LeMaitre Vascular's (LMAT) CEO George LeMaitre on Q2 2016 Results - Earnings Call Transcript

| About: LeMaitre Vascular, (LMAT)

LeMaitre Vascular, Inc. (NASDAQ:LMAT)

Q2 2016 Earnings Conference Call

July 27, 2016, 5:00 PM ET

Executives

JJ Pellegrino - Chief Financial Officer

George LeMaitre - Chairman & Chief Executive Officer

Dave Roberts - President

Analysts

Chris Lewis - ROTH Capital Partners

Drew Ranieri - Stifel

Jeff Chu - Canaccord Genuity

Larry Haimovitch - HMTC

Mike Petusky - Barrington Research

Jan Wald - Benchmark Company

Operator

Welcome to the LeMaitre Vascular Q2 2016 Financial Results Conference Call. As a reminder, today's call is being recorded. At this time, I would like to turn the call over to Mr. JJ Pellegrino, Chief Financial Officer of LeMaitre Vascular. Please go ahead sir.

JJ Pellegrino

Thank you, Michelle. Good afternoon and thank you for joining us on our Q2 2016 conference call. Joining me on today's call is our Chairman and CEO, George LeMaitre and our President, Dave Roberts.

Before we begin, I'll read our Safe Harbor statement. Today, we will make some forward-looking statements, the accuracy of which is subject to risks and uncertainties. Wherever possible, we will try to identify those forward-looking statements by using words such as believe, expect, anticipate, pursue, forecast and similar expressions. Our forward-looking statements are based on our estimates and assumptions as of today, July 27, 2016 and should not be relied upon as representing our estimates or views on any subsequent date.

Please refer to the cautionary statement regarding forward-looking information and the Risk Factors in our most recent 10-K and subsequent SEC filings including disclosure of the factors that could cause results to differ materially from those expressed or implied.

During this call we will discuss non-GAAP financial measures, which include organic sales and growth numbers, as well as EBITDA. A reconciliation of GAAP to non-GAAP measures discussed in this call is contained in the associated press release and is available in the Investor Relations section of our website, www.lemaitre.com.

I'll now turn the call over to George LeMaitre.

George LeMaitre

Thanks JJ. Q2 2016 was a very productive quarter. I'll focus on three headlines. First, we posted several records in Q2 2016. Second, XenoSure grew 36% in Q2 and will likely benefit from a competitor back order in Q3. And third, International sales continue to drive our growth.

As to our first headlines, in Q2 2016, we posted several financial records. Record sales of $22.4 million, up 13%, record EBITDA of $4.8 million, up 30%, record EBITDA margin or 21%, record operating income of $3.8 million, up 35%, record net income of $2.6 million, up 47%, and record EPS of $0.14 per diluted share, up 40%.

As for our second headline, XenoSure biologic patch continues to drive growth, up 36% in Q2 to a record $4.3 million. XenoSure growth was strong in all geographies with the Americas coming in at 36% and International operations up 35%. XenoSure growth in Q2 occurred largely independent of the Baxter backorder discussed in the press release, as only four selling days at the end of June were affected.

Growth of XenoSure in Q2 without the Baxter backorder was 26%. LeMaitre continues to increase its market share in the $70 million patch market because of XenoSure’s nice match with our growing sales channel and surgeons increasing desire to use biologics. More broadly LeMaitre’s entire biologic portfolio, including the Omniflow graft and the recently acquired ProCol graft accounted for over 25% of our total sales in Q2. This is a high watermark, up from 21% a year ago.

As you may know, on June 24 a safety alert was issued by Baxter Healthcare Corporation, requesting a U.S. Hospital to discontinue the use of certain lots of its Vascu-Guard peripheral biologic patches. This safety alert has since spread to the UK, Germany, Italy, Korea and other International markets. And we have continued to experience higher than normal XenoSure patch sales in July.

For the purposes of guidance, we assume that the competitor’s safety alert will be resolved on September 30 and that we will benefit from incremental XenoSure sales of $1.25 million in Q3 and $500,000 in Q4. Of course I would be remiss not to mention the valvulotomes continue robust sales growth. Q2 2016 was the record valvulotomes quarter with sales growth of 14%. Valvulotomes growth over the last two years was largely a result of the introduction of the HYDRO. This transition is nearly complete.

As for our third headline, our growth continues to be driven by our international operations, which were up 22% in Q2 and 16% a year over the past five years. Over this period, we’ve added products via acquisition and development and we’ve opened sales offices in Madrid, Toronto, Melbourne, and Shanghai. Over the same timeframe, we increased international sales rep headcount by 65% from 28% to 46%.

In H2 of 2016, we expect to enroll our first patient in the XenoSure, China clinical trial and to make our application to the Australian health authorities for the approval of XenoSure. International sales accounted for 41% of our sales in Q2 2016, as compared to 38% in the year earlier quarter. I will now turn the call over to JJ Pellegrino.

JJ Pellegrino

Thanks George. I will focus on four topics. Our gross margin, cash balances, share buyback program and guidance. Q2 2016 gross margin was 68.6%, up 260 basis points from the prior year. The improvement was driven in large part by reduced manufacturing costs of XenoSure and HYDRO, as well as increased average selling prices. We expect the gross margin to rebound to 72% in Q3 2016 and 70.5% for the full year 2016 as cost reductions in XenoSure and the HYDRO continue to take hold.

Our cash balance was $29.3 million at June 30, 2016, an increase of $3.4 million in the quarter. The increase was a result of strong operating results and proceeds from employee stock option exercises. Of note, cash increased significantly despite dividend payments of $1.7 million and cash taxes of $1.2 million in the quarter. Given our strong balance sheet and cash generating ability, it is worth touching briefly on our capital allocation strategy and then saying a few words about our recently approved share repurchase program.

As many of you know, we strive to increase profits 20% per year, which have been used to buy companies and pay dividends. And on July 25, our board approved a $5 million share repurchase program. In part to reduce the dilutive effects of our stock based compensation program. Share repurchases are not entirely new at LeMaitre and you may recall that from 2009 to 2013 we have repurchased $6.5 million of stock at an average price of $5.85 per share.

We do not expect the current program to affect our ability to execute acquisitions indeed with $15.9 million of guided 2016 operating income. We are well positioned to use cash as well as debt for any future acquisitions.

Turning to guidance, the company expects Q3 2016 sales of $22.2 million, an increase over the prior year of 17% on a reported basis and 17% organically. The company also expects Q3 2016 gross margins of 72% and operating income of $4.3 million, an increase of 29%. For the full year 2016, the company expects sales of $88.3 million, an increase over the prior year of 13% on a reported basis and 12% organically.

Company also expects full year 2016 gross margin of 70.5% and operating income of $15.9 million, an increase of 38%. Before opening the call up to Q&A, I would like to remind listeners that LeMaitre Vascular will be presenting at a number of upcoming conferences, including Canaccord in August, Three Part Midwest in August, Barrington in September, and Dougherty in September.

With that I’ll turn the call back over to the operator for Q&A.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Chris Lewis of ROTH Capital Partners. Your line is open.

Chris Lewis

Hi good afternoon guys, thanks for taking the questions.

JJ Pellegrino

Hi, Chris.

George LeMaitre

Hi, Chris.

Chris Lewis

Just wanted to start on the Baxter Safety Alert, I was hoping you could just spend a minute elaborating on kind of what you’ve seen since that alert came out and I guess how many new customers have you added and I guess, you kind of, your assumption that it ends on September 30, I guess what does that mean exactly and are you assuming those customers to convert back or do you think it’s reasonable that you could retain some of those potentially new customers.

George LeMaitre

Hi Chris, it’s George. Thanks for the question. Of course we knew this issue would attract some interest. So, I’m going to start backwards, you asked a bunch of questions. In terms of what we will retain, so we just made an educated guess that this thing would end at September 30, of course there is a lot of things going on inside some Baxter building somewhere that you know that none of us are pretty too, and so we are trying to put all the hints and corridor conversations that our reps are having in hallways in hospitals.

Together to get you a guess and our guess is hey it’s probably going to last till September 30, further more we’re going guess that for Q4 maybe we retain 40% of that business. So, if this is something that’s really hard to put a number on and we’re doing our best to do it and that’s the best that we can do for you guys is 1.25 in Q3 of additional Baxter related XenoSure sales and then the tail of that being 40% of those customers stick around for $500,000 of revenue in Q4. I hope I got to a bunch of your questions.

Chris Lewis

Yeah, appreciate it. And you talked about the incremental kind of impact of revenues, I guess two part question, first is that kind of mix between the U.S. and OUS and can you potentially break that out and then second what type of impact will that have in terms of profitability?

George LeMaitre

Right. So, until now there has been almost no impact overseas. Any impact that’s happened has been in the US, but because we’ve seen these safety alerts go up at the various health authorities, we're guessing that there will be some impact overseas, so I wouldn't break that 1.5 out. Again, this is a funny thing they have to guide on if you don’t know, we don't have any information on what's going on inside their building. So, I wouldn't try to break that out US, International. I would just say it seems like 1.5 worldwide and what was your second question?

JJ Pellegrino

Bottom line effect.

George LeMaitre

Yes, bottom line effect….

Chris Lewis

In terms of profitability…

George LeMaitre

Maybe, I would let JJ do that. We have been thinking and talking about that.

JJ Pellegrino

So Chris as George was saying we're thinking maybe 1.75 million in total in revenue. I think the bottom line is we get to about a 50% contribution on it at the end of the day, maybe it’s a 70%, mid-70s, 80% margin and then you've got to pay commissions and then on top of that we’re gearing up here for extra units and in a bunch of different places customer service and in warehouse and shipping and then the manufacturing room as well in other areas. So, I'm going to say about half of that probably goes to the bottom line.

Chris Lewis

Great, appreciate it and then switching over to just International you know that continues to be just a nice significant growth driver for you, understood, you’ve obviously added some resources in terms of new sales reps over there, are there any other kind of growth drivers that we should think about for that business, you continue to outperform and I’m just hoping to get a little bit more color on where that’s coming from? Thanks.

George LeMaitre

Right and so at its root the question is why do we continue to do well internationally, is that right?

Chris Lewis

Exactly

George LeMaitre

Okay. So, I think one thing to keep in mind is that the two big pieces of the business that are growing really well for us right now are XenoSure and valvulotomes. They happen to be over represented in the international, let’s call Europe portfolio and Europe is not bogged down to a certain extent by some of the lower, slower growing product lines that the U.S. has to handle cholangiogram specifically in Carotid Shunts and also VascuTape. The business in Europe for those three items is fairly small versus the U.S. and therefore when XenoSure and the valvulotomes move ahead they are not bogged down by the other items, which I just talked about. There is a big piece of this.

Another piece of it is, we really did get started with XenoSure about two years later in Europe, and so accepting out this current quarter in general XenoSure is growing faster over year in Europe then it is in the United States because we started a little bit later there and then I’d point to the reps, which is, if you look at reps in the US and Canada we went from 41 last Q2 to 45, that’s a growth of 4 reps with a denominator of 40. In Europe, we had a growth of five reps with a denominator of 31. And so on the margin and we are growing percentage wise faster in Europe with all these offices and also some of them are just virgin territory that we're going into. You know we went into New Zealand recently, notably Finland.

There are places where we effectively had zero sales and there are no Finland's and New Zealand’s left in the United States, where there are effectively zero sales. So, I would say a combination of all those things means, if I where to look ahead in this business I’d put my money on international operations growing faster than American operations.

Chris Lewis

Great, and just one more from me, if I could, in terms of operating margins if you look at the business over the past 2 years to 3 years, you’ve done a great job of really expanding the operating margins from kind of the single digit now here in the 19% implied in the back half of this year. I understand there is some Baxter tailwind in those quarters for the remainder of this year, but longer-term where do you think operating margins can expand to? Thanks.

JJ Pellegrino

Thanks for the question Chris. So, I mean we don't guide on this obviously but I think directionally, we sort of frame it with our larger peers sort of in the mid-20s or so and our more direct peers generally losing money on lower margins, not all, but many. And so, yes, I think you’ve accurately portrayed us sort of moving into the mid to high-teens, high-teens more recently.

I would say, you can probably expect to get some more directionally leverage in the selling and marketing line, as we build out local geographies with a little bit more sales, maybe layering some acquisitions on top of those smaller local geographies and leverage the fixed cost there over more sales.

G&A, certainly, you want to get a little bit of leverage there. You don’t need another CEO, CFO or President, as you grow. But R&D, you might get negative leverage, Chris, as we try and invest a little bit more in R&D going forward. I think we’ve been down around 7% or so recently, and that feels a little bit light to us probably going forward, we like to be able to invest more there.

So, I would say, there is room for more leverage, I can't quantify that for you now. But I do feel like the guiding principle of 10%, 20%, 10% top line growth and 20% bottom line growth can help you sort of divine that answer going forward.

Chris Lewis

Okay. Congrats on a quarter.

JJ Pellegrino

Thanks, Chris.

Operator

Our next question comes from Rick Wise of Stifel. Your line is open.

Drew Ranieri

Hi, guys, it’s Drew Ranieri in for Rick, and congratulations on, another record quarter. And just to start, you’ve talked about biologics being the future growth engine for LeMaitre and becoming a greater portion of your overall revenue, surpassing valvulotomes. And just as you look over the next three years, I mean, where do you see your biologics exposure going to? And XenoSure, ProCol, Omniflow are these products going to get you there, or do you need to expand their labels or acquire additional patches or grafts?

Dave Roberts

Drew, it’s Dave Roberts, thanks for the question. We certainly believe there are more opportunities for further penetration with XenoSure. We’re living through that right now, of course. And the other two biologic products we have in our bag currently; one we acquired just two years ago, and one we acquired four months ago. And so I’d say, it’s still early days with those products.

So, certainly, I think we have three horses that we can ride and generate more sales to expand biologics within LeMaitre over time. But clearly, there are other biologic products that the company does not currently have that we would like to. For example, that our large diameter biologic graft that we don't offer. Our U.S. sales force does not have a ProCol graft because ProCol is only indicated for dialysis act.

On the patch side, we don't have a de-cellularized patch. So there are plenty of examples of other biologics that we would like to go out and hunt for from an acquisition standpoint and you can rest assure, we’re doing that. And then with respect to our R&D operation filling in, SKUs in expanding - SKUs is something that they’re busy doing. So, I think, there’s plenty of opportunities still for us in this space.

Drew Ranieri

Okay, great. Thanks. And just on guidance, you raised overall guidance by about $2.6 million. So part of that, I’m guessing is the incremental XenoSure sales and [indiscernible] be. But just the business seems to be coming along very nicely. I mean, is there anything that you're cautious about going into the back-half of the year?

JJ Pellegrino

Yes. So just to quantify the first part and generally agree with you, the $2.6 million [ph], you think of it as raise, we beat Q1 by about 800,000 and the back to pieces George said was about $1.7 million. The hidden piece of this is foreign exchange when we gave guidance, I think the euro was about 1.14 or so.

So there was about $400,000-plus bad guy from when we gave guidance. And so that sort of goes the other way. So we feel like the raise was $500,000-plus or so. In terms of the back-half of the year, I think the big question mark is the Baxter and backorder piece. And really, we did our best to guesstimate what we think Q3 and Q4 would be about in terms of that. But who knows, you don’t know what’s going to come out of that in terms of an answer over the coming weeks. Otherwise, I think, by and large, I think the business generally along pretty much all product lines we’re feeling pretty good about.

George LeMaitre

And, Drew, just to pile on here a little bit. I look forward to the back-half of the year, because this reps surge that we keep talking about, the 2016 reps surge. Those reps started coming on in Q4 of 2015, Q1 of 2016. We’re now getting a critical math of this reps surge and it does takes some time to gear up and I think by Q4. Now this is all baked in our guidance as far as we know right now.

But I think by Q4, we should be seeing some nice results coming out of those new reps. So, I do think the wins at are back from the reps surge perspective and to-date we’ve just been sitting through all the additional expenses without exactly gaining revenues, and I think going forward you’ll have that with you.

Drew Ranieri

Okay, and George just on the sales reps, are you still targeting 96 by year-end 2016?

George LeMaitre

Yes.

Drew Ranieri

And adding five or six annually for that?

George LeMaitre

Yes, I guess I’m not guiding for this second into 2017, but you’ve seen on our presentation, we’ve given sort of a long-term, yes, we’ll add 5-ish, but yes, specifically 96 for year-end.

Drew Ranieri

Okay. And then just lastly, you did touch on this, but on the share repurchase side, you said that it’s not going to impact your focus on M&A, and Dave, you may just want to talk about this. But can you just give us your updated thoughts on M&A broadly and kind of what your pipeline looks like and valuations that you’re seeing?

Dave Roberts

Sure, it’s a pretty consistent story. The pipeline looks good. I think as you know, we’re trying to look for a little bit larger target, but we remain focused on the vascular surgeon niche markets. We like biologic as know we also like endovascular, I would say endovascular niches.

So and I think been pretty consistent over time, obviously with the cash generation inside the company even with the buyback. I think at this point, we have a good $20 million of dry powder, last 12 months EBITDA is around $17 million, so - and we have no debt. So, from a debt standpoint, we could probably add - you might know the number better than me $40 million or $50 million of debt.

Valuations, of course there’s been a nice sort of run-up in peripheral vascular device company, some of our pears 16%, 18%, 20% of first six months that [indiscernible] has sort of sat on the sidelines of so - and then we’ve seen larger deals, the St. Jude deal and Medtronic HeartWare, we’re seeing take outs of around five times sales, but when we get into the targets that I’m look at, I would say valuations are a little bit more situation depended. So, I don’t necessarily take those market indicators as an exact correlation to the type of multiples that I would pay.

Drew Ranieri

Okay, thanks guys. I’ll hop back in queue.

Dave Roberts

Thank you.

Operator

[Operator Instructions] Our next question comes from Jason Mills of Canaccord Genuity. Your line is open.

Jeff Chu

Hi, good afternoon. This is actually Jeff Chu filling in for Jason. George congrats on another solid print, just a couple of quick questions from me, number one on gross margin. Maintained your guidance at 70.5% with - if I recall the improvement driven by HYDRO and cost reductions. Wonder, if you could comment on your progress with the protocol, understood you were initially in the 30% to 35% range and I was curious on the progress there?

George LeMaitre

Yes, so ProCol the issue there is not necessarily the actual current cost of manufacturing. It’s more about purchase accounting that brought it down to 30%, I think for the first eight months or so. So, we’re going to experience that for a while. I think it was like a 0.5 or 0.6 hit to the margin in the quarter, and we’ll feel that for a little bit of - for a little while longer and I think will probably wind up in the 60% range to start and then hopefully we can improve that from there. But that’s a temporary phenomenon on that piece.

Jeff Chu

Okay, great. And just to follow-on, on the last question about M&A, you certainly talked about M&A accounting for I think about 2% of your 10% growth plan. But I'm more curious on your internally developed products and I was hoping you could remind us on some of the projects or products that you have in a pipeline that will make up that 8% of that growth?

George LeMaitre

Sure, Jeff, I would be happy to. It’s George again. So, hope to do a first demand by the end of the year for the famous prove it shunt with monitor that we’ve been talking about for a little bit on these calls now. Technically, we’re getting our arms around and overall the issues that we had talked about perhaps six months ago, fulfilling good surround and overall the issues that we had talked about perhaps six months again. So we are feeling good technically and we hope to have first in man - potentially in Canada by the end of this year. So we are feeling good about that project again.

In terms of the XenoSure product line we’re starting to build out some new SKUs I think this is the first time we’ve talked about it on these calls. We will be making what are little tiny blocks called pledgets, they’re just XenoSure cut up into a 1 million little pieces for cardiac surgery.

And we’re also coming out with a couple new shapes and sizes of the patch, some slightly bigger than what we’re selling right now and we’ll see where those go. Those do not come with regulatory hurdle in the United States. And so these will be relatively fast to market maybe even in Q4.

We also have some fixes going on, some nice quality fixes going on with the Trivex machine. There’s 3 or 4 ones that we’ve been trying to get after since we bought that device in 2013. You'll see those in H2 that’s coming out.

And then there's one more - we came out with a long clip about six months ago, the long anastoclip device, and that thing is going quite well. Anastoclip, grew I believe 20% in Q1 and 29% in Q2 and a lot of the growth that’s happening in that category is based on that new product long device, which is a little bit more geared towards neural and science surgeons than to vascular surgeons, nonetheless the category is growing robustly again.

Jeff Chu

Great. Thanks for a color, that’s it from me, I’ll get back in the queue.

George LeMaitre

Thanks a lot Jeff.

Operator

Our next question comes from Larry Haimovitch of HMTC. Your line is open.

Larry Haimovitch

Good afternoon gentlemen I hope you can hear me okay I'm driving and I’m on speaker phone. And I hope you hear me?

George LeMaitre

Yes, we can hear you. It does sound like you’re on a cruise ship Larry, but we’ll take your word for it.

Larry Haimovitch

Oh come on now. I wish I was. So, I have two questions, we are seeing some interesting changes in the reimbursement landscape this year, some different proposals. Have you seen anything yet that could have any impact positive or negative on any of the key procedures that use your products George?

George LeMaitre

No.

Larry Haimovitch

Okay, next question. On China can you give us a bit of an update, I tried to call you’ve been talking a bit about China can you give us an update on your progress getting some of the products approved through the Chinese authority?

George LeMaitre

Okay great so and Larry we did not talk about China yet. So, China we now have five devices approved over there, which accounts for approximately 37% of our worldwide annual revenues. So you can think of us as being one third approved in China. And we started to file for XenoSure we hope we get that approved in 2020. And we also hope to get the PTFE product approved in let’s say two years. So, I would say we just finished the bolus of approval. And then more approvals will come, but they’re going to come somewhat down the road.

So, you have what you have. And now we’re building out the sales force to sell those. And I would say, baring all of this, I would say China operationally going very well in terms of us ticking off the milestones, hiring the sales reps, working on contracts with mass distributors, but I would say buried in all of these numbers even though we had a good Q2 for China.

China is not our leading country right now, it’s longer and harder than I think we expected. It doesn't bother us at the corporate level you can see we posting nice results. But I would say we continue to find that it’s a long complex project we’re a 100% committed to it, because it’s the second largest device market in the world already. I mean it’s just going - growing gangbusters. But we’re definitely new over there and I would say the sales results are middling it best.

Larry Haimovitch

George and how large is China [ph], I don’t know if you want to give a specific number, but is it a seven-figure over a million dollar market for you at this point?

George LeMaitre

I think I’ve quoted this for more than happy to it's about $1 million maybe a little bit less Larry and maybe a year and a half ago it was like $1.2 million for us something like that. So it’s flattish around a $1 million.

Larry Haimovitch

And the issue there is lack of new product approvals, is that what’s keeping you from really growing it George?

George LeMaitre

No I would say fundamentally Larry we bought that Trivex device and it had a nice distribution channel over there and the personnel they’ve had a lot of upheaval at the Chinese distributor, the master distributor and would try to put the pieces together from that turnover of personnel at the master distributor, because a big chunk of our Chinese revenue is Trivex. Everywhere else Trivex is a big player in our world. It’s not more than 4% of our company, but in China it’s a big piece of what we do and we struggle with personnel at the distributor.

Larry Haimovitch

So, one more question on China, I don't think [indiscernible] but however China sounds like given the size of this market that this could become very nice growth market for you, as you walk through these problems, you got the distribution and management and new products approved this could become a major market for you?

George LeMaitre

Yes our success in Japan and Germany is two other very large markets, would point us toward someday we’re going to get great success in China. It’s not coming yet, but we’re very confident and we continue to grow out the operation as still what will succeed.

Larry Haimovitch

Okay great George congrats on the progress and I’ll jump back in the queue.

George LeMaitre

Thanks a million Larry.

Operator

Our next question comes from Mike Petusky of Barrington Research. Your line is open.

Mike Petusky

Good evening guys. I just - really most of my questions were asked and answered, but I never actually heard, what's the current sales rep number?

George LeMaitre

The current at June 30 was 91.

Mike Petusky

And then just a couple of housekeeping, do you guys have the D&A figure for the quarter, as well as the Capex figure for the quarter?

George LeMaitre

G&A in the quarter - say that again Mike sorry, I don't know if you said G&A or D&A?

Mike Petusky

Depreciation and amortization.

George LeMaitre

Yes, in the quarter about $850,000.

Mike Petusky

Okay and Capex.

George LeMaitre

About $525,000.

Mike Petusky

Let me ask one last one, stock comp for the quarter?

George LeMaitre

Yes, sure. Stock comp about $350,000.

Mike Petusky

All right, great. Like I said, most of my questions were asked and answered thanks guys good - really great results. Thanks.

George LeMaitre

Thanks Mike.

Operator

Our next question comes from Jan Wald of Benchmark Company. Your line is open.

Jan Wald

Good afternoon everyone congratulations on the quarter. It was really a good quarter, I guess like Mike most of my questions have been answered, but just wanted to get your feeling for what was, what we have right now is a nice additional income stream for the third quarter that’s sort of waning in the fourth quarter, do we go back to sort of business as usual in the first quarter of 2017 or is there going to be some leveraging you get out of the Baxter Enterprise or was there something like that, So is this a flip on the screen or is it a bit of a change in trajectory from your perspective?

George LeMaitre

So, I can't imagine that looking out into the 2017, I cannot imagine all the business will go away Jan. So, I think this is going to leave some prominent good item at our level on the sales level. I also feel through this process of getting closer to understanding Baxter. I think we are now discovering why we are making such nice inroads against this company and their sales compensation strategy and the attention levels that they pay to this product. So, we are forgetting about exactly this “blip” right now. We are doing fantastic on a real true unit and market share bases against Baxter, but as well against all the other synthetic and some small other biological competitors. So, I think this affirms and continues to let us know we’re in a good place here in this product line and we should continue to steal share from all the competitors and maybe we’ll get something residual from this Baxter thing as well.

Jan Wald

Okay, thank you very much.

George LeMaitre

Thanks a lot Jan.

Operator

There are no further questions. Ladies and gentlemen that concludes today's conference. I would like to thank you for your participation and you may now disconnect. Have a great day.

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