Q3 2023 LeMaitre Vascular Inc Earnings Call
Welcome to the law vascular Q3, 2023 financial results conference call. After the speaker's presentation. There will be a question and answer session to ask a question during the session you'll need a press start one one on your telephone.
Then here an automated message advising you that your hand is raised to withdraw your question. Please press star one one again How's reminder, today's call is being recorded at this time I would like to turn the conference over to Mister J J Pellegrino, Chief Financial Officer of Le <unk> <unk>. Please go ahead Sir.
Thank you operator, good afternoon, and thank you for joining us on a Q3 2023 conference call.
With me on today's call is our CEO, George roommate, and our President's day Robert.
Today, we will make some forward looking statements within the meaning of the U S. Private Securities Litigation Reform Act of 1995.
Wherever possible, we will try to identify those forward looking statements by using words, such as believe expect anticipate pursue forecast in similar expression.
Forward looking statements are based on our estimates and assumptions as of today November 1st 2023.
Not be relied upon as representing our estimates our views on any subsequent date.
Please refer to the cautionary statement regarding forward looking information and the risk factors in our most recent 10-K and subsequently SEC filings.
[noise] disclosure of the factors that could cause results to differ materially from those expressed or implied.
During this call we will discuss non-GAAP financial measures, which include organic sales growth as well as operating income operating expense and EPS, excluding special charges.
A reconciliation of gap to non-GAAP measures discussing this call is contained in the associated press release and is available and the Investor Relations section of our website Www Dot <unk> dot com.
I'll now turn the call over to George Lemonade.
Thanks, J J Q3 was an excellent quarter.
Three with similar to Q2 on the top line with 16 per cent organic sales growth, but it was better on the bottom line.
Who the year, we've gained control of op expenses.
Spending growth was 26 per cent in Q1.
19%, you too and now 14 per cent in Q3.
As a result up income grew 49% in Q3.
P S was up 36%.
Reported sales growth of 21 per cent in Q3 spread across all geographies APAC was up 30 per cent a mere 24 per cent in the Americas 20 per cent.
Byproduct bovine patches route 22 per cent Valvulotome was 27 per cent bovine graft 15 per cent and carotid chance 24 per cent.
Ah Beaumont patching Karate Chun businesses continue to excel in Q3 is key competitors have left the market.
<unk> might be due to the recent publication of the best CLI trial, which showed superior results of being bypassed versus stance angioplasty and atherectomy.
Hospital procedures remained elevated in Q3 is the 20th 23 returned to hospital continued.
And our January 1st price increase as long as you have been accepted.
Time of high inflation supply chain disruption and the C E. Mark transition hospitals are now more attracted to our long standing no back orders promise and price might've become a secondary topic.
Or 16% organic sales growth in Q3 was 11% price and five per cent units.
So you're down the street and are growing international presence also help.
We added Q3 with a record 136 sales reps 15 per cent more than a year ago <unk>.
We generally are posted higher sales growth rates internationally every keep entering new markets.
New Bangkok office open in August and we began selling directly to tie hospitals.
We also open a new expanded Madrid office in September and.
Now we're planning a French sales office for each one <unk> 2024.
Francis our sixth largest market.
For a company with a French name, it's a bit odd that we've never had a dedicated French sales office.
Paris will be our 14th sales office and will now be able to serve the five largest European countries with dedicated customer service service reps in their country and their languages.
Previously or European customer service reps were centralized in Frankfurt.
This re localization of customer service Titans are hospital relationships and likely increases sales.
Important regulatory projects underway include our autographed and RFA filings in Europe, as well as our two Chinese dizziness, your filings for cardiac and peripheral.
It's likely that all four of these things will be at their respective regulatory agencies by H, one 2024 and would expect approvals two years after that.
And H 220, 24 will also file for autographed approval in Canada and Australia.
These findings are in addition to the M. D. R C E transition in Europe.
As you May know Brussels is extended the M D R deadline to 2027.
We have approximately 17 product categories needing this new C stamp or letters to file. So this is a considerable undertaking.
To conclude 21 per cent sales growth in Q3, and 49% of the income growth resulted from price increases restrained up expenses and the continued returned to hospital by patients and staff.
Profitability in $97 million of cash on hand provide safety and strategic Optionality wood.
With that I'll turn it over to J J.
Thanks, George George noted operating expenses in Q4, 2023 were up 14% and operating expense growth is slow.
From 20 to 25 per cent and H, one 215% in age too.
If the sales force ramp and post Covid rehiring with our mantra in 2022, it's safe to say that hiring restraint and cost containment has been our 2023 theme.
We had 450 employees at the end of 2021.
591 at the end of 2022 and now 613 at the end of Q3 2023.
One of our notable internal goals throughout 2023 plus to.
To finish the year with fewer than 625 employees <unk>.
This target seems achievable.
Increase LS and cost constraints is improve the bottom line considerably in.
Q1 operating income growth, excluding special charges was 3% it.
It was 8% in Q2 four.
89% in Q3, and now we're guiding 44% in Q4.
In Q3, we posted a gross margin of 65% up 80 basis points a year over year <unk>.
The increase was driven by average selling price increases in direct labor productivity improvements.
The benefits of a larger and more efficient manufacturing team are starting to come to the piano.
In retrospect R 2022 manufacturing hiring surge was well timed with the global return to hospital patients and staff.
Units are up and back orders are down.
Cash at the end of Q3, 2023 was $97 million, an increase of $6.8 million in the quarter.
This increase was driven by cash from operations of $11.8 million, which was partially offset by dividends of $3.1 million and capital expenditures of $1.1 million.
Forgotten please see our business outlook issued in today's press release.
Q for highlights include.
Organic sales growth of 16%.
Operating income growth and 44%.
And E P S growth of 43 per cent.
That's 600000 dollar upward revision to our queue for operating income guidance is largely due to an improved gross margin and tighter expense control.
Strengthening dollar.
<unk> output constrained.
And the continued U S export ban on sales to Russia.
Finally, I would like to welcome to analysts teams to the law made story.
September Suraj calia, and Seamus <unk> from Oppenheimer initiated coverage.
On October David <unk>, and Danny starter from JMP initiated coverage.
Thank you to both teams and we look forward to working with you.
With that I'll turn it back over to the operator for questions.
Thank you as a reminder to ask a question. Please press start one one on your telephone and wait for your name to be announced.
Your question. Please press star one one again.
While we compiler Q&A roster.
Oh My first question is gonna come from the line of bricks with.
Lake Street capital markets. Your line is open. Please go ahead.
Good afternoon, everyone. Congratulations on a terrific quarter I'm.
Curious I guess I'd like to add David If you don't mind, if you could comment at all on the M&A environment. It seems to me like.
Like.
The cash balance is robust.
Perhaps.
Some of the.
Challenges that are affecting the world, maybe clean up some tasty morsels from some of the.
<unk>.
Medical company out there with whom you talk any update would be helpful. Thank you very much.
Hi, Brooks and thanks for the question, Yeah, obviously, having a building cash balance is very helpful. In the quarter, we increase the cash $6.8 million and we're up to $97 million.
When you combine that with our over $40 million of EBITDA gives us a pretty big war chest to go after acquisition.
In terms of <unk>.
The environment I would say of course valuations are down there off about 20 per cent since.
Since our last call on August 1st.
In small and mid cap companies as you know are trading at less than three times E. V to next 12 months sale. So in terms of public multiples. The valuations have come down I think it always takes private sellers, a little while to digest and get the email.
But yeah. So that's the environment in terms of targets I would say we are continuing to stay disciplined focusing primarily on targets in the middle of the fairway, which are these open vascular targets with more than five or 10 million.
Revenue, we like these these necci open vascular market, but we have been hunting adjacent Lee.
I'd say, probably more a little bit in the cardiac surgery market.
And.
We have ongoing discussions at various stages with different potential sellers and so.
Hunting, we know it's been a little while since we've done an acquisition a little over three years.
But we're waiting for a deal that we feel really good about that deserves our capital. So we're out hunting and at some point, you'll see something pop out of the toaster.
Great. Thank you very much congratulations to get onto it for a quarter.
Thanks Brooks.
Thank you and.
Next question and again, ladies and gentlemen, if you would like to ask a question. Please press star one one on your telephone.
And our next question comes from the line as Michael <unk> Barrington restart to your line is open. Please go ahead.
Good evening.
<unk> sorry, if you mentioned as I did not catch did you mentioned cash flow from ops in the quarter.
In the corner. It was 11.8, if I recall, let me check that mic.
It was 11 821.
Okay, Alright, great well, let me let me just follow up on on Brooks's.
Question around M&A real quick gave you know obviously.
We're hearing more more targets more attractive targets, but also cost of capital is is is you know materially up as well. So I'm. Just wondering how you guys are you M. B a stink about the cost of capital and you know, especially what that means for larger deals. Obviously, you know your balance sheet and cash for support.
Small or or maybe even mid size deals, but you guys have repeatedly suggested hey, you know we had we had a great.
You know a <unk>.
Great success with autograph.
More than open to larger deals how does how does cost of capital and larger deal sort of compute just you guys at this point.
Yeah, I would say, obviously, the cheapest form of capital as the cash on the balance sheet.
If we're up near $100 million in cash on the balance sheet at the moment, we probably at $80 million of dry powder and.
When you put that in the bank and earn a 5% money market return.
It's not that expensive so I would say of course, we'll use our our cash first secondly, absolutely that is.
Is more expensive than it used to be but it's cheaper than using our own equity and so we will go to that next then as I mentioned, the EBITDA is north of $40 million, probably you could easily bile three times that and that excluding pro forma EBITDA. So we normally.
Do accretive acquisitions, and so the borrowing capacity can be higher of course in this environment.
We're not gonna overlap or the balance sheet.
And then I would say third and I'll, let J J add any color when I'm done on this.
Third would be.
Issuing equity you know that would have to be a much larger deal of course, our resolve would have to be much much higher there are deals out there where I could picture doing that there aren't that many but there are some so that for me I guess, it's summarize the pecking order of how we would access capital to do larger deals.
Okay great.
And I guess I'm sure she mentioned that keep competitors.
Some some.
Markets and what you guys compete could you just sort of tease out whatever details are willing to share their thanks.
Course, and one of them, they're both sort of old stories here, maybe once a year and a half old Navy one half year old but back in Dickinson is completely left the shop market over in Europe drag.
Dragged down by Europe, they've done it for the whole world. So they're out of the shot market and I would say they were.
Either the dotcom, the key competitive or the second competitor over there so our market shares over in Europe and shots are now approaching <unk>.
Seventies, eighties, and nineties and the various countries over there and then in the the bovine patch World. We've had one Canadian Guy bio integral has been taken off the market. They could not re up their C. E marks and then Abbott has left a large patch more of the cardiac patch market and that is providing.
Crazy growth rates for us in our cardiac patch market that product line for US is called Cardiocel, you've heard us talking for years about the product Xena sure. That's more the peripheral patch and Cardiocel is more of a cardiac patch and of course, the new patch is also a cardiac type patch.
And since you mentioned it and before I jump off the zeal partnership I mean, how how you know you guys have now I guess get involved in that at least a couple of two or three quarters. It feels like how is that working out any any commentary just around that relationship. Thanks.
Yeah, Mike, It's Dave I'll take that I'd say, it's going fine at the sales are probably running a little bit less than what we provided as guidance on the last call I would say that you know as we look here over the next couple few months at the moment are are.
North American argues sales organization is compensated really outside of their quota system on this patch and starting January the patch will be included in their quota. So we're sort of interested to see you know will that affect the revenue, let's let's see how that affects or does it.
That revenue uhm, but the good news is we've got six months at least to think about whether we want to acquire that's the soonest, we could exercise that option would be in April of next year and as I learned way back in business School, you should never kill alive option. So we're.
Thinking about that right and and and then if we do exercise it would certainly be accretive right and so and so.
It's something we're paying very close attention to but at the moment I know you're not asking that we don't have further thoughts about what we exercise that are not but yeah, I would say it seems to be going well one spin off benefit as as George mentioned, it's used mostly around cardiac surgery.
He picked up a lot of customers a couple hundred customers, which has helped us actually sell some of our other cardiac surgery products. So they're nice some nice spin off benefits occurring as well.
Okay terrific. Thank you.
Thanks, Mike.
Thank you and when my.
Next question.
And our next question is gonna come from the line.
Company. Your line is how can I. Please go ahead.
Good afternoon, and thanks for taking the questions. Your first one.
A lot of talks you last few weeks about <unk> can be added G. L. P. One drugs.
And its impact on some other names are you seeing any impact on your business.
Hey, Jen Thanks for the question as jurors no clearly not at this time.
Okay and do you expect any impact over the next two to three years.
I mean, that's a it's a long it's a long thing and there's still a lot more to learn about that <unk>.
My senses, our answers won't really add to this but I'm happy to run through some stuff we knew there'd be questions on G. L. P. So if you want I can give you a little blurb on sort of where we came at would you like that.
Sure.
Okay. So I guess, the recent 20% major adverse cardiovascular event reductions from G. L. P. As these headlines really got some attention on wall Street.
The elephant in the room and most of these medical device conference calls.
I don't really know how much J J, George and day, we're going to add to your folks understanding of this but we'll take a swing at it so.
And to start with before we get into this of course, everyone hears rooting for ways to reduce cardiovascular disease.
Call It cat and pad for it just for brevity here, but our take is that any G. L. P impact on cat or pad revenues seems very uncertain and very far away.
This 20% headline which is I think what most people are taken away from this whole thing it quickly turns into a 6% a year headline because those events that 20% of events right. The cardiovascular major adverse cardiovascular events will call them Mace. If you will they took place over $3.
Three years, so if it's a 20% reduction that's pretty quickly turned into it if you're looking at the revenues of accompany you probably want to mark that down to 6%.
Then you'll get that down to 4% because a third of those events or death by heart attack and of course I hate to get technically are a little bit grim, but if we can manage to prevent death, it's a great outcome for both the patients and then also a little oddly here for the companies that sell devices to those patients who live longer.
Roughly speaking you can pretty quickly get the headline down to 4% per year.
Assuming that the 42 person and that that would that would be on the whole company, if all 42% of adult.
Americans were on the drugs were on the G. L. PS and that's 108 million people. So we we keep coming back to you. It's really unlikely that that many people are going to be on these drugs, but you know never say never you don't know none of US on this call no in 10 years. If this is going to be another staten or what what it's going to be I think <unk>.
It has come out in a couple of calls saying they think it's about 12 million Americans will be on these G. L. PS and it's sort of a lines with that we've all heard this $80 billion in revenue for the analyst estimate this peak revenue for the G. L. P is out there and I don't know X years, no one's putting a number on it but and so that will be 12 million.
Being on it just for comparison, we can discuss this lipitor.
Lipitor launched in 1997 is it made me so maybe the gop's or another Staten right, who knows 40 million Americans are on Staten and I would say maybe the most important talk.
Topic that you can think about is that even though the staten come out there and lots of us lots of US 59 year old men are on stat, and the need for cat and pad devices has only increased over this quarter of a century. So I I think maybe this could be like that but again I don't know I don't think any of us knows the.
The Jeffries analysts who are covering us have written some really nice pieces on this they might be on this call I don't know if they are they've published three and and I'll close up here I know, there's a bit of a long ramble gym and you probably didn't ask for all this but all closed up quickly here they are.
Published three lengthy G. L. P reports in the month of October and they go all around and they they make good proofs everywhere and they come back to this match or that they were peek over and over.
<unk> or indeed, so I'm definitely stealing this from their report Gop's are indeed, a big drop in the bucket, but the bucket as much bigger than the bucket wins and I think what they're trying to say is cardiovascular disease is the number one cause of death in the world. It's a very big bucket, it's unlikely that it goes away because of this.
And all of this we didn't talk about the fact that 40% of a mate is O U S and I think we all know that maybe this comes to the U S in Germany, but I don't think it's off in Japan in Thailand for a very very long time. So I hope that's a good swing at a gym I'm happy to go in any direction you want with it on that but that's sort of what we got.
Okay. No that that was that was exactly what I will do that thank.
Thank you you said you ended the quarter with 136 sales reps <unk>. Thank.
Take your at the right number now or do you think you'll continue to add.
In the fourth quarter.
Right. So we feel like we're going to end the year between 135 and 140, so maybe pick our way down the field and grab one or two more but we're good for now I do think that the growth of the salesforce as a continuing objective and I'm not gonna give what are we gonna do next year, but I definitely feel like it's a growth vehicle for us we're really I don't know if.
Feeling I wrote is the wrong word, but we're feeling really good about the growth of these offices and the growth of these reps around the world everywhere I mean, we're rolling everywhere with reps.
Alright, and then the last one for me Yoga indicated the theme for 2022 was was to build up the staff get.
<unk> 2023 was too.
Operating munchies improved.
Improved what what would you would.
Do you want to tell us what you think the theme for 2024.
Right you want you want an advanced copy of our planks. We are we are in discussion at a lots of bureaucratic long meetings trying to figure out. We we publish this thing called the planks Jim we have nine objective every year and it's on our walls. All if you visited our facility I know, it's been Covid and everything but if he came up here you can see they're all of our walls will.
Have that posted I think the last one is actually at this Friday next Friday.
It's next Friday at the last meeting so we'll have that all sorted out by next Friday, but it's a little early to share.
Alright, Alright, alright give it a shot thank you.
Thanks channels.
Thank you and one moment as we move on to our next question.
And our next question is going to come from the line up the rash Kelly I have with it.
Oppenheimer. Your line is open. Please go ahead.
Good afternoon, everyone can you hear me all right.
Yes.
Yeah perfect.
One of the key things and forgive me I joined a little light.
The contribution of price in the quarter.
11% and 5% unit Suraj.
Got it.
Fair enough.
Commentary on G L P ones.
On a relative basis.
Given the categories and how you compete.
And the different product segments.
Am I wrong in thinking that.
Should be should be relatively more insulated and other cardiovascular companies I understand you.
The the 4%.
And so on and so forth.
On a relative basis.
Shouldn't be also look at it.
<unk>.
Relatively insulated.
The impact if at all it should be <unk>.
I mean.
The thing about Le made that you have to keep knowing if it were really diversified by product categories by disease state and by geography, and again, 40% of our revenues Oh USA is that right yeah, 61% USA. So.
This is a very even though we seem like a small company because I think our guidance here is 193.6 and revenues we.
We do we seem like a small company because it's only 190 693 million in revenues, but I think we act and feel like a very diversified larger med cap because we're everywhere with a lot of different devices. So I think you are right, but again I'm not sure anyone knows right. This is all we're gonna pick we're all going to work down the field here and figure this out.
The thing about these studies is not much information has come out yet right, we really don't know much.
Airplanes.
Study will be released.
I believe that's next Friday, so I'm sure there'll be a lot of discussion.
Georgia in terms of just pulling up a final question in terms of the 40 per cent O U S. Again, maybe I'm just stretching adhere forgive me if I am.
How do you <unk>.
Thanks.
Offers.
Medications O U S.
Given everything going on geopolitical facts things seem to be.
And given your exposure.
Kind of talk to us.
The buffers from a risk management perspective, thank you for taking that right. Okay. Okay. Yeah, that's a great question.
And maybe it goes back to how do we choose to get into the market is that we choose to get into internationally I think as your question and I would say we have been very cautious maybe with the exception of Thailand, which is not exactly what I would call a western democracy, but we've been very cautious and trying to sort of follow what I would call to be picky about at the British rule of law.
So you go to places like Canada, you go to places like Japan, you go to places like the UK, Singapore Places, where you wouldn't be you'd be nervous, but if you've got you know put up on some crime and some of these countries you would get a jury and you'll get a trial by jury. So I think most of the places we've gone had been those type of places and so I think.
The 40% that we do derive overseas is in fairly safe places like Spain, France, Germany, Italy, the UK, Japan, and Canada, and I, just reeled off and use those are the seven biggest countries in and out of our revenue. We don't go to places like Russia, We stayed away from Saudi Arabia, we stayed away from south at.
Africa, So we've been.
Is very thoughtful I'd say, the one slightly odd duck here would be the Thailand thing, which is new but we had a very big distributor there and we felt like be worth taking risks and what again I would not categorize that as a voting democracy right now, but that's the only one.
Got it thank you.
You're welcome Sir and welcome.
Thank you and one moment as we move on to our next question.
And our next question is gonna come from the line of Michael Sycon with Jeffrey each of your line is open. Please go ahead.
Great. Good afternoon, and thank you for the shout out before.
Okay, you're more than welcome thanks for the nice research very thoughtful.
Great to hear.
Question, Yeah, you'll have the 11% ASP contribution this quarter I was wondering if you could comment on what what's baked into the 16% organic growth guide for four Q from a price standpoint, and then you know looking forward how do you think about the sustainability.
Any of that Asce contribution.
Going forward into 2024.
Okay. So so first answer is not going to be very helpful to you, which is we try not to break guiding what 16% organic for the quarter were try we trying not to break that out by units or price, you're looking backwards, though you could make some logical influences, which is I I feel like I don't know the exact numbers right now, but the the relationship between <unk>.
Pricing units has been a bit stable. This year for these 313% Aspie in Q1, 9% in Q2, 911% in Q3.
Going forward, which is part of your question you Britain you were trying to break into 2024, which we always try to not to go into but we'll play with it along a little bit here going forward I think that you know.
The law made story has been about try to get into niche markets, where you have big market share and name aren't real after valvular Toms the shunts.
Xena sure. We're number one player there be in markets, where you have pricing power and being markets, where you think worldwide pricing is set in Burlington, Massachusetts, and so I don't that's not gone away. You know you haven't seen us change up our segments here with acquisitions here. So there's a lot of there's a lot of segments, including autographed here.
I do feel like you're setting prices in Burlington in Frankfurt.
We don't have to go to Arizona with Gore and Duke it out with them about what the PTFE prices, that's very cute, but but I do think this is.
A bit of law made as a price play and we keep having pricing power and the the good thing here is if you want more pricing power. The Brussels is about to give it to you in spades here, they keep making these regulatory barriers higher and higher with the M. D R's and the people the competitors are falling off like fleas in the smaller markets, they're just going to.
Way and so therefore, it gives us more pricing power to with the.
The shot pricing that we've had in the last three years. The power. They have gotten has been largely because back in Dickinson left the market and the and they left the market because Brussels is put up regulatory barriers that are too high for people to climb over so I think the story continues unchanged I won't predict project, what 2024 will look like but I don't think the stories.
Changing that much Mike This is J J another way to think about Q4 and one of the many ways. We think about it as sequentially, what's going on and so those price hikes that I talked about for Q1, two and three are kind of the same minute around 10%. So you're kind of thinking probably you're gonna do about the same in Q4.
Sure and then what else is different and so the things that's kind of stuck out from Q3 to queue for this time around where one is FX. The FX has moved a lot and so sequentially from Q3 Q for it's like a 600000 dollar headwind and so that's one topic you have to take into consideration the number of days.
As in accord of those matter, we take those into consideration season.
Seasonality matters, a lot for us as well Q3 is generally the slower quarter in Q4 is sort of.
Behind Q2, if you will in terms of seasonality and so there is an uptick there and what does that mean, what's happened historically and so what will it be this year and then we can look into specific stories like we've had a restore flow sort of back order topic in Q3 that we're working our way out of hopefully in queue for and as we get into Q1, what does that mean.
Well, maybe that adds an extra whatever a few hundred thousand dollars, there's a Thailand story that.
We went direct their in Q3, the Thailand distributor stuff the channel essentially so we didn't get the sales. We thought we were getting Q3, but it will get them in Q4, and maybe that's a couple hundred thousand dollars or so so sequentially I think the Isps you can think of is consistent but other topics coming and going to get to the sort of $49 million we could.
Yeah.
Got it that's really helpful. Thank you I just a follow up on that day did it. Thank you and I have spoken about in the past historically.
The price algorithm is it really kind of mid single digits level.
But I guess given the the regulatory consideration that you're mentioning is it fair to think that maybe kind of new paradigm as above what we've seen historically.
You know I think we'll take it year by year, but I think the cycle you're in right now at least for this year and then maybe you can talk a little bit about next year, but not too much. This year, it's all about mostly valvulotome insurance.
And so one of our Valvulotome, so surprised below one of our other <unk>, we brought that price up to essentially match it.
And being the premier provider of these devices the customer said fine and so we got really nice price hikes and Valvulotome an insurance the topics George was talking about it with other competitors going off the market certainly helps our share and our leverage in those spaces and so we've got a nice price hikes, there, particularly in Europe and then the third.
We did this year was we put in and we've done it before but I think we really did it with a little more forcefully. This year was put in pricing floors and some of these product lines and so you may not discount beneath whatever that pricing floor is if you're a sales rep, whereas in the past you could have.
So.
To the extent that we use pricing floors in the future you might get outsized ASB growth versus your 5% historical to the extent, there's other product lines in the bag that are mismatched in terms of pricing that can be fixed you might get outsized pricing in the future. So we'll see where that goes but right. Now we are certainly in a nice spot <unk>.
The pricing.
Very helpful. Thank you.
Thank you.
<unk> next question.
And our next question is going to come from the ninth at Daniel Sarah with JMP Securitas. Your line is open. Please go ahead.
Hi, Daniel Europe, if you want to ask US a question it's George.
Operator, they might have bad phones out in San Francisco why don't we move along.
Right just one moment please.
And our next question is gonna come from the line is Scott Henry Roth Capital like your line is open. Please go ahead.
Thank you. Good afternoon, just a couple very quick questions first if you don't mind could you give me the mix between biologics and non biologics.
Biologics was 51% of sales in the quarter.
Okay. Thank you.
And then looking at the numbers.
Ah.
Sales and marketing was kind of down sequentially with employees up.
Any thoughts of why and even on similar revenues to kill or yeah. Similar revenues to Q1, it was down significantly from key one.
How should I think about sales and marketing in Q3, and and how that she'd be indicative going forward.
Thank you yeah. So so one of the reasons selling and marketing has been elevated.
And the first part of the year is because sales results were.
So strong versus quotas and I think as we get through the year, a little bit quotas start to ramp up a little bit and so even with a 16% consistent organic growth and each of the quarters the answer versus quota changed a little bit and so commissions and contests.
We're down a little bit Q3 is also seasonally.
The time, we're selling and marketing goes down a little bit there is a little bit but have a vest travel.
And conferences, and all that kind of stuff and so down there as well and so I think there's there's a couple of good reasons for that and then in Q1. The weird Weird answer there is we have a sales meeting and so that's sort of I dunno, a six or 700000 dollar event globally. There's one for each of the main geographies and so you can see.
See an absolute dollars sort of coming down from 10 nine to the tend to from Q1 Q2, So maybe that's how that cadence work throughout the year.
Okay, great. Thanks for the color and final question you mentioned how are you.
You are losing some competitors and some international areas and it benefited some of the products are there any new product launches internationally.
<unk>.
And any specific countries that we should be factoring into our model going forward any any levers that would kind of change the trajectory of any of the.
<unk> in the near term. Thank you Scott George I'll take that's a great question I'll take that you know we've read out in this script these regulatory approvals, but they're kind of longer in the you know they take awhile to get through there but.
RSA in Europe at some point will add something we don't know when we'll get the approval outside of the UK. So we don't want to get on the hook for changing anyone's model here as you are suggesting.
Already graft is a biggie in in Europe, maybe two years from now three years from now, but I wouldn't until we we haven't even filed for the regulatory approval when we get that and maybe we'll have more details on timing and things like that and then of course, autographed and Canada and Australia, but <unk>.
In short answer I would say no. There's nothing that I would change my model for here things are going along we're getting tons of little regulatory approvals over in Asia pack that we don't talk about on these calls because they're kind of smallish, but the machine keeps going.
Okay, great. Thank you for taking the questions.
Thanks, a lot Scott.
As they move onto our next question.
And our next question is a follow up question from the line as Michael <unk>.
Reset your line is open. Please go ahead.
Thanks, Yeah, a few quick ones, Georgia, I didn't catch us. If you said, it's early forgive me, but the C E. Mark filing for autographed is that targeted by year and still are I think at one point. It was yeah. It has been for a long time, it's on one of our quote planks for this year is to put it in by December 31st So I definitely that will go in by December.
31, and it's been on our radar screen for two years or so yeah. Okay, great and then I want a I'd just make sure I understand what.
What are you doing in Paris, that's the first time.
Time, you've had direct sales folks in France is that correct.
You know what I'm glad you're asking us. So we can sort of re distinguish it forever no. We've had sales reps in France since I think 2007.
This is the first time, we're going to have an actual customer service office with French customer service gotcha, Okay, Okay, and all of that to give the hospitals were more hand hen treatment. We have we have eight reps in France, and I would say that's that's on the high end of what we usually have they've had six or seven but we always have them.
Yeah, because when he said that I was sort of confusing to me that that was the <unk>. Okay got it got it and then just one for Jake numbers.
Right Yep, depreciation and amortization 2.395.
SBC 1313.
Capex 1.053.
Okay and then.
The usual.
Yeah.
Thank you and then just J J on on on gross margin and and one quarter right now does not make necessarily a trend, but I think you and and probably investors are really hoping that it. It is I mean do you feel like it looks like gross margin may end up being flat for this here I mean do you feel like you you guys have sort of hit bottom on there.
And are are on the right sort of on the right side of momentum here I guess as we look forward. Yeah. I know, it's a great question I mean of course I want that to be the answer but I'll give you some more color behind that I would say the manufacturing efficiencies from the folks getting more efficient in the seats.
Making devices, that's been Super helpful and it started to come through the piano, obviously price increases help a lot that's sort of a <unk>.
3% benefit year over year with these with these nice price hikes coming through.
And I would say those two things are sort of fighting against I.
I would say one quality cost historically.
Those those increased a lot over the last four years, but I would say, we really started focusing on those so maybe we can.
Make some headway on that topic as we move forward and then the other piece would be the transition of manufacturing for Omniflow and for Cardiocel and those start out pretty inefficient as we've discussed before and hopefully and we think we can make some good progress on those as we move forward through the quarters. So we make it so.
Good answers there as well so we'll see where that all lines up for next year, when we give you guidance.
Alright sounds great. Thanks, Thanks, and and really congratulations was put another excellent quarter. Thanks.
Thanks, a lot thanks, Mike.
Thank you.
Ladies and gentlemen, does does conclude today's conference.
I would like to thank you for participating and you may now disconnect everyone have a great day.
Mmm.
[music].