So we now have established protocols with some good supplier partners. We have quality validation metrics already set up. They’re part of our supply chain, it works well. So it gave us the confidence we can move more things and do more, if we couldn’t get the capacity and cost levels to where we need to be, and over time, we couldn’t. So we had this plan B in our pocket. And as I said earlier, as you see, the bulk of our revenue today in our Med Tech segment comes from suppliers that are partners in our supply chain today. So back to logistics, we’ve got a wind down around each of those product segments that are still manufactured in our sites here and a plan around each of those, to move those to a supplier partner and make sure that the quality operations are ready, the validations and all the regulatory processes are in place.
That’s why we have really a two year window, Jayson, to complete that cycle.
Jayson Bedford: Okay. Just maybe last one for me for now. Cash flow, I think you have had a goal out there, $65 million, $70 million cash exiting the year. Is that still on the table?
Steve Trowbridge: Jayson, it will be a little bit of moving parts when you think about the manufacturing transfer that we just talked about. For example, there’s probably going to be some cash that’s going to move from one spot on the asset of the balance sheet to another spot, right? We’re going to build up a little inventory as we prepare for some of these movements. That being said, as Jim said, this is a plan that we’ve been working on for a very long time. There may be some shifts in the balance sheet, but it’s not going to fundamentally change our expectations of where we’re going to end up.
Jayson Bedford: So – sorry, still $65 million to $70 million or towards the low end?
Steve Trowbridge: I wouldn’t expect it would be a little bit below that. But like I said, I expect that there’s going to be some shifting. I have cash that might move into inventory buildup as we prepare, right? So that will be a little bit less cash, but maybe not terribly different when you think about current assets.
Jayson Bedford: Got it. Okay, thank you.
Operator: Our next question is from the line of Steven Lichtman with Oppenheimer. Please proceed with your question.
Steven Lichtman: Thank you. Good morning, guys. I guess just first, a couple of cleanup questions on the manufacturing shift. What percent of Med Device is outsourced currently? And what anticipated cash costs of the transition should we assume?
Steve Trowbridge: So Steve, with respect to your first question, roughly 20% of the current device portfolio is already made by third-party manufacturing partners. Jim mentioned that we started this process a number of quarters ago as we were building up capacity with our Costa Rica partnership. So we’re going to continue doing that. I think it’s important to understand that this process that we’re talking about is really a continuation of something that was started over the last 24 months or so. Jim talked about it taking the full 24 months. That’s to the point where we can get there and it’s fully outsourced. And the benefit that, that gives us is, as opposed to today, where we have to have a management structure that supports both this hybrid company-owned manufacturing structure as well as managing the outsourced structure.
We’re going to move to 1, which is really going to be one of the fundamental drivers of that $15 million annual savings that we talked about once we can finish this two year process. And then you’re going to see that fully roll into FY ’27. In terms of the investment, there’s going to be investment. That’s something, as Jim said, we’ve been planning for the last nine months. It’s something that is well within our plans. And the payback for these types of procedures are always very good, just what you’d expect to see.
Steven Lichtman: Okay. Got it. So shifting to Auryon. Can you provide some more color on the pre-off headwinds you mentioned? And what you’re seeing on that front, sort of as we went to – as we’ve gone into this fiscal quarter?
Jim Clemmer: Yes. Steve, we did touch upon it in our last – our Q1 call, we touched upon it. We’ve seen it out there. I think one or two other companies in the meantime, I’ve talked about it in more detail than we have. We got a balancing thing here. We’ve got still really strong demand being created by Auryon and how it works and the data is generating and the excitement in the marketplace. We’ve got this cool tailwind of interest in Auryon. I was at our Global Symposium 1.5 months ago overseas, watching new doctors be trained and talk about the capability of Auryon. So we’ve got that cool tailwind of interest. But yes, there is a headwind that’s been created. We’ve seen it in the field. So the pre-authorizations, which have always kind of been a part of the cycle, have tightened up and more players are in on it.
So it has slowed down procedures. We are working with industry groups and our customers to go through that process. We haven’t come out and said it stopped our procedures or slowed them down significantly, but it has made an impact. There’s no doubt. You still saw growth in a strong quarter. We think the quarter would have been stronger and more procedures would have been done without this headwind. We’re doing all we can to work with our customers to minimize it, but it is there.
Steven Lichtman: Thanks Jim. And then I guess just lastly, I don’t think you mentioned anything today about indication expansion for Auryon, including this small vessel the key and potentially coronary. Any update on those?
