Bob Jones - Investor Relations Joe DeVivo - Chief Executive Officer Mark Frost - Chief Financial Officer

Tom Gunderson - Piper Jaffray Charles Haff - Craig-Hallum Jeff Chu - Canaccord Genuity Jason Bedford - Raymond James

Thank you, Amber. Welcome everyone and thank you for joining us for AngioDynamics’ conference call this afternoon to review the financial results for the fiscal 2015 second quarter, which ended on November 30, 2014.

The news release that crossed the wire this afternoon is available on the company’s website at www.angiodynamics.com. A replay of this call will be archived on the company’s website.

Before we get started, during the course of this conference call, the company will make projections of forward-looking statements regarding future events, including statements about revenue and earnings for the fiscal 2015 third quarter ending February 28, 2015 and the full year ending May 31, 2015. We encourage you to review the company’s past and future filings with the SEC, including without limitation, the company’s Forms 10-Q, 10-K and 8-K and any amendments thereto which identify specific factors that may cause the actual results or events to differ materially from those described in the forward-looking statements.

Finally, during the question-and-answer period today, we’d like to request each caller to limit themselves to two questions and encourage callers to re-queue to ask additional questions. We appreciate everyone’s cooperation with this procedure.

With that, I’d now like to turn the call over to Joe DeVivo, Chief Executive Officer.

Thank you, Bob. Thank you, ladies and gentlemen for joining the call today.

So to start off, I am pleased to report another solid quarter for the company as we continued to deliver on the objectives we have set for ourselves while executing both top line growth and improved bottom line leverage. We accomplished some major milestones this quarter which will help us grow into the future while delivering the revenue and earnings necessary today.

I am pleased to see us positively anniversary last year’s improving sales performance as each of our growth drivers continued to contribute. Our gross margin improved 105 basis points this quarter due to our operational excellence program and positive mix from our growth drivers bringing us to 51.7% gross margin, which is ahead of schedule.

I believe our performance signals that we have entered a period of sustained operating leverage where gross margins and earnings will continue to grow faster than revenues. Within the quarter, AngioDynamics was added to the S&P SmallCap 600 Index and the GICS Life & Health Insurance Sub-Industry Index adding significant liquidity for investors.

This event coupled with a strong first quarter performance increased our trading volume from 100,000 shares traded per day to 300,000 shares during the second quarter. This added liquidity has attracted new kinds of investors making it much easier to build positions and frankly exit them.

We believe this addition is a validation of the strength of our company, our mission and the significant value creation we believe is yet ahead of us. This third-party validation stands on the shoulders of our management team’s execution of expected revenue and profit growth plan, which I believe are sustainable.

I am very proud of our team and for our products. So, now to business updates.

Our peripheral vascular business grew 1% in the quarter. Our largest business presented the biggest year-over-year challenge as revenues last year grew 7% on significant market share gains in venous ablation.

Frankly, I am pleased to maintain those gains throughout the year. AngioVac sales grew 46% year-over-year, while utilization year-over-year was up 146% and consistent with last quarter.

We have just received FDA approval a few weeks ago for our second generation AngioVac, which we believe will make it even easier to setup and even more clinically applicable. We are preparing for a full market launch for this second generation AngioVac device by the end of March and we expect increased procedure penetration as it helps us gain the next level of new customers.

Our larger PV businesses had moderate performances for different reasons. Venous ablation in the first half of last year grew 24% off a major market share win for EVLT.

In those numbers were significant new account revenues above the normal run rates, so the first half of this year does not have that level of new account activity, but we believe procedure growth is in the upper single-digits. A 2-year CAGR for the business is 11%, so we are very happy with where we are.

So now as we anniversary last year’s second half 14% growth rate I expect that EVLT will return to the normal mid to upper single digit growth rates normalizing the big wins from prior year and finishing closer to the appropriate run rate of the business. Fluid management continues to flow between plus or minus percent and it will be this way for the foreseeable future as this is a pretty mature business.

While we have several R&D efforts ongoing, we don’t believe they will contribute in the near future. So with that now let’s move to Vascular Access.

We are seeing simply a stellar turnaround in this business period from negative growth last year to 9% worldwide growth this quarter. I mentioned to many investors I have hoped to see near double digit growth rates in Vascular Access by the end of fiscal year ’15.

And here is now two quarters before that prediction. We believe our growth rate in Vascular Access shows that we are taking share in this category as BioFlo is now contributing 56% of all PICC business and the other categories are penetrating with BioFlo as well.

Our focus strategy of launching a differentiated product which improves patient outcomes while reducing immediate healthcare cost is occurring across our Vascular Access portfolio. Thus far this fiscal year, we have benefited from prior contract wins for Ports and PICCs reliant on our BioFlo technology and as predicted now we are seeing its impact in our numbers.

In December we announced we added – that we were added to the HealthTrust agreement for our entire product line in PICCs opening up for us for the first time in a very long time over 1,400 hospitals that have never been on contract with AngioDynamics for the PICC category. While it is the multi-source agreement, HealthTrust is a very compliant group and is extremely difficult to work off contract with their members.

We believe this will create a real opportunity for share growth through out the 3-year term of this agreement which started just a few weeks ago at the beginning of calendar ’15. The next major milestone will be the approval of the no chest x-ray claim for our Celerity tip location system which we believe we should receive any data.

With that clearance most of the large institutions who have converted to bedside PICC placement will now be a fair game again further opening up the market opportunity for our PICC products. While in Vascular Access we spent a lot of time talking about PICCs our Ports and dialysis catheters are higher ticket and higher gross margin items and have less barriers to entry and are really powering our near-term performance with growth rates of 13% and 8% respectively.

While no data has been presented yet, we are seeing early anecdotal data showing improved flow rates, meaningful reductions in TPA usage as well as reductions in infections. Yes, I said reductions in infections.

While BioFlo is not an anti-infectant as a device, it is believed by some clinicians that the reduction of chronic thrombus reduces the chance for infections to form in the areas of stasis in the clots themselves. If this continues to hold true in the clinical setting BioFlo’s upside opportunities are even more powerful than earlier anticipated.

So now let’s shift gears to oncology. Our second quarter oncology surgery sales grew 9% to $13.6 million driven by strong international sales.

Thermal ablation sales were $8.1 million, which was a 7% increase, is a $7.6 million in the previous year. NanoKnife sales continued to grow and in the second quarter we posted 13% growth compared to the prior year’s quarter driven by 16% growth in NanoKnife disposable sales.

We are excited to report the reimbursement outlook for NanoKnife continues to gain momentum. In Germany we obtained OPS codes which we announced earlier, which is the first step in achieving full reimbursement for NanoKnife procedure not only in Germany but hopefully throughout the rest of Europe.

We expect ZE and DRG codes in early January and anticipate the full Germany reimbursement early in the summer. We also interestingly received positive reimbursement news from the Danish healthcare system for the NanoKnife procedure in pancreas.

Reimbursement for the procedure has been approved at $7,000 per procedure. On the publication front, there were two noteworthy publications in the second quarter Freeman Hospital UK systematic review article and Johns Hopkins’ IRE Stage 3 pancreatic cancer paper both published in September.

In the systematic review paper, the author concluded the initial evidence suggests IRE incurs a prognostic benefit with minimal morbidity. In the Hopkins’ Stage 3 pancreatic paper, it was shown the adaptation of IRE for pancreas tumor therapy is safe.

These two publications add to the growing evidence which shows IRE as safe and effective. We have mentioned a couple of the new published papers in our press release.

For you NanoKnife geeks out there, I encourage you to read these papers. Alright.

So, now moving to international. Our international business had another very positive quarter, growing 9% year-over-year.

Our new leadership team and regional sales models continued to deliver returning to the role of being revenue accretive for the whole company. I am very pleased with the entire progress of our international team and look forward to their continued success.

Finally, probably the last remnant of the challenging Oracle implementation has been the building inventory, which stems from new system implementation as well as planned inventory build for the operational excellence programs ramp in advance of product transfers from one facility to the next. In the quarter, our inventory levels spiked to $75 million, which is not a normal level for us.

We take the steps last quarter and this quarter to reduce inventories as it takes a while to turn the ship. We are not concerned about this and we will see it meaningfully reduce and cash flows increase by the end of this fiscal year.

So with that, I will now turn it over to Mark Frost, Chief Financial Officer. Mark?

Thank you, Joe. As you can see from our second quarter fiscal year 2015 results, we slightly exceeded our top line expectations and hit the high-end of our guidance range for the bottom line.

We continued the strong start to our fiscal year and delivered operating leverage with 5% revenue growth excluding the supply agreement and 21% earnings improvement. In addition, our adjusted EBITDA increased by over 18% to $15.9 million.

We believe this performance is sustainable, which is reflected in our increase in our earnings guidance once again. The one financial metric requiring improvement within the quarter related to our cash flow and the inventory management.

We made further progress in receivable management, but experienced higher inventory levels than planned. We also experienced a drop in accounts payable primarily because of the timing of the inventory build at the start of the second quarter.

I will discuss cash in more depth later in my comments. Total revenue grew 4% from the prior fiscal year’s second quarter and 5% excluding the wind down of our supply agreements.

There are no quarterly day differences this fiscal year, so all prior year comparisons are consistent on an average daily sales basis. Now, I will be more limited in my product performance comments as Joe has covered this in some depth within his own comments.

Peripheral vascular increased 1% to $49.4 million reflecting strong contribution of AngioVac at $2.9 million. However, this was offset by flat results within venous and a 2% decline in fluid management primarily because of international award timing, while the U.S.

was essentially flat. Vascular access revenue continued to accelerate with 9% growth to $28 million compared to last year’s second quarter.

All three product lines within VA grew this quarter with our Ports portfolio growing at a very strong 13% level. PICCs were up 4%.

Dialysis grew 8%. Oncology surgery had another good quarter with 9% overall growth.

The key catalyst for our strong results was international NanoKnife. Our installed base increased by 8 sites to 216 units in the field.

Within ablation, microwave continued to perform well with 27% growth. The microwave results were offset somewhat by expected RF erosion and so we ended the quarter at 7% ablation growth, which was a better result than the previous quarters.

From a geography perspective, U.S. revenue improved to 4%, while the international markets grew 9%.

As communicated last quarter, we were expecting international growth to moderate. Now, moving down the income statement, gross profit fell to $47.7 million or 51.7% of sales.

This was a 105 basis point improvement from last year’s second quarter. Key drivers for the improvement was our operational excellence program which contributed about 70% of the year-on-year improvement, including absorbing approximately 30 basis points of provisions we needed to record for aging inventory.

Stronger mix contributed the remaining 30% improvement. Our strategy to add developed products with stronger profitability potential is working as the contribution from AngioVac, NanoKnife and BioFlo particularly from ports and dialysis are driving the gross margin expansion.

The GM percent returns dropped about 75 basis points from quarter one, reflecting royalty and warranty costs from higher U.S. volume as well as distributor sales contributed more of the international revenue, which diluted our gross margin return versus our quarter one results.

Now, turning to expenses, operating expenses totaled $43.1 million. Sales and marketing expenses remained flat, reflecting leverage from rebasing our global commission plans as we discussed in the past.

G&A increased $1.6 million with $700,000 from the ERP implementation, $600,000 from higher incentive and stock-based compensation with the balance being timing. We think the run rate increase for G&A should be around $1.2 million per quarter above the prior year for the second half.

R&D declined by about $900,000 reflecting restructuring savings from organizational actions taken in the quarter one, as well as timing benefits primarily related to clinical and IP activities. R&D should return to low 7% range as a percent of revenue in the second half.

Now included in the OpEx was $2.3 million of acquisition, integration and restructuring items of which $800,000 pertain to litigation, $800,000 also came from our restructuring initiatives primarily related to our operational excellence program. The remaining $600,000 was from accounting organization process activities and some other miscellaneous items.

GAAP income results were $0.04 income per share versus $0.01 loss per share in 2014. Adjusted EPS was $0.17 per share versus $0.14 in 2014.

We saw leverage in both our gross margin operating expense lines contributing to the 21% improvement in earnings. Turning to EBITDA, EBITDA grew to $11.9 million or $0.33 a share versus $8.6 million or $0.24 a share in the prior year.

Adjusted EBITDA was $15.9 million or $0.44 a share versus $13.5 million or $0.38 a share. Now, as we indicated on our last conference call, we did not expect to generate significant cash within quarter two.

In the quarter we utilized $2.1 million of operating cash and $4.6 million of free cash compared to $4.2 million free cash generation in the prior year quarter. This was lower than our expectations caused primarily by $14.4 million working capital build with $5.9 million from an AP reduction, $4.9 million inventory build and $2.7 million in AR from higher revenue volume.

Now on a year-to-date basis working capital has increased by $20.9 million with $14.1 million in inventory, $6.1 million from a payables reduction offset in part by $3.2 million decrease in AR. We believe the AP impact is primarily timing, while the major impacts in the quarter and year-to-date was the inventory increase.

Now as I indicated last quarterly conference call, a significant portion of the increase relates to a delivered build of inventory in advance of our manufacturing transition from our Queensbury to our Glens Falls site. In addition, we have a contractual inventory commitment about $1.2 million per quarter relating to the Medcomp deal.

The unexpected factor has been in the raw WIP area where ERP learning curve issues led to excess ordering and build. In this regard we think we have solved these issues in the month of November realized our first reductions of inventory levels for both of these components.

Now on the finished goods front we have begun the line transitions and expect to see a steady decline in the second half of fiscal year 2015. Now during the quarter we utilized $10.4 million of cash primarily for the Vortex guaranteed contingent $8 million obligation, $1.3 million for repaying term debt and $1.1 million relating to a clinical device revenue earn-out.

In addition, we acquired $2.4 million of fixed assets, bringing the total investment year-to-date to $7.5 million. This reflects primarily the build out of costs of Glens Falls facility for the manufacturing consolidation as well as some ERP costs, which have been pushed into fiscal year ’15.

Now as a result of the contingent obligations and the working capital build, we borrowed $15 million from the revolver. We ended the quarter with $16.6 million in cash and investments and $155.2 million of debt outstanding.

We intend to repay the revolver draw downs during the second half of this fiscal year. As I also indicated in the last call we expect cash flow to improve in the second half as the working capital concerns are well within our control.

We continue to anticipate generating low to mid-$30 million operating cash flow and free cash flow in the low to mid-$20 million range for the fiscal year. So now I am going to turn a discussion of our guidance for fiscal year 2015 and the third quarter.

For fiscal year 2015 we are maintaining our revenue guidance in the range of $362 million to $368 million, representing 5% growth at the top end of the range when excluding the impact of the planned wind down of our supply agreement. On the earnings side, we are raising again both the lower and upper end of our adjusted EPS range and are now guiding to $0.66 to $0.72.

This represents a potential improvement of 18% to 30%. Our visibility and confidence level have increased after seeing both gross margin and operating expense leverage continued to improve within the first half of our fiscal year supporting our belief from the sustainability of this performance.

Now, turning to fiscal year third quarter guidance, we are guiding to a revenue range of $88 million to $91 million, 5% growth at the top end excluding the supply agreement impact. The range is being driven in part by capital timing and international order timings.

We are lower than second quarter in absolute dollars as there is one less day in quarter three versus quarter two. Given our top line expectations, adjusted EPS is expected to be in the range of $0.14 to $0.17 up to a 21% improvement at the high-end over the prior year fiscal quarter.

So, with that, I will turn the call back to Joe for his final comments. Joe?

Thanks Mark. So, as we can see in the numbers, we are continuing to make great progress on all levels.

Our team continues to execute in the growth drivers top line and bottom line of the company and our operational excellence program is beginning to deliver meaningful operating leverage to the business. We have set a goal for ourselves to get to 60% gross margin as a company over the next 5 years.

If our progress continues, we have every chance on beating that goal and getting there sooner. As you can all see in our latest IR presentation as well, there are meaningful research and development programs launching at the end of ‘15 and then throughout ‘16 and ‘17 as these programs range from well needed line extensions to new novel technologies that will increase our presence and then value up the categories we currently serve.

Over the past couple of years, we have benefited from products we have acquired for our top line growth. Now as they continue to grow, our top line will be powered by two new product launches driving our performance to our stated top and bottom line aspirations.

For now, our success is in our hands and continued implementation of our strategy and disciplined execution from an excellent management team will get us there. So, thank you very much for your attention.

And operator, now please open the line for questions.

Hi, good afternoon, guys.

Hey, Tom.

Two questions. One, the first one will be in the area of AngioVac, I think I heard $2.9 million, in the previous calls Joe, you have talked about number of procedures, could you say that was this about the same as last quarter or?

Yes, it was about the same as last quarter. It was up like – it’s like 140% year-over-year and consistent with the prior quarter.

And how do you feel about that? I mean, that’s one of those ones where it’s just a dynamite presentation and the videos are incredible, do you expect to see procedure growth like we saw in the last few quarters as we go into second half?

Yes, I mean, I definitely believe procedures are going to grow. It’s still a new technology.

And we are – the best comparables are year-over-year comparables. Quarter-to-quarter comparables and they can show trajectory, but they don’t match in timing and logistics and seasonality and whatnot.

So, I am not concerned about it. We have had quarters where there is – each quarter has not been a consistent level of growth as it kind of ebbs and flows.

And I think last quarter we are very strong in procedures. We didn’t do virtually anything on new accounts.

We were 500,000 up over last quarter and could just be sales force attention and stuff ebbing and flowing. So, no, I have no concern.

I think the business is going to continue growing nicely and we are very excited especially about this new product launch. We are still selling the first generation AngioVac, which is made by a startup company and is not as refined.

And from the ability to setup the room to reduce procedure times to make it easier on the team to be able to make the procedures more predictable, it’s in the order of magnitude a better product from the ability to drive consumption. We think we will be able to get to the next level of clinicians.

So, no, Tom, I am not concerned about it if I would, I would say it.

Okay, thanks. And then the second question would be on BioFlo, but really it’s more of a general question, Joe, you and I have talked in the past about your rule for R&D projects that they have to be cost effective for the hospital within the first 12 months.

I would think infection rate – lower infection rate would qualify for that, what do you have to do from here beyond just a little bit bigger trial is it a publication, is it going back to the FDA for labeling what do you think you have to do to push that forward?

I think it’s the former. The first step is simply the product has to prove itself out clinically and with the Ports and dialysis catheter I was referring to which have very long dwell times in the patient’s chronic thrombosis is a challenge and when it infects it’s a really bad thing for the patient, it’s different in the type of infection you talked about the PICCs where it’s probably more placement and site related.

Some clinicians and they have mentioned it in the papers believe that if there is a stasis of thrombus that resides in the catheter for a long period of time whenever like a swap, whenever you don’t have flow and you don’t have movement it’s an area that can cause problems and if BioFlo can reduce that kind of chronic thrombus in that stasis then net-net it reduces that cesspool that create and improves that. But I think this is – it’s just very early, its things that we are seeing at individual sites that are kind of opening our eyes and we are excited about.

I think it’s going to take some time before the data presents itself but it’s an exciting early indication that while we spend so much time talking about PICCs but our Ports and dialysis catheters I think are real winners.

Got it, that’s it for me. Thanks guys.

Thanks Tom.

Hi guys. Congratulations on a great quarter.

Thanks Charles.

Couple of questions here, on the AngioVac side of the product the second-gen product, is that the one that’s better designed for PEs that you have been talking about or is that something different?

Well, the product and Charles as indicated for thrombus it’s not indicative for any specific application, but it’s a general device for thrombus removal. In order to get to more difficult areas if it is more nimble and it has curvature to it.

It can get through more torturous anatomy and this device is the one that can do that.

Okay. Thank you.

And then for the NanoKnife registrations internationally that’s very encouraging. I know that you are having some challenges with that when you are going through your Queensbury issues, would you expect more NanoKnife international registrations in the near future or is it going to be a kind of a pause here based on ones that you got now?

No, we are working pretty hard to catch up for some lost time. But we are working hard on not only getting those registrations but working on reimbursement.

We think it’s time and there is enough data out there for countries to reimburse and we have seen the successes that we have had. And probably the next big – the next couple of big milestones for NanoKnife will be around China and Japan.

And those are things that we are actively working on. I don’t have any timing to share with you today, but we think – but China and Japan are both very big ablation markets, very high level of primary cancers.

And if we get those approvals I think it will be the next level of positive things for Nano.

Okay. And just as a follow-up to that Joe after you get those product registrations do you kind of have a little bit of pent-up demand that gets released and you get a kind of a little flurry of orders shortly after those registrations or does the – is the business more even than that?

Well, it takes time to develop those markets obviously not having our products on the market we are not developing the market. So these are capital equipment sales with long life cycle, so no – I mean if something drops because someone is going through an international meeting it will be a one-off.

It takes time to develop those markets.

Okay, great. I will get back in and re-queue.

Thanks Charles.

Hi guys, this is actually Jeff Chu filling in for Jason. Congratulations on a great quarter.

Thanks.

Just a quick couple of questions, number one on the gross margin side, you are making great progress on the operational excellence program and so I am just wondering how should we think about gross margin expansion from here. I appreciate your commentary on getting to 60% margins over the next several years, but perhaps how we should think about in the near-term?

Sure. Joe, you want me to take a shot at that?

Yes, please.

Okay. So, we have communicated in our investor presentations now the 4-year plan will make roughly between a 400 and 500 basis point improvement.

We said at the beginning of the year that we would be up 100 basis points on our gross margin. We are running a little ahead of that.

Operational excellence is coming in a little stronger than we expected for the year. So, we have the chance potentially for upside in the second half and then it would ramp over the next few years, I think we have it outlined ramping it up to 125, 130 basis points each year out all the way through 2018.

And then the wildcard is our ability to drive success on the product mix, which you can also see we are doing a little better than we expected as we drive our big growth drivers AngioVac, BioFlo, microwave and so forth. So, I’d say we are running slightly ahead of schedule and that’s one of the reasons why we have raised our guidance as well, Jeff.

Okay, great. Thanks for the color.

And just a quick follow-up with regard to the HealthTrust contract, I am wondering how we should think about the contribution to the balance of your fiscal year?

Well, it is something that is positive for us. As you know in the PICC business, there is a cycle of evaluation and time.

This doesn’t just flip and place orders. I think really the catalyst that will be the determining factor is we are waiting any day for the decision on Celerity.

We were hoping to get it by now. I think the 90-day clock runs out in 3 or 4 or 5 days or something.

So, we are expecting and hoping that we get that. And I think if we do, that’s where we have some pent-up demand that will help drop a lot sooner, but I think the HealthTrust is realistic to believe that it’s really accretive to top line growth in fiscal ‘16.

Great. Thanks for taking the questions.

No problem. Thanks for asking them.

Good evening and Happy New Year to you guys.

Hey, Happy New Year, Jason.

So, just following the last question a little bit and I don’t mean to be ungrateful with the growth in access, but PICC is up 4%. It seems like PICCs are the biggest beneficiary of BioFlo, but it’s also the slower growth – slowest grower out of the three product categories there?

So, I am just wondering is it just a more competitive market or are folks truly waiting for Celerity and that will allow the growth to pick up in PICCs?

Yes. It’s the same thing that we have mentioned over quarter over quarter over quarter, which is that the PICC market for us is a battlefield.

We are winning and converting a lot of accounts, but also accounts – our competitors who have tip location devices out there with no chest x-rays are converting non-BioFlo accounts over to – if they decide to go to bedside, it’s the most frustrating thing in the world. We will go and we will convert an account and then we will turn around and lose an account, because we don’t have chest x-ray.

It’s just the same story that we have been dealing with. And that’s why I believe when we get it, it will definitely allow a lot of those other conversations to shift from a method that’s good and helps reduce hospital costs to a product and a procedure that reduces costs and improves patient outcomes.

It’s kind of frustrating that there are hospitals, but we understand that the dynamic when they decide to move PICCs from the IR suite into bedside nursing that, that’s a major shift in cost and in policy for the hospitals. And because the tip location device is enabling, they will choose that over anti-thrombogenic and we have seen that we have been losing share.

That’s why we had negative growth. The only reason why we are growing today in PICCs is because of BioFlo, but if you look under the sheets, there is a lot of churn in that business.

And in the other businesses we don’t see it. We are not losing ports and dialysis accounts.

So, we have been losing dialysis price over the last several years as that market got more competitive, but what we are seeing now is a stable business and whatever we grow we keep and that’s why those growth rates get up so quickly. So, I think when we received an approval from the chest x-ray, it’s really going to open our bedside nursing opportunity finally after years’ worth of self-imposed drama of not having the system and then that will be a great catalyst and then that will help within our Novation accounts that are looking to covert over to us.

It will help with our HealthTrust accounts that are looking to convert over to us and other legacy AngioDynamics accounts that maybe have been very loyal to AngioDynamics, but went over to a competitor because they had a system. So it’s really the same old story Jason and it’s just as simple as that.

Okay. And maybe for Mark, do have within the guidance do you assume kind of a bump up here when Celerity is approved?

No, we have not assumed much impact from that. That’s the change we have made to our budgeting and forecast process that we don’t build it until we have the regulatory approval.

So that potentially would be an upside to our numbers if that happens.

Okay. And then maybe last for me, Joe on the PV side of the business, it’s a slower growth end market, it seems like from a product standpoint outside of AngioVac there is not a lot in the near-term, just wondering what you can do to grow the business, perhaps broadening it out geographically what can you do in the near-term until you get a few more products out there to grow that business a little faster than what we are seeing?

Well, first of all, if you look at our EVLT business. Again, even though it showed the negative 1% for the quarter for a two year period, it’s up 11%.

We were 24% up last year with – and PV grew entirely last year 12%, our biggest business. So we need to have – I will look at it and for me at least and you can look at it and everyone can look at – for how they want.

But I will look at it and put in perspective that while we were down in Vascular Access and while international was kind of sucking win, PV brought it home for the company last year. And so now we are anniversarying some huge performance and I think the EVLT business will continue to be the type of revenue growth business and margin accretive business that has always been for the company.

So let’s put that to the side. It’s really fluid management, fluid management is the big number for us and it’s a low gross margin and it’s the low growth.

I mean you pull fluid management out of the equation and we are – I don’t know I guess I haven’t looked at that recently, but our gross margin probably goes up 3 or 4 or 5 points and our growth rate goes up probably 3 or 4 points. We are probably closer to the 10% growth company and 55, 56 gross margin product line – or a company.

So it is an anchor and it does weigh on the business. But it also funds the sales force.

Our biggest challenge as a company as we have mentioned earlier is scale. And we like having that revenue and we like having all the sales people out there to sell all these other products and without that revenue we probably have small sales force.

So that’s really the balance of it. Now, we have communicated a lot about the Duet program about getting into automated.

We had some major road blocks and we were back to the drawing board and that’s just – that’s why they call a research and development, its research and development. We went for it and we have chosen that we have to retool that program.

But we do have the desire to be in the automated segment. We will be in the automated segment.

And when we get closer to how we are going to get there we will communicate it to you. And we also have some things in the pipeline on the fluids side that should return and improve its growth, but it’s just not happening in the next several quarters.

So it’s something that’s a little bit farther out. So probably if you really ring fence it, its fluid will the biggest issue and we are focusing on it, but it’s going to take sometime.

And it’s a core part of our business and it is where it is and that’s why we are as every day goes by our growth driver numbers are becoming a higher percentage of the overall revenue. And yes, okay so you don’t have the anchor, we would be higher in those levels, but also it is helping us to fund the core business.

So I don’t know if that answers your question, but I think it’s really just around fluids.

Alright, that’s helpful. I appreciate the time guys.

No problem.

Hi. Thanks for taking my follow-up questions guys.

On the no chest x-ray claim it sounds like you are pretty confident that you are going to get the clearance there, is that just a function of the 90-day clock expiring in the next 3 to 5 days like you said Joe or are there some other things that you are clin/reg people are kind of telling you that are giving you some confidence without getting into specifics of course?

Yes, well, it’s kind of hard to answer the question without getting into the specifics. Our clin/reg people think that we have gotten there I mean this is if you go back in time this product has been in front of them for almost 2 years now.

And we think we have supplied everything. We think the questions they have asked have been answered and we expect a positive response, but we – and it’s at a risk for us to say that we expect to have positive response.

If it doesn’t happen, then you guys will be disappointed but we wouldn’t say it if our team didn’t feel confident.

Okay, that’s great. And then one more follow-up from me for Mark, on the cash flow side, Mark, I wasn’t sure if I heard you correctly, but did you say that there is a $20.9 million increase in working capital that will not be reversing or is that did you say you are working on that number to get that down?

Yes. What I said is it’s increased at the first half by $20.9 million and we will work that down considerably we think in the second half.

Okay. So, with the sales increases that you have had and would presume to have in the second half, should we expect maybe half of that to improve in the second half or any help you can give us on kind of quantifying it?

Yes. I mean, you can get to the numbers.

What we have said is we should be able to get to low mid 30s operating cash, low mid 20s free cash. So that will tell you that we are reversing significantly the impact to the first half working capital, capital build.

Okay. That sounds great.

Thanks guys.

No problem.

So, in closing, peripheral vascular up 1% or down 1% for the quarter, we have vascular access up 9%, oncology up 9%, international up 9%, very strong top line numbers, earnings improving in the 20% range. We think this is sustainable.

We are excited about where we are at. We have improved over the last several years a lot of change and that the team is now driving some very nice execution.

So, we are excited about our position in our team and we very much appreciate your attention on the call. So, thank you everybody.