Bill Quirk - Piper Jaffray Will Fafinski - Craig-Hallum.

Good day, and welcome to the Accelerate Diagnostics Inc. 2019 Q3 Results Conference Call. All participants will be in listen-only mode. After today’s presentation, there will be a question and answer session. Please note, this event is being recorded. I would now like to turn the conference over to Laura Pierson of Accelerate Diagnostics. Please go ahead.

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Before we begin, it is important to share that information presented during this call may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.

Forward-looking statements include projections, statements about our future and those that are not historical facts. All forward-looking statements that are made during this conference call are subject to risks, uncertainties and other factors that could cause our actual results to differ materially.

These are discussed in greater detail in our Annual Report on Form 10-K for the year ended December 31, 2018, and other reports we file with the SEC. It is my pleasure to now introduce the Company’s President and CEO, Larry Mehren..

Thank you, Laura. Good afternoon, and welcome to our third quarter 2019 earnings call. Our placement and revenue results for the third quarter came in below our expectations. This shortfall is partially mitigated by a substantial backlog of deals awaiting a final sign-off.

Keeping us on track to hit our previously communicated placement and go-live targets for the year. We believe that we will end the year at the low-end of our placement target and the higher end of our go-live timing target for full year 2019. Again, our 37 net new placements for the third quarter fell short.

Two large deals comprising over 20 instruments in total were pushed from Q3 to Q4. Our placements at the end of Q3 totaled 167 units, but as we saw last year, we expect a significant Q4. And while there is risk, our funnel is strong with more than enough instruments to keep us on pace to achieve our 300 to 400 instrument target for the year.

Revenue for the quarter fell short of our expectations due primarily to longer than expected go-live timing, which I will discuss in more detail later in the call. On a positive note, consumable sales grew 15% sequentially and over a 150% on an annualized basis.

And we remain on track to realize a more significant step-up in consumable revenue in the fourth quarter based on a record number of go-lives in September and expectations to exceed this mark and even more go-lives in the final month of the year.

I am happy to report that we completed development on our respiratory test kit and moved into verification and validation, the clinical trialing phase of the project. China expansion is also proceeding well with first clinical evaluation in Hong Kong demonstrating excellent results.

Lastly, our new Chief Operating Officer, Jack Phillips is already having a positive impact on our commercial operations and has provided valuable insights on our sales funnel, execution and implementation processes.

Dozens of customer visits and reviews with our commercial team have only increased his conviction in the strength of our product offering and the size of our available markets. Moreover, he has identified opportunities for commercial strategy and execution improvements that he will bring down for you in detail later in the call.

Before I review our progress against our three key focus areas for 2019, and Jack provides his commercial review, I will hand it over to Steve to review our third quarter financial results.

Steve?.

Thank you, Larry, and good afternoon, everyone. Net sales were $2.3 million in the third quarter and $5.8 million year-to-date, compared with $1.4 million and $3.8 million for the same period in 2018. This represents year-over-year growth of 68% for the quarter and 51% year-to-date.

It is important to note that the majority of our third quarter 2019 revenue and all of our year-to-date revenue growth was a result of higher consumable sales driven by an increase in the number of live customers.

Predictably, 2019 net instrument revenue has declined due to a shift toward reagent rental deals that were not available until September 2018 as we have discussed in prior quarters. To put this in further context, our instrument revenue was down by approximately 10% year-over-year, while consumable sales grew well north of 150% over the same period.

Cost of goods sold were $1.1 million in the third quarter and $2.9 million year-to-date resulting in gross margins of 51% and 50% respectively. This compares to cost of goods sold of $680,000 and $1.9 million or gross margins of 50% and 51% respectively from the same periods in 2018.

This year-over-year decrease was the result of a one-time inventory timing benefit in the prior year, which did not repeat in the current year.

After normalizing for the effect of these pre-FDA instrument inventory, previously written off to R&D, gross margin improved by 500 basis points on a year-to-date basis, due to higher consumable production levels. Selling, general and administrative expenses were $12.7 million for the third quarter and $38.3 million year-to-date.

This compares to $12.2 million and $41.8 million for the same periods in 2018. The decrease in spend is largely attributable to lower stock-based compensation expense, as most of our other costs have remained consistent with prior year. Research and development costs were $6.1 million for the third quarter and $19.1 million year-to-date.

This compares with $7.9 million and $20.7 million from the same periods in 2018. We expected this spend to remain relatively flat on a year-over-year basis, as our R&D programs remain consistent year-over-year and the small step-up in expenses attributable to our respiratory clinical trial have just begun in November.

Our net loss was $20.4 million for the third quarter of 2019 and $63 million year-to-date resulting in a net loss per share of $0.37 and $1.16 respectively. This net loss contains $3.1 million for the quarter and $9.4 million year-to-date in non-cash stock-based compensation expense.

Net cash used was $15.9 million for the quarter and the company ended the quarter with cash and investments of $122 million. We believe our current cash position is sufficient to execute against our strategic initiatives and we continue to expect 2019 net cash burn to be similar to or just below our 2018 net cash burn.

I’ll now hand it back to Larry to review our third quarter placement and go-live key commercial results in greater detail.

Larry?.

Thank you, Steve. As discussed on prior calls, we have three principal focus areas for 2019, market penetration, rapid customer go-lives, and new market expansion. Turning first on market penetration. U.S.

placements were short of our expectations as a result of two newly completed deals comprising approximately 20 instruments shifting into the fourth quarter. While capturing such a lucrative multi-site IHN accounts yields significant step function growth, these deals are more difficult to predict.

Similarly, one deal in EMEA for over a dozen instruments shifted into the fourth quarter. Combined, this resulted in a lower than anticipated global placement number. Despite these delays, our year-to-date instrument placements are two times that of the prior year and we are confident in a strong Q4.

In summary, our 37 net new additions for the quarter brings our year-to-date placement total to a 167 instruments compared to our annual target of 300 to 400 placements.

Given our progress to-date, and the strength of our end of the year funnel, we anticipate a strong Q4 keeping us on pace to achieve the lower-end of our annual global placement target. Our second focus area driving rapid customer go-lives is aimed at helping customers complete the processes required to begin routine patient testing.

As a reminder, each commercially contracted instrument requires several implementation steps before going clinically live and generating consistent consumable revenue.

These steps include installation and verification, connection to the laboratory information system and electronic health record and physician and pharmacist training on the clinical pathways necessary to ensure prompt action based on Pheno results. Our target for the time from contract signature to go-live is four to nine months.

Accounts going live in the first three quarters of the year realized an average time to go-live of approximately eight months. While this is within our target range, we continue to see multi-hospital implementations take longer with many of the Q4 2018 hospitals currently in the latter stages of their implementations.

Accordingly, we expect to end the year with an average time to go-live of nine months with individual hospitals going live rapidly and multi-hospital implementations pushing us to the high-end of our target.

As I discussed earlier, we had a record month of go-lives in September, and that rate continues to increase as large multi-hospital deals signed late in 2018 and early 2019 are now moving towards completion. Given this timeline, and the record account go-lives, we expect a meaningful pickup in consumable revenue in the fourth quarter.

Once live, we continue to see strong annuity stream in the U.S. within our targeted $45,000 to $65,000 per instrument per year. We expect this to improve as multi-hospital implementations conclude, which have consistently demonstrated higher consumable pull-through.

While the go-live process can be lengthy, we are encouraged by the immediacy and predictability of the consumable sales, a good indicator of customer satisfaction and annuity durability. In contrast, our EMEA average annuity continues to come in at a fraction of the U.S. installed base.

We are currently doing a full evaluation of EMEA reagent rental installed base and where appropriate, reallocating instruments to more productive sites in EMEA and/or the U.S.

Before moving on to our progress in our third focus area for 2019, market and product expansion, I would like to introduce Jack to speak about his early observations in commercial execution and his plans for improvements.

Jack?.

Thank you, Larry. I have been at Accelerate for just over 60 days and the more I learn the more excited I become about the opportunity in front of us. We are building a great company. I have found that the best ways to develop a deeper understanding of the opportunity that lies ahead for Accelerate is spending time with our customers.

Since joining I’ve been on the road visiting many health systems and attended ID Week in October. I have learned three important things about our market opportunity. First, customers who have already implemented Pheno are extremely satisfied with it.

Second, we have many new prospects moving through the sales funnel who are excited to adopt Pheno and third, the market potential for Pheno and our planned product extensions is substantial.

Despite the enthusiasm that is present in our existing and potential customer base, our rate of market penetration since receiving FDA approval for the Pheno in 2017 has been below expectations.

My job is to improve this and I have identified positive tailwinds that we need to take better advantage of, as well as some headwinds which need to be addressed.

Our tailwinds include the robust clinical data from various independent studies that demonstrate meaningful improvements in clinical outcomes with Accelerate Pheno and the growing number of satisfied customers who are becoming advocates for the technology.

In my career, I have not sold a product with stronger clinical data than what’s being produced by Pheno period. At the top of this list are the recent studies from ID Week including Rapid’s GN, which many refer to as the Mayo study, a study from the University of Arkansas Medical Sciences and finally the University of Iowa Study.

Let me take a moment and summarize some of the highlights from these three studies. Pheno results lead to impaired therapy changes 80% of the time. This means the initial therapy selected by the treating physician is not optimal in managing the infection.

In around one-third of cases, our results lead to therapy escalation, which means the initial impaired therapy did not include antibiotics well-suited to handling the infection. This can be life-saving.

In two-thirds of cases, our results lead to de-escalation of therapy which means the patients are receiving drugs they don’t need sometimes, with serious side-effects. And finally, on average, we can change therapy more than 24 hours earlier than what is standard-of-care today.

The powerful data from these landmark studies are now being translated into tools to improve the velocity of our sales cycle. Specifically, we have built a new ROI tool for customers to further prove the economic impact of improved outcomes on their specific institutions.

The data will also be very important in our reimbursement strategy to establish payment for our unique CPT code recently designated for Gapfill by CMS and also, our recent new technology add-on payment submission.

Finally, these data are also being considered by clinical and laboratory standards bodies in establishing new guidelines for recommending rapid testing for Bacteremia. The other significant tailwind is our growing number of enthusiastic customers, many of whom are turning into strong advocates for Accelerate.

These customers see the clinical difference our systems make in both lives saved and complications avoided from administering too many unneeded antibiotics. Moving forward, we are going to do a better job of leveraging our most valuable resource, our customers and their belief in the life-saving potential of the Pheno.

The principal headwinds we face are long sales cycles and a lengthy time to go-live for new customers. These won’t be fixed overnight, but they are exactly the type of challenges that my team and I know how to address. Competition is not a serious issue we have to deal with at this point as we remain the only solution for gram negative infections.

We face competition from the various molecular players in gram positive infections, but they do not offer rapid AST solution. In other words, they can only impact 30% of escalation cases. With regard to our selling and go-live processes, we are doing a lot of things right, but there is still a significant amount of room for improvement.

Where there is magic bullet that will fix everything overnight, we are continuously evaluating our selling and go-live processes and have already identified areas for improvement and begun to make changes.

Specifically, our initial focus has been on improving our sales productivity measured in new accounts signed per year per rep, as well as our go-live timing. This improvement process is ongoing and will take some time to complete and I will provide further updates on both topics on our next quarterly call.

In conclusion, I am thrilled to be a part of this team as we continue to drive commercial success in the ever-growing space of rapid ID/AST. Our momentum is building and I am confident that it’s just a matter of time until Pheno’s life-saving technology is in nearly every hospital in the U.S. and many more throughout the world.

I will now hand it back to Larry to discuss our development updates. .

Thank you, Jack. That’s great. Finally, during the quarter, we made progress in our third area of focus for 2019, market expansion. Specifically, progressing the launches of our bacterial pneumonia test for the U.S. market and of our current blood products for the Chinese markets.

The bacterial pneumonia test will be an important addition for us as these serious pneumonias are a costly and often deadly condition. In addition to expanding our adjustable market, this new test demonstrates the versatility and platform potential of the Pheno and its ability to replace significant portions of the current microbiology lab workflow.

On our last quarterly call, we indicated that a reagent contamination issue had delayed our plans to initiate our clinical trial. We are pleased to report that these issues have been resolved, our analytical accuracy meets our expectations and have begun the verification and validation of the respiratory kit.

This trialing process will include approximately 500 patients across six sites and in general it’s similar to the study we ran for Blood. We will run the analytical studies first to ensure site-to-site consistency and acceptable limit of detection among other things.

Now that we are kicked off, we anticipate launching this next test kit for our Pheno customers in late 2020. I want to pause here and note the significance of this achievement. Respiratory samples are recognized as the most complex and challenging samples within the clinical microbiology workflow.

What we had to create for respiratory is a system for standardizing highly variable samples and managing multiple bacteria in a single sample at the same time.

With this, we believe we now have a kit that can be used on virtually any specimen and that allows us to extend the benefits of the Pheno to many other sample types addressing a broader portion of the microbiology market. The learnings we have gained over two hard fought years to get us to today will further separate us from those who try to follow.

Now I will update you on the progress we have made towards obtaining approval and launching Pheno in the Chinese market. First, our preparations to initiate this registration trial are progressing well and are tracking with our goal of starting near yearend. Achieving this milestone will position us to begin selling in China in the first half of 2022.

In addition, we have begun testing the market via our first clinical site evaluation in Hong Kong. The site is quite enthusiastic and early analytical results look promising with almost perfect performance despite the trial including twice as many resistant patient test as would be typical of a similar study conducted in the United States.

In summary, while our third quarter placement and revenue results were below our expectation, we continue to see positive signs that we will again have a solid fourth quarter. We are encouraged by our growing body of clinical evidence and by the improvements to our commercial process that Jack has already begun implementing.

These factors, along with our progress in respiratory and China further our belief that 2019 will continue to be a very highly productive year and that Pheno is the new standard-of-care for sepsis patient management. Before beginning our Q&A, I would like to share a story from a recently live U.S.

Pheno customer, Allegheny General Hospital in Pittsburgh where a patient of there is tested with Pheno. This woman had completed a prolonged hospitalization and within hours of being discharged developed high fever and was clearly fighting a serious infection.

Because of the speed and accuracy of the results provided by Pheno, the hospital was able to discharge her home on oral antibiotics days sooner than would have previously been possible. Length of stay reduction was among the principal economic drivers in securing Allegheny acquisition of Pheno.

We are really thrilled that the hospital is realizing these benefits and more importantly that patients’ lives are being improved as a result. And with that, we would be happy to answer questions from our analysts.

Should others on the call have questions not addressed, we would welcome you to send these questions or requests for a follow-on meeting to investors@axdx.com. .

[Operator Instructions] And the first question comes from Brian Weinstein with William Blair. .

Hey guys. Thanks for taking the question. Just wanted to kind of focus more on the placement side here, obviously, there is below expectations. You mentioned elongated sales cycle.

I want to be clear, that are we referring to EMEA is one-offing theirs or is it broader? And the reason I ask is, last quarter, you mentioned the issue in EMEA, but you also noted that in the U.S. you had built up a large bottleneck under a couple GPO contracts where addendums that were put in place in July and that that would help in Q3.

So, what’s going on with those? And then, you had gone through that exhausted review going over a company account and really thought the second half so good.

So just trying to understand the disconnect there on those different components and just thoughts on the sales cycle itself and what we’re really been on with here?.

Hi, Brian. This is Jack and I’ll take that question first. First off, I’ve been on Board for about 60 days now and as we dive into this, we continue to be very optimistic about the opportunities ahead of us here with the opportunities that we are working on closing.

As Larry pointed out in his comments, this quarter really came down to three major opportunities, two in the U.S. and two in EMEA that have slipped due to a very complicated sales cycles and working through in the U.S. anyway the GPO process.

But I would say, as I get grounded on the business and deep into the business, one of the first things that I took time to do is I said in my comments was to really get into the market opportunity. And first and foremost, the market opportunity the four Pheno is tremendous.

As I was coming into this role, one of the questions that I wanted to answer for myself and have done that is, where – what is the right fit for Pheno? What is the right health system for Pheno? And with that, I went and have visited dozens of customers from single site community hospitals to regional integrated health networks, both medium and large to the largest health systems in the country.

I have not made it to Europe yet, but we’ll be doing that over the next couple of weeks. And what I have confirmed is the unmet medical need for Pheno is real across all these health systems. The demand is real across all these health systems.

And so, where one of my first areas of focus to continue to improve productivity of placements is really around strategies to tap into all of these opportunities and do it quicker. Relative to our immediate term placement productivity, we have many items underway to improve that.

We are working on these now and it starts first and foremost with proving the value of Pheno. And as you know, over the past three months, we have made tremendous strides here with the data from fantastic health systems in the U.S. that are coming out that are speaking to the value of Pheno and the clinical outcomes that it delivers.

And then, with that, on the immediate term, we’ll be tying that those results to ROI models, financial models that will allow opportunity – customers and opportunities for customers to really look at the value of Pheno in their own institutions. .

Okay. I appreciate the details there.

And I think you said, as it relates to the go-lives and the improvements that you are trying to make there that you would give us an update on that in future calls, but is there any kind of a cliff notes version or just high level thoughts as to kind of some of the things that you guys are working on that that you’d be wanting to share?.

Yes, absolutely, Brian. So, first and foremost, coming in as I learned about the go-live challenges here at Accelerate, first and foremost having been in diagnostics for a while absolutely not a surprise. So, something that we – something that we see pretty much everywhere in diagnostics. And so, that was not a surprise.

What we continue to work on here is where we constructing now the go-live process. We are going to put best practices in place immediately and we look to launch this new program for go-lives over the next 60 days and with that we really expect to see improvements with regard to our ability to get customers live quicker over the next several months. .

All right. Thanks, I’ll let others jump in. Thanks guys. .

Thank you. And the next question comes from Tycho Peterson with JPMorgan. .

Hi. Thanks. This is Eleni on for Tycho. So maybe starting with system placements. Last quarter, you noted that there were a couple of multi-instrument capital deals with 20 plus placements that were pushed out to the second half of the year.

Can you talk about how many of these were recaptured in 3Q? Or if these were all pushed back to 4Q? And then, can you also update us on the – I know you’ve talked about this a little.

But the reason for the continued hold up and how you are progressing on pricing for these deals?.

So, yes, the large deals that we referenced last quarter was in EMEA. That was a multi-hospital deal in the Middle East and that deal is still under works and looks very favorable to close in Q4. .

Okay.

And then, in terms of the backlog of deals, which are awaiting the final sign-off, can you give us some more color? And what gives you confidence you will be able to convert these to placements in 4Q?.

Yes, sure. This is Jack again and thanks for the question. We are continuing to work through many deals, but those larger deals are continuing to progress nicely. We – they have been complicated based on GPO type contracts that we are working through.

And like I said, they continue to progress and we are forecasting to close those in Q4 along with really a right funnel of many other opportunities that we continue to progress through the funnel. And again, we look to those deals, as well as several others to finish out the quarter and year in the manner in which we indicated. .

Okay. And then, last one from me.

Given you are a month into 4Q, can you give us an early read of whether placements are tracking in line with your expectations?.

Yes, sure, and this is Jack again. As Larry indicated in his opening remarks, we continue to track towards our full year guidance, albeit at the lower end of the guidance.

But we continue to track full year guidance on placements and as we look at the funnel for quarter four, the opportunities that we plan to closing quarter four continue to progress through the funnel and already through October and into even November here, we’ve already closed several of those deals and look to close several more over the coming weeks and months.

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I would just add on to what Jack said, we all here at this table lived through last year and you’ll recall that the majority of our contracts were closed in the final weeks of Q4. It’s not how we want things to be, it’s not optimal and I know Jack is working on changing that periodization for sure.

That being said, I would expect the same thing that we had last year to occur this year. We will have a very significant, I believe Q4 that will take us to within our range of expected placements and our go-live targets. .

Okay. Great. Thank you. .

Thank you. And the next question comes from Bill Quirk with Piper Jaffray. .

Great. Thanks. Good afternoon everybody. .

Hey, Bill..

Hey, Bill..

Hi. So, I guess, Larry or Jack, you mentioned the new benchmarks for the sales team in terms of looking at number of contracts per year.

Can you speak a little bit about the sales force comp structure? Things like how much is salary versus mission? And then, in within that structure, what sort of incentives are there in place for things like placements versus go-lives and driving the consumable side of the equation? Thanks. .

Yes, sure, Bill. So, our sales people join us at a relatively modest salary and the majority of their compensation at plan is contingent compensation. That contingent compensation is based on a number of factors. They include the things that you mentioned. They include the number of placements that they make.

They also include a revenue target and other factors that we are seeking to drive through the year. To be clear, our sales team is highly incented, highly incented to deliver on our targets for the year and if they don’t, they are – they certainly are not pleased. It’s absolutely a bit draconian that way. .

And maybe one thing to add Bill is, it’s something we are also looking at with Jack and at the beginning of the year, we rolled out annually-focused targets with the team. And so, the team has been working and driving to really hit an annual metric, both on placements and revenue.

So, they have a lot of incentive to really drive at the end of the year and that’s been their focus against the goals that we set out which were annually focused for the year. .

And to Steve’s point, Bill, that’s an opportunity to relieve some of this periodization that we see right now. I think there are opportunities to manage incentive such that we don’t see a huge bolus in the last quarter and the last months of the year. .

That certainly seems logical that you try to shape that into a more of a quarterly or monthly expectation over time. Certainly, makes sense to us. Couple of additional questions.

With respect to the lower respiratory clinical trial starting, if I'm kind of walking back from your comments perspective, when it’s going to be commercialized? It sounds like the clinical trial itself is going to kick-off probably early 2020? Is that the right way to think about that?.

No, we’ve kicked it off now, Bill. We are beginning with the analytical studies as I mentioned in our prepared remarks to ensure that we have site-to-site consistency and appropriate limit of detection and do that in a way that is presentable to the FDA and others.

But we are going to kick that off and do expect to have our submission to FDA in time to have a 2020 approval. .

Okay. Got it. Appreciate the clarification there. And then, lastly for me, with respect to the comments at looking at some of the EMEA systems that are not going live to where they are supposed to be and reallocating those to other customers.

Are we talking about a fairly large number, small number, just trying to get a sense here for the magnitude of that? Thanks guys..

Yes, sure, Bill. So, here is what I’d say, as I have mentioned in the past, our growth will primarily be driven from the U.S. and we are laser-focused here. Now, we also are bullish on EMEA, but we are still very enthusiastic about the market. But now we know which markets are developing faster and which will lag.

So, you can imagine that we have markets, for example, in the Middle East and in Eastern Europe, in Southern Europe that are developing very quickly. We want to apply our resources to those markets and then reallocate and redistribute our assets to support those from markets that aren’t developing nearly as quickly.

Markets that have demonstrated a lack of significant demand for Pheno. So, you can expect us to be doing that over the course of the next couple of quarters. We think ultimately this will help us drive the overall EMEA business in a way that increases the annuity ensures the sales cycle. .

Got it. Thank you. .

Welcome. .

Thank you. And the next question comes from Alex Nowak with Craig-Hallum Capital Group. .

Great. Good afternoon everyone. This is actually Will Fafinski on for Alex today. Thanks for taking our questions. Larry, I was hoping to clarify something that’s been kind of coming up in the investment community here. There was a press that said that Mayo would create outcomes data.

We now know that the trial was empowered to hit mortality or length of stay. So does this at all change the behavior of the diagnostic launch at all? Thanks. .

No, not at all. As a matter of fact, we are super pleased about the Mayo study. It’s important to note that the outcomes from that May study so far are significant both in terms of Mayo’s ability to use the Pheno device to both deescalate, get patients on antibiotics they don’t need.

And perhaps more importantly, escalate get patients on antibiotics that they do need which can be life-saving much, much faster than they were able to do without our device. And given that Mayo is perhaps one of, if not the best hospital in the world, I think that’s fantastic. Number two, Mayo has not completed that study.

So, we expect to see continued data come out from the analysis of that trial and we are interested as you are to see what continues to come out there. But that’s not the only piece of evidence. We saw excellent results from the University of Arkansas. We saw excellent results from the University of Iowa. We’ve seen excellent results from Peninsula.

And the body of evidence keeps growing and demonstrating that not only is Pheno life-saving, but it also saves hospitals length of stay and lots of precious resources. So, we are enthusiastic and frankly I have not seen a diagnostic with the body of evidence that we create that we created ever before.

So, and that was just a matter of weaponizing that data, turning it into the kinds of tools that our sales people can use and we are – we done some of that already. And I know Jack and his team are actively engaged in doing that right now.

So, and the results from that are already hitting in the fourth quarter and I believe will continue to drive sales into 2020 and 2021 and beyond. .

Got it. Okay. I appreciate the color there. That was very clear. And then, there were a 100 or so systems placed at the end of 2018. On just those systems, how many are live generating clinical consumable sales today? And how many cartridges per system per day are we looking at for the systems that are running today? Thanks. .

First of all, as we mentioned in the script, we targeted at the onset of the year to hit between four to nine months time to go-live and that’s where we are at. And that is inclusive of the deals that closed in Q4. Now, you have to keep in mind that there is a mix in there. We’ve got individual sites that have gone live very rapidly during the year.

And then we’ve got some pretty large multi-hospital implementations that are nearing conclusion. And so, when you take into consideration all of that, we are at eight months today. That will be moving to nine months by the end of the year with nearly all of those going live from Q4 and many, many more throughout this year going live. .

Okay. Perfect. And then….

And then, yes, just a follow-on to the second part of your question, the annuity looks very strong in the U.S. We spoke about this on the call.

It’s right within our target range and we also mentioned that we are seeing a pull down effect on the overall average from EMEA and this is part of our interest to – in a targeted fashion look at those lower producing units.

But the combination of that change out in EMEA, as well as these larger multi-hospital implementations going live is very encouraging.

The other thing just real quick on our annuity is that, one of the things investors ask us quite a bit, is there a ramp to the annuity? And what we see is that, while the go-live process is tedious and frustratingly long in spots, the annuity is pretty durable and immediate.

And so, once the go-live where part of the hospital’s machinery and it is just run as a matter of course. .

Got it. Understood. Okay, appreciate that there. And then, one more quick one if I could squeeze in is, you’ve continued to bring in an impressive group of people onboard the company with Jack in Q2 and now Roland on the Board this quarter.

Specifically, on Roland, what did he see at the company? What sort of diligence did he conduct? And what sort of ideas does he have for the company to help accelerate the growth?.

Yes, so, we're excited about Roland join the Board for sure. He has a tremendous experience in running a global diagnostics company. And in particular, he has a significant amount of experience in both Asia and EMEA in growing those regions.

And as we’ve mentioned in prepared remarks before, we believe that Asia, and in particular, China will be a significant growth engine for us in the future. As we mentioned China is a reimbursed market for us. China has a significant AMR challenge, antimicrobial resistance challenge, that’s twice that of the U.S.

And given that we have reimbursement in that country, unique reimbursement we want to leverage that and we think Roland is a great addition to our Board to help guide us in through that launch process besides being a great guide and fantastic counselor. .

Great. Thank you..

Thank you. And this concludes our question and answer session. I would like to the conference back over to Mr. Lawrence Mehren for any closing remarks. .

Thank you. So, in closing, I want to thank our employees and our Board of Directors for their hard work this quarter. While our commercial performance was less than we wanted to see this quarter, the innovation engine is really delivering and respiratory will be a tremendous product.

I want to thank our shareholders for their continued support in patients as we get our commercial engine revving consistently. I have tremendous confidence in the underlying business and then Jack Phillips and his team’s ability to achieve the sales and go-live performance we all want and doing it in relatively short order.

And finally, I want to thank our customers who are ferocious in their support of Accelerate and the Pheno platform and its ability to save patients’ lives and their institutions’ precious resources. They are our best sales people and their numbers are growing significantly. We find this very encouraging. Have a good evening. .

Thank you. The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect your lines..