Q4 2023 LeMaitre Vascular Inc Earnings Call
Operator: Welcome to the LeMaitre Vascular Q4 2023 Financial Results Conference Call. As a reminder, today's call is being recorded. At this time, I would like to turn the call over to Mr. J.J. Pellegrino, Chief Financial Officer of LeMaitre Vascular. Please go ahead.
Well couldn't you didn't meet National There Q4, 2020 financial results Conference call. As a reminder, today's call is being recorded at this time I would like to try to call over to Mr. J, J Pellegrino Chief Financial Officer Ashley.
Joseph P. Pellegrino: Thank you, Operator. Good afternoon, and thank you for joining us on our Q4 2023 conference call. With me on today's call is our CEO, George LeMaitre, and our President, Dave Roberts. Before we begin, I'll read our Safe Harbor Statement. Today, we will make some forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, the accuracy of which is subject to risk and uncertainties. Wherever possible, we will try to identify those forward-looking statements by using words such as believe, expect, anticipate, pursue, forecast, and similar expressions.
Please go ahead.
Thank you operator, good afternoon, and thank you for joining us on our Q4 2023 conference call.
On today's call is our CEO, George when I and our President Dave Roberts.
Before we begin I'll read our safe Harbor statement.
Today, we will make some forward looking statements within the meaning of the U S. Private Securities Litigation Reform Act of 1995, the accuracy of which are subject to risks and uncertainties.
Wherever possible, we will try to identify those forward looking statements by using words, such as believe expect anticipate pursue forecast and similar expressions.
Joseph P. Pellegrino: Our forward-looking statements are based on our estimates and assumptions as of today, February 27, 2024, and should not be relied upon as representing our estimates or 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 subsequent SEC filings, including 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 GAAP to non-GAAP measures discussed in this call is contained in the associated press release and is available in the Investor Relations section of our website, www.lemaitre.com. I'll now turn the call over to George LeMaitre.
Our forward looking statements are based on our estimates and assumptions as of today February 27, 2024, and should not be relied upon as representing our estimates or 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 subsequent SEC filings.
Including 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 GAAP to non-GAAP measures discussed in this call is contained in the associated press release and is available in the Investor Relations section of our website Www Dot dot.
Dot com.
I'll now turn the call over to George Lemaitre.
George W. LeMaitre: Thanks, JJ. Q4 was an excellent quarter, with 19% sales growth, a 68.1% gross margin, and 46% up-income growth. I'll focus my remarks on the top line, Salesforce activities, and some regulatory updates. Geographically, EMEA was up 21% in Q4, the Americas 20%, and APAC 11%. By product, bovine patches were up 18%, allograft 52%, valvotelm 12%, and carotid shunt 16%. Distribution of the porcine patch also added $1.5 million in sales in the quarter.
Thanks, JJ Q4 was an excellent quarter with 19% sales growth.
68, 1% gross margin and 46% op income growth.
I'll focus my remarks on the top line sales force activities and some regulatory updates.
Geographically EMEA was up 21% in Q4, the Americas, 20% and APAC, 11%.
Byproduct broadband packages were up 18% allograft, 52% the average on 12% and carotid shunts, 16%.
Distribution of porcine patch also added $1 $5 million of sales in the quarter.
George W. LeMaitre: The return to hospital by staff and patients, ASP increases, ample product supply, and the growth of our sales force drove Q4 sales growth. We ended 2023 with 136 reps worldwide. By December 2024, we expect to employ approximately 150 reps. To accommodate rep growth in North America, we recently promoted three regional sales managers to become area sales managers. This additional management bandwidth should enable us to hire, train, and manage more RSMs and reps. The revenues from the 2020 autographed acquisition, coupled with recent sales growth, have made our North American territories too large. In 2023, our average North American territory had $2 million in sales.
The return to hospital by staff and patients ASP increases.
Product supply and the growth of our sales force drove Q4 sales growth.
We entered 2023 with 136 reps worldwide.
By December 2024, we expect to employ approximately 150 reps.
To accommodate rep growth in North America, we recently promoted three regional sales managers to become area sales managers.
This additional management bandwidth should enable us to hire train and manage more RSM and reps.
The revenues from the 2020 autograft acquisition coupled.
Coupled with recent sales growth and made our north American territories too large.
In 2023, our average North American territory had $2 million in sales.
George W. LeMaitre: Over the years, we've found smaller territories enable tighter relationships with surgeons, so we've begun dividing some of the larger territories. This should reduce windshield time, too.
Over the years, we found smaller territories enabled tighter relationships with surgeons.
So we began providing some of the larger territories.
This should reduce windshield time too.
George W. LeMaitre: In Europe, we also remain in growth mode. We plan to open a Paris office in Q2, which should improve our connections with French surgeons and hospitals, as well as our eight French sales reps. France is our sixth largest country by sales. Turning to Asia, I visited four of the six APAC offices in early February.
In Europe, we also remain in growth mode.
Plan to open a Paris opex in Q2, which should improve our connections with trained surgeons and hospitals as well as our eight French sales reps.
<unk> is our sixth largest country by sales.
Sure.
Turning to Asia.
Visited four to six APAC offices in early February.
George W. LeMaitre: Things look great over there. Our Tokyo branch is celebrating 20 years, and we've just opened offices in Seoul and Bangkok. In our first direct year in Korea, 2023, sales reached $1.7 million, and profits were $250,000. Both figures exceeded expectations. In Thailand, our first full year of direct sales should be about $1.6 million in 2024. Our Chinese team is also performing well and grew by 40% last year. The Artigraph CE file was submitted in December 2023, and we also plan to file for Artigraph approval in Canada, Australia, and several other APAC countries this year.
Great over there our Tokyo branch is celebrating 20 years and we've just opened offices in Seoul in Bangkok.
And our first direct year in Korea, 2023 sales reached $1 $7 million in op profits were $250000 both figures exceeded expectations.
In Thailand, our first full year of direct sales should be about $1 $6 million in 2024.
Our Chinese team is also performing well and grew 40% last year.
The autograph the file was submitted in December 2023, and we also plan to file for Autograft approval in Canada, Australia and several other APAC countries. This year.
George W. LeMaitre: We also plan to make Xenosure filings for our peripheral and cardiac products by 2025 in China, and we're also making the MDR transition in Europe. As you know, Brussels has extended the MDR deadline to 2027. 22 of our product categories need this new MDR-CE mark, so this is a considerable undertaking. We currently own three of these new MDR-CE marks. Also in Europe, our allograft filings have been made in Ireland and Germany, and approval in either of those countries will be our first approval of allografts in the European Union.
We also plan to make finished your filings for our peripheral and cardiac products.
2025 in China.
We're also making the MBR transition in Europe.
As you know Brookfield has extended the MBR deadline for 2027.
22 of our product categories mid this new MDI CE Mark. So this is a considerable undertaking.
We currently own three of these new MBR CE marks.
Also in Europe, our Allograph filings have been made in Ireland and Germany.
An approval in either of those countries will be our first approval of allograft in the European Union.
Joseph P. Pellegrino: To conclude, 19% sales growth and a gross margin recovery produced 46% up-income growth in Q4. Our growing profitability and cash on hand provide safety and strategic optionality. With that, I'll turn it over to JJ. Thanks, George. 2023 was an excellent year.
To COVID-19% sales growth and gross margin recovery produced 46% op income growth in Q4.
Our growing profitability and cash on hand provides safety and strategic Optionality.
With that I'll turn it over to JJ.
Thanks, George 2023 was an excellent year, we posted a $193 million in sales an increase of 20% on a reported basis and 17% organically.
Joseph P. Pellegrino: We posted $193 million in sales, an increase of 20% on a reported basis and 17% organically. Our operating income increased 37% on a reported basis. If 2022 was our post-COVID rehiring year with 141 ads, then 2023 was the hiring constraint year with only 23 ads. This headcount control, along with our strong sales results and an improved gross margin, led to a 19% operating margin in 2023 versus 17% in 2022. Separately, our cash balance has improved by $22 million in 2023 to $105 million. Turning to the quarter, in Q4 2023, we posted a gross margin of 68.1%, up 450 basis points year over year. This increase was driven by higher ASPs, productivity improvements, and a weaker dollar. The benefits of a larger and more efficient manufacturing team have also come to the P&O. Our allograft manufacturing team had a strong Q4, and quality costs remain in check. In retrospect, our manufacturing hiring surge was well-timed with the global return to hospitals. Operating expenses in Q4 2023 were $23.1 million, an increase of 21% versus Q4 2022.
While our operating income increased 37% on a reported basis.
If 2022 was our post Covid rehiring year with 141 adds in 2023 was the hiring constraint year with only 23 ads.
This head count control along with our strong sales results and an improved gross margin led to a 19% operating margin in 2023 versus 17% in 2022.
Separately, our cash balances improved by $22 million in 2000 $23 million to $105 million.
Turning to the quarter in Q4 2023, we posted a gross margin of 68, 1% up 450 basis points year over year.
This increase was driven by higher Asps croda.
Productivity improvements and a weaker dollar the.
The benefits of a larger and more efficient manufacturing team have come onto the P&L. Our allografts manufacturing team had a strong Q4 and quality costs remain in check.
In retrospect, our manufacturing hiring surge was well timed with the global return to hospital.
Operating expenses in Q4, 2023 or $23 1 million.
An increase of 21% versus Q4 2022.
Joseph P. Pellegrino: The increase was driven largely by higher sales commissions, more sales professionals, and $700,000 of one-time reversals in Q4 2022. Q4 2023 operating income increased 46% year-over-year to $10.2 million, driven by higher sales and an improved growth margin. The operating margin in Q4 was 21%, up from 17% in the prior year period.
The increase was driven largely by higher sales commissions more sales professionals.
$700000 of one time reversals in Q4 2022.
Q4, 2023, operating income increased 46% year over year to $10 $2 million driven by higher sales and improved gross margin.
The operating margin in Q4 was 21% up from 17% in the prior year period.
Joseph P. Pellegrino: In addition, we recently went live with a new ERP system in the United States. This system should improve real-time reporting, streamline financial processes, and provide more sophisticated analytics. Implementation at our overseas entities will take place in 2025 and 2026.
Separately, we recently went live with our new ERP system in the United States.
This system should improve real time reporting streamline.
Streamline financial financial processes and provide more sophisticated analytics.
Implementation at our overseas entities will take place in 2025 and 2026.
Joseph P. Pellegrino: We estimate that we will spend approximately $7 to $8 million on this project, and the annual P&L impact will be approximately $1 million per year. With respect to guidance, we are forecasting improved operating leverage in 2024 driven by restrained operating expense growth and an improved gross margin. Our guidance includes an operating margin of 21% in 2024, versus 19% in 2023 and 17% reported in 2022. For more details, please see our Business Outlook issued in today's press release, but a few Q1 highlights include reported sales growth of 10%. Gross margin of 68.5%, operating income growth of 33%, and EPS growth of 42%
We estimate that we will spend approximately $7 million to $8 million on this project and the annual P&L impact will be approximately $1 million per year.
With respect to guidance, we are forecasting improved operating leverage in 2024, driven by restrained operating expense growth and an improved gross margin.
Our guidance includes an operating margin of in 2024 of 21%.
Versus 19% in 2023, and 17% reported in 2022.
For more details please see our business outlook issued in todays press release, but a few Q1 highlights include.
Reported sales growth of 10%.
Gross margin of 68, 5%.
Operating income growth of 33%.
And EPS growth of 42%.
Operator: And for the full year 2024, guidance includes reported sales growth of 10 percent, gross margin of 68 percent, operating income growth of 22%, and EPS growth of 23%. With that, I'll turn it back over to the operator for questions. In order to ask a question, please press TAR11 on your telephone and wait for your name to be announced. To withdraw your question, please press TAR11 again.
And for the full year 2024 guidance includes reported sales growth of 10%.
Gross margin of 68%.
Operating income growth of 22%.
And EPS growth of 23%.
With that I'll turn it back over to the operator for questions.
In order to ask a question. Please press Taiwan, one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
Operator: Please stand by while we compile the Q&A roster. Thank you. Your first question comes from the line of Suraj Kalia with Oppenheimer.
Please standby, while we compile the Q&A roster. Thank you.
Your first question comes from the line of Suraj Karla with Oppenheimer. Your line is now open.
Suraj Kalia: Your line is now open. Hi George, JJ, can you hear me all right? Yeah. Gentlemen, apologies for the background noise. You know, in your prepared remarks, you talked about territories, or maybe it was J.J.'s comments. But when you split the territory, let's say from 2 million to, let's say, a million, can you walk us through the thought process in terms of sales reps and commercials? Retention, you know, how do you, how does the process go about?
Hi, George J J can you hear me all right.
Yes.
Gentlemen, apologies for the background noise.
So George let me start out.
In your prepared remarks, you talked about territories, maybe for Jay Jays comments, but when you split the territory, let's say from 2 billion to let's say a bill yet.
Can you walk us through the thought process in terms of sales Rep Commission.
Retention, how do you how does the process go Bob.
George W. LeMaitre: Okay, sure. And of course, Saraj, this is completely normal medical device activity, right? So this is exactly how sales forces grow. It's like an amoeba.
Okay sure and of course Suraj. This is completely normal medical device activity right. So this is how exactly how salesforce is grow.
George W. LeMaitre: The thing gets big, you've got to cut it in half, and it becomes too big for them to handle. If a rep is running around Ohio trying to cover $2 million worth of medical device sales, of course, some of the smaller hospitals start to feel ignored. And so, at a very high level, you would clearly split it and put one guy and pick a city, Cleveland, and one guy in Columbus, and they would now split Ohio, if you will. So I think that's sort of the amoeba aspect of it; it's perfectly normal.
An amoeba thing gets big you've got to cut it in half and it becomes too big for them to handle if if if a rep is running around Ohio trying to cover $2 million worth of medical device sales of course, some of the smaller hospitals start to feel ignored and so very high level, you would clearly split it and put one guy and pick up pick a city.
Cleveland and one guy in Columbus, and they would now split, Ohio, If you will so.
I think thats sort of the amoeba aspect of it is perfectly normal.
George W. LeMaitre: And then what else would you like to know about what happens there? I was just curious in terms of, I understand it's a normal process in the industry, but I was more specifically curious in terms of... do you usually encounter any Salesforce retention issues? Hence, by definition, any any churn concerns about churn. Sure. No, I don't have a particular concern. I do agree with you. Anytime you touch anything near the sales force, you sort of get a higher turnover rate. But this is perfectly normal, and you have to do it, or else you won't get good service from those surgeons in the hospital.
And then what else would you like to know about what happens there.
I was just curious in terms of I understand it's a normal process.
Industry.
Specifically curious in terms of.
Usually do encounter any sales force retention issues.
Hence by by definition any any churn concerns about charter.
Sure.
No no I don't have particular concern I do agree with you anytime you touch anything near the Salesforce, you sort of get near higher turnover, but but this is perfectly normal and you have to do it or else you won't get good service to those surgeons in the hospital so.
George W. LeMaitre: And on that score, Saraj, maybe just, I know you didn't exactly ask this question, but we're into this thing. I read some article recently. It's called The Big Stay. I don't know if anyone's heard that.
And on that score Suraj, maybe just I know you didn't exactly asked this question but.
We are into this thing I read some article recently, it's call. It the big stay I don't know if anyone's heard that and so as opposed to the great resignation, we're now into the big stay and Lemay experienced dramatically reduce turnover in last year I think our number was like seven 5% down from somewhere I'm going to get it wrong, so around 14 or 15%.
George W. LeMaitre: And so, as opposed to the great resignation, we're now into the big stay, and LeMaitre experienced a dramatically reduced turnover in the last year. I think our number was like 7.5% down from somewhere, I'm going to get it wrong, somewhere around 14 or 15% the year before. We're always three or four points better than our Massachusetts manufacturing colleague companies or peer companies, but a major decrease in turnover. And notably with the sales force, one thing to further mention, Saraj, specifically. Remember last year we had this massive surge in procedures, and we grew organically 17%, while LeMaitre before that had grown about 9% organically.
Year before we're always three or four points better than our Massachusetts manufacturing colleague companies our peer companies.
But major decrease in turnover and notably with the Salesforce. One thing that further mentioned Suraj, specifically remember last year. We had this massive surge in procedures and we grew organically, 17% usually limit before that had grown about 9% organically and as a result the W. Two.
George W. LeMaitre: And as a result, the W-2s in the sales force, how much we paid the sales reps, were dramatically higher in 2023. And as a result, they stuck around to get those paychecks. And you would have seen them start leaving on January 15th and January 25th when they were getting their final commissions and bonuses. We haven't seen that at all. I mean, there's been one or two here and there, but we have not seen that at all.
And the sales force how much we paid the sales reps was dramatically higher in 2023 and as a result, they stuck around to get those paychecks and you would've seen them start leaving January 15th January 25th when they were getting their final commissions and bonuses.
We haven't seen that at all I mean, it's been one or two here and there, but we have not seen that at all and so we're very very happy time in my opinion in the sales force.
Joseph P. Pellegrino: And so it's a very, very happy time, in my opinion, in the sales force. Great results, commission checks are huge, et cetera, et cetera. And Saraj, part of your question was, how do the commissions change when you split the territories?
Great results Commission checks are huge et cetera, et cetera, Suraj part of your question was out of the commission.
When you split the territories and as you recall, we compensate the reps based on their performance versus gross profit dollars quota.
Joseph P. Pellegrino: And as you recall, we compensate the reps based on their performance versus a gross profit dollars quota. And so when the territories split, we obviously commensurately split the gross profit dollar quarters or change them based on whatever the new answer is. And then their compensation, their tier that it gets paid doesn't change, but what it's linked to does. So it's kind of, quote unquote, fair when you make the split.
And so when the when the territory split we obviously commensurately split the gross profit dollars quarters are changed.
Based on whatever the new answer is and then their compensation their tier that the and the better it gets paid.
Doesn't change by what is linked to Doug.
So it's kind of protocols fair when you make the split there isn't a big topic necessarily around that that they are obviously also going to make half of what they were making before.
Suraj Kalia: There isn't necessarily a big topic necessarily around that, that they're all of a sudden going to make half of what they were making before. Fair enough. Gentlemen, I'll quickly ask my two follow-ups to avoid the background noise. So, George, I'd love to get your updated thoughts on your MNA strategy going forward. And the second question I have is I would love to get your perspective.
Fair enough.
And I'll quickly asked my two follow ups to avoid the background noise. So George.
Love to get your updated thoughts on your M&A strategy looking forward and the second question I have is.
Love to get your perspective.
Suraj Kalia: Valvular tomes grew 12% year over year. Obviously, that was the best CLI study, and that has really been pulled through for you guys in terms of growth. Are you all seeing any counterbalancing going on with the Basel II study, you know, which gave somewhat opposite results? Just curious, if any, about your thoughts on that front.
Calvin the terms grew 12% year over year.
Obviously, there was the best CLI study and that has really seen pulled through for you guys in terms of growth.
Seeing any counter balancing going on with the Basel II study.
Rich gave somewhat opposite results just curious if any.
To your thoughts on that front. Thank you for taking my questions again.
David B. Roberts: Thank you for taking my questions again. Suraj, I'm going to pass your M&A call over to Dave, or rather, the question, rather, over to Dave, and then I'll come back to the valvetone question. Hi Suraj, great to hear from you and, yeah, with respect to the acquisition strategy, I'd say the criteria are consistent with previous calls. Of course, we're focused on open vascular targets with more than 5 million in revenue. There are about 25 of them all together.
Raj I'm going to pass through M&A call over to Dave a question rather over to Dave and then I'll come back to the <unk> question.
Great to hear from you and yes with respect to the acquisition strategy I would say.
The criteria are consistent from previous calls of course, we're focused on open vascular targets with more than $5 million of revenue.
There are about 25 of them all together beyond that where we are and have been hunting in adjacent markets may be first cardiac surgery and endovascular if anything.
George W. LeMaitre: Beyond that, we are and have been hunting in adjacent markets, maybe first cardiac surgery and endovascular. If anything, I think we learned from the autographed acquisition a few years ago that hunting larger is probably a good thing. It will move the needle more, so we've been looking at a little bit larger targets and we also have more cash. Of course, to do an acquisition with 105 million of cash and leaving 20 million on the balance sheet plus maybe three times our 46 million LTM EBITDA, we could fund 225 million of the purchase price excluding an equity raise or the target EBITDA levered up. So I think we're just consistently looking out in the same hunting grounds where we have been, and hopefully, someday, we'll be able to report back that we have made a transaction.
I think what we learned from the Autograft acquisition, a few years ago that hunting.
Hunting larger is probably a good thing it will move the needle more so we've been looking at a little bit larger targets and also we have more cash of course to do an acquisition with the $105 million of cash.
And leaving $20 million on the balance sheet, plus maybe three times higher $46 million LTM EBITDA, we could fund $225 million purchase price, excluding an equity raise or the target EBITDA levered up. So I think we're just consistently looking out in the same hunting.
Grounds, where we have been and hopefully someday, we'll be able to report back that we've done the transaction.
George W. LeMaitre: And Saraj asked your BEST-CLI question. Yeah, in the first half of the year, I feel like we got excited about the BEST-CLI study as it relates to valvulotomes. And then, of course, BASL comes out, the European study, BASL-2 comes out, and it's sort of the antidote to BEST-CLI. BEST-CLI basically says, do leg bypasses first, open surgery, and then BASL-2 comes and says, no, no, you can do stents and angioplasty.
So Raj asked your best CLI question, Yes in the first half of the year I feel like we got excited about the best CLI study.
As it relates to valvular Toms and then of course Basel comes out of the European study Basel II comes out and it's sort of the anti dote best CLI <unk> basically says do leg bypasses first open surgery, and then Basel II comes and says no. No you can do stenting angioplasty, you're going to get great results of that.
George W. LeMaitre: You're going to get great results that way, too. So, in some ways, you do have surgeons that want to do open surgery saying, "I listen to BEST-CLI." And then you have surgeons and angiologists who want to use angioplasty and stents who come out and say, I heard about BASL-2. So, there was a little bit of a retrenchment, I would say. For the exact fact here, we grew valvulotomes 12% in dollars, that's 11% organic, and units were up 5% last year. In fact, in general, across our portfolio, units were up 5%. So, our first year with BASL-2, I would say, you know, valvulotomes didn't go crazy good, although that 5% was better than the slightly decreased units of 21 and 22. So, 2021 and 2022, the decrease was around 3% or 4% in units, and then it bounced up again post-BASL. I guess I'd say, make of it what you will. It seems like it was a good thing, but it then got counteracted by BASL-2.
Way too so in some ways you do have surgeons that want to do open surgery, saying I listened the best CLI and then you have surgeons and Angiology us who want to use angioplasty and steps would come out and say I heard about Basel. Two so there was a little bit of a retrenchment I would say for the exact fact here, yes, we grew valve tons.
5% in dollars.
<unk> organic and units were up 5% last year in fact in general across our portfolio units were up 5%. So our first year with Basel III I would say valvular Tom's Didnt go crazy good although that 5% was better than the slightly decreased units of <unk>.
One and 'twenty two so 2021 'twenty two decrease was around three or 4% in units and then it passed up again post Basel I guess I'd say make of it what you will it seems like it was a good thing, but then got counteracted by Basel III.
Thank you.
Thanks, a lot suraj those are great questions.
Again that is star one wanted to ask a question.
And one moment. Please our next question.
Your next question comes from the line of Danielle Charter niche JMP Securities. Your line is now open.
George W. LeMaitre: Thank you. Thanks a lot, Suraj. Those are great questions.
Operator: Again, that is TAR11 to ask a question. And one moment for your next question. Your next question comes from the line of Daniel Staudter with GMT Securities. Your line is now open. Yeah, great. Can you guys hear me?
Yes, Greg can you guys hear me.
Yes.
Great.
First off just wanted to ask on gross margin.
Very healthy got and great to see.
Daniel Staudter: Yeah. Great. So first off, I just wanted to ask about gross margins. You know, very healthy gut and great to see, and you talked about some of the primary drivers there, but as we look out to 2024, could you give us an idea of how much of the contribution is coming from the manufacturing efficiencies versus some of the ASB gains, and then how should we think about cadence for gross margin in 2024? Thanks.
Talked about some of the primary drivers there but.
As you look out to 2024 could you give us an idea of how much contribution is coming from manufacturing efficiencies versus some of the ASP gains and then how should we think about cadence for gross margin in 2024.
Yes so.
Those are the two.
Two largest drivers I would say that those manufacturing efficiencies.
Joseph P. Pellegrino: Yeah, so, I mean, those are the two largest drivers, I would say those manufacturing efficiencies. I've been talking about them for two or three quarters, and now they're finally coming to the P&L. That and the A.F.
I have been talking about it for two or three quarters.
Ellen.
So that's good.
And the Asp's, you've heard us talk about those.
And it was a really healthy asps year this year and so I would say those two are battling for sort of the number one position maybe they're a third each of the story or something like that in terms of in terms of the improvement.
Joseph P. Pellegrino: You've heard us talk about them. And it was a really healthy ASP year this year. And so I would say those two are battling for sort of the number one position.
Depends on what your comparison period is after a year over year or sequential or whatever but at a high level I would say.
Joseph P. Pellegrino: Maybe they're a third of the story or something like that in terms of the improved. And it depends what your comparison period is and if you're year-over-year or sequential or whatever. But at a high level, I would say, you know, general DL efficiency and ASPs battling it out.
General Dl efficiencies and Isps battling it out theres some other lesser lights in there that debt.
Maybe I didn't put in the script.
On that matter as well like our quality costs are a big part of the story.
And they had been sort of growing.
David B. Roberts: There's some other lesser lights in there that maybe I didn't put in the script that matter as well, like our quality costs are a big part of the story. And they had been sort of growing at a pace that was accelerated from really, really wanted to be until we started monitoring that and putting a little bit of a lid on that. And I think that's helped a lot as well. And so to the extent that we can keep those quality costs in check, that'll help the market going forward as well. And then RestoreFlow has had some really nice operational results on the sort of processing side as of late.
At a pace that was accelerated from really really want it to be until we started.
Monitoring that and putting a little bit of a lid on that and I think thats helped a lot as well so to the extent that we can keep those quality costs and check that will help the margin going forward as well and then restore flow has had some really nice.
<unk> operational results.
On the sort of processing side.
So hopefully we can keep that going.
Sure.
Okay.
Great. Thanks, and then just one follow up related to M&A.
Cash generation has been very healthy this year.
David B. Roberts: And so, hopefully, we can keep that going. Great, thanks. Then just one follow-up related to M&A. The cash generation has been very healthy this year, in 2022 and 2023, you know, just with the announcement of the shared purchase of $50 million. How should we think about the pecking order for the use of cash? You know, does that change how you look at M&A this year, or do you feel that you would be able to achieve both and, you know, just kind of weigh your options? Any thoughts there would be great.
2019 countries shortly.
Just with the announcement of the share repurchase $50 million.
Should we think about the pecking order for use of cash.
Does that change how you look at M&A this year or do you feel that you would be able to achieve both.
Just kind of weighing your options.
So it would be great. Thank you.
Hey, Danny its Dave Roberts I would say.
The doubling of the authorization on the share repurchase is just good corporate oatmeal I mean, obviously, our cash balances growing as you mentioned pretty healthily, so without increasing it from 25% to 50 is probably a good idea, but really at the end of the day, we're feeding we're taking cash and were feeding the dividend.
David B. Roberts: Thank you. Hey Danny, it's Dave Roberts.
David B. Roberts: I would say, I think the doubling of the authorization on the Sherry purchase is just good corporate oatmeal. I mean, obviously, our cash balance is growing, as you mentioned, pretty helpfully, so we thought increasing it from 25 to 50 was probably a good idea. But really, at the end of the day, we're feeding, we're taking cash, and we're feeding the dividend.
Obviously, you heard we just increased the dividend for Q1 from 14 to 16.
So that's I think our 13th annual increase in our ROE. So that's sort of a mainstay at la <unk> and then excess cash beyond that is.
David B. Roberts: Obviously, you heard we just increased the dividend for Q1 from 14 to 16 cents. So that's, I think, our 13th annual increase in a row. So that's sort of a mainstay at LeMaitre.
Set aside for acquisitions, we've been hunting for a while.
We will identify one if its larger will use more of the cash beyond that there are other consumers of cash in terms of running the business like capital expenditures or when we buy out distributors as we did a couple of years ago in Korea and last year in Thailand.
David B. Roberts: And then excess cash beyond that is set aside for acquisitions. We've been hunting for a while. At some point, we'll identify one. And if it's larger, we'll use more of the cash. Beyond that, are there other consumers of cash in terms of running the business, like capital expenditures, or when we buy off distributors, as we did a couple years ago in Korea and last year in Thailand? Those are uses as
Those are uses as well.
Great. Thank you very much.
Thanks Danny.
Your next question comes from the line of.
Rick Wise with Stifel. Your line is now open.
Hey, this is John on for Rick.
Just to start off I wanted to get a little bit better understanding of guidance this year and maybe how prices contributing to the growth outlook in 2024 versus how it contributed in 2023.
David B. Roberts: Great, thank you very much. Your next question comes from the line of Rick Wise. It's T4.
Operator: Your line is now. Hey, this is John on Prereq. Just to start off, I wanted to get a little bit better understanding of guidance this year and maybe how price is contributing to the growth outlook in 2024 versus how it contributed in 2020. Yeah, so in 2023, I mean, you've heard us talk about it quarterly, and I think George mentioned that for the full year 2023, it's about 11-12% price. And I would say going forward in 2024, maybe our default answer will be sort of around 5 or 6 percent. Notably, that was kind of the default answer this past year in 2023.
Yes so.
In 2023, I mean, you've heard us talk about it.
Italy, and I think George mentioned that for the full year 2023, it's about 11%, 12% pricing answer.
I would say going forward in 2024.
Maybe our default answer is sort of around five or 6%, notably that what's kind of the default answer this past year in 2023, we instituted something a little bit new call pricing floors, and I think we got more traction out of those than we thought we might get.
So maybe we'll do a little bit more of that this year, we will see where that goes but I would say if you want to sort of base case. The answer is probably in that mid to mid high single digits range.
John: We instituted something a little bit new called pricing floors, and I think we got more traction out of those than we thought we might get. And so maybe we'll do a little bit more of that this year. We'll see where that goes. But I would say if you want a sort of base case answer, it's probably in that mid-high single-digit range.
Thanks, that's helpful.
Just looking ahead.
Just focusing on the gross margin line, you're guiding to 68% for 24, that's pretty strong growth youre talking a lot about manufacturing increases manufacturing efficiencies and price increases.
Joseph P. Pellegrino: Thanks. That's helpful. And just looking ahead, just focusing on the gross margin line, you're getting to 68% for 24. That's pretty strong growth. You're talking a lot about manufacturing increases, manufacturing efficiencies, and price increases.
Looking further ahead I mean.
How should we be thinking about the gross margin structure for the business going forward with higher with higher asps more efficient manufacturing could we be thinking about potentially returning to sort of pre COVID-19, 70% gross margins you had.
Joseph P. Pellegrino: Just as I look further ahead, I mean, how should we be thinking about the gross margin structure for the business growing forward with higher ASPs and more efficient manufacturing? Could we be thinking about potentially returning to sort of the pre-COVID 70% gross margins you had? I mean, obviously, we're not looking out that far with you guys right now on that score.
Thanks.
Yes, I mean, obviously, we're not we're not looking out that far with you guys right now on that score.
I would say for right now.
We're happy with that 68% sort of next step in the evolution here, we'll see where it goes from there.
Getting those I don't know call it 10% price hikes, instead of 5% price cycle.
Joseph P. Pellegrino: I would say for right now, we're happy with that 68% sort of next step in the evolution here. We'll see where it goes from there. If you keep getting those, I don't know, call them 10% price hikes instead of 5% price hikes, that does bleed through, and that is an incremental benefit that you will get.
Does bleed through and that is an incremental benefit that you get and if you can keep your direct labor folks efficient.
As they are now or maybe a little bit more going forward that obviously is going to help but there's so much other stuff that goes on in gross margin land.
Those aren't the only two answers even if they are the biggest cancers inventory is a topic for us whenever we do consolidations or or transfers or manufacturing.
Joseph P. Pellegrino: And if you can keep your direct labor folks efficient as they are now or maybe a little bit more going forward, that obviously is going to help. But there's so much other stuff that goes on in gross margin land that those aren't the only two answers, even if they're the biggest ones. You know, inventory is a topic for us whenever we do consolidations or transfers or manufacturing or other issues when excess and obsolete come and get you for a quarter or two, those issues come and go. That quality topic, the quality expenses that I talked about, that's a topic. Transitions of manufacturing product lines, like OmniFlow and CardioCell, which we've done recently, can come in and out of it.
Our other issues with an excess in obsolete company guests here for a quarter or two of those issues come and go that.
That quality topic, they expect quality expenses, what I talked about that the topic.
Transitions of.
Manufacturing product lines like omni slow in cardio cell, which we've done recently those can come in and out of it. We've built a couple of clean rooms in the last year or two and those pieces come through in terms of depreciation and get us there and pushed the margin down a little bit so.
I don't want to make it.
A clear line story for you there's a lot going on in gross margin, we will see what happens after this year, but Jay I would like to leave John with a little bit of hope going forward. I think there are several shots on goal in that line item. We're just getting used to what it's like to be 68, again, but we need a lot of studying et cetera.
George W. LeMaitre: We've built a couple of clean rooms in the last year or two, and those pieces come through in terms of depreciation and get us there and push the margin down a little bit. So I just, I don't want to make it a clear line story for you. There's a lot going on in gross margin. We'll see what happens after this. But Jay, I'd like to leave John with a little bit of hope going forward. I think there are several shots on goal in that line item. We're just getting used to what it's like to be 68 again, so we need to do a lot of studying, et cetera. But I think there are some shots on goal.
But I think theres some shots on goal John.
I appreciate the color guys. Thanks.
And your next question comes from the line of Michael <unk> with Barrington Research. Your line is now open.
Thank you good evening C. J J you get the 300 basis point improvement and people are asking for more they're never satisfied.
Michael Petusky: Appreciate the color, guys. Thanks. Your next question comes from the line of Michael Petusky with Barrington Research. Your line is now open. J.J., you get the 300 base. I know that didn't last long, did it Mike? What have you done for me?
I know that maybe the last one Mike did really didn't.
You had about an hour after the press release came out I guess alright. So.
I didn't catch us if you guys mentioned it did you guys mentioned what percentage of the Q4 sales growth was related to price and volume how that split out for Q4, specifically.
Joseph P. Pellegrino: You had about an hour after the... Alright, so, uh, I didn't catch this if you guys... Did you guys mention what... We did not. It was 13 price, 1 unit. And for the year, again, to repeat, it was 12% price, 5 units. Is it possible to get the R to graph?
We did not it was 13 price one unit and for the year again to repeat it was 12% priced five units.
Dan.
Possible and I know you guys don't always do this but you've occasionally done this is it possible to get the autograph revenue for the quarter and for the year.
Yes of course.
Joseph P. Pellegrino: Let's try to find it quickly for you here. Corridor, I have it. I have it, Mike, it's Dave.
Let's let's try to find it quickly for you here quarter I have I have Mike It's Dave It's a little under 8 million $7 9 million up 10% for the quarter Q4.
David B. Roberts: It's a little under $8 million, $7.9 million, up 10% for the corridor, Q4 year. It's going to be around $34 million, something like that. We can get you that while we're on the call. So, you know, obviously..., and Anthony Thomas.
And what we're here for the year.
I think that's going to be around $34 million something like that something like that.
Can.
We can get you that while we're on the call.
I have another question.
Obviously, it's been a while in the autograph.
Deal has been yes.
Successful and I know, David it's been looking diligently.
Operator: For more information, visit www. FEMA.gov. For more information about FEMA and its partners, visit www.fema.gov.
J J in terms of.
Your comfort level with leverage.
Obviously, yes.
Yes.
You could do with $225 million deal potentially.
Where do you think your sort of top out in terms of your comfort level with leverage ratio on auto.
External growth.
Growth opportunity.
Yeah. So.
If you made me 335 times EBITDA may be somewhere in that range before you talk about the EBITDA of the acquired company.
Operator: For more information, visit www.fema.gov. For more information, visit www.fema.gov, J.J., in terms of... For more information, visit www.fema.gov, Where do you think you sort of top? Just one more quick question: pricing. I'm just curious, I suspect maybe..., and Huffer going forward.
EBITDA is sort of in the $45 46 ish range. These days.
Maybe it's maybe it's in that sort of 130 $140 million 150 somewhere in there Mike I would say.
Okay very good and then just one more quick question.
Pricing floor initiative.
It does seem like it's really really helped on the incremental basis.
Just curious I suspect maybe you went after some of the easiest low hanging fruit on that and maybe it's tougher going forward or is that or is that not the case in terms of pricing floor than what you can do that okay. Yes, thats a good question and at a high level what the management team has been trying to do over the last three years is sort of take the <unk>.
Joseph P. Pellegrino: Okay, yeah, that's a good question, and at a high level, what the management team has been trying to do over the last three years is sort of take the pricing lever away from individual reps and bring it back in-house, because, you know, as the previous questioner asked, the reps don't last forever here, and sometimes they cut a deal at a low price, and then we're left with it for X years, so we've been kind of pulling it back, and this all started, Mike, about two years ago in the US with one or two products, and now it's become a full-blown effort, and for the first time ever this year, there's a full set of pricing floors in Europe. We've had some pricing floors in Europe before, but for the first time ever, it's drilled into what we call the plank card, which is this little goal set that we pass out to every single employee, so you've got a European plank set that has pricing floors, and then also again for the first time ever, it's being drilled into the Japanese planks, and so in Japan specifically, not all of Asia, just Japan, which is half of our Asia right now, so we have it on the...so I think you've still got some room to go here.
Pricing.
Leever away from individual reps and bring it back in house, because you know as the previous questioner asked the reps don't last forever here and sometimes they cut a deal at a low price then we're left with it for X years. So we can kind of pulling it back and this this all started Mike about two years ago in the U S with one or two products and now it's become.
A full blown effort and for the first time ever this year.
There is a full set of pricing floors in Europe, we've had some pricing floors in Europe before but for the first time ever drilled into what we call. The plank card, which is this little bowl set that we pass out to every single employee. So we've got a European planks that has pricing floors and then also again for the first time ever it's being drilled into the jazz.
<unk> planks and so in Japan, specifically, not all of Asia, just Japan, which is half of our Asia right. Now so we have it on the so I think you've still got some room to go here I think youll Youll start learning and nine weeks when we come back to you guys with Q1 as to Hey, what happened in Q1 relating to pricing but.
Joseph P. Pellegrino: I think you'll start learning in nine weeks when we come back to you guys with Q1 as to, hey, what happened in Q1 relating to pricing, but it's become a full-blown effort, and it started with, you know..., dribs and drabs two and a half years ago, and now it's real, and it's worldwide. Sorry, did you have a follow-up on that? Yeah, on your autograph. Question, we have a category for bovine graft, nearly all. The autographed answer, it was.
It's become a full blown effort and it started with.
Dribs and drabs, two five years ago, and now it's real and it's worldwide.
Hey, Mike.
On Europe, sorry to just follow up on that.
Go ahead, yes.
Yes on your R&R grafts.
We have a category bovine grafts.
Nearly all.
<unk> autograft answer it was.
George W. LeMaitre: $33 million, was up 15% on a reported. Actually, could I just confirm... George, you were talking about autographed Canada and Australia filings in 24, is that correct? That is correct, and then also we've thrown in roughly five more Asia-packed countries we'll file over there as well. And then Zena Shore is still... 2020.
<unk> call it $33 million in the year and it was up 15% on a reported basis.
Can I just confirm.
George you were talking to SaaS. When you were talking about some of the O.
Oh U S development, Autograft, Canada, and Australia filings in 'twenty four is that correct.
That is correct and then also we've thrown in roughly five more Asia Pac countries will file over there as well.
And then Marc shore in Athena shirts still.
2025 in China, Yes.
George W. LeMaitre: Yeah, I mean, it just keeps pushing away. But yes, ZenaSure Cardiac and Peripheral in China 2025. Thankless job, Mike. Thank you. Thank you. Thank you. And your next question comes from the line of James Sidoti, Rick Sidoti, and Co. Your line is now open. Hi, good afternoon.
Yes, I mean, it just keeps pushing away, but yes, xena share cardiac and peripheral in China 2025, Okay, great well listen congratulations and particularly congratulations to the team and particularly JJ on that gross margin I know you've been after that for a while and congrats thanks.
Tankless job Mike.
That's right.
Okay.
Yes.
And your next question.
Comes from the line of.
James Sidoti with Sidoti <unk> co. Your line is now open.
James Sidoti: And thanks for taking the questions. Um, can you talk a little bit more about a little bit more about the Salesforce expansion? You said you're going to add about 14 folks in 2024. You know, can you break that out internationally and domestically? Sure, it feels, Jim, this is George, it feels largely like it's a domestic thing. We've got a bunch lined up to go in the U.S., less so in Canada, but call it a North American thing. And then a couple over in Asia Pacific, where we have some of these newer subsidiaries where why would you start in Korea if you didn't give the guy three or four sales reps, right? It was not worth going over there unless you did that.
Hi, good afternoon, and thanks for taking the questions can you talk a little bit of more about a little bit more about the sales force expansion you said I.
I think youre going to add about 14 folks in 2024.
Can you break that out internationally and domestically.
Sure. It feels Jim this is George it feels largely like it's a domestic thing we've got a bunch lined up to go in the U S. Less so in Canada, but call. It a north American thing and then a couple over in Asia Pac where we have some of these newer subsidiaries, where why would you start in Korea. If you didn't give the guy three or four sales reps right. It was not.
Going over there and I should do that so mostly north America, a little bit Asia.
George W. LeMaitre: So mostly North America, a little bit of Asia, and not much in Europe, oddly this year. Okay. And you mentioned you opened offices in Korea and Thailand. What were you doing this year?
Not much in Europe oddly this year.
Okay, and you mentioned you opened offices in Korea, and Thailand, where you're doing this year with those folks just working on to their home or whats what changed.
George W. LeMaitre: Were those folks just working on their home, or what changed? Okay, so, 2023 was our first year, a full year of operations in Korea. No, we were going through a distributor, and we sold items to that distributor. Then she passed them along to Korean hospitals for, actually, from before I started, Jim, 40 years later, she was still doing that.
Okay. So.
2023 was our first year of full year of operations in Korea.
No we were going through a distributor and we sold items to that distributor then she pass them along to Korean hospitals for actually from before I started Jim 40 years. Later, she was still doing that and we finally bought out her distributor ship, we set up an office hired a general manager and then hired three sales reps for Korea and now they are in our Seoul office.
George W. LeMaitre: And we finally bought out her distributorship. We set up an office, hired a general manager, and then hired three sales reps for Korea. And now they're in our Seoul office, and they've been operating for one year. Same drill in Thailand.
And they have been operating for one year same drill in Thailand.
James Sidoti: Okay, all right, and... For 2024, you're guided for about 9% organic growth. Is it fair to say that a significant portion of that is from pricing? You know, I would say we try not to guide on pricing because it's so variable what's happening, but if you look back to the 12 and 5 this past year in 2023, 12% price, 5% units, maybe that relationship holds until we all know differently. Okay, and then the last one... Can you, JJ, can you tell me what you're assuming the tax rate will be for 2024? For Q1 or a 24, let's see what I put in there, Jim. 24.3. And then for the full year, 24.1. Well, can you be a little more specific? to the U.S. Okay, 24 would have been good.
Okay Alright.
For 2024, you guided for about 9% organic growth is it fair to say that a significant portion of that is from pricing.
I would say, we try not to guide on pricing because it's so variable what's happening, but if you look back to the 12, 5%. This past year in 2023, 12% price 5% units maybe that relationship holds until we all know differently.
Okay, and then the last one.
Can you JJ can you tell me what youre, assuming the tax rate will be for 2024.
FERC Q1 or 24.
Let's see.
Jim.
$24 three and then for the full year $2004 one.
Well can you be a little more specific.
Yes.
Okay.
Okay.
Joseph P. Pellegrino: All right, thanks. Thanks, Jim. Your next question comes from the line of Brooks O'Neill with Lake Street Capital Markets. Your line is now open. Hey, good afternoon, guys. This is Aaron on the line for Brooks.
Four it would have been good alright. Thanks.
Thanks, Jim.
Your next question comes from the line of fruit.
O'neill Lake Street capital markets. Your line is now open.
Hey, Good afternoon, guys. This is Aaron on the line for Brooks.
Operator: You know, most of my questions have been addressed. But so I guess for for 2024, you know, we're, we're sent in solid pricing and, and mainly solid volume and tight expense control are main key priorities for you guys. Can you just give us a little more color in an updated sense for the general environment in the in these areas? Sure, and one of the folks on this call from KeyBank, Brett, we see him up on the screen, KeyBank just published a really nice report about credit card swipes in USA Hospitals and also we're studying staffing in USA Hospitals and I would say it feels good from all the stuff we read, you know, we're not revealing what's going on in the business for the first eight weeks of the year, but it feels good from all the stuff we read that this quote return to hospital of staff and patients seems to be stretching out into 2024 and we were happy to see it take place in 2023 and we, I feel like it really helped the business in 2023, so maybe more of the same procedure wise. Great, yeah, that's helpful. And then last one for me.
Most of my questions have been.
But so I guess for 2024.
And solid pricing and mainly solid volume and tight expense controls remain key priorities for you guys can you just give us a little.
More color on an updated sense for.
The general environment in these areas.
Sure and one of the folks on this call from Keybanc.
We see them up on our screen Keybanc, just published a really nice report.
About credit card swipes in USA hospitals, and also we're studying staffing in USA hospitals, and I would say it feels good.
From all the stuff, we read we're not revealing what's going on in the business for the first eight weeks of the year, but it feels good from all of the stuff. We read that this quote returned to hospital of staff and patients seems to be stretching out into 2024, and we were happy to see it take place in 2023, and we I feel like it really.
Help the business in 2023, so maybe more of the same procedure wise.
Great. Yes, that's helpful. And then last one from me. So you hired aggressively in sales and manufacturing last year and this has been brought up but you plan to add 14 ish repsol.
Aaron: So you hired aggressively in sales and manufacturing last year, and this has been brought up, but you plan to add 14-ish reps. So if you could just outline some of the priorities for 2024 and how you're thinking about those. Thank you. What are your priorities in terms of hiring? Is that where you're going, Aaron?
If you could just outline some of the priorities for 2024, and how youre thinking about those thank you.
So priorities in terms of hiring as we go on Erin.
George W. LeMaitre: Correct. Yeah. Okay.
Correct, yes.
George W. LeMaitre: Great. And just to sort of get in there on the beginning of that question, the big hiring spurt took place at this business in 2022. We put in 141 new employees. And then in 2023, we really slowed down a lot. We only put in 23 new employees.
Great and just to sort of get in there on the beginning of that question. The big hiring spirit took place at this business in 2022, we put on 141, new head Count and then in 2023, we've really slowed down a lot. We only put in 23, new head count. So we really put on the breaks last year, we wanted to catch up to all that pose.
George W. LeMaitre: So we really put on the brakes last year. We wanted to catch up on all that post-COVID hiring. We think we did that. And now we're back at it a little bit. And of the people we plan to hire this year, it feels like maybe we talked about 15 reps. You add five sales managers, and there's 20 in the sales department, maybe. And maybe there's 20, 25 elsewhere.
Covid hiring we think we did that and now we're back at it a little bit of the people we plan to hire this year. It feels like maybe we talked about 15 reps you add five sales managers Theres 20 in the sales Department, maybe and maybe there is 2025 elsewhere and maybe the biggest bucket of that has operations in manufacturing or something.
George W. LeMaitre: And maybe the biggest bucket of that is operations and manufacturing. So something like 40-ish, 50-ish, we're still working that out. But we're pretty tight-fisted. We're on a pay-as-you-go plan here.
40 ish 50 ish, we're still working that out but we.
We're pretty tight fisted, where on a pay as you go plan here. Our number one goal here is op income and then stuff come fills in after that.
George W. LeMaitre: Our number one goal here is operating income, and then stuff fills in after that. Great, very helpful. Thanks for that clarification. Congratulations on the quarter and year guys. Thanks a lot, Aaron. Your last question comes from the line of Brett Fishman with Quebec Capital Markets. Your line is now. Hi, this is actually Liz on for Brett.
Great very helpful. Thanks for that clarification, and congrats on the quarter and year guys.
Thanks, a lot here.
Your last question comes from the line of Brett Fishman with Keybanc capital markets. Your line is now okay.
Hi, This is actually Liz on for Brian Thanks for taking my questions.
Operator: Thanks for taking the questions. Just to start off with the 9% growth for the year. How should we think about that amongst the different regions and where do you expect to drive the most growth? Well, that's a good question.
Just to start off with the 9% growth for the year, how should we think about that amongst the different regions and where do you expect to drive the most growth.
Well that's a good question I would say generically, we always think Asia Pac is going to grow faster Europe's going to grow second fastest in North America is going to be a little bit slower. So thats generically, we don't really make guidance based on which region is going to happen will be thrilled when we show up with that 9% organic growth.
Liz: I would say, generically, we always think Asia-Pacific is going to grow faster, Europe's going to grow second fastest, and North America is going to be a little bit slower. So that's generically. We don't really make guidance based on which region it is going to happen in.
George W. LeMaitre: We'll be thrilled when we show up with that 9% organic growth, regardless of how it happens. 10% reported for the year is also what we guided. Does that get at some of your questions, Liz? Yeah, that was really helpful.
Regardless of how it happens.
10% reported for the year is also what we guided.
Does that get at some of your question Liz.
Yes that was really helpful.
Liz: And then, on the operational leverage side, how are you thinking of balancing your R&D investments versus SG&A? And how should we think about this going forward? Right. So sort of as, you know, all balancing down as some kind of operational margin numbers or something like that.
And then if I could ask on the op leverage side, how are you thinking of balancing your R&D investments versus SG&A and how should we think about this going forward.
Right, so sort of as all balancing down as some kind of op margin numbers or something like that.
Joseph P. Pellegrino: I mean, R&D, we've been kind of building a little bit on the percent spent. I think we're up at 9% of sales on that. Maybe historically, we were sort of in the eighths, and now we're in the nines.
R&D, we've been kind of building a little bit on a percent spent I think we're up at 9% of sales on that maybe historically, we were sort of in the eights and now were in the nines. So maybe we've been cranking up a little bit on the R&D side, and specifically for us R&D really means expanded regulatory and clinical efforts.
Joseph P. Pellegrino: So maybe we've been cranking up a little bit on the R&D side. And specifically for us, R&D really means expanded regulatory and clinical efforts, not so much old-fashioned R&D with new products. We tend to try to bring products in through acquisitions, so that may cover your R&D thing as a small part of your question. But the bigger part of the question is I think our guidance is implying a 21% operating margin for the year. Am I getting that right? Yeah, 21% operating margin for the year. And I think in 23, that same figure was 19%. And the year before that, it was 17%.
Not so much old fashion R&D with new products.
Tend to try to bring the products in through acquisitions that may cover year R&D thing is a small part of your question, but the bigger part of the question is I think our guidance is implying 21% op margin for the year am I getting that right, yeah, 21% op margin for the year and I think in 'twenty three that same figure was 90.
Teen percent and the year before that it was 17%. So I think we're seeing a little bit of operational leverage here of course were helped out in a big way by that gross margin number if that sticks around should make things pretty easy not easy, but more doable around here.
Joseph P. Pellegrino: So I think we're seeing a little bit of operational leverage here. Of course, we're helped out in a big way by that gross margin number. If that sticks around, it should make things pretty easy, not easy, but more doable. So, a little bit of leverage coming from gross margin and still growing sales.
A little bit of leverage coming from gross margin and still growing the sales force.
Liz: Okay, great. Thanks for taking the question. Thanks a lot, Liz. Ladies and gentlemen, that concludes today's conference. I would like to thank you for your participation, and you may now disconnect. Have a great day.
Okay, great. Thanks for taking the questions.
Thanks, a lot less.
Ladies and gentlemen that concludes today's conference I would like to thank you for your participation and you may now disconnect.
Great day.
Okay.
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Okay.
Okay.
Yes.
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Okay.