AngioDynamics Inc (ANGO) 2016 Q4 法說會逐字稿

Good day and welcome to the AngioDynamics 2016 fiscal year fourth-quarter earnings call. Today's conference is being recorded. At this time I would like to turn the conference over to Mr. Jim Polson. Please go ahead, sir.

Thank you for joining us for the AngioDynamics conference call this morning for a strategic update on our business as well as to review the financial results of our fiscal 2016 fourth quarter, which ended on May 31, 2016.

The news release detailing the fourth-quarter results crossed the wire earlier this morning and is available on the Company's website. A replay of this call will be archived on the Company's website as well.

During the course of this conference call the Company will make projections or forward-looking statements regarding future events, including statements about revenue and earnings for the fiscal year 2016 fourth quarter and full year ending May 31, 2016.

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 the forward-looking statements.

With that I will turn the call over to Jim Clemmer, Chief Executive Officer of AngioDynamics.

Thanks, Jim. Good morning, everyone, and welcome to our fourth-quarter earnings call. I am pleased by our overall performance this quarter where we delivered solid results and laid the foundation for future growth. We had strong sales this quarter with revenues of $93.4 million showing a 3% increase over the prior year period.

A big part of our success for the quarter was due to the resiliency and effort of the employees here at AngioDynamics who continue to deliver amidst a variety of changes as we seek to build a stronger global business.

Our Peripheral Vascular group delivered strong results during the fourth quarter as we successfully launched the new Asclera varicose and SPDR vein treatments, and benefited from additional volume as a result of the Cook Medical recall. We were also encouraged by growth in the Oncology/Surgery international business driven by the approval of our NanoKnife probes in China.

As you may recall we took revenues associated with the registrations for oncology in China and Japan out of our Q4 guidance in April. We gained $2.4 million in revenue associated with the China registration in the fourth quarter but we still await registration clearance in Japan. I will provide details to each of our franchises a bit later.

Our strong cash generation, which allowed us to exceed our annual guidance of $30 million, was the result of continued focus on improved working capital combined with strong operational efficiencies. We were able to strengthen our balance sheet and accelerate a reduction in our outstanding debt.

Finally, you will notice from the release this morning that we had a one-time non-cash write-down of a long-term tax-deferred asset that impacted our results for the quarter and full year. I will provide more detail around our financial results for the quarter and the year a bit later in my comments.

Now I will do an overview of the fourth-quarter results for each of our franchises.

Our Peripheral Vascular franchise had another solid quarter and drove our growth for this period. Our PV business generated revenue of $54.8 million, which is an increase of 10% over the prior year period. One key driver of this growth came from the venous business.

We had positive response to our Asclera launch and saw 6% year over year in laser procedure kit sales during the fourth quarter. We saw a 13% decline in AngioVac sales in the quarter due to a tough comparable from the year ago fourth quarter. For full year fiscal 2016 AngioVac sales are up 6%.

We also saw a significant boost to the core angiographic catheter product line within our PV business. An opportunity presented itself to fill a demand left by an unfortunate recall that has affected Cook Medical. The demand has had a positive and direct impact on our volumes and our revenue. We are working hard to meet the demands of these customers who have an urgent need for product.

Based on my 25 years in the industry, I believe that taking a measured thoughtful approach and managing this situation tightly through this uncertain period will serve us best. We will do our best as we try to supply the demands of the market until Cook returns.

During the quarter we believe the impact from the Cook recall on our business to be in the range of $2 million to $3 million. Although it is hard to determine how much of the increase is due to underlying demand versus stocking orders from either new customers or existing customers.

In our Vascular Access franchise we generated $24.8 million in revenue, down 8% from the fourth quarter 2015. BioFlo now represents 43% of all VA sales, up 39% from Q4 2015. We saw a significant ramp in BioFlo Midline sales which accounted for 8% of all BioFlo sales in Q4 after being on the market for just four quarters.

We want to focus VA where we can compete and win. We believe that is in BioFlo. Therefore we have made the strategic decision to discontinue the Celerity Tip location program as it is structured today. We made this decision based upon three key factors. Number one, Nostix, our partner for Celerity, was recently purchased by Teleflex. Two, we still have not yet received FDA clearance for Celerity with Navigation. And third, Celerity was distracting from BioFlo commercialization efforts.

You will see that we are taking a $5.9 million inventory charge related to Celerity. However, as we look to the year ahead, we expect our overall PICC business to be roughly flat.

Moving to Oncology/Surgery franchise, the franchise generated $13 million in revenue, flat to the fourth quarter of 2015. As I mentioned earlier I am pleased to report that we received an approval for the NanoKnife probes in China which generated $2.4 million in revenue for the quarter. And we look forward to more solid growth for NanoKnife in China in the coming quarters.

We saw Microwave growth of 9% worldwide including 22% in the US due primarily to both strong capital and applicator sales during the quarter. In addition, we expect to launch Solero, our next generation Microwave product in fiscal year 2017 and will be a growth driver going forward for this business.

Our international sales were $17.6 million, down 2% year over year and down 1% when adjusted for foreign currency fluctuations.

Turning to our financial results. As I have said before, we are pleased to announce a solid quarter to close the fiscal year. In Q4 we generated $93.4 million in sales, a 3% increase year-over-year and above the $90 million guidance that we issued in April.

Gross margin was 44.4%, which includes the inventory write off for Celerity. Without this write off our gross margin would have been 50.8%.

Adjusted EPS was $0.19, up $0.05 year over year, and again above the $0.18 we guided to in April. Adjusted EBITDA was $13.9 million, up 5% year over year.

We are very pleased with our strong cash flow performance of $18.1 million in free cash driven primarily by improvement in net working capital with DSO improvement as well and far better inventory management. This has enabled us to add an additional $10 million in debt payments towards our principal in the fiscal year. Our cash position now sits at $34 million.

As seen in the press release, before adjustments the Company recorded a net loss of $44 million or $1.21 on a per share basis for the fourth quarter. This was the result of a one-time long-term tax-deferred asset write-down primarily based upon a three year look back at our financial performance.

I would like to point out that we don't lose the NOLs and they can still be applied going forward based upon our future profitability. I also want to reiterate we continue to deliver strong cash flow, we strengthen our balance sheet and we improve our working capital.

Combined with some of the initiatives already taken and our outlook for 2017, we remain confident in our ability to deliver on our financial objectives and build a stronger business for stronger growth beyond 2017.

In fiscal year 2016 we generated $353.7 million in revenue, down 1% compared to fiscal year 2015, and a gross margin of 49.2%. Without the inventory write off for Celerity, gross margin would have been 50.9%.

Full-year EPS was $0.58 -- full-year adjusted EPS was $0.58 compared to $0.58 in fiscal year 2015 and adjusted EBITDA was $53.2 million or $1.46 per share compared to $56.7 million or $1.56 per share in the year ago period.

There were a lot of changes in fiscal 2016, but I think you'll see that we have a solid underlying business. Our Q4 numbers are encouraging and, as our new strategic initiatives take root, I look forward to our performance improving in 2017.

We anticipate quarter one FY 2017 sales to be in the range of $84 million to $87 million and adjusted EPS to be $0.11 to $0.14. For full-year FY17 guidance we expect sales to be $355 million to $360 million and adjusted EPS to be in the range of $0.62 to $0.65 per share. We also anticipate free cash to remain strong and to be in excess of $30 million in 2017.

Now let me talk for a minute about what I have seen since I have joined Angio in April. Since joining AngioDynamics I have spent a significant amount of time getting to know our team and our Company, as well as meeting with many of our major customers and business partner. After a quarter in this role I am even more enthusiastic about the growth opportunities that I see for AngioDynamics for growth and value creation.

Since our last call you may have seen that we have made some changes to our management team and their leadership team here at AngioDynamics. We have eliminated our Chief Commercial Officer position and realigned the commercial reporting structure to now that I have more direct oversight of our commercial teams and a more direct view of our customer.

We hired Chad Campbell in May to become our new Senior Vice President and General Manager of our Vascular Access franchise. Chad brings more than 20 years of sales and marketing experience from working at companies like Covidien and Medtronic and will help strengthen our VA product offerings and deliver excellent results for the franchise moving forward.

A search for a permanent CFO is ongoing; we have found some exceptional candidates and hope to have an announcement on this front in the near-term.

Right now I am working with the team and taking a disciplined approach to better align our resources with global market opportunities and to deliver more sustainable growth and stronger financial performance. As such we will continue to actively adjust our structure and identify the right talent to add to our team as we build towards the future.

As I think about how to take AngioDynamics forward I am looking at three key areas.

First, I am looking at areas of the business where we have a competitive advantage. This will help us determine our investment decisions in order to increase our revenue growth rates.

Second, I am focused on increasing our operational efficiency throughout the Company. It is important for us to continue to drive growth efficiently while expanding our high-level product offerings that help patients in critical need of care.

And third, I see plenty of room for disruptive innovation within the marketplaces that our franchises operate. We need to align our R&D process in order to better leverage these opportunities.

And finally, as we move into fiscal 2017, we want to be very straightforward and transparent about where we are headed and our areas of focus, namely pursuing the initiatives and programs where we have a clear competitive advantage, focusing on driving our operational efficiencies and developing those products that will improve patient outcomes and lessen the financial burden on healthcare providers and healthcare systems.

Using these guiding tenets in the coming quarters we will focus on execution and making the right decisions now and in the future that will help grow our revenues, EPS and provide stronger cash flows for the Company in 2017 and beyond. I look forward to sharing more strategic updates on our business in the coming months and quarters.

Thank you all for listening. We'll now open up the floor to questions. I will be joined during our question period by [Peter Kish] who has served as her interim CFO, and Steve Trowbridge who is our General Counsel. Operator, I will return it back to you for questions.

(Operator Instructions). Brooks West, Piper Jaffray.

A couple of things for me. But I wanted to start higher level. You mentioned the three areas of focus and your first being areas where you have a competitive advantage. I just wonder if you would expand on that a little bit more. I mean you are taking over a broad portfolio.

And I know you have only been there for a quarter, but as you look at the portfolio, I just wonder if you would go one layer deeper in terms of where you see potential competitive advantage. And then as a follow up to that, your thoughts on use of cash. What is a comfortable debt level and when might you think about acquisitions and/or divestitures?

Sure, Brooks. Let me try to tackle what you have asked. First, since joining Angio I have gotten closer to our -- we have a diverse product portfolio, which, as you know, many companies would be envious of. Diversity in our portfolio is a strength, but it also can be distracting. So what we are focusing on here are areas, as I said earlier, that we truly know we have competitive advantages. Let me give you an example.

In PICCs, our BioFlo products, made with Endexo technology, offer something that no one else can offer. So they are still kind of a little wild west gunfight taking place about tip location and navigation. But we feel strongly that any tip being placed that is not a BioFlo tip doesn't benefit the patient or the caregiver as hospitals are dealing with higher infection rates in situations of dealing with care.

So we feel that BioFlo is one of the examples in our portfolio that we will expand upon and make sure that we are backing up what our customers are finding for clinical evidence with the way we approach the market in those categories. Second, I think you asked about potential use of cash over time?

Yes, use of cash, focus on use of cash. And then also just when might we start to see some acquisitions or divestitures of the portfolios?

Sure. I think if you go back, Brooks, to what I stated three months ago when I joined the Company, my initial goals still remain the same. I want to understand our business, (technical difficulty) it a bit, make sure our foundation is solid for growth.

I am three months closer to that now, but I'm still in a position where we are defining our strategic objectives internally, making sure we have the right areas of growth identified. When we are ready to do that we will look at the balance of internal opportunities for growth and external opportunities for growth.

I think the fact that we are now generating healthy levels of free cash has given us the level, as you have seen, the ability to pay down our debt. I think we are approaching a very reasonable level now that we are comfortable with. And it also will give us the freedom to utilize cash and utilize external sources to get cash when we see something important to us that may exist externally.

So I want to leave you with the thought that right now I am not in the process that we are really looking at external sources for growth opportunities, but we probably will real soon.

I guess two more quick ones if I could. The Cook recall, is that $2 million to $3 million revenue benefit -- I understand that is hard to estimate, but is that sustainable or do you give that up when Cook comes back into the market?

And then the second one is you said $2.4 million in China from the NanoKnife registration. What is the number for Japan and any update on timing there?

So let me tackle both your questions. So with the Cook recall, Brooks, we don't know when Cook will return back to the market and then we don't know what the acceptance level will be when they return. So the $2 million to $3 million I identified in Q4 of 2016 was pretty much what we can identify for the revenue associated.

Obviously going forward we will do our best to maintain whatever level of business that we can. We're working very hard to maintain our operational efficiencies, maintain the high quality levels of our products and to service not only our current base of customers but the future customers that have asked us for product during this.

It has been really a strong demand situation. Going forward obviously we will do our best, as will probably one or two other companies to retain whatever business they can through the situation. When I have more clarity I will share it with you.

And second, I think you asked about the potential business in Japan. And I think we mentioned before that it is worth about $1 million when we receive that registration and that still seems accurate.

Great, thanks, Jim. Appreciate it.

Charles Haff, Craig-Hallum.

Congratulations, Jim, on a good first quarter out of the gate. I had a couple questions, the first is regarding BioFlo. Now that you are discontinuing Celerity, what do you see as the future for BioFlo? Can BioFlo be a strong -- as strong as we were kind of expecting without the Celerity? Can it be a standalone product where they can still use the Teleflex and the Bard tip location products on its own?

Charles, good morning. Good question. So since I have come here much of the experience I have gained throughout my years in this industry I've dealt with products that are similar to BioFlo in other areas of technology. So here at AngioDynamics we have good job of launching BioFlo.

The technology is proven, our customers prove it every day with some of the studies that they have provided to us showing the efficacy of the product. What I think we need to do here is match the efficacy of the product in the field with our selling and marketing efforts.

So, we are going to look to almost relaunch the BioFlo technology. We believe this story is compelling enough to stand alone. There will be customers and opportunities for people who desire tip location and navigation. We think that Teleflex and Bard offer those opportunities, but the BioFlo PICC catheters offer something that they don't have, which is the Endexo technology.

By bringing in a guy like Chad Campbell who has had many years of experience in marketing products like this with some of the benefits that are offered like this it takes a little different angle to do that.

I have full faith in Chad and our team here that will take a different look at how we bring BioFlo to market. So we feel very strong, Charles, about the opportunity and the future here.

Okay. And one of the focuses for BioFlo from prior management was the success with IDNs and GPOs and getting on contract. Can you give us an update on where the momentum stands with those entities?

I can do that, Charles. Let me give you a step back to and in the 25 years I have spent in this business, a lot of the businesses and the products I have managed were in this space, the mid-tech space. And I full have a really good grasp of the understanding and influence that GPOs play in our marketplace.

To be honest with you, over time I don't see BioFlo as a high-level GPO driven product. We need to have access to the customers that are aligned to the GPOs. And usually in most cases most GPO contracts just do that, give you the access. There are very few that truly drive compliance once you have the contract.

We will obviously look to both of those situations. But I think right now our portfolio that we have gives us good levels of access to most of the major GPOs. Over time we will rely upon compliance by how we do the pull through at those levels.

So it is still a work in progress. We have a good portfolio of GPOs, but there is also some of our competitors are on there as well. Some of those contracts are dual or multi-sourced contracts that we have access to.

How about on the IDN front, Jim?

IDN front as well, we have a dedicated team that works with our IDNs along with our selling and marketing team. And, Charles, moving forward I think what you are identifying, in my experience the IDN customers will drive compliance at much higher rates than the umbrella of the GPOs.

So, we are very focused on making sure that we have the right people in the right places telling the proper story of BioFlo and our other products at the IDN level. And I think over time we will share with you maybe some more details around our IDN expansion program.

But I truly believe over time the way our marketplace and our customers have aligned themselves and made purchasing decisions, the IDNs represent a stronger level of influence going forward than the umbrella that sometimes the GPOs used to give us.

Okay, thanks. And then my second question is on AngioVac. So the latest generation of AngioVac with the new tip was targeted on the PE market. How do you see that product today? Do you think that it is good enough to succeed in the PE market?

I realize that there was a tough comp, but having only 6% full-year growth for AngioVac is a little bit disappointing given the game changing nature that this technology could bring. Where do you feel that AngioVac is positioned and how strong of a product offering is it as it is designed today?

So, Charles, some of the research that I did prior to joining AngioDynamics was trying to understand AngioVac, understand the product better and the market opportunity. And honestly I was bit confused about it before I joined here.

Since I have come here I have learned now that clinicians, and we have seen evidence from when the product is used, we know what it does in clinical settings, it is very, very efficient and effective. But what we have struggled with is the marketing of the product and making sure we are in the right spaces where we have opportunities to sell the product.

The clinical efficacy of AngioVac is actually ahead of where we are as a Company marketing the product. We need to do a better job here of understanding how we will take this product to market and what resources are necessary to kind of hit what the peak commercial opportunities are (technical difficulty) presented in the past I have seen, like you have, some different forecasts.

Today we are in the process where we are just going through a strategic review to make sure we are aligned and have the right resources to support what could be peak commercial outputs in that product line. Today, Charles, I don't have a clear picture for you.

Okay. Well, I will stop there and let some others jump in. Thanks.

Matt Mishan, KeyBanc.

Can you first talk about where you are at with the facility consolidations and how we should be thinking about gross margin improvement as a result of that over this year and into next?

So, Matt, good morning. So a couple things. So in FY17 I think we have showed you some gross margin expansion. And I don't have direct plans today, we haven't talked about facility consolidations as part of that plan. So in the past I think AngioDynamics has indicated some different levels of consolidations. We are making sure that we are moving manufacturing to the right places to be efficient.

But really what you will see from gross margin expansion in 2017 is not related to any consolidation, it is just related to efficiencies and opportunities to reduce costs internally. If we have consolidations over time we will articulate those in a bit more detail.

Okay. And then can you give us an update on where you are at in the conversations around NanoKnife and reimbursement [with the] CMS and NICE?

Yes, so it is interesting, so there's some movement with NICE, there's actually some meetings occurring as we are speaking. And there is an opportunity this fall where we hope to have clear indication of what NICE will bring.

In my brief time here, Matt, I think I see the need to make sure that we are supporting our NanoKnife sales with better clinical data. So we need to do a little better job of making sure we have done and have invested the proper resources in providing the backup that we need, support going forward to get the indications and the registrations that we need to sell the product.

So, we will come back to you with that, but I think it is an area that we see as an investment potential. But we need to do the work first to unlock what NanoKnife can be. We haven't given it the full opportunity to having the registrations and the indications that it can use.

Okay, and then last question. As we look at the individual segments, how long do you think it is going to take to turn vascular access around? Should we be looking at positive comps and positive growth in peripheral and oncology this year and down in vascular access, is that the right way to look at it?

Yes. So if you look at what we have in 2017, Matt, we have got growth in two of our three franchises. Vascular Access, we are looking at the year being roughly flat. And I spoke earlier about our PICC business.

Luckily the mid-lines that we launched last year are part -- under our PICC umbrella and the mid-lines are growing very strong, mid-lines with BioFlo. So we are seeing the mid-lines in our PICCs being roughly flat. And really the VA business essentially flat. As we do a better job of marketing I think BioFlo to our customers we will see (technical difficulty) business.

We also have seen and have identified potential new product opportunities in that space that we are now readjusting R&D priorities towards. And we will have to talk to you about that technology in the future. So, if you assume it is roughly flat this year, Matt, that would be probably on target. And we look to grow in 2018 and beyond.

All right. Thank you very much.

Jayson Bedford, Raymond James.

I guess first, and I apologize if I missed it, Jim. What is the gross margin guidance for fiscal 2017?

So, Jayson, gross margin guidance, let me just double check my notes. So, Jayson, for 2017 gross margin guidance -- you have got me checking my notes, Jayson.

Yes, sorry, you need that CFO.

So, Jayson, in 2017 we are guiding to 51% [gross margin].

Okay, so effectively kind of flat year over year?

A slight change but roughly flat.

Okay. And then I thought the quarter was a good one. You showed some good growth and I realize China helped out a bit. But when I look at your fiscal 2017 revenue guidance the growth is somewhat modest. And I guess maybe you can just walk through some of your primary concerns on sales growth in 2017, Jim. I realize that Vascular Access is expected to be flat. But again, that doesn't imply a lot of growth in the other two segments.

So a couple of things, Jason. We have had some disruptive events that have occurred here with my arrival, changing some management and doing some things differently. So I am being cautious and conservative that we are going to still maintain our current rates of business with our current customers before we can get to a stronger growth profile.

Some of the areas that you have seen, the opportunity with Asclera that we launched in March, our deal with Merz, has gone probably a little better than we expected. So in our venous franchise things are growing a bit better.

We have the uncertainty right now of the Cook Medical recall, and we are seeing strong demand currently to fill that. It is uncertain going forward along that demand will remain or how much of that business we can retain permanently going forward. But we see that we will have more clarity soon there as time goes by.

Really the VA business, I think, Jayson, is the one that is a bit uncertain today. As I mentioned a minute ago, we are roughly going to be flat this year, maybe slight growth as we get towards the end of the year in there with our PICC business and with BioFlo. But ultimately we need to do a better job of outlining how we will grow.

There are some things that we will do globally that maybe were different in the past. I think there are international expansion opportunities that exist for AngioDynamics that we've maybe not resourced as well in the past.

So we need to build out a little bit more strategic plans here and then we can articulate to you of how we can take advantage of global or regional opportunities that we think exist as long as just -- as well as just product opportunities.

Okay, that is helpful. On the discontinuation of Celerity, does this imply that you are not interested in tip location? Meaning you either are not working on it internally or won't pursue it externally?

It doesn't imply that, Jayson. I tried to be careful with the comments. So we talked about discontinuing the Celerity program as it is set forth today. We don't see the Celerity program as something we can win in going forward. We don't think it makes sense to keep investing dollars there.

Jayson, in a perfect world we would love to have a combination of BioFlo with a really effective tip location and navigation system. Today we don't think Celerity would have given us that. So there are other opportunities to add that technology to our offering over time. And if we do so or have movement there we will talk to you guys about that.

But for now we know there is risk when you discontinue something like Celerity. But we think it is the right move for us going forward. And we are not saying no to the area; we know there are some customers that truly like the fact of having the ability to navigate and locate tips with using technology.

Right, okay. And then maybe lastly for me and a bit of a follow up on the AngioVac question earlier. I realize it was a tough comp, but are you still focused on this product as a growth driver for the PV segment? Meaning are you adding, subtracting or keeping the level of resources dedicated to this product the same?

So recently there was a change where we added some resources; we have clinical resources to assist in the marketing efforts of the product. But today, Jayson, I am trying to take an assessment of where we should be and how the product should be sold and supported in the marketplace.

Charles asked the question a few minutes ago about AngioVac and is the current version aimed at the PE market? And really that is not the case. We had talked about future development, maybe looking to address that market, but the current product is really not aimed at any specific market use at all. So it is really a tough spot.

So, Jayson, I have to borrow a bit more time here coming into the situation. We know, again when a clinician uses AngioVac, we know what the results are, they are very compelling. But it also provides an opportunity that is very difficult to sell and market the product appropriately. It is just a challenge.

Okay (multiple speakers).

And I'll further add to that too, in our PV business, Jayson, as you see, we've got folks servicing the angiographic catheters due to the Cook recall, and we've got really great growth in our venous space. That division is doing a really great job growing those two areas while still trying to handle the AngioVac area as a third leg of the stool there.

Okay, that's helpful. Thanks, Jim.

Thanks, Jayson.

Jason Mills, Canaccord.

A follow up on Jayson's question on AngioVac. Curious if you could help us understand the market dynamics with respect to that product. Correct me if I am wrong, but essentially with this product you and a couple of other competitors are essentially trying to change the paradigm, a paradigm that I has been really defined by clinicians getting these patients in an out of the cath lab very, very quickly.

And while not cost effective in introducing risk that AngioVac or other more direct atherectomy -- direct thrombectomy products don't introduce the lytic drip catheters are easy and it is a paradigm that allows these patients to get out of the clinician's hair relatively quickly. If that is true how hard is it -- are you finding it to change that paradigm?

You outlined -- you kind of told the story pretty accurately. This is a difficult space. And I apologize -- I know you guys are trying to go a bit deeper and I appreciate that. I want to be careful; I want to give the clarity that you are seeking when I have it. So I am asking a lot of questions here similar to what you guys are asking me, to understand how the product is used.

We know that there is compelling evidence of what the product does when clinicians use it. I actually feel there's not really a competitive offering from a product standpoint that can do what this product does. So the challenge for us isn't as much competing with a competitive technology, it's just making sure that we are going to market in the proper way.

So, we have to take a step back and look at our go-to-market assumptions. I think they were made a few years ago and maybe some were on target, maybe some were slightly off because it is such a new product and hard to pin down.

So today, Jason, I am trying to take a little more deliberate approach toward how we should go to market with this product today. And make sure we support it properly from a resource perspective. But it can be a bit of a challenge.

Got it, okay, I will look forward to more detail as you get it. I guess a little bit further up the tree, 20,000 feet or so. As we think about AngioDynamics or as you think about AngioDynamics over the course of the longer-term, three, four years, and understanding that your answer may need to factor in things that are hard to factor in like divestitures and acquisitions.

I guess if you sort of put that aside for a second and think about this organically. The business you are looking at today, what do you see in terms of top-line growth and optimal gross margin -- three or four years from now?

I would probably ask the same question if I were you. Let me give you the answer. In 90 days it is hard to give you an exact profile. But here is where I will go with you. Today we have been growing historically behind our market growth and we know we have got to get to midmarket growth.

Now it is actually hard to identify that because we have a diverse product portfolio and we serve different market needs. So there is really no company that matches up -- identifies itself like an Angio competitor. AngioDynamics is a bit unique. But we want to get our Company to market growth first and we are close -- we will be close to that soon.

And then I think we can get beyond that through a few factors. Because we are a Company with a diverse portfolio it's easy to be distracted. I think we need to do a better job of choosing the areas that we can win and putting more resources in those areas. And those, as I said earlier, we'll identify that with you.

But we know what the market growths are for a lot of the products that we compete in. And we know that we can make some tweaks to how we are doing things. As I mentioned with BioFlo, we see significant opportunity be based in the technology and what it does when it is in use. So we need to address how we're going to market in areas like that to get there.

Over time Angio should be a growth Company providing you not just with stable revenue growth in the mid-tech space that we compete in, but also opportunities for margin expansion through two factors. Number one, through us increasing our operational efficiency levels and gaining gross margin through that. And second, introducing new product technologies that will have more exclusive uses and other better opportunities for margin expansion through innovation.

That is helpful, Jim. Thank you.

Charles Haff, Craig-Hallum.

So, on the [BSC] supply agreement, that is the gift that keeps giving here in recorded higher sales than was previously expected. What are your thoughts on that and what kind of conversations have you had and when that may terminate?

Charles, that is a great question. I asked the same question here too. In that case we are really just supplying a customer who I don't think has shown an interest in having a long-term supply agreement with us. But they have offered to continue to buy products from us without a (technical difficulty).

So we have kind of changed the way we treat that customer. And we are happy to supply at the rates they suggest, but we don't see really a long-term clear view. The customer has not provided us with that outlook or has asked us for commitments as well to supply.

So, going forward it is hard to predict. I wish I could give you better outcomes. But we are assuming it is going to slightly decline over time. And we have a decline built into our 2017 number, but it is not very significant or material to our overall business.

Is that a positive cash flow business, Jim?

It is a good question. I haven't really looked at that piece of the business individually because I always kind of assume it is hanging out there. I would hate to make a guess or assumption towards it. I can follow up with you, Charles, maybe do a little more digging there and get you an answer on that.

Okay.

I just haven't -- I don't want to give you an answer because I haven't done enough digging on that little piece of business yet (multiple speakers).

Sure, no problem. Well obviously you have a lot more important things to be working on. And secondly, on EVLT, with the Solero now, I mean this quarter was some of the strongest growth we have seen in EVLT for a couple of years. How do you kind of view that varicose vein business stacking up against Covidien now that you have a Solero -- from a reimbursement standpoint and so forth? What are your expectations there?

So, a couple things. First of all with Solero, we are proud of the partnership that we have. Merz has been a really good partner out of the gate. They have a good technology that they offer and we are great Company to get it to market. We have a lot of trusted customers that look to us for solutions. So really the combination, I think, of AngioDynamics and Merz is a really good one.

Second, we have some opportunities to grow kind of what we are doing in that space from a technology standpoint as well. So we will look to add on to new technologies. I mentioned earlier about investing in R&D and our R&D process.

So there are other companies in the market that have new technologies, we do as well. But we think we have an offering with a basket of products in that suite that is as strong as anyone's.

So, you will see some new things from us there soon, but by adding Asclera to the bag it really strengthens our overall offerings. We think not only can we sell Asclera effectively, but it may pull through some of our other technologies in the vein space.

So, for fiscal 2017 do you think that this growth rate that you put up this quarter is sustainable?

Charles, I am not sure if the Q4 growth rate is sustainable because we had kind of a one-time pop in getting it rolling, but we see very strong growth going forward, it is part of our growth profile in 2017.

Okay, thanks for taking my follow up.

It does appear we have no further questions at this time. I will now hand it back over to our speakers for any additional or closing remarks.

Okay, thank you, operator. Thank you, Ashley. Folks, thanks for listening in today. Again, people here at AngioDynamics have worked hard to produce the results that we just reported. I am part of the resilience of our Company. They have faced a lot of change in this past quarter and I'm going to ask them to take a little different look at our business and to change again.

So, I am happy to share our results with you. I look forward over time into strengthening our strategic profile and the way we execute deliver on growth and provide more value for our Company going forward. Thanks for joining us today.

And this concludes today's presentation. We thank you all for your participation.