Greetings, and welcome to the CryoLife Fourth Quarter and Year-End 2016 Earnings 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. It is now my pleasure to turn the conference over to CryoLife management. Please go ahead.

Good morning and thanks for joining the call. I'm Ashley Lee, CFO of CryoLife. Before we begin, I would 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. These forward-looking statements are subject to a number of risks, uncertainties, estimates and assumptions that may cause actual results to differ materially from current expectations. Additional information concerning risks 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 last night. Now I’ll turn the call over to our CEO, Pat Mackin.

Okay, thanks, Ashley and good morning everyone. I am pleased to be here to report on our progress during the fourth quarter and CryoLife’s overall successful 2016. Although we came in just below our twice upwardly revised revenue guidance at $180.4 million for the full year. We did deliver adjusted earnings above our guidance. Furthermore, we believe our Q4 top-line performance does not reflect the demand issue or loss of momentum for our core products, and we will detail why we believe this in later comments. We suggest you view our progress on an annual basis as quarterly progressions can vary from time-to-time. We also reported a significant improvement in our gross margins for the quarter and for the year, which was primarily driven by our continued productivity improvements in our Tissue Processing segment. Those who have followed us over the past year know that 2016 was a transformational year for CryoLife as we laid out a series of new strategies and objectives and made substantial progress on each. As a result, we believe we had a very successful 2016 and are well positioned to drive continued growth into the future. One of the biggest organizational changes we made was to expand our cardiac surgery sales force. That move has led to increasing momentum in the market leveraging cross-selling opportunities and expanded awareness for On-X valves and their unique clinical benefits to patients. In addition, we believe our products are the preferred heart valve replacement technologies for patients under the age of 60, which represents about one-third of the market. Given our progress in the quarter and strong positioning, we are confident in our ability to continue to capitalize on the opportunity in the cardiac surgery market we serve. You may also recall our decision to focus the product portfolio…

Thanks, Pat. I will now review our results for the fourth quarter and full year of 2016. Compared to the fourth quarter of the prior year, total revenues increased 13% to $45 million. This was primarily driven by the acquisition of On-X and an increase in cardiac tissue revenues. On a non-GAAP basis, revenues decreased 2% compared to the fourth quarter of last year. The non-GAAP revenue decrease was driven primarily by 32% decrease in TMR revenues in the fourth quarter mostly offset by 9% increase in On-X revenues in Q4. Please refer to our press release for additional information about our non-GAAP results including a reconciliation of these results to our GAAP results. On a geographical basis, Q4 North American revenues, which includes the US and Canada were $33.7 million, up 8% year-over-year driven largely by the acquisition of On-X. On a non-GAAP basis, North American revenues were flat for Q4 compared to the prior year. Revenues from our European region were $7.6 million, up 30% year-over-year, primarily as a result of the acquisition of On-X. On a non-GAAP basis, revenues from this region decreased 5% driven primarily by decreases in BioGlue and On-X revenues. Pat previously discussed the drivers behind these results. Revenues from Asia-Pacific and Latin America were $3.7 million for Q4, up 38% year-over-year, primarily as a result of the acquisition of On-X, partially offset by a decrease in BioGlue revenues. On a non-GAAP basis, revenues from Asia-Pacific and Latin America decreased 5% year-over-year, primarily due to a decrease in BioGlue revenues, which were affected by orders from our Japanese distributor, partially offset by 19% increase in On-X revenues. I’d like to spend some time focusing on individual product lines and specifically on tissue processing, BioGlue and On-X which combined account for about 90% of our…

Thanks, Ashley. Before we open up the call for your questions, I’ll summarize our numerous accomplishments for 2016; provide an overview of the key initiatives for 2017. I am pleased much of the transitional items we needed to focus on in 2016 are behind us and as a result, CryoLife is now better positioned to compete in 2017. In 2016, we successfully repositioned the company to focus on cardiac surgeries with the On-X acquisition and the divestiture of our non-core product lines. Now we have a differentiated physician preference product line that is profitable and growing. We combined three sales – separate sales forces in the United States to one combined 51% channel focused on the cardiac surgeons. We enhanced our ability to execute by making key changes to our management team, both at the executive level and sales leadership and throughout the organization. We’ve made meaningful strides towards our goal of establishing ourselves as leaders in the cardiac surgery market and strengthened our ability to compete and win. Our gross margins expanded due to process improvements in growth and our higher margin products and more direct sales. With that in mind, let me outline our key operating initiatives for 2017. First, we are focused on achieving our financial guidance for revenue growth and adjusted EPS that Ashley just outlined. Second is to build on the integration activity completed for the On-X business in 2016 and deliver low double-digit non-GAAP revenue growth of the On-X portfolio excluding the OEM business. Third, we will transition our sales channels in Canada, Belgium and The Netherlands from a distributor model to a direct model; we expect to complete these initiatives by mid-2017. Fourth, we will continue to pursue future growth drivers for the company through our clinical programs which include enrolling patients in our PerClot and BioGlue China clinical trials. And fifth, we will continue to evaluate potential business development opportunities to enhance our focus in critical mass and cardiac surgery. Additionally, one of our 2017 goals will be to find a commercialization partner for NEOPATCH. We are very active and focused on business development and are hopeful we’ll have a successful 2017 on that front. If we accomplish these goals, CryoLife will enhance its position as a leader in the cardiac surgery market with continued upside potential for revenue growth and margin expansion. So in closing, we are very excited about the future prospects for the company and believe our experienced leadership team is well suited to deliver on our goals. I would like to thank all those at the company for their contributions in 2016. I am proud of the work that we do at CryoLife and to all of our employees, please remember your contributions are making differences in lives of so many people around the world. With that, we will now open the lines for questions. Operator?

[Operator Instructions] Our first question today is coming from Brooks West from Piper Jaffray. Please proceed with your question.

Thanks, good morning. Can you hear me?

Yes, we hear you fine, Brooks.

Great. Hey, Pat, I wanted to start with, I just wanted to make sure I understand the bridge of the results in Q4 to the guidance you gave in Q3. So, you gave a lot of information there. But just kind of large buckets, I think you said $1 million was from the tissue processing business and then, I want to make sure I understand the other buckets to kind of bridge back to your guidance, you could touch on that.

Yes, I think the best way to characterize this is, I mean, first of all we weren’t thrilled about the miss in Q4 and we were frankly surprised by a few items that we didn’t know about at the end of Q3 going into Q4 that we had, we probably would not have raised our guidance. The first bucket was On-X. There were two things that happened with On-X in the quarter that we didn’t know about going into Q4. The first item was, both I and Ash – both, you know Ashley mentioned, we have a non-strategic OEM business where we kind of quote parts of other companies, medical device companies, technology, they are not strategic and we really don’t talk about it much. It’s been a fairly stable business at about a $2 million a year. We were notified by one of those OEM suppliers late in the third quarter that their $300,000 order for On-X wasn’t going to show up and not only that, but the $500,000 we had in our budget for 2017 was also not going to show up. I am not allowed to comment further, because of confidentiality provisions in those agreements, but it’s just again that was a – it’s not a end-user commercial part of the business, it’s not something we focused a lot on and it was frankly a big surprise and that was – again, $300,000 in Q4 and $500,000 that we backed out to $2017. The second On-X issue was also a surprise and I don’t want to get into too much of the detail, but we basically had some discussions with our regulatory body in Europe and they weren’t happy with the speed at which we responded to some audit findings and they basically held up our certification…

And Pat, is there a lingering impact with the tissue processing in 2017? Or is that just a Q4 issue?

Yes, I think I mean, one of the comments I made early on was, and again, we understand we have to hit quarters and we need to kind of manage our business on a quarterly basis. If you look at the tissue business, the previous five years, it was growing 1%. Tissue grew 6% this year. So I actually think, again, we focus on the quarter as well. But I think if we step back a little bit and look at the tissue business at CryoLife, the previous five years, the business was top-line growing 1% and the gross margins on the business were around 40%. If you fast forward over the last 18 months of work, this business is now growing 6% and the gross margins were 56%. So it’s been a massive change taken the growth rate from 1% to 6% and the margin from 40 to 56. So I think, that’s probably to be honest, having been in this business for a long time, the cardiac tissue business is very difficult to predict quarter-to-quarter. I think on a yearly basis, we think it’s going to grow in the mid single-digits, but I think, hopefully that only answers your question.

Yes, yes, I got it. Okay, and then, I just had a couple on On-X if I could. You didn’t mention the PROACT II trial and I am wondering where you are on that? And then, can you talk about where you are with the sales force and your kind of coverage, account coverage for On-X versus where you might want to be ultimately with that product?

Yes, so on PROACT II, I mean, part of it’s just – given all we have to cover, just there is so much, we can’t cover everything. We’ve had some very good meetings on PROACT II with our investigators. We had a big meeting at SGS at the end of January and really have – I think what I think is strong alignment about kind of the next step. So that we are doing some – we are doing some checks, just some data checks on pulling together things for the protocol, but I think you are going to start to see us move forward and begin discussions with the FDA and to start putting the ball in motion for that study. So that’s actually tracking quite well and then your second question on the sales force, I think that’s another potential tailwind for us this year, because, I’ve talked about this on previous calls, when we merge three sales forces together, the two CryoLife sales forces which was the vascular surgery sales force, the CryoLife cardiac sales force and the On-X cardiac sales force and I have done a number of these in my career. There is always kind of fallout from it and we didn’t lose anybody in that process which they tell you typically you are going to lose 20% and we didn’t, which is great news. Two, you always have people who are out of position and so we probably had about eight territories that were out of position and those are now full and those were filled late in a year. So we have almost an entire region at CryoLife and starting the year in 2017 that didn’t even exist last year, which I think is very positive. And we’ve been very aggressive on the On-X. I think, one of the real positive messages here and again, I understood, a lot of focus on why we missed but at the same time, On-X delivered 22% growth in the quarter in the US in Q4, which again is kind of what I’ve been saying. It’s taken us time to get through the consignment and the contracting and all this kind of stuff and once you do that, you can start to see the – that we will start moving and that’s a market that’s not growing and we are growing at 22% and that’s a 90% gross margin business which is also why you are seeing our margins accelerate.

That’s great. And then, Pat, just last from me, did I hear you say low double-digit growth for On-X in 2017?

Yes.

Okay, perfect. Thank you so much.

Thank you. Our next question today is coming from Jeffery Cohen from Ladenburg Thalmann. Please proceed with your question.

Hey guys, can you hear me okay?

Yes, good morning, Jeff.

Hey, how are you? So, four, five things I wanted to get through, I guess, you can pick what you’d like, but can you go through On-X a little bit and talk about SKUs and then potential line extensions? I’ll just go to my list, but can you talk about the DFU study and what will be measured? Can you discuss little bit about tissue margins going forward? Can they be held at current levels going into 2017? And I guess, lastly, could you talk about the current size and scope of the sales force now in Canada, Belgium, and The Netherlands and what that might look like and what this avenue have been and maybe going forward? Thanks a lot.

Okay, sure. I’ll kind of go one at a time. Hey, Ashley, I’ll come back to you on the tissue margin. I have some thoughts, but I I’ll have you maybe give a little more color. So, as far as, there is a lot going on in On-X, again, I am glad you actually ask, so, the question around On-X’s SKU, there is still a number of things we are doing in the clinic with On-X to fully complete that product line. So for one, we don’t have a 17 millimeter aortic valve approved, which is the smallest size which has got applications for pediatrics where we are very strong with our SynerGraft product. It has huge applications in Japan given the patient size. So that trial is enrolling. We are almost done. I don’t have the timing off the top of my head, but that product line, we’ll actually have that 17 millimeter valve in Europe I think late this year and that would got to go through the FDA and the MHLW process in Japan. But those are two, I think real opportunities for the company on the 17 millimeter valve. Pediatrics and Japan. We are also in the clinic on a 23 millimeter mitral valves which is the largest mitral valve that’s kind of missing in our portfolio. And then third, we’ve got the AAP device, which again is just a valve with a Dacron graft on it used for repairing both the valve and part of the aorta. We are actually coming up, we’ve got some R&D projects there around different graft options. We want some surgeons that want oversized grafts and again it’s just rounding out the product line. So we’ve got a number of things going on in the On-X portfolio to give us…

Just big pictures one-time in nature for the quarter?

Why don’t you comment, he has actually spent a lot of time looking at this.

Yes, so, Jeff, for the balance of 2017, we fully expect tissue processing margins to stay in the mid 50% range. Longer-term, the margins can be dependent somewhat on revenue mix as well as processing volumes, but we are – as we sit here right now, we are pretty confident that that the margins we can maintain them in the low to mid 50% range. There are other things that we are working on right now from a productivity and efficiency standpoint that may allow us to even drive margin higher in the future, although that we are not really ready at this point to make any commitment to that.

And then last question I had was the sales force. So, in the US, I made some comments earlier about the combining of the three, we have a 51 person sales force in US that’s full trained in the field. In Europe, we’ve got about a 30 person team that’s full trained and in the field. The new go direct areas, so Canada, we will go direct with three reps and Belgium and The Netherlands we each go with one. That will be five additional kind of CryoLife reps in 2017. And as I made comments – both Ashley and I made comments in the script, those are typical, you notify the distributor and one of the reasons you are going to see lower Q1 and Q2 revenue and then see it accelerate in the back half at least from those areas. They’ll burn their inventory down, we will switch to direct operations and then you get higher revenue and higher gross margin once you do that. So, those are all planned for kind of at different phases in the first half, but both to go live in the second half.

Okay, and then, finally, 2017 gross margins, as far as the cadence per quarter, you made some commentary, can you just review that please?

The big issue that Ashley hit a couple times is, when we acquired On-X a year ago, we bought back a bunch of inventory from our distributors, particularly in the Europe and in the US we could go direct. There is about $2 million left of that sitting on our cost of goods sold line. That will flow through the P&L in the first quarter. So, our – as Ashley commented, I think our gross margins in Q1 are going to be kind of in the low to mid-60s and then once that flows through the P&L in the first quarter, Q2 through Q4, your margins will pop up to – I don’t know, Ashley, you can comment. Because again, that we were guiding to 68 to 69 for the year. But it’s going to be lower in Q1and higher in Q2, Q3, Q4.

Yes, Pat. So, you had that right. So, in the first quarter it’s going to be closer to the mid-60s and for Q2 through Q4, it will be closer to 70.

Okay, perfect. Guys thanks very much for taking the questions. I appreciate that.

Thanks, Jeff.

Thank you. Our next question today is coming from Jason Mills from Canaccord Genuity. Please proceed with your question.

Hi, good morning, Pat and Ashley, can you hear me okay?

Yes, we hear you fine, Jason.

Great. Lot to unpack you, Pat. But my basic question just focuses on your core business, which you sounded generally bullish notwithstanding some of the things your– left here in the fourth quarter that were trailed here, but as you think about your business, your three large pillars, BioGlue, On-X, and the tissue business and you talked a lot about some of the things you are working on with respect to those businesses. You’ve got On-X mitral tissue longer-term PROACT II, BioGlue Japan and BioGlue China and then on the tissue side, you talked about NEOPATCH and some of – you’ve seen significant improvement from 1% to 6%. So as you think about your core business, over the medium-term, you’ve already seen just a fairly good improvement. Where can this business go, Pat, given the market, given the growth of the end-market, but yet, some of the dynamics that you have that are going to be putting your growth, your margins relative to the overall market, what do you see this business looking like, sort of excluding M&A which is a second question that I have, over the next say, two to four years?

Yes, so, I think, again, you characterized that quite well. I mean, we have a lot of different things that are going on in the three pillars and I like the way you described that. But, so if you look at the tissue pillar and I commented earlier about, this business was growing 1% for five years at 40% gross margin and now it’s growing 6% at 55%. I would say, that’s a big improvement and obviously had a huge benefit to the company, in our profitability, in our margins and on our EPS. We are also doing some other things there. We’ve got, we are not sitting still, right. We’ve got the NEOPATCH as we talked about, that could be – that’s not in our guidance and if we can get a partner and find somebody up for that in a big market, that could be significant for us. We also have a couple new products that we frankly haven’t even really talked about both in the pediatric space. They are totally proprietary. Nobody else is doing them. They came from our focus on the cardiac surgery and the pediatric market. These are ideas that came from heart surgeons and we have one that’s a special conduit of saphenous vein or femoral vein used in a – what’s called the Norwood procedure. Again it’s fairly technical and complex, but this was the chiefs at one of the major institution said, why can’t you guys do this, we’ve done it. It’s been very popular. That’s a potential $10 million opportunity. I think one of the coolest things we are doing right now is with a major pediatric center, one of the top guys in the world, basically, we have a new service where we just started where for very small…

That’s really helpful. So couple other things and then, I’ll let some others jump in. Your growth over the longer-term seems to be – just based on like you are doing with your R&D taking it up, so wanted to ask you about that initiatives to typically within that, it seems like you are contemplating BioGlue China, you are contemplating PROACT II, you are contemplating PerClot trials in there. But want to see your comments and also your M&A strategy, as you’ve talked about in the past, you’ve seen other companies that are targeting different call points, in small cap, med tech, I know, you know who they are that have seen quite a bit of success focusing on a call play, the large guys are focused on it. You are seeing some of these companies are able to get to low double-digit growth executing that tuck-in acquisition strategy and then generating twice that on the bottom-line. I am wondering if you aspire to the things sort of the model and what – just typically again, just to the question I guess, am I missing anything on the internal R&D as to why that’s ramping a little bit here this year? And we have that in our model, so it’s not a surprise. Just want to make sure I am not missing anything and then on the M&A strategy if those – if you can give us a sense for what the opportunity culture looks like out there in cardiac surgery now versus sort of when you started a couple of years ago? Thank you.

First, I think you characterized the R&D, obviously, the R&D line is going up this year pretty significantly and that’s mostly driven by clinical. The big – the meet of the PerClot enrollment is going to be this year. Both you can – as that trial kind of executes this year, that spend will kind of come down next year. The other thing is BioGlue China is we are going to start enrollment in Q2. So, those are two big trials. One for the glue franchise and one for a brand new product. And that’s a – I mean, that’s a significant opportunity for the company. That’s a big market and high margin and pretty significant. So I think those two – and by the way they both hit in 2019. So again, I think as people think about the story, 5% to 7% growth with our current franchise, 70% gross margin once you get through Q1 and increasing profitability. The pipe basically is setting you up for nice additions in 2019. So, PerClot, BioGlue China, and then obviously the NEOPATCH which we haven’t even figured into this, because that’s been in our R&D number which we just hadn’t talked about it. Then shifting to the kind of the M&A side of things and by the way, on the R&D clinical side of things, there are a number of things that are also in there. I talked about them all on the call with one of the questions, 17 millimeter aortic trial, 23 millimeter mitral trial, mitral PROACT trial, larger graft. I mean, so, there is a bunch of things that are in R&D pipeline that we don’t really talk a lot about, but I’ve mentioned a number of them on the call today. If you talk about the M&A,…

Thanks, Pat. I’ll get back in queue.

Thank you. Our next question today is coming from Brooks O'Neil from Lake Street Capital Markets. Please proceed with your question.

Good morning , first time on the call and frankly first time in 30 years there been two Brooks is on the call at once. So..

Small world.

Small world. I am an older guy. So I sort of go into the model and look at it and if I am looking at it correctly, you guys are guiding for a drop in adjusted EPS in 2017 versus 2016. And so, I am trying to understand what the primary driver is. I think I might have sent you guys a little spreadsheet. It looks to me like the only place things could be jumping up in a big way is in the G&A line and A, is that correct? And B, if it is correct, what do you spend in the money on?

Ashley, would you – I know, I was just asking about this last night. Ashley, do you want to take that one?

Sure. So, Brooks, for G&A, for 2017, we are anticipating G&A on a quarterly basis to be roughly about $22.5 million to $23 million per quarter. So, a lot of it is really just, Pat alluded to this earlier about not having the sales force fully staffed throughout 2016 and as we have that sales force fully staffed that’s now going to annualize. The other thing is, we had a lot of transitional activities during 2016. The acquisition of On-X, divestiture product lines and so forth. So, as part of getting the appropriate management team and people in place, during 2016 a lot of that is annualizing in 2017, and that’s really driving some of the increase that you are seeing in G&A. So again, $22.5 million to $23 million on a quarterly basis, I will say that historically, just for modeling purposes for the analyst community, the first has historically been one of the higher G&A spending quarters for us and that’s because, we have our national sales meeting. It’s really a heavy quarter in regards to industry conferences and so forth. So, you may actually see G&A be a little bit higher in the first quarter compared to some of the other quarters during 2017.

Great. That’s helpful. And then, just secondly, obviously, you’ve gone direct with On-X in a number of international markets. You talked quite a bit about the success you’ve had in the US market which is terrific. Can you just give us some sense for how things are going internationally on On-X as well?

Yes, I would say, international is obviously a big question. I mean, in our direct markets – the biggest next direct market for On-X is Europe and we saw a 20% growth in Europe in On-X this year. The only snag as I mentioned at the beginning of the call was this is kind of regulatory issue with one of our product lines at AAP, you heard it a little bit in the fourth quarter, but they actually – our European team was looking at 20% growth. When you kind of get outside of Europe and you go to the kind of the rest of the world, the non-developed markets, I mean, there is entirely kind of price-sensitive – it’s mostly handled by distributors. So, we’ve done okay there. But we still have kind of work to do and we just find that our growth is much stronger when we got the direct channel to tell the message.

And you think both US and Europe where you have that direct opportunity could be good for On-X in 2017, right?

Definitely.

Great. Thanks a lot.

Thank you. Our next question today is coming from Suraj Kalia from Northland Securities. Please proceed with your question.

Good morning everyone. Can you hear me, okay?

Yes, good morning, Suraj.

So, Pat, pardon the background noise if any. I have a number of questions, Pat. So first and foremost, the 22% US growth in On-X, can you give us an idea of what does that translate into share in the mechanical valve segment approximately?

Yes, so it’s – in other roles I’ve had in the device industry, we had great kind of quarterly pulses of market share data. It just doesn’t – it doesn’t really exist in the state. So a lot of what we do on the share side is we just have to do a math and triangulate and try to figure out. So I mean, it’s there is no third-party market share service if you will on the valve side. I would say, we acquired the company, it was sitting at about 20% market share in the US. I’d say we are probably in the 23% if you just do the math and I think as we gain momentum, we are going to be pushing higher than that.

Got it. Pat, if I remember correctly, you’ve got 800 or so accounts were using BioGlue in the US. Specifically on On-X one of the key components that leads to final piece, as well as the cross selling that could occur in BioGlue plus On-X, again the number, 450 accounts comes to mind that you all were selling On-X in the US. Is there an updated number you can give? And am I directionally right in my approximate?

No, I think you are correct. In fact, we had some market research that we had done prior to the acquisition. That was one of the reasons that we are excited about the – sight from the data and all that is, just that given the small On-X sales force that they had, that they were in probably about 40% of the accounts and there is about a 1000 heart hospitals out there, again, some are obviously smaller than others. But, they were in about, you call it 400 accounts and we thought that you could almost double that to 800, exactly to your point, the BioGlue account. So if you got all your BioGlue accounts using On-X you would double the number of accounts you are in. So I think we probably started with On-X a year ago in the four – low 400s and I think we are probably up around 500. One of the things that you see there is – it takes time to do that account, do that 500th account show up at the end of December, because you haven’t even seen revenue from that account yet, versus if it was a year ago and you understand the consignment and getting your product on the shelf and the contracts and all that kind of stuff. So, that is a huge part of our focus and we think over time, the cross-selling that we are selling On-X valves to heart surgeons. We are selling pulmonary valves to heart surgeons. We are selling glue to heart surgeons. We are selling PhotoFix to – I mean, just that continued having our rep in front of that customer for different reasons and we’ve had some reps who have been extremely successful where we have a program right now where we are looking at kind of cross-selling and they are sending the updates on where they use On-X in a case, BioGlue in a case, PhotoFix in a case, where we are getting multiple products from CryoLife using a case. And I think that’s a real – that’s kind of cross-selling of that sales force is a real opportunity for the company. And that’s something we are working very hard on to and we can provide metrics on that going forward.

Got it. I guess, one more question for Ash and Pat one more question for you and I’ll hop back in queue. So, Ash, in terms of components of FY 2017 guidance, correct me if I thought this wrong and I’d love if any color you could provide on US versus OUS? What I heard was cardiac tissue to grow in mid single-digits, On-X to grow low double-digits, one, did I get that right? And two, would you care to break it out between US versus OUS, at least how you are picking through that?

Yes, I think you heard the components correctly, Suraj. For our tissue processing business, we are expecting that to grow in mid single-digits next year. That is almost all a US-based business, probably about 99%. So, everything that you are going to see there is going to be US-based. In regards to On-X, you heard that correctly also. We are expecting low double-digit growth excluding the OEM business for 2017. I don’t have the breakout at my finger tips, right now, but that’s something that I can give back to you after the call.

Perfect. Pat, finally, this is not per se on CryoLife, but I have to ask as a question. On NEOPATCH, you’d have obviously seen something that gives you the level of enthusiasm you got, Pat help me reconcile and this is just, I’ve covered the wound care space for a zillion years. Right now, there - the space is riddled with questionable marketing practices. Clinical trial data should really few and far between, there are questions about BLAs for the trials. Help – and there are really no pass-through payments anymore and that is a bundled payment of I believe 1410 or something. Help us understand to the extent that you can the excitement or enthusiasm about NEOPATCH and you all think you all can differentiate yourselves in this already crowded and fragmented market? Thank you for taking my questions.

Yes, I think it’s a good question. I mean, so, this was a project that the R&D team and it’s - actually they’ve done an excellent job and this is something that was here when I got here and it was a little often, to be fair to the company, it was a R&D project and the strategy hadn’t been set yet. So, I looked at it. So this is pretty interesting. And so I think to your point on clinical, my first thing is, let’s get this into a real clinical trial. I mean, we did a 50 patient first-in-man with people who are using current commercially available products and we’ve got very strong feedback on the handling characteristics of our products. We think we have a very good cost position which gets to your point about reimbursement. We’ve already submitted for our Hick-Picks code. So, yes, it’s a crowded space, but I think a lot of what we saw was that there is a number of different kind of really small players in this space that have partnered up with bigger companies and none of them have the 30 years of tissue processing experience in the brand and the quality, regulatory – the things that CryoLife brings to the party. So, I think it’s a – it’s something that we see the same kind of crowded field. But the fact that the matter is, I think we’ve got a great product and we’ve already had a meeting with – we’ve already had meetings with potential partners and we are through that. So, there is also some very interesting cardiac applications that we are investigating that I am not going to get into on this call. But I think for the fact that a lot of the money have been spent and I think we have a great product and as a partner, we have a way better kind of capabilities and some start-up little companies never done this before.

Thank you.

Thank you. We have reached the end of our question and answer session. I’d like to turn the floor back over to management for any further or closing comments.

Yes, so, I appreciate everybody joining in. Again, we weren’t thrilled about the top-line miss that hopefully people have a better sense of – we feel like our core businesses are strong. The three pillars as we’ve talked about, in Glue, in On-X and in our tissue businesses. We have a lot going on in all those. We put our guidance out in the 5% to 7% range. We think our margins after Q1 are going to be at 70%. We’ve got a lot going on in the mid-term pipe between – during the PerClot trial, between BioGlue China. This NEOPATCH is a bit a flyer from a – we have nothing in our guidance on that and we are working to partner that product. And then on the M&A front, we have some exciting things we are working at and I am not going to kind of promise the future here. But, we’ve spent a lot of time focusing on kind of what we do and where our strengths are and the types of products we are looking at, I think will make a huge difference for patients and the healthcare system in a meaningful way. And when you add that into CryoLife, I think it’s just going to make it a stronger and better company. So, we appreciate everybody joining in on the call and we look forward to the next update.

Thank you. That does conclude today’s teleconference. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.