Misonix, Inc.
Q3 2016 Earnings Call Transcript

Published: 7 May 2016

[Operator:]

Good afternoon, and welcome to the Misonix Incorporated Reports Third Quarter and Nine months Fiscal Year 2016 Financial Results Conference Call. All participants will be in a listen-only-mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please note this event is being recorded. I'd now like to turn the conference over to Joe Dorame. Please go ahead.

[Joe Dorame:]

Thank you. Good afternoon and thank you for joining us today to review the financial results of Misonix Incorporated for the third quarter and nine months of fiscal year 2016, which ended on March 31, 2016. As the conference call operator indicated, my name is Joe Dorame, I am with Lytham Partners. We are the Investor Relations consulting firm for Misonix. With us on the call representing the company are Mr. Michael McManus, President and Chief Executive Officer; and Mr. Richard Zaremba, Senior Vice President and Chief Financial Officer. At the conclusion of today's prepared remarks, we will open the call for a question-and-answer session. If anyone participating on today's call does not have a full text copy of the release, you can retrieve it from the company's website at misonix.com or numerous financial websites. Before we begin with prepared remarks, we submit for the record the following statements. Statements made by the management team of Misonix during the course of this conference call that are not historical facts are considered to be forward-looking statements subject to risks and uncertainties. The Private Securities Litigation Reform Act of 1995 provides a Safe Harbor for such forward-looking statements. The words believe, expect, anticipate, estimate, will and other terms of expectation identify these forward-looking statements. Investors are cautioned that forward-looking statements made during the course of this conference call are based on management's current expectations and involve risks and uncertainties that could cause actual results to differ materially from the statements made. The company disclaims any obligation to update any forward-looking statements. Risk factors include but are not limited to factors discussed in the company's annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K. With that, let me turn the call over to Mr. Michael McManus, President and Chief Executive Officer of Misonix. Mike?

[Michael A. McManus:]

Thank you Joe. I appreciate the introduction and good afternoon to all of you and welcome to the Misonix third quarter conference call. As you’ve seen from this afternoon's release Misonix continues to grow well off of its disposable revenue base model. Nine months recurring or disposable revenue was increased to 68% of total revenue compared to 58% for the same period last year. BoneScalpel revenue in the United States increased 41% for the nine months. Those numbers are important when you understand that it in our major market of the United States both our BoneScalpel and SonicOne O.R. systems are mainly consigned to a qualified surgeon in hospital who then purchases disposable blades and tips on a single use case by case basis. So when you look at BoneScalpel revenues in the United States which are mainly disposables, recurring revenue were up 57% for the third quarter and 44% of the nine months. Those are very good growth indicators of both acceptance and usage by the high quality, high volume surgeons that we target. Another metric we track daily is the sales or consignment in particular of BoneScalpel units in the United States to prequalified high volume surgeons. In the third quarter that number was 17 compared to 30 systems in the prior year’s quarter. While we certainly look for an increase in the sale of consignment numbers from quarter-to-quarter, the fact is that the consignments are driven by a number of factors and it’s important that you have visibility to them. We don’t want to just consign units. We want to have them in the hands of carefully identified high volume users. The good news is that the data that is analyzed to identify these high volume potential customers is getting better and more specific. There is now a list of surgeons that receive payments from Medicare and other sources that identifies the volume procedures that a surgeon did, the hospital and the procedures to specific procedures they actually do. Since we know the benefits of the BoneScalpel, can best be shown in more complex cases like deformity and stenosis, etc. we can target the surgeons doing those in high volume cases. We then can direct the sales force to those places while understanding the potential dollar value of a specific consignment in usage, practice, and dollars. One issue we have to plan for is that these surgeons are by definition busy people in larger hospitals. In some cases they are part of multi surgeon groups and in some cases the hospital may require more than one surgeons signature on the purchase request which still then has to go to the back committees we have discussed previously. We find these high value targets do take a little more time but it varies by hospital. We do know however that the end result is the surgeon or group doing more cases on average and using more disposables. If you looked at the list of Medicare hospitals you would recognize a very large quality hospitals and surgeons are not on it. The reason is again because they are not large Medicare hospitals. So the value of the list is very specific and good. At the same time we obviously still go to the high profile hospitals that just don’t happen to be part of the Medicare system. Sometimes we don’t have the same depth of information as you get off the Medicare list but the process is similar. We continued to build on the quality and detail of the proper targeting of the right high volume users. The combination of the high volume, the right surgeons, and increased usage will drive a continued strong growth in the disposable revenue and margin that we project for the future. When you look at the number of systems at BoneScalpel’s in the United States and their usage there are a couple of groupings that we want you to have visibility to. The first is new units with a new user getting up to speed. Those are the most recent consignments. The second is units consigned by Misonix sales people over the past three years or so. The third is the units of BoneScalpel sold by Aesculap into their accounts during their distribution agreement. As previously disclosed we wound down their exclusivity in the United States overtime. The final piece of the Aesculap business was complete and ended at the end of December 2015, last December. During the Aesculap sales period, they sold to accounts based on their analysis and also where they could sell some of their 1,000 or so other products. In some cases BoneScalpel may have been part of a package of product. In some cases disposable pricing was lower than our present pricing. All of those contracts expired in December of 2005. We are now in the process of going in and assuring that the surgeons are trained and comfortable with their ability to do more cases. In some cases their customers will be faced by a higher price. We are going through this with some Aesculap help. Most of the accounts are presently lower usage either because they knew the Aesculap deal was done, they were not high volume as we defined it to begin with, or for other reasons. We will go through these facts. The point I am trying to share with you is that there is a difference in blade usage for BoneScalpel among the groups. Aesculap accounts are on average lower and reduce the overall usage number as a result. The Misonix accounts are more than four uses per month. New targeted accounts that we discussed with regard to the better targeting are approximately 6 uses per month. The Aesculaps as I said are below four on average. So when some of you look at the number of BoneScalpels and the disposables and you see a slower growth, it is not that the new accounts aren't growing, they are. They are faster growing than the accounts that we’ve had over the last several years because of the better targeting. But the overall average number is brought down partially because of the slower usage of surgeons that were sold those scalpels by Aesculap. Again we are going through that and we will sort that out and the effort is to if we can energize that base and bring them up to a higher number. So with the increased quality of the data we need to move to introduce the BoneScalpel to the right surgeons. We continue to make investments in expanding our team with the addition over the last nine months of three new clinical lab specialists, two new people in marketing all to drive the placements that we discussed offer to model in United States. In addition we added two international sales directors to help our distributor partners drive more sales around the world. We expect these new personnel to make important sales contributions in the coming quarters and into next year. During the quarter as you've seen we continued to invest in inventory. Our inventory needs to be sufficient to keep up with our growth and forecast but also include a category we call safety stock of important disposables to assure we can meet customer needs without delay. That means a hospital or doctor calling for an unscheduled surgery at midnight where he doesn’t have a disposable and we have to be prepared to get it to them as quickly as we can out of what we call safety stock. International sales for the quarter and nine months continue to be impacted by the difficult market conditions that still exist in China and Russia. As you’ve seen many recent international company reports mention these issues as well. As I indicated in the previous calls these are large markets that offer significant growth potential. We are working hard to make sure that we are well positioned when these markets and economic conditions improve. If you exclude Chine and Russia from the result, international revenue was up 17% for the nine months of this report. Outside of those two markets our international operations are doing well on generating solid results including pricing stability. Our expectation is that the addition of the two new international sales directors will help us to better manage and grow the existing business outside the United States. During the quarter we presented four clinical abstracts relating to our SonicOne O.R. product at the 2016 Diabetic Limb Salvage Conference in Washington D.C. which took place from March 31 to April 2nd of this year. The new data demonstrated the value in using ultrasonic technology into bleeding wound. In one study SonicOne O.R. we have shown to have a 90% success rate in the uptake of a skin graft when used to prepare the wound bed graft site. A second study demonstrated new evidence in the effectiveness of ultrasound in reducing bacterial load in infected wounds. Bacterial infection is one of the leading causes for chronic wounds to fail to peel or to fail to take the graft. That data shows that SonicOne O.R. reduces the bacterial load allowing for the patients wound to correctly heal. As the clinical evidence continues to build, the opportunity exist to establish SonicOne O.R. as the gold standard for wound debridement in the operating room. The investment in our wound platform technologies continues to be validated by this clinical evidence. We believe that strong clinical evidence such as that presented at the DLS Conference this year will further enhance the value proposition of our SonicOne O.R. Our recently introduced SonicVac is a very important new product combining the benefits of ultrasonic debridement that I just mentioned with the unique method to control the bacterial laden mist or spray associated with debridement process in the operating room. The bacteria in the spray has been of concern to surgeons in the hospitals that are constantly trying to remove sites of possible infection to patients and surgeons. The removal of this bacteria together with a better procedure has been shown to increase acceptance of the product and will drive overall growth and disposable revenue. We have a very unique technology that can provide multiple death benefits to hospital, surgeons, and patients. The company continues to be in a strong financial position with cash of approximately 8.4 million and no long term debt. We’re pleased with the continued strong performance of our sales teams, our engineers and R&D folks, our quality team, operations, the people around our company, and distributors around the world. We look forward to continuing to drive solid operation and financial results throughout the rest of the fiscal year, and into the future. With that let me turn the call over to Rich Zaremba, our Chief Financial Officer.

[Richard Zaremba:]

Thanks Mike. Revenue for the three months ended March 31, 2016 was 5.4 million, a 2% increase when compared to revenues of 5.3 million for the same period in fiscal 2015. BoneScalpel revenues increased 40.6% to 3.1 million, SonicOne O.R. revenue increased 7% to 603,000, and SonaStar revenues decreased 25% to 1.5 million. Domestic BoneScalpel revenue increased 60% to 2 million over the same period of fiscal 2015. Recurring revenue worldwide for the third fiscal quarter 2016 increased 32% over the same period of fiscal 2015 to 4 million and is 73% of third quarter fiscal 2016 revenue. The company reported a net loss for the three months ended March 31, 2016 of 679,000, a $0.09 loss per diluted share as compared to earnings of 454,000, a $0.05 earnings per diluted share for the same period in fiscal 2015. Revenue for the nine months ended March 31, 2016 was 16.7 million an 8% increase when compared to 15.5 million for the same period in 2015 fiscal year. BoneScalpel revenue worldwide increased 24% to 9.2 million. Total recurring revenue increased 30% to 11.4 million and a 68% of nine month fiscal 2016 revenue. The company reported a net loss of 724,000, a $0.09 loss per diluted share for the nine months ended March 31, 2016 compared to net income of 1.7 million, a $0.21 earnings per diluted share for the same period in fiscal 2015. The company’s cash position as of March 31, 2016 was 8.4 million, day sales outstanding is 66 days, inventory turnover is 1.3 times, and the company has long-term debt. The company’s backlog of unfilled full orders as of March 31, 2016 was 411,000. Most orders are shipped when received. I’d like to turn the call back over to Mike.

[Michael A. McManus:]

Thank you Rich. Operator we’d be happy to take any questions from people on the line if there are some.

[Operator:]

[Operator Instructions]. The first question comes from Scott Billeadeau of Walrus Partners. Please go ahead.

[Scott Billeadeau:]

Good afternoon guys. Just a quick kind of overview, you talked about the distribution partner going away, what did they have any inventory or anything like that, that you have to deal with? And then the second question or follow up is just on the deals, where are you on the ramping up on the sales side, to using the new tools obviously to be more targeted, focused on the tools that are you ramping restore something as well? Thanks.

[Michael A. McManus:]

Yes, so the answer to the first question is that very little inventory was picked by Aesculap B from Aesculap B basically ran it down going into the end of December. The question with regard to sales is that as I said, we have a team of people that we added there becoming more seasoned. We believe they are going to continue to add greater value going forward. But we basically feel that right now we’re not going to have to add additional expenses in that area.

[Scott Billeadeau:]

So it will be mainly getting those guys more mature and leveraging off of that technology for high volume users?

[Michael A. McManus:]

That’s right. It is getting people more experienced in sales and sales of our products and in training very highly experienced surgeons who do high volumes of procedures to use the BoneScalpel. And this team of people has ramped up very quickly and they’ll continue to mature. And part of it as you said is just helping them by the ability that we have to give each of them a target of X number of highly qualified accounts where we can identify the surgeon, the procedures, and the volume and that means we know the value of the target and those are high priority accounts that this team then has to track.

[Scott Billeadeau:]

And then just one last on so you place the 17 new BoneScalpels compared to 30 in the quarter, do you know how many did the partner that you discontinued, how many did they place in the year ago quarter? Was that included in that 30.

[Michael A. McManus:]

So, as I said the Aesculap contract for them to be the exclusive distributor in the United States was wound down in segments overtime and we’ve disclosed this in the past. Over the last year they were basically just selling disposables.

[Scott Billeadeau:]

Disposables so no unit, okay. Great, thanks.

[Michael A. McManus:]

Thank you.

[Operator:]

[Operator Instructions]. The next question comes from Michael Kaufman of MK Investments. Please go ahead.

[Michael Kaufman:]

Hi Rich and Mike, good afternoon.

[Michael A. McManus:]

Hi, how are you?

[Michael Kaufman:]

Very good. I applaud doing the resources to go after what you say is 1.5 billion overall market. The question I have is when do you think you’ll see the knee and the curve in terms of revenue because right now we’re at 22 million run rate or something like that? And you might got to give some color into why the total revenue from a year ago, the growth was not as much as one would have expected with that larger market opportunity?

[Michael A. McManus:]

Thanks Mike. So let's talk about the last first I guess and that is that’s I think one of the things that cause me to want to focus more on some of the visibility of what we do in the United States. Because you will remember that when we are talking about total revenue something less than half, comes from international where we’re actually selling units and disposables that then distributors sell in their country and those are at lower prices. And we mentioned the issue with regard to two large distributors of two large territories that were not performing as well as they had last year. So that’s something like -- effect something like a little bit less than half of our sales. On the other hand if you look at the greater part of our sales which are in the United States its difficult for me to not look at that and be excited about the fact that high margin disposables which is an important part of the basic model that we’re using and an indicator of the acceptance and continuing use by the well targeted surgeons is growing as fast as it is. I don’t know where many businesses that are growing at that rate with the margins that we have it is diluted by in terms of total revenues by the effect of the international market. But that’s why I wanted to focus on and give some visibility with regard to what is happening in the United States because I think that’s a very positive story as well.

[Michael Kaufman:]

Thank you very much.

[Operator:]

[Operator Instructions]. And we have a follow up from Scott Billeadeau of Walrus Partners. Please go ahead.

[Scott Billeadeau:]

Hi guys, I think you mentioned that the new units placed I think you kind of categorized some groups, the new unit placed like Misonix Consigns in the last three years and then the partner and you have been ahead but the new units were averaging reusable's a month compared to four and then your partner that you are going to go in and – was less than four. On those 6 units how new are those units, maybe give us a little of the 17 you placed is it more than that as placed in the last six month or maybe…?

[Michael A. McManus:]

Thank you for the question. All of the 17 units are not new units. But the point that I was trying to make in my remarks was that if you looked at the units that we do have generated from the targeted accounts and the use of the list, then what we call our aim system, those accounts when you get one are higher volume, higher usage, and higher dollar accounts. And so those are the ones that are at a average usage of six. But it’s a smaller number because they are the ones that are just coming off the use of this aim targeting ability. And as we said, the closing of those accounts with regard to the consignment take a little bit longer. Part of my point was that what's coming out of that pipeline by this targeting will be higher volume, higher valued accounts. So the next time we talk the unit number should have a greater number of high volume accounts and they should be averaging around 6%. And to the extent that we can build that going forward or build in a more valuable franchise.

[Scott Billeadeau:]

And then on the go forward because I know a lots of us either look at BoneScalpel units placed, look at the revenue but given this is -- are you going to show us this on an ongoing quarter basis or what metric should we look to get that that is continuing?

[Michael A. McManus:]

Right, so again a great question and the reason I structured my remarks the way I did is because we want to give you greater visibility going forward with regard to an understanding of the pipeline and the two groupings. And so we will going forward break those out better for you so you can track them.

[Scott Billeadeau:]

Great, thanks guys. Thanks.

[Michael A. McManus:]

Thank you.

[Operator:]

The next question comes from Robert Smith, Private Investor. Please go ahead.

[Robert Smith:]

Hi, gentlemen. How are you?

[Michael A. McManus:]

Hello, thank you. How are you?

[Robert Smith:]

I am doing good. If you go back to the early adopters of this technology, have you lost any of them or are they all still with you and still making orders and how did those do when you have yield accounts to the accounts increase in volume overall?

[Michael A. McManus:]

Right, so the answer is that we don’t lose very many accounts. The thing that happens is that doctors don’t necessarily give us notice when they move from hospital to hospital. So because we’re tracking the usage in a hospital we may see the usage drop from one level to a lower level. And our job is to go in and find out why. Sometimes we find out the key doctor left. And then the job is to find out where he went because we’ve got a new account potential. But our older accounts for instance doing with Baptist has been with us for a long period of time and has built continually year-to-year into one of our highest performing accounts on the basis of usage persistent for month and dollars. So they do stay with us, we lose some every once in a while, unfortunately older doctors pass on, some people move but we have to stay on top of that and we do. Most of our older customers are with us and it is our job to help them be comfortable with the use of the BoneScalpel and to grow the usages per month in their practice.

[Robert Smith:]

Okay, one last question, it is about Mike’s question about a timeline or some idea, do you have any idea on the length of time it i8s going to take to be profitable on a regular basis?

[Michael A. McManus:]

My bad, because Mike did ask the question and then he got off the line and he’ll call me tomorrow and be upset because I didn’t answer his question. So I am glad you put up that again. I think that the way we look at this is what you are really talking about is in the main how do we replace the quarterly royalty income that we have been getting from Covidien that’s going to roll off in October of this year. And I think the way to look at it, the way we look at it is that at approximately an incremental $7 million at a 68% margin we would replace the Covidien revenues. And so that’s our goal.

[Robert Smith:]

You would replace and then I didn’t hear the last part?

[Michael A. McManus:]

We would replace it on the basis of just that mathematical formula. So we know what we have to do and we’re going to do that as quickly as we can. So next year I mean we are working on our budgets right now. We’re on a June 30, fiscal year. Next year we will expect to grow faster and we know that we’re going to have to grow fast enough to include an additional X millions of dollars to replace the Covidien gap as we call it. And the math works the way I just took you through.

[Robert Smith:]

Okay.

[Michael A. McManus:]

Is that clear?

[Robert Smith:]

Well it is. I think last time you talked about February?

[Michael A. McManus:]

Well, so let's be clear about this. If we’re talking about $7 million at the present margin over and above our growth that’s not going to happen by February no matter how I look at the budget. It is just not realistic. But if you look at the growth this year, you look at the growth in the United States, and you assume some growth international what will our growth rate be next year and how do we add to that approximately $7 million over a period of time at 68% margin to replace the Covidien royalty revenues.

[Robert Smith:]

Okay, I do think I get that. And…

[Michael A. McManus:]

It is certainly not on anybody’s analysis of our present growth rate even accelerated off of the base and these better targets going to be February. But it is going to be faster than it was this year because the targeting is better, the acceptance is better, and the combination of that with regard to the BoneScalpel and the introduction of a new product on the SonicOne O.R. side including the SonicVac, we think it is going to accelerate significantly over this year as a percentage of present sales and those factors will contribute to faster growth in helping us to close this gap.

[Robert Smith:]

Thank you. I appreciate your reference. You guys work hard I can tell.

[Michael A. McManus:]

Thank you very much.

[Operator:]

The next question comes from Alan Smith, Private Investor. Please go ahead.

[Alan Smith:]

Yes, good afternoon gentlemen and thank you for taking my call.

[Michael A. McManus:]

Sure happy to.

[Alan Smith:]

I just had a question about whether or not there are any new products in development in the pipeline that have hasn’t been mentioned in the last few quarters, could you provide a little color on that?

[Michael A. McManus:]

Sure, I can. We -- important to note what we have done over the last nine months I think and the fact that we have introduced a product for minimally invasive surgery in the spine area which is we think going to be one of the fastest growing segments of the spine market. And we need to be a player there so introducing a new product there is important. And a lot of what we do is add line extensions, add value to the present product. So you will see additional instruments for surgery based upon our customer needs that will include blades and shavers and things like that for cutting bone, doing spine surgery, and neurosurgery. We also this year just recently introduced another new product the SonicVac which is going to be I think a game changer because we all know how much hospitals are worried about bacteria and infection. And the worst thing that can happen as you go into a hospital and you wind up sicker than you were when you came in. So one of the things that we’re doing in a very important category, addressing not only diabetes but burns is how do you affect those procedures with a safer environment for both the patient, all of the patient to hospital and the surgeon. And we think the product we just introduced will do that. It will not only be better because it is safer it will be better because ultrasonic debridement provides many benefits that we’ve talked about over present technology in terms of how you debride a wound, visibility because there is less bleeding, the speed of the debridement, the ability of ultrasound to affect bacteria, and the generation of protein and growth uptake to enable a wound to heal faster. So we will continue to build out our platform. You also know that a year and half ago we introduced a new line off of our SonaStar product which is a higher aspiration vacuum capability that allows us not as much inside the United States but outside the United States, be able to participate better in the use of aspirators in liver surgery. And we added to that this year a laparoscopic probe. So those are the results of some of the very important research and development work that we do. In ultrasonic medical device technology they are only a couple of players in the world and nobody is better than we are and we’ve got the best people. And we have in the past and we will continue to in the future add value based upon the input we get from our surgeon customer needs around the world.

[Alan Smith:]

Thank you very much. I do have one additional question if I may.

[Michael A. McManus:]

Please.

[Alan Smith:]

Just you had indicated and I have kind of a takeaway here that we can expect the selling expenses to kind of level off in this area or slightly higher. They have been growing in absolute dollar, it is faster than the growth in gross margin and just wondering if we couldn’t expect those -- that spend to kind of level out here in the coming quarters?

[Michael A. McManus:]

Thank you again and the answer is, yes, I think you can. And we have talked about this in the past. There is no question that as a percentage of revenue those lines whether they are sales and marketing or even G&As expensive as a percentage of revenues are both higher than we would like. And they will come down as we manage those going forward with the same team and a basic core platform as revenues grow. That’s important to us. But if your company is our size and you’re trying to make a difference in this world, the important thing to do is to drive our consignments in the United States and our sales in the international markets even if we have to spend a little bit more to get the volume increase in consignments and unit sales of systems and disposables. That’s the highest priority to me because we’re a unique new product and actually three products in powerful categories and we have to drive that from a very small base. Overtime, in the very near future we will start to level that off and you will see those expenses come down as a percentage of sales.

[Alan Smith:]

Thank you very much Mike.

[Michael A. McManus:]

You’re welcome.

[Operator:]

[Operator Instructions]. The next question comes from Michael Kaufman of MK Investments. Please go ahead with your follow up.

[Michael Kaufman:]

I just wanted to clarify something and ask another question, when you talked about replacing the Covidien royalties its really -- I calculated like 6.4 million per year which is 1.6 million per quarter not 7 million per quarter, anybody would have thought of something like that. So it’s a relatively modest quarterly increase in revenue at 66% margins or there about?

[Michael A. McManus:]

It is not right, it is not 7 million per quarter, its 7 million for the year.

[Michael Kaufman:]

Based on last year I calculated 1.6 million per quarter?

[Richard Zaremba:]

It depends upon the margin that you are talking about. And so you know we’re in the ballpark but what we’re talking about is not on a quarterly basis. The way we look at it is what's the dollar size that we have to replace at a margin overtime to start generating income over and above the royalties that we received from Covidien. And so you said it right and I appreciate you clarifying that. The other thing I think is important is as I said there are only so many companies in the world that have this ultrasonic technology that we are finding provides unique benefits and is accepted more and more throughout the world. Another way to think of the Covidien patent expiration is that we can start practicing some of that technology again and build off of it. And we are not subject to a distribution agreement anymore and so in a way it freezes up to try to use some of that technology to help to look out.

[Michael Kaufman:]

No, I totally understand. I was just trying to clarify, the other real question that I had was on the SonicVac which to me sounds like an incredible opportunity, what is the consumable cost per procedure on that one and where do you stand on starting to sell that?

[Michael A. McManus:]

So, we started to sell it and the matter of fact one of the things that happened in the last quarter is that some of our sales of the SonicOne O.R. was slower than we would like because we were doing a test market and doing some studies with regard to the SonicVac and surgeons became aware and said I am not going to order, I’ll wait till the SonicVac comes out. And we are starting to see that pickup now so the disposable cost for that is about 600 versus 400.

[Michael Kaufman:]

Okay, and that’s a one shot replaceable?

[Michael A. McManus:]

It’s a single use disposable yes.

[Michael Kaufman:]

Alright, thank you very much. I wish to the best of luck, it sounds exciting.

[Richard Zaremba:]

Thank you.

[Operator:]

This concludes our question-and-answer session. I would like to turn the conference back over to Michael McManus.

[Michael A. McManus:]

Well again I want to thank you for your thoughtful questions. One other things I get excited about with these calls is the number of people that are really taking the time to understand our business and it is our responsibility to give you greater visibility which is one of the things that I wanted to accomplish in my remarks today. And we will continue going forward because I think it is important to understand that when you look at a 6% growth in total revenue you need to understand what's impacting that for both good and for bad. And we have talked about those things. On the other hand I think it is also important to understand the effect of the acceptance and the growth particularly in disposables which is key to our model in the United States. And those numbers I continue to believe are impressive. And we think we’ll continue to grow them not only with regard to the BoneScalpel but with regard to the SonicOne and the SonicVac and we even think there is an opportunity to see some growth because of some of the technology we built into the SonaStar platform to see some growth there as well. We obviously continue to work in territories that are slow and we talked about China and Russia but that’s not something that’s unique to us. Most international companies are suffering from not those problems. That’s not to say in my mind that those places aren't going to be great opportunities for us going forward and we have the right people and distributors in place to be able to take advantage of that when those economies and those markets start to turnaround. So you put all of those things together and I think there is a lot of reason to be optimistic about what we’re doing and the opportunities for growth going forward across our entire platform. So I thank you again for being on the phone. I thank you for your questions and have a good evening and we’ll talk to you next quarter. Thank you

[Operator:]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.