AngioDynamics Inc (ANGO) 2014 Q2 法說會逐字稿

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the AngioDynamics fiscal second-quarter 2014 conference call.

During today's presentation all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator Instructions).

This conference is being recorded today, Thursday, January 9, 2014. I would now like to turn the conference over to our host, Mr. Bob Jones, investor relations. Please go ahead, sir.

Thank you. Welcome, everyone, and thank you for joining us for AngioDynamics conference call this afternoon to review the financial results for the fiscal 2014 second quarter, which ended on November 30, 2013. The news release is available on AngioDynamics website at www.AngioDynamics.com. A replay of this call will be archived on the Company's website.

Before we get started, during the course of this conference call the Company will make projections and forward-looking statements regarding future events, including statements about revenues and earnings for the fiscal year 2014 third quarter ending February 28 and the full year ending May 31. We encourage you to review the Company's past and future filings with the SEC including, without limitation, the Company's Forms 10-Q and 10-K, which identify specific factors that may cause the actual results or events to differ materially from those described in forward-looking statements.

Finally, during the question and answer period today, we would like to request each caller to limit themselves to two questions, and encourage callers to re-queue to ask additional questions. We appreciate everyone's cooperation with this procedure. And, with that, I would now like to turn the call over to Joe DeVivo, Chief Executive Officer.

Thank you, Bob. I am very pleased to report that the growth story is returning to AngioDynamics. Our revenue of $88.6 million this quarter is ahead of our plan, giving us good momentum as we head into the second half of the fiscal year.

Our worldwide sales growth of 3% net to supply agreement is an improvement over the 1% posted last quarter and 2% the quarter prior -- during the fourth quarter of last fiscal year. So that is three quarters of improvement. This topline acceleration is due to an overall higher performance in sales and marketing execution, as well as growing acceptance of key growth drivers in each of our three business segments.

Pretty much for the first time since the acquisition of RITA, the peripheral vascular business, which is over 55% of our Company, grew 7% worldwide, up from 5% last quarter, and became the fastest growing business of the Company. Driven by $2 million in AngioVac sales, the team delivered a strong and balanced performance.

AngioVac was not only -- the only positive story as the team delivered double-digit growth in EVLT, while maintaining a flat fluids management business in a declining market. And strong maintenance of our core product lines pretty much proved that the organization in our sales and marketing PV teams can grow new business while preserving the core.

I was very pleased this quarter with the entire team's delivery as we have had more sales territories in the money than we have had in a long time. Oncology, which is our smallest business, grew 5% globally, up from 4% last quarter, with double-digit growth in the US, partially offset by sluggish international capital sales. When you think about it, the two combined, both peripheral vascular and oncology represent 70% of the Company, which today has collectively grown at about 5%.

The balance of our business, vascular access, improved to negative 4% from negative 5% quarter over quarter. We all know this has been our area of focus and also, quite frankly, in my view, the business with terrific opportunities for growth in what I believe is the very near future. The negative 4% growth in the quarter brings the whole Company down from a mid-single-digit grower, but in my view that won't be for long.

I have seen recently this business firming up. And even without tip location, the clinical value that BioFlo brings is being appreciated in the marketplace. I believe in the not-so-distant future we will see this business level off, even without tip location, and move to at least market growth with it. If that happens, we should be a mid-single-digit grower in the foreseeable future.

The pieces in the business are step-by-step following into place. Regarding tip location, I expect it to see clearance before the end of the year, but, of course, it hasn't happened yet. Our partner did receive a few more questions from the FDA reviewer at the end of November and, subsequently, answered them before the Christmas holiday.

If the FDA is satisfied, approval is imminent. If not, our partner will continue to answer questions until they are satisfied. We are, though, fully prepared for an immediate launch in the US following approval.

Product is in inventory. And in December the entire sales force for vascular access was brought in and trained to support and sell the Celerity tip location system.

Our experience with the Celerity tip location system in Canada thus far has been very satisfying. It may be an even better product than we first believed and it seems Celerity has some real competitive advantages to the competition.

BioFlo continues to be an important part of our strategy with now about 35% of our global PICC revenue being BioFlo. We also started to ship our first BioFlo ports this quarter, which is a really nice add to a very complete and compelling port line. There is no tip location in our [wayward] ports and I expect to make headway in that category.

Similar to the benefits of BioFlo and PICCs, ports even have a longer dwell time in patients and have higher total occlusion rates than PICCs. The difference is the complication to total port occlusions in cancer patients can mean a much higher probability of patient death, a far more dire complication than upper extremity EVT for PICCs.

Now, it will take us some time to compile data, demonstrating and proving that BioFlo can impact this product and important clinical efforts are being constructed. That said, it is nice to have this product in the market. Regarding BioFlo dialysis, we expect to hear from the FDA in March 2014 as everything has been submitted, so hopefully with a positive outcome.

Moving on, this quarter I made a move to promote John Soto, the Chief Commercial Officer, following his very successful turnaround of our PV business. In this role, peripheral vascular, vascular access, oncology, and international sales and marketing efforts all now report in to John. I am excited about this move as my objective is to accelerate our international opportunity through an improved alignment of our business and priorities.

Moving forward, we will continue to increase our direct investment internationally and focus also our business development activities there. The last several quarters of international performance on the whole, in my view, is suboptimal. And extra attention is now being placed to get it in line with the success we have been able to generate in the US.

On the operating front, we continue to make progress. We announced an operational excellence program, which, over the next three years, will deliver an additional $15 million to $18 million of cost savings designed to make the Company more lean and efficient.

We also have an important milestone in a few weeks where we will go live on a single Companywide ERP system. This should allow the Company to consolidate from three different systems into one more efficient one, provide more real-time data for our executives, and help expense management more readily.

With that, I would like to turn the call over to Mark Frost, our Chief Financial Officer. Mark?

Thank you, Joe, and good afternoon, ladies and gentlemen. Building on Joe's commentary, we have continued to drive improvements to our performance, overachieving on the revenue front and meeting adjusted earnings and cash generation targets. I will start with our quarterly results and then move to guidance for both the third quarter and fiscal year.

Starting with revenue, total revenue was up 2% from prior year, but excluding the impact of the plan wind-down of our supply agreement, we were 3% higher than prior year. This is an improvement from the 1% growth in quarter one and a better measurement of our sales performance.

Consistent with our strategies to bring faster growth, higher-margin products to the market, our growth drivers continue to increase through impact from the overall business. AngioVac delivered $2 million in sales, while BioFlo's market penetration reached 35% of global PICCs now sold with this disruptive technology.

During the quarter, we also launched BioFlo ports, which Joe mentioned, which helped drive growth in this product line for the first time while contributing to the overall improved performance in vascular access. Microwave, again, doubled revenue in the quarter.

Turning to product performance, peripheral vascular increased 7% to $48.9 million, reflecting over 20% growth in EVLT and the larger contribution of the AngioVac. EVLT's results were driven primarily by exceptional US performance and the conversion of our competitive customer as well as the benefit of the new NeverTouch, a next-generation product.

Fluid management again was essentially flat, reversing its past negative result as it came in above our expectations. Vascular access was down to $25.6 million compared to the prior year, but a sequential improvement from this year's first fiscal quarter.

PICC is expected to continue to be impacted by the lack of tip location and sales are down 5%. Ports, however, grew 1%, reversing the erosion experienced over the past two years, driven in large part by new product introductions as well as the previously mentioned launch of BioFlo ports.

Oncology surgery growth improved to 5%. Growth was lower than we expected, reflecting mixed performance within NanoKnife, which experienced a positive growth in the US, but a tough quarter internationally as a number of NanoKnives did not close despite the strong pipeline.

On the thermal ablation front, driven by strong US microwave results, growth came in at 11% for the quarter. From a geography perspective, US revenue increased 3% while the international markets demonstrated slight improvement with 1% growth. While we did show positive growth, we are disappointed with our international performance and we believe we have significant potential to improve revenue and its profit contribution.

Some of our current issues relate to regulatory delays in registering new products as well as the indirect impact of the warning letter, which has prevented our ability to file CFGs in some of our core products not yet registered in all of the countries around the world. As you are aware, we have operated under a warning letter for the past two years at our Queensbury site and are awaiting the FDA to perform their final audit, which we believe should result in the letter being lifted.

We recently announced a leadership change which we expect will be a catalyst to improve our performance. In addition, as previously discussed in our prior earnings calls, we are assessing further M&A options to accelerate our growth on the international front.

Now, continuing down the quarter's income statement, gross profit totaled $44.9 million, or 50.7% of sales, flat with prior year's second quarter results. Our gross margin return was lower than expected, reflecting a product mix impact in oncology, which is our highest margin business as well as an increase in royalties because of the stronger performance of EVLT.

Now, while our broader product portfolio and national account efforts have led to new GPO IDN wins and contributed to our sales group, our admin fee rebates have increased, reducing the margin return. All of these points are expected to flow through to our full year results, which I will touch upon when I discuss our guidance.

Now, turning to expenses, our operating expenses totaled $43.4 million, including $2.7 million of acquisition integration and restructuring items, of which $1.6 million is associated with the Navilyst acquisition, including some startup costs related to our recently announced operational excellence program, which is designed to generate significant savings over the next three fiscal years.

In addition, we had costs related to our refinance, prior litigation with Bard and the Clinical Devices acquisition. Now, sales and marketing expenses did increase $2.4 million from last year as a result of a planned increase in sales territories leading into 2014, as well as our investment in AngioVac clinical specialists' team, which we have previously discussed on past calls.

An important point to also remember is that we experienced significant sales attrition during the first half of fiscal 2013, which artificially reduced the run rate, particularly for quarters two and three. Lower G&A offset some of the sales and marketing increase. We also incurred $1 million in medical device tax and $0.9 million of contingent costs, which were basically new costs in the first half of fiscal 2014.

As announced in December, we have begun the next phase of integration on the operations side of our business. Our operations excellence initiative is expected to generate savings of $15 million to $18 million within the manufacturing and supply chain areas, and improve our gross margin return by 400 to 500 basis points with the improvements starting in fiscal year 2015. These activities are envisioned to take three years to fully implement and will involve a $5.4 million CapEx investment, most of which will occur in fiscal year 2015 and 2016.

We also anticipate $4.7 million in restructuring charges with $1.5 million being cash and $3.2 million non-cash, reflecting cease use accounting for the Queensbury facility. We expect $1.6 million of these charges to occur in fiscal year 2014 with $0.9 million being cash and $0.7 million non-cash.

GAAP results were breakeven versus $0.06 in the fiscal year 2013 second quarter. Pro forma adjusted EPS, excluding amortization, was $0.14 per share versus $0.17 in fiscal 2013 comparable quarter. Adjusted EPS, excluding amortization, was reduced by $0.02 of medical device tax as well as the higher sales and marketing cost which offset our gross margin absolute improvement.

We also started to see the benefit of our refinanced transaction and we expect to realize the full impact starting in the third quarter. The GAAP to non-GAAP reconciliation items are detailed in the earnings tables in the quarter's news release.

EBITDA was $7.8 million or $0.22 a share, versus $11.4 million or $0.32 a share in the prior year's second quarter. Adjusted EBITDA was $12.7 million or [$0.36] a share versus $15 million or $0.43 a share in the prior year. A detailed reconciliation, again, is provided in our news release.

We generated $8.2 million of operating cash and $4.2 million of free cash flow in the second quarter. And year to date we have generated $15.8 million of operating cash and $8.6 million of free cash flow, versus operating cash of $5.5 million and free cash flow of $0.7 million in the prior year's first half.

We did invest slightly more than planned in CapEx because of the timing of the ERP project, which is expected to go live, as Joe mentioned, in the next quarter. Our cash balance was reduced to $17 million, reflecting the first Vortex earnout payment of $8.4 million, and we ended the quarter with $140.2 million of debt outstanding.

I will now turn to a discussion of our guidance for fiscal year 2014. For fiscal year 2014, we are raising the lower end of our revenue guidance from $347 million to a range from $349 million to $353 million, representing 3% growth at the top end of the range. Our change is driven by the stronger results we have seen in the first half of our fiscal year 2014.

As I will discuss in a minute when speaking to third-quarter guidance, we continue to anticipate revenue growth to gradually increase over the fiscal year as our growth drivers become more significant contributors and, therefore, had a larger impact in the back half of the year. However, it will be uneven by quarter and not linear.

On the earnings side, we are reiterating our full year guidance and expect adjusted EPS, excluding amortization, to range from $0.63 to $0.67. However, we are going to achieve this outcome in different fashion than previously communicated.

As a result of the gross margin headwinds mentioned earlier, we are expecting the pro forma gross margin to improve by 50 to 75 basis points versus 75 to 100 basis points indicated at the beginning of the year. We expect leverage in G&A, R&D, and our refinance benefits to offset the lower gross margin rate.

For cash guidance, we have slightly reduced our expectation for operating cash improvement and expect operating cash to improve by 40% to 45% from $27 million in the prior year. The lower expectation incorporates an interim inventory build as we begin to undertake our facility rationalization at the start of the summer calendar 2014. The free cash flow range is accordingly being reduced to $25 million to $28 million from the previous $28 million to $30 million based on the inventory build and CapEx the higher end of our range of $8 million to $10 million.

On the adjusted EBITDA front, we continue to expect we will be in the $56 million to $59 million range. Now, turning to fiscal year third-quarter guidance, we are guiding to a revenue range of $85 million to $88 million, 4% to 8% at the top end of the range and 5% to 9%, excluding the wind down of the supply agreement.

The growth is higher in quarter three as we have an extra day, and last year's fiscal year's softer quarter represents an easier comparison. In the fourth quarter, we will have one less day. So, doing the math, you will see that our growth rate is anticipated to be 2% to 3% and 3% to 4% without the supply agreement.

I will reinforce the point we have made in the past few calls. We do not expect to see a dramatic increase in our revenue growth rate, but a more gradual improvement as we continue to build our growth drivers to improve the execution on our core products.

Adjusted EPS excluding amortization is expected to improve from quarter 2 and be in the range of $0.15 to $0.18. So with that, I will turn the call back to Joe for his final comments. Joe?

Thank you, Mark. So the team is delivering to our plan and I believe we will continue our progress throughout the balance of the year.

I am very excited about the progress of our key growth drivers as well as the overall performance of our team. We should continue to make progress on our topline and I believe improvements to the earnings will show favorably, as Mark has identified. So with that, I would like to open it up for questions.

Thank you, sir. (Operator Instructions) Jayson Bedford, Raymond James.

Happy New Year to you guys. A couple of quick ones here and then I will get back in queue.

In terms of BioFlo, can you just remind us of the premium over a non-coated PICC as well as is this premium holding? And then, in terms of penetration, kind of the 30% to 35% here, where does that settle out and what is the pushback for those folks who have not adopted BioFlo?

Good questions. So first of all, the premium that we have been asking to get and are getting is 15%.

We are seeing a premium in all of the accounts that have converted over to us. We are in probably over 200 accounts now, which is great.

And I think what will happen is -- I do think as a Company in the next three years I don't see why we would be selling any PICC or dialysis catheter without BioFlo. The results are so good that I think it is going to be unethical to sell a product without a thrombo-resistant material.

What is holding us back is purely our -- we have a lot of accounts today that are telling us, hey, evaluations were great; we have had terrific clinical success. But when you get tip location, we will go ahead and do the conversion. So I think we are building up some pent-up demand and we are waiting for that to occur.

On the current product side, most of our sales force has been focusing on competitive accounts with BioFlo, but we are converting current business. And it is just a matter of time and energy and place. But the tip location part of it continued to be a barrier and I am very excited to -- I am hoping that any day now we receive that clearance.

And our sales force is trained. Products and inventory accounts are literally waiting for the day that we receive it, and we I think we'll see an immediate boost when it does come.

So the impact of tip location is not so much from tip location, it is the pull-through? So basically tip location will pull through and convert folks to BioFlo?

Well, I mean, if you look at the market, if a hospital has made a decision that they wish the nursing team to place the PICCs, then it is basically an enabling technology. If they are actively -- if nurses are actively placing PICCs bedside, for them to switch to another vendor they need to use that vendor's tip location device.

And we have been hampered as tip location over the last several years has become more standard of care. In the accounts that are using the device, it is very difficult for us to convert them over.

So I think a lot of places have just simply said, we like the PICC. When we get a tip location device, we will make the move. And I think, with just a lot of great activity that our sales team has put in place when we see that clearance, I think there is a lot of places who will move pretty quickly.

And then, it will open up opportunities for other places who haven't been willing to look at anything unless we come with a tip location system. But as I have mentioned on prior calls, it is more of a neutralizer to eliminate a barrier. And I think when we do come out with a tip location system, it will provide the account preference of vendor will switch to who has the best PICC and who has -- and whose PICC is performing the best, not just a quid pro quo to whether you have a system or not.

Okay. And then, just switching gears to AngioVac, up sequentially, are you still looking for $10 million in AngioVac contribution for the full year? And then what can you do to really accelerate sales?

Is it just more bodies? Is it expanded label? What do you do to get to those goals?

Well, over a five-year period, to get to our $50 million goal, we do need to get an expanded claim. We have already filed for that expanded claim. And that would allow our marketing and market development efforts to be more pointed.

Right now, we market specifically to the label that we have. And when the label expands, it will free ourselves up to a much more aggressive market development activity. But we have known the timeline for that and we planned for that.

And throughout this fiscal year our objectives have been a function of our own ability to educate our salespeople, develop a 15-person clinical specialist organization, which I think we are at 12 or 13 in the field today, who are just -- we are bringing on just the best people that we have seen; just wonderful people who are very clinically astute and working with a lot of great sellers.

So a lot of this has been, if you -- the more you understand AngioVac, it is a very disruptive technology. It is a technology that is -- it requires a lot of different skill sets to be successful and it takes time to on-board procedures into a new account, a lot of training. It requires a profusionist to get involved with an interventionalist which is a new relationship.

So there is a lot of work to be done. And after those first cases of the accounts those accounts do, it's one of probably the most gratifying things to take very sick patients with no other option and all of a sudden give them one.

So we are very excited about our adoption. We have gone from [80 to 500] to 1.1 million to 1.5 million to 2 million, and we think 10 million is still within eyesight and we are very pleased with our progress as we are accelerating at an accelerating pace each quarter. So we are pretty -- we are still very, very excited about AngioVac.

Yes, just building on that a little bit, Jason, as you probably noticed, we got cleared in Europe. So that gives us some confidence that we are going to start getting some revenue over there. But, obviously, also we have a range in our revenue so, clearly, we build a little bit, but I think we are very confident we are going to get close to that number again -- close to our goal with this year.

Charles Haff, Craig-Hallum Capital Group.

Nice quarter, guys. Question for you on tip location. You said you were hoping for approval by year-end in the US. Was that fiscal year-end or calendar?

No. That was calendar.

No. We were hoping before -- when we had the last submission in and we saw the questions and the answers in the October timeframe, we felt very confident that the magnitude of the questions were not something that would be anywhere near showstoppers.

So it gave us the confidence to even say publicly that we thought, given the question and answers and the magnitude of them, that the FDA that would give us clearance before the end of this calendar year. So with not having it today -- well, in the end of November, another question did come in. It was quickly answered before the holiday, a couple weeks later.

And we are just waiting now. We can either get a fax saying there is approval and we can get another question.

That is just -- it is just the way things are today. But we are very bullish on the technology and we are committed to get this clearance.

And do you have anything in your guidance for US tip location approval right now?

I think we have been pretty conservative on what we think the -- from a guidance perspective for tip location, we have been -- if you go back and look at the last four conference calls, I have been talking about I can't wait to get this clearance so I don't have to talk about this anymore. But we have been expecting clearance.

We signed in this deal October last year and thought we would get clearance January of last year. So because we have been burnt, we are not ahead of ourselves on guidance. I think if we get the clearance it is not inconceivable there would be a little upside.

It would be an upside to our guidance if we get Celerity. (multiple speakers)

Okay. Great. And my last question is regarding international.

So you made a new executive shift there. You mentioned maybe some acquisitions internationally.

Would that be maybe distributors or product acquisitions? And how do you see international growth playing out over the next couple of years?

Well, you know -- that is a good question, Charles. As your -- for those of that have been following us for a while, following the integrations and all of the work that we have done, we have really focused getting our US channel humming and getting it in line. And it really is working well.

I have to give a lot of credit to Rick Stark, who runs our oncology business; Chuck Greiner, who runs vascular access; and John, who runs peripheral vascular. I think they have -- done a very good job getting the sales and marketing teams working well.

We have a good comp plan; we have more people on all three businesses in the money than we have had in the past. So things are going well.

And we really kind of didn't put the type of attention in international. It's 20% of the business.

We have got a good team out functioning there. And I think, given the fact that a lot of our products come out of our Queensbury facility, we haven't been able to get the type of new registrations or we haven't probably given that team in the near term as much investment as it should have.

And we felt that, by elevating John, having one global commercial leader it wouldn't be this being versus that team. We wanted to create harmonization between the businesses, the ability to move resources where we thought the greatest opportunities were, and now to focus our corporate attention by having a person here in the office who is focusing on the global footprint.

So we can now become more of a global organization. We had been relying on some pretty high level of growth from the international teams in the years past. I think with the US focus we kind of allowed that to get deemphasized a bit and we are trying to rectify that now.

Okay. And on the acquisition part of my question, (multiple speakers) products or distributors or --?

I think as a Company we need to increase our international footprint. We are not situated commensurate to our peer group with the amount of revenue and infrastructure internationally. I think just trying to grow internationally, using your operating expenses is hard.

I think, to the extent that there is acquiring distributors, that is most -- we don't do anything hostile with distributors. We don't go direct and then get into fights. When people do well, we become partners with them and that is our philosophy.

If there are businesses that are like ours, that are international that have their own products and their own registrations in certain markets, that will definitely be of interest if it is at the right magnitude. I don't think we have an appetite to do things that were in the magnitude that we have done over the last 24 months. I think we are looking for measured ways of increasing our global footprint.

But, today, after we have gotten our three US businesses running well, it is time to make sure that our team in international is getting the attention and the resources. And to the extent that, whether it is new registrations, whether it is the addition of the sellers and/or the acquisition of more infrastructure, that is top of mind for our management team today.

Jason Mills, Canaccord Genuity.

This is actually Jeff Chu filling in for Jason. I had a couple of quick questions. First one, on gross margin, I was wondering what your expectations are near term and longer-term for gross margins?

Sure. As I indicated on the call, our improvement pro forma wise, primarily through the benefit of mix and some operational things we undertook last year, which are on top of that we discussed in the operational excellence, our hope is to improve pro forma 50 to 75 basis for the year. So we would expect sequential improvement both quarter 3, quarter 4 in our gross margin.

Now, it is a little lower than we anticipated walking into the year, but we are talking about 20 basis points. So it is not a significant challenge for the business.

I think longer-term, the whole operational excellence program was something that we have been working hard on the last six months to look at how we implement and it will be very significant. Now, it's going to take three years because we are in the FDA world, to fully implement all the changes.

But the expectation is, by the end of three years, we will have a 400 to 500 basis point improvement in our overall gross margin. And that will come from a number of things: the ERP catalyst, supply chain improvements, both direct and indirect, the facility reorganization, product rationalization moves we have begun to make.

So there is five or six categories of activities we are working on now and have set plans in motion to make happen. So it will -- our expectation is this will have a very significant impact and improve us to be much more cost-competitive on a number of our product lines. So that is the plan right now.

And, as we enter into next year, we will talk more about the impact of how it splits over the years. It is a build each year. You layer on a piece each year and we will have more color on that as we enter into 2015, how much is going to come in 2015; how much will come in the 2016, and how much will come in 2017.

But the expectation is, by the end of 2017, as we get into the year, as we will have a 400, 500 basis point improvement in overall gross margin. Does that help to answer the question?

Yes. Very helpful. On my last question, I just want to ask a quick one on free cash flow in 2015. Perhaps you can provide us with some direction on where we could expect that to go in the next fiscal year.

Yes. I would expect -- I am not going to give you an exact number, but our expectation in 2015 is, we will accelerate the leverage because of the operational excellence, because of higher -- even higher mix benefits that we would have an amplified leverage. I think the other issue for this year is, or like on sales and marketing, I mentioned earlier, we were artificially down probably on our run rate.

We won't have that problem next year. So we should have even better leverage.

And, as you have seen, we are doubling basically our free cash flow in 2014. So it is going to be, I would expect, another significant improvement. But it is too early to give you exact numbers.

Jayson Bedford, Raymond James.

Hopefully, I am not jumping in front of anyone. On the gross margin, Mark, you gave a few items there.

Did price factor into the lower gross margin at all? Or what was -- I realize there was a mix -- (multiple speakers)

Yes. In a way, the fees, rebates is a form of price management.

So that was probably 20%, 25% of the gross margin story. So it is a trade-off we make on doing deals where we consciously look at, as you do more contract deals and more national account deals, you trade-off getting volume versus price.

It is something that we looked at. We measured it, and you can see we are starting to get the real acceleration in our revenue. But yes, you got to give a little up on the margin return line, but in the end, we think we are much better off.

Okay. And then, what is the revenue mix between -- in the oncology between -- on the thermal side, RF and microwave?

I don't think we --

We don't give the two pieces, Jason. We only give a thermal ablation number. So I am not sure -- what is your question?

How much is RF; how much is microwave?

No. We are --

RF is going down, and microwave is going up. Net-net, the whole category is going up.

Right, double-digits.

Okay. And then, where are you on the timeline on the API?

Right now we are on the original schedule. We are going to file our regulatory for US later in the third quarter and then Europe beginning the fourth quarter.

And then we have baked in a little bit longer than normal time for maybe a couple of review cycles in case that is there, so that would have US summer -- end of summer and Europe fall; the same type of window that we have been looking at. Our big goal is just to get those filings in, and right now we are on plan to get there.

Larry Haimovitch, HMTC.

See you next week at JPMorgan. Congrats on all the progress.

I don't know whether I missed it on the call, but I didn't hear much or anything about IRE. And I wondered if you could provide an update specifically the progress of the urology trial. And any update at all on your progress with FDA and getting a pancreatic trial going?

Yes. You know, it is the same answer every quarter. We continue to go back and forth on pancreas.

It is almost why I just stopped talking about it. Until I have positive news and we make progress, it is really the same story.

But, that said, there are a lot of good clinical activities going on in the US with sites that choose to do it for pancreas and we still think it's a very good application. But we have not made the kind of progress and we will just continue to work at it.

And, finally, when we break through, maybe I will pick up the phone and call you, Larry. You will be the first one to know.

On -- but we do have a lot of good clinical activities happening. And we are preparing our sites for the US safety study for prostate.

We are accruing patients. I am not sure how many were up to, but I think we are double-digits with our CROES study and in our -- we have 12 patients with our CROES study, which is excellent.

The activities -- and I will tell you, I have a tough time with IRE because it is probably one of the technologies I am most excited about but I purposely don't talk about because I don't want to create expectation that -- until I see the market activity. But clinically, Larry, seeing what is occurring with investigators who are using it for early intervention of local ablations internationally, the response of the investigators and I think it is very, very exciting.

But just to be cautious and not overhype and over focus, my attention is to focus on what are the things that are going to deliver revenue today. And when we achieve key clinical or technical milestones that I think represent near-term commercial activity, then I will get more and more excited about it.

But we are still investing in Nano. The CROES study is actively happening and when that safety study is over we will go into a pivotal study.

The Endourological Society over in Europe is very excited about it and we have several investigators who are doing a bunch of procedures. And that could -- especially if the data continues, it could be a wonderful opportunity.

So we are -- continue to be excited about it and we will see. When we come up with important clinical milestones, Larry, we will be very vocal when we get there.

Did you have any commercial shipments of capital equipment in the quarter, Mark?

Yes, we did. We only had a couple -- I think four in total for the world. So we have definitely seen a slowdown.

I think capital is more difficult and the whole process to approve a NanoKnife because of -- it is our theory because of some of our challenges with the FDA, it has slowed down the decision process. So to Joe's point, that is why we are being much more careful on this front.

And reimbursement also remains a challenge, doesn't it?

Yes. To the extent where surgeons are using the device as an adjunct to the current procedure, reimbursement is not an issue. But we right now have built our plan to not live and die on Nano. If it contributes, it's great.

Actually, the procedures and the procedure contributions are going well. It is really the capital sales and the new account placements that it is slowing a bit on the Nano side.

And, again, we are fine with it, because it is not about -- we are not going to make or break the Company based on selling a Nano here and there. That is not our focus.

Our focus with the Nano is develop the clinical support that is going to create a multiple -- several hundred million dollar business when we accomplish that goal. But we have great investigators who are creating great data and multiple applications in US and international. We had the first NanoKnife being performed in Hong Kong just last week and a nice little press release went out by that institution.

And just so many wonderful things are happening, but when it comes up to the size of company we are now and the magnitude to investors on a quarter by quarter basis, it is still a program that is receiving clinical investment. And it is -- one day we are going to come out with, wow, look at what we did and it is going to be very large. But it is not something that I am willing to telegraph in the very near future.

And, you know, Larry, the moment I get something that I see is a quarter or two away, I will start winding it into the story and I will start giving people guidance. But it is a technology that has tremendous promise.

We are investing. We are thrilled. We have great people out.

We have investigators who are doing unbelievable work. And as material milestones to investors come up, we will communicate them.

Did procedures at all grow during the quarter year-over-year or sequentially?

Larry, they are slightly up. Well, it is sort of a mixed bag. In the US we did a little better than we did in international, but overall slight growth.

Okay. So the basic business is more or less flat right now until you start getting some of these milestones that Joe talked about.

All of our efforts [are I think] clinical development. We are not pushing the sales force.

We are not doing things that are artificial. We are letting the business go to where it goes.

There is a lot of activity on microwave today, a lot of activity on -- and we are growing some nice market share in overall thermal ablation given our microwave and now want to 1-2 punch with RF and microwave. And we are very happy with, in general, where the oncology teams are going.

And, yes, we are not selling as many Nanos as we were in the past. But the overall health of the business and the margin of the business is still strong.

We would like to do better. I mean, we are typically a double-digit grower in that category, which is usually fueled by continued capital placements. And we are probably being a little bit of lull with the NanoKnife at the moment.

Joe, one other question and I will jump back into in queue, and that relates to the RF microwave effort. Does it make strategic sense to ever combine those into one box and try to sell them as a combined product?

Yes. We have a competitor internationally who does do that. We find that there are still -- I thought that for a while, but our team has convinced us that having two different systems to do one thing, which could be in multiple locations, would be more inefficient than anything instead of just having one RF box here and one microwave box there.

We actually, at our investor meeting, showed it. We had an RF microwave and Nano all in one box -- all-in-one type of cart type of thing. But the more we brought it to our customers, the customers threw up more logistics issues than the novelty of having it.

And, typically, given the CT scans and the amount of prep work for a patient, the customers are pretty sophisticated today with the imaging of knowing which energy source would be best for which patient's anatomy at a particular time, because they will know before the procedure. So we found out through customers that, while we can technically do it, it is probably more of a novelty than a necessity.

(Operator Instructions) Mr. DeVivo, there are no further questions in this time.

Great. Well, I would like to thank everyone for being on the call. We are very excited about where we are as a Company.

We are executing to our plan. If there is deviations, we fix them.

We have an unbelievable management team today who is starting to get this business focused on its topline revenue growth. We have made progress three quarters in a row and I think that will continue into the foreseeable future. And as with PV growing now from 5% to 7% and oncology in the 5%, making progress in vascular access, we are one business away from having all of them growing and then as seeing where the acceleration will take us.

So we think the future is bright. We have gone through the tough times and are now executing to our plan.

And we very much appreciate the support. So thank you, everybody.

Ladies and gentlemen, this concludes the AngioDynamics fiscal second-quarter 2014 conference call. If you would like to listen to a replay of today's conference, please dial 800-406-7325 and enter access code 465-5652.

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