CRY - Earnings call transcript Q1 2018

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Operator

Greetings, and welcome to the CryoLife Corporation First Quarter 2018 Conference Call. At this time, all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Pat Mackin, Chairman, President and CEO; and Ashley Lee, CFO for CryoLife. you. Thank

begin. may You

Ashley Lee

and CFO joining of everyone, Ashley call. Lee, the CryoLife. thanks morning, the for I'm Good

Before made we XXXX. predictions uncertainties, requirements statements The to the are begin, forward-looking Comments in these These Litigation as following Reform the cause Securities statements. statements statements hopes, time, I of or Reform within made to of estimates would like or comply include Litigation Securities expectations and that forward-looking Private Act may the the to from that of forward-looking on actual intentions, management's with risks, involve this meaning of assumptions a Safe look of risks number forward-looking Harbor Act subject of call Company's Private to to the statements results XXXX. materially future. make and forward the statements beliefs, are the and differ uncertainties

certain is press impact was risks in may the last and release that time-to-time, Additional SEC and Company's night. from information the issued contained concerning filings uncertainties statements that forward-looking these in

over turn Mackin. Now, it I'll CEO, our to Pat

Pat Mackin

quarter. my comments, than better our quarter, And last to opportunity first closing Ashley, In first year our morning, are and today. very start I'm to I with CryoLife JOTEC. that lines, including all product Thanks, addressable for competitive major more that On-X, positioned, been we revenue strong XX% a a these in revenues on has everyone. does drove you report non-GAAP never solid in growth generated and quarter had of that a solid pleased across good the growth four it growth factors market told larger XX%

execute strategy place vascular with products. highly is sales demonstrate strategy put and sharp this on is hard the force, direct We worked aortic and a this We selling with in surgeons, disease. have to results call our cardiac well-trained which that person strategy our patients to treat with XXX who and focus differentiated We our strategy, competitive working.

performance strong XXXX We expect beyond. in and drive strategy this to

of complete, profitability starting the years. opportunity capitalize expanded acquisition the drive On-X and growth the next and already increasingly on are market five integration our almost With CryoLife's to over success and the JOTEC to we

As regarding On-X we've approximately through the billion own market the PerClot to $X and the R&D a we $X result, our to bringing potential internal of China to addressable acquisitions, and increase increased those and BioGlue JOTEC previously efforts, billion discussed it to have including to have U.S. our

potential highly JOTEC's the JOTEC's bring R&D to We even and market. to also about very R&D pipeline, remained capabilities of more excited differentiated products

to of to Moving each of on key our The examine to our our initiatives. is quarterly best initiatives. our way accomplishments assess XXXX core review for our five progress

these our hear with for we on initiatives, well towards of you'll we we are track achieving on each way later are for the CryoLife XXXX. goals As today, and set

comments, Ashley will quarter review financial And of my questions. we'll our Following then, the any detailed open results. call for provide a first

quarter currency owned JOTEC quarter increases a quarter we first achieve the that revenue of of is initiative XX% compared on increase we revenues of the representing an XXXX assuming X% basis. year, calculated first and In first XXXX, full Non-GAAP year guidance. set key of last first XXXX. The financial million are X% XXXX were to the XXXX. delivered the $XX.X quarter we of to for increases over our constant of in revenue first Non-GAAP

diluted first share. EPS of our $X.XX earnings, delivered per XXXX quarter we non-GAAP Regarding

guidance. early, still first we quarter full-year it on us put results Although deliver believe on our our had solid to is footing financial

in details more provide will Ashley commentary. his

complete JOTEC growth in revenue the year XXXX. initiative for and deliver the is key non-GAAP Our to double-digit of integration second

the growing JOTEC the is only a posted significant we digits. mentioned, – demonstrate We quarter XX% in first in results of first over these highly and the potential the quarter non-GAAP JOTEC's quarter market XXXX. growth As portfolio believe first the in XXXX, that of in low-single of of I of differentiated just overall portfolio XXXX revenue product

communicated take share force direct going highly very have to with remain expect JOTEC products. the excited the sales this We our we portfolio trained about for previously prospects We differentiated our highly forward. behind business

momentum key to initiative third deliver XXXX. is double-digit revenue and Our the continue of in growth On-X

relative to product to XXXX, We increase of an that market. and XX% line Middle the Africa, our not Europe, to On-X available in quarter XX% of XX% first the portfolio start, great as are including having the increase North markets, a in off of grew in East despite us an first direct AAP American quarter the in

the of demonstrating by On-X and to market PROACT aortic to reduction take in On-X a physicians scientific even X.X,. our I PROACT are more As more care announce the valves for between learn of bleeding approved with mechanical trained publication educates later sales in for that customers journal trial. superior a product X.X the expect paper us year. an regarding that FDA XX% portfolio. for and products, more showed major excited making we will just highly has Meaning valve prospects that mechanical optimistic mentioned, this as benefits clinical health study, clinical that Furthermore, and is only the INR in results this which heart more share we our JOTEC about about the the the is been and advantages professionals accepted force

continue Our total to fourth to XXXX current is market key expand our addressable opportunity. initiative in

approximately the $X we communicated, JOTEC. of opportunity expanded from As previously with million our we acquisition $XXX approximately billion to

expect our regard, patients trials track the China to further second In the legacy activation pipeline. product both line centers, product remain make significant all have trial, in currently for at in and seven have BioGlue the enrolled CryoLife now the clinical BioGlue, PerClot in we've full trial. we needed in in under progress our R&D the in billion of site U.S. China, and approval JOTEC in where We patients we for study trial. XX% investment institutions, clinical BioGlue In protocol, the and including $X trial. pipeline, to needed of that our the with at expand product we restarting patients continue to into Since the of enrolled of now this date, are complete have XXXX. XX% to To the enrolled revised complete on half full XX China being We the activation the PerClot site

quarter three expect of we sites activated the In addition, XXXX. in second be to another

on enrollment FDA between Our keeps current rate of first XXXX. second of half for approval track the the XXXX and an us

international forward more details working if file providing when on the also And commence for trials for are We exciting in These we that will to remain next trial, year. those same PROACT IDE. this launch be IDE markets clinical to we several the We on look we FDA next year. we are and expect track seeking finally, to U.S. bring it next-generation and products markets, products approval the XXA receive this U.S. trial. to to JOTEC to the time the

CryoLife servicing I his key that the we to for I'm in that, our fifth each that IT the period customers across products and transition announce as complete markets over initiative to for of all we April direct began is accomplish of functions in Poland. time. service, Also, entities. And for a will Italy X, to direct all April pleased for customer finance Our the X, turn the back thank that XXXX markets. we've legacy We financial of support on a of short key European with to for those achieved major basis undertaking Spain, want our help office, and Ashley system objectives, in same employees products call to and legacy implemented those to this sales relatively CryoLife review. channels to on now

Ashley Lee

XX% revenues included increase were geographical $XX North an results XX% year-over-year X%, for approximately and Middle of JOTEC total Thanks, of XXX and by in first increased Pacific first Latin revenues Pat. first On-X to million and markets Africa On primarily was XXXX, and our like Revenues the $XX.X Total increased ordering million the quarter first a Europe, over North basis, On-X in year-over-year. Middle an were quarter on On-X quarter the XX% patterns. our processing East year, compared Africa. patterns. the JOTEC Middle prior first The to the in for a America, American on XX% XX% compared year. the XX% basis a from X% our X% first XX% Asia over of in revenues, XX% increase in in On result distributor first revenues, individual of spend ordering non-GAAP quarter. non-GAAP compared a for of distributor to $XX.X and first driven basis, region were from due Africa, for direct the decrease lines. an points $X.X of million, I'll $XX.X to were the revenues year. million. X% revenues first currency of compared company Europe, On-X quarter to XX% primarily a now of were quarter basis and up for revenues as review XXXX. revenues XXX% Revenues of prior Europe, XX% our a when increase the of East, I'd increased tailwinds. million to some the overall to the revenues of Non-GAAP increase and Asia increase quarter increased America time East American $XX.X quarter increase focusing revenues in direct a quarter, increase tissue product of the Pacific an businesses million, BioGlue increase and for quarter decreased XXXX. were which an revenues. prior Latin first

markets. to surgeons, Africa, the the ordering cross-selling second XX positive vascular the in for OUS on million, revenues an BioGlue prospects in Tissue East and remain quarter BioGlue years. with and The the first X% of from in the million strategy JOTEC's anticipated direct which was an opportunity to BioGlue XX% quarter $XX.X $XX.X a were XXXX. $X.X period, patterns. first same million. great QX, basis, the North some This were revenues revenues year-over-year a X% up decreased considering million of increase quarter excluding of in X% up year-over-year this Europe, non-GAAP on to million. BioGlue first up revenues currency result OEM. $XX.X half a competitive in our in processing the JOTEC of ongoing distributor in American from Pacific, last sales X% X% of We on BioGlue was and year-over-year. BioGlue in of XX% constant of regulatory we've based were activity China Middle basis XXXX. selected the of approval who couple seen were currency call increase reps, over increased resulting constant and decreased on $X.X X% go revenues OUS revenues in Asia For

increased unit XX% unit During increase quarter, year-over-year, processing the X% vascular X% increase revenues increased first X% shifts. on revenues in and in tissue Cardiac shift. a year-over-year

was and gross other inventory. margin a the included of overall Gross a for the acquired step-up first for in JOTEC quarter XX%. first $X.X basis, margins quarter Our million to related charge distributor in

We which expect year, million charge balance the XQ. in million expected of an $X the additional over is of $X.X

$X.X expenses million, non-GAAP Excluding integration-related were $XX.X processing excluding and during expenses for business gross SG&A expenses, in were was million Tissue $XX.X XX%. and XX%. development million the gross million. quarter product quarter for first charge, gross SG&A was were margin the XX% margin the margins $X.X quarter the first

rate related tax offset executive nondeductible costs rate The for benefits first partially and stock of tax expenses, compensation. excess Our XXXX the tax by reflects XX%. to transaction quarter compensation was

Excluding tax the in been effective mid-XX% these have items, would rate our range.

results, reconciliation first $X.XX and non-GAAP of fully net the or million net or reported quarter to line, share of results $X.XX of these GAAP loss share. our release the On diluted a in for our Please information non-GAAP results. about income to refer XXXX, $XXX,XXX press GAAP of per additional $X.X our we bottom per including

stood had B under at As four of over loan leverage and credit net We under outstanding just cash on four May gross equivalents our current our times XXXX, $XXX million cash, documents, was and based X, our $XX and approximately had million we leverage our times. term securities. in restricted

currently interest rate are options our rate We exposure, swaps to and including evaluating other manage floating-rate instruments.

progress. our We you on will posted keep

be this release financial to press which our are last and for And that first our over JOTEC the acquisition, it expect last, between quarter second XXXX in comments, night. concludes That revenues and I the XXXX we we my detailed and full now of integration issued will the $XX million $XX we turn to underway, Given the quarter million. Pat. back following still guidance, that reiterating was is with

Pat Mackin

Ashley. Thanks,

right, and with business JOTEC extremely how are the pleased we we summary, performing. is where we and the On-X in had So with overall be hope are to acquisitions

aim highly well-trained force not surgeons. differentiated is aortic replicated. Our on on products to We but straightforward, focus high-quality and a supported vascular easily business calls sales strategy cardiac by repair, sell that

We more in before. are now ever markets direct than

We are generating. the our by encouraged highly team is momentum sales

transaction pipeline new a JOTEC's remains these come. strong. and product significant they in us combined with solid, a expect to CryoLife. On-X the of for have the R&D much about days and BioGlue years offer at lot robust, are competitive should Our and days potential. excited be quarter we The was of and still and very continue. potential, steady product we early trend are a The In short, to to stream provide Tissue their and

CryoLife. XXXX been of thank hand be Operator, great sincere accomplish employees that, year. extend our want toward you delivering please a lines. in reasons, for those my we we I'm will the time. lines such Our to successful to in With of another open period able I the start strategy all proud of of to the you for will And questions. a open for a is relatively we've year expect what working. to short

Operator

Thank you.

will question ahead, go be The conduction now [Operator first Please sir. question-and-answer a session. Canaccord Mills, from Jason Mr. We Instructions] Genuity. is

Jason Mills

can me okay. Hey, Pat Ashley, hear and you Thanks.

Pat Mackin

Yes, good morning

Ashley Lee

Hey, Jason.

Jason Mills

Pat, morning. want Pacific great year. to Congratulations. to the specifically market. just start internationally, the in questions here. Good I Asia start Several

even it you this shown only Pacific. better, against now have go your of distributor obviously in a like had nice looks You couple and you to It been had order patterns could a in beat expectations Asia quarter.

But perhaps minute time? with augment BioGlue time, be you that the coming over for a spending do time over year. the out late able to those region, So Pacific smooth What on do be them might the that's region, there. Asia you over going be and China next opportunities obviously, might important to in, able would to to results

Pat Mackin

Yes. Obviously, the look that ordering got flat, it even this extra need I we're patterns lumpy. we was frankly, mean an you and in you was mentioned the XX% things. our we be an didn't the received really We of down call look as time imagine year two And Pacific. from on at last order that like. quarter. have I can Asia last just said, – would One, if mean, distributor extra even what growth But given order, at again, somebody's end we the rate Japan. numbers

that And year. so that, order last happened in this quarter

$XXX,XXX So – there missing order to of it's of $XXX,XXX. kind was a

the that So one was of pieces.

piece The distributors. are other On-X a in QX for big really we last of year and is different Japan, had they in order

big revenue, bigger trying those these So are it again, I small think smooth related. they but lumpier But to that markets wasn't some of chunks of out relative have geographies. to

the in that we next have and I've portfolio, year, JOTEC see on in mentioned late On-X kind portfolio of the many I in BioGlue in think lower upgrade distribution before our now new And China products is, nice side registration, of calls. the the for other as That thing significant previous INR of And the pretty given China. a things. makes a coming platform opportunity opportunity. well we as their the

think, in be It's I is online. later that And the probably XXXX, towards So as China BioGlue will managing opportunity. we future. more comes an

Jason Mills

I been have Yes, flat. the helpful. have eye-popping, The that's been it could yes, asked could sort of Okay, so numbers question.

color. thanks So for

is the XX%, impress you out. the continues that to light market, Turning the in helping XX% On-X to The again, growth market. domestic of over not obviously, fact it

performance. share opportunity continue obviously you to gaining You of sort do there. that What have

maybe me we're of I concerns it study could that that IDE. doesn't I about should domestically. surprise talk be next But mentioned you like maybe years, any get get on it you because talk to X specifically, guess, able to if seems that if you you you, you can hopeful context and surprise talk to I'm – but On-X, the not start are new mind, my folks. it the And also maybe but about continues be in about trial, in there about you and getting wrong to too. have just the think maybe X correct any I the the mean, IDE, shouldn't

Pat Mackin

Yes, think multiple there On-X working about news so I I that favor, many counter is, of in is the to from are are standpoint. think a competitive great and hard factors our them kind of

I only FDA that for the think I the reduction of in U.S. first and has the because patients. in is in are remarks, prepared we the approval bleeding lower a benefit that INR XX% and for foremost, mentioned company

them replicate, five that's seven company to five going years. to So or take for a to

I So day. feet XX-person two, we've That's of a years, at company five two with every have ago, point that really has North years this message. organization and a one. our in street, had of the never America selling next sales strong the kind good a it uncontested. very the think team of stronger extremely gets on gotten and runway And valves. reps Remember, our we commercial got mechanical Point we kind sold acquired little over

be big paper and the the I deal in powerful. mentioned trial taking in journal extremely out force be a more to the paper getting that I've talked summer. because will and out advertising published where this sales in patients web. years. and direct-to-patient that a than tissue we were of point valve getting we is, The very to effort nine get on Third, looking direct-to-consumer, about strong previously, at hits, major that options PROACT this prepared breaks better a for clinical having our down the And going tons is clinicians remarks, to That's have fourth is five more

for differentiation working this we another I we've On-X you think, This going mean are XXA. information mention where so more it's kind back. talked have kind been protocol I just the FDA, ready with valve, have But definitive is me FDA, be. previously. the of when definitive from reinforcement the we the and fifth, the of discussions, to and we've to in hard contemplate to just PROACT of until discussions, are more and of kind I got we in a go, of feedback that's about we've

happy We share it. to be will

Jason Mills

that And just a that right BioGlue guess, The I and perhaps, more $XX this queue. into now Ashley, million color. little for you a on higher that domestic issues one, States? as see PerClot was little level then, of SG&A next bit in couple United the in you be follow-up Obviously, it, do the helpful How bit the out normalize is and we SG&A On-X so. opportunities over the of important for throw a you augmented you and market see about side, then That's then lower. this sort gross over the be obviously and down. months do a Okay. as to few in do the The product you. next playing thinking to I will or competitive the on quarter back by expand of get growth where should general, market, just margin gross years. you level U.S. How profile with baseline And R&D dragging the see specifically, the that couple the just I'll year? years? XX is margin – the for maybe

Pat Mackin

me me Yes, the... question. first Remind let the take

Jason Mills

Pat... generally, market, U.S. The

Pat Mackin

said both again, I So double-digit. we mean, transactions, we we look will – said the that think market, on grow we've when On-X in I U.S. globally,

We double-digit globally. will grow JOTEC

to expect into kind this quarter us you It's driver take market. if big those to JOTEC, we XX% get to So growth. products the into which we obviously saw be with have On-X of here growth, you years yet. But don't several going the zoom U.S., the of

saw back kind then we in which of of cardiac was also tissue a Glue We kind nice to X%. at to at mid-single vascular digits, nice tissue rebound And down saw see. X%,

come next for PhotoFix a pretty single digit U.S. – the to on our I U.S., couple few years maybe, in expansion we've for more on of got the mid are what and quarter, products the think expecting out. coming On-X you've products kind had So I'll talked got gross good U.S. underlying one kind our But I the gross of of growth is the one internationally. previously, I to the And And until comment I've that's about U.S., and strategy. gross kind expected much let other, that's direct new and think SG&A also quarter, think we some the targeted we've the a see. we Ashley margin. tailwinds with The margin. the get margin the of take Number this The that very in

middleman we Poland, we mentioned As go so we in CryoLife end-user products, gross direct Spain, of eliminate the the Italy, the margin. country, kind get with and

the bring as piece. JOTEC piece, in margin the one those very products high are U.S. that's U.S., bring So we A down second the products marketplace. as the to road, we

further but upflow, an again, away. that's So that's

was strong I Baxter's other else, On-X our operations, really from mix, a to cost He do any CryoLife The anything new JOTEC, chain. product run of think the over five help opportunity to Austin, big I strategic cost. and our product worked used Baxter. pieces, see margin with down very from products. we legacy it and facility, from down He's leader. aside Medtronic. in He on the I drive entire brought bring significant cost the years direct And operational to head never there supply

two. Ashley, maybe the can take you other

Ashley Lee

XXX the look variety on around first reasons, including Yes, for for people our quarter question, got SG&A we globe. back Jason, spent a if of actually now and so has have the that national meeting, historically, it's we have bigger the heaviest you at company the this and a our lot year, a been sales go SG&A different

and to, heaviest go our has we that spent it conventions So been typically that some quarter.

far margin, pretty think less you it's balance I Pat see than summarize is $XX that So SG&A and this ceiling over then that. as every well. I Yes, for the year, and that quarter the should gross million little to a bit as of likely think, be

the of look the certainly, And down initiatives, have think as continued bringing strategically at longer distributor opportunity for is a a world. into term, line for term we little a a bit cost around margin the direct you product maybe JOTEC lot U.S., that, to obviously nice longer then, that expansion but the little We opportunity the company.

Operator

O'Neil, sir. go Next Street Capital ahead Lake Please Markets. question Brooks from is

Brooks O'Neil

or morning. terrific Congratulations non-GAAP think on number from I I the the little number we on, a X% of I could to if some U.S. And the augmentation about release to is you mentioned about expect wondering, would? just start Good year. that or going hoping currency forward that to was in things? constant growth. see you talk bit, was coming the you other the check-in Just until a JOTEC if sort

Pat Mackin

December Yes, lot things, We full obviously, had, had so we really first moving just about, of a quarter it. first acquired had of guess, integration. the lot in a QX, about maybe a talked of lot couple noise And parts things, the company talked again, of we was together. in X. it a still our quarter when on we It on was I

quarter. and So start all April second the we the the to direct on quarter. a we we've X, we went of mentioned good that even our in lighter on actually first We performance transcript the markets at and expected last comment saw so in be earlier quarter

the throughout always of would expect and year. can on for Maybe, in to kind it. it start Ashley, out you then QX of we comment slower build those So don't kind reasons,

Ashley Lee

Yes.

on the somewhere we and X% guidance guiding on constant for and X% GAAP between our maybe full-year for the around Brooks, think the high-end. the growth X% X% coming range the low-end, was high out were currency year I the implied X% X%, on a And to basis. So

to we've be basis. do what if successful and we our that, in obviously, on stated, could than then goal plus doing currency constant we're seven is So, better at

Brooks O’Neil

good. That's

do I have one have act? opportunities. balancing difficult curious, you with that pull growth a a you just the or of see as balancing think significant Or long-term the sort up? ask I'm to obviously, tools more. two Do in challenge of short-term will that you you So place you

Pat Mackin

obviously, Yes, prepared It's now. we've Italy, pretty so we fresh. I commercial got X, April the well-established Spain, North direct I pretty are a couple that's so channels remarks, old. are times those and direct in went Europe. month mean, America in and think, XXX on organizations well-established. comment of Poland, a the I still reps But, in And as just

just channels have. the hitting to think those their we are portfolio stride with that going drive growth product the So I

the next-generation to think We've see international major got year, are time this got we've portfolio. we next-generation of three device. going Elephant and a in pipeline, I new nice the markets thing the JOTEC graft launching we in out about Trunk, thoracoabdominal a stent be Frozen next next-generation is products a thoracis

products XXXX. XXXX, PerClot in use But, coming clinical So, JOTEC the late late those XXXX, in will trials. that and be the U.S. channels, just same three in early the the we Glue products are followed by

think really further execution U.S. pipeline, stuff and the the JOTEC the products big new kind of with near-term products, out the coming we of which current for of a up out. as opportunities set ourselves the R&D nice we've got I are channels in market with the

Brooks O’Neil

you excited. Thank I’m very great. That’s Perfect. much.

Pat Mackin

Thanks.

Operator

have Cohen, go Jeffrey Thalmann. Please question Ladenburg from ahead sir. a We

Jeffrey Cohen

discussion? whole guess about I valves may underway on far TAVR and as more internationally? approval? an how both you're that a recent And as as the your heels issues. wanted a domestically discussions size of versus as new the guys. also was thoracic and of give out And far mechanical I little your play two hear bit Hello, meeting. take of what us to kind feeling Can the you

Pat Mackin

Which to? size are referring you

Jeffrey Cohen

XX? The mechanical it was new size,

Pat Mackin

Okay, XX.

Okay, yes.

There chance to the I and the session Surgeons this Association it you afternoon. of Americas San So had on, presentations. in will take the Diego on And was week. to this Sunday three a first don't I go were I know if three at presentations, there one. believe is Thoracic were

an TAVR who in younger use that interventional patients. was was presentation should you cardiologist, first The saying

to but trial, Puskas, mechanical, surgeons the think who I who's got valve second – then, did the actually patients presentation. UK, showed in what interesting valve from it it presentation valve. tissue is a of came patients. basically put in the cardiologist be of in saying really that, patient. was job, On-X and valve a was first heart that very to by the that young And presentations feedback their you the for using was actually the of He surgeon we said John and half PI valve five And And John is use them, years. the I in the should later. starting years, presentation afterwards nine to a tissue a compelling not thought in were putting On-X a in patient based thought put was The valve shows in at failed when interventional I with only the and and PROACT of I so-called it who Puskas younger last valves at thought presentation The valve. from valve you over an tissue the that a registry an and TAVR TAVR registry talk us tissue valves the a fail you a should was fantastic hopes

valves. TAVR And showed The interesting. same exactly the breakdown very that the he in younger these was in tissue valves patients. arguing, tissue valves it was thing fact, surgical the bioprosthetic so in in the the And as his earlier is data

of what before, the to the mechanical from of based lower almost XX% here. again, younger about So said U.K. have I the is, number And I booth because But Puskas group INR, the that the kind Dr. kind this risk was, came patients On-X surgeons off heel. and the you the big of we with and said, I there valve as of rethink doing on that valve mentioned a what think with increase by surgeon really I'm had got of a the bleeding, take bleeding this reduction from table. in with is Achilles' heart argument that the

I there the – our to So you've we there. and seen is share think continue growth in is and numbers, take

far we this opportunity got we've So And as going think forward. – nice ahead… as go

Jeffrey Cohen

ahead. go No, no,

Pat Mackin

of need in as the of and certain the size a valves one And the we're time patients get talking takes through trial of the – about mm, of each now. certain amount geography small has we're XX obviously as process enrolled. in clinical It you a that it's I to with follow-up, numbers just going very mean and – really far

working but are to it So get done. it we it, a time takes on long

Jeffrey Cohen

quarter-or-so? about well could a into integration working, that Poland? and secondly, the of size How product-specific, going? the international then sales some both past the how's Italy current little you over And force, it. domestically And as and bit have in and is talk Spain, size, got products of it JOTEC emanated out U.S. that in European the Okay, as

Pat Mackin

JOTEC Yes, got mean so well. I'd I integration, say it's on extremely the

we immediately, sometimes advantage of lucky were And the and things always almost that we but definitive was you in the real One was integrating October started we early which benefit of do XXXX. to were a signed able do, – we agreement can that.

been we've for now. So integrating months

I so And well. extremely said integration the has gone

that milestones, in service it's work customer the April mentioned setting on typical One revenue. was back which distribution, all We impeding in started going completed. Spain, big Poland, to pretty as is of those. software our Europe, direct any all up of backbone, done. It's – still previously, big finance, of through the kinks IT we're get that not X, a We the system, I have is much Italy, the office a that operation but and new working

got reps and we've not got channel Your second sales XX direct in management. including America, XX question sizes. Europe, direct North in was We've reps about the

you reps – to kind Europe. your So in XXX and and gets that direct America of North

any I – regulatory a previously. grafts, products the haven't products mean I it on stent standpoint. the products are opportunity because the we JOTEC U.S. big brought just JOTEC mentioned as from time in U.S. the The far As the takes to

trial for at B to clinical three looking for dissections, this start Elephant thoracoabdominal for year then we're thoracoabdominal for next in the different product device one the indications: time aneurysms. graft thoracic Frozen a type stent So Trunk and arch,

will year. their be be that, about So driving those starting are time this we other next than trials portfolio going And internationally. to

Jeffrey Cohen

for of you a can margins little more you they on quarter? I product of heavier the Ashley, it. little got see bit how just One the know year? $XX,XXX were bit more, the side out the for color playing the on provide line a balance Okay, on

Ashley Lee

margins, gross about Jeff? talking You're

Jeffrey Cohen

Yes.

Ashley Lee

Yes.

to The XX% which was be. for XX.X% quarter, guidance, the a pretty wanted in came in full-year. much over for at full we where is and So, which line XX.X% between the reiterated we with year little we

So XX% implies range. the year the that of of for in kind margins XX% remainder gross the to

Jeffrey Cohen

Thanks for guys. Okay. questions the Perfect.

Operator

question from We have go ahead, sir. a Please Mr. Suraj Northland Kalia, Securities.

Suraj Kalia

Good morning, Pat. right? Good morning, Ashley. Can you hear me all

Pat Mackin

Yes, good morning.

Ashley Lee

Suraj. morning, Good

Suraj Kalia

I us start quarter, JOTEC too cross-selling, color Can just that these get organic first through and you the questions on in bunch see it early can give into of if quickly. CryoLife and congratulations gentlemen, Is let some any to between Europe? So yet? nosing the Pat, if on me

Pat Mackin

early. got was BioGlue that customers. biggest actually think JOTEC of vascular in near-term really not mean, start pick I XX in BioGlue. too have it's and kind up reps We've them and surgeons the to, opportunity cross-selling – new idea on No, calling I But for selling us is to the basically the

in in Now again, sales just our that late initiative, started trained we reps, we January the meeting.

half, they still time of So and a you kind got samples probably I by and mean, got it's their – the that stuff. all month

but So, growth nice I a in that's Europe. saw in pretty the new, BioGlue really quarter think we first in

I you on for think the proxy that's a So cross-selling.

BioGlue. I the the That's CryoLife the opportunity. think team selling JOTEC biggest that's product,

It have of for way, of kind JOTEC other heart and we opportunity a and It's to happen, that's Elephant the Frozen procedure. a bit little more we've new technical. more on higher a see Going surgeons to takes CryoLife It's curve. the the that also team learning Trunk, calling on started sell an the a time training. that's already

we we think that we the time go will particularly, that through So I see see our upside on new start launch next year. product as play we will And significant when year, this think, cross-selling. out I to

Suraj Kalia

it, Got China of remind on the BioGlue trial? point end [dumb] question, Pat us

Pat Mackin

the believe to ago I PMA. dissection, is get XX Yes, A primary done basically which U.S. aortic the endpoint that on was lumen a exact the is trial same in of years the the false type that obliteration in

China, the years big XX that's before that another But ago, you for we the we in in do we China the answer the FDA it's exact now. trial. to bizarre clinical rules have know and the started off go know trial really did – same we So Again, when answer. the and trial it's kind of

Suraj Kalia

or Got understand it, – U.S. low than versus us you in the is average your for is Europe to [X.X, Or seen that? INR around mean that can the INR X.X] X.X was INR On-X, relative still in trial? that help Pat, the number being label? what higher used the Are we

Pat Mackin

to I for monitoring I I know be answer. randomized it's of I would it a FDA with INR. – that because the think best mean Yes, was question. impossible control good the mean me is a proxy trial, that home trial

valve perfect surgeon INR INR. you are the information. Patients X.X as actually the So that who pointed you heart off gets cardiologist and handed managed. patient the then was And does out. manages The had to case, the

So that's the for anecdotal I you're – in patient, kind – talking assume of private about what of visibility same of from I us clinicians, conversations. to I running just any I information won't have would physician the health discussions just X.X for are. from that, the know mean with knowledge or there a range range, those that do

Suraj Kalia

at that. were moving have and you should for you, about one – bps FX Got reps and $XXX all impact given think thinking can impact you How loan you currencies rate impact, admittedly, FX day-to-day, XX% next forward move exposure. question outstanding year? your how finally, we have FX it, swaps, current year looking moving about positive But XXX this million that I get Ashley, are and of the

Ashley Lee

Suraj, it's so great a question. Yes,

net now. from we larger because much flow standpoint, of especially, So a have cash business right there out Europe,

a all operations of We we kind with the of on natural the have a ground. that hedge have

exposure a coming significant two, don't Europe. net expect standpoint next over or cash we year of So the to out flow from have a

want the you've company's top first this the had FX in think you top quarter of lot companies seen talk companies significant the year. specifically, first significant about to in a on had a line, from device and the a many of quarter line I U.S.-based If report tailwind, tailwind

I know, the started last XXXX, over think to balance of the the in moderate. versus as dollar quarters three euro the you

we big benefit as from So in don't see topline. to the expect a FX

will it. probably you again, see quarter Second

to quarters, paying fourth you're on line. and very then in impact the third that it's rates the to over credit top we're start see to the four movement something going close last And six attention FX to and The regards from interest that months, in moderate to.

we apprised parties, keep decide do something. risk interest to active looking we you if in alternatives discussions will our manage progress currently with to at are that of And We forward. rate going and

Suraj Kalia

Thank you.

Operator

sir. [Operator Analysis. from a have Instructions] Joe ahead, Munda, Please We go question First

Joseph Munda

versus traditional differentiated growth revenue could asset being How some the much Real up growth products quick, put will, curious, of in the on sense Ashley, if commoditized that that here, some more to the in you the just E-xtra from you I give hone mix of want E-vita, quarter, portfolio? or if three of the JOTEC you came that us there. and E-tegra products the the in

Ashley Lee

Yes.

kind breakdown So, don't mix. of we individual product the

the does in product do it's And well line; is we've perspective of So a side, well we've which portfolio. the kind good macro tell E-liac AAA in to so for reason every a the system. you segment give been market Europe. one, in got – Branch, saw two, able marketplace. with which It extremely is the device, example, we very our a I double-digit in actually, very to kind just can The of nice product we a on that, single Device, a of XXXX. We competitive Iliac just a on more JOTEC proprietary saw growth you line the relative but

graft a well. as every like, growing including would products was one is blown it it kind product at line, product digits So of line, that you double double-digit old their an saw in crowded a vascular out. are we We product say market, which was it a yet, wasn't

It's just portfolio. and access, us I the So entire across the think seeing getting differentiated. are portfolio highly is great we that growth

Joseph Munda

by the is you Suraj's as the do the matching portfolio? back are that be question opportunities think to And you Okay. the result cross-selling up that, core would seeing JOTEC CryoLife portfolio of

Pat Mackin

yet, have think that, – even to I be think Yes, I honest. don't we seen

legacy the heart of sell in – opportunity device. CryoLife team Frozen the is biggest open, cross-selling the Europe, Trunk calling the cardiac So is for to surgeons I the mean E-vita in which on Elephant short-term

their mentioned our take are that in launching about of we we some market under a we I are that think question, get share significant next-generation on, trained that team technical product, takes year, learn, to very it As to time a belt, up part version Suraj's the but get with. the will take is of which time that's to exciting some to in that going

upside, big in cross-selling contribution think think I see following So year. we'll time nice this kind year. this of see next a some I later we'll see we'll But

Joseph Munda

would that launching, to that products of you be next-gen questions. about Yes, Pat the couple point

concerned. these incrementally, at off, R&D incremental are where we are mean, as as costs products. looking First costs I far to launch

new will. well products? version on As what as it how you the give there benefits version, as can perhaps, of is on some X.X to over the if a difference And you X.X much of will us for these the be launch insight based

Pat Mackin

that did guidance... end of given early call Yes, We we've guidance. we guidance back the so in QX We give at R&D the gave March.

Ashley Lee

$XX million to million. $XX

Pat Mackin

Yes, $XX million. to $XX million

percentage of with we you when pretty apple-to-apples, I of kind is consistent – an mean of kind if R&D pre-JOTEC. I were think that our did So and

had asking Frozen one. for next-generation acquire and U.S. a had new space. it's London, the it was a a of of deliver next-generation Point last I the my mean future I to we It's the – that existing I'm our at point we've it. into Trunk, spend will from able I got experience previous that think in have excitement absorb number I – were. I to is had know product the the three JOTEC, is week to of The days talk Cross powerful absorb in And big with to vascular new products. ton be think Charing customers channel about. just next-generation our keep to I organization There delivery are, them for. extremely Elephant of products R&D system. kind spending chance So best-in-class kind which features our to been chance been a where a to I clinicians two excited customers. talk the JOTEC Meeting a I is meeting. That's

of be there. to lot So a that's, I think going upside

I both well Frozen think on be for Trunk, key as the as the that stent that's with thoracic thoracoabdominal is And it anything good used as Elephant it's device. next-generation market. the Our is, that the with will as graft

We that real and a I ton cutting is features. think got of that had number There have is has to a we're unique a next-generation excitement kind edge bringing technology around we of the no device. to going show chance London. in one device our the else was I thoracoabdominal technology to significantly of in when And the biggest the this. getting grow will here after in potential I've involved sites we That take that. centers in clinical share, that U.S. and will are interested

And end we're of design we the a in devices kind the going I then three should the and the freeze, in think Europe, devices testing be expect and to those those just so U.S. year will in see of a it's Mark, to same devices and in trial our CE all is about we by be lot year about submitting excitement So – of are just will it. there of those through again,

Joseph Munda

What That's Two this. of missed you. perhaps I more helpful. Thank debt end Ashley, the quarter? total here, the was at

Ashley Lee

on lease believe, do loan as of our as have we million in the instruments. low $XXX capital range, under well I the including couple had million and We to term B, total outstanding a our those smaller loans, mid-$XX that is consolidated other the financials.

Joseph Munda

Okay. And – then that's then question. my And helpful. final

being If guys can us more perhaps from you are moves could to flip about roadmap are those go, You Poland, concerned. us remind you direct for direct? distributor But far remind more as there Spain and to Italy, to are are that talked geographies available guys geographies you XXXX, there as – to

Pat Mackin

of basis. developed we with that, the one having data, the that's a stated differentiated have in Japan, force clinical Australia, that nature early my America, And on North sales our case-by-case these on Europe, to are. a tenure again, saw direct There so at kind was in competitive I a from of of experience that you highly my products of have markets, here the look given eventually, but – significant things kind I

mentioned pleased So, our that, number China a not with we've I have been of think, times in I situation China. distribution

are some And So right in we're be in but are answered – but in something we things of in Jason's we're that's nothing to question. at several markets doing and that we and now, going different looking to Not – direct XXXX. at, when we looking things. that kind different doing were China, That's I some China. going go

XXXX, – will for are and We as be timings will the appropriate. those communicate different and evaluating as for opportunities are XXXX done those

Joseph Munda

of End Okay, thank you. Q&A

Operator

the the further I'd time. There ahead, over back Please at the this floor go questions are to like no management. to to turn sir. conference

Pat Mackin

Well, thanks in. for joining everybody

I quarter. belt mean, our the we the recall, We deal if with finished signed are the you quarter December or on with we And X. very under pleased with first JOTEC. we only four close months

put the and commented next ramp through progress quarter. reiterating for as end the of as quarter some we updating Spain, the was guidance think Margins numbers. look it flows our full March. kind Ashley a see first bottom integration we On-X you that the I to purchases has kind that, the we've gone would we got runoff accounting And at of forward in kind line we They year P&L. great beat as our the We And the in beat improving quarter, and are of posted throughout of that Italy, Poland, softness and distributor we first extremely and of said the the in top some numbers. well. with great the would we great year. on the be out pipeline line. And that posted had move will

and calling great So a in I have you appreciate day.

Operator

concludes This conference. today's

disconnect your participation. you for Thank your may time. You at lines this

Artivion (AORT) 6 May 182018 Q1 Earnings call transcript