Andrew LaFrence - VP Finance, CFO Gary Maharaj - President and CEO.

Jim Sidoti - Sidoti & Company Brooks O'Neil - Lake Street Capital Markets Benjamin Haynor - Aegis Capital Michael Petusky - Barrington Research.

Good day. And welcome to the Surmodics First Quarter 2018 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Andy LaFrence, Vice President of Finance and Chief Financial Officer. Please go ahead, sir..

Thank you, Schuman. Good morning and welcome to Surmodics' fiscal 2018 first quarter earnings call. Before we begin, I would like to remind you that during this call, we will make forward-looking statements.

These forward-looking statements are covered under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 and include statements regarding Surmodics' future financial and operating results or other statements that are not historical facts.

Please be advised that actual results could differ materially from those stated or implied by our forward-looking statements, resulting from certain risks and uncertainties, including those described in our SEC filings.

Surmodics disclaims any duty to update or revise our forward-looking statements and result of new information, future events, developments or otherwise. We will also refer to non-GAAP measures because we believe they provide useful information for our investors. Today's news release contains a reconciliation table to GAAP results.

This conference call is being webcast and is accessible through the Investor Relations section of the Surmodics website, where the audio recording of the webcast will also be archived for future reference. A press release disclosing our quarterly results was issued earlier this morning and is available on our website at www.surmodics.com.

I'll now turn the call over to Gary Maharaj.

Gary?.

Thank you, Andy. And good morning everyone and thank you for joining. We had a busy and productive first quarter and our results reflect both solid top line performance and operational results even as we invest in our new product pipeline. We generated revenue of $17 million and diluted GAAP loss per share of $0.12 in the quarter.

And we are reiterating our expectations for fiscal 2018 revenue to be in the range $72 million to $75 million for the year.

On today's call, I'll provide an overview for our quarterly achievements and progress towards our strategic objectives and then I will turn the call over to Andy to provide a more detailed review of our first quarter financial results and updates of our fiscal 2018 guidance. We'll then open the call to take your questions.

In the first quarter we were pleased at the progress in each of our three major strategic objectives that we previously described for fiscal 2018. As a reminder these are to execute the TRANSCEND trial in the high quality rigorous and the efficient manner.

We plan to have a full complement of clinical sites initiated and up and running by the end of fiscal 2018.

Two, to advance our R&D whole product solutions pipeline by securing a regulatory of clearances for at least four new products in fiscal 2018 and file for the first in-human use of either our below-the-knee or AV fistula access drug-coated balloon programs.

And three, finalize and further delineate our commercialization strategy with potential distribution partners for proprietary products. Starting with TRANSCEND we have started our pivotal trail comparing our SurVeil drug-coated balloon to the U.S. market leading Medtronic IN.PACT Admiral drug-coated balloon.

We are actively getting sites up and running and beginning to enroll patients. And we are on track for continued progress throughout this year. As a reminder, TRANSCEND is expected to enroll approximately 446 patients at up to 60 clinical sites in the U.S. and 18 clinical sites in Europe.

The randomized trial will evaluate the SurVeil drug-coated balloon for the treatment of peripheral artery disease in the upper leg compared to the Medtronic IN.PACT Admiral drug-coated balloon. This trial is amongst the first level one studies to compare in next-generation DCB with one that is commercially available.

In Europe we are still in the process of evaluating our strategy and timing of all assumptions to get the CE mark, taking into consideration evolving EU regulations. We look forward to further progress in both US and Europe as we moved through this year.

Switching gears to our R&D efforts around our whole product solutions pipeline, starting with our sirolimus-based below-the-knee DCB program.

We are making progress using our internally developed .014 balloon platform, working through the preclinical studies for the data package that will be used to determine our readiness for first in-human clinical trial. We remain on track with this program and expect to make continued progress throughout the remainder of fiscal 2018.

We have also made dramatic progress developing our AV fistula drug-coated balloon. As discussed previously, we believe we have the technology to address access and maintenance of fistula patency which are major frustrations for patients undergoing renal dialysis and that can add dramatically to the cost of care.

We are moving file developing our preclinical data set that will determine the possibility to further accelerate this DCB program even in this fiscal year. We're working to gathering the preclinical data and clarity to file for regulatory clearances to conduct the first in-human study in either of these drug-coated programs.

Now turning our focus to our non-drug delivery R&D pipeline. We are quite pleased with the recent FDA clearance of our Telemark support microcatheter. The Telemark support microcatheter offers superior crossability for complex coronary and peripheral lesions.

This microcatheter combined Surmodics' extreme composite shaft technology with a high performance pristine hydrophilic coating, that together provide exceptional deliverability, kink resistance and complex lesion crossing.

The Surmodics' pristine hydrophilic coating offers best in class lubricity and low particulates and is available only in Surmodics' proprietary products. The Telemark microcatheter's tapered profile design as an outer diameter ranging from 2.6 french to 1.4 french for effective penetration of very tough calcified lesions.

We continue to make headway in products in developing using advanced versions of our coating chemistry. As you recall, in late 2017 we received both FDA clearance and CE mark for our .014 balloon catheter, which incorporates our serene hydrophilic coating for use in below-the-knee angioplasty.

We are confident that our highly durable low-profile PTA catheter will provide clinicians an effective tool for accessing and crossing even the most complex peripheral lesions.

For the .018 peripheral balloon catheter incorporating our serene hydrophilic coating, we have finalized our design specifications and have submitted our data package to the agency for 510(k) clearance.

Looking ahead, we have also begun working on next wave of product innovations for which we are targeting regulatory filings and clearances of calendar 2018. These will help us further build on our platform and achieved significant topline growth. We will discuss these R&D programs in future calls as we get closer to these regulatory filings.

Now turning to our food strategic objective regarding the whole product solutions product commercialization strategy. Our .014 PTA balloon catheter is currently undergoing clinical evaluation in actual patient use both by Surmodics and interested partner. We are targeting revenue to be generated from this product in the latter part of fiscal 2018.

We are also beginning clinical user experience with the Telemark .014 support microcatheter in the coming several quarters. It's an exciting time at Surmodics and we are investing in and making great progress in our R&D programs.

We are on track to become a leading and enduring medical device innovator by combining our key strategic technology assets with all Medical Device customer relationships to deliver best in class and highly innovative product solutions for vascular disease.

We are excited by our clinical regulatory and development achievements coupled with ongoing topline performance and operational progress. Our long-term goals of generating double-digit topline growth by the end of calendar 2019 and generating EBITDA margins at or above 30% by fiscal 2021 or in our sites, and we believe are very attainable.

I'll now turn the call back to Andy to provide more details on our first quarter fiscal 2018 results as well as our outlook for 2018, Andy?.

Thank you Gary. We are pleased to report that revenue for the first quarter of fiscal 2018 was $17 million, as compared with $17.8 million in the first quarter of last year.

As a result of our significant investments in our whole product solutions strategy, we delivered an operating loss of $0.6 million in the first quarter of fiscal 2018 as compared with operating income of $3.3 million in the comparable prior year period.

On a GAAP basis, our diluted loss totaled $0.12 per share in the current year quarter as compared with the earnings of $0.17 per share in the first quarter of fiscal 2017. On a non-GAAP basis, quarterly earnings per share were $0.10 per share in the first quarter of fiscal 2018 versus $0.19 in the prior year quarter.

Turning now to our two business units. Medical Device reported revenue of $12.8 million, a decrease of $1 million as compared with a year ago period. Looking at specific areas within Medical Device. First quarter royalty and license fee revenue totaled $7.1 million, down $0.9 million from the comparable prior year quarter.

The decrease in royalty and license fee revenue was anticipated and is attributable to lower royalties resulting from expirations of patents covering our third generation hydrophilic coatings. Product sales increased $0.1 million from the comparable prior year quarter due to increased reagent shipments.

Medical Device customer research, development and other revenue decreased $0.2 million from the current quarter as compared with the first quarter of fiscal 2017. This unit generated a $0.4 million operating loss in the first quarter versus operating income of $3.7 million in the prior year quarter.

The Medical Device operating income change was impacted by planned increased investments related to our whole product solution strategy, anticipated reductions in royalty revenue, as well as a $0.7 million increase in our contingent consideration expense.

For our In Vitro Diagnostics segment, first quarter fiscal 2018 revenue was consist of product sales totaled $4.2 million as compared with $4 million in the comparable prior year period, an increase of 5.9%. IVD revenue in the current year first quarter reflected strong growth in BioFX substrate and microarray slides.

IVD operating income was $1.7 million in the current quarter as compared with $1.5 million in the first quarter of fiscal 2017.

Operating margin in the first quarter of fiscal 2018 increased to 39.4% versus 36.4% in the comparable prior year quarter due to improved gross margins due to a casualty loss incurred in the first quarter of fiscal 2017 related to a damaged shipment from our vendor which reduced product gross margins.

Product gross margins for the first quarter were 64.3% of product sales as compared with 65.9% in the prior year quarter.

The current year period gross margins benefitted from higher Medical Device reagent in IVD sales, lower scrap from prior year damaged shipment from our vendor which is more than offset by our Irish facility infrastructure and scale up cost in anticipation of future growth which resulted in lower Medical Device product gross margins.

As a percent of revenue, first quarter of fiscal 2018 R&D expenses were 46% versus 33.6% in the comparable year ago period. R&D expense of $7.8 million for the current quarter was up $1.9 million from the first quarter of fiscal 2017.

As we have stated before, we anticipate R&D expense will increase in fiscal 2018 as we accelerate our whole product solution strategy investments including advancing our TRANSCEND drug coater balloon human clinical trial and other proprietary products including preclinical work on below-the-knee and AV fistula drug-coated balloon projects.

SG&A expenses in the first quarter of fiscal 2018 were 30.5% of revenue versus 27.4% in the prior year period. On a dollar basis, SG&A in the first quarter of fiscal 2018 totaled $5.2 million as compared with $4.9 million a year ago.

The increase in SG&A expenses reflects continued infrastructure investment to support our whole product solution strategy. Additionally stock based compensation expenses for the quarter -- for the first quarter of fiscal 2018 increased by $0.1 million [ph] as compared with the same fiscal 2017 quarter. During the quarter, the U.S.

dollar continued to weaken as compared with the euro. As a result, we realized a $0.2 million of foreign exchange loss on our euro-denominated contingent consideration obligation related to the Creagh Medical acquisition.

We also recorded an income tax expense of $1 million in the first quarter of fiscal 2018 as compared with income tax expense of $1.7 million, or 42.9% of pretax income in the prior year period.

The current quarter included a onetime tax expense of $1.2 million from our net deferred tax assets revaluation as a results of the Tax Cuts and Jobs Act enactment in December 2017.

Both periods reflect the impact of non-tax benefited amortization, accretion, contingent consideration gains and losses, foreign currency losses, and operating losses in Ireland. We realized that maybe difficult to model our income tax expense for fiscal 2018 given all the moving pieces from tax reform and impacts of non-tax benefited items.

We expect income tax expense including the impact of tax reform for fiscal 2018 to be in the range of $0.3 million to $0.8 million. Looking at our balance sheet, which continues to be strong, cash and investments totaled $46.7 million at quarter-end. We generated cash from operating activities of $0.6 million in the first quarter of fiscal 2018.

We invested $1.3 million in plant equipment during the first quarter as well. Our current cash and investments balances and operating cash flows provide adequate capacity to support our corporate strategic growth initiatives. As for our outlook we continue to expect revenue in the range of $72 million to $75 million for fiscal 2018.

GAAP diluted loss is expected to be in the range of $0.45 to $0.70 per share as compared with the prior guidance of $0.50 to $0.75 per share. We expect non-GAAP to range from a loss of $0.20 to earnings a $0.05 per share as compared with the prior guidance of a $0.16 to $0.41 per share diluted loss.

As previously noted, the guidance per share includes $3 million or $0.15 per share estimated R&D expense variability as a result of our estimated range of patient enrollment rates in our TRANSCEND study. Gary and I are pleased with the performance of the entire Surmodics team in our fiscal first quarter.

Thank you for your hard work and outstanding results. Operator, this concludes our prepared remarks. We'd like now to open the call to take questions..

Thank you. [Operator Instructions] And we will take our first question from Jim Sidoti from Sidoti & Company. Please go ahead. .

Good morning.

Can you hear me?.

We hear you, Jim..

Good morning. .

Sorry if you cover this, I'm actually trying to listen in two calls at once. But R&D spending is down at little under $8 million that's the lowest it's been in the last three quarters.

Is that just a timing issue and where do you expect that to be over the next two to three quarters?.

There is a couple of pieces there Jim, regarding the R&D expense. First of all if you recall, we do have R&D revenues which are down slightly this year and so part of the customer R&D expense is down by -- in the first quarter about $900,000 from what we thought would be and lot of that has to do with our customer focus R&D expenditures.

And if you look at where we are at from our internal R&D expense, we are probably about $1 million light on that and that's just timing.

So in the aggregate if you look at where we're going to be, we're still going to be in that 55% to 60% of revenue for the year and we would expect to see acceleration in the back half of the year, so that -- I would say that if you think about as a percentage of revenue that we will be ramping up to closer to 60% and 55% to 60% in each of the next two quarters -- next three quarters I should say.

.

Okay, alright.

And then you indicated that tax rate is going to be difficult to model this year, but as we look ahead into the next two or three years when you get back to being a profitable company what do you think the right tax rate would be for Surmodics?.

Well, part of that Jim, has to do what the timing of our run-through of our NOLs in Ireland.

As you know the Irish tax effect is about 12.5% and with the new model here in the US at 21%, we'd expect a blended range probably to be in the high teens, once we get to the point where we've gone through the NOLs and then our state rates right now it's running about 1% to 2%.

So that'll give you a pretty high teens maybe 20% rate going forward, once we get through those NOLs. .

Okay. Alright. Thank you. .

And we will take our next question from Brooks O'Neil from Lake Street Capital Markets. Please go ahead. .

Good morning and congratulations on the good start to the year.

I want to be sure, I understand a little bit about this tax charge, I'm thinking you said the loss of $0.12 on a GAAP basis includes the $1.2 million charge so excluding that charge you'd be quite a bit lower loss, is that correct?.

Brooks that's correct. If you look at our press release there is actually a reconciliation between our GAAP numbers and our non-GAAP numbers and tax reforms impact is $0.09 a share.

So to be specific what happen there is that we have deferred tax assets that are on the books and those are valued at 35% and as a result of tax reform the benefit we'll actually see from those, when we can deduct those expenses will now be 21%. So the difference between in that is what was a charge to earnings for deferred taxes of $1.2 million. .

Okay, I got that. Appreciate that. Secondly, could you guys comment about the level of interest you're seeing in the .014 catheter.

I think you said you are doing some testing with that product as well as customers or potential partners, just give some….?.

Our strategy is, for both us and the strategic partners now that we have the regulatory clearances. And on the .014, it's both in Europe and the US, is to get it into clinical evaluation with some of the world's top below-the-knee interventionalists.

I think our team was in Europe in Austria last week with one of these top interventionalists using the device.

And for Surmodics to get a good deal or the best deal for our shareholders, we also want to have our independent data on how the product performs in patients and that sometimes is the best -- certainly the strategics will be doing the evaluations in patients as well.

But we want to have direct knowledge of how this device performs as well, so that when we sit down to talk about potential distribution agreements, the data and the feedback from the physicians is critical. And, by the way, we feel very positive.

And the data even last week is very positive about the device's ability to go below the knee to actually treat the lesion and things like that. So that's the idea. The microcatheter will go through the same paces. And I'm not sure if people quite get the degree of technology in this microcatheter. I mean this thing is a meter and a half long.

It starts off at one end at less than a millimeter in diameter and tappers over that meter and half to less than a half millimeter in diameter. And it's surrounding a guide wire that's about a third of a millimeter. And so there aren't really products like that in the market across complex coronary and peripheral lesions.

The only two that come to mind that really are in that category are the Terumo Finecross which was sort of the grand-daddy of that genre of devices, and then in June '016, ASAHI launched the, what we call ASAHI Caravel. And so we're building on the capabilities of those products with the Telemark.

So it's a pretty unique product and we can't wait to put it through its paces in these very, very complex lesions. .

That's very helpful Gary. And could you just comment about any surprises you have found as it relates to the interest in strategics picking up a product like that? Obviously it's sort of your first shot at trying to negotiate with potential partners. .

Right. This is purely anecdotal but I'll share it anyway. But I'll protect the names of those involved. One of the heads of R&D of a very large strategic basically said, I've got dozens of people working on this for many years, how are do you guys come up with this so quickly, based on microcatheter. So there is strategic interest.

And as I said, some of the Japanese multinationals have had really good head start on the U.S. multinationals in this genre of technology. And so Surmodics is bringing that to the next level. And so yes, the interest is high. The .014 as well the interest is high.

It is probably a smaller pool of strategics, but it's still a keen level of interest in that. So no surprises there. It also reflects for us at least, the pristine coating which the only way to get that is on our devices that we have now secured an FDA clearance using that pristine coating for the first time in our devices. .

That's good. You had earlier I think in prior conference calls suggested that if you saw favorable things from your additional products particularly the AV fistula product and I think the microcatheter as well that you might actually increase your R&D investment this year.

And if I'm looking at your guidance appropriately, it looks like at least so far you have not made a decision to do that.

Could you comment on that just so I have clarification on how you're thinking about it?.

It depends on Andy lets me do. We have planned the year to accommodate what we believe R&D spendings. But what I asked of Andy, is sometimes things are opportunistic. And so we feel good about our range in R&D that he just described earlier.

But if we see an opportunity if the preclinical data on AV is so dramatic and there is an opportunity to accelerate. We always believe it's in the best interest of our shareholders to do that. Now, the way we're doing is not by just increasing R&D budget.

We look at the tradeoffs and what we're doing first so we can reallocate the investment from one area to another. After we optimize that, if you are still a need only then will we consider increasing the budget.

Is that correct [ph] Andy?.

That is correct. .

He controls that flow. .

I'm going to ask Andy about this tomorrow. So when you're not in the room I'll get the real scoop. .

It will be the same scoop. .

Well I'm sure that's true. So last question from me and it's a two part question. I guess number one, any early surprises in the SurVeil work you're doing? And then I continue to have in the back of my mind that you're comparing that product to product from your largest customer.

And I'm curious if you are prodding the bear has it resulted in any reaction from it. .

Sure. No surprises with the performance of -- clearly we don't see the endpoint beta and it is blinded. But getting sites the budgeting and the contracting it's a process. I mean you have to get a contract and budget and lawyers have to talk to lawyers for every single site.

But that's ongoing, and as I said we expect to have the sites up and running by the end of the fiscal year. As far as the head-to-head trial, no, Medtronic is our largest customer. We have good relationships with the teams there. And it's really about the clinical question not about the competitive question.

It's not a priory trial, but there has been this debate I was just at the linked meeting and life sick about whether there is a class effect of drug-coated balloons or are there really differences in the technology. And so we believe for the clinical community, raises the competitive devices very relevant question to answer about drug-coated balloon.

So the outcomes of the trial is really about that. And for us the outcome is really about secure the CME approval. And so, no, I certainly don't sense or believe -- both companies are very high class act companies and there is no bad blood at all. .

Perfect. Thank you very much. .

Thank you. .

We will take our next question from Ben Haynor from Aegis Capital. Please go ahead..

Good morning gentlemen, thanks for taking the questions. First off from me kind a following on Brook's last question. Just when it comes to adding the sites and enrolling patients I know there is still a lot that needs to take place before get up and running and the patients enrolled.

But do you feel that you're on track with what your internal expectations were for having sites up and running and patients being enrolled?.

I think we're on track in terms of selecting the highest quality sites. We could take the approach of just grab a bunch of sites and hope for the best. And so we're being very selective. In terms of our -- I always have my expectations and the clinical team just grown.

Here my expectations are, but if you look I mean the most recent trial was the STARFlex [ph] device. And they had 300 and, I do not want to measure this, about 350 patients, about 90 to 100 less than us. And it took from June '15 to June '17 I believe to enroll that trial. So that's the nature of what we're working at.

We clearly are trying to beat that but we have more patients, but we also think the fact it's a head-to-head trial should give us a more interest from the clinical community. So it's hard to tell, because it's so early. I continue to push.

The next quarter I'll have a better read to see the two curves of sites up and running, there is two curves that we look at, the two sets of data.

How many sites are we getting up and running and what is the enrollment rate of the sites that are up and running? But I'm looking forward to getting all of the sites up and running, so that you can get the maximum contribution by having a big denominator. .

Okay, that makes sense. And then just had a curiosity, are you planning on disclosing, okay we've got x number of sites up and running which was all that we're going to do.

And do you plan on disclosing the enrollment figures as the trial goes on maybe every conference call or may hit like 25% or 50% of milestones like that?.

Frankly, we want to stay away from the ladder. We don't want to be the first company putting ourselves on an enrollment rate chart. There is also reasons that for some of our strategic partners we do all want to keep that under the net. I believe though we can't say and Andy will give me the kick under the table here.

But we can't say when we have gotten the full complement of sites up and running because we've said what our target is on that. .

Sure. .

And Ben, one of the realization of that will be through our guidance around R&D expense. So that's what you'd be able to think about where we're at with the stating, we won't disclose the stays, I mean $32 million to $40 million over the next several years. So that's really what you have sense of being on track. .

Okay, that's helpful. It is nice to hear some of the comments you are getting on the microcatheter.

With those types of comments coming your way are you getting maybe internal suggestions on the pipeline on where we go next or is there any back and forth in that fashion with the strategics?.

We layout more of the details of the pipeline, but clearly we are very excited about the microcatheter and now with .018 hopefully in the latter part of this year we can get the clearance on that as well. So the .014 is below the-knee, the .018 sort of goes into the vessels behind the knee and it's very tortuous pathway.

But we actually have the pipeline set for the next year. The things that are we're working on, typically you have to been working on them before. So we are getting suggestions but we also are very clear what we need to deliver on that. So there is no lack of clarity in our end on what's going on in the early pipeline right now.

But because for some competitive reasons and for some disclosure reasons, we want to keep that tight until we feel we're able to solve the clinical problem. We don't want to say what we're trying to solve and then we can't solve that. So later in this year I hope as the teams get through their first challenge testing then we will share more. .

Okay. And then lastly for me.

I think you said that you're going to make the decision on below-the-knee drug-coated balloon or AV fistula program are you leaning one way or another? I figure out probably not a get idea which way you are going but….?.

I am -- the development teams to tell you, I am always leaning one way and then they actually have data. So I have to shut up and listen to them. But below-the-knee certainly at the link meeting there was a lot of discussion about it and the effect and impact of drug-coated balloons it still comes down to potentially how to deal with calcium.

So it's a very complex multifactorial disease where everybody understand there is one interventional approach that works. So that we will do our part as far as what a drug-coated balloon can contribute.

We will be working on things that also solve the other aspects of the below-the-knee problem, but easy access is such a dramatic high volume problem for patients in a very high cost and certainly in US Medicare. It's probably 1% or 2% of procedures but I've been told it's about 7% of Medicare costs.

So I'm a fan favorite of that, but really comes on to the data. .

Okay. Thanks. Well thanks for taking the questions gentlemen. .

Great, thanks. .

Thanks, Ben..

And our last question, comes from Mike Petusky from Barrington Research. Please go ahead. .

Good morning guys. Thanks for taking the questions.

So Gary, what do you see is the cadence for the four new 510 K products in fiscal '18? I mean I am assuming kind of second half or maybe even very backend loaded in terms of regulatory clearances, is that fair to say?.

Yeah. I think the lessons learned from last year. We're adding -- we had sort of green lighted our feeling of the timing in terms of getting through with one pass, now adding like in microcatheter there was a second pass.

And some of that had to do with certainly the newness of the coating technology what we're using and the very intense design of a product like a microcatheter. So we sort of backed up and said realistically, weighted average is going to be pass on a half but there's nothing like a pass and a half, duration and a half.

So we believe it will take two passes which will push it probably into the fourth quarter that doesn't mean we can't have a pleasant surprise in the third quarter.

But I think from our viewpoint of submitting these devices, and this is by the way it is not a knock on the US FDA, we are submitting some devices that really do have some critical aspects for them and how they treat the disease.

So that's how we're looking for it and then later in the calendar year as well, some of these may slip into the first quarter of '19..

Okay. And then I guess the double-digit revenue growth you guys are projecting to begin in fiscal '19, how much is that hinge on the timing these 510(K) products that don't yet have clearance? And I mean I guess essentially that's the question, how much of that changes on that timing sort of holding up..

We have the clearances on two, right, one is CE and U.S. and then the microcatheter and then certainly we will be looking for. So we feel quite confident in the contribution from about three of them. It really depends on four, five and six.

Five and six may not really contribute in the material way to fiscal '19, but I will let Andy comment if there is anything..

I agree with you Gary..

Yeah..

Okay.

So essentially you have a line of side on a double-digit revenue growth sort of based on the 510(K) products that you have gotten clearance on so far but haven't partnered yet and possibly one or two others between now and then?.

Yes..

That's all I have got. Thank you..

Thanks..

Thanks, Mike..

I would like to hand the call back to Gary Maharaj for any closing remarks..

Thanks, Schuman. Thank you all for your questions. We are pleased with our first quarter results and progress in our whole product solutions strategy. And look forward to speaking with you in our second quarter earnings call. Thanks everyone..

That will conclude today's conference. Thank you for your participation ladies and gentlemen. You may now disconnect..