Invuity, Inc. (IVTY) CEO Scott Flora on Q2 2018 Results - Earnings Call Transcript

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About: Invuity (IVTY)
by: SA Transcripts

Invuity, Inc. (NASDAQ:IVTY) Q2 2018 Results Earnings Conference Call August 2, 2018 4:30 PM ET

Executives

Caroline Corner - IR, Westwicke Partners

Scott Flora - Interim CEO

Jim Mackaness - CFO

Analysts

Matt Blackman - Stifel

Richard Newitter - Leerink Partners

Andrew Brackmann - William Blair

Kevin Farshchi - Piper Jaffray

Operator

Good day, ladies and gentlemen, and welcome to the Q2 2018 Invuity, Inc., Earnings Conference Call. At this time, all participations are in a listen only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to introduce your host for today’s conference, Caroline Corner with Westwicke Partners. You may begin.

Caroline Corner

Thank you. Good afternoon, everyone, and thanks for joining us on today’s call.

On the call this afternoon are Interim CEO, Scott Flora; and Chief Financial Officer, Jim Mackaness.

Earlier today, Invuity released financial results for the second quarter and six months ended June 30, 2018. I’d like to remind everyone that comments made by management and responses to questions today, will include forward-looking statements. Those include statements related to Invuity’s future financial and operating results and plans for developing and marketing new products.

Forward-looking statements are based on estimates and assumptions as of today and are subject to risks and uncertainties that may cause results to differ materially from those expressed or implied by those statements, including the risks and uncertainties described in Invuity’s filings with the SEC, the Risk Factors section in its annual report on Form 10-K as well as other risks and uncertainties detailed in subsequent SEC filings. The Company undertakes no obligation to publicly update or revise any forward-looking statements, except as required by law.

With that, I’d like to turn the call over to CEO, Scott Flora. Scott?

Scott Flora

Thank you, Caroline. Good afternoon, and thank you for joining us for our second quarter conference call.

As most of you know, this is my second earnings call as CEO, and I’m pleased to announce that we have already executed on a number of steps aimed at increasing shareholder value. During the quarter, we implemented the internal restructuring we announced on our last quarterly call. And this will result in approximately $6 million reduction in annual operating expense. We’re continuing to look for other opportunities to reduce operating expenses and remain keenly focused on reducing our cash burn, while driving revenue growth.

I also mentioned on the first quarter call that we would complete our strategic work around our go-to-market strategy and portfolio development process. Today, I’d like to share with you an overview of the findings from the strategic evaluation. I’ll also be providing an update on our progress this quarter, including some financial and operational highlights. After that, I’ll turn the call over to Jim for a review of our second quarter financial results.

Turning to the first item. I am pleased to report that we have completed our strategic evaluation. And armed with the findings, we are implementing a new focused, go-to-market and product development strategy. Our evaluation revealed a lack of strategic and organizational alignment in our sales and marketing efforts. In addition, it highlighted our lack of focused execution. The challenge that we face, as many of you know is that our products have broad applicability across many different surgical procedures. And based on my years of experience and running medical device businesses, I am acutely aware of how difficult it is to successfully scale a direct sales force if you have disparate call points.

As we suspected, our analysis showed that our growth has stalled because of our efforts to-date have been too scattered to make the impact we need. Our sales per rep has grown consistently as our portfolio of products has expanded, but it’s not where we needed to be. So, we’ve decided to hone our focus to concentrate our sales and marketing energies on breast and women’s health procedures.

Our new approach has three key elements. First, we are instituting a prescriptive call plan for our direct reps to drive account adoption, leading with fellowship trained breast surgeons. Secondly, we will drive deeper adaption into Tier 1 hospitals across breast, plastics and GYN, using a disciplined approach which includes surgeon education programs, Hidden Scar patient awareness programs, and procedural economic tools. Third, we are collaborating with top academic institutions and societies to enhance breast and urogyn surgeon fellowship training and conduct meaningful clinical studies around patient outcomes and post-surgery patient satisfaction.

So, let me tell you why we are taking this focused sales strategy approach. To start, we’ve been most successful in the breast surgery market to-date. In markets where our reps have focused on breast surgeons, we have observed strong growth, high rates of adoption and account stickiness, usage of a broad range of our products, good productivity, and lower account churn. At Invuity, we are committed to the idea that no woman should suffer after surgery with visible scarring or quality of life issues. And we think our portfolio of products uniquely enables our surgeons to drive the best possible clinical and aesthetic outcomes.

Hospitals and surgeons are keen to use our products to portray themselves as delivering state-of-the-art surgical techniques and promoting patient satisfaction and quality of life after surgery. We think our proprietary marketing platform around Hidden Scar paired with our portfolio of products is truly driving meaningful improvements in outcomes for hospitals, surgeons and patients. As hospitals and surgeons continue to take a more comprehensive approach to surgery including patient satisfaction with surgical outcomes, we are finding that are Hidden Scar marketing program is really resonating across the breast surgery landscape.

We also think this focused strategy provides a great opportunity for us to take next steps with our stage introduction of PhotonVue. The product is scoring highly with surgeons due to ease of use and its nimble form factor which allows it to be moved easily from OR to OR as needed. Therefore, in a few targeted markets, we’ve decided to introduce PhotonVue and test procedural bundling strategies to provide those ease-of-use advantages while also offering the hospital a more cost effective solution.

We are excited about PhotonVue’s potential utility in helping enable breast reconstruction surgery, particularly in the rapidly growing PrePex procedure. We are opportunistic that with PhotonVue in our bag, the combination of all of our products enables us to deliver against the promise of Hidden Scar as well as allowing us to introduce procedural bundling.

For other high-value markets beyond women’s health, we will build out independent distribution efforts. We will be approaching the spine and orthopedic markets this way as well as smaller rural markets and other one-off opportunities. This approach allows us to offer Invuity products into call points where there is significant utility for our product, but where we cannot support a direct sales effort. We’ve already hired a Head of Distribution for Orthopedics to turn this plan into reality. We’ll also be continuing to use distributors to approach international markets and now have partners in Japan, UK and Australia where we are in the early stages of commercial launch. I believe these efforts will allow us to achieve our goal of doubling our revenues over the next three years.

In line with our go-to-market strategy, our product development efforts will now be focused on listening to the voice of our customers to find opportunities within women’s health surgeries that would benefit from a new product innovation. We are leveraging our market research and working with our surgeons to identify key surgical tests in need of enabling devices, so we can deliver products that are high-value and fit easily within the surgical workflow. We may develop these solutions internally and we are also open to licensing or distribution opportunities as they arise.

While I’ve been focusing so far on what we are going to do during this transitional year, now, let me turn to some highlights of what we’ve accomplished in the quarter.

Revenues in the second quarter were $10.5 million. Disposable revenue of $9.2 million increased 11.5% over last year’s second quarter, driven primarily by the consistently increasing acceptance of PhotonBlade. However, sales were slightly below our expectations due in part to the organizational changes we are making and also to a temporary supply chain disruption as we implemented some product improvements to PhotonBlade. During the quarter, we implemented a more reliable LED board and also some ease-of-use apps from our surgeons including a new button placement. As a result of these changes, we had about a month of disruption in evaluations and about a two-week supply out on PhotonBlade which impacted our revenue. Our supply chain is now back up to full speed, and we have a robust pipeline of evaluations. And the feedback we are getting around the new features are resoundingly positive.

Turning to new product rollouts. The Adapt launch into the gynecology market has been going very well, and we’ve seen continued adoption, especially in challenging vaginal surgery. We’ve had one surgeon contact us to let us know she is preparing a paper on the cost benefits. She’s realizing using Adapt and a highlight of that is the use of our new Adapt retractors in prolapse repair and hysterectomies is resulting in saving enough procedural time that allows her to perform one extra procedure a day. This is a revenue boost to her hospital.

I am pleased to tell you that Q4 will mark the full Adapt release into the gynecology market and we’ll be following up in Q1 with a launch of Adapt into the breast surgery market. We remain focused on achieving the cost reduction opportunities that we outlined last quarter.

We recently identified a senior leader within the organization whose primary focus is ensuring we complete the execution of the internal restructuring plan and achieve the identified cost reductions. In addition, she is charged with evaluating whether future investments are in line with our new organizational focus and provide an appropriate return. Along with identifying inefficiencies in the organization, that may result in further cost reductions.

With that, I’ll now turn you over to Jim, to review our financials.

Jim Mackaness

Thanks, Scott.

Second quarter 2018 revenue was $10.5 million, a 7.5% increase over last year’s second quarter and up10.5% sequentially over Q1 results. Last year’s second quarter included $278,000 of corporate revenue, as expected, and due to order timing, we recorded $86,000 in corporate revenue in Q2 2018. Excluding corporate revenue from both periods, revenue grew 9.8%.

Disposable revenue, which represents the strategically important part of our business, was $9.2 million, an 11.5% increase over last year’s second quarter and up 7.7% sequentially over our Q1 results. Reusable revenue was $0.8 million, a decrease of 8.4% year-over-year, but sequentially a 21.3% increase. Although not a key revenue driver going forward, we have been working on improving our performance in this area, particularly because the launch of the Adapt Waveguide will result in a series of new retractor launches tailored to work specifically with the Adapt Waveguide and create revenue opportunities within new and existing accounts.

We had approximately 935 active accounts in Q2, compared to 880 in the first quarter and approximately 825 in Q2 2017. Gross margin was 61.2% in the second quarter, compared to $69.1% in the second quarter of 2017. Our gross margin will fluctuate quarter to quarter, particularly due to the impact of manufacturing variances. Our gross margin for the six months is 65.0%, in line with expectations we set for the year where we stated that as a result of the impact of meaningful PhotonBlade sales, we expected gross margins to be in the mid 60s.

Total operating expenses in the second quarter was $14.6 million, down from $16.6 million in Q2 2017 and down from $17.0 million reported in the first quarter. Second quarter OpEx included $1.2 million in severance and litigation costs. Excluding these costs, operating expenses in the second quarter were $13.4 million.

Net loss for the quarter was $9.0 million or a loss of $0.37 per share, as compared to a net loss of $10.4 million or a loss of $0.61 per share in the second quarter of 2017. We ended the quarter with $23.9 million in cash, cash equivalents and short-term investments on the balance sheet. Cash used during the quarter, net of third-party financing activities, was $9.7 million, which included the one-time $1.7 million payment for settling outstanding legal issues and associated fees, and $0.6 million in payment in connection with severance-related costs incurred in the quarter. Excluding these payments, cash used during the quarter was $7.4 million, continuing the overall downward trend over the last eight quarters and consistent with our stated intention of reducing our cash burn.

Looking forward, we continue to expect our 2018 revenue to be in excess of $46 million. We continue to expect gross margins to be in the mid 60s for the full year as the continued success of PhotonBlade is creating headwinds in the short-term. However, as we’ve implemented various cost reduction programs, we expect margins to improve over the longer term.

As a result of the cost cutting measures we have implemented, we anticipate operating expenses to be approximately $26 million for the second half of 2018. We remain committed to our plans to drive increased efficiencies in the P&L and reduce our cash burn. On a normalized basis, we expect to burn approximately $10 million cash for the second half of 2018.

At this point, I’ll turn the call back to Scott for closing comments.

Scott Flora

Thank you, Jim.

I’d like to close by underscoring my commitment to driving a culture of execution here at Invuity. As we look ahead, I’m feeling confident about how we now have a well thought out and focused sales strategy with a bag of exceptional products targeting clear surgical end markets. I think, we have real potential for accelerating our revenue growth and truly believe we can approximately double sales in three years while significantly improving gross margins.

I’m even more encouraged that Invuity is in such a unique position to drive patient satisfaction and quality of life after breast surgery and drive the scar-free outcomes that are such an important goal.

As a final note, as we continue to make progress executing against our new strategy, we are in the planning stages for our Investor Day in New York before the end of the year. We would like to use that opportunity to update you on our progress and let you hear directly from some of our customers about the meaningful impact our products are having within their practices and the outcomes they are achieving.

Thank you all for joining us today. And thank you for your continued support of Invuity.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question is from Rick Wise from Stifel. Your line is now open

Matt Blackman

Good afternoon. It’s Matt Blackman in for Rick. I’ve got a few questions. Maybe to start, Scott, how long do you anticipate it taking to fully implement these strategic and structural changes? And is this quarter’s performance sort of the new steady state post the changes you’ve already implemented or would you expect more dislocation from here?

Scott Flora

Yes. Matt, that’s great question. So, here’s how we’re looking at the strategy rollout. And actually, we started the strategy rollout [technical difficulty]. We’re looking at engaging our management and sales force around how we make these changes to minimize and take this little disruption out as we go forward. And one thing I’ve learned over the years is that by properly engaging your sales force and helping them -- help you with the solutions, the least, the less disruption you have. And then, we’re going to use -- we’re using Q3 as a training and rollout on Adapt because it’s an important technology as we move into breast, gynecology and plastics. Then, we will fully launch adapt in Q4. So, what you’re going to see for the rest of this year is us working behind the scenes to get ready for the full transition of the surgery as we execute on making our guidance commitment, and we’ll take you through the pieces of that.

Then, I look at Q1, January, we’re going to launch Breast 2.0 and we’ll have built up to that with work on training programs, thinking about these procedural economic tools and also thinking about these procedural pricing tools. And at the same time, we’re going to be layering in this orthopedic independence during that process. And then, I feel January is the launch of, I’m calling it, Breast 2.0. And then, we’ll kick it off at the national sales meeting there.

Matt Blackman

And then, the next question is, we think about this refined focus on breast and women’s health. Can you help us understand what the sort of account opportunity denominator is, and how many of these accounts you’re already selling in? And then, as you think about these two opportunities over the next several years, how large a direct sales force footprint, sales force footprint might you need to fully exploit these very large markets?

Scott Flora

Yes. I’m going to answer two pieces of that and I’m going to turn one piece over to Jim. So, one thing I want -- one thing in the data -- the data shows that we have tremendous stickiness in these large Tier 1 institutions where we go after level 1 trained breast surgeon. And we’ll take you through the denominator on that. The other thing that the strategy shows is that we get more tools per procedural sale. And when we sell into orthopedics hip, knee, we get one disposable for procedure; when we sell into electrophysiology, we get one disposable for procedure. When we sell into GYN and breast and plastics, we have the opportunity to sell 2 to 3 to 4 tools for procedure.

So, this higher procedural revenue piece is what got my attention. And then, right now I’ve got -- on that 50 reps and on that 8 what we call service type reps, where we have some of our biggest producers with multiple hospitals to cover, we help them out with another type of sales rep to help them provide day-to-day service while they’re selling. But, if we look at our average sales per rep, we’re almost a barbell. We don’t have a normal bell curve. And that’s the work I talked about on the first call. And that’s the work we’re really -- we now have the tools to really get after this and the data has been very helpful. But, we have room to grow in these 49 direct reps. And I think by focusing them with a very tight bundle of products in a very tight call point strategy that has a very scripted -- this is how you drive account adoption, I think we’re going to move that sales rep productivity up pretty quick. Do we have the -- do you have the denominator on the number of breast accounts we’re in?

Jim Mackaness

Well, we’re in about 935 accounts in total. I think, directionally where I’d say this is, to go to what Scott is saying is, we’re talking about breast and women’s health. So, we’re going to be going after the breast surgeons, both in the whole gambit, so, the oncology, the reconstruction and the plastic component. And then, the GYN, urogyn and it also encompasses system general surgeons who basically work in those procedures. So, the relevance of that across if you like all of the hospital accounts, it’s a pretty large number. So, as I said, I don’t think we’re limited by the accounts at this stage. It is going to go back to a little bit of what Scott was talking about, more dividing it by A, B and C. So, in other words, not necessarily putting our direct reps into the C accounts where just the surgery is done but the volume numbers are not there to make it attractive. In that situation, that’s actually where we’d infill with somebody in the indirect channel to take access of that.

Operator

Our next question is from Richard Newitter from Leerink Partners. Your line is now open.

Richard Newitter

I was just curious, I wanted to ask you, Scott, about one of the comments you made in you’re prepared remarks and actually it was in the press release too, this comment about reaching or achieving your goal of doubling your sales over the next three years. I think, unless I’m mistaken, I think it’s first time I’ve heard Invuity mention that goal. And I’d love to just hear a little bit about how you came up with it. Maybe what your approach was to kind of getting to that level and that time period. And I’m assuming three years would be 2021. Is that correct? Thank you.

Scott Flora

Yes. You’re correct on the timing. So, that statement came out of the strategic planning work we did, and which gave us a clear roadmap of adding additional channels, focusing on a certain set of procedures, thinking about how to market into those procedures, and then also other product opportunities we may roll out. And the doubling of the sales is built on organic growth within the confines of the channels that I outlined, the orthopedic channel, the international channel, and the direct channel. And it’s not dependent upon any acquisitive growth at this time. Anything acquisitive or partnership or things like that would be on top of that.

Richard Newitter

Okay. And I want to also just ask on the comment you made around PhotonVue and unbundling, can you elaborate a little bit on what exactly you mean by that? Are you referring to a process by which you negotiate the PhotonVue to get placed for more PhotonBlade utilization, or how is the bundle going to play out?

Scott Flora

Yes. So, what came back in the strat plan and I will also tell you what came back from our limited test market on PhotonVue over the last year and then also what came back in some direct contact I had with some top plastic surgical departments in university hospitals is people like PhotonVue, but we didn’t have arms around on how to properly market it. And so, that’s what the learnings have kind of forced -- have kind of driven us to think, okay, we have a tremendous opportunity here, we have a device that lowers the cost of fluorescence and can allow more surgeons to use fluorescence more cost effectively, which is going to be critical as you think about breast reconstruction and other procedures.

And also, to me, it’s a driver of could we start thinking about and especially when you think of other care settings. But, is this an opportunity for Invuity to come up with a price for procedure for a breast reconstruction procedure that a hospital peg and contract with us on and we provide the tools that the surgeons need. So, that’d be one element of this. The other element would be classical bundling strategy of signing a contract for more Waveguides, PhotonBlades, putting our whole bundle of products together into a contract. And I think -- I’m particularly interested in this because the Company hasn’t been as -- I think as adept in driving better conversations with the economic buyers and the hospitals. And I think engaging in these strategies is going to get us into a better discussion and help us break through some of these stalemates around that committee and things more efficiently.

Richard Newitter

That’s helpful. And maybe can I ask you one more, Scott, just kind of an open ended question. But just as you think about this new strategy, I think you said that’s beginning, literally on Monday, getting implemented on Monday. Can you just tell me, what do you think is the biggest record? What’s the thing that you have to get right or that poses the biggest kind of potential to limit the success of implementation here? What’s going to keep you up at night as you implement it? Thanks.

Scott Flora

Yes. So, what keeps me up is -- and I’ll tell you, Rick, one of the reasons that in the first quarter, I made the decision to lean out the number of layers in the organization, because I think to do this strategic change, the sales force needs to know that they can trust me. And we have worked really hard this last quarter on building a relationship and building confidence with our sales team. Because they’re going to be the ones that are going to help us get this done and they’re going to be the ones that help us work these programs the right way. And if they’re buying into this, and they’re executing, and they’re saying, okay, I get it, I’m going to jump on this new bundle of products, and I’m going to walk away from chasing these orthopedic deals. That’s how we win.

And so, I’ve got to keep on top of that, and I’ve got to keep my team on top of that, as we move through this strategic change. Inclusiveness versus just dictating what they’re going to do is going to win the day here. And we started that on Monday. And I’m pretty confident the team -- the management team is behind me on how we’re going to roll this out, and how we’re going to execute to that. But that -- you know any of these things anytime -- you can -- if you stub your toe with channel, that’s a problem. And I think that having done this a number of times in my life, I’ve -- I see the warning signals and we’re going to get -- we’re getting on it now to make sure we don’t stub our toe.

Operator

Our next question is from Brian Weinstein from William Blair. Your line is now open.

Andrew Brackmann

Hi, guys. This is actually Andrew Brackmann on for Brian today. Scott, you made the comment that part of your plan is to provide the sales force for the procedural economic tools. Maybe provide a little bit more color there. Are these going to be economic studies that can help you get through those bad committees? [Ph] Thanks,

Scott Flora

Great question. And they’re going to be multidimensional. We have -- actually, if you -- along with our product development strategy, we now have a portfolio of initiatives around economic studies. And not all of these are big long-term studies, but it’s being smart approach, and how can you take something that’s being done and turn it into something that gets published quicker, or maybe it becomes a white paper. So, there’s an effort on that. The second effort just we are engaging with some reimbursement experts to understand the landscape of what’s going on with -- so if you follow our patient, our patient can have lumpectomies and those are being done in the hospital and the surgery center, our patient can have breast mastectomy and then our patient can have breast reconstruction.

I want to make sure and it’s something that hadn’t been done here and it needs to be done is that we have a very thorough understanding of the economics around how those procedures are reimbursed, paid for. And providing the sales reps -- we’re not going to be giving advice to anybody but the sales reps have to have a real understanding of the healthcare economics of those procedures or we can’t engage with surgeons on how to properly help them, understand how to use our products and how to make our products more available to fit into those reimbursement envelopes. So, that’s a piece of work we’re engaging in.

And then, there’s a change going on in the market around how oncology plastics is being driven and the growth in oncology plastic. And we need to understand that because it is reimbursed differently. I just think it’s better understanding of our environment to make sure we’re smarter and to make sure that our sales reps and customers are smarter.

Andrew Brackmann

Got it. Thanks. And then, the second question was on the step-up in guidance implied for the second half of the year. It looks like it’s about $6 million over the first half. And given the kind of training and educational initiatives that you have for the sales force, how should we get comfortable in you guys achieving that? What are some of the kind of assumptions that you’ve built in there? Thanks.

Scott Flora

Yes. I think it’s important -- it’s good question. I think it’s important to understand, obviously, there’s a little bit of cadence between Q3 and Q4. So, logically, we’re expecting the bulk of the -- remainder of the guidance to come in, in the fourth quarter. I think within that as well as a couple things to tease apart -- and alluded to it. So, historically, obviously one of the things we’ve been doing is we’ve been driving our revenue growth on the back of the direct channel. What you’re hearing is talk about -- is you’re hearing us talk about the continued progress, we’re making some of the other channels to get us supported. But the direct channel itself, but once you are actually going to have some stability, sort of being certainly the dust and so they got a good opportunity over the next six months to continue to drive their productivity and their growth with Blade and with Adapt. So we’re expecting to see some significant growth coming out of the direct channel.

And then, we’re looking to make up the residual, obviously, through the opportunity of having corporate revenues come back, anticipating those coming back on stream in a more normative size in the fourth quarter. But also, I think it is simple to recognize the contribution from the indirect channel. We already have for example, 50 people in the indirect channel, various stages of training, but it shows that we’ve already got some momentum going there and will there obviously get more mature as they get through to the fourth quarter. And we’re going to continue to add. So, I think there’s an opportunity for some decent contribution coming in from the indirect channel. Basically, at this stage posting typically on sort of the Greenfield sites, if you like, that aren’t covered by our direct reps, and weighted towards orthopedics within that.

And then the other component, obviously, is contribution from international. We made reference to the fact we now have three partners. And we’re getting some good early signals, so we anticipate some major contributions that sort of move the needle if you like, in the fourth quarter coming through there. So it’s a question sort of getting our rhythm back in the direct sales channel, but also looking to start to get some measurable contribution from these other opportunities.

Operator

Thank you. [Operator Instructions] Our next question is from Matt O’Brien from Piper Jaffray. Your line is now open.

Kevin Farshchi

Thanks for taking the questions, guys. Kevin on for Matt today. I wanted to dive in a little finer on the indirect channel. I guess, I’m curious how many of those distributors are incremental versus relationships you already have for the years, specifically for the -- for orthopedics?

Scott Flora

Yes. So, basically, towards the end of 2017, we had less than a handful if you like. But, at the beginning of this year, we’ve already started towards identifying the opportunity to bring on the indirect folks. So, really, we’ve been sort of bringing that number up from the beginning of this year through to the 50 that we now have.

If you go a significant period in time back in Invuity’s history, we did have some of these relationships. Some of them are rekindling relationships that have sort of ebbed over the time. So the good news is, it’s not always classically completely new. But we do seem to find that there’s a strong demand in that arena for looking to work with us. So, that’s why we sort of been pleased and we’re feeling confident about the rate of brining on these indirects. And their experience with our products is -- either they’ve had it from a long historical point of view or is relatively straightforward training process for how we’re asking to use our products in their existing call points.

Kevin Farshchi

And then, the last one I had is as far as PhotonBlade goes, how should we think about the revenue contribution there in the second half of the year versus the first half? Just given some of the disruption that you mentioned with two weeks coming off and then a month on the manufacturing side. Is it meaningful that [indiscernible] is it more of the recapture from that disruption that helps you get $6 million? Thank you.

Scott Flora

I would peg it that I think it costs me about $0.5 million to 800 in a combination of Photon -- and PhotonBlade and other reusables. And I think that what you’re going to see is that you’ll get -- you’re going to get recapture that in this quarter. And you’re also going to get -- because we can flow new product into the evaluations, you’re going to see some stronger evaluations. And you’ll see that continuing to flow through the back half of the year. We are seeing a very nice cadence in this, which is normally a soft quarter. So, we are seeing a very nice cadence in our disposables as a result of some of those evaluations.

Operator

Thank you. Ladies and gentlemen, thank you for your participation in today’s conference. This concludes the program. You may now disconnect.