Cardiovascular Systems (CSII) Q3 2022 Earnings Call Transcript

Cardiovascular Systems (CSII)
Q3 2022 Earnings Call
May 04, 2022, 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, and thank you for attending today's Cardiovascular Systems, Inc. fiscal 2022 third-quarter earnings. My name is Austin, and I will be your moderator for today. [Operator instructions] I would now like to pass the conference over to our host, Jack Nielsen from Cardiovascular Systems.

Jack, you may proceed.

Jack Nielsen -- Vice President, Investor Relations

Thank you. Good morning, and welcome to our fiscal '22 third-quarter conference call. With me today are Scott Ward, CSI chairman, president, and chief executive officer; Rhonda Robb, chief operating officer; and Jeff Points, chief financial officer. Earlier this morning, we issued a press release announcing third-quarter results.

You may find a copy of this release on the Investor Relations section of our corporate website. Here, you may also find an earnings supplement that includes additional details on our performance and outlook. During today's 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 include 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. In particular, the COVID-19 pandemic has created risks and uncertainties for our business, results of operations, financial condition and prospects, which we will discuss on this call. 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 press release contains a reconciliation table to GAAP results. I will now turn the call over to Scott Ward.

Scott Ward -- Chairman, President, and Chief Executive Officer

Thank you, Jack. Good morning, everyone, and thank you for joining the call. As we get started, I want to tell you how proud I am of our team here at CSI. During Q3, we persevered through omicron and our field sales and clinical support teams continued to provide outstanding support for our customers and patients under difficult conditions.

In addition, our manufacturing and supply chain teams continue to deliver outstanding performance, and we are largely unaffected by global supply chain challenges. Today, we reported Q3 results that were in line with our expectations, despite the impact that omicron had on hospital capacity and procedure volumes in January and into February, our Q3 sales were encouraging as we exited March with some momentum in the U.S. and our international sales remained strong throughout the quarter. For the quarter, worldwide revenue of $56.2 million represented a 4.9% sequential decrease compared to Q2 and 11.1% versus the prior year.

As we have noted previously, the duration and severity of the delta and omicron outbreaks and the resulting decline in outpatient visits throughout the past year have had an enduring impact on procedure volumes. Although we only have limited visibility into the patient referral channel, we believe there is a small COVID-related backlog, but the capacity of hospitals and OBLs to manage the inflow has been negatively impacted by staffing shortages and turnover. We are seeing staffing slowly improve, and we expect the backlog of cases to gradually flow through our accounts during the remainder of the calendar year. We are encouraged that the key operating statistics in our business continue to demonstrate strong demand for our products.

Performance metrics like new customers trained and new contracts exceeded our expectations in the quarter. In addition, our support devices continue to gain traction and drive incremental revenue. We are excited about the early demand for our Scoreflex NC scoring balloon, and we expect this device to emerge as an important growth driver in our coronary business in the quarters ahead. Outside the U.S., we continue to deliver robust growth as we expand our geographic footprint and open new accounts in areas like Japan and Europe.

This momentum is expected to continue as the adoption of coronary and peripheral atherectomy continues to gain traction in international markets. In the third quarter, we had several notable achievements that support our strategy to enter new growth markets and transform CSI into a more formidable multiproduct, multinational company. We announced new initiatives to develop peripheral and coronary intravascular lithotripsy balloons, as well as a full line of aspiration and mechanical thrombectomy devices for the treatment of peripheral vascular disease and pulmonary embolism. We also completed the first-in-human clinical experience of our new PVAD device for high-risk PCI and the peripheral everolimus drug-coated balloon.

These are just a few of the developments that give us a sense of optimism and excitement about the future. We believe that our new products will significantly enhance patient care and the growth potential for this portfolio is largely underappreciated. As our product pipeline has rapidly progressed, we are now preparing to initiate several new clinical research programs. To prepare for this increased clinical activity, we recently announced that Dr.

Jeff Chambers has joined CSI as our new chief medical officer. Jeff is a practicing interventional cardiologist with extensive experience in patient care as well as the design and conduct of clinical research programs. In addition to medical affairs and patient safety, Jeff will lead our clinical research organization and he will infuse medical expertise into all areas of our business. In a moment, Rhonda will provide additional information regarding our commercial progress.

But now Jeff Points will provide you with additional details regarding our third-quarter financial results. Jeff?

Jeff Points -- Chief Financial Officer

Thank you, Scott. Good morning, everyone. omicron had a large but transient impact on our performance in Q3, causing a significant reduction in procedures in January and February. However, in March, we began to experience an improvement in sales.

Financial results for Q3 were as follows: worldwide coronary revenue decreased nearly 7% sequentially to $18.9 million. In the U.S., coronary revenue decreased 12% sequentially from Q2. Outside the U.S., coronary revenue increased 17% sequentially to $4.2 million as a result of continued strength in Japan and Europe. Worldwide peripheral revenues decreased 4% sequentially to $37.4 million.

Turning to expenses, gross margin was 74% for the quarter. Gross margins were impacted primarily by lower volumes and to a lesser extent, revenue mix. We are positioned well on the supply of materials and components. As Scott mentioned, we have no material supply chain issues at this time, and we currently expect that any inflationary increases in material and labor costs will be offset by our continued focus on cost reduction programs.

Operating expenses totaled $51.1 million, which was about $3.8 million lower than last year. We continue to invest strategically in research and development. In Q3, we invested $9.1 million or 16% of revenue in product development and clinical research. Our balance sheet remains incredibly strong and gives us tremendous flexibility to execute our long-term growth strategy.

We ended the quarter with $172 million in cash and marketable securities and no long-term borrowings. Turning to our outlook, assuming no new COVID headwinds and a gradual improvement in U.S. hospital staffing shortages, we are projecting Q4 sales to be between $61 million and $66 million, which represent sequential growth of 9% to 18% from the third quarter. As a result, our guidance for the fiscal year ending June 30, 2022, is updated as follows: revenues of $235 million to $240 million; gross margins of approximately 73%; net loss in a range of 15% to 16% of revenues; and an adjusted EBITDA loss in a range of 4% to 5% of revenues.

While we anticipate the impact from COVID on procedure volumes will decline, we are continuing to provide a wider guidance range to account for the uncertainty related to the impact of staffing shortages on hospital capacity. I will now turn the call over to Rhonda, who will provide our commercial update.

Rhonda Robb -- Chief Operating Officer

Thank you, Jeff, and good morning, everyone. COVID and related staffing shortages continue to be the primary factors influencing our business in Q3. We are encouraged that the reduction in COVID infections and lower hospitalization rates in March have now translated into improving procedure volume. However, the labor shortage and turnover in the healthcare workforce continues to constrain our procedure volumes.

In support of our hospitals and OBLs, we are deploying resources to accelerate the training of new technical and nursing employees. And in Q3, we trained 116 support staff. We are encouraged by the improving environment and we do expect to see continuous improvement in staffing over the course of calendar year 2022. Improving COVID environment, including increased access to cath labs has been somewhat offset by the impact of competitive pressures and reimbursement reductions in the OBL setting.

In coronary, we're seeing a modest improvement in coronary procedure volumes and we believe the competitive dynamics in this market have begun to stabilize. We are now recovering OAS cases as our customers value the dual mode of action using orbital atherectomy. The versatility of OAS achieved favorable outcomes with all calcium morphologies, heavy stenosis, long and diffused lesions and multi-vessel disease, and the demand for OAS training remains high as evidenced by our continued growth in our trained physician metrics. In Q3 alone, over 200 physician fellows and staff were trained or certified by our teams.

In peripheral, IBL has received reimbursement in ATK in the hospital setting, but it doesn't appear to have had an impact on our business in Q3. Our hospital volumes were flat with Q2, and we even had small increase in ASPs. Finally, our mix of ATK, BTK procedures was consistent with previous quarters, confirming stability in case mix. However, the reduction to the 2022 physician fee schedule had a small impact on our Q3 OBL volumes.

We have observed sporadic disruptions in some OBLs with several clinics reducing their patient volumes and a few exiting the market. Although OBL procedure volumes are now stabilizing, we do expect the segment of the market to remain under pressure near term. In anticipation of these trends, CSI has developed and launched the customized outpatient resources program, to help our OBL customers mitigate reimbursement challenges and enable CSI to support high-volume sites that will continue treating complex patients where our technology is focused. In total, we forecast sequential growth in our domestic OAS business in Q4.

Turning to ISPs, we continue to make progress in our strategy to drive incremental revenue growth with coronary and peripheral angioplasty balloons, guidewires, and support catheters. During Q3, we generated $1.3 million in revenue, from the sale of peripheral support products, 11% sequential increase compared to Q2, representing $95 of incremental revenue per peripheral OAS device sold, which is ahead of our plan. We're also pleased with the continued growth in coronary ISPs. In total, sales of coronary support products were $2.9 million in the quarter.

We continue to experience strong demand for the Sapphire balloon and the Teleport Microcatheter. In addition, we are excited about the recent launch of the Scoreflex NC scoring balloon in the U.S. that I'm pleased to share that the product is being very well received. Outside the U.S., our business grew 19% to $4.4 million.

Like the U.S., we continue to serve strong demand for physician training and certification in our international markets, and we launched coronary OAS in two more countries during Q3. Shifting to Q4, we believe we are poised to resume sequential growth. We are rapidly addressing the need for additional staff and technician training, and we are excited to get back into cath labs and support cases. Our training pipeline has expanded significantly.

We expect that new accounts and new customers that we have trained will now have access to our product without complications from COVID. New products like Scoreflex will add to our growth and we will continue to leverage the co-launch of our peripheral balloons, guidewires and catheters. We continue to believe that these specialty support products will experience strong adoption going forward. We expect our strong revenue growth to continue in international, and we plan to launch OAS in several new countries, bringing us up to 30 countries by our fiscal year-end.

We remain on track to deliver approximately $16 million in international revenue in fiscal 2022. I will now turn the call back over to Scott.

Scott Ward -- Chairman, President, and Chief Executive Officer

Thank you, Rhonda. As we closed our fiscal '22, we believe the combination of procedure recovery in our base business, combined with growing ISD sales and international expansion will allow us to get back to sequential revenue growth. Looking ahead, many of these same drivers will contribute to our expected growth in fiscal '23. We are anticipating growth from continued COVID recovery in our core atherectomy business, increased adoption of our support devices, new product introductions and international expansion.

With respect to ISDs, we expect to benefit from the products we recently launched, including the peripheral Jade balloons, Zilient wires, and ViperCross catheters, as we drive higher revenue per procedure. In addition, the adoption of the Scoreflex balloon will be an important growth driver in coronary. Finally, we will launch the 2.0 Max for mixed plaque in the ATK market, and we expect to launch our CTO catheter portfolio late in fiscal '23. Our international franchise continues to gain traction.

We are on pace to open accounts in 15 new countries and train over 300 physicians in fiscal '22. We will enter fiscal '23 with sales in approximately 30 countries and over 1,000 physicians trained to use OAS in international markets. Beyond fiscal '23, we are making great progress to broaden and expand our value drivers. We remain on track for commercial launches of our IVL and thrombectomy products in fiscal '24 and '25, as well as the everolimus DCBs and the Propel PVAD launching in fiscal '26 and '27.

In total, these new products will expand our addressable markets by tenfold to $18 billion over the next five years. Clearly, we have a tremendous number of initiatives in play, both near term and long-term to ensure that our investor community fully appreciates our pipeline, I'm pleased to announce that we will host a product fair and analyst briefing in early August at our headquarters here in Minnesota. Details for the event will be available soon and we hope you will join us in person or virtually. In closing, I would like to thank our CSI employees for their continued resilience as we continue to deliver exceptional support to our customers and our patients.

I would also like to thank all of you for your continued interest in CSI, and we will now take your questions.

Questions & Answers:

Operator

[Operator instructions] Our first question is from Danielle Antalffy from SVB Securities.

Danielle Antalffy -- SVB Leerink Partners -- Analyst

Scott and team, I appreciate that COVID continued to have an impact in the quarter. You also -- there are a lot of headwinds going on. But I guess specifically in the coronary on the competitive side of things, I think last quarter you guys messaged that trialing was coming to an end from a competitive perspective. Was that not -- does that not continue into the quarter? Anything you can comment on the competitive landscape in coronary would be helpful?

Scott Ward -- Chairman, President, and Chief Executive Officer

Danielle, thanks for the question. We do think that the competitive dynamics in our coronary market segment have stabilized. The trialing has obviously drawn to a close, we've now annualized. And we are beginning to get our cases back, and we're seeing a rebound in our coronary business.

So at this point, we are encouraged by the results we're seeing in coronary.

Danielle Antalffy -- SVB Leerink Partners -- Analyst

And then is there -- I think some other companies that have reported so far this quarter and granted, they're more diversified companies. So maybe that has something to do with that, but it feels like the omicron impact was limited to early in the quarter. The rebound happened in the back half of the quarter, and a lot of results are coming in better than expected. I'm just curious, Scott, is there something different about CSI's business that makes it more susceptible or makes that not the case here? Just trying to get a sense of exactly how omicron impacted in the quarter? Was it more prolonged? Was it just the rebound didn't happen as quickly, anything there?

Scott Ward -- Chairman, President, and Chief Executive Officer

Yes. I think because in particular, in peripheral, the acuity of our cases is deemed to be lower by the hospital administrators and chief medical officers in many of these hospitals. So the trough that we experienced in January and February was perhaps deeper and our recovery really began probably about early to mid of March. So we did not have -- we didn't have that month of February, and we didn't have an extended amount of time for that recovery.

I will say that we exited the month of March with real momentum that as we've said we has continued. So we're encouraged by that. And I think as hospitals get back to more normal operation as we see these staffing shortages ameliorate and some of these that the labor issues get back to normal, we are seeing cath labs returning to more normal caseloads. And as a result, they're beginning to perform the cases for some of these lower acuity procedures like claudication improved arterial disease and that, we think, will really enable a continued market environment for our company.

Danielle Antalffy -- SVB Leerink Partners -- Analyst

One more quick one on the peripheral and the impact to the OBLs. Are you guys seeing those procedures shift to the hospital or are they just not getting done? Like what -- the patients presumably are still there? I mean, there's a lot of moving parts because of for omicron. But the patient still needs to get treated. So what's happening to them if they're not getting treated at the OBL?

Scott Ward -- Chairman, President, and Chief Executive Officer

I think that the patient will ultimately returned to the OBL for treatment. As we look at our Q3 results, we did see potentially some shift to the hospital, but we don't think that, that's really sustainable. The size of this epidemic and peripheral arterial disease is too great to be simply managed by the hospital environment. It will ultimately require continued adoption in the office-based labs.

So we expect to see office-based labs continue to be an important site of care. But as Rhonda pointed out, there -- we have seen some turbulence in that segment due to these reimbursement changes. We think that that turbulence will settle down. And in fact, we're beginning to see that stabilize.

So we think that that will happen over the course of our Q4, which is in the next couple of months. And then I think we will see OBLs get back to a more normal pace.

Operator

Our next question is from David Saxon of Needham & Company.

David Saxon -- Needham and Company -- Analyst

I had a question on something you said in the prepared remarks, Scott. I think you said there was a small COVID-related backlog. Just wondering if you could help us kind of think about the size of that and the mix, is it more exposed to peripheral or coronary?

Scott Ward -- Chairman, President, and Chief Executive Officer

Thank you for that question. I think as we look at that, what we considered to be a small backlog, that really isn't our peripheral segment of our business. And generally, that is in that claudicant patient population that I referred to in the previous question. That is also the segment of our business that is most affected by staffing shortages and turnover.

So as cath labs begin to return to a more normal pace, we do expect them to begin addressing some of this backlog. But we don't expect that to be a rapid recovery. Rather we expect that that backlog will flow through our centers, probably over the remainder of this calendar year. So to be a more gradual and steady recovery and somewhat constrained by the staffing shortages that are out there, and these are very real.

And we're seeing this really across the country. Hopefully, we'll see that continue to improve as some of this temporary labor -- the use of temporary labor-related clients and like I said, hospitals get back to more standard operating procedures.

David Saxon -- Needham and Company -- Analyst

And then just looking into fiscal '23, I mean, consensus to a kind of a wide range, but it has it growing kind of low teens off the midpoint of fiscal '22, the guidance range at least. So I just kind of want to hear your initial reaction to where consensus sits? And it sounds like some of these headwinds are easing, but they're still around. So, how should we think about fiscal '23 growing occurs, either fiscal '22 or going back to fiscal '21?

Scott Ward -- Chairman, President, and Chief Executive Officer

I think we're excited about fiscal '23. Clearly, as you indicated, some of the environmental factors are beginning to ease as we look at COVID recovery and staffing easing our near-term product pipeline and the products that we've launched will contribute to our growth. We think our ISD pipeline with Jade and Zilient and ViperCross launched in peripheral will help us really drive our growth next year. The Scoreflex NC catheter is going to be a very important product for us.

And we do expect to launch our CTO portfolio as well as our 2.0 Max orbital atherectomy system, which will be used in the above the need segment of the peripheral market. That combined with the coronary rebound and our continued international growth means that we believe we can achieve strong growth, probably consistent with where that consensus is at. And I think in that low double-digit range should be achievable for us.

David Saxon -- Needham and Company -- Analyst

Over the last couple of quarters, you've announced key products that are in development as well as partnerships. So I just wanted to see what you guys get most excited about? And maybe I'm front-running the product there later this year, but I would love to hear your thoughts on that.

Scott Ward -- Chairman, President, and Chief Executive Officer

Yes. I think it's hard -- it's kind of like speaking about your children. Obviously, it's hard to pick your favorite but I would say as we look at the near future, we're probably most excited about our thrombectomy pipeline and in particular the use of our thrombectomy devices for peripheral vascular indications. We intend to launch our clot retriever, as well as our aspiration device about a year from now, maybe a little bit longer than that.

And that has the potential to really drive significant growth as we start looking at FY '24. So we think we have a great product pipeline there with our Malibu aspiration device and our Laguna retriever. And we're excited to have the chance to launch that through our peripheral channel, where we have about a 150 sales reps that focused on that, sale of products to peripheral customers. So we already have a lot of commercial strengths in that segment.

We're going to bring out two very competitive and exciting products. And I think that has probably great potential for us in the near term. The rest of our pipeline, as we look at our IVL, our drug-coated balloons, and our mechanical circulatory support devices, I think, have tremendous potential to really improve the quality of care and also really drive our growth over time. That is a pretty impressive pipeline, I think that's unrivaled really among our competition, and we'll position CSI for great success going forward in the future.

Operator

Our next question is from Mathew Blackman from Stifel.

Mathew Blackman -- Stifel Financial Corp. -- Analyst

Maybe to start, Scott, just a bigger picture question, and Jeff certainly chime in as well. Just curious how you're thinking about the balance sheet today. Obviously, integrate position but whether your appetite for larger revenue contributing M&A or buybacks has increased. Just curious what your thoughts on strategically with the balance sheet from your end? And I'll just have a couple of quick follow-ups.

Scott Ward -- Chairman, President, and Chief Executive Officer

I think we feel very good about our balance sheet, about our position. We think we have a very healthy company with a strong cash position, no long-term debt, no borrowings. We also have an access to an extensive line of credit. We don't anticipate needing it.

We do think that based on the commitments that we have made thus far, looking at this pipeline and the investments that we've made, we have the cash we need to execute this product plan and to basically extend the company through the course of the next year or two as we drive toward the launch of these new products. Jeff, do you have anything you want to add to that?

Jeff Points -- Chief Financial Officer

No. Nothing to add. I think Scott covered that well.

Mathew Blackman -- Stifel Financial Corp. -- Analyst

And then, Rhonda, maybe a couple of questions for you on first the ISD, the peripheral ISD portfolio. I think -- and I apologize if you updated it this quarter, but I think in prior quarters, you had said something like that had been rolled out to 25% of your accounts. Just any update on where that metric is now and what the gating factors are to ramp that higher and then the follow on there? Just think about the ISD portfolio peripheral specifically. Is there any way to tease out how much of the growth we're seeing is expanding account access, so more customers versus increasing utilization at existing accounts? Is it skewed it one way or the other? Is it balanced? Just any color on that would be helpful?

Rhonda Robb -- Chief Operating Officer

Thanks, Matt, for the question. Yes, we've continued to roll out our PAD, ISDs and really kind of the big, most recent focus has been [Inaudible] it's Jade balloons. They've been received exceptionally well. The big focus that we've been placing is really an access to new contracts in the United States, which has opened up just a considerable number of new accounts that we can access, both in terms of OAS existing accounts and accounts where OAS may not exist today.

And so that's really been where our focus is, and we're really pleased with the rollout of the results and the customer reception.

Operator

Our next question is from Travis Steed of Bank of America Securities.

Travis Steed -- Bank of America Merrill Lynch -- Analyst

A lot had mentioned on the hospital staffing shortage. I think that's probably the biggest impact on your business right now. If you just get a sense for -- if it wasn't for these hospital staffing shortages, because you've done $1 million more this quarter, $5 million. I don't know if you have a general sense of how much the staffing impact to the business to some degree.

And any way to quantify the IVL trialing impact in the quarter as well. I would love to hear those numbers?

Scott Ward -- Chairman, President, and Chief Executive Officer

Thank you, Travis. I think for sure COVID and the staffing shortages had the greatest impact on our business in Q3 difficult to afresh at this point to really put a number on it. But I think as we have said and Rhonda indicated in the prepared remarks, we did see some impact from COVID. We did see some impact from competition and also some from OBL reimbursement.

As I said, COVID was far and away the largest impactor. Competitive impact, probably some continuing competitive impact in coronary, although as we're annualizing that now, as we said, we think that's stabilizing and we'll see continuous improvement in our coronary business over the course of the coming year. The OBL reimbursement did have some impact as we even indicated in Q2, we expected that when we would see this reduction in the physician fee scheduled, that would cause some turbulence in the market and in fact, that has occurred. Once again, we think that that market will shake out.

We may see for a short period of time, a lower amount of utilization. We may see some OBLs that exit the market. But overall, I'll tell you, our OBL customers, while they're not happy, they're driving efficiencies, they're increasing their volume. And I think we'll see them rebound and come back fairly strongly.

So for now, I think that it would probably be those -- I would identify those three categories, but I would also say that as we look to the Q4 and the remainder of this calendar year, we do think that this macro environment is going to continue to improve. And we believe that our competitive position will also improve, in particular, in coronary where we are seeing that we're beginning to regain our cases where there's a high degree of intimal calcium, where there's heavy stenosis, where there's multi-vessel disease. These are the circumstances where we are seeing coronary cath labs coming back and returning to their more normal utilization of orbital atherectomy for the catheter patient. Overall, I think we're optimistic about the future, and most of these headwinds at this point, we think, are beginning to abate.

Travis Steed -- Bank of America Merrill Lynch -- Analyst

On the OBL reimbursement, I mean, you used the word turbulence quite a bit on that. I guess it's on the ground, is that like you mentioned some are accessing the market. Is it any pricing impact? It's kind of just to get a little more color on exactly what's happening after the reimbursement changed? I don't think you expected that impact you as much three months ago and just making sure we have the confidence that some of that comes back later into next year?

Scott Ward -- Chairman, President, and Chief Executive Officer

Well, Travis, I don't want to overemphasize the impact of this. It's not -- it really hasn't impacted our business to that degree. It is a headwind that we've seen, and certainly, we did experience it. But we did indicate in Q2 that we anticipated to see some impact from this OBL change in our business.

I really don't think that this is going to lead to a fundamental change in where patients are treated, I think we'll continue to see growth in our OBL segment. And I think as we work through this now, in particular, during the course of the coming quarter, the OBLs will continue to stabilize out and get back to more normal growth.

Operator

Our next question is from Jayson Bedford of Raymond James.

Jayson Bedford -- Raymond James -- Analyst

Just a few questions. You mentioned that you exceed in March with momentum. I'm just wondering, did you see growth? Is the business growing year over year? Because I'm just trying to reconcile the momentum comment with the implied fourth-quarter guidance, which the comp is tough, but fourth quarter is still down year over year. So if you could just comment maybe a little bit more in detail on the strength in March?

Scott Ward -- Chairman, President, and Chief Executive Officer

Thank you, Jason. Yes, the reference there is really to the improvement in our average daily sales in March versus what we had seen in January and February. So we're not comparing year over year there. I would say that we experienced, as I said earlier, a rather pronounced trough in our business that we really saw in January and into February, but the recovery from that was fairly cracked in.

We did have, like I said, fairly strong momentum as we exited March.

Jayson Bedford -- Raymond James -- Analyst

And just you mentioned on the peripheral side, the IVL reimbursement and it didn't have an impact this quarter. Are you expecting a greater impact either in the fourth quarter or into '23?

Scott Ward -- Chairman, President, and Chief Executive Officer

We won't have data on that until next quarter as we've said before market share data is how it's [Inaudible]. Just about -- just a little bit over a quarter. So we'll be able to give more visibility to how that market share is shaking out, but we don't really expect to see a large impact there in any case. I mean, recall that the mix is right now roughly 37%, 40% of our revenue comes from the above-the-knee segment.

About half of that comes from the OBL. So when you really look at the amount of our business that is exposed to risk related to, let's say, the ATK IVL segment, it's less than 20%. These products have been launched since 2016. So they've been out there for a while.

We don't really anticipate trialing or things like that, that we might have seen elsewhere because the products had been trialed. So at this stage, we'll continue to monitor it. We think that we will see some increased utilization in the hospitals but it may be in hospitals that are outside the traditional atherectomy market. It may be in the care of patients that are less complex cases.

Let's wait and we'll see what happens when we actually see the real market share data in about a quarter.

Jayson Bedford -- Raymond James -- Analyst

Last one for me on the P&L. The net loss was a bit better than we expected. You've got a lot of pipeline initiatives, you're globalizing the business. When you look at spending levels in fiscal '23, anything you'd point out specifically on the R&D line?

Scott Ward -- Chairman, President, and Chief Executive Officer

Jayson, I would just comment that I would expect R&D to continue to kind of be 15% to 16% of revenues as we move forward. That will be kind of true for FY '22 and FY '23.

Operator

Our next question is from Brandon Vazquez from William Blair.

Brandon Vazquez -- William Blair and Company -- Analyst

I wanted to circle back on kind of the OBL environment. I know you guys talked a little bit about rolling in new support for remote to kind of help with -- deal with some of those reimbursement headwinds. I was curious if you guys could talk about that a little bit. It seems like it's a little bit of a differentiated factor maybe for these guys.

What can you do to help these accounts get through these headwinds? Then to what extent does that help you kind of remain within those accounts and maybe keep growing volume there?

Rhonda Robb -- Chief Operating Officer

Yes. I'll take that question. Thank you, Brandon. Yes, it's called our core program and it is differentiated in something that CSI can uniquely do really given our laser focus in the peripheral market and in particular, on the OBL.

And what we're finding is that they really value the expertise that our clinical and sales team can bring in terms of increasing procedure efficiency. We obviously have talked about our volume-based contracting before, and that's becoming increasingly important with offering educational resources, again to help with staffing and turnover. We're offering inventory management services. And so it's really just a collection of programs that we tailor to the needs of the specific OBL that we're dealing with.

And this is going to be very focused on a segment of large OBLs that treat complex patients that are, in particular, our customers, and they treat our patients. And so that's really what it is. We're going to continue to grow and expand and further defined that program as we learn more about how this market is evolving.

Brandon Vazquez -- William Blair and Company -- Analyst

And then under thrombectomy devices within peripheral, those that are in the pipeline coming out maybe in the next 12 to 18 months. Can you -- maybe were too early, but if not, can you talk a little bit about where you think you can add some value into what's out there already? When you come in to the market, where do you -- what would be the competitive positioning of these products, given it's a meaningful opportunity, and you guys already have a strong presence there? So what can you offer from a product side to kind of drive some adoption?

Scott Ward -- Chairman, President, and Chief Executive Officer

Yes. Thank you for that question. We're developing our thrombectomy product in partnership with the Innova medical. The product that we're developing really uses a low-profile delivery system.

The clot retriever is novel in the sense that it uses a laser-cut design. It has a very large cell size in comparison to some of the other products out there and really provides more enhanced radial force. So this really enables the retriever to really grab hard retain it and remove it. So those features, we think will present some competitive advantage in the market.

We also, of course, have very strong commercial strength in the peripheral segment that's already present. In many cases, our sales reps are already in some of these cases and are also certainly in these hospitals in the care settings where these patients are being treated. So we're very well positioned to move rapidly into this market and to really take advantage of the products that we're developing and bringing to market. So we're excited about the opportunity in thrombectomy.

Brandon Vazquez -- William Blair and Company -- Analyst

And then if I could sneak one last modeling question and just any color you can give us in coronary and peripheral Diamondback 360 season quarter?

Scott Ward -- Chairman, President, and Chief Executive Officer

Thank you. The question is regarding ASP in the quarter. Oh, yes, ASPs we're actually just very steady, both in peripheral and coronary. I would say that we saw some ASP erosion in the OBL space.

That was pretty consistent with what we'd seen historically. Again, very stable ASP in both coronary and peripheral hospital.

Operator

Our final question. It's from Suraj Kalia from Oppenheimer.

Suraj Kalia -- Oppenheimer and Company -- Analyst

Hey, Scott. So the softness in U.S. coronary for that matter even peripheral, was it more geographically concentrated or for that matter, account concentrated?

Scott Ward -- Chairman, President, and Chief Executive Officer

Suraj, I'm sorry but you're quite muted. I think that you had asked the question for coronary, was the impact on the business concentrated geographically?

Suraj Kalia -- Oppenheimer and Company -- Analyst

Yes. Was it more related to certain -- I hope you can hear me all right. Was it more account-specific softness or was it more geographic-related softness?

Scott Ward -- Chairman, President, and Chief Executive Officer

No. I think it was actually that the impact in our coronary business was really in January and early February and was really completely impacted by omicron. Our coronary business rebounded, as I've indicated, along with the rest of the business but actually did quite well in March. And we're continuing to see strength in that coronary segment.

So I don't think that it had any -- there were any unique characteristics in terms of our centers or our geographic areas. I think it was more generally the impact from omicron that influenced the performance of our business in Q3.

Suraj Kalia -- Oppenheimer and Company -- Analyst

And, Scott, one final from my side. Scott, you mentioned multiple times on the call in terms of the environment stabilizing in terms of competitive trialing. Maybe if I could ask a little differently, Scott, and push you on this. How do you reconcile the implied outlook, for example, for IVL with your comments about stabilizing environment for orbital atherectomy? Any additional color? I guess what I'm trying to understand is, is it just a function of the breadth of competitive IVL usage, whereas yours is more related to a concentrated -- relatively a concentrated use? Any additional color would be greatly appreciated?

Scott Ward -- Chairman, President, and Chief Executive Officer

Thank you, Suraj. So I think what we're really seeing in the coronary segment of our business and the competitive dynamic there is that physicians in these cath labs as they have completed the trialing of the device are really beginning to return to the use of orbital atherectomy for the cases that they encounter, where they're challenged with a high degree of intimal calcium, where there's heavy stenosis, where there's nodular lesions if they're performing imaging, some of these diffuse and long lesions and also where they're encountering multi-vessel disease. And I think a lot of that is just due to the fact that the physicians really value the performance of our device, the versatility of our device. They know that when they use our device, they'll be able to treat these patients quickly, efficiently, and effectively.

As our sales reps are able to get back into cath labs now, we can work to address some of the staffing shortages, train and educate the staff. Deal with the turnover that was there and really enable these sites just to get back to, let's say, they are more normal standard procedures in caring for these patients. And I think that's really what we're seeing. It's a combination of the reduction of the impact of COVID, as well, let's say, the return to more normal procedures in the cath lab.

Those two things combined with our presence is what's enabling us to really get that coronary business back on track, and we feel good about where it's at. Our team is doing a great job in supporting our customers, and we expect to see continued progress in coronary now going forward. Thank you, everyone, and thanks for joining today's call. We do look forward to updating many of you at the upcoming Bank of America Conference and also updating you on our call again next quarter.

So thanks very much, everyone.

Duration: 49 minutes

Call participants:

Jack Nielsen -- Vice President, Investor Relations

Scott Ward -- Chairman, President, and Chief Executive Officer

Jeff Points -- Chief Financial Officer

Rhonda Robb -- Chief Operating Officer

Danielle Antalffy -- SVB Leerink Partners -- Analyst

David Saxon -- Needham and Company -- Analyst

Mathew Blackman -- Stifel Financial Corp. -- Analyst

Travis Steed -- Bank of America Merrill Lynch -- Analyst

Jayson Bedford -- Raymond James -- Analyst

Brandon Vazquez -- William Blair and Company -- Analyst

Suraj Kalia -- Oppenheimer and Company -- Analyst

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