Good morning, my name is Larry Pemble and I am pleased to have the opportunity today to introduce you to Chindex International and United Family Healthcare. I will begin with an overview of the company and the background environment for foreign investment in healthcare in China. Then I will walk you through the current operations and strategic growth plans of our two operating divisions. I will conclude with an overview of the financials.
Before we get started I would like to point out that this presentation contains forward looking statements and you should refer to our SEC filings which are available on our website for specific disclosures about risks and uncertainties related to our business.
Chindex International has been recognized as a pioneer in foreign investment in healthcare in China for more than 27 years. We are the leading independent American provider of premium healthcare products and services in China. The company was founded in 1981 and went public on NASDAQ in 1994. We have operated the medical products division – recognized by the corporate logo on the left – since the company’s founding. In the mid-1990’s we established the healthcare services division – recognized by the United Family Healthcare logo on the right. These two brands are well-known in Chinese healthcare markets and represent the company’s commitment to the highest quality in medical technologies and patient care.
Our fiscal year ended on March 31, and in fiscal 2009 we reported $171 million in total revenues which was split between our two operating divisions.
As we continue through the introduction of the company operations, I would like to point out several specific investment highlights: First our current operations show healthy, consistent growth and profitability. Our healthcare services division represents and unprecedented opportunity in a frontier market segment and our established distribution platform is delivering impressive annualized growth. Second, our strategic development plan in both divisions is completely in-line with recent Chinese government policy announcements including the long-term healthcare reform program and near-term economic stimulus package. Third, we have a significant competitive advantage as a result of our first-to-market private hospital network, nationally recognized brands, extraordinary management expertise and – to use the Chinese phrase “guanxi” meaning excellent governmental relationships built over nearly 30 years which greatly facilitate the execution of our strategic plans
According to the numbers, China appears to have weathered the worst of the global economic crisis. Annualized GDP growth in the first half was 7.1%, and it has been accelerating through the year. It rose from 6.1% in the first quarter to 7.9% in the second. The idea that China might actually hit its 8% target for the year seemed outlandish six months ago, but now looks feasible. The 4 trillion yuan stimulus package announced last November has been a big factor in keeping the economy moving. But so too has bank lending, which totaled 7.4 trillion yuan in the first half of 2009. According to some counts, that is more than the bank lending totals of 2007 and 2008 combined. There are risks that this could lead to a rise in NPL rates down the road, which would be unfortunate since China has done much to improve those figures in recent years, which in turn has done a lot to stabilize the banking sector. A greater concern is that growth will fizzle out again as soon as the credit and stimulus taps are shut off. China left itself enough room to do a second round stimulus package if needed, but lending at these rates is probably not sustainable. It is likely that the US and other export markets will not return any time soon to their previous consumption levels of Chinese imports. So if China’s efforts to increase domestic demand are not successful, China could see its recovery go from V-shaped to W-shaped. Over the longer term, there is a potential silver lining for all of this in China. The national leadership has been trying for years to re-balance the economy toward less reliance on export-led growth and fixed asset investment, and more reliance on domestic market demand. It has not seen much success, though, because it has been so easy and so profitable for all these years for China to lend Americans money and then watch them spend it on Chinese goods at Wal-Mart. But the recession and the slowdown in export markets has finally put this portion of the re-balancing effort in motion. Unfortunately, the stimulus and its emphasis on infrastructure has meant that China’s over-reliance on fixed asset investment is being reinforced. This in turn makes it likely that some of the recurring problems in the Chinese economy – such as overcapacity, redundancy, and bubble creation – will remain unaddressed. Also unaddressed is one of the major factors preventing the true unleashing of domestic demand. Lack of substantial health and pension coverage means China continues to save at high rates and is reluctant to spend. Neither infrastructure spending nor bank lending will solve this problem.
The last quarter century of development in Chinese healthcare has served to highlight the problems that exist today – insufficient government investment over time which has helped to create a huge imbalance of resources between the urban and rural populations. There is insufficient healthcare insurance coverage which has left the majority of the Chinese population completely uninsured and the economics of the public hospital system steers profit making to the sale of pharmaceuticals and under the table payments.
We believe these two government policy statements will have several positive impacts on Chindex Most fundamentally – both state the governments focus on continuing to increase investment in healthcare. This will lead to increased equipment procurement over time which we believe will benefit our medical products division. Chinese public hospitals will focus on providing basic medical care across the broad spectrum of Chinese population. This will leave premium services to be addressed by private investment. Finally, the development of commercial insurance products is being encouraged – this is an important component of the Chindex long-term development strategy for the United Family hospital network. In summary, we believe these various factors in the China market – both from the macro economic standpoint and those related specifically to the healthcare industry – provide important support for both our operating divisions.
Let’s turn now to the business. First, the Medical Products Division.
For over 25 years, the medical products division has operated a national marketing, sales and service platform - distributing top-tier medical capital equipment manufactured by many of the worlds leaders in medical device technologies. The division is the largest independent US distributor of medical equipment in China and currently holds exclusive distribution rights to products such as Siemens Medical Systems color ultrasound systems, Hologic mammography systems, J&J clinical chemistry systems and Candela cosmetic lasers. We have recently added 3 new product lines to our portfolio – Vital Images visualization software, Biotest blood banking chemistry systems and Cutera aesthetic lasersystems. The business has an existing installed base of equipment in over 3,000 Chinese hospitals.
We currently have a direct sales force of approximately 180 nationally, 80 field service engineers and a channels distribution management structure which handles over 100 local Chinese sub-dealers. In the mid-1990’s we pioneered the use of government backed financing programs for Chinese hospitals. Today we utilize financing programs from the U.S. Export-Import Bank and the German KfW Development bank.
We have been proud to introduce many new and revolutionary medical technologies into China over the years. We were the first to introduce real-time ultrasound in 1983; in the mid-1980’s we sold the first magnetic resonance scanner ever sold in China …
The most recent chapter in the story is a technology you may be familiar with – the da Vinci robotically assisted surgical system manufactured by Intuitive Surgical. Chindex is the the exclusive distributor for the da Vinci in mainland China and Hong Kong. This amazing minimally invasive technology is fast becoming the standard of care in the U.S. for many urologic, cardiothoracic, gynecologic, and general surgical procedures. We are still in the early stages of product introduction in China and Hong Kong and the reception the product has received has been tremendous. We believe the da Vinci system which has a strong after sales order flow as well, will have a very positive impact on our divisional performance in the years to come and provide the catalyst for additional products in minimally invasive surgery.
We have recently announced three new products which supplement existing technology offerings in imaging, chemistry and aesthetic laser groups. The daVinci system continues to receive tremendous market reception in China. We anticipate an order flow that averages 1-2 systems per quarter. The order flow from our government backed financings is continuing through this year. We have recently announced our most recent KfW contract award. These positive developments have added to our confidence in the divisions performance expectations in the future.
Our strategic growth plan for the medical products division includes four aspects First – the organic expansion of the market for imported medical technologies is continuing. We believe the market penetration for products in our class will see a substantial increase over the next several years, possibly doubling the customer base from our current 3,000 users to as many as 6,000. Second – our government back financing programs offer exceptional value for our Chinese hospital customers. We expect the contribution from such financing packages to continue to grow and we are working to expand beyond the current U.S. and German government programs. Third – new product and technology offerings will continue to be a cornerstone of growth. We are investigating Minimally Invasive Surgical technologies which would capitalize on our work with the Intuitive Surgical product and new technologies in cosmetic surgery as well. Fourth – we are investigating M&A and Strategic partnership opportunities with both Chinese and foreign companies which could utilize the value of our distribution platform for large-scale market expansion. One longer-term opportunity we see is in the area of hospital supply chain management a service area that we current operate for our own hospital network.
Let’s turn now to the second operating division of the company – Healthcare Services and our United Family Healthcare Network. Having been a supplier hardware to the Chinese healthcare industry for over a decade, we became acutely aware that the software – healthcare administration – was equally as essential in a developing healthcare environment. We began talking to the Ministry of Health about a for-profit hospital project in the early 1990’s. At first they laughed at the idea of a for-profit hospital in a socialist country but eventually they agreed to let us start a pilot project.
Beijing United Family Hospital opened in 1997. It is a 50 bed, staff model facility with affiliated satellite clinics and was the first foreign invested for-profit healthcare institution to open in China. We focused initially on primary care, family practice, ob/gyn/, pediatrics and internal medicine. We quickly expanded the service offerings to include a 24/7 emergency room, most surgical specialties, full laboratory and imaging services, dentistry, dermatology, ophthalmology, ENT, physical therapy, traditional Chinese medicine, etc. The United Family Healthcare network in Beijing was first accredited by the Joint Commission International in 2005 and received its first re-accreditation in July of this year.
The United Family network expanded to Shanghai in 2005 with the opening of our second hospital and satellite clinic. Also a 50 bed facility, it was built on the same business and service model as the network in Beijing. Shanghai United received its first Joint Commission accreditation this past July.
Last fall we expanded into the southern China market of Guangzhou with the opening of a large United Family clinic in advance of our Guangzhou hospital facility which is scheduled to open in 2010.
What differentiates the United Family Healthcare network from the existing hospitals in these major Chinese cities? Some of you perhaps have visited Chinese hospitals. If you have I think you would agree that the experience would NOT be characterized by the bullet points on this slide: Western management style and nursing model Commitment to quality standard and voluntary accreditation. Uniquely comfortable environment Patient centered care Joint Commission accreditation is the “gold standard” in healthcare – it is cornerstone of the United Family quality standard and brand value. Our network is unique in China today and far-and-away the market leader in premium care services.
The current operations of the division include a total of 100 licensed beds in two geographic markets servicing a patient base of approximately 120,000. 2/3 of these patients are foreign passport holders and 1/3 are Chinese nationals. The foreign passport holders usually have international insurance and we maintain direct bill relationships with most of these providers. Those patients not covered by insurance are private pay.
The future expansion of the network will exploit a frontier market for premium healthcare services in China. Particularly in the post-SARS environment, it is well documented that the affluent sectors of Chinese society are extremely under-served by the Chinese domestic system. Our near to middle term growth strategy targets the upper tier of this demographic in the 10 most affluent cities – this conservatively puts the target market segment at over 2.5 million people. Market surveys have shown the willingness of the affluent Chinese to spend their increasing levels of disposable income on quality healthcare. And we are seeing increasing high-end health insurance products being introduced which will allow better access to premium care.
With this market potential in mind, let me show you what the UFH network looks like today. What it will look like in 2010 and what it may look like in the medium term.
Our expansion plans for the next phase of our growth are in place and fully funded. Last year we completed a $100 million fund raising to expand the UFH network. This funding included an equity investment in Chindex by JP Morgan and the International Finance Corporation as well as future credit facilities from the IFC and DEG (the German policy bank). So, in the current market environment, we are in the enviable position of having all the cash needed to execute our expansion plans over the next two years. Our future network facilities will be focused on the Chinese population and will be substantially larger in size. Both the pricing of services and the costs of delivering those services will be adjusted to meeting the Chinese market profile.
Here is our historical total revenue picture and our expected FY09 projection
Over the 2006 to 2008 period, the medical products division was heavily impacted by three issues: First, the periods did not have any government backed loan program revenues because the bilateral trade agreement between China and the U.S. had expired. These agreements have been renewed now and last year we delivered $23 million in loan sales. Second, the anti-corruption campaign within the healthcare industry known as the “white coat storm” lasted almost 2 years and significantly dampened purchasing trends particularly of larger equipment. This campaign is over now. Third, delays in product registrations were excessive. It took nearly two years to receive approval to sell the daVinci system for example. We have now received the primary registrations we had been waiting for for so long. In short, we believe the negative factors which drove our results over that three year period are behind us. Our FY2009 results and our expectations for future performance reflect that.
Same periods for Healthcare services division revenue.
We have shown very positive trends in net income over the past four years. The increase from FY06 to FY07 is largely attributable to the ramp-up cycle of the hospital in Shanghai began generating earnings in the second half of FY06, or a year and a half after opening. In FY09 our GAAP income was impacted with of approximately $1.2 million related to investments impacted by the global economic conditions and approximately $2.2 million related to the development and opening of new United Family Healthcare network facilities
Healthcare in China The Opportunity for Investment Chindex International and United Family Healthcare December 2009
Forward Looking Statements <ul><li>This presentation contains information which may be considered forward looking statements within the meaning of the 1933 and 1934 Acts. Refer to statements regarding risks and uncertainties in our SEC filings available on our website. </li></ul>
Company Overview – A Pioneer in Healthcare in China for 28 years <ul><li>Founded in 1981, IPO 1994 </li></ul><ul><li>Leading independent American provider of premium healthcare products and services </li></ul><ul><li>Medical Products division operating since inception </li></ul><ul><li>Healthcare Services division operating since 1995 </li></ul>Two Nationally Famous Brands
Investment Highlights <ul><li>Healthy, consistent growth and profitability available from existing operations </li></ul><ul><ul><li>Unprecedented Healthcare Services opportunity </li></ul></ul><ul><ul><li>Established national distribution network, impressive annual sales growth </li></ul></ul><ul><li>Strategic development plan in line with Chinese government </li></ul><ul><ul><li>Healthcare reform and Economic stimulus programs </li></ul></ul><ul><li>Robust medical products portfolio with large addressable markets </li></ul><ul><li>Competitive Advantage from </li></ul><ul><ul><li>First mover advantage: First-to-market private hospital network </li></ul></ul><ul><ul><li>Nationally recognized Chindex and United Family brand </li></ul></ul><ul><ul><li>Experienced management team </li></ul></ul><ul><ul><li>Excellent relationships with the US and Chinese Governments - have a meaningful impact on our ability to obtain critical regulatory approvals </li></ul></ul>
China’s Macro Economic Picture <ul><li>2009 H1 Growth 7.1%, steadily increasing through the year </li></ul><ul><li>2009 Growth now expected to hit the governments target of 8% for the year </li></ul><ul><li>4 trillion RMB stimulus package </li></ul><ul><li>7.4 trillion RMB bank lending </li></ul><ul><ul><li>More than 2007 and 2008 together </li></ul></ul><ul><ul><li>Fears of future NPL’s </li></ul></ul><ul><li>Long term strategy to reduce reliance on exports led growth and fixed asset investment </li></ul><ul><ul><li>Stimulus emphasis on infrastructure counter to above rebalancing </li></ul></ul><ul><ul><li>Health reform and improved social net coverage will help in this process </li></ul></ul>Weathering the Global Economic Crisis
Healthcare in China Replete with Problems <ul><li>From 1980 to 2006, expenditure on healthcare in China grew by 80x, yet there is still great dissatisfaction </li></ul><ul><li>Insufficient government investment </li></ul><ul><li>Imbalance of resources – Urban v. Rural areas </li></ul><ul><li>Insufficient insurance coverage </li></ul><ul><li>Public hospitals incentivized to pursue profit (esp. through drug sales) </li></ul>
Highlights of the Health Reform Plan <ul><li>Universal access to basic health insurance </li></ul><ul><ul><li>Extend coverage to 90% of population by 2011 </li></ul></ul><ul><ul><li>Including children, students, migrant workers and retirees </li></ul></ul><ul><li>Introduction of an essential drug system </li></ul><ul><ul><li>List issued 300+ drugs </li></ul></ul><ul><ul><li>Mandatory stocking for grass roots facilities </li></ul></ul><ul><ul><li>Central purchasing and reduced mark-up </li></ul></ul><ul><li>Improved primary health facilities </li></ul><ul><ul><li>2000 new county hospitals, 5000 township health centers, 3700 urban health centers </li></ul></ul><ul><li>Equitable access to public health services </li></ul><ul><ul><li>Public health investment to be increased from RMB20 billion in 2009 to RMB27 million in 2011 </li></ul></ul><ul><ul><li>Public education, infectious disease control, wellness and health checks for young and elderly, experimental screening programs (free paps and mammos in Beijing) </li></ul></ul><ul><li>Pilot reform of state run hospitals </li></ul><ul><ul><li>Reduce perverse incentives (ie profits from drug prescribing) </li></ul></ul><ul><ul><li>Increased governance and investment for public hospitals </li></ul></ul><ul><ul><li>Encouragement of private investment to supplement public system </li></ul></ul>
2009 Healthcare Spending <ul><li>Total Expected Healthcare Spend RMB1,682 billion up 25% from 2008 </li></ul><ul><li>2009 Government Budgeted Spend RMB341.5 billion up 25% from 2008 </li></ul><ul><ul><li>RMB118.5 Central Government up 24% </li></ul></ul><ul><ul><li>RMB223.5 Local Government up 18% </li></ul></ul><ul><ul><li>RMB 580 Social Spend up 38% </li></ul></ul><ul><ul><li>RMB 760 Out of Pocket estimate up 28% </li></ul></ul><ul><li>Additional RMB 850 billion over 3 years </li></ul><ul><ul><li>RMB283 billion per year </li></ul></ul>YTD 2009 - hesitancy in the medical device markets reflect uncertainties about execution of the government’s spending programs. General market condition for healthcare in China remain robust.
Expected Positive Impact of Government Policy on Chindex <ul><li>Government increasing investment in healthcare </li></ul><ul><ul><li>Will need to purchase equipment for medical facilities </li></ul></ul><ul><li>Public hospitals to focus on basic medical care </li></ul><ul><ul><li>Rather than investment in premium services </li></ul></ul><ul><li>Private investment in healthcare for special services will be encouraged </li></ul><ul><ul><li>Chindex’s United Family Healthcare is the market leader </li></ul></ul><ul><li>Companies encouraged to develop commercial insurance products </li></ul><ul><ul><li>Key component of long-term Chindex growth strategy </li></ul></ul>
<ul><li>Modern Marketing, Sales, Service and Distribution Platform </li></ul><ul><li>Largest Independent US Distributor </li></ul><ul><li>of Healthcare Equipment in China since 1981 </li></ul><ul><li>Installed base covers over 3,000 Level 3 and 2 hospitals </li></ul><ul><li>Market expanding to lower tier facilities </li></ul>Medical Products Division Exclusive distribution rights for major brands: Siemens color ultrasound systems Hologic mammography Vital Images advanced visualization software J&J Ortho clinical chemistry Biotest blood banking chemistry products Candela and Cutera aesthetic laser systems
Medical Products Division <ul><li>Financing for Purchases </li></ul><ul><ul><li>Chindex pioneered the use of U.S. Ex-Im Bank financing for medical equipment in China in 1995 </li></ul></ul><ul><ul><li>Chindex GmbH provides German KfW Development Bank financing </li></ul></ul><ul><li>National Sales, Marketing and Technical Support </li></ul><ul><ul><li>Direct Sales Force operating nation-wide - 180+ salespeople </li></ul></ul><ul><ul><li>Clinical and operator training - 30+ Field Applications Specialists </li></ul></ul><ul><ul><li>Channels management system – 100+ regional sub-dealers </li></ul></ul><ul><ul><li>National technical service - 80+ factory trained service engineers </li></ul></ul>
Medical Products Division <ul><li>Chindex has a 25+ year reputation for introducing revolutionary medical technologies in China …. </li></ul><ul><li>1983 real-time ultrasound </li></ul><ul><li>1985 magnetic resonance imaging </li></ul>
And Now….. The daVinci ® Surgical System, robotically assisted minimally invasive surgery from Intuitive Surgical (NASDAQ:ISRG)
Recent Highlights – Medical Products Division <ul><li>New product introductions diversify portfolio in imaging, chemistry and aesthetic laser product groups </li></ul><ul><li>Intuitive Surgical – daVinci system order flow and customer demand continues at a strong pace of 1-2 systems per quarter on average. Recent order delays due to technology review by Ministry of Health is routine-course-of-business for high value products and temporary. </li></ul><ul><li>New ultrasound technology platform receiving strong market reception </li></ul><ul><li>Continued order flow for government backed financings: recent KfW contracts announced </li></ul>
Strategic Growth Plan <ul><ul><ul><li>Market expansion </li></ul></ul></ul><ul><ul><ul><ul><li>Through healthcare reform and economic development current customer base of 3,000 hospitals could grow to over 6,000 </li></ul></ul></ul></ul><ul><ul><ul><li>Expansion of government backed financing programs </li></ul></ul></ul><ul><ul><ul><ul><li>U.S., Germany </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Future development of Israeli and Nordic Bank Financing Projects </li></ul></ul></ul></ul><ul><ul><ul><li>New product introductions </li></ul></ul></ul><ul><ul><ul><ul><li>Continuing focus on new minimally invasive and robotic surgery technologies </li></ul></ul></ul></ul><ul><ul><ul><li>M and A and Strategic Partnerships </li></ul></ul></ul><ul><ul><ul><ul><li>Investigations of potential targets in China </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Hospital supply chain management presents a significant opportunity </li></ul></ul></ul></ul>
Shanghai United Family Hospital <ul><li>Shanghai United Family Hospital </li></ul><ul><ul><li>opened 2005 </li></ul></ul>
Guangzhou United Family Health Clinic opened October 2008
Differentiators How We Differ from the 534 Existing Hospitals in Beijing and 284 Hospitals in Shanghai <ul><li>Western management style and nursing model </li></ul><ul><li>Commitment to quality standard and voluntary accreditation. </li></ul><ul><li>Uniquely comfortable environment </li></ul><ul><li>Patient centered care </li></ul><ul><li>JCI accreditation </li></ul>
Current UFH Network Serves Ex-Pats Living in China and Local Chinese <ul><li>BJU and SHU </li></ul><ul><ul><li>50 bed model with affiliated satellite clinics </li></ul></ul><ul><li>Total approximately 120,000 patient base </li></ul><ul><li>2/3 -1/3 foreign passport holders to Chinese nationals </li></ul><ul><li>60% international insurance </li></ul><ul><li>Private pay for uninsured </li></ul>
United Family Healthcare A frontier market for premium services <ul><li>Affluent sectors of Chinese society extremely under-served by Chinese domestic healthcare system </li></ul><ul><li>UFH’s strategic growth plans now target top 3% - 5% in the 10 most affluent cities – over 2.5 million people </li></ul><ul><li>Healthcare second only to education in surveys of this demographic relative to disposable income </li></ul><ul><li>Future health insurance products in China will facilitate broad based access to premium care </li></ul>
UFH network in development stage Current UFH network Hospitals Beijing Shanghai Qingdao Ningbo Xiamen Guangzhou Wuxi UFH Network Expansion Plan Future UFH Sites under consideration or negotiation Current UFH network Clinics Dalian Nanjing Chengdu
UFH Expansion in Beijing and Guangzhou – Funding in place <ul><li>$100 million for UFH development </li></ul><ul><ul><li>Market entry in Guangzhou </li></ul></ul><ul><ul><li>Market expansion in Beijing </li></ul></ul><ul><ul><li>Other potential cities suited to UFH market-entry </li></ul></ul><ul><li>UFH Expansion – Chinese market focus </li></ul><ul><ul><li>Future expansion will be targeted toward Chinese population </li></ul></ul><ul><ul><li>Future facilities will be larger to improve efficiencies of scale – </li></ul></ul><ul><ul><ul><li>The Beijing expansion will double our current bed count to 100+ </li></ul></ul></ul><ul><ul><ul><li>The Guangzhou facility will be a 125 bed model </li></ul></ul></ul><ul><ul><li>Future pricing strategies will be targeted to achieved deeper penetration into the Chinese market </li></ul></ul>
2Q FY10 vs 2Q FY09 Results <ul><li>Total Revenue $38.1 million vs $38.1 million </li></ul><ul><li>Operating Income $1.4 million vs $1.6 million </li></ul><ul><li>Diluted EPS $0.03 vs $0.05 </li></ul>FY09 Results <ul><li>Total Revenue $171.4 million </li></ul><ul><li>Operating Income $8.2 million </li></ul><ul><li>Diluted EPS $0.31 </li></ul>H1 FY10 vs H1 FY09 Results <ul><li>Total Revenue $83.5 million vs $70.2 million </li></ul><ul><li>Operating Income $6.6 million vs $2.4 million </li></ul><ul><li>Diluted EPS $0.24 vs $0.04 </li></ul>
Balance Sheet and Cash Flows September 30, 2009 Cash, cash equivalents and investments $71.7million Accounts receivable $41.7million Accounts payable and accrued expenses $22.2 million Long term debt $22.5 million Net cash provided by operating activities, six months $4.6 million
Fiscal 2010 Healthcare Services Division <ul><li>Existing operations will continue to see top-line growth of mid-teens </li></ul><ul><li>Expansion of Beijing hospital and new Cancer Center will have phased opening starting early 2010 </li></ul><ul><li>Guangzhou hospital in design phase, to open 2012 </li></ul>
Fiscal 2010 Medical Products Division <ul><li>Revenue growth at historical rates – low teens </li></ul><ul><li>Continued roll-out of daVinci product and new ultrasound technology in mainland China market </li></ul><ul><ul><ul><li>daVinci order flow expectation is 1—2 units/qtr </li></ul></ul></ul><ul><li>Continued pipeline of government backed financing projects </li></ul><ul><li>New product introductions </li></ul>