Q1 2024 Surmodics Inc Earnings Call

Welcome everyone to the Cimarex first quarter of fiscal year, 'twenty 'twenty four earnings call.

Please note that this call is being webcast.

The webcast is accessible through the Investor Relations section of <unk> website at Www Dot <unk> Dot com.

An audio replay will be archived for future reference.

An earnings press release, disclosing thrombotic quarterly and full year results was issued earlier today and is available on the company website as well.

He became a like to remind everyone that remarks and responses to your questions on today's call may contain forward looking statements. These forward looking statements are covered under the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.

Statements regarding <unk> future financial and operating results or other statements that are not historical facts.

Please be advised that actual results could differ materially from those stated or implied by somatic as forward looking statements, resulting from certain risks and uncertainties, including those described in the company's SEC filings.

I'm, Alex disclaims any duty to update or revise these forward looking statements as a result of new information future events developments or otherwise.

This call will also include references to non-GAAP measures because robotics believes they provide useful information for investors.

Today's earnings release contains reconciliation tables to GAAP results I would now like to turn the conference over to Mr. Gary Maharaj, <unk>, President and Chief Executive Officer. Please go ahead Sir.

Thank you operator, and welcome everyone to our first quarter fiscal year 'twenty 'twenty four earnings call.

He has all we plan to cover today.

I'll begin with a high level overview of our quarterly financial performance followed by a discussion of our recent progress from an operational standpoint.

Our outlook for the rest of the year Tim.

Tim will discuss our Q1 financial results in more detail and review our financial guidance for fiscal 'twenty 'twenty, four which we updated in today's earnings press release, then we will open the call for questions.

Let's start with a discussion of our financial performance.

In the first quarter, we were pleased to achieve total revenue growth of 23% year over year to $36 million.

Excluding the <unk> license fee revenue in both periods, which represented an approximate $300000 headwind in the quarter, we achieved total revenue growth of 25% year over year.

Our total revenue performance came in just above our stated range of expectations for the quarter of $29 $5 million to $35 million, which we shared in our last earnings call.

Importantly, our performance was driven by impressive contribution from both of our business segments. The medical device segment grew 24% year over year to $23 5 million and increased 27%, including the year over year headwind related to the survey DCD license fee revenue that I just mentioned.

And revenue from our in vitro diagnostics. The IBD segment grew 18% year over year to $7 million.

In our medical device segment growth was primarily driven by record product sales, which increased 43% year over year fueled by our vascular interventions device portfolio.

Specifically, our surveil drug coated balloon and pounds thrombectomy platform.

We also saw important contributions from royalties and license fees from old performance coatings as well as R&D services revenue.

Yeah.

We also know IBD segment, which was exceptionally strong in the quarter benefited from a combination of factors, including strong demand for select products heading into peak influenza season.

Timing of orders and the continued return of more normalized purchasing patterns from some of our customers that had taken steps last day to manage Covid you are elevated inventory levels.

Lastly, we were pleased to complement our impressive revenue performance with year over year improvements in our operating results delivering adjusted EBITDA of $3 $9 million is $7 2 million dollar improvement compared to the first quarter of last year.

Overall, we were quite pleased to deliver a strong start to fiscal 2024.

Turning now to our operational progress in the first quarter.

In addition to our financial performance our team has been hard at work executing with respect to the three strategic objectives for fiscal 2024 that we outlined at our last earnings call.

As a reminder, these objectives are.

First to capitalize on the key near term growth catalysts, and all vascular intervention portfolio.

Our <unk> pumps, thrombectomy, and sublime radial access products second to drive durable revenue growth and cash flow generation across our core medical device performance coatings offerings in IBD business.

And food to facilitate our long term growth by developing and introducing new products and line extensions that will enhance our existing towns sublime and medical device performance coatings portfolio.

Let me walk you through our recent progress with respect to each of these objectives, beginning with all the vascular intervention portfolio.

As I mentioned product revenue in our medical device segment increased 43% year over year.

This impressive growth was driven primarily by sales of fall of surveil, BCB and pounds thrombectomy products.

Most notably we generated the first commercial revenue from our surveil ECB as we began shipping units in October two old commercial partner Abbott in preparation for a January launch.

I am pleased to report that our commercial manufacturing process proceeded reasonably smoothly during the first quarter and we ultimately completed all shipments required to satisfy abbott's initial commercial stocking order.

On time as planned.

Drug coated balloons like also the old ECB are some of the most difficult to manufacturer with consistent quality in the intervention of the device segment.

Our efficient and successful transition from manufacturing clinical units to commercial quantities of processes, which have previously created to starting a diesel engine in the middle of winter.

Speaks to <unk> unique technology capabilities and expertise as an organization as well as the talent and dedication of our employees. Our <unk> operation team did an excellent job of ensuring the success of initial commercial production.

And I'd like to give them a shout out on today's call to thank them for their efforts.

In addition to our manufacturing efforts, we continue to support Abbott's commercial readiness activities, such as the development of technical marketing and sales team training materials.

We were also pleased to share the three year results a fall of 446 patient transcend trial, which are presented to the 50 S and Youll Veith Symposium on November the 15th.

As a reminder, the 65 site randomized controlled trial found at all Seville DCD to be non inferior in both safety and efficacy to the market leading impact Admiral DCP, which uses a 75% higher drive dilutive paclitaxel.

97% of our patients in the trial completed their three year follow up and we were pleased to see that the data continue to demonstrate sustained safety and efficacy outcomes for the low dose revealed ECB that was comparable to the control device.

I'm pleased we were able to provide this compelling clinical evidence to the medical community, which supports the long term outcomes that can be achieved with our technology. I will also add this is the only randomized control worldwide trial off a low dose ECB compared to a high dose BCB liked the impact.

With this recent progress as the backdrop I am excited to share that the <unk> Malik commercial product available in the United States through Abbott.

Last week at intervention at the International Symposium on Endovascular therapy avid hosted a lunch symposium featuring the Seville ECB entitled.

Drug coated balloons time tunes deal, what you're not seeing.

Dr. Bill agree a key opinion leader in the field of intervention cardiology and one off the principal investigators of the transcend pivotal trial discuss the differentiating features of the surveil DCD, which he highlighted in the three year clinical data from the transcend trial.

We're excited to see the surveil DCD position as the next generation of drug coated balloons.

We'll look forward to abbott's progress and remain committed to addressing their future demand as they move through the initial months of commercialization.

In addition to the commercial revenue we recognize from the initial stocking order follows the LDC D sales a followup pounds thrombectomy products also represented an important contribution to the 43% growth we achieved in the medical device segment.

Sales of these products continued to track with our expectations as our direct sales team remains focused on supporting both existing and potential customers raising awareness in the marketplace and educating the medical community. We ended the first quarter with the direct sales team consisting of 23 territory managers.

Which is unchanged from the end of fiscal 2023 and compares to 28 territory managers as of December 31 2022.

Building on the progress made in fiscal 2023, our team continued to establish a foundation for future growth by developing existing accounts and expanding our active customer base.

In the first quarter, we continued to be pleased that our customer we had great customer reorder rates and saw a healthy year over year growth in average revenue per existing customer.

As part of our efforts to raise market awareness and educate prospective new users during the quarter.

We sponsored two digital and print supplements and Endovascular today, a leading industry publication with an editorial advisory board composed of the top Endovascular specialists.

The publications focus is the latest technological advancements in the Endovascular field.

And in November issue featured a supplement on our sublime radial access platform and its impact on patients and practices in the December issue featured a supplement on our pounds arterial thrombectomy system.

The pound supplement featured case studies and interviews with 10 physicians, including a diverse set of vascular surgeons interventional radiologists and intervention cardiologist.

It provides clinicians with insights into how their peers integrating pounds into the approach of treating patients with acute limb ischemia.

With case studies, featuring pre and post procedure Angiograms. It also succinctly and powerfully demonstrated <unk> ability to quickly remove multiple mixed morphology clots in a single treatment session.

Eliminating the need for capital equipment all aspiration.

And reducing reliance on lytic drugs.

I encourage you to read the supplements enjoy your own conclusions and develop your own view as to whether all of the products.

Not falling away the best in any class, including products marketed by current large incumbents.

<unk> seen in the past the future has already been created it's just not evenly distributed yet.

The latter is our job to be done with the <unk> portfolio.

The supplement serve as an important resource to do just that to increase awareness for potential customers and for a relatively small but talented sales team to increase their leverage.

Turning to our second strategic objective.

We continue to make progress in our efforts to drive durable growth and cash flow generation across our core medical device performance coatings and IBD businesses.

Our team delivered a strong start to fiscal 'twenty 'twenty four with revenue from these two areas growing 10% year over year on a combined basis driven by growth in each business.

The performance of the medical device performance coatings is driven by growth in royalty and license fee revenue as well as revenue from R&D services. Our IBD sales growth was fueled by sales of our antigen and slight products and benefited from the combination of factors as I mentioned earlier.

Including flu season demand.

Timing of orders and the return of more normalized customer purchasing patterns.

These core businesses are tracking towards our expectations of low to mid single digit growth for the full year of fiscal 2020.

Note. However that the performance of these core businesses was an important contributor to the adjusted EBITDA profitability that we achieved in the first quarter.

Yeah.

And lastly, with respect to our food strategic objective, we continue to lay the foundation for future long term growth by advancing our pipeline of new products and line extensions with notable progress on multiple fronts.

In our medical device performance coatings business, we secured the first five 10-K clearance and initiated the commercial launch of our preside line of hydrophilic coatings.

The most advanced hydrophilic coating our team has ever developed and I believe that the world has ever seen.

As I discussed in detail in our last earnings call preside is specifically formulated with a next generation neurovascular coronary and peripheral vascular devices in mind.

It is designed to provide both enhanced coding durability and industry, leading lubricity, enabling coated devices to reach distal treatment sites across challenging coronary lesions and chronic total occlusions.

All with minimal particulate generation.

By addressing the specific needs preside complements and enhances our existing portfolio, including our serene hydrophilic coating.

Facilitates improved treatment outcomes.

And Furthermore, reinforces our position as the market leader and provider of performance coating technologies for years to come.

In the months following the commercial launch of preside we've been pleased with the level of interest we're seeing from both new customers and existing customers most notably in the neurovascular segment of the market.

We look forward to supporting their efforts as they integrate preside into the next generation devices and pursue regulatory clearance.

And our vascular interventions portfolio, we continue to make strides into limited market evaluation of our pounds venous thrombectomy system.

Physician feedback from the enemy continues to highlight the product flexibility when it comes to treating different plaque morphology and it's each format design.

Which enables clinicians to meet multiple passes with a single device, while minimizing stress or damage to the vein.

And our most recent Alami, we had completed just under 60 cases at the end of the quarter and compared to just under 40 as of September 30th.

Looking ahead, our team remains focused on gathering additional physician feedback as we complete the remaining cases in this alami and prefer commercialization on a limited basis before initiating a full commercial launch in the second half of fiscal 2024.

This past week. We were also pleased to announce a successful early clinical use of our low profile pounds arterial thrombectomy system.

Otherwise known as pounds arterial L P. In.

In tandem with initiating a limited market evaluation of the product.

As a reminder of our pounds arterial thrombectomy system is designed to remove acute to chronic <unk> and peripheral arteries throughout the body and vessels ranging from three five to six millimeters in diameter.

By comparison pounds L. P is cleared for use in vessels ranging from two to four millimeters in diameter, which extends the treatment range of outbound saw <unk> portfolio to include smaller diamond the vessels such as Donald those fallen below the knee and potentially all the way to the.

Ankle.

Pumps arterial LP represents a promising enhancement to our product offering as it is extremely difficult for clinicians to remove from buy and embolite from vessels below the knee with the currently available technologies on the market.

Any intervention will tell you the prospect of moving a piece of embolus a plaque downstream into the tibial during an endovascular procedure is a major concern.

So it would be likely the most.

Cost of action to address issues in this region.

And it's not always the viable option.

With this in mind Poland's arterial out T has the potential to be a game changer, providing clinicians with an ideal non surgical solution below the knee in an area that I believe is not well sued because of the limitations of the current technology marketed by incumbents.

Clinical outcomes and feedback from the initial 10, plus cases has been overwhelmingly positive and I stress that and we look forward to gaining additional insight as we continue to progress through the limited market evaluation in Q2.

In summary, we're pleased to kick off the new fiscal year with considerable progress across each of the three strategic objectives that we committed to for twist called 2024.

Our team's performance with respect to these objectives enabled us to deliver impressive revenue growth in both of our segments.

Operator: Welcome everyone to the Cermonics first quarter of fiscal year 2024 earnings call. Please note that this call is being webcast. The webcast is accessible through the Investor Relations section of the Sermonics website at www.sermonics.com, where an audio replay will be archived for future reference. An earnings press release disclosing Cermonics' quarterly and full-year results was issued earlier today and is available on the company website as well.

Coupled with considerable year over year improvements in our profitability profile, while also enhancing our strategic position in the markets we serve.

Our guidance, which we are raising today reflects the financial and operating performance, we achieved in the first quarter as well as our continued confidence in the ability to accelerate our revenue growth profile in fiscal 'twenty, four but growth of 10%, Ohio, excluding license fee revenue related to <unk>.

Operator: Before we begin, I'd like to remind everyone that remarks and responses to your questions on today's call may contain forward-looking statements. These forward-looking statements are covered under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 and include statements regarding Cermonic's future financial and operating results or other statements that are not historical facts. Please be advised that actual results could differ materially from those stated or implied by Somatic's forward-looking statements, resulting from certain risks and uncertainties, including those described in the company's SEC filing. Sermonixis does not claim any duty to update or revise these forward-looking statements as a result of new information, future events, developments, or otherwise. This call will also include references to non-GAAP measures because Sermonics believes they provide useful information for investors. Today's earnings release includes reconciliation tables to GAAP results. I would now like to turn the conference over to Mr. Gary Maharaj, Somatics President and Chief Executive Officer. Please go ahead.

We look forward to building on these accomplishments as we progress through the fiscal year.

While continuing to focus on cash efficiency, preserving and allocating capital strategically in order to achieve strong sustainable growth and value creation on a long term basis.

I'd like to thank our entire team for their contributions this past quarter and their commitment to advancing our leadership in the market spaces as well as several customers and stakeholders for their ongoing support of symbolics and our mission.

Tim will now review, our first quarter financial results of fiscal 'twenty for guidance in greater detail Tim.

Gary unless noted all references to first quarter results on a GAAP and year on year basis.

Total revenue for the first quarter of fiscal 2024 increased $5 6 million or 23% to $30 6 million. Excluding survey all GCB license fee revenue total revenue increased $5 9 million or 25% to $29 6 million.

Gary R. Maharaj: Thank you, operator. Welcome everyone to our first quarter fiscal year 2024 earnings call. Here's what we plan to cover today. I'll begin with a high-level overview of our quarterly financial performance, followed by a discussion of our recent progress from an operational standpoint and our outlook for the rest of the year. Tim will discuss our Q1 financial results in more detail and review our financial guidance for Fiscal 2024, which we updated in today's Earnings Press release. Now, let's start with a discussion of our financial performance.

Our earnings press release includes detailed reconciliations of total revenue, excluding <unk> license fee revenue.

Product revenue increased $4 6 million or 32% to $18 8 million.

Medical device product revenue increased $3 6 million or 43% to $12 million.

A record for our medical device business.

<unk> revenue growth was primarily driven by our fulfillment of the initial surveil DCD stocking order from Abbott as well as increased sales of our pounce thrombectomy device platform.

Gary R. Maharaj: In the first quarter, we were pleased to achieve total revenue growth of 23% year-over-year to $30.6 million. Excluding the surveilled ECB license fee revenue in both periods, which represented an approximately $300,000 headwind in the quarter, we achieved total revenue growth of 25% year-over-year. Our total revenue performance came in just above our stated range of expectations for the quarter of $29.5 to $30.5 million, which we shared in our last earnings call. Importantly, our performance was driven by impressive contributions from both of our business segments. The medical device segment grew 24% year-over-year to $23.5 million and increased to 27%, including the year-over-year headwind related to the surveilled DCB license fee revenue that I just mentioned. And revenue from our in vitro diagnostics, or IVD, segment grew 18% year-over-year to $7 million. In our medical device segment, growth is primarily driven by record product sales, which increased 43% year-over-year, fueled by our vascular interventions device portfolio, specifically our Surveil drug-coated balloon and Pound's thrombectomy platform.

As a reminder, product revenue from sales of our Surveil GCB consists of revenue from both the contractual transfer price and estimated profit sharing the two revenue streams under our development and distribution agreement with Abbott.

IBD product revenue increased $1 million or 17% to $6 9 million, our diagnostics business benefited from strength in our antigen microarray slide offerings and benefited from a combination of factors, Gary mentioned earlier, including flu season demand timing of orders and the return of more normalized.

Customer purchasing patterns from some of our customers that had taken steps last year to manage COVID-19 are related.

Elevated inventory levels.

Royalty and license fee revenue increased 410000, or 5% to $9 2 million.

For firm performance coating royalty and license fee revenue increased 740000, or 10% to $8 2 million driven by customer utilization of our serene coating and benefiting from a relatively easy comparison in the prior year period.

Surveil drug coated balloon license fee revenue decreased 330000, or 25% to 1 million corresponding to the decrease in transcend clinical trial costs incurred.

R&D services revenue increased 610000, or 32% to $2 5 million.

Gary R. Maharaj: We also saw important contributions from royalties and license fees from our performance coding, as well as R&D services revenue. Growth in our IVD segment, which was exceptionally strong in the quarter, benefited from a combination of factors, including strong demand for select products heading into peak influenza season, the timing of orders, and the continued return of more normalized purchasing patterns from some of our customers that had taken steps last year to manage COVID-era elevated inventory levels. Lastly, we are pleased to compliment our impressive revenue performance with year-over-year improvements in our operating results, delivering adjusted EBITDA of $3.9 million, a $7.2 million improvement compared to the first quarter of last year. Overall, we were quite pleased to deliver a strong start to fiscal 2024.

The increase was primarily due to increased customer demand for performance coating services and our medical device business, which was impacted in the prior year period, our customers' supply chain challenges.

Moving down the P&L product gross margin was 53, 2% compared to 63% in the prior year period.

Several factors contributed contributed to the adverse mix impact to product gross margin relative to the prior year quarter.

Importantly sales of our near term growth catalysts, our surveil drug coated balloon pounds and supply products are increasing as a portion of total company product sales.

These device products are not yet at scale and product gross margins are impacted by the associated.

Absorption and production inefficiencies.

IBD product sales also contributed to the adverse mix impact this quarter with increased sales of our distributed antigen products that carry a lower margin profile.

Gary R. Maharaj: Turning now to our operational progress in the first quarter. In addition to our financial performance, our team has been hard at work executing on respect to the three strategic objectives for fiscal 2024 that we outlined in our last earnings call. As a reminder, these objectives are, first, to capitalize on the key near-term growth catalyst in our vascular interventions portfolio, our Cervéal DCB, Pound's Thrombectomy, and Sublime Radial Access products. Second, to drive durable revenue growth and cash flow generation across our core medical device performance coatings offerings and IVD business. And third, to facilitate our long-term growth by developing and introducing new products and line extensions that will enhance our existing pounds, sublime, and medical device performance coatings portfolio. Let me walk you through our recent progress with respect to each of these objectives, beginning with our vascular interventions portfolio.

In addition absorption of fixed overhead costs had an unfavorable impact this quarter relative to the prior year due to a timing related decrease in production volumes.

R&D expense, including costs related to clinical and regulatory activities decreased $4 1 million or 32% to $8 7 million, reflecting lower surveil PCB clinical costs, the timing of certain projects in our pipeline and the benefits from the spending reduction plan we implemented.

During the second quarter of fiscal 2023.

SG&A expense decreased 700000, or 5% to $12 5 million due to lower head count in our commercial organization compared to the prior year period related to the aforementioned spending reduction plan as well as the timing of investments in our commercial organization.

Our medical device business reported an operating loss of 220000 compared to $7 2 million in the prior year period, which reflects the operating expense savings from the restructuring and workforce reduction implemented in the second quarter fiscal 2023, and lower surveil GCB clinical.

Gary R. Maharaj: As I mentioned, product revenue in our medical device segment increased 43% year over year. This impressive growth was driven primarily by sales of Follis Surveil DCB and Pound Strombectomy products. Most notably, we generated the first commercial revenue from our surveilled ECB as we began shipping units in October to our commercial partner Abbott in preparation for a January launch. I'm pleased to report that the commercial manufacturing process proceeded reasonably smoothly during the first quarter, and we ultimately completed all shipments required to satisfy Abbott's initial commercial stocking order on time as planned. Drug-coated balloons like our Surveil BCB are some of the most difficult to manufacture with consistent quality in the interventional device segment. Our efficient and successful transition from manufacturing clinical units to commercial quantities, a process which I previously equated to starting a diesel engine in the middle of winter, speaks to Systematics' unique technology capabilities and expertise as an organization, as well as the talent and dedication of our employees. Our Surveils operation team did an excellent job of ensuring the success of initial commercial production, and I'd like to give them a shout-out on today's call to thank them for their effort.

Expenses favorability and timing of operating expenditures in the first quarter and broad based revenue growth.

Our IBD business reported operating income of $3 1 million or 45% of IBD revenue compared to $2 9 million or 50% of <unk> revenue in the prior year period.

This reflects leverage on product sales growth, partially offset by the adverse mix impact product gross profit of increased distributed antigen sales.

Turning to income taxes.

<unk> income tax expense of $60000 compared to an income tax benefit of 170000 in the prior year period.

GAAP net loss was 790000.

Loss of <unk> <unk> per diluted share compared to a net loss of $7 8 million or a loss of <unk> 56 per diluted share in the prior year period non-GAAP net income was essentially breakeven and consequently, non-GAAP EPS was zero compared to non-GAAP net loss of 7 million or a loss of 50.

<unk> per diluted share in the prior year period.

non-GAAP adjusted EBITDA was $3 9 million compared to adjusted EBITDA loss of $3 3 million in the prior year period.

Gary R. Maharaj: In addition to our manufacturing efforts, we continue to support Abbott's commercial readiness activities, such as the development of technical marketing and sales team training materials. We were also pleased to share the three-year results of our 446-patient Transcend trial, which were presented at the 50th Annual WIDS Symposium on November 15th. As a reminder, the 65-site randomized control trial found that our surveillance DCB was non-inferior in both safety and efficacy to the market-leading IMPACT Admiral DCB, which uses a 75% higher drug load of paxotaxel.

Adjusted EBITDA includes adjustments for stock based compensation expense in both periods. Our press release, our earnings press release includes detailed reconciliations of GAAP to non-GAAP measures.

Moving to the balance sheet, we began the first quarter with $45 4 million and total cash and cash equivalents and investments in available for sale Securities and ended the quarter with $35 2 million in cash and investments total cash used in the first quarter or the decrease in cash and investments.

<unk> was $10 2 million.

Gary R. Maharaj: Ninety-seven percent of our patients in the trial completed their three-year follow-up, and we are pleased to see that the data continue to demonstrate sustained safety and efficacy outcomes for the low-dose surveilled ECB that are comparable to the control device. I'm pleased we were able to provide this compelling clinical evidence to the medical community, which supports the long-term outcomes that can be achieved with our technology. I will also add that this is the only randomized controlled worldwide trial of a low dose DCB compared to a high dose DCB like IMPACT.

As we shared on our last earnings call. Our first quarter historically requires a higher use of cash to fund our working capital needs such as annual employee bonus payments and annual prepaid insurance premiums during.

During the first quarter, we reported cash used in operating activities of $8 8 million and capital expenditures of 720000.

Long term debt was unchanged during the first quarter at $29 4 million.

As of the end of the first quarter, we had access to approximately $64 million in additional borrowing capacity under our existing credit agreement.

Gary R. Maharaj: With this recent progress as a backdrop, I'm excited to share that the Surveil DCB is now a commercial product available in the United States through Abbott. Last week at the International Symposium on Endovascular Therapy, Abbott hosted a lunch symposium featuring the surveilled ECB, entitled, "Drunked with the Balloons: time to unveil what you're not seeing." Dr. Bill Gray, a key opinion leader in the field of interventional cardiology and one of the principal investigators of the TRANSCEND pivotal trial, discussed the differentiating features of the survey LDCB, which he highlighted in the three-year clinical data from the TRANSCEND trial.

Turning now to fiscal 2024 guidance, we updated our fiscal 2020 for revenue guidance today to reflect our performance in the first quarter as well as our revised expectations for the remainder of fiscal 2024.

We now expect fiscal 2020 for total revenue to range from $117 million to $121 million, representing a decrease of 12% to 9%.

Excluding surveil DCD license fee revenue, we expect revenue to range from $113 million to $117 million, representing an increase of 10% to 14%. This compares to our prior range of $112 million to $117 million or an increase of 9% to 40.

Gary R. Maharaj: We're excited to see the SurveyLDCB positioned as the next generation of drug-coated balloons. We look forward to Abbott's progress and remain committed to addressing their future demand as they move through the initial months of commercialization. In addition to the commercial revenue we recognized from the initial stocking order for our survey of DCV, sales of our thrombectomy products also represented an important contribution to the 43% growth we achieved in the medical device segment. Sales of these products continue to track with our expectations as our direct sales team remains focused on supporting both existing and potential customers, raising awareness in the marketplace, and educating the medical community. We ended the first quarter with a direct sales team consisting of 23 territory managers, which is unchanged from the end of fiscal 2023 and compares to 28 territory managers as of December 31st, 2022.

14% over the prior year.

Surveil DCD license fee revenue is expected to be approximately $4 million in fiscal 2024 compared to $29 6 million in fiscal 2023.

We now expect fiscal 2024, GAAP loss per diluted share to range from a loss of $1 40 to a loss of $1 10.

Compared to our prior range of a loss of $1 55 to a loss of $1 20 per share.

non-GAAP loss per diluted share is expected to range from a loss of $1 17 to a loss of 87.

Compared to our prior range of a loss of $1 32 to a loss of <unk> 97 per share.

I'll now share a few additional considerations for modeling purposes.

With respect to our fiscal 2024 total revenue guidance product revenue is expected to be approximately 60% of total revenue driven largely by contributions from our product growth catalysts, specifically, we now expect combined product revenue from our surveil pounds and sublime products of at least 14.

Gary R. Maharaj: Building on the progress made in fiscal 2023, our team continued to establish a foundation for future growth by developing existing accounts and expanding our active customer base. In the first quarter, we continued to be pleased that our customers, we had great customer reorder rates, and saw healthy year-over-year growth in average revenue per existing customer. As part of our efforts to raise market awareness and educate prospective users during the quarter, we sponsored two digital and print supplements in Endovascular Today, a leading industry publication with an editorial advisory board composed of the top endovascular specialists. The publication's focus is the latest technological advancements in the endovascular field.

An increase from the $13 5 million, we communicated last quarter.

Revenue associated with our medical device performance coating offerings in IBD business is expected to grow in the low to mid single digits from the $88 3 million of combined revenue generated in fiscal 2023.

Our fiscal 2024 diluted loss per share guidance reflects the following full year assumptions product gross margin is expected to be in the mid fifties.

We expect operating expenses, excluding product costs to decrease in the low to mid single digits.

Gary R. Maharaj: And the November issue featured a supplement on our Sublime Radial Access platform and its impact on patients and practices. And the December issue featured a supplement on our Pounce Arterial Thrombectomy System. The Pound Supplement featured case studies and interviews with 10 physicians, including a diverse set of vascular surgeons, interventional radiologists, and interventional cardiologists. It provides clinicians with insights into how their peers are integrating pounds into the approach to treating patients with acute limb ischemia. With case studies featuring pre- and post-procedure angiograms, it also succinctly and powerfully demonstrated Pounce's ability to quickly remove multiple mixed morphology clots in a single treatment session, eliminating the need for capital equipment or aspiration and reducing reliance on lytic drugs. I encourage you to read these supplements and draw your own conclusions and develop your own view as to whether our VI products are not far and You've heard me say in the past, the future has already been created; it's just not evenly distributed yet.

We expect R&D expense to range from $40 to 41 million, representing a decrease of 14% to 12%.

We expect SG&A expense to range from 54% to 55 million, representing an increase of 4% to 6% as we invest in our commercial organization.

Interest expense is expected to be approximately $3 5 million consistent with the prior year.

Finally, our EPS guidance reflects full year tax expense of $2 million to $3 million.

With respect to our revenue growth in the second quarter, we expect second quarter total revenue to range from approximately $28 five to $29 5 million, representing an increase of approximately 5% to 8%.

Lastly, with respect to cash utilization at the end of fiscal 2023, we had $45 4 million of cash and investments, which included $3 9 million of available for sale Securities.

In fiscal 2024, we expect to finish the fiscal year with approximately 28% to $32 million of cash and investments.

Let me take a moment to walk through what this means for our anticipated cash use in fiscal 2024 compared to 2023.

Gary R. Maharaj: The latter is our job to be done with the Simotics VI portfolio. These supplements serve as an important resource to do just that, to increase awareness for potential customers and for a relatively small but talented sales team to increase their leverage. Now, to our second strategic objective. We continue to make progress in our efforts to drive durable growth and cash flow generation across our core medical device, performance coatings, and IVD business. Our team delivered a strong start to fiscal 2024, with revenue from these two areas growing 10% year-over-year on a combined basis, driven by growth in each business. The performance in medical device performance coding was driven by growth in royalty and license fee revenue, as well as revenue from R&D services.

In fiscal 2023, our cash and investments increased by $26 million year over year. Importantly, this included an influx of cash from both the milestone payment for obtaining survey L. PMA approval as well as debt proceeds drawn from our term loan and revolving credit facility.

As we discussed on last quarter's call when we set aside the $27 million from the surveil PMA milestone payment and the $19 3 million in net debt proceeds cash and investments decreased by approximately $20 million for fiscal 2023.

By comparison in fiscal 2024, we expect a year over year decrease in cash and investments to range from approximately $17 million to $13 million, reflecting an improvement in total cash used of approximately 3% to $7 million compared to the $20 million in fiscal 2023.

Gary R. Maharaj: Our IVD sales growth was fueled by sales of our antigen and slide products and benefited from the combination of factors as I mentioned earlier, including Flu Season Demand, the timing of orders, and the return of more normalized customer purchasing patterns. These core businesses are tracking towards our expectations of low- to mid-single-digit growth for the full year of fiscal 2024. I note, however, that the performance of these core businesses was an important contributor to the adjusted EBITDA profitability that we achieved in the first quarter. And lastly, with respect to our third strategic objective, we continue to lay the foundation for future long-term growth by advancing our pipeline of new products and line extensions, with notable progress on multiple fronts. In our medical device performance coatings business, we secured the first 510K clearance and initiated the commercial launch of our Prezide line of hydrophilic coatings. The most advanced hydrophilic coating our team has ever developed, and I believe that the world has never seen.

As a reminder, our expectations for cash used in fiscal 2024 reflect the following assumptions the receipt of a $3 4 million cash tax refund from the IRS associated with the cares Act employee retention credit cap.

Capital expenditures of up to $5 million compared to $2 9 million in fiscal 2023, which includes certain investments postpone last year as a part of our spending reduction plan.

And payments totaling approximately $2 7 million to satisfy obligations related to previous acquisitions.

As Gary mentioned cash efficiency continues to be a top priority for our organization in fiscal 2024.

We remain focused on disciplined expense management and optimization of working capital and importantly, our fiscal 2024 guidance continues to assume no borrowings under our credit agreement.

With that operator, we'd now like to open the call to questions.

Thank you if you'd like to ask a question. Please signal by pressing star one on your telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment. We do ask that you limit yourself to one question and one follow up if you'd like to ask additional questions. We invite you to address.

Gary R. Maharaj: As I discussed in detail in our last earnings call, PRESIDE is specifically formulated with next-generation neurovascular, coronary, and peripheral vascular devices in mind. It is designed to provide both enhanced coating durability and industry-leading lubricity, enabling coated devices to reach distal treatment sites across challenging coronary lesions and chronic total occlusion, all with minimal particulate generation. By addressing these specific needs, Prezide complements and enhances our existing portfolio, including our serene hydrophilic coating, which facilitates improved treatment outcomes, and furthermore reinforces our position as the market leader and provider of performance coding technologies for years to come. In the months following the commercial launch of Prezide, we've been pleased with the level of interest we're seeing from both new customers and existing customers, most notably in the neurovascular segment of the stomach.

So to the queue again by pressing star one once again, please limit yourselves to one question and one follow up our first question is coming from Brooks O'neil from Lake Street Capital markets. Your line is now live.

Good morning, and thank you for all that detail I'll try to limit myself as you expect.

First can you give us any color at all with regard to the market response to surveil that Ed.

And so far.

It's very early innings and you know.

We chatted with Abbott team last week at the Isa meeting, they're excited but it's really really early innings for this so we don't have that feedback loop associated yet, but what I will say it was exciting to see.

Gary R. Maharaj: We look forward to supporting their efforts as they integrate PRECIDE into the next generation of devices and pursue regulatory clearance. In our vascular interventions portfolio, we continue to make strides in the limited market evaluation of our pounds venous thrombectomy system. Physician feedback from the LME continues to highlight the product's visibility when it comes to treating different clot morphologies and its atraumatic design, which enables clinicians to make multiple passes with a single device while minimizing stress or damage to the vein.

As Elisa social media posts.

The first patients treated.

And remember we also our job is to really respond to abbott's demand and support them with whatever materials. They know so.

I'm sure we'll be hearing more in the weeks to come after this early innings period.

Sure that makes sense to me Okay. The second question I have is obviously.

And Tim provided a lot of detail about the clinical superiority of some of the new products and in particular about may.

Gary R. Maharaj: In our most recent LME, we completed just under 60 cases at the end of the quarter, compared to just under 40 as of September 30th. Looking ahead, our team remains focused on gathering additional physician feedback as we complete the remaining cases in this LME and prepare for commercialization on a limited basis before initiating our full commercial launch in the second half of fiscal 2024. We are also pleased to announce the successful early clinical use of our low-profile pounds arterial thrombectomies, otherwise known as Pounce Arterial LP, in tandem with initiating our limited market evaluation of the product. As a reminder, our Pounds Arterial Thrombectomy System is designed to remove acute to chronic thrombi and emboli from peripheral arteries throughout the body in vessels ranging from 3.5 to 6 millimeters in diameter.

Maybe Tim can you help us think about what the commercial impact.

New products and growth for Powell.

There's likely to be in terms of maybe the number of products that you're offering to the marketplace.

Maybe the price points of some of the newer products.

How that might impact.

Performance for you guys this year.

Now I'll turn it over to Tim just to calibrate a little bit.

Products like pumps LP and the supply Microcap that birds eye and limited market evaluation right now so the launch window of those is the second half of the year and like anything Thats free commercial we want to be very careful of what when we trigger that full commercial revenue stream, but.

No. We're excited with how the limited market evaluations are progressing.

Right. Thank you Gary at Brook says as I mentioned on the call. We have at least 14 million of total product revenue coming from the likes of Pout Surveil and sublime in fiscal 2024.

Gary R. Maharaj: By comparison, Pounce LP is cleared for use in vessels ranging from 2 to 4 millimeters in diameter, which extends the treatment range of our Pounce arterial portfolio to include smaller diameter vessels, such as those found below the knee and potentially all the way to the ankle. Pounce Arterial LP represents a promising enhancement to our product offering as it is extremely difficult for clinicians to remove thrombi and emboli from vessels below the knee with the currently available technologies on the market. Many interventionists will tell you the prospect of losing a piece of embolus or plaque downstream into the tibials during an endovascular procedure is a major concern; surgery would likely be the most serious.

So we just raised that from $13 $5 million as you can imagine to combination of factors, including parts, but as well as surveil the guidance that we provided does reflect.

A modest amount of revenue coming from the introduction of new products once they followed limited market evaluations.

I'd say more towards the second half of fiscal 'twenty four you'd asked about the selling prices will remain somewhat silent here on <unk>.

We'll talk more about that as we get that into the market but.

As you can imagine these products run have asps from a market perspective competitive offerings anywhere from about $2500 per unit to about.

Gary R. Maharaj: This is a course of action to address issues in this region, and it's not always a viable option. With this in mind, Pound's Arterial LP has the potential to be a game-changer, providing clinicians with an ideal, non-surgical solution below the knee in an area that I believe is not well-served because of the limitations of the current technology marketed by incumbents. Clinical outcomes and feedback from the initial 10-plus cases have been overwhelmingly positive, and I stress that, and we look forward to gaining additional insight as we continue to progress through the limited market evaluations in Q2. In summary, we're pleased to kick off the new fiscal year with considerable progress across each of the three strategic objectives that we committed to for Fiscal 2024.

About 4000 4000 plus per unit you can imagine our power technology, given our value proposition is on the upper end of that range.

Great. That's very helpful. Thank you very much youre welcome.

Thank you. Our next question is coming from Mike Matson from Needham and company. Your line is now live.

Yeah. Thanks.

So just wanted to ask one on <unk>.

Salt piece, though.

Can you maybe just talk about.

The size the market opportunity I mean, how common are clause in the below the knee area and then the degree of competition here I think you've said that the competitors practical work very well there but.

Maybe just talk.

What options are out there other than pulp here.

Sure.

The the being of the competitors' products capital equipment and not on the table solution.

Gary R. Maharaj: Our team's performance with respect to these objectives enabled us to deliver impressive revenue growth in both of our segments, coupled with considerable year-over-year improvements in our profitability profile, while also enhancing our strategic position in the markets we serve. Our guidance, which we are raising today, reflects the financial and operating performance we achieved in the first quarter, as well as our continued confidence in the ability to accelerate our revenue growth profile in Fiscal 24 with growth of 10 percent or higher, excluding license fee revenue related to our surveilled ECB. We look forward to building on these accomplishments as we progress through the fiscal year while continuing to focus on cash efficiency, preserving, and allocating capital strategically in order to achieve strong, sustainable growth and value creation on a long-term basis. I'd like to thank our entire team for their contributions this past quarter and their commitment to advancing leadership in the markets we serve, as well as our customers and stakeholders for their ongoing support of Somatics and our mission. Tim will now review our first quarter financial results and Fiscal 24 guidance in greater detail. Tim?

And Mike as you go below the knee the vessels T put towards the ankle.

We are trying to ascertain the market right now the initial feeling is it's not a huge market.

But the reason for that is sometimes they just can't get there with a mechanical device suction or otherwise.

So they revert to surgical embolectomy.

All Olympics right. So now if you take the that potential market I suspect, it's many times larger, but I don't want to speculate as to what it is as we get our bearings on it so what's unique about our device. It's the same techniques that they using above the knee right just devices downside.

<unk> and its downsides, specifically, because we respect the integrity of the arterial wall. So first thing. So the reason we designed L. P. As you can you don't want to shove off a big hunting device into very small friable tibial arteries. So we specifically designed LP to get down to two millimeters maintain the health of.

The vessel wall and pull the crowd out other devices.

Timothy J. Arens: Thank you, Gary. Unless noted, all references to first quarter results are in a gap in your on-year basis. Total revenue for the first quarter of fiscal 2024 increased $5.6 million, or 23%, to $30.6 million. Excluding the surveilled DCB license fee revenue, total revenue increased $5.9 million, or 25%, to $29.6 million. Our earnings press release includes detailed reconciliations of total revenue excluding surveilled ECD license fee revenue. Product revenue increased $4.6 million, or 32%, to $18.8 million. Medical device product revenue increased $3.6 million, or 43%, to $12 million. This is a record for a medical device business.

Not disparaging according to devices, but there's limitations to the technology as Youre trying to suck for example, and you're trying to suck through a much longer straw, that's narrowing of tapering its very difficult to generate the power to remove.

All types of clot down the soft stuff will come out early the hard stuff not so much and so what we're seeing is the lessons learned and the technique above the knee.

Following that experienced logistical below the knee and use the same techniques that pull out clot in the physicians I have proof.

Personally talked to with this feel that it's just given them an extra arm with similar techniques and so that's that's exciting now again.

We're just into double figures on it and as you know with my.

Timothy J. Arens: Product revenue growth was primarily driven by our fulfillment of the initial surveil DCB stocking order from Abbott, as well as increased sales of our PoundStorm Vectomy device platform. As a reminder, revenue from sales of our Surveil DCB consists of revenue from both the contractual transfer price and estimated profit sharing, the two revenue streams under our development and distribution agreement with Abbott. IVD product revenue increased 1 million or 17% to 6.9 million. Our diagnostics business benefited from strength in our antigen and microarray slide offerings and benefited from a combination of factors Gary mentioned earlier, including flu season demand, timing of orders, and the return of more normalized customer purchasing patterns from some of our customers that had taken steps last year to manage COVID-era related elevated inventory levels.

Prudent so I'd like to see quite a few more cases before we we saw it fifth pumping and that'll be the work untapped for Q2.

And then it will also allow us to understand more of the market opportunity by real world experience.

Instead of reading some.

Some report this ancient put.

Put it that way.

Yes.

And we lose Mike. Thank you. Our next question is coming from Jim Sidoti from Sidoti and company. Your line is now live.

Hi, good morning, Thanks for taking the question.

First question on Surveil.

Do you expect additional orders in the second fiscal quarter and do you expect Q2 to exceed Q1, it'll be down from Q1.

In terms of its available orders yeah, great great question.

Timothy J. Arens: Royalty and license fee revenue increased $410,000, or 5% to $9.2 million. Performance coding royalty and license fee revenue increased $740,000, or 10% to $8.2 million, driven by customer utilization of our serene coding and benefiting from a relatively easy comparison in the prior year period. Surveillance drug-coded balloon license fee revenue decreased $330,000, or 25%, to $1 million, corresponding to the decrease in transient clinical trial costs incurred. R&D services revenue increased $610,000, or 32%, to $2.5 million.

Jim Im sure. This is a question that sent a lot of folks' mind, Yes, we continue to expect our surveil orders from Abbott throughout the fiscal year I will say that typically not always but typically one can expect that the stocking orders.

Outpace the initial follow on orders.

Our guidance would reflect that meaning you would expect that Q2 would see lower orders and shipments to Abbott of surveil Youll notice that our guidance reflects a sequential decline and you would be right to think that might have something to do with it that's totally normal.

Okay, and then as part of that decline also lower sales on the on the coatings business because of the seasonality or is it primarily because of the stocking order.

Timothy J. Arens: The increase was primarily due to increased customer demand for performance coding services in our medical device business, which was impacted in the prior year period by our customer supply chain challenges. Moving down the P&L, product growth margin was 53.2% compared to 63% in the prior year period. Several factors contributed to the adverse mixed impact to product gross margin relative to the prior year quarter.

Yes.

Not really getting into a lot of specificity, but you would imagine that it's probably going to be more related.

The surveil stocking order.

Okay Alright.

Then a question your guidance for interest expense, our balloons around $3 million.

Reported about 400000 in the quarter.

Timothy J. Arens: Importantly, sales of our near-term growth catalysts, our surveilled drug-coated balloon, pounce, and sublime products, are increasing as a portion of total company product sales. However, these device products are not yet at scale, and product growth margins are impacted by the associated under-absorption and production inefficiencies. IBD product sales also contributed to the adverse mix impact this quarter, with increased sales of our distributed antigen products that carry a lower margin profile.

Is that guidance is that is.

Is that minus the interest income.

On the cash you have on hand or you.

We expect interest expense to pick up going forward.

This expense will.

Is going to remain you can almost take the $3 five and just kind of normally distributed across the four quarters. So any variability that youll see us really kind of going to be the interest income that will be generated.

Okay.

Alright, thank you.

Yes, Thank you Jim.

Timothy J. Arens: In addition, absorption of fixed overhead costs had an unfavorable impact this quarter relative to the prior year due to a timing-related decrease in production volumes. R&D expense, including costs related to clinical and regulatory activities, decreased $4.1 million, or 32%, to $8.7 million, reflecting lower surveilled DCB clinical costs, the timing of certain projects in our pipeline, and the benefits from the spending reduction plan we implemented during the second quarter of fiscal 2023. SG&A expense decreased $700,000, or 5%, to $12.5 million due to the lower headcount in our commercial organization compared to the prior year period related to the aforementioned spending reduction plan, as well as the timing of investments in our commercial organization. Our medical device business reported an operating loss of $220,000, compared to $7.2 million in the prior year period, which reflects operating expense savings from the restructuring and workforce reduction implemented in the second quarter of fiscal 2023 and lower surveilled DCB clinical expenses, favorability in timing of operating expenditures in the first quarter, and broad-based revenue growth.

As a reminder, Thats star one to be placed in the question queue.

Our next question is from Mike Matson from Needham. Your line is now live.

Yeah, I think sorry, I had a couple more questions I had you did buy salt.

Yeah.

Just on supply you didn't call it out as a growth driver in the product category.

So can you give us an update there and I'm just wondering.

The issue of just the.

The market for radial access.

Adoption of radio access and peripheral store not really taking off or is this some kind of a competitive issue where the competitors. The bigger guys are starting to offer some of the radial access products.

That's a good point I did actually has nothing to see there it actually.

I don't want to give the absolute detail here, but it's actually met our plan in Q1. So it's just so we have to get the micro catheters.

Complete that alanine and thats when youll be hearing a lot more about it because the microcap visible break open the market in terms of being able to get through difficult lesions from the risk, but the sublime is.

On track for Istent, Yes, Mike I'll, just add it did it did contribute growth in.

Timothy J. Arens: Our IBD business reported operating income of $3.1 million, or 45% of IBD revenue, compared to $2.9 million, or 50% of IBD revenue in the prior year period. This reflects leverage on product sales growth, partially offset by the adverse mixed impact of product gross profit on increased distributed antigen sales. Turning to income taxes, we reported an income tax expense of $60,000 compared to an income tax benefit of $170,000 in the prior year period. Gap's net loss was $790,000, or a loss of $0.06 per diluted share, compared to a net loss of $7.8 million, or a loss of $0.56 per diluted share in the prior year period.

In the period, but we call out.

Products that are driving the greatest majority of the growth and that would be of course.

As well as surveil.

And keep in mind as I mentioned I think the earlier call from Brooks asked about Asps. There is certainly a difference in asps between the offerings, which obviously has an influence this quarter in terms of the overall growth profile.

Yeah, Okay that makes sense and then I haven't dug into our model yet, but just looking at the kind of profitability results for the quarter.

It seems like Theres a bit of a disconnect between what.

Strong results, we had this quarter and kind of a guidance, although you raised the guidance some bugs.

Were there some one offs or something this quarter.

Timothy J. Arens: Non-gap net income was essentially break-even, and consequently, non-gap EPS was zero, compared to a non-gap net loss of $7 million, or a loss of $0.50 per diluted share in the prior year period. Non-GAAP adjusted EBITDA was $3.9 million, compared to adjusted EBITDA loss of $3.3 million in the prior year period. Adjusted EBITDA includes adjustments for stock-based compensation expense in both periods. Our earnings press release includes detailed reconciliations of GAAP to non-GAAP measures. Moving to the balance sheet, we began the first quarter with $45.4 million in total cash and cash equivalents and investments in available for sale securities, and ended the quarter with $35.2 million in cash and investments. Total cash used in the first quarter, or the decrease in cash in investments, was $10.2 million.

I know you called out the timing of expenses a few times, but is that is that just the main issue that you just had some things that just didn't hit us this quarter.

Kind of catch up later in the year and Thats, why youre expecting profitability to sort of worse than over the next couple of quarters.

Thank you for paying attention and catching that yes.

What you'll notice was a decline year on year and even sequentially, both in R&D and SG&A expense.

As we described in terms of the strategic objectives Youll.

You'll see that we're focused heavily this year.

Driving revenue growth from the catalytic products that we've mentioned including constant sublime.

Gary and I have discussed probably over the last several quarters that we've got a pretty rich and robust pipeline of opportunities that are gone through limited market evaluations currently and we expect to commercialize during the second half of the year. So as we get closer to the commercialization periods. You can expect that there would be incremental expense to support that.

Timothy J. Arens: As we shared on our last earnings call, our first quarter historically requires a higher use of cash to fund our working capital needs, such as annual employee bonus payments and annual prepaid insurance premiums. During the first quarter, we reported cash use in operating activities of $8.8 million and capital expenditures of $720,000. Long-term debt was unchanged during the first quarter at $29.4 million.

Our third strategic strategic objective is to continue to enhance and develop and introduce new products and extensions to our existing platform technologies and Thats what were doing so youre going to see continued expense thats, mostly the timing related matters along.

With the introduction of new products.

Timothy J. Arens: As of the end of the first quarter, we had access to approximately $64 million in additional borrowing capacity under our existing credit agreement. Turning now to Fiscal 2024 Guidance. We updated our fiscal 2024 revenue guidance today to reflect our performance in the first quarter, as well as our revised expectations for the remainder of fiscal 2024. We now expect fiscal 2024 total revenue to range from $117 to $121 million, representing a decrease of 12% to 9%.

But thats really whats driving that I would say Gary one of the things that we probably did.

Q1 was as we were focused on launching <unk>.

<unk> are helping abbot to launch or avail and satisfy their demand.

We've put a lot of our energy and effort and focus and time on surveil.

We've successfully done that we feel that we've got that pretty well dialed in but we'll know more about that as we go through the next couple of quarters, we feel more confident and comfortable moving forward and accelerating some of these things that we were probably moving a little bit slower on are pacing a little bit slower in the first 13 weeks of the year yes.

Timothy J. Arens: Excluding the DCD license fee revenue, we expect revenue to range from $113 to $117 million, representing an increase of 10% to 14%. This compares to our prior range of 112 to 117 million, or an increase of 9% to 14% over the prior year. Surveil DCV license fee revenue is expected to be approximately $4 million in fiscal 2024 compared to $29.6 million in fiscal 2023. We now expect fiscal 2024 gap loss per diluted share to range from a loss of $1.40 to a loss of $1.10, compared to our prior range of a loss of $1.55 to a loss of $1.20 per share. Non-GAAP loss per diluted share is expected to range from a loss of $1.17 to a loss of 87 cents, compared to our prior range of a loss of $1.32 to a loss of $0.97 per share.

<unk> hit it on the head.

The year is divided into four equal quarters in.

We drive the car at full speed on itself Nice freeway and then we have other things if it's a small country road, we slow it down but as Tim said, we have three major product launches coming up the microcap pumps LTE pounds lead us and so I expect to see us.

Throttle up on the SG&A appropriately.

Moving up to P&L, but throttle up appropriately in the back half and then as well.

R&D is really focused on these launches so as we get back into the R&D for the things that are just slightly over the horizon that should pick up as well. So that's really what it is.

Okay.

Okay got it thank you.

Thank you we've reached end of our question and answer session and ladies and gentlemen that does conclude today's teleconference. You may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.

Timothy J. Arens: I'll now share a few additional considerations for modeling purposes. With respect to our fiscal 2024 total revenue guidance, product revenue is expected to be approximately 60% of total revenue, driven largely by contributions from our product growth catalysts. Specifically, we now expect combined product revenue from our Surveil, Pounds, and Sublime products to be at least $14 million, an increase from the $13.5 million we communicated last quarter. Revenue associated with our medical device performance coding offerings and IVD business is expected to grow in the low to mid-single digits from the $88.3 million of combined revenue generated in fiscal 2023. Our fiscal 2024 diluted loss per share guidance reflects the following full year assumptions. Product gross margin is expected to be in the mid-50s. We expect operating expenses, excluding product costs, to decrease in the low to mid-single digits.

Okay.

Timothy J. Arens: We expect R&D expense to range from $40 to $41 million, representing a decrease of 14% to 12%. We expect SG&A expenses to range from $54 to $55 million, representing an increase of 4% to 6% as we invest in our commercial organization. Interest expense is expected to be approximately $3.5 million, consistent with the prior year.

Timothy J. Arens: Finally, our EPS guidance reflects full-year tax expense of $2 to $3 million. With respect to our revenue growth in the second quarter, we expect second quarter total revenue to range from approximately $28.5 to $29.5 million, representing an increase of approximately 5% to 8%. Lastly, with respect to cash utilization, at the end of fiscal 2023, we had $45.4 million of cash in investments, which included $3.9 million of available for sale securities.

Timothy J. Arens: In fiscal 2024, we expect to finish the fiscal year with approximately 28 to 32 million in cash and investments. Let me take a moment to walk through what this means for anticipated cash use in fiscal 2024 compared to 2023. In fiscal 2023, our cash and investments increased by $26 million year-over-year.

Timothy J. Arens: Importantly, this included an influx of cash from both the milestone payment for obtaining survey LPMA approval, as well as debt proceeds drawn from our term loan and revolving credit facilities. As we discussed on last quarter's call, when we set aside the $27 million from the monitored PMA milestone payment and the $19.3 million in net debt proceeds, cash and investments decreased by approximately $20 million for fiscal 2023. By comparison, in fiscal 2024, we expect a year-over-year decrease in cash and investments to range from approximately $17 to $13 million, reflecting an improvement in total cash used of approximately $3 to $7 million compared to $20 million in fiscal 2023. As a reminder, our expectations for cash use in fiscal 2024 reflect the following assumptions, including the receipt of a $3.4 million cash tax refund from the IRS associated with the CARES Act employee retention credit.

Timothy J. Arens: Capital expenditures of up to $5 million compared to $2.9 million in fiscal 2023, which includes certain investments postponed last year as a part of our spending reduction plan and payments totaling approximately $2.7 million to satisfy obligations related to previous acquisitions. As Gary mentioned, cash efficiency continues to be a top priority for our organization in fiscal 2024. We remain focused on disciplined expense management and optimization of working capital. And importantly, our fiscal 2024 guidance continues to assume no borrowings under our credit agreement.

Operator: With that, the operator would now like to open the call to questions. Thank you. If you'd like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment.

Operator: We do ask that you limit yourself to one question and one follow-up. If you'd like to ask additional questions, we invite you to add yourself to the queue again by pressing star 1. Once again, please limit yourself to one question and one follow-up. Our first question is coming from Brooks O'Neill from Lake Street Capital Markets. Your line is now live. Good morning.

Gary R. Maharaj: Thank you for all that detail. I'll try to limit myself as you expect. Can you give us any color at all with regard to the market response to surveil that has been seen so far? It's very early innings, and you know we chatted with the Abbott team last week at the ICET meeting. They're excited, but it's really early innings, so we don't have that feedback loop associated with it yet, but what I will say was exciting to see at least a social media post from the first patients treated. And remember, our job is also to really respond to Abbott's demand and support them with whatever materials they know, so I'm sure we'll be hearing more in the weeks to come after this early innings period. Sure, that makes sense Okay, the second question I have is obviously you and Tim provided a lot of detail about the clinical superiority of some of the new products and, in particular, pounds. Maybe Tim can help us think about the commercial impact of New Products and Growth for Pounds. Mike and Gary.

Gary R. Maharaj: It's great to be here. I'm Mike Matson. I'm a senior product manager at the Microsoft Office of Marketing. I'm here to talk about the new products that are coming out this year. And I want to start by giving a little background on what the market price is likely to be in terms of maybe the number of products that you're offering to the marketplace and maybe the price points of some of the newer products, and how that might impact performance for you guys this year. Yeah, and I'll turn it over to Tim just to calibrate a little bit. Products like Pounds LP and the Sublime Microcatheters are in limited market evaluation right now.

Gary R. Maharaj: So the launch window for those is the second half of the year. And like anything that's pre-commercial, we want to be very careful when we trigger that full commercial revenue stream. But right now, we're excited with how the limited market evaluations are progressing.

Timothy J. Arens: Brooks, as I mentioned on the call, we have at least $14 million of total product revenue coming from the likes of Pounce, Surveilled, and Sublime in fiscal 2024. So we just raised that from $13.5 million, as you can imagine. It's a combination of factors including Pounce but also Surveilled.

Timothy J. Arens: The guidance that we provided does reflect a modest amount of revenue coming from the introduction of new products once they've followed limited market evaluations. I would say more towards the second half of fiscal 2024. You asked about the selling prices. We'll remain somewhat silent here on Pounce Venus.

Timothy J. Arens: We'll talk more about that as we get that into the market, but as you can imagine, these products have ASPs from a market perspective, competitive offerings anywhere from about $2,500 per unit to about $4,000, $4,000 plus per unit. You can imagine that our Pounce technology, given our value proposition, is on the upper end of that range. Great. That's very helpful. Thank you very much.

Operator: You're welcome. Thank you. Our next question is coming from Mike Matson from Needleman Company. Your line is now live.

Gary R. Maharaj: Yeah, thanks. Um, so just wanted to ask one on Poundstall P. Can you maybe just talk about the size of the market opportunity? I mean, how common are plots in the below the knee area?

Gary R. Maharaj: And then, you know, the degree of competition here. I think you've said that the competitor's products don't work very well there, but maybe just, you know, talk about what options are out there other than LP. Sure, you know, the bane of the competitor's products is capital equipment and not an on-the-table solution. And Mike, as you go below the knee, the vessels taper towards the ankle. We're trying to ascertain the market right now, but you know, the initial feeling is it's not a huge market. But the reason for that is sometimes they just can't get there with a mechanical device, suction or otherwise, and so they revert to surgical embolectomy or lytics, right?

Gary R. Maharaj: So now, if you take that potential market, I suspect it's many times larger, but I don't want to speculate as to what it is as we get our bearings on it. So what's unique about our device? It's the same technique that they're using above the knee, right? This device is downsized, and it's downsized specifically because we respect the integrity of the arterial wall. So, first thing, the reason we designed LP is you can't, you don't want to shove a big honking device into very small, friable tibial arteries. So we specifically designed LP to get down to two millimeters, maintain the health of the vessel wall, and pull the crud out. Other devices that... Not disparaging according to the devices, but there are limitations to the technology. As you're trying to suck..., for example, and you're trying to suck through a much longer straw that's narrowing and tapering, it's very difficult to generate the power to remove all types of clots down there.

Gary R. Maharaj: The soft stuff will come out early; the hard stuff, not so much. And so, what we're seeing is the lessons learned and the techniques above the knee are allowing that experience to just go below the knee and use the same techniques to pull out clots. And the physicians I personally talked to with this feel that it's just giving them an extra arm with similar techniques.

Gary R. Maharaj: And so that's exciting. Now again, we're just in the double figures on it. And as you know, with my prudence, I like to see quite a few more cases before we start fist pumping. And that'll be the work on tap for Q2. And then it'll also allow us to understand more of the market opportunity through real world experience instead of reading some, I guess, ancient report that's ancient. I'll just put it that way. Did we lose Mike?

Operator: Thank you. Our next question is coming from Jim Sidoti from Sidoti and Company. Your line is now live. Hi, good morning.

Timothy J. Arens: Thanks for taking the questions. First question on Surveil: do you expect additional orders in the second fiscal quarter, and do you expect Q2 to exceed Q1 or be down from Q1 in terms of Surveil orders? Jim, I'm sure this is a question that's on a lot of folks' minds.

Timothy J. Arens: Yes, we continue to expect surveillance orders from Abbott throughout the fiscal year. I will say that, typically, not always, but typically, one can expect that the stocking orders will outpace the initial follow-on orders. Our guidance would reflect that, meaning you would expect that Q2 would see lower orders and shipments to Abbott of surveil. You'll notice that our guidance reflects a sequential decline, and you would be right to think that might have something to do with it. Totally normal

Timothy J. Arens: Okay, so is part of that decline also lower sales in the coatings business because of, you know, seasonality, or is it primarily because of the stocking order? Yeah, not really getting into a lot of specificity, but you would imagine that it's probably going to be more related to the surveil stocking order. Okay. And then, question: your guidance for interest expense. I believe it's around $3 million. You only reported about $400,000 in the quarter.

Timothy J. Arens: Is that guidance, is that... Is that minus the interest income you expect on the cash you have on hand, or do you expect interest expense to pick up going forward? Interest expense is going to remain. You can almost take the 3.5 and just kind of normally distribute it across the four quarters. So any variability that you'll see is really kind of going to be the interest income that will be generated. Okay. All right, thank you. Yep, thank you, Jim. Thank you. As a reminder that the star ones should be placed into question Q.

Operator: Our next question is from Mike Matson from Needham. Your line is now live. Yeah, thanks. Sorry, I had a couple more questions. I had muted myself.

Gary R. Maharaj: I forgot to unmute. I wondered where you went. So, just on Sublime, you know, you didn't call it out as a growth driver in the product category. So, can you give us an update on that? And I'm just wondering, you know, is this an issue of just the market for radial access, or I guess adoption of radial access and peripherals still not really taking off? Or is this some kind of competitive issue where competitors now, the bigger guys are starting to offer some of this radial access product? No, that's a good point, but there is actually nothing to see there.

Gary R. Maharaj: I don't want to give the absolute details here, but it actually met our plan in Q1. So it's just we have to get the microcatheters, complete that LME, and that's when you'll be hearing a lot more about it because the microcatheters will break open the market in terms of being able to get through difficult lesions from the wrist. But no, Sublime is on track for us, Tim.

Timothy J. Arens: Yeah. Yeah, Mike, I'll just add it did contribute growth during the period, but we call out the products that are driving the greatest majority of the growth, and that would be, of course, Pounce as well as Surveil.

Timothy J. Arens: And keep in mind, as I mentioned, I think the earlier call from Brooks asked about ASPs. There's certainly a difference in ASPs between the offerings, which obviously has an influence this quarter in terms of the overall growth profile. Yeah. Okay. That makes sense.

Timothy J. Arens: And then, you know, I haven't dug into our model yet, but, you know, just looking at the kind of profitability results for the quarter, it seems like there's a bit of a disconnect between, you know, the strong results you had this quarter and kind of the guidance. And I know you raised the guidance some, but, you know, were there some one-offs or something this quarter that, you know, I know you called out like timing of expenses a few times, but is that just the main issue that you just had some things that just didn't hit this quarter that will, you know, kind of catch up later in the year and that's why you're expecting profitability to sort of worsen over the next couple quarters Thank you for paying attention and catching that. Yes. What you noticed was a decline year on year and even sequentially, both in R&D and SG&A expense.

Timothy J. Arens: You know, as we've described in terms of the strategic objectives, you'll see that we're focused heavily this year on driving revenue growth from the catalytic products that we've mentioned, including Ponce and Sublime. You know, Gary and I have discussed probably over the last several quarters that we've got a pretty rich and robust pipeline of opportunities that are going through limited market evaluations currently, and we expect to commercialize during the second half of the year. So as we get closer to the commercialization period, you can expect that there will be incremental expenses to support that. Our third strategic objective is to continue to enhance and develop and introduce new products and extensions to our existing platform technologies, and that's what we do. So you're going to see continued expense; that's mostly timing-related matters along with the introduction of new products, but that's really what's driving that.

Timothy J. Arens: I would say, Gary, one of the things that we probably did in Q1 was, as we were focused on launching Surveil or helping Abbott to launch Surveil and satisfy their demand, we put a lot of our energy and effort, focus, and time on Surveil. Now that we've successfully done that, we feel that we've got that pretty well dialed in, but we'll know more about that as we go through the next couple of quarters. We feel more confident and comfortable moving forward and accelerating some of these things that we were probably moving a little bit slower on or pacing a little bit slower in the first 13 weeks of the year. Yeah, Mike, and Tim hit it on the head. The year isn't divided into four equal quarters, and we drive the car at full speed when it's a nice freeway, and then we have other things. If it's a small country road, we slow it down.

Gary R. Maharaj: But, as Tim said, we have three major product launches coming up, the microcaster, Pounds LP, and Pounds Venus. And so expect to see us throttle up on the SG&A appropriately, not blowing up the P&L, but ramp up appropriately in the back half. And then, as our R&D is really focused on these launches, so as we get back into the R&D for the things that are just slightly over the horizon, that should pick up as well.

Operator: So that's really what it is. Okay, got it. Thank you. Thank you. We've reached the end of our question and answer session. And, ladies and gentlemen, that does conclude today's teleconference. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.