Robert L. Gershon - CEO Jay Ewers - CFO.

David Turkaly - JMP Securities Matt O'Brien - Piper Jaffray Charles Haff - Craig-Hallum Russell Cleveland - RENN Capital.

Good afternoon, ladies and gentlemen, and welcome to the First Quarter of 2017 Earnings Conference Call for Bovie Medical Corporation. At this time, all participants have been placed in a listen-only mode. At the end of the Company's prepared remarks, we will conduct a question-and-answer session.

Please note that this conference call is being recorded and the recording will be available on the Company's Web-site for replay shortly.

Before we begin, I would like to remind everyone that our remarks and responses to your questions today may contain forward-looking statements that are based on the current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including those items specified in the Risk Factors section of our most recent annual report on Form 10-K filed with the Securities and Exchange Commission, as well as our most recent 10-Q filing.

Such factors may be updated from time to time in our filings with the SEC, which are available on our Web-site. We undertake no obligation to publicly update or revise our forward-looking statements as a result of new information, future events or otherwise.

This call will also include references to certain financial measures that are not calculated in accordance with Generally Accepted Accounting Principles or GAAP. We generally refer to these as non-GAAP financial measures.

Reconciliations of those non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings press release on the Investor Relations portion of our Web-site. I would now like to turn the call over to Mr. Rob Gershon, Bovie Medical's Chief Executive Officer. Please go ahead, sir..

Thanks Dagmar. Good evening, everyone, and welcome to our first quarter 2017 earnings call. I am joined on the call this evening by our Chief Financial Offer, Jay Ewers, and our Chief Commercialization Officer, Jack McCarthy. Let me begin with a brief agenda for this evening's call.

I'll begin my prepared remarks with a high level summary of our results for the first quarter of 2017, along with a review of the multiple factors that contributed to our performance during the quarter. I will then provide you with an update on our operational progress in the first quarter.

Then, I'll turn the call over to Jay, who will discuss our quarterly financial results in detail and review our financial guidance for 2017, which we just introduced in this afternoon's earnings release. Following Jay's review of our 2017 guidance, I will share some closing remarks before we open the call up for your questions.

Now let's get started with an overview of our financial performance. During the first quarter, we achieved total revenue of $8.4 million, which represented an 8% growth year-over-year. Our revenue results were driven primarily by 5% growth in our largest business segment, which we call Core, and 71% in our Advanced Energy segment.

Q1 revenue growth also benefited from 7% growth in sales from our OEM segment.

Overall, our revenue performance in IQ was in line to slightly better than expected in our Core and OEM segments, while our Advanced Energy segment experienced slower than expected sales growth in the first quarter driven primarily by lower generator sales to new customers.

I will now spend a few moments elaborating on the dynamics we experienced in our Advanced Energy segment in Q1. Revenue in our Advanced Energy segment increased 71% year-over-year in the quarter, driven by a solid revenue performance in the surgical oncology market, offset by weaker revenue performance in the plastic surgery market.

As we have discussed on earnings conference calls throughout 2016, we have experienced strong demand for our J-Plasma technology from plastic surgeons. We identify the plastic surgery market as a potential growth area, given the strong procedure tailwinds, office-based procedure setting, and shorter time-to-close dynamics.

Plastic surgeons have identified J-Plasma for use in a variety of procedures, including breast reconstruction and wound debridement. In fact, surgeons have commented in white papers on the benefits of using J-Plasma in both of these areas.

In breast reconstruction for example, J-Plasma allows for breast capsule scoring with controlled precision and reduced concern for injury to surrounding structures. Likewise, in wound care, J-Plasma can be used with controlled precision with ablating diseased tissue with similarly reduced concern for injury to surrounding healthy structures.

In addition to these procedures, we also began to see J-Plasma being used in various plastic procedures that we would characterize as emerging areas.

At our National Sales Meeting at the beginning of 2017, we dedicated significant time to understanding the potential opportunities from these emerging procedure areas and refining our selling strategy in the plastic surgery market overall.

Trends in both new plastic surgeon adoption and in handpiece utilization slowed in the weeks that followed our National Sales Meeting as we refocused our efforts and reprioritized our procedural targets.

As discussed on prior calls and consistent with what we are now seeing in plastic surgery market, we are expanding our clinical development program for J-Plasma in emerging areas, including dermal and sub-dermal procedures. Importantly, we continue to believe there is a significant market opportunity for our J-Plasma technology.

We are very encouraged by the surgeon feedback on J-Plasma's performance in the different procedures, with surgeons highlighting J-Plasma's unique properties.

I'll share additional color on the potential opportunity for J-Plasma as part of my commentary on our 2017 growth expectations, but for now, the takeaway here is that while our J-Plasma sales in Q1 were impacted by slower new surgeon adoption as our sales force refocused selling efforts in emerging areas, we are very encouraged by the early feedback from plastic surgeons who have incorporated our innovative J-Plasma technology into their procedures in recent months.

Our confidence in the growth outlook for J-Plasma is further supported by the continued positive traction we are seeing in the surgical oncology market.

Before I turn the call over to Jay for a financial review, I will share an update on our operating progress, specifically in the areas of new products, new sales partnerships and enhancing our Medical Advisory Board. First, with respect to new product innovation, we have made notable progress so far in 2017 with three significant 510K clearances.

In March, we announced 510K clearances for a new J-Plasma generator and a new open handpiece, both of which incorporate our Cool-Coag technology.

Cool-Coag is a new feature that combines the unique benefits of J-Plasma, namely increased precision with minimal thermal spread, with standard monopolar coagulation and helium spray coagulation capabilities.

This functionality is available to surgeon users in one handpiece and allows the surgeon to benefit from using a single device that offers the greater control of tissue effect that J-Plasma delivers, while being able to switch to a monopolar or helium spray coagulation mode with just the push of a button.

We expect this new open handpiece to enhance our growth in the surgical oncology market, once fully commercialized later this year. Just last week, we announced a 510K clearance for our new J-Plasma Precise Flex handpiece.

This is an important clearance for Bovie as it introduces innovative technology and allows us to continue to build our presence in an important area of the surgical market, robotic-assisted procedures.

The J-Plasma Precise Flex handpiece has a flexible shaft that can be controlled with graspers, forceps and grasping instruments and was designed to be used through an accessory port of a robot, such as Intuitive's da Vinci Surgical System.

When used in robotic-assisted procedures, the J-Plasma Precise Flex can be controlled entirely from a surgeon's console using a robotic grasper which allows a surgeon the ability to access and visualize a wide variety of surgical planes. The early feedback on the Precise Flex is encouraging.

One of the preeminent surgeons in the area of robotic-assisted procedures, Dr.

Vipul Patel, believes that the Precise Flex will enable surgeons to access areas of the anatomy that are not possible with a laparoscopic version, and that this flexibility combined with the Cool-Coag technology may also allow surgeons to complete all aspects of cutting, coagulating and ablating tissue with one instrument, potentially reducing the need to use other instruments.

We are currently targeting a full commercial launch of Precise Flex in the second half of 2017. Second, in January we announced an exciting sales channel partnership as part of our strategy to identify opportunities to drive growth in our Advanced Energy segment.

The partnership is with CONMED, a global medical device company with a strong sales presence and brand recognition in the areas of minimally invasive and orthopedic surgery around the world. CONMED will market our PlazXact Ablator as part of their UltrAblator Bipolar series for use in a variety of arthroscopic procedures.

We look forward to contributions from this partnership to drive growth in our Advanced Energy business as the product enters full commercialization later in 2017 and expected to be a material driver of growth in our Advanced Energy segment beginning in 2018. Finally, we announced the fifth member to our Medical Advisory Board in Q1.

In January, we announced the addition of Dr. Dennis Chi, the Head of Ovarian Cancer Surgery at Memorial Sloan Kettering Cancer Center. The addition of Dr.

Chi represents the continuation of our efforts to build a group of thought leaders across surgical specialties to increase awareness of the many advantages of our innovative J-Plasma technology in specific clinical applications. Dr.

Chi is a world-renowned surgeon, specifically as it relates to using advanced surgical techniques to treat cervical, uterine and ovarian cancers. Dr. Chi has been the principal investigator of several institutional and multi-center trials and has published more than 100 papers on ovarian cancer surgery. Dr.

Chi's expertise in gynecologic oncology expands the surgical specialties covered by the five members of our Medical Advisory Board, which now includes urology, gynecology, cardiac surgery, thoracic surgery and GYN oncology.

With that, let me turn the call over to Jay for a detailed review of our financial results and a summary of our 2017 financial outlook which we introduced in this afternoon's press release.

Jay?.

Thank you, Rob. Before I begin, I would like to highlight a change in our financial disclosure this quarter that we believe will help the investment community better understand the underlying growth and profitability performance in each of Bovie's primary business areas.

Specifically, beginning in the first quarter of 2017, we have adopted reportable segments to align with changes in how we manage our business, review operating performance, and allocate resources, as a result of the growth in Advanced Energy and the different behavior of the Core and OEM product lines.

In addition to our historical practice of disclosing revenue performance by these business lines, our new segment reporting will include the underlying operating profitability of each of these segments.

To assist in the evaluation of the historical trends under this new reporting methodology, we will provide 2016 quarterly information in the supplemental document available on our Investor Relations Web-site.

Turning to our first quarter financial results; total revenue for first quarter 2017 increased $600,000 or 7.9% to $8.4 million, compared to $7.8 million in the first quarter of 2016.

Revenue in the United States increased $400,000 or 5.7% year-over-year to $7 million, and international revenue increased $200,000 or 20.4% year-over-year to $1.4 million.

International sales represented approximately 17% of sales this year compared to approximately 15% of sales last year, driven by initial orders from distribution partners in new geographies.

Total revenue growth was driven by a 4.6% increase in sales from our Core segment, a 70.5% increase in sales from our Advanced Energy segment, and to a lesser extent a 7% increase in sales from our OEM segment.

First quarter sales by product line was driven by a 25.4% increase in sales of electrosurgical products, partially offset by year-over-year declines in sales of cauteries, lighting and other products of 9.8%, 12.1% and 18.9% respectively in the period.

By product line, sales of electrosurgical, cauteries, lighting and other products represented 64%, 20%, 5% and 11% of total revenue. Gross profit increased $900,000 or 27.2% year-over-year to $4.2 million, compared to $3.3 million for first quarter 2016.

Gross margin increased 770 basis points year-over-year to 50.4% for the first quarter of 2017, compared to 42.7% last year. Gross margins in first quarter 2016 were negatively impacted by a write-down of approximately $484,000 for obsolete inventory.

Excluding this impact, gross margins increased 140 basis points year-over-year in the first quarter of 2017, driven by product and pricing mix benefits in the Company's Core segment. Operating expenses for first quarter 2017 increased $700,000 or 12.2% to $6 million, compared to $5.3 million for first quarter 2016.

The increase in operating expenses was driven primarily by a $400,000 increase in salaries and related costs and by a $200,000 increase in selling, general and administrative expenses compared to the comparable period last year.

Loss from operations for the first quarter of 2017 was $1.7 million, compared to a loss from operations of $2 million for the comparable period last year.

The net loss attributable to common shareholders for the first quarter of 2017 was $1.7 million or $0.06 per diluted share, compared to a loss of $1.9 million or $0.07 per diluted share for the first quarter of 2016. The Company had working capital of $19.7 million as of March 31, 2017 as compared to $21.3 million as of December 31, 2016.

Our days of inventory outstanding declined by 26 days to 186 days in the first quarter, compared to 212 days in the first quarter of 2016. Total cash flow used in operations was $2.8 million, compared to cash used in operations of $2.3 million last year.

The change in cash flow used in operations was driven primarily by our net loss of $1.7 million and by changes in working capital accounts, including inventory investments, which increased $1.2 million in the period. As of March 31, 2017, the Company had cash and cash equivalents of $12.3 million, as compared to $15.2 million as of December 31, 2016.

Turning now to a review of our 2017 financial guidance, which we introduced in this afternoon's press release; for the 12 months ended December 31, 2017, we expect total revenue in the range of $38.3 million to $40.3 million, representing growth of 5% to 10% year-over-year, compared to total revenue of $36.6 million in fiscal year 2016.

We expect total revenue growth in fiscal year 2017 to be driven by Core sales growth in the range of approximately 4% to 8% year-over-year, Advanced Energy sales growth in the range of approximately 60% to 80% year-over-year, and an OEM sales decline in the range of approximately 25% to 35% year-over-year.

For consideration, when evaluating our reported growth expectations this year, we have provided additional color on nonrecurring contributions to our OEM sales results in 2016 that we believe are masking the underlying growth profiles of both our OEM segment and our total Company growth expectations this year.

Excluding sales of $2.3 million in fiscal year 2016 related to unique generator demand from a large OEM customer, the Company's OEM segment sales in fiscal year 2017 are expected to increase in the range of 16% to 32% year-over-year.

Similarly, excluding sales of $2.3 million in fiscal year 2016 related to unique generator demand from a large OEM customer, total Company sales in fiscal year 2017 are expected to increase in the range of 12% to 17% year-over-year.

Importantly, we remain focused on improving our profitability performance over time and as such we have introduced expectations for adjusted EBITDA this year. We expect adjusted EBITDA loss in a range of $1.2 million to $1.4 million, compared to adjusted EBITDA loss of $2.2 million in fiscal year 2016.

We have included a full reconciliation from GAAP to non-GAAP adjusted EBITDA in our earnings press release this afternoon.

Finally, for modelling purposes for the full year 2017 period, we expect gross margins in the low 50s this year compared to 49% last year, stock-based compensation expense of approximately $700,000, depreciation and amortization of approximately $700,000, and weighted average diluted shares outstanding of approximately 31 million shares.

With that, I'll turn the call back to Rob for closing remarks.

Rob?.

Thanks Jay. Before we open the call for your questions, I will share a few thoughts on our outlook for 2017 and why we are confident in our expectations for growth this year. Let me start with a little background on our decision to introduce formal financial guidance as part of our first quarter earnings report this evening.

Simply stated, this was a direct result of the valuable feedback we received from analysts and investors following our Q4 2016 earnings conference call. These conversations highlighted the fact that our expectations for growth in 2017 could have been more clearly communicated.

Our financial guidance philosophy is to help the investment community understand not only the range of total Company revenue growth we expect this year, but also the underlying segment growth rates we expect to drive our total Company results.

Importantly, we remain committed to improving our profitability over time and our formal financial guidance includes the expectations for improving profitability, as defined by our adjusted EBITDA in 2017.

We have also enhanced our disclosure practices beginning in Q1 2017 by moving to segment reporting practices, which will build on the historical reporting of our revenue by major business line by adding the operating profitability of our primary business segments.

This is part of our commitment to improve transparency with a goal of helping the investment community better understand the underlying trends in our business. In management's view, we have multiple tailwinds to the Bovie Medical story in 2017 and beyond.

We expect total revenue growth on a normalized basis to increase in the range of approximately 12% to 17% year-over-year in 2017.

We believe this growth rate, which excludes the one-time benefits from OEM demand in 2016, better reflects the underlying growth profile of our business as compared to the GAAP reporting growth rate of 5% to 10% implied by our 2017 financial guidance.

This normalized growth profile is driven by improving trends in our largest business segment, Core, where we expect sales growth in the mid to high single-digits this year and our strong growth in our Advanced Energy segment in the range of 60% to 80% year-over-year.

Growth in our OEM segment will be impacted by the difficult comparison related to the nonrecurring orders from a major medical device company. Although, excluding these sales in 2016, we expect our OEM business to increase at least 16% year-over-year in 2017.

While the pace of J-Plasma adoption slowed in the first quarter, we are confident that this is not a competitive issue. Rather, we made the decision to refocus the direct sales force on surgical oncology and plastic surgery to enhance the Company's foundation of growth in the future.

We remain confident in the J-Plasma growth opportunity this year as we continue to see strong adoption and utilization trends in the surgical oncology market and we continue to evaluate new opportunities for J-Plasma in the plastic surgery market.

The longer-term outlook for growth in our Advanced Energy business has been enhanced by our progress with the sales channel partnerships, like our PlazXact CONMED agreement, and by our planned commercial launches of our new generator and our open handpiece and our Precise Flex handpiece for use in robotic-assisted procedures.

We are focused on driving further operating progress and improving financial results over the balance of 2017 and we appreciate the continued support from our Bovie Medical shareholders. That concludes our prepared remarks for this evening. Dagmar, we will now open the call for questions. We are ready to open the call for questions..

[Operator Instructions] Our first question will come from Dave Turkaly. Please state your question..

Rob, I just want to be clear on this. So I think you highlighted some reasons why plastics were weak.

I just want to make sure you don't think there was any sort of lingering impact from Hologic, and what gives you comfort sort of that the oncology side, any color you can give us that would help us understand how that was still pretty good in the quarter?.

Sure, happy to elaborate, yes. There is no relation at all to Hologic with respect to our performance. So, as we have indicated in previous calls, Hologic relationship didn't contribute to sales outside of the demo order. So, there was no hangover so to speak from Hologic.

With respect to surgical oncology, this is an area of focus that we spent during our National Sales Meeting early in the year, at the beginning of the year, and we have seen growth in surgical oncology since the training and since we moved the focus to just surgical oncology and plastic surgery.

So, as we monitor, we've seen quite significant growth actually in surgical oncology, and as I indicated in the prepared remarks, it was that growth that kind of offset the decline in generator sales..

Thanks for that. And I realize it was just demo sales. I was actually wondering just like from a perception standpoint, but that color is helpful in terms of what's going on, on the oncology side.

I guess as you look at your reps and then sort of their productivity, any update there you can give us, any of their numbers or where you think that's going over I guess the remainder of this year and beyond, if you can sort of refresh our memory on what you are expecting there, from these direct reps?.

We are expecting a real uptick in their productivity, and here's why.

At the National Sales Meeting, which occurred at the beginning of the year, we refocused the reps on two areas, so surgical oncology and plastic surgery, and we specifically really focused on the attractiveness of plastic surgery in a non-acute care setting with its shorter sales cycle.

Now as I indicated in the prepared remarks, it is now with that focus, we expect to see an uptick in productivity across the board in our entire sales organization as we are all executing against that very same strategy..

Okay, thanks..

Our next question comes from Matt O'Brien. Please state your question..

Rob, I think it would be helpful just to go through a little bit more on the J-Plasma outlook for the business, because I know that was an area that you were expecting some pretty big things for and that's going to be a focus among investors.

So, by my math, I think it's about – I was thinking it was going to be more of a doubling this year of revenue, and now you know that 60% to 80% is still good but roughly 1.3 million below what I was kind of expecting and I think the Street was expecting.

So if you can just kind of walk through some of the components for that shortfall and then how we think about that business as we exit the year with all these new products and new areas, I think that would be helpful as well..

So, let me just start by walking through guidance for a moment. So, our expectation is that we will grow 12% to 17%. So, remember our formal guidance is 5% to 10%, but we are suggesting that formal guidance has in it the $2.3 million of OEM revenue that we referenced in our prepared remarks. So omitting that, we see it as 12% to 17%.

Of that, yes, we do expect the Advanced Energy to grow 60% to 80%.

So we are confident in that growth expectation, really driven by three things, the focused approach of our direct sales force as I mentioned before with surgical oncology and plastic surgery, the new product launches that we referenced earlier, as well as the CONMED partnership for the ablator product. So, those are the big revenue drivers.

I'm not sure, Matt, if I fully answered your question. So if you don't mind, if you would just repeat any portion that I didn't answer, I'm going to get to it right now..

Sure. So I mean, that all makes sense, and I think as I'm thinking about what you are saying here in exiting the year, it all makes sense that there is probably going to be an acceleration.

But I think there is going to be a little consternation about the near-term shortfall as far as the revenues this quarter and then the outlook for J-Plasma specifically for the year, and that's coming up I think a little bit short of what some people have been expecting.

So, the components for that shortfall and then how do we think about the business as we exit the year, given all these new products and applications?.

Yes, the way we think about it is, as we think about it strategically, we think it was critically important to take a step back and reflect on the learnings from the market with J-Plasma and really narrow our focus on the biggest growth opportunities for us. So in essence, we took a step back to take two steps forward.

And where we believe that leads us to is growth throughout the year, and we certainly expect it to be – the back-end growth is certainly going to begin to accelerate and set us to a good trajectory for 2018. So, that refocus on the growth areas is what we expect to really fuel the growth of J-Plasma.

And just as a reminder, this is literally the first time in the Company's history where we have introduced formal financial guidance. We are certainly supremely confident in the guidance and the tailwinds that we expect from the new product launches and other activities certainly will give us the ability to have that level of confidence..

Okay.

And then as my follow-up, just it sounds like there is a level of conservatism you're building into guidance, which is great to hear, and obviously the smart thing to do, but it might be helpful just to hear a little bit more, as you took those steps back or took that step back and thinking about the markets where you are focused, what type of market opportunities are you seeing now? Maybe you just give some general color, maybe market sizes, these procedure opportunities, 200,000 or 300,000 cases whereas before we were focused on 80,000 case opportunities, anything along those lines might be helpful..

Yes, very fair question, Matt. So really, where we see the growth opportunities? Certainly in surgical oncology and the new open handpiece will further help in that regard. But a real big opportunity we see is in plastic surgery.

So as you know, we have been in plastic surgery for quite some time and we made reference in our prepared remarks to emerging areas of growth, and those emerging areas include dermal and sub-dermal coagulation procedures.

So, as you know, we are pursuing a specific indication for the dermal procedures and we are also focusing on new applications in the sub-dermal space where coagulation is being used. And we mentioned that we are expanding our clinical programs accordingly.

So, we are working with the FDA on that as well and we see sub-dermal coagulation following various plastic surgery procedures to be a real, real growth area.

We are hesitant for competitive reasons at this point in time to further elaborate on the specific procedures, but those are high-volume procedures where surgeons are realizing the positive benefits of J-Plasma and we really need to put a program around it, and that's why we are expanding our clinical programs and working with the FDA accordingly..

Fair enough. Thank you..

Our next question comes from Charles Haff. Please state your question..

I had a question regarding your guidance for Advanced Energy.

What kind of assumption do you have in your 2017 Advanced Energy guidance for Precise Flex or PlazXact?.

Okay, sure. So certainly, embedded in the guidance is our new product launches. So you asked about the Precise, the new open handpiece in flex, that was the question? Yes, so it's embedded in the guidance with respect to the timing of the launch. So, it's in there but we're not getting overly granular, but it's certainly a part of that..

Okay.

And is there some PlazXact revenue in that guidance as well?.

Yes, there is. As I indicated in the prepared remarks, PlazXact will have a much more material impact in 2018, but it will have an impact in 2017. So, it does include some growth in 2017 in PlazXact..

Okay.

And then staying on PlazXact, I think that CONMED has been selling it now, correct me if I'm wrong there, and how is it going, what kind of feedback have you heard, and were there any PlazXact sales in the first quarter?.

Right. So, there were some modest PlazXact sales that were reported in the first quarter. And this partnership is in the very, very early innings. So we just really launched it in March.

So it's really too early to comment specifically on how it's going because it's so early in the process, but certainly there have been some sales that are reported in PlazXact..

Okay. And I know one of the kind of the key factors that you guys were thinking about was where CONMED was going to price it at.

Would you mind sharing where that pricing ended up now that it's being sold and is that better or less than your expectations that you had previously?.

Yes, we cannot comment on their pricing strategies at this time. So we have not been kind of given the green light to do that..

Okay, fair enough.

And then my last question is on Advanced Energy, just so we are all level-set in terms of the 60% to 80% growth that you're talking about there, can you share with us, Jay, the Advanced Energy revenues for 2016 please?.

Sure, I'd be happy to, Charles.

Advanced Energy revenue for 2016, do you want it by quarter?.

Just an annual number would be fine..

$3,491,000..

Perfect. Thanks for taking my questions, guys..

Our next question comes from Russell Cleveland. Please state your question..

Some months ago, when our agreement with Hologic ended, you had mentioned that we were going to have a replacement company fairly shortly, and all of that talk seems to have disappeared.

Can you comment on what we're doing in that regard and any enhancement in OB/GYN and other areas?.

Absolutely, I'm happy to, Russell. So just to be clear, those conversations have not disappeared. In fact, they are certainly ongoing. So let me take a step back for a moment and describe what our strategy is with respect to a potential sales channel partnership for GYN.

As I indicated in the prepared remarks and commented a little bit in this Q&A, we have made the focus of the direct sales force, surgical oncology and plastic surgery, and we are not ignoring the GYN space. So, our plan is to enter into a sales channel partnership with a GYN partner to focus on that GYN specialty.

So you can think of it as outsourcing that specialty to a sales channel partnership. Now, since the partnership with Hologic did not move forward, we have been in active discussions with multiple sales channel partners, and those partnership discussions continue.

And right now, it's a little difficult for us to say the exact timing when one is going to come to fruition, because the timing is not entirely in our control because we are dealing now with multiple interested parties and we are going down the path of exploration.

So, as soon as we have an update, we will absolutely notify the investment community accordingly. But that strategy has not disappeared. And it is by the way – I'm sorry, just one more quick comment, Russell, before your follow-up question. It's important to note that our 2017 guidance does not assume that a sales channel partnership is in place.

So that would certainly – if one is announced, we would comment further on our guidance accordingly, but right now it is not assumed in our guidance..

I know it's difficult, but are we talking a quarter or what? I mean, I think some, a little more enhancement here about when we think we can get this done would be helpful..

Yes, so there is certainly urgency to get this done as quickly as practical. The reality is we are dealing with multiple organizations and we don't completely control the timing on our own. That's about as much as we can comment. But as soon as we have news to share, we will share it right away..

Great, okay.

One simple question, on the dermatology, which seems to be very, very good for us, we were talking about submitting to the FDA our results so that we could start advertising on the plastic surgery, face-lifting and so forth, what's the timing on that now?.

Yes, sure. So we have commented in several of the most recent earnings calls that the dermal resurfacing is off-label, so of course we cannot promote it or support it, and we are in the process of filing for a very specific 510K indication on that.

So, it does take time, we are still moving forward, we have done a ton of work in this regard, and the process is ongoing. So, it's happening, and once it occurs, we'll certainly make an announcement because it would be significant, but it's a very important part of the overall story..

Right, okay, thank you so much..

Okay, that is all the time we have for questions. Okay, this does conclude our conference for today. Thank you for your participation..