IMRIS' CEO Discusses Q4 2013 Results - Earnings Call Transcript

Mar. 4.14 | About: Imris Inc (IMRS)

IMRIS Inc. (NASDAQ:IMRS)

Q4 2013 Earnings Conference Call

March 4, 2014 5:00 PM ET

Executives

Kelly McNeill – EVP, Finance and Administration and CFO

Jay Miller – President and CEO

Analysts

Alan Ridgeway – Paradigm Capital

Jeff Chu – Canaccord Genuity

Doug Miehm – RBC Capital Markets

Marcel Herbst – Herbst Capital Management

Lin Yu – Cowen and Company

Operator

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the IMRIS Fourth Quarter and Full Year 2013 Financial Results Conference Call. During today’s presentation, all participants will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator Instructions) This conference is being recorded today.

And at this time, I would like to turn the conference over to Kelly McNeill, Chief Financial Officer. Please go ahead sir.

Kelly McNeill

Hello, everyone, and welcome to our call. IMRIS’ fourth quarter and full year 2013 financial results were issued after market close this afternoon. The news release, MD&A, and financial statements, as well as the link to the webcast of this call are available on our website at imris.com. With me on our call today is Jay Miller, President and Chief Executive Officer.

Please note that the comments made on today’s call may contain forward-looking information. These statements should be not understood as guarantees of future performance or results. Such statements involve known and unknown risks, uncertainties, and other factors that may cause actual results to be materially different from those implied by such statements. Although such statements are based on management’s reasonable assumptions, there can be no assurance that actual results will be consistent with such statements. For further information on these risks and uncertainties, please consult the company’s relevant filings, which are available on SEDAR.com or sec.gov.

Now, I will turn the call over to Jay.

Jay Miller

Thanks, Kelly and good afternoon everyone. We are building a sustainable medical device company, and toward that end, I am pleased to report many significant accomplishments during our 2013 fourth quarter and full year. This was truly a transition year for IMRIS as we laid the groundwork for long-term growth and profitability.

2013, we undertook planned initiatives to enhance future revenues and improve the company’s operational efficiencies. Our achievements included relocating key functions and the SYMBIS robotics program to Minneapolis as well as approximately 100 jobs, obtaining FDA clearance and CE Mark for the VISIUS iCT, completing development work and this past month gaining FDA clearance for our next generation VISIUS Surgical Theatres including the Skyra and Aera systems, implementing a new multi-source pricing initiative for our VISIUS Surgical Theatres iMR products, revamping our customer service offerings and pricing as we strive to deliver A-plus customer support, standing system options, upgrades, and disposables to broaden our revenue stream with new offerings such as the horseshoe headrest, increasing the number of IMRIS installations while supporting procedures growth and finishing the bulk of our MR-guided radiation therapy or MRgRT development work in conjunction with Varian. We are excited to have moved swiftly through these milestones over the past year. IMRIS is stronger as a result of our actions, which will enable us to reach our long-term strategic goals.

I will go into more detail in these initiatives in a moment. First, I want to relate all of you that we are off to a strong start in 2014 with bookings commitments in all of the following product categories: VISIUS Surgical Theatres, iMR, VISIUS iCT, service, options, upgrades and disposables.

Now, taking a look at the 2013 fourth quarter, strong revenue in the first half of the year was not enough to overcome lower than our anticipated revenue in the fourth quarter. The revenue shortfall was partially due to a regulatory delay that impacted the shipment of a major order. Now, with this unexpected delay, fourth quarter revenues would have been on target to meet the upper end of our guidance. This shipment timing issue was resolved early in the 2014 first quarter. With this delay, fourth quarter revenue was approximately $10 million versus $20 million in the prior year period.

During the quarter, we continued to focus on building our service revenues. Expanded maintenance contract revenue nearly doubled to $2.9 million versus the same period last year. This is due to additional expanded maintenance contracts from a larger installed base of VISIUS Surgical Theatres that have transitioned off the warranty into chargeable service program coupled with improved service pricing.

Full year service revenue in 2013 increased 88% to $9.6 million. We expect further growth in this area of our business as we expand our installed base and strive to deliver A-plus customer support. We also saw slightly increased sales from disposables and upgrades versus the prior year quarter. Company had a net loss of $0.42 per diluted share in the 2013 fourth quarter compared to a net loss of $0.14 per diluted share in the same quarter last year chiefly due to several effective charges that Kelly will reveal.

Turning to our bookings, new order bookings in the fourth quarter were $11.4 million resulting in an order backlog of $102.4 million. Fully expect our order bookings to improve in 2014 although we continue to experience lengthy decision cycles in certain hospital systems, increasing (indiscernible) continues to be a high priority for the IMRIS team. And as I mentioned earlier, we have had a strong booking start to 2014 over the past two months. Our VISIUS Surgical Theatre iMR systems require a large capital outlay historically ranging in price from approximately $5 million to $10 million depending on the product solution, theatre layout, and selected system option.

In addition to the capital equipment purchase, most of our customers enter into equipment service contracts that generally span 4 to 5 years post warranty. As our fourth quarter revenue show at this stage in IMRIS’ growth a few orders for our capital equipment can have a significant impact on our quarterly results. We need to anticipate revenue and bookings variability from quarter-to-quarter. However, by further expanding our range of products and services we expect the volatility to dampen over time. Now that we have largely completed our transition year initiatives, we are excited about our future growth prospects including the progress we are making in the development of image guided intraoperative technologies for the Surgical Theatre and an increasing volume of positive clinical results with our systems.

Estimates we have made in the latest iMR and iCT platforms is behind us, the company now offers a family of imaging systems from which we build our services, options, upgrades and disposables revenue. As you may know the VISIUS iCT is the first and only ceiling mounted intraoperative CT system available. We believe the iCT offers the highest radiological quality images and the seamless surgical workflow making it a category dominating product. Our sales team is focusing their efforts on hospitals and surgical centers with the greatest ability to benefit from neuro and spine surgical applications. Numerous combinations of rapid installations, ease of operations, breadth of clinical applications and state-of-the-art radiological level image quality and X-ray dose management makes this product the best choice for hospitals and clinics around the world.

Let me give you some details about the FDA clearance I mentioned at the beginning of my comments. In February we received FDA clearance for our next generation VISIUS Surgical Theatre. These advanced systems integrate the latest high field Aera 1.5T and Skyra 3T MR scanners, the best MR scanners in the world to bring unequaled intraoperative imaging quality to the surgical suite. Our first installation is a four room hybrid operating suite known as the Center for Surgical Innovation at Dartmouth-Hitchcock Medical Center in Lebanon, New Hampshire. This is the first operating suite anywhere with both VISIUS iMR and iCT modalities able to serve multiple operating rooms without moving the patient. This is very exciting news for us our neural and spine surgeon customers and for patients.

To-date roughly 13,000 patients have been treated using our VISIUS Surgical Theatres since the first installation in 2005 and six hospitals located in Boston, St. Louis, Minneapolis, St. Paul and Beijing and Huashan in China have performed approximately 1,000 cases each using the iMR. These hospitals predict their VISIUS Surgical Theatres with lowering re-operation rates by enabling surgeons to get better overall intraoperative visualization without moving the patient and ensuring more complete surgical results.

Using re-operation rates is a very important ROI metric in today’s global healthcare environment. More installations coming online and the number of procedures growing suddenly, we estimate the volume of VISIUS patients treated will reach roughly 17,000 by the end of 2014. This represents a 30% gain in one year over the previous eight years as intraoperative MR utilization expands to improve outcomes in a growing number of neurosurgical applications.

The top neurosurgical hospitals are doing more than increasing the number of procedures completed in the suite. They’re also expanding the types of applications and conditions beyond brain tumor resection that they treat. This will include epilepsy, stroke, aneurysm, Chiari malformation, Parkinson’s disease and additional neurological procedures using deep brain stimulation, RF and laser ablation and other interventional technologies with iMR. Further the recent addition of VISIUS iCT to our regulatory approved portfolio broadens our solution into spinal condition, trauma and intricate reconstruction.

Consumable products are another key revenue driver for IMRIS that will enhance our long-term profitability. In February 2014 we launched the world’s first MR-safe and CT-compatible neurosurgical horseshoe headrest. This additional release in our disposable product portfolio establishes IMRIS’ capability develop tools that speed case-to-case transition and optimized patient handling and surgical workflow.

The benefit of the horseshoe headrest is that it provides non-rigid head positioning for a full range of patients from neonatal to adults during neurosurgical imaging procedures in the VISIUS surgical theater. It also expands the use of intraoperative imaging patients who cannot be positioned for surgery with a clamp-like head fixation device because the skulls are too soft or fragile. We expect to continue growing our disposable business in 2014 and beyond. We see tremendous market opportunities with the VISIUS iMR and VISIUS iCT products. We’re also continuing to make progress in other exciting and innovative systems that are in development and moving towards commercial launch.

2013 fourth quarter we completed nearly all of the work and co-developing an MR-guided radiation therapy or MRgRT system with industry leader Varian Medical. We’re combining IMRIS’s proprietary iMR technology with Varian’s TrueBeam system to enable the use of iMR during the radiotherapy treatments for cancer. Our two companies have been collaborating with Dr. David Jaffray, a world-renowned radiation physicist and the team at the Princess Margaret Cancer Center in Toronto also known as PMH to develop this system.

(As research piece) of iMR and radiation therapy and studied how the iMR and radiation treatment technologies can be compatible. We remain very confident about the possibilities for MRgRT. We’ve said before we believe the MRgRT system is a potentially disruptive technology that will allow clinicians to provide targeted radiation therapy in ways never before contemplated.

While the MRgRT product is not clear for sales this time, we believe that (features) that Varian IMRIS MRgRT product will build these clinical results are gathered in PMH. We’re also extremely excited about our progress developing a second generation image-guided robotic system. In this surgical system it’s the first surgical robot in the world is compatible to both MR and CT system, buying the state-of-the-art imaging of our VISIUS surgical theaters and the SYMBIS microsurgical robotic system with the neurosurgical procedures that haven’t been possible before.

We have driving (card) to achieve the goal receiving initial regulatory approval with far more relatively simple procedure using SYMBIS in late 2014 or early 2015. 2014 we’re focused on executing our strategic plans in order to set the stage for future growth. We have a very talented team in place to achieve our goal. IMRIS now offers a broader product range including a growing disposable business and we plan to continue building momentum for our VISIUS iCT and service sales.

We expect improved bottom line performance with an emphasis on petroleum cost, increasing gross margin and becoming cash flow neutral in 2014. We have largely completed our R&D investment and as a result expect gross profit margins to improve. We also anticipate market excitement along the development of our second generation SYMBIS MR and CT compatible robotic system and MRgRT.

Moving forward our strategic priorities continue to include increasing market penetration and order bookings by making it easier for our hospital customers purchase our VISIUS iMR in today’s cost containment environment. We drive VISIUS iCT in U.S., Europe and Australia driving to provide A-plus customer support, selling options, upgrades, disposables and services into our expanding satisfied installed base customers. Answering the development and commercialization of the SYMBIS and MRgRT systems and enhancing the company’s operating efficiency.

Now, I will turn the call over to Kelly to review the financials. Kelly?

Kelly McNeill

Thank you, Jay. Revenue in the fourth quarter came in at $10 million and for the full year 2013 were $46 million. Revenue for the quarter was 50% higher from the same quarter last year for the reasons Jay described earlier. In the fourth quarter of 2013, service contract revenues increased by 84% to $2.9 million. In the full year 2013, revenues from service contracts rose by 88% to $9.6 million. Revenues from these contracts will continue to increase as more of our VISIUS Surgical Theatres transition from warranty and onto service agreements.

Fourth quarter gross profit decreased by 60% to $2.8 million yielding a gross margin of 27.7% versus 34.8% in the prior year quarter. The fourth quarter gross profit as a percentage of sales reflect significantly unfavorable project gross margins compared with the same period last year, due to higher gross margins from additional magnet installations in the prior year. Full year gross profit was $15.7 million compared to $17.8 million due to lower revenues offset by increased gross profit earned on additional extended maintenance contracts that began in 2013.

Full year gross profit as a percentage of sales was 34% which was consistent with the prior year. The improvement in service margins was offset by lower product margins as a percentage of sales reflecting unanticipated cost over runs in 2013 for the research programs already noted combined with the favorable impact of some cost recoveries on a number of projects in the previous year.

Operating expenses for the 2013 fourth quarter were $22.6 million, up from $13.3 million last year. Most of this increase is due to one-time charges in R&D of $8.3 million related to the completion of a clinical data site of our MR-guided radiation therapy system at PMH and transition costs of $3.5 million for the relocation of certain parts of our operations to Minnesota. The transition costs include a $2.1 million lease accrual related to exiting our Winnipeg manufacturing facility.

Full year operating expenses in 2013 continued to track in line with our plans for the year, increasing $9.7 million or 21% compared with the prior year. This is primarily due to R&D charge of $8.3 million previously discussed, higher costs of $4.1 million related to the relocation of our operations to Minnesota, additional occupancy expense of $800,000 for the additional facility in Minnesota along with $2 million for additional employee costs and administrative, customer service and operations function. This was partially offset through a planned decrease of $6 million of research and development costs for the robotics or/and other ancillary research programs, which are substantially completed in the early part of 2013.

Net loss for the 2013 fourth quarter was $21.6 million versus a net loss of $6.6 million in the prior year quarter. The net loss for the full year 2013 was $42 million versus $27.8 million last year. The year-over-year increase in net loss is due to the timing of system backlog conversion, lower gross margins as a result of unfavorable project mix including early research system, high operating costs including the company’s relocation, and unfavorable foreign exchange currency impact.

Looking at the balance sheet, we had cash, restricted cash, and accounts receivable totaling $27.9 million at December 31. Total order backlog at the end of the quarter was $102.4 million, an increase of $1 million from the prior quarter. As of December 31, 2013 we had sold 51 systems of which 48 are installed and 13 are in variant stages of delivery phase.

Turning to the 2014 financial outlook, our expectation for revenues is to range between $44 million to $46 million in 2014. IMRIS’ quarterly revenue profile in 2014 will once again vary depending on the underlying system installations in each period as Jay said. We anticipate that the first quarter revenues will be in the $8 million to $9 million range and similar to prior year the strongest quarterly revenue performance will again occur in the second half of the year. We anticipate significant gains in gross profit in 2014 including higher gross profit as a percentage of sales, which we forecast to be above 40%. This is primarily due to project mix with improved margins on systems and quotable products. We do expect quarterly gross profit as a percentage of sales will continue to vary through 2014 depending on the timing of underlying system installations in each of the quarters. We anticipate based on our operating plan that total cash and non-cash operating expenses in 2014 to be approximately $33 million. Thank you. And now we would like to open up the call for any questions. Operator?

Question-and-Answer Session

Operator

Thank you, sir. Ladies and gentlemen, we will now begin the question-and-answer session. (Operator Instructions) And our first question comes from the line of Alan Ridgeway with Paradigm Capital. Please go ahead.

Alan Ridgeway – Paradigm Capital

Hi, good afternoon guys. Thanks for taking the questions. Kelly, I think my two questions probably both for you. On the gross margins, you guys are guiding to 40% on the year, is that going to display, can you give us any idea of how that might look quarter-over-quarter, you are expecting 8% to 9% in Q1, should we be expecting maybe lower margins earlier in the year and higher margins later in the year? And then secondly, just on the expense guidance of $27 million cash expenses, that include R&D? And I will leave it at that. Thanks.

Kelly McNeill

So I think obviously from a margin perspective, there could be some level of volatility, I will say quarter-to-quarter although we don’t actually really expect a lot of it quarter-to-quarter and that now we actually have some fairly solid project revenues inside of each of these quarters. And despite the revenues being little bit lower, we actually just stayed as being able to stay within that range of 40%, but if you are right to assume that certainly margins grow as we have additional delivery activity in the latter half of the year. So that is a fair statement.

I will say on the R&D side, yes, of course that does include R&D. The R&D expenditure obviously in 2013 was quite large partly as we described related to the Princess Margaret Hospital installation. So that charge is now behind us overall, so largely due to a lot of the R&D activity related to SYMBIS and other programs of that nature. So really, we are now in what I will call completing some of those R&D activities related to the next application and mostly I will say sustaining work within the R&D environment. So that is why we are seeing still the decreases on our overall operating expenses and that’s sort of broader than just R&D, but that’s generally the trend.

Alan Ridgeway – Paradigm Capital

So maybe just as a follow-up so the expense line of $55 million this year, you guys think will be $33 million next year including the depreciation and non-cash stock-based comp and everything?

Kelly McNeill

That’s correct.

Alan Ridgeway – Paradigm Capital

Okay, great. That’s all I have. Thanks.

Operator

Thank you. Our next question comes from the line of Jason Mills with Canaccord Genuity. Please go ahead.

Jeff Chu – Canaccord Genuity

Hi, guys. This is actually Jeff Chu filling in for Jason. Thanks for taking the questions. Just a couple of quick ones for me. First off, what kind of growth are you expecting in terms of bookings for 2014?

Jay Miller

We are not going to give guidance on bookings growth. We normally don’t. We expect we are speaking with our ratio, our book-to-bill ratio of 1.5. Of course, there will be volatility to that as we have seen in the past, where as I mentioned we are very excited about the start for 2014 with bookings, commitments in every product category. iMRI, iCT, service options, upgrades and disposables are all ready and close to expectations for what we expected to have for the entire quarter already in the first couple of months. So that is encouraging.

Jeff Chu – Canaccord Genuity

Great. And in terms of your new products, with regard to your MR-guided radiation therapy product, when do you expect to receive approval and commercialize, are you expecting the revenue this year?

Jay Miller

It’s a very good question and not of all that is in our hands of course. Nearly, all of the work has been completed and what I mean nearly all the work, the 99% of the work that we need to do has been completed and there are still few things that we need to finish up. And then it’s largely in Varian’s hands after that. And it really go according to Varian’s (indiscernible), so we don’t want to make any statements not surely about whether Varian will again in the sale of this year, we do – we are at longer term, we are at phase about the opportunity. The clinical data that Dr. (Jafri) and the folks at PMH and all will be very, very big. We expect that those – that data will be good and compelling. And the stronger the data, the strong we think the market opportunity will be.

Jeff Chu – Canaccord Genuity

Alright, great. And sticking on to new product front on the SYMBIS robotic system, where are you in the regulatory process? And do you have any feedback from investigators with regard to the product, just any color that you can provide would be appreciated?

Jay Miller

We are in relatively early stages of the next step of the regulatory process. We have alluded to this in the past that we are going to taking take daily steps in this process. We are developing beta units right now. We will through the regulatory process going through a very relatively simple regulatory approval, which we expect that we will have late this year or early next year as you probably know that the FDA is a little bit unpredictable what comes with these things and we will want to work very closer with them, so – but we like our plan. We like where we are, we like where the development is. Every day I can see progress as I walk down and I see what’s happening with the SYMBIS program, it’s nice to have the SYMBIS in Minneapolis, so I can see it every day. So we are optimistic, but we are going to do this, we are going to go through this methodically quickly, methodically we are going to do it the right way and we are going to take their request.

Jeff Chu – Canaccord Genuity

Great, thanks for taking the question. I will get back in queue.

Operator

Thank you. Our next question comes from the line of Doug Miehm with RBC Capital Markets. Please go ahead.

Doug Miehm – RBC Capital Markets

Thank you. First question just has to do with the split of the backlog, could you tell us what was system versus service?

Kelly McNeill

That could actually be in the MD&A, but $60 million is approximately the service asset of the total.

Doug Miehm – RBC Capital Markets

Sorry, that’s not the question. The question is in Q4 out of the $11.4 million what was the split?

Kelly McNeill

Majority of all of that is actually service business.

Doug Miehm – RBC Capital Markets

Okay, were you guys surprised with that given that you are trying to adopt the new VISIUS selling methodology with a lower cost to your clients and you have the iCT available as well?

Jay Miller

Well, we clearly of course we would like to have had more bookings in the fourth quarter. There is no doubt about that. But these things do take time, our sales cycle especially for on the MR side are long. We don’t have been in the market with the CT at that point for roughly six months and it does take some time to get into budget cycles. But again, we expect the bookings will grow. We are happy with how things have started in 2014 and we are optimistic that that momentum will build as we go through the year.

Doug Miehm – RBC Capital Markets

Okay. Next question has to do with the cash. If you guys are guiding to $44 million to $46 million I guess it is in revenue and maybe a gross margin of 45% with cash expenses of $27 million, how are you guys going to get to a breakeven of cash this year?

Kelly McNeill

So Doug as you know obviously this is the tied largely to our bookings side of performance as well and our ability to draw deposits and it’s part of our business. Also the conversion of a lot of the unbilled revenues that you have seen off our balance sheet right now we have $12 million unbilled at the end of the quarter. So that is really what creates that capability, I will say to get to a cash flow neutral position by the end of the year.

Doug Miehm – RBC Capital Markets

Even when you consider the deferred component that you are going to have to recognize with the revenues this year?

Kelly McNeill

I am not sure what you mean by deferred, but in unbilled receivables, those are all activities we believe performed as the company. And all we need to do is then complete the activity related to installation and that should then increase the billing.

Doug Miehm – RBC Capital Markets

So, you have no deferred revenue you are going to recognize this year?

Kelly McNeill

We would, but that’s a different issue, right. So that’s talking about taking when sitting in deferred and then converting that into backlog, but that’s a backlog conversion question not unbilled revenue conversion. The unbilled is something we have already performed. Deferred is what’s left of the activities we have not yet performed.

Doug Miehm – RBC Capital Markets

That’s not a cash item, right, when you recognize it?

Jay Miller

The cash item was recognized on a (deposit) that’s what usually those increase the cash and that deferred revenues already been recognized as cash.

Doug Miehm – RBC Capital Markets

Exactly. Okay. So as we look forward here you guys said that you do have some orders. What type of revenues on the VISIUS are you seeing? Is it the low revenue option or be it the real ones say $8 million to $10 million type things?

Jay Miller

The low revenue option I assume you’re talking about multi-source pricing. We’re not going to go to that level of detail here. I will say this with a 100% comp, the multi price option just having the option with the customers is helping move these deals specifically in U.S. but we’re starting to see it a little bit outside of the U.S. It’s helping – it’s – even if the customers don’t opt to use it, it is helping us get through deals. So the multi-source pricing definitely is starting to work. We’re starting to see good signs, it is working nicely.

Doug Miehm – RBC Capital Markets

Okay, perfect. And the last question this has to do with the 1.5 book-to-bill. So if you were to get a 1.5 book-to-bill on your net count of $45 million in revenue this year, we could assume maybe 65 to 70 bookings in this year?

Jay Miller

I know you’re trying to pin us down on booking at guidance and we’re not going to get it. We’re put into to drive bookings hard but we’re not going to give bookings guidance here.

Doug Miehm – RBC Capital Markets

So you like 1.5?

Jay Miller

We like the 1.5 long-term. So long-term ratio that we are shooting for can improvise bidding.

Doug Miehm – RBC Capital Markets

That’s perfect.

Jay Miller

But the long-term ratio that we’re shooting for.

Doug Miehm – RBC Capital Markets

Thanks.

Jay Miller

Thank you.

Operator

Thank you. Our next question is from the line of Marcel Herbst with Herbst Capital Management. Please go ahead.

Marcel Herbst – Herbst Capital Management

Good afternoon, and thanks for taking my question. Maybe you can talk a little bit about the initial interest you have gotten on the iCT now after the launch and approximately how much of your funnel is currently comprised of iCT?

Jay Miller

Well our overall funnel just to answer that question first. The overall funnel of iCT is building, its building pretty rapidly, but it’s – at this point still smaller than the funnel for iMR. Over time because the iCT market is bigger and more established and mature we expect the iCT funnel will be bigger than the iMR funnel. And we’re not going to break that out into detail right now but the funnel is filling actually, the funnel most of us are filling in that’s very encouraging. The feedback we’re getting from the market was our product is what you would expect.

We’re going out and we’re saying look you can get radiology state-of-the-art CT imaging technology including dose management in your operating room. The same are better images than you’ll get in radiology. So the benefit of that is stunningly good 3D images and the algorithm which can be – are more and more for the surgeons than they are the radiologists with again state-of-the-art dose management. So they minimize dose of the patient and everyone else in the room and it’s very easy to get access to that story is plank, people understand that. story very, very well and we’re building some momentum there. And the early case of information and data we have is from the clinicians is very positive.

Marcel Herbst – Herbst Capital Management

That sounds great. Just a quick follow-up on the funnels. In the past you mentioned it’s now at $500 million. Did I understand correctly that you feel that the iCT product line itself can create a funnel of larger that size?

Jay Miller

Longer term I believe that the case and I’m, not going to put a timeframe on that but longer term I think that the iCT funnel will be bigger than the MR funnel, yes.

Marcel Herbst – Herbst Capital Management

Okay. Thank you.

Operator

Operator Instructions) Our next question is from the line of Josh Jennings with Cowen and Company. Please go ahead.

Lin Yu – Cowen and Company

Hi guys, actually this is Lin Yu calling for Josh. Thanks for taking the call. Just a quick question about guidance, you guided to about $44 million to $46 million. Can you give us some additional color on the breakdown in terms percentage of that you’re expecting from service or from a conversion from bookings in terms of systems? Just wonder if you can give us any additional information on that?

Jay Miller

So, (indiscernible) the service revenue grown so much obviously and so I wouldn’t expect but we don’t really have breakdown of that at this point in time. But we don’t expect it to grow dramatically I believe from the prior year given that a lot of these systems are into service and however many we can tread over into a live installation in 2014 we’ll dictate that. So it’s not going to be dramatic and probably this split you might saw really this year. The one thing is going to be new for us. It is going to be on the disposable side and we’re optimistic where we might go but we don’t really have anything we’re going to product divide yet on that because this is too early at this stage. So that’s what we think we have some upside in our business.

Lin Yu – Cowen and Company

Great, great. Just one follow-up question kind of related to the approval for next generation system. You said you had a pretty strong quarter booking so far. Can you give us a little bit details on whether the booking – how you think about rolling out the new system, are you going to have the current generation and the newly approved generation available or how are you guys thinking about it?

Jay Miller

We’ll only have about – there are different price points, there are high deal systems all one and a half and three key systems that would be at different price points. This is not a major surprise to the market because the versions on the MR side or the radiology side are very well established and in the market already, so not a huge surprise in our customer base because they’ve already been in the radiology market. By the way I mentioned in my note these are the best MR scanners in the world and I actually believe that at high field 1.5 and 3T (use) is good and you can get well the radiology on anywhere in the world. This is state-of-the art MR.

Lin Yu – Cowen and Company

Great, great. Thanks for taking the question.

Operator

Thank you. Gentlemen, I am showing no further questions at this time. I would like to turn the conference back to Mr. Miller for any closing remarks.

Jay Miller

Thank you very much. 2013 was a very important transition year. IMRIS has a compelling line-up of regulatory cleared and development stage products that will provide a strong foundation for the future. Our objectives are to drive sustained growth to the adoption of our products and services by customers to continue operational improvements and to enhance long-term shareholder value. Although we expect variability in our quarter-to-quarter performance at this stage in our company’s development, I’m very excited about the continued stream of positive clinical results and the strong talent we have brought on board and we create a world-class medical device company. We’re extremely excited about the future. IMRIS had an excellent growth potential on cutting edge technologies designed to improve patient outcome while lowering health care cost. We look forward to updating you on our progress in May. Thank you.

Operator

Thank you sir. Ladies and gentlemen, this concludes the IMRIS fourth quarter and full year 2013 financial results conference call. Thank you very much for your participation. You may now disconnect.

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