Artivion, Inc. (AORT) Q3 2015 Earnings Report, Transcript and Summary

Greetings and welcome to the CryoLife Corporation Third Quarter 2015 Financial Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to CryoLife management. Thank you. You may begin.

Good morning. This is Ashley Lee. Before we begin, I'd like to make the following statements to comply with the Safe Harbor requirements of the Private Securities Litigation Reform Act of 1995. Comments made in this call that look forward in time involve risk and uncertainties and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements include statements made as to the Company's or management's intentions, hopes, beliefs, expectations or predictions of the future. Additional information concerning risk and uncertainties that may impact these forward-looking statements is contained from time-to-time in the Company's SEC filings and in the press release that was issued this morning. Now, I'll turn it over to Pat.

Thanks, Ashley, and good morning. Thanks everyone for joining the call today. I am pleased to report that we had a very productive quarter. Today I will detail considerable progress we have made in advancing the future growth prospects for our business that were not readily visible in our reported numbers for the quarter, but which we believe will become more evident in the coming quarters. I will provide you with some highlights from our third quarter results and update you on the progress of our growth drivers that we’ve been communicating for the past year. Following my initial comments Ashley Lee, our CFO will provide a detailed review of our third quarter 2015 financial results and our updated 2015 guidance. I will conclude with an outline of why we believe the business is setting up for a solid 2016 performance and we will then open the line for questions. This morning we reported total revenues of $36.7 million for the third quarter, a 1% decrease year-over-year. We had our second consecutive quarter of growth in tissue processing revenues which were up 1% year-over-year and 8% sequentially. Product revenues were down 3% reflecting the transition to a direct sales force in France, the negative impact of foreign currency in certain markets such as Europe and Brazil, and weaker performance from HeRo than we expected. These items were partially offset by the continued growth of ProCol and PhotoFix. During the quarter, we made meaningful progress on the growth drivers that we’ve been communicating over the past year. This is important as that they are in central components that will drive our future growth. As a reminder, we seek to, one, maximize the opportunity of our new products in ProCol and PhotoFix; two, further increase our global distribution footprint as we did by going direct in France in October 1; three, expand indications of our key products, which include the enrollment of the PerClot Surgical IDE clinical trial in the US and approval for Japan’s new expanded indication for BioGlue; four, to enhance our growth profile through business development opportunities; five, further improve our efficiency and results of the tissue processing operation; and six, to strengthen our leadership team. We believe when we execute on these growth drivers, we will transform CryoLife into a higher growth and more profitable company. In the quarter, we made considerable progress towards delivering on these objectives and I’ll take a few minutes to update you on each. First, we continue to enhance CryoLife’s executive leadership team with the appointment of John Davis as Senior Vice President, Global Sales and Marketing in early September. I had the privilege of working directly with John at Medtronic and can attest to his exceptional track record of driving revenue growth, developing high-performance sales teams and building strong customer relationships. Second, our new product launches are off to a strong start. Customer feedback on PhotoFix continues to be excellent and sales are tracking towards our expectations. We achieved 444,000 of PhotoFix revenue in the third quarter, a 29% sequential increase. We are also working on rounding out the PhotoFix product line with new sizes as well as working on obtaining a CE mark for PhotoFix, which will wed access to the European market. We continue to believe that PhotoFix has the potential of becoming a leading product in the $30 million plus market for biological patches using cardiac surgery. As to ProCol, we achieved $371,000 in revenue during the quarter and 11% sequential increase. We continue efforts to maximize the opportunity for ProCol in the coming quarters. Our effort to expand our global distribution footprint is also going well. The transition into a direct sales model inflect international markets is a key strategic initiative for CryoLife because it enhances our revenue and gross margin mix. It also allows us to implement a more focused sales and marketing strategy and provide a platform for future new product introductions. Earlier this year, we announced plans to transition to a direct sales model in France, which became effective on October 1. As part of this transition, four members of our former French distributor sales team joined CryoLife, giving us an established footprint with strong existing customer relationship. This team’s responsibility is unchanged and they have continued their role of executing sales of CryoLife’s products in France. In addition, we also hired an experienced leader from a major medical device company that will service the country manager for France. I am pleased to report the transition has gone well and our revenue is tracking to our expectations. Looking forward, we plan to add another territory manager to the team further enhancing our direct channel and ability to sell our growing product portfolio in this important European market. Accordingly, we expect to see positive impact to revenue and gross margin beginning this quarter and into 2016. Another key strategy is expanding indications on select products. I will begin with an update on PerClot pivotal trial. To-date, enrollment has been fore than expected as it continues to take longer than anticipated to bring sites to the IRB and contracting process. We currently have only 5 of our 15 sites fully qualified for enrollment. We are working diligently increase the pace of enrollment and are submitting a protocol amendment to the FDA that we believe could be helpful at enrollment. Among other things, it would allow us to increase the number of trial sites from 15 to 25, which should help bring additional trial sites to the enrollment phase as soon as possible. For now, we are targeting to have 15 sites up and running by January 1, 2016. Once we get all of our centers qualified for enrollment, we believe that the trial enrollment will be completed in 2016. With the three month follow-up period, we could potentially gain USFDA approval for cardiac, general and neurological surgery for PerClot in 2018. Also on the new indication front, we recently received regulatory approval for an expanded indication for BioGlue in Japan. We’ve been working closely with our Japanese distribution partner to prepare for the launch which doubles the BioGlue market opportunity in Japan to over $10 million. During the quarter, we collaborated to train their sales team on the expanded indications which allows BioGlue to be used in all aortic, cardiac and large vessel procedures. The launch began on August 1 and in September our partners secured reimbursement coverage which further supports their sales efforts. Another future growth driver is our focus on growing the company through business development transactions. We see this as a highly important area of focus. Our sales platform is highly experienced and poised to drive growth of additional products. We seek products that leverage our well-established customer relationships in cardiac and vascular surgery. We have identified several interesting opportunities, that said, we have a disciplined process and criteria for any investment. We will wait to find the right opportunity if necessary. Moving on, one of the first areas I addressed when I came to the company was to improve the efficiency and results of our tissue processing operations. I am pleased to report that we have made great strides in this area. Following the resolution of the FDA warning letter in the first quarter, we’ve put in place several important initiatives to enhance our tissue processing operations and increased tissue supplies as we have moved through 2015. These efforts began to pay-off in the second quarter and have continued to pay-off in the third quarter. Tissue processing revenues have increased sequentially from $14.4 million in the first quarter to $15.6 million in the second quarter to $16.8 million in the third quarter. The improved efficiency has also benefited tissue processing gross margins, which rebounded in the third quarter and which has positioned us for additional improvements in 2016. We continue to make significant progress on these initiatives and believe that our tissue processing revenues will meaningfully increase in the future. I will now turn the call over to Ashley for a detailed review of our third quarter results and updated 2015 financial guidance.

Thanks, Pat. This morning we reported our results for the third quarter of 2015. The following factors influenced our performance. Compared to the prior year, total company revenues decreased 1% to $36.7 million for the third quarter. Foreign currency unfavorably affected revenues by 1% compared to the prior year quarter. Tissue processing revenues increased 1% compared to the prior year, while product revenues decreased 3% in the quarter. The main factors affecting the product results were the conversion to a direct sales model in France and FX which has resulted in currency translation issues as well as affected orders from our OUS distributors who order in US dollars. On the bottom-line, we reported income of $0.07 per fully diluted share. However, excluding $1.1 million in severance-related charges, and $817,000 in business development expenses, we reported non-GAAP EPS of $0.10. Focusing on geographic revenues, our domestic revenues increased 2% for the third quarter of 2015 compared to the prior year period. This increase was driven primarily by price increases for tissue processing services and the recent launches of ProCol, PhotoFix. Our third quarter international revenues were $7.3 million, down 11% compared to the third quarter of 2014. International revenues accounted for 20% of our business in the third quarter. The decrease in international revenues was driven by lack of revenues from our French distributor as we moved to a direct distribution model in France and the effects of foreign currency, which has affected our distributor ordering patterns and volumes in several large o-US markets including Brazil. Focusing on individual product lines, tissue processing revenues increased 1% for the quarter compared to the prior year, primarily due to price increases. As Pat mentioned, we are seeing positive effects of the processing improvement initiatives that we implemented earlier this year. Our tissue processing yields have increased significantly and that has had a positive effect on the top-line and on gross margins which improved to 44% in the third quarter. Worldwide BioGlue revenues in the third quarter decreased 6% year-over-year, slightly more than expected, driven primarily by decrease in international revenues especially in France and Brazil. HeRO Graft revenues decreased 3% to $1.9 million in the third quarter of 2015, compared to $2 million in the third quarter of 2014. Year-to-date, the HeRO business is up 4%. PerClot sales decreased 2% for the third quarter of 2015, compared to the third quarter of 2014. The decrease was primarily due to the competition from other powdered hemostats in the European market and FX. Revenues from our TMR product line decreased 20% in the third quarter of 2015 compared to 2014, which resulted primarily from a decrease in handpiece volume, year-to-date, our TMR business is down 2%. We are pleased to report that gross margins were ahead of our expectations and improved to 62.6%, in the third quarter up from 60.7% in the second quarter and 58.1% in the first quarter. This primarily results from the increased throughput and productivity and the tissue processing operations and product mix. SG&A expenses were $17.5 million for the third quarter, down from $18.9 million last year. The third quarter included $1.1 million in severance-related benefits and $817,000 in business development expenses. As Pat mentioned, we continue to seek out, evaluate and pursue business development opportunities that would align with our business strategies and priorities and enhance our prospects for future growth. As of September 30, 2015, we had $44.3 million in cash, cash equivalents and restricted cash and securities. We continue to carry no debt and expect to continue to generate operating cash flow. And now for the updated guidance for 2015. We are lowering our range of revenue guidance to between $146 million and $148 million. We still expect tissue processing revenues to be at low single-digits on a percentage basis year-over-year and expect that product revenues will be flat compared to the prior year. We have lowered product revenue guidance due to the continuing challenges we’ve seen in the international markets, as well as the trends we’ve seen in the HeRO and TMR businesses. We are raising our estimates for gross margins and now expect that the full year – for the full year, gross margins will be approximately 61%. We now forecast R&D expenses to be between $11 million and $12 million, due principally to slower than expected enrollment in the PerClot clinical trial. And finally, we are increasing our earnings guidance and believe that GAAP earnings per share will be in the range of $0.09 to $0.11, excluding any future business development charges if any. That concludes my comments. And I'll turn it back over to Pat.

Thanks, Ashley. Before we open up the call to your questions, I wanted to detail our thinking on the potential we see for our business in 2016. As I outlined earlier, the initiatives we believe are essential to our future growth are taking hold and beginning to manifest themselves in our operating results. We’ve seen sequential improvements in our operating results over the first three quarters of the year and expect that fourth quarter will be a record quarter for CryoLife and launches into 2016 with strong momentum. I’d like to highlight on the following items demonstrating the progress we’ve made this year and paint a picture for what 2016 could be. First, if you look at our quarterly revenue progression from the first quarter through the third quarter, we posted $33.8 million, $35.5 million and $36.7 million in revenues. Going forward, we believe that revenues will be favorably affected by the initiatives we’ve undertaken in our tissue processing business, direct sales in France and the recently received expanded indication for BioGlue in Japan. This is evident and that our 2015 full year guidance implies fourth quarter revenues would be 7% to 13% above fourth quarter of last year, that’s comparable to a 1% decrease in 2015 year-to-date third quarter revenues as compared to 2014. Second, we’ve discussed the impact of our previous quality issues have had on our gross margin. Fortunately, we’ve seen significant improvement. Our quarterly tissue processing gross margins have demonstrated steady improvement from the first quarter through the third quarter, going from 37% in the first quarter to 38% in the second quarter to 44% in the third quarter and we expect to see another sequential improvement in the fourth quarter and we’ll be able to continue into 2016. We also believe that the transition to the direct sales force in France will enhance our gross margins in the fourth quarter of 2015. Finally on the expense side, there were several unusual costs and expenses in 2015 including the $2.9 million year-to-date severance charges, $1.8 million in business development charges, and approximately $1 million in charges resulting from the injunction regarding PerClot in the US. Some of these items will likely not occur in 2016. Taking together, we believe that these factors will lead to meaningful improvement in our financial results in the fourth quarter and into 2016. So in closing, we are very excited about the future prospects for the company and believe our team of proven leaders is well suited to deliver on our goals. I would like to thank all those at the company for their contributions this quarter. Although, you may never know or hear from the people you help on a daily basis, your work is critical to the well-being of many. With that, we will now open up the lines for questions. Operator, can we please open the line?

[Operator Instructions] Our first question comes from the line of Jeffrey Cohen with Ladenburg Thalmann. Please proceed with your question.

Hi, guys. Thanks for taking the questions.

Good morning.

Good morning, Jeff.

Could you walk me through and help me out on Q4 as far as guidance and annual guidance, I know you are having a tough time getting through the range you are talking about unless revenues on the tissue side you are talking close to $40 million, if nothing else changes dramatically on the device side. Could you discuss that a little bit?

Yes, so, if you do the – if you take the first three quarter actual and then take the guidance, that’s what I talked about, you are going to see at the low-end of our guidance you are going to see a 7% increase over Q4 of last year and a high-end of 13% increase over the last year. That’s a combination of a number of things. It’s the going direct in France, so we are going to get end-user revenue and profit as well as the – all the initiatives we put in place for tissue processing. We basically started that work after the warning letter was lifted back in March and we started that initiative and took a couple of months to get things kind of turning and that takes about a 90 days because of the way the tissues are processed and the way it flows through your inventory. So, all the work that we did kind of in the spring and the summer is going to really come to roost in the fourth quarter on the tissue side of the business.

Okay, thanks. Could you talk a little bit about the margins on the tissue side there are fairly strong for the quarter. Do you expect that they are going to hold up in the – call it 43%, 44% range? And could you also talk more specifically about why it looks like the cardiac side was a bit lighter on revenue and why the vascular side was a bit heavy in revenues?

Yes, as we’ve said, we were disappointed when we gave out guidance in the beginning of 2015 that our tissue margins really took a hit and as Ashley have said in his comments, I mean, a lot of that was due to the all the quality things we had to put in place, the consultants we’ve brought in, some of the things that we changed really drove up our cost. So we try to maintain our very high focus on quality but the improvements we’ve seen in these initiatives, we kind of kicked off in the March timeframe. So, again, I will just go back on the margins, right. So we saw a 37% margin in Q1, this is on tissue, 38% in Q2, 44% in Q3. Our forecast for Q4 is probably in the 47% range. So we continue to seek – a 1000 basis point improvement over four quarters and we expect to see that kind of throughout 2016 as well.

So you are saying, gross margin on tissue could be in the mid to high 40% range?

Yes.

Going forward, okay, interesting and one more if I may, could you talk a little bit more about PerClot geographies, what you saw the last quarter and what you may see over the next few quarters?

Yes, so, I mean, as Ashley mentioned in his comments, I mean, we are seeing, I mean, there is actually very good unit growth on PerClot, primarily in the European market. The challenge we are seeing in that market is really multiple competitors and prices coming down. So, t he unit growth is being offset by the ASP declines from some of these aggressive small players, which frankly we don’t longer-term, I mean the bigger market is the US and they are never going to show up in the US because of the barriers to entry from a clinical and intellectual property standpoint.

Okay, thanks for taking my questions.

Thanks, Jeff.

Thank you. Our next question comes from the line of Tom Gunderson with Piper Jaffray. Please proceed with your question.

Hi, good morning guys. So, just so I can understand the ramp a little bit better on PhotoFix and ProCol up 29% and 11% sequentially. Are we still in a mode of adding new institutions buying the products or is some of that growth coming from re-orders from Q2 and earlier?

I would say both. I mean, particularly on the PhotoFix side, I just came back from the Pediatric Surgery Meeting over the weekend and I received a lots of favorable comments on this product. So, we are getting hospitals to re-order were also opening new hospitals, also the story on PhotoFix is going to evolve over the next 18 months I would say which is – as I said in the comments, we are going to be bringing on larger product, a larger sheet so it can be used in LVADS. We are going to be getting the CE mark, so we can launch the product in Europe. We are also expecting a couple of papers, very positive clinical papers to come out in the next three to six months. So that continued, kind of flow of new iterations is really going to have PhotoFix on a – I think a nice, nice trajectory going forward. So I don’t think you’ve even see in the beginning of PhotoFix yet. ProCol, I think is similar in that, there is not as many kind of drivers coming behind it. But we continue to open new centers as we continue to get re-orders from centers and part of this is just getting the product done. I think you know very well Tom and in 2015, these value analysis committees, you can’t do a show up with a product and have a bath next day. These things sometimes take a quarter to go through their committee before you can actually get the product on the shelves. So, we’ll again continue to see these new accounts come on board as well on ProCol.

A quarter would be fast to it. On SG&A, I just want to make sure we come close on Q4. I am expecting that if France comes on board and adds to your gross margin and to your revenues, it’s also going to have a pop as you have these new employees in Europe on the SG&A line. Can you give us any guidance on how much that might be?

Yes, so we are going to be adding, all of sudden doing about five to six sales reps in total and on a quarterly basis you are probably looking about $300,000 to $400,000 in incremental SG&A expenses.

Okay, thank you for that. And then, if we look to 2016, kind of continuing on this SG&A theme, you just hired a new sales guy, are you looking – I’m sorry a new head of global sales and marketing. Are you looking to expand the US sales force to contract somehow make it more productive above and beyond the new products? What should we look for in 2016 as far as sales force and maybe jazzing top-line a little bit more?

I think, on of the things you get with John and obviously with my background as well, I mean, we both have a lot of experience with big organizations. I don’t think that, I think our sales force, if you look at the US, we’ve got probably 50 positions. We are not looking at contracting that at all, in fact, I think there is opportunity. As we talked about is one of the growth initiatives being M&A, anything that we acquire, we may or may not pick up reps along the way. So, we will definitely be looking at ways that we can increase the efficiency and the kind of throughout of our sales organization. That’s something we are going to undertake and as it becomes something we want to share publicly, we will do that. But at this time, I think you can just suffice it to say that we are always looking at things like that.

Got it. Okay, that’s it for me guys. Thank you.

Thanks, Tom.

Thank you. [Operator Instructions] Our next question comes from the line of Joe Munda with First Analysis. Please proceed with your question.

Good morning, Pat and Ashley. Thanks for taking the question.

Hey, Joe.

Hey, Joe.

Real quick, Pat, can you give us a little bit more color on what’s going on with the enrollment for PerClot? 5 to 15 sites you had hoped it to be a little bit – the progress there would be a little bit better going forward. Can you give us some color on some of the issues maybe that you are dealing with as far as the trial is concerned?

Yes, so there is a couple of points I’d bring up from – that were in my comments. We’ve talked about over the last couple quarters that the contracting IRB, that just the process by which to get a site fully up and running. It’s pretty daunting again in 2015. So, we’ve got five of the 15 up. They are at various stages of the process. I think the other thing that we kind of – we are a bit surprised by, some of the protocol requirements that, as we discussed the protocol with the FDA and then once you put it into practice, there were a number of things regarding blood test and imaging where once we gotten into the, kind of the close of the trial, several clinicians just said I am not going to put my patients through a CT scan. At this point I would contrast, particularly when they’ve got – you are having an operation on their kidney and then you want to have subject it to contrast, that was an example of one. The other one would be, blood test that you need in certain number of days in advance that just doesn’t fit with their kind of flow of the patients. So we are going back to the FDA with some protocol adjustments and we think that those kind of, if you will, those kind of blocking points would tend to open up the flow as well as we are asking for 10 more centers. So, I think the combination of all those things, I think together, taken together would put us in a good position to enroll this trial in 2016. So, again, we’ve got the benefit of time on our side regarding given the current injunction on PerClot we certainly have a window of opportunity here to, I don’t want to take my time with the trial, but it’s not like, we got a gun to our head on the enrollment speed here.

Sure. And to that point, I mean, every quarter we are consistently looking for a ramp in R&D. I guess, to that point, how should we look at R&D spending, fourth quarter going out into 2016 as the trial starts to really get underway?

Yes, so we actually, basically gave you the full year R&D number. So you can take the first three quarters for 2015 and look at what he gave you for guidance and you can pretty much figure what Q4 is going to be.

No, I know, I understand that, but is that a number we can normalize out?

No, I don’t think so, because if you follow my comments about the trial, we would see a significant ramp in 2016 on the actual enrollment of the trial. So you are going to see the R&D. If you look at this year’s number, we expected heavy enrollment this year and we’ve backed that number down because of the reasons I just said and so you are going to basically see that, that heavier enrollment in expense in R&D going into 2016.

Okay. And then, as far as the shake up to the sales team, now Bruce Anderson is out, John Davis is in, just ascertain the timing of it, can you give us some sense of why now, why not a quarter now, or before a quarter later, why all of a sudden now this decision to shake up the sales force?

Yes, I mean, again, there is never a – it’s not like we kind of sit down and plan these types of things. I think there was a number of factors that went into that decision. Frankly, I wasn’t real thrilled with the sales performance for the first half of the year and that basically was one of the catalyst and I wanted to get more seasoned and experienced leadership on the commercial side. So, part of it is, when we are ready and part of it’s when your candidates ready. So, I think, when those two lines crossed is when we made the move.

Okay. And then, one other, I guess, question on that front. David Frank, him leaving the company, can we – any issues there? I mean, I saw the 8-K, but anytime you see somebody like that, probably insurance, some of the issues you had in the past. Is there any read-through there or?

No, I think, look, I am not going to get into comment about specific employees on our earnings call. I mean, Dave was a long-term loyal employee of the company and we just made a decision to go in a different direction. So, that’s it.

Okay. And then, as far as sales reps are concerned, 50 reps, I mean wit the changeover and John Davis coming in, has there been any attrition for the sales force?

Not really. I don’t think we’ve really had any, we had some over the last before John got here, we had some attrition, but I don’t think we really had any. And again, John is a very, very seasoned strong leader, a very seasoned well respected. So, I would expect to see the sales team kind of railing behind him as he kind of gets to know the folks and lead that group.

Okay. Thank you.

Thanks, Joe.

Thank you. Our next question is a follow-up from the line of Jeffrey Cohen with Ladenburg Thalmann. Please proceed with your question.

Hey, just a couple more if I may. Could you talk a little bit about SG&A, it looks like it’s coming off a fair amount. Has there been any change in the structure as far as compensation?

No, I think, I’ll let Ashley comment, but I think on a big picture, I mean, 2015, there were a number of things and I made the comments in my closing remarks. There were a number of things that happened in 2015 that we don’t expect to repeat in 2016. So, there were a bunch of severance. There has been a number of changes at the senior executive level, at the Executive Chairman level, and we don’t expect those to repeat in 2016. We also had the injunction in some of the litigation that, again, it was a big number in the first part of the year. We don’t expect to repeat itself. So, again, there is a lot of – and those were in the comments, there is a lot of kind of one-time things this year that we don’t expect to repeat themselves, so, I don’t know, Ashley?

Just one other comment, I’ll make to that, we’ve had several open positions over the last couple of quarters for a variety of reasons that we’ll probably talk about in the future. We’ve just been delaying in filling a lot of these positions. So we have had the benefit of that too in the long-lived not filling those positions. We have reduced travel and support expenses too. So, there are lot of factors that are going on that are causing G&A to be not as smooth as you would expect to see on a quarterly basis.

I think the other thing, Jeff, I would comment, I’ve been here a year and you never know kind of when you come into a new company what the culture is from a financial discipline and how strong the controls are around people budgets and these types of things. I can tell you that the finance organization here is very strong. They’ve got excellent budgeting and tracking mechanisms. I know on a monthly basis, every one of my direct reports and their entire organization, how they are tracking, everyone of my people are below their spending. So it’s a very disciplined culture around spending and I don’t want to be, like say penny wise and pound foolish. We need to spend the money to drive the growth of the business, but we’ve got very strong controls and financial discipline in place.

Got it and one more if I may. Any further commentary as far as the BD expense for the second quarter in a row. You are up to now 1.88 for the year. I guess, what we are looking for is, any color as far as number of opportunities or specific expenses or is there any one opportunity or two opportunities that’s kind of getting further down the path or what should we expect to hear or how should we expect those special charges to go on in the future?

Yes, Jeff, you’ve been around this a long time and there is no, the soup making is sometimes a messy business and we’ve obviously looked at a number of different opportunities and I think the most I could say on that topic is that, we are encouraged because there are lots of opportunities, but we are being very disciplined and we are doing our homework. We don’t want to get into a situation where we acquire something and which we hadn’t. So, when we decide to acquire, we are going to have very strong conviction around what it’s going to mean for our business and we will be able to share with you what it will do for us and why we are doing the deal and again, I think, once again shows that the discipline and we are not just going to go off and do acquisitions, because we’ve got the financial wherewithal to do it. We are going to do smart acquisitions and you guys will be the first to know when we do one.

Thank you.

Thank you. Ladies and gentlemen, that marks the end of our question session. I would like to turn the floor back to management for final remarks.

Yes, thanks. Well, again, I appreciate everybody for joining this morning and while I said in the beginning, I wasn’t real pleased with the top-line. I think this is a inflection point for the company. We’ve been kind of eating the French revenue with kind of a zero for the first three quarters. Now we’ve got a direct team in place. We’ll be driving top-line revenue and margin improvement in that geography going forward. I just got back from Japan where we launched the new indication for BioGlue there at our most profitable market. We’ve also got, I think, some very encouraging data coming out on PhotoFix and that will continue to ramp. And I think the other, the kind of the – hopefully the surprise story here fore everyone is, kind of the turnaround of a tissue business. We told you after the warning letter got lifted, that we are going to back in and do a lot of work on tissue and improve supply as well as improve margin and we are doing it. So, to get a 1000 basis point improvement in margin from Q1 to Q4, I think is a pretty impressive accomplishment and we think that will continue into 2016. So, 2016 is set up to be pretty good and at the tail-end of it, we are working overtime here on the M&A side and we see lots of things we like and like I said, we expense some money, but you should feel good about it because we are being disciplined about it and we are going to try to get the right things for the company going forward. So, I am encouraged about 2016 and look forward to speaking with you guys all at the next quarter call. Thanks.

Thank you. This concludes today's teleconference. You may disconnect your line at this time. Thank you for your participation.