Q4 2023 Artivion Inc Earnings Call

Operator: Greetings and welcome to the Artivion fourth quarter and year-end 2022. This time, all participants are on a listen-only basis. This brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during, As a reminder, I will now turn the call over to Lane Morgan from Gilmart.

Greetings and welcome to the arc to be on fourth quarter and year end 2023 financial conference call.

At this time all participants are in a listen only mode.

A brief question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded.

I will now turn the call over to Lynn Morgen from the Gilmartin group.

Lane Morgan: Thank you. Good afternoon, and thank you for joining us on the call today. Joining me today from Artivion's management team are Pat Mackin, CEO, and Lance Berry, CFO. Before we begin, I'd like to make the following statements to comply with the safe harbor requirements of the Private Securities Litigation Reform Act of 1995. Comments made on this call that look forward in time involve risks and uncertainties and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include statements made as to the company's or management's intentions, hopes, beliefs, expectations, or predictions of the future.

Lynn Morgen: You may begin.

Lynn Morgen: Good afternoon, and thank you for joining our call today, joining me today from a to be honest management team, our Putback and C. E O N Lansberry CFO before we begin I'd like to make the following statements to comply with the safe Harbor requirements of the private Securities Litigation Reform Act of 1995 comments made on this call that look forward in time.

Lynn Morgen: All risks and uncertainties and are forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.

Lynn Morgen: The forward looking statements include statements made as to the Companys or managements intentions hopes beliefs expectations or predictions of the future.

Lane Morgan: These forward-looking statements are subject to a number of risks, uncertainties, estimates, and assumptions that may cause actual results to differ materially from these forward-looking statements. Additional information concerning certain risks and uncertainties that may impact these forward-looking statements is contained from time to time in the company's SEC filings and in the press release that was issued earlier today. You can also find a brief presentation with details highlighted on today's call in the investor relations section of the Artivion website. Now I'll turn it over to Artivion CEO, Pat Mackin. Thanks, Wayne, and good afternoon, everybody.

Lynn Morgen: These forward looking statements are subject to a number of risks uncertainties estimates and assumptions that may cause actual results could differ materially from these forward looking statements.

Lynn Morgen: Additional information concerning certain risks and uncertainties that may impact. These forward looking statements is contained from time to time in the Companys SEC filings and in the press release that was issued earlier today. You can also find a brief presentation with details highlighted on today's call on the Investor Relations section of the website now I'll turn it over to charge against it.

James Patrick Mackin: Pat Mackin.

James Patrick Mackin: Yeah, Thanks, Wayne and good afternoon everybody.

James Patrick Mackin: I want to start off our call today by welcoming Lance Barry, our new Executive Vice President and Chief Financial Officer. Lance most recently served as Executive Vice President, Chief Financial Officer, and Operations Officer at Wright Medical until the acquisition by Stryker in November of 2020. We are thrilled to have Lance join our team during this exciting time. I am confident his broad expertise and proven leadership in MedTech will add significant value to Artivion as we enter the next phase of profitable growth. I'd also like to thank Ashley Lee for many years of dedicated service to Artivion.

James Patrick Mackin: Start with the call today by welcoming Lance Berry, our new executive Vice President and Chief Financial Officer.

James Patrick Mackin: Lance most recently served as executive Vice President and Chief Financial Officer, and operations Officer Wright medical until the acquisition by Stryker in November of 2020.

Wayne: We are thrilled to have Lance joined our team during this exciting time.

I'm confident his broad expertise and proven leadership in med Tech will add significant value to our T V.

Wayne: As we enter the next phase of profitable growth.

Wayne: I'd also like to thank Ashley Lee for his many years of dedicated service starts to be on.

James Patrick Mackin: His contributions, no doubt, helped make Artivion the outstanding company we are today. Now on to our fourth quarter and full year 2023 results. 2023 was an outstanding year for Artivion, and I'm pleased to report that we achieved total company constant currency revenue growth of just over 12% for the full year of 2023 compared to the full year of 2022. In addition to exceeding our top-line growth revenue target, we achieved adjusted EBITDA growth of nearly 30% year-over-year, enabling us to deliver positive free cash flow, while making strides in advancing our clinical programs and further expanding Our achievements throughout 2023 culminated in a particularly strong Q4 as we delivered constant currency revenue growth of 15% year over year, resulting in $93.7 million in revenue.

His contributions no doubt helped make our treaty and the outstanding company we are today.

Wayne: Now onto our fourth to fourth quarter and full year 2023 results.

Wayne: 2023 was an outstanding year for our activity on and I'm pleased to report that we achieved total company constant currency revenue growth just over 12% for the full year of 2023 compared to the full year of 2022.

Wayne: In addition to exceeding our topline gross revenue target.

Wayne: We achieved adjusted EBITDA growth of nearly 30% year over year, enabling us to deliver positive free cash flow, while making strides in advancing our clinical programs and further expanding our global footprint.

Wayne: Our achievements throughout 2023, culminating in a particularly strong Q4, as we delivered constant currency revenue growth of 15% year over year, resulting in $93 7 million in revenue.

James Patrick Mackin: Our performance was driven by improved revenue growth in our Onyxx business, which increased 19%, followed by tissue processing at 18%, Bioglue at 11%, and Stencrafts at 8% growth, each when compared to the fourth quarter of 2022, all on a constant currency basis. We've also benefited from the expansion of our commercial footprint through regulatory approvals across new geographies, especially in Latin America and Asia Pacific.

Wayne: Our performance was driven by improved revenue growth in our on X business, which increased 19%.

Wayne: Followed by tissue processing at 18%.

Wayne: We were at 11% and stent grafts at 8% growth.

Wayne: Each when compared to the fourth quarter of 2022, all on a constant currency basis.

We've also benefited from the expansion of our commercial footprint through regulatory approvals across new geographies, especially in Latin America and Asia Pacific.

James Patrick Mackin: Our strong top-line performance led to $15.3 million in non-GAAP-adjusted EBITDA in the fourth quarter, which is a 40% increase compared to the fourth quarter of last year. We expect our strong momentum in the fourth quarter to continue into 2024. From a product perspective, as I mentioned earlier, Onyxx revenues increased 19% compared to the fourth quarter of last year on a constant currency basis, as we continue to take market share globally and have the only mechanical aortic heart valve that can be maintained at an INR of 1.5 to 2.0. We believe our valve is the best aortic valve on the market. Our market share gains each year and the recently presented results of the Onyx post-approval data, which showed an 85% reduction in major bleeding, clearly support our view. Tissue processing revenues increased 18% compared to the fourth quarter of last year at a constant current, due primarily to pricing issues and the increase in volume of the Roth.

Wayne: Our strong top line performance led to $15 3 million and non-GAAP adjusted EBITDA in the fourth quarter, which is a 40% increase compared to the fourth quarter of last year.

Wayne: We expect our strong momentum in the fourth quarter to continue into 2024.

From a product perspective, as I mentioned earlier on X revenues increased 19% compared to the fourth quarter of last year on a constant currency basis as we continue to take market share globally and have the only mechanical aortic heart valve that can be maintained and INR 152 to two point to one five to two point out.

Wayne: We believe our valve is the best aortic valve on the market our market share gains each year and the recently presented results of the Onyx post approval data, which showed an 85% reduction of major bleeding clearly support our view.

Wayne: Tissue processing revenues increased 18% compared to the fourth quarter of last year on a constant currency basis.

Wayne: Due primarily to pricing issues and the increase in volume of the Ross procedure.

James Patrick Mackin: We expect continued double-digit growth in our tissue business in 2024, driven primarily by our significantly improved supply of our proprietary Synagraft pulmonary valve. And lastly, Stencraft revenues grew 8% on a constant currency basis in the fourth quarter compared to the fourth quarter of last year, driven by improved supply and strong performance in AMDS outside the U.S. We anticipate demand to remain strong through 2024 and beyond for our Stencraft products, which should sustain and continue our strong revenue performance. Our results were also driven by the continued progress we are making in expanding into new markets. Through new regulatory approvals and commercial footprint expansion in Asia Pacific and Latin America, both delivered constant currency revenue growth of 19% compared to the fourth quarter of last year.

Wayne: We expect continued double digit growth in our tissue business in 2024, driven primarily by a significantly improved supply of a proprietary center graph pulmonary valve.

Wayne: And lastly, Statkraft revenues grew 8% on a constant currency basis in the fourth quarter compared to the fourth quarter of last year, driven by improved supply and strong performance in a M. D S outside the U S.

Wayne: We anticipate demand to remain strong through 2024 and beyond for a stent graft products, which should sustain and continue our strong revenue performance.

Our results were also driven by the continued progress we are making expanding into new markets.

Wayne: Two new regulatory approvals and commercial footprint expansion in Asia Pacific and Latin America, both delivered constant currency revenue growth of 19% compared to the fourth quarter of last year.

James Patrick Mackin: We expect these regions to be important growth drivers over the coming years as we continue to leverage our industry-leading product portfolio further into these regions. In addition to our strong financial performance, we continue to advance our clinical programs and show leadership in the aortic field with two late-breaking science presentations at the STS annual meeting in San Antonio. First, the full data set from the AMDS Persevere clinical trial.

Wayne: We expect these regions to be important growth drivers over the coming years as we continue to leverage our industry, leading product portfolio further into these regions.

Wayne: In addition to our strong financial performance, we continued to advance our clinical programs and show leadership in aortic field with two late breaking science presentations at the STS annual meeting in San Antonio.

First the full dataset from the a M D S persevered clinical trial and second the interim data from the Nexus triage clinical trial.

James Patrick Mackin: And second, the interim data from the Nexus Triumphant clinical trial. First, in November of last year, we completed the trial enrollment of Persevere, our IV clinical trial for PMA approval, which consists of 93 patients who have experienced an acute type A dissection. I'm pleased to report that the trial methods combined primary efficacy and safety endpoints, demonstrating a statistically significant reduction in all-cause mortality in the primary endpoint of major adverse events, as well as no occurrence of dame, which is associated with increased risk for reintervention and mortality. As a reminder...

Wayne: First in November of last year, we completed the trial enrollment of persevere, our IV clinical trial for PMA approval, which consists of 93 patients who have experienced an acute type a dissection.

Wayne: I'm pleased to report that the trial met its combined primary efficacy and safety endpoints, demonstrating a statistically significant reduction in all cause mortality and the primary endpoint of major adverse events as well as no occurrence of Dane.

Wayne: Which are associated with increased risk for re intervention and mortality.

Speaker Change: As a reminder.

James Patrick Mackin: The adverse events, called MAEs, which is the MAE endpoint for the ID trial, are based on historical control of patients with malperfume. In this reference cohort, 58.2% of patients had greater than or equal to one major adverse event. The target goal in the trial from the FDA was a reduction in this endpoint to 40% of patients with greater than or equal to 1 MAE. The recently presented 30-day data at STS showed that only 28% of the patients had greater than or equal to one major adverse event, representing a 52% reduction compared to the standard-of-care Hemiarchs procedure. As it relates to Dane pairs, for contact, Dane occurs in up to 70% of patients following hemiarchal pair without ANDS.

Speaker Change: The adverse events called <unk>, which is the MAA endpoint for the IV trial is based on historical control of patients with mild perfusion.

Speaker Change: And this reference core 58, 2% of patients had greater than or equal to one major adverse events.

Speaker Change: The target goal in the trial from the F D a.

Speaker Change: <unk> seen in this endpoint to 40% of patients with greater than or equal to one M E E.

Speaker Change: The releases the recently presented 30 day data at STS should only 28% of the patients had greater than or equal to one major adverse events, representing a 52% reduction compared to the standard of care Hemi Archs procedure.

Speaker Change: As it relates to Dane tiers for context, Dane occurs up to 70% of patients following Henry Archer pair without Andy yes.

James Patrick Mackin: Results from the full IDE data set have shown there have been no deigns at all detected in any patients treated with AMDS, nor were there any deign cares reported in DART's study after three years of follow-up. Critically, the data up to 30 days also demonstrated a statistically significant 72% reduction of all-cause mortality, a truly revolutionary result. Second, the interim data from the NEXUS-TRIUMPH-USID trial, which included 22 patient study participants, demonstrated a 9% mortality rate, and no detected strokes, paraplegia, or renal failure in any patients treated with NEXUS aortic arch stent grafts. As of today, there have been 42 of 60 patients enrolled in the primary endpoint of the NEXUS trial, and it remains In summary, we're very excited about these two new data prints, which, assuming we exercise our option to acquire Endospan, should accelerate stent graph growth in markets where the products are currently in. If these PMA processes proceed as we anticipate, we would expect PMA approval for AMDS in 2025 and NEXUS in 2020.

Results from the full dataset has shown there have been no no dean's at all detected any patients treated with M. D. S. Nor were there any dane chairs reported in Dart study after three years of follow up.

Speaker Change: Critically the data up to 30 days also demonstrated a statistically significant 72% reduction of all cause mortality.

Speaker Change: Truly revenues revolutionary resolved.

Speaker Change: Second the interim data from the Nexus tree off U S. IDE trial included a 22 patient study participants demonstrated a 90% mortality.

No detected strokes, purfle, Egypt, or renal failure in any patients treated with nexis aortic arch stent graft system.

Speaker Change: As of today, there have been 42 of 60 patients enrolled in the primary endpoint of the Nexus trial and it remains on track for approval in 2026.

Speaker Change: In summary, we're very excited about these two native these two new data prints, which assuming we exercise our option to acquire understand should accelerate stent graft growth in markets, where the products are currently approved.

Speaker Change: If these PMA process is pursued as we anticipate we would expect PMA approval for <unk> in 2025 indexes in 2026.

James Patrick Mackin: At that time, again, assuming we exercise the option for Endospan, these two products would significantly increase our adjustable market operation. Lastly, on our R&D pipeline, our third-generation frozen elephant trunk used to replace the entire aortic arch, called Arcebo LSA, is in the final testing stages, and we currently expect to start the USID trial later this year. I look forward to providing additional updates on our progress on future calls. With that, I'll now turn the call over to Lance. Thanks, Pat, and good afternoon, everyone.

Speaker Change: At that time again, assuming we exercise the option for I understand these two products with significantly increase our addressable market opportunity.

Speaker Change: Lastly, on our R&D pipeline are third generation frozen elephant trunk used to replace the entire aortic arch called our Siebel LSA isn't the final testing stages. We currently expect to start the U S. IDE trial later this year I look forward to providing additional updates on our proprietary on our progress.

Speaker Change: Future calls with that I'll now turn the call over to Lance.

Lance Berry: Thanks, Pat and good afternoon, everyone before I begin I'd like to remind you to please refer to our press release published earlier today for information regarding our non-GAAP results, including a reconciliation of these results to our GAAP results. Additionally, all percentage changes discussed will be on a year over year basis and revenue growth rates will be in cost.

Lance Berry: Before I begin, I'd like to remind you to please refer to our press release published earlier today for information regarding our non-GAAP results, including a reconciliation of these results to our GAAP results. Additionally, all percentage changes discussed will be on a year-over-year basis, and revenue growth rates will be in constant currency unless otherwise noted. Revenues were $93.7 million for the fourth quarter of 2023, up 15 percent compared to Q4 of 2022. Non-gap adjusted EBITDA increased approximately 40 percent from $11 million to $15.3 million in the fourth quarter of 2023.

Lance Berry: Currency unless otherwise noted Rev.

Lance Berry: <unk> revenues were $93 7 million for the fourth quarter of 23.

Lance Berry: 2023 up 15% compared to Q4 of 2022.

Lance Berry: non-GAAP adjusted EBITDA increased approximately 40% from 11 million to $15 3 million in the fourth quarter of 2023.

Lance Berry: After generating $5.8 million of free cash flow in the third quarter of 2023, we generated $7.4 million of free cash flow in the fourth quarter. Importantly, we were free cash flow positive for the full year 2023, representing a critical milestone achievement for Artivion. As importantly, we expect that free cash flow will continue to be positive in 2024. From a product line perspective, Onyx revenues grew 19%, tissue processing revenues increased 18%, bioglue revenues increased 11%, and stent graft revenues grew 8% in the fourth quarter of 2023. On a regional basis, revenues in both Asia-Pacific and Latin America increased 19%, while North America increased 17%, and EMEA increased 10%, all compared to the fourth quarter of 2022. Gross margins improved to 65% in Q4 compared to 64% in the fourth quarter of 2022. This increase was driven by price increases in the product mix, partially offset by inflationary impacts on materials and labor.

Lance Berry: And after generating $5 8 million of free cash flow in the third quarter of 2023, we generated $7 4 million of free cash flow in the fourth quarter.

Importantly, we were free cash flow positive for the full year 2023, representing a critical milestone achievements, where our T V or as importantly, we expect that free cash flow, we will continue to be positive in 2024.

Lance Berry: From a product line perspective on X revenues grew 19% tissue processing revenues increased 18% bio glue revenues increased 11% and stent graft revenues grew 8% in the fourth quarter of 2023.

Lance Berry: On a regional basis revenues in both Asia Pacific and Latin America increased 19%, while North America increased 17% and EMEA increased 10% all compared to the fourth quarter of 2022.

Lance Berry: Gross margin improved to 65% in Q4 compared to 64% in the fourth quarter of 2022.

Lance Berry: This increase was driven by price increases and product mix, partially offset by inflationary impact on materials and labor.

Lance Berry: General administrative and marketing expenses in the fourth quarter were $50.3 million compared to $38.5 million in the fourth quarter of 2022. Non-GAAP General Administrative and Marketing expenses were $47.7 million compared to $41.9 million in the fourth quarter of 2022. R&D expenses for the fourth quarter were $7.6 million compared to $8.3 million in the fourth quarter of 2022. Other income and expenses include $5.8 million in net interest expense and foreign currency translation gains of approximately $2.2 million. On the bottom line, we reported a gap net loss of approximately $4 million, or $0.10 per fully diluted share, in the fourth quarter of 2023. Non-Gap Net Income was $4.6 million, or $0.11 per share, in the fourth quarter.

Lance Berry: General administrative and marketing expenses in the fourth quarter were $50 3 million compared to $38 5 million in the fourth quarter of 2022.

Lance Berry: non-GAAP general administrative and marketing expenses were $47 $7 million compared to $41 $9 million in the fourth quarter of 2022.

Lance Berry: R&D expenses for the fourth quarter were $7 $6 million compared to $8 3 million in the fourth quarter of 2022.

Lance Berry: Other income and expenses include $5 $8 million and net interest expense and foreign currency translation gains of approximately $2 $2 million.

Lance Berry: On the bottom line, we reported GAAP net loss of approximately $4 million or 10 cents per fully diluted share in the fourth quarter of 2023.

Lance Berry: non-GAAP net income was $4 6 million or 11 cents per share in the fourth quarter.

Lance Berry: As of December 31, 2023, we had approximately $58 $9 million in cash and $312 million in debt.

Speaker Change: It's important to note that this does not contemplate the impact of our recently closed comprehensive credit agreement, which I will speak to shortly.

Lance Berry: As of December 31st, 2023, we had approximately $58.9 million in cash and $312 million in debt. It is important to note that this does not contemplate the impact of our recently closed comprehensive credit agreement, which I will speak to shortly. And now for our initial outlook for 2024. We expect to continue building on our momentum, enabling us to achieve as-reported revenues in the range of $382 to $396 million. At current FX rates, the year-over-year impact on revenue is expected to be negligible.

Speaker Change: And now for our initial outlook for 2024 weeks.

Speaker Change: We expect to continue building on our momentum, enabling us to achieve as reported revenues in the range of $382 million to $396 million.

Speaker Change: At current FX rates the year over year impact on revenue is expected to be negligible. Therefore, this range represents revenue growth of 8% to 12%, both as reported and on a constant currency basis.

Speaker Change: With their continued top line revenue growth and general expense management, we expect adjusted EBITDA to be in the range of $68 million to $72 million for the full year 2024, representing 26% to 34% growth over 2023, and 280 basis points of adjusted EBITDA margin expansion at the midpoint of our ranges.

Lance Berry: Therefore, this range represents revenue growth of 8-12% both as reported and on a constant currency basis. With our continued top-line revenue growth and general expense management, we expect Adjusted EBITDA to be in the range of $68-72 million for the full year 2024, representing 26-34% growth over 2023 and 280 basis points of Adjusted EBITDA margin expansion at the midpoint of our ranges. We expect gross margins to remain at levels similar to 2023. We expect to continue to drive significant leverage from our global sales force and G&A infrastructure. Additionally, R&D expense is expected to remain relatively flat as a percentage of sales.

Speaker Change: We expect gross margins to remain at levels similar to 2023.

Speaker Change: We expect to continue to drive significant leverage from our global sales force and G&A infrastructure. Additionally.

Speaker Change: Additionally, R&D expense is expected to remain relatively flat as a percentage of sales.

Speaker Change: I would like to proactively note that our guidance range is below the $75 million that we originally targeted for 2024 at our March 2022 Investor Day.

Speaker Change: There has been no change to our commitment to drive significant adjusted EBITDA growth in 2024, as evidenced by our expectation for 30% year over year growth at the midpoint of our range, which is three times, our midpoint topline growth rate.

Speaker Change: We are driving this level of improvement, while maintaining our investment levels in R&D as a percentage of sales.

Lance Berry: I would like to proactively note that our guidance range is below the $75 million that we originally targeted for 2024 at our March 2022 Investor Day. However, there has been no change to our commitment to drive significant adjusted evidi growth in 2024, as evidenced by our expectation for 30% year-over-year growth at the midpoint of our range, which is three times our midpoint top-line growth rate. We are driving this level of improvement while maintaining our investment levels in R&D as a percentage of sales. Driving strong adjusted EBITDA growth is a top priority, but not at the expense of the investments we need to make for the future. We feel that the strength of our underlying business, our longer-term growth outlook, and our balance sheet today validate this approach.

Speaker Change: Driving strong adjusted EBITDA growth is a top priority, but not at the expense of the investments we need to make for the future.

Speaker Change: We feel that the strength of our underlying business our longer term growth outlook and our balance sheet today validate this approach.

Speaker Change: In regard to our capital structure. We are very pleased to have recently closed a comprehensive non dilutive financing for $350 million of senior secured interest only credit facilities with six year maturities.

Speaker Change: The facilities include an initial $190 million term loan a $60 million revolving credit facility and an additional $100 million in unfunded delayed draw term loan that may be drawn to refinance our convertible bonds at any time prior to their maturity in July 2025.

Speaker Change: As a reminder, our convertible notes do not contain any financial covenants.

Speaker Change: The initial 190 million term loan and $30 million on the revolving credit facility were drawn at close along with the use of some cash on our balance sheet to retire the existing senior secured credit facilities and pay related transaction expenses.

Lance Berry: In regard to our capital structure, we are very pleased to have recently closed a comprehensive non-diluted financing for $350 million of senior secured interest only credit facilities with a six year maturity. The facilities include an initial $190 million term loan, a $60 million revolving credit facility, and an additional $100 million in unfunded delayed draw term loans that may be drawn on to refinance or convert bonds at any time prior to their maturity in July 2025. As a reminder, our convertible notes do not contain any financial covenants.

Speaker Change: Overall this credit agreement coupled with our strong financial performance gives us flexibility with no near term debt maturity overhang as we continue to evaluate the best options to address our convertible debt.

Speaker Change: We also intend to file a shelf registration statement on form <unk> with the SEC following the filing of our 10-K we've.

Speaker Change: We view this strictly as a matter of good corporate housekeeping and prudent considering the reestablishment of our Wppsi status.

Speaker Change: As it relates to free cash flow, we are not giving formal guidance. However, we are confident in our ability to be free cash flow positive in 2020 for.

Lance Berry: The initial $190 million term loan and $30 million from the revolving credit facility were drawn at close, along with the use of some cash on our balance sheet to retire the existing senior secured credit facilities and pay related transaction expenses. Overall, this credit agreement, coupled with our strong financial performance, gives us flexibility with no near-term debt maturity overhang as we continue to evaluate the best options to address our convertible debt. We also intend to file a shelf registration statement on Form 3 with the SEC following the filing of our 10-K. We view this strictly as a matter of good corporate housekeeping and prudent considering the reestablishment of our Wixie status. As it relates to free cash flow, we are not giving formal guidance, but we are confident in our ability to be free cash flow positive in 2024.

Speaker Change: The $16 million of incremental adjusted EBITDA at the midpoint more than covers the $5 7 million of additional interest from the new credit facility, which provides us room for working capital expansion to support the growth of the business, while still being free cash flow positive.

Speaker Change: Finally, I want to make a few comments on quarterly cadence to assist you with your modeling.

Speaker Change: As it relates to revenue seasonality the third quarter is typically our lowest growth quarter, particularly due to the impact of the European vacation season.

Speaker Change: Q1 is our most cash intensive quarter due to the payment of annual bonuses and due to the normal activities such as sales meetings and industry conferences, which are heavier in the first quarter.

Speaker Change: Despite our expectations for free cash flow to be negative in Q1 because of these items, we still expect cash flow to be free to be free cash flow positive for the full year of 2024.

Speaker Change: In summary, we are thrilled with our 2023 performance and are excited about the prospects of the business in 2024 and beyond.

Speaker Change: With that I will turn the call back to Pat for his closing comments.

Pat: Hey, Thanks Lance.

Pat: <unk> heard from lands, we're extremely pleased with our 2023 performance and continue to deliver on our mission to build a world class aortic company.

Lance Berry: The $16 million of incremental adjusted EBITDA at the midpoint more than covers the $5.7 million of additional interest from the new credit facility, which provides us room for working capital expansion to support the growth of the business while still being free cash flow positive. Finally, I want to make a few comments on quarterly cadence to assist you with your modeling. As it relates to revenue seasonality, the third quarter is typically our lowest growth quarter, particularly due to the impact of the European vacation season.

Pat: We finished strong with 15% revenue growth and 40% adjusted EBITDA growth in the fourth quarter, we continued to expand our markets and meaningfully advance our clinical pipeline positioning us well for long term growth.

Pat: We also executed a non dilutive capital structure, giving us a six year runway with no financing overhang.

Pat: Our strategy to deliver sustained profitable growth is working and we look forward to continuing momentum we built in 2023 through 2024 and beyond.

Lance Berry: Q1 is our most cash-intensive quarter due to the payment of annual bonuses and due to normal activities such as sales meetings and industry conferences, which are heavier in the first quarter. Despite our expectations for free cash flow to be negative in Q1 because of these items, we still expect free cash flow to be positive for the full year of 2024. In summary, we are thrilled with our 2023 performance and excited about the prospects of the business in 2024 and beyond. With that, I will turn the call back to Pat for his closing comments.

Pat: More specifically our growth this year will be driven by the following number one our.

Pat: Our continued growth in our stent graft business driven by the recent 30 day persevere data presented at S. T S showing a 72% reduction in mortality and a 52% reduction in major adverse events compared to the standard of care literature control.

Pat: Number two continued market share gains for <unk> driven by data recently presented in Europe, a 510 patients in our aortic valve showing an 85% reduction of major bleeding.

Pat: Number three continued growth of our proprietary scintigram pulmonary valves driven by price increases growth of the Ross procedure as well as our ability to capture that growth from our efforts to improve supply and fourth our continued growth in Asia Pacific and Latin America from our channel investments and new regulatory approvals. So in conclusion, we're more.

James Patrick Mackin: Hey, thanks, Lance. As you heard from Lance, we're extremely pleased with our 2023 performance. We continue to deliver on our mission to build a world-class aortic company. We finished strong with 15% revenue growth and 40% adjusted EBITDA growth in the fourth quarter. We continue to expand our markets and meaningfully advance our clinical pipeline, positioning us well for long-term growth. We also executed a non-dilutive capital structure, giving us a six-year runway with no financing overhead.

Pat: Confident we're more confident than ever in our near and long term prospects of our business.

Speaker Change: Finally, I want to thank all of our employees around the globe for delivering an exceptional year. So with that operator. Please open the line for questions.

Speaker Change: Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue.

Speaker Change: Press Star two if he would like to remove your question from the queue.

Speaker Change: Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker Change: One moment, please while we poll for questions.

Speaker Change: Our first question comes from the line of Rick Wise with Stifel. Please proceed with your question.

Speaker Change: Hey, Pat Hey, Lance this is John on for Rick today.

John: Just wanted to start off with M. D. S. You had some really positive strong data readout.

James Patrick Mackin: Our strategy to deliver sustained profitable growth is working, and we look forward to continuing the momentum we built in 2023 through 2024 and beyond. More specifically, our growth this year will be driven by the following. Number one, our continued growth in our STENCREF business, driven by the recent 30-day Persevere data presented at STS, showing a 72% reduction in mortality and a 52% reduction in major adverse events compared to the standard of care literature control. Number two, continued market share gains for Onyx, driven by data recently presented in Europe of 510 patients with our aortic valve, showing an 85% reduction in major bleeding. Number three, continued growth of our proprietary Synagraft pulmonary valve, driven by price increases, growth of the ROS procedure, as well as our ability to capture that growth from our efforts to improve supply.

John: STS recently and I just wanted you to maybe remind us about just how clinically meaningful. This is in the eyes of doctors, how the technology is performing in Europe today, and how we should be thinking about the U S opportunity as we look ahead to 'twenty five.

Yeah, I'll take that one so you know clearly this is a.

Speaker Change: Very exciting technology I've been in the field a cardiac devices for 30 years.

Speaker Change: And associated with a lot of breakthrough technologies I've never seen one that actually.

Speaker Change: Has the patient benefit that we've seen in this in this device and I'll give you just a kind of a background rate. So in acute type AJ section is a very extreme disease state where patients are medevac and typically in the middle of night and.

Speaker Change: This trial was done in patients with mild perfusion, which means they have kind of blood not flowing to the to the brain to the kidney to the legs. This this device.

James Patrick Mackin: And fourth, our continued growth in Asia-Pacific and Latin America from our channel investments and new regulatory approval. So, in conclusion, we are more than ever confident; we are more confident than ever in our near and long-term prospects for our. Finally, I want to thank all of our employees around the globe for delivering an exceptional year. So with that, operator, please open the line for questions. Thank you. We will now be conducting a question and answer session, if you'd like to ask a question. Star 1 on your telephone, for more information, tell them what indicates that you're in line.

Speaker Change: An FDA trial at 93 patients, which is the largest series ever done in acute type Adas section patience.

Speaker Change: <unk> had a statistically significant reduction of 72% and mortality that's death right. So 72% more patients were alive.

Speaker Change: It also showed a reduction in the major adverse events of strokes people have required kidney dialysis and myocardial infarctions. So we saw 52% reduction in those four major adverse events.

Speaker Change: So I think this is a really a light it's all it's truly a lifesaving technology and we're very excited our investigators are very excited about this.

Operator: And you may press star 2 if you'd like to remove... participants using speaker equipment it may be necessary to pick up your handset before One moment, please, while we... Our first question comes from the line of Rick Wise with Stiefel. Please proceed with your question. Hey, Pat. Hey, Lance. This is John on for Rick today.

It's about $150 million market opportunity in the U S.

Speaker Change: Well, obviously you will have to go through all the steps you have to go through and the adoption of a new technology, but we're all alone in the market. There is no. Other competitor the competitor is a hemi orange, which is a surgical graft. That's been done for 50 years Theres been no innovation. This is a highly patented protected products. So we feel like this is a market.

James Patrick Mackin: I just want to start off with AMDS. You had some really positive, strong data readouts at STS recently, and I just wanted you to maybe remind us about just how clinically meaningful this is in the eyes of doctors, how the technology is performing in Europe today, and how we should be thinking about the U.S. opportunity as we look ahead to 25. Yeah, I'll take that one. So, you know, clearly, this is a very exciting technology. I've been in the field of cardiac devices for 30 years and associated with a lot of breakthrough technologies, but I've never seen one that actually has the patient benefit that we've seen in this device. And I'll give you just a kind of background, right?

Speaker Change: That our TVN will own for a very long time, and we're super excited about getting it out to the patients.

Speaker Change: Thanks, that's helpful. And then just to follow up on the guidance.

I understand the logic on adjusted EBITDA reinvesting in the business just curious one exactly what particular areas of focus are you reinvesting in innovating and then on the revenue side I noticed that in the fourth quarter stent grafts on an organic basis were more like high single digits.

Speaker Change: And then.

Speaker Change: The preservation tissue business was up high teens. So just as we think about that into 'twenty four should we expect similar growth rates from those two or maybe find somewhere in the middle.

James Patrick Mackin: So an acute type A dissection is a very extreme disease state where patients are medevaced in, typically in the middle of the night. And this trial was done in patients with malperfusion, which means they have some blood not flowing to the brain, to the kidneys, to the legs. This device, in an FDA trial of 93 patients, which is the largest series ever done in acute type A dissection patients, showed a statistically significant reduction of 72% in mortality. That's death, right? So 72% more patients were alive. It also showed a reduction in the major adverse events of stroke.

Speaker Change: Yeah, Let me let me take the first one I'll Atlanta take the second one so as far as the investments.

As we've said all along we're building an aortic company right. So you've seen a significant investment in <unk> in the U S. FDA trial, persevere, which you just heard about.

Atlanta: Where we're literally starting is that one is getting ready to get to market. We're literally starting our next generation.

Atlanta: Device to replace the entire aortic arch called our CFO.

James Patrick Mackin: People have required kidney dialysis and myocardial infarction. So we saw a 52% reduction in those four major adverse events. So I think this is, you know, really a light. It's truly a life-saving technology, and we're very excited, our investigators are very excited about this. You know, it's about a $150 million market opportunity in the U.S. Obviously, we'll have to go through all the steps you have to go through in the adoption of a new technology, but we're all alone in the market. There's no other competitor. The competitor is the Hemiart, which is a surgical graft that's been done for 50 years. There's been no innovation.

Atlanta: We've been developing it for several years, it's a breakthrough technology as identified by the FDA, We will start that clinical trial. This year here in the U S and Europe and then we've got some some technologies behind it but as Lance said in his comments.

Atlanta: We can do this in our P&L and not really hold you to increase our percentage of R&D as a percentage of revenue because we're growing the top line as well so we're being very pragmatic about.

Atlanta: Being financially disciplined.

Atlanta: Growing the top line mid point of our range, 10% bottom line, 30% and still being able to invest in innovation. So I think this is something that shareholders should life, because we can deliver top line bottom line cash flow and a pipeline.

James Patrick Mackin: This is a highly patented, protected product, so we feel like this is a market that Artivion will own for a very long time, and we're super excited about getting it out to patients. Thanks, that's helpful. And then, just to follow up on the guidance, I understand the logic on adjusted EBITDA reinvesting in the business. Just curious, one, exactly what particular areas of focus are you reinvesting in and innovating in? And then on the revenue side, I noticed that in the fourth quarter, stent graphs on an organic basis were more like high single digits. And then, Preservation, Tissue Business was in the high teens. So just as we think about that into 24, should we expect similar growth rates from those two or maybe find somewhere in the middle? Yeah, let me take the first one. I'll let Lance take the second one.

Speaker Change: So maybe you could take that second question.

Speaker Change: Sure. So you know the.

Speaker Change: The question was about student graph growth in tissue processing growth and how those flow into 2024 or so.

Speaker Change: First one stent grafts.

Speaker Change: I think the Q4 I would call that just kind of normal.

Speaker Change: Our level of quarterly fluctuation on growth rates for the full year stent grafts grew in the mid teens and that's really how we think about that business going into <unk> for full year 2024, again, you may see some variation quarter to quarter on the tissue processing, we are benefiting from the price increase we took.

James Patrick Mackin: So as far as the investment... As we've said all along, we're building an aortic company, right? So you've seen a significant investment in AMBS and the U.S. FDA trial Persevere, which you just heard about. We're literally starting, as that one's getting ready to go to market, we're literally starting our next generation device to replace the entire aortic arch, called Arcevo. We've been developing it for several years. It's a breakthrough technology as identified by the FDA.

Speaker Change: In second quarter of 2023 on our xenograft technology. So we're benefiting from that and we began to see a little bit of the improved supply as well in the fourth quarter that helped help that so we may see.

Speaker Change: Tissue processing revenues to be a little higher in the beginning of 2024 for the full year.

Speaker Change: Think about that more you know kind of a double digit grower as we've kind of talked about in the recent past.

James Patrick Mackin: We will start that clinical trial this year here in the U.S. and Europe, and then we've got some, you know, some technologies behind it, but as Lance said in his comment, we can do this in our P&L and not really hold, you know, increase our percentage of R&D as a percentage of revenue because we're growing the top line as well. So we're being very pragmatic about, you know, being financially disciplined, growing the top line, the midpoint of our range 10%, the bottom line 30%, and still being able to invest in innovation. So I think this is something that shareholders should like because we can deliver a top line, a bottom line, cashflow, and a pipeline. So Lance, maybe you can take that second question.

Speaker Change: Thanks for taking the questions.

Speaker Change: Our next question comes from the line of Mike Matson with Needham. Please proceed with your question.

Mike Matson: Yeah. Thanks, So I guess I'll just start with the financing the new credit facility. So can you just call it kind of where you'll be with regard to your leverage ratio.

Mike Matson: Following that.

Mike Matson: Transaction.

Mike Matson: Where are you kind of ended at the year last year in terms of EBITDA.

Speaker Change: Yeah go ahead last year.

Speaker Change: Yeah. So.

Ralph top of my head, but you know, we did $53 8 million of EBITDA.

Speaker Change: At the end of this that the in 2023 and you know post transaction you know you're really thinking about net debt of about $260 million. So I mean, I guess you do the math on that real quick.

Lance Berry: Sure, so I think the question was about stent graft growth and tissue processing growth and how those will flow into 2024. So first on stent grafts, I think the Q4, I would call that just kind of normal level of quarterly fluctuation in growth rates. For the full year, stent grafts grew in the mid-teens, and that's really how we think about that business going into the full year 2024. Again, you may see some variation quarter to quarter.

Ralph: Five point something roughly yeah, yes 448.

Ralph: Do you know is where it is right now and we think we will get it you know.

Ralph: The midpoint of the range in some cashflow will kind of get that approaching three.

Ralph: Three and a half to three by the end of 2024.

Ralph: <unk>.

Ralph: So some really good progress there I would point out that there are covenants in the new debt, but they are well above that level and we actually have a favorable definition of EBITDA in our credit agreement. So per the actual credit agreement that net leverage ratio is even less than than what it is an honor.

Lance Berry: On the tissue processing, we are benefiting from the price increase we took in the second quarter of 2023 on our stent graft technology. So, we're benefiting from that, and we began to see a little bit of the improved supply as well in the fourth quarter that helped that. So, we may see, You know, the tissue processing revenues be a little higher in the beginning of 2024 for the full year. We think about that more as kind of a double-digit grower, as we've kind of talked about in the recent past. Thanks for taking the question, from the line of Mike Matson with Nido. Yeah, thanks.

Ralph: You know as adjusted basis.

Speaker Change: Okay. Thanks that helps.

Speaker Change: And then.

Speaker Change: Just on the Mds I mean, obviously the data looked really good you know do you expect to.

Speaker Change: The FTAA require a panel for that or do you think they'll just you know peripheral without a panel.

Speaker Change: We haven't gotten Mike we haven't gotten to that level of detail, yet I mean, I am not going to opine on what the FDA is going to do but obviously that I think the data speaks for itself right. I mean, it's this is a super sick population with phenomenal result, so we're obviously going to work with them to get the technology out as soon as we possibly can so.

Lance Berry: So I guess I'll just start with the financing, the new credit facility. So can you tell us kind of where you'll be with regard to your leverage ratio, you know, following that, that transaction, and where you kind of ended the year last year in terms of EBITDA? Yeah, go ahead, Lance.

Panel or not I don't I can't really comment.

Speaker Change: Okay and then.

Speaker Change: As far as <unk>.

Speaker Change: The timing I mean, so would that be.

Speaker Change: Is that really more 27 2027 at this point or could it be earlier that yes.

Lance Berry: Yeah, so I don't know what rattled off my head, but we did 53.8 million in EBITDA at the end of this, at the end of 2023. And post-transaction, you're really thinking about net debt of about $260 million. So I mean, I guess we'll do the math on that real quick. 4.8 is where it is right now, and we think we'll get it to the midpoint of the range, and with some cash flow, we'll kind of get that approaching three-and-a-half to three by the end of 2024. So some really good progress there. I would point out that there are covenants in the new debt, but they're well above that level. And we actually have a favorable definition of EBITDA in the credit agreement. So, per the actual credit agreement, that net leverage ratio is even less than what it is on an as-adjusted basis.

Speaker Change: I think that's I think that's about right probably late 2017, so we expect to get the the IV approved.

Speaker Change: This year and hopefully.

Speaker Change: You can get some patients enrolled but again, there's a lot of bureaucracy at the startup of a trial. So I think that's right we feel like.

Speaker Change: Just the centers we have in this in the kind of the a.

A lot of these top centers were involved in the development of this technology and they are super excited about it. So I expect our enrollment to go pretty well, but there is a one year follow up and then you've got to go through an FDA pm.

Speaker Change: PMA cycle. So there's some time, but kind of a late 2007 is probably a good timing for that.

Okay got it thank you.

Speaker Change: Yeah.

Speaker Change: Thank you. Our next question comes from the line of Suraj Kalia with Oppenheimer. Please proceed with your question.

Suraj Kalia: Pipelines can you hear me all right.

Suraj Kalia: Yeah, we hear you fine.

Suraj Kalia: Pat Let me start off with a congratulations I mean, you guys have consistently even through Covid I'm, probably one of the few that has consistently beat numbers every quarter. So congrats once again.

Suraj Kalia: I know Pat on M. D. S. A number of questions that'd be as Pat just for the audience again can you size up the the U S market, what how do you define the low hanging fruit.

James Patrick Mackin: Okay, thanks, that helps. And then, you know, just on AMDS, I mean, obviously, the data looked really good. Do you expect the FDA to require a panel for that, or do you think they'll just, you know, approve it without a panel? We haven't gotten to that level of detail yet.

Pat: Yeah. So so basically if you if you look at you know, there's a number of different ways to kind of slice up the market.

Pat: So we come up with a number of $150 million. The ASP on that device, who is going to be about $25000. So there's about 6000.

James Patrick Mackin: I mean, I'm not going to comment on what the FDA is going to do, but obviously, I think the data speaks for itself, right? I mean, this is a super-sick population with phenomenal results. So we're obviously going to work with them to get the technology out as soon as we possibly can. So panel or not, I can't really comment.

Pat: Acute type a dissection is done in the U S. So that's really kind of the back of the napkin is the math.

Pat: <unk> 6000 cases, 25000 device multiply two together and you get a $150 million.

Pat: We've done market research.

Pat: With a number of physicians.

Pat: You can talk to you and you know some of the physicians that were in the trial. This is a very substantial technology again as I said from an earlier question.

James Patrick Mackin: Okay, and then as far as our ACVO goes, just the timing, I mean, would that be really more 2027 at this point, or could it be earlier than that? Yeah, I think that's about right, probably late 2027. So we expect to get the IV approved this year, and hopefully, we can get some patients enrolled. But again, there's a lot of bureaucracy at the startup of a trial, so I think that's okay. We feel like just the centers we have in this, and the kind of, a lot of these top centers were involved in the development of this technology, and they're super excited about it. So I expect our enrollment to go pretty well, but there is a one-year follow-up, and then you've got to go through an FDA, you know, PMA cycle. So you know, there's some time of, you know, kind of late 2027 is probably a good time.

Pat: I would not see any how you see these heart failure trials. What are you trying to get somebody to walk 12 more feet, you're talking about a 72% reduction in mortality the mortality in the standard of care control group was 35% at 30 days, we were at $9 seven.

Pat: So that is a significant technology.

Pat: And you know.

Pat: These are these are extremely sick patients that are matter of fact in it's an emergency and isn't this is lifesaving technology. So.

Pat: We're very excited and we've got a sales force biogas used in aortic dissections or sales team sells the on X valves in aortic repair our CEVA devices used in in replacing the art.

Pat: We are an aortic company and this is kind of the first significant innovation in acute type a dissections in 50 years.

Lance Berry: Okay, got it, thank you. Our next question comes from the line. Thank you. Uh, Pat Lance, can you hear me alright?

Pat: So I mean I'm Super excited about it and think this is really going to change a lot of lives.

James Patrick Mackin: Yeah, we hear you fine. Pat, let me start out with a congratulations. I mean, you guys... Covid. The U.S. Smart.

Speaker Change: Fair enough.

Speaker Change: <unk> I'll just throw a bunch of questions go away and hop back in queue.

Speaker Change: For U.

Speaker Change: ESP impact in the quarter.

Speaker Change: For Q1, how should we think about the sequential move Pat for you in terms of Onyx mitral label any Oh. It just in terms of Onyx mitral I know the FDA process is behind us, but just kind of give us next steps in this status.

James Patrick Mackin: Yeah, so basically, if you look at, you know, there's, there's a number of different ways to kind of slice up the market. So we come up with a number of $150 million. The ASP on that device is going to be about $25,000. So there are about 6,000 acute type A dissections done in the US. So that's really kind of on the back of a napkin, the math.

Pat: So Pat more generally.

Pat: The stage at this point in time do you think the portfolio is optimized.

Speaker Change: Not what else needs to be done gentlemen, thank you for taking my questions and congrats again sure I'll take the first I'll take the last two I'll, let lance work on the number of peace while I'm talking.

Lance Berry: So as far as the Pro Act mitral you know as we talked about last year, but I guess it we've seen that in the end of Q3.

Lance Berry: We ended up withdrawing the PMA because we missed our statistical end point, which is really you know I don't want to get into the details around the statistics of the trial. The fact that matter is it is the largest body of evidence ever with the mechanical mitral valve.

James Patrick Mackin: 6,000 cases, 25,000 a device, multiply two together, and you get $150 million. Um, We've done market research with a number of physicians, and you can talk, and you know some of the physicians that were in the trial. This is a very substantial technology. Again, as I said from an earlier question, I'm not seeing these heart failure trials where you see these heart failure trials where you're trying to get somebody to walk 12 more feet. You're talking about a 72% reduction in mortality. The mortality rate in the standard of care control group was 35% at 30 days. We were at 9.7.

Lance Berry: I just had a recent presentation.

Lance Berry: At SCS and in <unk>.

Lance Berry: In January Theres, nothing close from a significant level of data and the fact of the matter is the mitral business grew 20% in 2023.

Lance Berry: Right. So people are recognizing the value of that we're not off label promoting it but people will recognize that you can actually lower that INR, if thats the physician's choice.

Lance Berry:

Lance Berry: So.

Lance Berry: Maybe over to Lance you can you can grab a couple of the other ones.

Lance Berry: Yes, so on the ASP.

Lance Berry: <unk>.

Lance Berry: You know without giving you an exact number on the total company was kind of tough with different products different mix in different countries. I think the things to highlight is obviously our tissue business benefited meaningfully from price, which we've talked about we took a significant price increase in Q2 of this year.

James Patrick Mackin: So, that is significant technology, and, you know, these are extremely sick patients that are transported in as an emergency, and this is life-saving technology. So, we're very excited, and we've got a sales force, you know, Bio Glue is used in aortic dissections, our sales team sells the Onyx valves for aortic repair, and our SEVO device is used to replace the arcs. So we are an aortic company, and this is kind of the first significant innovation in acute type A dissections in 50 years, so I If not, what else can you do?

Lance Berry: And so in Q1, we will still benefit from that and we'll annualize that in Q2.

Lance Berry: Then we have had some favorable pricing on on at Onyx in particular I would call out.

James Patrick Mackin: Sure, I'll take the first one, I'll take the last two, and I'll let Lance work on the number piece while I'm talking. So, as far as the PROAC mitral, you know, as we talked about last, in fact, I guess it was in Q3, you know, we ended up withdrawing the PMA because we missed our statistical end point, which is really, you know, I don't want to get into the details around, you know, the statistics of the trial. The fact of the matter is, it's the largest body of evidence ever to show a mechanical mitral valve. We just had a recent presentation at STS in January. There's nothing close to the significance and level of data.

Lance Berry: That we will have a portion of the year as well other than that.

Lance Berry: Taking price increases.

Lance Berry: But not anything outside of the kind of normal.

Lance Berry: Running the business type price increases.

Speaker Change: Yeah and then the other question you had suraj was on the portfolio I mean, we you know one of the things. We've said as you know we did three acquisitions in one kind of a distribution agreement with an option to acquire with understand with the Nexus device.

Speaker Change: Really fairly quickly over the four or five year period.

Speaker Change: We feel like our portfolio is in excellent shape and as I mentioned from an earlier question. You you can see us going from the <unk> U S. FDA trial to the foreseeable F. D. Eight trial and then we got more stacked up behind them. So we really we do not need to acquire anything where we're very well set up from a portfolio standpoint.

James Patrick Mackin: And the fact of the matter is, the mitral business grew 20% in 2020. Right, so people are recognizing the value of that. We're not off-label promoting it, but people are recognizing that you can actually lower that INR if that's the physician's choice. So. Maybe over to Lance, you can grab a couple of the other ones.

Speaker Change: The only other point I would make on the on the pricing and I've said this to a number of times I mean, we did get some significant price increases on on Scintigram pulmonary valves and in 2023.

Lance Berry: Yeah, so on ASP, I think... Without giving you an exact number on the total company, which can be kind of tough with different products, different mixes, and different countries, I think the things to highlight are obviously how our tissue business benefited meaningfully from price, which we've talked about. We took a significant price increase in Q2 of this year, and so in Q1, we will still benefit from that, and we'll annualize that in Q2. And then we have had some favorable pricing on Onyx, in particular, I would call out, that we will have for a portion of the year as well. Other than that, we're taking price increases, but not anything outside of the normal running the business type price increases. Yeah, and then the other question you had, Suraj, was about the portfolio.

Speaker Change: And is that kind of asked me on itself at the end of the first quarter.

Speaker Change: 23 was a year of the price for <unk> 24, a year the volume because we've had some significant yield improvements in our processing, where we're going to potentially double our availability of those valves and we sell every single one of them because of the significant growth of the Ross procedure. So again, we feel very confident.

Speaker Change: In that tissue business, continuing to grow pretty significantly.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Jeffrey Cohen with Ladenburg Thalmann. Please proceed with your question.

Jeffrey S. Cohen: How are you.

James Patrick Mackin: I mean, one of the things we've said is, you know, we did three acquisitions and one kind of distribution agreement with an option to acquire with Endospan, with the Nexus device, fairly, fairly quickly over the four or five year period. We feel like our portfolio is in excellent shape. And as I mentioned earlier, from an earlier question, you can see us going from the AMDS US FDA trial to the Arcevo FDA trial, and then we got more stacked up behind them. So we really do not need to acquire anything.

Jeffrey S. Cohen: Good how are you.

Jeffrey S. Cohen: Thanks.

Jeffrey S. Cohen: Thanks Gerard.

Jeffrey S. Cohen: Right and so my first question, which is I'm sure.

Two 9% on tissue forms that's all time high for the company is that sustainable or how should we think about that opening up in the tissue business for 24.

Well as I just mentioned Jeff.

Speaker Change: I think it's you know so you know last commented on the pricing.

Speaker Change: We had some significant increases on the center graph in 'twenty three.

Speaker Change: We'll still get some benefit in the first quarter.

James Patrick Mackin: We're very well set up from a portfolio standpoint. The only other point I would make on pricing, and I've said this a number of times, I mean, we did get some significant price increases on Synagraft pulmonary valves in 2023. And as that kind of, you know, asthmatotes on itself at the end of the first quarter, 23 was a year of the price for Synagraft, 24 is a year of the volume because we've had some significant yield improvements in our processing where we're going to potentially double our availability of those valves, and we sell every single one of them because of the significant growth of the Ross procedure. So again, we feel very confident in that tissue business Hi Pat and Lea, how are you? Good, how are you?

Speaker Change: During that year by working with some of our top top surgeons. We've also seen significant yield improvements in our processing area.

Speaker Change: So we think that that growth will continue because we like I said, we've almost doubled the availability of our pulmonary valves and because of this rapid growth of the Ross procedure. We're literally selling every one that kind of comes out the off the line. So you answered. Your question is yes, it's going to continue.

Speaker Change: Wonderful.

Speaker Change: I guess secondly, first could you comment a little bit on some of the geographies out there I know you called out Asia, Latam at that 2% rate, but any specific geographies and how does that tie in specific product lines by geography or in geographies.

Speaker Change: Yes February every region grew double digits.

James Patrick Mackin: Good. Thanks, Suraj, for a segue right into my first question, which is... 59% on tissue forms. That's an all-time high for the company. Is that sustainable, or how should we think about that holding up in the tissue business for 24?

Speaker Change: Obviously Asia Pacific Latin America are smaller just in size, they're growing 20%.

Speaker Change: So again, we're seeing double digits across all four of our regions.

Speaker Change: Yeah.

Speaker Change: Okay got it and then lastly could you talk about Dan a little bit as far as the.

James Patrick Mackin: Well, as I just mentioned, Jeff, and I think it's, you know, so you know, Lance commented on the pricing, we obviously had some significant increases on Cinegraph in 23, which will still get some benefit in the first quarter. During that year, by working with some of our top surgeons, we've also seen significant yield improvements in our processing area. So we think that that growth will continue because, like I said, we've almost doubled the availability of our pulmonary valves. And because of this rapid growth of the ROS procedure, we're literally selling everyone that kind of comes off the line. So the answer to your question is yes, it's going to continue. And I guess secondly for us, could you comment a little bit on some of the geographies out there? I know you call out Asia and Latin at that 19% rate, but any specific geographies and how does that tie into specific product lines by geography or by region? Yeah, every every region grew double digits. Obviously, Asia Pacific and Latin America are smaller just in size, but they're growing 20%.

Speaker Change: The prevention of a chair and the structure and or or clinicians and hospitals looking at that.

Speaker Change: Costs associated or it's just a period.

Speaker Change: I'm not sure if I caught that Jeff.

Speaker Change: As far as seen in its measure move and how it is being viewed by.

James: James Yes.

James: Yeah actually it's a you know again, it's probably not a topic. Many people understand I mean, I certainly didn't know what Dan was until we got into this specific area.

Speaker Change: I'm thinking about it this way.

Speaker Change: In the current standard Hemi arch, where they actually.

Speaker Change: To make our plumbing analogy right.

Speaker Change: You have a.

Speaker Change: Tara in the pipe you got to fix that little piece of pipe. So you take the bad piece out you put a new piece, sending you connected to the old kind of connect the old piece of the pipe. So now you've got a fully functioning pipe.

Speaker Change: That's what they do with Emmy arch.

James Patrick Mackin: So again, we're seeing double digits across all four of our regions. Okay, got it. And then lastly for us, can you talk about gain a little bit as far as the prevention of a tear in the structure and are our clinicians and hospitals looking at that as a cost associated, or it's just a death period? I'm not sure if I caught that, Jeff.

Speaker Change: Up to 70% of the times the connections you make ends up having a leak.

Which requires a re operation and can lead to higher mortality.

Speaker Change: It's a real problem and it can happen again, it depends on where you're doing it but 35% to 70% of time, they get a leak in the connection which is a gain.

Speaker Change: We don't see it at all with Andy Yes, three years in the in the 50 patient Darts trial and 93 patients in the person of your child to zero.

James Patrick Mackin: As far as Dane and its measurement and how it's being viewed by clinicians, yes. Actually, you know, again, it's probably not a topic many people understand. I mean, I certainly didn't know what Dane was until we got into this specific area.

Speaker Change: So we're running the health economics on that but a re ups and mortality for these patients I mean this is obviously a significant thing.

James Patrick Mackin: So think about it this way. In the current standard Hemi art, where they actually, you know, I tried to make a plumbing analogy, right? You have a tear in the pipe; you've got to fix that little piece of pipe. So you take the bad piece out, you put a new piece in, and you connect it to the old piece of the pipe.

Speaker Change: The FDA has been extremely interested.

Speaker Change: N D.

Speaker Change: How does that add it as a primary efficacy endpoint.

Speaker Change: Yeah.

Speaker Change: Got it Okay. That's super helpful. Again, thanks for the questions and fantastic read out on the year.

James Patrick Mackin: So now you've got a fully functioning pipe. That's what they do with a Hemi art. Up to 70% of the times, the connection you make ends up having a leak, which requires a re-operation and can lead to higher mortality. It's a real problem, and it can happen like, you know, it depends on where you're doing it, but 35 to 70 percent of the time, they get a leak in the connection, which is a Dane.

Speaker Change: Thanks, Jeff.

Speaker Change: Thank you. Our next question comes from the line of Frank Bachman with Lake Street Capital. Please proceed with your question.

Speaker Change: Yes.

Speaker Change: Hey, This is Nelson Cox on for Frank ill, just start maybe internationally as well can you refresh us on the current size of the sales force there and maybe thinking about the team.

Nelson Cox: Size there throughout the year, obviously, you've seen some nice nice gross growth there, but maybe just walk through your thinking there.

Speaker Change: Yeah, we've been able to you know we've talked about Asia and Latin America as you know when I started the company we had one person in Asia Nobody in Latin America.

James Patrick Mackin: We don't see it at all with AMDS. Three years in the 50 patient DARTS trial and 93 patients in the PERSEVERE trial, zero. So we're running the health economics on that, but RE-OPS and mortality for these patients, I mean, this is obviously a significant thing and, you know, the FDA has been extremely interested in Dane and actually had it added as a primary efficacy indication. Okay, that's super helpful. Again, thanks for the questions and fantastic readout on the year. Thanks Jeff. Hey, this is Nelson Cox on for Frank. I'll just start, maybe, internationally as well.

Speaker Change: We're now probably about 30 people in Asia, and probably 15 in Latin America, we feel like Latin America is kind of where it needs to be we may have a kind of onesie twosies here and there.

Speaker Change: Obviously as a significant opportunity and we will continue to.

Speaker Change: You know add to those regions when we treated somewhat like a like a venture capitalist right I mean, as we get product approved products approved for example, we've had some big approvals in Australia.

James Patrick Mackin: Can you refresh us on the current size of the Salesforce team there and maybe think about the team size there throughout the year? Obviously, you've seen some nice, nice growth there, but maybe just walk through your thinking there. Yeah, we've been able to, you know, we've talked about Asia and Latin America as, you know, when I started at the company, we had one person in Asia and nobody in Latin America. We're now probably about 30 people in Asia and probably 15 in Latin America. We feel like Latin America is kind of where it needs to be. We may have a kind of onesie, twosies here and there.

Speaker Change: We'll add feet on the street, we've got approvals in Hong.

Speaker Change: Hong Kong were directly or we've had approvals in Thailand or direct there we've got approvals in Taiwan.

Speaker Change: Taiwan, where we're adding people there so as as we get the product approved which is really just the incremental cost of the regulatory approval if.

Speaker Change: If we see the size of that market makes sense and we just run an N P V.

Speaker Change: And then we will have people. So it's really a gated self fulfilling self funding process that we go through but Asia is the area that we can pull that back we can titrate that depending on our EBITDA requirements and commitments.

James Patrick Mackin: Asia obviously is a significant opportunity and, you know, we'll continue to, you know, add to those regions. But we treat it somewhat like a venture capitalist, right? I mean, as we get products approved, products approved, for example, we've had some big approvals in Australia, and Mark with. And then we'll add people. So it's really a gated, self-fulfilling, self-funding process that we go through. But Asia is the area that, you know, and we can pull that back.

Speaker Change: What we see coming from an approval standpoint, so hopefully that helps you.

Speaker Change: Yeah, no that does.

Speaker Change: And then obviously I'll switch over to Onyx, obviously strong quarter. There can you maybe just talk a bit more about the competitive landscape, maybe just what you're seeing from the other competitive competitors there.

Speaker Change: You can clearly continue to take share, but just curious what youre hearing out there from maybe their investments or lack thereof.

Speaker Change: Yeah, So I mean, I'm I'll I'll talk about what customers are saying, we just as I mentioned are in November I guess October last year, we presented a 510 patient study.

James Patrick Mackin: We can titrate that depending on, you know, our EBITDA requirements and what we see coming from an approval. Hopefully, that helps. Yeah, no, that does.

James Patrick Mackin: And then obviously, I'll switch over to Onyx. Obviously, a strong quarter there. Can you maybe just talk a bit more about the competitive landscape, maybe just what you're seeing from the other competitors there? You can clearly continue to take share, but just curious what you're hearing out there from maybe their investments or lack thereof.

Speaker Change: The kind of the FDA post approval trial on the low INR, which is a typical requirement they want to see that your valve performs in the in the community as it performed in the in the kind of rigorous FDA trial.

Speaker Change: So 60 centers 510 valves.

James Patrick Mackin: Yeah, so, I'll talk about what customers are saying. We just, as I mentioned, in November, or I guess October of last year, we presented a 510 patient study, the kind of the FDA post-approval trial on the low INR, which is a typical requirement. They want to see that your valve performs in the community as it performed in the rigorous FDA trial.

Speaker Change: We saw an 85% reduction of major bleeding. So we went and did some market research talk to a 100 cardiac surgeons by the way is very unique research that and I've got a lot of this over my career, we did research in competitive accounts, what we call competitive accounts, which have onyx share like less than 25%.

James Patrick Mackin: So, 60 centers, 510 valves; we saw an 85% reduction in major bleeding. So, we went and did some market research, and talked to 100 cardiac surgeons. By the way, it's very unique research that, and I've done a lot of this over my career. We did research in competitive accounts, what we call competitive accounts, which have Onyx shares of, like, less than 25%, and it shows that we continue to take share over the next three years and basically double our share.

Speaker Change: And it shows that we continue to take share over the next three years and basically double our share. So this is a very meaningful new dataset.

Speaker Change: We're excited about and our customers are excited about it and we're gonna be going after it.

Speaker Change: Awesome. Thanks, guys.

Speaker Change: Yeah.

Speaker Change: Thank you there are no further questions at this time and I'd like to turn the floor back over to management for closing comments.

Speaker Change: Yeah, well, obviously, we appreciate everybody's time here I mean, I'm I'll be quick in my wrap up we're super excited about about 24.

James Patrick Mackin: So, this is a very meaningful new data set we're excited about, and our customers are excited about it, and we're going to be going after it. Awesome. Thanks, guys. There are no further questions. I'd like to turn the floor back over to management for. Yeah, well, obviously, we appreciate everybody's time here. I mean, I'll be quick in my wrap up.

Speaker Change: We have this great persevere.

Read out on an AMD as well.

Speaker Change: With 72% reduction in mortality, a 52% reduction in major adverse events. So we're gonna be working with the FDA to get this technology here in the U S.

Speaker Change: But we're also approved around in multiple countries in Europe, Canada, and Asia, where we're going to use that data to continue to take care of patients and drive growth.

James Patrick Mackin: We're super excited about about 24. We have this great Persevere readout on AMDS with 72% reduction in mortality and 52% reduction in major adverse events. So we're going to be working with the FDA to get this technology here in the U.S. But we're also approved in multiple countries in Europe, Canada, and Asia, where we're going to use that data to continue to take care of patients and drive growth. I just got done talking about the ONIX post-approval trial of 510 patients showing an 85% reduction in major bleeding. And we're going after share there. I talked a couple of times about our price increases on Cinegraph, as well as our efforts to improve supply, and we'll continue to see growth there, and we talked about Asia Pacific and Latin America. We're also advancing our pipeline. We're going to be starting the third generation frozen elephant total arch repair system called Arcevo LSA later this year. So, we continue to build an aortic company and are excited about delivering for you again in 2024. Thank you. Cruz today.

Speaker Change: Got that and talking about the Onyx post approval trial of 510 patients showing an 85% reduction in major bleeding and we're going after share there I talked about a couple of times about our price increases on <unk> as well as are our efforts to improve supply and.

Speaker Change: We'll continue to see growth there and we talked about Asia Pacific Latin America, while also advancing our pipeline, we're gonna be starting the third generation.

Frozen elephant total arch repair system called <unk> LSA later this year. So we continue to build anywhere in our company and are excited about delivering for you again in 2024. Thank you.

Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time.

Speaker Change: Thank you for your participation.

Speaker Change: Oh.

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Hum.

Speaker Change: Yeah.

Speaker Change: Uh huh.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Hum.

Operator: You may disconnect your line. Thank you for your... and others. Thank you. Thank you, www.artivion.com and more www.artivion.com. Thank you. Thank you, www.artivion.com and more.

Speaker Change: Yeah.

Okay.

Speaker Change: Hum.

Speaker Change: Yeah.

Speaker Change:

Speaker Change: [music].