Q3 2019 Earnings Call

Please note this event is being recorded.

Oh, that's telecom so what personnel salaries diagnostics. Please go ahead.

Before we begin it's important to share that information presented during this call may contain forward looking statements within the meaning of section 27.

Other Securities Act of 1933 and section 21.

The Securities Exchange Act of 1934.

Forward looking statements include projections statements about our future and those that are not historical facts. All forward looking statements that are made during this conference call are subject to risks uncertainties and other factors that could cause our actual results to differ materially. These are discussed in greater detail and I know report.

On Form 10-K for the year ended December 31, 2018, and other reports we filed with the FTC. It's my pleasure to now introduced the company's President and CEO Mary Mary.

Thank you Laura.

Good afternoon, everyone and welcome to our third quarter 2019 earnings call.

Our placement revenue results for the third quarter came in below our expectations.

Shortfall is partially mitigated by a substantial backlog of deals awaiting final sign off keeping us on track to hit our previously communicated placement and go live targets for the year.

We believe that we will end the year at the low end of our placement target at the higher end our goal line tiny target for full year 2090.

Again, our 37 net new placements for the third quarter fell short.

Two large deals comprising over 20 instruments in total were pushed from Q3 to Q4.

Our placements to the end of Q3 totaled 167 units, but as we saw last year, we expect a significant Q4.

And while there is risk our funnel is strong with more than enough instruments to keep us on pace to achieve our three to 400 instrument target for the year.

Revenue for the quarter fell short of our expectations due primarily to longer than expected go live timing, which I will discuss in more detail later in the call.

On a positive note consumable sales grew 15% sequentially and over 150% on an annualized basis and we remain on track to realize a more significant step up in consumable revenue in the fourth quarter based on a record number of go lives in September .

Expectations to exceed this mark and even more go lives in the final mile pop the year.

I'm happy to report that we completed development on our respiratory test kit and moved into verification and validation the clinical trialing stays up their project.

China expansion is also proceeding well with first clinical evaluation in Hong Kong demonstrating excellent results.

Lastly, our new Chief operating officer, Jack Philips is already having a positive impact on our commercial operations and has provided valuable insights on our sales funnel execution and implementation processes.

Dozens of customer visits at reviews with our commercial team has only increased his conviction and the strength of our product offering and the size of our available market.

Moreover, he has identified opportunities for commercial strategy and execution improvements that he will break down for you in detail later in the call.

Before I review, our progress against our three key focus areas for 2019 and Jack provides this commercial review I will hand, it over to Steve to review, our third quarter financial results.

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Thank you Larry and good afternoon, everyone.

Net sales were $2.3 million in the third quarter and $5.8 million your today.

Compared with $1.4 million and $3.8 million for the same period in 2018.

This represents year over year growth of 16% for the quarter at 51% year to date.

It's important to note that the majority of our third quarter 20, Nike revenue and all of our year to date revenue growth was the result of higher consumable sales.

Driven by an increase in the number of life customers.

Predictably 20, Nike net instrument revenue has declined due to a shift toward reagent rental deals that were not available until September 2018, as we have discussed in prior quarters.

To put this in further context, our instrument revenue was down by approximately 10% year over year, while consumable sales grew well north of 150% over the same period.

Cost of goods sold were $1.1 million in the third quarter at $2.9 million year to date.

Resulting in gross margins of 51% and 50% respectively.

This compares to cost of goods sold of $680000 at $1.9 million or gross margins of 50% and 51% respectively from the same periods in 2018.

This year over year decrease was the result of a one time inventory timing benefit in the prior year, which did not repeat in the current year.

After normalizing for the effect of these pre F.D.A. instrument inventory previously written off to R&D gross margin improved by 500 basis points.

On a year to date basis due to higher consumable production levels.

Selling general and administrative expenses were $12.7 million for the third quarter at $38.3 million year to date.

This compares to $12.2 million and $41.8 million for the same periods in 2018.

The decrease in spend is largely attributable to lower stock based compensation expense as most of our other costs have remained consistent with prior year.

Research and development costs were $6.1 million for the third quarter and $19.1 million year to date.

This compares with $7.9 billion and $20.7 billion from the same periods in 2018.

We expected to spend to remain relatively flat on a year over year basis, as our R&D programs remain consistent year over year and the small step up in expenses attributable to our respiratory clinical trial have just begun in November .

Our net loss was $20.4 million for the third quarter 2019.

And $63 million year to date.

Resulting in a net loss per share of 37 cents and $1.16 respectively.

This net loss contain $3.1 million for the quarter and $9.4 million year to date and noncash stock based compensation expense.

Net cash used was $15.9 million for the quarter and the company ended the quarter with cash and investments of $122 million.

We believe our current cash position is sufficient to execute against our strategic initiatives.

We continue to expect 2019 net cash burn to be similar to or just below our 2018 net cash burn.

I'll now hand, it back to Larry to review, our third quarter placement and go live key commercial results in greater detail.

Larry.

Thank you Steve as discussed on prior calls we have three principal focus areas for 2019.

Market penetration rapid customer go lives and new market expansion.

Turning first to market penetration.

Yes placements were short of our expectations as a result of to nearly completed deals comprising approximately 20 instruments shifting into the fourth quarter.

While capturing such lucrative multi site h. and accounts yields significant step function growth.

These deals are more difficult to predict.

Similarly, one deal in EMEA for over a dozen instruments.

Shifted into the fourth quarter combined this resulted in a lower than anticipated global placement number.

Despite these delays our year to date instrument placements are over two times that if the prior here and we're confident in a strong Q4.

In summary, our 37 net new additions for the quarter brings our year to date placement total to 167 instruments compared to our annual target of three to 400 placements.

Given our progress to date and the strength of our end of year funnel, we anticipate a strong Q4, keeping us on pace to achieve the lower end of our annual global placement target.

Our second focus area driving rapid customer go lives is aimed at helping customers complete the processes required to begin routine patient testing.

As a reminder, each commercially contracted instrument require several implementation steps before going clinically alive and generating consistent consumable revenue.

These steps include installation and verification connection to the laboratory information system, and electronic health record and physician and pharmacists training on the clinical pathways necessary to ensure a prompt action based on Pheno results.

Our target for the time from contract signature to go lives is four to nine months.

Accounts going live in the first three quarters of the year realized an average time to go live of approximately eight months.

While this is within our target range, we continue to see Multihospital implementations take longer with many of the Q4 2018 hospitals currently in the latter stages of their implementations.

Accordingly, we expect to end the year with an average time to go live of nine months.

Individual hospitals going live rapidly and Multihospital implementations pushing us to the high end of our target.

As I discussed earlier, we had a record month of go lives in September at that rate continues to increase as large multi hospital deals signed in late 2018 and early 2019 are now moving towards completion.

Given this timeline and the record account go lives, we expected meaningful pickup in consumable revenue in the fourth quarter.

One slide we continue to see strong annuity stream in the U.S. within our targeted 45 to $65000 per instrument per year.

We expect us to improve as Multihospital implementations conclude which have consistently demonstrated higher consumable pull through.

While the go live process can be lengthy we're encouraged by the immediacy and predictability of the consumable sales a good indicator of customer satisfaction and annuity durability.

In contrast, our EMEA average annuity continues to come in at a fraction of the U.S. installed base.

We are currently doing a full evaluation of the EMEA reagent rental installed base, and where appropriate reallocating instruments to more productive sites in EMEA and or the U.S.

Before moving onto our progress in our third focus area for 2019 market and product expansion I would like to introduce Jack to speak about as early observations in commercial execution and his plans for improvement.

Jack.

Thank you Larry I have been at accelerate for just over 60 days and the more I learned the more excited I become about the opportunity in front of US. We're building a great company I have found at the best ways to develop a deeper understanding of the opportunity that lies ahead for accelerate is spending time with our customers.

Since joining I've been on the road visiting many health systems and attended I'd week in October .

Learn three important things about our market opportunity first customers, who have already implemented pheno are extremely satisfied with it second we have many new prospects moving through the sales funnel, who were excited to adopt pheno and third the market potential for Pheno and our planned product extensions is substantial.

Despite the enthusiasm that is present in our existing and potential customer base our rate of market penetration since receiving FDA approval for the Pheno in 2017 has been below expectations. My job is to improve this and I have identified positive tailwinds that we need to take.

Take better advantage of as well with some headwinds which need to be addressed.

Our tailwinds include the robust clinical data from various independent studies demonstrate meaningful improvements in clinical outcomes with accelerate pheno and the growing number of satisfied customers, who are becoming advocates for the technology.

In my career I have not sold and product with stronger clinical data than what's being produced by Pheno period at the top of this list or the recent studies from I'd week, including Rapids, Gn, which many referred to as the Mayo study a study from the University of Arkansas Medical Sciences and finally.

The University of Iowa study.

Let me take a moment and summarize some of the highlights from these three studies.

Beano results lead to impaired therapy changes, 80% of the time. This means the initial therapy selected by the treating physician is not optimal and managing the infection.

In around one third of cases, our results lead to therapy escalation, which means the initial impaired therapy did not include antibiotics well suited to handling the infection. This can be life saving.

In two thirds of cases, our results lead to de escalation of therapy, which means the patients are receiving drugs. They don't need some times with serious side effects.

And finally on average we can change therapy more than 24 hours earlier than what is standard of care today.

So powerful data from these landmark studies are now being translated into tools to improve the velocity of our sales cycle. Specifically, we have built a new ROI tool for customers to further improve the economic impact of improved outcomes on their specific institutions.

The data will also be very important in our reimbursement strategy to establish payment for our unique CPT code recently designated for Gapfill by CMS.

And also our recent new technology add on payment submission.

Finally, these data are also being considered by clinical and laboratory standards bodies in establishing new guidelines for recommending rapid testing for bacteremia.

The other significant tailwind is our growing number of enthusiastic customers many of whom are turning into strong advocates for accelerate.

These customers see the clinical difference our systems make in both lives saved and complications avoided from administering too many unneeded antibiotics.

Moving forward, we're going to do better job of leveraging our most valuable resource our customers and their belief in the lifesaving potential of the Pheno.

The principal headwinds, we face our long sales cycles and a lengthy time to go live for new customers.

These won't be fixed overnight, but they are exactly the type of challenges that my team and I know how to address.

Competition is not a serious issue we have to deal with at this point as we remain the only solution for Gram negative infections, we face competition from the various molecular players in Gram positive infections, but they do not offer rapid A.S.T. solution in other words, they can only impact 30 per se.

Sense of escalation cases.

With regard to our selling and go live processes. We are doing a lot of things right, but there is still a significant amount of room for improvement.

While there is no magic bullet that will fix everything overnight, we are continuously evaluating our selling and go live processes and have already identified areas for improvement and begun to make changes specifically our initial focus has been on improving our sales productivity measured in new accounts sign per year.

Yep.

As well as our go live timing this improvement process is ongoing and we'll take some time to complete and I will provide further updates on both topics on our next quarterly call.

In conclusion, I'm thrilled to be a part of this team as we continue to drive commercial success in the ever growing space of rapid I'd ASP.

Our momentum is building and I'm confident that is just a matter of time until FY knows life saving technology isn't nearly every hospital in the us and many more throughout the world.

I will now hand, it back to Larry to discuss our development updates.

Thank you Jack that's great.

Finally during the quarter, we made progress in our third area of focus for 2019 market expansion.

Specifically progressing the launches of our bacterial pneumonia tests for the us market and of our current blood products for the Chinese market.

The bacterial pneumonia tests will be an important addition for us as these serious pneumonias are costly and often deadly condition.

In addition to expanding our addressable market. This new test demonstrates the versatility and platform potential as a female and its ability to replace significant portions of the current microbiology lap workflow.

On our last quarterly call, we indicated that a reagent contamination issue had delayed our plans to initiate our clinical trial.

We're pleased to report that these issues have been resolved.

Our analytical accuracy meets our expectations and have begun to verification and validation of the respiratory kit.

This trial in process will include approximately 500 patients across six sites and in general is similar to the study we ran for blood.

We will run the analytical studies first to ensure site to site consistency unacceptable limit of detection among other things.

Now that we are kicked off we anticipate launching this next test kit for our female customers in late 2020.

I want to pause here and note the significance of this achievement.

Respiratory samples are recognized as the most complex and challenging samples within the clinical microbiology workflow.

What we had to create for respiratory as assistant for standardizing highly variable samples and managing multiple bacteria in a single sample at the same time.

With this we believe we now have a kit that can be used on virtually any specimen and that allows us to extend the benefits of the pheno to many other sample types addressing a broader portion of the microbiology market.

The learnings we have gained over too hard for years to get us to today will further separate us from those who try to follow.

Now I will update you on the progress we have made towards obtaining approval and launching pheno in the Chinese market.

First our preparations to initiate this registration trial are progressing well and are tracking with our goal of starting near year end.

Given this milestone will position us to begin selling in China in the first half 2022.

In addition, we have begun testing the market via our first clinical site evaluation in Hong Kong.

Aside is quite enthusiastic and early analytical results look promising with almost perfect performance. Despite the trial, including twice as many resistant patient test has would be typical of a similar study conducted in the United States.

In summary, while our third quarter placement and revenue results were below our expectations. We continue to see positive signs that we will again have a solid fourth quarter.

We incurred we are encouraged by our growing body of clinical evidence and by the improvements to our commercial process that Jack has already begun implementing.

These factors along with our progress and respiratory and China further our belief that 2019 will continue to be a very highly productive year and that pheno is the new standard of care for sepsis patient management.

Before beginning our Q in a I would like to share a story from a recently lives us Pheno customer Allegheny General Hospital in Pittsburgh.

For a patient of there is tested with Pheno.

This will that had completed a prolonged hospitalization and within hours of being discharged developed a high fever and was clearly fighting a serious infection.

Because of the speed and accuracy of the results provided by Pheno. The hospital was able to discharge or home on oral antibiotics days sooner than would have previously been possible.

Length of stay reduction was among the prick principal economic drivers in securing Allegheny's acquisition of Dino.

We are really thrilled that the hospital is realizing these benefits and more importantly that patients' lives are being improved as a result.

And with that we'd be happy to answer questions from our analysts.

Should others on the call have questions not addressed we would welcome you to send these questions or request for a follow on meeting.

To investors at X Dx dotcom.

Thank you.

We'll now open the Schooldays session to ask a question. Please press Star then one on your Touchtone phone try your question. Please press Star then so please remember to pick up your speaker phone before pressing issues.

This time, please give us almost with some of the roster.

And the first question comes from Brian Weinstein with William Blair.

Hey, guys. Thanks for taking the question.

Just wanted to kind of focus more on the facing side here and obviously was below expectations. You mentioned that you all good sales cycle I want to be clear there are we referring to talk to me.

Just one offering marriage or as a broader and the reason I ask you saw last quarter you mentioned the issue in EMEA, but you also noted that in the U.S.U.S. built up a large bottleneck under a couple of GPO contracts worth where there were a dead terms that were put in place in July and that that would help in Q3, so what's going out with that was and then you had gone through that.

Xos to review going over our account by account and we always talk to second half to look good. So just trying to understand the disconnect. There on those different components and just thoughts on the sales cycle itself and what we're really dealing with here.

So hi, Brian This is Jack and I'll I'll take that question first first off a I've been on board for about 60 days now and as we dive into this.

We continue to be very optimistic about.

The opportunities ahead of us here with.

The opportunities that we're working on on closing.

As Larry pointed out in his comments.

This quarter really came down to three major opportunities to in the U.S. Intuit EMEA.

That said have slipped due to.

Very complicated sales cycles and.

Working through in the us anyway, the GP O process, but.

I would say as as I get grounded on the business in deep into the business. One of the first things that I took time to do as I said in my comments was to really get into.

The market opportunity and.

First and foremost I'm the market opportunity they the four pheno is tremendous.

I was coming into.

This role one of the questions that I wanted to answer for myself and have done that is where where what is the right fit for FY know what is the right health system for Pheno and with that I went in and have visited.

Dozens of customers from single site community hospitals to regional integrated health networks.

Both medium and large to the largest health systems in the country I have not made it to Europe , yet, but we'll be doing that over the next couple of weeks and what I have confirmed is the unmet medical need for FY No is real across all these health systems.

The demand is real across all these health systems and so.

Were up one of my first areas of focus to continue to.

Improve productivity of placements is really around strategies to tap into all of these opportunities then do it quicker.

Relative to our immediate term placement productivity, we have many items underway to improve that we're working on these now and.

It starts first and foremost with.

Proving the value of fee no and as you know over the past three months.

We've made tremendous strides here with the data from from Fantastic Health systems in the us that are coming out that are better speaking to the value of pheno and in the clinical outcomes that delivers and then with that on the immediate term will be time.

That those results too.

ROI models financial models that will allow.

Opportunity customers and opportunities for customers to really look at the value of pheno in their own institutions.

Okay.

I appreciate the details there and I think you said as it relates to the go lives on the improvements that you're trying to make there that you would give us an update on Vera.

In future calls, but is there any kind about.

No its version or just high level thoughts as to kind of some of the things that you guys are working on there that you wanted to share.

Yeah, absolutely right so.

First and foremost coming in as I learned about the go live challenges here to accelerate.

First and foremost having been in diagnostics for a while absolutely not a surprise so something that we.

So it's something that we see.

Pretty much everywhere in diagnostics, and and and so that was not a surprise, but we continue to work on here is.

We're deconstructing now the go live process.

We're going to put best practices in place immediately and we look to launch this new program for go lives over the next 60 days and with that we really expect too we really expect to see improvements with regard to our ability to get cuts.

Summers life quicker.

Over the next several months.

Alright, Thanks, I'll, let others jump in sensors.

Thank you and the next question comes in Telco Peterson with JP Morgan.

Hi, Thanks, this is a lending on for Tyco.

So maybe starting with system placements last quarter. You noted that there were a couple of multi instrument capital deals with 20, plus placements that were pushed out to the second half of the year can you talk about how many of these were recaptured and three Q or if these were all pushed back to for Q and then can you also date.

On the read I know you've talked about this a little but the reason for the continued hold up and how you're progressing on pricing for these deals.

So.

Yeah. The large deal that we reference last quarter was in EMEA.

It was a multi hospital deal in the middle East and that deal is still under works it looks very favorable to close in Q4.

Okay and then.

In terms of the backlog up deals, which are awaiting the final sign off can you give us some more color.

No what gives you confidence you'll be able to convert piece to placements in Fourq you.

Yes sure. This is Jack again, and thanks for the question.

We.

We're continuing to work through many deals, but those those larger deals are continuing to progress nicely.

We we they've been complicated based on.

GPO type contracts that were working through.

And.

Like I said, they continue to progress and we're forecasting to close those in Q4 along with.

Really right funnel of of many other opportunities that we continue to progress through the funnel and.

And again, we look to we look to those deals as well as several others to finish up the quarter and year and in the manner in which we indicated.

Okay and then my last one from me, giving you are a month into Fourq. You can you give us an early read of weather placements are tracking in line with your expectations.

Yes, sure and this is Jack again as Larry indicated.

And his opening remarks, we continue to track.

Towards our full year guidance, albeit at the lower end of of the guidance, but we continue to track full year guidance on placements and.

As we look at the final for quarter four the opportunities that we plan to close in quarter four continued to progress through the funnel and and already through October and into an even November here. We've already closed several of those deals and look to close several more over the coming.

In weeks and.

Month, I would just add onto what Jack said.

We all here at this table lived through.

Last year and.

And you will recall that the majority of our contracts were closed in the final weeks of Q4.

It's not how we want things to be it's not optimal and I know Jack is working on changing that period is Asian for sure that being said I would expect the same thing that we had last year to occur. This year, we will have a very significant I believe Q.

For that will take us to within our our range up expected placements and our go live targets.

Okay, great. Thank you.

Thank you and then next question comes from Bill Quirk with Piper Jaffray.

Great. Thanks, good afternoon everybody.

Hey, Bill Bill.

Right, So I guess, Larry or Jack.

You mentioned, the new benchmarks for the sales team in terms of looking at a number of contracts per year can you speak a little bit about the sales force comp structure.

Things like how much in salary versus mission and then even within that structure, what sort of incentives are there in place for things like placements verses go lives and driving the consumable side of the equation. Thanks.

Yes, sure Bill so our salespeople join us at a relatively modest salary.

And the majority of their compensation at plan is contingent compensation.

That contingent compensation is based on a number of factors.

They include the things that you mentioned.

They include the number of.

Placements that they make they also include a revenue targets.

And.

And other factors that we are seeking to drive through the year to be clear our sales team is highly incented highly incented to deliver.

On our targets for the year.

And if they don't they are they certainly are not.

They certainly are not pleased it's.

It's it's absolutely a bit draconian that way.

Maybe one thing to add bill as I.

This is something we're also look looking at with Jack and at the beginning of the year, we rolled out annual annually focus targets with the team and so the team has been has been working and driving to really hit an annual metric both on placements in revenue.

So they have a lot of incentive to really drive at the end of the year and that's been their focus against the goals that we set out which were annually focus for the year and to Steve's point Bill that's an opportunity to relieve some of this period as a nation that we say.

Right now.

I think there are opportunities to manage.

Manage incentives such that we don't see a huge bolus in the last quarter and the last month of the year.

That's certainly seems logical that you try to shape that into more of a quarterly or monthly expectation over time, certainly certainly makes sense to us couple of additional questions with respect to the lower respiratory clinical trials, starting if I, if I'm kind of walking back from your comments with respect to when it's going be commercialize it sounds like the clinical trial.

Self is going to kick off you're probably early 20 that the right way to think about that.

No worse, we've kicked it off now bill we're beginning with the analytical studies.

As as I mentioned in our prepared remarks to ensure that we have site to site consistency and and appropriate limit of detection and do that DNA away that is present to bold too.

FDA and others.

But we're going to kick that off and do expect to have.

Our our submission to FDA in time to have a 2020 approval.

Okay got it appreciate the clarification there and then lastly from me with respect to the comments about looking at some of the any AE systems that are not going live to where they are supposed to be and reallocating those to other customers are we talking about a fairly large number small number just trying to get a.

A sense here for the magnitude of that thanks, guys.

Yes, sure Bill so here's what I'd say as I've mentioned in the past.

Our growth will primarily be driven from the U.S. and we're laser focused here now. We also are bullish on EMEA, but we've got we're still very enthusiastic about the market.

But now we know which markets are developing faster and which will lag. So you can imagine that we have markets. For example in the middle East Central Eastern Europe in Southern Europe that are developing very quickly we want to apply our resources to those markets.

And then reallocate and redistribute our assets.

To support those from from markets that are developing nearly as quickly markets that have demonstrated.

Lack of significant demand for Pheno. So you can expect us to be doing that over the course of the next couple of quarters. We think ultimately this will help us.

Drive the overall EMEA business in a way that that increases the annuity and and shorts the sales cycle.

Got it thank you.

Welcome.

Thank you and the next question comes from Alex Nowak with Craig Hallum Capital Group.

Great. Good afternoon, everyone. This is actually will to fin ski on for Alex today, Thanks for taking my questions.

Larry I was hoping to clarify something that's been kind of coming up in the investment community here. There was a precedent set that mail would create outcomes data. We now know that the trial wasn't powered mortality or length of stay. So does this it all changed the behavior of the diagnostic launch at all thanks.

No not at all as a matter of fact, we are Super pleased about the Mayo study. It's important to note that the outcomes from that Mayo studies. So far are significant both in terms.

I have made those ability to use the pheno device to both de escalator get patients on antibiotics, they don't need and perhaps more importantly, escalate get patients on antibiotics that they do need which can be lifesaving much much faster than they were able to do without our device and go.

Given that Mayo is perhaps.

One of if not the best hospital in the World I think that's fantastic.

Number two Mayo has not completed that study. So we expect to see continued data come out from the analysis of of that trial and where were interested as as you are to see what.

Continues to come out there, but that's not the only piece of evidence we saw.

Excellent.

Results from the University of Arkansas, We saw excellent results from the University of Iowa, We've seen excellent results from peninsula and the body of evidence keeps growing and demonstrating that not only is pheno.

Lifesaving, but it also saves hospitals.

Length of stay in and lots of lots of precious resources, So where we're enthusiastic and frankly I have not seen.

A diagnostic with the body of evidence that we've created that that we've created ever before so.

And now it's just a matter of Weaponizing that data turning it into the kinds of tools at our salespeople can use and and where we've done some of that already and I know Jack and his team are actively engaged in doing that right now so and and the results from that are our.

Already hitting in the fourth quarter and I believe we'll continue to drive.

Sales into 2020 in 2021 and beyond.

Got it okay. Appreciate the color there that was very clear and then there were 100 or so systems placed at the end of 2018.

Just those systems, how many are alive generating clinical consumable sales today and how many cartridges per system per day are we looking at for the systems that are running today. Thanks.

First of all as we mentioned in the script, we targeted at the onset of the year to hit between four to nine months time to go live and that's where we're at and that is inclusive of the deals that closed in Q4 now you have to keep in mind that there's a mix in there we've got individual sites that have gone live very rapidly during the.

Here and then we've got some pretty large multi hospital.

Limitations that are nearing conclusion and so.

When you take into consideration all of that were at the eight months today that will be moving to nine months by the end of the year with.

You know nearly all of those going live from Q4 and many many more throughout this year going live.

And then.

Yes, just to just to follow onto the second part of your question.

The annuity looks very strong in the U.S., we spoke about this on the call its right within our target range.

And.

We also mentioned that we are seeing a a pull down effect on the overall average from EMEA and this is part of our interest too in a targeted fashion look at those lower producing units.

But the combination of that change out in EMEA as well as these larger multi hospital implementations going live.

It is very encouraging the other thing just real quick on our annuity is that.

One of the things investors ask us quite a bit is is there a ramp to the annuity and what we see is that while the goal I process is tedious and frustratingly long and in in spots.

The annuity is pretty durable and immediate and so once they go live were part of the hospitals machinery and it is just run as a matter of course.

Got it understood. Okay. Appreciate that there and then one more quick one if I could squeeze then is you've continued to bring in an impressive group of people.

For the company with Jack in Q2, and now Roland on the board this quarter.

Typically on Roland what did you see at the company, what sort of diligence to be conduct and what sort of ideas does he have for the company to help accelerate the growth.

Yes so.

Were excited about.

A role and join the board for sure. He has a tremendous experience and running a global diagnostics company and in particular, he has a significant amount of experience in both Asia and to me and growing those regions and as Weve mentioned.

In prepared remarks, before we believe that Asia and in particular, China will be a significant growth engine for us in the future.

As we mentioned China is a reimbursed market for us China has a significant.

Hey, I'm, our challenge antimicrobial resistance challenge, that's twice that of the U.S. and and given that given that we have reimbursement in that country unique reimbursement, we want to leverage that it. We think Roland is a great addition to our board to help guide us in and through that.

Bunch process.

Besides being a great guy and a fantastic counselor.

Great. Thank you.

Thank you.

And this includes our question and answer session I would like to turn cost conference back over to Mr. launch marron for any closing remarks.

Thank you so in closing I want to thank our employees and our board of directors for their hard work this quarter.

While our commercial performance was less than we wanted to see this quarter. The innovation engine is really delivering and respiratory will be a tremendous product.

I want to thank our shareholders for their continued support and patience as we get our commercial engine rabbit consistently.

Tremendous confidence in the underlying business and Jack Philips and his teams ability to achieve the sales and go live performance, we all want.

And doing it in relatively short order.

And finally I want to thank our customers who are ferocious in their support of accelerate and the pheno platform and its ability to say patients' lives and their institutions presses resources.

They are best salespeople and their numbers are growing significantly.

We find this very encouraging.

Have a good evening.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.

Yes.