Cardiovascular Systems Inc (CSII) 2012 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the second quarter 2012 Cardiovascular Systems Incorporated earnings conference call. My name is Taheesha and I'll be your operator for today.

At this time, all participants are in a listen-only mode. Later we will conduct a question and answer session. (Operator instructions.) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Larry Betterley, CFO. Please proceed.

Thank you, Taheesha. Good afternoon and welcome to our fiscal 2012 second quarter conference call.

Before we begin, I'd like to remind you that during the course of this call we will make forward-looking statements. These forward-looking statements are covered under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 and include statements regarding CSI's future financial and operating results or other statements that are not historical facts.

Please be advised that actual results could differ materially from those stated or implied by our forward-looking statements due to certain risks and uncertainties including those described in our most recent Form 10-K and subsequent quarterly reports on Form 10-Q. CSI disclaims any duty to update or revise our forward-looking statements as a result of new information, future events, developments, or otherwise.

We will also refer to non-GAAP measures because we believe they provide useful information for our investors. Today's news release contains a reconciliation table to GAAP results.

I'll now turn the call over to Dave Martin, CSI's President and CEO, for comments. Dave?

Thank you, Larry, and hello, everyone. We continue to prioritize key initiatives that will drive future revenue growth and profitability. We are committed to, one, expanding the use of our Stealth system in the peripheral market, two, generating scientific data that supports the safety, effectiveness, and the economic benefit of our products, three, obtaining approval for a coronary application of our technology.

Toward that end, we saw progress on multiple fronts. Highlights include Stealth 360 system revenue growth of 55% and account growth of 81% over the first quarter of this year, revenue growth in the office-based lab market of 12%, overall revenue growth of 5% over the prior year and 6% over the first quarter of this year, a 50% increase in our ORBIT II clinical trial enrollment for coronary application, and a generation of an additional data presented at the TCT supporting the safety and efficacy of our technology. I'll cover each of these during our time with you today.

Demand for the conversion to the Stealth 360 system was high. In the just completed quarter, the Stealth 360 customer base grew 81% sequentially from the first quarter to nearly 400 accounts. This represents over 70% of our revenue base. Stealth device sales rose 55%, now totaling 67% of our total device revenues.

The simplified and improved Stealth 360 has only five crown configurations available versus the 13 configurations for the Diamondback. Stealth reduces the amount of inventory the customer needs. However, we expect physician adoption to pick up the pace in the future to offset this difference.

Device usage per Stealth account grew over the first quarter of this year and is nearly twice that of our overall average usage per account. In addition, Stealth commands almost a 10% higher average selling price than the predecessor Diamondback 360 device.

The Stealth 360 combines our proven orbital mechanism of action in an electric powered device with an improved shaft design. System setup and treatment times each take only about a minute. The simplified Stealth 360 design eliminates a separate console and moves controls to the handle into the hands of the physicians during procedures. As a result, physicians now have complete control of device operation. Our device is a frontline therapy for both complex and routine cases.

Stealth 360 has also been honored as a New Technology of the Year by Life Sciences Alley. The annual award is given to the top 10 novel products that address a medical need, demonstrate the ability to improve healthcare, and have significant market potential. Expert industry judges selected groundbreaking healthcare technologies from established and emerging organizations around the US and Canada.

Office-based lab accounts posted a 12% sequential rise in revenues over the first quarter. At the same time, we saw revenues from the hospitals that our office-based lab physicians are associated with grow 15%. We view office-based labs as an important market for CSI.

Though the physician migration from hospitals to labs has leveled off from the initial surge, we believe that the strength of our technology, supported by compelling clinical data, will lead us to long-term success in both the hospital and office-based lab settings.

Now Larry will provide more details on our financial results, and then I'll come back for additional comments before we take your questions.

Thank you, Dave. For the second quarter of fiscal 2012 compared to a year ago, revenues grew 6% sequentially and 5% over the prior year to $19.7 million. Diamondback and Stealth device revenues were 89% of the total.

Over 5,500 devices were sold in the quarter, bringing the life to date total sold to over 75,000. Other product revenues declined slightly to $2.2 million from $2.4 million, primarily due to the expiration of a balloon distribution agreement.

Reorder revenues increased 11% to 95% of total revenue, up from 91% in the prior year quarter. We added 41 new accounts compared to 68 last year as we continue to place our priority on Stealth conversions and driving adoption in our key existing customers. 37 of the new accounts added this quarter were Stealth accounts.

Gross profit decreased to 77% from 79% as stronger average selling prices and the shipment of fewer control units were offset by a higher mix of Stealth 360 sales. Stealth devices currently carry a higher unit cost due to limited additional component purchase volumes.

Also, the ramp up of CSI's second manufacturing facility in Texas for additional production capacity has temporarily increased production costs, but will enhance efficiencies over time.

Operating expenses rose 12% to $18.8 million. The increase is related to investments in advancing the ORBIT II clinical trial, building the sales and marketing organization, and payments related to disputed amounts with a former vendor. Additionally, prior year's R&D expenses were reduced by receipt of a $488,000 grant under the Qualifying Therapeutic Discovery Project program.

Interest and other expense increased to $476,000 from income of $27,000 the prior year. This increase in expense was primarily due to $180,000 of expense from conversion and valuation changes of our convertible debt compared to income of $371,000 in the prior year. The resulting net loss was $4.1 million, or $0.23 per share, compared to a loss of $2 million, or $0.13 per share, last year.

The number of weighted average shares outstanding rose two million to 17.8 million with the issuance of stock from our employees' stock plans, excises of stock options and warrants, and the conversion of $4 million of convertible debt into 400,000 shares of common stock since last December.

Adjusted EBITDA, calculated as loss from operations less depreciation and amortization and stock-based compensation expense, was a loss of $2.2 million compared to earnings of $72,000 last year.

For the six months ended December 31 compared to the prior year, revenues rose 4% to $38.4 million. Reorder revenues were 95% of total revenue compared to 93% last year. The gross margin was 77% versus 78% a year ago for reasons similar to the quarter.

Operating expenses increased 4% to $36.2 million, again for reasons similar to the quarter. The prior year also included $500,000 of expense for settlement of a lawsuit.

Interest and other expense was $1.2 million versus $347,000 last year. As in the second quarter, the expense increase was mainly due to conversion and valuation changes of our convertible debt compared to income in the prior year.

The year-to-date net loss totaled $8 million, or $0.45 per share, compared to a loss of $6.3 million, or $0.40 per share, last year. The averages shares outstanding grew by 2 million shares to 17.6 million due to the same factors noted for the second quarter. Adjusted EBITDA loss was $3.6 million versus $1.7 million last year.

We finished the quarter with nearly $25 million of cash, including $6.4 million of proceeds from refinancing of our term debt during the quarter. We continue to manage the business to live within our available cash and debt capacity.

However, as we've said before, CSI may raise additional capital in the future to fund acceleration of our current growth initiatives or additional growth opportunities if we believe it will significantly enhance CSI's value. We have a universal shelf registration statement in place for this purpose if needed.

I'll now turn it back to Dave for additional comments.

Thanks, Larry. Let me now update you on CSI's clinical trial program.

In November, we presented results from six studies at the Transcatheter Cardiovascular Therapeutics Conference, or TCT. Presentations included the six month data from our COMPLIANCE 360 study of severely calcified above the knee lesions.

The data demonstrated that, compared to PTA alone, orbital atherectomy with low pressure PTA using the Diamondback 360 nearly eliminates the need for bailout stenting due to acute complications. Procedural success of achieving less than 30% residual stenosis with freedom from stenting was 92.1%. This compares to only 21.4% for PTA alone.

Further, we are pleased to announce follow up data from ORBIT I. Our initial coronary feasibility study, ORBIT I, showed a freedom from major adverse cardiac events of 92% at six months. In a single center subset of ORBIT I, Dr. Parikh reported two year data and a freedom from major adverse cardiac events of 85%.

Other key TCT presentations included results from CALCIUM 360 and CONFIRM II. CALCIUM 360 is a prospective, randomized, multicenter study comparing treatment of below the knee lesions with the Diamondback 360 versus PTA. All 50 patients in the study had critical limb ischemia and calcified lesions, which are especially challenging to treat.

Outcomes from CALCIUM 360 demonstrated the key advantages of orbital technology versus treatment with balloon angioplasty. Diamondback patients experienced a much higher freedom from major dissection, a rate of 96% freedom versus only 76% for balloon.

Diamondback also had greater procedural success, 90% procedural success versus 76% balloon, and superior durability with a perfect record, in fact 100% freedom from reintervention after six months, in the Diamondback 360 arm.

Results from CONFIRM II, a prospective registry of over 1,000 patients and 1,700 lesions, reinforced superior outcomes. We reported 34% residual stenosis post treatment and 10% after adjunctive low pressure PTA. We achieved unprecedented safety results with a dissection rate of 2.5%, bailout stent rate of 4.6%, and perforation only 1%, in fact less than 1%.

In contrast, balloon angioplasty dissection rates range from 40% to 74% and bailout stenting rates to fixed dissection are as high as 40% with balloons. Additionally, the study also demonstrated short orbital atherectomy procedure times of 103 seconds on average.

In a single center study with 46 patients and 57 lesions, Dr. Makam reported long-term results of 89% freedom from reintervention at 12 months. You can find the details from these presentations on our website.

Our outcomes data is drawn from 12 clinical studies of more than 3,800 patients and 5,500 lesions. These studies provide powerful irrefutable evidence of safety, efficacy, and cost effectiveness of our orbital technology.

Now turning to coronary, our coronary PMA study increased enrollment pace by 50% this quarter. A little background -- in May 2011 following the FDA's review of the first 50 cases, CSI received approval to continue enrollment on to 429 patients in the ORBIT II Investigational Device Exemption, or IDE, clinical trial.

Enrollment in ORBIT II has now passed the halfway mark. Nearly 40 of 50 potential US medical centers are enrolling patients. We expect to complete patient enrollment near the end of fiscal 2012. It's important to note, because ORBIT II's primary endpoints are based on patients' 30 day follow up post procedure, we should be able to file a PMA application soon after we complete trial enrollment.

Many patients with small calcified coronary arteries have been excluded from other clinical studies because of limited effective treatment options. A coronary application of our technology would give patients a new, minimally invasive option. It would also provide CSI with a large growth opportunity. Our confidence to successfully complete ORBIT II is high given our technology's ability to treat calcified lesions in small arteries and our success in the ORBIT I trial.

Now I'd like share our outlook for fiscal 2012. We are progressing on both Stealth 360 and the office-based lab opportunities. That momentum will result in sequential quarter revenue growth for the rest of fiscal 2012. At this point, however, we do not think our sequential growth will deliver 10% growth for fiscal 2012 over fiscal 2011.

With the opportunity to introduce and expand Stealth 360 within the rest of our account base and the acceleration of our ORBIT II coronary trial, we need to invest further to capitalize on our growth opportunities.

Therefore, we plan to increase operating expenses for the remainder of fiscal 2012 to enhance future growth. As a result, we do not expect positive net income in the fourth quarter of fiscal 2012. Specifically for the third quarter of fiscal 2012 ending March 31, 2012, we anticipate revenue to be in the range of $20.5 million to $21.5 million.

CSI's gross profit as a percentage of revenue should be similar to the second quarter of fiscal 2012. The higher initial Stealth 360 unit cost and ramp up of our second manufacturing facility in Texas will continue to offset other efficiencies.

We expect operating expenses to be about 7% higher than the second quarter of fiscal 2012 as we expand the ORBIT II trial and invest in physician and sales education for the next phase of growth.

We anticipate interest and other expenses to be about negative $400,000, excluding the effect of conversions or valuation changes of convertible debt.

The resulting net loss is expected to be in the range of negative $4.2 million to negative $4.8 million, or loss per common share ranging from negative $0.23 to negative $0.27, assuming 18 million average shares outstanding. Again, this excludes potential effect of conversions or valuation changes of convertible debt.

CSI has the technology and clinical data support to be successful in the peripheral, arterial, and coronary markets. Executing on our key initiatives positions us well for significant profitable growth and shareholder value over the long term.

Thank you for participating in today's call. And now, Operator, we would like to take questions from the participants.

Thank you. (Operator instructions.) Jose Haresco from JMP Securities.

Hi, guys. Good afternoon.

Hey, Jose.

Hi, Jose.

Sorry if I missed this, but how many new accounts did we open in the quarter?

41 new accounts, and 37 of those were Stealth.

Okay, got it. And did you also tell us how many cases you did in the quarter?

We didn't.

Okay, got it. The reorder rate is still, I believe you said, 94%, right?

The reorder rate was 95% for the quarter.

Okay, got it. Okay, on to some of the kind of overhangs we had earlier in the year. Could you talk a little bit more about the transition from the lab to the hospital and about what you're seeing with regards to that trend, what you're seeing with regards to financing within -- for the folks who have already made this transition? Are they -- is it easier for them to get? Are you still seeing this as being a pervasive problem? And perhaps more long term, I mean, how do you see the split between the hospital-based versus office-based procedures in your field?

Yes, we like the trend. We think it's going to continue. It did level off a little bit, but it's great for patients and ultimately it's going to lead to more opportunities for patients to get to Diamondback.

We have seen firms partner with physicians, co-ownership to finance these operations. And they've done some great work. I was able to visit a couple of these office-based labs last quarter, and they're beautiful. Some of these are really great places for a patient to go.

One bragging point in the San Antonio office-based lab that I was in is that, in the time it takes some patients to get admitted to the hospital, they could be in and out of the office-based lab. So, we're supporters. Great work is being done. And we really focused on servicing that customer this quarter and it showed up in the 12% increase in revenue.

Okay. Larry, for a quick question, what was the other revenue in the quarter?

Other revenue was $2.2 million, and that consists of our supplemental products and distribution partner products of the ASAHI wires.

Okay, great. Thank you very much.

Ernie Andberg from Feltl and Company.

Good afternoon, Dave, Larry.

Hi, Ernie.

Hey, Ernie.

You look like you're making great progress on the Stealth side, Dave. I haven't tried to do the math on the other side of the business, but that seems to be lagging in terms of where those accounts are doing procedures. Am I looking at the whole picture properly?

Are you talking about Stealth versus our old air-powered device, or possibly versus --?

Yes, Stealth versus the old air-powered device.

Yes, that's the story at CSI right now is the rise of the Stealth during the demise of the air-powered device. And we managed that much better this last quarter. We'll continue to manage it, but we felt like we did some great wood chopping. We did some great work in servicing those accounts, and we worked very hard to get the ASP bump as well in a large number of accounts.

Going forward, there's still a number of accounts, in fact over half of our customer base, to get to. But, we feel great about the fact that we did focus on flagship accounts and those places that did the most volume. So, while there's still more wood to chop, there are some indicators to say that we've gotten over the hump.

Okay. Those accounts, if I just do some simple math, look like they're doing two to three times as many cases per quarter as the system on average. What's happening anecdotally to the cases, let's say per account, that's going on right now, Dave?

Per account? We do have some accounts with both systems, and our customers would love to return them. We're asking them -- given the great clinical data and the results of that air-powered device and the fact that it's the same mechanism in the body, our wonderful orbiting technology, we're really working with them to use those.

And in some cases, that means that we've got both systems in the account that we're working through. And that's the way we've handled it since the beginning, and the team did a real super job this last quarter on that count.

Well, you had given us some anecdotal evidence earlier of accounts where utilization had gone up after the introduction of the Stealth into the account. Is that trend continuing?

Yes, there's two things that are happening. The introduction of Stealth and the easy to use in the physician's total control device alongside our continually growing clinical data is doing two things. One, it's making people more comfortable going below the knee. So, we continue to dominant that below the knee market and expand that market pie one physician at a time.

Also, for those physician who have been on the sidelines and maybe in the past thought all atherectomy were the same are seeing that orbital atherectomy is different. We're friendly to the native artery. We can do fantastic things with the safety of this device. Some of the CLI data that we're presenting is really dovetailing nicely with the coronary results.

We had some excited physicians on the TCT floor. Dr. Shammas did not expect to get as good a result as he got in the below the knee CALCIUM 360 study. And he was able to talk to Dr. Parikh who was involved in our ORBIT I study. And he's the one that presented the 85% freedom from major complications at two years.

And to hear those guys compare notes, we know we've got something wonderful. We've had a long-term approach and it's going to pay off. And so, for anecdotes, that was my favorite from the quarter is those faculty members talking on the floor of the TCT.

Okay. Larry, you mentioned a figure in your comments and I was trying to keep up, $6.5 million of long-term debt on your line. Was that new or was that rolling over? Because it looks like your long-term debt is up by about that amount, total long-term debt.

Yes, we refinanced our term debt and working capital line of credit. And it increased from the original $10 million to $12 million of term debt. We had paid it down, so the new proceeds to the Company were $6.4 million upon the refinancing.

Okay. So, that is the difference in the long-term debt quarter-to-quarter less some change in the current portion, correct?

Yes. Yes, that's correct.

Okay. Thank you. I'll get back in line.

David Runkle from Newel Capital.

Yes. Hi, guys. The office-based labs, what percentage of that business would you say that you guys are getting?

I think your question is what percentage of the office-based labs do you think that CSI is in? Is that the question?

Right.

Yes, we think we're in about 25% of those that exist. In the summer quarter, we got hit hard a little bit because those physicians who were jumping out and outfitting a brand new lab worked with the big companies, primarily Johnson & Johnson and Covidien, to outfit their cabinets. Everything is cost to them, so they are judicious.

But, we were able to work with those accounts and we offered them a consignment along with other service. And we were able to get product usage and a 12% growth in office-based labs from quarter-over-quarter. And we'll continue to do that going forward.

Okay. And it's my understanding that the office-based lab procedures are primarily above the knee.

That's true. Physicians need the confidence that the procedure would be safe if they did go there. And they want some peer-to-peer validation and some scientific support in order for them to try that in the office-based lab. So, until we get to them and sit down with those physicians and offer up that information and connect them with their peers, we're not going to get any business.

We did ramp up physician training this quarter after kind of shutting it down for a period of four or five months. And we had a fantastic event last quarter. We'll continue to have a couple of events per quarter going forward. We'll include the office-based physicians. And we had a faculty membership for this last training event that represented over 2,500 Diamondback cases, the majority below the knee. And you could see the light bulbs go on right there.

Because of the history of -- the 20-year history in peripheral intervention and the fact that there hasn't been any successful device to routinely treat below the knee and what are often calcified arteries, people are necessarily gun shy because they want good clinical and economic outcomes. And you're not going to get it with adverse events.

So, we're proving it successfully one physician at a time. That's our long-range plan. We've had a long-range outlook and built this science exactly for that purpose, and I think we'll continue to emerge with both office-based and hospital physicians.

Okay. Okay, thanks.

Ernie Andberg from Feltl and Company.

Larry, in your comments and in the press release, you make the statement a 12% sequential increase in the office-based lab market. Are you willing to give us a feel for how big that is for you right now? Is it 10%?

It's roughly -- we don't want to give exact numbers, but it's probably in the 10% range of our revenue at this point.

Okay. Dave, you said that you thought you had gotten into about 25% of the labs that either exist out there or are getting opened up. Last quarter you said you had about 100 physicians, about half of whom were transferred over, the other half in process. That suggests a lot more freestanding cath labs out in the world than I thought existed. What do you see the population at, Dave?

Well, there's multiple physicians per site, if that helps you kind of congeal your numbers. And in fact, there were four treating physicians at the office-based lab I visited, all doing great work, all having been introduced to the our orbital atherectomy system and the science, who are really beginning to put up some numbers.

And we didn't get to every office-based account. But, the ones that we target we do a great job. And that's why the ones that we were in, the 50 or so, drove that 12% growth. It wasn't through massive expansion into all 200. We're taking a targeted approach to both hospitals and office-based labs.

Okay. So, overall the number of freestanding labs out there probably isn't much different than I think. It's just how you're counting accounts in terms of guys per lab.

Yes, they vary. But, maybe I'm not understanding the question.

Well, I -- what do you think the universe of freestanding labs out there is, Dave? I think you just said about 200.

Yes, we think it's a couple hundred.

A couple hundred.

Yes, we think a couple hundred.

So, if you had 50 guys on average doing it right now, that's roughly 25% plus some more who are coming on stream, is I think --.

Yes, my 25% number comes from -- we think there's a couple hundred. We're in 50, a little bit more than 50. And that's my 25%.

All right. Fair enough.

Yes. And we've got multiple physicians in the labs, and we've targeted some of the larger ones.

Okay. To your knowledge, are these guys making money in these labs, Dave?

Yes, they're doing great. There's some setup time and expense and trauma, you can imagine. And they still have to grow their reputations and their referral bases. But, that's where our science really plays a great role. If they can go to a physician and say, hey, you're not going to have any drop off in the quality of the outcome, and in fact you're going to have a major increase in patient satisfaction, getting them in and out, that's a great sell.

Now, they need the device and the procedure to get that done, and that's where we come in. We're the only enabler for strategic revascularization that starts with outflow in those tibial vessels, those small vessels below the knee.

So, having your procedure in there should help these guys in terms of volume in the labs. I had read some commentary that just straight angioplasty diagnostic procedures reimbursement was somewhat squeezed in these labs. But, your procedure should help that?

Yes. In a great way, there's no economic detriment to doing the right thing for the patient. Reimbursement's in place. The margin's great. As long as they know how to do our procedure and start low and move high, they're going to have great results. They're going to have a super margin and they're going to be able to get their businesses profitable sooner.

Okay. Last question. Larry, you made a comment about the physicians who were moving into their own practices. And I thought you referenced something about what's happening in the hospitals that they're at at the same time, and I missed the nuance there.

Oh, the hospitals that the physicians have moved from, some of them are still doing some procedures in their old hospital. Some aren't. But, we actually saw a 15% growth in revenue in those hospitals after a fairly sharp decline last -- in the first quarter. So, we did see growth in those as well as the office-based labs.

Okay. So, the business had declined, but you're saying you're seeing some incremental volume coming out of those hospitals is what --.

Right. That's right.

Okay. Thank you very much. That's good for me. Thank you.

James Terwilliger, private investor.

Yes. Hey, guys. Can you hear me?

Yes we can, James. Thank you.

Real quick here, on the product revenue over the last two years, you've had tremendous growth in that area and it seems like -- it seems to have kind of stalled here a little bit. I think in your opening comments you mentioned that there may have been a distribution contractor relationship that terminated. Could you talk a little bit about the outlook for your other product revenue product line?

Oh, sure. The other product, we had a balloon distribution agreement last year and that company had been purchased. And so, the distribution agreement ended up expiring.

For other revenue, other revenue runs between 10% to 12% of our total revenue in any given period. And that's a reasonable amount going forward.

With that company being acquired, is there anything on deck to fill that void or is that -- or is there nothing to fill that void at this time?

Well, with great guns, the coronary opportunity. We're excited about the accelerated ORBIT II enrollment because, with our same distribution network in the United States and the fact that seven out of 10 of our current Diamondback installed customers also do coronary cases, the efficiencies and the productivity is massive.

So, we see that. It's come into the clear. We have knowns now. Anecdotally we've -- and we've always thought the trial was of high quality. And then, definitively, because of ORBIT I, we knew it was a great trial and a great opportunity and a large market in the US. Now that the pace has picked up, we're all guns a blazing for that productivity. It could really rocket per sales representative and same store shopping productivity in the near future now with the increased enrollment.

So, that's the pipeline. We think we've got one of the best pipelines in the business. The margin is fantastic. And because of all the study, we feel like we've squeezed out scientific risk, which is major. And the technology works every time it's used properly, so the technology risk is gone. At this point in time, it's all about execution.

That's great. On the ORBIT trial, that was going to be my next question, what is the target for completing the enrollment of that trial, because I think this press release said you're 50% enrolled or --?

Yes, we rocketed past the halfway point this last quarter with the addition of a few new sites and also supporting our sites a little bit better. We also hired an in-house team to control that data because it's getting close and we want to be able to ready, set, submit after that last patient.

So, we're looking towards the end of this fiscal year, which is June 30th and just months away. And we want to ready, set, submit. It's the last patient plus 30 days. I think a lot of people mistakenly think that we've got to wait a year or two, but that's not the case. We're going to -- we've got control of this data. We feel like we know the answer from ORBIT I. We've got an in-house team that's second to none, and we will ready, set, submit as soon as possible after that last patient. And we're expecting revenue in 2013.

Okay, excellent. And one last question just on the sales and marketing side. You have a sales forces laser focused on the hospital market. You have a transition of procedures to office-based facilities. I assume you're building the sales force a little bit to some degree to go after the office-based market. Could you just update me real quick on the build of the sales force? And that's my last question. Thank you for taking my questions.

Sure. Yes, sale force size is about the same, but we're working on quality. We made a big investment in Kevin Kenny who's managed well over 1,500 people and $1 billion in annual revenue. And his blue chip business practices are being installed now. They showed last quarter and that's great. We've got a national sales meeting up here in the next week for the first time in two years. And we'll have this team significantly upgraded well in advance of coronary activities.

And then, the play here is productivity. It won't be about massively expanding the footprint. It'll be about targeting those high volume institutions on both peripheral and coronary, whether that be in the hospital or the office-based, and servicing them in a way that we get really great productive metrics on our 78%-plus margin device.

All right. Thanks, guys. I'll jump back in queue. Thank you for taking my questions.

And we have no more questions at this time. I would now like to turn the conference back over to Dave Martin, CEO, for any closing remarks.

CSI has an exciting new product in the Stealth 360. It enhances ease of use and performance for treating PAD, so physicians are rapidly adopting it. We continue to build our excellent clinical trial results, which is what physicians need to make sound decisions for their patients. And we continue to make progress in expanding our technology to a coronary application.

With these initiatives, we are excited about our future potential. Thank you again for joining us today.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.