Q1 2020 Earnings Call

[music].

Greetings and welcome to the Cryolife 2021st quarter Financial Conference call.

This time, all participants are they listen only mode.

Good question answer session will follow the formal presentation, if anyone should require operator systems. During the call. Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded.

Now my pleasure to introduce your host Lynn Lewis from Gilmartin group. Thank you Miss Louis you may begin.

Good afternoon, and thank you for joining the call today.

Joining me today from Cryolifes management team I popped back and CEO and actually be CFO before I begin I'd like to make the falling statements to comply with the safe Harbor requirement to the private Securities Litigation Reform Act at 1995.

That's made on this call to look forward in time involve risks and uncertainties that are forward looking statements in the meeting at the private Securities Litigation Reform Act at 1995.

Forward looking statements include statements. After the companies are management's intentions hopes beliefs expectations or predictions of future. These forward looking statements are subject to a number of risks uncertainties estimates and assumptions that may cause actual results could differ materially from those forward looking statements.

Additional information concerning certain risks and uncertainties.

These forward looking statements contained from time to time and the company's FCC filings. It in the press release it was issued earlier today.

That's helpful and the color <unk> CEO, Pat Mackin <unk>.

Hey, Thanks, Lynn and good afternoon, everybody and thanks for joining us.

Before I talk about Carlife achievements during this past quarter I'd like to acknowledge express our sincere gratitude to the health care providers well the frontline fighting this could 19 pandemic.

Having worked with these impressive individuals for decades, I'm not surprised about their dedication.

Our industry is filled with outstanding people, who is calling us to help others in the.

I also want to thank our employees and partners accordingly.

Our team is making every effort to ensure that our products are available to save or improve lives. So people around the world.

[music].

Today's call I'll provide an update on our current anticipated performance during the cold 19 pandemic.

Progress year to date on our objectives.

Ashley Lee our CFO for you our first quarter financial results and provide details regarding our loan structure in liquidity.

I will then make closing remarks and open up the call for your questions.

Let me begin by saying that there's no doubt that the coven 19 pandemic has affected cryolife and it's almost every other company in a world.

Nothing however, about our strategy that is to achieve higher gross well spending more to support that growth has changed except for this temporary disruption caused by the pandemic.

We remain cautiously optimistic because through the worst of the pandemic. So far we've been able to continue relatively normal operations.

Steve important objectives to support long term growth opportunities.

One key R&D projects and ensure liquidity for the foreseeable future.

In addition, many of our products are used in procedures that cannot be postponed to even in a covert 19 world.

Turning to our achievements, we're off to a solid start of a year in our first quarter.

Is progressing nicely until the Koby 19 began to hit in March.

We started to see more impact on regions beyond China.

In the first quarter, we restored to the CE Mark for a pea.

We also received CE mark for the open meal.

We improve your check supply.

Our clinical trials for addressing exciting large growth opportunities, we're advancing as anticipated.

Even though the effect of the pandemic began to be felt in mid March we achieved Q1 revenues of 66.4 million.

Which reflected a decrease of 2% versus first quarter 2019, unless a 1% decrease on a constant currency basis.

If you exclude TMR our growth rate for the first quarter would've been approximately 1% and 2% over first quarter 2019 on a constant currency basis.

I believe we're well positioned to weather the cobot 19 storm and have a strong year in 2021.

I will start by sharing with you how we expect our business to perform moving forward in 2020 based on what we know today.

Normally we would not discuss certain aspects of our financial performance beyond the quarter close.

But we believe that it's important to do so now so you have a better picture of how we anticipate coping 19 will impact us over the next few quarters.

Of course, this virus and its impact on the global economy has been there will likely continue to be unpredictable.

Well, we believe for 2020, the April will Mark our weakest year over year monthly performance in Q2 will likely mark the weakest quarter over quarter performance.

Well our revenue revenue results for April are not completely finalized we believe they will show our total revenue was down approximately 40% versus April 29 team.

And then our performance will continue to improve sequentially in May and June.

As well as in Q3, Q4 will improve versus Q2.

There are two principal reasons why we believe this.

First even at the height of the pandemic over the last two months our business remains strong because up to 50% of our products are used to non elective procedures that simply cannot be postponed or delayed very long.

In fact in March CMS, the main U.S. government agency responsible for hospital reimbursement.

Issued recommendations regarding which surgical procedures shouldn't be performed excuse me should not be performed during the pandemic at approximately 50% of our product sales are from these types of procedures.

For instance, Bioglue and if you to open our use it acute typing dissections.

Vascular tissue like SAP and his name is usually limb salvage operations.

And our tissue valve and it's also used in pediatric as well as infected heartfelt patients.

Using the CMS recommendation, we estimate that 40% to 50% of our procedures that use our products would not be postponed during March and April.

And our our estimates appear to have been conservative given our April revenue performance.

We saw these results reflected in the productivity of our sales team. It's during the past few months they've been very busy around the globe, ensuring the supply of our devices.

Supporting emergency procedures, both in person in virtually and they've been employing some creative solutions to ensure continued customer service in patient care.

Second we expect revenue to improve going forward.

April appears to have been the we'd point of the lock down in the U.S. excuse me of into peak of the locked out any U.S. and Europe as we saw about a 40% reduction in our business. During this time.

Which was better than our model based on the CMS recommendation predicted.

In addition, we're already seeing hospitals in the U.S., Europe, and Asia, starting to schedule more elective type cases.

The 40% or so of our cases that were not performed in April or more like the nature, but do the progressive nature of the diseases, our devices treat such as aortic Aneurisms investor notices.

These procedures cannot be delayed for very long.

As a result, what was impossible to forecast our revenue for the remainder of the second quarter with accuracy given the uncertainty surrounding regarding the pandemic. We do believe we will have a market sequential improvement in our revenue performance for May and June and thereafter.

When the pandemic subsides.

As such we've continued to invest in R. and D. programs and in particular, those that will deliver revenue in 2021 in 2022.

In his comments actually provide you with specific details at the expense cuts that we have taken and they're expected impact on the company.

<unk>, we anticipate that these actions will reduce expenses without adversely impacting our near term revenues in the long term prospects for the business.

Moving on to manufacturing.

We've had no significant supply chain disruptions this year to date and our three manufacturing sites had been running almost full capacity during the pandemic.

Even since mid March when we impose mandatory work from home at all sites.

And each of these sites, we've put in place protocols to ensure during the pandemic to ensure that continue safety of employees, who must come into this office every day.

In previous earnings calls, we've talked about our challenges meeting demand for you a check products and the impact on our revenue performance.

We believe that to slow down an elective surgeries do the pandemic increase will increase the likelihood that are you take inventory position will improve over the next 90 days.

Notwithstanding the pandemic were also proceeding with our second sore sewing supplier and expect them to contribute to our <unk> production, but a fourth quarter of this year.

[noise] moving on a comment question companies are being asked her things. During this crisis is how was your liquidity.

As we previously announced at the beginning of the crisis, we took steps to improve our liquidity.

Solely as a precaution every measure we drew down our 30 million dollar line of credit under our credit facility.

We've also renegotiated our maintenance covenant under the facility for the remainder of 2020 and into 2021.

During this period covenant compliance generally only becomes requirement if we make certain restricted payments are we fall below 12 million and combine cash on the balance sheet and undrawn availability under the revolving credit facility.

Based on our current cash balance in our projections for the business at this time.

And even if we assume we take no further measures to ensure liquidity, we do not anticipate that we will fall short of this covenant of or amended credit facility.

Next even through the pandemic, we are taking steps to be in a position to deliver growth.

Beginning with our next generation Geotech products, we're making progress on our goal of introducing the three new products and Nexus in the U.

Our teams are gearing up to trained physicians, we are building supply to support the three product launches and we have sufficient nexus inventory.

In 2020, we still planned to we still playing the limited and full market releases for a veto open neo for and yeah for inside as well as a resumption of the launch of Nexus.

With surgeon training and launches behind us and 2020 and with full inventory available for each product.

Will be very well positioned to sell these products and 2021.

In addition, we recently received breakthrough device designation from the F.D.A. for our next generation frozen elephant trunk Iveta open neo and and just span. Likewise recently received the same designation for its nexus in connection with its I.D.

This is <unk>. This designation recognizes that both of you to open neo and Nexus are likely to be more effective treatments of certainly order diseases than other products that are currently available.

It also should help hopefully to speed up at the evaluation and commercialization in the U.S. reviewed open neo in Nexus. So the more patients can obtain access sooner to these devices.

[noise] turned to the Proact 10, a trial, we successfully conducted our investigators meeting during the first quarter of 2020, when more than 40 sites <unk> participating virtually.

As a reminder, this is a prospective randomized clinical trial to determine if patients with onyx. He already vowels can be maintained safely and effectively on eloquence versus morphin.

We believe that if this trial successful it meets its primary endpoint that the onyx here to valve will become the market leader in the mechanical vowel segment and also takes year from existing Bioprosthetic aortic valves.

Are investigators are eager to begin enrollment however, enrollment is likely to be somewhat delayed as the coping 19 pandemic has adversely impacted hospitals ability to conduct clinical trial work.

In the meantime, we continue to make progress with our v. approvals and contract negotiations.

And last in February we received a renewed C.E. mark for our sending a already prosthesis known as the A.P., which had been suspended since late twenties 16.

We once again have a complete portfolio onyx products available in Europe, allowing us to be more competitive and dry further market share games.

A.P. is indicated for the treatment of disease damaged or malfunctioning native or prosthetic heart valves and he ordered position involving the as sending a Nordic aneurism.

These associated able to group diseases present in as many as 10% of all your developed replacements. We're delighted to have this product back in our back.

Would that I'll now trying to call over to actually for a detailed financial review of the quarter Ashley.

Thanks pad and good afternoon, everyone total company revenues were $66.4 million and slightly behind the first quarter 2019, due primarily to the absence of T. a more revenues in the impact of our business from coded 19 <unk>.

The results are slightly higher than the amount we announced on April one and just below our original range of revenues guidance of between 67 $69 million.

Overall revenues declined to person on the gap basis, and the climb 1% on a constant currency basis.

In the first quarter of 2020 versus the first quarter of 2019 tissue processing revenues increased to 5%.

Onyx revenues increased 4%.

Blue revenues decrease 3% and you took revenues decreased 4%.

Formants in each of these products lines was adversely affected by the cope with 19 pandemic.

Or gross margins were 66.5% for the first quarter and reflect better Oh, U.S. distributor performance versus performance in our direct markets, especially in a media were performance was impacted by code that 19.

On the bottom line were reported a gap net loss of $6.7 million or 18 cents per fully diluted share in the first quarter of 2020.

Non gap net loss was $3 million for eight cents per share.

Net loss on both the gap and non get basis reflects a 3.7 million dollar pre tax loss or seven cents per share primarily related to noncash unrealized foreign currency losses on intercompany valuables.

Please refer to our press release for additional information about or non gap results, including a reconciliation of these.

Mhm.

As of April 24, 2020, we had over $63 million in cash in cash equivalents.

I would like to take a moment to talk about or capital structure in measures. We have taken to ensure that we will have more than adequate liquidity to support our business was foreseeable future.

We are continuing to monitor our expenses carefully and have significantly reduced or spin for Q2 and two three.

These initiatives include a hiring freeze unless related to manufacturing sales and other critical positions.

Reduction in discretionary spending restrictions on non essential business travel.

<unk> of Merit increases for members of top management.

In a temporary slow down of most clinical ignored the programs that are not directly connected to revenues before 2023.

Additionally for six months, we have imposed senior management cash salary reductions in exchange for cash payments in the second quarter of 2021, and our board of directors will receive crying like stock in lieu of cash compensation.

However, we are as pets, continuing to invest in clinical in R. and d. programs related to products that could deliver revenue in 2021 in 2022.

Polluting, our Perclot P.M.A. Bioglue in China, and Prozac module.

In addition to expense reductions we have taken additional measures to ensure we can support our business model in growth initiatives and comfortably service our debt.

On March 27, 2020, we borrowed $3 million under our credit facility to maintain financial flexibility during the uncertainties stemming from the <unk> 19 pandemic.

We will also benefit from a significant reduction in capital expenditures.

Favorable tax provisions of the cares Act and other textural benefits made available by O.U.S. governments.

Finally, as pets, we have successfully new renegotiated or credit facility to modify our debt covenants to reduce the risk of a covenant compliance issue or loan default.

With the spending reductions we have put in place and the credit facility Covenant modifications. We believe we have ample liquidity for the company.

Due to the potential for continued uncertainties from the cope with a 19 impact we will not be reinstating 2020 revenue guidance at this time.

Oh, we'll turn it back to Pat Force closing comments.

Thanks actually so as you've heard 2020 was off to a good start prior to the global pandemic.

But at least for the near term we have shifted from offense to defense.

Times like these are putting every company to the test and I can say with confidence we are well suited for the challenge.

The bottom line is that the products that we may have a fairly durable demand profile even during the pandemic.

And there used to either cannot be delayed or can only be delayed for so long.

We estimate that about 50 per cent of our business falls under the <unk> C.M.S. procedure categories are beginning to see the deferrable procedures rebound, which is the other 50 per cent of our products.

We expect I recently improve your check products as well as next us to be radically a rapidly adopted by clinicians given these products strong clinical differentiation.

The company a sound financially our manufacturing operation supply chain and commercial teams continue to function that near full capacity.

<unk> working hard to support our customers with an uninterrupted supply of products and k. support for reducing expenses that will not impact near term revenue or long term prospects for the company.

I'm confident we had taken the right steps to ensure your position to deliver on initiatives over the next several months.

In some looking past the next couple of quarters, we're poised to enter 2021 from a position of strength.

With the following programs.

The limited in full market releases for and Yeah and side Iveta open knee or we will be complete.

You don't take supply issues were largely be resolved as well as our second source supplier will be on board in contributing by the fourth quarter.

We'll be Relaunching Nexus and 2020 their reintroduction of R.A.P. Onyx device in 2020.

Prolactin enrollment in 2020.

<unk> approval in 2021, U.S. Perclot approval in 2021.

So as the Kobe 19 pandemic continues I want to close by taking our team for the continued commitment to our mission to improve the lives of patients with Eric disease.

Continue for what you're accomplishing during these challenging times and I've never been prouder to lead this exceptional company.

That I would like to open the lines for questions. Operator. Please proceed.

Thank you.

That'd be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad confirmation tone will indicate your line as in the question cute.

They also press start to if you'd like to remove your question from the queue.

Participants using speaker equipment, it may be necessary for you to pick up your handset before pressing the stark <unk>.

One moment, please while we not both for questions.

Our first question comes from Jason Mills with Ken Accords.

Please proceed with your question.

Oh piled high actually I hope you and your parents are staying healthy can you hear me okay.

Yeah Thanksgiving.

Super So question is really about 2021, but.

Some contacts <unk>, we don't really want your perspective on <unk> hospitals, and how they're thinking about capacity through this year and then.

Into 2021.

<unk> to be at full capacity for quote unquote elective procedures and I understand they're varying degrees of what would more sort of the for the <unk>, but just in general procedure, while you're running through the hospitals within your target market I guess a bird.

Seats in Europe are they are they expected to be running about 100 per cent of capacity by the end of year or will will there be with capacity <unk> for a while to prepare for any relapse of code living room geography, I guess, that's what I'm trying to get my arms wrong for everybody.

Yeah, No I mean, so I can give you I mean, I've I I'd, probably like you talk a lot of people. Both you know hospital executives as well as surgeons in our teams you know around the world.

<unk>, what we've been saying and it's I think it's played out is you know in the media as well as a everywhere else. There's this this does not just pandemic doesn't hit you know everywhere at the same time, so there's gonna be peaks and troughs in different places at different times, which is obviously provides a smoothing effect of the impact what I can't tell use we've we've actually started to see.

I I was very pleased to see that in the what we think is the worst month of April that you know 60% of our procedures got done that's a unique position because of the journal nature of our products.

The other 40%, which are kind of the more elective, but frankly as you know you really can't delay a lot of our procedures I mean, you've got growing aneurisms and deteriorating heart valves. So you can't push these things off for very long.

And what we are already starting to here is multiple states and cities reopening for these cases, we've got some some hospitals, where I've talked to certain is that they're going to go to seven days a week. We've got some hospitals are going to six days a week when they do that how long they do that for I can't per you know predict got on control that.

You know as I mentioned in my comments and actually mentioned in his comments I mean, the one thing this viruses proven to be is unpredictable. So for me to sit here and tell you I know exactly how this is going to unfold would not be you know fair, but what I can't tell you is that you know hospitals are are hemorrhaging when it comes to financials and they need to get back up and running so I think too.

Extent, there's been a number of messages sent out from big institutions, where they were they were kind of geared up for the Cuban 19, onslaught that didn't happen and they got empty I see you beds and empty hospital beds and their o. ours aren't going so we're seeing those start to rant back up and again, if if you know if something happens in in that specific city.

You know that may kind of slow down, but if you're going to have that'll be muted by other other cities kind of returning back to kind of you know full full capacity. There. There is clearly been a message from hospital leadership from the people I've talked to that they are going to try to ramp back beyond five days a week.

It's helpful. Pat Thanks for that color and then just says a follow up either powder actually with respect to your operational expensive improve structure, you barbecue had to make some difficult.

Choices you mentioned you're on the defensive now, but when you do go back on on the offensive have you found do you think operating expense cots projects or perhaps efficiency.

You can <unk> continue to garner well after the covert crisis has.

Yes, they're paid or in other words have you become <unk> can you become more efficiently rabbits silver lining, possibly after this crisis has a better thank you <unk>.

Yeah, I think one of the things we've talked <unk>. This is this is a balancing act you know is <unk> is they started off the call I mean really nothing about our strategies changed I mean, I think we're we're very confident with our our strategy to focus on patients that are suffering from a Nordic disease, and we've we've ramped up our spending to fuel future growth because we believe that are.

Current platform with our pipeline can really start to accelerate Grove here.

That being said I mean, we've obviously had to shift to defend it just because of the nature of this pandemic hitting our procedures now you know I don't think we've been hit as bad as a lot of companies have been hit the fact that we delivered 60% of our revenue in the worst <unk> is is very reassuring.

Oh really provides us a lot of strength as it relates to our cash balance in our liquidity.

As far as the expense I I do think one thing you're you're going to see from everybody is the the travel budget, we're probably going to be down for a while I don't think you're going to see a lot of I mean, I had a trip to go to China in July I don't think that's probably going to happen. So I I do think there's gonna be a a total you know, though whether it's webex isn't working from home or telecommuting.

You want to call it.

I do think that the travel spending is going to come down for a lotta people.

I think there's ways any you know necessities. The mother of all invention I think our employees have been extremely responsive and and functions. Just as an example, our findings organization you know on March 13th we we told everybody that you know could work from home wouldn't work from home you know obviously the people who work in the factories and the sales teams.

That are out in the you'll ours could do that but everyone else started working from home and that's been almost seven weeks, our our finance team went through their full Q1 audit remotely and did a fantastic job. So I do think it's created a whole lot of new efficiencies, whether it's going to play at our expense budget I I haven't you know I'm I'm still trying to get through a cue too.

Right Okay.

Thank you.

Our next question comes from like Madsen with need them and company. Please proceed with your question.

Yeah.

Oh good afternoon. This is David taxing on for my Thanks for taking the questions.

I guess I just wanted to start.

You'll look back I. Q1 can you talk about the growth you. We're seeing in January and February and then went in March two you saw some destruction and then stuck into that I hear your your comments ramping down around 40 per cent in April can you give any color on on what you're seeing.

<unk> exiting the month, if you're if you're seeing any improvement.

Yeah sure. So you know it gets you know we don't really break out you know you know weeks of quarters.

Something we've we've ever done or we're not going to do we gave April numbers. You know this quarter just because of this this pandemic and we thought it was obviously very positive as well yeah. I think you know Mars, what I'll say about about Q1 is we were actually tracking to hit our the the guidance and we only came and a half million dollars off our guidance and.

We were tracking pretty well on that throughout the quarter. There was clearly a big slow down in the procedures starting on <unk> on March 15th.

We actually had a our last two weeks or March were pretty similar to the last two weeks March last year, even with the pandemic. So clearly tells you we were we were going above that.

As it relates to April we we clearly have seen a a a pick up in the revenue kind of week to week as each week goes by the revenue is stronger reflecting more elective cases coming online <unk> you know we're one month in it gives you a a data point, we think it's the worst.

You know based on what we're seeing and we see a lot of well auto are starting to open up. So we expect it to get better you know may it'll be better than April and you know be better than me. So you know, we'll see where Q2 ends up but I think you know we're we're positive on the signs that we're seeing at least for our business.

Okay. That's helpful. And then just with the limited launched the three year Tech products in Europe can you just talked about the initial feedback you're you're here from what the position community and maybe the cell source as well.

Yeah. So we were we were getting ready to I mean this this is obvious had been a just a delay in those launches so.

Anytime you do these product launches right, we've got to get in and train. The surgeon. We've got a you know do cases, so that none of the three Yo took products have actually started to eliminate market releases, yet we were going to have to wait on those to as you know two two I think the Neil starting Q2 will start to see cases of that because those those procedures were actually being.

Done at the height of the pandemic, even in places like Italy, and Spain. So we we expect Neos limited mark or at least to start this quarter and then we'll fall with N.N. side. So we'll we'll report on those as in our subsequent corners.

Okay, and then I'm just last one for me and then I'll hop back and cue I thought in your closing remarks, I heard you're expecting pie glue and 2021.

Any <unk> I guess any update there has there been any <unk> on on the China front.

Yeah. So one of the things I mean this is obviously been a you know we we've been going through this approval process for about a year already and they typically see it takes you know a year to to and this is P.M.A. like product with a clinical trial, which usually takes longer we did have our panel meeting we were supposed to have an in personal in person panel meeting with the Chinese F.D.A.

In March and obviously with coping 19, <unk> that was not going to happen and they they were they worked with us and we did it remotely via Webex. So we did have or a panel meeting with the Chinese F.D.A. in March we've got some questions back and we'll be going through the typical process of responding to those questions, but you know we're we're optimistic.

We should see this product approve in 2021.

Great. Thanks, so much.

Next month or David.

Thank you.

Our next question comes from <unk> Oppenheimer Company. Please proceed with your question.

<unk> could happen naturally hope everyone to safe and healthy.

<unk>, obviously, you guys did pretty well on in Q1.

Understanding the the lack of visibility the cute too and you know and Q3, let me commented from a different <unk>.

What are the things that companies across the board or you know there's this notion out that that is pent up demand and I'm just asking for your general opinion, but <unk> well, it's picking up into feel pad is that a number of these patients, especially emerging procedures that are debts that.

<unk>, you know probably won't come back.

Love to get your thoughts that you get what kind of visibility details I mean, <unk>, specifically for Cryolife and in general.

Yeah, I've I mean, I've I've heard I've talked to some positions about this you know, it's obviously a a logical kind of a flat of thought it's hard to say, though because I mean, if you think about it you've got two two things working at the same time, you've got a period of you know almost two months where.

You know a big chunk of elective cases were not done.

And even if there's some unfortunately some of these patients you know we're affected if they died of koby 19, or something else that they're not going to be there to get their procedure, but there was two months or just disappeared right. So what what does that due to the overall overall impact because you've got to kind of the patient flow coming in as normal.

I don't know I guess I. There is no. There is no reference guide you can go to a web site you can go look at for something like that.

Oh I do know is what I'm hearing from field reports that yeah. We just heard from the hospital that has seven to 10 <unk> going in next week. So they're they're clearly is is a pent up demand now.

Oh those other eight weeks in cases that we're going to get done that didn't happen that were more elected in nature.

How many of those get done because there are still around or not I don't know the answer to that but I I would assume again given that those two months are disappearing forever it'd probably wash itself out.

Got it and Pat just hopping in between codes, maybe you guys already talked about per one penny any I'll be there ruined illanes youre update yeah. So <unk>.

So we so we had we had a virtual we're supposed to have the you know in person investigator meeting back in early March because like the second with the March and you know we decided to move into a virtual meeting it was actually very well attended we'd like 40 of our 60 sites in attendance for the for the kick off meeting and we we.

Have made great progress on our B.I. are abusing contracts, we already have a couple of sites approved they can start enrollment. So we were actually close to starting enrollment on that trial. There are some senators I will say that have you know that were in their kind of the you know in the middle of the the coping 19 kind of hot spots that the.

Sources at hospitals, where does not focused on things like this so I do think it's going to slow down. The you know just start up.

But we're actually making very good progress on our on bringing our centers on line and you know given the nature of this trial, particularly since it's the you know what when you're very unique things about this trial is you know surprises.

This is a drug trial.

The patients have the heart valve already see they actually don't even have to come to the hospital. So all we were going to be shipping them drugs. So this is actually a pretty you need trial, it's just more getting through the hospitals arby's and contracts given everything that's going on with their resource constraints.

Okay.

Thank you are next question comes from <unk> with Ladenberg Salmon. Please proceed with your question.

Oh, Hi, Pat naturally how are you.

<unk>.

So two questions I guess personally actually look like the <unk> heavy for the court or were there any one time items worth calling out and then looking forward and she talked about the the no reductions of procedures for April and through 222, and three could you talk.

What we might expect on on the line item as far as reductions based off of a previous year or two one.

Yeah, so so for for Q1.

Just you know as we spoke about in the fourth quarter Conference call. This this was going to be a year of investment for US you know, especially in channels and and other areas to support the growth in the business and and so when we came into the year <unk> started spending money in January and February and wasn't until we got into the March.

Timeframe when it became apparent that coded was going to have an impact and and we immediately you know put the brakes on a lot of the programs that we had so I don't know if there's really anything in specific to call out other than like the corporate remain rebranding project that we spent $300000 on you know we have now.

Put a halt on that program, but other than that you know.

You want us typically a heavy quarter for us because we have sales meetings in in lots of Congresses and so forth.

Going forward, if you know I don't want to get into specifics of of.

From a person's at some point to quantify what the expense cuts or because you know based on the revenue progression that path laid out earlier in the call. You know we have cut expenses accordingly to ensure that we have adequate liquidity for the foreseeable future now with that being said.

Yes revenues perform better than what we're anticipating we're probably going to spend some more money insert reinvesting again and if for some unforeseen reason an unfortunate reasons revenues or worse than we anticipate let's say there's another breakout then we have additional lovers that we can pull to even cut back even further on.

<unk> spending so yeah I don't know if it's it's it's really constructed to give you a a you know percentage that would cut our expenses because it's going to be a moving target and it's going to be largely dependent upon you know how the top line place l.

God It and.

Could you talk about the progress on a per car and the status in some of the <unk>.

Yeah. So we we are one of the <unk> actually mentioned in his remarks was you know this is one of the projects on the R. and D. side that we've we've kept full funding for a bio boon China full funding for U.S. Perclot full funding for Proact mitral in the U.S. and the the testing and basically the the package that has to go in.

For the U.S.P.M.A. is the yarn T.R. and D. team is still working on that and we're planning on submitting a at the end of this year. So that network is still ongoing.

Okay got it that's how it for a little actually for me could did did the A.P. for <unk> have much of a chance to embed within the shelves organization outside the U.S. in there. So we're then it was there any pickup from kind of that feeding the portfolio for your check and vice versa or there wasn't much of a chance.

To yeah. It came <unk> the the C.E. marked by the time the C.E. Mark out here and we had to do all the paperwork into labeling and all that kind of stuff by the time, we landed in in Europe was kind of when when Italy, and Spain or or you know going through the peak of their crisis. So I I think it was modest to some distributors, but it wasn't it wasn't significant in the corridor.

Okay, and then lastly for me I know you've been asked.

Different directions from a few different directions, but so it sounds like on the elective side generally speaking that you know through a transition back to getting the elective procedures. There may be some Polish where there's some some ketchup pays in a number of institution. So you know, perhaps if x. was to previous ruined right, but that may be x. plus some.

Thing.

Catching up is is that how we should read into it when you're talking about you know procedures being done six and seven days a week.

Yeah, I think so it's really hard this is part of the challenge we have it's it's really hard to predict you know what a thousand hard hospitals are going to do every one of those cities. You know has different dynamics going on with their icy use or not <unk>, what's the what's the hospitals financial position what I mean.

I think one of the the real advantages for a portfolio like ours is you know the cardiac procedures tend to be the most profitable procedures in the hospital.

I've heard center say, they're going to prioritize you know the cardiac procedures. So I mean, I I can't I can't predict what what's gonna happen I do know that I'm hearing from a number of centers that given given to slow down in the o. ours.

That they're looking to ramp up there will ours to pick up these elected cases, which is obviously going to be helpful. Number. One number two is that there's a big backlog and they're going to work whether it's you know six days 78, I I think it'll be different in every hospital, but clearly they're going to be trying to make up for some of these laws procedures at.

And to make sure these patients get treated appropriately.

Okay got it that's helpful. Thanks.

Thanks Ya.

Thank you.

Mr. Mac in there are no further questions at this time I would like to turn the floor back over to management for closing comment.

Well. We appreciate you guys you know taking the time and obviously this is we hope everybody out there stays a safe and healthy I mean, you know certainly been an interesting seven weeks you know I really want a a think our team, though I mean by I think the fact that are three manufacturing facilities have not Mr. B.R. commercial team is still covering cases even.

At the height of the pandemic yeah. They mentioned this is a balancing act we've we've taken the appropriate actions to kind of go to defense, while we're going through this pandemic over kind of Q2 and Q3, we're very pleased to see that we delivered on 60% of our procedures in the in the worst month, we believe it'll get better in May and better in June and then veteran cue.

Three from Q. too. So we think things are going to be looking up from here and we're very excited about 2021, we've got the three to you a check products that new next product, we've got our supply chain improving we've got the product any trial and we've got we've kind of around the corner is by with China and U.S. Perclot. So I I think we don't we're we're extremely well positioned and we'll manage through this and we approve.

What's your your attention on the call. Thank you.

Ladies and gentlemen. This concludes today's teleconference. You may now disconnect Airlines at this time. Thank you for your participation.