Rick Wise: And again, one more high level, you highlighted the making innovation pipeline a priority. There’s obviously the innovation pipeline in place. I mean, it sounds like probably M&A is not going to be a big near-term priority given everything else going on. But what do you mean by that innovation pipeline? Is there something beyond what we know and you’re not ready to talk about it? Or are there opportunities to invest internally and drive innovation in some way that we’re not appreciating?
Steve Williamson: Not really. There’s nothing that’s some secret program that we’re working on right now. We’re really focused on the AeriSeal clinical trial. I think there’s a lot of innovation with that product and I think it’s going to open our TAM up significantly over time. So that’s part of the innovation I’m talking about. I think our ability to continue to innovate our current product offering, make certain components easier to use or just refinements from a sustaining perspective are very important over time. Ease of use is obviously a big driver for adoption. And so, we want to continue to make the procedure as easy as possible for our physicians. So, we’ll continue with sustaining work in that area. And then as we go through and develop The Strat Plan and spend more time on that, there may be other areas that we go after.
But right now, the primary innovation that we’re looking at from an R&D perspective is AeriSeal and some kind of sustaining improvements. I think more broadly, when you think about innovation, there’s ways that we can innovate the way that we interact with physicians, the way that we interact with patients, so marketing innovation. And also, I think you’ve seen innovation from our sales perspective and the sales process that’s in place. So, we look to innovate across the organization coming up with creative ways to get after this really large TAM, this big untapped market with physicians that want to do more procedures, with motivated patients that will advocate for themselves. And in most cases, we have administrative buy in as well. So, it seems like all the pieces are in place.
We just have to innovate that work flow and the process to get these customers up and get their productivity continuing to grow.
Rick Wise: And just, Mehul, if I could ask a third here, gross margins came in 100 basis points better than I was looking for this quarter. And I look back at last year and I appreciate it’s not perfect example maybe, but gross margins sort of stepped up first quarter and second quarter and sort of stayed there basically at the 74 or better level in the last three quarters. Why are we still thinking about 74 to 75? What gets you to or at or above the upper end of that range? Just your perspectives would be very welcome.
Mehul Joshi: I’d say our Q1 gross margins were driven primarily by a favorable geographic mix. So, U.S. to OUS revenue. We had about 68% of our revenue coming from the U.S. and the rest of it from OUS. So, that helps quite a bit on the gross margin side. And then we also had some higher manufacturing capacity utilization, which helps. So that’s what raised the number in Q1. And it’s 30 basis points, 40 basis points, right? That rounds up to 75. So, we did see some benefit mostly from geographic mix. But as we get into the second half of the year, and that’s what we’ve guided to, that we expect higher volumes to move through the factory, and that is the primary driver in increasing gross margins. So, geo mix will also help, but that’s again volume-based and then better utilization. So, that’s what we expect in the second half of this fiscal year to drive gross margins up to 75%.
Rick Wise: Thank you.
Operator: [Operator Instructions]. Our next question comes from the line of Larry Biegelsen from Wells Fargo.
Vik Chopra: This is Vik Chopra in for Larry Biegelsen. Thanks for taking the questions. Welcome Steve and Mehul. So maybe just two questions for me. Steve, one for you. You talked a little bit about your priorities over the next year. Maybe just talk about what would success look like for you in the next 12 months? And then I had a follow-up, please.
Steve Williamson: Sure. We’ve got an aggressive program in front of us. I think we’ve got a new sales process that’s in place. We’re doing quite a bit from a clinical perspective, both with our CONVERT II trial, as well as our Japanese post-approval study, and ongoing from a marketing perspective reaching out and doing more training from a COPD physician and patient perspective, raising awareness there. So, I think good for me, looks like continued progress in all of those areas. We’ve got, as I said, I believe in the plan that’s in place and execution of that plan and our ability to do so would be a big win for us.
Mehul Joshi: And if I can add in, we’d also want to make sure that we’re meeting or beating our guidance and really focus on driving operating leverage through our P&L and through our business.
Vik Chopra: Good transition to my next question as well. You lowered your OpEx guidance for the year this afternoon. Maybe just talk about what’s driving that? Thank you.
