Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from the line of Newton Juhng with BB&T Capital Markets.
Newton Juhng - BB&T Capital Markets
Good afternoon gentlemen. Rob and Randy, I was wondering if you could give us a little more detail on the U.K. contract. It looks like you are working with a distribution partner here. Can you just give us an idea as to how this going forward is going to impact your numbers considering the size of the deal?
Rob Seim
Yes, we do work through distributors on every other geography outside the United States except Canada and the distributor in the U.K. is a company called Ventech who’s done a great job placing our systems in some of the most renowned hospital trusts in the U.K..
These particular orders come from two large trusts in London, the Guy’s and St. Thomas Trust which are two hospitals and the King’s College Trust, which is a teaching hospital in London, and they’re jointly implementing a fairly major project to automate medical and surgical supply inventories throughout their facilities.
It is a rollout of multiple hundreds of our units and in the U.K. the hospitals announced that it was a project with a budget of £6 million or roughly $10 million.
That’s a total project cost includes everything they’re doing in the project. We’re kind of the cornerstone of it and our course it's at the end-user prices not the revenue that we would see selling to our distributor.
The trusts have not actually fully designed that system yet so we’re not precisely sure how much they’re going to order. We did get the initial orders and we do expect it, as Randy said, to be several million dollars of orders over the next year.
Newton Juhng - BB&T Capital Markets
Okay, in terms of the margin profile of that business similar to what you see in the States?
Rob Seim
Our international pricing model is different than our U.S. pricing model because our distributors take on some of the responsibilities that we would normally take on in the United States. So gross margins will be lower but they then provide service installation and the sales, and the bottom line operating margins of the deals are about the same for us.
Newton Juhng - BB&T Capital Markets
Okay, okay in terms of contribution there. Service gross margin was really light this quarter versus historical and I was just wondering, especially compared to what we were expecting. Can you just give us a little detail as to was the driving the contraction there?
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