Artivion, Inc. (NYSE:AORT) Q1 2023 Earnings Call Transcript May 7, 2023

Operator: Good day, ladies and gentlemen. And welcome to the Artivion First Quarter 2023 Financial Conference Call. All lines have been placed listen-only mode and the floor will be open for questions and comments following the presentation. At this time, it is my pleasure to turn the floor over to your host, Brian Johnston, VP of Gilmartin Group. Sir, go ahead.

Brian Johnston: Thank you. Good afternoon and thank you for joining the call today. With me from Artivion’s management team are Pat Mackin, CEO; and Ashley Lee, CFO. Before we begin, I’d like to remind you that the following statements comply with the Safe Harbor requirements of the Private Securities Litigation Reform Act of 1995. Comments made on this call that look forward in time involve risks 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 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 these forward-looking statements.

Additional information concerning certain 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 earlier today. With that, I will turn it over to Artivion CEO, Pat Mackin.

Pat Mackin: Hey. Thanks, Brian, and good afternoon, everyone. I am pleased to report that the first quarter of 2023 our business performed well, enabling us to deliver constant currency revenue growth of 10% year-over-year. Our strong performance was led by our On-X platform, which grew 24%, followed by BioGlue at 8%, stent grafts at 8% and tissue processing at 7%, all compared to the first quarter of 2022 on a constant currency basis. Our first quarter success demonstrates that our strategy is working. Under this strategy, we are driving increased revenue within existing markets, as well as in new geographies through expansion of our commercial footprint and by expanding our addressable markets through our additional clinical pipeline.

To that end, we recently received an approval order from the FDA for the PerClot PMA and expect approval for our recent PMA inspection is once our recent inspection is finalized. We have even more confidence in our ability to deliver on our financial commitments for 2023. Given our first quarter performance, we likewise are even more confident in our ability to deliver strong bottomline growth in 2023 and beyond. As you will recall from our Investor Day in March of 2022, we have committed to delivering annual double-digit constant currency revenue growth through 2024 and are focused on driving further operating leverage across our business to deliver adjusted EBITDA of $75-plus million in 2024. Our focus is clearly paying off. As I mentioned earlier, On-X revenues grew 24% on a constant currency basis in the first quarter compared to the first quarter of last year.

We saw double-digit constant currency year-over-year revenue growth in On-X across all geographies. We remain confident that we will continue to take market share globally with the only mechanical heart valve that can be maintained in an INR of 1.5 to 2.0. Additionally, stent graft revenues grew 8% on a constant currency basis in the first quarter compared to the first quarter of 2022. Demand for stent graft portfolio remains high and we expect it to grow even higher. As you may recall, to meet this demand, we hired additional staff in Germany last year, who are now contributing to our increased stent graft production and whose productivity we expect to improve throughout the year. As a result, we anticipate in 2023 and beyond being able to better meet the strong demand of our stent grafts and accelerate the growth in revenues of these products.

We are also executing extremely well on our initiative to grow product sales in APAC and Latin America through new regulatory approvals and commercial footprint expansion. In APAC and Latin America, we delivered first quarter constant currency revenue growth of 18% and 34%, respectively, compared to the prior year period. We continue to expect these regions to be important growth drivers over the coming years. As I mentioned earlier, we expect FDA approval for PerClot soon. Following this approval, we received a $14.3 million milestone payment, net of the amounts owed to our former partner and we will begin shipping products — revenue generating product to Baxter. As for PROACT Mitral, we are in dialogue with the FDA and look forward to potential approval in the second half of this year.

As we mentioned in our last call, approval for PROACT Mitral in 2023 is not factored into current forecast and would represent further upside from our revenue growth outlook for 2023. In addition to our progress in each of these three initiatives, we continue to make progress on the AMDS trial. We have now enrolled 51 patients in the PERSEVERE trial, which is our U.S. IDE clinical trial for PMA approval and up to 30 U.S. centers and approximately 100 patients who have experienced in acute type A dissection. The combined primary efficacy and safety endpoints of the trial are reduction in all-cause mortality, new disabling stroke, myocardial infarction, a new onset renal failure requiring dialysis and the re-expansion of the true lumen of the aorta.

We anticipate completing full enrollment in PERSEVERE in the second half of this year. Following a one-year follow-up period, we are assuming the trial meets its endpoints, we anticipate we should receive FDA approval for AMDS in 2025. In addition, our partner Endospan is making progress on the U.S. IDE called TRIOMPHE for its NEXUS aortic stent graft system. In that trial, there are approximately 44 patients enrolled and treated and a total number of 53 patients enrolled and approve of treatment. Endospan estimates enrollment completion later this year and PMA approval in 2025, again, assuming the endpoints are met. To reiterate, if these PMA trials proceed as anticipated, we expect FDA approval for AMDS and NEXUS in 2025. At that time, assuming we exercise our option for Endospan, these products would increase our adjustable market opportunity by an estimated $900 million.

Looking ahead, we intend to build on our strong growth in 2023, but continue to drive growth in the On-X aortic stent grafts, we have a clear differentiation in pricing power. We also expect to benefit further from our investments in commercial channels and new regulatory approvals in Asia-Pacific and Latin America. With that, I will now turn the call over to Ashley.

Ashley Lee: Thanks, Pat, and good afternoon, everyone. Total revenues were $83.2 million for the first quarter of 2023, up 8% on a GAAP basis and up 10% on a constant currency basis, both compared to Q1 of 2022. On a year-over-year basis in the first quarter of 2023, On-X revenues increased 23%, BioGlue increased 7%, tissue processing revenues increased 6% and aortic stent grafts grew 3%. On a constant currency basis compared to the first quarter of 2022, On-X grew 24%, BioGlue and stent graft revenues both grew 8% and tissue processing revenues increased 7%. On a regional basis, first quarter 2023 revenues in Asia-Pacific increased 17%, Latin America increased 36%, North America increased 10% and Europe decreased 1%, all compared to the first quarter of 2022.

On a constant currency basis, revenues in Asia-Pacific increased 18%, Latin America increased 34%, North America increased 10% and Europe increased 5%, all compared to the first quarter of 2022. Gross margins improved sequentially from the fourth quarter to 64.6% in Q1, compared to 65.7% for the first quarter of 2022. The decrease compared to Q1 of 2022 was driven by inflationary impacts on materials and labor, as well as geographic and product line mix. G&A expenses in the first quarter were $50.4 million, compared to $39 million in the first quarter of 2022. Excluding non-recurring acquisition-related business development expenses and benefits, and other nonrecurring charges, G&A expenses were $45.2 million for the first quarter of 2023, compared to $39.7 million in the first quarter of 2022.

R&D expenses for the first quarter were $7.2 million, compared to $10.1 million in the first quarter of 2022. The decrease in R&D spending primarily results from savings from the cessation of the PROACT 10A trial. Other income and expenses include $6 million in net interest expense and foreign currency translation gains of approximately $1 million. On the bottomline, we reported GAAP net loss of approximately $13.5 million or $0.33 per fully diluted share in the first quarter of 2023. Net loss for the first quarter of 2023 includes a pretax charge of $4.8 million related to contingent consideration for the acquisition of AMDS and the impact of valuation allowances on our deferred tax assets. Non-GAAP net income was $769,000 or $0.02 per share in the first quarter.

Non-GAAP income includes foreign currency gains and excludes business development and other non-recurring charges. As of March 31, 2023, we had approximately $30.8 million in cash, $314 million in debt and the full $30 million available to us under our revolving credit facility. Non-GAAP adjusted EBITDA for the first quarter of 2023 was $10.8 million, compared to $10 million for the first quarter of 2022. Please refer to our press release for additional information about our non-GAAP results, including a reconciliation of these results to our GAAP results. And now for our outlook for the remainder of 2023. Given our momentum in Q1, our price increase initiatives, anticipated improvement in supply of stent grafts and anticipated FDA approval for PerClot, we are raising our revenue guidance and now expect constant currency revenue growth of between 9% and 12% for the full year of 2023, compared to the previous range of 8% to 12%.

We expect revenues to be in a range of $337 million to $348 million, compared to our previous range of $331 million to $343 million. We continue to expect revenue growth will accelerate more meaningfully in the second half of the year compared to the first as recent hires in Germany become fully productive as we continue to pursue price increases for products where we have clear clinical differentiation and with the approval of PerClot. With our strong first quarter performance, continued topline revenue growth, general expense management and a decrease in R&D spending, we are also raising our adjusted EBITDA guidance from a minimum of $50 million to a minimum of $52 million for 2023. This will put us on track to meet our 2024 adjusted EBITDA commitments we made in March of last year at our Investor Day.

Further, we do not anticipate the need to raise additional capital to fund our debt obligations, our investments in our channels or our pipeline in the foreseeable future. We expect we will be able to comfortably service our debt and continue to invest in growth. And finally, our Term Loan B contains no financial covenants that would place us in default unless we were to have more than $7.5 million drawn on our revolving credit facility at the end of any calendar quarter, which we do not. As of now, we have the full $30 million available under our credit facility and do not foresee the need to draw on it. As a reminder, our convertible notes do not contain any financial covenants. Overall, we are laser-focused on continuing to deliver strong top and bottomline growth to afford even greater flexibility as we consider our future obligations and efforts to deliver meaningful shareholder value.

I will turn the call back over to Pat for his closing comments.

Pat Mackin: Yeah. Thanks, Ashley. So as you just heard, 2023 is off to an excellent start and we expect that momentum to continue. Our strategy is working and generate what we expect to be meaningful EBITDA growth this year. We also took guidance up this quarter and believe that we will deliver on our financial commitments for the following reasons. First, continued strong On-X performance, together with potential for PROACT Mitral later this year. Two, stronger performance in our stent graft business due to recent staffing improvements at our German facility and other supply chain improvements. Three, continued strong performance in Asia-Pacific and Latin America. Four, growth in BioGlue and PerClot to do recent regulatory approvals.

And then finally, these two U.S. clinical trials with AMDS PERSEVERE and Endospan NEXUS TRIOMPHE are currently enrolling and should enroll this year. Combined, we expect our total addressable market will increase by $900 million in 2025, assuming we exercise the Endospan option. Through the remainder of the year and through 2024, we continue to expect to grow double digits on a compounded annual growth basis and to generate greater than $75 million in adjusted EBITDA in 2024, which will end up reducing our net leverage to less than 3 times, despite the headwinds we face from inflation and its impact on gross margins. In conclusion, we continue to advance our goal of being the market leader in aortic repair and we expect 2023 to be a standout year for the company.

I want to thank all of our employees around the globe for delivering on our exceptional first quarter results and the continued dedication to our mission. With that, Operator, please open up the line.

Q&A Session

Operator: Thank you. And our first question comes from Rick Wise from Stifel. Go ahead, Rick.

Rick Wise: Good afternoon. Hi, Pat. Hi, Ashley.

Pat Mackin: Hi, Rick.

Rick Wise: Nice to see the quarter and great to hear the PerClot news. Just maybe my first question was a couple of parts to it on PerClot. Talk to us in — if you could just flesh out some of the comments in the press release. Once the inspection is final, help us understand what’s involved in that and when it’s actually to occur. And just — when — and then sort of going on beyond that, when would you expect to start shipping, when do you — when does that $14.3 million, I think, was the number come in the door, how are you going to put it to use, just maybe sort of two basic parts there? Thank you so much.

Pat Mackin: Yes. Yeah. So the first one, Rick, is the way this process works is, part of the PMA is that they come in for a pre-approval inspection and that was completed about a month ago and they have to write up their report and sent it over to the branch. So that’s basically what we are waiting on. And again, that could happen kind of any day now, and as soon as that happens, we should get the green light and get the approval. So I am hesitant to commit what regulators are going to do. But I think we are kind of at the end of the line, we have received the approvable letter and we are just waiting for this kind of inspection paperwork to clear. And then once that’s done, we should be able to ship product to Baxter within probably — they have got to do some paperwork on their side, but — and they are already starting to work on that, given the approvable letter.

So we think in this quarter, we would be shipping product. And then, Ashley, maybe you can comment on when we get the cash.

Ashley Lee: Yeah. I mean, I think, it’s within a couple of weeks after we transfer all of the PMA documentation to Baxter. So, again, assuming that we get the final approval from the FDA, which we expect, we should get those funds later in the second quarter. And then, in regards to what we plan to do with it, it will certainly help to strengthen the balance sheet and we will continue to move forward and drive revenue growth and drive cash flow. And in the event that we don’t find good alternative uses, we will consider paying down debt at some point in the future.

Rick Wise: Yeah. That sounds good. Maybe just turning to the sort of a larger picture, you have been clear, we have heard a lot this quarter, Pat, I am sure you have listened or heard about some of them from other MedTech companies larger and smaller, that the environment is improving, that volumes are recovering, that the macro is getting less of a headwind, supply chain, blah, blah, blah, blah. I am just curious from your perspective and from Artivion’s vantage point portfolio, et cetera, how are those factors affecting you, how does it benefit this quarter and how do we think about that kind of dynamic, improving macro dynamics giving you confidence about the rest of the year? Just if you could put all that in context for us.

Pat Mackin: Yeah. I mean, clearly, a lot of the — we never really experienced and we have talked about this previously. We never really experienced a lot of staffing impact for us, because of the nature of our procedures. We grew every quarter and COVID except for one. So the staffing stuff is annoying it may move a case a day or two. It causes inefficiencies. It causes a lot of stress on our commercial team. But we never really felt a lot of that. I mean there was definitely some noise in Europe this past quarter with striking, and again, how much that really impacts things, it didn’t really impact us that much. So, again, I don’t think we really — because of the portfolio we have. I don’t think we really were subject.

At the end of the day, if there’s a staffing issue, they somehow find a way to get the cardiac stuff done, partly because of the urgent need of the patients, as well as the — in most cases, the profitability of the procedure. So we have been pretty lucky not to get subject to the staffing, but it does seem like it’s getting better.

Rick Wise: Good. Good. And Ashley, it went by sort of quick and I want to make sure I understood what you were saying and make sure I understand what you are referring to. You talked about price — your pricing moving higher. I am hearing a lot of that in MedTech as well. If you could just kind of like say it again and how — what was the positive impact of item or price in the first quarter? What are you factoring into your guidance and your expectations?

Ashley Lee: Yeah. Let me take that one, Rick. So we are not going to get…

Rick Wise: Yeah.

Ashley Lee: We are not going to get specific because of competition and things like that. So just suffice it to say that, we had some technologies in our portfolio that are very proprietary that nobody else has. We also have a very high demand on those technologies. So we are in those cases raising prices significantly and you haven’t even seen them in our numbers yet. So those are going to be things that you are going to see in Q2, Q3 and Q4. So I am just going to leave it at that and not going to get more specific.

Rick Wise: Okay. I totally get it, but good to hear. Thank you so much. I appreciate it. Thank you.

Ashley Lee: Thanks, Rick.

Pat Mackin: Thanks, Rick.

Operator: Our next question comes from Suraj Kalia from Oppenheimer. Go ahead.

Unidentified Analyst: Hi, Pat and Ashley. This is James on for Suraj.

Pat Mackin: Hey. Hi.

Ashley Lee: How are you?

Unidentified Analyst: Congrats. I am good. I am good. Thank you. Congrats on the quarter and thanks for taking the questions. So I guess to start off kind of what are the kind of key sales and marketing changes in our rep commission territory assignments that you will do post-Mitral Approval?

Pat Mackin: Yeah. We haven’t even — I mean the great thing about the Mitral is kind of unique in this situation. It’s one of the few product launches I have been involved with. The product is already on the shelf. It’s a label change, right? It’s just a — you are changing, if we were to get approval, it’s just changing the label for the INR. So, from a launching standpoint, we have already got all of our commission plans and everything built out. You can see what On-X grew 24% in the first quarter without PROACT Mitral. So, again, I — we don’t really anticipate having to make any changes other than the launch plans and marketing plans and those kind of things, surgeon education and those things. Our commercial teams are well set.

Their comp plans are well set. And the product, in many cases, already on the shelf, all we have to do is get the label change and then market from there. So it’s a different launch than what you normally think of as rolling out a new product off the assembly line versus it’s literally on the shelf already.

Unidentified Analyst: Got it. Thank you. And kind of just one more product as I believe you said supposed to be published, I believe, this weekend…

Pat Mackin: Yeah. It could be — yeah. Productivity is going to be presented at ATS in Los Angeles on Saturday afternoon out there at the AATS meeting by Lars Svensson, who’s the Chief of Cardiac and Vascular at Cleveland Clinic. So that will be presented on Saturday afternoon.

Unidentified Analyst: Okay. And I guess on a follow-up on that publication details, I know you previously talked about a journal for it. Any idea on timing on that or we are still too far out?

Pat Mackin: I don’t know that — I do not have an update on the timing of that. Obviously, the — this is the presentation is the trigger for that. So this is — that’s the first public data that’s going to be out there on it. So from there the publication will follow, but as soon as we have an update on that, we will let people know.

Unidentified Analyst: All right. Appreciate it. That’s all from our end. Thank you.

Pat Mackin: Sure.

Ashley Lee: Thanks, James.

Operator: And our next question comes from Jeffrey Cohen from Ladenburg Thalmann. Go ahead.

Jeffrey Cohen: Oh! Hey, Pat. Ashley, how are you?

Ashley Lee: Good Jeff.

Pat Mackin: Hi, Jeff.

Jeffrey Cohen: So a few questions from our end. Nice topline for the quarter, congratulations. Could you talk about the G&A line a little bit as far as some of those there’s $5 million noncash in the G&A line? And then maybe from a larger perspective, talk a little bit about the commercial organization. Does it seem like you are ahead of or catching up with the growth on the topline as far as your increased trajectory? Does it feel like your prep for the coming year or two or there’s going to be more gains on that front and as that relates to leverage?

Pat Mackin: Yeah. I think I will take the second one and then I will let Ashley take the G&A question. As far as the channel goes, I mean, our channels, if you look around the world, our channels are pretty well set in the U.S. we are not adding at this point. Europe is pretty well set. We are not adding — we have gone direct in a couple of countries where we may have added a handful of people. The real expansion has been primarily in Asia and we are basically titrating that investment with the growth. So, for example, when we get a product approval or multiple product approvals, then we will potentially add a rep there, but that’s starting to kind of ask method out now. And the number of people we are bringing on there is less this year than last year.

So we are starting to actually get leverage out of both of those regions. So they are actually growing much faster than the investment we are making in those regions. So I think our channels are actually in pretty good shape and we are going to start to see leverage as we push more product through those channels. That’s what we have been talking about as we move into 2024 and seeing that EBITDA jump. That’s one of the triggers for that is actually pushing more product through our existing infrastructure. So maybe — and then, Ashley, you could take the G&A question.

Ashley Lee: Yeah. So G&A reported was a little over $50 million. And as I stated, Jeff, there was approximately $5 million included in that for contingent consideration changes related to the Ascyrus acquisition. And that is a balance that changes every quarter, and there are multiple factors that go into determining what the adjustment is, their discount rates, their probabilities of success, there’s time and so it’s kind of difficult to precisely predict what that’s going to be on a quarterly basis, but this quarter, it happened to be close to $5 million. If you look at the remainder of the G&A, about $45 million, it was higher than the prior year. But there were some things that we did in the first quarter of this year that we have not been doing over the last couple of years.

We had sales meetings. We went to some really large major medical conferences in person. So our G&A expenses were elevated in the first quarter compared to where they were in previous first quarters, and likely, they are probably a little higher than what they are going to be for the remaining quarters of this year as well because we are not going to be, again, having sales meetings throughout the year to that magnitude and although we will be continuing to go to some medical conferences, probably, not as heavy as the cadence as we had in the first quarter.

Jeffrey Cohen: Okay. I got it. And then I know the previous question on pricing, but I am more curious on the margin front. How does it feel out there as far as your cost, as far as labor, transportation, logistics, et cetera? And is Q1 margin that you feel pretty comfortable with for the balance of the year?

Ashley Lee: I think margins are going to be…

Pat Mackin: Yeah.

Ashley Lee: You want to take this, Pat?

Pat Mackin: No. Go ahead.

Ashley Lee: So, margins, we anticipate being relatively flattish throughout the year, a lot of it’s going to depend on how successful we are and securing these price increases that Pat talked about a little bit earlier. Another thing that dynamically comes into play is, inflation was really high in the second half of last year and some of those layers of inventory are going to be flowing through 2023. So you have got that offsetting dynamic. But taking all of that as a whole, we think margins are going to be relatively flattish this year, especially compared to the prior year.

Jeffrey Cohen: Okay. And then just one quick one, if I may. Do you see any or seen or heard of any robotic placements going on of any equipment or robotic testing of placements going on?

Pat Mackin: We don’t really pay much attention to that, to be honest with you, it’s not really in our field.

Jeffrey Cohen: Okay. Got it. Thanks for taking my questions. Appreciate it.

Ashley Lee: Thanks, Jeff.

Operator: Thank you. Our next question comes from Frank Takkinen from Lake Street Capital. Go ahead, Frank.

Frank Takkinen: Hey. Thanks for taking the questions and congrats on the progress. I wanted to start with one on On-X, looks like growth continues to be really solid there. Could you just take us a little deeper into what the primary growth drivers are there? Is it related to more competitive wins, does the market just feel better out there and you are getting a little rebound from a choppy market over the last few years or is it something completely different?

Pat Mackin: I mean, On-X has grown double digits for the last, it’s growing — I think the CAGR over the last five years is 13%, 14%. So this is a big jump, a lot of this — I mean, we grew double digits in every single market. I think part of it is just the data that keeps coming out on the self is extremely strong. Our reps are well trained and I think it’s just — it’s become the valve of choice, I mean, it’s the market-leading mechanical valve in the U.S. We are the only valve that has a low INR. So I just think it’s really taking hold kind of around the world and you just continue to see strong performance on it.

Frank Takkinen: Okay. Maybe one follow-up directly to that. I think, obviously, the stock price reflected pure panic when the data came out on PROACT 10A and I think maybe there was some assumptions around the demand profile of the device when that occurred. It occurs to me that, that has not at all manifested in how the product is growing, would you agree and do you think this continue to be a 20%-plus grower maybe now?

Pat Mackin: Yeah. We guided in our — back in March last year, we guided 10% to 15% growth for On-X over the planning period up to through 2024 and we have grown last year, we grew On-X 13%. Like I said, the CAGR has been right in that between 10% and 15%, obviously, it was higher in the first quarter. There’s a lot of international stuff there. So, I mean, we are not going to like immediately jump to change the guidance on On-X. I think we are comfortable with growing 10% to 15%. But to me, I mean, the PROACT 10A was a drug trial. We were changing the drug. The drug failed, right? So it had nothing to do with the valve. It was basically Eliquis can’t protect the valve and that data will be presented on Saturday. But the On-X Valve performs extremely well with completely low INR, which we have shown in multiple studies and I think that will give people confidence. But in the end that the valve didn’t have the problem, the drug had the problem.

Frank Takkinen: Right. Good color. One last one for me. APAC and Latin America continue to outpace growth of the rest of the organization looks good. Can you just maybe run through what you are looking at for 2023 as the key catalysts or regulatory approvals or investments that need to be made in that geography to maintain that growth profile?

Pat Mackin: Yes. It’s a pretty simple kind of algorithm. We get product approvals of our portfolio in new markets. So I was in Australia in the first quarter. We now have our Frozen Elephant Trunk approved there, the NEO. We have got our thoracal abdominal system approved there in a market we have never been in. We are waiting for approval of our AMDS in Taiwan, right? So just as these approvals come through, these are our existing products that are just getting paperwork to get the regulatory approvals, and in some cases, when we get enough critical mass, we put feet on the street. And as I mentioned earlier, we have overinvested the growth rate or around the growth rate previously, but we are now backing that down. So you are now going to start not only getting the good growth, but you are going to start getting leverage around those regions.

But it’s a simple equation, it’s get product approvals and add reps and it works, right? We said we think that those regions can grow 25% to 30% through 2020 — into 2024 and we have done that last year, we are doing it now. So I think the playbook is working.

Frank Takkinen: Thanks. Thanks for taking the questions. I will stop there.

Pat Mackin: Thanks, Frank.

Operator: And that appears to be the last question at this time. I would like to now turn it back to management for any closing remarks.

Pat Mackin: Yeah. Like I said, we are pleased with the quarter and we feel like we have got momentum coming out of Q1. You heard in my comments, I just mentioned a few things that you heard my comments, we have hired a big chunk of people in our manufacturing facility in Germany in the fourth quarter. They were trained in the first quarter and they are just now coming online. So we expect the supply to improve and that to grow significantly. I talked about our pricing power with our proprietary — some of our proprietary devices, which we think we can get meaningful price increases from starting kind of now. As we haven’t even seen that in the gross margin. PerClot, we have got an approvable letter from the FDA. We are just kind of waiting on the final inspection to get closed out.

We beat the first quarter. We have raised our guidance on the top and bottomline and we just need to execute, keep doing more of the same, and we feel like we are set up for a very good 2023 and we expect to enroll two PMA trials this year, in the second half of the year. So things are moving forward and we are very bullish on what’s in front of us. So thanks everybody for joining in on the call.

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