07-Feb-2018 Cardiovascular Systems, Inc....2018/02/07 · Cardiovascular Systems, Inc. (CSII)Q2 2018 Earnings Call Corrected Transcript 07-Feb-2018 1-877-FACTSET 3 Copyright © 2001-2018

Corrected Transcript

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07-Feb-2018

Cardiovascular Systems, Inc. (CSII)

Q2 2018 Earnings Call

Cardiovascular Systems, Inc. (CSII) Q2 2018 Earnings Call

Corrected Transcript 07-Feb-2018


2 Copyright © 2001-2018 FactSet CallStreet, LLC

CORPORATE PARTICIPANTS

Jack E. Nielsen Senior Director-Corporate Communications & Investor Relations, Cardiovascular Systems, Inc.

Scott R. Ward Chairman, President & Chief Executive Officer, Cardiovascular Systems, Inc.

Jeff Points Chief Financial Officer, Cardiovascular Systems, Inc.

Rhonda Robb Chief Operating Officer, Cardiovascular Systems, Inc.

......................................................................................................................................................................................................................................................

OTHER PARTICIPANTS

Danielle J. Antalffy Analyst, Leerink Partners LLC

Margaret M. Kaczor Analyst, William Blair & Co. LLC

Brooks O'Neil Analyst, Lake Street Capital Markets LLC

Bob Hopkins Analyst, Bank of America Merrill Lynch

Mike Matson Analyst, Needham & Co. LLC

Jayson T. Bedford Analyst, Raymond James & Associates, Inc.

......................................................................................................................................................................................................................................................

MANAGEMENT DISCUSSION SECTION

Operator: Good afternoon. My name is [ph] Crista (00:00:09) and I will be your conference operator today. At

this time, I would like to welcome everyone to the Cardiovascular Systems, Inc. Fiscal Year 2018 Second Quarter

Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the

speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you.

Jack Nielsen, Senior Director of Investor Relations Corporate Communications, you may begin your conference. ......................................................................................................................................................................................................................................................

Jack E. Nielsen Senior Director-Corporate Communications & Investor Relations, Cardiovascular Systems, Inc.

Thank you, [ph] Crista (00:00:43). Good afternoon and welcome to our fiscal 2018 second quarter conference

call. With me on today's call are CSI executives Scott Ward, Rhonda Robb, Larry Betterley, and Jeff Points.

During this call, we will make forward-looking statements. These forward-looking statements are covered under

the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, and includes statements

regarding CSI's future financial and operating results or other statements that are not historical facts.

Actual results could differ materially from those stated or implied by our forward-looking statements due to certain

risks and uncertainties, including those described in our most recent Form 10-K and subsequent quarterly reports

on Form 10-Q. CSI disclaims any duty to update or revise our forward-looking statements as a result of new

information, future events, developments or otherwise. We will also refer to non-GAAP measures because we





believe they provide useful information for our investors. Today's news release contains a reconciliation table to

GAAP results.

I'll now turn the call over to Scott Ward. ......................................................................................................................................................................................................................................................


Thank you, Jack. Good afternoon, everyone, and thank you for joining us today. During today's call, we will

discuss our second quarter performance and several recent developments that establish a foundation for growth,

sustainable growth, going forward.

Second quarter revenues are of $52.6 million, increased 5% compared to the year ago period. Peripheral revenue

of $39.2 million, increased 6% versus last year and was up 3% versus last quarter. Coronary revenue of $13.4

million, increased 3% versus last year and rebounded nicely from first quarter, increasing 17% quarter-over-

quarter. It is still early, but we are encouraged that our decision to dedicate about 20 of our sales reps to our

coronary franchise has resulted in improved performance.

In Q2, we added $1.9 million in coronary revenue compared to Q1, with an increase in new accounts and a nice

rebound in same-store sales. We are also pleased with the resurgence of growth in same-store sales in the in-

hospital segment of our peripheral business. However, our revenue in the office-based lab or OBL segment, fell

short of expectations and are not likely to rebound as quickly as the hospital segment of the peripheral business.

We operate in an increasingly competitive environment, particularly in the price-sensitive office-based lab site of

service. On a unit basis, our OBL business grew 7.5% over last year but price declined 7% and revenue is flat for

the quarter.

The OBL segment represents about 20% of our peripheral sales. Given the utility and effectiveness of orbital

atherectomy, we don't intend to compete on price but going forward, we will be more competitive on price if we

can secure higher volumes or long-term contracts.

Our unit structure has – our unit cost structure has significant volume efficiency that will accommodate this

approach. As I have said for some time, case coverage and procedure support differentiates CSI from other

companies and is a key success factor as we strive to grow our business and increase the adoption of orbital

atherectomy. This bolus of customer support continues to gain momentum and early results indicate that they are

having a positive impact on sales productivity. However, as we gain more experience with the use of clinical

specialists, we recognize that it may take three to four quarters for a new clinical specialist to reach full

productivity.

As a result, we anticipate attractive sequential quarterly revenue growth throughout the back half of fiscal 2018 as

these clinical specialists mature in their respective territories. So, I am pleased that we are gaining traction on

many of the key initiatives that we implemented to restore growth in the coronary and peripheral franchises. We

are also keenly focused on building the strength of our leadership team here at CSI.

So before we discuss the financial results in more detail, I would like to comment on some recent organizational

changes. In November, Dr. Ryan Egeland joined our senior leadership team as our Vice President of Medical

Affairs. Dr. Egeland has extensive medical technical and business leadership experience. He joins us from

Covidien and Medtronic where we held positions in business development, medical and scientific affairs. Dr.

Egeland will lead our global medical education function and he will drive strategies throughout our company to





improve the quality of care for our patients. Ryan has an MD from Harvard and a Ph.D. and MBA from the

University of Oxford where he was a Rhodes Scholar.

In January, we announced that Rhonda Robb was appointed to become our new Chief Operating Officer. Rhonda

joined CSI following a highly successful 30-year career with Medtronic where she was most recently the Vice

President and General Manager of the Heart Valve Therapies Business which included the transcatheter valve

business.

Many of you on the call today know that Rhonda has significant experience in leading and scaling complex, high

growth med tech businesses. She is a dynamic and customer-focused executive with a strong track record of

successfully driving commercial execution, developing new markets and building product portfolios that improved

– have improved the quality of care for patients with cardiovascular disease.

Rhonda has the ability and experience to guide the expansion of our company and I look forward to partnering

with her as we continue to build CSI's leadership positions. During my tenure at Medtronic, I had the opportunity

to work with Rhonda, and I know that she is highly motivated to deliver on our CSI mission to save limbs and save

lives every day. She is the ideal fit for CSI as we continue to build this company for growth.

And today, we are also announcing that after 10 years of service as Chief Financial Officer, Larry Betterley has

announced his plans to retire in August of 2018. As part of a plan succession, Jeff Points will lead – will succeed

Larry as our new Chief Financial Officer.

We are very grateful to Larry for his many years of service to our company. Clearly, Larry's leadership has been

fundamental to the success of CSI. He helped develop this company from an early stage start-up to a financially

sound market leader poised for long-term growth and profitability.

So, on behalf of the board of directors, our CSI employees and over 350,000 patients treated with orbital

atherectomy, I want to thank Larry for his dedication to our mission. Effective today, Larry is taking on a new role

as Vice President of Administration. In this newly created role, Larry will serve as an executive leader within the

company and he will assist in the orderly transition of the CFO office.

I would now like to introduce our new Chief Financial Officer, Jeff Points. Many of you have had the opportunity to

meet Jeff and you know that he brings more than 20 years of accounting and finance leadership to our

organization. Jeff has been with CSI for over 10 years, most recently serving as Vice President, Corporate

Controller and Treasurer. He is a proven financial leader within our organization, and we welcome him to the

senior leadership team.

Jeff will now provide details on our Q2 results, as well as our Q3 and fiscal year guidance. Jeff? ......................................................................................................................................................................................................................................................

Jeff Points Chief Financial Officer, Cardiovascular Systems, Inc.

Thank you for the kind introduction, Scott. Good afternoon, everyone. I look forward to working with many of you

going forward.

Second quarter revenue was $52.6 million, represented a 5% increase compared to last year and a 6%

sequential increase compared to first quarter. We sold over 16,000 devices during the quarter, generated 92% of

revenues. Peripheral revenues increased 6% of $39.2 million. Coronary revenue increased 3% to $13.4 million.

Below the knee product mix was about 58% of peripheral revenue. Reorder revenues were 98% of total revenue.





Gross profit margin was 81.9% in the quarter compared to 81.7% last year, driven by unit cost reductions.

Operating expenses of $43.4 million increased $3.6 million or about 9%. Operating expenses were lower than

guidance primarily due to lower incentive compensation and lower payroll expenses.

Second quarter net loss of $0.4 million or $0.01 per share was favorable to the guidance range. Adjusted EBITDA

remain positive at $3.4 million. At quarter end, our cash balance was strong at $107 million, an increase of

approximately $2.6 million during the quarter.

I will now discuss our financial outlook. Looking at Q3, we do anticipate continued improvement in sales rep

productivity albeit at a lower level than we initially forecasted. We expect that Q3 revenues should benefit from the

initial stocking order of approximately $800,000 for the commercial launch in Japan.

To a lesser extent, the recently announced agreements to distribute OrbusNeich coronary angioplasty balloons

and our ZILIENT guidewires will be available to select accounts and are not expected to generate material

revenue in the current quarter. Taking these factors into consideration for the third quarter of fiscal 2018, we

anticipate revenues in the range of $55 million to $56.5 million, representing year-over-year growth of 5% to 8%;

gross margin of about 81%, operating expenses of $45.5 million and net loss in the range of $0.9 million to

breakeven. This equates to a loss per share of $0.03 to $0.00 based on approximately 33.2 million average

shares outstanding.

Also, adjusted EBITDA is expected to remain positive in the third quarter. For the full year, we now forecast fiscal

year 2018 revenue to be in the range of $215 million to $219 million. Although we are pleased with our growth in

Q2 and our revenue is within the guidance range, we did not achieve the growth acceleration in our base

business that was required to overcome the slow start we experienced in Q1.

Absent to our Q1 results, the quarterly trajectory of our revenue growth remains consistent with our original

expectations. It's just pushed out by about one quarter. We now believe the sequential revenue growth of

approximately 5% to 7% is reasonable during the back half of fiscal 2018.

In addition to improve sales rep productivity in the second half of the year, we expect approximately $1.7 million in

revenue from the Japan launch and about $0.5 million from the limited market release of the procedure support

products.

I'll now turn the call back to Scott for additional commentary. ......................................................................................................................................................................................................................................................


Thank you, Jeff. Although we have tempered our guidance for the full year, CSI is a stable company and there are

several important catalysts that will drive growth in the months ahead. We are forecasting attractive sequential

revenue growth in Q3 and Q4 due to improving sales productivity and limited market release of procedure support

products and our commercial launch in Japan. The primary driver of revenue growth in the back half of the year

will come from higher sales productivity in our coronary and peripheral franchises.

In coronary, we will leverage our dedicated coronary sales representatives and our clinical specialists to focus on

large, high volume accounts. With increased selling time, we expect new account growth and increased case

coverage should translate into stronger growth at our current coronary accounts. I should also note that we





continue to achieve our key milestones for the ECLIPSE clinical trial, and we currently have 155 patients and 55

sites enrolled in the study.

In our peripheral business, we will also focus our clinical specialists on increasing case coverage at high volume

accounts, and we will begin to increase our focus on the OBL segment of the market. As I described last quarter,

the OBL market continues to grow at a rapid pace. We are transforming our business model to meet the needs of

this side of service and to increase our penetration of the OBL market segment. As you know, we are broadening

our product offering and we have increased case coverage to support physicians that are performing more

complex cases.

In addition, we are adjusting our inventory management practices and securing long-term supply contracts with

high volume centers. So, even though productivity improvements in the peripheral in- hospital and coronary

segments of our business still have the largest influence on our performance, the OBL segment of our market has

become an important area of focus for our business, and we will keep you updated on our progress with these

initiatives.

Adding new products to support orbital atherectomy procedures will also be a key component of improved sales

productivity. We intend to build on our market-leading position in atherectomy by offering physicians high quality

products that complement their use of our core technology in coronary and peripheral interventions. Our recently

announced balloon and peripheral guidewire offering are the first step in this direction and we are excited about

the impact these products will have on our procedures.

As many as four or five of these support devices can be used during our procedures, so offering these products to

our customers represents a meaningful opportunity to increase our level of service and the revenue we receive

per procedure.

We recently announced that CSI is now the exclusive U.S. distributor of OrbusNeich coronary and peripheral

angioplasty balloons. Over the years, physicians in Asia and Europe have come to rely on the differentiated

design, quality and performance of these balloons.

This has earned OrbusNeich leading market share positions in these geographic markets where competition and

demand for best-in-class balloons is fierce. For example, OrbusNeich is the market leader in the highly

competitive Japanese coronary balloon catheter market and their Sapphire II Pro balloon is the first and only 1.0

millimeter coronary balloon in the market. These very small balloons are uniquely suited to cross very tight

occlusions and improve access to complex coronary lesions.

We anticipate FDA clearance of the Sapphire II Pro balloon during Q3 and we are currently conducting a limited

market release of the other coronary balloons. We anticipate a broader commercial launch in fiscal -- in FY 2019.

CSI has also partnered with Integer Holdings Corporation to produce CSI branded ZILIENT peripheral guidewires.

These guidewires have been designed to provide tip resistance and cross ability to physicians working on

challenging peripheral lesions.

We have recently initiated a limited market release of our ZILIENT peripheral guidewires, and we expect to launch

additional guidewires for coronary and radial peripheral applications in fiscal 2019. We are finding that combining

our orbital atherectomy technology with a full kit of procedure support products may be attractive to our

customers, and we will continue to pursue additional opportunities to broaden our product offering in the future.





Last week, we announced the commercial launch of our business in Japan. And as we have indicated, we expect

about $1.7 million in revenue in the second half of the year, mainly from initial stocking orders. We are working

closely with our distribution partner, Medikit, to ensure the smooth introduction of our Coronary Micro Crown

technology.

Training of physicians and the enrollment of new centers in Japan will require peer-to-peer training and this will

result in a more gradual rate of adoption over time. There are currently six centers using our technology and we

plan to have about 15 onboard by the end of June.

In closing, last year, we demonstrated that we could rightsize our expenses, stabilize the sales force, grow

revenue and solidify our balance sheet. With this solid foundation in place, I began to articulate our intention of

broadening our product offering while expanding the use of orbital atherectomy.

The recent announcements regarding our organization, new products and international expansion are the next

steps in the evolution of CSI and demonstrate that we are building a broader cardiovascular company capable of

delivering strong growth while we improve the quality of care for our patients.

We are unique. For a small cap med tech company, CSI is in an enviable and rare position. Our orbital

atherectomy technology is firmly regarded as the therapy of choice for treating calcified plaque. The patient

populations we serve are large and growing. We have a large clinically-focused sales channel. Our base business

is generating over $200 million in revenue annually. We are essentially cash flow breakeven, with over $100

million in cash on our balance sheet and we have no long-term debt.

Finally, as I have said before, our greatest asset is our people. We have an outstanding team here at CSI and we

look to the future with confidence and a focus on our mission to save limbs and save lives every day. We certainly

appreciate your continued support and interest in CSI and we will now take your questions.

[ph] Crista (00:20:50), could you please repeat the instructions?





QUESTION AND ANSWER SECTION

Operator: Certainly. [Operator Instructions] Your first question comes from the line of Danielle Antalffy with

Leerink Partners. Your line is now open. ......................................................................................................................................................................................................................................................

Danielle J. Antalffy Analyst, Leerink Partners LLC Q Thanks so much. Good afternoon, guys. Thanks for taking the question. ......................................................................................................................................................................................................................................................

Scott R. Ward Chairman, President & Chief Executive Officer, Cardiovascular Systems, Inc. A [ph] Hey, Danielle (00:21:11) ......................................................................................................................................................................................................................................................

Danielle J. Antalffy Analyst, Leerink Partners LLC Q Scott, I just want to get a little bit more color on what got incrementally worse between the callback and I guess, it

was late October and today, that's prompting you to lower guidance. It sounds like you're saying part of it is

pricing in office-based labs. Is there anything else going on that we need to be aware of? Is there anything to do

with sort of the sales force restructuring and disruption that could be happening and what gives you the

confidence that it is going to improve from here? ......................................................................................................................................................................................................................................................

Scott R. Ward Chairman, President & Chief Executive Officer, Cardiovascular Systems, Inc. A Thanks, Danielle. So, first of all, I think that what we have seen is that our -- the acceleration in sales that we

anticipated seeing from the addition of our clinical specialists has not been as fast as we anticipated. When we

put about 45 clinical specialists into the market in our first and second quarter, most of those were hired by the

end of first quarter. We had anticipated that they would come online fairly quickly and accelerate our growth in Q2

and then in Q3 and Q4.

The impact of that team has been slower than we expected. And so, that is principally what has influenced our

forecast for Q3 and Q4. But I really should point out, as Jeff said in his remarks, that we had a very slow start in

Q1. Really, our performance in Q2, Q3 and what we're forecasting for Q3 and Q4 is actually right about on track.

It's just that in our current forecast, what we're saying is that we had poor performance in Q1, and we're now

pushing out what we expected to be strong performance in Q4 out into the future.

So, I think those are really the key factors that are influencing our business at this time. I feel very comfortable

with the nature of our sales structure and our current sales focus. I think we're doing exactly the right thing with

the addition of these clinical specialists. And I believe that our continued focus in coronary will pay dividends with

stronger revenue growth moving forward. So, I continue to have very strong confidence now in the second half

and I think we'll continue to see strong sequential growth quarter-over-quarter as we go forward.

Jeff, did you have anything you want to add to that? ......................................................................................................................................................................................................................................................





Danielle J. Antalffy Analyst, Leerink Partners LLC Q Okay. That's... ......................................................................................................................................................................................................................................................

Jeff Points Chief Financial Officer, Cardiovascular Systems, Inc. A Just to add on to that, Danielle. We had 240 sales professionals in Q1 and really, our guidance really gets back to

that same productivity level by Q4 of 285... ......................................................................................................................................................................................................................................................

Danielle J. Antalffy Analyst, Leerink Partners LLC Q Okay. ......................................................................................................................................................................................................................................................

Jeff Points Chief Financial Officer, Cardiovascular Systems, Inc. A ...professionals -- about [ph] $205,000 (00:24:19) per sales professional. ......................................................................................................................................................................................................................................................

Danielle J. Antalffy Analyst, Leerink Partners LLC Q Okay. That's helpful. And then just a quick follow-up and then if I could throw in a question for Rhonda. So, just on

the clinical sales specialists not ramping as quickly, is there one business that's more affected because you did

have a strong coronary quarter, but it looks like peripheral came in a little bit weaker. And what's going on? Is it

just the trainings taking longer, it's taking them longer to develop [ph] relationships with (00:24:47) the accounts?

Like what's sort of delaying their progress there and do you think you're where you want to be now, today? ......................................................................................................................................................................................................................................................

Scott R. Ward Chairman, President & Chief Executive Officer, Cardiovascular Systems, Inc. A Yeah. I think we really did make a very concerted effort to hire clinical specialists that came right out of cath labs.

So, most of our clinical specialists have deep clinical acumen. We are seeing that it just takes time for them to

develop relationships to get into these accounts. And it takes time for the availability of that clinical specialist to do

case coverage to actually then drive increased volume at an account. So, that is -- we're kind of learning as we go

here for this particular business. I think historically in med tech where we know we have high volume accounts,

we know that adding clinical specialists can allow us to drive growth of that account while freeing up our sales rep

to go spend time opening up new accounts or spending time training and educating other physicians at current

accounts.

So, this is a tried and true strategy. What don't know at CSI is just how long will it take for these clinical specialists

to get up to full productivity. And quite honestly, we expected that that could happen very quickly but we're finding

that it's just – it's going to take some time. And I do think that we'll see sequential growth quarter-over-quarter

because of the addition of these specialists, but it's just going to happen a little bit more slowly than what we

anticipated. ......................................................................................................................................................................................................................................................

Danielle J. Antalffy Analyst, Leerink Partners LLC Q Okay. That's fair. And then – oh, sorry. Go ahead. ......................................................................................................................................................................................................................................................





Scott R. Ward Chairman, President & Chief Executive Officer, Cardiovascular Systems, Inc. A Did you have a – did I answer – did you have another question in that? I don't recall. ......................................................................................................................................................................................................................................................

Danielle J. Antalffy Analyst, Leerink Partners LLC Q I think – no. I think you covered it. And then... ......................................................................................................................................................................................................................................................

Scott R. Ward Chairman, President & Chief Executive Officer, Cardiovascular Systems, Inc. A Okay. ......................................................................................................................................................................................................................................................

Danielle J. Antalffy Analyst, Leerink Partners LLC Q I just wanted to say, well, first of all, Jeff, congrats on the promotion and then also Rhonda. So excited to be able

to keep working with you and I was just wondering if I could ask you what you saw in CSI that brought you to this

from what was a very big job at Medtronic as well. So, anything you can say there. ......................................................................................................................................................................................................................................................

Rhonda Robb Chief Operating Officer, Cardiovascular Systems, Inc. A Thanks, Danielle and I'm excited to keep working with you as well. And I think as I talked to Scott about the role in

CSI, I just saw this was a very unique and distinct opportunity. And the team has laid out a very compelling

strategic plan and vision for the future that I thought was very exciting. There is tremendous opportunity for growth

here through the building of this company and that was a key reason.

And just more, I guess, down to basics, I came from a company that was a very mission-driven company and I

think you know that through your work with Medtronic, and what really impressed me is that CSI is also an

incredibly mission and patient-focused company and that was really important to me. And there's just an

incredibly strong leadership team and employee base here that I really saw myself being a part of. So, those were

the key drivers and excited to have my feet on the ground here and get started. ......................................................................................................................................................................................................................................................

Danielle J. Antalffy Analyst, Leerink Partners LLC Q All right. Thanks, guys. ......................................................................................................................................................................................................................................................

Scott R. Ward Chairman, President & Chief Executive Officer, Cardiovascular Systems, Inc. A Thanks, Danielle. ......................................................................................................................................................................................................................................................

Operator: The next question comes from the line of Margaret Kaczor with William Blair. Your line is now open. ......................................................................................................................................................................................................................................................

Margaret M. Kaczor Analyst, William Blair & Co. LLC Q Hey. Good afternoon, guys. Thanks for taking the questions. ......................................................................................................................................................................................................................................................





Scott R. Ward Chairman, President & Chief Executive Officer, Cardiovascular Systems, Inc. A [ph] Hi. Sure. (00:28:11) ......................................................................................................................................................................................................................................................

Margaret M. Kaczor Analyst, William Blair & Co. LLC Q First of all for me, I was hoping to dig down deeper into the office- based lab sales. Can you give us any more

color in terms of what caused that shortfall? Was it, in fact, share, was it underlying demand in the space, was it

hurricanes, pricing, did your contracts expire? Anything in addition beyond what you said on the comments

earlier. ......................................................................................................................................................................................................................................................

Scott R. Ward Chairman, President & Chief Executive Officer, Cardiovascular Systems, Inc. A Thanks for that. One thing I could tell you most certainly is it was not hurricanes, weather or any other extraneous

factors. I think as I said in my commentary, our OBL, the unit volume in the OBL segment of our peripheral

business actually grew 7%. So, we had strong unit volume growth there, but we do see significant pricing

pressure in that particular segment and we had about a 7% reduction in ASP and as a result, revenue was flat.

So, our OBL business is strong. We're -- right now, only about 25% of our peripheral business is in OBLs. And we

have an opportunity to grow our -- that segment and to play a larger role in the OBLs. We're going to try to do

that. As I said in my remarks, by engaging a lot of these larger – the higher volume OBLs with long-term contracts

and with increased case coverage and support. So, I – we feel pretty good that we've got some good strategies in

place to continue to access the OBLs and we're optimistic about our position there in the future. ......................................................................................................................................................................................................................................................

Margaret M. Kaczor Analyst, William Blair & Co. LLC Q Got it. And then, Rhonda, since you're on the phone, I'll follow-up with you as well. In terms of kind of your target

where you're going to be spending your time over the next six, 12, 18 months, do you have anything in place yet?

Is it sales structures or referral networks, market development coronary peripheral? What do you see as the

largest opportunity? I mean, one of the first things you'll focus [ph] on (00:30:23)? ......................................................................................................................................................................................................................................................

Rhonda Robb Chief Operating Officer, Cardiovascular Systems, Inc. A Yeah. I mean – so, I'm in week number two. And so, I'm spending a lot of time just learning the business in the

company, but clearly diving into the opportunity we have in front of us in Q3 and Q4 sales execution, ensuring that

this large and clinically-focused sales channel continues to grow and develop and get up to speed; that

executional component is really a top priority. ......................................................................................................................................................................................................................................................

Margaret M. Kaczor Analyst, William Blair & Co. LLC Q Okay. Helpful. And then in terms of -- I'll sneak one more in, but in terms of the Japanese reimbursement approval

on the top line, how do you guys expect to go through a hospital -- the hospital approval process? Is it hospital by

hospital or can you ramp up a little bit faster? And then on the bottom line, what was the reimbursement impacts

and how does that affect your gross margins going out further? Thanks. ......................................................................................................................................................................................................................................................





Scott R. Ward Chairman, President & Chief Executive Officer, Cardiovascular Systems, Inc. A That will be question on the Japan centers. It is peer-to-peer training, hospital to hospital there. And so, they're

really – we really cannot influence that. We currently have about six accounts that are trained and what we'll see

is kind of these geometric expansion as we leverage Professor Saito in Japan. He will begin training and

educating other physicians. He'll train the trainers. Those physicians will then train additional accounts. And we'll

see that kind of geometric expansion, but because sales reps are not allowed in cath labs in Japan, we're really

subject to this peer-to-peer training model, and as a result, we'll be expanding kind of hospital to hospital over

time.

The reimbursement rate that we received was roughly $2,000 and if you want to comment on the impact of that? ......................................................................................................................................................................................................................................................

Jeff Points Chief Financial Officer, Cardiovascular Systems, Inc. A Yeah. So, our price, Margaret, to selling these devices to Medikit is around $1,000. To follow-up on your question

on gross margin, we don't expect a significant effect. It's about a 50/50 transfer price but because it's a controlled

launch, the – it ought to be a slower growth item that won't affect margins significantly in the first 12 months. ......................................................................................................................................................................................................................................................

Margaret M. Kaczor Analyst, William Blair & Co. LLC Q Thanks, guys. ......................................................................................................................................................................................................................................................

Scott R. Ward Chairman, President & Chief Executive Officer, Cardiovascular Systems, Inc. A Okay. Thanks. ......................................................................................................................................................................................................................................................

Operator: Your next question comes from the line of Brooks O'Neil with Lake Street Capital Market. Your line is

now open. ......................................................................................................................................................................................................................................................

Brooks O'Neil Analyst, Lake Street Capital Markets LLC Q Good afternoon, everyone. ......................................................................................................................................................................................................................................................

Scott R. Ward Chairman, President & Chief Executive Officer, Cardiovascular Systems, Inc. A [ph] Good afternoon. (00:32:54) ......................................................................................................................................................................................................................................................

Brooks O'Neil Analyst, Lake Street Capital Markets LLC Q Scott, I was hoping you might just amplify a little bit on what you're seeing in the overall markets you're

addressing and competitively, whether there is any changes going on out there. And, I guess, coming straight to

the chase, is 3% growth in the coronary side of the business sort of what we should expect over time or is there

more juice in that orange? ......................................................................................................................................................................................................................................................





Scott R. Ward Chairman, President & Chief Executive Officer, Cardiovascular Systems, Inc. A All right. So, let's start with the market. We continue to – obviously operate in a high growth marketplace. The –

with the continuing crises that we're seeing with obesity and metabolic diseases, diabetes and other things, there

is an epidemic looming of complex coronary and peripheral arterial disease. And we're very well-positioned to

take advantage of that and to be an important player in improving the quality of care for these patients.

Now, I do think that we have seen some changes in the competitive marketplace. Certainly, there's been some

consolidation. Philips having acquired Spectranetics last August obviously brought yet another large company into

our sphere. We compete against large, well-established companies: Medtronic, Philips, Boston Scientific, these

are amongst the top names in medical technology, and they have large and well-established distribution channels

and they have capacity.

We compete against them because we have the best core technology, we have the strongest medical evidence in

the market, and we have the best distribution channel. So, the nature of our competition really hasn't changed.

We continue to compete because we just have the best solution for the treatment of calcified coronary and

peripheral arterial disease.

As we look at coronary, no, I don't think we're not at all satisfied with 3% growth year-over-year and I would

expect to see that continue to grow going forward. The coronary business historically has grown

as you know much more quickly than that. I was really pleased to see that we had a very strong rebound quarter-

over-quarter. So, we had almost what was 17% growth from Q1 to Q2. So, we saw some nice rebound there.

We have seen, although it's early, we've seen improved performance now from our focused coronary channel.

We do expect and we're seeing ECLIPSE continuing to have a positive impact in coronary with now 55 sites

enrolled in that study. It is achieving our goal of getting out into the market and conducting a really meaningful and

clinically relevant clinical trial that will fundamentally change the practice of medicine going forward.

And I think we're seeing increasing interest from interventional cardiologists as the amount of evidence that we

have available continues to increase. A lot of this is focused on the treatment of these complex, high risk indicated

patients or what [ph] Evia Med (00:36:38) calls [ph] CHIP (00:36:41) patients. We participate in that exact same

marketplace in coronary. And unfortunately, this is a patient population that continues to grow and the utilization

of our technology to treat patients that have calcified and sometimes multi-vessel disease is really an important

technology for these physicians to use. So, hopefully, that addresses your question, Brooks. I think I covered all

the topics.

So, in summary, in quick summary, still is a little bit of juice in that orange. ......................................................................................................................................................................................................................................................

Brooks O'Neil Analyst, Lake Street Capital Markets LLC Q That's good. I appreciate that. ......................................................................................................................................................................................................................................................

Scott R. Ward Chairman, President & Chief Executive Officer, Cardiovascular Systems, Inc. A And a lot of juice, yeah. ......................................................................................................................................................................................................................................................





Brooks O'Neil Analyst, Lake Street Capital Markets LLC Q That's good. I notice that... ......................................................................................................................................................................................................................................................

Scott R. Ward Chairman, President & Chief Executive Officer, Cardiovascular Systems, Inc. A Yes. ......................................................................................................................................................................................................................................................

Brooks O'Neil Analyst, Lake Street Capital Markets LLC Q ...spending on R&D is creeping up as you have indicated it would. And I'm just curious. I'm sure you're not willing

to talk a lot about what you're working on there, but is it more of a focus on improving your existing products or

are you thinking about opportunities to get into some new products? ......................................................................................................................................................................................................................................................

Scott R. Ward Chairman, President & Chief Executive Officer, Cardiovascular Systems, Inc. A Yeah. So, R&D is ramping up and for a few reasons, and you've captured most of them. But first, it – we do see

increasing R&D expense related to the execution of the ECLIPSE clinical trial. So, as patient enrollment continues

to accelerate there, obviously, the spending in clinical will also ramp concurrent with that.

We are investing, as we have been for some time, in product line extensions in our orbital atherectomy systems,

continuing to improve our orbital atherectomy system as well as continuing to expand its use, its usefulness and

to improve its ease of use. So, I think what we -- you can see us continuing to do that.

And then we are also making investments in our inorganic R&D now to broaden our product offering and to

expand our business going forward in the future. Some of that you are seeing already with the launch of, for

example, our ZILIENT peripheral guidewires. And then, of course, in a distribution agreement which doesn't

impact our R&D. But in the distribution agreement, we'll be bringing forward the balloon angioplasty catheters

from OrbusNeich.

So, we're very excited about that. That's the first expansion of our product offering. And I think with organic R&D

and other activities, we'll continue to expand that going forward. ......................................................................................................................................................................................................................................................

Brooks O'Neil Analyst, Lake Street Capital Markets LLC Q It's great. Just one more. Obviously, excited about the opportunity in Japan and I know we're right at the cusp of

getting that going. Would you comment at all about opportunities in other international markets? ......................................................................................................................................................................................................................................................

Scott R. Ward Chairman, President & Chief Executive Officer, Cardiovascular Systems, Inc. A Well, we do. Of Japan, as I've said before, Japan is our first international market. It's a great market for us. We're

very well-positioned there because the Japanese physicians, interventional cardiologists, use a lot more IVIS,

they use a lot more imaging. They're much more discerning in vessel preparation. The utilization of orbital

atherectomy is very consistent with their care model. So, we'll focus on that and really try to take advantage of

that here in the near term.





But the other important aspect of Japan is now that we have a international revenue stream coming into our

company, that will give us the opportunity to leverage the resources coming from Japan to build the infrastructure

that's necessary to expand globally.

And certainly, as we look forward, we will -- we do intend to expand our business, to take CSI global and we're

just now in the process of defining where we're going to go next. But certainly, we're focused on Japan for now

and we'll keep you informed as we develop additional plans for other geographic expansion. ......................................................................................................................................................................................................................................................

Brooks O'Neil Analyst, Lake Street Capital Markets LLC Q Perfect. Thank you very much. ......................................................................................................................................................................................................................................................

Scott R. Ward Chairman, President & Chief Executive Officer, Cardiovascular Systems, Inc. A [ph] Thanks, Brooks. (00:40:54) ......................................................................................................................................................................................................................................................

Operator: And your next question comes from the line of Bob Hopkins with Bank of America. Your line is now

open. ......................................................................................................................................................................................................................................................

Bob Hopkins Analyst, Bank of America Merrill Lynch Q Well, thanks very much and thanks for taking the question. And I guess congratulations to everybody. A lot of

changes announced in this call. But, again, I appreciate the chance to talk here for a quick second. I just wanted

to hit a few things, Scott, if okay.

First, I just wanted to clarify what I heard on the guidance for this year in terms of both Japan and the guidewires

and balloon catheters. Did you say you expect total revenue to be about $1.7 million from Japan and about a $0.5

million from the guidewires and balloon catheters? Did I hear that correctly? ......................................................................................................................................................................................................................................................

Scott R. Ward Chairman, President & Chief Executive Officer, Cardiovascular Systems, Inc. A Yes. That's correct. Yeah. ......................................................................................................................................................................................................................................................

Bob Hopkins Analyst, Bank of America Merrill Lynch Q And then what percentage of that is did you say was stocking? ......................................................................................................................................................................................................................................................

Scott R. Ward Chairman, President & Chief Executive Officer, Cardiovascular Systems, Inc. A For Japan, the majority of that is stocking, is initial stocking orders in Japan. ......................................................................................................................................................................................................................................................

Bob Hopkins Analyst, Bank of America Merrill Lynch Q Okay. Is there is a reason why there wouldn't be much procedure revenue? I mean, you're only halfway through

the year and are launching. Is that just conservatism on your part or... ......................................................................................................................................................................................................................................................





Scott R. Ward Chairman, President & Chief Executive Officer, Cardiovascular Systems, Inc. A Yeah. We're launching it -- I think, Bob, as I said, I mean, we're somewhat limited in our launch because it's peer-

to-peer training. We'll start with six accounts. We expect that by the time we get to June, we'll have about 15

accounts up and running, but as I had indicated, this is kind of a geometric expansion model in the sense that

we'll start with the physicians that participated in our COAST clinical trial who have been trained on the utility of

this technology. They then will train the trainer who will train the trainer who will train the trainer. So, there is a

kind of a geometric expansion that will result in perhaps a more gradual growth over time. I do expect that as we

head into our FY 2019, we should see nice growth coming out of our Japan business. ......................................................................................................................................................................................................................................................

Bob Hopkins Analyst, Bank of America Merrill Lynch Q Okay. Just want to make sure I get the numbers right. And then one other topic I wanted to hit was just on the

price declines in the OBL business. I think I understand that dynamic and you laid out the percentages nicely, but

could you just talk to like why we shouldn't be a little bit nervous about maybe about more price pressure in the

other 75% of the business? Why you're not seeing the price pressure there and just what gives us conviction that

we won't see incremental pressure there? ......................................................................................................................................................................................................................................................

Scott R. Ward Chairman, President & Chief Executive Officer, Cardiovascular Systems, Inc. A Well, we have projected about that we do expect to see price erosion over time and we had typically said that we

expect price reduction to be in that 1% -- I'm sorry, overall to be in range of the low single-digits for pricing.

Now, we have historically as you know over the past three or four years, we've performed much better than that.

But I think we will see a continued price erosion in our core markets. As I said, it probably will be in that low to mid

single-digit range. Now, we've said that before and it hasn't materialized, but we do expect that we can see that.

Now, if we look at the pricing differential between in-hospital peripheral and the OBL market, it's kind of important

to consider the types of patients that are treated in OBLs. The patients that are treated in hospital oftentimes are

more complex patients, they have comorbidities and they have other challenges that will cause them to be treated

in an environment where there's backup. A lot of these office-based labs are physician-owned. Cost containment

is really a core focus for them in these practice settings. The resources that are available to them, they are limited

in comparison to hospitals. I mean, for example, office-based labs really would lack surgical backup. And so, the

types of patients, that influences their patient selection.

Now, we do expect that over time, office-based labs, the types of patients that they treat, will evolve towards

perhaps more complex cases. And we want to partner with them and train and educate them on really how to use

our technology and also on how to treat these more complex cases. So, in kind of quick summary, on the one

hand in peripheral, you've got an environment where you're known to be treating more complex cases with

important comorbidities. In the OBL segment, generally, at least up until now, patients that have been treated

there, let's say, are not as severe and are perhaps more traditional in the sense of their peripheral lesions.

And as a result, that's what drives the pricing pressure, I think, or the differential on pricing pressure between

those two segments. ......................................................................................................................................................................................................................................................

Bob Hopkins Analyst, Bank of America Merrill Lynch Q





That's very helpful, Scott. Thank you. And then lastly, I just wanted to get your kind of updated views on coronary.

And I know you've talked about it on the call a little bit already but that business had a nice growth spurt and now,

it's been kind of a little bit stuck in sort of the call it $11.5 million to $13.5 million range. So, what would you point

to that would help give us some conviction that you could see – that we'll see better growth ahead? Like what

gives you that conviction and when do you think that happens? Just trying to get a sense for what the real drivers

are of incremental growth of coronary from here in light of the slowdown we've seen. ......................................................................................................................................................................................................................................................

Scott R. Ward Chairman, President & Chief Executive Officer, Cardiovascular Systems, Inc. A Yeah. Bob, as I've kind of said over the course of the past couple of quarters, I think it's mainly focus. And so, by

having these roughly 20 now dedicated coronary reps, I think we'll get much more consistent and stable growth in

our coronary business. And by then feathering in these really well-trained clinical specialists in our high volume

accounts, we'll be well-positioned to take advantage of the opportunity that's there.

There is no doubt that this marketplace, these patients that have highly calcified and complex coronary lesions,

that particular market is growing very quickly, and we're well-positioned to take advantage of that. We have to be

focused, we've got to have that clinical support, case coverage is important and so, as a result, continuing to

partner really closely with these physicians who are now dedicating their practices to treating these more complex

patients really is the key, I think, to driving growth.

We also, over time, will see the continued benefit of our ECLIPSE clinical trial and we'll be continuing to roll new

products into that coronary segment. We've talked about the 1.0 millimeter balloon coming from OrbusNeich and

some other products that I think can really make a difference in improving the quality of care for these patients.

So, we're dedicated to that particular group and I think just having a real focus on it will make a difference here. ......................................................................................................................................................................................................................................................

Bob Hopkins Analyst, Bank of America Merrill Lynch Q Great. Thanks very much for taking the questions. ......................................................................................................................................................................................................................................................

Scott R. Ward Chairman, President & Chief Executive Officer, Cardiovascular Systems, Inc. A Thanks, Bob. ......................................................................................................................................................................................................................................................

Operator: Your next question comes from the line of Mike Matson with Needham & Company. Your line is now

open. ......................................................................................................................................................................................................................................................

Mike Matson Analyst, Needham & Co. LLC Q Hi. Thanks for taking my questions. I guess, Scott, I just wanted to start with the hiring of Rhonda. Rhonda,

congratulations, by the way.

So, I know when you originally stepped in as interim CEO you went through a CEO search and you ended up

taking that role, taking the permanent role, but I guess what I'm wondering is the plan here really to have Rhonda

take over as CEO within a certain timeframe? Is that the succession plan? ......................................................................................................................................................................................................................................................





Scott R. Ward Chairman, President & Chief Executive Officer, Cardiovascular Systems, Inc. A Well, hey, wait a minute. I'm still kind of a young guy, so let's not move too quickly on this. How long you've been

here? Two weeks, so far? ......................................................................................................................................................................................................................................................

Rhonda Robb Chief Operating Officer, Cardiovascular Systems, Inc. A Not even. ......................................................................................................................................................................................................................................................

Scott R. Ward Chairman, President & Chief Executive Officer, Cardiovascular Systems, Inc. A Not even. So, no, no, no. That isn't the case. I think as you may have seen, Kevin Kenny, who was our Chief

Operating Officer until the end of November, left the organization at that time by -- for various reasons. And

Rhonda now comes in as our new Chief Operating Officer and really fills that very same role.

I think what's critically important to me, as I've said, is that Rhonda has deep commercial experience, she knows

how to operate a business that's larger than this. And frankly, Rhonda and I have partnered together in the past to

drive growth businesses. We worked together in Medtronic Coronary where we launched our drug-eluting stent

business. And then, of course, when I was running the Cardiovascular business and we had completed the

acquisition of CoreValve, I brought Rhonda on there to lead the transcatheter valve business at the time.

And so, we have partnered closely together in the past to scale businesses, to drive growth and really to create

innovative powerhouses that I think you can tell have really made – have been a real success in med tech. So, we

look forward to doing that again, and I kind of plan to be around here for a little while as long as you'll have me. ......................................................................................................................................................................................................................................................

Mike Matson Analyst, Needham & Co. LLC Q Okay, I understand. And then... ......................................................................................................................................................................................................................................................


Mike Matson Analyst, Needham & Co. LLC Q ... I know you had a FDA clearance for your radial peripheral device. So... ......................................................................................................................................................................................................................................................


Mike Matson Analyst, Needham & Co. LLC Q





I know when I had spoken with you about that, it was kind of on hold, pending some radial products being

launched by another company, some access products I guess. So, can you give us an update on that and is that

something that you think has potential to drive the peripheral business at all? ......................................................................................................................................................................................................................................................

Scott R. Ward Chairman, President & Chief Executive Officer, Cardiovascular Systems, Inc. A Yeah. First, thanks for that question, Mike. And certainly, the use of the radial side of access in our peripheral

business is going to be an important growth driver coming forward. And you are right. We have been waiting for

some of the other commercial partners to complete the development and launch of the guidewires and catheters

and other support products that are necessary to facilitate radial access for peripheral procedures, in particular, at

the SFA level, as you can imagine this very simply. These all have to be smaller but also very much longer. So,

we're right on the cusp now of launching that and I think that you can expect to see our peripheral radial launch

coming soon. ......................................................................................................................................................................................................................................................

Mike Matson Analyst, Needham & Co. LLC Q Okay, thanks. Just one more on the OBLs. So, just out of curiosity, if they have a patient with calcified lesion,

they're not using Diamondback that's because of cost reasons or whatnot, I mean, did they just not do an

atherectomy or are they using a competitor's product like ROTABLATOR or something? ......................................................................................................................................................................................................................................................

Scott R. Ward Chairman, President & Chief Executive Officer, Cardiovascular Systems, Inc. A No. They're using -- like I said, about 25% of our peripheral business currently is in the OBL, and the OBLs do use

Diamondback for the treatment of severely calcified lesions.

I think the point I was trying to make when I was addressing Bob's question is that because of the nature of these

office-based labs, because they don't have surgical backup, oftentimes, they wind up treating patients that are

perhaps not quite as severe and as a result, the prevalence of severely calcified lesions in OBLs has historically

been lower. Now, that -- we're seeing that evolve and change, and we may see that increase over time. So, it's

more the nature of patient selection criteria at the OBL level than it is the – their selection of products. I think

when severe calcium is present, physicians know to use Diamondback. ......................................................................................................................................................................................................................................................

Mike Matson Analyst, Needham & Co. LLC Q All right. Thanks a lot. ......................................................................................................................................................................................................................................................

Scott R. Ward Chairman, President & Chief Executive Officer, Cardiovascular Systems, Inc. A Thank you. ......................................................................................................................................................................................................................................................

A

Thank you. ......................................................................................................................................................................................................................................................

Operator: And your final question comes from the line of Jayson Bedford with Raymond James. Your line is now

open.





Jayson T. Bedford Analyst, Raymond James & Associates, Inc. Q Good afternoon and thanks for squeezing me in here. Just a couple of questions. I guess in terms of the number

of new customers added in the quarter was lower than our estimate and I think it's the lowest it's been in quite

some time. So, I'm just wondering is this a reflection of reps trying to dig deeper into accounts or is this, I hate to

suggest it, but is this a sign of market saturation? And I'd love your thoughts in terms of new customer adds going

forward. ......................................................................................................................................................................................................................................................

Scott R. Ward Chairman, President & Chief Executive Officer, Cardiovascular Systems, Inc. A Okay. So, a great – great question and I want to point to two things. I mean, first of all, recall that in peripheral, we

have a lot of accounts. So, our new account activity there generally isn't that great.

The second thing [ph] that but coronary it is, (00:54:25) the second thing I'll point out is and hopefully, this is more

of a personal problem or selfish on my part but hopefully, this is one of the last times I'll refer to our recall from last

summer. But when we initiated that recall in Q4 of last year and Q1 of this year, we had indicated that recall

because we didn't have pumps available, created a gap in our new account pipeline. We did not have pumps to

bring on new accounts as we – as new accounts became available, we shipped new accounts or we shipped our

pumps to our current accounts and we did not bring on that many new accounts. So, there was a gap in our

pipeline for new accounts.

Now, remember that we count a new account – we call a new account a center that has now used greater than

six units. So, that means that if accounts haven't used any yet, we bring them on, we ship them a pump. We have

to train them, educate them, bring them onboard and then when they get to six, we count them in this accounting

as a new account. So, there's a gap in our new account pipeline and that did influence our performance in Q2.

We're working harder to make sure that we address that going forward. ......................................................................................................................................................................................................................................................

Jeff Points Chief Financial Officer, Cardiovascular Systems, Inc. A Yeah. Jayson, just to add to that, we've always talked about 30 to 40 accounts being reasonable and that would

be a reasonable expectation moving forward. We are focused on driving adoption in our existing accounts as well.

So, just to follow-up on that. ......................................................................................................................................................................................................................................................

Jayson T. Bedford Analyst, Raymond James & Associates, Inc. Q Okay and just to be clear, that's 30 to 40 in peripheral and coronary? ......................................................................................................................................................................................................................................................

Jeff Points Chief Financial Officer, Cardiovascular Systems, Inc. A Yes. ......................................................................................................................................................................................................................................................

Jayson T. Bedford Analyst, Raymond James & Associates, Inc. Q Yeah. Okay. Can I [ph] apologize? Sorry (00:56:19)... ......................................................................................................................................................................................................................................................





Scott R. Ward Chairman, President & Chief Executive Officer, Cardiovascular Systems, Inc. A And I think, just to – sorry, Jayson, just one final comment on that. I mean, really, as we've said on numerous

occasions, we really do drive growth from our current accounts. I mean, the real opportunity here is to go deeper

in our current accounts where we have the opportunity to train and educate more physicians at our current

accounts on how to use our technology and increase the adoption of our technology for both coronary and

peripheral procedures. So, that continues to be our focus. ......................................................................................................................................................................................................................................................

Jeff Points Chief Financial Officer, Cardiovascular Systems, Inc. A And our reorder revenue remains at 98%, which it has been in previous quarters as well. ......................................................................................................................................................................................................................................................

Jayson T. Bedford Analyst, Raymond James & Associates, Inc. Q Right. Okay that's helpful. You may have mentioned it, but in the quarter, did you see better growth from those

centers on the coronary side, from those centers who are being serviced by the dedicated coronary reps? ......................................................................................................................................................................................................................................................

Scott R. Ward Chairman, President & Chief Executive Officer, Cardiovascular Systems, Inc. A Yeah. Well, we did see strong growth from that group. We've seen improved growth there. And that group of reps,

that group of 20, really roughly 20, are really focused on large accounts. And as I've described before, what's

happening in the marketplace in coronary is we're seeing this concentration now of patients, where patients are

aggregating at these more specialized accounts who are focused on treating complex coronary lesions.

Drug-eluting stents have become so good and so easy to use that community hospitals and let's say, the broader

health care community, can be very effective at placing these products. But when a patient shows up that has a

more complex coronary lesion or has a low ejection fraction or some other comorbidity that makes their case

more complicated, those patients are being referred to almost like tertiary centers now. And so, we're taking this

more focused coronary group of reps and really focusing them on those large accounts. And that's where we're

going to see a real opportunity going forward and in leveraging that focus channel. So, yeah, we did see an uplift

in Q2 and I think we will see sequential growth from that group in Q3 and Q4. ......................................................................................................................................................................................................................................................

Jayson T. Bedford Analyst, Raymond James & Associates, Inc. Q Okay. And just last – just on that topic, did you see any drop-off in peripheral accounts or usage from the

accounts that the coronary reps used to cover? Has there been a disruption there? ......................................................................................................................................................................................................................................................

Scott R. Ward Chairman, President & Chief Executive Officer, Cardiovascular Systems, Inc. A I don't -- I can't answer that quantitatively. I can tell you qualitatively, I really don't think so. We don't see that in

our data. And we -- as I said in our last call, this was more of an evolution than a revolution. I mean, we had

already -- we have always managed, I mean, since I came onboard here, I've always made it possible for our

regional managers to focus their resources in places where they felt they could get the best return on their

investment. And if that meant that they wanted to have a dedicated peripheral rep because they had a particular

peripheral account that was doing $2 million or something, they could do it. If, on the other hand, they had a great





coronary opportunity or they had a few coronary sites that were colocated and they could cover those sites with a

dedicated coronary rep, we allow them to do that.

And over time, we saw that evolve into a larger number of dedicated coronary reps and what we decided to do in

Q1 was just to really take that group and say, all right, now, we're going to go back to having this dedicated focus

in coronary and really begin to target that group at these high volume accounts. So, more of an evolution than a

revolution and as a result, I think our peripheral accounts over time there were adequately covered by our hybrid

sales reps, as well as clinical specialists that were present in those territories. ......................................................................................................................................................................................................................................................

Jeff Points Chief Financial Officer, Cardiovascular Systems, Inc. A And Jayson, just a follow-up on that. I mean, Q1 and Q2 we did see -- we didn't see disruption in the devices per

account on the peripheral side. It was actually flat or we did see an increase in coronary. So, I think the answer to

that would be that it was not a big disruption. ......................................................................................................................................................................................................................................................

Jayson T. Bedford Analyst, Raymond James & Associates, Inc. Q Fair enough. Thank you. ......................................................................................................................................................................................................................................................

Jeff Points Chief Financial Officer, Cardiovascular Systems, Inc. A Thank you. ......................................................................................................................................................................................................................................................

Scott R. Ward Chairman, President & Chief Executive Officer, Cardiovascular Systems, Inc. A [ph] Crista (01:00:59), are there any other questions? ......................................................................................................................................................................................................................................................

Operator: We have no further questions in this queue. I'll turn the call over to Scott. ......................................................................................................................................................................................................................................................


Okay. Thank you very much. Thank you, everyone, for your continued interest in CSI. We look forward to

updating you on our progress in the future and this concludes our conference call for today. Thanks, everyone. ......................................................................................................................................................................................................................................................

Operator: And this concludes today's conference call. You may now disconnect your lines.





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