AngioDynamics, Inc. (ANGO) Q4 2013 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the AngioDynamics Fourth Quarter Fiscal 2013 and Full Year Financial Results Conference Call. [Operator Instructions] This conference is being recorded today, Thursday, July 11, 2013. I would now like to turn the conference over to Mr. Bob Jones with EVC Group. Please go ahead, sir.

Thank you, Camille. Welcome, everyone, and thank you for joining us for AngioDynamics' conference call this afternoon to review the financial results for the fiscal 2013 fourth quarter and year end, which ended on May 31, 2013. The news release is available on AngioDynamics' website at www.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 2014. 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 the actual results or events to differ materially from those described in forward-looking statements. [Operator Instructions] With that, I would now like to turn the call over to Joe DeVivo, Chief Executive Officer.

Thank you, Bob. Welcome, ladies and gentlemen, to our fourth quarter and year end 2013 call. I'd like to start off by saying what a difference a year makes. 2013 was a transition year, yet a transformative year for the company. We took very bold moves to reset our business. We learned a lot about ourselves, as well as the assets we purchased. We completed complex integrations; drove down costs; reengineered our sales and marketing models; filled our R&D pipeline with some great opportunities and added some excellent new talent; strengthened our quality systems; continued to invest in our rapidly growing international team; and launched a new brand of AngioDynamics, which is built on quality, integrity and performance. We all know that our effort was a work in progress. We frankly executed this restructuring in one of the most difficult medical device environments in our history and of our industry. It's not a time for us to take a victory lap yet, but there are many positive signs the company is moving in the right direction. And our success, in my view, is no longer a matter of if, but when. Last quarter, we learned we were not alone in seeing procedure bonds being way off and challenges in closing capital sales. It was hard at the time to differentiate our internal issues from market conditions. Our third quarter was as much of a surprise for us as it was to you. But our team quickly learned from it, refocused, kept on fighting. Our disappointment turned into mindful motivation to prove the pundits wrong through focus, commitment and believe that my team that this quarter has a lot to be proud. Everyday, our team got stronger, closer, smarter and more productive. Our sales people were getting more comfortable with their territories and their products. Our new business pipelines are growing, and we're also seeing in our challenged sectors with less losses that we were seeing earlier in the year. I am so proud of the employees of AngioDynamics today. With your support, I know this team is the right team to take this company to great success in our future. In Q4, there were much stronger performances in Peripheral Vascular, oncology and international. We saw successes in channels, as well as key technologies. We have not yet seen the same response in our Vascular Access business. It's frustrating as Vascular Access is probably our best new technology and greatest growth prospect, in my view, over the next 3 years. The good news is that we are responding in 2 of our 3 businesses, including our international team, and now can focus all of our attention on BioFlo and Vascular Access. I know we usually view performance year-over-year, and this quarter should be no different. However, it's important to keep in mind that Q4 year-over-year was less indicative of our actual -- in my view, of the Q4 performance and is more due to attrition of losses occurring in the beginning of the year. I believe at this point, as I'm looking at the heartbeat of our business, a truer indicator of our Q4 performance is quarter-over-quarter trends and actual -- and average daily sales. From Q1 to Q3, we saw some average daily sales decline in certain core parts of our business. However, in Q4, average daily sales grew pretty much across the board except in our Vascular Access business. While this is a positive trend and only for the quarter, but for me it signaled that we have some stabilization and overall improvement in the health of the business. For those of you who attended our analyst meeting in January, you saw a talented team of people deliver a clear strategy for 3 distinct businesses, each with market-changing technologies that over the next 5 years will transform this company. Our performance last quarter was humbling but in no way changes our view of the quality of our organization, our excitement in our growth drivers, our pipeline and our future competitiveness. We did, in Q4, change our selling model from our single U.S. sales management commercialization model for a more traditional divisional structure. We made the management changes in May. We rolled out the model in June and are successfully operating today in the U.S. with that structure. Aside from that change, we are continuing to execute the strategy we laid out to you. Now as I turn over to Mark to go through the numbers, I want to reinforce the fact that I like this company today. I believe much of the risk in the story is behind us. The risks we deal with today are mostly environmental and are the same for our competitors. On an adjusted basis, of course, taking out LC Beads, we are earning more per share than we did a year ago as Angio was stand-alone. We are generating more EBITDA per share now than when Angio was stand-alone. We are generating more cash per share than Angio was stand-alone, have better quality systems, better operations, better research and development team than Angio had as a stand-alone and, frankly, have a better future than Angio has as a stand-alone company just 12 months ago. Our moves have proven to be accretive to adjusted earnings, cash, EBITDA and the future growth. While we continue to feel core business headwinds in for 2014 like everyone else will, we will return our company to growth. And as we do and our growth drivers get stronger over the next several years, I believe there will be no looking back. So with that, I'll turn it over to Mark Frost, our Chief Financial Officer. Mark?

Thank you, Joe, and good afternoon, ladies and gentlemen. In the fourth quarter of fiscal '13, we delivered respectable performance with overachievement on revenue versus our prior guidance, adjusted earnings at the high end of our range and strong cash generation. I'll start my discussion with fourth quarter revenue. All net sales numbers that we're providing are on a pro forma basis. Total revenue was down 2%. But as we discussed in our quarter 3 call, this was against a difficult comparable so we are encouraged by our results. In line with our strategy, our growth drivers contributed substantially more as AngioVac eclipsed the $1 million barrier within the quarter and delivered $1.7 million for the year, positioning us well for a stronger fiscal 2014. BioFlo continue to expand, with over 20% of U.S. PICCs now being sold with this disruptive technology. Microwave started well in the U.S. and was a major reason for our strong double-digit performance in oncology surgery. Turning to product performance. Peripheral Vascular was down 1%, reflecting basically flat results in Fluid Management and EVLT. Core products were down 9% but offset in large part by AngioVac revenue, which was reported in this line. The Fluid Management results were encouraging as we rebounded from difficult past performance. Now we did have a challenging quarter in Vascular Access, with revenue down 10% compared to last year. This continues to be a frustrating area as we are gaining traction with BioFlo as shown by our penetration and the recently announced Cleveland clinic results, but we are still losing accounts because of lack of tip location capability. Sales force attrition was minimal in the quarter. But as we discussed in the past, the learning curve for a new rep is 6 to 9 months to be fully effective. Rep attrition has had an impact on our results during the past fiscal year in this product area. However, our sales force is stable, and we believe this issue is behind us. A more stable sales force, combined with the addition of new product introduction, is expected to lead to improved performance in our Vascular Access business in fiscal year 2014. Oncology/Surgery delivered 18% sales growth, driven primarily by microwave performance and lower RF cannibalization. In addition, we had approximately 30% sales growth in NanoKnife in the U.S. Internationally, our comparable was challenging, but we did sell 6 NanoKnife internationally, with half of them for prostate. Our install base is now at 78 sites. From a geography perspective, U.S. revenue decreased 6%, while the international markets grew 14%, driven by strong results in Fluid Management, Vascular Access across the board and microwave performance. Now continuing down the income statement for the quarter, gross profit totaled $44.2 million or 49.1% of sales. As expected and discussed on our last conference call, we absorbed negative capacity variances because of the lower demand during the second half of the year. We are working diligently to identify multiple ways to reduce our overhead structure, but the cost reduction likely will not happen until the second and third quarter of fiscal year 2014. Turning to expenses. Operating expenses totaled $43 million, including $3.7 million of acquisition and restructuring items, of which $2.4 million is associated with the Navilyst, Vortex and Microsulis acquisition; an additional $0.7 million related to our closure of the U.K. Cambridge site, which is now completed. In addition, there was $0.4 million for onetime legal cost related a successful defense in our Bard IP case. Sales and marketing expenses increased from previous quarters, reflecting primarily the timing of the SAR conference, as well as further investment in AngioVac commercialization. The GAAP loss per share was $0.02 versus $0.27 loss per share in 2012. Pro forma adjusted EPS was $0.07 per share versus $0.03 in 2012. Now as commented before, we will now provide adjusted EPS, excluding amortization, which we consider a better measure of our cash generation and performance of our company. We have provided a table in today's press release which details quarterly and annual results. On this basis we delivered $0.14 versus $0.09 last year. For the fiscal year, our pro forma EPS was $0.35 compared to $0.21 in the prior year. Adjusted EPS, excluding amortization, was $0.64 versus $0.45 in fiscal year 2012. The reconciliation items are detailed in the GAAP and non-GAAP schedules included in the release. Now we continue to improve our EBITDA performance, delivering $7.9 million, or $0.22 a share, versus a negative $3.3 million, or $0.12 a share, in the prior year. For the year, we've generated $32.3 million, or $0.91 per share, versus $10.1 million, or $0.39 a share. Adjusted EBITDA was $12.3 million, or $0.35 a share, versus $7.9 million, or $0.30 a share, in the quarter. And for the year, adjusted EBITDA was $52.2 million, or $1.48 a share, versus $26.8 million, or $1.05 a share, a 41% per share improvement over prior year results. A detailed reconciliation is provided as well in our news release. Now we generated $10.8 million of operating cash and $7 million of free cash flow in the fourth quarter, driven by strong operational discipline, as well as inventory management efforts, which reduced inventories by close to $7 million. This compared to a cash use of $1 million last year in the quarter. For the year, we've generated $26.3 million of operating cash versus $11.5 million in the prior year. During the quarter we paid down $2 million of debt and ended the quarter with $24 million in cash and investments and $142.5 million of debt outstanding. Okay. Now I'm going to turn to our discussion of our guidance for fiscal 2014. For fiscal year 2014, we expect revenue to modestly grow to a range of $346 million to $352 million, representing 3% growth at the top end of the range. We anticipate growth to gradually increase over the year, with the primary reason being our expectation for our growth drivers to become more significant contributors and, therefore, have a larger impact on our growth in the back half of the year. Further details to this point relates to the following 3 growth drivers: AngioVac is expected to ramp each quarter as we fully build out our clinical specialist network and expand the customer procedure base. Vascular Access product introductions; tip location is expected to be live during the third quarter, as well as BioFlo and dialysis and ports, which should be introduced during the second half of the fiscal year. We expect to see meaningful revenue gains as we enter the second half of fiscal 2014. The third growth driver is U.S. microwave introduction, which we have just successfully launched, and is expected to contribute at a higher level to our growth as the install base builds over the year. The other factor impacting our revenue range is we hope conservatism on our core product areas, where we're assuming basically flat performance. Our ability to accelerate our growth drivers and deliver growth in our core products will define our range for the year. Now on the earnings side, we are expecting gross margin to improve by 75 to 100 basis points from the 50.8% level in fiscal year 2013, which reflects none of the one-offs in that number. This will happen because of operational efficiencies and a positive end mix, primarily from the AngioVac and microwave products. The degree of improvement will depend on the level of revenue achievement. Now on the OpEx side, we will be making investments in both R&D to fund more clinical activities to support clinical and economic outcomes and regulatory from a new product and international vantage point. On the sales and marketing side, as planned, we will be investing in our AngioVac infrastructure, as well as supporting our international growth, reduced in part by synergies on the U.S. management front. Overall, we are expecting adjusted EPS to range from $0.31 to $0.35 potentially flat in 2013. The headwind we face is the medical device tax, which will reduce our EPS by about $0.04. Otherwise, we will anticipate an increase as much as 11% on our adjusted EPS. Adjusted EPS, excluding amortization, will be in the range to $0.61 to $0.65, with a similar medical device impact limiting any year-to-year improvement. Now we are not providing specific cash guidance. However, we do expect to deliver significant improvement over 2013 full year results. On the EBITDA front, we are guiding to $52 million to $54 million with medical device tax negatively impacting any significant improvements. Now turning to fiscal year first quarter guidance. We are guiding to a revenue range of $81 million to $84 million, flat with last year's fiscal first quarter at the top end. The range reflects the timing of NanoKnife capital deals, where we are currently expecting modest closures in fiscal first quarter, as well as our U.S. comparable for last year's first quarter is quite challenging. In addition, we closed stronger than we expected in quarter 4 and are concerned this may negatively impact the first quarter. The range reflects these concerns. Now given the range of our revenue expectations, adjusted EPS will be in the range of $0.02 to $0.04, and adjusted EPS, excluding amortization, will be in the range of $0.10 to $0.12. The other factor limiting earnings growth in the first quarter is we anticipate a residual impact of fully absorbing the negative variances generated in 2013 to flow through in the first quarter. We believe we will see improvements starting in the second quarter. Operating cash and free cash performance will follow our revenue earnings, so we expect a reduction from quarter 4 results in quarter 1 and then an improvement over the year. With that, I'll turn the call back to Joe for his final comments. Joe?

Thank you, Mark. So now I'd like to also provide just a few updates. First, as you heard us mention at investor conferences, that there's a couple of presentations made by Cleveland clinic hospitals at independent meetings, 2 different series of data combined. And this is was on BioFlo -- I'm sorry, 2 series of data combined evaluated almost 7 procedures, where normal deep vein thrombosis rates of 3% to 7.8% would have occurred, with standard catheters causing 21 to 54 deepening thrombosis, which would have cost the health care system $12,000 per based upon published data and reports, with those 2 experiences of over 700 procedures only produced 1 deep vein thrombosis as a substantial potential improvement to our health care systems. We are so excited with this early data and excited to see that this product is proving itself clinically. What our goal is to now get data published. And also this month, we should begin accruing patients for our proof trial in which a controlled randomized trial will evaluate BioFlo to the current market leader. If we can validate this early data, proving out in a controlled setting, I believe that, that would really help spur future adoption. As Mark said on the tip location front, our partner continues to communicate with FDA. Our current view is they will see a clearance near the end of the calendar year, so it's in the third quarter range, and then we should launch shortly following that. Not having the technology remains a headwind and does mute some of the BioFlo progress temporarily as we continue to see wins offset by losses. Also while we wait for our partner's success, we do continue to evaluate other strategic options for the future. Second update is on AngioVac. As you saw in March release -- in the release and also March presentation, we completely exceeded our expectations on AngioVac for fiscal year '13. We said we would do $1 million, and that was our goal for the first part of the launch. We delivered $1.7 million in fiscal '13, and we actually exceeded our entire goal in the fourth quarter alone, delivering $1.1 million of AngioVac revenue. So while many of you have questioned our $10 million for fiscal '14, of course, it's an aggressive ramp. But the early launch has been so successful, and we're confident that we can reach our $10 million goal. We've also been making progress with FDA in many fronts. In addition to receiving clearance of our Xcela Port for power injection with our PASV valve, as you've heard, we've received approval for a Prostate IDE for our NanoKnife System in the U.S. Today, we have site selected, protocols are submitted to those sites IRBs and we expect to be enrolling patients by the end of this calendar year. We expect to enroll patients throughout calendar 2014 and submit near the end of that year. We know everyone wants to know what happens next. We'll need to allow the quality of our data and our conversations with FDA to determine that. I hope, of course, is the 510(k) path, but it may be up a PMA path. It's too early to tell. Today, the recent progress of NanoKnife in the prostate for us is very encouraging, even commercially, with prostate cases happening internationally, almost every week. Next, our Microsulis launch went better than expected. In the quarter, we converted 10 accounts right away in the first 90 days and are currently conducting over 20 competitive evaluations. As each day goes by, it's being validated that we have the best microwave ablation system in the world, and we believe our thermal ablation revenue category, which consists of microwave and radio frequency, will grow at the 20% target range we gave you when we announced the deal. And that will occur over the next 3 years. So we affirm that view as it's already happening. So as we head into our fiscal year 2014, we're pleased that our growth drivers are performing at/or ahead of our expectations. Each one rests in 1 of our 3 franchises giving every seller in our company something very exciting to sell. What is key for our future growth is how well our core businesses do in the current operating environment. We now have modest expectations set for those core businesses as Mark has referenced, and it's within our guidance. And we will rely on the continued momentum of our growth drivers to create the acceleration for our business. So with that, Camille, I'd like to open the call to questions.

[Operator Instructions] Our first question is from the line of Tom Gunderson with Piper Jaffrey.

I guess, for my 2 questions, I would go with R&D spend was less than we expected, and I think a little less than you guided last quarter. And I'm wondering, is that a good go ahead number to look for fiscal 2014? Or were there some things that got pushed off into another -- into this 90 days from last quarter? I'm just curious how that expense ratio and the actual dollars lined up to your expectations going forward.

Sure. I'll answer that, Tom. Yes, it was slightly slow. We were a little slow in some of our clinical things to start, so a number of those things will start in the first quarter. So it was a little below, but not hugely, is the way I'd answer it.

And it looks good for going into 2014 with that kind of rate?

Yes, yes.

And then on the international front, another strong quarter, good growth, particularly when we don't hear that kind of growth from some of your competitors or colleagues in med tech. Can you give us a little bit more color here, is the strength -- in this particular quarter, is the strength coming from new geographies, more procedures? Where did you see the strength that gave you that kind of result?

We are continuing to expand our channel. One of the decisions that were made several years ago was we're going to invest disproportionately in our international team. There are markets that as we're adding sellers or potentially doing deals with distributors to go direct. We are consistently building out our channel. There are some markets that do pretty well, and that our teams do a very good job at. But also, I think we're going to see quite a period of time, our international to deliver strong performance as we build out our channel and also help make our current partners more productive.

Our next question is from the line of Jayson Bedford with Raymond James. Jayson T. Bedford - Raymond James & Associates, Inc., Research Division: I guess in the fourth quarter, obviously things got better. I guess it's kind of a tough answer here. But how much of the performance in the fourth quarter was just better internal execution versus just a better macro environment, maybe also in the context of just price and volume?

It's all better execution. The environment is still challenging. Our team is just getting better. In the first half of the year of '13, we made a lot of changes, a lot of disruptions. We had some turnover and had -- you lived it with us. But our team is just settling in. And I think we feel much more in control of our destiny today. I think we've -- in the beginning of year, we've forecasted that. Our core businesses grow and we'd see in the markets we're stronger than it proved out, and that became a challenge. But I feel very confident that as every day goes by, as I said in my script, that the teams are getting more confident and spending more time on offense than defense. Jayson T. Bedford - Raymond James & Associates, Inc., Research Division: I guess, Joe, the last quarter, it seemed like a tough macro environment. This quarter, are you saying it got better or was it too early?

I'm saying the macro environment is still very difficult. I'm saying that I'm feeling that our teams are getting better. Jayson T. Bedford - Raymond James & Associates, Inc., Research Division: Right, okay. And then just the upside in oncology, you mentioned converting 10 accounts in terms of just from a definition standpoint. Are these true new accounts to AngioDynamics? Or are you converting existing accounts from RF to microwave? And then secondly, can you quantify how much the Microsulis acquisition added to fourth quarter revenue?

No, I don't think we're going to break out Microsulis . As we mentioned earlier, we're going to talk about thermal ablation because there is -- there are areas where there's cannibalization. And we -- especially when we did our numbers upfront, even when we did the announcement, there's going to be times where we see cannibalization. But so far upfront, I'd have to say most, if not all of those, were new accounts. Now for example, there could be account that we lost to other microwave companies and got back. Especially in our first 90 days, we haven't spent a significant amount of our time going into existing RF customers unless they're the ones who are interested to convert over the microwave. So this has been a positive net increase.

Our next question is from the line of Charles Haff with Craig-Hallum.

My first question is on operating cash flow. As you mentioned, you did much better on inventory this quarter. But receivables and payables worked against you this quarter, with basically flattish revenues. Could you explain the receivables and payables headwind that you had this quarter?

Sure, Charles. On the receivables side, it was more timing of the receivables. We had more happen in the third month than we were expecting so, therefore, the build happened later. So therefore, you're going to get collections in the next 45 to 60 days. So that was primarily the reason for that. Payables, not 100% sure. I didn't think we've got much worse than we've run in the past. I'll have to check that and get back to you. I didn't think were that far off in the payables. But receivables clearly was timing of the revenue.

Okay, great. And then my second question is on the gross margin side. You were a little bit light versus our expectation. And I thought with AngioVac and Microsulis were doing better, we might see a little bit more on gross margin. Was that a function of the international revenues? Or is there something else going on there?

No. Actually, it was a function that we did better in the Fluid Management and Fluid Management is one of our lowest gross margin products. So it was more a mix point actually in the quarter, although it wasn't phenomenal. I mean, it wasn't a significant impact, but that was one of the reasons.

Our next question is from the line of Jason Mills with Canaccord Genuity.

This is Jeff Chu filling in for Jason. Going back to your sales guidance, I appreciate your commentary ON sales directionally for fiscal '14. But I was hoping you could be able to provide more granularity on sales guidance by division insofar as you guys are willing to give us at this point.

Yes, Jeff. At this point, we're going to keep it at pretty high level as we go through the year. That's something that we're also reassessing, the level of granularity. But we're comfortable at this point providing that level of detail.

I think our calls and our announcements are pretty detailed as it is, and we'll continue to be as transparent as possible, but trying to guide every segment as much. And quarter by quarter, it just proves to be less productive.

Okay, great. And for my second question, I was just wondering how we should think about free cash flow for next year.

Yes. I think we're going to have a nice improvement. I would tell you if you look at our quarter 3 and quarter 4 performance, that's probably an indicator, hopefully, we think, for the year, how it's going to play out. I haven't provided specific cash guidance. As we go through the year, I think we'll be more comfortable to maybe do that. But if you look at how quarter 3 and quarter 4 have gone, that's our expectation how the year should hopefully run.

Our next question is from the line of Robert Goldman with CL&G. Robert M. Goldman - CL King & Associates, Inc., Research Division: First question is on statement you made about some -- what seemed to be manufacturing-related cost savings that will kick in beginning, I believe you said, the second or third quarter of the fiscal year. Perhaps, Joe, you could give us an idea of what you've got in mind with these cost savings and if you can quantify how much they'll be. And I assume whatever those cost savings are, they're included in your earnings guidance. That's my first question, and then I'll have another one.

Sure. I'm going to hand it to Mark. He's working on it.

So there's 2 parts for this. The first part is from a cost accounting standpoint, you take negative variances the next quarter following. So we are absorbing in the first quarters some negative variances. That will run off. So we'll immediately get a bump up in quarter 2 because we're no longer absorbing those. From an operational standpoint, we are assuming to get benefits as we go on to one operating system, which will happen in October. We'll go live on one operating system, so we will be taking out transactional cost associated with duplicate operating systems. And then secondly, we're looking at a number of things in how we run the plants, from sourcing opportunities to optimization of processes, to looking at rationalization of Navilyst versus Angio products. So there's a number of things that are going to drive it. We're not giving specific numbers on that, Bob, but a lot of that will start hitting second, third quarter during the year. And yes, that is built into our improvement of 75 to 100 basis points in the gross margin line. Robert M. Goldman - CL King & Associates, Inc., Research Division: Okay. And then my second question is on NanoKnife. I heard bits and pieces, I was just hoping you could aggregate a few things for me. In the quarter, how many NanoKnife generators did you sell? And what was the dollar increase in NanoKnife sales in the fourth quarter relative to the same quarter of the prior year?

Yes. We sold 12 units in the quarter and 26 for the year. We actually in the end were basically flat with last year. We had a better quarter in the U.S., but we had a very difficult comparable internationally. So we actually went backwards internationally. And the net result, too, was basically flat Nano revenue in the quarter. But we were up over 10% for the year in Nano.

Our next question is from the line of Larry Haimovitch with HMTC.

A couple of questions on NanoKnife. Obviously, some continued good progress. In the U.S. and then overseas, where are most of the procedures being performed? I don't mean by country, I mean in terms of therapeutic use.

It's pretty much across the board. I'd say that the most today are in pancreas procedures, followed by liver procedures. But we're starting to see internationally an uptick in prostate procedures. That's actually increasing at a -- well ahead of what my expectations were.

So pancreas #1, liver #2 and then prostate #3?

Yes.

And is that true also in the U.S., Joe?

No. It's more pancreas. We don't do many prostates in the U.S. right now, so it is pancreas and liver in the U.S.

Okay, next question. So the average install base in the year is about 65. If there were 52 at the beginning of the last year, 78 now, it's roughly 65. How many procedures were done using NanoKnife in the last fiscal year that just ended?

Yes, we don't report specific procedure revenue, Larry.

Can you give me some help in understanding, are there some centers that are doing 10 or 20 or 30 a month? Or are most of them just doing one-sies, and two-sies?

Yes, I don't think we have a center that's doing 30 or 20 in a month. No, I mean, it is across the board. There are some centers who, obviously, do more than others. But we're not at a place, especially in the U.S. where there's massive acceleration in procedure volume. We still have -- it's still very early in its development. It's still very early in its clinical efficacy. We still need to do more work to get data through the FDA and get some -- hit some particular indications. Actually, I think there's probably even a bit of a more acceleration in procedures internationally, where there's a little bit less. We don't market this. We don't push. We're not actively pushing procedures because we don't have the type of clearances that we feel we would need in order to do that. So we're a very compliant company. Internationally, I think especially on the prostate side, we are seeing a certain level of acceleration.

Okay. And then one more on NanoKnife, and then I'll jump back in line. So you've gotten the IDE to begin a limited clinical trial in the U.S. with prostate, which I'm sure you're very encouraged about. But it sounds like it could be -- I'm not trying to be pessimistic, I'm just trying to be very realistic here. But it sounds like it's a pretty long road before you really get full approval maybe 3, 4, 5 years. A, does that sound about right, Joe, based on your calibration, given you've got to do what appears to be sort of a small safety trial and then go back to the agency and get more patients and a full double blind or a full randomized trial in place?

Yes, that's exactly correct. And I've tried to, especially on these calls quarter-over-quarter, reset expectations around the time it's going to take to get this to be a real business. This is -- it's still very early. It's still very developmental. And for me, I believe the prize is big enough that if we're patient for that period of time, there's going to be a very big reward for shareholders and for the company. And what's encouraging now is we have the trial approved and it's funded and it's got sites, it's got protocol and we're doing it. So that timeline that you've just mentioned, I think it's probably been mentioned for the last 3 or 4 years, but it's never started. At least on the prostate, the clock started for NanoKnife in the U.S. And we also have a study with the clinical research office of the Endourological Society in Europe for prostate NanoKnife and are hitting a kind of a time where there's interest in focal ablation for the prostate of reinvigoration and where a lot of people have done IMRT or brachy or cryo. They're looking for what's potentially a safer way to intervene earlier into the prostate. And it seems like some thought leaders, especially over in Europe, are latching on the NanoKnife as potentially being that solution. So I would just caution investors in this standpoint that there's still a long road, and we have a lot of different growth drivers that we're excited about. I think this is a nice call option to a potential explosive future. But I don't want anyone getting excited about something happening in the quarter or 2 on NanoKnife.

I lied, I have one more quick question and that is, can you just give us a quick update on the pancreas FDA situation in the U.S.?

Yes, we're resolute that we want to get that IDE. I think, especially with the prostate one going through, it's an indication of the complexity of the disease state, the patient and the organ and less to do with the technology. And so we are working back and forth, questions -- supplying data questions, supplying data. And we're just going to continue to do that until we get that IDE approved. I can't predict what I don't control. But I think as every day goes by, the quality of our answers and the quality of our conversations gets better. And I believe we're going to get there. But I don't, again, want to set expectations on NanoKnife for that. I think a lot of things have been said in the past. And we have enough other things to get excited about that when does this start to hit, and it will. Because anecdotally, these procedures work, and these patients are doing well. And these doctors who were doing these cases are excited. But without having a clear marketing path, without having a clear reimbursement path, the natural barriers in this industry hold that type of acceleration adoption. So I don't want to create any expectations. We're going to walk right in the front door. We're going to produce great clinical data. And if we get into a control trial, the type of success that occurs on an anecdotal basis, this will be an enormous business.

[Operator Instructions] Our next question is a follow-up from the line of Charles Haff.

You seem to be a little bit more confident in the timing of the tip location for your partner saying end of calendar '13, maybe third quarter. I'm wondering what's changed, if you can give us any update from the clean reg side on tip location.

No, nothing's changed. Nothing's changed. I've given a first quarter date. I've given a second quarter date. Now I've given a third quarter date. I think in this area and in this field of using EKG to locate devices, I think there's been a lot of learning with the devices that are currently on the market. And sometimes when you're a follower, you deal with the additional questions. So the FDA has asked our partner on several occasions to compile more and more data, and they're doing it. And they're doing a good job. So I'm no more confident than I was before. I'm just telling you where -- based upon everything I know today, where we think it will be.

Okay. But I thought I understood that the FDA was concerned with one of the competitor devices and basically was stepping back on tip location. Do you feel like that is no longer as much of a concern at the FDA? Or are they as concerned as they were before?

I don't know if I'd characterize it as such. I mean, the FDA is a continuing evolving entity, that as new information comes up, it's their responsibility to investigate. And if there's something in the pipeline that's similar to something that they've seen, they take the time to make sure they do what's right and what's safe and whatnot. So I don't think it's anything to do with tip location. I just think that technologies evolve. I think that the questions around it have become more specific and more around certain areas. And I think the technology that we signed up with our partner, very good technology by a very reputable company, with good prospects, and they'll answer the questions. I will be comfortable when move forward. But especially in this environment, the cycle at times is less predictable, and we're very happy to go through the cycle and do it the right way.

Our next question is a follow-up from the line of Robert Goldman. Robert M. Goldman - CL King & Associates, Inc., Research Division: Joe, can you just give us an update relative to Queensbury, where things stand with the FDA? I think your last public statement was that the FDA last visited the plant in September of 2012, found a few observations and you had asked the FDA to revisit the plant.

I think, in general, we're doing very well. I think our quality systems have evolved significantly. I think the teams that we've had today have done an unbelievable job in quality system improvement, remediation processes. So I think we're in a great spot. And I think -- as evidenced by a bunch of the clearances that we're getting and the momentum that we are building, I think we're proving ourselves a good company, even to the extent that we've started to ask for our warning letters to be lifted. And I do hope the FDA comes back and gives us a positive inspection when we get these warning letters lifted. So I'm very confident. And I think the addition of Navilyst into the overall team built a tremendous amount of strength in our operations, allowed for very quick remediations on top of all the efforts that we already had. I think we are an excellent shop today, and I look forward to FDA coming in as much as they want. So I think they'll be pretty proud of what we see. And I believe when they do, they lift the warning letters and we'll move on.

There are no further questions at this time. I'd now like to turn the call back over to Mr. DeVivo for closing remarks.

Everyone, thank you for staying up for a long call. I think we're making a lot of progress. I don't think we're taking victory laps yet. I think we have a lot of areas we still can improve in a difficult environment, but I also think it's all in our control. And I'm very proud of where we are and look forward to continuing to show positive progress in the coming quarters in '14. So thank you very much.

Ladies and gentlemen, this concludes AngioDynamics Fourth Quarter Fiscal 2013 and Full Year Financial Results Conference Call. You may now disconnect. Thank you for using ACT Conferencing.