Q2 2021 Misonix Inc Earnings Call

Good day and welcome to the Masonic second quarter fiscal year 2021 earnings call. Today's conference is being recorded at this time I would like to turn the conference over to Norberto <unk>.

Investor Relations. Please go ahead.

Thank you operator, and good afternoon, everyone. Thank you for joining in my Sonics fiscal 2021 second quarter Conference call.

I will get started in just a minute with management's comments on your questions.

So let me take a minute to read the safe Harbor language.

Today's call and webcast contain forward looking statements within the meaning of the safe Harbor provision of the U S. Private Securities Litigation Reform Act of 1995.

And can be identified by words, such as anticipate believe estimate expect future likely may should will and other similar references to future periods.

Examples of forward looking statements include statements regarding guidance relating to our financial results.

Forward looking statements are neither historical facts, nor assurance of future performance.

Forward looking statements relate to the future theyre subject to inherent uncertainties risks and changes in circumstances.

Therefore, you should not rely on any of these forward looking statements and the company undertakes no obligation to publicly update any forward looking statements that may be made from time to time, whether as a result of new information future developments or otherwise.

Today's call and webcast include non-GAAP financial measures within the meaning of the SEC regulation G.

When required a reconciliation of all non-GAAP financial measures to the most directly comparable on.

Angel measures in accordance with GAAP can be found in today's press release as well as on the company's website.

With that I'd now like to turn the call over to Starbucks, It's very knock as president and CEO of Mcdonald's Starbucks. Please go ahead.

Thank you and the bullets on good afternoon, everyone. Thank you for joining us on the call today to review our second quarter results. Joining me on the call. Today is also Joe Dwyer, our Chief Financial Officer.

As a result, but still second quarter demonstrate my son extra resiliency by the difficult environment due to the ongoing impact of COVID-19 on our business and much of the health care industry as a whole.

We have never guided these temporary challenges exceptionally well by taking meaningful measures early on in the pandemic to reduce operating expenses strengthened our financial flexibility and adjust on mid to long term strategy. So that we come to that.

Non secular trends.

As a result of my son is reported sequential quarter over quarter growth in total revenue and significantly improve profitability at the same time, we've made many tough he had constructive on strategic decisions.

We're in the strongest possible position to drive market share gains from further adoption by both surgical and regenerative products as we hadn't health care providers emerge from the challenges of the pandemic they've made begin by providing an update on our business and strategy before handing the call over to Joe to review the financial results on the significant work he and his team.

To improve the financial side of our business.

So I can look at our wind business, we estimate that as many as 30%.

Patients being treated in wound care centers had been force took the Spartan all day light treatment. These temporary closures combined with unprecedented constraints on hospitals have been driving patients gel tenet slots of kit.

As a result, we continue to see on migration, albeit temporary winding out towards physician offices.

An area that is not a priority for us we believe that patients will.

Ultimately return back to the wound care centers and that is where you have this out there she thought expertise to manage complex chronic wounds a long term strategy remains firmly aligned with driving the weird franchise by leveraging our best in class ultrasonic technology to expand our footprint across hospitals in wound care centers, what prevented from warrior Fisher.

Both of them have development opportunity for us given their focus on patient kit on the quality of the outcomes when compared to a physician's offices, which are much more friendship and trading to prioritize.

The economics to the physician.

Overall revenue was down 16%. So I think one reason you increased over 35% during the second quarter off the scale 2021 as compared to the second quarter of fiscal 'twenty 'twenty. When we had no impact from COVID-19, that's their cards.

The value proposition of our ultrasonic technology does not value they kicked off by health care practitioners and debt once patients are able to return to your hospital wound care centers that we will see growth across our entire wood segment.

So I'll make one helps us with access to the award which was absolutely vital for our sales reps and we are confident that as vaccine be able to continue to ramp up that our access to facilities and physicians will increase and enabled us to displace our competitors and take added market share.

Right right.

Securing additional payer coverage presents another significant opportunity does that end in December we announced that the fifth largest U S. Commercial payer, it's not covering therapy for the treatment of all lower extremity wounds expanding their skins coverage by approximately 33 million lives.

We now have coverage from two of the big five pay us and we look forward to securing additional coverage really compete our RCP. Later this year, we're happy to announce that we're on track to bring to market a new range of extremity fixation products to tackle the visa threat, so shawcor, a foot and a more comprehensive manner, while offering nipple.

Hardware debridement Barton cutting as well as skin substitutes all in one package. Your ortho plastics initial debt will begin in early March and we sure if price was completed before the end of per quarter.

Marie while operating business is currently experiencing headwinds and there is still a lot of work to be done we are more excited and confident.

And our ability to grow that segment of the business and to do so profitably.

Moving on to our surgical division. We are pleased with the continued growth of this revenue segment, including robust 20 per cent domestic growth. That's true as a result of very strong mix of adoption as well as continued strong appeal about the BARDA scalpel and so on our store franchises.

Our surgical division, a dreadful complex procedure, including neuro and spinal surgery, which require a high degree of bread contact in spite of the childhood was regarding access we had significant wins in prominent hospital from audience and we look forward to more in the near future.

We are hard at work, bringing new and innovative products to the marketing on surgical portfolio to that is we're ready to launch our ultrasonic microdiscectomy at two Fox one in Arizona and one in Virginia, Befall us before a national rollout later on in the year.

Looking ahead, we are comfortable with our expectations that both spine and Europe procedural volume will remain healthy as long as we do not have further significant shutdowns that generate significant profits from most hospitals with regard to mix us. It's clear that the platform has helped dropped domestic revenue. Despite the headwinds brought on by the pandemic.

And it's been critical to our ability to secure some significant wins in both spine and Europe. Despite these headwinds we are confident that we will achieve on prior stated goal on placing over 100 and atg units in fiscal 'twenty 'twenty one.

And touching on the international business results came in better than expected at 23% below the prior year and sharing quarterly sequential improvement given the constraints on travel and the difficulty in doing business on the seat, particularly without a direct sales force as well as the new locked down from cancellations of elective surgeries, we did not.

We expect to see the segment to return to growth until later in calendar 2021.

Regarding our sales force, we have hired approximately 10, new sales resources.

Most of the wound business the hiring of these very tenured salespeople reflects my earlier comments regarding our confidence and belief in our wind business and in our ability to generate an attractive ROI and added shareholder value from these investments.

Quickly commenting on our supply chain issues are squarely behind us and our vendors continue to accommodate our equates with any without any disruption in summary, we are focusing on controlling the areas that we can control, including makes us placements advancing our product pipeline and improving our commercial execution of a hub and spoke.

Strategy as volume returns, we expect that work to pay off and see further growth in surgical and a marked recovery route what that I'd like to now turn the call over to our CFO Joe Dwyer.

Thanks, Howard and good afternoon, everyone.

Starting with top line performance second quarter.

Revenue decreased seven 4% to $18 $3 million compared with $19 7 million in the second quarter of 2020.

The ongoing headwinds brought on by COVID-19.

Establish connection we're pleased with the progress and the direction of our revenue since the onset of the pandemic. We are hopeful that the trend will continue to show improvement.

Having had done it begins to slow.

We were also pleased with our volume to show top line improvement, while maintaining healthy margins with a gross margin percentage for the second quarter coming in at 71, two per cent compared with 69, 9% in the second quarter of last year.

The improvement is in part due to the heavier contribution of domestic sales compared with international sales.

Moving down to our operating expenses the various expense reduction initiatives, we have put in place over the last six to nine months have resulted in significant savings.

It's worked extremely hard to find additional opportunities to operate more efficiently and effectively across all aspects of the business.

Total operating expenses decreased $4 $7 million during the second quarter of 2021 to $13 3 million or 26, 2% reduction compared with the second quarter of <unk>.

Last year.

Before moving on I want to point out that the second quarter of this year included a net $1.2 million bad debt recovery from the collection of our Chinese receivable previously reserved for.

In the second quarter of last year included a 1 million dollar.

Contract asset charge.

We removed these two items operating expenses still show that 15 per cent decrease during the quarter.

And our second quarter, we reported a net loss of $1 $3 million or seven cents per share cash.

With a net loss of $5 $1 million or 33 cents per share in the prior year period.

EBITDA for the second quarter was positive at $803000 compared to a loss of $3 3 million in the prior year period.

While adjusted EBITDA for the second quarter was at one 6 million positive compared with a loss of $1 $9 million in the second quarter of last year.

We're pleased with our continued progress that has driven improved bottom line results and we see this.

As further proof that our business is moving in the right direction and we are well on the path towards our goal of achieving profitable growth.

Moving on to cash flow on the balance sheet, we had $32 $8 million from cash at December 31.

Compared with $34 9 million at September 32020.

I'm happy to report that we have further reduced our quarterly cash burn again.

For the second quarter cash used in operations was only $1 $4 million compared with cash used and our first quarter of $3 8 million.

By comparison cash used in operations for the second third and fourth quarters of our last fiscal year were $8 1 million and $7 9 billion and $5 4 million respectively.

So you can see that we've delivered on our goal of continuing to reduce the cash burn of preserving cash.

Also during the second quarter, we renegotiated a $30 billion trimmed debt facility.

How are the boring raised by 1% to extend maturity by one year to June 2024 and to move out.

<unk> commenced on a principal payments to May 2022.

As of December 31st we don't have any current debt from a travel on their backlog.

Our PPP loan repayment has also been extended by the new SBA rules subject to that well being possibly forget it.

As it relates to guidance given the continued uncertainty surrounding the impact of COVID-19 that procedures in hospitals.

Wound care centers, we will not be providing formal guidance at this price.

In closing we enter the second half of our fiscal 'twenty 'twenty, one with a healthy balance sheet with over $232 million in cash a more efficient operating structure.

And with the confidence that we're well positioned to withstand the near term challenges related to the global pandemic and better position than ever before.

And that is to leverage the long term prospects of our business to create added shareholder value.

I'd like to turn the call over to the operator for questions.

Operator.

Thank you if you would like to ask a question. Please signal by pressing star one on your telephone keypad using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment. Once again. Please press star one to ask a question, we'll pause for just a quick moment.

Yeah.

And we'll take our first question.

From Alex Nowak with Craig Hallum Capital Group.

Yes.

Great Good afternoon, everyone.

Maybe to start could you expand on the strength that you're seeing on the surgical market the growth there.

Well above the market. So is it coming from the Nexus placements is it coming on from a launch of new products, particularly on the narrow segment or is this just continued penetration in spine, but bone scalpel.

Thanks, Alex Thanks, Thanks for the question.

We really are seeing strength on a number of aspects.

Aspects when we look at the episodes vehicle business. Firstly, I think that makes this value proposition continues to resonate well and we continue to drive placements.

And a number of accounts, but existing upgrade accounts as well as competitive accounts a bone scalpel continues to grow in terms of penetration rates and getting widespread acceptance in the sponsor community and where we've seen particularly strong demand has been on the neuro side. So you know we are confident that our strategy.

Next up is working well and the execution with our sales team is really where we've been challenged as you know with overall exits and the ability to launch new products. As you know we spoke about the upcoming launch of the ultrasonic microdiscectomy.

Procedures and that has been delayed and.

So I was putting up will then see the rollout of these new products in the coming months, but right now I think the strength is makes us platform as well as from Euro portion of it where we see tremendous games.

No that's great and maybe you could go over to the Wuhan segment, just expand in some of the dynamics taking place there I hear you loud and clear about patients transitioning from the wound care clinics over to the physician office, but I guess, what's the trigger to get patients to go back from the physician office and go back to the wound care clinics and.

And do you think this transition takes place this calendar year or is it going to be somewhat of a slow trickle.

Centers reopen.

It is difficult to see because I think a lot of the centers are open but they are basically operating at a fairly reduced occupancy numbers I think one of the positive impacts that we're going to start seeing as more of the population gets vaccinated I think we'll see a lot more patients coming back to the wouldn't say just because these are really.

Centers of excellence, you've got so much expertise in this interest from managing these complex wounds and that's ultimately where pit with patients wanted to go back and I think one day you know vaccinated. These on a.

Generally a higher risk portion of the population. These people like many cases of beef that's suffering from diabetes on a number of other comorbidities. So I think when there is the safety of you know having been vaccinated I think overall that confidence level, just returns and we'll ultimately see them coming back to the wound care centers. So we still didn't have.

Pretty positive on that.

Think that that's probably going to happen in a big got more significant why publicly in the second half of the yet, but we wanted to bring those trains all the time.

Okay.

Understood and maybe expand a little bit on the ortho plastics initiatives does that product suite come from internal R&D or is that going to be at and licensed product just explain how those products fit within your overall rep's bag in the world.

Right. So that's really more of a of a surgical play into our Warsaw I'll focus on on these patients.

Patients with this patient population what we've done is we've looked at specific opportunities. The biggest we see in a Shocker force.

And if we look at the procedures a day when a physician performs these cases you have to do so it's hardware from from one company tissue from another company debridement from possibly a third company. It's our vision was to really put everything together.

Debridement is obviously developed into any anything to do with the ultra Sunny so whether we're talking button cutting with debridement with tissue is the odds of theorists getting all of the theater regenesis at the bottom there and what we've done is we've signed a distribution agreement.

The agreement for the orthopedic hardware. So we now have a significant range of extremity fixation products, but we are not focused on the general trauma market, we're really focusing on complementary segments and we see shock output as a very complementary segment to what we do right now but.

The distribution agreement that we concluded.

Okay understood no that's great and then just last question from me just just for Joe.

The expenses did come in lower than what we're liking pretty.

Wei I'm so maybe.

How should we think about.

On a go forward basis is 13, nine really a good reflection of the duty of the quarterly expense run rate for an hour or should we expect on paper, but.

I think we would expect that to pick up in the quarter, we had a bad debt reversal. So that was a benefit to the quarter.

We were at 13.3, I think taking that out going into the third quarter.

And I'm, assuming some added expenses to complete our day. After your study, which will be happening in the third and fourth quarter GAAP probably in that you know.

16, 17 range 60 on a change.

Yeah.

Okay understood. Thank you appreciate it.

Yep.

Okay got it.

Yeah.

And next we'll take a question from Kyle Rose with Canaccord.

Great. Thank you for taking the question and good afternoon gentlemen.

I wanted to kind of.

Well I guess just cause out Alex asked it without whether on the plastic side. There maybe can you just just to put a bow on that can you help us understand I mean, it just are you going to stay just in the charcoal side or do you envision.

Adding additional hardware opportunities for broader lower extremity.

You know foot and ankle on.

Hardware here.

Thanks for the question Karl I think that's to be determined. This is a preliminary on Friday into the ortho plastics market. We see this as really an emerging segment or speciality. So.

So we think that shock a foot is our initial entre into this opportunity if we're successful.

In that arena, we will certainly look at adding in other applications and looking at other hardware opportunity.

I think for the next probably 12 months, we squarely focused on shock of book because its a complementary to everything else that we do with the whole hub and spoke strategy. So that I showed on <unk> to be determined if it goes well well certainly look at expanding those just from a revenue perspective, I think that takes us from.

You know from our legacy my Sonics perspective, being able to do debridement, it might be a bit of bone cutting and having a thousand dollar opportunity to then adding on tissue to having them.

3000 dollar opportunity now with the hardware and now puts us into the 12 to $15000 per seat drill opportunities. So I think what we're looking to do is to maximize our return on risk prisons in the or with complementary products. So we've gone.

What about this we don't want to distract ourselves from our core business, but we also think that this could be a sort of sub specialty debt.

That can grow and exist within the Masonic sales team.

Yeah.

Okay. Thank you that that that's very helpful. I appreciate the incremental.

Data there when you think about the wound care on.

On a go forward basis, and maybe you know on calendar 'twenty. One you have on some new tissue products, you're talking about their debt if there's a little bit.

You know you've got you've got an amniotic product as well how do you expect the contribution of tissue to trend over the course of calendar 'twenty 'twenty, one and when should we expect to see you on the new tissue products, you'll really start to drive incremental revenues.

Yes, I think with that call. We've complemented the portfolio are pretty modestly the problem is being seen on trying to launch new product in a pandemic has been challenging to say the least so I think that for the remainder of our first calendar quarter and probably up to June will be in launch mode.

And going through different value value add commodity within hospitals and wound care seem too. So I think what we factoring from an internal revenue perspective, as a significant revenue ramp really in the second half of calendar year. So we are hoping that you know over the next five months we can.

Orange products on a national basis to really the full sales team and then sold out issues like reimbursement around the products and fine tune the strategy. So that second half of the year, we can see significant contribution because if we just look at the opportunity in the ore from the bottler wound matrix product that opportunity as you know anywhere between.

152 are two probably $200 million worth of business that exists out there today with competitor products or what we've seen in early probably isn't the valuation on our product is very competitive price very aggressively but to launch a product in the pandemic is just challenging to get everybody on board at the same time I think what we've.

Been aligning with our wound team as you know trying to get everybody to March in fit and in sync.

I would say from a modeling perspective, I would start looking at a significant ramp in the second half of the year.

Okay, and then just one one more from me, but going back to the surgical side I mean, obviously the U S business is performing really well on the surgical side, but you do have some new product launches you talked a little bit on them on a micro desk activate side I think you have some new hand pieces as well I mean, how should we think about what.

Those additions due to the growth rate I mean, you're already growing 20% in the domestic surgical.

Fight the pandemic, you're launching new products depend on it should fade in the background you know hopefully how do we think about what that growth looks like moving forward, particularly when youre lapping easy comps.

Yeah.

Well I think to be determined.

We were in the final phases of locking in design.

So the objective is right now to launch new hand piece of it.

Really the third calendar quarter of this year and in the fourth calendar quarter. So you know the most significant one in the M. I S space and then something additional on the neuro space.

What we've seen especially in the in the last quarter is a good ramp in terms of euro on our hand pieces. So we think that you know these things could help take us above the 20% level given that you know things are stored in the state of flex with the pandemic, we don't want to be overly bullish.

And to your point, we've been fortunate to go with this 20% level, but I think that this could further accelerate and enhance our value proposition because I think what customers are really looking for is the next level of innovation and I think what's bringing specialized handpiece is to facilitate M. I S. If we look at you know waste spine surgeries going.

There's more lateral approach is being done there's more M. Ay its work and I think these are going to be really.

Significant products for us into the future.

I think it's just going to be a question of when we actually launch them into the market place and how quickly. We can we can scale up from a manufacturing perspective, but if we take a.

Steady state scenario I think it's not unreasonable to expect debt over time. This could help push on growth rates on the surgical thought north of 20 per se because we've seen that our hospitals are willing to pay per hand pieces or do you see the value in the pan pieces, we've been able to manufacture it and get to scale pretty quickly said these.

Things could help move the needle because as you get into speciality hand pieces the Isps.

Yeah, I'm moving more towards the $20000 Mark. So you don't have to sell a hell of a lot of them to start moving the sales number pretty significantly.

Great. Thank you very much for taking the questions.

Thank you Carl.

And once again to ask a question. Please press star One next we'll take a question from Ryan Zimmerman with B T I G.

Good afternoon. Thank you for taking my questions.

On the cost if you follow up from before.

A little further on the chocolate side initiatives.

Star Wars I appreciate the metrics you gave around the revenue opportunities.

Maybe.

Joe for you what kind of impact on service.

Have given that it is a distribution agreement on.

On margin.

Will there be some downward margin pressure.

Initiatives takes hold.

On a little bit.

Yeah, Thanks, Ron I'll actually take that from Star Wars in.

Involved in the distribution agreements and I think you know we've got a couple of criteria that we look at when we look at doing a distribution deal in the one.

The thing that's probably top and center is that we want to maintain our margins as an organization I think we've worked hard to establish a 70% margin and although it's challenging with distribution partners. We've been able to you know have partners see the strength and value in our distribution network. So you know what.

Haggling, we'd been able to get to the 70% gross margin. So what are we talking you tissue product like the bilayer wound matrix all the.

On the extremity fixation frames were able to maintain that 70% margin, but I think if it goes to you know it might be taken a little bit longer to find the right partner being very transparent with the path on that front as to what we need and that's not being willing to startup business, unless we get certain minimum criteria and.

You know I think that from the open from the beginning so our view is if it doesn't at least to give us the same margin.

There's no reason to distributed unless it's gonna be a complete game change on a product, but these are incremental product, but we think you know.

The output from in the O R and being able to offer the food.

The range of products and really offer a procedural solution, but that's where we offer a lot of strength as an organization than it would be difficult for others to replicate not having the ultrasonic portion of it's going to avoid sitting on the labor that ultrasonic thought to it we view things like frame as being more commodity products, but these are high value commodity.

And.

Earlier point I think it's about establishing that relationship from the beginning so we don't see any any drag from a margin perspective. The only thing is it's always an investment in inventory. So it's a couple of hundred thousand dollars or even going on over a million dollars in some instances when you commit to these new businesses, but I think we've done our homework for the last year.

A lot of time in the marketplace has been splitting with physicians that are performing these procedures and we feel pretty strongly that will be differentiated just because of our value proposition that we offer them that nobody else can match.

Right Okay.

I wanted to ask a few more questions on that if I could I mean, if you're talking about the types of physicians that are doing taking care of patients wound care patients and.

When I think about your sales force kind of what's the composition in terms of the California, because some of those maybe podiatrists or from Nicholas rational. So I think as those mutations on others.

Others may not be those types of physicians and so you know when you boil. It down you know do you expect that all of your room reps or maybe carrying the hardware and going after those patients or is it is it some segment on the customer base that you're really trying to focus in on.

I guess, that's the first question on the second question is you know around that.

About the kind of a tissue portfolio.

To sum pears, I mean, I'd love to just get you on your.

On your thoughts around how you feel it stacks up given this transition to the office and.

And what you need or made mainly down the line two to offer that kind of a full range of complementary products that can cross sell within and across different a different specialties. Thank you sorry, a lot of on final questions. There's a lot of detail.

I didn't answer anything just called me out on what else do you need to answer, but I think the whole thing boils down to focus for US right on I think if we look at ortho plastics I think this is an emerging speciality. This is not something that we see all on rips doing on day. One. So we are we've got a very very targeted approach with us we know which was.

Missions, we're going after which facilities to be going after and we know specifically you know which of our salespeople were going to use to essentially.

After the segment of the market so to augment the salespeople.

<unk> hired some additional <unk>.

Resources and will continue to hire.

Specialists that are really really experts when it comes to the management of Shawcor foot and specifically in the application of frames. So these people are going to work with any need group or one sort of a bit of work would be not sales force.

Really from a top performing salespeople will be the ones that get the opportunity to introduce you know these range is in specific targeted accounts do specific targeted surge and so this is not a general approach that would be so if you look at products like an amniotic tissue product for instance debt would go into the bag of every single sales per.

Whereas you know with oil price plastics and finds in particular, because it's super specialized it's gonna go into you know the bags of only a select number of salespeople as well.

So that's the way that we've approached it just from a focus perspective, because they're all worried from that.

Being pedantic about it as losing focus on the core business. So this is going to enhance our business. You know, we're not looking to displace to anybody in the extremity fixation business, but since then to service and provide in an offering that nobody can to a small subset of patients. So these are generally your surgical podiatrist flow again a lot of.

The Dodgers set up that are treating wounds I'm not doing advanced surgery like Shawcor fourth using frames and offloading. So that's that's how we approach the market in terms of you know.

The rest of the question, which relates more to the general wound portfolio I think what we've what we've learned as you know one is all the wound business now for more than a year is that you need a variety of products and you need a variety of value propositions to win in the different settings of care. So if we look at the wound care centers.

I think it's really about coverage and you know we've seen that that was the shortfall and we've invested heavily in the in the RCT.

<unk> hundred patient RCT were about 86 per cent of the way.

Through that trial would be disrupted RBC by Covid, but we think that you know right now we have two of the five major private payers that are covering their skin on the wound care thing because we don't think that there's any reason why we shouldn't get all of them and you know when we pick up the profit pie as you run any pick up the profit insured.

Patients, but we're also picked up the Medicare advantage plans because a lot of these patients on now.

Covid and these insurance companies look at what their local coverage decisions off. So this impacts the acceptance of your product in the wound care centers that being said we've also seen that you know if there is skin those more effective on the more difficult to heal wounds in the bigger so we've had to introduce a per.

Like on Emily on for smaller less complex wounds and that's taken from time to find the right commercial partner and you know as we've done it and we just started launching theory on within ran into Covid.

Most wound care centers, a lot of shutting down was signed up Doug rig any.

New products into the arena now so we feel good that we've got the right product offering are the rod strategy regarding reimbursement to women the wound care centers and similarity.

Oh odds, we think that our strategy with a one two punch bundling the debridement with tissue where people are less concerned about reimbursement because everything is under the DRG. It gives us an opportunity to really win in that arena.

Well the two technologies together, where we've been slow as it most to market has really been developing a good strategy for the physician's office and what we've seen isn't that physician's office setting of care. It's not so much about the product to a range of products that you're offering that's more about economics for the physician.

We don't see that at sticky business and although we do have some business in the physician's office arena and that business has moved into that setting of Kid, we see that is more.

More difficult business to maintain because unless reimbursement changes day in a significant way, we're always going to be up against a situation where on a quarterly basis, you know wind Isps change and works that reviewed that physicians will be more inclined the majority of them to go for products with some people more per.

For the book to them in their practice.

And that's something which will give them the most optimal outcome for that specific patient. So that's yeah, a little bit about how we approach the market and how we've looked at.

Different tissues in our portfolio. So I hope that answers your question if I missed anything.

I don't know if that was that was very helpful. Stan Ross and it's good to get the color around the strategy with the move into hardware.

I think investors are going to be curious about that and just lastly from me and I'll hop back in queue, but I.

I think he did change some leadership in the wound segment, maybe around here and I could be wrong, but maybe just talk about kind of how that's gone on now what the impact may or may not cause around the sales force.

On a realigning your strategy with them and we're on right.

So I think we had made a couple of changes at the beginning of Covid to the structure of the wound care team.

So you know we did let some people go we had brought in.

From new sales managers as well, but the most significant transfusion was either retirement or would you stop he headed up the division and you know we gave out domestic VP of sales the opportunity to lead the whole division, So Jay Wag mystic in and he's obviously got a different approach.

<unk> to the business day than its predecessor, we think that it's about getting everybody in sync and focusing on the same things not having disparate strategies of love you know some of these strategies. We're working I think it's about having more uniformity in the sales team. So I mean, what we've seen is Jay brings a different level of discipline and focus to.

The team, which was which was might be lacking in the past so I think that.

It's an opportunity there's not significant disruption. We've also been opportunistic because there's been disruption in the wound market with acquisitions and people living on a lot of Chinese people go. So we've been opportunistic and also hired from additional salespeople to further bolstered the wound team.

So I think you know if you had asked me in on three months ago, you know what my feelings, whereas I would have said, there's a lot to be done and there's still a lot to be done now, but I think we're more confident in terms of the execution. I think you know everything seems to be lining up well for the next 12 months. So if we don't do anything about execute.

And just launched the products that we wanted to launch out of the price six months I think we've got a good runway ahead of us.

Thank you.

And once again that is star one if he would like to ask a question.

Yeah.

Yeah.

Okay and it appears that there are no further questions in queue I'll turn the call back over to management for any additional or closing remarks.

Thank you operator, I'm confident that today's call is offered further proof and brought added confidence in our strategy. The success of our work both as it relates to our go to market strategy as.

As well in the overall improvements to the financial health and performance of the company and in our ability to create shareholder value by leveraging the various opportunities we are targeting.

Before closing I'd like to thank the entire team at <unk> for the incredible talent and dedication during this really challenging times as well as some kind of partners and you our shareholders for corporation on continued support. Thank you everybody for spending time with US today, and we look forward to updating you on our fiscal 2012.

One third quarter results later in the year. Thank you.

And this concludes today's call. We thank you for your participation you may now disconnect.

Yeah.

Yeah.

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