Cardiovascular Systems, Inc.
Q3 2016 Earnings Call Transcript

Published: 4 May 2016

[Operator:]

Good afternoon. My name is Andrew and I will be your conference operator today. At this time, I would like to welcome everyone to the Cardiovascular Systems, Inc. Fiscal 2016 Third Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. [Operator Instructions]. Thank you. I will now turn the call over to Jack Nielsen, Senior Director of Corporate Communications and Investor Relations. Please go ahead, sir.

[Jack Nielsen:]

Thank you, Andrew. Good afternoon and welcome to our fiscal 2016 third quarter conference call. With me on today's call are Scott Ward, CSI Chairman and Interim CEO and Larry Betterley, Chief Financial Officer. During this call, we will make forward-looking statements. These forward-looking statements are covered under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 and include statements regarding CSI's future financial and operating results or other statements that are not historical facts. Actual results could differ materially from those stated or implied by our forward-looking statements due to certain risks and uncertainties, including those described in our most recent Form 10-K and subsequent quarterly reports on Form 10-Q. CSI disclaims any duty to update or revise our forward-looking statements as a result of new information, future events, developments or otherwise. We will also refer to non-GAAP measures because we believe they provide useful information for our investors. Today's news release contains a reconciliation table to GAAP results. I’ll now turn the call over to Scott Ward.

[Scott Ward:]

Thank you, Jack. Good afternoon everyone. It is a pleasure to be with you on today's call and I am excited to update you on many of the initiatives that are outlined on our quarterly conference call in January. First, let me begin with a summary of our stronger than expected third quarter results. Revenues of $44.5 million were $2.5 million above the high end of our initial guidance range and represented a 7% consecutive increase from our second quarter results. Improved stability in our territories combined with continued focus and increased success determining [ph] high volume of comps translated into improved sales productivity. Our net loss was $22.7 million including $12.4 million of onetime costs. Excluding these onetime costs, the loss improved $4.5 million from second quarter and was better than our third quarter guidance. This smaller operating loss is evidence of our efforts to align our cost structure with our revenue expectations and is indicative of the disciplined management practices we have implemented to attain positive cash flow and profitability. We continue to make meaningful progress on the key initiatives that we described last quarter. Most notably stabilizing our sales force and regaining sales momentum. Creating a pathway to positive cash flow and profitability and addressing business uncertainties that may potentially influence our business. Later I’ll provide a detailed review of each of these points but first Larry will provide his financial commentary. Larry?

[Laurence L. Betterley:]

Thanks Scott and good afternoon everyone. We regained consecutive quarter revenue growth in Q3 with total revenues increasing 7% over the Q2 of this year to 44.5 million. Revenues declined about 1% from prior year excluding Asahi guide wires sales in the comparable period last year of 1.9 million. About 13,000 devices were sold representing 92% of revenues. Coronary revenue totaled 10.5 million, a substantial increase of 23% over second quarter and a 31% increase over prior year. Peripheral revenue also resumed consecutive quarter growth with a 3% increase over second quarter led by growth below the knee. Virtual product mix was approximately 60% below the knee compared to 57% in the second quarter. Combined ASPs were similar to last year and increased 2% from Q2. The order revenues remain high at 97% of total revenue. We added 44 new peripheral accounts and 53 coronary accounts. Gross profit margin was very strong at 80.4% or just 77.8% last year. The improvement was driven primarily by unit cost reductions. Operating expenses excluding onetime cost declined 2% from last year and 5% from the second quarter. Reductions were driven by our cost realignment actions including a reduction in force of about 8% on March 31st. Onetime cost of 12.4 million included an agreement in claims about settlement with the Department of Justice of 8 million, 2.4 million of restructuring charges related to our workforce reduction, and 2 million of CEO retirement benefits. Net loss was 22.7 million or $0.69 per share compared to a loss of 10.7 million or $0.34 per share last year. Excluding the onetime cost of 12.4 million or $0.38 per share, the third quarter loss was over 3 million favorable to the guidance range as result of lower operating expenses and higher revenues than anticipated. Adjusted EBITDA excluding the onetime cost improved 4.7 million from second quarter to a loss of 6.4 million which was similar to last year’s loss of 6.1 million. At quarter end our cash balance was 62 million. Cash usage in the third quarter was about 3 million which is down significantly from the 11 million in the second quarter. The lower usage was driven by a lower loss before the onetime cost that was accrued at year-end, a lower receivable balance as a result of more consistent daily sales throughout the quarter, and stable inventory levels. Our priority is to live within our current cash levels to reach positive cash flow and profitability. We believe our cash balance of 62 million is sufficient to achieve that. However we also continue to evaluate additional non-equity financing options to potentially provide a cushion as warranted. I’ll now discuss our financial outlook. For the fourth quarter of fiscal 2016 we anticipate revenues in the range of 45 million to 46.5 million including approximately 11 million of coronary product revenue. We expect gross profit as the percentage of revenues to be about 80%. Operating expenses are projected to be 7% lower than the third quarter of this year excluding the onetime cost. This reduction reflects the impact of our cost realignment efforts to date including our reduction in force at the end of the third quarter. Net loss is expected to be in the range of 5.9 million to 6.9 million which equates to a loss per share of $0.18 to $0.21 based on 32.7 million average shares outstanding. I’ll now turn the call back to Scott for additional commentary.

[Scott Ward:]

Thank you, Larry. I’d now like to take a few minutes and provide an update on many of our key initiatives starting with our sales force. In January I emphasized the near-term importance of stabilizing our sales force and regaining sales momentum. As you recall we made many changes that were disruptive to our sales force and reduced our customer focus, including the rapid expansion of our sales channel, changes to sales territories, and extensive sales training. We implemented these changes and endured the turbulence to create a larger and stronger sales channel with the capacity and core competency required to realize the full potential of Orbital Atherectomy. Since October 1st, our focus has been to stabilize the sales force and allow them more time to support cases, educate their customers, and properly develop accounts. Exceptional customer focus is a hallmark of our strategy to accelerate market penetration and improve the quality of care for patients with calcified artery disease. With more time and territory and the increasing tenure of our sales professionals, we are now delivering improved continuity in our daily sales cadence and we have resumed the consecutive quarterly revenue growth. This is encouraging evidence that our business is regaining momentum. Our field sales organization remains at about 240 professionals, including sales representatives, sales associates, and clinical specialists. As we discussed last quarter, we have implemented a more flexible approach that better aligns the staffing in a territory at this stage of opportunity. This approach is resulting in both increased productivity of our sales representatives and lower costs. Overall, third quarter productivity increased about 12% over second quarter. More importantly our veteran dual franchise representatives achieved an average of over $250,000 in sale, which is near our near-term quarterly target for all sales representatives. We are encouraged by the performance of this veteran group achieving this level of productivity is a strong leading indicator that our dual franchise sales strategy is gaining traction. In addition to regaining our sales momentum, an important part of our business plan is to put CSI on a clear course to achieve positive cash flow and profitability. We began this effort by implementing a more flexible sales strategy, prioritizing our activities, focusing our organization on a smaller number of high impact initiatives, and lowering our cost structure. On March 31st we completed another step in this process by reducing our workforce by 8%. The results of these cost reduction efforts is an expected 11% decrease in quarterly operating expenses in the fourth quarter compared to the second quarter this year for annualized savings of over $20 million. In addition to stabilizing the sales force and right sizing our cost structure, we also made progress in Q3 on a few open items. In March we announced the agreement in principle with the Department of Justice to settle all charges against the company. As we noted earlier, we reserved $8 million for this agreed upon amount. We are still completing the details of this settlement agreement and will continue to update you as warranted. We will certainly let you know when the case has been fully resolved. Regarding the CEO search, the Board of Directors is conducting a search for my successor and recently retained Spencer Stuart [ph] to assist with this effort. During my five months in this interim role I have been impressed by the strength of our management team and encouraged by the incredible dedication and commitment of our CSI employees. Together we have positioned the company for revenue growth and future profitability. We look forward to selecting a new CEO who will continue these initiatives and lead CSI to even greater success. Naturally I will remain as CEO until a successor is named and I will continue to influence the direction of the company in the future as the Chairman of the Board. In closing, we are pleased with the progress we have made on the key initiatives we described last quarter. We believe the actions taken provide us with sales momentum and confidence going into the fourth quarter and fiscal 2017. Furthermore our cost realignment actions position us to lever revenue growth for a clear pathway to positive cash flow and profitability in the future. Despite the sales disruptions we have experience, one thing that has never faltered is the unique utility and performance of the Diamondback 360 in treating calcified artery disease. Our Orbital technology which is backed by a large and growing body of medical evidence has been used in over 250,000 cases to date. Our biggest competitor is under treatment of this very challenging patient population. We are confident that our large highly skilled sales organization will be successful in educating physicians on the numerous benefits of treating calcified lesions with the Diamondback 360. Reaching many more patients and driving attractive growth for many more years to come. We look forward to updating you on our progress when we report our fourth quarter results in August. Before we turn the call over for your questions, I do have some sad news to share with you. Our past CEO, David Martin passed away on May 1st at the age of 51 due to cancer. Dave guided our company on an extraordinary journey developing Orbital Atherectomy from an early stage innovation to a market leading product that has stabilized and improved the quality of life for thousands of patients living with peripheral and coronary artery disease. We remember Dave for his boundless enthusiasm, extraordinary sense of humor, and his passionate commitment to our technology and the patients we serve. We know that the Martin family is grateful to the love and support they have received and we certainly ask that you keep them in your thoughts and prayers in the days ahead. Larry and I will now take your questions so Andrew if you would please repeat the instructions for the Q&A period. Thank you.

[Operator:]

[Operator Instructions]. Your first question comes from the line of Ben Andrew with William Blair. Your line is open.

[Ben Andrew:]

Congratulations on a strong quarter guys and my condolences about Dave, it is terrible news. So, I guess my question for Scott is as you have made some changes in the organization maybe talk a little bit about the specific changes and I saw the R&D line came down relatively materially sequentially, I am just curious what specific projects or initiatives maybe that represents and then similarly in terms of the changes in the field organization above and beyond people what other kind of cost and investment changes you made.

[Scott Ward:]

We start with the sales organization Ben and thanks for those questions. Appreciate your attention to detail on that. As we look at the sales organization actually we’ve made minor reductions overall in total number of headcount. But we actually have overly been committed to this more flexible approach allowing our local sales management teams to really optimize the deployment of their weak forces to really maximize local growth. What that has meant is that we have had a bit of a change in the mix of our sales organization where the number of our quarter carrying reps has come down a bit. But the number of our sales associates and our clinical specialists has increased. And of course what that does is that that’s given us just much stronger local flexibility to occasionally place a clinical specialist or we have high volume accounts or where we have a really high volume territory, and we also have increased our talent pool by increasing number of sales associates that we have in our organization. So really the sales I would say we are optimizing our approach there. As we look at R&D Larry you want to comment on R&D as we look back and then I’ll make a few comments as we look ahead.

[Laurence L. Betterley:]

Sure Scott, thanks. Ben the reduction R&D is really related to more on the clinical side and a lot of involvement going in the LIBERTY 360 and a lot of work going on with that. And that enrollment phase of that is wound down now and scrubbing the data and getting ready for presentations fall. So that’s primarily a reduction in the clinical study activity. We expect that to ramp up a little bit again going forward.

[Ben Andrew:]

Okay, great

[Scott Ward:]

And I guess that what I was coming on there Ben. It is just a follow on, as we look to the future we did not really intend to make major deductions in R&D. We will continue to invest in improving and innovating our product lines and continuing to expand the medical evidence that will support the utilization of our product in coronary and peripheral applications. So R&D will continue to be a very important of the company.

[Ben Andrew:]

Okay and then last question from me. The fourth quarter guidance implies a nice sequential uptick. I mean part of that seasonality if you will how should we think about kind of a durable rate as we look towards fiscal 2017. Should we think of you all as a market grower in peripheral or below the market and then on coronary obviously that is sort of an entity to itself and so perhaps that would grow well above that rate?

[Scott Ward:]

Our objective has been as I described in January, our goal really was to stabilize the sales organization and to achieve consecutive growth quarter-over-quarter. I think as we look now in Q4 as we’ve mentioned, we do see continued sequential growth, I think we will see that as we head into the next fiscal year and I would expect that both in peripheral and in coronary we’ll begin to see year-over-year growth and continue in consecutive quarters.

[Ben Andrew:]

Thank you.

[Operator:]

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

[Danielle Antalffy:]

Hi, good afternoon, guys. Thanks so much for taking the questions. And I second Ben’s thoughts, congrats on a great quarter but so, so sorry to hear about Dave, so thinking about his family and the entire CSI family today. Just a -– it almost makes this call seem like so, no offence, but like not important, right, put things into perspective. So, but really great quarter. I guess, one other questions I had, you mentioned sales force productivity grew 12% but if I read the press release correctly, the top line only grew 7%. Can you walk us through the disconnect there and how much further you’re already at? I think you mentioned your near-term target, so what’s the rate number for sales force productivity and how many quarters until we get there, from a peak productivity perspective?

[Scott Ward:]

So Danielle, let me just -– thank you for comments, by the way, and I think it does put today and perhaps everything we do in a little different perspective. But let me address your question. So here the -– what I had described earlier was really the performance of our veteran sales reps. So veteran sales representatives are those who were with us after Q4 of 2015. And those sales representatives now are performing at or above that benchmark level of $250,000 per quarter. In my experience and perhaps in yours as well, I mean as we look at medical technology that level of $1 million per rep per year is a good benchmark that indicates a healthy and productive sales organization. So as we look at those veteran reps and by that I mean these are the reps that have been with us for a while, they’re trained, they’re educated, they know how to educate customers, and how to work that effectively in their territories. We are seeing that organization perform very well. Now as we look at the rest of the organization that group now has completed training, the territories are established, that organization is stable, and we have every reason to believe that their performance will continue to improve as they have more time and territory and they get more time just to focus on their customers and to build sales in their current accounts. So that really -– I don’t know that that’s necessarily a disconnect but I was referring to veteran reps and I think I gave you some indication that as we look to the future where we really anticipate our growth to come from, I think our veteran reps will continue to improve in their performance. But really our -– the whole organization now I think we’ll see continue to move towards that healthcare model of about $250,000 a quarter. You want to add anything in there?

[Danielle Antalffy:]

Okay, great.

[Laurence L. Betterley:]

No, I think, I -– one of the disconnects you mentioned Danielle was the $20,000 seemed to be a little higher than the revenue growth rate. I think part of that is that Scott mentioned earlier is we have this more flexible approach to territory management now. So the mix of our professional force is going to change quarter-to-quarter most likely, with the number of core trained reps specialists and associates sales folk. So that can impact the ratio a little bit as well.

[Danielle Antalffy:]

Understood. Okay, that’s helpful. And then just wondering if you could comment on the market this quarter because another major player Boston Scientific had very positive comments actually on growth in their Atherectomy business, so wondering if we saw a pick up in the Atherectomy market in this quarter, and if so what's driving that and how sustainable is that or what are you guys seeing maybe as just the best way to answer that question? And if you’re curious about the break out, sorry if you already gave that, above and below the retail? Thanks so much.

[Scott Ward:]

Sure, okay, thanks. So it’s a little bit hard to comment on the market and the market growth because obviously Boston does not report…

[Danielle Antalffy:]

Right.

[Scott Ward:]

This level of detail. So -- and the other thing of course is as you know we deal with this knee as to somewhat unpack the Atherectomy market. They focus on the soft black segment of the market while we focus more on completely on calcified artery disease. So we are much more about calcified lesions that really is our unique competitive advantage and it is where we focus. I think in the coronary segment of the market we have seen certainly a continued increased utilization of Orbital Atherectomy there. I think we are seeing increased market penetration for the treatment of these more severally and heavily calcified lesions. In below the knee segment we also saw a continued market growth there. I think above the knee we continued to see a fair amount of trialing by physicians who are using drug coated balloons. That trialing is, we kind of expect that to continue for probably 12 to 18 months most of the physicians that I spoken with over the course of the past quarter say that you know sometime over the course of the coming year they anticipate that the drug coated balloons and the use of drug coated balloons in combination with Atherectomy will begin to kind of return to a standard of care or a more standard medical practice. But for right now physicians are still trialing that kind of in that middle range. So by that I mean, I think we are still getting the cases when we have severely or heavily calcified lesions or calcified smaller vessels. We don’t get the cases where there is soft plaque or where our device just would not be implicated to use that. It is that middle area where you perhaps had eccentric calcium but not so efficient to say, boy, for sure this is really calcified and I am going to use it. And I think it’s in no circumstances right now where we’re receiving physicians trialing drug coated balloons to see if in fact that’s going to be sufficient to achieve a good outcome. We don’t think it will be because what we don’t believe [indiscernible] has a very little -– compound that is going to effectively penetrate into heavily calcified lesion. So we do think overtime we will see a return to more standard medical practice and we’ll see if physicians return to adopting Orbital Atherectomy for treatment of these calcified lesions.

[Laurence L. Betterley:]

Danielle, the mix below the knee increased nicely in the third quarter to 60% of our peripheral business and that’s up from 57% in Q2. So we had a nice projection below the knee in the quarter.

[Danielle Antalffy:]

Alright, thanks so much you guys.

[Scott Ward:]

Thanks.

[Operator:]

Your next question comes from the line of Jan Wald with Benchmark. Your line is open.

[Jan Wald:]

Good afternoon everyone and my condolences as well. I guess I have two questions, a more of a follow up than anything else but in terms of the sales force and the flexibility that you are talking about one thing that I kind of heard is that some of the flexibility you have given the field management team or the sales management team is to just say to somebody if you are a peripheral sales man, sell the peripheral stuff and you are letting that sort of guide what's happening so sales are more important rather than trying to somehow get to some kind of ratio between coronary and peripheral. Is that the kind of flexibility you are giving to sales force?

[Scott Ward:]

Let me be just a little bit more specific, what we are actually doing is really following our customers. So where we have customers who have adopted let's say in the case of peripheral who have adopted Orbital Atherectomy and have a practice where they are treating a high volume of peripheral artery disease we may focus in on that particular physician or account with let's say a dedicated workflow rep. In that case that particular rep obviously is not going to have a coronary number and its going to focus on delivering their performance solely with peripheral. In other circumstances where we may leverage deep core confidence that we may have in coronary or peripheral along with a clinical specialist and we might create more of a team approach where we have strong and core competence in coronary and peripheral in different people and those individuals will move around the territory covering those cases and those accounts. And then where we have high volume accounts we supplement that with a clinical specialist. What we have learned over time is that this is certainly not a one-size-fits-all situation. And where we will benefit the most is by driving decision making deep in our organization and allowing our sales management team to take the actions that are necessary to really optimize sales. I think your final comment is right though and that is if we can maximize sales in peripheral by doing that, that’s what we’ll do. We are going to obviously support our customers and drive growth in each segment once again as determined by the customers’ interest and the customers’ votes.

[Jan Wald:]

Okay. Thank you for that. and I guess my last question is you – and I think Larry may have answered this in a way, but you had what I always considered to be an ambitious and kind of cool, clinical program going at CSII and I’m wondering that’s going to continue, that’s not part of the reduction or are there some things that we should expect not to happen that we kind of had expected to happen, clinical trials?

[Laurence L. Betterley:]

That question now and that’s why I clarified that point, we will continue to invest in the generation of medical evidence. I like your characterization that it’s a cool clinical program and we're going to -– we definitely plan to keep that going.

[Jan Wald:]

Okay. Thank you very much.

[Laurence L. Betterley:]

Yes, thanks.

[Operator:]

Your next question comes from Ben Haynor with Feltl and Company. Your line is open.

[Benjamin Haynor:]

Hey, guys, sorry to hear of Dave’s passing. That’s sad news. Just a couple of quick ones from me. On the improved sales productivity it looks like you had a nice step up from last quarter. Can you talk maybe a little bit about how that tracked throughout the quarter you just reported and has that continued into the current quarter, I would assume by the guidance that it does?

[Scott Ward:]

Yes, I think this is merrier that I am pleased about, as we talked about at our last call, a very important method that we watched closely is really driving the variance out of our average daily sales and seeing this good healthy cadence in our – the performance of our sales representatives day in and day out. And I have been really pleased to see really over the course of the past four or five months now, we have seen that variability and average daily sales really gets squeezed out. And we now are seeing this very good continuity and very strong average daily sales. So I think it is that consistency that really has contributed to our sense of confidence and I think also our level of confidence and our ability to predict that future performance.

[Benjamin Haynor:]

Okay, great, very helpful. And then secondly for me, I just wanted a point of clarification on the guidance on the operating expenses. I assume when you're talking about excluding one-time costs those were in the just reported quarter and not in Q4?

[Scott Ward:]

No, that’s correct. It’s excluding the one-time cost in Q3 and that’s the basis for the 7% reduction.

[Benjamin Haynor:]

Okay, perfect. That’s all I had gentlemen, thank you very much.

[Scott Ward:]

Thank you.

[Operator:]

Your next question comes from the line of Bob Hopkins with Bank of America. Your line is open.

[Robert Hopkins:]

Hey, good afternoon. Can you hear me okay?

[Scott Ward:]

Yes.

[Laurence L. Betterley:]

Hey, Bob.

[Robert Hopkins:]

Great, hey guys. Boy, I can’t tell you I'm just absolutely devastated by this news. I had no idea. I'm just beside myself. I feel so badly for everybody at your company and the entire family. What a great guy, what a great innovator, what a great important medical device entrepreneur and individual. It’s just terrible news, I'm sorry to hear it. So, anyway, I wanted to ask just one question, because the thing that really stuck out to me was the terrific growth you saw in the coronary side. And I'm wondering if you could just describe a little bit what happened there? Scott, obviously, you have a lot of great connections in that world. I'm sure you have a strong view on what caused the uptick here. So, as a place to start, just maybe a little more detail on what drove the really nice growth on the coronary side this quarter.

[Scott Ward:]

Yes, I – thanks, Bob and thanks for your comments about Dave. That certainly resonates with all of us. Coronary is as you know has been treating these really complex coronary lesions, operating and partnering with physicians in the coronary cap lab. The thing is how we get to the game. It is not easy, it is difficult. It’s a hard challenge. Often times these patients are very challenging and the cases are difficult. I think what you are seeing in our increased growth in coronary is really the net result of the fact that our reps now are better trained, they are spending more time in the cathlab, we have reduced the amount of disruption we have been throwing at them, and they just have time to be present and to support their customers. The real advantage that we have with Orbital Atherectomy is that we can both open and prepare a vessel and we can do it fast and easy. So the Diamondback is really quick to setup, it's easy to use, its quick in and quick out, and when physicians come to realize that they really start to get comfortable with the idea that the use of Orbital Atherectomy actually makes them better and faster at treating a really complex case. So as our sales reps just get more time in these cathlabs and have the opportunity to develop these deeper partnerships we are picking up just a lot more of these cases. I am sure that you are aware of the fact that the treatment of this complex coronary lesions is increasing I think because of surgical turndowns and or other environmental reasons. We are seeing just a lot more of these really complex and heavily calcified lesions showing up in cathlabs. I think beneficial for us is that those cases are often time aggregating into let me say a higher volume accounts and frankly aggregating into the hands of physicians who are skilled and expert at treating these patients. So what that means is that we can target our channel, add those accounts really pretty effectively, and relatively quickly gain adoption. And that’s what we sought. The other thing I would say and just finally is that most of that growth actually came from same store sales. So we just saw really nice growth in our current and existing accounts which is really gratifying because it does tell us that where we train and educate accounts we are getting the increased penetration and adoption.

[Robert Hopkins:]

Yes, it's very helpful. I know it is pretty early and still off a low base but from what you’re seeing do you feel comfortable suggesting that this should at least settle in sort of a 20% growth cadence off of this low base?

[Scott Ward:]

Well I think it’s hard to predict. I don’t know exactly, I will tell you that it is my expectation and we will continue to see strong growth in coronary. So we’ll remain at 20% level or higher. It is difficult for me to predict and I think there are obviously numerous environmental factors and other things that play into that but this is -- I am encouraged with what I am seeing Robert. I mean this is a large unmet medical need, it's really underpenetrated, it is an undertreated patient population. Marty Leon describes it as the unmet medical need of our time and I think we are really well positioned right now to participate as a leader in improving the care of these patients. And so we are going to have a great opportunity to really be the market leader and contribute to improving here in this environment and I am really excited about that.

[Robert Hopkins:]

Great, follow up. Thanks for that. Scott thank you, Larry thank you, and have a good evening.

[Scott Ward:]

Yes, thanks a lot.

[Operator:]

There are no further questions at this time. I would now like to turn the call back over to Scott Ward for closing remarks.

[Scott Ward:]

Great, thank you everyone and thanks for your kind comments regarding Dave. We appreciate that and certainly do appreciate your support. Thank you for joining us all today and thank you for your interest in CSI. We look forward to updating you on our progress next quarter. Good afternoon.

[Operator:]

This concludes today's conference call. You may now disconnect.