Q1 2025 LeMaitre Vascular Inc Earnings Call
Operator: Welcome to LeMaitre Vascular first quarter 2025 financial results conference call. As a reminder, today's call is being recorded.
Welcome to the Omega vascular first quarter 2025 financial results Conference call. As a reminder, today's call is being recorded.
Operator: At this time, I would like to turn the call over to Mr. Dorian LeBlanc, Chief Financial Officer of LeMaitre Vascular. Please go ahead, sir. Thank you, operator.
Speaker Change: At this time I would like to turn the call over to Mr. Doran Leblanc Chief Financial Officer of Lemaitre vascular. Please go ahead Sir.
Speaker Change: Thank you operator, good afternoon, and thank you for joining us on our Q1 2025 conference call.
Dorian LeBlanc: Good afternoon, and thank you for joining us on our Q1 2025 conference call.
Dorian LeBlanc: With me on today's call is our CEO, George LeMaitre, and our president, Dave Roberts. Before we begin, I'll read our safe harbors. 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 risks and uncertainty. Wherever possible, we will try to identify these forward-looking statements by using words such as believe, expect, anticipate, pursue, forecast, and similar expressions. Our forward-looking statements are based on our estimates and assumptions as of today, May 1st, 2025. and should not be relied upon as representing our estimates or views on any subsequent.
Speaker Change: 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.
Speaker Change: Today, we will make some forward looking statements within the meaning of the U S. Private Securities Litigation Reform Act of 1095, the accuracy of which are subject to risks and uncertainties.
Speaker Change: Wherever possible, we will try to identify these forward looking statements by using words, such as believe expect anticipate pursue forecast and similar expressions are forward looking statements are based on our estimates and assumptions as of today may one 2025.
Speaker Change: And should not be relied upon as representing our estimates or views on any subsequent date.
Dorian LeBlanc: 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, such as organic sales growth.
Speaker Change: 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.
Speaker Change: During this call we will discuss non-GAAP financial measures such as organic sales growth a reconciliation of GAAP to non-GAAP measures discussed on this call is contained in the associated press release and is available on the Investor Relations section of our website Www Dot <unk> dot com.
Dorian LeBlanc: 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.
George LeMaitre: I'll now turn the call over to George LeMaitre. Thanks Dorian. Q1 sales were stronger than our February 27th guidance. 13% organic and 12% reported growth was led by grafts up 17% and carotid shunts up 14%. We posted sales records in all five of our categories, grafts, carotid shunts, catheters, valvetomes, and patches. By geography, EMEA was up 18%, the Americas 11%, and APAC 3%.
Speaker Change: I'll now turn the call over to George Lemaitre.
Speaker Change: Thanks, Doran Q1 sales were stronger than our February 27th guidance.
Speaker Change: 13% organic and 12% reported growth was led by grafts up 17% and carotid shunts up 14%.
Speaker Change: Posted sales records in all five of our categories grafts carotid shunts catheters.
Speaker Change: Other towns in patches.
Speaker Change: By geography, EMEA was up 18% the Americas, 11% in APAC, 3%.
George LeMaitre: I'll focus my remarks on three topics, first, the growth of our sales force, second, our new international sales offices, and finally, our MDRCE market. We currently have 164 reps on payroll, and we're now targeting 170 at year-end. We also employ 34 sales managers versus 31 at our last earnings call. The sales force is our number one asset, so we continue to invest in reps, managers, and sales offices. Our new Alpine Regional Sales Manager started on April 1 and will oversee seven sales reps in Switzerland, Austria, and Czechia. Shipping from our new Zurich office will reduce customs complexity for Swiss hospitals and our direct offices almost always improve sales performance.
Speaker Change: I'll focus my remarks on three topics first the growth of our sales force.
Speaker Change: Our new international sales offices, and finally, our MDI CE marks.
Speaker Change: We currently have 164 reps on payroll and we're now targeting a 170 at year end. We also employ 34 sales managers versus 31 at our last earnings call.
Speaker Change: The sales force is our number one asset so we continue to invest in reps managers and sales offices.
Speaker Change: Our new Alpine regional sales manager started on April one and will oversee seven sales reps in Switzerland, Austria and Czech here.
Speaker Change: Shipping from our new Zurich office will reduce customs complexity for Swiss hospitals, and our direct offices almost always improved sales performance.
George LeMaitre: Switzerland is LeMaitre's sixth largest European market. We expect to sign a transition agreement with our check distributor shortly and should log our first direct sale in August. and we are currently recruiting two check reps. As for Portugal, we hired our Lisbon rep on January 1st, signed our distributor transition agreement on March 19th, and on May 1st became direct in Portugal.
Speaker Change: Switzerland made six largest European market.
Speaker Change: We expect to sign a transition agreement with our Czech distributor shortly and should launch our first direct sale in August.
Speaker Change: And we are currently recruiting to check reps.
Speaker Change: As for Portugal, we hired our Lisbon Rep on January one.
Speaker Change: And our distributor transition agreement on March 19th and on May 1st became direct in Portugal.
George LeMaitre: Also in Europe, we've just received our MDR CE mark for ArteGraft, and the European launch will begin presently. ArteGraft, a biologic graft used primarily in AV access and peripheral bypass, was the company's largest U.S. product in 2024, with $37 million in U.S. sales.
But also in Europe, we just received our MDI, our CE Mark for Autograft and the European launch will begin presently.
Speaker Change: Allograft, a biologic grafts used primarily in access in peripheral bypass was the company's largest U S product in 2024 with $37 million in U S sales.
George LeMaitre: At previous earnings calls, we've estimated Artigraf's current market size to be about $8 million in Europe and $8 million in the rest of the world. We currently have Artigraf's approvals in New Zealand, South Africa, Thailand, Israel, and Malaysia. We sold $180,000 of Artigraf's internationally in Q1. We also expect to receive approvals in Australia, Canada, Singapore, and Korea by H1 2026.
Speaker Change: In previous earnings calls, we've estimated autographs current market size to be about $8 million in Europe, and $8 million rest of world.
Speaker Change: We currently have autograft approvals in New Zealand, South Africa, Thailand, Israel in Malaysia.
Speaker Change: We sold $180000 of autograph internationally in Q1.
Speaker Change: We also expect to receive approvals in Australia, Canada, Singapore, and Korea by $81 2026.
George LeMaitre: So this is an exciting worldwide launch with plenty of long run upsides. Our New Jersey Autograph Production Facility is currently running a single shift and is capable of meeting this new demand.
Speaker Change: So this is an exciting worldwide launch with plenty of long run upside.
Speaker Change: New Jersey autograph production facility is currently running a single shift and is capable of meeting this new demand.
George LeMaitre: Separately, we continue to anticipate at least one RestoreFlow allograft approval in 2025 from Ireland or Germany. As a reminder, allografts require approval on a country-by-country basis. Approvals from either Ireland or Germany would then expedite our individual European country approvals. Anticipating the Irish approval, we'll be opening a pan-European RestoreFlow distribution facility in Dublin in H2. RestoreFlow is currently approved in the U.S., the U.K., and Canada. Since the 2016 acquisition, RestoreFlow's sales CAGR has been 23%.
Speaker Change: Separately, we continue to anticipate at least one restore flow allografts approval in 2025 from Ireland or Germany.
Speaker Change: As a reminder, allograph require approval on a country by country basis.
Speaker Change: Approvals from either island, or Germany would then expedite our individual European country approvals.
Speaker Change: Anticipating the Irish approval, we'll be opening a pan European restore flow distribution facility in Dublin in H two.
Speaker Change: Restore flow is currently approved in the U S. The UK and Canada.
Speaker Change: Since the 2016 acquisition restore flows sales CAGR has been 23%.
George LeMaitre: In summary, Q1 sales momentum, our continued office and sales force buildout, and our regulatory progress allow us to increase our 2025 reported sales guidance to $245 million from 239 previously. And our organic sales guidance has advanced to 13% from 10% previously. $303 million of cash also provides strategic optionality.
Speaker Change: In summary, Q1 sales momentum our continued office and Salesforce Buildout and our regulatory progress allow us to increase our 2025 reported sales guidance to $245 million from 239 previously and our organic sales guidance has advanced the 13% from 10 <unk>.
Speaker Change: <unk> previously.
Speaker Change: $303 million of cash also provide strategic optionality.
Dorian LeBlanc: With that, I'll turn the call over to Dorian. Thanks, George. The LeMaitre portfolio of niche devices continues to deliver in Q1. As George referenced, we experienced record quarterly sales in grafts, carotid shunts, catheters, valvulatomes, and patches. Organic sales growth of 13% over Q1-24 was driven by average selling price increases of 9% and unit increases of 4%. In Q1 2025, we posted a 69.2 gross margin. The 60 basis point increase, year over year, was driven primarily by higher ASPs and lower inventory scrap, offset by product. average selling price increases improve the gross margin by approximately 270 basis points in Q1.
Dorian: With that I'll turn the call over to Dorian.
Dorian: Thanks, George the law made portfolio of niche devices continues to deliver in Q1 as.
Speaker Change: As George referenced we experienced record quarterly sales and graphs carotid shunts catheters, valvulotome and patches orgs.
Speaker Change: Organic sales growth of 13% over Q1, 'twenty four was driven by average selling price increases of 9% and unit increases of 4%.
Speaker Change: In Q1, 2025, we posted a $69 two gross margin.
Speaker Change: The 60 basis point increase year over year was driven primarily by higher Asps and.
Speaker Change: And lower inventory scrap offset by product mix.
Speaker Change: Average selling price increases improve the gross margin by approximately 270 basis points in Q1.
Dorian LeBlanc: Reduce scrap, contribute an additional $85 basis. The shift in product mix, particularly towards grafts, negatively impacted the gross margin by 220 basis.
Speaker Change: Reduced scrap contributed an additional 85 basis points.
Speaker Change: The shift in product mix, particularly towards graphs negatively impacted gross margin by 220 basis points.
Dorian LeBlanc: Operating expenses in Q1 2025 were $28.8 million, an increase of 16% versus Q1 2024. The increase was driven largely by higher compensation expenses, including the addition of 21 more sales professionals. and higher non-compensation sales-related expenses. Q1 2025 operating income increased 6% year-over-year to $12.6 million, an operating margin of 21%. Fully diluted EPS was $0.48, up 10%.
Speaker Change: Operating expenses in Q1, 2025, or $28 8 million, an increase of 16% versus Q1 2024.
Speaker Change: The increase was driven largely by higher compensation expenses, including the addition of 21 more sales professionals and higher non compensated non compensation sales related expenses.
Speaker Change: Q1, 2025 operating income increased 6% year over year to $12 6 million and operating margin of 21%.
Speaker Change: Fully diluted EPS was <unk> 48.
Speaker Change: Up 10%.
Dorian LeBlanc: We ended Q1 2025 with $302.5 million in cash and securities, an increase of $2.8 million in the quarter. Cash from operations generated $9 million in the quarter. We paid $4.5 million in dividends to shareholders and made the final deferred payment of $1.4 million related to our 2019 CardioCell acquisition.
Speaker Change: We ended Q1 2025 with $302 5 million in cash and securities an increase of $2 8 million in the quarter.
Speaker Change: Cash from operations generated $9 million in the quarter.
Speaker Change: We paid $4 5 million in dividends to shareholders and made the final deferred payment of $1 4 million related to our 2019 cardio cell acquisition.
Dorian LeBlanc: As we turn to guidance, there are two additional topics that we have incorporated into our full year forecast.
Speaker Change: As we turn to guidance there are two additional topics that we have incorporated into our full year forecast.
Dorian LeBlanc: First, we have amically wound down our porcine patch distribution agreement with Aleutia effective April 30th in order to focus on sales of our own biologic. In 2024, our hospital sales of Aleutia patches total approximately $5 million. this product exit will likely improve our organic growth rate and gross margin.
Speaker Change: First we have amicably wound down our porcine patch distribution agreement with a Lucia effective April 30.
Speaker Change: In order to focus on sales of our own biologics and.
Speaker Change: In 2020 for our hospital sales of our Lucia patches totaled approximately $5 million.
Speaker Change: This product exit will likely improve our organic growth rate and gross margin.
Dorian LeBlanc: Second, we'd like to address tariffs. In summary, we believe the company is comparatively well-positioned as it relates to this issue. LeMaitre manufactures 100% of its products in the United States. and therefore we have limited concerns related to U.S. import tariffs. Approximately 25% of our cost of goods sold is for raw materials and components, of which approximately $2 million is paid to foreign suppliers, largely to Australia. Simply stated, we are not big importers. As for the impact of potential retaliatory terrorists, approximately 40% of our sales are international. Since we generally compete in low rivalry markets, we anticipate low substitution risk, and we believe we can raise prices to offset most potential tariffs.
Speaker Change: Second wed like to address tariffs.
Speaker Change: In summary, we believe the company is comparatively well positioned as it relates to this issue.
Speaker Change: <unk> manufactures a 100% of its products in the United States.
Speaker Change: And therefore, we have limited concerns related to U S import tariffs.
Speaker Change: Approximately 25% of our cost of goods sold as for raw materials and components of which approximately $2 million is paid to foreign suppliers largely to Australia.
Speaker Change: <unk> stated we are not big importers.
Speaker Change: As for the impact of potential retaliatory tariffs approximately 40% of our sales are international.
Speaker Change: Since we generally compete and low rivalry markets, we anticipate low substitution risk and we believe we can raise prices to offset most potential tariffs.
Dorian LeBlanc: Chime that calendar for less than 1% of our total annual revenue. The Chinese import tariffs currently in place will increase our Chinese cost of goods by almost $825,000 per year. We are implementing price increases on May 15th in China, which would offset half of these costs. We remain committed to a long-term view of our business prospects in China. We generally believe that cooler minds will eventually prevail, and most terrorists will recede in the long run, particularly on life-saving medical devices. Overall, we feel well-positioned with our U.S.-only manufacturing footprint, our U.S.-focused supply chain, and our competitive positioning in foreign markets with our niche products and direct sales markets.
Speaker Change: China accounted for less than 1% of our total annual revenue.
Speaker Change: The Chinese import tariffs currently in place will increase our Chinese cost of goods by almost $825000 per year.
Speaker Change: We are implementing price increases on may 15th in China, which had offset half of these costs.
Speaker Change: We remain committed to our long term view of our business prospects in China.
Speaker Change: We generally believe that cooler mines will eventually prevail and most tariffs will recede in the long run, particularly on life saving medical devices.
Speaker Change: Overall, we feel well positioned with our U S only manufacturing footprint, our U S focused supply chain and our competitive positioning in foreign markets with our niche products and direct sales model.
Dorian LeBlanc: Therefore, we feel comfortable increasing our 2025 sales guidance despite trade tension.
Speaker Change: Therefore, we feel comfortable increasing our 2025 sales guidance despite trade tensions.
Dorian LeBlanc: LeMaitre continues to deliver broad-based revenue growth with our differentiated products, direct-to-hospital model, and growing commercial organization. We have raised our full-year revenue guidance to $245 million, reflecting a continued robust sales performance and a benefit from the weaker U.S. dollar, offset by the discontinuation of our Aleutian distribution agreement and a weaker outlook for our small China business. We have further updated our annual guidance for a gross margin of $69.6 million, operating income of $57.7 million, and a midpoint guide on diluted earnings per share of $2.16.
Speaker Change: <unk> continues to deliver broad based revenue growth with our differentiated products direct to hospital model and growing commercial organization. We have raised our full year revenue guidance to $245 million, reflecting our continued robust sales performance and a benefit from the weaker U S dollar offset by the discontinuation of our.
Speaker Change: Alicia distribution agreement and a weaker outlook for our small China business we.
Speaker Change: We have further updated our annual guidance for our gross margin of $69 six operating income of $57 7 million and our midpoint guide on diluted earnings per share of $2 16.
Dorian LeBlanc: For more details, please see today's press release.
Speaker Change: For more details. Please see today's press release with that I'll turn it back over to the operator for questions.
Operator: With that, I'll turn it back over to the operator for questions. Thank you.
Operator: As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. One moment while we compile our Q&A roster.
Speaker Change: Thank you and as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, one moment, while we compile our Q&A roster.
Seamus: Our first question is going to come from the line of Suraj Kalia with Oppenheimer and Company. Your line is open. Please go ahead. Hi guys, congrats on a strong quarter. This is Seamus on for Suraj. Hi Seamus. Hi. Just to start, you know, you guys had a strong 1Q. You guys beat by a little over 2 million, but you raised the guidance by 7. You know, obviously, there's some moving pieces here. You guys have artigraph clearance now, the ELUSHA, you know, agreement cessation.
Speaker Change: Our first question is going to come from the line of Suraj Kalia with Oppenheimer <unk> Company. Your line is open. Please go ahead.
Speaker Change: Hi, guys. Congrats on a strong quarter. This is seamus on for Suraj.
Shannon: Hi, Shannon.
Speaker Change: Hi.
Speaker Change: Just to start.
Speaker Change: You guys had a strong <unk> you guys beat by a little over $2 million.
Speaker Change: Raised the guidance by seven.
Speaker Change: Obviously, there's some moving pieces here you guys have autograph clearance now Lucia agreement cessation I guess, what's giving you the confidence here early especially with kind of.
Seamus: I guess what's giving you the confidence here, you know, early, especially with kind of You know, the current things swirling around in the air in terms of tariffs and globally, that's giving you the confidence to increase guidance so early in the year.
Speaker Change: The current thinking.
Speaker Change: Swirling around in the air in terms of tariffs globally, that's giving you the confidence to increase guidance. So early in the year.
George LeMaitre: Thanks for the great questions, Seamus.
George LeMaitre: Thanks for the Great question Seamus This is George.
George LeMaitre: This is George. Yeah, of course, you're pointing out what gives us this confidence. There's a bunch of factors here, but maybe the first one that you pointed out was that we beat Q1 by a lot, so you got that going. That's already in the bag. The price hikes also are working better than anticipated. It was a big topic at the last call, but we came out and said we think the U.S. price list was going to increase prices by 8%, and in Q1 we got an 11% in the U.S., so we got a little bit better than we expected with those pricing floors.
Speaker Change: Yes of course, you are pointing out so what gives us this confidence is a bunch of factors here, but maybe the first one that you pointed out was that we beat Q1 by a lot. So you got that go and Thats already in the bag. The price hikes also are working better than anticipated.
Speaker Change: Big topic at the last call, but we came out and said we think the U S. Price list was going to increase prices by 8% and in Q1, we got an 11% in the U S. So we got a little bit better than we expected with those pricing floors.
George LeMaitre: Interestingly enough, getting out of the Aleutia business will help organic growth in the year because it was reducing over time. It never really worked that well inside of our bag of goods, and so getting rid of that oddly increases organic growth. You can see also we're sort of, quote, guiding more sales reps than on the last call. We were guiding 165 for the end of this year on February 27th, and now come May 1st we're guiding 170, so we're putting on more reps, and we think that will lead to additional sales growth. Obviously, you pointed out also the Artigraft International.
Speaker Change: Interestingly enough getting out of the <unk> business will help.
Speaker Change: Organic growth in the year, because it was reducing overtime. It never really worked out well inside of our bag of goods and so getting rid of that oddly increases organic growth.
Speaker Change: You can see also we're sort of guiding more sales reps than on the last call. We're guiding $1 65 for the end of this year on February 27th and now come May 1st we're guiding 170, so we're putting on more reps and we think that will lead to additional sales growth.
Speaker Change: Obviously, you pointed out also the Arctic graft.
Speaker Change: International.
George LeMaitre: It's starting to work internationally, and then on Tuesday we got the approval, the big one we've been waiting for, which is the CE mark for Artigraft. Just in general, Europe's going so well these days for a variety of reasons.
Speaker Change: It's starting to work internationally and then on Tuesday, we got the approval the big one we've been waiting for which is a CE mark for Autograft and then just in general Europe's going so well these days for a variety of reasons, both price and units and all of these office as we keep putting in seem to help out with growth. So I would say.
Seamus: Both price and units and all these offices we keep putting in seem to help out with growth, so I would say that's a big, long laundry list for your question, but that's sort of why we feel comfortable going from 10 to 13 organic. Got it. Appreciate all that helpful color.
Speaker Change: So that's a lot that's a big long laundry list for your question, but thats sort of why we.
Speaker Change: Feel comfortable gone from 10% to 13 organic.
Speaker Change: Got it appreciate all that helpful color and then just kind of one more and I'll hop back in queue.
Seamus: And then just kind of one more and we'll hop back in queue, you know.
George LeMaitre: Can you give us any update on M&A, what you're seeing? And then George, I can't help but at least clarify this. You noted that you guys have 303 million of cash and it provides strategic optionality. So I feel like there's something there that you're maybe hinting at kind of behind the scenes if you can give us any, what you may mean by that.
Speaker Change: Can you give us any update on M&A, what you're seeing and then George I can't help but at.
Speaker Change: At least clarify this you noted that you guys have $303 million of cash and it provides strategic optionality. So I feel like there's something there that youre.
Maybe hinting kind of behind the scenes if you can give us any.
Speaker Change: Now what you mean by that thank you, Okay really really quickly I'll say I'm not hinting at anything I just feel like if you have $300 in the bank you can do stuff with it. So there's no nothing underneath that but I'll pass it over to Dave who usually handles the M&A question Seamus.
George LeMaitre: Thank you. Okay, really, really quickly, I'll say I'm not hinting at anything. I just feel like if you have $300 million in the bank, you can do stuff with it.
David Roberts: So there's nothing underneath that, but I'll pass it over to Dave who usually handles the M&A question.
David Roberts: Hey Seamus, great to hear from you. Yeah, the pipeline's in really good shape. Obviously, we're still hunting in the center of the fairway for us, which is open vascular surgery. There are 22 or 23 targets, over five million of them. But we're also actively hunting in an adjacent space, cardiac surgery, where there are crossover devices. And some cardiac surgeons do vascular surgery. I'd say, of course, like I said in previous calls, we're hunting for larger deals. Our last deal was almost five years ago, Artigraft. And we're obviously delighted with how that's gone. But we're hunting for larger deals.
Speaker Change: Amos great to hear from you.
Dave Roberts: Pipelines and.
Speaker Change: Really good shape.
Speaker Change: Obviously, we're still hunting in the center of the fairway for US, which is open vascular surgery. There are 223 targets over $5 million of revenue, but well.
Speaker Change: We're also actively hunting in an adjacent space cardiac surgery, where there are crossover devices and some cardiac surgeons do vascular surgery.
Speaker Change: I would say of course like I said in previous calls were hunting for larger deals. Our last deal was almost five years ago Arctic graft and we're obviously delighted with how that's gone but.
Speaker Change: We are hunting for larger deals and hence we've done we did the bond offering in December.
David Roberts: And hence, we did the bond offering in December. The sweet spot probably is revenues of $15 to $150 million, or something like that worth of revenue.
Speaker Change: Sweet spot, probably as revenues of $15 million to $150 million or something like that.
Speaker Change: Worth of revenue.
David Roberts: Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you.
Operator: in one moment as we move on to our next question.
Speaker Change: And one moment as we move on to our next question and as a reminder, if you would like to ask a question. Please press star one on your telephone.
Operator: And as a reminder, if you would like to ask a question, please press star 1-1 on your telephone.
Michael Petusky: Our next question comes from the line of Michael Petusky with Barrington Research. Your line is open, please go ahead. Good evening.
Speaker Change: Our next question comes from the line of Michael <unk> with Barrington Research. Your line is open. Please go ahead.
Speaker Change: Hey, good evening.
Michael Petusky: George, I'm curious, any view on Xenoshore and China and just all the sort of the strain in this relationship, do you have any concerns that this hangs it up? Or is there any intelligence that you might have on that, you know, sort of relative to that issue? Right. That's a great question, Mike. Thanks a lot. You know, I feel like the whole project just took a, I don't know, a five-yard sack, if you will. Not just ZenaSure, but the whole China LeMaitre. And as you can remember, two years ago we were in here, you know, saying how bad China was.
Speaker Change: Hi, George I'm curious any view on xena shore in China and to solve that sort of the strain in this relationship do you have any concerns that this hangs in op or is there any intelligence that you might have on that sort of relative to that issue.
Right. That's a great question, Mike Thanks, a lot.
Speaker Change: No.
Speaker Change: I feel like the whole project just took a.
Speaker Change: Now a five yard stack, if you will not just in a share but the whole China law maiden as you can remember two years ago, we were in here, saying, how bad China was in the last year, it's sort of really turned around for US we had a fantastic Q1, if you remember.
George LeMaitre: And then in the last year, it sort of really turned around for us. We had a fantastic Q1, if you remember. And so, yeah, it's frustrating. But you know, we've been there ten years. We call it the Long March, ha, ha, ha. We plan to continue being there. It will hurt us a little bit. But you know, I bet you in the long run, some of this stuff simmers down. I think it'll be okay.
Speaker Change: And so.
Speaker Change: And so yes, its frustrating, but we have been there 10 years, we call. It the long March ha and weakened we plan to continue being there it will it will hurt us a little bit but.
Dave Roberts: I bet you in the long run some of this stuff simmers down I think it would be okay, and Mike It's Dave.
David Roberts: And Mike, it's Dave. You know, obviously, we were delighted to get that ZenaSure cardiac approval back in December. And so, for us, despite all the tariff and trade tension and all that, our team is actively seeking provincial listing approvals in the 31 provinces there. We expect to get most of those in Q4. Of course, the material sales wouldn't appear probably until next year sometime. But yeah, let's just see what happens between the countries. But in the meanwhile, you know, we're preparing to move ahead with that product line.
Speaker Change: Obviously, we were delighted to get the zena generic cardiac approval back in December and so for us Despite all the tariff and trade tension in all of that.
Speaker Change: Our team is actively seeking provincial listing approvals and the 31 provinces there.
Speaker Change: We expect to get most of those in Q4 of course materials sales were up here probably until next year sometime but yes, let's just see what happens between the countries, but in the Meanwhile, we're preparing to move ahead with that product line.
Michael Petusky: All right, great.
Speaker Change: Okay Alright, great.
Dorian LeBlanc: And Dorian, curious if you have this handy. Do you have cash flow for Ops and CapEx this quarter by any chance? Sure, Mike. Cashflow from Ops was $9 million and within that depreciation and amortization was $2.552 million. share base comp was $2.046 million. and capital expenditures for the quarter is $1.383 million. And cash flow from Ops was like roughly 9.0. 9.0.
Dorian: And Dorian.
Speaker Change: Curious if you have this handy just cash flow from ops and Capex this quarter by any chance.
Dorian: Sure Mike cash flow from ops was $9 9 million within that depreciation and amortization was $2 55 2 million shares.
Dorian: Share based comp was 2.046 million.
Dorian: And capital expenditures for the quarter was one $383 million.
Dorian: Cash flow from ops like roughly 9.0.
Dorian: 9.0 million correct.
Dorian: Awesome. Thank.
Michael Petusky: Thank you so much, JJ. It was good having that handy. I really appreciate you doing the same.
Speaker Change: Thank you so much to J&J always goodwill was having that handy I really appreciate you.
Michael Petusky: I'll get back in the queue at this point. Thank you, guys. Appreciate it. Thanks a lot, Mike.
Dorian: Sorry.
Dorian: I'll get back in the queue at this point. Thanks. Thank you guys appreciate it.
Mike: Thanks, a lot Mike.
Rick Wise: And our next question is going to come from the line of Rick Wise with Stiefel. Your line is open. Please go ahead. Thank you. Good afternoon, everybody.
Speaker Change: And our next question is going to come from the line of Rick Wise with Stifel. Your line is open. Please go ahead.
Mike: Thank you good afternoon everybody.
Rick Wise: Hi, George. Just to start off on your pricing commentary, I mean, clearly, as you said, price was stronger, better than expected, and maybe I'm misremembering. Please correct me, obviously, if I'm wrong. I feel like that the last call, we were thinking about more of a 6% blended price increase for the year.
Speaker Change: Hi, George.
Speaker Change: Just.
Speaker Change: Just to start off on your pricing commentary.
Speaker Change: I mean, clearly as you said price was.
Speaker Change: Stronger better than expected and maybe I'm misremembering. Please correct me, if I'm wrong I feel like that.
Speaker Change: Last call, we were thinking about more of a 6% blended price increase for the year. So given the first quarter performance and whatever.
Rick Wise: So, given the first quarter performance and whatever the guidance was before, how do you want us to think about price or price and volume as we break it down and think about the full 25-year? Okay.
Speaker Change: Guidance was before how are we how do you want us to think about.
Speaker Change: Price or price and volume as we break it down and think about the full 25 years.
Rick Wise: And then I know I'm going to come to an unsatisfactory answer to this question, but I'm going to get there in a second. Just to go at, I think the difference between your 6% number and my 8% number that I just mentioned was I'm talking U.S. only, and we were trying to use that as a proxy, as a simple proxy. You might have blended worldwide as 6%. You might remember that from the last call. I do. Regardless of where we remember it, the raw fact is, in Q1, it was a 9% price increase and a 4% unit increase.
Speaker Change: Okay and then.
Speaker Change: Then I know I'm going to come to an unsatisfactory answer this question, but im going to get there in a second just to go out I think the difference between your 6% number in my 8% number that I just mentioned was <unk>.
Speaker Change: Talking U S only and we're trying to use that as a proxy as a simple proxy you might have blended worldwide at 6% you might you might remember that from the last call I did regarding what either of us regardless of where we remember it. The raw fact is in Q1, it was a 9% price increase and a four.
Rick Wise: We always have an eye towards having better unit growth, but it's a nice number anyway. So 9 and 4 was what we got in Q1.
Speaker Change: Percent unit increase.
Speaker Change: We have an eye towards having better unit growth, but it's a nice number anyway. So nine and four was what we got in Q1 I sort of talk it through now to just go back to the U S. Our price list price increase was eight 1% blended in the U S and we think we got an 11 a tenant.
Rick Wise: I sort of talk it through now to just go back to the U.S. Our list price increase was 8.1% in the U.S., and we think we got an 11. I think we got an 11. So we got a little bit more price discipline than we expected, I guess is what I would say.
Speaker Change: I think we've got an 11 so.
Speaker Change: We got we got a little bit more price discipline than we expected I guess is what I would say as for.
Rick Wise: As for the back of your question about price and volume for the year, it's almost impossible for us to get what the organic growth is. It's so hard. We don't really try to break it between price and units. Perhaps you could assume status quo as the year goes by. I don't have any reason to think it's not status quo, and that's 9 and 4 is the 13 for Q1, but I don't know about the next three quarters. Gotcha. That's helpful.
Speaker Change: Back to your question about price price and volume for the year.
Speaker Change: It's almost impossible for us to get what the organic growth is it so hard we don't really try to break it between price and units, perhaps you could assume.
Speaker Change: Status quo as the year goes by I don't have any reason to think it's not status quo and that's nine and four is is the 13 for Q1, but I don't know about the next three quarters.
Speaker Change: Got you.
Rick Wise: And I was hoping you'd expand on the excellent news about the autograph CE mark approval. How do we think about the contribution from autographs in Europe? What kind of incremental volumes should that offer? What's baked into your guidance? Just maybe some additional color there would be helpful. Sure. That makes a lot of sense.
Speaker Change: Helpful.
Speaker Change: And I was hoping you could expand on.
Speaker Change: The excellent news about the autograph CE Mark approval.
Speaker Change: How do we think about.
Speaker Change: The contribution.
Speaker Change: Autograph.
Speaker Change: In Europe.
Speaker Change: What kind of incremental volumes should that offer what's baked into your guidance.
Speaker Change: Some additional color there would be helpful. Sure that makes a lot of sense. It's why we gave you that international number which is without Europe. So far so in the first real quarter of selling internationally, we've got 180000.
Rick Wise: It's why we gave you that international number, which is without Europe so far. So in the first sort of real quarter of selling internationally, we've got 180,000. We've pumped into our model a number which it's so preliminary, but we've wrote it in as 350,000 euros for the back three quarters of this year.
Speaker Change: We've pumped into our model a number which.
Speaker Change: So preliminary but we wrote it in its 350000 euros for the back three quarters of this year, but honestly, Rick I think I'd love for you guys to give us a quarter or two to get our sea legs on this product and then I think we'll be a lot better at guiding prospective on that and then of course as you remember I am.
Rick Wise: But honestly, Rick, I think I'd love for you guys to give us a quarter or two to get our sea legs on this product. And then I as you remember, I'm going to not want to guide on individual devices at some point, but I realize we all need more information around this.
Not want a guide on individual devices at some point, but I realize we all need more information around this what does it mean another way to look at it as we keep saying there is an $8 million market in Europe, and an $8 million market rest of world. Another way to look at it which we keep trying to do.
Rick Wise: What does it mean? Another way to look at it is we keep saying there's an $8 million market in Europe and an $8 million market rest of world. Another way to look at it, which we keep trying to juxtapose with that number is there's a, we sold $37 million of it in the US. If you take a really high level look at it, I don't know, maybe in 10 years, you're selling half of that or a fourth of that. I don't know. They have different practice patterns over there. It's a long run. I hope I'm answering part of your question.
Speaker Change: Jacques as opposed what that number is we sold $37 million of it in the U S. If you take a really high level look at it I don't know maybe in 10 years, you are selling half of that or a fourth of that I don't know they have different practice patterns over there. It's a long run I hope I'm answering part of your question.
Rick Wise: Do you want to poke away at any of that, Rick? Any other further comments on my answer? No, no. No, that's a great perspective.
Speaker Change: Do you want it you want to poke away at any of that Rick any other further comments on that and on my answer no no no.
Speaker Change: No that's great protector I will sneak another small question about gross margin if I could.
Rick Wise: I will sneak in another small question about gross margin, if I could. Thank you, Dorian, for the gross margin breakdown. And help us think about the graft drag. Obviously, price was a positive scrap good, you know, contributed. But is this mixed drag? Is there anything that's going to change as the year unfolds? And just maybe just give us some color about how gross margins we should think about it as the year unfolds, you know, as the quarters unfold for the year as well.
Speaker Change: Thank you Duane.
Speaker Change: The gross margin breakdown.
Speaker Change: Help us think about the graft.
Speaker Change: Drag obviously pricing was a positive scrap.
Speaker Change: Good.
Speaker Change: <unk>.
Speaker Change: Contributed but is this mixed drag is there anything that's going to change as the year unfolds and just maybe just give us some color about how.
Speaker Change: Gross margins, we should think about it.
Speaker Change: As the year unfolds.
Speaker Change: Warner's.
Unfold for the year as well thank you.
Dorian LeBlanc: Thank you. Yeah, and the Allograft product in particular is the component of mix that is you can think of as being below the corporate average margin. Obviously, we've continued to see great growth in that product line. George mentioned that, you know, we've got a 23% compound annual growth rate since the acquisition there. But it is a little bit different product, you know, the human tissue. And so the great growth there, and we will hopefully see that as well in 2026 with the approvals that we see coming in Europe, the investments that we're making. So that was the big contributor from a graph perspective on the mix.
Speaker Change: Yes.
Speaker Change: Allograft product in particular is the.
Speaker Change: The component of mix that is you can think of as being below the corporate average margin.
Speaker Change: Obviously, we've continued to see great growth in that product line, George mentioned that we've got a 23% compound annual growth rate since the acquisition there.
Speaker Change: But it is a little bit different different product.
Speaker Change: The human tissue.
Speaker Change: And so the great growth, there and we will hopefully see that as well in 2026 with the approvals that we see coming in Europe, the investments that we're making.
Speaker Change: That was the big contributor from a graph perspective on the mix.
Rick Wise: Gotcha.
Rick Wise: Thank you.
Speaker Change: Gotcha. Thank you.
Operator: Thank you, and one moment as we move on to our next question.
Speaker Change: Thank you and one moment as we move on to our next question.
Michael Sarcone: Our next question comes from the line of Michael Sarcone with Jeffries. Your line is open. Please go ahead. Good afternoon, and thanks for taking our questions. Just to follow up on Rick's question, just to make sure I'm clear. So just on the 1Q gross margin and operating margin coming in below guidance, is it fair to read that as allograft kind of performed better than expected, and that's what drove the below-guide margin? Yeah, I think this graph graphs overall as a category, you know, performing as high as they did, is what drove that that mix component.
Speaker Change: Our next question comes from the line of Michael Sarcone with Jefferies. Your line is open. Please go ahead.
Michael Sarcone: Good afternoon, and thanks for taking our question.
Speaker Change: Just to follow up on Rick's question make sure I'm clear so just on the <unk> gross margin and operating margin coming in.
Michael Sarcone: LOE guidance is.
Michael Sarcone: Is it fair to read that as allograft kind of performed better than expected.
Michael Sarcone: And Thats what drove the below guide margins.
Michael Sarcone: Yes, I think this graph grass overall as a category performing as high as they did.
Michael Sarcone: Drove that mix component and Mike I would add it's Dave Roberts.
Michael Sarcone: And Mike, I would add, it's Dave Roberts. And within that, as Dorian mentioned, allograft has been an important growth driver for us over many quarters. And it did outperform in Q1 by about a million dollars. And so that, I'd say, was the primary driver of the gross margin missed from a product standpoint. Got it. That's helpful. And then just, you know, on gross and operating margin for the full year, it looks like the guide came down modestly for gross margin, but you're taking up your operating margin guidance at the midpoint. Can you just kind of elaborate on the moving pieces there?
Michael Sarcone: Within that as Doron mentioned allograft is.
Michael Sarcone: <unk> has been an important growth driver for us over many quarters and it did outperform in Q1 by about $1 million and so I'd say it was the primary.
Speaker Change: Driver of the gross margin from a product standpoint.
Michael Sarcone: Got it that's helpful and then just.
Michael Sarcone: On gross and operating margin for the full year. It looks like the guide came down modestly for gross margin, but you are taking up your operating margin guidance at the midpoint can you just kind of elaborate on the moving pieces there.
Dorian LeBlanc: Yeah, I mean, there's a lot to that, right? We have such a nice sales, growth, guidance, and yet the operating margin moves down from 25 to 24 for the full year. That's what you're getting at, right, Mike? What's the component of that? So, as you already alluded to, we're pulling down our gross margin guidance ever so slightly for the year because we got a 69.2 in Q1. We're a little nervous about what does that mean? So, I think we're now, what are we at, 69.6 as the guide? Yeah, okay. So, 69.6 for the yearly guide, so that's involved in it, too.
Michael Sarcone: Yes, I mean, theres a lot to that right we have such a nice.
Michael Sarcone: Sales growth guidance and yet the operating margin moves down from 25% to 24 for the full year Thats, what youre getting at right Mike.
What what's the component.
Michael Sarcone: Part of that so as you already alluded to we Miss were pulling down our gross margin guidance ever so slightly for the year because we got a 69 two in Q1 were a little nervous about what does that mean and so I think we're now at what are we at 69, 6%.
Michael Sarcone: As the as the guide yes, Okay. So 69 six for the yearly guide.
Speaker Change: That's involved in it too I would I would go back and think about this 24% op margin to Crazy high op margin and it gets affected.
Dorian LeBlanc: I would go back and think about this 24% op margin's a crazy high op margin, and it gets affected. It's pretty rare to see a company with that op margin, so anything you do upsets that op margin. Maybe one thing that you can see us doing here on this call is we've increased our quote guidance, I don't know what you'd call it, from 165 sales reps at year-end to 170, so I think our sort of bullishness that we're seeing with sales and with the success of this commercial build-out, I think we're saying, hey, let's add five more to this, and I think maybe you're seeing some of that in the op margin.
Speaker Change: It's pretty rare to see a company with that op margin. So anything you do upsets that op margin, maybe one thing that you can see us doing here on this call as we've increased our quote guidance I don't know if you call. It from 165 sales reps at year end to 170, So I think our sort of bullishness that we're seeing with sales and with the success.
Speaker Change: Of this commercial build out I think we're saying hey, let's add five more to this and I think maybe youre seeing some of that in the op margin and then finally of course, our Swiss office doesn't come cheap we continue to learn and clearly the most expensive place to operate on a planet. Besides Tokyo, So you've got a little bit of Swiss office in there too.
Dorian LeBlanc: And then, finally, of course, a Swiss office doesn't come cheap. We continue to learn, clearly the most expensive place to operate on the planet besides Tokyo, so you get a little bit of Swiss office in there, too, in some of these sales reps. Got it.
Speaker Change: And some of these sales reps.
Operator: Thank you very much.
Speaker Change: Got it thank you very much.
Frank Takkinen: Thank you and one moment for our next question. Our next question comes from the line of Frank... Tarkinen with Lake Street Capital Market.
Speaker Change: Thank you and one moment for our next question.
Frank: Our next question comes from the line of Frank.
Kennon: Hi, Kennon with Lake Street capital market. Your line is open. Please go ahead.
Frank Takkinen: Your line is open. Please go ahead. All right, thanks for taking the questions. Congrats on all the progress.
Alright, thanks, taking the questions congrats on all the progress.
Frank Takkinen: Wanted to also start with one on on the Salesforce. Can you just remind us kind of ramp up time and then when we can see that convert to kind of operating leverage? I know that the guidance implies that that operating income starting to grow a little quicker through the back half of the year, but typically we've seen that really outpaced the top line. So when can we see some of those reps start to contribute and then drive that impressive operating leverage profile you guys have shown?
Speaker Change: To also start with one on the sales force can you just remind us kind of ramp up time, and then when we can see that convert to kind of operating leverage I know the guidance implies that net operating income starting to grow a little quicker through the back half of the year, but typically we've seen.
Speaker Change: That really outpaced topline so when can we see some of those reps start to contribute and then drive that impressive operating leverage profile you guys have.
Speaker Change: Yeah.
Frank Takkinen: Thanks for the question, Frank. And just to put some numbers on what you're talking about, H2, it looks like... We are implying in the guidance that the op income growth gets back to 14% for H2, and I think it's a piece of what you're alluding to. As to how quick the reps get up and running, we've been answering this question for, I've been answering for 20 years, I don't have a great answer. I will say that we've done a lot of what I'll call regression analysis and salesforce analysis, and God knows we have a lot of data around here now, having run this salesforce for so long.
Speaker Change: Thanks for the question, Frank and just to put some numbers on where you are talking about <unk>. It looks like we are implying in the guidance that the op income growth gets back to 14% for <unk> and I think it's a piece of what youre alluding to as to how quick the reps get up and running.
Speaker Change: In answering this question for I've been answering for 20 years I don't have a great answer I will say that we've done a lot of what I'll call regression analysis, and Salesforce analysis and God knows we have a lot of data around here now having run the salesforce for so long and I used to say to people. All it takes a year for people to ramp up I don't feel that way anymore I think.
George LeMaitre: And I used to say to people, oh, it takes a year for people to ramp up. I don't feel that way anymore. I think it's quicker than that, and I think that it's extremely hard to distinguish between a rep that's been here two quarters, this is shocking, and one that's been here for five years. The performance to quota is indistinguishable for those two cadres of employees. So that's an odd answer, it's a surprising answer, but those are the numbers that keep showing up. And we've been looking at this for two and three years now, it's not going away, that's what we see.
Speaker Change: It's quicker than that and I think that it's extremely hard to distinguish between a rep. That's been here two quarters. This is shocking and one that's been here for five years. The performance to quota is indistinguishable for those two cadre of employees. So that's an odd answer it's a surprising answer but those are the numbers that keeps showing.
Speaker Change: We've been looking at this for two and three years now.
Speaker Change: It's not going away, that's what we see I think it's maybe unfortunately I know their sales reps on this phone call I hate to do this but maybe it's a little bit of a warm body hypothesis. When you put a rep in Cleveland theyre going to sell rather than whether they are six years into this or two months into this thing theyre going to sell stuff I hope that helps that's odd data I will admit.
George LeMaitre: I think it's maybe, unfortunately, I know there's salesforce on this phone call, I hate to do this, but maybe it's a little bit of the warm body hypothesis, where you put a rep in Cleveland, they're going to sell, whether they're six years into this or two months into this thing, they're going to sell stuff. I hope that helps. It's odd data, I will admit. No, that's helpful. Thank you.
Speaker Change: No. That's helpful. Thank you and then maybe one for Dave just on the M&A front with kind of med Tech valuations and all.
David Roberts: And then maybe one for Dave, just on the M&A front, with kind of med tech valuations and all. publicly traded valuations coming in for that matter. Does this change your your thought process at all? And maybe you can get a more novel bigger market device rather than smaller niche products that you've traditionally gone after at a more attractive valuation? I mean, I would say, I would say it doesn't change our strategy so much, Frank. I mean, the types of targets that we're hunting, it all starts with the markets they're in and making sure those are markets we're in and there's synergy and all that.
Publicly traded valuations coming in for that matter does this change your thought process at all and maybe you can get a more novel bigger market device, rather than smaller niche products that you've traditionally gone after at a more attractive valuation.
Dave Roberts: I mean, I would say I would say it doesn't change our strategy so much Frank.
Dave Roberts: Types of targets that were hunting it all starts with the markets, they're in and making sure those are markets, where and there is synergy in all of that of course, one valuations come down it makes targets more affordable so.
Frank Takkinen: Of course, when valuations come down, it makes targets more affordable. So you know, and we're lucky to have $300 plus million of cash in the bank. So from that standpoint, maybe we can get more with our money. But you know, in terms of does it change the types of things we're looking at, I would say no, it doesn't really. Okay, that's helpful. I'll hop back in queue. Thank you. Thanks, Frank. Thank you.
Dave Roberts: We're lucky to have 300 plus million dollars of cash in the bank. So from that standpoint, maybe we can get more with our money, but in terms of does it change the types of things. We're looking at I would say no it doesn't really.
Dave Roberts: Okay. That's helpful I'll hop back in queue. Thank you.
Dave Roberts: Thanks Frank.
James Sidoti: One moment for our next question. Our next question is going to come from the line of James Sidoti with Sidoti & Co. Your line is open. Please go ahead. Hi, good afternoon. Thanks for taking the question. So I'm going to ask the operating margin question a different way. You know, for the quarter that just ended, the margin was about 21%. You're guiding for 24% for the full year. So, you know, what changes in the back half of the year that gets that up?
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question is going to come from the line of Jim Sidoti with Sidoti <unk> Co. Your line is open. Please go ahead.
Speaker Change: Hi, good afternoon, thanks for taking the questions.
Speaker Change: I'm going to ask the operating margin question a different way.
Speaker Change: For the quarter that just ended.
Speaker Change: The margin was about 21% <unk>.
Speaker Change: And you're guiding for 24% for the full year, so what changes in the back half of the year that get set up.
James Sidoti: I mean, one of the big topics here is these year comps, excuse me, that's not, I apologize, I'm off on a different answer here. What changes, I mean, the sales ramp helps you a lot, right, and the gross margin ramp, the implied gross margin ramp. I think the H2 implied gross margin is now 69.9 for the last two quarters, so I think you get a lot in that, those second two quarters, the last two quarters of the year that, yeah, Dorian can add to that. And the dropping out of the Aleutia distribution agreement where we only were earning distribution margins, not the full, you know, manufacturing margins that we earn on our own biologics, that does have a nice pickup on the gross margin percentage for us in the back half of the year, so that's one of the lifts for us.
Speaker Change: I mean, one of the one of the big topics here is easier comps excuse me, that's not us I apologize I'm off on a different answer here what changes I mean, the sales ramp helps you a lot right in the gross margin ramp the implied gross margin ramp I think the H two implied gross margin is now 69 nine.
Speaker Change: For the last two quarters, so I think you'll get a lot in that those second two quarters. The last two quarters of the year.
Speaker Change: Yes during can add to that and the dropping out of the <unk> distribution agreement, where we only were earning distribution margins not the full manufacturing margins that we have.
Speaker Change: <unk> earned on our own biologics that does have.
Speaker Change: A nice pick up on the gross.
Speaker Change: Margin percentage for us in the back half of the year. So that's one of the lifts for us Jim.
James Sidoti: Okay, all right, that makes sense. The other question I had is, you know, in the past when you said you're going to add tenant sales folks in a year, you know, usually it's maybe one or two at the beginning of the year and, you know, it builds up during the year. This year, you seem to add a lot right in the first quarter. Is that due to the transition from distributors to direct, you know, those folks that have already been selling your product?
Jim Sidoti: Okay, Alright that makes sense. The other question I had as you know in the past when you said youre going to add sales folks in a year, usually it's maybe one or two at the beginning of the year.
Speaker Change: Yes.
Speaker Change: It builds up during the year. This year you seem to add a lot right in the first quarter is that due to the transition from distributors to direct.
Speaker Change: Those folks are folks that have already been told will product.
George LeMaitre: Jim, not really. We put in place a big, quote, surge last July and it really is just that surge kind of coming to fruition and it's always longer than you think. I would have guessed it would have happened. You remember I was, quote, missing my sales rep guidance in Q4 and I think the bolus of reps came in Q1, not in Q4, and I kind of missed it by three months. So this is just that old surge finally coming to fruition.
Jim Sidoti: Jim not really we put in place a big quote surge last July and it really is just that surge kind of coming to fruition and it's always longer than you think I would have guessed. It would have happened you remember I was missing my sales rep guidance in Q4.
Jim Sidoti: And I think the bolus of reps came in Q1, not in Q4, and I kind of missed it by three months. So this is just that old surge finally coming to fruition.
Dorian LeBlanc: Alright, and then the last one for me, you have that Share Buy Back program open, have you started buying shares back? I don't know how we're supposed to answer that. You know, Dorian? We have not bought any shares back at the All right, thank you.
Jim Sidoti: Alright, alright.
Jim Sidoti: And then the last one for me.
Jim Sidoti: Have that share buyback program opening.
Speaker Change: Have you started buying shares back.
Speaker Change: I don't know, how we're supposed to answer that Dorian.
Dorian: We have not bought any shares back as of today.
Speaker Change: Alright, thank you.
Brett Fishbin: Thank you and one moment for our next question. Our next question comes from the line of Brett Fishbin with KeyBank Capital Markets. Your line is open. Please go ahead. Hey, guys. Good evening. Thanks for taking the questions. A couple more clarification ones. So on the tariffs, very helpful in terms of laying out some of the key considerations. And I'm really just trying to clarify what has been incorporated into the guidance. I know you were talking about like 825K of extra COGs related to the small China component, and then maybe something like more modest around the raw materials and components.
Speaker Change: Thank you and one moment for our next question.
Speaker Change: Our next question comes from the line of Brian Fishman with Keybanc capital markets. Your line is open. Please go ahead.
Brian Fishman: Hey, guys. Good evening, thanks for taking my questions.
Speaker Change:
Speaker Change: A couple like more clarification, one so on the tariffs.
Speaker Change: Very helpful in terms of laying out some of the key considerations and I'm really just trying to clarify what has been incorporated into the guidance. I know you were talking about like 825 K of extra Cogs related to the small China component and then maybe something more modest around the raw materials and components I'm, just curious if thats actually factor.
Brett Fishbin: I'm just curious if that's like actually factored in specifically into some of the margin assumptions.
Speaker Change: And specifically into some of the margin assumptions.
Dorian LeBlanc: So yes, it has been factored in that $8.25 was an annualized number for China that we gave you. And we, if you noted, we're increasing prices in China here in two weeks. to recoup about 50% of that where we have the ability to do that on the differentiated products. And that's the real significant impact for us on the back half of the year. You know, we do have the ability to. reprice products if we see tariffs, retaliatory tariffs. The timing of that may not be perfect, but we've incorporated our best estimates into the guidance for how we view the rest of the year on this.
Speaker Change: So yes. It has been factored in that $8 25 was an annualized number for China that we gave you.
Speaker Change: And we.
Speaker Change: If you'd noted we are increasing prices in China here in two weeks.
Speaker Change: To recoup about 50% of that where we have the ability to do that on the differentiated products.
Speaker Change: And thats, the real significant impact for us in the back half of the year.
Speaker Change: We do have the ability to.
Speaker Change: Reprice products, if we see tariffs retaliatory tariffs the timing of that may not be perfect but.
Speaker Change: We've incorporated our best estimates into the into the guidance for how we view the rest of the year on this issue.
Dorian LeBlanc: All right, helpful.
Speaker Change: Alright helpful. And then second question is just on <unk> <unk>, sorry, the pronunciation, Amit distribution announcement that youre stepping away and I was just curious like how you are looking at that as an organic growth tailwind is it more just like extra time.
Dorian LeBlanc: And then second question is just on like the Aludia, or Alush, sorry, the pronunciation, omnic distribution, you know, announcement that you're stepping away. And I was just, you know, curious, like how you're looking at that as an organic growth tailwind? Is it more just like extra time? Like, you know, you're not focusing on that product as much? Yeah, just trying to kind of like figure out how exiting 5 million of revenue becomes a tailwind. Thank you very much.
Speaker Change: Youre not focusing on that product as much.
Speaker Change: Just trying to kind of figure out how exiting $5 million of revenue becomes a tailwind. Thank you very much.
Dorian LeBlanc: Sure. I think this is simple, which is the product is declining year over year in our hands, and the sooner we get it out of our hands, the less it's going to negatively impact our organic growth rate. Yeah, Brett, when we talk about organic and we're not selling in the future because we terminated the relationship or agreed to with Elusha, you know, for the organic math, we pulled the sales a year ago out of the denominator, and that helps us.
Speaker Change: Sure I think this is simple which is the product is declining year over year in our hands and assuming when we get it out of our hands unless it's going to negatively impact our organic growth rate, yes, Brett when we talk about organic and we're not selling in the future because we.
Speaker Change: Terminated the relationship or agreed to with <unk>.
Speaker Change: The organic math, we pulled the sales a year ago out of the denominator.
Dorian LeBlanc: But you're also bringing up a good point, and I think this was part of the issue with the product and LeMaitre is that, you know, it was the third patch inside of the LeMaitre bag, so the LeMaitre reps will be able to focus more on the other products, and that could make a...contribute to organic growth as well. All right, thank you very much. Thanks, Brett. Thank you.
Speaker Change: That helps us, but youre also bring up a good point and I think this was part of the issue with.
Speaker Change: The product and will make is that it was the third patch inside of old Navy bags, so that reps will be able to focus more on the other products and that could make a contribute to organic growth as well.
Speaker Change: Alright, Thank you very much.
Speaker Change: Thanks, Brett.
Ross Osborn: One moment for our next question. Our next question comes from the line of Ross Osborn with Cantor Fitzgerald. Your line is open, please go ahead. Hey guys, congrats on the strong quarter. So almost halfway through the year at this point, so I'll try and squeeze in some questions on 2026. But we'll stay away from numbers at this point. So starting with autographed, congrats on the mark.
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes from the line of Ross Osborne with Cantor Fitzgerald. Your line is open. Please go ahead.
Speaker Change: Hey, guys. Congrats on the strong corner, so almost halfway through the year at this point, so I'll try and squeeze in some questions on 2026.
Speaker Change: We'll stay away from numbers at this point.
Speaker Change: Starting with autograft.
George LeMaitre: And so following that approval, you know, what steps do you guys need to take from an operational or, you know, generating incremental clinical data standpoint this year in order to set yourselves up for a strong 2026 round? Thanks a lot, Ross, this is George, and you're specifically referring to the ArteGraft project? Yes. Okay, okay, great. Nothing. We don't owe anything to anyone. We're ready to go. This is just a marketing launch. We'll probably do some kind of, you know... in terms of running clinical looks at it at some point, but we don't have anything planned right now.
Speaker Change: That's on CE, Mark and then following that approval what steps you guys can take from an operational or generating incremental clinical data standpoint. This year in order to set yourself up for a strong 2020. Thanks Ram.
Speaker Change: And your sourcing. Thanks, Thanks, a lot Ross this is George and Youre, specifically, referring to the autograph project.
Speaker Change: Yes.
Speaker Change: Okay. Okay, great nothing we don't owe anything to anyone we're ready to go. This is just a marketing launch, we'll probably do some kind of.
Speaker Change: Just in terms of running clinical looks at at some point, but we don't have any plan right now we're just going at it. It's a nice launch the device comes to us or came to us in 2020 with lots and lots of clinical data and lots of articles. So there's no real need.
David Roberts: We're just going at it. It's a nice launch. The device comes to us or came to us in 2020 with lots and lots of clinical data and lots of articles, so there's no real need to go do more of that. In fact, that's probably why the thing went so quickly in the regulatory pipeline and did not require a clinical trial.
Speaker Change: To go do more of that in fact, that's probably why the thing went so quickly in the regulatory pipeline and did not require a clinical trial.
David Roberts: Ross, I would add, it's Dave, and great to hear from you. We actually are shipping, we're just making our initial shipment from the U.S. to Europe next week because obviously we couldn't ship until we had the mark and now we've got it, so obviously step one is to place inventory over there. We've already begun training with our U.S. sales reps who are expert and facile with They've started the training of our European team, but George is right. There's already an enormous amount of clinical data about this product, so there's no generation of clinical data need to launch this product.
Speaker Change: I'd add its day.
Speaker Change: Great to hear from you.
Speaker Change: We actually are shipping I mean, we're just making our initial shipment from the U S and Europe next week, because obviously, we couldnt ship until we had the CE Mark and now we've got it. So obviously step one is to place inventory over there we've already begun Trey.
Speaker Change: Training.
Speaker Change: With our U S.
Speaker Change: <unk> reps, who are expert in facile with autograft.
Speaker Change: Started the training of our European team, but George is right. There is already an enormous amount of clinical data about this product. So theres no generation of clinical data and need to launch this product line.
Ross Osborn: Okay, perfect.
Speaker Change: Okay, perfect and then turning to restore flow would you walk through any different market dynamics that may exist between the U S versus Germany and Ireland.
George LeMaitre: And then turning to RestoreFlow, would you walk through any different market dynamics that may exist between the U.S. versus Germany and Ireland, whether that be price or surgeon training, such as the return of the Roth procedure here as we came to Mount Sinai, and then how many reps do you think you will need in those markets to support adoption? Okay, I'll go to the back of the questions a lot simpler, which is I think we have the reps already in place. You don't need to hire additional reps. It's the beauty of this thing. It goes down our sales channel.
Speaker Change: Whether that would be price or started training such as theyre trying to Ross procedure here as we can at Mount Sinai.
Speaker Change: Then how many reps you think you'll need in those markets.
Speaker Change: And adoption.
Speaker Change: Okay I'll go to the.
Speaker Change: Back of the questions a lot simpler, which is I think we have the reps already in place.
Speaker Change: Don't need to hire additional reps just the beauty of this thing it goes down and our sales channel so with that out of the way I would say we have seen a big difference between the U S and the UK and a specific sorry, I know, you're talking about Ireland, and Germany, but we're going to learn about that soon.
George LeMaitre: So with that out of the way, I would say we have seen a big difference between the U.S. and the U.K. And it's specific. Sorry, I know you're talking about Ireland and Germany, but we're going to learn about that soon. I feel like they're very different markets. In the U.K., it's very much a cardiac approach. Canada is also more cardiac for us, and the U.S. has been more peripheral vascular. So yeah, they're all going to be different markets. And I think as we get closer and closer to these launches, we'll be tailoring whether we're going to bring more peripheral over there or more cardiac over there.
Speaker Change: I feel like they're very different markets in the U K, it's very much a cardiac approach Canada is also more cardiac for us in the U S has been more peripheral vascular so yes, they're going to be different they are all going to be different markets.
Speaker Change: And I think we're going to as we get closer and closer to these launches will be tailoring, whether we're going to bring more peripheral over there or more kodak over there inside of this call. We also mentioned there's a nugget in there which is we're opening up our distribution site in.
George LeMaitre: Inside of this call, we also mentioned there's a nugget in there, which is we're opening up a distribution site in Ireland, in Dublin, in the back half of the year. And that should help us, once we get approvals in other countries, have sort of a pan-European approach to that one product, not the other products, which are generally shipped out of Frankfurt.
Speaker Change: In in Ireland in Dublin in the back half of the year and that that should help us once we get approvals in other countries have sort of a pan European approach to that one product not the other products, which are generally shipped out of Frankfurt site piggyback on George's comments and by the way I'd also say, thank you to you and Matt and <unk>.
David Roberts: Russ, I'd piggyback on George's comments.
David Roberts: And by the way, I'd also say thank you to you and Matt and Cantor for that nice deep dive piece on the historical allografts. You guys did a really thoughtful job with that. At a high level, George is right. We've seen a lot of success in the UK. And part of the reason for that is, unlike the US, there aren't companies who are providing allografts and providing them to hospitals. It's a fairly disorganized system in the UK. And we think that's true across Europe more generally. So regardless of the door through which we enter the European market, whether it's Ireland, which opens a lot of countries' doors for us inside the EU, or Germany, which opens fewer but still opens some, the markets that we see ourselves entering are equally fragmented from a supply standpoint.
Speaker Change: Answer for that.
Speaker Change: Dave.
Speaker Change: Historical Allografts, you guys did a really thoughtful job with that.
Speaker Change: At a high level George is right we've seen a lot of success in the UK and part of the reason for that is.
Speaker Change: Unlike the U S. There are companies, who are providing allografts and.
Speaker Change: And providing them to hospitals.
Speaker Change: Fairly disorganized system in the U K, and we think Thats true across Europe, more generally so regardless of the door through which we enter the European market, where it's whether it's Ireland, which opened.
Speaker Change: Lot of country stores for us inside the EU.
Speaker Change: Germany, which opened fewer but still open some of the markets that we see ourselves entering are equally fragmented from supply standpoint. So we do see a lot of opportunity. There frankly, I believe as you and I discussed in Chicago, a month and a half ago the biggest channel.
David Roberts: So we do see a lot of opportunity there.
George LeMaitre: Frankly, I believe, as you and I discussed in Chicago a month and a half ago, the biggest challenge for LaMie... providing enough grafts and tissues into Europe to meet the demand. Sounds great.
Speaker Change: <unk> for <unk> will be providing enough graphs in tissues into Europe to meet the demand.
Ross Osborn: Thank you for taking our questions and congrats again on the progress. Thanks, Ross. Thank you.
Speaker Change: Sounds great. Thank you for taking my questions and congrats again on the progress.
Speaker Change: Thanks Ross.
Danny Stauder: One moment for our next question. Our next question comes from the line of Danny Stauder with Citizens JMP. Your line is open. Please go ahead. Yeah, great. Thanks for the questions. Just first one on the sales and marketing spend. It was up a little bit or quite a bit in the first quarter, and I'm assuming that was due to the large step up in the reps. But, you know, I'm just curious if there were any expenses that were more one-time in nature there, such as signing bonuses or anything like that. And, you know, how should we think about this sales and marketing expense going forward in 2025?
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question comes from the line of Danny starter with citizens JMP. Your line is open. Please go ahead.
Danny: Yeah, great. Thanks for the questions just first one on the sales and marketing spend.
Speaker Change: Up a little bit or quite a bit.
Speaker Change: The first quarter and I'm, assuming that was due to the large step up in the reps but.
Speaker Change: I was just curious if there were any expenses that were more onetime in nature, there such as signing bonuses or anything like that.
Speaker Change: How should we think about this sales and marketing expense going forward in 2025. Thank you sure Danny Thanks for the question. This is George So first of all there is a discrete a big guy discrete one which is about $1 million sales meeting almost always that happens in Q1. So it's not a year over year difference for you, but in terms of looking for.
George LeMaitre: Thank you. Sure. Danny, thanks for the question. This is George.
George LeMaitre: So, first of all, there is a discrete, a big guy discrete one, which is there's about a million-dollar sales meeting almost always that happens in Q1. So, it's not a year-over-year difference for you, but in terms of looking forward into the year, there's about a million dollars worth of sales meetings that you kick off meetings that you don't need to have for the next three quarters. So, there's one thing. And then you alluded to it, but I think it's maybe it's worth going through here. But at the end of Q1 of 24, we had 137 reps.
Speaker Change: Forward into the year. It was about $1 million of sales meetings that you kickoff meetings that you don't need to have for the next three quarters. So there is one thing and then you alluded to it but I think it's maybe it's worth going through here, but at the end of Q1 of 24, we had 137 reps and today as I sit here, we have 160 <unk>.
George LeMaitre: And today, as I sit here, we have 164 reps. It's an increase of 27. So, this is a big change. And I think you can feel that in the Q1 op expenses, particularly around sales and marketing. So, you're right to point that out. But those are the numbers that would support what you're pointing out. Great, thank you for that.
Speaker Change: Four reps that's an increase of 27. So this is a this is a big change and I think you can feel that in the Q1 op expenses, particularly around sales and marketing. So you are right to point that out but those are the numbers that would support what you're pointing out.
Speaker Change: Great. Thank you for that and then just one follow up looking at free cash flow.
Dorian LeBlanc: And then just one follow up, looking at free cash flow, in terms of 2025, you talked about this a little bit, but how should we think about, you know, CapEx and working capital, specifically inventory, as we consider some of these regulatory approvals and geographical expansions? Thank you. Yeah, thanks for the question. I think on CapEx, you can you can consider that to be this quarter to be a fairly standard quarter for us, you know, maybe a little a little more around some of the offices that are coming online and continue to build out for the end of the year, but not not a big sequential change.
Speaker Change: In terms of 2025, you talked about this a little bit, but how should we think about.
Speaker Change: Capex and working capital specifically inventory as we consider some of these regulatory approvals and geographical expansions. Thank you.
Speaker Change: Yes. Thanks for the question I think on Capex you can you can consider that to be this quarter to be a fairly standard quarter for us maybe a little a little more around some of the offices that are coming online and continuing to build outs for the end of the year, but not not a big sequential change.
Speaker Change: Overall.
Dorian LeBlanc: Overall, on free cash flow, continue to, you know, deliver cash to the bottom line and, uh... And, you know, Danny, I'd also point out here, um, you know, uh, we've had this really, I'd call it lavish policy around here, called no back orders at any time. And we're that guy, we always want to have the devices. And it's led us to have a pretty big inventory closet, roughly sixty-five million dollars worth of inventory in our, mostly in Burlington here in Massachusetts, but also around the world in our thirteen or fifteen offices. Um, we're now finally going after that in terms of, we're going to try to be a little bit tighter at titrating back orders and the giant inventory balance.
Speaker Change: On free cash flow.
Speaker Change: Ed.
Continue to deliver cash to the bottom line.
Speaker Change: And Danny I'd also point out here.
Speaker Change: We've had this really I'd call. It lavish policy around here called no back orders at any time, and where that Guy we always want to have the devices and it has led us to have a pretty big inventory clause at roughly $65 million worth of inventory in our and mostly in Burlington here in Massachusetts, but also around the world.
Speaker Change: Our 13% or 15 offices.
Speaker Change: We are now finally going after that in terms of we're going to try to be a little bit tighter it tight trading back orders and the giant inventory balance. So you may see some cash free up from that this year and it could add to some of this free cash flow in Q1 remember that it's usually a light cash flow quarter.
Dorian LeBlanc: So you may see some cash free up from that this year, and it could add to some of this free cash flow. Yeah, and in Q1, remember that it's usually a light cash flow quarter for us, because you have annual bonuses being paid in Q1. And just maybe the last point on inventory is, in Q1, we were building inventory, particularly in Artigraph and in RestoreFlow, in anticipation of this European launch, you know, for Artigraph. And because we do believe that long-term supply is one of our constraints on growing the RestoreFlow. Other than those two product categories, we are seeing the inventory, you know, with progress there and should be able to free up cash flow in the subsequent quarters.
Speaker Change: For us because you have annual bonuses being paid in Q1.
Speaker Change: And just maybe the last point on inventory as in Q1, we were building inventory, particularly in our to graft and restore flow in anticipation of the European launch.
Speaker Change: For autographs and because we do believe that long term supply is one of our constraints on growing the restore flow business other than those two.
Speaker Change: Other categories.
Speaker Change: We are seeing the inventory.
Good progress, there and should be able to free up cash flow in the subsequent quarters.
Dorian LeBlanc: Great. Thank you very much for the question.
Speaker Change: Alright, Thank you very much for the questions.
Danny: Thanks Danny.
Michael Petusky: Thank you and one moment for our next question. We have a follow-up question from the line of Michael Petusky with Barrington Research. Your line is open. Please go ahead. Hey, thanks so much. Just a couple of quick ones. I may have missed this.
Speaker Change: Thank you and one moment for our next question.
Speaker Change: May I have a follow up question from the line of Michael <unk> with Barrington Research. Your line is open. Please go ahead.
Michael Sarcone: Hey, thanks, so much.
Michael Sarcone: Couple of quick ones I may have missed this George did you say how many of the.
Michael Petusky: George, did you say how many of the, I think, 23 MDR-CE marks that you're looking to get, where you stand on that? Is it like 17 at this point? 18? I missed it if you said it. I apologize. You're good, it is 17 out of 23.
Speaker Change: 23, <unk> that Youre looking to get where you stand on that is it like 17 at this point 18 I missed it if you said it I apologize.
Speaker Change: Youre good at 17 out of 23.
Speaker Change: 17, Okay, Great and then just one for David as well.
David Roberts: David, in any of the conversations over the last month or so with assets that you're interested in, have you seen anybody where they're essentially saying, hey, we're not doing anything until some of this tariff stuff is resolved, or we're more anxious to do something because of the screwed up nature of trading relationships? Have you heard any feedback either way? I'm just curious. Yeah, my short answer is no. I think there's a general sentiment that things are still changing a lot, and so I feel like sellers aren't at, you know, one extreme or another saying, we're frozen, we're not doing anything, or let's hurry up and dump this asset.
David: David any of the conversation say over the last month or so with.
Speaker Change: Assets that you're interested in.
Speaker Change: Have you seen anybody whether youre, essentially saying, hey, we're not doing anything until some of this tariff stuff is resolved or were more anxious to do something because of the.
Speaker Change: Screwed up nature of trading relationships like have you heard any feedback either way.
Speaker Change: I'm curious.
Mike: Yes, Mike the answer short answer is no.
Speaker Change: Think there is a general sentiment that things are still changing a lot so I feel like sellers.
Speaker Change: One extreme or another things were frozen, we're not doing anything or let's hurry up and dump this asset.
Michael Petusky: I feel like everybody's fairly circumspect about it. And they're, you know, so far, discussions are generally proceeding, but, you know, we've all got an eye on it. No question. All right, great. Thanks, guys. Thank you.
Speaker Change: Like everybody is fairly circumspect about it in there.
Speaker Change: So far discussions are generally proceeding, but we've all got an eye on it no question.
Speaker Change: Okay, Alright, great. Thanks, guys.
Speaker Change: Thank you ladies and gentlemen, this concludes today's conference call I would like to thank you all for your participation you may now disconnect and have a great day.
Operator: Ladies and gentlemen, this concludes today's conference call. I would like to thank you all for your participation. You may now disconnect and have a great day. Thanks a lot. [music]
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