Ladies and gentlemen, thank you for standing by, and welcome to the AngioDynamics Second Quarter 2013 Financial Earnings Conference Call. [Operator Instructions] Today's conference is being recorded, January 3, 2013. I would now like to turn the conference over to Bob Jones of EVC Group. Please go ahead.

Thank you, Alicia, and thank you for joining us for the AngioDynamics conference call this afternoon to review the financial results for the fiscal 2013 second quarter which ended on November 30, 2012. The news release announcing the results was issued this afternoon after the market's close is available on AngioDynamics website at angiodynamics.com. A replay of this call will be archived on the company's website. Before we get started, during the course of this conference call, the company will make projections and forward-looking statements regarding future events, including statements about revenue and earnings for fiscal 2013. We encourage you to review the company's past and future filings with the SEC, including, without limitation, the company's forms 10-Q and 10-K, which identify specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements. Finally, during the question-and-answer period today, we'd like to request each caller to limit themselves to 2 questions and encourage callers to requeue to ask additional questions. We appreciate everyone's cooperation with this procedure. And with that, I'd like to turn the call over to Joe DeVivo, Chief Executive Officer.

Thank you very much, Bob. So good afternoon, everyone. Happy new year. It will be a great year for AngioDynamics. I'd like to welcome you to our second quarter fiscal year 2013 conference call. With me is Mark Frost, our incoming Chief Financial Officer, so let's all welcome Mark. The second quarter was an encouraging quarter for AngioDynamics. Around the company, we began to see signs our new organization is starting to deliver, whether it was our new sales force starting to play some offense in beginning new account evaluations after a good 4 months of transition and relearning; or our operations teams finding more and more cost to drive out; our marketing teams getting used to the benefits of our combined product offerings; our quality teams accelerating our QMS implementation; or our finance teams beginning to drive cash performance. All in all, it was a consistent quarter of improvement. Our research and development teams brought to life some new growth opportunities, one which we will unveil at our upcoming Analyst Day in January. What's more important is we begin to see signs of what type of company we will be able to become. We generated overall 3% top line growth worldwide, to $87 million, and on guidance. We delivered an adjusted EBITDA of almost $14 million or $0.39 per share and generated $11 million in cash, resulting in an adjusted EPS of $0.10 per share ahead of expectations. Overall, our company performed well. Of course, the first half of our year has not been without challenges. We initially attributed a very slow start to our fiscal year to our organizational changes, of course, in our U.S. sales force. While that remains the main contributor, with our peer companies also are now reporting soft sales in the U.S. for the…

Thank you, Joe, and good afternoon, ladies and gentlemen. It has been a whirlwind past month, and I must admit that I'm still drinking from the firehose. There certainly is enormous opportunity and, of course, challenges both on the revenue and operational front at AngioDynamics, which I will look forward to sharing our progress as we move forward. I'll now move to discussion of the second quarter results and fiscal year 2013 guidance. Comparison of the year-over-year performance is adjusted to include Navilyst and exclude LC Beads from last year's numbers. The schedule on Page 12 of the release provides this analysis at the product line level. The 3% pro forma sales increase represents a substantial improvement on the 1% pro forma sales decrease we reported in the first quarter and is indicative of improved sales force productivity following the merger. Second quarter sales growth was led by 22% constant currency growth in our international business and 12% growth in oncology. The growth in international markets was driven by strong results in Canada where we now have a direct sales operation and a recent contract win with a large group purchasing organization, as well as increased microwave product sales under our international distribution agreement with Microsulis. In Oncology, the 12% growth was primarily attributable to microwave product sales. NanoKnife sales were $3.2 million in the quarter, flat from the second quarter a year ago. Double-digit probe growth was offset by lumpiness in generator sales as 7 NanoKnife generators were sold this quarter and 8 in the second quarter a year ago. We now have 68 installed base sites in place today, which we define as a hospital which has purchased NanoKnife products in the past 6 months, compared with 47 sites a year ago and remain optimistic about achieving our…

Great job, Mark. Thank you, and welcome again. So in conclusion, we're making progress. I like our team, I like our company and I like our future. We have made bold moves. And while not all perfect, we're seeing early signs of results. We have successfully navigated a very complicated integration, and we all have our eyes looking forward. It's not going to happen overnight, but it's happening. And as we deliver on our commitments for technologies on hand, we are investing in exciting growth products for our future. This fiscal '13 has been a transformative year for the company. As we increase our growth throughout the rest of the year, we remain committed to be a top line growth company which generates accelerating EPS and strong cash flow. So with that, operator, I'd like to open it up for questions.

[Operator Instructions] And our first question comes from the line of Jayson Bedford with Raymond James. Jayson T. Bedford - Raymond James & Associates, Inc., Research Division: So I guess, Joe, you throw out the teaser on the tip location technology. Can you just give us a little more detail on that transaction and kind of what needs to be done for you to start selling the product?

Well, we have a distribution deal with a partner. And when the product is available, we'll sell it. I think we'll announce the deal more specifically when it's time to launch the product, which we expect in the first fiscal quarter of '14. But that's really all I'm prepared to say at the moment. I'd -- while for -- what's material for today is we have a solution, and we expect that solution to be on the market at a time -- on the beginning of next year when it will be very helpful for us. So we'll announce the details of that deal of when we launch the product. Jayson T. Bedford - Raymond James & Associates, Inc., Research Division: Okay. And then it sounds like the Microsulis deal is working out pretty well. Can you just quantify the contribution from Microsulis in the quarter? And then secondly, you seem to mention -- you mentioned a couple of times the strength of the Canadian or the contribution from Canada in terms of the international sales. What exactly did you do there, if you could just remind me from a sales force perspective?

Well, first of all, I'll deal with the second one first. In Canada, we've been going direct when we -- Navilyst had gone direct in Canada based upon their launch of BioFlo and winning of an award as I had -- we had released earlier. And that seems deliberate. When that contract that we won is delivering top line growth for us, and we continue to bring more products direct in that market. So it's really become a nice contributor for us and a part of our growth. The second question was Microsulis. I don't know if we've -- we haven't broken out individual revenue. We probably aren't going to break it out. Solely for that, what we will talk about in the future, Jason, is thermal ablation because there is -- quite frankly, there may be a better cannibalization between RF and Microsulis. We are -- the revenue contribution is way net positive. But in the future, I think we'll be talking about thermal ablation numbers as those product lines are very close.

Our next question comes from the line of Brooks West with Piper Jaffray.

Just a couple, I'm trying to relate the Q2 performance to the guidance. Access was a little light and, Joe, you covered the reasons for that. Is that the primary reason for the reduction in the full year guidance? And then I had a couple of follow-ups to that.

Yes, that was, I would say, the main contributor. The second contributor was we expected to grow our fluid management business, and we've seen, even at accounts where we have had stable price, we've just seen weaknesses in overall procedures over the summer and into the beginning part of the second quarter. So I think both of those areas, being our overall Vascular Access business, which is market- and channel-driven, and the fact that we have a lot of tip location products, coupled with just the slowdown, what we've seen in overall cardiology procedures, I think those 2 things. But we had growth put on both of those businesses. And when you look right now, we're slightly in the red and you add on top of the growth. And that's, I'd say that's probably where the biggest sales is.

Okay. And then on the BSC agreement, that added about $1.25 million, $1.5 million versus our model. I'm just trying to quantify is that $2.5 million the go-forward number? Or how should we think about that? And then I want to relate the revenue questions I just asked to gross margins. Obviously, gross margin is a little light and reduced in the guidance going forward.

Yes, sure. We're going to be -- I really hate that we've pulled that out because I really don't want to talk about a nonstrategic OEM agreement. But the revenue is material and I appreciate the question, and I knew it would come up. That business used to be a $14 million business for Navilyst and it had been declining, and so we just figured it would go away. But we have an open relationship and a good relationship -- whatever BSC wants to buy based upon the prior relationship, we'll sell them. And so it's kind of hard to predict. So yes, it was a little bit more than we expected. It's so hard to predict what they'll buy in the future, and I just wish it wasn't that much of a contributor. But I don't think it's unreasonable to think that will continue, but it's -- we're not banking on it. It kind of delivers a little bit of incremental for us.

And then just the primary driver of the gross margin weakness.

Well, I think our original plan had us at a higher revenue level, and that higher revenue level simply drove higher gross margin. And it takes time to pull that cost out, the sales -- when the sales are a little softer than you anticipated. And especially there was a few deals on the nano side that got pushed off to next quarter, and that's a real high contributor of gross margin. But I'd say, it's a contributor of that in a couple of deals that just didn't close which normally had in the past and some absorption in the plant.

Okay. Did you call out -- sorry to sneak one more in, did you call out the overall NanoKnife revenue number?

I don't know. I think it was about, yes, $3.2 million.

Our next question comes from the line of Matt Hewitt with Craig Hallum Capital Group.

First question, on BioFlo, it sounds like it had a pretty positive reception right out of the gates. And I'm wondering if you could provide any incremental color on how that's going, what your sales team is telling you. And then also as we look out, I think you mentioned 2014 for ports in the dialysis products. Have those applications been submitted to the FDA? Or where do you stand in that time frame?

Great questions. So first of all, BioFlo. It has -- the product has had -- it had some pent-up demand. And so when it was approved, the sellers were on it right away. The whole process of getting into the PICC business is a long evaluation process and one which just simply takes time, so we didn't expect to be in a hundred accounts. That's maybe 2 or 3 accounts per seller already doing evaluations, which is very positive. And as I said in my script, we're getting some "oh my God's" in the clinical work. We had shown some reductions in thrombosis rates and BDT rates and others. And at some pretty big institutions that do a good job keeping the records, we're seeing that the product is a real deal. So we just need time for the organization to be able to get through value access communities, time to create new procedure kit, time to do those clinical evaluations. But if you measure the success based upon the type of -- the flurry of early activity, it's very positive. Obviously, at the same time, we've lost a couple of big accounts by not having a tip location device. And so while we have an uplift on BioFlo sales, we've had to wait in some accounts that said "Look, sorry, we're going to -- we want to move it out of IR and then do bedtime kits for nurses," and boy, that's been rough. And what that's done even for BioFlo is it's limited our target market because unless you have a tip location technology for some of those accounts, it's hard for them to move it back in IR. So we're excited that that barrier over the next several months will be lifted, and we think the dynamic that's going to drive the Vascular Access market, the dynamic that's going to drive the PICC market will shift away from tip location and back to the best catheters in the market that fortunately AngioDynamics has. The applications for the ports and dialysis will be happening very shortly, and that's exactly what's in our timeline. And given the fact that the main application was approved for PICCs, the rest, we think, is not elementary. There are some things that we do test out, but we're willing to commit to those dates.

Joe, you mentioned the tip location, and it sounds like you've got a nice partnership in place. I'm just curious what drove the decision to go that direction versus acquisition.

Well, it's kind of tough to identify the single point. But I think there's -- we have a 2-phase approach. One phase is to have a solution that allows us to basically take the competitive advantage away from our competitors' onset. So we wanted to get the fastest thing that we can get to the marketplace so we can spend more time selling BioFlo than being limited in the market. We will, at some point, and we are looking at other novel technologies, possibly with this partner or with others. That would be what we would call a more novel second-generation device. So we do think though that what's going to drive this business are the clinical outcomes that a product like BioFlo brings, and that tip location will ultimately turn into a generic, like an ultrasound machine. Our competitors, especially Bard, has done a very good job with the "quid pro quo, you have to use my PICC because it only works with this tip location device". It's done a good job selling it, it caused problems, but those days are numbered.

All right, last one for me and then I'll jump back in the queue. Given the modest reduction at the top line guidance, and I don't mean to put you on the spot but I'm just more out of curiosity, you had previously discussed something along the lines of 7% to 9% growth in '14, 10% thereafter or getting to be a 10% grower. Do you still feel comfortable with that trajectory? Or can we maybe assume that you're falling through a little bit lower expectations given what we've seen so far this year?

Matt, the hardest thing for us to do is really peg -- with all this change and whatnot, is to peg when the inflection point occurs. Everything that we've said over the last several quarters is absolutely in line with what we think we will do in the future. It's -- we've simply, either it's been a slower environment or our own -- the amount of work has been -- to get this thing focusing forward has taken a lot of energy. I think the slope of the ramp is what we think it's going to be, the question is when it's started. And we -- I guess we are hoping we hit the ground running. And I think most people today -- you're in for a lot of work, and I guess they were right. That's the basic fact of it. But the shape of the business, AngioVac is going to deliver a lot of top line growth. We have we think BioFlo, especially when we neutralize tip, is going to deliver top line growth. NanoKnife will continue and EVLT is -- will be the same sort of contributor as it has in the past. And we're launching something, we're going to show you at the Analyst Day. That will launch sometime late fiscal '14 or this time next year. And I think it's also going to really bend the growth curve for us. So it all depends how patient you are and how you look at the business. But we've made a lot of moves to make this a real strong growth company that generates a lot of cash and is going to create a great return for investors. We've taken those bold moves. We've taken the criticism on the chin, and we're just going to deliver. The hardest thing to do is just, with all the moving parts, is pinpoint the exact moment in time. But everything that we've said before and the slope of the graphs, we think, are the same. We just think we've had to push it back a little bit because it's just been a lot of work.

[Operator Instructions] And our next question comes from the line of Larry Haimovitch with HMTC.

A couple of questions, mainly for Mark. I don't think I heard any conversation on the call about the medical excise tax which we all, of course, dearly love. How are you guys going to deal with it? How are you going to account for it? Where will you put it in the P&L? And could you give us a ballpark of what you think it is on an annual basis?

Sure. It is incorporated into the guidance we discussed. We are geared up to start paying, and actually in 2 weeks, unfortunately. So from a P&L standpoint, that's still being debated looking at where the guidance is, whether it's a G&A or it's a cost of goods. So that's a process we're still going through over our auditors on where the right location is. I don't think we provided guidance on the number yet, but it's not insignificant clearly. But it is fully baked into the expectations we set, so we're covering it.

I think it was $6 million for the balance of this year is what we have said in the past. I'm not sure...

Right. It's probably going to be a lower number.

A lower number?

Yes. But I'll have the exact number by the time you see [indiscernible]

Yes, with 350 in ballpark times 2.3...

2%, yes.

Yes, so it's $7 million not -- yes, so $6 million, $7 million probably, which is a big hit. It's a big number.

It is.

Yes it is a big number.

And my second question is again probably for Mark, the 3% worldwide number you provided, is that truly apples-to-apples? In other words, did you adjust for -- you backed out -- I think you sort of adjusted for the Oncology, lost Oncology sales. Did you adjust Microsulis so it doesn't add incrementally and distort the sales? I just want to see if it's truly an apples-to-apples comparison in every way we can look at that.

No, no. There's a bit of Microsulis in there, but it's really not that much yet, Larry. I mean, we're hitting our plan, but it's not like it's -- it's not a huge number. It's not the reason why we're hitting our plan.

Yes. And then Vortex, I'm assuming, contributed -- well, probably didn't contribute anything so is it just...

Yes, it's 30 days. It was very negligible, very negligible.

Joe, as I recall from the last call, and forgive me if I'm taking too much time. Just cut me off, I realized I've asked more than just 2 questions. But if I recall from the last call, Vortex really, we shouldn't expect to really start hitting its stride until fiscal '14 when you have gotten the sales force really trained and gotten things really -- your arms really around that. Is that basically what you're feeling on that Joe?

Yes, as I mentioned in my comments we have a very organized training process to train the entire Peripheral Vascular sales force up to speed and train on the product. And the last training occurs right before the end of the second quarter. So fourth quarter will be our first quarter that we'll accept -- or expect material result of the product. And as we have said, we're still -- we still believe we're going to see $10 million worth of '14 sales.

I have one more question, but if there's anyone else in queue I don't want to be a hog here.

One more, Larry, and then we'll...

Okay. Tuck-in acquisitions. Obviously, you're not going to do anything humongous at this point given what you did in the last several months. Are you still looking at various different tuck-ins or are you backed off now and just trying to get things more integrated and moving forward with what you have?

I'm not actively speaking anything prospectively aside from closing our Microsulis deal so that we can bring that into the U.S. because we like the company, we like the product. And also we just did our distribution deal. We always reserve the right to do smaller things. But I think in the macro sense, to answer your question, Larry, we've done a lot of reengineering for this business because quite frankly, when I got here, aside from NanoKnife, there wasn't a lot of top line growth opportunities in our R&D stream. That's just the truth. So we've done a lot of things to reinforce our organization, reinforce our base, increase our share and give us a much better ability in the future, and then also invest in some novel technologies: one, by bringing BioFlo; and then two, by investing in AngioVac. Our goal now -- we have a great -- I can't wait until Analyst Day because you're going to meet George Bourne, our Chief Technology and Operations Officer. He's going to show you not only a new product launch, but give you a little bit of a peek in what we're doing. And I think you'll see that our intent for AngioDynamics growth from '14 and beyond will primarily be organic; organic, internal, novel growth. And the percentage of R&D that is going into all of our franchises for novel growth is much higher than it's ever been whereas it's historically been, just shoring up product lines and line expenses. So I feel really good that we've bridged the gap. We've had to put all -- I felt we've had to put this money to work because growth today is a premium. And I think now with everything solidifying, we can start seeing the early signs of us getting there. That's our intent and our hope. And I wish I could predict it better, but I think the markets we're going into, the products that we have will do a good job. So all in all, I'm not -- I don't have the type of appetite that I did earlier, feeling like I have to bring growth opportunities. Each one of my 3 franchises have significant growth opportunities in them and the core franchise to compete in a more complex health care environment. So I feel relatively satiated there. If an opportunity comes up and we think it's the right thing, we'll look at it. But we're not as -- we don't feel the type of need as we did before. We will -- our intent as George and our new R&D team are going to be delivering for us. And again, I can't wait for people to see what we're doing at our Analyst Day.

Good. What day is that again?

January 23.

I'm showing no further questions in the queue at this time. I would like to turn the conference back to management for any final remarks.

Sure. Well, I guess I cut you off, Larry. But anyway, I just want to say that thank you very much for listening to the call. We're making progress. We think the integration is behind us, and we're really focusing on our execution and want to get our top line going and improve our profitability. I'm very excited to have Mark as a part of the team and look forward also as he looks at our financials and go down and look at some future adjusted metrics to really see the cash generation and take in amortization out, really see the contribution and the profit we'll be able to build in this business. We have a good business and a good future. So with that, thank you very much and happy new year.

Ladies and gentlemen, this does conclude the AngioDynamics Second Quarter 2013 Financial Earnings Conference Call. Thank you for your participation. You may now disconnect.