at our salespeople, it is ---+ some people, it is 40% to 50% of the revenue in their territories.
And if by in the next 12 months, we can take that revenue out of their territories and have it in the new organization, we are going to be free up massive amounts of bandwidth to be able to continue to grow AngioVac and EVLT.
So I think the learning for this quarter is that, yes, we have seen some challenges in elective procedure delays.
But we have also realized that the organization has a lot on its plate and we've took steps that have already been now in place since June 1 to fix it.
There is a couple ---+ there are situations ---+ and that will happen going forward ---+ where initially, they will do one.
And then they will either ---+ sometimes accounts will have one.
They may have up to four or five.
In this quarter, there might have been one or two that had more than one.
But I think, as time goes on ---+ again, I don't want to get in the habit of reporting this information.
Our competitors do not report it for us, so I don't need to educate them.
But I do feel, for investors, I wanted to start giving you a shape as to what the activity was, which, for me, if I have 50 salespersons and I am putting 20 out a quarter in the first couple quarters, I'm very pleased with the activity, given each of them require clinical training and a lot of work.
So I think in those first 40, I think most of them are going to be individual accounts.
But I think going forward, we will see 1, 2, 3, 4, even 5 to a single account as we convert them.
We don't really have any new updates.
There is nothing new to update.
We are very excited about the relationship and we are working very closely together to meet our goals.
I have nothing that I am aware of that would change that objective.
Yes.
What is in the SEC, what is in the filing is pretty self descriptive.
We have no other comment than what is in the filings.
No.
If there is, it will be there.
But no.
Well, our objective is to answer all questions and meet whatever questions that would be had.
But there is ---+ I really can't speculate on something like that.
Yes.
I guess I will just build on it, <UNK>.
I mean, it is too early in the process to know where this is going to go.
We have in our litigation cost had a little more discovery costs, which was in that litigation line, and acquisition and restructuring and integration.
But it is just way too early to know where this is going.
So we can't really comment.
Right.
I would think at some point in time in the future, that is the right thing to happen.
I think the product deserves that.
I can't ---+ I haven't been able to and I can't predict now, but it should have one.
And I hope if we have progress on it, we can update everyone.
Yes.
I think so.
And we are also ---+ this quarter, as I mentioned in my comments, we resolved an inquiry on a letter of file that took a long time and a lot of heat loss, which pretty much put those type of activities on hold.
So with that behind us and I think there is a good opportunity for us to have some dialogue on the very impressive and very broad amount of activity in the marketplace with the FDA.
From a Bio Life Tech perspective, it is still ongoing.
We've won pretty much as much.
We are waiting for a one last decision and when that decision is rendered, we would have ---+ we would feel that we are done with the US.
We need to recoup some damages we hope to get and then we will start the next step of the process and go and find them everywhere else in the world we can.
That is a goal.
But it is not something I would look forward to any time in probably your or my lifetime.
But regardless, yes, I think they are ---+ they have benefited greatly from us and they have impaired our business.
And we are going to finish what we were doing in the US and then we are going to launch an effort in their biggest markets to pursue our ---+ what is rightfully ours.
I think one more and then we have to go, <UNK>.
Well, from what we could see from what is reported by competitors, there is not ---+ especially in the beginning part of the year, there wasn't a substantial amount of growth in the segment.
And I think it does ---+ I think the beginning part of the calendar year was very slow in the marketplace for elective procedures.
And we are now seeing an uptick, as I made in my comments, in the end of last quarter and now ---+ so we hope that continues.
We hope to recoup some of the slowness in the second half of this calendar year that we saw in the first half of the calendar year.
Thank you very much for everyone for being on the call.
We have gone ---+ we continue to improve the business.
We have a great team in place.
We've focused on fixing some of the core fundamentals and I think we are real close.
As I mentioned earlier, I think patience will be rewarded.
And again, I appreciate your attention and time.
Thank you.
