Q3 2025 LeMaitre Vascular Inc Earnings Call
Speaker #2: Ladies and gentlemen , this is the operator today's conference is scheduled to begin momentarily . Until that time , your lines will again be placed on music hold .
Speaker #2: Thank you for your patience . Hello . Good day . This is RG . Your conference operator today , and we welcome you to the Q3 2025 Financial Results conference call .
Speaker #2: As a reminder , today's call is being recorded . At this time , I would like to turn the call over to Mr. Dorian LeBlanc .
Speaker #2: Shi , Financial officer of limited . Vascular . Please go ahead , sir .
Speaker #3: Thank you . Good afternoon and thank you for joining us on our Q3 2025 conference call . With me on today's call is our CEO , George Lemat , and our president , Dave Roberts .
Speaker #3: Before we begin , I'll read our safe harbor statement . Today , we'll be making some forward looking statements within the meaning of the US private securities Litigation Reform Act of 1995 .
Speaker #3: The accuracy of which is 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 .
Speaker #3: Our forward looking statements are based on our estimates and assumptions . As of today , November 6th , 2025 , and should not be relied upon as representing our estimates or views on any subsequent date .
Speaker #3: 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 .
Speaker #3: We will discuss non-GAAP financial measures . For example , during the quarter , we recorded a non-recurring benefit from the receipt of the employee retention tax credit .
Speaker #3: non-GAAP adjusted financial measures discussed in our remarks exclude the benefit of the tax credit , a reconciliation of GAAP to non-GAAP measures discussed in this call is contained in the Associated Press release , and will be available in the Investor Relations section of our website .
Speaker #3: WW . I'll now turn the call over to George LeMaitre .
Speaker #4: Thanks , Doreen . Q3 featured organic sales growth of 12% and a better than expected gross margin , excluding the one time tax benefit .
Speaker #4: We also posted several bottom line records op income , EBITDA , EPs and cash generation . Q3 sales were led by graphs up 23% and shunts up 18% .
Speaker #4: EMEA grew 18% , the Americas 10% and APAC 4% price accounted for 10% of Q3 growth , with 2% from units . The April recall led to some customers Frontloading catheter purchases into Q2 , reducing Q3 organic and unit growth .
Speaker #4: Ex catheters , Q3 organic growth was 14% . Our international autograph launch continues to exceed expectations . Q2 sales were 420,000 . Q3 sales were 1.4 million .
Speaker #4: And now we expect Q4 sales of 2 million . Autograft grew 33% worldwide in Q3 , we expect 2026 approvals in Canada and Korea .
Speaker #4: We received German approval for restore flow in October and anticipate distribution beginning in Q2 2026 . As we build German specific inventory inventory for other EU markets will likely not need to be country specific and can be drawn from our worldwide stock .
Speaker #4: Irish approval is expected in H1 2026 . German and Irish approvals should accelerate other EU approvals to support the launches . We recently leased a European RFA distribution facility in Dublin as we look to understand the size of the European market , it's notable that we distributed $2.7 million of tissues in the U.K.
Speaker #4: over the last 12 months . We ended Q3 with 152 reps after implementing a performance based reduction of eight sales reps . We currently have 23 open rep hiring requisitions and expect to have 165 reps at year end on November 1st , we published our 2026 US hospital price list , reflecting an 8% increase .
Speaker #4: This is consistent with recent years . As usual , there will be a gap between the price list and prices realized . 55% of our North American revenue is now subject to price .
Speaker #4: Floors . 2026 international price lists are still being finalized to support our growth in Q1 , we're opening a 34,000 square foot distribution center near our Burlington headquarters .
Speaker #4: This is our first meaningful Massachusetts real estate expansion since 2020 . 2025 is shaping up to be another year of healthy sales and profit growth .
Speaker #4: We continue to make investments in our sales force , new international offices , and regulatory approvals . We're now guiding 40% op income Our in Q4 and a 29% op margin .
Speaker #4: I'll now turn the call over to Dorian .
Speaker #3: Thanks , George . Lamas . Organic growth rate was 12% in the third quarter . Year over year . Reported revenue growth of 11% was reduced by 1.3 million due to our Z0 distribution exit , but benefited from the weaker US dollar , which added 1 million to reported sales .
Speaker #3: As George detailed , excluding catheters , Q3 organic growth was 14% in Q3 2025 . We received 4.8 million from the Employee retention Tax credit .
Speaker #3: This non-recurring credit impacted several PNL line items . Reported cost of sales were reduced by 2.7 million reported operating expenses , net of fees , were reduced by 0.7 million and reported interest income was increased by 0.7 million .
Speaker #3: We also recorded an additional 0.9 million in our provision for income taxes , as a result , reported gross margin was 75.3% . Reported operating expenses were 25.6 million .
Speaker #3: Reported operating income was 20.3 million reported operating margin was 33% . Reported net income was 17.4 million and reported diluted EPs was $0.75 .
Speaker #3: We refer to our adjusted financial results during our call today to exclude this non-recurring benefit in Q3 2025 , we posted an adjusted gross margin of 70.8% .
Speaker #3: This 300 basis point year over year increase was driven primarily by higher pricing , manufacturing efficiencies product mix . Adjusted operating expenses in Q3 2025 were 26.3 million , an increase of 9% versus Q3 2024 .
Speaker #3: This expense growth rate is down from a 20% increase quarter on quarter in Q2 , higher compensation expenses in European investments in Ireland , Switzerland , Czechia and Portugal drove H1 expenses as we began to indicate in our Q2 earnings call , we now anticipate adjusted operating expenses decreasing by 4.5 million from H1 to H2 .
Speaker #3: Q3 2025 adjusted operating income was 16.9 million , up 29% . Resulting in an adjusted operating margin of 28% . Fueled by our gross margin improvements and operating expense control .
Speaker #3: 2025 is a year of operating leverage . OP margin has increased over the first three quarters . 21% , 25% , 28% , and now we are guiding 29% in Q4 .
Speaker #3: For reference, headcount was 633 at September 30, 2025, versus 637 at September 30, 2024. Adjusted net income increased 27% year over year to $14.2 million in Q3, and adjusted fully diluted earnings per share was $0.62, up 27%.
Speaker #3: We ended the quarter with 343.1 million in cash and securities , an increase of 23.6 million . We generated 28.8 million in cash from operations , and we paid 4.5 million in dividends to shareholders on August 11th , our new Jersey autographed facility received an FDA warning letter related to our quality management system .
Speaker #3: We have provided written responses to the agency's letter , and this has not disrupted our ability to produce , ship or invoice products .
Speaker #3: We've raised our full year operating income and EPs guidance as our continued focus on profitable growth sets us up for a strong finish to 2025 .
Speaker #3: Our full year revenue guidance is 248 million , 13% growth . We anticipate a full year adjusted gross margin of 70.3% and adjusted operating income of 63.7 million , up 22% .
Speaker #3: This results in a 26% adjusted operating margin for the year . Our guidance on adjusted fully diluted earnings per share of $2.30 7% is an increase of 22% over 2024 .
Speaker #3: With that , I'll turn it back over to the operator for questions .
Speaker #2: Thank you . At this time , I would like to remind everyone , in order to ask a question , press star . Then the number one on your telephone keypad .
Speaker #2: We will pause for just a moment to compile the Q&A roster . Your first question comes from the line of Michael Zarcone of Jefferies .
Speaker #2: Please go ahead .
Speaker #5: Hey , good afternoon and thanks for taking the questions . I guess just to start , mostly good guidance changes . But , you know , on the revenue side , it looks like you're now expecting lower organic growth .
Speaker #5: Could you maybe kind of walk us through the the moving pieces there ? And what's changed ?
Speaker #4: Sure . Mike thanks a lot . This is George . Obviously it's a it's a topic here . So maybe we break it down into Q3 topics in the Q4 topics because obviously we're the guidance decrease here .
Speaker #4: We're halfway into that , right . So in Q3 , we think that the catheter recall that we executed in Q2 wound up sort of front loading sales a little bit more than we expected into Q2 .
Speaker #4: And then it pulled it out in Q3 , and we think it will keep pulling it out in Q4 . So a topic in Q3 export , which we don't talk that much about , didn't have such a great European or Asia-pac quarter in Q3 .
Speaker #4: And then in general , APAC , a little bit of struggles lately . You're watching . It's only 7% of our sales , but we've had a tough couple quarters here and at the root of it , maybe there's some management turmoil .
Speaker #4: The we we've reloaded for a brand new Korea RSM and a brand new Japanese RSM or excuse me , general manager in Japan .
Speaker #4: And so there's been a little bit of that . We don't know if it's exactly the issue , but that's certainly on our plate .
Speaker #4: And I would say that's your Q3 topic . And then in Q4 , I would sort of just repeat what I said about the catheter recall .
Speaker #4: And I'd repeat what I said about APAC in general . And then a third of the whole thing , because we're bringing guidance down by about 1.8 in the quarter .
Speaker #4: About a third of it is FX . And at the last call in August , six , the euro is at a buck 17 .
Speaker #4: Now the euro is at a buck 15 . So that strengthening of the dollar . Am I doing this right ? No . Yeah .
Speaker #4: The change has taken away about $600,000 of sales out of our Q4 guidance. That has nothing to do with us. Right.
Speaker #4: But , you know , it's still going to look like the guidance was pulled down . So that's what that is . I hope that's it .
Speaker #4: We obviously expected that question . I hope that's a pretty full answer .
Speaker #5: But very much so . Thank you . And I guess just my for my second gross margins , really strong . You know , you talked about 10% price and manufacturing efficiencies as well .
Speaker #5: I guess , you know , when we look forward to 2026 , you know , what are the moving pieces that we should think about in terms of how gross margin could could change over the course of the year ?
Speaker #3: Yeah . Mike , thanks . I don't think we're we're ready to start guiding on 26 yet . But you know , I think you can look at the cadence of gross margin over the last three quarters , 69.2 in Q1 , 70% , Q2 , 70.8% adjusted here in Q3 , and our guidance of 71.2% .
Speaker #3: And you can see that we've been making some progress . The pricing obviously is a nice flow through . Getting a Z0 out , which is you remember , had a distribution only margin helps us from the mix perspective .
Speaker #3: You'll hear us talk a lot about Autograft . I think again this quarter really providing a positive impact to to product mix as well .
Speaker #3: And we continue to benefit from some of the manufacturing efficiencies , standard cost basis that takes sometimes those a little while to flow through .
Speaker #3: So I think the , you know , the ramp during the year , you know , a good sign for us .
Speaker #5: it . Thank you .
Speaker #2: Again , as a reminder , if you need to ask a question , press star one on your telephone keypad . Your next question comes from the line of Suraj Kale of Oppenheimer .
Speaker #2: Please go ahead .
Speaker #6: Hey , this is Seamus on for Suraj . Thank you for taking questions to start . You know , I guess one of the things is you guys have been really good at , you establishing and getting price increases .
Speaker #6: I noticed I , during the . You noted that you greeting put an 8% price floor , so to speak , for 2026 and the US hospitalist .
Speaker #6: Just curious kind of you know , how do you kind of arrive at that 8% versus say , seven or , you nine and kind of what are the puts and takes that go into that ?
Speaker #4: Sure . That's a great question . Thanks a lot . It's George , you know , I think we're all in the US .
Speaker #4: And then obviously internationally when those come along , we don't know those yet . We're always sort of probing in our in our mind about which , which categories can take it and which categories can't .
Speaker #4: And I would say one of the reasons why we try to build a niche nichey type businesses , because in some of these niches , you can achieve price hikes .
Speaker #4: So you're pushing harder on those niches categories . And then on some of the commodity categories , you know , the Dacron , the PTFE , maybe to a certain extent , the catheters where your lower margins and your more more in combat with other similar devices .
Speaker #4: We're pressing in a lot less so that 8% number we're reading to you guys right now is trying to give you a blended number across everything with sort of some of them tens and some of them fours and some of them nothing's things like that .
Speaker #6: Got it . Appreciate that . And then just kind of two smaller ones on my end and I'll package them together . You know , would you be able to break out I guess you know , your to date kind of price versus volume contributions and you know , some various categories .
Speaker #6: We've kind of seen this year and then also how much of direct sales you know us as you guys have converted contributed this year .
Speaker #6: Thank you again for taking our questions .
Speaker #4: Okay . Great . So I think I'm going to understand your question . But the back half I think is a lot easier .
Speaker #4: Is your question what percent of sales are direct to hospital . And if that's the question I would say 95% . It's a very clean number that's known by all of us .
Speaker #4: A lot . Is that what you want to get at with the second question ?
Speaker #6: No . Just looking . I know you guys have converted and gone direct in Portugal , Czech , you know , just curious how much that has contributed this year versus that year .
Speaker #6: Going direct ,
Speaker #4: I would say so far , specifically on Portugal and Czech . It's not meaningful at all . They're very small right now . So far , so it's not it wasn't a topic that came up in sales at all for the quarter .
Speaker #4: And your other question was about units and price, and of course, it's a pretty serious topic for us in the quarter.
Speaker #4: It was on a on a reported basis , if you will . It was ten and two , 10% price and 2% units .
Speaker #4: But you know , the way we look at it is without the catheter recall , we're sort of normalizing it . So x that recall it was 11% price and 3% unit .
Speaker #4: If you want to draw out from that and not look exactly at Q3 and look at the nine months of 2025 , it was 4.3% units .
Speaker #4: And the balance was price . Last year it was in 24 . It was 4% units . The balance was price . And the year before that 23 , which was sort of the big year here .
Speaker #4: It was 5% units . So you can sort of feel like it's a five or a four or a four and a half these days .
Speaker #6: Got it . Appropriate that and I'm sorry to push it a little on that . I guess as well . Could we can you give us a flavor of where the respective kind of categories are on that price versus volume kind of curve ?
Speaker #6: You know , graphs has been more price versus volume shunts , you know , so on and so forth . Thank you .
Speaker #4: Okay , I'll give it a shot . We don't exactly look at it like that all the time . But I would say it feels like with Valvulotomy and shunts , you're feeling it's more of a price topic .
Speaker #4: And with patches and grafts it feels more like a unit topic .
Speaker #6: Thank you .
Speaker #4: Thanks a lot . That's a good question , Sheamus .
Speaker #2: Your next question comes from the line of Rick Weiss of Stifel . Please go ahead .
Speaker #7: Hi, this is Andy on for Rick. Thanks for taking our questions. So the first one from me, appreciating that you're not providing any specific 2026 guidance today.
Speaker #7: Can you highlight any key product lines or geographies that you're particularly excited about now ? And sort of as we head into next year , I know you've mentioned Autograft and Allografts as having notable strength this year .
Speaker #7: So curious if these will continue to be key growth drivers moving forward .
Speaker #4: Right . Any George again ? Yes , I would call those two out and I would then I would then toss into the mix .
Speaker #4: Zeneca , which is part of our patch category , specifically the peripheral vascular segment . But but all of Zeneca has been going really well .
Speaker #4: We have a lot of momentum in it . So I would say those three devices and maybe one of the themes you can , we can draw on is that the biologics that the company are going extremely well right now .
Speaker #4: We have a lot we have a lot of momentum in them . And I don't I definitely don't expect it to change as we go into 2026 .
Speaker #4: If anything , probably some of these European approvals that you're hearing about for Autograft , as well as for RFA and our projection that we're going to get some approvals would lead you to believe that the focus of the growth is probably more about biologics than about synthetics , or about transient use , single use devices .
Speaker #7: Got it . Thank you . And then just one more . You ended the quarter with what was that , 343 million of cash on hand .
Speaker #7: And we've seen that balance continue to grow over time . So I'm hoping you can share any updated thinking about your capital deployment strategy .
Speaker #7: You know , are you thinking more aggressively about M&A or just any color here would be very much appreciated .
Speaker #3: Hi , Annie ,
Speaker #4: It's Dave .
Speaker #8: Yeah , it's it's certainly a nice cash balance . That's a gross cash balance on a net because we have the convert on a net basis .
Speaker #8: It's 170 . But you know in terms of thinking more aggressively I would say we do like the optionality that the higher cash balance provides us .
Speaker #8: But on the other hand I don't necessarily I don't think the team necessarily feels like , oh gosh , we better get something done quickly .
Speaker #8: And , and reduce our own standards for acquisitions . I would say , you know , as I mentioned on the call on August , we've been pretty busy in terms of Bizdev acquisition related activity this year with term sheets , Et-cetera .
Speaker #8: So we're out there hunting , but I don't necessarily feel like having more cash . It's a nice problem to have , if you will , a high class problem .
Speaker #8: But I don't think we're relaxing our standards for the types of acquisitions that we'll be doing .
Speaker #7: Got it. Thanks, Dave.
Speaker #2: Your next question comes from the line of Nathan Trebeck of Wells Fargo. Please go ahead.
Speaker #9: Hi . Good evening . My first question , I think in your opening remarks , you disclosed a new metric that 55% of your North America customers are now subject to price floors .
Speaker #9: Can you help us understand what you're trying to convey by disclosing this ? And maybe just talk about your plans to roll out price floors to the rest of your customers ?
Speaker #4: Okay , that's a great that's a great question there , Nathan . It's George again . Yeah . So just to reiterate , 55% of our North American revenue is now subject to price floors .
Speaker #4: And I think we get this question so much about what are these price floors . How much of the revenue is sort of nichey enough that you can put a price floor on it .
Speaker #4: And we keep having people keep people keep wanting us to put numbers on it . So we figured we'd just drag it up front and get it , get it out instead of it coming out as a question , how much can be price floored ?
Speaker #4: We don't know exactly . I would say it hasn't gone up that much in the Americas in the last 1 or 2 years , so you might be reaching a place there where the price floors are in on those 55 , and then the balance , as I mentioned before , answering another question , maybe some of the other commodity type stuff you probably wouldn't .
Speaker #4: It wouldn't be wise to put a price floor on it because , you know , they'd run over the other guys and buy from the other guys .
Speaker #4: So I just think we're trying to , you know , we've gotten a lot of questions about pricing around here . We always hear it .
Speaker #4: Dorian and Dave , who do most of the IR work out in the field , are always getting these questions , and it'll be good just to settle it with that .
Speaker #4: And that's the genesis of why we put it there .
Speaker #9: Great . George , on the last earnings call , you made a comment that you see R&D as a percent of sales , you know , increasing back to 8 to 10% over time .
Speaker #9: You know, can you talk about how you intend to manage this increased spend against your EPs growth targets? And you know what?
Speaker #9: How should we think about 2026 R&D spend ? Thanks .
Speaker #4: Right . And so as we were prepping for today's call , we were nervous we were going to get a bunch of , hey , you're up margins too high .
Speaker #4: And so there's part of that here , which is the R&D spend is not as high as maybe you want to see right now .
Speaker #4: What is the percentage six 6% or something ? 5% . And one of the things we're seeing , it's a very temporal , temporal part of our life here is that we just finished all these MDR and internally we call it the peace dividend .
Speaker #4: I guess it's a remark about back in George Bush's day or whatever . But we're trying to convey we just got over this big bolus of expenses , and now it's coming down in , in , in R&D around these regulatory approvals of MDR , almost certainly somehow , some way that's going to build up with looking for different regulatory approvals elsewhere , doing factory transitions .
Speaker #4: We still have two factories out there , as you know , new Jersey and Chicago . And then also plain old fashioned R&D .
Speaker #4: At some point . So there's lots of ways to deploy the money . It seems unrealistic that we would be down at 5 or 6% .
Speaker #4: And I think we have room to put it back in , given the 28 , 29% op margins that we're talking about .
Speaker #9: Okay , if I could just squeeze one more in . So you got restore flow approval in Germany . You know , I think in the past you talked about the overall European market being 80 to 100 million .
Speaker #9: You know , Germany is probably the largest economy there . How are you thinking about this rollout into next year ? Is this a big upside lever for , you know , where you see street numbers are right now for 26 .
Speaker #4: Right . I'm not I haven't looked at tree numbers for 26 . So I'm not trying to comment on where they're at or how this helps or doesn't help .
Speaker #4: I'm just looking at my business and I would say the Germany , the Germany approval is great and it's the most important economy and the most important medical device market in continental Europe .
Speaker #4: I think that's very obvious , but there's a little hairball on it for us in that you that the German authorities want to see the recovery centers .
Speaker #4: Will we get these tissues from all other European countries ? We believe don't really care where we get them from . Just like the FDA .
Speaker #4: Sorry . The American Tissue Bank authority doesn't exactly want to go audit our recovery centers . So the German thing , it's big .
Speaker #4: It's huge . We need it to get other approvals . But in the very short term . And then why we're calling this thing out in the script here is that you have to build German specific inventory in allograft , and it can only come for now from those two recovery centers .
Speaker #4: And we'll have another two recovery centers approved . Say let's , let's say by Q3 of next year . So it's a little bit Germany .
Speaker #4: We'll see where it goes . It's a little bit hobbled by those recovery center items . But when we get Ireland and then when Germany and Ireland lead to other countries , we don't think there'll be that kind of constraint and we can draw the inventory off our worldwide bucket .
Speaker #4: The reason we put in the and I think this is a market size question at its root , also , the reason why we threw in this little stat about the UK is we did get our approval in the UK in 2022 , and we've had three years to sort of work the kinks out over there .
Speaker #4: And last year in the last 12 months , rather , we sold $2.7 million of tissues . We transferred or distributed is what you're allowed to say .
Speaker #4: $2.7 million of tissues in the UK . And it gives you a sense of where we got to after three years . It's a great tidbit and what the .
Speaker #4: Dave , do you happen to know the Canadian number for allograft ? I don't have that at my fingertips right now .
Speaker #8: The Canadian revenue number .
Speaker #4: Yeah , because it might be another tidbit here to help people sort of triangulate where Germany would end up .
Speaker #8: Yeah , I don't have it specifically , but I would say qualitatively , we've seen pretty significant uptake of our allografts in Canada .
Speaker #8: I would say , particularly on the cardiac surgery side , I think some some significant percentage of revenue in Canada is now cardiac surgery because of allografts and some of that has to do with the fact that the other market participants aren't in Canada , or they have a distributor .
Speaker #8: And of course , having an allograft at your at your disposal at the ready in inventory is very important . And we feel like that advantage will carry over to allograft supply chain in Europe .
Speaker #8: But I don't have the exact figure on .
Speaker #4: Nathan . Did we get at the essence of your question , or do you want to re-ask parts of it , or how do you feel about our answers ?
Speaker #9: No , I think that it . Is there any way to kind of compare the size of the market in the UK versus the German market ?
Speaker #4: I can try it . We always assume the German market is bigger than the UK . I'm going to say . I feel like in most medical devices it's kind of like 50% bigger than the UK , 75% bigger than the UK .
Speaker #9: Great . Thanks guys .
Speaker #4: Thank you .
Speaker #2: Your next question comes from the line of Michael Petrowski of Barrington Research . Please go ahead .
Speaker #6: Hey , good evening guys .
Speaker #10: George , I didn't catch a completely what you said around the the sales force . Did you give the number of reps currently ?
Speaker #4: Yeah . 152 at the end of the quarter with 23 open requisitions still trying to land at 165 at the end of the year .
Speaker #10: Okay . And I did I do think I caught that you left . Maybe eight guys go as well . I'm just curious .
Speaker #10: That seems like it seems like it seems like a lot . And it seems like a lot of open slots . Is there any anything to add there or just its normal course of business ?
Speaker #4: I agree that I agree that 23 is a bit on the larger side , but of course when you let go of eight folks , it meant we were sort of trying to get 15 more growth territories than we had as we , you know , you guys have watched us grow the sales force pretty aggressively over the last couple of years .
Speaker #4: And I think as we've done that and as we've installed you've heard this story a lot too . Is installed a lot more regional managers .
Speaker #4: We've gotten we've gotten a chance to even take closer looks actual reps , even though there's more of them . A there's more , you know , problems at the end of the bell curve , if you will .
Speaker #4: And then B , we have more inspectors , i.e. we now have 12 rsms in the US and 3 or 4 four area sales managers above them .
Speaker #4: And I would say going back two years ago in the US , you had a VP of sales and eight Rsm's trying to man the whole ship , and now we have a lot more management and they're able to , you know , figure out who's not pulling their weight more quickly .
Speaker #4: So , you know , we're always at the who's how can we do better in a certain region . Or territory . So that's where the riff , the lay off there of the eight went , went to .
Speaker #4: And then , you know , you got to keep growing . And I think we've been on this 165 number for at least one phone call .
Speaker #4: If not two phone calls here now . So .
Speaker #10: Okay . All right . Very good . I didn't catch if you gave an update . Anything to talk about in China I guess particularly vascular patch and or any , any vascular patch or any , any other interesting items in China .
Speaker #4: Right , right . So I would say the big update from China is things continue to go well . Sales growth of 40% in Q3 .
Speaker #4: Since you're asking about China specifically and then the negative update is we're really , really struggling to sell the cardiac patches that we got approved last December .
Speaker #4: So that doesn't feel like a great launch . I think you guys are watching this launch in Europe , and it's going great .
Speaker #4: Guns . We all know that . We've talked about it a lot . I would say this is the opposite of that . And then to transition to the peripheral vascular Zeneca over the peripheral vascular patch , bovine patch over in China , we expect to make our quote unquote final filing for the approval in Q4 .
Speaker #4: So within two months , and then we're sort of thinking another two years till that approval . We believe there are fewer competitors in the peripheral segment than the cardiac segment for patches in China .
Speaker #4: But , you know , we'll see . We had been really excited about that . Chinese cardiac patch . And that's not working out too well for us .
Speaker #11: Okay .
Speaker #10: And again forgive me . This is the fifth call I've done today . I may have missed this , but did you say that MDR is completed at this point or is it just mostly , you know , substantially completed ?
Speaker #4: It's all over except the shouting . We still have one more to get , and it's a minor product line . So we're 21 of 22 .
Speaker #10: Okay , well great . Great job on that . And and the quarter thanks .
Speaker #4: Thanks a lot Mike .
Speaker #2: Your next question comes from the line of Brett Fishbein of KeyBanc capital Markets . Please go ahead .
Speaker #12: All right . Hey guys . How's it going ? I'm just had a couple questions . I think you mentioned a target of 165 sales reps exiting 2025 .
Speaker #12: And then you just responded to the question about the number of open positions . But was really just curious , maybe how you're thinking about that .
Speaker #12: 165 number . You know , looking ahead , it seems like a lot of hiring activity is taken place over the past couple of years .
Speaker #12: And really just interested , like where you think that number needs to go over the maybe like medium term 2026 , maybe even 2027 , or if this is kind of the right place to be .
Speaker #4: Okay . I mean , I think that has some to do with our up margin , which is if you see a plump up margin , this is a fantastic place to invest money .
Speaker #4: So I do feel like it's going to want to go up . I don't know how much . I guess we really haven't finalized what happens next year .
Speaker #4: We got a lot of reps to hire right now , but it's , you know , it's going to go up . The rule of thumb that we sort of we're balancing the OP margin , right .
Speaker #4: We want to pay as you go on these types of investments , we don't want to kill our margin . But , you know , you have dozens of 2 million .
Speaker #4: You've heard me say this before on the call . So it's a little boring . But we have dozens of 2 million plus territories in the US alone where you should be splitting them .
Speaker #4: And setting up for growth over the next 2 or 3 years . So it can get it can get considerably larger and then this is ex-china .
Speaker #4: If you really we have four reps in China right now . We're hiring a fifth right now , which is barely scratching the surface over there .
Speaker #4: So if you really want to go at China and we do , you know , you can have pick a number 30 to 100 reps over there .
Speaker #4: So I would say most of our conversations are taking place without that China topic . But there's a long , long way to go in that 1.3 billion person country .
Speaker #4: , as well as .
Speaker #10: US .
Speaker #4: Sorry .
Speaker #12: All right . Appreciate that . I just had one one more question . It's come up a couple times on the call about the US autograph performance .
Speaker #12: I was hoping you could maybe just comment on what's gone differently or you know , better than originally expected . I think a couple of quarters ago you were talking about , you know , maybe 2 million for the full year , but you know , obviously doing doing a little better there .
Speaker #12: So was it , you know , the original expectation was conservative or just getting market acceptance faster than you thought . Any any color there would be .
Speaker #12: Awesome . Thank you .
Speaker #4: Great . Well , I love it . It's sort of a softball question , so I love doing that . It feels to me like maybe we didn't realize the strength of our channel .
Speaker #4: And we've , you know , we've been out we've been over there for so long and so many countries direct . So maybe we didn't realize the strength of our channel and how quickly they could get to vascular surgeons with this device .
Speaker #4: I think we were a little bit nervous going in that since it's more of an AV access device in the US and AV access isn't really that typical .
Speaker #4: Over in Europe , they use the patients native fistula to do to do the work rather than implanting prostheses like the Americans do .
Speaker #4: So and , you know , we're learning that , oh , well , maybe it doesn't get used for AV access over there , but maybe it gets used for peripheral bypasses .
Speaker #4: And so they're finding customers faster than we thought . The doctors love it . We're getting great reports . And then there's been a wild card in this international in this international thing .
Speaker #4: And that South Africa , which does use grafts for AV access , has exploded in terms of sales . And so you got basically it's Europe and South Africa .
Speaker #4: And I think South Africa , just to give you some $300,000 in Q3 alone . So something huge has happened in South Africa .
Speaker #4: We've had the same dealer forever . They're an excellent dealer and they have 50 or 60 reps down there , and it is a large country .
Speaker #4: I think it's 55 million people in South Africa . So you've got that helping out with the European launch . And to help it all go a lot better than expected .
Speaker #4: And I hope that's a good answer .
Speaker #2: Your next .
Speaker #12: Question .
Speaker #2: , go ahead .
Speaker #12: I'm just saying thank you . Thank you to George . I'm all good .
Speaker #4: Thanks a lot , Brett .
Speaker #2: You're next question comes from the line of Jim Sidoti of Sidoti. Please go ahead.
Speaker #13: Hi . Good afternoon . Thanks for taking the questions . Can you give us the operating income and CapEx in the quarter ?
Speaker #3: Yeah .
Speaker #13: I'm sorry , operating cash flow .
Speaker #3: Yeah . Cash flow from operations , Jim , was 28.8 . And the CapEx was 2.3 million .
Speaker #13: And the increase in the share count , is that related to the the share price ? And is that where you expect it to be in the fourth quarter ?
Speaker #3: The increase in the share count for the on a reported basis , Jim , for the first time , the convert was not antidilutive .
Speaker #3: So if you look at our our Q , which will file tomorrow morning , you'll see the reconciliation . And we did have to bring in some of the convert shares on an if converted basis .
Speaker #3: So that was a minor , a minor point that you'll see in the Q overall , I think you can expect that each quarter , you know , we're adding to share count through employee equity .
Speaker #3: And the fourth quarter is actually the largest quarter . We do a lot of grants in the fourth quarter . So then you've got a lot of vesting dates for restricted stock in the fourth quarter .
Speaker #3: So it'll it'll be up , you know , a marginally in the fourth quarter due to the employee vesting .
Speaker #13: All right . So you know around in that 24.5 million shares .
Speaker #3: I know it won't be up that high . I think we're at 23.5 now . It'll be maybe 24 Jim . Probably closer okay .
Speaker #13: Because on the the press release at 24 3.92 .
Speaker #2: Your next question comes from the line of Kyle Bauser of Roth Capital Partners . Please go ahead .
Speaker #4: Hey , RG RG one second . Let's finish off Jim's question before we move along . Sorry about that , Kyle . But let's let's pause to get a decent answer here .
Speaker #4: Or maybe we get back to Jim with more data .
Speaker #3: Yeah Jim we're at we're at 24 392 . You're right . 24 392 here off the wrong page . And you probably expect that to go up to 24 five .
Speaker #3: And I think that's what you said. So you are right on, Jim. My apologies.
Speaker #4: Jim , are you all set with questions . You want to go after something else ? Okay .
Speaker #2: All right . So your next question comes from the line of Kyle Bowser of Roth Capital Capital Partners . Please go ahead .
Speaker #9: Okay . Great . Thank you .
Speaker #14: So .
Speaker #9: Some some really nice sales growth . Of course across key product categories here . Just looking at volume increases .
Speaker #14: Can you speak a bit more about the makeup of this growth ? I guess in terms of new accounts versus higher utilization within existing accounts , I think you've got like 12,000 surgeons .
Speaker #14: You're calling clients . And I think , you know , there's a Tam of maybe 22,000 vascular surgeons out there worldwide . I just I know there's a lot going on in terms of flipping from distributor to direct and new launches , etc.
Speaker #14: . I'm just trying to get a sense of the kind of growth mix profile of new business versus higher utilization and existing business .
Speaker #4: Hey Kyle , before I get to that question , just a quick welcome to you and Roth Reinitiating coverage . It's great to have you along for all these calls .
Speaker #4: As to your question, I don't have a great answer for that, to be honest with you. And I don't want to speak off the tip of my tongue here.
Speaker #4: I could come back to you separately as to you're looking for does the unit growth come from new accounts or more utilization at the current accounts ?
Speaker #4: Is that sort of the essence of the question ?
Speaker #14: Yeah , exactly . Yeah .
Speaker #4: I honestly don't have a good answer for you , Dave . Anything .
Speaker #8: Kyle , it's Dave Roberts . I would say I don't have a firm answer , but I would tell you directionally in the US and North America , maybe less new accounts , whereas in Europe and in Europe , particularly due to Autograft and a little bit the UK Allografts , those are a little bit more new accounts .
Speaker #8: And then Asia , which is , you know , our newest region of the world , like , say , where , you know , we have gone direct in some new countries like Thailand and Korea , etc.
Speaker #8: , probably a little bit more tilted towards the new account . Greenfields over there .
Speaker #14: Okay . Now appreciate that . And appreciate the welcoming as well . We're excited to be following the name . Also , some really nice margin improvement here .
Speaker #14: Both in gross margin and operating margin . You talked about manufacturing efficiencies and and moderation of opex . Just trying to get a sense of the types of , you know , maybe more specifically manufacturing efficiencies and examples of moderating operating expense just to understand , you know , you know , what still remains above and beyond , kind of just economies of scale , if you will .
Speaker #3: Yeah , I think I think scale help in several of the businesses , especially , you know , the businesses that are growing fast .
Speaker #3: We've talked about Restore flow , benefiting from from scale as that has ramped up . And I think we're we have been working pretty diligently on efficiencies .
Speaker #3: Across the expense base . So we had some manufacturing efficiency projects around automation that have paid off . It's allowed us to reduce overall direct labor headcount .
Speaker #3: We're working on more of the commercial operational efficiencies around logistics and shipping , as well , that we think will continue to pay does us .
Speaker #3: off for
Speaker #3: George mentioned just better management of the sales reps and some performance based management . There . I'd say that stretches across the employee base in general , and we have been focusing on just delivering operating leverage in the back half of of 2025 .
Speaker #3: So I think all of those have helped contribute to the the strong OP Inc .
Speaker #14: Okay , great update guys . Thanks for taking my questions .
Speaker #4: Thanks a lot, Kyle. Welcome.
Speaker #2: You're next question comes from the line of Daniel Snyder of Citizens . Please go ahead .
Speaker #15: Yeah . Great . Thanks for the questions . Just had two quick ones . So
Speaker #15: first one to ask on the open cardiac call point . I think you commented that was particularly strong last quarter . I think that had to do with restore flow .
Speaker #15: So I was curious what you saw in three . Q in terms of performance and , you know , more broadly , are there any trends in this area that are playing out into the end of the year and into 2026 that you think are interesting , or we should keep top of mind ?
Speaker #15: Thanks .
Speaker #4: Yeah . And I'm glad you bring up the Q2 topic because Q3 was just almost a repeat performance . If you look at allograft , it grew about 56% on the cardiac side and about 14% on the vascular side .
Speaker #4: So you have the same type of dynamics going on in general. The cardiac allograft business is growing a lot faster than the peripheral vascular allograft business.
Speaker #4: You know , we like both of the businesses , but we're newer to cardiac and oddly , we don't put as much emphasis on cardiac .
Speaker #4: I think our vascular , our sales force feels as though it's a peripheral vascular sales force . And this cardiac thing is sort of a new thing for them .
Speaker #4: So oddly , there's less attention on it by the sales reps . But the results in this one particular category are a lot better with cardiac .
Speaker #4: And it's a little bit led by the UK and Canada. And now another theme here is that the Canadian results are sort of starting to come down into the United States as the new manager of the sales force is Canadian.
Speaker #4: He's he's been here for a year and a half . But , you know , he's just getting going here and he's Canadian , not American .
Speaker #4: So he's bringing some of his bag of tricks up in Canada down to the States .
Speaker #15: Great . Appreciate that . Just one follow up on carotid shunts . Just on the quarter . You know , was there anything that was driving that 18% growth ?
Speaker #15: I think looking back the year over year comp was actually pretty difficult at 22% . So just wanting to see if there was anything that was specific to three .
Speaker #15: Q, and then just a little bit more broadly, I feel like carotid shunts kits are called out 2 or 3 times a year, 2 or 3 quarters a year.
Speaker #15: Just having double digit growth . So , you know , longer term , how do you think about this product ? How should we think about this product ?
Speaker #15: And you know , anything on the market or you know , it's long term trajectory would be would be great . Thanks .
Speaker #4: Sure , sure . I think we're still benefiting from the fact that barred left the business , particularly in Europe , but also in the US .
Speaker #4: About a year and a half to two and a half years ago . And in Europe , we've been left with an extremely high market share where we're able to sort of do what we want with pricing in the US , it's not quite as nice as that .
Speaker #4: Our market share is more down in the 20s and 25 , and so it's not quite as flexible . But feels more like a European thing .
Speaker #4: And I think they left us with a nice position . And I think you're seeing that in terms of units and also a lot of pricing flexibility on that product line .
Speaker #4: So yes , you're right to say it keeps coming up a lot over the last 2 or 3 years . So it stands to reason because of Bart exiting .
Speaker #15: Great . Thanks for the questions .
Speaker #4: Thanks a lot .
Speaker #2: Does that answer our Q&A session ? And we appreciate your participation . Ladies and gentlemen . That concludes today's call . Thank you all for joining .