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Volcano Corporation (NASDAQ:VOLC)

Q1 2014 Earnings Call

May 2, 2014 5:00 PM ET

Executives

John Dahldorf – CFO

Scott Huennekens – President and CEO

Analysts

Brooks West – Piper Jaffray

Chris Lewis – Roth Capital Partners

Chris Pasquale – JP Morgan

Danielle Antalffy – Leerink Swann & Company

David Goldman – Goldman Sachs

Mike Matson – Needham & Company

Jason Bedford – Raymond James

Bruce Nudell – Credit Suisse

Joanne Wuensch – BMO Capital Markets

Imron Zafar – Jefferies & Co

Ben Andrew – William Blair

Steven Lichtman – Oppenheimer

Jason Mills – Canaccord Genuity

Operator

Good afternoon, and welcome to Volcano Corporation’s First Quarter 2014 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Following our formal comments, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference call is being recorded, Friday, May 2. A replay of the call will be available through May 9 by dialing (404) 537-3406, passcode 27362765 or via the company’s website at www.volcanocorp.com.

I would now like to introduce Mr. John Dahldorf, Volcano’s Chief Financial Officer. Please go ahead sir.

John Dahldorf

Thank you, and good afternoon. With me today is Scott Huennekens, Volcano’s President and Chief Executive Officer. Scott will discuss the key events for the first quarter and I will follow with a review of our financial results for the quarter and guidance. I want to mention that we are aware that the timing of this call was not optimum, but we had no reasonable alternative given management travel schedules. We appreciate your patience and understanding and we will do our best to avoid this scenario in the future.

Before turning the call over to Scott, let me remind you that today’s discussion will contain forward-looking statements that involve risks and uncertainties that could cause our actual results to differ materially from those discussed in today’s call. These risks and uncertainties are outlined in today’s press release, and in our filings with the Securities and Exchange Commission. We caution you not to place undue reliance on our forward-looking statements, and we disclaim any obligation to update these statements. Scott?

Scott Huennekens

Thank you, John, and Volcano had a solid start to 2014 with our Europe, Middle East Asia-Pacific and Latin American regions performing very well. Additionally FFR in Europe and peripheral imaging in the U.S. turned in very good performances.

Overall, the U.S. and Japan were a bit challenging, as was the coronary imaging business especially in Japan. We are very pleased with the notable progress in our pipeline which will drive growth acceleration in the remainder of the year and in 2015 with U.S. approval of both our IFR physiology offering and Sync Vision Co-Registration System Technology. We are in the process of initiating the limited market release for these two products in the U.S. and Europe and the Sync Vision launch in Japan is scheduled for the second half of this year. Also during the first quarter, we initiated the full market release of our Crux IVC filter. In addition, we continued to experience very solid growth in our Peripheral business, revenues generated by sale of the Pioneer re-entry catheter.

Lastly, we completed the realignment and expansion of the U.S. sales organization with the addition of approximately 20 new personnel. This process created a little more of a distraction in the first quarter than we had expected. However, entering the second quarter, all coronary peripheral and capital equipment territories are now fully staffed and the people are trained. Our revenues in the quarter increased 1% on a reported basis and 4% on a constant currency basis in line with guidance. And we feel very good about our accomplishments in the first quarter and having set the stage for the growth as evidenced by our anticipated acceleration in revenues for the second half of the year in our guidance. Leading our performance was growth in our U.S. peripheral IVUS business which increased more than 20% year-over-year as we continued to generate market growth with our imaging catheters through procedure growth and market penetration of IVUS. This business is really beginning to gain momentum particularly in the U.S.

As has been the case the last few quarters, we experienced exceptional growth in Europe and in the Middle East where total revenues increased 21% versus a year ago on a reported basis including 20% and 14% increases in FFR and IVUS disposable sales respectively.

In addition, console revenues in the region increased 52% year-over-year, we are also gaining increasing traction in emerging markets such as Latin America and Asia-Pacific.

Our results for the quarter also reflect the growing importance of products introduced in the latter half of last year including IFR in Europe and Japan, our new Verrata FFR wire and the Pioneer Plus re-entry catheter, as well as initial sales of the Crux filter.

While the contributions from Crux are at this point very modest. In the Pioneer Catheter healthiness achieve a greater presence in the peripheral markets. At the same time we continue to face unfavorable exchange rates that yen in the quarter as well as weather challenges in the U.S. affected that as noted by other medical device companies.

Even though we saw some stabilization in PCI activity in the U.S. and Japan during the quarter, we continue to be cautious in our outlook for PCIs for the remainder of the year. As a reminder, the final reimbursement filings in Japan took effect April 1 and reflecting approximately 5% for our Imaging Disposables and approximately 2% for our FFR disposables.

These reductions in reimbursement will be in effect for the next two years. In addition, the Japanese government has mandated a 3% consumption tax increase in addition to those reductions in reimbursement. As a result, we believe our original expectations for cath in Japan was 7.5% or in line with the final outcome.

While in the U.S. we believe we realized some market share gains in imaging, these were offset in part by share losses in FFR. We believe that our separate and focused coronary and peripheral sales forces going forward, in combination with the technology leadership represented by IFR in the Verrata wire will enable us to regain traction and share in the U.S. FFR marketplace going forward.

In Japan, we lost a bit of share in the imaging market, but experienced a slight market share gain in the FM market. We believe our imaging share was impacted temporarily by physicians evaluating new disposable catheters from our competition.

We believe that we can recapture and increase our market share during the balance of the year and that the expected introduction of Sync Vision in Japan in the next several months will facilitate our efforts.

We continue to be the overall IVUS market share leader in the U.S., Japan and Europe and have a global share in excess of 50%. We remain committed to our three-prong growth strategy given the changes occurring in our sector with respect to proof of necessity and the drive to reduce hospital re-admission and overall cost, while improving clinical and economic outcomes.

This includes, one, growing our base FFR and coronary in peripheral IVUS business, with innovation and improved distribution to drive penetration, market share gains and growth in new indication.

Because of the industry trends I mentioned a moment ago, we continue to believe in the long-term growth opportunities for FFR and peripheral imaging. In addition, we believe we have a significant runway for growth in the peripheral imaging space in all of our key geographies going forward.

Two, facilitating market expansions in our emerging business, such as our recently introduced products, Crux, Pioneer and Sync Vision in the ramp of Axsun’s OEM ophthalmology business.

And then third business expansion through targeted acquisitions, in-licensing or partnering and building out of therapeutic solutions in targeted indications such as peripherals and other verticals.

We continue to have the broadest system and disposable product portfolio. We now offer 13 modalities in our integrated systems, and expect to add several additional modalities over the next two years. This provides us an important competitive advantage and that’s why we have a larger install base today than others and continue to win the overwhelming majority of system placements in the U.S., Europe, and the rest of world where systems are sold.

As we stated in the past, this is a significant barrier to entry as well as switching cost that allow us to continue to win the land grab and drive utilization of our disposables.

Turning to our core businesses. In terms of FFR we believe the overall market grew in Q1 in the mid-teens and we grew 9% on a constant currency basis. In Europe, where we offer IFR and Verrata, we gained market share and in Japan, we also gained share where we have IFR.

In the U.S., we lost market share as we did not yet have the benefit of the full market release of our Verrata wires and the release of the IFR technology which are now in process in Q2.

We are now selling the Verrata wire our new everyday wire that facilitates faster and easier FFR and our fifth new wire in the past five years in both the U.S. and Europe and their market response has been very positive. We are on track to introduce the Verrata wire in Japan during the second half of this year.

As I suggested, we are seeing continued growth of IFR in Europe and Japan and as we announced in March, we received FDA clearance for commercial use of IFR in the U.S. in the first quarter.

This approval came about three months ahead of our original expectations and we are initiating a limited market release in the U.S. over the next several weeks. For competitive reasons we are not providing a high level of detail around our launch plans for IFR. With this approval, more than 90% of our install base of multi-modality system can now be upgraded with IFR.

We believe the time and cost savings associated with IFR will increase market penetration by helping to mitigate the barriers to use of physiology measurement including the ease of use and cost. We believe with the technology innovation represented by Verrata and IFR in combination with clinical education and elevation in U.S. practice guidelines and covers decisions required in the use of FFR to prove us keener prior to doing a PCI will foster continued long-term growth for FFR.

Increased penetration of PCIs as well as the potential use of FFR in indications such as acute coronary syndrome patients, the peripheral and mapping in coronary artery bypass procedures can create a potential addressable market in excess of $1 billion. As I mentioned earlier, our peripheral business realized solid growth during the quarter.

Factors driving our business include, our industry-leading product portfolio, which includes four IVUS catheter suitable for the peripheral market. We are the only company to offer IVUS catheter specifically for use in the peripheral as well as our Pioneer Re-Entry catheter, the Crux IVC filter and Valet Microcatheters. A more focused U.S. peripheral sales force which now numbers 40.

Expanded clinical education in clinical trial programs, we also plan to have a major presence at the peripheral-focused medical meetings throughout this year. As we’ve discussed with you in the past, given the current low penetration rates we believe that for the foreseeable future, the IVUS peripheral – the U.S. peripheral IVUS business can grow in the high teens. We remain focused on five indications including EVAR/TEVAR, two FFAs, three IVC filter placement, four AV Fistula graft revascularization and five vein compression, indications in which worldwide IVUS penetration is typically in the low single-digits.

We are also excited about the early response to our Sync-Vision-co-registration system with IVUS in angiography. We now have a handful of limited market release sites in the U.S. and Europe and the initial clinical experience has been very positive.

In closing, I want to reiterate that we see as the key elements of our strategy to generate additional traction in our core FFR vascular businesses. It begins with a more strongly focused sales force. As I mentioned earlier, we now completed our reorganization of the U.S. sales team and ended the quarter with approximately 150 sales reps, including 40 within our peripheral group, 80 within our coronary group, and 30 within systems.

Going forward, we expect better alignment with our priorities and targeted resources on what we anticipate will be higher return opportunities in the marketplace. This focused sales force will be a particular importance to our U.S. FFR business as we rollout our IFR offering during the year and facilitate continued conversion of current and prospective accounts to the Verrata wire. We will augment our enhanced distribution capabilities and technology leadership with continued clinical trial and market education programs. For example to support this business as well as our IVUS effort, we recently held our seventh Functional PCI Summit. We had 80 attendees representing nearly 60 customers including 14 major U.S. healthcare systems.

In Japan we’ve implemented some changes within our sales organization that we believe will enhance our efforts in that market. We continue to see an excellent response to IFR and look forward to benefiting from the introduction of the Verrata wire later this year. As I mentioned earlier, ThinkVision will be a key component of our imaging strategy in Japan in the second half of the year.

With respect to our peripheral imaging business, we are pleased with our efforts in the peripheral markets and look forward to expand upon our market leadership during the year with both our imaging catheters and the Pioneer device. Our Crux filter and Valet Microcatheters outpace, increase our presence in the peripheral market and our peripheral-only sales force new clinical education program will further support our efforts to achieve our goals for this market.

While the coronary IVUS business is subject in great parts PCI volume and growing pressure by hospitals release cost, we believe that our continued success at winning the majority of console placement will provide us a solid base for growing that business over the long-term. We believe the rollout of Sync Vision can be an important driver for us.

I want to address the third leg of our growth strategy through business expansion opportunities. As we have discussed with you over the past few earnings calls, we have a disciplined capital allocation strategy in place to drive shareholder value. We understand the need to invest our cash, such that our returns will be greater than our weighted average cost of capital, and have a process in place to ensure this.

We remain conscious of the key risks of M&A, overpayment dilution and integration and we’ll continue to look for opportunities that can generate near-term returns through our manufacturing, distribution and clinical expertise.

In addition, we will seek opportunities to build our product portfolio, particularly therapeutic offerings that complement our platform technologies.

I also want to mention that the transfer of our disposable manufacturing activities to our Costa Rica facility are on schedule for completion by the end of the year. In conclusion, we are off to a good start in 2014 and are particularly pleased with the progress we have made with growth in Europe, our U.S. sales force alignment and expansion, peripheral growth, new product introductions on time, Costa Rica transition on time, product pipeline including regulatory approvals for IFR and Sync Vision in the U.S. and our initial success with the Pioneer and Crux offering.

Additionally, we are cautiously optimistic that PCI volumes will be in line with our expectations for the year. We appreciate your participation today. I’ll now turn the call over to John. John?

John Dahldorf

Thank you, Scott. Revenues on a reported basis for the first quarter of 2014 were $94.5 million versus $93.2 million in the fourth quarter a year ago. Our results includes sales of the Pioneer device, which we did not have a year ago.

FX exchange rates had a negative impact of approximately $2.7 million. On a constant currency basis, revenues in the quarter increased 4% year-over-year.

Consolidated sales of multi-modality systems and related equipment in the quarter were $8.5 million versus $8.9 million a year ago. Total console placements in the quarter were 213 versus 169 a year ago, including 64 in the U.S. versus 74 a year ago.

In Japan, we had 37 placements versus 32 last year, and 91 in Europe versus 31 last year. Our increased placement activity in Europe reflects new placements in Turkey, the Middle East and India We placed 21 consoles in the rest of the world versus 32 a year ago. Excluding our legacy IVG systems, we now have more than 7,200 consoles placed versus approximately 6,300 a year ago.

Highlights from our top-line performance included U.S. IVUS disposable revenue increased 9% year-over-year driven by a growth in our peripheral imaging business which included our peripheral IVUS catheters and the Pioneer device and disposable revenues in Europe demonstrated solid growth of 20% and 14% for FM and IVUS disposables respectively.

Gross margins for the quarter were 62.9% versus 64.5% in the first quarter a year ago. Gross margins in the quarter were impacted by the unfavorable FX rates and cost related to the ramp of manufacturing in Costa Rica and duplicate capacity. As we discussed in our prior call, we expect gross margins will be lumpy throughout the year until we complete the transfer of all of our disposable manufacturing to Costa Rica.

In the second quarter, we expect gross margins will be in the mid-64% range and be approximately in the low 62% range in the third quarter and then exit the year with approximately 65% gross margins.

Operating expenses in the first quarter of the year $6 million versus $61.9 million a year ago. Year-over-year SG&A increased by approximately $6.5 million due primarily to increased sales force headcount, litigation expenses, an increase in incentive compensation for non-executive employees and increased facility costs related to our expanded San Diego headquarters.

R&D expenses declined approximately $1.7 million, reflecting the strategic prioritization initiative we implemented last October offset in part by increased investments in high priority pipeline programs.

With respect to other expense categories, acquisition-related items were related to the accretion of the Crux milestone and the increase in re-prioritization expense was related to develop technology intangibles for the Crux and Pioneer product lines.

Restructuring charges were related to our strategic re-prioritization program implemented last October.

Interest expense for the quarter was $7.2 million, of which approximately $2.3 million was a cash expense. With respect to income taxes, we recorded a benefit of approximately $4.3 million reflecting a rate of approximately 28.2%. There were two drivers impacting the lower effective tax benefit rate. The first was the expiration of the R&D tax credit in December of 2013; the second was related to non-deductible expenses associated with stock compensation. We expect that our effective tax benefit rate will be approximately 35% for the remainder of the year.

For the first quarter of 2014, we reported a net loss on a GAAP basis of $10.9 million or $0.21 per share versus the loss of $3.2 million or $0.06 per in the first quarter a year ago. Basic weighted average shares in the quarter were 52 million. This substantially reflects the impact of our $100 million accelerated stock repurchase program that we initiated in the fourth quarter. We expect that weighted average basic share for the year will be approximately 51.4 million.

Excluding acquisition-related items, amortization of intangibles and non-cash interest expense on convertible notes, net of tax, we reported a non-GAAP net loss of $0.12 per share versus a non-GAAP net income of $0.02 per diluted share in the same period a year ago. I should also note that at the end of the quarter we had cash, cash equivalents and available-for-sales investments of approximately $370 million. We are confirming our guidance for all of 2014 with expected revenues in the range of $413 to $421 million on a reported basis and $417 to $425 million on a constant currency basis.

We anticipate that approximately 25% of our revenues will be in Japanese yen and 19% in euros. We expect gross margins will be in the range of 64% to 64.5% and operating expenses will be in the 68% to 69% of revenues range.

On a GAAP basis, we expect a net loss of $0.57 to $0.60 per share with a net loss on a non-GAAP basis, of $0.16 to $0.19 per share. For purposes of this guidance, we are not factoring in the execution of the second $100 million tranche of our share repurchase program. As we indicated last quarter, we continue to take the capital allocation process very seriously, and our board and management continue to evaluate this opportunity in context of what is best for the company and our stockholders in the long run.

For additional context related to our full year guidance, I refer you to our commentary in the fourth quarter conference call.

With respect to the second quarter of 2014 we expect revenues on a reported and constant currency basis will be in the range of $102 million to $104 million; for the second quarter on a GAAP basis we expect a loss per share of $0.13 to $0, 15 and loss per share of 4% to 6% on a non-GAAP basis. We expect weighted average basic shares will be approximately 51.3 million in the quarter. We are expecting revenues of $103 million to $105 million; and $114 million to $117 million on a reported basis in the third and fourth quarter respectively.

You will note that our expectations for the second quarter are a little bit lower than our previous expectations while the expectations for the fourth quarter revenues are a little bit higher. This reflects our belief that we will achieve strong attraction in Japan in the second half of the year with the introduction of the Verrata wire to go along with our already established IFR technology and the launch of Sync Vision.

As we indicated in our last call, our expectations for 2014 revenues are a bit more back-loaded than in prior years due to the changes in our U.S. sales force, which we believe will provide us increasing benefits as we go through the year as well as increasing contributions from new products such as IFR, Verrata, Crux, Sync-Vision.

In closing, prior to our planned conference call, we will be appearing at the Bank of America Healthcare Conference on May 13, and the Goldman Sachs Healthcare Conference on June 10. Thank you again for joining us today. And we’ll now open the call to your questions. In the interest of time, we ask that you limit yourself to one question and a follow-up. Thank you.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Our first question comes from Brooks West from Piper Jaffray. Your line is open. Please go ahead. Brooks, your line might be muted.

Brooks West – Piper Jaffray

Hi, Can you hear me? Sorry guys. Can you hear me?

Scott Huennekens

Yes, we can hear you now

Brooks West – Piper Jaffray

Great. Hey, Scott, I was hoping you could give us or try to quantify the impact of IFR on you revenue in Europe and Japan, now that you got a little bit more experience there. And in any weight you can put on the bone in terms of the new account openings, is it increased utilization?

And just kind of help us think about quantifying that impact from IFR and how we might think about the impact of that product once it’s in full launch in the U.S.?

Scott Huennekens

Yes, sure, so it’s multi-factor as we talked about the last couple of calls, number one, we are initially rolling it out in Europe and in Japan into our existing accounts. In some cases, those accounts use both companies’ products and in those cases, we see our share is going up in addition utilization is going up.

So what we are also seeing is that initially the accounts are using it as we have talked about utilizing the technology as a hybrid and use it 65%, 70% of cases you don’t need to do FFR and do anything, but over time, they migrated to a comfort level given the cost savings and time savings to utilizing the product more and more without and using it more and more in different ways and that is using it to deploy the stent and then using it to assess functional gain afterwards.

So, we are seeing primarily today, we are in Europe, we are using it to drive depth of penetration of number of cases as well as market share in our existing accounts, we see as we go forward it will help us penetrate our competitive accounts out there and I would say Japan is the same way. John anything?

John Dahldorf

No, no, I think that's pretty answer it.

Brooks West – Piper Jaffray

So, guys just to follow-up on that, can you say, are you on average seeing 10% share gains, 20% share gains, can you give us an idea of the magnitude of the impact of the product?

John Dahldorf

I don’t have specific numbers. I would say that our share – we believe our share probably went up 3% to 5% in Europe and I would say that our utilization limits in accounts has gone up where we have it probably over 10%.

Brooks West – Piper Jaffray

Okay and then I know, Dr, Davis is working on some follow-up clinical studies. Can you just give us an update on the clinical flow of information behind IFR maybe over the next couple of years? Thanks.

Scott Huennekens

Yes, in our next call we’ll have more update on the FFR defined study as well as sweetheart and others. In addition to some next-generation technology that you’ll see at PCR that we are working with Dr. Davis on relative to IFR, FFR, pullbacks and our Sync technology.

So, we are not stopping with IFR. We are pushing this ball forward and as you think about new entrants into the FFR market, having just an FFR wire is not going to be sufficient.

You are going to have to have the ability to do things like IFRs, pullbacks, you are going to have to have it on a multi-modality platform with imaging and other modalities as well in order to compete. So, John can give you more color offline too on the flow down what are all the studies and their status.

Brooks West – Piper Jaffray

Great, thank you.

Operator

Our next question comes from the line of Chris Lewis with Roth Capital Partners. Your line is open

Chris Lewis – Roth Capital Partners

Hey, guys, good afternoon.

John Dahldorf

Hey, Chris.

Chris Lewis – Roth Capital Partners

First, I guess, just on the sales reorganization, I was hoping you could provide some more color on that it sounds like there is obviously a bit of disruption during the quarter probably somewhat expected. I guess sensors reps have been fully hired and trained at this point. What types of improvements and traction are you seeing with that sales reorganization into the three separate groups?

Scott Huennekens

Yes, so, thank you for the question. Yes, we did expect that there would be disruption and it’s amazing how fast three months can go when you are trying to reorganize the sales force as well as hire over 20 new people and/or transition another 10, 15 people from your coronary sales group into our peripheral group and get them trained and up and running.

So, I think part of the shortfall you see in our U.S. sales in Q1 are a result of that in combination with weather and then in combination it taking a good 60 days longer than we had anticipated or maybe modeled to get through approval processes at hospitals for Crux, IVC Filter trial.

Our closure rates on sales and alike are what we expect. It just taken a little longer to get though the cycle and it’s taken a little longer to get those peripheral reps up and running who are selling the products. So, that’s probably the effect that’s been the most pronounced in Q1.

As we go into the remaining part of the year, I think the benefit of the coronary focused sales force as it relates launching IFR, Verrata, also the focus on intravascular imaging with the data that exists from different clinical trials that we are rolling out is going to be a positive. Peripheral having 40 people not just 10 or parts of 50, 60 others, it’s also going to have a benefit in launching Crux.

Starting to share this new data that we are generating bi-month on these different peripheral indications for imaging as well as impact in Pioneer more focus is going to benefit us. And then, the capital group has a great new, whole new line of product to sell with our core system our new advanced controller which we launched or launching right now that also ties in with Sync.

So, we feel very good as we go into the second half of the year on the hardware side and into 2015, with starting in our cycle of replacements of an install base of integrated systems that’s getting a little bit longer in the two, so to speak.

John, anything there?

John Dahldorf

No, no. I think it’s a pretty good recap.

Chris Lewis – Roth Capital Partners

Okay and then, for FFR in the U.S., it sounds like there is some market share losses there, maybe just expand on what you saw competitively in the U.S. for FFR? And then, kind of how we should think about the competitive landscape going forward?

Scott Huennekens

Yes, so, I think, the best proxy is Europe where I think we grew twice the market growth rate in Europe as we took share having the combination of Verrata along with IFR and in Europe, we are undermanned versus St. Jude from a sales force standpoint.

So, in the U.S. where we are kind of equally manned, we are playing decent by not having Verrata fully launched and not having IFR. So with that, I think, you are going to continue to see the FFR market in the U.S. grow in the low teens and I think whereas we didn’t grow in Q1.

We are going to get back to here over the next 12 to 18 months in growing in double-digits having those technologies in place as well as having the focus of a coronary only sales force.

Chris Lewis – Roth Capital Partners

Okay, great. Thanks for the time.

Operator

Our next question comes from the line of Chris Pasquale with JP Morgan. Your line is open

Chris Pasquale – JP Morgan

Thanks, good afternoon. I want to start with the quarterly sales cadence. So, it was a back-end loaded outlook to begin with and it’s even more so now despite the fact that IFR came a little earlier than expected in the U.S. So, two questions really, what drove the expected sales reduction for 2Q? And then what are the key pieces that gives you confidence in the back half ramp?

John Dahldorf

Yes, Chris, as we mentioned in our remarks, it’s really kind of comes down in Japan and our ability to kind of react to the – some of the competitive, what I’ll call trial that is going on with some of the new catheter technologies that have been introduced and so, as we sat down with the Japanese sales team and kind of plotted out the year, we kind of felt like we wanted to be a little bit more conservative in Q2.

And we historically have seen good momentum going into the second half of the year and growth in the second half of the year in Japan and we think with the new product set we will be introducing in Japan in the second half primarily Sync and Verrata will go along with IFR we just feel like we will have some exciting things to talk about and to build on both on the coronary side as well as both on the imaging side as well as the physiology side.

Scott Huennekens

Yes, Chris and I would add in Europe and the U.S., as I mentioned, Crux is probably 60 to 90 days behind where we thought. But our win rates are above what we thought and so by Q4, that is hitting the income statement and the revenue line and so it gives us greater confidence.

IFR, yes, introduced a quarter early, I mean not introduced a quarter early, approved a quarter early, we are doing training as we speak yesterday and today of our sales force. So the launch is really only a couple months early. So it gives us greater confidence in the Q4 number and the ability to maybe increase it based upon IFR and Verrata.

Chris Pasquale – JP Morgan

Okay, thanks. And then just on the IFR launch strategy, if I remember correctly when you first came out with the integrated FFR solution on the S5 platform you went out and proactively upgraded a large percentage of your install base and that really jump started your share gains, is this a situation where you could do something similar with IFR or is it really going to be just customer-by-customer?

Scott Huennekens

Yes, Chris, we are in the middle of a launch and for competitive reasons, we don’t want to share what our strategy is going to be with our competitors on the line with me right now. But you can imagine we can do that. We have many different options.

Chris Pasquale – JP Morgan

Thanks. Scott.

Operator

Our next question comes from the line of Danielle Antalffy with Leerink. Your line is open.

Danielle Antalffy – Leerink Swann & Company

Thanks so much guys. Good afternoon. Thanks for taking the questions. My first question relates to the peripheral business, just curious if you look at your current users in the coronary, how many of those also do peripheral procedures? And then of those what’s your penetration, i.e. how many of those are using your products in the coronary and in the peripheral?

Scott Huennekens

Yes, that's a lot of detail. And I appreciate the question and I’ll say that year in and year out, it becomes a smaller and smaller number of interventional cardiologists. They become more and more specialized to coronary and peripheral as each factor grows especially on the peripheral side of things. But we do find where you have customers that are comfortable because of your coronary experience with either they are faster to adopt. But, I’ll say that, as I walk through the five procedures we are focused on, they are very different and they are different physicians. Generally, the focus on Triple A the focus on venous disease relative to venous depression and alike. So customer training, education and clinical data is a critical part of our success. It’s not as simple as we would like it to be, okay, they already use it and they know how to use it and they are going over to peripheral. Is that’s the nature of your question?

Danielle Antalffy – Leerink Swann & Company

Yes, I guess, I was just trying to figure out if there is still sort of low hanging fruit. I know we are still actually in early days on peripheral and just speaking about from a current user perspective is there is low hanging fruit within your coronary users to drive easy growth there?

Scott Huennekens

Yes, now there is a lot of low hanging fruit in peripheral. We are still in the very early stages. These are often new procedures, new indications where the physicians are trying to, number one trying to figure out how to, what the therapy should be what the disease is how we should optimize it and how should you figure that out. So, this is going to help you figure that out in the short-term, and then over time, it’s going to become a critical part we believe as the five procedures we talked about and the penetration will continue to escalate with physician education, with clinical data that shows better outcomes reduce cost et cetera.

Danielle Antalffy – Leerink Swann & Company

Okay, that’s really helpful and then one follow-up if I could. There has been some new clinical data on peripheral, particularly Medtronics drug eluting balloon, in the FFA as we see positive clinical data on peripheral in general, how do we think about that potentially impacting IVUS in the peripheral, I’d imagine it would good for us, or is that trying – is that too much of a stretch?

Scott Huennekens

No, I think, it’s like the coronary, right. When coronary was growing 4% 5% procedure-wise, that was very good for imaging. Separately we had to go do the clinical data for each of the indications whether it’s bifurcations or let’s name to these or whatever, but if you have a bigger ocean to swim there is more ground to cover. So it’s the same thing with peripherals. Revenues on peripheral cases is good for us either.

Now, with that said, we still have to go show how, for example we believe there is a strong benefit to using IVUS doing FFA cases to determine when do you use a drug eluting balloon and how effective the drug eluting balloon is going to be, could you dilate in a heavily – you could treat with that atherectomy first and then a drug eluting balloon, determining that and guiding that with the use of IVUS. Those are some of the things that are being done in Europe where there are drug eluting balloon and you see that are going to become part of a care pathway as we move forward?

Danielle Antalffy – Leerink Swann & Company

Okay, thanks so much guys.

Operator

Our next question comes from the line of David Goldman with Goldman Sachs. Your line is open

David Goldman – Goldman Sachs

Thank you. Good afternoon everybody. I wanted to keep going on the peripheral side for a second, Scott, and I just hope if you could talk in a little bit more detail about the type of accounts who are adopting IVUS in the periphery.

And the reason I ask is, just, how should we think about the early adoption in the context of longer term opportunity, because sometimes these types of technologies obviously you get an early bolus of academic or sort of high-end users with the technology and they sort of petering out after that. But maybe if you could just anecdotally talked about the customers who you’ve seen adopt the technology and what you’ve seen in sort of either reorder rates or same-store growth?

Scott Huennekens

Yes, so, David, great question, and again we are talking about five indications. So there is no one answer but across the board we consistently continue to see reorder rates grow and as well as new account or new store growth and lots of room to continue and there is no leaning towards academic centers or high volume centers or outpatient centers that are more – let’s say profit-oriented or physician offices, we are getting a little bit of all of that.

And if you look at each of these in a little bit different stage of development. If you talk about FFA, we are doing FFAs where everybody else from pet genetics to CSI are doing those same procedures.

Triple A those are hospital-based, we’ve been doing Triple As for five plus years and we are steadily seeing the 1%, 1.5% increases in penetration per year now up to about 10% of cases. Our PVS 5 with new markers in a year ago, help kind of boost that. We got some additional product enhancements over the next 18 months which we think we will continue to enhance it.

Venous is a new area. Venous is a new exciting area across the board in interventional and that doesn’t work well for diagnosing where the disease is, the size of the vessel, et cetera in order to place those stents.

So we work hand in hand with the stent companies that are selling stents into that indication today and are growing the market nicely that in-hospital. So that’s a little bit of a flavor.

David Goldman- Goldman Sachs

That's really helpful perspective. Thank you. And then for John. You walked us through the gross margin progression through the balance of the year and I am assuming a dip in the third quarter to start to doing with that being a low volume quarter for revenues and I guess firstly, is that a correct characterization?

And then secondly, could you maybe just update us on how to think about the progression of gross margins once you are fully moved into the Costa Rica facility, because I know those numbers have changed given how FX rates have moved over the past couple years?

Scott Huennekens

Yes, so, we have pretty good visibility into the gross margin right now because we are carrying those variances on our book and as the inventory turns, those variances turn with them.

And, so that's what gives me some, again, some good clarity in terms of how it’s going to be impacting the total gross margin line and then as I mentioned, we expect to finish the fourth quarter in kind of the 65% range and then I think next year, if you think about our total gross margin for this year, in kind of a 64% to 64.5% range.

I think next year we should easily see about 150 basis point improvement in gross margin and then a year after that, easily another 150 basis point improvement as well. And so we are really targeting something in the 67% to 68% range within 24 months of being completely out of range.

David Goldman- Goldman Sachs

Okay, and then maybe just a quick one on the guidance for the ramp for the balance of the year. It sounds like your census are really predicated on your own new product success rather than any type of change in end-markets or macroeconomic factors, is that the right way to think about it?

John Dahldorf

Yes, the macroeconomic factors are still pretty consistent from what we discussed last quarter.

David Goldman- Goldman Sachs

Okay, thanks so much.

Operator

Our next question comes from the line of Mike Matson with Needham & Company. Your line is open

Mike Matson – Needham & Company

Hi, thanks for taking my question. I guess, I was just wondering, with regard to the IVC Filter, the Crux product and just more broadly as you get into more therapeutic devices in the peripheral area, to what degree do you think these are really physician preference items where the physicians really calling to shots versus once where the hospital maybe has a contract with one of the bigger companies, physicians are really steered toward the products or just it happened to be on contracts?

John Dahldorf

Yes, that's a very fair question and the market continues to move and more towards being on-contracts, IDNs et cetera, et cetera. But with that said, there are exceptions for differentiated special products and Crux is like that because with an IVUS catheter and getting a bedside indication, you don’t have to take the patient to the cath lab, or it’s bidirectional retrieval.

So there is a patient population that you need Crux for vis-à-vis the other products on the market. So most hospitals are stocking a minimum two different IVC filters to cover all patient sizes and indications. So, that hasn’t been an issue that we have been facing, it’s just been more of the time of getting through the hospital approval process to trial new products and then get the initial evaluations and orders.

Mike Matson – Needham & Company

Okay, and then I guess, it looks like your console sales in the U.S. were down quite a bit and I guess that's an area where you move some of the ales people or I guess maybe you got rid of some sales people but I think the number went down is that byproduct to that or was there something else going on?

John Dahldorf

No there is really something else going on. We had a pretty tough comp versus last year. We had a number of deals that really got moved out of the Q4 2012 into the beginning of 2013. We didn’t had that same experience at the end of 2013. But that’s really kind of what the impact there was.

Scott Huennekens

Yes, we didn’t lose any sales people. So, if we had 37 catheter reps and we have 30 now. Those seven just moved over in a coronary rep role. So, they still in Q1 were compensated and work towards selling any catheter they are working on.

John Dahldorf

Yes, I might add Mike that the Q1 console revenue not only in the U.S. but across all the geographies, it was pretty consistent with our internal projections.

Mike Matson – Needham & Company

All right. That’s all I have thank you.

Operator

Our next question comes from the line of Jason Bedford with Raymond James. Your line is open.

Jason Bedford – Raymond James

Good evening and thanks for taking the questions. Just a couple quick ones and I apologize if I missed this. But within IVUS, is Pioneer all in the U.S. bucket?

John Dahldorf

To the extent that our sales in the U.S., yes, we do have some pioneer sales in Europe as well very, very small amount. But yes, they are embedded in the IVUS disposable number.

Jason Bedford – Raymond James

Right, what was the contribution from Pioneer in the quarter?

John Dahldorf

Almost $2 million.

Jason Bedford – Raymond James

Okay, and then, as a percentage of U.S. IVUS, what was peripheral in the quarter?

John Dahldorf

Peripheral is about 20%.

Jason Bedford – Raymond James

Okay, and then just jumping over to the U.S. FFR business, flattish results here in the first quarter. How fast do you expect to grow the U.S. business this year and is IFR a meaningful driver in 2014? Thanks.

John Dahldorf

Yes, so, I mean IFR and Verrata are meaningful drivers along with the focused sales force just I kind of talked about and we expect total revenue growth for the year to be in the 7% to 8% range.

Jason Bedford – Raymond James

Thank you.

Operator

Our next question comes from the line of Bruce Nudell with Credit Suisse. Your line is open.

Bruce Nudell – Credit Suisse

Good afternoon. Thanks for taking the call. Gents, by major geography, what would you say the underlying FFR market growth was U.S. if I guess?

John Dahldorf

Yes, so, in total, it was in the mid-teens. And I would say that in Japan it was probably more towards the higher teens. I would say that Europe was in the mid-teens and the U.S. was in the low teens.

Bruce Nudell – Credit Suisse

Okay great. And just another question on IFR, you know a multi-point question. Basically, price point, savings was then seen that you could kind of partially recoup I guess, or it takes for yourselves and the usage in Europe and Asia, is it expanding that and in the setting of ACS FFR – gives ambiguous answers, 30% at the time or something and so is there any left with having to get a good answer let’s say or non-ambiguous answer, how the clinicians juggle that question and patients and whom since early are not indicated?

Scott Huennekens

Yes, so on the first question on cost, again it depend on geography in the cost of identifying. But it can be, in the U.S., it’s going to be closer to $200, at some geographies it’s below $100, other geographies, it’s closer to $200. So, today, if you look at third-party data our pricing is slightly higher than St. Jude’s pricing and we’d expect to continue to maintain a price premium versus St. Jude.

And by maintaining a price premium, the customer overall will be in a net lower cost position using our FFR is the thought. So, as it relates to ECS patients, we are not talking about giving or doing ECS patients in the corporate vessel, it’s the non-corporate vessel. This is still work that’s being done in clinical trials. I wouldn’t say that it’s a growth area during 2014, it’s not a growth area in 2015 and beyond based upon the clinical data that we generate.

Bruce Nudell – Credit Suisse

Thanks, so much.

Operator

Our next question comes from the line of Joanne Wuensch, with BMO Capital Markets. Your line is open.

Joanne Wuensch – BMO Capital Markets

Hi, thank you for taking the questions. I think I heard you say that Pioneer Plus added about $2 million into IVUS, how much did Crux and the other acquisitions if there was another acquisition add all in for the quarter?

John Dahldorf

Yes, I would say that, it wasn’t a significant amount.

Joanne Wuensch – BMO Capital Markets

The total acquisition revenue was about $3 million we’ll call it?

John Dahldorf

No, no, just I would say, it’s slightly over $2 million.

Joanne Wuensch – BMO Capital Markets

Okay and one of the things which when you are shutting down some of the research and development projects, I anticipate it, would that be R&D as a percentage of revenues would be coming down, It did come down on a dollar basis. How should we think about that for the rest of the year?

John Dahldorf

I think, again, I’ll take you back to our comments, last quarter I think that we’re probably going to be in the 13% to 14% range versus the 17% to 18% range that we were last year.

Joanne Wuensch – BMO Capital Markets

For the full year of the remaining quarters?

John Dahldorf

For the full year.

Joanne Wuensch – BMO Capital Markets

Okay and just – my last question is you still have a fair amount of cash on the balance sheet. How should we think about you using that for the remainder, for the next several quarters?

John Dahldorf

So, as both Scott and I mentioned in our prepared comments, I mean, we do have a pretty disciplined capital allocation process in place and we are always evaluating licensing and acquisition opportunities versus shareholder return.

Joanne Wuensch – BMO Capital Markets

Okay, thank you very much.

Operator

Our next question comes from the line of Imron Zafar with Jefferies. Your line is open

Imron Zafar – Jefferies & Co

Hey, good afternoon. Thank you for taking my question. I wanted to actually first expand upon Joanne’s question about OpEx. As you look to the outer years, beyond 2014 you talked about revenue acceleration to 9% to 11% range. How do you see operating expenses growing relative to that and in terms of the ability to get some leverage on the OpEx side?

John Dahldorf

Yes, so, I mean, we don’t – we don’t model and we don’t anticipate operating expenses growing faster than revenues. We actually see it growing significantly less than revenues and so with the gross margin expansion that we expect to get out of Costa Rica and the operating expense that I think will demonstrate as we go through this year and then into 2015 when we are out in the 2018, 2019 timeframe, we expect to have operating margins in the mid to high teens.

Imron Zafar – Jefferies & Co

Okay, and then a quick question on IFR, do you have any metrics to help us understand where you are in your development in terms of commercialization? What percentage of your installed base is IFR enabled? And then also talk about some of the gating factors logistically beyond just simple data et cetera in terms of the install base getting software upgrades and maybe some training on some of the launches versus FFR. Just help us better understand what the commercialization actually looks like in the U.S.?

John Dahldorf

Yes, that's something that we need to think about. We are very sensitive to the competitive response to IFR and at this point in our market launches in Japan and in Europe, we are just reluctant to kind of share, that detail of information with you. So, it’s something that we are going to have to think about as we go forward.

Scott Huennekens

Yes, I would suggest you are just going to have rely in the short-term on our FFR market share and our FFR disposable growth.

Imron Zafar – Jefferies & Co

Okay, and then on the FFR market, you’ve acknowledged some share loss in the U.S. from the sales force disruption. Do you have a sense of what the overall market in terms of maybe trying to quantify the impact of that?

John Dahldorf

The FFR market?

Imron Zafar – Jefferies & Co

Yes, and then…

John Dahldorf

So, I believe the US market grew in the low teens.

Imron Zafar – Jefferies & Co

Okay, and then, so still think that there is …

Scott Huennekens

As John stated earlier, and we were flat, so, we lost share correspondingly based upon little bit of share as we talked about little bit on sales force disruption as well as not having brought in FFR that we have in other geographies that are gaining share.

Imron Zafar – Jefferies & Co

Okay, so you still think that 10% growth for the year in FFR is achievable?

Scott Huennekens

I think, John said earlier, U.S. growth, I think when he was answer Joanne, it was…

John Dahldorf

And 7% to 8% range.

Imron Zafar – Jefferies & Co

I am sorry, I missed that. Okay, thank you very much.

John Dahldorf

It’s okay.

Operator

Our next question comes from the line of Ben Andrew with William Blair. Your line is open.

Ben Andrew – William Blair

Hi, guys. Thanks, just a quick question for you. And I have – just doesn’t come off – but how significant a factor has competitive pricing been because as we have seen the share loss now against the competitor who arguably has a less complete portfolio, and so as you make the product more complete and with more features why would that necessarily reverse the trend?

Because we build the consoles more on the disposable side, why shouldn’t we be here in six, nine, twelve months? And given the reasons in terms of the product changes but why wouldn’t we expect the competitor continue to be aggressive even at all our price point continue to hold and take share thereon?

Scott Huennekens

Well, I think where you see that we have our product portfolio, we’ve gained share. The only place we haven’t gained share was in the U.S. where we didn’t have our differentiated product. IFR and Verrata. And so, I think that you gave the answer.

Maybe I am not understanding the question. We’ve had a market with FFR which St. Jude were previously already was the market share leader with 65%, 70% share in over the last two to three years, we took share and grew it to over 30% and became the leader for about a year.

Now, we’ve probably slipped back four, five percentage points, going through a product cycle where they on their product cycle and then we will be on our product cycle. So, they – price shouldn’t be that much of a factor. Our prices are fairly similar that are little bit lower than we are.

We are not going to be a price leader. We think that it’s the wrong strategy to lower price. There is only one way to go, you lower price then you end up with lower prices forever. You can’t raise prices in today’s market.

So, in a duopoly with some minor entrants like – or whatever entering the market, you have Boston coming next year. We think having and maintaining our price and losing a little share is the right answer and then address that when we have your new products Verrata and IFR to gain share.

Ben Andrew – William Blair

Sure, that's what I am worried about.

Scott Huennekens

We made the conscious decision, we made that conscious decision in the past with Boston Scientific on the either side, where we let them have share, if they want to give away product, because we in the end, we are going to do better by having the differentiated products. There may be quarters or two quarters here or there but you may lose share but we are in this for the long run.

Ben Andrew – William Blair

Sure, and I think that the issue, Scott, for me is really that there is the market penetration grows and there is still a lot of room to go, but we are getting incremental competition, the value proposition of the differentiation is probably becoming less. And…

Scott Huennekens

No, it’s becoming more. You got a $200 cost savings on product that sells in the high $100. That's a huge difference.

John Dahldorf

Well and you got to provide a wire that you are going to have the therapeutic devices on as well. I mean, so.

Scott Huennekens

Right, that's our – that's what we are winning with in Japan and in Europe. And I felt very comfortable with the win rate effectively in the U.S.

Ben Andrew – William Blair

Okay, that’s it. Thanks.

Scott Huennekens

St. Jude is a very, very good competitor. They have very good products and I think it’s going to be very hard for the new entrants to compete with Volcano and St. Jude based upon that.

Operator

Our next question comes from the line of Steven Lichtman with Oppenheimer And Company. Your line is open

Steven Lichtman – Oppenheimer

Thanks, hi guys and just could you sort of tie-up I think what you are saying at the end there Scott is, with IFR, you are providing a price savings through – that’s how, and does that sort of how you see it, not only from a new feature but from a cost savings as well?

Scott Huennekens

Correct. If we sold our wire at the same price as St. Jude, the net cost to the hospital is lower with IFR.

Steven Lichtman – Oppenheimer

Okay. And then, Scott, just on IFR in terms of – obviously your first goal is going to be from a market share perspective here in the U.S. but can you talk a little bit about market expansion potential, I think earlier you talk a little bit about some new data presentations that it could be made to sort of educate those who are not using FFR as to why IFR might be the right choice because it’s simpler to use?

Scott Huennekens

Yes, so just to clarify on your first point as well, our target is market share, but not necessarily by going and taking St. Jude accounts. It’s by solidifying our own accounts and growing penetration in those accounts. FFR is completely underpenetrated at the mid-teens when the data supports more than 40% penetration.

So, as I described earlier, we don’t need to go convert St. Jude accounts to grow our FFR business 7% to 8% between now and the end of the year. We are going to drive penetration in gain in our existing business. Sure, there will be other opportunities to take account as well, but we want to make the market bigger and for us as we make that market bigger, to have that share.

So that's number one. And then number two is, it makes our portfolio more competitive to go take share from a Boston integrated account or a St. Jude FFR account.

I am sorry, the second part of your question was?

Steven Lichtman – Oppenheimer

Just on – in terms educating those that aren’t actually using FFR in general and why IFR makes it simpler

Scott Huennekens

Yes, exactly. It just makes it simpler, faster and easier to use.

Steven Lichtman – Oppenheimer

Okay and so, you mentioned earlier that we will hear more in the second quarter call about some more data presentations on that front?

Scott Huennekens

Data presentations as well as our customer education programs and market growth plans. So it was all part of our comprehensive IFR U.S. market launch package.

Steven Lichtman – Oppenheimer

Okay and then just lastly on, Scott, you mentioned about PCIs it may be showing some stabilization so you are maintaining your guidance. Can you talk a little bit more about. What do you mean by that and in terms of what you are seeing in the field in U.S. and in Japan?

Scott Huennekens

Yes, so, I would say that that things are generally in line with our expectations, maybe a little bit favorable in Japan versus our projections and talking with Medtronics or Abbott’s and others of the world, everyone seems to be a little more optimistic that there maybe things won't be as bad as we thought they would be from a decline in share.

But as we said in our prepared statement, that’s what we are planning for is what we projected. Even though we might be a little – I think the positive for me from the first quarter is, PCIs were in line with our expectations to slightly better than Japan.

So that’s a step in the right direction, vis-à-vis the last 24 to 36 months where things have been worse at times and Japan reimbursement declines were in line to slightly better than what we are expecting. So those are nice kind of macro factors that we can take off of the table as being headwind hopefully.

Steven Lichtman – Oppenheimer

Okay, got it. Thanks, Scott.

Operator

Our next question comes from the line of Jason Mills with Canaccord Genuity. Your line is open

Jason Mills – Canaccord Genuity

Thanks guys maybe you should have call in Friday afternoon. Every quarter you are getting such a great participation here. Scott, on the IFR side, speaking with that data front, could you talk about, perhaps, more that you would like to talk about.

But the time flair and the – but the IFR Sweetheart studies, when they could be carried out or what we should be looking for from those data that will read positively for IFR. I am assuming if it reads that IFR is just good as FFR it would be a boon for you. Well, I ask a second question if I could just, specifics about those two trials if you could.

Scott Huennekens

Yes, Jason, thank you for the question. Even without those two, John, I think it will be beneficial to send all of our analysts Joe’s summary for the training that’s taken place this week.

There is already, now I believe nine papers between IFR, FFR nuclear IFR and FFR that show relative equivalency. There is only one paper relative to anything to do with identifying pre-FFR which was a different algorithm not ours, that didn’t show non-inferiorities so to speak.

So, we have that. It’s a very, very strong data with upper to 4,000, 5000 patients of data at this point in time. So we feel very comfortable with where we are. The FDA was very complementary relative to our approval. That’s why it happened a quarter early. So, with that said, we have additional studies that expand the data sets with defined flow and flair and sweetheart as well.

So, I think it will be easy and interest time just to – I already feel bad enough that we’ve kept you guys on Friday as it is we can get that information out to you, Jason and to all the analysts on the call. This has been asked have two or three times, so let’s just send it in detail.

Jason Mills – Canaccord Genuity

Okay, the reason I ask you about is, the sort of days, it’s for defined flair or IFR sweetheart, perhaps I am reading correctly, but in the analysis you sort of referred to – does it not essentially, so IFR is – is it – whether you need to do FFR whereas really expand the market is IFR will indication not needing FFR?

Scott Huennekens

This starts to get into an argument, what should be the gold standard? And if you say, FFR should be the gold standard, then we can make the argument that you just made. If you say nuclear is the gold standard, then IFR is superior to FFR from a couple of different datasets.

So, we are getting to the point where we can make the argument, the decision is based upon the dataset around. It’s a mass problem, it’s not a technology problem. When you already have one set of data that you are arguing again, and I don’t want to get into complications of statistics on an earnings call, but we can share that data with you.

I think what you are seeing in the marketplace is that, over time for example in Europe, people are accepting that as the case and they just start to utilize it in that way and let the key opinion leaders and alike which are the right people with Justin Davis, have the academic arguments and push to get to the right solution. If you rely on flow, which everybody could argue is the gold standard, then again, IFR is equal to superior we believe to FFR.

Jason Mills – Canaccord Genuity

I am guessing people like to talk about IFR for another 30 minutes on the Friday afternoon. I know, I would,, but I’ll say so. So I can ask more questions, it is interesting that it is a positive upside here. Thanks guys.

Scott Huennekens

All right, thank you Jason,

Operator

I am not showing any further questions at this time, I would like to turn the call back over to Mr. Huennekens for closing remarks.

Scott Huennekens

All right, well, thank you guys again and we apologize again for the Friday afternoon. It won't happen again. It’s our strong hope we unfortunately had trips. We had to take to Europe next week and other travel this week. John, as it interfered any ability to do something together. So, Thanks for bearing with us. We appreciate it. We look forward to seeing you at one of the upcoming meetings like PCR et cetera. So, thanks again and have a great weekend.

Operator

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may all disconnect. Everyone have a good day.

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